March 01, 2001

Total intra-regional bandwidth capacity demand in the Americas will increase to almost 9Tbit/s by 2006, from around 1.6Tbit/s today, says analyst and consulting firm Ovum. This is driven by the expansion of cross-border trading relationships in the NAFTA and South American trading blocs, the growth of intra-regional broadband content distribution to multiple broadband access devices in both North and South America, and the rapid development of intra-regional capacity in South America.

However, the North and South American markets will develop differently, with North America accounting for less than 20% of intra-regional bandwidth demand by 2006, down from almost 40% today. "As intra-regional broadband infrastructure expands rapidly in other regions of the world, particularly Asia Pacific, demand for broadband content distribution and increased cross-border traffic within the Americas region will more than compensate for the reduction in North American IP transit traffic. " says Sue Uglow, research director at Ovum. "Broadband network operators in North America should therefore re-align their investments to support domestic and intra-regional, rather than international, demand for bandwidth."

Ovum forecasts that revenues from intra-regional bandwidth sales supporting outbound international bandwidth demand on routes within North America (between the US and Canada) will increase slowly, reaching just $500 million in 2006. This slow growth is reflective of a decline in outbound traffic from the US to Canada, and of sharp price erosion and changes in the way that bandwidth is purchased.

Uglow cautions that although demand for incremental in-region, end-to-end broadband capacity will remain strong through 2006, the North American market is highly competitive, with a large amount of infrastructure already available from competitive suppliers, resulting in revenue and margin pressures. "The arrival of viable broadband access and subsequent proliferation of the broadband content delivery model will completely change the regional communications environment in North America," says Uglow. "This will have a major impact on all players throughout the content value chain."

In South and Central America and the Caribbean, broadband demand will come mainly from bandwidth-starved corporate and government end-users. "Opportunities abound for providers of broadband backbone and local access connectivity, and progress towards liberalisation provides a favourable environment for competitive backhaul provision and intra-regional connectivity development in many markets", says Uglow. Regional broadband network development in South and Central America and the Caribbean will focus initially on the installation of new, IP-based long-distance infrastructure, satisfying pent-up demand for Internet connectivity in line with carrier and business end-user demand. Broadband distribution of Spanish-language content will only become a reality once the basic connectivity is in place. "Multiple broadband local access devices such as mobile IP and digital TV will be used from 2003 or 2004. This, combined with an increase in the availability of region-specific content, will spur the development of broadband content distribution," Says Uglow.

Ovum forecasts that revenues from intra-regional bandwidth sales (within South & Central America and the Caribbean, and from South & Central America and the Caribbean to North America), will reach $3.37 billion by 2006. According to Uglow, "This rapid growth reflects the increases in supply on the main inter-capital routes, increased purchasing to support cross-border corporate traffic and increased IP traffic within South and Central America for the distribution of Spanish-language web content."

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