Monday, December 11, 2006
Latin American Broadband Explodes
Competitive pricing from cable operators like VTR in Chile have helped
boost the country's broadband market, the highest per capita in Latin
America. (Photo: VTR)
Broadband growth is driven by demand, but also by the level of
competition in each market, experts say.
BY CHRONICLE STAFF
Latin America is set to reach 20 million subscribers next year, a new
record and a 36.4 percent increase from 2006, according to forecasts
from U.S.-based market research firm Pyramid Research.
"We can expect broadband to keep growing in countries like Brazil,
Mexico, Argentina and Venezuela," says Thomas Abreau, a senior analyst
with Pyramid Research. And Colombia is expected to see good growth
thanks to growing investments from Spain-based Telefonica, he predicts.
Braodband will also get a boost from the incrased deployment of
technologies such as WiMAX, which enable wireless broadband access in
areas not covered by traditional broadband services, he adds.
The 2007 outlook follows a strong 2006, which is set to end up with 14.7
million subscribers, a 50.4 percent increase from 2005, according to
Pyramid Research.
CHILE TOPS PENETRATION RANKING
Brazil is Latin America's top market in total subscribers, but Chile has
the highest penetration rate. With a penetration rate of 6.53 percent,
chile ranks ahead of countries like Argentina (3.78 percent), Brazil
(3.09 percent) and mexico (2.60 percent), according to Pyramid Research
estimates for year-end 2006.
"The past 20 years Chile has been a much more open and outward-looking
and morfe stable society economically than most Latin American
countries," Abreau says. "And I think that trickles down to adoption of
broadband. Chile has higher GDP per capita [and] more people can afford
a luxury like broadband Internet."
Chile has Latin America's highest GDP per capita, according to 2006 data
from the International Monetary Fund analyzed by Latin Business
Chronicle (See Chile Tops Latin GDP Per Capita). In addition, Chile can
boast several operators that are strong financially and a competitive
environment, which helps develop a broadband market, according to Abreau.
MEXICO LAGS BRAZIL, ECUADOR WORST
Although Brazil lags Mexico in Internet penetration, it has higher
broadband penetration, data from Pyramid Research shows.
"There's a little more competition in Brazil than Mexico, where Telmex
is the incumbent," Abreau says. "Avantel and other companies in Mexico
have had financial problems [and] are not really able to invest in
networks as much as Telmex."
Argentina, the second-largest broadband market in per capita terms, has
been helped by a strong recovery the last few years and a large
middle-class, he says.
Ecuador ranks at the bottom of both broadband and Internet penetration
in Latin America, according to Pyramid Research data for 10 countries in
the region.
"Telmex is not in Ecuador and neither is Telefonica," Abreau says. "And
Pacifictel and Andinatel [the state telecom incumbents] are fairly weak
financially [and] they are partly government-owned, so making decisions
takes long. They lack the strategic vision and financial resources to
develop broadband."
Despite the growth, Latin America lags significantly behind North
America and Europe in broadband penetration due to a combination of
factors, including relatively high prices (even by U.S. or European
standards), low purchasing power among the majority of consumers and
insufficient competition.
"It all depends on the level of competition in the market," Abreau says.
"The trend overall is for prices to fall. Oerators have en interet in
expanding the subscriber base. Buyt they don’t want to kill their value
by extending broadband to everyone."
Case in point: Brasil Telecom, whose previous holding company had no
problem in making massive invstments in broadband and even announced an
ambitious goal of one million braodband subscribers by the start of 2005.
"They had to cut prices [and] some argued that the company left money on
the table because they were being too aggressive on expanding their
broadband base," Abreau says. "If companies don’t face too much
competition, and a lot don’t, they wil continue to cut prices, but do so
while maintaining pace. So for the most part in Brazil, Mexico [and
other markets] the pace of broadband growth is exactly that which
operators want," Abreau says.
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