Eventually, everything heads south: Service providers heat up in Latin America

Expanding into new markets is often critical for service providers to meet their customers' snowballing demands. And, unfortunately for service providers, that sometimes involves delving into areas such as Latin America, known for its numerous snares.

Despite the hurdles awaiting service providers that venture into Latin America, many are taking the leap into the region. Several providers such as 360networks, AT&T and WorldCom's UUNet recently have made strides in the region. While U.S.-based providers are not entirely foreign to Latin America, the continued deregulation of markets coupled with more undersea capacity reaching the area may be key to the increased activity.

Last week, carrier's carrier 360net-works inked its third deal in a month in Latin America. The latest deal involves a multipronged $300 million agreement with Impsat Fiber Networks, a Latin American-based provider. One portion of the agreement gives 360net-works indefeasible rights of use for about 2850 miles of dark fiber - as well as some lit capacity in Brazil and Argentina - from Impsat. 360net-works also will secure dark fiber on Impsat's metro ring in Rio de Janeiro, Brazil.

"The deal is about expanding the original Globenet system from its original two rings," said Scott Lyons, vice president of 360ameri-cas, 360networks' undersea division."We created a ring with another wet leg."

The newly obtained terrestrial segment will link cable landing points in Brazil and Argentina. As another portion of the deal, 360networks will lease co-location space from Impsat in Rio de Janeiro and Sao Paulo, Brazil; Buenos Aires, Argentina; and Caracas, Venezuela. That $122 million agreement will enable 360networks to establish several points of presence in the region.

As if to reciprocate the $300 million fiber deal, Impsat agreed to purchase at least $46 million worth of capacity on 360ameri-cas' undersea link between the U.S. and Latin America.

"Basically, this allows us into the three largest markets in Latin America," Lyons said, acknowledging 360americas' plans to concentrate on Argentina, Brazil and Venezuela. "We are focusing on cities where our customers want to be and where we expect to see the most growth."

In addition to the agreement with Impsat, 360networks recently landed a deal to provide Teleglobe with 10 Gb/s wavelength capacity on its network in the U.S., Bermuda, Brazil, Argentina and Venezuela. The company also inked a similar deal with France Telecom.

"We have a lot more deals pending," said Lyons, who noted that the company's primary focus is still in the U.S., followed by Europe, then Latin America."Latin America has a different gestation time. It will take around six months to light this."

360networks is not alone, though. UUNet recently launched its new operations in Latin America and also is acting on customer demand.

"Latin America is the next major green area," said Jeff Sturgeon, vice president of marketing for UUNet. "It's really the next to take off."

UUNet decided the time was right to head into the region about a year ago, based on the opening of markets, the shortage of available services and the number of large customers wanting connectivity in the region, Sturgeon said. The turn-up of undersea links such as Americas-2 also played a big role in the onset of service provider activity in the region, he said.

Similar to 360networks, UUNet will focus its efforts on Argentina and Brazil, although it plans to establish infrastructure in Chile and Venezuela.

"We will look at Mexico, depending on what the regulatory bodies do with Telmex," Sturgeon said.

Currently, Telmex is operating as a monopoly in Mexico, giving little room for competition to have a chance of success in the region.

"Telmex is charging extremely high interconnection charges to providers such as AT&T and Sprint just because they can," said David Humphreys, Frost & Sullivan research analyst for the Latin American telecom market. "That might change with the new president, but it remains to be seen."

Providers such as AT&T, which has acquired several service providers in Latin America, have a different battle to fight, Sturgeon said.While acquisitions may provide instant infrastructure and customers, they also come with problems such as outdated equipment or employees who are not ecstatic about working for a large corporation, Sturgeon said.

"Going in and acquiring companies is just not the way to go if you want to secure the highest capacity for your customers," said Sturgeon.

But securing capacity is not easy either, Sturgeon said. "The demand far exceeds the supply, but that should get better."