2009 Latin American Convergence, Pay TV and Digital Media Market

Convergence offers promising prospects in Latin America and the Caribbean, a continent with about 577 million people, a soaring broadband sector, low teledensity, relatively high TV penetration, and a growing VoIP market.

Convergence, however, has created a number of challenges for regulators, forcing them to revisit outdated laws in view of technological advances. In some countries, the broadcast and telecom industries are regulated by entirely separate authorities that do not always see eye to eye when it comes to convergence. As pay TV operators seek to branch into high-speed Internet and cable telephony, and telecom operators seek to add pay TV to their broadband and telephony services, these previously separate regulatory authorities must cooperate or merge to create a transparent and logical regulatory framework.

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.

Although the region’s pay TV market is still small, the long-term outlook is positive, particularly in view of convergence opportunities, the gradual upgrading of cable networks from analogue to digital, and the efforts to reduce signal piracy.

Nevertheless, pay TV in Latin America is beginning to suffer from the global economic downturn; the setback, however, is expected to be temporary. A more serious threat for cable and satellite TV operators will come eventually from IPTV, although bandwidth shortage and the lack of FTTx infrastructure are likely to delay widespread IPTV take-up.

Cable TV subscribers and penetration in major Latin American countries – 2007 - 2008

(Source: BuddeComm based on industry data with BuddeComm estimates)

Key highlights:

Argentina

In terms of pay TV penetration, Argentina is a world leader, with more than one home out of two being subscribed to pay TV services, but media convergence suffers from regulatory battles involving the government, pay TV companies, and telecom operators. According to Argentinean law, a telecom company is not allowed to offer pay TV, and must ally with a CATV operator if it wants to offer converged services. Telcos have been urging the government to reform the Argentine telecoms law to facilitate media convergence. The Cable TV Operators’ Association, on the other hand, has urged the government not to allow telcos into the pay TV sector – at least not until CATV companies have completed the digitisation of their networks. It claims that the telecom incumbents would take over the pay TV market and push CATV companies out of business.

Brazil

In Brazil, delay in legislating on the matter of convergence has led to much confusion and conflict, involving pay TV companies, telecom operators, and regulatory authorities. Incumbent telcos have been forcing the issue by entering the pay TV market before receiving authorisation to do so. Although regulatory questions still await resolution, both pay TV and telephone companies have been active in developing convergence strategies, and several operators offer triple or quadruple play packages. The market leader is Net Serviços de Comunicação, controlled by Mexico’s Telmex; in fact, Net is the largest multi-service cable TV provider in Latin America, with a bundled video, broadband, and voice service in 79 Brazilian cities. Brazil was the second country in Latin America to adopt a digital TV standard; digital terrestrial TV was launched in December 2007, but is experiencing slow uptake.

Mexico

Mexico’s main cable TV providers, Megacable, Cablemás, and Cablevisión, are active in the triple play market, with offerings of bundled cable TV, broadband, and telephony; as a result, their broadband subscriber base and in particular their VoIP subscriber numbers witnessed healthy growth during 2007 and 2008. Telmex has claimed to have lost over 50% of the voice market in areas where cable companies offer triple play services. In 2007, it requested to have its own licence modified to include pay TV services, but in late 2008, it entered into an agreement with the newly constituted Dish Mexico to distribute DTH satellite TV services. Mexico was the first country in Latin America to launch digital terrestrial TV; by early 2009 there were an estimated 38 digital channels.

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