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TG Spotlight: A Cable Boom, an Evolving Latin American Market

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By Jayne MillerFeb 17, 2017

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TeleGeography's Spotlight is a monthly email in which we interview one of our analysts about content from our blog. Today we're sharing our January interview on the Latin American cable market. To get the Spotlight in your inbox, sign up here.

When we thought about our first Spotlight interview of 2017, we wanted to do something that looked at the surging investment in new submarine cables.

There are few markets that tell this story as well as Latin America, which has a flurry of cables announced for the coming years. That's why we asked our own Anahí Rebatta, a TG analyst who specializes in Latin American markets, to talk to us about what she's seeing.

Anahí took the time to chat with us about the cable construction boom, content providers, and the evolution of local exchanges. Read our interview below or listen to the conversation here. (We've condensed our chat into the most share-worthy 10 minutes.)

This interview has been condensed and edited. 

Jayne Miller: Thanks for taking the time to chat. The first thing I’m really curious to talk about, Anahí, is big picture: can you tell me what the Latin American market looks like right now?

Anahí Rebatta: When I think about “how does the market look right now,” a handful of key points come to mind. First, the region is going through a submarine cable construction boom. In fact, this year the route U.S.-Brazil will be served by two new submarine cable systems.

On top of that there are other projects that are currently under construction, including another cable between the U.S. and Brazil and a cable between Brazil and Angola. There’s also investment in new data centers, not only by traditional carriers, but also by content providers.

Also the market is largely concentrated, meaning that only a few carriers with extensive networks across the different countries here in Latin America provide a large share of the telecoms services in the region.

Finally, the presence of content providers is becoming more noticeable, not only because they’ve been deploying long-haul capacity throughout the region, but also because they are investing in new infrastructure.

JM: That’s interesting and we’ve seen that story in other places – content providers getting in on the cable game – so I don’t know that it’s surprising. But what does that mean for the next year, 2017?

AR: So going along that line, 2017 will mark the official entry of content providers and subsea cable investors and owners here in Latin America. For example, Google is a member of the consortium behind the Monet cable, which will connect Brazil with the U.S.

Google is also behind the construction of the Tannat cable between Brazil and Uruguay.

And Google is behind a domestic private cable in Brazil called Junior between San Paulo and Rio.

So we’re definitely going to see these content providers be more involved in investing in the infrastructure.

The presence of content providers is becoming more noticeable, not only because they’ve been deploying long-haul capacity throughout the region, but also because they are investing in new infrastructure.

JM: I’m definitely hearing a lot of Google in there. I guess we’ll have to keep our eye on that and follow the story on our blog.

Another thing I’m thinking about is that there’s always room for a surprise. What has been the biggest surprise in the Latin American market over the last year.

AR: So last year market consolidation continued to be a dominant theme in the region. It wasn’t a big, big surprise, but it was something dominant.

For example, at a regional level, Liberty Global completed an acquisition of Cable and Wireless Communications in May. At the country level, the Mexican operators Axtel and Alestra completed the merger of their operations at the beginning of 2016.

The market is very dynamic and we’re expecting to see more mergers and acquisitions across the region.

JM: There was another specific thing I was curious about. That is what local exchanges look like in Latin America. Is that something that is growing?

AR: Latin America remains heavily connected to the U.S. in terms of international connectivity. In fact, the route U.S.-Latin America continues to be the largest in capacity among all the different routes that we study here at TeleGeography.

The route U.S.-Latin America continues to be the largest in capacity among all the different routes that we study here at TeleGeography.

However, the different network operators that operate here in Latin America are working on improve inter-regional connectivity by deploying lots of capacity in key markets and also caching more content within the region. On top of that, there are also initiatives that are being carried over to encourage exchange at the local level. Last year Paraguay and Honduras launched their first internet exchange points.

JM: I’m curious about that – another thing we’ll have to watch in the next year. We wrote a little bit about the local exchange of content in Africa a few months ago and we did an interview with Paul [Brodsky] that touched on how those local exchanges are growing. It’s an interesting story to follow in markets like this, just to see how it’s evolving. I’m glad you could tell us a little bit about what it looks like in Latin America.

AR: Yes, and this is something that – Latin America and Africa are markets that, even though they are so far away from each another, they do share similarities. I mean, they’ve seen several initiatives to promote IXPs and encouraging different ISPs to interconnect at a local level, that way they do not depend on the U.S., in the case of Latin America. And they do not depend on Europe in the case of Africa for internet exchange.

JM: Sure. That’s neat to watch these two different markets that are thousands of miles away go through a similar process.

One basic thing I’ll ask is: is there anything about the Latin American market right now that you think is especially interesting or exciting or just good for people who might be reading our blog to know.

AR: Yeah – I would like to emphasize that, as I mentioned in the beginning, there is a boom of cable construction. It’s something that we need to keep an eye on. One of the cables that’s going to enter service this year is Seabras-1. It’s connecting the U.S. and Brazil via New York instead of the very popular route of South Florida.

 

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Anahí Rebatta

Anahí Rebatta

Anahi is part of TeleGeography's telecom infrastructure and voice traffic teams. She specializes in Latin America and the Caribbean regions.

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