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Smart Homes In The U.S. Becoming More Common, But Still Face Challenges

2019 Outlook Turbulence But Cards To Play

2019 Outlook For Latin American Multichannel Broadband Market

Latin American Multichannel Broadband Market 2018 Recap

Technology Platforms For Monetizing Connected TV Have Lots Of Room To Grow


Smart Homes In The U.S. Becoming More Common, But Still Face Challenges

Jun. 14 2017 — The following post comes from Kagan, a media research group within S&P Global Market Intelligence. To learn more about this research, please request a call

Despite the growing popularity of several smart home applications and products, the majority of U.S. homes still aren’t “smart.” 

Kagan, a media research group within S&P Global Market Intelligence, reports that the number of U.S. smart homes grew to over 15 million at the end of 2016. While this total equates to just 12.5% of total U.S. households, that percentage is forecasted to grow to 28% by 2021.

US smart homes as a percent of total u.s households

Smart homes have long existed on the edge of reality, something of a futuristic idea that appears to be close, but is always “two years away” from becoming big. However, with smart/connected products filling the shelves of both online and brick-and-mortar stores, the smart home has become real.

The smart home is also rapidly becoming a key component in the technology industry’s vision of the emerging Internet of Things, or IoT.

The current industry vision of an IoT-enabled world is one that creates a more convenient, secure, intelligent, and personalized experience. While this seems to be an achievable vision, the reality of IoT is sometimes different.

For example, in order to create real value, IoT has to solve real problems, not just connect a bunch of devices. Enter the smart home, which can meet the goal of creating real value for the user. At its best, the smart home can solve problems, create new efficiencies, and even save a consumer some money.

Market challenges and drivers

The drivers supporting the growth of the smart home market are broadly based on growing consumer awareness about the value of connected devices. More specifically, these drivers are:

  • An increasing consumer focus on home security. While home security concerns certainly aren’t new, many current security products and services weren’t possible without a broadband service or a mobile electronic device. Products and services such as IP security cameras, smart locks, and automatic notifications sent directly to your mobile phone are becoming integral parts of the smart home.
  • There is growing consumer awareness of the utility of smart hub products. Led by the explosive growth of Amazon’s Echo, smart hub devices such as Google Home and Samsung’s SmartThings Hub have moved beyond simply being smart speaker systems. These devices can now control other smart home products and are increasingly becoming the centerpiece of “do it yourself,” or DIY, smart home systems. 
  • Connected energy management devices now offer greater functionality. Demand for devices such as smart thermostats and smart lighting systems has increased markedly over the past two years, driven by both their money-saving capabilities and their easy-to-use reputation.

Market drivers smart home

On the other hand, the concept of the smart home is still viewed with a healthy dose of skepticism. Challenges that are holding back the smart home market include:

  • Defining the value proposition of the smart home remains problematic. Consumer surveys routinely show the skepticism of some homeowners about the real value of connected devices in the home. Frequently heard comments such as, “If I need to adjust the temperature in my home, I’ll do it manually,” and “Why would I ever need a smart doorbell?” underline the challenge of moving the smart home past the early adopter phase.
  • The price of both smart home service packages and some leading smart home devices are often viewed as too high for mass adoption. On the service provider side, support for smart home services usually requires an existing subscription to either a security service or a broadband service. Examples include Comcast charging $30 per month for its Xfinity Home service, while ADT pricing starts at $59 per month for its Pulse + Home Control package.

Market challenges smart home

On the device side, many products used in the smart home are generally perceived to be more reasonable than a smart home monthly service fee. Examples of leading product prices include the Amazon Echo at $50, the Nest Learning Thermostat at $250 and the SkyBell HD video doorbell at $199. Still, for many consumers, these prices can seem high for products often viewed as unnecessary.

  • One of the toughest problems faced by smart home advocates is security. Unlike the market driver that focuses on improving the physical security of the home, this challenge has to do with keeping the access to the home, personal information and data secure from illegal or unauthorized access.
  • With online access to everything from door locks to security cameras, many consumers are rightfully concerned about the vulnerability of these products to hackers. In September 2016, hackers managed to take control of over one million home video security cameras. This hack, which was generally limited to security cameras from a single vendor, received worldwide attention and publicity. It also served to highlight how challenging it is to convince many potential smart home adoptees that their connected devices will truly be secure.#learnMoreAbout("sector-intelligence-1") 
  • On the physical security side, a common fear is that smart locks or smart alarm systems can be bypassed or hacked. A leading security service executive recently mentioned that this issue was the second most common reason they hear as to why consumers refuse to sign up for an online security system (number one was price).
  • Another significant market challenge to the smart home is the overall usability and interoperability of connected devices in the smart home. This is especially true in a smart home not supported by a service provider, where a consumer might want to integrate a standalone smart thermostat from one vendor into to a smart home hub from a different vendor. It’s important to point out that just because a device is an internet-connected device, that doesn’t mean it will communicate with, or even work with, a different connected device.

The future of the smart home

At year-end 2016, we estimated there were just over 15 million households in the U.S. that met our definition of a smart home. By the end of 2017, we are projecting that total to increase to more than 20 million households.

Over the next several years, we are forecasting solid, but not meteoric, growth in the number of U.S. smart homes. Fueled by an expanding number of connected devices in the home, coupled with the desire to allow these devices to communicate and interoperate, we are projecting U.S. smart homes to exceed 35 million by 2021. 

US smart homes,2016-2021

Some notable elements of our smart home shipment forecast are:

  • The current base of smart homes in the U.S. falls into two categories: service provider-supported smart homes and DIY smart homes. The service provider category consists of homes supported by pay TV/telecommunications service providers, home security companies, and some home improvement retailers (i.e. Lowe’s, Home Depot) that offer or promote proprietary smart home platforms. The DIY category includes homes with multiple connected devices, meeting our definition of a smart home, but they do not rely on a service or platform provided by one of the companies in our service provider category.
  • In the U.S., the DIY smart home category is significantly larger than the service provider smart home category. Currently, the segmentation stands at approximately 70% DIY smart homes, 30% service provider smart homes. Much of this split is based on the cost, or perceived cost, of the smart home. A majority of consumers with smart homes seem to view the monthly subscription fees charged by service providers as being too expensive. This pushed them into relying on the DIY model for their smart homes.
  • There is some churn in the smart home market. Although the annual percentage is quite small, estimated in the 1% to 2% range, there are some consumers who either end their smart home service provider subscription or effectively “disconnect” their home.

Virtually all of the anecdotal stories we hear about these homes “going dumb” are based on three issues:

      • Security concerns
      • Service pricing
      • Unfulfilled expectations of the smart home

    While we are projecting the number of smart homes in the U.S. to increase significantly over the next few years, it is important to point out that they will still be a minority of total U.S. homes. In fact, in 2021 the number of “dumb” homes will still outnumber the number of smart homes by more than a two-to-one margin. 

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    Technology, Media & Telecom
    2019 Outlook Turbulence But Cards To Play

    Jan. 24 2019 — Multichannel faces headwinds in 2019, including persistent cord-cutting, a maturing broadband market and the launch of high-profile subscription online video services backed by media heavyweights. With the next 'big thing' continuing to elude the sector, debt levels and the possibility of additional Federal Reserve rate hikes could weigh on share prices.

    Maturing wireline penetrations and the emergence of 5G promise to slow the reliable broadband growth engine while the internet of things further embeds the role of connectivity as a basic utility. Choice is a watchword for the upcoming year, but next-generation content bundling approaches run the risk of consumer aggravation from re-aggregation.

    Kagan, in its 2019 outlook listed the top areas to watch along with the possible impacts and repercussions. Below is sample of the full outlook.

    Launch of AT&T, Comcast, Disney online subscription bundles

    • Additional pressure on legacy multichannel subscriptions.
    • Possible long-term disruption of content licensing deals, particularly with direct competitors in the streaming video universe.
    • Consolidation of global home video entertainment market with the top U.S. providers dominating worldwide.
    • Pressure on incumbent subscription video on demand services' growth.
    • Increases in budgets and production of exclusive original content.
    • Bloated online subscription marketplace with $10-$15 offerings piling up, crowding the field.

    5G rollout

    • Negligible impact on wireline broadband in 2019 due to limited deployment initially and belated entry of leading U.S. mobile handset maker Apple.
    • Restrictions on wireline broadband rate increases with wireless looming larger.
    • Smooth, reliable streaming of live events on the go, notably sports, which could boost virtual multichannel value proposition.
    • Enables mobile viewing, notably among millennials and younger generations.
    • Democratization of wireline 1-Gig broadband with lower rates on high-end tiers.

    Wireline broadband maturity

    • Cable market share gains in areas with belated/slow telco transition to fiber and possibly vice versa.
    • Limited upside and fierce competition — including 5G rollout — for existing customers likely a strong deterrent for widespread implementation of usage-based billing.
    • Subscriber slowdown to weigh on market valuations accustomed to broadband growth in last 10 years. 
    • Net neutrality debate rekindles with Democratic Congress but lacks firepower.
    • Telcos to focus on fiber deployment to support fiber to the home and 5G backhaul.
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    5-Year Virtual Multichannel Revenue Forecast Underscores Segment's Opportunities

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    Broadband Only Homes Log Record Gains In Q3

    Learn More

    Technology, Media & Telecom
    2019 Outlook For Latin American Multichannel Broadband Market

    Highlights

    Pay TV and broadband growth trend strengthens in 2019.

    Broadband net adds projected to be almost double those of multichannel in 2019.

    IPTV gets a boost from new Telefónica strategy.

    Jan. 14 2019 — The Latin America multichannel and broadband industry is heading into 2019 with positive headwinds. Demand for convergent services and economic recovery in larger markets should drive industry growth in 2019. The big caveat is the economy, with external shocks threatening to decelerate economic growth. Amid this environment, we expect the M&A market to remain active, with transactions in Mexico and Central America highly likely. New virtual multichannel, satellite broadband and IPTV services should also gain a foothold in the region.

    Pay TV and broadband growth trend strengthens in 2019

    Kagan estimates Latin America's multichannel and broadband subscriber bases should expand during 2019, with broadband net adds projected to be almost double those of multichannel. The trend toward convergent services is expected to help cable regain strength in the multichannel market, accounting for the majority of net additions. Multichannel revenues are forecast to grow, with Argentina, Brazil and Mexico expected to be the biggest contributors to multichannel revenue growth. The importance of fiber technologies is rising, concentrating the highest share of fixed broadband net additions during 2019.

    Already a client? Refer to the regional profile linked here for additional details.

    Economy: Outlook for 2019

    The World Bank projects Latin American and Caribbean GDP will expand 2.3% during 2019. However, deteriorating external conditions and local challenges might hinder economic growth. Recovering private consumption and investments should drive GDP growth in the region for 2019, although foreign exchange volatility and rising financing costs could weaken this trend. Prospects for fiscal consolidation in Argentina and Brazil remain challenging due to political opposition, especially in Argentina, where general elections are to be held in October. Venezuela's economic prospects remain dire, worsened by the recent drop in oil prices.

    M&A: Mexico and Central America to remain active

    The possibility of Telefónica SA divesting its Mexican and Central American operations, along with Millicom International Cellular SA's and Liberty Latin America Ltd.'s continued competition for acquisition targets in Central America to strengthen their positions in the region, raises the prospects for active Latin American M&A in 2019. Investment funds and Latin American telecommunication groups seem to be competing for Telefónica's assets in Mexico and Central America. Liberty Latin America is actively looking for acquisition opportunities in Latin America through its Chilean subsidiary VTR and is cited as a potential buyer for Telefónica assets, along with competitors Millicom, Entel Chile and AT&T Inc., although the latter may be barred in Mexico due to the mobile market concentration that would result.

    AT&T Inc.'s acquisition of Time Warner Inc. may also lead to changes in its Latin American operations. After the failed IPO of DIRECTV Latin America LLC (now named Vrio) in 2018, the company may still need to divest some assets in Brazil due to local regulations preventing pay TV operations from owning content producers.

    Brazilian regulator Anatel also raised spectrum caps at the end of 2018, opening up the country's mobile market for consolidation. Embattled former iDEN carrier Nextel Telecomunicações SA has been looking for a buyer for years, and Telecom Italia SpA's TIM Participações SA has already announced it has made an initial offer. Regional telco Sercomtel Telecom may also choose to sell its spectrum assets — which may be allowed if a telecom reform bill currently under discussion in the Senate is passed — or even the whole company.

    In Argentina, regulatory conditions for the approval of Telecom Argentina's merger with Cablevisión Argentina may lead the company to divest many assets in 2019. The operator must sell off its fixed broadband business in 28 areas of the country where the merger could affect competition, as well as excess wireless spectrum above the regulatory cap.

    Already a client? Please click here for our annual global mobile spectrum roundup, and here for an overview of upcoming global spectrum auctions.

    A final ruling by the Court of Cundinamarca put to rest the Bogotá municipality's proposal to sell Empresa de Telecomunicaciones de Bogotá SA ESP, or ETB. The court cited irregularities in the approval of the proposal as its basis to nullify the decision. Nevertheless, the court said the ruling does not prohibit the sale of ETB, but that the municipality will have to initiate a new approval process to achieve it.

    Effects of election results

    The election of Jair Bolsonaro in Brazil and Andrés Manuel López Obrador in Mexico introduced some uncertainty into the Latin American political picture. Both presidents are in the opposite side of the political spectrum, Bolsonaro on the right and AMLO on the left. Nevertheless, both candidates ran on a populist agenda, with ambitious campaign promises that pose a risk to fiscal discipline. Ivan Duque, Colombia's new president, is likely to maintain his predecessor's market-friendly policies, while Argentina's Mauricio Macri's inability to implement fiscal reform may cost him the presidency in general elections in October 2019.

    In the telecommunications sector, AMLO pledged to promote market efficiency and close the gap in access to telecommunications, whereas Bolsonaro's program remains vague on issues related to media and telecommunications.

    Already a client? Please click here for additional insights about AMLO election, and here for insights on Bolsonaro election.

    LatAm countries with upcoming 2019 elections

    Argentina
    Bolivia
    Dominican Republic
    El Salvador
    Guatemala
    Panama
    Uruguay

    Virtual multichannel

    DIRECTV Latin America launched Latin America's first virtual multichannel services in November in Colombia and Chile. The company is expected to expand the offer, DIRECTV Go, to Argentina and other Latin American markets during 2019. Telecom Argentina executives have also hinted that the company's video-on-demand/TV Everywhere service, Cablevisión Flow, which offers over 200 linear channels to pay TV subscribers, may soon be launched as a virtual multichannel service for nonsubscribers.

    Telefónica has also been quietly rolling out access to its TV Everywhere platform, which includes several linear channels, to nonpay TV subscribers in some Latin American markets, such as Central America and Chile. The Movistar Play Full offer is available as a value-added service to Telefónica’s mobile and fixed broadband, and to voice subscribers for an extra fee.

    Satellite broadband

    Penetration of residential satellite broadband is set to increase as more Ka-band satellites become available in the region and new operators enter the market. Hughes Communications Inc. continued to expand its HughesNet service, launched in Brazil in 2016 and Colombia in 2017, to Peru and Ecuador during 2018. Competitors Al Yah Satellite Communication Co. PJSC and ViaSat Inc. also began operating in the Brazilian market during 2018, while satellite operator Hispasat SA launched a white-label service in the region.

    Dish México announced it would partner with Hispasat SA and Gilat Satellite Networks Ltd. to launch satellite broadband service in Mexico. Dish México will leverage Amazonas 5, Hispasat's high-throughput satellite, to reach underserved markets. Amazonas 5 has the potential to reach 77% of Mexico's population. The broadband service will use Gilat's SkyEdge II-c platform to provide high-value services to Mexican consumers and small and medium-sized enterprises.

    Already a client? Please click here and here to learn more about satellite broadband service offers currently available in Latin America.

    Argentina quad-play

    Following new regulations allowing telcos to offer multichannel services, Claro Argentina and Telefónica de Argentina SA launched IPTV offers during 2018, but coverage remains limited, as convergent services were initially only permitted in the major cities of Buenos Aires, Rosário and Córdoba, in order to protect small operators in other regions. In 2019, this will be expanded to cities with populations below 600,000. Delays in passing a telecoms reform bill allowing telcos to offer DTH may lead the two companies to abandon plans for a national satellite pay TV offer, choosing to focus on high-end convergent services based on their growing fiber networks.

    Meanwhile, Argentina's largest player, Telecom Argentina, will be allowed to offer convergent services only in 2019, as part of antitrust regulators' restrictions for approval of its merger with Cablevisión Argentina.

    IPTV gets a boost from new Telefónica strategy

    Telefónica made a strategic decision during 2017 to prioritize investments in fiber deployments to power ultrafast broadband and IPTV services, as well as expanding its VOD portfolio for fiber-based subscribers with STB-embedded over-the-top services such as Netflix and Amazon Prime. Based on this, as well as the continued entry of new players and migration of many existing telco and cable networks to fiber, we revised our IPTV forecast up for 2019.

    Regulatory outlook

    In Brazil and Argentina, "mini-reform" bills for the telecommunications industry remain stalled in Congress but are expected to finally be approved in 2019. Argentina's "Ley Corta," as it became known for being a reduced version of the government's originally proposed telecoms reforms, allows telcos to offer direct-to-home services in major cities starting in 2020, with gradual expansion to smaller towns up to 2022. Although passed by the Senate in July 2018, the bill, which also bans exclusive network agreements in order to encourage network sharing, among other measures, still awaits voting in the Chamber of Deputies.

    Meanwhile, the Brazilian Senate is expected to resume discussions on the PLC 79 bill, which have been frozen since 2016. The reform would require telcos Telefônica Brasil and Oi SA to migrate their public fixed telephony concession contracts to a private service authorization contract, as is the case with their mobile and broadband businesses. In exchange, the companies would have to invest in broadband expansion the value of the public fixed telephony infrastructure they would be incorporating. The value of these "reversionary assets" and where these investments should be made are to be defined by the regulator Anatel and may take a year to implement. The PLC 79 bill also tackles several other measures favored by the industry, including a reduction in tariffs for satellite broadband services, which is expected to encourage more competitive prices, allowing telcos to sell spectrum assets and exempting broadcasters from regulatory tariffs.

    The Mexican Congress reduced the annual budget for the telecommunications regulator, Instituto Federal de Telecomunicaciones, or IFT, by 25% compared to 2018. The budget cut would weaken the IFT amid regulatory battles with América Móvil SAB de CV's Teléfonos de México SA de CVand other important Mexican players.

    Already a client? Click here to access the full article.

    Global Multichannel is a service of Kagan, a group within S&P Global Market Intelligence's TMT offering.

    This piece was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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    Technology, Media & Telecom
    Latin American Multichannel Broadband Market 2018 Recap

    Highlights

    M&A activity drives consolidation in Central America

    DIRECTV launched region’s first virtual multichannel service

    Brazil multichannel continues losing DTH subscribers

    Jan. 11 2019 — Latin America and the Caribbean are starting to show signs of economic recovery, which has helped the region's multichannel market return to growth despite continued direct-to-home losses in Brazil. Meanwhile, some telecommunications groups are acquiring operators in Central America to strengthen their competitive position and gain convergent capabilities. DIRECTV Latin America LLC for its part is honoring its traditions of innovation by introducing the region's first virtual multichannel service and 4K linear TV channel. In Colombia, Empresa de Telecomunicaciones de Bogotá SA ESP's, or ETB's, cost-cutting plan's early results are showing progress.

    Economy

    The Latin America and Caribbean economic environment seems to be stabilizing, with GDP expected to expand 1.7% in 2018, according to the World Bank. Recovering private consumption, investments and commodity exports should be primary drivers of economic stabilization. Consumer price inflation was 2.6% during 2017, according to World Bank data. However, unemployment remained at 8.3%, a high for the past 10 years, based on World Bank data.

    Intense fluctuations in exchange rates in several Latin American markets during 2018, especially in Argentina and Venezuela, are expected to cause multichannel revenues expressed in dollars to drop by 6.1%. The year was also marked by political uncertainty, with elections in seven countries, including the region's largest markets, Brazil and Mexico.

    Already a client? Please refer to the economy and multichannel affordability section of Latin America profile for more information. For in-depth analyses of the perspectives following presidential elections in Mexico and Brazil, refer to the articles linked here and here.

    Regional

    Following a slight drop in subscribers in 2017, mainly due to direct-to-home losses in Brazil, the Latin American multichannel market returned to growth in 2018, while fixed broadband continued to grow steadily, with broadband households expected to overtake multichannel households in the region by year-end 2018. IPTV adoption accelerated in 2018, boosted by Telefónica SA's, or TLF's, decision to upgrade its last mile to fiber, mainly in Brazil and Chile.

    Already a client? Please refer to the cable, DTH and IPTV sections of Kagan's Latin America profile for more information, and the article linked here for an analysis of Latin America's top multichannel groups.

    Latin America and the Caribbean has one of the lowest levels of fixed-broadband penetration among the global regions included in our analysis, ahead of only the Middle East and Africa estimated at 44.0% in 2018. Cable overtook DSL in 2018 to become the largest broadband technology platform in the region, while FTTP continues to gain market share rapidly.

    Already a client? Please refer to the broadband section of Latin America profile for more information, and to the articles linked here for an analysis of Latin America's top broadband groups and here for an analysis of broadband speeds in the region's largest countries.

    AT&T Inc. subsidiary DIRECTV, América Móvil SAB de CV, or AMX, and Grupo Televisa SAB were the top three multichannel providers in the region ranked by pay television revenue during 2017. The top three fixed-broadband providers in the region ranked by revenues were América Móvil, Telefónica and Oi SA.

    Click here to find out more about our Latin America Multichannel & Broadband Market Overview report, which provides an in-depth group-specific analysis on the multichannel, broadband and telephony market in Latin America.

    M&A

    M&A activity slowed during 2018 in terms of values compared to 2017, when the merger of Telecom Argentina and Cablevisión Argentina was announced. The deal ranks as the Latin American multichannel market's second most important M&A transaction in the past four years, with an implied value of $11.08 billion. 2018's largest transaction, meanwhile, was Millicom International Cellular SA's acquisition of an 80% share in Panama's largest MSO, Cable Onda SA, at an implied value of $1.46 billion.

    Consolidation was intense in Central America, with several acquisitions registered during the year, mostly by Millicom, which is already the leading operator in most markets in the region. In 2017, Liberty Global PLC announced it would divest its Latin American operations and in 2018, Liberty Latin America Ltd. became an independent company, launching an inorganic growth strategy with its largest operation, Chile's Vtr.Com Spa, in charge of seeking acquisition opportunities in the region, also with a focus on Central America. The company led M&A activity in the year with its announcement in February that it had acquired Costa Rica cable operator Cabletica SA, but was outmaneuvered by Millicom, which throughout the year bought several other key Central American assets that Liberty had an eye on.

    TV Everywhere and virtual multichannel

    In November 2018, DIRECTV launched Latin America's first virtual multichannel service, DIRECTV Go, in Chile and Colombia. The platform gives non-pay TV subscribers online access to over 80 live linear channels, as well as VOD content, through mobile apps or browsers for 19,990 Chilean pesos (13,490 Chilean pesos promotionally) or 80,000 Colombian pesos. Traditional multichannel subscribers to the operator's top premium packages are also given free access to the service. In Chile, online-only subscribers also have the option of acquiring premium programming as an add-on, whereas in Colombia the service is offered in a single package. The company is expected to expand DIRECTV Go to Argentina and other Latin American markets over the coming months.

    The company was also the first to launch a permanent linear 4K channel in the region, with a commercial offer in six of its Latin American markets (Argentina, Chile, Colombia, Ecuador, Peru and Uruguay) ahead of the 2018 FIFA World Cup in Russia. The channel will broadcast, in Ultra HD, live sports content from several international leagues as well as original programming and series and documentaries from third-party content providers.

    Already a client? Please refer to the report tagged here for more information about global UHD deployments.

    Cablevisión has also suggested that it may offer its TV Everywhere platform, Flow, to non-pay TV subscribers as a virtual multichannel service in the near future.

    During 2018, content providers such as Fox Networks Group Inc., HBO Latin America Group (SM),Turner Broadcasting System Inc., Viacom Inc. and Sony Entertainment Television continued expanding their offerings of TV Everywhere platforms to non-multichannel subscribers as stand-alone over-the-top services across the region, mainly through partnerships with mobile and broadband operators, but also through mobile app stores and third-party OTT aggregators such as Clarovideo. New OTT and VMC platforms launched across Latin America may put a strain on the pay TV market.

    Already a client? Please refer to the report tagged here for more information about content partnerships with mobile carriers.

    Mexico: Grupo Televisa not an agent with substantial power

    The IFT, Mexico's telecommunications regulator, retracted Televisa's designation as an agent with substantial power in the pay TV market in March 2018. The IFT designated Televisa as an agent with substantial power in the pay TV market after Mexico's Supreme Court asked the regulator to review a previous ruling in 2017. However, a final ruling on this issue by Mexico's Supreme Court ordered the IFT to review the designation based on a new set of conditions. As a result of the new analysis, the IFT determined Televisa did not have substantial power in the Mexican pay TV market. The designation would have obligated Televisa to share its infrastructure, limit its growth in some markets, set pricing structures that promote competition and pay retrans fees to FTA channels.

    Since overtaking Brazil in 2017, Mexico remains Latin America's largest multichannel market. In fixed broadband, the country ranks second, behind Brazil.

    Already a client? Please refer to the Mexico country profile for more information on its multichannel and broadband market, and to the article here, for an in-depth analysis of the Mexican broadband market's revenues and ARPUs.

    Brazil: Multichannel operators continue losing subs

    For the first time since 2014, Brazil, Latin America's largest market, is projected to see subscriber growth in 2018, albeit slightly, as DTH operators continue to shed low-income subscribers as a result of the recent economic crisis. Continued political and economic instability has prompted a sharp deceleration of the multichannel market in Brazil. Brazilian pay TV operators have lost an estimated 1.4 million subscribers since 2014, with revenues expressed in dollars dropping 27.4% in the same period, also impacted by currency devaluation. The crisis does not seem to affect the broadband market, though, as the country's fixed-broadband operations added 6.4 million subscribers between 2014 and 2018.

    In December 2018, Brazil also completed its planned analog switch-off and migration to digital terrestrial television in major cities, reaching an estimated 63.7% of Brazilian households. In smaller towns where carriers do not have plans to launch 4G services using the 700 MHz frequency, analog switch-off is expected to occur by 2023 but may take longer since the distribution of DTT set-top boxes will no longer be subsidized. There are also concerns among market players that local broadcasters may not be able to afford the migration to digital transmission by that date.

    Brazil is Latin America's second-largest multichannel market, behind Mexico, and largest broadband market.

    Click here for an in-depth analysis of the Brazilian broadband market's revenues and ARPUs.

    Already a client? Please refer to the Brazil country profile for more information on its multichannel and broadband market, and to the article here for the complete article on the Brazilian broadband market's revenues and ARPUs.

    Argentina: Operators begin to offer convergent services while currency crisis puts investments on hold

    The Cablevisión/Telecom Argentina merger between Argentina's largest cable operator and telco was effective Jan. 1, 2018, the same date that new regulations allowing telcos to offer video services over "physical link" in Argentina also came into effect. Initially, convergent services were permitted only in the major cities of Buenos Aires, Rosário and Córdoba, in order to protect small operators in other regions. In cities with populations below 600,000, this was delayed to 2019.

    The deal was approved by antitrust regulators in June 2018, but the approval came with restrictions, which include a delay for permission to offer convergent quad-play services to 2019, while competitors were allowed to do so as of 2018. The operator must also sell off its fixed-broadband business in 28 areas of the country where the merger could affect competition. Telecommunications regulator ENACOM also imposed conditions regarding spectrum caps and infrastructure sharing in regions where the two companies have a high market concentration in broadband.

    The new regulations also allowed AMX's Claro Argentina and TLF's Telefónica de Argentina SA to enter the pay TV market in 2018. Both companies launched IPTV services in the country during 2018, leveraging their existing fiber-to-the-home networks, and may launch DTH satellite services in the future, pending congressional approval of a bill expanding permission to offer pay TV over wireless platforms. The law would allow these convergent DTH services in major cities starting in 2020, with gradual expansion to smaller towns up to 2022. Although passed by the Senate in July 2018, the bill still awaits voting in the Chamber of Deputies. Both América Móvil and Telefónica already provide DTH services in Latin America, and permission to do so in Argentina would significantly reduce the cost and time-to-market for their new services.

    Argentina is Latin America's third-largest multichannel and broadband market.

    Already a client? Please refer to the Argentina country profile for more information on its multichannel and broadband market, and to the article here for an in-depth analysis of the Argentinean broadband market's revenues and ARPUs.

    Colombia: ETB cuts costs to improve its financials while sale is on hold

    Empresa de Telecomunicaciones de Bogotá's sale is on hold after a Colombian judge ruled that the municipality did not follow the appropriate process to approve the privatization project. Meanwhile, ETB has been implementing an austerity plan since 2017. As part of this plan, ETB shrank its channel lineup during 2017, reducing its programming costs significantly. ETB's 2017 results show the austerity plan is starting to pay off, with programming cost as a percentage of average revenue per user dropping in 2017.

    Colombia is Latin America's fourth-largest multichannel and broadband market.

    Already a client? Please refer to the Colombia country profile for more information on its multichannel and broadband market, and to the article here for an in-depth analysis of the Colombian broadband market's revenues and ARPUs.

    Peru: Operators cannot charge for set-top-boxes

    OSIPTEL, the Peruvian telecommunications regulator, prohibited the sale or lease of set-top-boxes in March 2018. Installation expenses can be financed in a maximum of six monthly installments. As a result, operators increased installation fees. Telefónica del Perú SAA increased its installation fees to 309.5 Peruvian soles for cable, up 74.7% from 177.15 soles in 2017. Claro Perú started charging the same installation fee with the possibility of paying in six monthly installments of 51.6 soles.

    Peru is Latin America's seventh-largest multichannel and broadband market.

    Already a client? Please refer to the Peru country profile for more information on its multichannel and broadband market.

    Already a client? Click here to access the full article.

    Global Multichannel is a service of Kagan, a group within S&P Global Market Intelligence's TMT offering

    This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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    Technology, Media & Telecom
    Technology Platforms For Monetizing Connected TV Have Lots Of Room To Grow

    Dec. 19 2018 — In the advertising industry, ads for over-the-top video streaming to TVs either directly or via a device connected to the TV such as a streaming media player or a game console are referred to as connected TV ads. There has been an increasing number of streaming devices shipping worldwide, bringing more viewers to connected TV. Ad tech vendors have noted the opportunities provided by the growth in connected TV ad inventory and are expanding their own connected TV products and services for video providers and advertisers. Kagan expects U.S. connected TV ad tech vendor revenue in ad serving, demand side platforms, or DSPs, and supply side platforms, or SSPs, to grow from $129.1 million in 2017 to $654.4 million in 2022.

    The growth in both ad-supported OTT video streaming services and their viewing has OTT providers and the advertising industry looking toward this segment as an important avenue to reach viewers. Unlike traditional TV, which has a finite amount of inventory, the more viewers the advertising OTT services reach, the greater the amount of ad inventory they have.

    For advertisers, connected TV inventory brings the best parts of TV and digital advertising together with 100% viewability, 90% plus completion rate, reduced fraud and the ability to target audiences with 1:1 addressability. Brand or sales lifts from the viewing of an advertisement can also be determined by the advertiser. In addition to addressability, part of advertiser interest in connected TV comes from a desire to reach younger consumers who are more likely to use online video services.

    However, some issues remain for connected TV. With the fragmentation of platforms and services, each has their own dataset on viewers that cannot always be compared exactly against another. There is also no industry agreement on a common measurement currency for connected TV to equalize the buying process so all know what they are buying. The large number of platforms offering connected TV inventory, none of which have the viewing hours equal to TV at this time, makes buying connected TV complex in determining with whom to work.

    When it comes to the technology used for connected TV ad trading and insertion, the pieces are in place but the system is complex. When a provider directly sells an ad, there is a single call made to an ad server. However, with a programmatic marketplace there may be many hops out to programmatic platforms with which to contend. That adds to the latency of the stream and may result in no ad filling the spot or the viewer turning away from the program.

    The benefits outweigh the concerns, so we expect the rising awareness of the opportunity in connected TV advertising to drive more usage of the technology to the benefit of advertising technology vendors.

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