The Yankee Group Predicts Massive Demand for Undersea Cable Connectivity in Latin America
Competition Heats up between Global Crossing, Telefonica and 360networks
BOSTON, Sept. 11 /PRNewswire/ -- The race is on! One of three companies will be first to light up South America's first private broadband undersea cable system sometime in the last quarter of this year. Global Crossing, Telefonica, and 360networks (formerly Globenet) are all developing their respective networks, and each has announced that it will be first-to-market with pan-regional, wholesale bandwidth capacity. MCI WorldCom and Telecom Italia are quietly studying the feasibility of leading yet another consortium- backed cable to South America. So who will it be, and is this race even worth running? ( Photo: http://www.newscom.com/cgi-bin/prnh/20000609/YANKEELOGO ) The Yankee Group estimates that the total carrier demand for undersea cable capacity in Latin America will surpass 80 Gbps by the end of 2001, increasing by a compounded annual growth rate (CAGR) of roughly 68% per year, to a total of at least 1.4 Tbps in 2006. This wholesale market could potentially reach over $3 billion by the end of 2001 and increase to approximately $21 billion by the end of 2006. In our view, this race is indeed worth running, and all three companies noted above can be winners if they effectively differentiate their customer focus and product offerings. Price will not be a differentiator, but Quality of Service (QoS), in-country network capillarity (backhaul), and corporate relationships will dictate who emerges as the leader in serving Latin America's growing thirst for international bandwidth. Latin American markets have long been plagued by limited international bandwidth availability at exorbitant prices. Although a few cables already serve the Latin American market, these systems are full to capacity and cannot be upgraded. In total, The Yankee Group estimates these existing systems hold less than 100 Gbps of combined capacity. We also estimate satellite transmission currently provides approximately 1 Gbps in total additional broadband capacity in the region, primarily carrying Internet traffic between North and South America. The Yankee Group believes that important economic, geographic, cultural, and linguistic factors will foster increased bandwidth demand in the Americas region. Ties between the United States and the countries of Latin America are unique and deeply rooted. In addition, the approximately 31 million Hispanic inhabitants of the United States spend, on average, twice as much on monthly long-distance calling as the average American, and virtually all of their international calls go to Latin America. We note that international voice traffic in Latin America has been growing at a faster rate than in other developed regions. Undersea cables that can provide seamless connectivity between the U.S. and Latin American markets will therefore be able to capitalize on these traffic flows. Because most Internet content and e-commerce companies targeting the Latin American audience are currently hosted in the United States, The Yankee Group believes that demand for bandwidth among Latin American markets and the United States will initially be driven by connections initiated in Latin America. Most of this broadband traffic will flow from the United States to the user in Latin America. As Internet usage expands in Latin America, The Yankee Group expects more content and e-commerce companies to become hosted in the region. This will result in an increased number of connections initiated in the United States, providing a notable increase in broadband traffic flowing from Latin America to users in the United States as these users access Latin American hosted content. The Yankee Group anticipates that the demand for this traffic will arise from the large and growing Hispanic population in the United States and businesses with interest in the region. And so, the hotly contested race to light up the Americas' first pan- regional broadband undersea cable continues. According to the latest press releases from Global Crossing and Telefonica, it looks to be close match, with each carrier promising an RFS date in late 3Q or early 4Q 2000. While The Yankee Group thinks that the first-to-market advantage should not be underestimated, the other various determinants of success will carry more weight in the medium to long term. As more and more Internet and e-commerce hype permeated the public press, The Yankee Group anticipates that additional companies will begin to think about installing undersea cable networks in the Americas. However, we believe that at most, only three full-ring Latin American systems will be able to maintain viable business plans. While we expect to see additional limited footprint systems for certain traffic routes, we believe that Global Crossing, Telefonica, and potentially 360networks will have a firm hold on the pan-regional market. About The Yankee Group The Yankee Group is an internationally recognized leader in technology research and strategic consulting, whose broad-reaching analysis encompasses all areas essential to e-business success: the Internet, electronic commerce, communications, wireless/mobile, computing, and enterprise applications. The Yankee Group specializes in assisting companies with their e-business, enterprise networking, and Internet technology and electronic market initiatives while maintaining synergy with their overall business strategies. Headquartered in Boston, our research and sales staff is located throughout North America, Europe, Latin America, and Asia Pacific. With over 30 different planning services, complete consulting capabilities, and a full calendar of technology focused conferences and seminars held around the globe, The Yankee Group is truly a "one-stop shop" for strategic analysis and advice on the information technology industry as a whole. The Yankee Group continues to distinguish itself by providing comprehensive research, electronic content delivery, and personalized one-to-one analysis and planning assistance to its customers. For additional information regarding The Yankee Group and the services we offer, please visit our web site at www.yankeegroup.com.
SOURCE Yankee Group
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