 | Issue: | Latin America IV 1998 |
| Article no.: | 6 | |
| Topic: | Paging Growth in Latin America: Standing Before Near Boundless Market Potential | |
| Author: | Jay Kitchen | |
| Title: | President | |
| Organisation: | Personal Communications Industry Association, USA | |
| PDF size: | 32KB |
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Article abstract
The paging industry has enjoyed steady growth in Latin America. Experts largely agree that the introduction of Narrowband Personal Communications Services (N-PCS) will be the catalyst that energises the paging market and boosts demand, not only for two-way capabilities, but for traditional, one-way paging as well. With numerous sectors of the consumer market virtually untapped, the paging and messaging industry in Latin America stands before near boundless market potential.
Full Article
The wireless industry is enjoying phenomenal growth around the world, and service providers and equipment manufacturers stand before enormous opportunities as developing countries recognise the economic benefits of privatising their telecommunications markets and moving toward a competitive marketplace. Beyond Economics Few of the world’s regions have demonstrated the financial and societal effects of privatising the telecommunications sector as acutely as Latin America has. Consider that the spectrum auctions in Mexico, which closed in May 1998, earned more than US$1 billion for PCS and fixed wireless licenses. And the government’s break-up of Brazil’s telephone monopoly, Telebras, added nearly US$19 billion to that nation’s coffers. But the implications go far beyond economic growth for governments. The onset of competition in previously monopolistic, government-run telecommunications institutions has opened up communications possibilities to levels never before imagined. Ripe for Wireless Solution Today, a scant 8.5% of all households in Brazil have phones; only 10% have phones in Mexico; and a mere 17% of households have telephones in Argentina, according to the National Telecommunications and Information Administration, US Department of Commerce. Latin American communities such as these that have limited telephone service because of either remote location, low population or simply lack of financial means are turning to wireless services, in some instances leapfrogging traditional wireline altogether. Add to that the poorly functioning telephone networks, insufficient capacity and long waiting lists for service, and it quickly becomes apparent that the environment in Latin America is ripe for the wireless solution. Pyramid Research projects that the cellular phone market in Latin America will grow from 12 million subscribers in 1997 to more than 40 million in 2002. Prospects for Paging Growth The introduction of broadband PCS (B-PCS) will further augment communications choices for consumers. As seen in the US, the entry of broadband PCS into the cellular marketplace will increase competition, reduce prices and increase demand. PCS also will have several advantages over analogue cellular, such as enhanced quality of sound, better security from threat of eavesdropping, and the introduction of new value-added services. And while cellular and PCS are making strong headway within the Latin American markets, paging continues to maintain a foothold in the wireless arena. Paging is not a new concept in Latin America (for instance, paging has been available in Mexico for more than 20 years), it has enjoyed steady growth, and by most accounts, stands before an even brighter future with the advancement of two-way paging. According to BIA Consulting in its recent white paper, “Paging in Latin America – Prospects for Growth” in 1997, Latin America had more than 2.6 million pagers in service. That number is expected to jump to 5.7 million pagers in service by 2001, and by 2003, units in service are expected to top 9.9 million. In recognition of the emerging competition, the Latin American paging market itself is changing. Once dominated primarily by ‘mom and pop’ operations, the industry is moving toward consolidation to garner the economic leverage that is needed to survive in this new marketplace. Even so, penetration rates for paging remain low in Latin America, well below 1% in many areas. Clearly there is ample room for growth, not only by tapping into unchecked markets, but also through the emergence of new technologies, such as N-PCS (two-way and voice paging). Unlike in the US, where numeric pagers dominate the market, in Latin America alphanumeric service accounts for more than 90% of market share. Numeric service accounts for 6% and tone pagers 2%, according to BIA’s white paper. Several factors make numeric paging less attractive to the Latin American market: without the basic necessity of touch-tone phones, numeric paging is impossible, and most telephone sets in use are rotary dial. Second, the poor quality of the wire line networks makes it difficult to depend on calling in to retrieve voice-mail messages. Catalyst of Paging Market The introduction of N-PCS will further bolster the paging industry, as its two-way capability allows the user to send and receive short messages from the pager, bypassing wire line all together. Experts believe that N-PCS could be the catalyst that energises the paging market in Latin America by lowering costs, providing improved services and bringing new awareness to paging. This in turn will fuel demand for both one-way and two-way messaging. The BIA also predicts that the overall Latin American/Caribbean messaging market will reach a total population penetration of more than 1.8% by 2003. BIA attributes 1.04% of that figure to one-way paging and 0.79% to N-PCS penetration. This translates into a total mobile messaging market of more than 8 million users. Two-way paging will play such a key role in the vitality of the paging industry that Rick Nelson, Vice President-international, of PageMart Wireless, cautioned that carriers that are not offering FLEX™, Motorola’s high-speed paging protocol, or are not in the process of converting to FLEX, “might have a survival problem.” Speaking at the PCIA’s PCS ’98 Latin America conference recently, Nelson pointed out that the migration path from Motorola’s FLEX paging protocol to its two-way ReFLEX™ protocol is relatively easy and affordable, and the services and prices offered by ReFLEX carriers will put “insurmountable competitive pressure on non-ReFLEX operators in the long run.” Threshold of Uncharted Opportunities Through effective market positioning and competitive pricing points, there stands exceptional potential to increase the subscriber base for both one-way and two-way paging. As paging usage is highest in the commercial sector, the consumer market remains largely untapped. Accessing this immense sector will require numerous tactics, not the least of which is educating consumers on the value and benefits of messaging. Additionally, to keep ahead of the competitive pressure brought on by two-way paging, traditional paging operators may do well to provide features beyond just paging, such as access to sports scores, weather updates or financial news. BIA’s Edward Czarnecki points to another latent subscriber base as well. Wedged between users of one-way pagers and cellular and PCS telephones is a cache of potential subscribers who may desire more functionality than conventional pagers offer, but at a less expensive cost than cellular or PCS telephones. Pricing also will become an issue as two-way operators introduce their services at or near the level of their one-way counterparts. This will be of particular challenge to one-way service providers, who may struggle to lower costs as alphanumeric paging is heavily dependent on operators to transcribe messages. However, the proliferation of computers and widespread access to the Internet will ease the need for operators. In fact, providing this capability will add to the attraction of paging for consumers. As the paging and messaging industry stands before a threshold of uncharted opportunities and challenges, a number of companies recognised the need for a cohesive alliance to address paging and messaging issues. With that goal, the Latin American Messaging Associations (LAMA) was launched in March 1998. Members include Arch Latin America, Directel, Glenayre, Motorola, Orbcomm, PageNet do Brasil and BIA Consulting. Initial agenda items that LAMA will tackle include spectrum allocation, interconnection and operational and frequency taxes. Emerging Global Marketplace Wireless services, everything from paging and messaging to PCS and cellular, from specialised mobile radio to satellite and mobile data, are linking the world’s people in ways never before imagined. We truly live in a ‘global village’ as the innovations of wireless services gives us access to our neighbours not only across the border, but across the oceans and around the world. Conclusion Countries in Latin America are quickly embracing the true potential of global, seamless communications by opening their markets to the forces of competition and the emergence of new technologies. Demand is high and the market potential boundless. In the wake of this emerging marketplace, as companies jostle for market share, eclipse one another in technological advances and strive for effective pricing strategies, the ultimate winner will be the consumer. Through wireless services, in Latin America and around the world, consumers will reap the benefits of anytime, anywhere communications.
