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Brasil Telecom has launched IPTV trials in Brasilia with VOD only but needs approval to add live TV, while Telemar is waiting for a verdict on its purchase of Way TV. Branislav Pekic reports on Latin America
Facing the prospect of diminishing revenues from fixedline services, Brazilian fixed operators Brasil Telecom, Telemar and Telefonica are betting on triple-play and IPTV services for growth opportunities, especially in the pay-TV sector which has so far been dominated by cable operator Net. Due to regulatory constraints, the initial offerings are limited to VOD, in expectation of favourable rulings from the telecommunications sector regulator Anatel.
Brasil Telecom:
Brasil Telecom launched IPTV trials in October to 300 clients in Brasilia, thus becoming the first company to offer such a service. The VOD offering includes movies, cartoons, shows and some interactive games which can be accessed during a 24 hour period. Currently, Brasil Telecom has partnership deals with providers such as Europa Filmes and TV Cultura, but negotiations are underway with leading movies studios.
According to the company’s vice-president for finances, Charles Lagan· Putz, Brasil Telecom currently has 1.25 million broadband subscribers (up 40.4% on 2005) with more than half having the possibility of accessing the IPTV offer. The operator plans to make significant investments over the coming months to upgrade its infrastructure in order to make VOD accessible to its entire user base. However, Mr Putz admits that VOD "is not very profitable" and that the business strategy "would be more successful if we could offer our clients a complete programme offer".
Although prices have yet to be defined, Mr Putz promises that the price of a movie will be similar to a lease from a video club. The full commercial launch of Brasil Telecom’s IPTV service should take place during 2007.
Telemar:
In July, Telemar purchased Way TV, a broadband and pay-TV operator based in the state of Minas Gerais where it has a 26% market stake. The deal is still waiting for regulatory approval, which could open up an important precedent for the entry of telecom operators in the pay-TV sector. However, the Brazilian Pay-Television Association (ABTA) is opposing the purchase of Way TV by Telemar, claiming it is contrary to the Constitution and the principles of healthy competition on the telecommunications market. “The entry of a telecom operator in the pay-TV sector threatens the competitive balance of the sector”, claims ABTA executive director Alexandre Annenberg.
The head of corporate strategy, Sergio Tigre, says the main aim is to expand the cable TV service from the existing 500,000 to 1,300,000 households. Thanks to IPTV technology it will be possible to personalise the channel grid, introduce time-shifting, VOD and individual programme control as well as simultaneous Internet access while watching TV.
Telemar also plans to commercially offer PPV via its broadband network from the first half of 2007, although a technological platform has yet to be selected and supplier contracts have still to be signed. At the end of September, Telemar had just over a million clients, up 43% in comparison to September 2005.
Telefonica:
Like Telemar, Telefonica is also conducting IPTV tests but regulatory restrictions have led the Spanish company to seek other options. The operator plans to initially offer VOD and negotiations are under way with various international channels (agreements have already been signed for a similar service in Peru). Telefonica is also seeking a national WiMAX license in order to guarantee nationwide coverage for its broadband pay-TV offer.
The Spanish group believes it is being discriminated against by the Communications Ministry and Anatel while its biggest competitor in Latin America, Mexico’s Telmex, has had an easy ride to enter the local pay-TV market. By offering pay-TV, Telefonica hopes to prevent the growth of Net over its client base. Since April 2006, Net has been selling triple-play packages for BRL 99.90 (US$ 46) and has been snatching away clients from Telefonica. The president of Telefonica Brasil, Fernando Xavier Ferreira, has appealed for more flexibility from Anatel, allowing telephony operators to offer voice, internet and video via broadband networks.
Telefonica has also signed a partnership with DTHi/Astralsat (satellite) and bought a stake in TVA (cable). "We are seeking alternatives to IPTV such as a joint offer of services with TVA," says Mr Xavier. However, the launch of the satellite TV venture in November generated strong controversy and Anatel is expected to rule on the issue by the end of January.
Net Servicos:
Telefonica’s main rival, Telmex, is rapidly expanding in Brazil, where it owns fixed telephony concessionaire Embratel, as well as shares in cable television operator Net Servicos and the broadband provider Vivax.
Net Servicos is the biggest pay-TV operator in the country and at the end of September, Net had 1.7 million TV subscribers (up 15.5% on 2005), while the broadband client base more than doubled to 630,200. The company is investing BRL 650 million (US$ 30 million) for the expansion of its bi-directional network by Q3, 2007 in order to launch triple-play in 43 cities. Net plans to offer triple-play to 4.5 million Brazilian homes by the end of 2007, which is more than half of the 7 million Brazilian pay-TV households.
Net president Francisco Valim has warned that the entry of telecom operators in the pay-TV market could end up destroying competition in the sector instead of increasing competitiveness and reducing prices for consumers. In the battle between Telmex and Telefonica, the company that could end up losing out is satellite TV platform Sky/DirecTV, which has no possibilities of offering a triple-play package. In the last few months, the growth of satellite TV has slowed down while Net is registering above average market growth.
Terra:
Internet portal Terra, which has more than 1.6 million subscribers in Brazil, launched its ‘Terra Mundo’ IPTV service in December. Initially, 18 international TV channels (TVE, RTP International, Al Jazeera, Al Arabiya, Canal 13, Caracol Internacional, 2M, America TV, Panamericana, ANB, Future TV, CDN, El Trece, Meridiano TV, Multimedios, Teleritmo, ProTV International and Telecaribe) are on offer but their number is set to grow to 200 by February 2007. Also on offer is live coverage of the main football (Italian League, FA Cup) and tennis (ATP Tour) events. The service is available free of charge in 17 Latin American countries.
The IPTV service is a partnership between Terra and Jump TV, who will divide up the profits from advertising (banners and commercial breaks). Terra is aiming for US$ 50 million in advertising revenues in Latin America during 2007, with 25% of them coming from the IPTV service (currently 15%).
Besides TV Mundo, Terra is also backing TV Beta in Peru which should later expand to other Latin American countries. The IPTV service counts on varied programming both from Peruvian networks as well as from independent producers.
Venezuela:
In neighbouring Venezuela, fixed line operator Cantv has announced the launch of IPTV services in 2008, initially in the capital Caracas and the states of Zulia and Lara. Cantv will invest US$ 157 million over the next five years to extend broadband capacity and hopes to sign up 800,000 users in five years time.
The package will include at least 100 TV channels (basic, premium and PPV) as well as a digital music service with both local and international radio. In VOD mode, subscribers will have access to a library with more than 5,000 hours of national and international programming. According to the general manager for corporate affairs, Francisco Sannez, the IPTV service will permit viewers to select the TV channels they really want to watch, in line with their interests and economic possibilities. While similar services currently cost BS 750,000 a month, Cantv hopes to reduce the entry barrier by charging BS 400,000 (US$ 186), thus stimulating competition in this market segment. The telecom operator is still awaiting final approval from Venezuela’s telecoms regulator Conatel.
Colombia’s ETB:
The Colombian state-owned telecom operator plans to roll-out IPTV services in Q1, 2007, investing some US$ 50 million. Although trials have been successfully completed in Bogota with equipment supplied by Siemens, ETB is expected to make a final decision on the technology partner by February 2007 in order to launch the service a month later. With the launch of IPTV, ETB will be in a position to offer the full triple play package, as it already provided fixed line and broadband internet.
ETB will face strong competition from Spain's Telefonica and Mexico's Telmex who have both announced plans to introduce triple-play offerings on the Colombian market. Telefonica is launching a satellite pay-TV service via local unit Telefonica Telecom, while Telmex is acquiring local operators TV Cable and Cable Pacifico. The Mexican company already owns one cable operator, Superview, in Bogota.
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