Brazil president signs new pay tv bill into law

Brazil's president Dilma Rousseff has signed a law which is expected to shake up the market for paid television services and introduce more competition.

The government hopes the changes will bring down costs and expand the availability of pay TV services, which are largely confined to Brazil's largest cities. It also expects them to extend access to broadband Internet connections.

The bill makes a significant change, for the first time allowing local telephone companies and overseas companies to start offering pay TV services in Brazil, alongside mobile, fixed line and Internet services.

Until now, telephone companies have had to provide so-called triple-play services in partnership with the existing pay TV operators, Net Servicos De Comunicacao SA, controlled by Brazil's Globo Comunicacoes e Participacoes SA group, TVA of publishing group Abril, and satellite operator Sky, owned by Globo and Directv.

The pay TV market is expected to grow significantly as a result of the changes, and will pose a challenge to the existing players.

Two of those companies are already set for major changes, as foreign players took strategic stakes in both companies ahead of the expected changes to a rule which prevented them from owning more than a 49% stake in pay TV companies.

Mexican telecoms group America Movil SA owns a minority stake in Net, while Spain's Telefonica SA has bought a small stake in TVA, and both are expected to increase their control now that the rules have been altered.

But it should also see the entrance of new players. Brazilian telecoms group GVT, part of France's Vivendi, is planning to launch pay TV services next month, and other players are also expected to join in.

According to the communications ministry, there are more than 600 requests from small and mid-sized companies that want to provide pay TV services in small towns with 60,000 to 100,000 inhabitants.

TIM Brasil SA, the local unit of Italy's Telecom Italia, isn't interested in following in the footsteps of its rivals. "Our mission is to provide a good connection," the firm's chief executive, Luca Luciana, told reporters Tuesday.

For Fernando Neves, of Guerreiro Consult, a telecoms advisory firm, after five years of debate in Congress, the regulatory changes come very late, as the market has already moved ahead. Although Neves said he expects significant growth in pay TV options, companies such as Netflix Inc., which launched video-streaming services across Latin America earlier this month, will use growing availability of high-speed internet access to compete, he said.

One of the more controversial aspects of the law is the minimum quotas for Brazilian programming. One-third of the channels available must be Brazilian, and of those, two channels must have at least 12 hours per day of programs produced independently in Brazil.

(Published by Fox Business - September 13, 2011)