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Friday, June 28, 2013

Latin America - Broadband and Internet Market Research Report

Growth inhibitors and growth drivers in Latin America’s Broadband market

Broadband penetration

Estimated fixed broadband penetration in LAC was 8.4% at end-2012, slightly below the world average of 9.2% but ahead of other developing regions such as South Asia and Africa. Nevertheless, Latin America has a long way to go before it can catch up with North America and Western Europe, where broadband penetration is over 30%.

There also exist wide differences between countries within the region itself. While some – St Kitts & Nevis, Barbados, Trinidad & Tobago, Uruguay, Chile, Argentina, and Mexico – have fixed broadband penetration ranging between 11% and 30%, others – like Haiti, Paraguay, Nicaragua – have barely 1% or 2% penetration rates. Generally, higher broadband penetration can be found in the Southern Cone countries and some of the wealthier Caribbean islands, while the lower rates are prevalent in Central America and in the poorer countries on the northwest coast and interior of South America.

Growth inhibitors

Hurdles in the Latin American broadband market include:

  • weak competition and insufficient bandwidth (hence, expensive and/or slow services);
  • inadequate fixed-line infrastructure (hence, service unavailability in many areas);
  • low PC penetration, poverty, and unequal income distribution (hence, limited demand).

All of Latin America suffers from insufficient international connectivity, both between countries and with the rest of the world, as submarine cables are inadequate to meet the escalating need for bandwidth. This has pushed up broadband prices. In Bolivia, the most expensive country for broadband, 1Mb/s connection costs a staggering 55% of GDP per capita.

Growth drivers

On the positive side, bandwidth has been increasing in most countries, leading to higher speeds and lower prices, while governments seek regulatory measures to promote competition. An important development for Latin America as a whole is the construction of a new submarine cable network – the Atlantic Cable System (ACSea) – which is being developed by Brazil to link with the USA, Europe, Africa, and several other Latin American countries. When completed, the 24,000km ACSea submarine cable will substantially increase bandwidth and reduce prices for broadband in the region.

Substantial investments and regulatory reforms are being implemented in preparation for the 2014 FIFA World Cup and 2016 Olympic Games being held in Brazil. These should have a positive effect on the broadband market so that we expect to see robust broadband growth in the forthcoming years.

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One of the region’s main growth drivers for both fixed and mobile broadband is social networking. Seven Latin American countries are among the world’s top thirty in terms of Facebook users. Brazil has the highest number of active users in the region, while Chile has the highest ratio of users per capita. With penetration upward of 52%, more than one out of every two Chileans is, in fact, an active Facebook user.

National broadband plans

Most nations in Latin America have adopted some form of national broadband plan, as governments begin to realise the strategic importance of high-speed internet for GDP growth and socioeconomic development. Countries involved in plans to expand broadband access include Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, and Uruguay.

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