Cable & Satellite International july-august 2009 www.csimagazine.com page seventeen

Market focus

Latin American telcos face the

same competitive pressures as

their peers worldwide, but the

region has seen relatively low penetration

of IPTV to date and services are still in

very early stages. In this

sense, it differs from most

other regions, where at

least some national markets

have seen significant IPTV

development.

Fewer than 0.1% of households in

Latin America subscribed to IPTV at

year-end 2008 and the technology

had very few net additions during

the year, according to estimates

from Pyramid Research.

The explanation behind Latin

America lagging in the IPTV deployment

curve is attributable primarily due to

regulatory hurdles. Indeed, regulation is a

key concern for IPTV providers - a number

of incumbent telecoms operators are

testing IPTV services but are for the most

part hampered by legislation and

forbidden from offering (live) video

services over their networks.

Countries like Chile, Colombia, Panama,

and Bonaire are already offering IPTV

services, while other markets, like Costa

Rica and Venezuela, plan to launch very

soon. However, the major operators in

Argentina and Brazil, who are showing

strong interest in IPTV, face a number of

regulatory issues before they can actively

rollout services.

Being the largest markets in the region,

Argentina, Mexico and Brazil have the

most potential, according to Tim Johnson

at analyst firm Point Topic. Johnson notes

that telecoms operators in Argentina

currently cannot offer live TV services,

although some operators are trialling on

demand services via IPTV. Argentina's

cable operators won a court ruling against

IPTV in 2007.

Similarly, Telmex in Mexico faces

regulatory barriers to offering IPTV.

However, the company has IPTV plans

ready should the

regulatory

situation change.

Meanwhile, Maxcom has

just under 20,000 IPTV

subscribers in the country.

Once regulatory problems

are overcome and resolved,

everyone expects to start to see some

real impetus and scale in IPTV

deployments across the region.

There are ways around this, or at least

for service providers to be future-proof so

they are in a position to launch

commercial services when regulatory

issues ease. “Operators are being

pragmatic, and looking at TV services

across a number of platforms, not just

IPTV. Oi in Brazil (formerly Telemar)

provides TV services via satellite for

example, and also has a mobile TV

offering,” says Johnson.

As in other parts of the world, many

telcos are very keen on using satellite pay

TV as an alternative to IPTV in order to

expand quickly, put together a multi-play

offer and have an economical means to

reach many different income segments,

Derek Medlin, senior analyst at

Pyramid Research.

Argentine fixed line operator

Telefonica de Argentina, for

example, along with US satellite TV

provider DirecTV has launched triple-

play services in Mendoza and Rio

Negro provinces, with plans to expand

the service to all areas where the pair

has a presence in the near future. The

pair's TRIO package offers basic

telephony, high speed internet and

satellite TV services and includes

unlimited local calls, broadband download

speeds of up to 3Mbps and digital TV.

Another way is to use the approach

taken by Korean telecoms companies,

notes Johnson. They could, until recently,

not offer live TV channels, so instead

concentrated on developing on-demand

services via the set-top box. They also

had well-executed TV via web services

available. When the government finally

relaxed restrictions, the operators were

ready to deploy a live channel service.

Both options allow telcos to get a sense

of the market and customer preferences

and prepare themselves for when the

government allows them to offer full IPTV

The South American market for IPTV services is still verysmall, but will be driven by favourable regulatory changes.Goran Nastic reports

IPTV in Latin Americashows signs of growth

18_iptv_la.qxd 22/06/2009 14:01 Page 1

page eighteen www.csimagazine.com Cable & Satellite International july-august 2009

Market focus

services. In some cases, there needs to

be a telecoms/broadcasting law overhaul

and in others they must demonstrate that

the addition of pay TV to their portfolio

will not result in anti-competitive

conditions. “Most are still in 'sit-and-wait'

mode,” says Medlin.

Strategies and models

In terms of strategy, many of the telcos

that are pushing into IPTV and other pay

TV areas have done so via acquisitions of

smaller local players or they are using

their pan-regional presence to keep costs

down, according to Medlin. “In certain

markets where local content is highly

valuable, there is more intense need for

exclusive content.”

For those that do launch services, there

is a need to establish market differentiators

for IPTV compared versus other media

delivery platforms (satellite and cable),

much like in other parts of the world.

Are telcos likely to adopt a me-too

approach or will they go for the more

personalised and interactive services that

IP can support? Medlin believes in a bit of

both. “Where an operator already has a

pay TV offer, we see IPTV being a “me-

too” service that matches the current

offerings while the telco expands the IPTV

coverage and bolsters the networks that

are underpinning the service. Down the

line, we believe that incumbent telcos and

challengers who launch IPTV will tend to

make a more direct jump towards

advanced services given that they will

benefit from know-how from operators in

advanced markets and the lower cost of

equipment, such as set-top boxes

(STBs),” he says.

Operators' business plans are looking

for a return on investment within three to

five years, so there is pressure on all

elements of the value chain to drive costs

down, according to Sandra Conejos,

director of sales for Latin America at

Amino, which has been involved in the

region for a couple of years now, helping

operators to evaluate the opportunity and

determine the kinds of services that will

drive take-up.

“For STB companies, this means

pitching entry level low cost boxes which

have been the bedrock of most of the

IPTV service launches to date. However,

we are seeing encouraging signs in the

market of a move to HD STBs for second

phase deployments - a clear sign that the

market is starting to develop and grow,”

she says.

Similarly, Johnson believes that

operators will try to emulate existing pay

TV services first and to deploy a reliable

live TV and on-demand 'catch-up' TV and

movie rental service before dipping into

more advanced areas.

Most business models are relatively

simple and straightforward to start with,

agrees Conejos. Basic TV packages are

driving initial take-up, but operators are

already looking at more sophisticated

offerings. The evidence, according to

Conejos, is that more sophisticated STBs

are being deployed, greater depth and

breadth of content is becoming available

and the marketing of services is

becoming more sophisticated.

Conejos argues that the initial rollout of

VoD offerings has encouraged telcos to

look further ahead to more sophisticated

offerings. “Most of the telcos have

analysed the market and see that the

demand is there. HD services are only

available in very limited areas with only

five HD channels currently available from

content providers. However, telcos are

staring to talk about HD as the next

natural service to offer. OTT applications

are seen as an additional added value

service and some telcos are now

considering investing in platforms that

would bring these kind of services to

market.”

HD services are currently only available

in very limited areas, with only five HD

channels presently available from content

providers. It is the same case on VoD,

where the studios are very careful

authorising HD content to be distributed

in Latin America. It is also illegal to re-

transmit US broadcast channels in Latin

America.

Due to the relative infancy of the

sector, Conejos notes that system

integrators with experience in IPTV have a

key role to play in this market and

operators are very keen to work with

them. “The IPTV market in Latin America

is unique. IPTV is still considered a very

new technology and companies are

carefully considering their options before

committing to rolling out services. This

means project cycles are longer than

usual with an average of 24 months from

business plan to deployment,” she adds.

From a content and advertising

perspective, there are massive markets to

tap into in Latin America. As IPTV-based

services grow and mature - and become

increasingly interactive and personalised -

the widespread belief is that the major

global players will move in. Content

owners, of course, are motivated to get

2008 2014

Argentina 1,203 5,877Brazil 3,222 9,877Mexico 2,86 6,695Rest of region 4,588 14,677Latin Total 12,174 37,085

Source: Pyramid Research

IPTV subscribers in major Latin American markets

“Content providers like Digital Latin America (DLA) are alreadytransmitting content to those telcos offering IPTV, which is hugely encouraging.”

18_iptv_la.qxd 22/06/2009 14:01 Page 2

page twenty www.csimagazine.com Cable & Satellite International july-august 2009

Market focus

their programming in front as

many households.

“Content providers like Digital Latin

America (DLA) are already transmitting

content to those telcos offering IPTV, which

is hugely encouraging. Once telcos

reach the minimum customer

levels required by the

Hollywood studios, more content

will become available at more

affordable prices,” says Conejos.

High levels of TV consumption

generally are of note and offer a

point of differentiation from other

markets, according to Frederic

Maizeret, general account director for

Pace's Telecoms division, which has

manufacturing capabilities and an office

presence in Brazil.

Maizeret believes end-users will be

excited by the services that the return

channel enables, such as VoD, internet TV,

recommendation, interactivity etc. Indeed,

he says Pace is proposing a new set-top

box with a very advanced user interface, as

well as pushing home networking solutions

and internet TV services to the market.

Infrastructure upgrades

Pyramid's Medlin reckons

network issues are another

major component of the

IPTV barriers, primarily

because basic connectivity

still is not widespread. “A

lot of organic growth is still

available for broadband providers,

so telcos are focused on expanding

their original network to reach those

households (and meet universal

service agreements) rather than making

dramatic upgrades.”

Due to market characteristics, most

deployments are expected to be of a

hybrid variety. Satellite and IP networks

can be complementary and most

observers believe there is very good

potential for satellite head-ends. Moreover,

hybrid set-top boxes (combination of

satellite for live services and IP for VoD)

can be a good way of maximising existing

infrastructure channels to provide

advanced services, especially in areas that

suffer from network issues. The majority

of the IPTV deployments in Latin America

are expected to have their own satellite

headend to distribute content.

In many cases, MPEG-4 is the only way

that copper-based telcos have to offer

HD services, making MPEG-4 the

preferred codec of choice, claims

Amino's Conejos. “Some projects have

been developed in MPEG-2 because of

lower investment costs, but for me this

has been an error as it will require further

major investment in network

improvements to allow them to offer up

to three to four STBs per home. We need

to keep in mind that an average of two to

three STBs per home is normal for most

countries in Latin America,” she says.

Telco payTV and DOCSIS 3.0 should

drive fibre deployments. A recent report

by Signals Telecom Consulting identifies

Latin America's high purchasing-power

urban centres - such as Bogota, Buenos

Aires, Mexico City, Rio de Janeiro and Sao

Paulo - as the leading markets for the

deployment of FTTx networks. The

research firm states there needs to be a

regulatory framework designed to

encourage these investments. “Allowing

incumbents to offer pay-TV services

would act as a catalyst to boost FTTx

deployment in the markets of Argentina,

Brazil, Colombia and Mexico,” said Carlos

Blanco, Market Research Director for

Signals Telecom Consulting and co-author

of the study.

Meanwhile, the launch of DOCSIS 3.0

services by the region's cable operators

will also help trigger FTTx investment in

the region, according to the report, driving

VDSL and FTTH solutions' deployment by

fixed-line operators. Mexico appears to be

the most attractive market for operators

such as Megacable and Televisa's cable

companies (Cablemas, Cablevision and

TVI) to begin to offer bundled services

based on DOCSIS 3.0.

Pyramid's Medlin is optimistic. He

expects IPTV to break out of its niche

around 2012, when it will be approaching

a 5% share of total pay-TV subscriptions.

By 2014, the region will be home to more

than 4.4 million IPTV subscriptions, which

will reach 2.6% of all households. “IPTV is

really only stalled in Latin America. We

believe that once conditions are met and

regulatory restrictions lifted that there will

be a market for it,” he says. CSI

Q1 2008 Q4 2008Q4 Q1 2009 Quarterly Yearly

growth growth

11,183 21,495 23,467 9.17% 109.85%

Source: Point Topic

IPTV subscriber growth in Latin America

18_iptv_la.qxd 22/06/2009 14:02 Page 4