Study: Telephony Costs Inhibiting Latin American Growth

A recent study of Latin American Internet access
providers found that telephone charges are the biggest obstacle on the road to increased Internet usage in that part of the world.

The study from International Data
(IDC) was based on interviews with Internet Service Providers (ISPs), telecommunication service providers, and cable operators in Argentina, Brazil, Chile, Colombia, Mexico, and Venezuela. IDC said the players in these countries handle 40% of the accounts in the Latin American market or approximately 1.2 million Internet users.

Those Internet access providers surveyed said they will spend up to US$6.3 million each on technology in 1998, a combined investment of more than US$390 million, according to IDC. Personal Internet usage accounts for an estimated 60% of all Internet access in Latin America, the study revealed.

Prohibitive telephone charges, however, have a significant impact on the typical Latin American Web user. The average American Netizen usually makes just one payment to an ISP for Net access, while the Latin American user must pay for ISP connectivity and per-minute charges to local phone companies for every minute they are online, according to IDC.

“Despite a heterogeneous nature of the regional market, basic telephony costs remain the single largest inhibitor to greater growth in Internet usage in Latin America,” said Annika Alford, research manager, IDC Latin America.

“These per-minute costs have allowed cable Internet access pushers in the regions to position themselves as low-cost alternatives to traditional analog dial-up access,” added Alford.

Since cable operators can offer users potentially higher bandwidth and
price advantages, interest in cable Internet access is growing
significantly in Latin America, IDC said. The seven surveyed cable operators in the region predicted cable account growth would represent the greatest increase of all the access types, accounting for a 504% surge for the year.

The IDC study also reported that Brazil had the strongest consumer market with approximately 79% of all accounts in the home, while Mexico represented the lowest consumer penetration with only 29% of total accounts from the home.

Other findings include:

  • Latin American Internet access providers typically had two links to the Internet backbone in the United States
  • One-third of those surveyed used MCI for their connections to the
    backbone in the U.S.
  • Sprint was the second preferred link with 26% of the sample
  • Leading providers of domestic connections to the Internet backbone were Embratel, Avantel, and ImpSat.

Overall, surveyed access providers were optimistic about growth in 1999, the study said. The group forecasted a 90% increase in the total number of accounts they will service next year. Dial-up accounts are forecasted to grow 87% in 1999, and dedicated accounts are expected to increase 124%.

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