Latin America: Government and New Players Demand More Capacity

Government projects to reduce the digital divide are increasing the demand for satellite services. Will HTS have an even stronger impact than originally forecast?

Brazil is facing its worst recession since 1901, according to a recent economic analysis conducted by Bloomberg. However, despite the economic crisis, and the fact that the expensive dollar valuation in the region affects investments, satellite has not been severely impacted. The satellite market plans, invests and buys according to long-term strategies. Opportunities for growth in the region are evidence of continued confidence in the regional economy, with both players and end users facing exciting prospects over the next few years. This is partially due to the very diverse geography in Latin America. The region has 570 million inhabitants, distributed along an area of over 17 million square kilometers, corresponding to 15 percent of the Earth’s surface.

In Latin America, satellite is a complement to other communications technologies. In most cases, it is the technology of choice after the end customer confirms it has no other terrestrial communication alternative. “Satellite continues to be an excellent alternative for video contribution and business continuity solutions as well as for our traditional bread-and-butter markets — companies with important assets in rural or suburban regions which have to be connected to their main operations and have no other reliable communication alternatives,” says Mauricio Segovia, CEO of AxeSat, one of the main service providers in the region.

Government Projects

In Latin America, satellite has been a key solution for many government projects, to support Universal Service Obligation (USO) requirements, cellular backhaul and other main connectivity and defense projects. In Mexico, for instance, VSAT connections provide a means of essential, reliable and very rapid deployment, according to Javier Braun, Pegaso’s president. He points out that “Latin America is one of the fastest growing regions in the world with a shortage of satellite capacity both in Ku- and Ka-band. Our consumers are looking for competitive satellite capacity and VSAT technology to expand.”

Frost & Sullivan Analyst Georgia Jordan says that the expectations for Ka-band to increase access to broadband in the region are still high. Prices for satellite services are still seen as a constraint, and the expansion of optical fiber networks further weakens the competitiveness of this product. “We predict that the launch of a new Telebras satellite, as well as other government-financed initiatives in the region, propels satellite broadband in Latin America,” comments Jordan, referring to Brazil’s Geostationary Defense and Strategic Communications Satellite (SGDC), which Arianespace is set to launch later this year. The satellite will have seven X-band and 50 Ka-band transponders, and it is expected to be fully operational in early 2017.

This satellite is a big bet from the federal government in Brazil for its project to reduce the digital divide, called “Programa Nacional de Banda Larga,” and will reach more than 2,000 towns in remote regions in the north of the country, where fiber networks are not considered economically or commercially viable.

Sebastião do Nascimento Neto, Satellite Manager at Brazilian state-owned company Telebras, says the company expects their next launch, SGDC 1, to help with three main goals. They want to broaden their capacity to regions where optical fiber still cannot reach, secondly, increase broadband capacity for operators and finally, reduce Mbps costs. “SGDC will complement Telebras’ optical fiber network, especially in those areas where it is still too expensive to install a land-based network, such as in the northeast region of Brazil, according to Neto. It will be the only satellite in the region to allow coverage throughout the whole country. Brazil has currently more than 2.500 towns without broadband services, due to the high costs of the broadband network and the towns have relatively small populations,” says Neto.

There are also high expectations regarding big players coming into the market after the most recent Brazilian orbital slot auctions in 2015. In the last auction, Canada’s Telesat, Spain’s Hispasat, and Yahsat from the United Arab Emirates were the latest winners. According to Anatel, Brazil’s telecommunications agency, the auction netted over $63 million, which was above the regulator’s expectations, and shows once again the value of these orbital slots.

Anatel is betting on the experience of these operators to really accelerate the broadband market in Brazil. “The companies investing in the Brazilian satellite market are experienced in offering Ka-band services. They offer two-way broadband in other markets,” says Anatel official, Augusto Drummond de Moraes.

Mexico

One of the interesting projects to look out for here is “Mexico Conectado.” The project is possible under new laws adopted by the Ministry of Communication and Transport in Mexico, which aims to reduce the digital divide by granting citizens the constitutional right to Internet access. The program is implementing coordinated actions along with state and municipal government to provide free Internet access in public spaces such as hospitals, schools, parks, squares and universities. This is a major opportunity for local operators and providers. Mexican provider Pegaso is one of them. Since 2004, the company has been involved with Mexico’s Ministry of Communication and Transport and has since deployed more than 22,000 VSATs. In 2015, the company deployed the installation and service for 5,000 VSATs in partnership with Hughes.

Colombia

Colombia is also providing educational opportunities for connectivity projects to reduce the digital divide. Gilat Colombia is supporting one of them, the “Kiosco Vive Digital” project, which aims to build digital spaces in rural areas and reduce the digital divide. This project has the potential to impact around 100,000 students providing them with Internet access during school hours and then remaining open to the community for the rest of the day. Gilat brings not only the technology solution to the project until at least 2018, but it is also responsible for the training of the community and the sharing of success cases between the kiosks. Gilat is supporting the Colombian government’s mission to reduce the digital divide, which is one of the most visible projects of its kind in the region.

In Colombia, the digital divide reducing program, Kiosco Vive Digital, intends to take connectivity to remote areas of the country, where there is low population density. The plan here is that better access to connectivity will increase quality of life and improve areas such as education. Since most of these areas are far from the big cities, 93 percent of the Kioscos are supported by satellite technology, according to Colombia’s communication ministry, MinTIC. “One of the principles of the country is the neutrality for telecom projects. Therefore, the contractors that execute the project are free to choose which technology they will work with to provide the digital services at Kiosco Vive Digital,” says MinTIC spokeswoman, Claudia Marcela Hurtado. Even though MinTIC has installed optical fiber in more than 90 percent of Colombian towns, the country sees satellite technology as the only technical and economically viable solution to provide connectivity throughout Colombia.

Hurtado, says that one of the biggest challenges for using satellite services in the country is the price of satellite capacity. She says Colombia still lacks satellite capacity, and since operators still concentrate on bigger and more prosperous markets, such as Europe and the United States, this means satellite capacity is considered expensive for an organization like MinTIC. In Colombia, there are big opportunities for satellite in areas such as education. Currently, the education ministry is working on a project called ‘Conexion Total’, a project intended to provide full Internet access to schools across Colombia. In 2014, 84 percent of the schools were connected. The next goal for the ministry is to connect 92 percent of schools.

High Throughput Satellites

The impact of HTS in the region, despite its late arrival in Latin America compared to other markets, will be huge over the next few years. HTS will allow operators and providers to reach more costumers while reducing costs. “Until recently, Ka-band in the region was limited to specific satellite coverage, Amazonas 3 from Hispamar, [for example]. Eutelsat and Hughes are good examples of players who might join the satellite broadband market in the region in 2016 using Ka-band,” says Jordan. Axesat expects the market to be inundated by a number of opportunities in HTS starting later this year. According to Segovia, the impact on prices will be so significant that it will allow Axesat to go into verticals that have traditionally been out of reach, such as infrastructure, retail, and energy, depending on the country. “However, for current established players like ourselves the challenge is to manage the transition from being a player that has only worked with traditional capacity to becoming a provider that manages different types of capacity and uses them accordingly where it is best depending on the needs of our end customers,” says Segovia.

Ana Freitas is a freelance writer who has written extensively on the technology and mobile markets in Brazil.

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