• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
Page
  1. 1
    1
  2. 2
    2
  3. 3
    3
  4. 4
    4
  5. 5
    5
  6. 6
    6
  7. 7
    7
  8. 8
    8
  9. 9
    9
  10. 10
    10
  11. 11
    11
  12. 12
    12

Telecommunications in Latin America "The dawn of a new economy"

Extracts from this document...

Introduction

TELECOMMUNICATIONS IN LATIN AMERICA "THE DAWN OF A NEW ECONOMY" By Sydney Jones Tila Neto J.J. Centurion Chris John October 6, 2004 The current environment in the Latin American telecommunications market is one of perpetual change. After many years of significant investments made in infrastructure, many players are considering reducing their presence in the region due to the global economic situation. While many countries in the region have liberalized their markets (market leaders are Chile, Brazil and Mexico), there are still significant pockets of areas and market segments with restrictive competition practices as well as state-owned operator monopolies (Cost Rica, Ecuador, Honduras, and Uruguay). After many years, the region's key markets are witnessing open competition. However, in some markets this open competition is not yet a REALITY. In addition, we have seen major growth in the deployment of wireless, data and broadband services across the Latin American region. Much of the focus has been on Internet access and not content. But, there is a huge potential marketplace for the distribution of Spanish- and Portuguese-language content in many countries. It is easy to get excited about investment in Latin America in general, and in telecommunications in particular, particularly in such "hot spots" as Peru, Mexico, Chile and others, as evidenced by the hundreds of companies that have done so over the past decade. My presentation is designed to put that investment into a sober context of benefits and burdens, while observing what appears to be a phenomenon of a new economy driving the sector. The presentation begins with a brief history of the opening of the telecommunications markets in Latin America, with emphasis on a few countries that have attracted a high level of investor interest. These include particularly Mexico, Chile and Peru, but also others who have rebalance tariffs, privatized the incumbent telephone company and/or otherwise pursued private investment in their telecom's sectors. ...read more.

Middle

international traffic market, it seized the opportunity to "encourage" Mexico to share at least 5% of its traffic with the new lead U.S. international competitor, MCI. The irony of this piece of Mexican telecommunications history as we will see below, is that it is now MCI-WorldCom's and AT&T's Mexican long distance subsidiaries suffering most from Mexican regulation and enforcement policies which they believe are designed to "control" the level at which they compete with TELMEX today in an open telecommunications sector; to the point that the two had declared a "moratorium" on their further investment in the Mexican telecommunications sector and urged the FCC to intervene on their behalf. Not surprisingly, a considerably more mature Mexican commercial government than the one the U.S. dealt with in the 1980's has reminded the FCC of Mexico's sovereignty and has sought to resolve the conflict completely free of U.S. intervention. In the late 1980's the Mexican telephone company was an under-performing monopoly that, typically for its era, and bureaucratic ownership, used sharp cross-subsidies of its services to mask severe inefficiencies. The result was a national monopoly provider to telecommunications services, with strong governmental protection, that almost literally gouged its international customers, with rates at hundreds of multiples above cost, while barely covering one third of its costs to provide the limited local exchange service it provided. Following two in-depth corporate restructuring studies conducted by U.S. consultants, TELMEX reorganized itself into five divisions, designed to allow the company to identify its costs, subsidies and revenue streams and rationalize them. The "corporatization" took about 18 months, after which 20.4% of TELMEX's shares were sold to private strategic investors for nearly U.S.$2 billion. This sobered those who laughed at TELMEX's pre-restructuring estimate of its corporate worth at U.S.$10 billion. The international 1990-91 IPO was a raving success with overseas markets clamoring for a larger share and a share value that went from U.S.$0.10 just prior to privatization, to U.S.$65 at its peak! ...read more.

Conclusion

Now Chilean local exchange carriers are saying that the new rules no longer allow that. Thus, they have declared a moratorium on the construction of local exchange infrastructure. Perhaps by the time of the PTC conference, we shall have a resolution of the dispute. What all of the above, and current marketing of services in other countries, like the U.S., cause us to think about is how networks will be paid for in the future. In a technological environment where long distance is virtually the same as local exchange service (eg. AT&T advertises its "one service" which encompasses the entire of the U.S., local and long distance; Venezuela has reduced its domestic long distance to two regions, all else within them is local exchange; Sprint sells its "ten cent" minute anywhere in the country, etc); wire line virtually the same as wireless (Uganda's second national operator uses exclusively a GSM cellular network with software distinctions for price-capped services; Canada and U.S. move toward wireless local loop being interchangeable with cellular and fixed line telephony); data equals voice services (GPRS and UMTS provide telephony services with internet access, interactive email and other mixed services features), etc. Thus, technological convergence; global seamless mergers of services and service operators and new means of delivery, like the INTERNET, point toward different measures of financing infrastructure build-out. For example, whereas operators used long distance and international revenues predominantly in the past as a primary revenue stream, which supported financing of build-out, those streams have shrunk substantially in a competitive environment. The same is true for international settlements. Now, as we are seeing in Chile, the same could be true in the future for the monthly recurring charge on local exchange service. Prepaid services and cellular or other wireless substitutes for local exchange service, already threaten this revenue stream. As voice over the Internet is refined to basic telephony quality, monthly recurring charges and per minute rates will be vestiges of the past. In the new economy, then, what will operators look to in order to finance network build-out. Will it be retail advertising on the INTERNET?? ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level UK, European & Global Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level UK, European & Global Economics essays

  1. Free essay

    does uk housing market warrant government intervention

    113 Infant mortality rate,3 2005 4.5 Percentage of pupils achieving 5 or more grades A*-C at GCSE level or equivalent, 2005/06 57.4 Economic activity rate4, second quarter 2006 (percentages) 76.5 Employment rate4, second quarter 2006 (percentages) 71.7 Unemployment rate4, second quarter 2006 (percentages)

  2. This investigation will try to test the level of external debt and measure its ...

    In the forthcoming three decades, Ecuador has paid approximately 88.935 million dollars, five times the current stock of the debt, resources that have not been used for projects to promote economic development. In 1983, the president signs the first letter of intent with the International Monetary Fund.

  1. Why has GDP growth been so slow in Somalia?

    One obvious economic effect of famine is that food must be imported. This is costly, and will decrease the changes of balancing the trade budget that year. Crops and livestock must also be replaced, since they will have been unable to survive the ruthless conditions.

  2. 'Globalisation should not be resisted.' What do you think?

    With the rise of technology, especially in the telecommunications field, this is very much possible. Multinational Companies (MNCs) possess the ability to inject huge amounts of money on a particular project. To a developing country, the influx of money is very much welcomed.

  1. Free essay

    Globalisation and changing career patterns

    This movement of the industry to being a key element of a business is part of the reason for the movement of such call centres to overseas developing countries. As stated by Rice earlier, these developing countries can provide a specific type of employee, graduates and well educated individuals.

  2. comparative HR Management

    Certainly, here there is a known simplification: clever and educated managers - Europeans well knew and appreciated skills to adapt the management for local cultural realities. Moreover, frequently mentioned in the literature on management a unique example of Britain, which has managed to ensure long-term stability and stability of the

  1. Is Mexico better off with NAFTA

    The growth in trade, as a result of increased productivity and a heavy increase in FDI were supposed to keep Mexico up with the growing demand for work. "It is necessary to look at both the elimination of tariffs on exports from Mexico to its northern neighbours and elimination of

  2. ECN353 International Economy

    be nationally beneficial, and trade will have numerous effects upon prices, wages and rents, when the nations vary in their relative factor endowments and when different industries exploit factors in different proportions. Both the Heckscher-Ohlin model and the Ricardian model have distinct features.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work