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While much attention has been given to the incredible changes that are occurring in telecommunications, in Australia, many of the changes currently taking place in the media world don’t receive the same degree of attention.

This is a clear indication of the absence of dynamics in the Australian market.

In the USA, in particular, the developments are mind-boggling. Competition between the telecoms and cable TV companies has resulted in the latter group rapidly evolving in a totally new media direction. For example, the cable TV market dominates the broadband market, with a 50% market share. Since the mid-1990s the operators have upgraded their networks to allow for a range of digital and interactive services.

In Australia, the traditional broadcasters have been dominated by the Nine Network over the last few years and in the process have taken a somewhat laid-back approach. It became rather lazy and is certainly was not driving change in the market.

Seven has been bruised in the various new media deals but perhaps has learned some good lessons in the process. They received a boost from taking over the lead in ratings from Nine during 2006. Its new Yahoo!7 venture is also showing some leadership in multi media initiatives. The Ten Network operates in a niche market, which it will develop further.

Content-wise, Austar is a copy of Foxtel and is more interested in selling the business. As a matter of fact, the pay TV market is a de facto monopoly, since the two operators don’t play in each other’s market. The battle regarding the control of these two networks will be one of the most exciting events of the year, as it will bring together the most powerful media and communication companies and personalities.

Despite this, the digitalisation of pay TV has certainly brought some interesting new activities into the market. While I am not impressed by the very limited Video-on-Demand (VoD) service on offer here, I do like their interactive news service and use it several times a week.

Converging and supplementing media services

The cable TV companies in the USA, Europe and Asia are also behind the incumbent telcos’ current losses of market share in the telephone market – they are making a real impact through adding Voice over Internet Protocol (VoIP) and mobile offerings to their traditional pay TV and broadband packages.

At the same time, their core business remains entertainment, and it is in this area that even more interesting developments are taking place, with VoD, DVRs and a range of interactive TV developments entering the market.

The customer focus of the telecoms market is clearly moving away from basic telephone services towards a media rich environment. Media companies have a much better understanding of this market than telephone companies (fixed or mobile for that matter).

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By late 2006, Fairfax had taken the most strategic step in the period following the media reforms.

On the surface it might seem to be a rather traditional move, a merger of newspapers, but I believe it is a sound strategy, since it makes the company much stronger; and it also begins the all-important process of winning back the leadership position it once held in the Australia media market. As we all know, you have to be big and strong if you want to play in this market, or else the others will just cut you into pieces and gobble you up.

However, this isn’t the key issue for me. What I find significant is the fact that this move demonstrates that Fairfax fully understands the shift that is taking place in the media. The New Media are leading a process of media democratization and the focus is now moving from international and national to local and ‘me’.

Look at all the major new media developments that are currently taking place – the majority of them are ‘local’or ‘me’ services.

In acquiring the Rural Press, Fairfax has bought itself a gateway position in many communities in Australia and New Zealand, from which it can exploit the ‘local’ trend – not just through newspapers, but increasingly through Internet portals delivering local video, audio and text and graphics services.

I believe that the company will learn from this, and perhaps get a better understanding of how to transfer these local concepts from regional Australia to its media activities in its metro markets.

There will no doubt be a major shift in advertising spending from national to local, and with the merger Fairfax is in a prime position to profit from this shift.

The company could also play a key role in the ‘broadbanding of the local communities’. During my campaigns in regional Australia over the last five years one of the major problems was to get the telcos and ISP to take a leadership role. Utilities have played a much more leading role and it’s to be hoped that this will now also be complemented by the local media companies.

We need a group of strong partners to make the broadbanding of local communities happen, and the Fairfax move is a major step in that direction.

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Latin America has come a long way since the economic recession of 1999-2003. From a negative GDP growth of 0.4% in 2002, the region has been registering average GDP growth levels of around 5% in the past three years or so. But this is still not enough to overcome the region’s social and economic problems, which include high levels of political conflict or crime in some countries, as well as significant inequalities throughout most of the region, between the rich and the poor and between rural and urban populations.

This has led to dissatisfaction with the existing economic models, prompting two countries, Venezuela and Bolivia, to re-nationalise their incumbent telcos in early 2007.

The question of whether state-owned or privately-owned operators are more likely to improve a country’s teledensity is at the forefront of telecom debates in Latin America.

The fact is that most state-owned companies have proved to be inefficient, obsolete, and corrupt, but there are exceptions to this reality in Latin America. Uruguay’s Antel is often quoted as a notable example of a state-owned operator that has provided the country with 100% telephony coverage, and is reasonably advanced technologically. In Costa Rica, the state-owned monopoly telco ICE has been criticised for poor service quality and obsolescence, yet the country has one of the highest fixed-line teledensity rates in Latin America – considerably higher than would be expected from its GDP per capita compared with the rest of the region.

On the one hand, private operators have no interest in areas that are not going to be lucrative in the relatively short term. Therefore, they normally avoid investing in rural or economically backward areas. This ensures that poor populations remain poor, since the presence of communications infrastructure is an important factor for development. Yet, in the long run, poverty will be a handicap for private investors, since it restricts the number of people able to afford telecom services, thus lowering the saturation threshold.

On the other hand, competition among private operators appears to have worked well in many countries, particularly in Chile, where early privatisation and liberalisation have made its telecom market the most mature in Latin America. Like Uruguay, Chile has 100% telephony coverage.

If we use Uruguay, Costa Rica and Chile as examples, we find that fixed-line teledensity is higher in the first two, while Chile is lagging behind in this sector. In the mobile market, Chile has the highest penetration rate in Latin America, while Costa Rica lags far behind with a mobile penetration that is much lower than what would be expected given the country’s relatively high GDP per capita. Until 2004, Uruguay’s mobile penetration was considerably lower than the Latin American average. Unprecedented growth in 2005-2006, however, brought mobile penetration to a level that matches the country’s GDP per capita.

The fact is that competition in the mobile market does appear to stimulate rapid expansion of telecom access in developing nations, while the nature of fixed-line infrastructure makes competition more difficult. Besides, having duplicate networks ends up being a waste of resources in countries that cannot afford wastage. Therefore, there could be an argument for nationalising the fixed-line infrastructure, if it can be managed efficiently, but leaving the mobile market open to competition. The other solution would be to introduce real competition in the fixed-line market by unbundling the local loop, something that has yet to happen in Latin America.

See also:
Latin America
Latin America Annual Publications

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