Telco giant Telmex set to dial up cable biz

Change in cable rules lets in phone company

MEXICO CITY — Mexico’s humble feevee industry may soon be forced to face up to an 800-pound gorilla if the nation’s biggest telcom has its way.

In recent weeks, Telefonos de Mexico, better known as Telmex, has begun taking formal steps to enter Mexico’s restricted-access TV playing field and could begin transmission via telephone line or fiber-optic cable by the end of next year.

The entry marks a drastic shift for the giant, which has for the past decade been so focused on its audio conquest of Latin America that it seemed to have forgotten video existed.

But the move could prove even more extreme for the current kings of Mexican pay TV: Sky Mexico, PCTV and Cablevision, plus dozens of smaller operators.

Industry observers predicted a shift in the corporate winds as buzz generated in anticipation of last month’s announcement that Telmex would purchase a large share of Brazil’s largest cabler, Net Servicos de Comunicacao.

Telmex, formerly a state-owned utility, was privatized in 1990 under a charter that limited it to telephony, an area it soon dominated. Telmex now has 95% of Mexico’s conventional telephone market as well as a huge lead in mobile systems thanks to its extensive infrastructure.

But late last month, Telmex, owned by Latin America’s richest man, Carlos Slim, ended growing speculation and announced that it had requested that the Secretary of Communication and Transportation (SCT) change its license to permit it to transmit images.

Telmex has pointed out that the nation’s cablers were recently given permission to use their infrastructure for telecommunications, including phone transmissions, a decision the National Chamber of the Cable Television Industry lobbied hard for, and one that Telmex says opened the door for its request.

“I’d hope that the rules would be reciprocal and that if they changed the concessions of the cablers, they’ll also reflect that change in Telmex’s concession,” says Arturo Elias Ayub, director of strategic alliances for the telcom.

And although the SCT has made no public comments about the request, agency sources say it looks favorably on Telmex’s position and could issue the permit by the end of the year.

Analysts suggest Telmex could rapidly gain a stranglehold on the market, especially as its client list is in the tens of millions, as compared to roughly 900,000 for satcaster Sky Mexico, the largest feevee company in Mexico.

Operating a cable service, analysts say, would allow Telmex access to the coveted “last mile” that would allow it to combine television with services it already offers, such as Internet and long distance, all on a single wire.

Still, Mexican feevees are gearing up for the challenge, making relatively huge infrastructure investments this year that will upgrade many signals, enlarge coverage area and expand programming.

Cablevision Mexico, for example, says it will have converted all subs to digital cable by year’s end.

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