Ed, how about a little Spainish DTV. Canel Plus and Telefonica, Cube does business with both. Who ya gonna root for???????????????
ijumpstart.com
Making hay on the Costa del Cable
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The first thing you notice about a gathering of Spain's cable operators is that the principal protagonists are not Spanish.
The most recent line in the curriculum vitae of Bradley Herrmann, who is advising the recently formed Cableuropa consortium, refers to the fact that he was in charge of regulatory affairs at Videotron, the troubled London cable operator that has since been subsumed in the Cable and Wireless Communications grouping. Others in the intricately structured Spanish consortium who have experience from the UK include David Colley, formerly managing director of Videotron, and Richard Callahan, former head of US West's international operations.
A cynical observer may suggest that former UK cable executives, with their track record for franchise speculation and poor customer service, may not be best people to run the cable industry in Spain, seen as a potentially lucrative market for multichannel TV.
To these calls of alarm Herrmann simply replies that "we're going to get it right this time."
Overall, the projected 10-year investment in Cableuropa's seven franchises (so far won) is estimated to be in excess of Ptas233 billion ($1.6 billion). To their credit, as they launch into the Spanish market, Cableuropa officials are stressing the importance of customer service more vociferously than they did in the UK. Herrmann says that in this market "we are not a construction company."
The possibility always exists that some horsetrading of licences will occur as seen in the early days of UK cable where some players are said to have made personal fortunes in the process.
Herrmann observed of the Spanish cable market that "there's not a US telco in sight - this is a market 'only for professionals'."
Herrmann paints a rosy picture of the socio-demographic attractiveness of the Spanish market. Indeed with higher than average take-up of mobile telephony and Internet, it's hard to believe that climate and culture would seriously stunt the market.
But Pio Cabanillas, representing the Canal Satelite DTH platform, is sceptical; he said that these seemed to be the same speeches he heard in 1992 - when UK operators Bell Cablemedia and US West were striking unwritten agreements with local councils for the provision of cable. He said he felt cable would only take off once Telefonica set its mind to it.
Indeed, in some respects it appears that the companies are going to make the same mistakes that were made in UK cable's early days. Undaunted by the fate of cable programming initiatives in the UK - including the Cable Programming Partners' WireTV and Home Cinema ventures which all failed - Cableuropa is planning to invest in new content. Herrmann is reluctant to reveal further details.
Cableuropa for one has not made any commitments to programmers as yet and is in communication with programme suppliers to both major DTH packages. Indeed there may be some trouble ahead as Carmen Fuente, in charge of programming at Cableuropa, declared that Via Digital channels will not be welcome in the CATV offering as they are backed by rival Telefonica. Herrmann contradicted this later in the conference by saying that some Via Digital channels may prove worthy of carriage.
But in the end this may prove to be a moot point. Via Digital's Fernando Cortinas, in a stormy final session, declared that his package was "non-negotiable."
The Spanish Overview
Spanish cable operators are launching their assault in a market where two strong digital direct-to-home platforms have already been launched. The Via Digital platform, whose backers include Telefonica, Mexican group Televisa, Spanish public broadcaster RTVE, was launched after that of Canal Satelite. Canal Plus is broadly following the same strategy as in France, pitching its premium programming - including live football and Hollywood blockbusters - at premium prices to what a representative referred to as "our exquisite customers."
Via Digital, on the other hand, is targeting a broader audience with a bouquet of themed channels, with no major content rights, but at more populist prices.
Spanish TV facts
Population : 39,200,000
GDP : US$ 548 billion
TV Households : 11,826,000
Cable Homes passed : 1.15 million
Cable Homes connected : 150,000
DTH Homes (Digital) : 200,000
DTH Homes (Analogue) : 650,000
VCR Homes : 6,524,000
Homes with two or more TV sets : 5,688,000
But private operators such as Cableuropa also face competition in any of the franchises they are awarded from Telefonica from the end of 1998. This will mean that they would be wise to build their systems quickly to ensure early access to would-be telephony customers before Telefonica can head them off at the pass.
The newly enfranchised cable operators such as Cable i Televisi- de Catalunya are offering over 30 television channels for around Ptas 2,000 per month with a Ptas 5,000 initial connection cost and promising the full range of advanced services, such as high speed access to the Internet, telebanking and video on demand.
Telefonica is not the only player new cable operators have to worry about. Retevision, the state owned transmission company, recently acquired by a consortium headed by ENDESA and Telecom Italia, has been awarded the second telephony licence and is preparing to offer voice telephony from November 1998.
There are a number of unanswered questions facing the two major players in Spanish cable. One relates to the mundane issue of wiring. 70 per cent of Spain's population lives in apartment blocks which already enjoy a respectable penetration of SMATV systems.
Among the factors underpinning Cableuropa's strategy are lower construction costs, and the dual offering of cable TV and telephony.
The cost of laying cables underground in the UK turned out to be astronomical. But Spanish operators cannot simply string up wires on any convenient telegraph pole. They are only allowed to lay exterior wires in areas where this would be an overbuild, which Herrmann says is a significant part of the franchise area.
Secondly, with both competing digital DTH platforms already launched - which both offer more channels than cable would - cable operators may encounter new areas that are already served with video services. Herrmann admits that some of the CATV business will be lost to existing SMATV and DTH.
Cableuropa wisely has set conservative targets for the Spanish market; it is not banking on achieving penetration rates above those seen in the UK. The operator also has plans for business telephony, where it will likely team up with another operator - possibly Endesa - to offer a common service. Cableuropa will also bid for PCS licences when these are offered.
Critically, Cableuropa has yet to take a position on the conditional access system it will use and how it will market its in-home technology to consumers. These decisions must be seen as central to the business plan, and investors in cable systems - and those trading the stock in faraway places such as Wall Street - are surely interested in these matters. |
