Latin America: It Takes Two To Tango

Competition is fierce in Latin America, as satellite operators and service providers mine what is perceived as rapidly growing demand for both narrowband and broadband services. Is this market big enough in terms of both consumer and enterprise spending power to propel the majority of business plans ahead to profitability? It is too early to tell, but hybrid fiber/satellite (HFS) strategies are being put to the test.

The year started with two new satellites on station: Panamsat Corp.’s PAS 1R and Telesat Canada’s Anik F1. Together, they contribute enormously to the shift to higher-powered transponders, and a broader array of footprints in the region.

“To make broadband satellite networking more affordable, especially in the mesh or partial-mesh configuration, you need satellites with EIRP of 50 dBW and better,” says Bruce Fakhari, vice president of the products business group at Bethesda, MD-based Lockheed Martin Global Telecommunications (LMGT), formerly part of Comsat Labs.

“This is not a matter of enterprises wanting connectivity alone. There is a young, upwardly mobile middle class in all of the countries of the region. You see them–a lot of these potential broadband customers–walking along with their laptops, Blackberry’s, pagers and MP3 players,” says Dennis Billard, vice president of business development at Telesat Canada, which operates three teleports in Brazil.

At the same time, the number of fiber links to major urban areas has mushroomed in 2001, thanks to three new submarine cable systems which bring potential new capacity of well over three TB (Terabytes) to the region. These are Global Crossing’s South America Crossing, which includes the Trans-Andean Crossing; the Montevideo-based Emergia network, which is a unit of Telefonica S.A.; and 360networks’ 360americas, which is a so-called collapsed ring that will ultimately link the United States with Venezuela, Brazil, Bermuda and Argentina.

“All of a sudden, these three systems are providing much greater capacity, lighting approximately 200 GB of their combined total capacity thus far,” says Erica Eppinger, director of Latin American research and consulting at the Boston-based Yankee Group. “At the same time, many of the major satellite service operators and service providers are complementing their satellite assets with fiber purchases, and offering hybrid connectivity, while demand for their satellite capacity for broadcast and IP multicast purposes remains quite strong.”

“The concentration–or saturation–of fiber in the major metropolitan areas of South America is extraordinary with every possible right-of-way including hydro and gas lines in use. And yet these companies which are providing fiber are very reluctant to step outside the city limits,” Billard adds.

The rapid migration from satellite to fiber in major Latin American cities is illustrated by the recent termination of the only DS-3 satellite link for high speed Internet2 access in Latin America that was provided by Buenos Aires-based Impsat. This Internet2 traffic now flows via South America Crossing, as part of an Internet2 initiative known as AMPATH. At the same time, REUNA (Red Universitaria Nacional) remains a satisfied Impsat customer, according to REUNA’s technical manager Octavio Espinoza.

“Our customers are buying complex network designs and solutions. We focus on high quality, highly supported data services,” says Impsat spokesman Gonzalo Alende. “We are providing REUNA with a terrestrial/submarine connection to the Internet2 NAP–the Star Tap facility outside Chicago–from Santiago through Buenos Aires and Miami.”

Impsat has 800 MHz of satellite capacity available, along with 10 Gbps of long haul capacity with Global Crossing and 360networks. Starting in 1999, Impsat’s Pan Latin American Network now consists of 15 major metropolitan area networks.

“‘Coopetition’ is the pervasive force in this market. Somebody who serves as our supplier one minute may also compete with us the next. Providing the best value is what wins contracts,” Alende says.

“While satellite trunking and backbone services are not good businesses to be in these days, DTH with IP piggybacked on top and enterprise VSATs hold a great deal of promise. And satellite applications like cybercafes remain very popular, too,” says Christopher Baugh, president of Northern Sky Research in Cambridge, MA.

In May, Star One, which is a partnership involving Embratel and SES Astra, Universo Online and Starband Latin America, outlined their plans to provide two-way VSAT-based Internet services to both consumers and the small office/home office market in Brazil.

“The success of the two-way IP/DTH ventures like Starband Latin America all depends on margins. There are usage and load rate issues as well. Is the propensity to pay for these satellite-based consumer broadband services really there? That remains to be seen,” adds Baugh. “Aside from these consumer services, the content distribution providers are suffering due to the reluctance of operators, while many satellite caching businesses are drying up as well.”

A “Get It There” Issue

“Delivery is ultimately going to be the way the client is going to accept it. This utilizing of wireless and wireline is going to happen. And right now, the combining and delivery of hybrid fiber satellite services is not well understood, says Barry Pasternak, president and CEO of Sunrise, FL-based Sunglobe Telecom and Sunglobe Fiber Systems Corp., which serves Central America and the Caribbean.

“It is a ‘get it there’ issue at the Quality of Service (QoS) that the customer wants to pay for,” he adds. “In Latin America, the satellite industry needs to devise better ways to get the level of trust up and to get PTTs (Postal, Telephone and Telegraph Authorities) and local governments to sign off on new access schemes.”

Sunglobe Telecom plans to launch its Americastar satellite system consisting of three mid-sized GEO satellites starting in 2003. Each satellite will provide more than 2.5 Gbps of IP throughput, according to Pasternak. The satellite industry, which has already deployed thousands of inexpensive VSATs in the region, is ready to bring new technology to bear on this market as it quickly ripens.

“This growing demand is coinciding with not only a greater emphasis on the asymmetric mixing of satellite and terrestrial resources, but also with a situation where, due to new compression techniques and what I describe as IP protocol magic, a lot less satellite capacity per circuit is required,” says Pasternak.

For satellite-based Voice over IP (VoIP) services, Sunglobe Telecom uses Satmex 5 and Solidaridad 2 along with capacity on the Maya 1 undersea cable. A planned Network Access Point (NAP) in Panama is part of an ongoing expansion of the Sunglobe Sunpac Network.

“With VoIP, you can create an instant phone company with IP services with little more than a Cisco router, a gateway, a PBX and a satellite modem,” Pasternak says. “We now have more than 20 out of 28 T-1 equivalents on a DS-3 link carrying VoIP services.”

Miami-based Picksat provides broadband streaming and IP services to the region using a single Ku-band transponder on Hispasat. Skystream Network’s IP Gateway is used by Picksat to deliver content to ISPs and CATV operators, primarily in Brazil, Ecuador, Mexico and Peru. Global Exchange Communications, a unit of Telia, is a partner with Picksat. Among other things, Picksat’s satellite hub serves as Telia’s POP in the United States for Latin American Internet traffic.

“We were one of the early providers of DVB broadband over satellite services in the region. Although the market is more mature now, there is still a lot of careful matching to be done in terms of providing customers the right footprint and power levels,” states Rom Mattesich, Picksat’s CTO.

Diversification Is A Necessity

Satellite service and hardware vendors are coming to the realization that a more flexible and diversified strategy is the best way to proceed in this region. While Virginia- based SkyOnline Inc., for example, still offers VSAT-based telephony services, it is quickly migrating from a VSAT phone services provider to an end-to-end data and telecom services provider. Argentina is a priority now as SkyOnline is branching out quickly with the acquisition of one of the top five ISPs in Argentina.

“We need to own more pieces of the technology chain in order to be more competitive, and this means focusing on value-added Web-based services, among other things,” says Fabrice Langreney, vice president of operations at SkyOnline.

“Don’t misunderstand me. Satellite is still a very viable solution in Latin America where you can sell a data TDMA channel for as much as five times what you could in the U.S. market,” he adds.

Langreney is somewhat disappointed and dismayed by the way in which the VSAT industry has been turning its collective back on what once was the promising combination of DAMA VSATs and wireless local loop (WLL) technologies.

“VSAT/WLL is not a well-developed solution. VSAT vendors claim there is no market, but it is my belief they are not looking at all the requirements for population clusters of 5,000 or less,” says Langreney. “Terrestrial microwave is capturing this market.”

SkyOnline is averaging two to three lines per site at a per line cost of approximately $3,000, not including installation and maintenance. For enterprise customers, SkyOnline is offering the SpaceWeb platform from STM Wireless, and International Datacasting’s Superflex DVB satellite receiver is used by SkyOnline as well. In mid-2001, SkyOnline will initiate MMDS-based services using a Lucent system in Argentina.

“Everybody is very hungry right now because business has been down the last few months. In Brazil, in particular, we are watching as several companies scramble to meet contractual obligations and infrastructure build-outs as deregulation begins to kick in,” says Terry Nenaber, president of Linksat America in Chandler, AZ, which operates the NetStation teleport in Sao Paulo.

“We have to be quite creative, and much more than a carrier’s carrier. We offer integration and installation services because we see a growing demand for complete solutions,” he elaborates.

Linksat America is pursuing an aggressive IP Multicast strategy with its Linkback satellite-based back channel solution. San Diego-based Harmonic Data System’s Cyberstream has been selected by Linksat America as part of its DVB IP Multicast platform, which handles multi-protocol encapsulation.

“Using NetStation, we are able to offer two-way satellite-based DVB IP Multicast on a shared hub basis both within as well as outside Brazil. Our goal is to beat TDMA VSAT prices for enterprise networks with asymmetrical data requirements in the 200 to 300-site range,” says Nenaber, adding that by using off-the-shelf DVB and DTH parts in its IP Multicast system, Linksat can offer QoS with a very inexpensive return channel.

Linksat America taps Satmex 5, Hispasat, Brasilsat and Intelsat in the sky, while using teleports in the United States operated by Globecomm Systems, Verestar and FMC, and Telefonica Madrid and Detesat in Europe.

The Market For Broadband Services Is Heating Up Fast

When you consider what a laptop costs today, the cost of VSAT-driven broadband Internet access in Latin America is actually quite compelling, according to LMGT’s Fakhari, who sees a long line of enterprise customers demanding solutions for 256 kbps and 512 kbps connectivity .

“We like to remind service providers that with either the LMGT Linkway or Linkstar, service providers can extend their market base, fill up their transponders quickly, and fulfill a client’s two-way broadband demands effectively,” says Fakhari, adding that both Intelsat and Eutelsat have designated Linkway as their IP platform for global broadband solutions.

Linkstar is a satellite terminal for star-topology networks, and it features a broadband forward channel and a broadband return channel–up to 60 Mbps/under 1 Mbps–along with turbo coding forward error correction (FEC) and TCP spoofing.

“With deregulation well under way, a lot of traditional vendors suddenly have become service providers. As expected, lots of fiber is now coming into major urban hubs, but it does not extend beyond them. So, a shared solution in terms of melding fiber and satellite together is in order,” says Hugo Frega, LMGT’s manager of major accounts in Latin America.

What sort of rates are available via fiber in selected markets? Fakhari says that 256 kbps at $300 per month is not uncommon with 512 kbps per month at $400. “This gives you a good idea of the rates we are competing against in the most populated urban centers,” Fakhari says. “With the price of narrowband VSATs so low, we have to carefully explain the interaction between broadband terminals and space segment costs, while making the point that the customer needs to factor in scalability and growth.”

New Satellites On Station, With More Coming

Intelsat has 10 satellites–equal to 424 thirty-six MHz-equivalent units–scheduled for launch in the next two years as it replaces its existing fleet of series 6 and 7 satellites, with seven assigned to slots over the Atlantic. “In Latin America, we have to explore applications where satellite has a clear advantage over fiber. This involves point-to-multipoint, broadcast, and rapid deployment scenarios,” says Ruben Levcovitz, Intelsat’s group director of Latin American sales. “We see a lot of opportunity as far as combining satellite and fiber.”

Intelsat is attempting to create “video communities” similar to the cable neighborhoods that have emerged on several satellites over North America. At the same time, according to Levcovitz, Intelsat is transforming Intelsat 805 at 304.5 degrees E into a “hot bird.”

“The competition in the Latin American market is very fierce right now,” says Levcovitz. “With Venezuela and Argentina recently opening up their international telephony markets, customers there appear eager for satellite capacity, and that is always the first step to future broadband applications.”

The selection of LMGT’s Linkway IP as Intelsat’s Broadband VSAT platform, which Levcovitz describes as ideal for mesh networks in particular, is seen by Intelsat as the best way to address customer needs up to 4 Mbps in the fast-growing broadband arena.

With eight Ka-band orbital slots, Intelsat is keeping all of its options open as it evaluates every possible combination of Ka-band, and Ku/Ka-band which is covered by a recent RFP.

Panamsat lit up its PAS 1R at 45 degrees W in late February with 72 thirty-six MHz transponders–half Ku-band, half C-band–including interconnecting C-band and Ku-band beams to link Europe, North and South America.

“Latin America is one of our strengths, and together, Panamsat and DirecTV Latin America represent a major force in the region,” says Javier Recio, Panamsat’s senior director for Latin America sales. “With PAS 1R, we offer a Ku-band beam which sweeps the length of Latin America from Panama to Argentina along with a series of higher-powered spotbeams which are aimed at major metropolitan areas.

“With all this new fiber capacity, people tend to overlook that it only hits major metropolitan areas which, in most instances, means just one city per country. In Chile and Argentina, for example, there is tons of fiber, but there is a noticeable lack of interconnectivity. With a $2,500 earth station, you can get connected,” he adds.

Panamsat is stressing the creation of local partnerships such as Panamsat de Mexico in which CorporativoW.com SA de CA holds a 51 percent stake. “Mexico and Brazil have their own culture, and this means that a local partner is an absolute necessity,” says Recio. “PAS 1R is not approved for service in Brazil yet, although negotiations are proceeding smoothly.”

Panamsat’s Net 36 content distribution service in Latin America is not seen as a congestion avoidance mechanism due to the relatively small concentration of ISPs, among other things. As for Spotbytes DVB, AT&T Latin America is one of Panamsat’s major customers, and both are members in the new Miami-based NAP of the Americas, which also includes a number of regional players such as Global Crossing, Impsat and Verestar.

“We have a single transponder on PAS 1R devoted to Spotbytes over a DVB carrier, along with two transponders on PAS 6B, and a 54 MHz transponder on PAS 3R,” says Recio.

Internal connectivity or the lack thereof on a country-to-country basis is also what Ottawa-based Telesat Canada is tracking closely. It initiated regional service in February using 28 out of a total of 84 C-band and Ku-band transponders in both North and South America.

Anik F1 offers full continental coverage. The majority of its 12 South American C-band transponders are sold out, and only two out of 16 Ku-band transponders are not under proposal. DTC in Brazil, Montreal-based Teleglobe, Verestar and iDirect which is engaging in the dual role of modem hardware and service provider, are listed as Anik F1 customers.

“Demand is quite strong for the cross-strapped capacity between North and South America,” says Billard. “Recent deregulation and privatization of the regional telecommunications markets in South America has attracted new international players to this emerging market. The new players are bringing on new capacity over a period of a couple of years. For new entrants like Telesat that have capacity available right now, the timing of their entry into this market is perfect.”

Large companies are not the only ones with their eyes on Latin America. Smaller players are making their presence known, too. The satellite sector is energized, open to new HFS architectures, and ready with robust, affordable last mile solutions.

Catering To Specialized Markets

In the days following the latest Summit of the Americas in Quebec, the talk of a free trade zone encompassing the entire hemisphere is a reminder of the uncertainties, and the possibilities that lie ahead. As Mexico opens its doors to giant Panamsat Corp., Lauro Gonzalez, president of Satmex, appears confident that Satmex will be quite capable of holding its own.

“I welcome Panamsat’s initiative in Mexico. It is a wonderful thing,” Gonzalez says. “We are competing against them, and have done so quite successfully in 32 countries thus far. Our strengths are based on our ability to specialize and cater our services for niche markets, while taking advantage of our superb orbital slots, which I describe as beachfront property.”

He sees the massive deployment of fiber in the region as a bit misleading. Rather than dealing a crippling blow to the satellite sector, fiber is spurring even greater demand for all sorts of telecom services, including satellite.

“There are numerous applications where fiber cannot compete with satellite. Also, fiber availability is not what it seems. Here in Mexico City, which is one of the most heavily fibered cities in the world, we are using a satellite link to connect our headquarters to our satellite network operations center just a few miles away because it will take at least two years before a fiber link is available,” says Gonzalez.

He indicates that, among other things, rural telephony is a vast, relatively untapped market in the region. “Yes, I agree that the deployment of hybrid VSAT/wireless local loop systems has not met my expectations thus far,” says Gonzalez.

He strongly endorses the e-Mexico strategy that has been forged by President Fox of Mexico, and he sees a number of exciting possibilities which were unthinkable just a few years ago. “Look at Mexico and Brazil, for example. There is hardly any commerce between them today despite the fact that these two countries combined have a total population of close to 300 million people,” he adds. “I am very enthusiastic about free and open trade in general. Better trade relations between countries always triggers growth in telecom services.”

Peter J. Brown is Via Satellite’s Senior Multimedia Editor. He lives on Mount Desert Island, ME.