Increased Demand Fuels Latin American Internet Service Market

The Latin American Internet services market will see robust growth over the next five years, according to a report by IDC Latin America. Increased demand for access coupled with evolving value-added service supply will help drive a five-year annual growth rate of 42 percent through 2004. At that point, the market will reach a value of $8.1 billion.

According to IDC’s study, “Latin America Internet Services,” the Latin America Internet services market had a value of $1.4 billion in 1999. This value represents a 22 percent increase over 1998’s estimated value of $1.1 billion. In September 1999, when IDC performed its research, Internet accounts for the entire Latin American region totaled 4.2 million.

“The overall market volume, in terms of Internet accounts, grew rapidly in 1999, but pricing fell dramatically,” said Annika Alford, manager of IDC’s Latin America Internet research. “This is the result of both continued strong demand for access services and increased competition among the top ISPs in each of the country markets. We can see that basic dial-up access is nearing commodity status in Latin America like it has in the United States.”

IDC’s research dubbed 1999 the “Year of the Acquisition” in Latin America’s Internet services market. Driving the many acquisitions in 1999 were key top-tier ISPs, which were striving to rapidly establish a pan-regional presence without having to build a network from the ground up in each targeted country market.

While IDC found dedicated line availability and pricing improved in some key markets such as Brazil, overall penetration of dedicated lines is still low in Latin America. The number of dedicated lines in service in the region in September 1999 was slightly more than 36,000. In addition to dedicated lines, broadband access made its official debut in Latin America in 1999. Cable, ISDN, wireless, and xDSL broadband options were rolled out in many of the region’s top-six country markets.

Despite an underdevelopment of the larger, value-added services market, 1999 saw the emergence of e-commerce solution services as a key value-added service. This service surpassed Web-hosting services as the top revenue generating value-added service for the region’s ISPs. A major weakness among the region’s ISPs, however, is their inability to offer online payment transaction services within their e-commerce solution umbrella, according to IDC.