The recent VTR-Metropolis merger dramatically altered the Chilean telecommunications market, creating a dominant triple-play provider overnight. This has lead to the formation of Direct-to-home (DTH)–Telco alliances in an attempt to match VTR-Metropolis’s triple-play offer. At the same time, Chilean telcos are developing IPTV networks, eliminating the need for DTH alliances. However, in the mid-term, content and the cost of network deployment will prolong DTH–Telco triple-play alliances in Chile.
After the merger, Chile’s traditional telcos moved quickly to close the field, seeking alliances that would allow them to counter VTR-Metropolis’s triple-play potential before it gained momentum. A shortage of competing traditional cable operators lead to a creative solution: Direct-to-home television (DTH). In April 2005, CTC allied with Chilean startup satellite TV provider, Zap TV, to offer triple-play. Telsur, which formerly partnered with Metropolis to offer bundled services, also announced a partnership with DirecTV. A few months later, GTD-Manquehue joined the crowd, announcing it would offer triple-play with DirecTV as well. This burst of activity to grab a piece of the emerging triple-play market is no accident: Chilean broadband, voice services, and pay TV total US$1.28 billion in annual revenues.
While Chilean telcos are rushing to partner with DTH providers, they are also developing IPTV capable networks for the next round of the triple-play battles. Both CTC and Telsur have announced plans to launch IPTV later this year, and also plan to invest fairly heavily in the technology in 2006: Telsur plans to invest US$20 million, and CTC has announced over US$100 million in IPTV and broadband investments for 2006, part of a four-year US$200 million IPTV investment plan. Granted, it will probably be years before IPTV has a sizeable presence in the Chilean market, but when CTC and Telsur begin offering IPTV triple-play on a large-scale, will their DTH partners be left out in the cold?
The end result of DTH-telco triple-play in Chile will be increased competition in the pay TV sector, leading to more attractive prices and content offerings for consumers. These alliances will also serve as a viable stopgap strategy for telcos to head off subscriber loss to VTR-Metropolis’s triple-play offensive and give DTH operators a valuable opportunity to grow their markets. While DTH-telco triple-play is unlikely to mean big contracts for vendors, the parallel drive to IPTV by telcos offers ample opportunities. Alcatel and UTStarcom are hopefuls for the Telsur IPTV network, and as the provider of Telefonica’s Imagenio solution in Spain, Lucent appears to have an edge in the CTC contract.
As one of the leading telecommunications markets in Latin America, Chile’s experience with DTH-Telco triple-play may be an indicator of things to come in neighboring markets. DirecTV recently partnered with ETB in Colombia to provide bundled triple-play and has also entered a number of similar deals in the US, demonstrating that this strategy has broad potential. Indeed, in Latin America the benefits for both telcos and DTH operators provide strong incentives for triple-play partnerships in any market with a shortage of traditional cable operators, or broadband penetration too low to allow large-scale IPTV launches.
