Home Latin America 2004 Telecommunication – A catalyst for development in Latin America

Telecommunication – A catalyst for development in Latin America

by david.nunes
Leon TaimanIssue:Latin America 2004
Article no.:6
Topic:Telecommunication – A catalyst for development in Latin America
Author:Leon Taiman
Title:Vice-President, Sales, Latin American and Caribbean
Organisation:Telcordia Technologies
PDF size:136KB

About author

Leon Taiman is the Vice-President of Sales for the Latin American and Caribbean markets for Telcordia Technologies. With more than 15 years of experience in the telecommunications industry, Mr Taiman began his career at Telcordia working in software development for Operations Support Systems. For many years Mr Taiman has worked with major operators in the Latin American market, developing strong relationships, and supporting the deployment of next generation solutions. A native of Lima, Peru, Leon is fully bilingual in Spanish and English and conversant in Portuguese. Mr Taiman earned an M.B.A. from New York University’s Stern School of Business and an M.S. in Computer Science from Stevens Institute of Technology.

Article abstract

Economic development driven by better telecom connectivity is helping improve the economy of Latin America. Although customer satisfaction is a new priority for Latin American service providers, affordable services and new payment schemes have done more to make technology accessible in Latin America. The region has benefited by its ability to observe the telecom markets in North America, Europe and Asia. Latin America embraced such important wireless services as prepaid calling by observing their success in other world markets.

Full Article

As part of the recovery phase following the economic decline within the telecom market, many companies are beginning to test the waters again in new regions of opportunity throughout the world. Although much of the investment is still being targeted at North America, Asia and Europe, there is another region that should remain on the radar of the savvy investor – Latin America. Latin America’s potential for growth is second to none and several trends are prompting a second look from investors around the world. The economic development of this region is tied closely to its need for pervasive connectivity. If Latin American countries hope to compete economically with the rest of the world, they will need to improve the overall communications infrastructure – and today’s conditions are more favourable than ever before. A December 2003 Global Telecommunications Market Take report by Gartner Dataquest, compared Latin America to Europe, Asia/Pacific and North America in terms of compound annual growth rate (CAGR) percentages. Beginning as early as next year through 2007, Latin America is expected to outpace all three regions each year with revenues reaching about $123 billion in 2007. The penetration rate of telephony still remains very low in most of Latin America. Telephone service is only available to between 10-30 per cent of a population of 520 million people and greatly varies by country with half of the countries at the 10 per cent mark and a handful at the 30 per cent mark. There are only about 12 million active Internet users. Even mobile telephony, the region’s dominant telecom service, is only available to just over 100 million people, a penetration rate of about 20 per cent. Dismal penetration figures, however, indicate plenty of room for growth and marketing opportunities for telecom investors. Economic development driven by better telecom connectivity has put Latin America on the road to improving business and the standard of living in the region. Recent market trends With penetration rates less than one-third those of the U.S. and Europe, the demand in Latin America is much greater than the supply for telecom services. Additionally, the liberalisation of the telecom market in most Latin American countries makes it even more attractive to telecom investors. Although there is still work to do lifting regulatory restrictions that might hamper infrastructure investment, there is progress enabling new service providers to gain market share through cost-effective and innovative technologies and services. Customer satisfaction has become a new priority for Latin American service providers; they are now focusing on improving and upgrading services. The need to improve networks and services will increase with competition. Improving telecommunications will, in turn, improve the ability of Latin American countries to compete on a global scale in other industries, including oil, gas, mining and manufacturing. For this reason, telecom services must continue to improve. Communications will play a vital role as both a beneficiary and a promoter of sustained economic growth in Latin America. Wireline services A major challenge Latin America has faced over the years is providing basic telephone services over large geographical territories that include many densely populated urban areas. With only a limited wired infrastructure in place, carriers must find the means to deliver voice telephony where there is virtually none existing today. However, there is a bright spot in the form of Digital Subscriber Line and its growing popularity in the region. DSL providers are finding ways to grow the number of DSL connections with little fear of competition. Unlike in the U.S., there is very little cable penetration in the region, so the responsibility falls upon the providers to keep prices low enough to attract a growing number of subscribers, both residential and business. DSL broadband connectivity and the high-speed Internet connections it allows, will serve to interconnect small communities and small suppliers to the rest of the world. Access to a broader market will unleash limitless marketing opportunities and introduce Latin American products to the world’s marketplaces. Internet services continue to lag in Latin America, but not having affordable PCs in most homes has not stopped the on-line revolution from making progress. Innovative ideas, such as cyber-cafes and Internet pay phones, are making the worldwide web available to a larger percentage of the population. The result will be an ever-increasing demand for more affordable Internet connectivity and personally owned PCs. For now, however, Latin America’s biggest challenge is simply to reach people with basic telephony and basic connectivity. Service providers may even see opportunities in the deployment of ‘leftover’ technology and equipment to meet these basic demands. Many areas of Latin America are not interested in the latest in telecom technology; they need inexpensive, simple communications to improve their standard of living. Wireless services In terms of wireless opportunities in Latin America, the Global System for Mobile Communications (GSM) has become the technology of choice in the region. With a penetration rate of only about 18 per cent, well below the world average, there is still plenty of room to grow. Again, there is minimal competition, so providers have great opportunities to provide vital connectivity in otherwise underserved areas. Although wireless communications are still dominated by voice, data services are picking up slowly. As in other parts of the world, video will lag behind, but eventually bring with it the higher bandwidth services requiring high-speed broadband connections. Several wireless services that have gained popularity in Latin America include pre-paid wireless and ‘calling party pays’. Affordable service, not necessarily the technology itself, has enabled wireless phones penetration to accelerate quickly. New payment schemes have done much to make wireless technology more accessible to great segments of Latin America’s population. Other exciting technologies that are poised to enter the Latin American market are wireless fidelity (WiFi) and wireless microwave access (WiMax). Given the diversity of the geography and topology in the region, wireless telecom holds the promise of meeting connectivity demands much faster and with fewer infrastructures than wireline technologies. Watching and learning Latin America has benefited over the years by its ability to observe the telecom markets in North America, Europe and Asia. Learning from the mistakes and miscalculations of others has helped them sidestep many hurdles. By knowing which technologies are fleeting and which technologies promise the most, Latin America has had the luxury of picking and choosing the best paths through the telecom landscape. This helped many decide that GSM was the right choice over alternatives like time-division/demand multiple access (TDMA) and code-division multiple access (CDMA) and to achieve the rapid adoption of wireless technology. Latin America also embraced such important wireless services as prepaid calling by observing their success in other world markets. This has proved a wise strategy given the constraints imposed by Latin America’s geography and demographics. Avoiding tough and expensive lessons has enabled the region to grow its connectivity, reduce price points, introduce competition and appreciate the importance of standards for interoperability. More work to do Still, there is much more work to be done to spur pervasive connectivity in Latin America and thereby, develop the region’s economy. Companies like Telcordia Technologies can help operators and regulators select technologies at the right costs and assist in understanding the proper regulatory framework that will drive these services and technologies to develop the region as a whole. Latin American service providers and regulators must come to an understanding in several areas, in order to: – Develop a consistent business strategy from a regulatory, service creation, wholesale, operations and customer care perspective; – Analyse disruptive technologies and stand by that analysis – VoIP will surely be disruptive and carriers will want to be on the winning side; – Realise that most successful operators take a pro-active approach to influence both the regulatory and industry perspective; – Develop a sound business case for major investments or initiatives and learn from the mistakes of the world’s operators; – Find a common ground for achieving both customer services and operational excellence; – Understand that wireless will save the day in Latin America for those who embrace it quickly; – Unite wireless and wireline services to gain competitive advantage over wireless operators that do not have working relationships with wireline partners. Hand-in-hand Improving Latin America’s basic ability to connect and communicate throughout the region and the world will foster its overall economic development and bring a higher standard of living for its population. As telecommunication technology both wireline and wireless expands throughout the region, Latin American businesses and enterprise will feel the ripple effect, and benefit from greater opportunities to compete in the world’s industrial marketplace. The opportunities are huge for telecom service providers, system manufacturers and equipment vendors. Investments made early have significant potential for long-term growth in the market, particularly with the limited competition in Latin America today. Through innovative, low-cost services, business focus and customer care, a new entrant can rapidly gain market share from both the incumbent operator and early service adopters.

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