Since 2005 started, Telmex is to launch new services to transmit data, voice and video on IP technology. VoIP services are yet to be ruled in Mexico and, although Telmex bets on having its offer technically ready, services won’t start until the corresponding regulation is passed, in spite of the arrival of entrants IusaComm, Alestra, Axtel, and Avantel, as well as competition to come from cablecos.

IusaComm, the firm owned by Carlos Peralta Quintero, pioneer of wireless and cell telephony in the country, is back in telecoms with the launching of broadband VoxIP services, enabling local, long distance and cell calls. Avantel, long distance and data transmission operator controlled by the US MCI, introduced NetVoice, a mixed offer of broadband Internet access and local and long distance telephony services. Alestra (managed by AT&T, now bought by SBC) invested US$ 2 million on IP platform, thus allowing the firm to focus on pre-paid service offers for local telephony and long distance. Alestra has announced total investments for US$ 40 million in 2005 to expand voice over IP businesses.

In spite of the fixed-to-mobile migration, basic telephony businesses of Telmex –counting on over 96% market – experienced growth of 9.5% along 2004, and went from 15.7 million fixed lines late in 2003, to 17.2 million. For Internet businesses, 2004 was the year for broadband take-off. ADSL accounts climbed to 600,000 late in 2004. Telmex serves over 75% of the broadband market. The firm owes most of the copper in, on which ADSL is mounted the country, where there’s no unbundling.

Telmex owns the copper lines with which customer’s homes are reached, that is, for the Internet access provider (ISP) that offers broadband and VoIP on that access; something that will render new revenues at marginal costs. Therefore, Telmex bets on capturing the second line of clients before reaching another competitor. By expanding the VoIP concept that does away with the DLD, the firm finds it more beneficial to cut competition capacity from rivals in that market than in the local area.

ADSL rollout Telmex has been conducting for over year now is to ease IP implementation, as you can deploy several phone lines on one copper pair, so that it work as an IP Center (managed PBX). Extension accesses will also run on IP. The service is already under trial in Telmex labs, and before year-end it will be launched in the market. Telmex will be initially focused on corporate clients with wide consumption volumes, and small and medium sized enterprises (SMEs). It will implement a business plan to allow for savings in costs per user, and also for network management by the operator. In fact, the company already uses IP on its backbone as a 4-class switching mechanism, and among switches through soft-switches.

Telmex goal will be to hinder the arrival of new players, such as Iusacomm, Alestra and Avantel. However, the main threat comes not from entrants, but from cablecos, well positioned to offer “triple play”. For the time being, a legal provision prevents cablecos from offering telephony directly, and has promoted joint-trade agreements with firms offering VoIP. The goal lies on focusing efforts to capture clients in homes with broadband cable modem access.

The other possibility to be opened for triple play comes from the sky. SES Americom, awarded the orbit 77ºW in Mexico, will start offering high-speed data transmission and digital video services in the USA on its AMERICOM2Home platform for the satellite TV operator Echostar. SES Americom announced it would take the same product to Mexico, probably together with Echostar. Likewise, the Group Pegaso, led by Alejandro Burillo Azcárraga, member of the family controlling Televisa, will offer last-mile broadband Internet access, on its satellite platform, for ISP. Pegaso is to use the system SurfBeam of ViaSat and its capacity in the extended Ku-band of the satellite PAS-1R of PanAmSat. However, the future may bring closer links with Televisa, controlled by Sky Mexico, to allow integrating video service in one pack.

As a counter-part, Telmex needs to add its video offer. In that sense, it has struck a mega-deal with UTStarcom, similar to the one the provider has with Yahoo BB in Japan. UTStarcom offers the Yahoo BB ADSL platform to over 5 million customers for the broadband solutions TV Broadcating and Video-on-Demand, value added services that exempt Telmex from the ban to offer radio-broadcasting services. However, in Telmex case, speed offers are limited: it keeps offers of up to 8 Mbps, considerably lower than the high-speed access of up to 45 Mbps Yahoo BB offers in Japan, thus prompting Telmex not to compete with cablecos, but to focus on Video-on-Demand offers.