While wireless executives in North America plot in their war rooms about how to sell the wireless Web in an already highly penetrated Internet market, executives just south of the border are wringing their hands in anticipation that the wireless Internet will explode in Latin America, and they are moving toward it as fast as they can.
“The opportunity for data is tremendous down there,” said Scott Harris, assistant vice president for GTE Corp.’s international operations. “We’re really thinking the Internet revolution will happen through wireless devices in Latin America.”
Latin America has typically followed whatever moves U.S. operators make when it comes to technology and offerings, but today the region’s operators are seeing a huge opportunity for wireless Internet access, perhaps even more than the United States.
Mobile-phone operators in Latin America already have struck success with wireless voice service since much of the landline telephone infrastructure in these countries is poor. In many areas, wireless penetration is close to reaching teledensity rates. As such, Internet penetration is extremely low and many people cannot afford personal computers. In Mexico, for instance, penetration for personal computers is less than 4 percent, said Steve Fleischer, spokesman for Bell Atlantic International, which controls Mexican operator Grupo Iusacell.
“In the U.S., the cost of a PC is about 3 percent of the average GDP. In Latin America, it’s about 20 percent,” said Jim Bacon, vice president of wireless products for BellSouth International. “In Latin America, wireless will be a lot of people’s first experience with the Internet.”
A number of Latin American markets today have some sort of wireless data, ranging from SMS push services to full WAP-enabled services. Analysts say carriers have a big opportunity to jump-start the market with initial cheap services that whet consumers’ appetites for the Internet. Most customers will not have any preconceived notions of what the Internet should be.
“Operators will tell you they see different user bases with different needs, and they don’t need to pump a lot of money to start these services,” said Bryan Prohm, analyst with Dataquest. “The user base doesn’t have a lot of experience with the Internet over PCs so you can set expectations to reflect the capabilities and functionalities of a certain device. A simple wireless phone with a browser can be an entry-level device and upgrade as you go down the road.”
Already, Mexico’s Iusacell has launched a short-messaging information push service and a Wireless Application Protocol-enabled service, offering Motorola Inc. WAP browser handsets. Its competitors have announced plans to offer similar services soon.
Bacon said all of BellSouth International’s numerous Latin American properties will offer WAP services by the end of the year. Like the rest of the world’s operators, the company is waiting for vendors to work out interoperability problems between the handsets and servers. Movicom BellSouth in Argentina already offers a pre-WAP service, while other markets have launched one-way and two-way SMS services.
GTE’s Time Division Multiple Access operator in Venezuela, Movilnet, recently launched a wireless portal called tun-tun.com. The evolution of this service will take three steps, said Harris.
“We’re seeing that the initial opportunity in Latin America will be through SMS push services. That’s where tun-tun is,” said Harris. “That’s going to evolve into WAP-type access, but there is a certain segment that may not be able to pay for what we’d have to charge for WAP-type access. They may have SMS service for years at a really low price. Then after WAP, we see going to full 3G-type of services. This could theoretically happen before the United States.”
Leap Wireless International Inc., which owns stakes in Mexican operator Pegaso PCS and in Chilean operator Smartcom PCS, sees its markets evolving the same way.
“You’ll see a progression of different data offerings whether SMS or WAP,” said Dan Pegg, senior vice president of public affairs with Leap. “How complex they will be will be a subject of the market and service providers there.”
Pegaso, which operates a Code Division Multiple Access network in Mexico, will launch commercial SMS services this month, offering push services such as sports, news headlines and weather information.
Wireless Internet service may not cause any dramatic increase in penetration or revenues for many years, however. Lower-end prepaid service already has exponentially expanded the number of customers. BellSouth International reports year-over-year growth in Latin America of 81 percent. Only about 20 percent of users are high-end users, said Michael Krier, director of Latin American research with The Strategis Group. Those customers will subscribe to the more expensive WAP-enabled services.
“Prepaid is the driver. That’s where it is because of the income inequality,” said Krier. “Once you penetrate the top income segment, you have a long way to go before you can get to the next level.”
But many Latin American operators are seeing their average revenue per user either flatten or fall because of prepaid services. Cheaper wireless Internet prepaid service should increase minutes of use and customer appeal, say Latin American wireless executives.
“The penetration right now is largely due to prepaid,” said Bacon. “We’ll see some usage shifting to the higher end of the segment. But there’s a large segment of prepaid that will have Internet access.”
