Home Latin America 2005 Converging communications in Latin America

Converging communications in Latin America

by david.nunes
James M. BellIssue:Latin America 2005
Article no.:12
Topic:Converging communications in Latin America
Author:James M. Bell
Title:Managing Director, CALA Region
PDF size:144KB

About author

James M. Bell is the Managing Director of the Caribbean and Latin America (CALA) Region for Radvision Ltd. He served previously as Managing Director for Polycom Corporation’s CALA Region and as Managing Director, Latin America and Asia Pacific, for eShare Communications (Melita International). Mr Bell founded VistaTel, a top videoconferencing reseller in the United States and has served in various management roles within AT&T, Fujitsu, Philips Electronics and the PictureTel Corporation. James Bell is a graduate of the University of Minnesota, Minneapolis, and holds a B.A. degree in Communications. He has been a key speaker at various industry events and has been a guest lecturer for the Graduate Program in Telecommunications at St Mary’s University in Minneapolis, Minnesota (USA). He is a member of the Executive Committee of the Telecom Committee of the AMCHAM of Peru.

Article abstract

Half of Latin America’s people live on US$1.50 per day or less. Deregulation, privatisation and innovative marketing has brought communications services to people who, ten years ago, had little hope of ever using a phone. Calling-party-pays mobile services make it possible for people and businesses that cannot afford a fixed phone to buy a pre-paid cell card for US$5/month and receive calls free. In cities, people can access the Internet, paying by the minute, at ‘cabinas’ and cafés.

Full Article

There are approximately 550 million people in Latin America. Over 50 per cent of these people live on US$1.50 per day or less, a startling figure that has to be taken into account by corporations evaluating where and how to make their global investments. We speak of ‘converging communications’ in Latin America, but it remains an elusive concept for most of the population. Does this mean that it will not arrive? Not at all. The same advanced telecommunications and Internet services found in the USA are available in nearly all Latin American metropolitan and secondary markets. How, though, can someone making subsistence wages participate in this communications boom? Deregulation of telecom services occurred later in Latin America than in the USA. For the most part, poorly operated government telecom services were privatised within the past seven to ten years. What did this mean to the average person? Typically, getting residential telephone service from a government telephone monopoly might take two years to install and cost US$1,500. After privatisation, telephone installation takes about a week and costs about US$100. Monthly service costs, depending upon the country, are now similar to the USA at about US$25/month. Yet even US$25 per month is far beyond the budget of most of the population. Fixed line In the USA, fixed line service penetration has topped 95 per cent for many years. Latin America has never come close to this. Mobile subscribers in Latin America now exceed fixed line subscribers. Unlike the USA, most mobile operators in Latin America use calling-party-pays billing – only the party calling a mobile phone is charged. Calling-party-pays mobile services make it possible for many people who cannot afford a fixed-line phone, to buy a pre-paid cell card for US$5/month and receive calls free. This means that anyone can call their gardener or neighbourhood fruit vendor, because these can now afford to own a mobile phone. They can manage their business and receive orders, etc, without incurring unaffordable expense. Because the fixed line penetration percentage of households is also relatively small, naturally the number of households that have DSL services is still smaller. This is also true of cable modem service, as the percentage of pirated cable connections is very high. Much of the public, at least in larger centres, have access to the Internet and email. Public access Internet ‘cabinas’ have cropped up throughout many Latin American cities, providing ‘walk-in’ Internet access for people who do not own computers or cannot afford dedicated DSL or cable modem service. These Internet cabinas charge by the minute, giving many an opportunity to surf the web, check their email accounts, apply for jobs and more. The typical business drivers for Latin American telephony, while there are differences, are roughly the same as in the USA. Businesses need telecommunications to increase productivity and decrease costs. Although labour costs are lower, price sensitivity in Latin America is higher. While businesses in the USA complain about high gasoline prices that raise transportation costs in Lima, Peru, where gasoline costs US$4.60/gallon, there is a different outlook about gas prices. Importation costs affect the cost/benefit analysis of any investment. Depending on the country, the landed price of legally imported technology is between 1.2 and 2.1 of the FOB USA price. As a result, one needs to obtain between 20 and 100 per cent more in benefits to justify many purchases than one would in other regions. Accordingly, many manufacturers set up assembly facilities in major market countries like Brazil and Mexico to avoid these high importation costs. These facilities assemble the products with using enough local labour to exempt the product from duties. This solution works when the market is big enough to justify the plant investment, smaller companies can rarely afford the investment. The USA is a single, homogenous market, but Latin America consists of more than 20 countries, each with different rules, regulations and ways of doing business. Latin America typically accounts for around four per cent to eight per cent of technology sales worldwide. In other words, companies like Nortel, Avaya, Cisco, Microsoft, etc, typically sell this amount in the Caribbean and Latin America (CALA region). ‘The’ solution Converged communications are just now arriving in Latin America. Powerful new collaboration tools bring voice, video and data collaboration capabilities at the desktop of every computer user in the world. Software packages will soon bring the functionality of advanced PABX systems to the desktop computer. At one time, many thought that videoconferencing was ‘the’ solution. We now know that it is just a part of a much larger and more valuable business solution called collaboration. Each year, many were convinced, would be the ‘breakout’ year – the year the industry would take off and videoconferencing would become a mainstream business tool like copiers, faxes and PCs. This never happened for several reasons: 1. Videoconferencing did not bring enough value. Without full collaborative capabilities, videoconferencing solutions just did not generate enough return to justify the investment; 2. Network reliability, or call connection/completion, with ISDN was poor compared to today’s true broadband solutions; 3. There was no company large enough to create a market for videoconferencing by itself. There were, and are, good, well-managed conferencing technology companies. They were not large enough, though, to push collaborative tools onto every desktop and laptop computer and into every conference room or boardroom. Now major software players, global champions of converging communication through real time collaboration over IP networks, have legitimised the industry. What does this mean for converging communication in the Latin American region? With a major player now seriously entering the real time collaboration space, we will see the cost per user of true collaborative solutions will go down. This is especially important in CALA, as this region is more price sensitive than the USA. The increased demand for videoconferencing will also generate more demand for broadband services and an increase in network build-out by the service providers. Bandwidth remains relatively expensive in Latin America and an increase in demand will bring increased competition and help drive down prices. Someone once said that Latin America is where you should go when you know that the world is coming to an end, because everything arrives here 10 years later. Not any more. Converging communications is rapidly changing all that.

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