Venezuela Will Create a State Telecommunications Company

The new telecommunications company will provide telephone, cellular, and internet service throughout Venezuela's territory, using an existing fiber-optic network that is already in place on top of the electricity network.

The government of President Hugo Chávez, known for its state-oriented philosophy and its opposition to privatization, has recently returned to the theme of creating a new telecommunications company in a market that has long been dominated by large multi-nationals.

In recent edition of his weekly television show Aló Presidente, Chávez announced that the new state-run company will provide voice and data telephone services using fiber-optic cable to private and public companies operating in Venezuela.

“This company will be a subsidiary of the Venezuelan Corporation of Guyana (CVG—Corporación Venezolana de Guyana), 100% national capital, state capital,” said Chávez. However, the President didn’t go into more detail on the new enterprise regarding, for example, the investment that will be required or when the proposed company would be operational.

For those who pay attention to the telecommunications sector, the announcement seemed repetitive, since the first time this new enterprise was announced was in May, 2003.At the time, the hydroelectric firm Edelca—a subsidiary of CVG—said it planned to penetrate into this market as a partner and stated that local and foreign investors had already expressed interest. A few months later, Edelca cancelled a press conference on the launch of the new state enterprise.Since that time, until this most recent announcement, there had been complete silence on the issue.

Chávez, who faces the possibility of being recalled in a referendum on his mandate this August, said they will use 1,228 km of fiber-optic cables already installed as part of the state firm’s system of electrical distribution.

Caroní Electric (Edelca)

“As a result, we will use these 1,200 km of fiber-optic cable already installed and some 1,348 km that we will install in the CVG Edelca network,” said the President, who didn’t get into technical details of the state firm.Edelca is administrating the Guri hydroelectric dam. “We will offer [telecommunications services] to all companies in the country, private and state-owned, national and international,” affirmed the President.Chávez emphasized that with the new company “we will unite every region in Venezuela and, thus, we will bring voice and data transmission services to every corner of the country via fiber-optic cable.”

Between Proposals and Reality

In the middle of a series announcements of new companies, cooperatives, and a large rosary of etceteras, the creation of the Venezuelan Telecommunications Corporation (Covetel) was announced last year.Covetel was to be created to develop telecommunications networks and to provide this service, as well as a cultural television channel. The decree that created Covetel—whose only investor will be the State—stated that the State should guarantee access to telecommunications services and information to deepen the “democratization of information and popular participation.”

It is clear that the objective of the Corporation is to establish and develop telecommunications networks and to provide telecommunications services, “with the aim of promoting and developing these networks and the exchange of information, thereby promotingan information system of the national public administration.”Information Minister Jesse Chacón admitted that the decree “covered a broad spectrum,” that allowed the enterprise to operate any branch of telecommunications, but he added that “right now that is not yet underway.”

However, the possibility that in future Covetel might penetrate the fixed telephone line, cellular, or internet markets should not be dismissed.Currently these services are concentrated in two private enterprises that, according to Covetel, have impeded a complete opening of the sector—most of all by the ‘monopoly’ of Cantv, which was privatized in 1991.

Tough Competition

Getting off the ground will not be easy for the new telecommunications company, when one considers its strong and entrenched competitors.At present, Cantv, controlled by the US company Verizon Communications, leads fixed-line telephone and internet service providers in Venezuela.Telcel, which as of October will be controlled by the Spanish company Telefónica, dominates the mobile phone market.Finally, there is Digitel, which is completely owned by the Italian corporation Telecom Italia Mobile, with over 1.1 million subscribers at the close of 2003.

Translated by Jonah Gindin and Clemente Britto.