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Mexico Warms Up to Voice Over Internet Service
17 December 2004 VoIP, or voice traffic over the Internet, is headed for Mexico offering an opportunity for upstart telecommunications companies but a headache for traditional companies, who see pressure on their earnings as the cost of long distance calls decline.
The new service, known as voice over Internet protocol (VoIP), requires a high-speed broadband connection and has caught the eye of customers around the world because of its wider array of features compared with traditional telephony.
The service is yet to be regulated by local authorities"
In Mexico, companies like VoxIP, owned by telecom entrepreneur Carlos Peralta, was formed recently to take advantage of the service in a market dominated by Telefonos de Mexico (Telmex) (TELMEXL.MX) (NYSE:TMX - news).
Alestra, 49 percent owned by AT&T Corp. (NYSE:T - news), also plans to launch VoIP services in the first quarter of 2005.
Alestra's president, Rolando Zubiran, told reporters on Wednesday that about 500 clients, including residential and small businesses, will be offered VoIP as part of its added value services package.
The introduction of the new service is already sending shockwaves among Mexican cable operators, whose technology, while ready for VoIP services, lacks the permits necessary to operate a public telecommunications network.
"Regardless of the technology used to carry voice services, whoever makes a commercial use of such services should have a public network concession to operate" in the country, a source at telecom watchdog Cofetel told Reuters on Wednesday.
The services will not break new ground, however, as Mexican residents already can use Internet telephony services from foreign firms, like upstart Vonage Holdings Corp., as long as they have a U.S. billing address and credit card.
Vonage, which does not offer its services directly in Mexico, charges $15 for its basic package that includes an adapter, a U.S. phone number and air time throughout the United States and Canada. Calls to other countries carry a separate fee.
PROFITS? NOT NOW
For new companies like VoxIP, Internet telephony is a good chance to cash-in faster on customers' need for cheaper services without the broader investment that thorough networks like Telmex's require.
Telmex, owned by Latin America's richest man, Carlos Slim, owns the biggest and most state-of-the-art telecommunication network in the country. Next year it plans to invest $2 billion in network expansion.
But company officials have said Telmex is not too eager to lead the country to Internet telephony as VoIP would likely cut into its long-distance revenue.
Yet, it is already testing the service for the time that it becomes a fully-fledged service with wide appeal.
Analysts think the new service won't change the rules of telephony in the short term for one simple reason: prices for high-speed broadband connections, particularly those for the residential market, are still too high.
Mexico, where more than half of its 104 million inhabitants live in poverty, has slightly over half a million high-speed Internet connections.
"This is a long-term issue," said analyst Jose Luis Ramirez with Deutsche-Ixe brokerage. "It will change the rules of the market, but you will see the difference in (at least) two years."
(Additional reporting Pablo Garibian)
Source: Reuters via Yahoo
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