Russia, Latin America installing fiber-optic networks

A handful of network operators have begun deploying high-speed fiber-optic and cable networks in areas where Internet religion has yet to explode.

Two recent examples include Impsat Fiber Networks, a communications carrier building a series of fiber-optic networks across Latin America, and a joint venture between Andersen Group and Comcor to build a fiber-optic Internet and cable TV network in Russia.

The recent international moves come as U.S. companies scramble to deploy any high-speed networking technology they can get their hands on: fiber optics, fixed wireless, satellite systems, cable modems and digital subscriber lines (DSL). Analysts commonly refer to the market for high-speed, or broadband, Internet connections as "supply constrained," meaning more consumers want the services than the companies can accommodate.

Several companies, such as Global Crossing, KPNQwest and Worldwide Fiber, are building or planning international fiber-optic networks and undersea cable links. The demand for those networks, primarily serving portions of Europe, Asia or trans-Atlantic connections, is fairly predictable, analysts said.

But in Latin America and Russia, though the economies of both are improving, business growth trails well behind that of North America, which raises questions about the necessity of expensive new networks at this time.

Some entrepreneurs, however, are betting that being connected will become a priority in even the most obscure regions.

"Given the recent political developments in Russia, the attendant reduction of risk and uncertainty, and the renewed prospects for a positive economic turnaround, I believe that (our network) is at the right place and at the right time," Andersen Group chairman Francis Baker said in a statement.

Analysts believe that so-called third-world regions, and countries that have long been under-served by communications companies, will flourish when introduced with high-speed data connections.

"We have to assume that, given political stability and all things being equal, these people will demand the same sorts of services that the more developed nations have now," said Robert Rosenberg, president of communications consulting firm Insight Research.

"We have seen that when more bandwidth is made available, it gets consumed," said Dataquest analyst Steve Koppman.

Analysts also believe the new networks, in many cases, are less about responding to increased demand by local residents and businesses, and more about large U.S. and European companies expanding their foreign operations with far-flung remote offices.

"It's driven partially by multinationals building out their own wide-area networks," said Blaik Kirby, vice president at Renaissance Strategy, a communications market research firm.

But analysts also believe some companies are simply building the new networks on speculation, hoping to extract high rates in the short term in order to sell the networks to larger communications companies.

"There's always an advantage to being first to market," Renaissance's Kirby said. "People are probably making bets that these networks will be bought."

Kirby said the rest of the world, which is roughly five to 10 years behind U.S. communications trends, is likely to follow the same models, which recently saw upstart domestic carriers such as IXC Communications and Frontier Communications be acquired.