Luxner News Inc, Stock Photos of Latin America & the Caribbean
 

Article Search

AOL enters battle for share of Brazil's Internet market
The Washington Times / November 25, 1999

By Larry Luxner

SÃO PAULO -- Brazil's fiercely competitive Internet market -- one of the hottest in Latin America -- is heating up even more with the arrival earlier this month of America Online Brasil. Inaugurated Nov. 16, the service -- a joint venture between Dulles-based AOL and Venezuela's Grupo Cisneros -- is promising quick, easy and low-cost Internet access in an aggressive bid for customers in this Portuguese-speaking nation of 165 million people.

"Brazil ranks among the most promising markets in the world for interactive services," said Charles Herington, president and chief executive officer of AOL Latin America, upon launching the service. "By combining unmatched local content with America Online's signature convenience and ease-of-use, America Online Brasil will lead the way in turning the interactive medium into a mass-market phenomenon throughout Latin America."

So far, more than 1.7 million Brazilians have logged onto the Internet as paid subscribers since September 1995, meaning five million people actually surf the net regularly. Experts say that by 2002, Brazil will have 7 million subscribers and 15 million users. But the number of Internet service providers (ISPs) is certain to come tumbling down.

"Industry representatives speculate that the market can reasonably accommodate eight to 12 Internet service providers," according to the U.S. Commercial Service in São Paulo, in a new report. "Considering there currently are over 400 ISPs, much consolidation will occur, especially among firms that do not have easy access to capital. Despite this trend, there will still be space for corporate providers with specialized services and for companies which carve out a niche market."

One of the most aggressive Internet companies in Brazil is Herndon-based PSINet.

"I think there's obviously going to be about a dozen very large ISPs," says Philippe J. Kuperman, president of PSINet Latin America. "But we see the market breaking down into more niche markets. and at the next phase of evolution we see ISPs which will specialize in a vertical market. For example, there might be ISPs concentrating on providing service to lawyers only. Another will serve doctors only. These are the sort of niche players that will abound, not only in Brazil but throughout Latin America."

All over Brazil -- from Sao Paulo in the south to Recife in the Northeast and even Manaus in the Amazon jungle -- colorful billboards have sprouted up along highways, atop buildings and near shopping malls, advertising one Internet access provider or another.

At present, Universo On-Line (UOL) has an estimated 31% of the pie, with 530,000 of the total 1.7 million subscribers. Zaz, owned by Telefonica, has 330,000, or 19%. Third-ranked PSINet has 150,000 (just under 9%), followed by Mandic, with 90,000 (5%), and ZipNet, with 23,000 (about 1%). AOL, which has no market share yet, reportedly plans to invest $200 million in Brazil and the rest of Latin America over the next 12 months.

With the entry of AOL, industry representatives predict that the Brazilian Internet market will increasingly take on characteristics of more mature markets. Currently, an access price war is underway with many companies now offering low "unlimited access" prices. Likely future trends point to increased alliances between traditional media firms and internet companies for content purposes as price becomes less important.

"A lot of companies are realizing the Internet is an amazing new way to reach customers," says Andy Castonguay, a Sao Paulo-based analyst at Pyramid Research Latin America. "Access is getting easier, content is growing on the Web, and a lot more capital is being put into advertising. As large groups like PSINet continue an aggressive buyout strategy, you'll see continued consolidation."

According to the Comite Gestor da Internet no Brasil -- an Internet watchdog group -- Sao Paulo state has 28.1% of all Internet subscribers, followed by Minas Gerais (14.2%); Rio Grande do Sul (8.9%); Rio de Janeiro (8.4%); Parana (7.5%); Bahia (6.5%) and Santa Catarina (5.8%).

Broken down by plan, 34.9% of subscribers have unlimited Internet access (paying an average $27.55 a month), followed by 28.8% with 10 hours a month (paying $16.14 plus $1.61 per additional hour), and 23% with 20 hours per month (paying $24.72 plus $1.24 per additional hour).

Despite the rapid growth, however, many economic and technical factors could hamper the Internet's spread throughout Brazil.

For example, while the price of computers and telephone service keeps falling, it'll still be awhile before all but only the richest Brazilians will be able to afford the equipment necessary to access the Internet. And there still aren't enough phone lines to go around. According to USCS, even ISPs can't get the number of lines they require. For example, São Paulo's Telefónica has a 50,000-line backlog for ISPs alone. Meanwhile, other ways of accessing the Internet -- such as cable, satellite, DSL and wireless local loop -- aren't yet popular in Brazil or are only just starting to be explored.

"Although still relatively small, Brazil’s fast-growing Internet market is attracting large, well-capitalized U.S. and other firms," says USCS. "The entrance of these companies has sparked a wave of acquisitions, mergers and strategic partnerships. Some firms are also using Brazil as an anchor for expansion into other parts of Latin America. While nobody is quite sure where the market is headed or how fast it’ll grow, all participants foresee fierce competition for the Brazilian market."

Luxner News Inc, PO Box 938521 - Margate, FL 33093 USA tel=301.365.1745 fax=301.365.1829 email=larry@luxner.com web site design washington dc