|Issue:||Latin America I 2000|
|Topic:||Broadband Trends: The Triple Play Bet|
|Author:||Luis F. B. Baptistella|
|Title:||Infrastructure & Technology Director|
In the year 2000 the cornerstone for broadband’s growth in Brazil was laid. Following ANATEL’s, Brazil’s regulatory agency, initial regulatory framework, major players (cable operators and local telecom operators ILEC) started to offer broadband services using ADSL (digital subscriber line) or cable modems. Each type of player has managed to attain penetration in given markets of as much as 1-3 percent of the total subscriber base by the beginning of the year 2001. This, even in developed countries, is fairly good for the first year of deployment.
The open access model adopted in Brazil helped a lot, thanks to the clear split between the operator’s responsibility for connectivity and data transport over the distribution network, and the “value added” service provider’s responsibility to transport applications at IP level and above. This split gives the ISP (Internet Service Providers) and content providers equal opportunities to accelerate their services offerings while preserving the operators’ control of the network. If there was adequate access to inexpensive capital in Brazil, or in Latin America, the growth rate could be even higher. On the other hand, if they continue to accelerate this pace, the players shall face some challenges. Challenges Waves of Service Deployment Broadband delivery, especially by the entertainment business, was first made available as part of a development wave of basic pay TV service offerings. The wave was motivated by the need to foster mass deployment and high network penetration targeting higher income geographical areas. Today, we are in the midst of a second development wave. The focus of the current wave is more customer oriented, and the key goals are to earn customer loyalty, achieve higher subscriber penetration rate and to clean-up bad debt. The challenge now will be to generate the third development wave, by providing such high value bundled services that they are perceived as essential, change the customer behaviour and become part of culture. Streaming Technology Available streaming platforms, from wireless services to HDTV, are niche oriented. No current platform can offer data rates high enough to provide different types of services. The lower the rate demanded by the streaming services, the more proprietary are the solutions. They are offered by means of “de facto” standards (WAP to wireless, Microsoft Windows media, Real Networks to MPEG1 streaming) or “open” standards (DVB or Open Cable to MPEG2 streaming). The challenge is to find a common streaming technology that maximizes bandwidth efficiency and can handle services with very low bit rates, high rate ones such as HDTV (high definition television), as well while maintaining video quality at accepted levels (i.e. VHS and DVD). Increase the market share through available networks The existing networks were designed on a mono-service, mono-segment approach (telephone network, pay TV network, residential market). The challenge is to find creative ways to integrate the different network platforms. This way they can complement one another and provide increased penetration for a wide portfolio of services in new regions to a broader variety of market segments. Increase the wallet share The A and B socio-economic classes in Brazil can afford relatively cost-effective telecommunications and entertainment services. On the other hand, the total income in C class family is very limited. The income typically available to a class C family for telecommunications and entertainment services is barely US$ 15 per month. The challenge is to discover how to increase the broadband penetration in this socio-economic class. This market has huge growth potential if the Brazilian economy continues to expand healthily. Win the broadband race The broadband race has been run by multiple competitors: cable operators, incumbent local operators, competitive local operators, data local operators, long haul operators, satellite operators, internet service providers and utilities. The challenge is how to generate, and be the first to provide, the most comprehensive customer-oriented portfolio of services and capture customer interest and loyalty. Find out the missing piece The more benefits an ordinary customer associates with a service, the better the chance for a successful mass deployment. People seek for convenience, quality, economics and good tradeoffs. Nowadays, though, broadband solutions are only captivating the technologically adventurous “early adopters.” The challenge is to bridge the gap separating the early adopters from the mass market followers. Trends Convergent platforms for distribution networks To create a comprehensive set of broadband services, two evolutionary paths have been adopted: Track the telecommunications services evolution: start with carrier services (connectivity, point-to-point, or point-to-multipoint data communications); follow by teleservices (telephony, video conferencing) or value added services (internet connectivity); and move on, in the future, to multi-media-on-demand services Track the entertainment services evolution: start with basic pay TV services; followed by pay-per-view, impulse pay-per-view, electronic programme guides, internet connectivity, voice services and near or full video-on-demand; and, in the future as above, offer multi media on demand. Both approaches are supported by full digital platforms, despite differing technical frameworks: Circuit switched and “time division multiplexing” (TDM) in the telecom industry Radio frequency (RF) and “frequency division multiplexing” in the pay TV industry. The Internet provides a new, convergent platform. The Internet packet switched IP (Internet Protocol) based platform works equally well with any of the above technologies. The evolutionary path for both approaches will be “IP-centric.” Multi-services and multi-segments strategies Major broadband players in Brazil are listed on the stock markets. This means that their management pays a lot of attention to the value of the companies. The “metrics” accepted by the capital markets are value per subscriber. These companies continually devote themselves to increasing the subscriber values, through higher penetration and higher ARPU (Average Revenue Per User) and by aggregating multiple service contributions for a wide range of different market segments. To achieve their goals, their key strategies are based upon the “triple play” group of services offerings voice, video, data, complemented by high value services. Integrated Network Elements The evolution from analogue to digital technologies or the transition from mono to multi-services platforms creates operational nightmares. Difficulties come from the attempts to connect fragments of network elements by using “yet to be” open standards. Nevertheless, IP-centric platforms will host a myriad integrated network elements and will greatly facilitate the operation, provisioning and management of the network. Streaming media will be a moving target Major players in the streaming media industry (Real Network, Microsoft, Apple) continue to develop successful encoders, servers and client player systems. Those proprietary systems can adjust rapidly to advances in technology, but they lack interoperability and will be difficult to migrate to an IP/PC based platform. Standardization efforts, starting with the MPEG 2 standard, apply to TV “set top” equipment as well as to streaming devices that work with PC based platforms. Now, MPEG 4 has emerged as a viable player in the streaming industry. MPEG4 has the potential to integrate a variety of platforms and user devices such as PCs, set top boxes and other IP based devices and provide a wide range of services. Home Networks will appear The internal wiring in houses and small offices, is a reflection of the current the distribution networks. Each service telephone, electricity, cable TV has its own separate and proprietary points of connection. Nowadays, home networking is in the process of becoming a reality. As a result, technology environment promises to become quite dynamic. There will be a proliferation of devices with a wide spectrum of capabilities thanks to the IP-centric convergence of the distribution side of the network. Wireless interfaces and the seamless, interchangeable use of the same outlets for telephone, power or cable TV connections will typify this new phenomenon. Conclusion The foundations for broadband in Brazil are in place. 2001 promises to be a very dynamic year for broadband operators. If the Brazilian economy sustains its current pace, the environment will be ideal for Brazilian operators; they will be able to repeat the growth of the broadband market seen in the developed countries and, accordingly, double or triple their 2000 subscriber base. Nevertheless, great technical, cultural and business oriented challenges need to be faced by operators trying to break the “early adopter” barrier. On the other hand, though, there are clear trends that can help the broadband operators to circumvent those challenges. Ramping-up actions that exploit the convergence tendencies of distribution networks and home networks, for instance, can help the operators to better position themselves and provide them with additional marketing leverage. The use of strategies that facilitate the simultaneous offering of video, data and voice services, as well as high value added services, can be the route to conquering the market.