ITU Telecom Americas 2000 reflects wave of privatization in Latin America

July 1, 2000

By Peter Howard Wertheim and Dayse Abrantes


Organized by the International Tele communication Union (ITU) and hosted by the Brazilian government, ITU Telecom Americas 2000 reflected the wave of privatization and competition that has swept through Latin America in recent years. The event, the fourth regional telecommunications exhibition and forum for the Americas region, was held in April in Rio de Janeiro.

The exhibitors' profile at the show has changed significantly in recent years, mainly reflecting the penetration of European telecommunications giants in the region. Among the five largest exhibitors were two European operators, Portugal Telecom and Telefonica of Spain; Brazilian telco Telemar; and two vendors, Nortel Networks and Siemens. Approximately 18,000 trade visitors came to the show, which included 303 exhibitors from 25 countries. Another 10,000 attendees were part of the exhibitors' staff or guests. Nearly 715 forum delegates, as well as 300 speakers from 38 different countries and international organizations, attended the Americas 2000 Forum.

The fast-changing telecommunications environment in Brazil provided a rich context for the event. Brazil privatized Telebras, the holding company for all 27 state operators in 1998, for $18.6 billion. The government also privatized the eight B-band cellular operators for $6.7 billion and the long-distance and international carrier, Embratel, for $2.2 billion, in what turned out to be the largest telecommunications privatization in Latin America's history.

Brazil Communications Minister Pimenta da Veiga forecasted investments amounting to $50 billion in the Brazilian telecommunications industry over the next four years. He said, "By year 2003," he said, "our fixed telephone plant may reach 50 million lines, compared with 28 million lines today." Data traffic in Brazil is expected to grow by 300% in the next three years, according to a survey by Dataquest. With a population of almost 170 million and with "mirror" companies organized to compete with current companies barely underway in both wireline and wireless services, growth expectations are well founded.

Although the largest number of products launched during the event were in the Internet and wireless data segments, confirming the hottest trend seen at Telecom 99, fiber optics held an important place at the show. In fact, the Brazilian Association of Electro-Electronic Industries (ABINEE) forecasts that within the next three years, Brazil will rank third in the world, after the United States and China, with the largest amount of fiber-optic cables deployed.

According to telecom analysts, Brazil's fiber-optic-cable backbone has reached 76,000 km. However, there is little competition among carriers, except in the Rio de Janeiro and Sao Paulo state links, where only two competitors are offering 608,000 voice channels for sale. According to the Yankee Group, due to the upcoming competition in the Brazil's backbone, data-communications prices are expected to slide by at least 50% until year 2003, while the consumption is expected to increase by 82%.

Last year, data traffic in the telecommunications networks expanded by 40%, compared with 15% in voice traffic. Paulo Kobayashi of Pactual Bank believes this growth proportion should repeat itself in the next five years.

"Brazil's market today is highly propitious for creating a totally new fiber-optic network. It is good to remember that the teledensity in the country is 13 lines per 100 inhabitants, with projects for increasing this number to 33 per 100 by 2002. This is an ideal market for incorporating advanced fiber-optic technologies, significantly improving the existing transmission and routing systems," said Arely Castellon, vice president for Latin America with Ciena Corp.

At Americas Telecom 2000, Ciena announced the inauguration of Ciena do Brasil Limitada, a Ciena subsidiary in the city of Sao Paulo. "Telecommunications continues to expand in Brazil, and Ciena is now well positioned to sustain the growth of this stimulating market," said Castellon.

The executive added that the expansion of fixed networks, which includes new platforms such as Internet protocol (IP) and Asynchronous Transfer Mode (ATM), has occurred at a slower pace than the cellular network. "However, the wave of privatizations stimulates investment in backbone capacity in Latin America," said Castellon.

Most of this investment is coming from outside of the region. "As a result of privatization, foreign capital now controls most telcos in Latin America, and domestic capital either plays second fiddle or is nonexistent," said Purificacion Carpinteyro, vice president of MCI WorldCom and director of external affairs of Embratel, Brazil's largest long-distance and international carrier, now controlled by MCI.

During the opening ceremony of the Americas 2000 Forum, ITU secretary-general Yoshio Utsumi highlighted the opportunities offered to Latin America. He also described the need to develop and integrate IP backbones throughout the region to keep pace with high demand for Internet services as one of the main challenges facing operators and governments in Latin America. According to ITU statistics, the number of Internet users in South and Central America and the Caribbean will increase by five million this year, bringing the total for Latin America to 15 million by the end of 2000. Currently, the number of Internet users in Brazil is estimated at five million.

Exhibitors at the show illustrated the attention now being placed on the Latin American market. For example, Jorge Minas, marketing director in Brazil for Pirelli Cables, said that among the main novelties brought to Americas 2000 was FreeLight, a new line of optical-fiber products, and the worldwide launch of the company's e-commerce Website.

Bermuda-based Global Crossing, which offers services via fiber optics, is betting $500 million in Brazil, as part of its projects to set up onshore and underwater cabling in South America. Luis Carlos Pinto Correia, Global Crossing's director in Brazil, said the company has already signed three contracts with multinationals operating locally. Global Crossing is currently negotiating with Impsat and Telemar, a Brazilian operator, among others, as part of its strategy to establish interconnection points through partnerships.

Meanwhile, Alcatel presented its "Multiservice on demand" demo focused on Optinex, its line of carrier-class transmission products. Optinex enables operators to upgrade their networks with a single multiservice platform, flexible enough to support the existing and projected volume of multimedia traffic and offer revenue-generating high-quality services, said Bruno Piacentini, president of Alcatel transmission activities.

Fujitsu brought two exclusive world launches to Americas 2000. One was a WDM solution that can increase a fiber-optic network's transmission capacity by a factor of 32. Working in tandem with 10-Gbit/sec transmission equipment, it enables capacity of up to 320 Gbits/sec, the equivalent of about four million simultaneous telephone calls. In lab trials, Fujitsu's WDM has achieved transmission speeds of 1.7 Tbits/sec.

Fujitsu also presented the FSX2000, a services and applications platform for optic transportation and distribution for up to 2,000 subscribers, expandable according to demand. It supports analog and digital services.

Lucent Technologies presented the extremely compact SDH STM-1 equipment, which it says provides an excellent cost-benefit ratio. Siemens presented its TransXpress Optical Service Node (OSN), an optical crossconnect, and the new version 5.5 of DirX Meta Directory. Siemens says that this directory service now provides full support of the SSL/TLS protocol for secure data communications.

Xtal, a Brazilian company and one of the largest suppliers of optical fiber in Brazil, presented Acrylate singlemode and 62.5/125-micron multimode optical fibers. The company also used the event to re-launch its 50/125-micron multimode fiber in response to current requirements for systems capable of transmitting at high speeds over short distances.

Reichle & De-Massari (R&M), a Switzerland-based telecom company, displayed a line of products to supply the warmed-up telecom market with optical-fiber patch boxes, copper-quick connection blocks for fixed telephony connections, DIO and DGO, and the new connectors E2000 (LSH), explained Andrea Pires, R&M press officer.

Brazilian long-distance and international service operator Intelig took part in the first international telecommunications event since starting operations this year. Intelig is setting up state-of-the-art telecommunications infrastructure by investing about $1.62 billion until 2002 to build and operate its telephone network in Brazil. In 2002, when the Brazilian network is completed, Intelig will have 15,000 km of its own fiber-optic cables.

Peter Howard Wertheim and Dayse Abrantes are freelance writers based in Brazil.