The Yankee Group Predicts Massive Demand for Undersea Cable Connectivity in Latin America

Competition Heats up between Global Crossing, Telefonica and 360networks

Sep 11, 2000, 01:00 ET from Yankee Group

    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
     ( Photo: )
      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

SOURCE Yankee Group