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Telecom Outlook 2011

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Telecom Outlook 2011

The keyword for 2011: Broadband

By Patrick Nixon

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ith most economies in Latin America well and truly on the mend, the region has many growth opportunities to look forward to in 2011 including 4G spectrum auctions, value added services and devices. All of this hinges on broadband development.

Mobile broadband
ccording to the Global mobile Suppliers Association (GSA) the story of 2010 for mobile broadband across the world was the shift to HSPA+ with some 100 HSPA+ launches expected by the end of 2010. However, in Latin America many operators were still focusing on 3G and attracting customers to basic mobile internet. Entel PCS in Chile was the first to launch HSPA+ in the region, and according to 4G Americas, HSPA+ infrastructure is expected to be launched in Brazil, Mexico, Argentina and Colombia during 2011. While LTE trials started in 2010, operators will be keen to get as much mileage out of their networks with HSPA+ upgrades before shifting to LTE. The Latin America and the Caribbean (CALA) region was expected to end 2010 with 35mn UMTS-HSPA technology connections and 530mn connections in the 3GPP technologies (GSM-HSPA) segment, according to 4G Americas. However, in mobile broadband, the leadership will be distributed between Brazil, Argentina and Peru, according to the trade association. The odd one out in this equation is WiMax, for which 2010 was expected to be a make or break year. Much hope was placed on significant rollouts happening in Russia and India to bring about the economies of scale in equipment prices that would in turn benefit WiMax in Latin America. But then appeared TD-LTE, a version of the LTE technology that works on unpaired spectrum bands (TDD) typically used for WiMax, as opposed to paired spectrum bands (FDD). India now looks like it could opt more for TD-LTE than WiMax. And Russian operator Yota - which has WiMax deployments throughout Russia and has committed to build WiMax in Nicaragua and Peru - announced it was planning to migrate to LTE.

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Telecom Outlook 2011

Major WiMax supporters such as Israelis Alvarion also announced they would need to support both technologies, given the foreseen growth of TD-LTE. But the game is not over yet. Infrastructure providers say that TD-LTE and WiMax have 80% of basic elements in common, meaning that migration from WiMax to TD-LTE is feasible. In October, Trinidad & Tobago incumbent TSTT launched the countrys first WiMax network and these questions surely went through their minds before deciding to put their money on the table. Likewise, Caribbean and Central American mobile operator Digicel is deploying a WiMax network in Jamaica to target residential customers. Digicels CEO Colm Delves assured BNamericas in August that the company sees WiMax as a stepping stone to the inevitable LTE and that their equipment provider ZTE has assured them there is a migration path. Consultancy ABI Research predicts growth in global WiMax subscribers - albeit slower than previously expected - reaching 59mn mobile in 2015 with Latin America representing 7-8% of that amount. With fixed and mobile broadband amounting to less than 10% penetration across the region, there is ample room for continued growth. NexTV has estimated that mobile broadband will grow to 90mn subscriptions in Latin America by end-2011 and if the same 29% growth rate seen in 2010 continues in 2011, there could potentially be 57mn fixed broadband connections by December this year. To fuel demand for mobile broadband there are spectrum auctions underway now or scheduled for 2011 in Brazil (3G), Colombia (3G/4G), Chile (4G), Mexico (3G) and Peru (3G), with Brazilian 4G spectrum auctions likely in 2012.

Fixed broadband

hile fixed broadband may not be growing as fast as mobile, it is still considered more reliable and to have more capacity; further, it is seen as the lifeline for otherwise ailing fixed telephony operators. In 2010 technology vendors stepped up their promotion of cloud-based corporate services and teleconferencing, while the idea of the connected home including online music, gaming and IPTV - gained traction.
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Telecom Outlook 2011

Movistar launched the Homestation home multimedia platform in 2010, which integrates computers, MP3 players, video consoles, printers and other devices and that can be controlled using a digital phone. The company also launched a free cloud computing service providing broadband subscribers with 50Gb of cloud storage capacity for their photos, music and other information. Networks are under pressure from bandwidth intensive applications such as video and peer-to-peer transfers. Many operators are investing in VDSL, ADSL2+ and FTTx, while cable TV companies are looking at Docsis 3.0. Telefonica began deploying a US$2.5bn fiber optic network in Chile in September and expects to launch IPTV over it in 1Q11. Ultra-broadband was rolled out only in isolated cases in 2010, meaning there is plenty of scope for 2011. Brazils GVT has said that 60% of its broadband clients receive services of 10Mbps or above, and it has confirmed that it will be pushing 15Mbps service during 2011.

Backhaul

he burgeoning demand for international content could put pressure on international transport networks such as undersea cables and satellite fleets.

ABI Research recently pinpointed Latin America as the leading backhaul investment zone for the next five years. And 2011 is the year that stands out with microwave backhaul investment peaking at US$266mn then gradually declining through to 2015. The real bottleneck is in outlying areas, where backhaul is either insufficient or lacking altogether. Indeed the first step of the Brazilian governments multibillion dollar national broadband plan is to piece together an alternative backbone - a project that is sure to catch more than just a few headlines in 2011. The need for national backhaul has been a concern for the last few years, and prompted Brazilian mobile operator Vivo to secure satellite backhaul capacity with Hughes Network Services in early 2009. O3b Networks, the satellite startup that plans to bring internet access to 3bn people in emerging markets via medium earth orbit (MEO) satellites, secured its final funding round for a total of US$1.2bn.
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Telecom Outlook 2011

The company is aiming to offer backhaul in emerging markets at a cost that competes with microwave. O3b said in October it was close to finalizing a deal with its first client in Latin America, an ISP in Brazil. We can expect similar announcements with regional operators throughout the year.

Smartphones

martphones were a major growth story in 2010 and that will continue for several years as increasingly more people look for instant access to the web. The line between using social networking sites for work or entertainment is becoming blurred as companies start to see them as a productivity tool. Smartphones could represent 40-45% of total handset volume sales in Latin America in 2015 compared to 12% in 2010, according to Pyramid Research. However, average smartphone prices in Latin America are around US$200-300, which is still too high for mass market adoption. The consultancy predicts that in 2011 Latin America will see its first subUS$100 smartphone as local manufacturing plays an increasingly important role. Both Brazil and Argentina have local manufacturing due to high import taxation issues and that could mark the difference and even spell a shift in the market share of the top smartphone brands, which in most countries in the region are Research In Motion (RIM) and Nokia. RIM, maker of the BlackBerry, had a great year in Latin America in 2010 and is showing no signs of slowing down. That said, analysts are forecasting growth in upcoming smartphone operating systems, namely Android, Windows Mobile 7, the iPhone OS, Samsungs Bada and Nokias Meego.

Major market changes

osta Rica promises to be one of the most dynamic markets in 2011, with some 60 new carriers licensed during 2010 and three mobile licenses scheduled to be auctioned by the end of this year. In the case of three major players - Telefonica, America Movil and Millicom - their entry into Costa Rica would give near-complete coverage of Central America, meaning there could be beneficial pricing effects for their users across the whole sub-region.

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Telecom Outlook 2011

And having taken control of Vivo, Telefonica is now in a position to expand triple and quadruple play offerings across Brazil and compete head to head with America Movil. In Mexico one of the main outstanding issues from 2010 was discussion of a bill to allow foreign telecom groups to own more than 49% of a carrier. Many experts believe this limit on foreign investment has slowed down the development of infrastructure and services. The limit looks set to be repealed, which in turn may provide incumbent Telmex with enough fuel to argue that it be allowed into the highly sought after pay-TV segment.

TV

here are now 14 Latin American countries that have decided on a national digital TV standard.

While most of Latin America has chosen Japans ISDB-T, the odd ones out are Uruguay, Panama and Colombia which chose Europes DVB. Also, the Dominican Republic, Honduras, El Salvador and Mexico picked the US standard ATSC. Press reports have said that Japanese representatives have been trying to woo Uruguays government into changing its mind and going with ISDB-T. The Japanese have reportedly offered cash for equipment and training. A decision could potentially be made before the end of 2010. As regards IPTV, Cable & Wireless Communications (C&WC) is looking at launching in various Caribbean markets in the second half of its fiscal year 2011, boosting existing triple play offerings, and is also contemplating quadruple play in Panama. Chilean telco Movistar also said it is expecting a full commercial launch of IPTV service in the first quarter of 2011.

Number portability

inally, Argentina, El Salvador, Colombia and Chile are scheduled to launch number portability systems in 2011, bringing the number of countries with active systems in the region to at least nine.