Business

Internet threat to cable

Wednesday, May 09, 2012    

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JAMAICAN cable operators are at a competitive disadvantage against emerging Internet protocol television (IPTV) providers with lower infrastructure costs and no regulatory constraints, says the head of the local broadcasting commission.

Broadcasting Commission of Jamaica (BCJ) Executive Director Cordel Green said these factors threaten the viability of cable providers, officially known as subscriber television (STV) operations, in a consumer market increasingly lured by Internet-based media, such as Netflix and iVu-Tv.

Netflix, a world-renowned provider of on-demand movies and TV shows online, announced that it will soon extend its services to countries in the Caribbean and Latin America, including Jamaica.

Local firm eMedia Interactive last week launched what it claims is Jamaica’s first online television network, iVu-tv, which allows viewers to access original content — including the likes of Your Style, Your Money and the Wkndr — and popular re-runs such as Mission Catwalk and Magnum Kings and Queens of Dancehall.

“These developments portend some degree of trouble for existing wired cable operators,” Green warned during an address last week to the Lion’s Club of Kingston at the Jamaica Pegasus hotel.

Specifically, he said, the infrastructure-based business orientation of cable providers “...precludes them from delivering content at a cost close to marginal cost, as the Internet-based players such as Netflix and iVu would be able to do.”

Green added that IPTV providers are not regulated, unlike their STV counterparts.

Along with being charged a regulatory fee, cable operators are required to carry the local television stations, offer a minimum number of local cable channels and provide free public access channels for public service purposes, he said.

“The critical issue here is not about Internet subscription services versus cable services, per se, but one about regulations and whether there is a degree of unfairness inherent in charging a regulatory fee on STV operations, while the IPTV operators make no contribution,” he said.

The Broadcasting Commission boss noted that current proposed ammendments to the definition of “broadcasting” in the relevant legistation should “settle the matter” soon. Tyrone Wilson, eMedia managing director, said he welcomed the BCJ initiative.

“We consulted with the Broadcasting Commission before launching to ensure that we stick within the regulatory guideline,” Wilson told the Jamaica Observer in response to Green’s pronouncement.

“We understand that there are no regulations covering IPTV, but we are looking forward to it and would be willing to work with the BCJ to identify areas to stengthen the regulatory environment for IPTV,” Wilson added.

However, technological development and innovation are arguably the most critical factors that will determine survival of traditional media providers in the face of increasing competition from alternative mobile digital platforms, noted Green.

“Quality of the content and the consumers’ viewing experience will ultimately determine which business model and which firms will continue to exist in the long run,” Green declared. “This implies that the traditional electronic media operators must seek ways to enhance the consumers’ viewing experience, such as the introduction of HD (high-definition) and 3D (threedimensional).”

The management of media companies across the industry will also need to reassess existing distribution arrangements and innovate in order to respond to underlying structural shifts that are being caused by changes in technology and consumer behaviour, he added.

“These innovations must include alternative methods of distribution and also shared distribution facilities — for example, joint operation of digital cable headends,” Green advised.

According to the BCJ executive director, digital switchover in 2015, will present the traditional sector with an opportunity to inject fresh value proposition to consumers.

The BCJ recently completed an economic and financial analysis of the local electronic communications industry, which revealed that many of the challenges which face the sector are the result of “economic and technological upheavals and transformation globally”.

In 2010, industry revenues were $6.53 billion on thin net profit margins, reported the BCJ.

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