Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Tuesday, February 04, 2020

The challenge of the wholesale segment is to reduce the cost of bandwidth distribution

CenturyLink closed 2019 with 18 data centers and 32,000 kilometers of fiber optic in Latin America. Leonardo Barbero, Senior VP and CMO for Latin America of the company, outlined this in dialogue with Convergencialatina, the focus of investment for 2020: in infrastructure, entering new countries and product lines.

CenturyLink closed 2019 with 18 data centers and 32,000 kilometers of fiber optic in Latin America. Four data centers are located in Argentina - in Chacarita, in the city of Buenos Aires; Rosario; Cordoba and Mendoza-. Leonardo Barbero, Senior VP and CMO for Latin America of CenturyLink, considered that in the wholesale sector, the cost of capacity for operational infrastructure is no longer a challenge for the region, but that the exchange value that presents the greatest challenges is the cost of distribution.

Convergencialatina: What are the axes of the investment plan for the region?

Leonardo Barbero (LB): It has 3 main lines. First, infrastructure. In Chile we are deploying a very important metro network, and now the last phases of connection of client buildings are being addressed. In Ecuador, deployed a 1,600-kilometer fiber ring, and linked this country to Colombia by land, which provided Ecuador with the capacity for international business that it did not have before. We started the constructing a third data center in Santiago de Chile and also a third in Bogotá.

In the case of Brazil, a new building for data centers was established for Rio de Janeiro and started with the expansion of San Pablo. In Argentina, the expansion of the Chacarita data center in Buenos Aires is being completed. In the Mesopotamian route, capacities are being expanded to link eleven new cities.

A second line of the investment program has to do with the incursion into new countries. In 2019 our big bet was a longhaul network in Mexico.

Thirdly, investments in product lines or services are located to adaptively solve demand problems. An example of this is the expansion of capacity of CDNs in Argentina, Brazil and Mexico, because there are a huge number of companies in the United States and Europe that intend to distribute content as close to the user as possible. We are also in the process of expanding to face the increased demand for television and gaming content. All this allows us to put each end user of Argentina with the same level of efficiency as any user in the world.

Convergencialatina: Could you tell me about infrastructure expansions you expect in 2020?

LB: Of the four data centers in Argentina, an extension of capacity is needed in Chacarita. And it will be one of the points on the investment agenda for 2020. In the other establishments we do not perceive a demand that requires us to expand.

Continuing with the new focus in Mexico, a new land section will be made between that country and the United States. The project is very important because of the huge traffic between them and the sensitivity to latency, with numerous Mexican companies that process their information in the United States. To a section existing between Monterrey and the North American city of McAllen, a new one will be added from Monterrey to Laredo.

Convergencialatina: In 2020 new submarine cables will be operational with the landing in Argentina (the extension of Tannat, Google and Antel; the ARBR, of Seaborn Networks; Malbec, of Google and Facebook). Do you expect a reduction in the cost of wholesale capacity?

LB: What we have seen in the last 18 months is that the cost per capacity for operational infrastructure has already fallen, and what is paid in Argentina is already similar to that paid in other countries. The highest cost is not the value of the mega wholesale Internet, but the cost of distribution: from when I buy it, to the end user. You would have to see how the distribution cost is reduced.

Convergencialatina: What is your assessment of the operation in Argentina in these last four years?

LB: Our activity has to do with the growth of GDP, because it generates new investments in new plants to be connected, or more traffic to be managed. In that regard, it did not go wrong, but in the last half of 2019 we saw an important“stoppage” in the economy, and even greater in decision making. 2019 was characterized by great prudence in decision makers; in addition, technology was used in many cases, not for growth, but to reduce operating costs.

In this sense, there was a cost transformation - of which automation is an important part - particularly in retail, service companies and oil company segments.

Convergencialatina: What are the expectations with the new government?

LB: Beyond the new government, we want the economy to be strong and predictable. We have been in Argentina for 30 years and we will continue investing and betting on the country. We still do not have clarity on the measures that the government will execute, but we have renewed expectations. We are not going to stop the investment plan in Latin America.

The interview was published in the Convergencia’s Atlas and Yearbook 2019.

 

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