2013 Latin America - Digital Media and Pay TV Market

Amidst the global downturn, Latin America’s pay TV market booms

Convergence and competition

In Latin America, convergence has become a popular solution not only for companies, as a way to attract more customers, but also for regulators, as a way to promote competition. In most countries, the incumbents continue to dominate the fixed-line sector, with Local Loop Unbundling being rare in this region and wholesale activity not very well developed. In the broadband sector, most incumbents have secured a virtual monopoly in the delivery of ADSL access, and the only meaningful competition is across technologies, from cable modem and mobile broadband services.

The concern many governments face is the shortage of fixed line infrastructure, tied to the fear that operators will cease to invest in their network if they are forced to unbundle their local loop or lower wholesale prices. Of course, telecom companies have done their best to encourage this fear.

Regulators hoped alternative operators would build their own infrastructure to reach unserviced areas, thus increasing teledensity. New entrants have usually used fixed-wireless technologies such as WiMAX to offer broadband, telephony, and sometimes pay TV services, but their market share has remained small.

Triple play

Cable TV companies, meanwhile, have jumped onto the bandwagon, flaunting their ability to offer both broadband and telephony over hybrid fibre-coaxial (HFC) or fibre optic networks, thus being able to increase the country’s teledensity and broadband penetration, and create a more competitive environment thanks to their triple play solutions.

The incumbents, for their part, not to be outdone by any competitor, have launched their own triple play services, sometimes by acquiring existing cable TV operators, and sometimes by resorting to satellite TV or IPTV technology.

Triple play models in Latin America normally combine voice (traditional fixed-line telephony or VoIP), broadband (ADSL, cable, wireless technologies, or satellite), and pay TV (cable or satellite TV). One of the consequences of triple play is the start of competition between cable TV and telecom operators. This is, of course, beneficial for customers, who have a greater choice between service providers. But in many countries, issues of market balance and fear of losing market share to competition have led to lengthy regulatory battles, involving cable TV companies, telecom operators, and regulatory authorities.

The result of these battles has normally favoured triple play, and this has led to an increase in the number of cable modem connections. Between 2001 and 2007, ADSL was gobbling up most of the broadband market, but since 2008, cable modem has been regaining some of its lost ground.

Cable TV

Although some companies still offer analogue cable TV services, digital cable is becoming the norm in Latin America. Endemic cable TV piracy has been a powerful driver for the move to digital cable. Besides providing advanced services, the digital platform enables providers to prevent signal theft, forcing households to become paying subscribers if they wish to continue viewing cable TV.

Satellite TV

Latin America’s satellite TV sector was dominated for many years by DirecTV/Sky TV. Since around 2006, however, fixed-line incumbents and other new market entrants have been launching Direct-to-Home (DTH) services in several countries. The increased competition has driven significant growth in the satellite TV market.

Pay TV market growth

Thus, thanks to the success of triple play and satellite TV competition, the Latin American pay TV market has been performing remarkably well, not even slowing down during the recent global credit crunch – unlike the economic slump of 2001/02, which brought cable TV to its knees throughout the region. In fact, in most Latin American countries, pay TV has become the fastest growing telecom sector after mobile broadband.

Online video viewing

Online video viewing is also showing remarkable growth. According to ComScore, in 2011 consumption of online video grew faster in Latin America than in any other region worldwide. Reportedly, Brazilians watched 4.7 billion online videos in 2011, up 74% year-on-year. Mexico came second, with 3 billion videos viewed. Argentina occupied a distant third place, with 1.5 billion videos, and Chile was fourth, with 1 billion. Predictably, online video viewing in Latin America is driven by the youth market, with 15-24 year-olds accounting for 28% and 25-34 year-olds accounting for 30% of all online video consumption. Despite these strong growth figures, however, Latin America still only represents 9% of global online video consumption – a long way behind the leader, Asia, with 41.3%.

Smart TV sales

Smart TV sales in the more advanced Latin American markets are expected to escalate in the near future, especially in Brazil, where the forthcoming FIFA World Cup and Olympic Games are expected to drive substantial growth in digital and smart television technologies.

Digital terrestrial TV

Most Latin American markets have deployed Digital terrestrial TV (DTT). In South America, the preferred standard is the Integrated System for Digital Broadcast, Terrestrial, Brazilian version (ISDB-Tb), based on Japan’s ISDB-T. All South American countries have adopted ISDB-Tb except for Colombia, which uses Europe’s Digital Video Broadcasting (DVB) standard. Mexico and Central America, instead, have chosen the US standard, developed by the Advanced Television Systems Committee (ATSC).

Market Highlights

• Brazil has removed limits on foreign ownership in the cable TV sector and has given the green light to all telcos to provide pay TV anywhere in Brazil.
• In the pay TV sector, Argentina is a world leader, with penetration in the major cities only slightly higher than in the rest of the country.
• In Mexico, cable operators report lower churn due to triple-play services.
• Despite delays in the deployment of DTTV, Brazil intends to complete the switchover from analogue to digital TV broadcasting in 2016.

Data in this report is the latest available at the time of preparation and may not be for the current year.