Latin America starved for bandwidth

Providers of telecommunications services in Latin America are hungry for capacity in international fibre-optic networks, because demand for Internet, data transmission and long-distance services continues to increase in the region. This is opening the door for companies that build undersea pan-regional networks to carry international traffic and that sell capacity in their networks to other carriers.

That was the message from several speakers at the Capacity Wholesale Market Latin America & Caribbean event in Miami on Wednesday.

“There’s an incredible appetite for bandwidth in Latin America,” said Patrick Joggerst, president of the South America division at Global Crossing Ltd., a company based in Hamilton, Bermuda that is building a global fibre-optic network that includes a cable ring connecting Latin America’s major cities.

“Latin America is an increasingly important region and can’t be ignored,” he said, adding that Global Crossing has invested about US$2 billion in the region so far. “A technological and telecommunications boom in the region has caused an urgent need for fast, international fiber-optic connectivity.”

Carrier demand in Latin America for undersea cable capacity will top 110G bps (bits per second) by the end of 2001 and increase to at least 1.4T bps in 2006, a compound annual growth rate of about 68 percent, according to a study released in July by the Yankee Group Inc., a Boston-based consultancy and market researcher.

Along the way, the operators of these undersea broadband networks – often called carriers’ carriers because they sell network capacity on a wholesale basis to local telcos and other providers – are expected to amass sales in Latin America of more than US$3 billion by the end of 2001 and of about $21 billion by 2006, according to the Yankee Group study. This growth will be fueled by robust increases through 2005 in data traffic (93 per cent) and Internet traffic (113 per cent) in the region, according to Yankee Group.

“Latin America is characterized by significant suppressed demand for international broadband fiber-optic bandwidth,” the report states. This has led to “exorbitant prices” being charged.

However, now that several companies are building the necessary infrastructure to address this demand, prices are bound to fall, and this will be positive for the market, said Greg Maffei, president and chief executive officer (CEO) of 360networks Inc., another company that is building a global fibre-optic network with a Latin American component.

“There’s a tremendous growth opportunity in Latin America,” said Maffei, who before taking 360networks’ helm, was Microsoft Corp.’s chief financial officer. He called the region “critical” to his company’s success and said that 360networks is investing $1.5 billion in Latin America.

Another company that is getting into this so-called “wholesale” market is Emergia Holding NV, a subsidiary of Spain’s Telef