News

Mexicos Cable Newcomers Confront Old Guard

4/16/2000 8:00 PM Eastern

Guadalajara, Mexico-Mexico's presidential campaign isn't the only place where there's talk of challenging the status quo. A steady influx of new cable-license holders in recent years could reshape this country's pay TV industry.

That was the talk at the country's annual cable show, Canitec, held here recently. And despite chatter about the Internet and other high-speed data services, politics was very much in the air at the event inaugurated by outgoing Mexican president Ernesto Zedillo.

Though direct-to-home television has been available here for a few years, the overbuilders, known as "doble consecionarios," are providing incumbent cable operators with the first direct competition they've ever faced.

That could bring change not just to the operators, but also to their programming-buying cooperative Productora y Comercializadora de Television S.A. (PCTV).

PCTV members control more than 1.2 million subscribers. The organization represents the vast majority of cable companies operating outside of Mexico City and negotiates bulk-rate programming discounts for its members.

"We are seeing some cracks in the facade" of PCTV, said Carlos Diaz, vice president of Latin American Pay TV Service (LAPTV) and its movie channels Cinecanal, Movie City, and The Film Zone. "Those cracks might be under the surface, but by. next year, they'll be on the surface."

PCTV has been accused of not selling programming to at least one of its members, Telemedia S.A., effectively forcing it out of the organization.

"PCTV said that we had not fulfilled certain requisites [and] they canceled their channels," Telemedia director of operations Adolfo Merino said.

PCTV pulled the channels because Telemedia was expanding into new markets as an overbuilder, challenging larger PCTV-member operators, Merino alleged. PCTV director general Eduardo Ricalde declined to comment.

However, Enrique Yamuni, president of Guadalajara-based MSO Megacable S.A.-one of PCTV's founders and biggest members-argued that the organization's practices are legitimate. While not commenting specifically on the Telemedia situation, he argued that PCTV was under no obligation to sell to everyone in the market.

"PCTV is a private company that was built through the investment of its founding members. It reserves the right to buy programming and sell only to its members," he said. "Why should it make the benefits of this available to everyone if they are coming in and competing with us?"

Some PCTV members have also accused the newcomers of undercutting their subscription rates, in hopes of eventually being acquired by the incumbent operator.

Programming sources, however, said that only a few upstarts are coming in below market. "The majority are legitimate," said Juan Carlos Urdaneta, senior vice president at Turner Broadcasting System Latin America Inc.

Few international programmers have cut exclusive deals with PCTV, so they can sell directly to those overbuilders and independents the co-op won't deal with. However, such deals put the likes of Telemedia at a disadvantage, because they have to negotiate deals individually with programmers without receiving the PCTV volume discount.

That raises the possibility of the newcomers eventually clubbing together to form a program-buying association of their own. So far, there are no signs of this, as the newcomers account for less than 50,000 subscribers, according to programming sources.

Nevertheless, some believe this new guard is destined to change Mexico's cable landscape, which has been static in recent years.

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