|Issue:||Latin America 2006|
|Topic:||Digital TV – closing in on the digital divide|
Mateo Budinich is the CEO of VTR in Chile. In the course of his extensive career in the information and communications technology industries, he has been General Manager of IBM Chile, Vice President of the Large Corporations Department with Telefónica CUTCH and General Director of Telefónica Empresas, with responsibility for establishing this firm in Latin America. Mr Budinich is also the Manager of the Information and Communications Technology Area of Fundación Chile, a non-profit organization dedicated to Chile’s technological development, with a mandate to develop innovative ventures and projects. He is currently the VP of the United States-Chile Chamber of Commerce, AMCHAM. Mateo Budinich holds a Civil Engineering Degree from the University of Chile.
Despite the increase in mobile phone usage, cable TV, PC ownership and Internet connections in the world’s developing countries, the digital divide between the developed and developing countries is growing. Digital TV, which increases the number of channels 20 times, can help bridge the gap. Digital TV, combined with mobile telephony, could provide two-way communication to every household in the country, so that the citizens could obtain government services, get specialized education at all levels or choose their own entertainment.
One hundred and thirty years after the invention of the telephone, communications services have not yet reached large segments of the population in the developing countries. With the exception of the mobile revolution – fuelled by pre-paid plans and calling party pays compensation mechanisms – the penetration of traditional telephony services and paid TV has only reached a small percentage of the citizens in many developing regions of the world. If we look at the numbers in Chile, a country with one of the most advanced telecommunications infrastructures in the region, and compare them to the same indicators in the USA, we see that whilst in the USA there are more than 90 lines per 100 inhabitants, in Chile that figure is around 25. Cable TV penetration is close to 60 per cent of households in the USA, but in Chile cable TV only reaches approximately 24 per cent. PCs were found in only 20 per cent of the households in Chile and only 10 per cent of the homes had an Internet connection according to the 2002 Census data; in the USA, 51 per cent of the households had PCs and 41 per cent had Internet connections, according to the US Census data for 2000. If we project these figures, the gap has probably increased over the past four or five years. Looking into the future, it does not seem likely that the situation will change dramatically and that developing countries will achieve the same penetration levels of the more connected countries. This phenomenon, usually referred to as the digital divide, separates the ‘have’ and ‘have not’ countries and creates significant economic development hurdles for countries that lack digital connectivity. This same sort of digital divide is found within the countries themselves, given the uneven access that different segments of the population have to communications, education, information and services. One bright spot in this patchwork of communications infrastructure and access is the universal penetration of TV. Together, open (terrestrial) and paid (satellite or cable) distribution mechanisms cover almost 100 per cent of the population and people have access to a variety of quality entertainment, information, cultural and educational contents, improving their standards of living. The current use of radio spectrum for TV transmission in each country or geographic region is limited due to the inherent restrictions posed by the analogue transmission. Analogue transmission is subject to interference between adjacent channels, forcing the regulatory bodies to leave space between channels and only allocate a small percentage of the available spectrum for transmission, to ensure high quality transmission and reception throughout the regions served. The migration to digital TV – both terrestrial or via cable or satellite – makes it possible to multiply the number of channels each household can receive by a factor of up to 20. This makes it possible to massively increase the number of communications channels; and to transmit great quantities of content tailored to specific population segments; or to personal preferences and needs. In this scenario, a large number of organizations – businesses, institutions, social grouping of all kinds – would have the opportunity to communicate their values – or commercial offers – to a wide variety of specific interest groups, based on interests, needs or even their willingness to pay. This sort of wide-ranging distribution of information and content can turn broadcast media into an almost universal access platform. Governments could make services and information available to their citizens through data channels and interactive TV. Educational institutions could generate specific content tailored to different segments of the population, from programmes for preschool toddlers to elementary, middle and high school courses, all the way through to continuing educational programmes to keep university graduates up to date. A significant advantage of this scenario is that the public already knows how to operate TV sets; they do not have to buy a PC, learn how to use it, and then acquire an Internet connection and then learn how to use it as well. Digital TV, combined with the penetration of mobile telephony, could provide a two-way communication mechanism to every household in the country, so that the citizens could obtain government services, get specialized education or choose their own entertainment. TV is the preferred entertainment and information channel for a large segment of the population; extending its capacity, using it to provide new services, will not be difficult for users or rejected by them. Even more, for younger people – even children – given TV’s multimedia interface, this would be an enticing, very ‘natural’, way to be entertained or even educated. Moreover, the availability of massive distribution channels would propel the creation of a content industry in every country – even region, town or school – which would enrich and preserve the cultural inheritance of each segment of the population. There are some hurdles to cross to reach this level of universal penetration, including the premature obsolescence of the installed base of TV sets. This obsolescence results from the fact that digital TV transmission cannot be viewed on an analogue TV set. When the industry migrated from black and white to colour TVs, the old TVs could still be used. To receive digital transmissions, a digital-analogue converter, D-A/C, must be connected to each analogue TV. This D-A/C would cost around US$40 to US$60 per TV set. In the USA, the digital TV migration law allocated US$1.5 billion to pay for up to two US$40 rebate vouchers for each household that chooses to buy D-A/Cs instead of upgrading to a digital TV set. In Chile, this would mean a total one-time investment of around US$100 million, considering an average of 1.5 TV sets in each household in the country’s lowest 40 per cent income brackets. The migration from analogue to digital will require a clear regulatory roadmap to force all the current operators to migrate to digital transmission in a predefined timeframe, and to release much of the current analogue service radio spectrum to new content providers to bootstrap this virtuous circle. Telecommunications operators currently plan to increase their coverage and service offerings by offering converged communications services. Converged services include broadband Internet access, fixed and mobile voice and even Internet TV with increased quality and levels of integration. The growth of converged services would be fuelled by the adoption of advanced services by significant segments of the population attracted by the availability of a wide variety of content. The content would be distributed through a variety of mechanisms, including digital TV, the Internet, mobile telephony, mobile broadband, wired and wireless media, and an abundance of sophisticated end-user devices such as TV sets, computers, phone sets, PDAs, MP3 and MP4 players, and the like. In the future, we see a universal communications platform that can integrate all the user’s information and entertainment sources, media, and devices. This will allow users to select, interactively, the sort of communications and content they wish to receive, as well as when and where they wish to receive it, according to their lifestyle, situation or mood. What we have seen in the Chilean market is that the consumers favour a single relationship with one company that can satisfy all their communication, information, entertainment and service needs; they want the ability, however, to take advantage easily of all these media options as they see fit at any given moment. World leaders in the communications sector are betting upon a triple-play – voice video and data – strategy combining analogue and/or digital cable TV, fixed line telephony – either TDM, time division multiplex, or IP – and broadband data. Operators often offer different levels of service availability, and a range of pricing plans, in accordance with the specific market sector they are targeting. Offers of this sort have proven very successful in the highly competitive Chilean marketplace, and have driven the growth of the market for leading paid TV providers, the largest ISPs and fixed line telephony operators. The growth of one major player’s triple-play service relies upon a fibre optic intensive HFC, Hybrid Fibre Coax, network that covers almost 60 per cent of the households in the country, and operations in over 50 cities spanning 2,500 miles north to south. Based upon the triple-play service bundle, they have achieved a 23 per cent penetration rate, increased their ARPU, average revenue per user, and lowered subscriber churn rates. Robert Kennedy, in a speech in Cape Town, South Africa, in 1966, said: “There is a Chinese curse which says, ‘May he live in interesting times.’ Like it or not, we live in interesting times…” We think that we live in very interesting times, and have an opportunity that mankind has never had before to transform our society.