Latin America: Government Programs Fueling Market Optimism

By | February 1, 2007 | Cover Story, Latin America, Telecom

It is no secret that the satellite market in Latin America has been depressed for a number of years. Struggling economies, currency devaluations and a strict regulatory climate have kept vendors from reaching their full potential in this region. However,  a number of interesting satellite projects have rolled out in Latin America of late. The reason these networks are of interest is that they are sponsored by national governments. Are these projects good for the satellite industry, and will they be enough to spur business in a  depressed region?

Geographically, the Latin American market stretches from Mexico’s northern border with the United States to the southern tip of Argentina. The Central and South American land masses include 21 different countries. Spanish is the predominant language, through Portuguese is the national language of Brazil. French and regional dialects are spoken throughout the region as well. When you contrast the diversity of the Latin American market with the relatively homogenous North American market, you begin to understand some of the challenges the satellite industry faces.
“The Latin American region is a bit of a misnomer when it comes to satellite,” says Patrick French, senior analyst with Cambridge, Mass.-based market research firm NSR. “Latin America is a really a collection of country markets.”
The region is well known for strict regulatory policies and obtaining a license to operate in many of the countries requires a significant investment in both time and money. “The satellite market in Latin America is highly regulated,” says Maria Velez de Berliner, president of Latin Trade Solutions, a Washington, D.C.-based consultancy. “Companies operating in the market need a full understanding of the regulations to operate profitably,” and with 21 separate bureaucracies, learning to navigate one will not necessarily help a company understand any of the others.
But those same government are trying to help spur the development of the satellite market, as a number of government-backed initiatives have been announced and funded in recent years. These programs fall into one of four broad categories: telemedicine, distance learning, rural connectivity or entertainment  functions such as lotteries.

Serving The Population

Brazil has struggled to increase public health services to its population of 174 million. The Brazilian constitution guarantees free medical coverage to its citizens, but the reality is a large percentage of the population receive little or no medical treatment. “The health care system in Latin America can benefit greatly from satellite technology,” Velez de Berliner says. “There are several distinct groups of people in Latin America when it comes to health care: Those who have money and can travel abroad for treatment; those who use the national health care system; and those who live in rural parts of their associated countries. The latter group is grossly underserved. Health care absorbs the majority of the gross domestic product of many Latin American countries. Plus, land transportation is difficult, and it is expensive where it is available. Satellite technology is helping governments expand medical services into rural areas and also helping bring continuing medical information to clinics and hospitals in both rural and urban areas.”
Among the efforts intended to alleviate this problem is T@HIS, a promising telemedicine program launched in Brazil that focuses on women’s health. Space segment for the network is provided by the Amerhis (Advanced Multimedia Enhanced Regenerative Hispasat) payload on Hispasat’s Amazonas satellite. The advanced spacecraft was funded by the European Space Agency, the Centre for the Development of Industrial Technology and a consortium of companies led by Alcatel Alenia Space España.
The platform integrates the Digital Video Broadcasting-Satellite (DVB-S) and Digital Video Broadcasting-Return Channel over Satellite (DVB-RCS) standards into a single multibeam satellite system. This on-board switching allows full mesh connectivity between user terminals located at any point within each of the satellite’s beams, which cover North America, South America, Brazil and Europe, and allows the possibility of direct interconnection with terminals located in geographic areas covered by the beams of other  satellites.
In the first phase of the program, three remote clinics in the Brazilian states of Amazonas and Para will be linked to a hospital in Belem, the capital of Para. Amazonas, in northwestern Brazil, is predominantly tropical rainforest. The Internet protocol-based satellite network will allow doctors in the remote clinics to send ultrasound images to the hospital in Belem for review and diagnosis. The project has concluded a test period, and additional remote clinics and diagnostic hospitals will join the network soon. Ultimately, the advanced technology of the Amazonas satellite ultimately will allow doctors in Europe and Brazil to collaborate on the medical cases.
Educational systems in the region face many of the same challenges as the health care systems and could receive the same benefits from satellite technology, says Velez de Berliner. “Governments are looking for ways to serve schools in rural and remote areas. They want to find ways of taking advantage of their country’s human capital and doing knowledge transfer.”
Enciclomedia is a huge Internet connectivity project in Mexico that will ultimately connect 140,000 classrooms. The nationwide initiative is broken into phases, and 33,000 primary schools were the first to receive connectivity. Pegaso Banda Ancha, utilizing space segment from Intelsat, rolled out 13,000 ViaSat SurfBeam VSATs. In addition, Gilat, working with Mexican technology partners, supplied 15,000 SkyEdge VSATs for the first phase of the project.
The Enciclomedia project, which is overseen by the Mexican Ministry of Education, is moving into its second phase in which 7,000 middle schools are slated to join the growing educational network. Mexican integrators Alef Soluciones and Corporativo Lanix recently awarded Gilat a contract for 4,400 additional SkyEdge VSATs.

Economic Benefits

Realizing that a robust telecoms infrastructure is vital to a country’s economic interests, many Latin American governments also are engaged in efforts to extend basic telephony services to underserved areas and increase teledensity. The expansion of nation telecoms systems cannot be overlooked when it comes to governmental funding of satellite technology.
Teledensity is a term used in the telephony world which describes the number of telephones available per 100 people. Generally, the higher the teledensity, the better a country’s telecoms infrastructure, which makes it easier for people and businesses to communicate. Many Latin American countries are backing initiatives to increase teledensity, and satellite is playing an important role.
These government programs often are lumped under the generic term universal service obligations (USOs), which are a popular method for expanding a nation’s telecoms infrastructure into remote areas. Taxes or fees are levied on general telecoms services, and the monies are earmarked for underserved areas. The country’s telecoms ministry then writes a tender and oversees the completion of the project. “We see significant USO initiatives in Columbia, Peru, Argentina, Venezuela, and Brazil,” says Dave Lahey, vice president of business development for Telesat. “Of these, Columbia and Brazil are especially active.”
But of all the USO programs throughout the Latin American region, none is more ambitious than the one laid out by former Mexican President Vicente Fox. During his term, Fox crafted a bold plan called e-Mexico, which has the goal of having 98 percent of all Mexican citizens online by 2025. But e-Mexico goes well beyond simple connectivity issues. The program also is an information technology strategy for an entire country, as Mexico intends on using the improved connectivity to jump start its own information technology industry.
Can Mexico achieve such a grand scheme? The challenges are daunting. Consider the following: According to Mexico’s Ministry of Economy, less than 10 percent of all Mexican homes have a computer, and the teledensity for wired telephone service stands at just 12.8 per 100 homes. Wireless teledensity is a bit better at 13.5.
A coordinated effort between the Mexican government and private enterprise is intended to help develop the information technology industry in Mexico and improve the regulatory climate for electronic media and e-commerce. The e-Mexico network will allow the Mexican government to modernize and move into the digital world on a nationwide basis.
Internet Directo S.A. de C.V. was chosen as the service provider for the first phase of e-Mexico, and the company has installed a hub manufactured by ViaSat in Mexico City. To date, Internet Directo has rolled out 3,200 LinkStar VSATs, with terminals installed in schools, libraries, health centers, post offices and government offices. These locations are known as Digital Community Centers, and the goal is to have 10,000 of these centers on line within the next several years.
Lahey believes other USO projects will emerge due to the success of the efforts in Mexico as well as other countries. “The existing USO projects in the region have been very successful, but not all of the remote territories and areas have received coverage yet, and new government programs are being announced,” he says. “We look forward to continued growth in the region.”
Satellite technology also is playing a larger role in the entertainment field, such as with Brazil’s federal lottery. Caixa Economica Federal, Brazil’s state-owned financial institution, has just completed the installation of 25,000 lottery terminals in 9,000 locations. Satellite technology was the foundation for the hybrid network, allowing the remote lottery terminals to communicate back to Caixa’s banking centers. Comsat Brazil installed 6,000 Gilat SkyEdge VSATs and will provide service over a five year agreement.

Other Opportunities

Brazil and Mexico, the region’s two largest countries, are drawing the lion’s share of the attention from the satellite industry, but the two are leading the way in terms of satellite-enabled programs not due to their size but due to their commitment in using the technology. Many of their communication initiatives are being used as blueprints across the region. “Brazil and Mexico lead the pack because of government and commercial willingness to invest in satellite technology,” says Carmen Gonzalez-Sanfeliu, regional vice president for Intelsat.
“Columbia, Mexico and Brazil are particularly successful when it comes to utilizing satellite technology,” says French. “There is active support from each of these three governments, and it is clear they have the wherewithal and desire to make the investment.”
Government intervention certainly has helped jump start a number of satellite programs in the region, but is it enough to turn the stagnant Latin American market around? “The Latin American market is second only to the North American market for us,” says Gonzales. “We work with a number of service providers and integrators in the region and we are seeing an upward and positive trend. There are a number of very good growth opportunities in Latin America.” Intelsat now holds numerous unique opportunities to market both government and commercial customers as a result of its acquisition of PanAmSat. “Given that, we have been able to increase our market share throughout Latin America. In Mexico, the government has enabled our three partners to augment their service offerings by distinctively granting concessions that will allow each of them to play a unique role in the telecom industry throughout Mexico,” she says.
While these government efforts may not provide large amounts of business, French believes they will help spur overall demand for satellite-enabled solutions. “Government programs instill confidence in the private sector, which is very important,” he says. “The government initiatives in Latin America have a double benefit. There is certainly more take-up in the private sector if a government stands behind a plan. In addition, companies such as integrators, service providers and installation companies get to develop a skilled work force. That is good for the entire industry. The government programs have certainly helped and the Latin American market is showing improvement.”

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