Traditional local and long distance telephony operators in Latin America are facing increasing competition from Voice over Internet Protocol (VoIP) services, which are being driven by their inherent cost benefits and the increasing penetration of broadband and triple-play. New analysis from Frost & Sullivan (News - Alert), VoIP in Latin America 2008, finds that the market earned revenues of $72.3 million in 2007 and estimates this to reach $625.9 million in 2012.

 

“The growth of VoIP and IP Telephony is [expected to be] one of the most important factors for a 2.8 percent yearly dip in local revenues and a 7.9 percent dip in long distance revenues in Brazil during the next six years,” said Frost & Sullivan analyst José Roberto Mavignier, in a statement. “Analyzing end-user response, Frost & Sullivan found cost reduction to be the most relevant factor for the increasing adoption of VoIP in Brazil.”

 

As Latin American customers and businesses are largely reliant on voice communications, cost sensitive technologies such as VoIP, IP Telephony, and Fixed-Mobile offers are reducing traditional fixed voice revenues in the region. Furthermore, new generation service providers such as Internet-based companies, cable TV providers, and competitive local exchange carriers (CLECs) with innovative business models are introducing substitute products that are affecting traditional fixed voice services.

 

However, lack of number portability regulation, poor end-user awareness, low call quality levels, and an almost non-existent VoIP pre-sale effort still make it difficult for VoIP service providers to enlarge their share in the voice revenue pie in the region.

 

“Improving the clients' understanding of technical and operational aspects and efficient pre-sales support such as physical points-of-service sales, customer service, and new bundles of services will be crucial to make VoIP services more appealing to Latin American users,” Mavignier said. “Above all, the quality of calls has to be flawless in order to attract and retain fixed telephony users.”

 

While it is not easy for the smaller VoIP providers to compete with the big incumbents, they will do well to combine the agility of their small operations with innovative business strategies, which might help them to take this leap forward.

 

Such strategies could include partnerships with major retail stores to resell equipment and services, Internet customer service, Internet and direct marketing campaigns, and alliances with content providers to bundle services. With the arrival of ADSL 2+ services in the region, supported by high speed connectivity, technical issues could be easier to resolve in the future.

 

In order to take VoIP to the next level, VoIP and Wireless Voice over Internet Protocol (WVoIP) service providers should ensure operational efficiency and quality of service, along with effective distribution and promotion strategies.