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Latin America’s Telecom Odyssey: From Dial Tone to IP Services. Hector Hernandez Senior Telecom Analyst [email protected]. Agenda. Definitions and Methodology Latin America’s Traditional Long Distance Market Overview Latin America’s IP Long Distance Telephony Market Overview - PowerPoint PPT Presentation
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Hector HernandezSenior Telecom [email protected]
Latin America’s Telecom Odyssey: From Dial Tone to IP
Services
Agenda• Definitions and Methodology• Latin America’s Traditional Long
Distance Market Overview• Latin America’s IP Long Distance
Telephony Market Overview• IP Long Distance Market Drivers and
Inhibitors• Future Trends• The Next Steps
IP Telephony in Latin America Definitions
• Traditional Long Distance Service
• IP Telephony– PC to PC calls– PC to Phone calls– Phone to Phone
calls– Wholesale Market– Retail Market
• Web Talk– Click-to-talk– Conferencing– Messaging– IP Telephony
IP Telephony in Latin America Methodology
• In-country interviews with: – Incumbent operators – Next generation providers– Competitive exchange providers– Local Internet telephony service providers
(ITSPs)• Regional interviews with:
– Traditional telephony carriers – Global Internet telephony service providers
(ITSPs)– IP telephony equipment vendors
Latin America’s Long Distance Market Study
Preliminary Results
Latin America’s Domestic Long Distance Markets, 1999: Quite
Predictable
Total Market Value: US$10.6 Billion
$1,359
$4,427
$228$670
$3,008
$453$507
-5,000
10,00015,00020,00025,00030,00035,00040,00045,000
Market Revenues (US$ Billions)
Traffi
c (B
illio
ns o
f Min
utes
)
28% Revenues
(US$ Millions)
45% Revenues
ArgentinaBrazil ChileColombiaMexicoVenezuelaOther ELAM
51%
Traffic23%
Traffic
Latin America Traditional International Long Distance Market Revenues 1999:
Not Your Usual Suspect
Total Market Value: US$4.1 BillionSource: IDC’s Latin America Telecommunications Continuous Information Service, 2000
1999 Market Revenues (US$ Millions)
53% Revenues
$833.29$462
$538
$194 $113
$1,759
$266-1,0002,0003,0004,0005,0006,0007,0008,000
Market Revenues (US$ Billions)
Traffi
c (B
illio
ns o
f M
inut
es)
ArgentinaBrazil ChileColombiaMexicoVenezuelaOther ELAM
42% Revenues
52.3%Traffic
52.3%Traffic
42% Revenues
20%Traffic
20% Revenues
Six-Country Traditional Domestic Long Distance Market
Forecast: A Price War$0.17 $0.16
$0.14$0.12
$0.11$0.10
-10,00020,00030,00040,00050,00060,00070,00080,00090,000
100,000
1999 2000 2001 2002 2003 2004
Six-
Coun
try
Dom
esti
c Lo
ng
Dis
tanc
e (M
illio
ns o
f Min
utes
)
$-
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
$0.16
$0.18
Aver
age
Pric
e pe
r M
inut
e (U
S$)
CAGR 7%CAGR 7%
CAGR -13%CAGR -13%
Six-Country Traditional International Long Distance
Market Forecast$0.46
$0.41$0.35
$0.31$0.28 $0.26
-
5,000
10,000
15,000
20,000
25,000
30,000
1999 2000 2001 2002 2003 2004
Six-
Coun
try
Inte
rnat
iona
l Lon
g D
ista
nce
(Mill
ions
of M
inut
es)
$-$0.05$0.10$0.15$0.20$0.25$0.30$0.35$0.40$0.45$0.50
Aver
age
Pric
e pe
r M
inut
e (U
S$)
CAGR -24%CAGR -24%
CAGR 21%CAGR 21%
6-Country Domestic Long Distance: IP Arrives in
2001 • Driven by: – Efficiencies– Lower barriers to entry– Scaleability– Value Added Services
• Unified Messaging• Click-to-talk
• Hindered by:– Regulation– Competition from
cellular, cable telephony, etc.
IP DLD CAGR 2000-2004 =443%
24%24%
-
20,000
40,000
60,000
80,000
100,000
120,000
199920002001200220032004Dom
esti
c Lo
ng D
ista
nce
Traffi
c (M
illio
ns o
f M
inut
es)
0%
5%
10%
15%
20%
25%
30%Traditional DLD
IP DLDIP as % of Total DLD
6-Country International Long Distance: IP
Anywhere• Driven by: – Arbitrage– Efficiencies (cost per
call, lower bandwidth requirements)
– Lower barriers to entry
• Hindered by:– Regulation– Equipment
Interoperability– QoS
IP ILD CAGR 1999-2004 = 647%
25.1%25.1%
-
5,000
10,000
15,000
20,000
25,000
30,000
199920002001200220032004Inte
rnat
iona
l Lon
g D
ista
nce
Traffi
c (M
illio
ns o
f Min
utes
)
0%
5%
10%
15%
20%
25%
30%Traditional ILDIP ILD
IP as % of Total ILD
Global IP Telephony Market: The Opportunity
• Driven by: – Arbitrage– Efficiency– Gain Market Share– Value Added Services
• Unified Messaging• Web Talk
• Hindered by:– Regulation– QoS– Equipment
Interoperability
Source: IDC’s IP Telephony Services: Market Review and Forecast, 1998-2004.
IP T
raffi
c (M
illio
ns o
f Min
utes
)
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1999 2000 2001 2002 2003 20040%
5%
10%
15%
20%
25%
30%Global IP MOU6-Country IP MOU6-Country Percent ofGlobal IP Traffic
Global IP CAGR 1999-2004 = 119%
Latin America’s IP Telephony Market Drivers
Shift 2000-2004
VALUE ADDED VALUE ADDED SERVICESSERVICES
MARKET SHAREMARKET SHARE
MARKET SHAREMARKET SHARE
LOWER BARRIERS LOWER BARRIERS TO ENTRYTO ENTRY
EFFICIENCIESEFFICIENCIES
ARBITRAGEARBITRAGE
YEAR 2000YEAR 2000 YEAR 2004YEAR 2004
VALUE ADDED VALUE ADDED SERVICESSERVICES
EFFICIENCIESEFFICIENCIESARBITRAGEARBITRAGE
LOWER BARRIERS LOWER BARRIERS TO ENTRYTO ENTRY
Latin America’s IP Telephony Market Drivers Arbitrage: Chasing the
Opportunity
IP/PSTN Price Gap
Arbitrage Opportunity
Country 1Launch
Country 2Launch
Country 3Launch
Source: IDC’s IP Telephony Services in Europe, 1998-2003
Latin America’s IP Telephony Market Drivers• Arbitrage (origination Vs
termination)
PSTN PSTN
IP Gateway IP GatewayPublic Internet
International Carrier System
Settlement RatesTransport CostsOriginated $$Originated $$ TerminatedTerminated
Latin America’s IP Telephony Market Drivers• Arbitrage Onnet Vs. Offnet
PSTN PSTN
IP Gateway IP GatewayPrivate Network
SLAQoS
International Carrier System
Settlement RatesTransport CostsOriginated $$Originated $$ TerminatedTerminated
Latin America’s IP Telephony Market Drivers
Typical VoIP call 10 Kbps (Toll Quality)
Typical Voice Channel 64 Kbps
64 Kbps
• IP Network Efficiencies
Initial Investment Comparison
Source: IDC, 2000
SOLUTIOSOLUTIO
NN INVESTMENTINVESTMENT CAPACITY CAPACITY ADVANTAGEADVANTAGE
S S •QualityQuality•ReliabilityReliability•Proven Proven TechnologyTechnology•Efficiency Efficiency •New New Services Services Potential Potential •ScaleabilityScaleability•Efficiency Efficiency •New New Services Services Potential Potential •ScaleabilityScaleability
Traditional Traditional TelephonyTelephony
IP IP TelephonTelephon
yy
Class 5 Class 5 SwitchSwitch
IP PopIP Pop
IP IP Full Operation Full Operation
US$20 US$20 millionmillion
US$US$100,00100,00
00
US$3 to 5 US$3 to 5 millionmillion
20,00020,000LinesLines
400,000400,000Minutes per Minutes per
MonthMonth
35 Million 35 Million Minutes Minutes
per Monthper Month
BANDWIDTH BANDWIDTH AVAILIBILITYAVAILIBILITY
Latin America’s IP Telephony Market
Inhibitors
QOSQOS
REGULATIONREGULATION
YEAR 2000YEAR 2000
EQUIPMENT EQUIPMENT INTEROPERABILITYINTEROPERABILITY
REGULATIONREGULATION
EQUIPMENT EQUIPMENT INTEROPERABILITYINTEROPERABILITY
QOSQOS
BANDWIDTH BANDWIDTH AVAILIBILITYAVAILIBILITY
YEAR 2004YEAR 2004
Latin America’s IP Telephony Market InhibitorsIP Telephony Regulation IP Telephony Regulation
- 2000 - 2000
CHILECHILE
NO NO RESTRICTIONS.RESTRICTIONS.
ARGENTINAARGENTINACurrently Currently banned.banned.
Only Only licensed licensed
operators operators can carry can carry voice . voice . Clients Clients
cannot use cannot use value-added value-added services to services to transmit transmit voice. voice.
Will open in Will open in November November
2000.2000.
BRAZILBRAZILNot Not
regulatedregulatedOnly Only
licensed licensed operators operators can carry can carry
voice. voice. COLOMBIACOLOMBIA Only licensed Only licensed
operators operators
can use VoIP.can use VoIP.
MEXICOMEXICONot Not
regulated. regulated. Only licensed Only licensed LD operators LD operators
can carry can carry voice. voice.
VENEZUELAVENEZUELANot Not
regulated. regulated. Only CANTV Only CANTV
can offer can offer voice voice
services until services until October October 2000.2000.
Latin America’s IP Telephony Market
Inhibitors - Regulation
Regulation
Voice Over IP
Latin America’s IP Telephony Market
Inhibitors
Typical IP Level 200-350 ms
No Noticeable Delay
Barely Noticeable Delay
Acceptable Delay
Unacceptable DelayTypical Satellite Level 300 ms
Typical PSTN 50-150 ms
450
0
50100150200250300350400
450
0
50100150200250300350400
Quality of Service (QoS)Telephony Delay Levels (milliseconds)
ms
Worst
Source: IDC’s IP Telephony Services in Europe, 1998-2003
Best ms
Latin America’s IP Telephony Market Players• Regional ITSPs:
– Wholesale Operators: ITXC, iBasis, GRIC, etc.– Retail Operators: Net2Phone, Deltathree, etc.– Clearing Houses: (AT&T, Telia, etc.)
• Local ITSPs:– Incumbents: buying wholesale minutes, offering
IP Telephony, installing IP Telephony networks– Clecs: Globus, Cybercenter, etc.– Other Players: ISPs, clandestine operators,
callback operators (using IP Telephony), etc.
Main Global IP Telephony Players, 1999
• Traffic is growing at an average of 147% per quarter
• 13% of traffic is going to and from the LA region
• Wholesale (44%) Vs Retail (56%)
• New companies playing in the LA space: Ursus, AIC, talk.com,Netvoice, Dialpad, etc.
Source: IDC’s IP Telephony Services: Market Review and Forecast, 1998-2004.
ITXCIBASIS
DELTA THREE
Net2Phone (AT&T)
150.1 156.575 319
701
1999 Traffic (Billions of Minutes)
Total
Future Trends
Web Talk Convergence
Business ModelBusiness ModelWeb-centricWeb-centricTalk ServicesTalk ServicesFree to usersFree to users
Fax-to-emailFax-to-emailVmail-to-emailVmail-to-email
Instant Instant MessagingMessaging
Buddy ListsBuddy Lists
WebWebMessaginMessagingg
PC-to-PCPC-to-PCPC-to-phonePC-to-phonePhone-to-PCPhone-to-PC TelephonTelephon
yy
Audio,Audio,Video,Video,Document/Document/File SharingFile Sharing
WebWebConferencinConferencin
gg
Click-to-XClick-to-XVoice-Voice-EnablemeEnableme
ntnt
V-CommerceV-Commerce Mobile NetworksMobile Networks
Worldwide Web Talk User Forecast
A Web User is a Talking User
0
100
200
300
400
500
600
700
WW Internet Users 240 328 427 521 602 693Web Talk Users 10 40 107 208 361 416
1999 2000 2001 2002 2003 2004
Key Assumptions:• Simple, easy-to-user,
auto-install utility.• Cellfon quality or better
is typical.• 1999 is start-up year for
many services.• 12-15 services reach
1 million+ users in 1st half 2K.
• Hotmail-like growth expected for PC-to-PC services.
Mill
ions
Source: IDC, 2000
Latin America’s IP Telephony Market
Inhibitors - Regulation
Voice Over IP
Regulation
WebTalk
Web Talk in Latin America: The Chilean
Example in 2001
Total Minutes Total Minutes of of
Webtalk:Webtalk:255,681,429255,681,429
% of % of ResidentiResidential Users :al Users :
48%48%
Number of Number of
ResidentialResidential Users:Users: 546,328546,328
% of % of Residential Residential
Users Users Doing Doing Chat:Chat:50%50% NumberNumber of Residentialof Residential Users Doing Users Doing
Chat:Chat:273,164 273,164 Number of Chat Minutes Number of Chat Minutes
per Week per per Week per User:User:120120 Number Number
of Minutesof Minutesper Year perper Year per User: 6240User: 6240
Total Total Number of Number of
Chat Chat Minutes:Minutes:
1,704,542,861,704,542,86
1 1
% of % of Minutes of Minutes of Webtalk:Webtalk: 15%15%
Internet Internet Users:Users:
1,138,1831,138,183
Equivalent to 10% of Equivalent to 10% of DLD for that yearDLD for that year
What is Next?• Clarify Regulation• Operators:
– embrace the technology – generate new services – leverage on the efficiencies– Develop QoS, SLAs
• Equipment Vendors: – Achieve true interoperability