Market focus IPTV in Latin America shows signs of … South American market for IPTV services is...
Transcript of Market focus IPTV in Latin America shows signs of … South American market for IPTV services is...
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