Brazil opts for hybrid TV in the face of regulatory restrictions

Brazil seems to be opting for a hybrid IPTV solution (satellite + broadband), as telecommunications operators still face restrictions on offering TV channels via IPTV and face increasing competition. By Branislav Pekic

Although many see the Brazilian telecommunications sector as one of the most promising in the world, the situation is complicated by Brazil's obsolete and confusing legislation. In many cases, one piece of legislation clashes with others. The current restriction against telecom operators to offer broadcast TV (although they can provide VOD) provides an attractive window of opportunity for Brazil's largest pay TV provider, Net Serviços de Comunicação S.A., to grow its pay TV and broadband Internet services without competition from local telephony operators. On the other hand, telecoms operators must seek other alternatives for offering "triple play" and "quadruple play" services; for example, the deal Brasil Telecom and Telemar signed with Sky. The joint initiative is seen by many as the first step toward the creation of a large Brazilian operator, capable of efficiently challenging Spain's Telefónica and Mexico's Telmex in Brazil.

Brasil Telecom
Brasil Telecom (BrT), the IPTV pioneer, launched trials in 300 homes in Brasilia in September 2006.
"We are in a pre-commercial phase and only offer VOD, but we have the structure to offer broadcasting as soon as the government issues an authorisation", says Luis Henrique Castro Lima, assistant director for new business. BrT is planning to launch the service commercially in the second half of 2007 to around 1.5 million ADSL clients nationwide. For the tests, Brazil Telecom signed partnerships with content suppliers such as Europa Filmes, Viacom Networks Brazil, DLA, Trama, Log On Cultura Marcas, Dtcom and Buttman. Among programs offered are movies, documentaries, adult and children's content. According to President Ricardo Knoepfelmacher, the IPTV trials have shown that VOD is not sufficient to satisfy customer interest in video services, prompting the operator to seek alternatives while respecting the current legislation. So, in March 2007, BrT teamed up with satellite pay-TV operator Sky in order to offer "quadruple play" (fixed telephony, mobile, broadband and pay-TV). The package is initially being marketed in Brasilia and Campo Grande and will later be extended to all cities within its concession area (various parts of northern Brazil, the south and central-west, at a bundle price at least 40% cheaper than when sold separately. Subscribers can opt for several packages, retailing from BRL 99 to BRL 300 (Brazilian Reais, equivalent to about US$50 to US$150) per month.

Telemar
Telemar (which operates under the Oi brand name) is planning to offer IPTV via fixed-line telephony and interactive HDTV in different packages, targeting its 1.4 million broadband customers. The director for investor relations, José Luís Salazar, says that BRL 300 million will be invested in new business such as IPTV, with a small-scale pilot already underway. The company's IPTV plans suffered a setback in March, when Brazilian telecom regulator Anatel rejected Telemar's planned acquisition of pay-TV operator Way TV, based in the state of Minas Gerais.

According to Anatel, the deal would infringe Telemar's fixed line concession contract by supplying cable services in Minas Gerais state. Telemar has asked for a review of the process and challenge Anatel's decision. The operator had been planning to use Way TV as a base to expand its IPTV offer in Brazil. Also in March, like BrT, Telemar teamed up with Sky to offer quadruple play, initially in Rio de Janeiro and Niterói, before being expanded to its entire concession area (16 states in North, Northeast and Southeast Brazil).

Telefonica
Spain's Telefonica is planning to invest BRL 8.5 billion over the next four years in fixed networks, including telephony, pay-TV and broadband. In April, it launched a pilot fibre-to-the-home service (including VOD) to 4,000 households in the Jardins area of Sao Paulo, as part of a series of initiatives aimed at expanding its broadband service Speedy. The operator is planning to invest BRL 500 million in 2007 for the project which, according to director general, Stael Prata, is seen as a tester for the launch of a full IPTV service.

During the recent IPTV World Forum Latin America, the general director for television and multimedia services of Telefónica Latin America, Werner Schuler estimated that the revenues in the region from IPTV could reach US$ 1 billion in two years time. The operator invested US$ 400 million in Chile, where the service was launched in March, while advanced tests are underway in Argentina, Colombia and Brazil. Telefónica is currently awaiting Anatel's decision regarding its acquisition of TVA, a cable TV company from São Paulo. A negative ruling is seen as likely following Anatel's rejection of Telemar's bid to purchase Way Brazil. Meanwhile, TVA has teamed up with Motorola to test mobile WiMAX technology (standard 802.16e) in Rio de Janeiro. The solution will cover the city centre and parts of the south, bringing broadband wireless to a select group of users, with voice, data and multimedia capacity. The tests will serve for TVA to evaluate the technology as well as mobile TV and video services, VoIP, media streaming and data applications.

GVT
Brazilian carrier GVT has signed a two-year contract to use Global Crossing's global MPLS-based fiber-optic network to provide IP services such as VoIP, IPTV and streaming. According to the director for product marketing, Ricardo Sanfelice, GVT is looking at IPTV, but the service does not form part of the company's short-term plans. "We will wait for the market to mature", he explained.

Manufacturers
Brazil Telecom's technology partners are UTStarcom for middleware and streaming systems, Widevine Technologies for security and TV rights protection, and NEC, which serves as platform integrator. China-based telecommunications equipment producer ZTE estimates that about 3 percent of broadband users in Brazil may become potential IPTV users, according to ZTE do Brazil's CTO Thiago Aidar. ZTE is having talks with Brazilian operators about a proposal to offer IPTV via local phone lines to enable user's access to the internet via TV.

Cisco is also active in the Brazilian IPTV market. "In six months, we could have hybrid satellite and IPTV boxes', claims Pedro Ripper, president of Cisco do Brazil, in which TV channels would arrive via satellite and video on demand via broadband. He compared this service model to AT&T's Home Zone service, which combines satellite TV and live broadband video. For its part, Siemens has invested BRL 1.5 million to open up a development and integration lab for the Latin America IPTV market in the Brazilian city of Curitiba, at the end of 2006.