UUNet Plans to Enter Latin American ISP Market

Latin America's already crowded field of ISPs (Internet service providers) is gaining another player. This time it's UUNet Technologies Inc., WorldCom Inc.'s Internet services arm, which on Tuesday announced plans to extend its global presence to Latin America.

UUNet is entering a highly competitive market where consolidation has already started and is expected to continue during the coming years, as the strongest providers gobble up or squash their competitors. Some of the biggest names playing in the market include Spain's Terra Networks SA, PSINet Inc., IFX Corp., America Online Inc., Argentina's Ciudad Internet, México's Telefónos de México/Prodigy and Brazil's UOL Inc.

To make matters more complicated, market survival became more difficult this year with the spread and enthusiastic adoption of free Internet access throughout the region, which is forcing ISPs to rethink their business strategies.

However, UUNet will focus on businesses, and this could help it avoid having to deal with the price pressures being brought about by free access, which is mostly an issue in the consumer space, said Grant Smith, a senior analyst who follows Latin America's Internet market at market researcher Yankee Group Inc. in Boston.

"UUNet is following some strong players into Latin America, but that doesn't mean it will not succeed," Smith said.

ISPs in Latin America have tended to focus either on large companies or on consumers, so a company like UUNet could tap into an underserved market by catering to small and medium-size businesses, Smith said. A UUNet spokeswoman said that UUNet plans to target small and medium-size businesses in Brazil.

A challenge for UUNet will be to educate the market about its offerings and to understand the needs of its potential clients, Smith said.

The rewards will be big for the ISPs that manage to stay afloat in the region. The Internet services market in Latin America will grow to US$17.4 billion in 2005, from $1.18 billion in 1999, a compound annual growth rate of 58 percent, according to a recent study from market researcher Frost & Sullivan Inc. in San Jose, California. [See "Study: Net Services Market to Explode in LatAm," Aug. 22.]UUNet has established its regional headquarters in Sao Paulo, Brazil, and plans to take advantage of the enormous infrastructure and presence of Embratel, Brazil's former state-owned long-distance company monopoly. In July 1998, WorldCom acquired a controlling stake in Embratel Participações SA, the majority shareholder in Embratel. WorldCom claims that Embratel's network is the largest in Latin America, and UUNet will have Embratel's muscle at its disposal as it enters the Brazilian ISP market.

In addition to the Sao Paulo headquarters, UUNet plans to open an office in Rio de Janeiro. The company already has operations in Puerto Rico, a Spanish-speaking U.S. territory in the Caribbean. UUNet plans to open an office in Buenos Aires next and to have operations in the region's major countries before the end of 2001.

Initially, UUNet plans to build its own network in the region and offer dial-up Internet access at a speed of up to 56K-bps (bits per second) and leased-line dedicated Internet access at speeds ranging from 64K-bps to 2M-bps. Eventually, it will also offer other services, such as hosting of Web sites, virtual private networks and security services.

UUNet currently operates in 114 countries and serves more than 70,000 businesses in North America, Europe, Africa and Asia/Pacific. It can be reached at http://www.uu.net/. WorldCom, in Jackson, Mississippi, can be reached at +1-601-360-8600 or http://www.wcom.com/.

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More about America OnlineFrost & Sullivan (Aust)IFXPSINetTerra NetworksUOLUunetUUNET TechnologiesWorldComYankee Group

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