Brazil's Broadband Plan Takes Shape, and MNCs Are Noticing

Samantha Bookman, FierceTelecom, The Motley Fool
Updated

There's a new gold rush of sorts in Latin America, but it's not gold in them thar hills, it's fiber.

The continuing expansion of Fiber to the Home (FTTH) networks in Latin America and the opportunities apparent in that expansion are best exemplified by Brazil, where the government initiated an ambitious buildout in both cities and rural areas. To enable a faster and more economical network buildout, Brazil has begun modifying its regulations regarding how telecoms do business.

These regulations take into account the changing nature of networks to an IP-based environment. For example, no longer are telecoms restricted to providing voice services: they can add broadband and pay-TV services to their portfolio and sign subscribers to triple-play bundles that boost profits.

On the flip side, incumbent telcos are no longer protected by regulations that prevented multinational companies (MNCs) from competing directly with them in these areas. And those MNCs are beginning to rush into the country (if they weren't there in some capacity already) to fill the services niche.

Netflix (NAS: NFLX) launched its services in Sao Paolo just this month. France Telecom's (NYS: FTE) Orange Business unit announced it will expand its network in Brazil to serve more business customers tenfold. Verizon's (NYS: VZ) Terremark is expanding its Sao Paolo data center. On the television side, Genesis Solutions, a hybrid broadcast-media service provider, moved into the market following its acquisition by Global Crossing (NAS: GLBC) . Vivendi subsidiary GVT took advantage of the new regulatory environment to begin offering DTH (direct to home) satellite services in Sao Paolo. DirecTV (NAS: DTV) increased its presence this year, gaining 427,000 subscribers in Latin America in the first quarter of 2011.

Up front, satellite broadcast services don't seem to have much relationship to broadband expansion. But in a country where IPTV service is just beginning to ramp up, it's a key entry point for many providers. As Jose Otero, President of Signals Telecom Consulting noted in a recent FierceTelecom interview, while DTH services from foreign companies won't have a huge impact on the pay-TV market in Brazil, "it would help drive investment on Fiber to the X (FTTX) networks in the markets."

It's an important step in a country where demand continues to grow. Telebrasil noted earlier this year that broadband subscribers in Brazil rose more than 50 percent from March 2010 to March 2011, with 38.5 million wireline and wireless broadband connections.

Rapid FTTX growth will bring its share of headaches. Brazil's government is mainly dealing with the capex needed to build the physical plant. But beyond that, keeping that growth in pace with consumer demand will be difficult. As Bobby Blumofe, senior vice president and general manager of the network division at Akamai noted to FierceTelecom, ISPs especially must meet exploding traffic demands. "(T)hey're also going to have to now deal with these issues that we're facing in Europe, North America and parts of Asia."

Next week we'll feature a column by analyst Jose Otero, who will have a more in-depth look at how Latin America's broadband and the challenges the nation's telcos face in rolling out IPTV service.

This article originally published here. Get your telecom industry briefing here.

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