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

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

Extracts from this document...


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.


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.


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. Where does the World Trade Organisation fit in the overall scheme of international public ...

    Special and Differential Treatment "Old-style" special and differential treatment (SDT), as expressed in Part IV of the GATT and the Enabling Clause of the Tokyo Round, largely exempted developing countries from GATT rules and obligations. They were granted sweeping carve-outs from GATT disciplines; and they received developed country preferences but were not obliged to reciprocate.

  2. Free essay

    does uk housing market warrant government intervention

    82.9 Employment rate4, second quarter 2006 (percentages) 79.0 Unemployment rate4, second quarter 2006 (percentages) 4.7 Median gross weekly earnings: males in full-time employment, April 2006 (�) 546.8 Median gross weekly earnings: females in full-time employment, April 2006 (�) 410.5 Gross value added, 2005 (� billion)

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

    In 1992 the OECD agreed that they should give 0.7% of their gross national income each annum as aid, yet only the Nordic countries, the Netherlands and Luxemburg ever met this target71. More evidence came in 2008, when the nongovernmental organisation DATA reported that only 14% of additional funds pledged by the G-8 nations had actually been provided72.

  2. Free essay

    Globalisation and changing career patterns

    Many of these IT services providers were American based organisations such as IBM, EDS & CSC - global powerhouses who had built their reputation as market leaders. Globalisation had allowed these companies to compete for business overseas. As part of many outsourcing arrangements, the IT staff of the original company, transferred to the new IT service provider with immediate effect.

  1. Is Mexico better off with NAFTA

    Employment peaked at nearly 300,000 workers in early 2001. Since then, widespread layoffs have slashed jobs. By December 2005 they had fallen to 174,000 a 41 per cent drop in five years"10. Entering WTO levels the playing field for other developing countries to Mexico's comparative advantage in North America.

  2. International Trade - I have been asked to investigate the possibility of a company ...

    Economical This gym if opened up and run successfully and run efficiently will create jobs for people (the public). As more people are employed by David Lloyds it will help to keep the employment rate up as more and people are become employed it will only have this effect if

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

    Therefore, globalisation should not be resisted. Secondly, globalisation can benefit the economy. Globalisation has brought diminishing international borders and the fusing of individual national markets. Many economists would agree that the next big step is to expand business influence all over the globe and utilise whatever benefits the world has to offer, such as cheap labour.

  2. Porters Five Forces

    Affirmative answers will inhibit you.) - Do you have proprietary and protected technology? - Does your long-term industry experience provide a significant advantage? - Is it expensive/difficult for customers to switch away from your product/service? - Do you have all the distribution channels locked-up?

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