Facts
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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