Study: DSL growing fast in Latin America

www.idg.com.sg By Juan Carlos Perez IDG News Service, Latin America Bureau 17-03-2003

MIAMI - Digital subscriber line (DSL) will continue growing by leaps and bounds both in terms of revenue and accounts in Latin America in the coming years, as consumers and businesses adopt this broadband technology to improve their Internet use, according to a new Pyramid Research Inc. report.

Consumers who are heavy Internet users and medium-size businesses are the main adopters in Latin America of DSL, a broadband technology that allows subscribers to use a regular telephone line to simultaneously access the Internet at high speeds and make and receive voice calls.

Because DSL connections to the Internet are faster and more stable than dial-up connections, DSL subscribers enjoy a better Internet experience than their dial-up counterparts, especially with regard to more sophisticated content and applications, such as multimedia.

DSL growth in Latin America should spur a wider availability of multimedia content and applications, such as gaming, from regional and local providers, although Pyramid doesn't expect this development to be massive. Video represents a good opportunity for local providers of broadband content, but it remains scarce, according to the report, titled "Latin America: DSL's Swift Uptake."

In the long term, broadband content and applications will be fundamental for the growth of DSL in the region, but not in the short term, since at present the speed and stability of DSL connections are enough to attract subscribers, according to Pyramid.

Latin America had about 900,000 DSL accounts at the end of 2002, a figure expected to rise to about 6 million by the end of 2007, said report author and Pyramid analyst Gabriela Baez on Thursday.

Excluding connection fees, revenue from DSL services in Latin America amounted to about $300 million in 2002, or 13 percent of the region's total Internet service revenue, which includes dial-up, broadband and leased line services, she said. Pyramid expects DSL services revenue in 2007 to reach around $2.3 billion, or 40 percent of the estimated total Internet service revenue in the region for that year, she said.

Currently, DSL is the broadband technology with the most accounts in Latin America, and ranks second in revenue, behind leased lines with dedicated Internet connections, Baez said. However, Pyramid expects DSL to move into the top spot in revenue by early 2004, Baez added.

DSL's growth in Latin America is being fueled by investments in its roll out from incumbent carriers, which benefit from the technology because DSL accounts generate more revenue per subscriber than dial-up accounts, according to the report. Incumbent carriers have also found in DSL a vehicle to counterpunch cable companies, which provide a competing broadband option using their cable infrastructure.

On the downside, DSL does compete against the business of leased lines with dedicated Internet service that the incumbents also market, Baez said. DSL also eats into the incumbents' local service revenue because it removes the local per-minute fees that dial-up Internet calls generate, she added.

As usual, Brazil has the largest number of DSL accounts (70 percent). About 92 percent of DSL accounts are concentrated in Brazil, Chile, México and Venezuela.

For this study, Pyramid took into account the Internet service markets of Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Uruguay and Venezuela.