The convergence of technology is shaking up the telecom landscape in Latin America and Voice over IP (VoIP) in particular is making the news lately. Telecom operators are increasingly launching this service as a way for subscribers to reduce their long-distance charges.
Miami-based internet telephony software company VoIP Group has found a niche within this market by offering a software platform to IP telephony providers.
We recently spoke with VoIP Group CEO Alfredo Bellagamba regarding the firm's product offering and touching on VoIP trends, such as licensing issues and the impact of this technology upon traditional fixed line operators and future competition.
BNamericas: VoIP Group has recently closed a number of contracts with telecom operators in Brazil like EasyTone and Transit Telecom. How do you judge future growth prospects?
Bellagamba: The quality and size of a project is more important to us than the number of clients per se. We are growing quickly because we have limited competition in the niche market for the type of product and solution we develop.
BNamericas: That said, what makes your software different?
Bellagamba: We developed a soft switch called the VSC platform. With this software, carriers can manage distributors and final users, either residential or corporate. It makes billing real time, pre- and postpaid. That means that when you terminate the call, you can see the record online on the web.
You can also have a virtual office. For instance, you can sell a PSTN access number in Miami (USA) and receive the calls at a VoIP Terminal (box that connects to a phone) that is configured in our platform. Whenever you travel to any place with the VoIP terminal, calls will be forwarded to your new location automatically. For example a hotel in Sao Paulo, Buenos Aires or Santiago, Chile.
BNamericas: How important is Latin America for you?
Bellagamba: Our competition is in the US and Europe, where they are developing the kinds of solutions we offer. We have limited competition in Latin America and Brazil and that is why we want to lead Latin America in this business.
BNamericas: How do licensing issues impact your business?
Bellagamba: We have to really know the regulatory process in each country. For instance, you have two kinds of licenses in Brazil, the SCM and the STFC. We have addressed all the SCM and the STFC issues in Brazil, so we have licenses to provide our service to telecom operators.
BNamericas: What kind of investment is required for an operator to launch VoIP services?
Bellagamba: Voice technology lets an investor or a telecom company launch a new carrier without making a very big investment. For instance, you can set up four POPs [points of presence] for US$100,000 and you can begin offering VoIP services to the residential and corporate market. If you have the licenses from the necessary regulatory agency, you can establish a carrier with not that much investment.
One of the most important things about voice technology is that someone who wants to be a carrier doesn't necessarily have to have the network.
BNamericas: How does the emergence of VoIP impact traditional fixed line carriers?
Bellagamba: For instance, there are four incumbents in the Brazilian market. With privatization in 1998, they owned the last mile. They owned the cable. But then, to make the market more deregulated and to have cheaper rates for the final user, [regulator] Anatel began to launch new licenses - the SCM and STFC. Anatel has authorized 200 new SCM licenses - bear in mind that not all of those licenses are for VoIP - some of them are for radio and internet. But when we started offices in Brazil they had 10 or 15 new SCMs only. Now, two years later, you have 200. One year ago there were just 100 SCM licenses.
So now there are new operators launching residential and corporate projects that need a platform like ours to manage the network. But they don't necessarily need the whole network. They can invest in 50 or 100 POPs and co-locate these POPs in data centers in whichever city they choose. Last mile termination may be with the incumbent, going IP to PSTN, or without the incumbent, going IP to IP to the end point.
The incumbent should see new entrants as competition but also as a client to sell them termination and services. VoIP technology and services can also divide into those who offer service and those who own the network. There will be worldwide multiple operators that offer services, bringing a new reality to the industry structure.
BNamericas: Does VoIP represent a threat to incumbents?
Bellagamba: Yes, absolutely. IP will lead everything. What you will have in the next 10-20 years is an increasing voice network and a decreasing traditional network. But you are also going to have a mixture of networks. The way I see it, incumbents should cannibalize themselves. If they do not they will be losing greater quantities of customers to the emerging carriers.
BNamericas: What trends do you see in terms of competition?
Bellagamba: Competition in Brazil is going to grow and Brazil needs to increase competition because of the rates. Brazil has some of the most expensive rates in the world. The number of service providers, the new emerging service providers, is going to increase because of the chance voice technology gives you to differentiate.
Alfredo Bellagamba joined VoIP Group in early 2002. Previously he worked with Edward Perry at ATG Ventures, the venture capital fund that controls VoIP Group and evaluates Latin American tech projects.
In 1998 Bellagamba was an original partner and co-developed LatinStocks.com, a Latin American financial portal. In August 1999, he sold a controlling stake of LatinStocks to T