HOLLYWOOD — The U.S. cable industry shuddered when AT&T announced plans back in March to buy regional carrier BellSouth.
For the entertainment biz, the move intensifies the battle between cable companies and telcos to offer packages of broadband, cable and phone services known as triple play.
In the U.K. cabler NTL has stolen the march on Rupert Murdoch’s BSkyB to be the first to get such a service up and running.
In April it agreed to buy Richard Branson’s Virgin Mobile for £962.4 million ($1.67 billion) to create the U.K.’s first quadruple-play provider, bringing mobile, fixed-line, broadband and TV under one roof.
In Latin America, the fight is equally intense, with old-guard media titans — like Mexican behemoth Televisa — lobbying hard to change laws and keep tyros out.
And it’s easy to see why.
“There are 18 million pay TV homes in Latin America, while there are 200 million cell phones and 70 million Internet users,” says Pierluigi Gazzolo, the managing director of MTV Networks Latin America and head of Viacom Networks Brazil.
No wonder everyone wants to protect their corner of the biz — while convergence is again the buzz word.
Top prize for protection must go to Televisa. Critics claim a media law that will give it digital dominance was drafted by its lawyers. Dubbed the “Televisa Law” and signed by President Vicente Fox in April, it protects the already dominant webs and telcos and allows them to provide triple-play services for the first time.
Incumbents such as Televisa and No. 2 net TV Azteca, will be able to roll out digital channels and services without paying extra fees to the government, while new players must bid for licenses.
Televisa is investing $52 million this year to finish upgrading its cabler, Cablevision, to provide triple play services.
Carlos Slim, Latin America’s richest businessman, owns Mexican telco giant Telmex and a chunk of Televisa.
Telmex has invested around $150 million in its network and its high-speed Internet accounts surged nearly 85% in 2005 to more than 1 million subs.
Brazil’s media behemoth TV Globo is also using its clout to make sure these upcoming services will not erode its viewership.
Web, which dominates 50% of Brazil’s broadcast TV audience, is lobbying for a ban on telcos participating in the TV market.
However, if this fails, Globo already has its fingers in the pie through its controlling stake in giant cabler Net Servico.
In March, Net Servico teamed up with telco Embratel to add telephone to its TV and broadband Internet services. It now offers triple-play services to nine Brazilian cities.
Telmex also owns a stake in Net Servico.
Rival pay TV operator TVA, owned by publisher Abril Group, offers a limited triple-play package.
While it has 305,000 pay TV subs and 45,000 broadband subs, only its Sao Paulo operation also offers its phone service, TVA Voz.
In Argentina, Spain’s Telefonica is the most likely to get triple play up and running. It owns the dominant telco and Telefe, the leading free-to-air broadcaster. It is pressing the government to reform legislation so phone companies can secure pay TV licenses, arguing that they deserve equality with cablers.
Argentinean cablers already offer broadband and have licenses to provide phone services. But to offer telephony they must digitize their networks.
They are also under pressure from premium channels like HBO Latin America to digitize to combat rampant piracy.
Another holdback in Argentina is that of the three elements of triple play, telephony is the least lucrative and most competitive.
Triple play “is still a work in progress, and not as advanced as in Europe,” cautions Gretchen Colon, senior VP of advertising sales and business development for Turner Broadcasting System (TBS) Latin America. “But … it will represent the next big increase in multichannel distribution.”
(Michael O’Boyle in Mexico, Charles Newbery in Argentina, Marcelo Cajueiro in Brazil and Mary Sutter in Miami contributed to this report.)