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Puerto Rico Telecom flourishes in 2001: Despite economic slowdown, industry deregulation continues to fuel carrier competition and expansion of services .By JOSE MARTINEZ for http://www.puertoricowow.com
Jan 2, 2002

Since the deregulation of the telecommunications industry at a national level, more than 260 telecommunication companies in the areas of wireline, wireless, and cable television have been granted Puerto Rico Telecommunications Regulatory Board (TRB) authorization to do business locally.

Wireless cellular telephone service is currently the fastest growing segment in the telecommunication industry. Six companies provide cellular service to the more than 1.2 million users. These are Centennial, Cingular, MoviStar, SunCom, Verizon, and newcomer Sprint PCS.

"We've seen a reduction in the use of public phones, which is due to the widespread use of cellular phones. People are getting used to having access to a phone all the time, anywhere," said TRB President Phoebe Forsythe. "We expect the market to continue growing at a slower pace. We also think there's enough market for six companies to offer service. This is good for consumers as it lowers service costs."

At the beginning of 2001, the number of local cellular users was estimated at 1.2 million, or a 30% market share penetration. Most industry experts believe that by year end, penetration should increase to between 37% and 39% for a total of more than 1.4 million users, easily surpassing the number of fixed lines available. This means Puerto Rico was close to the nationwide average penetration of cellular service at the beginning of the year--estimated at 35.5%--and is growing on par with the national rate. Forsythe added that the market would probably get a further boost as Internet access through cellular handsets and other advanced applications become available. "Puerto Rico is one of the most competitive wireless markets in the nation," said Mario Garcia, president Cingular-Puerto Rico. "In the States, you don't see offers like free incoming calls, free calls from cellular to cellular, and free calls on weekends or nights. People feel free to use a cellular phone, often using it more than a regular phone. Some people prefer to just have a cellular phone."

Garcia also added that Puerto Ricans tend to talk more than stateside users. "Minutes consumed by our clients are growing exponentially," he said. As a considerable number of companies strive to gain market share, it's not inconceivable that some of them may merge. But a merger between wireless carriers wasn't a simple process, until now.

The spectrum cap for wireless companies, or how much of a frequency they could use, has been raised by the Federal Communications Commission (FCC) from 45MHz in urban areas to 55 MHz, and in January 2003, it will be eliminated all together. This will allow companies unrestricted spectrum, permitting the merger/buyout of wireless companies without the concern of having too much spectrum on a specific market. "With the spectrum cap lifted by the FCC, we will see more mergers, acquisitions and consolidations of various companies in the industry. An Example is AT&T Wireless purchasing TeleCorp," said Raul Burgos, general manager for SunCom AT&T-Puerto Rico.

The large number of local users, their unbridled cellular-phone use, and the upcoming data-intensive third-generation (3G) services have forced carriers to invest in their networks to improve the quality and capacity of their systems.

[The year] "2002 will bring the next evolutionary step in wireless data, with exciting data applications for consumers and more sophisticated ones for business," said Burgos. "During 2002 we will also see another generation of handsets with more data capabilities, among them entertainment and information features such as FM radio and MP3.

According to the Federal Communications Commission (FCC), there are 1.3 million wired telephone lines served by the local exchange carriers in Puerto Rico. Incumbent local exchange carrier Puerto Rico Telephone (PRT) provides 93% of these lines, now under Verizon's control. Centennial of Puerto Rico, a competitive carrier, provides the remaining 7%, as well as wireless service and cable television.

PRT was the government monopoly that provided the "last mile" connection, or wired connection between a home or business and the telephone company. Its disproportionate control of local lines isn't expected to change drastically in the near future. New companies will be able to expand the market, but gaining share in this area is highly unlikely.

The big buzz in the last year in wireline has been the delivery of data at high speeds. Data are now delivered through networks designed for voice communications. However, this setup is slowly changing to data networks that handle voice communications. Businesses with large bandwidth requirements need to rely on dedicated lines, like T1 or T3, which are usually too expensive for small businesses or the home consumer.

Centennial of Puerto Rico launched its new broadband division under the name Centennial Broadband Services. The new division will manage Centennial's local and Caribbean fiber-optic network constructed at a cost of more than $500 million over the past five years.

They also presented their first product under the new division under the name Innova. The new service will bundle regular voice and high-speed Internet/data services in a single package for business customers.

"By creating the new division we are sending a clear message of our commitment to Puerto Rico by providing the best telecommunication and Internet/data services available," said Carlos Bofill, president & CEO of Centennial of Puerto Rico.

"We plan to continue the development and expansion of our current telecommunication infrastructure offering redundancy and reliability across the whole island. As part of this effort we have increased our capacity on various submarine fiber-optic cables around the world, and acquired a switch in Florida and presence in the Internet Network Access Point of the Americas. This way, we can connect Puerto Rico directly to the States and the rest of the world," said Alvaro Pilar, general manager for Centennial Broadband services.

The simplest access to the Internet right now is by way of a dial-up line. It's simple to set up and widely available. Drawbacks include a slow connection speed (56 kilobits per second) and the inability to place calls and send or receive data while in use. Two technologies are slowly emerging to replace telephone lines--digital subscriber line (DSL) and Internet through cable television. Both these broadband systems work by integrating voice over a data connection and provide high speeds that are at least five to six times faster than regular dial-up connections.

DSL is provided through the current copper-wire telephone network, so PRT provides the service to the majority of telephone-line clients. Centennial also offers DSL service but only in places where it is the sole provider of telecommunication services. "DSL needs three basic things before it can fly. First, we have to condition or upgrade the copper lines. Second, modem compatibility problems need to be resolved. Then, we must be sure everything works for the customer," said Seidenberg.

"We expect that to have islandwide DSL coverage in the first quarter of 2002," said PRT President Jon Slater. "Right now, we have more than 2,000 customers on the service and our goal is to have another 1,000 by the end of 2001." Meanwhile, Internet access through cable television infrastructure uses the same coaxial cable entering homes to deliver cable television programming to transmit and receive large amounts of data at high speed. It can also be set up to provide voice call service like DSL.

The two largest cable TV companies in Puerto Rico--Adelphia and Liberty Cablevision--are preparing their networks for official launches in 2002. "When Adelphia launches the service in the first half of 2002, we could be offering it at an estimated basic price of $39.95 a month," said Francisco Toste, vice president and general manager for Adelphia-Puerto Rico. Toste added that under current network conditions 50,000 customers of its base of 140,000 could subscribe to the service if it was launched immediately. Liberty Cablevision expects to provide the service to more than 40% of the 23,000 customers they serve in the first year.

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