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© Telecommunications and Information Highways
Mexico - Convergence, Broadband and Internet market
1. SYNOPSIS
Broadband, especially ADSL, is one of the fastest growing telecom markets in
Mexico. The shift from dialup to broadband became apparent in 2005, when dial-up
accounts started to decrease, while broadband soared by around 122%. WiMAX made
a first appearance in Mexico in December 2005, when fixed-line operator Axtel
launched high-speed Internet access in Monterrey over a WiMAX network supplied
by Intel. Mexico’s first triple play service, combining cable TV, Internet, and
telephony, was launched in March 2005 by fixed-line provider Maxcom and local
cable TV operator SIT. A second triple play package followed in September 2005,
offered by fixed-line provider Axtel and cable TV operator Cablemás.
2. INTERNET MARKET
2.1 OVERVIEW OF THE INTERNET IN MEXICO
The Internet began in Mexico in 1992. Until liberalisation in 1997, Internet services
were expensive and of poor quality, mostly due to the difficulties faced by Internet
Service Providers (ISPs). Telmex often forced ISPs to wait for months before
providing new lines and increasing routing capacity, and ISPs accused Telmex of
anti-competitive practices.
Since then, however, the Internet market has become the fastest growing segment in
the country’s telecom sector. In terms of market size, Mexico is the second largest
Internet market in Latin America after Brazil. In terms of penetration, Mexico
occupies approximately the fifth place in Latin America (excluding the Caribbean
islands), behind Chile, Uruguay, Costa Rica, and Guyana.
While the Internet appears to be available everywhere in Mexico, actually only a
small fraction of the population uses it. Penetration is limited by the fact that around
35% of the population lives on a subsistence income, and 18% lives in extreme
poverty.
The main drivers for Internet growth include the widespread availability of Internet
cafés; the financed bundled packages (PC + Internet access) offered by Telmex; the
free access provided for a while by Terra and Tutopia; and the prepaid Internet
service offered by Todito and Terra.
In order to promote Internet uptake, the government conceived an ambitious project,
called e-Mexico, aimed at transforming the country into a digital economy. Part of
this project involved the installation of cybercafés throughout the country.
An e-Mexico project was developed in 2002-2003, aimed at wiring the entire country
to the Internet, then offering free email accounts to every Mexican, and universal
access to educational, health and government services. By 2003, a national satellite
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network has been set up to reach places without fixed lines. ViaSat enabled the
satellite connections with more than 3,100 LinkStar broadband VSATs installed, and
PanAmSat (Archived) (see separate report) agreed to provide free satellite Ku-band
space on its Galaxy 3 C satellite.
2.1.1 Internet statistics
Table 1 – Internet users, annual change and penetration − 1998 - 2005
Year
1998
1999
2000
2001
2002
2003
2004
2005
Users
1,222,000
1,822,000
5,058,000
7,410,000
10,765,000
12,219,000
14,036,000
17,100,000
Annual
change
n/a
+49%
+178%
+47%
+45%
+14%
+15%
+22%
Penetration
1.3%
1.9%
5.1%
7.4%
10.6%
11.8%
13.2%
16.1%
(Source: Paul Budde Communication based on ITU and AMIPCI data)
Note: Internet users are those accessing the Internet from school, university or work,
as well as from individual household or business accounts. Subscribers are
individuals who pay for Internet access accounts.
Table 2 – Internet users by access technologies − 2002 - 2005
Access type
Dial-up
Cable
Wireless
ADSL
Dedicated
Other
2002
47%
10%
1%
10%
12%
20%
2003
47%
12%
2%
18%
12%
9%
2004
44%
13%
5%
26%
7%
5%
2005
26%
20%
5%
43%
3%
3%
(Source: Paul Budde Communication based on AMIPCI data)
Table 3 – Internet subscribers by access technology − 2000 - 2005
Year
2000
2001
2002
2003
2004
2005
Dial Up
1,023,000
1,772,600
1,864,900
2,016,000
2,129,400
1,671,900
XDSL
0
5,300
78,100
213,500
695,100
1,606,600
(Source: Paul Budde Communication based on Cofetel)
Note: Other includes ISDN, wireless and dedicated access
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Coaxial
cable
8,600
64,500
124,100
180,800
309,100
663,000
Other
103,300
41,300
29,300
34,100
33,300
31,500
Total
1,135,000
1,883,600
2,096,400
2,444,400
3,166,900
3,972,900
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Table 4 – Internet host computers and annual change − 1996 - 2004
Year
Hosts
1996
1997
1998
1999
2000
2001
2002
2003
2004
34,180
54,696
132,860
404,873
559,165
918,288
1,107,795
1,333,406
1,523,277
Annual
change
n/a
+60%
+143%
+205%
+38%
+64%
+21%
+20%
+14%
(Source: ITU)
Note: A host is a domain name that has an IP address record associated with it. This
would be any computer system connected to the Internet via full or part-time, direct
or dial-up connections.
2.2 ISP MARKET
The de-regulation of value-added services in 1995 promoted the mushrooming of
ISPs, which multiplied from 23 in 1995 to more than 90 licensed providers in 2002.
But not many of these managed to become commercially viable businesses, and were
all too soon washed away by the wave of bankruptcy that swept through the Internet
sector. According to a study carried out in mid-2003, the surviving ISPs were the ones
that diversified, providing other services besides Internet access, such as e-commerce
and portal facilities. In mid-2005, there were 15 major ISPs out of around 350
companies registered to provide ISP services.
Low-cost suppliers such as DataNet and Internet de Mexico were purchased by USbased PSINet and StarMedia in early 1999. In mid-2000, AOL entered the Mexican
Internet market and quickly gained market share.
Telmex/Prodigy remains the dominant carrier and the major provider of local lines
and interconnection links to ISPs. Telmex’s backbone is the main path to the US
Internet nodes that route all of Mexico’s Internet access. The company provides
customers with PC purchase programs and access payments through their monthly
phone bill.
The phenomenon of free Internet access began in Mexico 1999. The first free access
was Terra Libre, launched in November 1999 by Telefónica’s Terra Networks
Mexico (Terra). In early 2002, however, Terra Libre transformed from a free Internet
access service into a prepaid system, and was renamed Terra Prepago. Two other free
access services were Gratis1.com (a joint venture of Chase Capital Partners, New
York-based StarMedia Network, and others) and Tutopia (a subsidiary of Miami’s
IFX Corp). Uptake of free Internet was slow: in July 2000, only about 420,000 people
out of the 6 million total users were availing themselves of free access. Sluggish
connections plagued free providers, and re-routing of calls often lead to expensive
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long-distance telephone charges. By end-2003, free Internet access had virtually
disappeared.
Growing competition among ISPs in Mexico led two companies to introduce prepaid
access plans: Terra and Todito.com (owned TV Azteca) mirrored the payments model
perfected by mobile phone companies. Todito introduced its prepaid Internet access
program in July 2001, and Terra in January 2002. Both ISPs used their prepaid plans
to extend services to residential low-end customers, although their execution
strategies and target markets differed. Terra’s approach was virtual, with its
distribution strategy confined to the Internet. Its prepaid programme aimed to court
young adults already familiar with the cyberworld. Todito’s approach more closely
followed the strategy used by Mexican mobile phone companies, with prepaid
Internet access ‘Todito Cards’ sold at retail outlets. Terra’s prepaid system was taken
over by Alestra in January 2005.
3. BROADBAND MARKET
3.1 OVERVIEW
Mexico has a ‘Broadband Mexico’ project to advance the country’s entry into the
information society. Broadband – especially Asymmetrical Digital Subscriber Line
(ADSL) – is one of the fastest growing telecom markets in Mexico. The shift from
dialup to broadband became apparent in 2005, when dial-up accounts started to
decrease at the rate of 21% annually, while broadband soared by around 122%.
According to Pyramid Research, broadband services will generate approximately 52%
of Mexican Internet services revenues by 2007.
Besides ADSL, broadband access in Mexico is available via cable (either copper or
fibre optic), satellite, or radio. WiFi and WiMAX, emergent technologies in Mexico,
are considered a solution to overcome low Internet access penetration.
Cable modems and ISDN dominated Mexico’s broadband market in 2001, with a 41%
and 44% market share respectively. ADSL represented only 12% of active broadband
Internet access accounts in 2001. But by 2005, use of ISDN had dwindled to less than
1%, and the broadband market was dominated by ADSL with a market share of
around 70%.
Major ISPs and broadband players in Mexico include:
• Prodigy – Telmex’s ISP (see below).
• Terra – Telefónica’s Terra Networks Mexico (Terra) launched Mexico’s first
free dial-up service, Terra Libre, in November 1999. In January 2002, Terra Libre
changed to Terra Prepago, a prepaid dial-up access. In January 2005, Alestra
signed a commercial agreement with Terra whereby it took over the management
of Terra’s prepaid dial-up operations. Terra retained the management of its Terra
Banda Ancha ADSL service, its Mexican Internet portal and web mail services.
• Maxcom – fixed-line network operator, offering Internet access since 1999.
Services include dial-up and ADSL access. It became Mexico’s first triple player
in March 2005, when it launched converged cable TV, broadband and telephone
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services in alliance with local cable operator Sistemas Interactivos de
Telecomunicaciones (SIT).
Tutopia – a company belonging to the IFX Networks group, began operations in
Mexico in 1999. It offers dial-up and DSL broadband access.
Avantel – began to offer dial-up access in 1996. In alliance with MVS
Multivisión, it launched a wireless broadband/VoIP package, branded NetVoice,
in February 2005. It also offers a range of Internet and data processing services
for corporate customers.
Alestra – controlled by AT&T Corporation, fixed-line operator Alestra provides
Internet services since July 1998, including dial-up access, dedicated Internet, and
a range of Internet services for corporate clients. It launched Masternet, also in
alliance with MVS, in February 2005, 15 days after the launch of NetVoice.
Axtel – based in Monterrey, local exchange carrier Axtel launched Internet access
using wireless technology in 2000. It offers dial-up and dedicated access, and
broadband through digital radio Point to Multipoint, Point to Point and fibre optic
systems.
MVS Multivisión – launched a bi-directional wireless broadband service branded
E-Go in June 2002, using Multichannel Multipoint Distribution Systems
(MMDS) technology.
MetroRED – México Red de Telecomunicaciones (MetroRED) was licensed in
May 1999 and began operations in January 2000 as a ‘Carrier of Carriers’,
providing last mile interconnection. It offers dial-up and dedicated Internet access
for corporate clients.
Several companies offer cable modem broadband. The major ones are Megacable,
Cablemás, Cablevisión, and InterCable (see the chapter on cable modems).
3.2 ADSL
Commercial ADSL service made its first appearance in Mexico in September 2001.
The market more than tripled between September 2002 and March 2003, and grew by
around 200% in 2004. According to a report by Point Topic Ltd, in 2004 Mexico
ranked highest in America and second in the world in terms of broadband growth rate.
The boom continued in 2005, with an annual increase of 131%.
The main provider is Telmex, through its ADSL service Prodigy.
Other companies offering ADSL services include Maxcom, Tutopia, and Terra (Terra
Banda Ancha).
3.2.1 Prodigy (Telmex)
Telmex (Archived) (see separate report) is Mexico’s leading ISP through its Prodigy
service.
In 1998, Telmex invested in Prodigy Communications Corporation, jointly with its
controlling shareholder Carso Global Telecom. Prodigy is a leading ISP in the USA.
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In November 2001, Telmex sold its 18% interest in Prodigy to SBC Communications.
Pursuant to a licence agreement, Telmex retains the right to use the Prodigy brand
name in Mexico free of charge and in perpetuity.
Prodigy services include:
• Prodigy con Computadora – package including a desktop or laptop PC plus
subscription to Prodigy Internet or Prodigy Infinitum;
• Prodigy Internet – dial-up Internet access;
• Prodigy Infinitum –ADSL services;
• Prodigy Móvil – WiFi access services.
In June 1999, Telmex launched Prodigy Internet Plus, a package including a
multimedia PC, a personal web page, an email account and two years of unlimited
dial-up access time. Prodigy Internet Plus became the largest provider of financing for
PC purchases. From mid-1999 to early 2004, it financed 614,000 personal computers.
It was replaced with Prodigy con Computadora, which offers computers at discounted
prices for both dialup and ADSL Prodigy services.
Telmex launched Prodigy Infinitum in February 2002. Initially, the service was
limited to high-income areas in major cities, including Mexico City, Monterrey,
Guadalajara, Merida, Puebla, Ciudad Juarez, Veracruz and Leon. Telmex slashed its
ADSL service by about 50% in January 2003. By early 2006, Prodigy Infinitum was
available in approximately 1,200 Mexican cities.
Telmex and Microsoft jointly operate a Spanish language Internet portal, T1msn.com,
in competition with the Spanish-language portals offered by TV Azteca (Todito) and
Telefonica (Terra).
Table 5 – Prodigy ADSL subscriber lines and annual change − 2002 - 2005
Year
2002
2003
2004
2005
Lines
67,000
179,000
560,000
1,033,000
Annual
change
n/a
+167%
+213%
+84%
(Source: Paul Budde Communication, based on company data)
3.3 CABLE MODEMS
Though not as popular as ADSL, cable modem grew at the respectable rate of 114%
in 2005, and its share of the total broadband market was around 29%.
Major companies that offer cable modem broadband services:
• Megacable – the market leader. It provides Internet access since December 1997
through its trademark, Meg@Red, with two-way broadband access. It was the
first Multiple Systems Operator (MSO) to go ahead with a cable modem roll out.
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Cablemás – the second largest cable TV company in Mexico, Cablemás offers
cable modem broadband under the brand name Cablered.
Cablevisión – launched broadband through cable modem in 2000. It was the first
company to offer this service in Mexico City, where it remains the leading cable
modem provider.
InterCable – sister company of Cablevisión Monterrey, a unit of Multimedios
Redes. It was established in 1996, and offers cable modem broadband over fibre
optic and coaxial cables, as well as dial-up and wireless high-speed Internet
access.
Table 6 – Megacable cable modem clients and annual change − 2001 - 2005
Year
2001
2002
2003
2004
2005 (June)
Subscribers
60,000
100,000
126,000
153,000
220,000
Annual
change
n/a
+67%
+26%
+21%
+58%
(Source: Paul Budde Communication based on company data)
Table 7 – Cablered cable modem clients and annual change − 2002 - 2005
Year
2002
2003
2004
2005 (Sept)
Subscribers
21,200
40,000
63,800
100,000
Annual
change
n/a
+89%
+60%
+93%
(Source: Paul Budde Communication based on company data)
Table 8 – Cablevisión cable modem clients and annual change − 2002 - 2005
Year
2002
2003
2004
2005 (Sep)
Subscribers
5,800
8,600
26,500
51,800
Annual
change
n/a
+48%
+208%
+155%
(Source: Paul Budde Communication based on company data)
3.4 WIRELESS BROADBAND
3.4.1 WiFi
Wireless Fidelity (WiFi) is a wireless networking technology for PCs and PDAs that
allows multiple devices to share a single high-speed Internet connection over a
distance of about 300 feet. It uses unregulated spectrum for establishing a network
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connection, and is often used for wireless local area networks, or to network a group
of PCs without wires.
WiFi can be found in homes, offices and public places such as coffee shops, hotels,
shopping malls and airports worldwide. Public sites with readily accessible wireless
networks are known as ‘hotspots’.
WiFi made its first appearance in Mexico in March 2003, when Telmex launched
Prodigy Móvil, a service based on the WiFi IEE802.11b norm, at speeds of up to
11Mb/s and at a range of 20 and 100 meters. WiFi hotspots were set up in restaurants,
coffee shops, hotels and other commercial establishments, primarily in metropolitan
and tourist areas. Telmex signed a WiFi roaming deal with US-based SBC
Communications in July 2004. In early 2005, Prodigy Móvil offered WiFi access in
over 50 cities.
3.4.2 WiMAX
Worldwide Interoperability for Microwave Access (WiMAX) is a wireless
networking technology that allows usage over greater distances and at higher speeds
than WiFi.
In collaboration with Intel, and using equipment based on the Intel PRO/Wireless
5116 broadband interface, fixed-line operator Axtel was the first company to
implement WiMAX in Mexico. In November 2005, it signed an agreement with Intel
to develop a WiMAX network. It launched high-speed Internet access for residential
and small business users in Monterrey, using WiMAX technology, in December
2005. Axtel plans to expand its WiMAX network nationwide by 2007. Network rollout is urban, with a coverage radius of about 2.5km.
Wireless broadband provider MVS Net announced, in January 2006, that it planned to
launch wholesale WiMAX wireless broadband in several Mexican cities by mid-2006,
in partnership with US-based WiMAX provider NextNet Wireless. MVS Net is a
subsidiary of MVS Comunicaciones, which also owns MMDS pay TV provider MVS
Multivisión. By early 2006, MVS Net was finalising construction of wireless
broadband networks in Mexico City, Guadalajara, Monterrey, Toluca, and Mexcali.
3.4.3 Internet via satellite
Broadband satellite access is available in Mexico through Hughes Network Systems
(HNS), which operates a satellite-based broadband Internet access service marketed
as DirecWAY. HNS has been operating in Mexico since 1987 and is the country’s
VSAT market leader. A wholly owned subsidiary of the DirecTV Group, HNS is a
global provider of broadband satellite network solutions for businesses, governments,
and consumers.
Tachyon Inc has provided two-way satellite broadband access in Mexico since 2000.
The service enables high performance access in areas where high-speed lines and
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telephone connections are not available. Tachyon’s broadband satellite services are
designed for use by corporations and government institutions that depend on highspeed Internet access. The company operates in North America, Mexico, parts of
Central America and the Caribbean, Europe and portions of the Middle East and
Africa.
In February 2003, GlobalSat introduced the Intelsat Broadband Service to Mexico,
targeting the small office/home market, small and medium-sized enterprises (SMEs),
and remote offices of multinational corporations. GlobalSat is a provider of satellitebased telecom services with worldwide coverage. The Intelsat Broadband Service is
offered to service providers on a wholesale basis, and is then distributed through incountry and regional service providers to end-users.
4. CONVERGENCE
4.1 OVERVIEW OF MEDIA CONVERGENCE
In its broadest sense, convergence in the communications industry means combining
various services – voice and data transmission, Internet access, video, cable TV
and/or other multimedia broadband applications – into a single package.
Latin America has only recently begun to develop convergence strategies, combining
various services – such as voice and data transmission, Internet access, video, cable
TV and/or other multimedia broadband applications – into a single package.
Convergence strategies are an attractive option in Mexico, a country with a soaring
broadband sector and low teledensity.
Although VoIP is suffering from regulatory restrictions, it is nevertheless gaining
popularity, with more and more companies looking to incorporate Internet telephony
with their broadband offerings.
Alestra and Multivisión (MVS) launched converged VoIP telephony and Internet
services, branded NetVoice, in February 2005. Also in February 2005, Avantel
launched a wireless broadband and VoIP package for the residential market, branded
NetVoice.
Fixed/mobile convergence was first developed in Mexico, in July 2004, through an
alliance between Avantel and Telefónica Móviles México (TEM México). Avantel
contributed its Virtual Private Network (VPN) product, fibre and microwave
backbone to the alliance, while TEM México contributed its GPRS network for lastmile high-speed connectivity. While real fixed/mobile convergence goes beyond
bundling services and into the seamless connectivity space, this first attempt of
competing players to work together represents an important strategic move. The first
product of the alliance was a connectivity solution for ATMs, launched in August
2004.
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A major area of convergence is the bundling of broadband with pay TV. All the larger
cable TV companies have or are developing Internet initiatives.
See separate report: Global – Convergence – Massive Media Changes – Analysis.
4.2 TRIPLE PLAY MODELS
The triple play strategy, combining fixed-line telephony, Internet and cable TV,
promises to be the bright star for the future of cable TV companies. In mid-2003, the
Under Ministry for Communications and Technology Development – Secretaría de
Comunicaciones y Transportes (SCT) – began drafting a triple play proposal. The
original draft allowed any cable TV company to offer data communication via
Internet, and eventually also local telephone services. This met with strong opposition
on the part of Telmex and other telephone companies.
The SCT finally legalized the provision of telephony by cable TV operators in June
2004. But it set a proviso: in order to guarantee quality of service, cable TV operators
could only offer telephony services if they first paired up with a telephone company.
This ruling met with strong opposition from cable TV companies.
A report released in mid-2004 by the National Chamber of the Cable TV Industry –
the Cámara Nacional de la Industria de Televisión por Cable (Canitec) – stated that
cable companies in Mexico had invested around US$500 million to launch voice
services. At that time, operators of cable TV rumoured to be interested in telephony
included: Cablemas, Cablevisión, Grupo HEVI, Megacable, Telecable and TV
Internacional.
In March 2005, the first triple play services in Mexico were launched in Querétaro by
fixed-line telecom provider Maxcom and local cable operator Sistemas Interactivos de
Telecomunicaciones (SIT). The two companies connected their networks to offer
cable television, Internet and basic telephony services. The companies saw huge
potential in the market, as SIT cables already served nearly 150,000 homes in
Querétaro.
Another company, Megacable, intended to add telephony into its service package
which includes cable TV and high-speed Internet. It anticipated that, by 2006, it
would generate a third of its income through Internet services, a third through video
services and a third through telephony. In August 2003, Megacable received a permit
from the SCT to commence a first experimental voice service via coaxial cable. But
commercial implementation was delayed by the legal developments requiring cable
TV companies to partner with telephony companies in order to offer triple play
services.
In May 2005, fixed-line provider Axtel revealed that it was teaming up with cable TV
operator Cablemás to launch a triple play package in the cities where the two
companies’ networks overlap. The two companies launched triple play operations in
September 2005, in the city of Tijuana, offering converged fixed telephony, Internet,
and cable TV services.
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Cablevisión announced plans to launch voice telephony services by end-2005 as a
carriers’ carrier. The launch would coincide with the completion of the company’s
network digitalisation program; the project was 50% complete in June 2005.
4.3 PAY TV
Mexico’s media markets are dominated by a few large players and pay TV is no
exception, with Televisa (which controls TV cable operator Cablevisión and satellite
TV provider Sky Mexico) and MVS (which owns MMDS operator Multivision) being
the leading operators.
In early 2004, new rules were issued against geographical monopolies in the cable TV
market, and licences were awarded to new entrants to compete in the same areas as
the established operators.
Concessionaires of all three pay TV technologies co-exist in Mexico: cable television,
MMDS, and Direct-to-Home (DTH).
Table 9 – Pay TV subscribers, annual change and penetration – 1997 - 2005
Year
1997
1998
1999
2000
2001
2002
2003
2004
2005
(Sept)
Cable
DTH
MMDS
TV
1,383,000 152,000 267,000
1,617,000 308,000 288,000
1,959,000 491,000 355,000
2,220,000 668,000 346,000
2,499,000 869,000 328,000
2,524,000 980,000 265,000
2,647,000 1,000,000 503,000
2,888,000 1,074,000 680,000
1,802,000
2,213,000
2,805,000
3,234,000
3,696,000
3,769,000
4,150,000
4,641,000
Annual
change
+7%
+23%
+27%
+15%
+14%
+2%
+10%
+12%
3,193,200 1,147,400 843,300
5,183,900
+13%
Total
Penetrati
on
1.9%
2.3%
2.9%
3.3%
3.7%
3.7%
4.0%
4.4%
4.9%
(Source: Paul Budde Communication based on Cofetel data)
4.3.1 Cable TV
Cable TV operators are subject to the Telecommunications Law, and since February
2000, have been subject to the Restricted Television and Audio Services Regulations.
Cable operators are classified as public telecom networks, and are therefore also
subject to the Federal Television and Radio Law and the Federal Television, Radio
and Film Industry Regulations.
Cable TV exists in Mexico since 1954, but it only began to develop as an industry in
1970. Growth was modest, however, until the late 1980s.
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There are now more than 800 cable companies in Mexico, with seven cable system
operators in the areas surrounding Mexico City alone. Consolidation is likely, since
three companies hold almost half of the market. In late 2005, Megacable’s market
share was around 18%, Cablemás around 15% and Cablevisión around 13%.
4.3.1.1 Megacable
Megacable SA de CV is the leading cable TV operator in Mexico in terms of
subscriber numbers. It has nationwide coverage, but operates principally on the
Pacific and Gulf coasts, including: Guadalajara, the second largest city in Mexico;
Hermosillo, the largest city in the state of Sonora; and Veracruz, the largest city in the
state of Veracruz.
Megacable Comunicaciones de Mexico (MCM) was spun off from Megacable in
November 2001. MCM has a licence to operate a broadband network in Mexico City,
Monterrey and Guadalajara. In Mexico City, it provides local voice service as well as
high-speed Internet access, principally to commercial customers.
RCN Corporation owns around 49% of Grupo Megacable, and Mexican Mazon and
Echevarria families around 51%. RCN first purchased 40% of Megacable from
Mazon Corporativo in January 1995, and increased its interest to around 49% in July
1999. RCN formally emerged from a Chapter 11 restructuring process in December
2004.
Megacable’s services are offered over a 96% two-way Hybrid Fibre Coax (HFC)
network, more than 11,000km in length. The company began to deploy digital TV
services in August 2003. It also provides Internet access since 1998 through its
trademark, Meg@Red, with two-way broadband access.
Table 10 – Megacable pay TV subscribers and annual change − 2001 - 2005
Year
2001
2002
2003
2004
2005 (June)
Subscribers
365,000
450,000
509,000
558,000
570,000
Annual
change
n/a
+23%
+13%
+10%
+4%
(Source: Paul Budde Communication based on company data)
4.3.1.2 Grupo Cablemás
The Cablemás group is Mexico’s second largest cable TV operator in terms of
subscriber numbers. It operates in the northeast, central, centre south and southeast
regions of the country.
The company is controlled by members of the Alvarez family, along with minority
backing from investment funds Citicorp Venture Capital and Olmeca.
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Founded by Alejandro Álvarez Guerrero, the Cablemás group brings together the
operations of various cable TV systems in Mexico. The groups first operator was
Visión por Cable de México, which began cable TV operations in Tijuana in 1968.
Between 1970 and 1975, various other operations were launched in other parts of
Mexico.
In order to centralise and standardise all the various operators under one
administration, the group TV por Cable Nacional was created in 1976. In 1997, the
group was renamed Cablemás, and all the group operations adopted the name as their
trademark.
In June 2003, Cablemás acquired and consolidated the Grupo Megapo, a provider in
Southern Mexico, further extending its footprint.
The company operates a 11,275km network, of which 71% had bi-directional capacity
in September 2005. Cablemás also offers high-speed Internet access by cable modem
through its Cablered division.
Table 11 – Cablemás cable TV subscribers and annual change − 2002 - 2005
Year
Subscribers
2002
2003
2004
2005 (Sept)
310,000
380,200
398,600
466,000
Annual
change
n/a
+23%
+5%
+24%
(Source: Paul Budde Communication based on company data)
4.3.1.3 Cablevisión
Although Cablevisión is the countrys number three cable TV company, it is the
leading provider of cable TV and cable modem broadband in Mexico City and
surrounding areas. Its service packages offer multiple channels of entertainment, news
and informational programming.
Listed on the Mexican Stock Exchange since April 2002, Cablevisión is owned 51%
by Grupo Televisa and 49% by public investors. It was originally a 51:41 joint
venture between Televisa and América Móvil, until América Móvil sold its stake
through an IPO on the Mexican Stock Exchange in April 2002.
Established in October 1966, Cablevisión pioneered cable TV in Mexico. In October
2000, it signed a three-year deal worth $128 million with Motorola, for the provision
of telecom services and cable equipment. Known as Elite Alliance, this agreement set
the standard for Latin American cable operators as they transitioned to become
Multiple Service Operators (MSOs). Using Motorola’s interactive digital broadband
platform, a variety of multimedia communications services were introduced in 2000
and 2001, such as interactive television (iTV) and other enhanced program services,
including TV-based Internet access and cable modem broadband.
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To expand its subscriber base and combat piracy, Cablevisión began switching its
analogue subscriber base to digital service in November 2003. By September 2005,
Cablevisión’s network consisted of approximately 9,107km of coaxial cable and
1,624km of fibre optic cable, with approximately 71% bi-directional capability; 100%
of the network operated at a speed of at least 450MHz, while 58% operated at
870MHz or more. The company aims to upgrade its entire network into a broadband
bi-directional HFC network.
During 2002-2004, Cablevisión experienced a period of dwindling subscriber
numbers and financial losses. Besides the general economic recession in Latin
America, the company blamed its subscriber falloff on cable piracy, a serious problem
in Mexico, where it is estimated that for every three cable subscribers there is one
household stealing the signal. The company hopes to resolve the problem by shifting
to digital cable, which is more difficult to pirate.
Cablevisión experienced a turnaround in 2005, with a 19% year-to-year increase in
subscribers at September 2005.
Table 12 – Cablevisión pay TV subscribers and annual change − 2000 - 2005
Year
2000
2001
2002
2003
2004
2005 (Sept)
Subscribers
403,500
452,000
412,400
364,400
355,000
406,300
Annual
change
n/a
+12%
-9%
-12%
-3%
+19%
(Source: Paul Budde Communication based on company data)
4.3.1.4 Cablevisión Monterrey
Cablevisión Monterrey is a unit of Multimedios Redes, a company belonging to
Multimedios Estrellas de Oro, a wholly Mexican conglomerate involved in radio, TV,
public telecom networks, newspapers, magazines, entertainment centres and
restaurants.
Cablevisión Monterrey is the cable TV market leader in the city of Monterrey. It
operates over a hybrid (fibre optic and coaxial) 4,500km cable network, in the
metropolitan area of Monterrey and neighbouring towns.
Its sister company InterCable, also a unit of Multimedios Redes, provides dial-up
Internet access, wireless broadband and cable modem access.
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4.3.2 Multichannel Multipoint Distribution Systems (MMDS)
MMDS technology uses terrestrial microwave bands to transmit programming
signals. It has lower channel capacity than cable, and lower costs of installation, as
there is no physical network. Digital MMDS systems can also offer high-speed
Internet access.
Mexico’s first MMDS service appeared in September 1989, when MVS Multivisión
went on air in Mexico City. The government issued a number of MMDS concessions
between 1995 and 2000. Of the 20 MMDS concessionaires listed by Cofetel in late
2005, most never started operations. The main MMDS operator remains MVS
Multivisión.
4.3.2.1 MVS Multivisión
The MVS Comunicaciones Group is owned by the Vargas family. It provides payper-view TV, broadband, Internet and other services through MMDS frequencies.
Group companies include MVS Multivisión (MMDS pay TV services), MVS Net
(wireless broadband), five TV channels, MASTV, MVS Radio, MVS Telenet, and
several others.
Founded by Don Joaquín Vargas Gómez, MVS was granted nationwide MMDS
licences of 194MHz in the 2.5 to 2.7GHz band in 1983. Due to objections raised by
competitors, however, the company was not able to freely use them until late 1988. In
September 1989, MVS Multivisión was born with the idea of creating a pay-per-view
TV system using MMDS frequencies. Later, Guajardo merged his Internet and radio
companies with MVS, creating a holding company known as MVS Comunicaciones.
MVS’s MMDS services cover all the major metropolitan areas in Mexico, including:
Guadulajara, Monterrey, Acapulco, Culiacán, Durango, Hermosillo, Mazatlán,
Mexicali, Morelia, Poza Rica and Tijuana. Most of the company’s customers,
however, are located in Mexico City.
MVS launched a bi-directional Internet access service in Mexico City, in June 2002,
using NexNet equipment.
In September 2002, the company launched MASTV, a low priced pay TV package
with only a few quality channels, targeting the less affluent sections of the population.
4.3.3 Direct-to-Home (DTH) Satellite TV
Under the Telecommunications Law, concessions to occupy and exploit geostationary
orbit positions and satellite orbits assigned to Mexico are granted through public bid.
The concessions may be awarded to foreign satellite systems capable of covering the
Mexican territory, provided that there is reciprocity. Only companies incorporated in
accordance with Mexican law with no controlling foreign participation are granted
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satellite concessions. Within five years of receiving the concessions, recipients must
have a satellite in orbit.
Concessions to broadcast DTH satellite services are for an initial term of up to 30
years, and are renewable for up to 30 years. A concession may be revoked or
terminated prior to the end of its term in certain circumstances.
Six concessions to provide satellite TV DTH service have been issued to date. Of
these, only two, Sky Mexico and Direct TV, actually became operational. Sky Mexico
used to be the DTH market leader, with an approximate 80% market share. After it
absorbed DirecTV in October 2004 it became the only operating DTH satellite TV
company in Mexico.
4.3.3.1 Sky Mexico
Grupo Televisa has a 60% interest in Innova, which provides DTH satellite television
services under the Sky TV brand name. Innova’s other shareholders are News Corp
with a 30% interest, and Liberty Media with a 10% interest.
Following News Corp’s acquisition of rival DTH operator DirecTV in December
2003, the two competing companies have merged throughout Latin America. While in
all the other countries Sky TV was merged into DirecTV, in Mexico Televisa bought
out News Corp, therefore DirecTV merged its operations into Sky Mexico in October
2004. DirecTV customers were offered the opportunity to migrate to Sky Mexico.
DirecTV had approximately 300,000 subscribers.
Grupo Televisa received a 30-year concession in May 1996 to operate DTH satellite
services in Mexico utilising SatMex satellites. In November 2000, it received a new
concession to operate DTH satellite services using the foreign-owned PAS-9 satellite
system. This concession expires in 2020.
Table 13 – Sky DTH subscribers and annual change− 1999 - 2005
Year
Subscribers
1999
2000
2001
2002
2003
2004
2005 (Sept)
410,000
590,000
692,000
737,800
856,600
1,002,500
1,216,600
Annual
change
n/a
+44%
+17%
+7%
+16%
+17%
+29%
(Source: Paul Budde Communication, based on company data)
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4.4 INTERACTIVE TV
Both Sky and DirecTV launched Interactive TV (iTV) in late 2000 – a service that
allows subscribers to shop on the Internet via their TV.
Cablevisión Mexico is one of the regional leaders in iTV, having launched Motorola’s
interactive digital platform in October 2000, the first such online access in Latin
America. In July 2003, it launched Microsoft’s Interactive Program Guide (IPG) for
television. TV This was the first commercial deployment of Microsoft TV IPG in
Latin America.
4.5 DIGITAL TERRESTRIAL TV
In early 1999, Televisa began to test High Definition Television Transmissions
(HDTV), becoming one of the first in Latin America to broadcast signals in the new
format. These were only demonstration broadcasts of HDTV signals in Mexico City
for two hours during the weekends.
In April 2004, the Under Ministry for Communications and Technology Development
(SCT) announced that TV digitisation would begin during 2004 and would include six
stages of three years each, concluding in 2021. Operators would temporarily be
allocated an additional channel, to transmit simultaneously both analogue and digital
formats. The SCT further clarified that any Digital Terrestrial TV broadcasts would
eventually need to be HDTV. To implement SCTs plan, it was estimated that TV
operators would have to invest around US$2.5 billion to upgrade their equipment.
Users would also need to invest in new high-definition television sets.
During the first half of 2005, Cablevisión in Mexico City began to offer 5 HDTV
channels.
Also in 2005, TV Azteca contracted Harris Corporation to provide digital TV
transmitters and HDTV encoding equipment for Mexico City, Guadalajara and
Monterrey by the third quarter of 2005, and for Matamoros, Reynosa, Nuevo Laredo,
Ciudad Juarez, Mexicali and Tijuana by mid-2006.
In January 2006, Televisa’s XEFB-TV and Multimedios’ XHAW-TV in Monterrey
began HDTV transmissions on UHF channels 48 and 50, respectively. XETV in
Tijuana, Baja California, had also started transmitting in HDTV.
Mexican viewers with HDTV sets receive picture resolution six times sharper than
standard definition analogue sets, while viewers without HDTV sets continue to
receive analogue TV signals.
5. RELATED REPORTS
For further information on Mexico’s telecom market, see separate reports:
• Mexico - Key Statistics, Telecom Market and Regulatory Overview;
• Mexico - Fixed-Line Market and Infrastructure - Overview and Statistics;
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•
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Mexico - Mobile Market - Overview and Statistics.
For information relating to:
• Telecommunications in individual Latin American markets, see: Latin America;
• Major telecommunications players in Latin American markets, see: Companies in
Latin America;
• Worldwide activities in the telecommunications industry, see: Global Overviews;
• Technical information relating to the telecommunications industry, see:
Technologies, Terminology and Glossary.
Copyright Paul Budde Communication Pty Ltd, 2006. All rights reserved.
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