Frost: Cost Benefits, Broadband Penetration Driving VoIP in Latin America
August 18 2008 // Published as a news service by IHS
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Traditional local and long distance telephony operators in Latin America are facing increasing competition from voice over Internet protocol (VoIP) services, according to Frost & Sullivan.
These VoIP services are being driven by their inherent cost benefits and the increasing penetration of triple play and broadband.
In order to take VoIP to the next level, analysts said VoIP and wireless VoIP (WVoIP) service providers should ensure operational efficiency and quality of service, along with effective distribution and promotion strategies.
Recent analysis from Frost & Sullivan of VoIP in Latin America found earned revenues of $72.3 million in 2007, with estimates to reach $625.9 million in 2012.
"The growth of VoIP and IP telephony is one of the most important factors for a 2.8% yearly dip in local revenues and a 7.9% dip in long distance revenues in Brazil during the next six years," said José Roberto Mavignier, industry analyst at Frost & Sullivan.
"Analyzing end-user response, Frost & Sullivan found cost-reduction to be the most relevant factor for the increasing adoption of VoIP in Brazil."
As Latin American customers and businesses are largely reliant on voice communications, analysts said convergent technologies such as VoIP, IP telephony and fixed-mobile offers are gaining ground, thereby reducing traditional fixed voice revenues in the region.
Analysts said new generation service providers, such as Internet-based companies, cable TV providers and competitive local exchange carriers with innovative business models are introducing substitute products that are affecting traditional fixed voice services.
However, lack of number portability regulation, poor end-user awareness, low call quality levels and an almost non-existent VoIP pre-sale effort still make it difficult for VoIP service providers to enlarge their share of the voice revenue pie in the region, analysts said.
"Improving the clients understanding of technical and operational aspects and efficient pre-sales support, such as physical points-of-service sales, customer service and new bundles of services, will be crucial to make VoIP services more appealing to Latin American users," said Mavignier. "Above all, the quality of calls has to be flawless in order to attract and retain fixed telephony users."
While it is not easy for the smaller VoIP providers to compete with the big incumbents, analysts said they will do well to combine the agility of their small operations with innovative business strategies, which might help them take a leap forward.
Analysts said such strategies could include partnerships with major retail stores to resell equipment and services, Internet customer service, Internet and direct marketing campaigns and alliances with content providers to bundle services. With the arrival of asymmetric digital subscriber line (ADSL) 2+ (also known as ITU G.992.5) services in the region, supported by up to 60 MB connectivity portfolios, technical issues could be easier to resolve in the future.
Source: Frost & Sullivan.