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By: Gary Schultz, President/Principal Analyst, Multimedia Research Group
Broadband Penetration: The South American Telco TV (or IPTV) markets are tightly interwoven with the broadband build out in that region. Broadband distribution has reached 5% on average in South America, with greatest penetration in countries like Brazil, Argentina, Chile, Columbia and Peru. Currently, the annual penetration of broadband roughly doubles each year, with the majority of that business going to the telcos.
Telefonica Peru’s General Director, Werner Schuler, announced a big broadband build out of Telefonica’s central offices to reach a 2-kilometer circle around each CO, with an initial budget of $400 million. The company believes that with such build outs, triple-play services will be easier to sell, operate and maintain. Yet, up to 50% of the region is not reached by basic telephony (voice) services, meaning a large upgrade effort for basic voice would also be required in order for sustained broadband and IPTV growth. .
The competitive picture: Unlike Europe or the US, the major tier 1 telcos do not have “agreements” with Microsoft for use of their IPTV middleware. For now, that means the market is open and free for competition by middleware, DRM and VOD vendors who want to compete on “best of breed” basis. Several companies, including Telefonica, have formed partnerships with vendors to offer turnkey IPTV services; and IPTV Americas is also offering turnkey IPTV systems in South America, along with UTStarcom.
Service/Function interest: The picture is unclear about HD as part of premium services. While penetration of HD sets is low in the “B, C and D” markets, most agree that HD will be in demand in the A (premium) markets at some time in the future. Given the high price of widescreens (well over US prices) and very recent announcement on a digital terrestrial standard, we question the viability of HD for the near future.
Regulations issues: IPTV in general has flown under the radar of heavy regulation. Consensus among telcos seems to be that this will continue so long as IPTV is an extension of Broadband services, and that best efforts will be made to extend services to all socio-economic groups (A,B,C,and D markets). In fact, in some markets (like Brazil), IPTV may prove to be a political convenience to the government, rather than forcing broadcasters to convert to expensive Ditital Terresrial TV. As with other regions, managing the regulatory situation will remain a balancing act on a country-by-country basis. It appears that the least regulated markets like Argentina, Chile and Peru will be the most hospitable to IPTV; and will create market conditions already receptive to new Pay TV services like IPTV. For this same reason, Telefonica is investing in cable properties like Cable Magico in Peru and TVA in Brazil as a way of gaining a position and experience in the Pay TV business..
Looking Ahead: Given currently announced plans, by Q1 2008 trials and possible early IPTV rollouts will have been achieved. In the meantime, ADSL2+ and fiber network build outs will be underway and content deals will be undergoing serious negotiations. By Q1/08, we can expect 10-15 early or mid-range IPTV trials and 2-5 early commercial IPTV rollouts.
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