The great digital divide: second-tier towns play catch-up to Mexico's big three. (Tech Talk).

Over the past 10 years, billions of dollars have been invested in Mexico to develop networks and operations for the delivery of information and communication technologies (ICT). As a result, the country's ICT penetration levels--measured as telephone lines, computers, internet users and the like per capita--have risen greatly.

If you are a resident of Mexico City, Guadalajara or Monterrey, this is terrific news. Residents of those major metropolitan areas now have access to telecommunications and IT distribution and service networks that are truly first-world in their extension and technology.

Outside of these three development poles, however, technology access and adoption lags, owing largely to the myopic business plans of Mexico's telecom and IT channel participants. Except for mobile telephony, the technology boom of the 1990s passed by mid-market cities like Merida, Leon, Saltillo and Ciudad Juarez.

Of the billions of dollars invested in new fixed and mobile telephone networks during the '90s, the vast majority were concentrated in the three major markets that together represent close to 40% of the country's GDP. As a result, numerous redundant voice and data networks in these large cities operate far below target utilization, while many mid-market cities are notoriously underserved.

The same can be said of Mexico's IT channel, which has actually contracted over the last several years. Fewer channel distributors now serve a smaller number of markets than was the case a decade ago. As IT channels withdraw from mid-market cities, lack of access to IT products, services, support and training cause the competitiveness of Mexico's "provincia" to fall further behind that of major national and international markets.

NEED FOR MARKET INTELLIGENCE

The extreme concentration of ICT investments in Mexico's major markets presents a problem for both businesses and society. Fortunately, there are ways to fix this problem: providing businesses with profitability while closing the growing "digital divide" that has emerged in the country.

First and foremost, IT and telecom firms must stop creating business plans in a vacuum, and recognize the effect of competitive forces on supply, demand and profitability.

Current market segmentation for Mexican technology firms often begins and ends as an exercise in metropolitan market sizing.

Naive firms often do not look further than the significant demand concentrated in Mexico City, Monterrey and Guadalajara, failing to recognize that dozens of competitors are also focused exclusively on the same prize.

The key ingredient missing here is competitive market intelligence. The complete lack of this vital element has led many firms to bankruptcy in markets with an overabundance of supply while ignoring underserved second-tier cities.

The inclusion of competitive analysis in planning can break the "copy-paste" business planning focus of firms, and help identify business opportunities where both demand and supply markets are conducive to success.

GOVERNMENT HELP

The government has a vested, social interest in the capillarization of Mexico's technology infrastructure, distribution and service networks, as current market forces are widening the economic and technological divide between first and second-tier cities.

Without massive spending, the government could easily promote the business practices that are needed to achieve social goals.

Principal in an effective strategy would be the provision of more effective incentives for technology investments and distribution outside of elite metro areas. Federally funded tax breaks and guaranteed financing--contingent on the approval of business plans--for technology investments and service sales in second-tier cities could do much to promote a more wired and competitive provincia.

Unfortunately, when it comes to closing the digital divide, the country has again placed all of its eggs in one basket: e-mexico. Well intentioned as it may be, this program suffers from a chronic lack of funding and a failure to consider a variety of solutions. The competitiveness of Mexico's provinces in an increasingly digital world is at stake. Hopefully the government recognizes a few well-placed carrots as incentives for technological development may be worth more than truckloads of subsidized agricultural goods.

Bruce Sinclair ([e-mail]) is the Technology Industries Director for Infoamericas, a multinational research and consulting firm specializing in Latin American markets.