To thread:
Alot of potential business in Brasil.
Fiber Deficiency
Latin America needs infrastructure. Several companies have begun an aggressive push to provide it
Ricardo Castillo, Contributing Writer
(NOTE-IDTC mentioned in 7th paragraph)
First it was cellular; now it's data transmission. Data services are the next big thing in Latin American
telecommunications, with its increasing teledensity and its growth in Internet hosts second only to China.
But the bandwidth needed to move the growing data traffic is still largely absent. And since real competition has yet
to arrive in most Latin American countries, PTTs have kept a stranglehold on capacity, making users pay dearly for
data pipes. The Argentinean portion of a 2-Mbit/s leased line to the United States or Europe, for example, runs
US$72,610, according to Phillips Tarifica Ltd. (London). Compare that to Chile, perhaps the region's most
competitive country, where the same link costs $28,125, according to Phillips.
In Argentina alone, the market for data transmission and other related services is expected to grow this year more
than 85 percent, with projected sales of about US$450 million. But until the necessary fiber infrastructure is in
place, service providers can't offer reliable and inexpensive bandwidth for advanced telecom services, such as
Internet, leased lines and corporate intranets, in the key cities and markets.
The tide is about to turn, however. Annual fiber ring and pipeline deployment has grown at a 11.6 percent pace
since 1997, according to a study by KMI Corp. (Newport, R.I.). And it's likely to increase at a faster rate through
2003, says the market research firm. "Although the Caribbean is small, geographically speaking, this region has
more planned fiber deployment in the next five years than the Mediterranean and northern Europe," says KMI
president John Kessler.
PTTs and nontraditional players such as cable TV companies and utilities are leading the aggressive pace of new
infrastructure deployment in Latin America. Former monopolies have completed deploying fiber on their own turf
and are now ready to branch out into other regions as competition opens up.
Take Telecom Argentina (Buenos Aires) and Telefonica de Argentina (Buenos Aires). In preparation for the partial
opening of the Argentine telecom market this November--and having nearly completed digitizing their own
networks--the two carriers are beginning to lay fiber in each other's regions. Next year, they will compete
nationwide against each other, as well as with two other carriers-Compania de Telefonos del Interior S.A. (CTI
Movil), owned by GTE Corp., and Compania de Radiocomunicaciones Moviles S.A. (Movicom, Buenos Aires),
owned by BellSouth Corp.
Ring Around the Continent
Latin American service providers also want to take advantage of the huge rings that will come by their shorelines.
In addition to metropolitan fiber optic networks, undersea fiber cables are being installed by international carriers
such as Atlantis 2, IDT Corp. (Hackensack, N.J.) and GlobeNet Capital Corp. (Winter Park, Fla.).
So Latin America will go from having no undersea connectivity on the Pacific coast to having several rings
interconnect and link with several international fiber systems. Telefonica de Espana S.A. (Madrid)--which plans to
link all of its companies in Peru, Chile, Argentina and Brazil--will connect to several rings, including those from
Global Crossing Ltd. (Beverly Hills, Calif.), which will cover the continent's southernmost portion. It also will link
up with the new pan-American cable, which provides the first undersea fiber connection to the west coast of South
and Central America.
All this is happening now and will continue over the next two years. So Latin American service providers will be
able to offer long-haul data services outside their home regions and countries. "Privatization has spurred
deployment of more fiber," says Kessler. "Argentina is ahead of its timetable for privatization. Peru just opened, as
well as Colombia. Mexico is turning up local competition." But the prize is still Brazil: "Even with its economic
problems, it's still the country showing the greatest growth."
After Brazil's telecom monopoly, Telecomunicacoes Brasileiras S.A. (Telebras, Sao Paulo), went private and
broke into multiple companies, the new companies were required to provide both certain voice and data services,
as well as specific volumes of lines, in short order to service a huge pent-up demand.
This means more fiber infrastructure for Brazil; deployment is at a compound annual growth rate (CAGR) of 17
percent, according to the KMI study. Brazilian government figures show total investment in infrastructure is
expected to reach US$60 billion in 2003; a third of that would be for fiber optic cable and network systems. If the
projections are right, Brazil would have increased its total deployment of fiber by 2003 from 1.6 million to 9.6
million kilometers for telco, cable television and other uses. "This would be twice the amount forecast for Mexico
and more than six times the amount for Argentina," says Peter Whitney, an economist at American University
(Washington, D.C.) who specializes in counseling investors on political and business risks in Latin America.
Full Steam Ahead?
One Latin American service provider forging ahead, despite losses of more than $17 million last year, is ImpSat
Corp. (Buenos Aires). The company, which operates prive telecom networks in seven countries--Argentina, Brazil,
Colombia, Ecuador, Mexico, the United States and Venezuela-and licenses in 12 other countries, plans to spend
$2 billion over the next six years to build a high-speed voice and data network that spans Latin America and the
United States.
Using a combination of about 3 million km of optical fiber, wireless and satellite technology, ImpSat wants to offer
value-added services like videoconferencing, leased data lines and Internet in 170 key Latin American cities and
markets, thus becoming the region's largest land backbone provider.
"The future of this business now goes well beyond voice," says ImpSat chief financial officer Guillermo Jofre, who
says his company had a head start in building a regionwide network system for wideband transmission. "We feel
we are in the right business at the right time." ImpSat's client base has increased from 125 in 1992 to 1,251 today.
ImpSat may be an example of the potential of the the region's fiber market, but it also illustrates its perils. With so
much economic uncertainty, ImpSat's annual growth of 30 percent is likely to slow down, says Jofre, since it is
becoming increasingly hard to raise investment capital. Investors are simply not buying emerging market securities.
Then there's Chile, where fiber is plentiful. "Chile has three fiber networks that cover all of its territory and all of its
main and medium-sized cities," says Jose Manuel Casanueva, president of Teleductos S.A. (Santiago, Chile). ?We
are the only country in Latin America with a problem of surplus capacity, and the existing competition will bring the
present fiber rates down even more."
Teleductos has among its clients five of the six local telephone companies in Santiago, the main long-distance
operators and most of Chile's big local corporations. Fiber also is being added to customer premises and even to
some homes, says Casanueva. That is because the cost to install fiber on many of the existing ducts is very
inexpensive. "It is at least more convenient and cost-effective than installing switching equipment," he says.
Meanwhile, Latin America has the largest regional growth of authorized international carriers entering the market,
as well as a growing number of local carriers resulting from the privatization of former monopolies, says Patrick
Joggerst, vice president of global sales and marketing for Global Crossing. The challenge then becomes foreseeing
the impact of an increase in data traffic on their networks' bandwidth and getting ready to provide the services that
will keep them afloat.
All content created and maintained by CMP Media Inc. or its agents.
Copyright 1999. All rights reserved. |
