Emerging from the pack

Anyone who's in the market for smooth-sipping rum, the finest coffee beans or slick-fielding middle infielders knows that the best place to look for any of these highly sought-after commodities is Latin America.

Now the region is drawing the attention of several companies — Global Crossing and 360networks among them — hoping to cash in on pent-up demand for high-bandwidth services.

Slipping in front of the pack — albeit ever so slightly — is Telefonica subsidiary Emergia, which last week announced it has completed the first high-capacity fiber optic ring connecting major Latin American cities to each other and to the U.S. at a cost of $1.3 billion.

The network covers about 16,000 miles and provides an initial capacity of 40 Gb/s, with the potential for expansion up to 1.92 Tb/s. In addition to undersea cable, the network features about 1000 miles of terrestrial fiber optic lines and connects major cities in Latin America, Florida and Puerto Rico.

The spotlight is on Latin America for good reason. Research firm The Yankee Group predicts a 93% compound annual growth rate (CAGR) for data traffic in the region through 2005, with Internet traffic posting a CAGR of 113%. Comparatively, voice traffic will grow at an average CAGR of just 20% during the same period.

That's why the race has been on to complete the region's first fiber optic network, a race that Emergia says it has won by two months over its closest-pursuing competitor, Global Crossing. Although 60 days doesn't seem like much of an edge, the first-mover advantage is critical in this case, said Rafael Arranz, Emergia's vice president of marketing and service development.

“Having the first ring that actually covers the whole of Latin America… means it is much more reliable than all the systems that were previously deployed in the region,” he said. “Reliability is something that all the operators are concerned about.”

Being first helps Emergia, agreed David Humphreys, program leader for Latin American communications for Frost & Sullivan. Having the muscle of Spanish telecom giant Telefonica behind it doesn't hurt either.

“It could be a very important advantage given the fact they have a relationship with the most important operator in the region,” he said.

Because Telefonica's regional subsidiaries will be providing the last-mile services, Emergia can bundle services for corporate and residential users — a big competitive edge, Humphreys said.

“If they're able to get to a position where they are able to establish a high quality of service, that will certainly be very important for them, especially in areas where they are the incumbent but… starting to get strong competition from other players,” he said.

Emergia's fiber ring — as well as Global Crossing's, when it is complete — will have a significant impact on businesses throughout the region, according to Erica Eppinger, director of Latin America for The Yankee Group.

“It makes the physical distance between Latin America and the major Internet hubs of the U.S. and Europe almost a non-factor in terms of time and, eventually, cost as the prices go down,” she said. “So companies wanting to push their data out will have a much easier time making their business case.”