Latin America: a region in transition

12 April 2019 | Natalie Bannerman

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With over 600 million people across 26 countries, the needs across Latin America (Latam) are like night and day – no one set rule applies. This was ever apparent at this year’s Capacity Latam conference that took place in São Paulo.

While one part of the region suffers from increasing price erosion due to too much connectivity, the other is heading for a period too little connectivity if more investment doesn’t happen.

Kicking off the event was Telefónica’s CEO of International Wholesale Business, Juan Carlos Bernal, who surmised the state of the region in saying connectivity and coverage will play a crucial role in Latam, creating an opportunity for telcos. In Bernal’s view, the wholesale market is undergoing a transformation, as evidenced by the fact that retail operators in the region have 100% mobile penetration driven by the fact that they offer free communications services as well as increased services at a lower cost.

Additionally, the regional wholesale market has also seen the introduction of new players or disruptors such as MVNOs, cloud computing companies, UCaaS providers and multinational corporations, eatingaway at market share.

In order to combat this, he says, carriers must transform on a few levels. These include leveraging new digital tools to improve the way they interact with traditional and new customers, and designing their network and processes towards a flexible, simple and scalable architecture. And they must create an ecosystem of partners to build the complete value chain for global customers. In other words, end-to-end solutions.

One session that was not to miss was TeleGeography’s market overview. This year Anahi Rebatta, part of TeleGeography’s infrastructure and voice traffic team in Latin America and Caribbean, gave the presentation. According to Rebatta, bandwidth demands in Latam grew by a compound annual growth rate of 39% between 2014 and 2018; bandwidth demands are roughly doubling every two years. As a result, cable construction costs in the region have increased from around $1.4 billion to $2.6 billion.

Content continues to be a key user of capacity, with a 20% increase in international bandwidth used by content providers. Due to increased competition, the region is experiencing increasing price erosion as regional capacity grows. Following this trend, IP transit price erosion continues as well.

In the subsea space, there was a panel featuring CenturyLink’s Gabriel Holgado, VP of Global Account Division and Wholesale Services, Latam; Antonio Nunes, CEO of Angola Cables; Eduardo Falzoni, CEO of Globenet; Larry Schwartz, CEO of Seaborn Networks; GITGE’s general director, Oscar Ngomo; and Norman Albi, CEO of AFR-IX Telecom.

During the session, several key points were raised. Brazil continues to be the main driver for subsea cables in the region because it has biggest population, and therefore has the biggest demands for increased connectivity.

Second, although the west coast of Latam continues to lag the east coast in terms of the number of subsea cables it has, there are opportunities for smaller regional cables in this area. Cloud is second only to content as the big driver of traffic in the region, the panel noted.

Interestingly the panel acknowledged that, although OTTs are pivotal in development of most cable projects, there are still carrier led systems. OTTs build largely end-to-end for their own purposes. In short, we still need carriers’ cables.

On the topic of price erosion driven by the low transit prices on newer systems, the feeling from the experts was that it is an opportunity for cables to offer new services and explore new revenue streams.

According to Phillip Marangella, CMO at EdgeConneX, the data demands of gaming, cloud adoption, consumer and industrial IoT, distributed networking and the connected enterprise together mean that everything moves closer to the edge.

Regionally, Miami continues to be the main Latin American internet hub, with four out of the top five highest-capacity routes in the region connected there. However, Marangella notes that there is a continued move from network operators to deploy capacity between key markets in an effort to improve connectivity within Latam. Intra-regional connectivity increased by 32% between 2017 and 2018.

This year’s Capacity Latam also saw the addition of a new conference segment. Prior to the official event was the Latin American Peering Forum – a series of panels and presentations exploring how multilateral peering is taking place across the region.

Taking part in one of the key panel sessions, on facilitating an efficient internet exchange were Ivan Zilic, director of PIT Chile; Tito Costa, corporate development and strategy manager, Latam, at Equinix; and Hernan Seoane, general manager of Cabase.

From their discussions it would appear that, unlike other regional hubs, Latam does little to no peering at an international level. Instead most remains on a national stage.

Most internet peering activity is happening on the east coast of the continent. In fact countries like Colombia have no functional internet exchange sat present. This could be tied to lack of infrastructure and security concerns.

However, the event heard, this is changing as the digital economy grows and the opportunities are too big to ignore.