High Demand for International Connectivity in Latin America
During his presentation at LACNIC 40 LACNOG 2023, Peter Wood, senior analyst at TeleGeography, noted that the arrival of new submarine cables to Latin America will increase regional Internet connection capacity and create greater competition.
In his opinion, the cost of IP transit is decreasing, and this translates into more local and intraregional traffic thanks to submarine cable capacity.
On 3 October and within the framework of the LACNIC-LACNOG event in Fortaleza, Peter Wood presented The Role of Latin America in the International Connectivity Market and stressed that maintaining investments in infrastructure will strengthen primary and secondary metropolitan markets.
In an interview with LACNIC Blog, Wood stressed that technological advances are allowing for increased capacity and improvements in service quality at much lower prices.
In your opinion, what has been the greatest impact of submarine cables in Latin America and the Caribbean (speed, connectivity, or cost reduction)? Why is that?
My opinion may be biased because I study market prices. I believe, however, that the new submarine cable systems have had a massive impact on the cost of international connectivity. The price of connecting Latin America has historically been higher than for regions such as Europe and the United States. However, the difference in prices between Latin America and those other regions has decreased considerably, accompanying a regional increase in capacity. This new dynamic correlates with a large increase in investments and competition in the Latin American connectivity market.
More than the prices, the key is that everything is connected: technological advances that facilitate capacity increases also bring about improved quality of service and much lower unit prices compared to older technology.
In your presentation you mention an average annual growth of 42% in the international bandwidth of the LATAM region between 2019 and 2022. What are the factors that have influenced this growth? Which countries have the highest growth numbers?
Demand! There is a high demand for international connectivity in Latin America, and this is why there is a lot of investment in infrastructure to satisfy this demand. This is evident if we look at undersea cables and at the recent history of investments in cloud infrastructure and content provider networks. In this sense, with its high consumption of international bandwidth, Brazil is the regional leader, followed by Mexico and then Chile. In terms of growth, less established markets such as Uruguay, Guatemala, and Ecuador are expanding their profiles at a greater speed.
How have content networks impacted the increase in broadband and consumption?
Content providers continue to have a major influence on broadband traffic in Latin America. For example, in 2022 we noted that more than 70% of all regional international bandwidth capacity was through content providers. Considering that several submarine cables under construction are the result of projects by OTT companies, this dominance is likely to continue.
Which countries in the LATAM region are in the best position to promote interconnection hubs? What are the advantages of creating these hubs?
Typically, a hub is born as a result of specific factors. These include high levels of competition, competitive prices, a regulatory environment that favors growth and investment, high levels of demand, and robust infrastructure including submarine cable capacity, but also datacenters and cloud connectivity. Cities such as São Paulo, Rio de Janeiro, and Mexico City are examples of such hubs. And we have seen that markets such as Bogotá, Santiago, Lima, and Fortaleza are positioning themselves as potential hubs with similar growth levels.
What can we expect in the next five years based on current projects for new submarine cables?
Several subsea systems are reaching the end of their economic lifetime. This doesn’t mean that all older cables will be retired over the next five years, but this is a distinct possibility. As this reality approaches, we will see investments in cables to replace existing infrastructure. In addition, considering the deployment of technologies such as artificial intelligence, it is highly likely that the demand for connectivity will continue to increase at an accelerated pace. In fact, we are already witnessing this, as in 2023 new projects are frequently announced, while new cables for connecting Latin America were not launched in 2022.