Cutting edge cable TV services in Venezuela

- Thursday, April 1, 2010

Venezuelan cable TV provider NetUno confirmed last week its plans to issue bonds on the local capital market this year and to launch IPTV service in Caracas, as well as the actual launch of HDTV in Maracaibo.

These issues overshadow the company's significant activity in the corporate segment, as well as efforts to bring service to low-income areas in some cities. BNamericas interviewed NetUno president Gilbert Minionis to go into further detail about these aspects.

BNamericas: How does your business break down between corporate and residential?

Minionis: It's two-thirds residential and one-third corporate. The 120,000-subscriber figure refers to those who regularly pay, who are up to date at 30 days. If you count up to 90 days then you can add another 25,000 or so.

BNamericas: Is it the long distance customers who pay less regularly?

Minionis: No, it's people who come in and out of the system on a regular basis. We cut them off after 30 days of non-payment, but they come back and seek an alternative payment plan.

There are also about 15,000 additional customers through affiliate companies that sell our cable service in slum areas, one group in Caracas and another in Barquisimeto. We team up with people who put up the investment and deploy the infrastructure in these areas, then we provide all the back office, the signal administration services, collections etc, while they take care of the outside plant.

BNamericas: Do you have other partnerships in the pipeline for this service?

Minionis: We're always in the process of doing that. What we're doing right now is acquiring those partner companies because the initial deployment was theirs and we can use that as a beachfront to penetrate, and then we run the company afterwards. Right now we're in the process of acquiring a couple of those.

We will continue to penetrate low-income areas, and in fact we plan to add broadband to the offering, which so far has not been included.

BNamericas: Does that mean expanding to new zones of Caracas and Barquisimeto, or launching the initiative in completely new cities?

Minionis: New barrios in other cities, but always in cities where we already operate. We just need to find the right partner.

BNamericas: Your website says you have "excess fiber (96 strands)." Does that mean 96 idle on top of a certain amount already in use?

Minionis: What we've deployed is 96-strand fiber. Our trenches have two main ducts each with three inner ducts. At the moment, only one of those six ducts has 96-strand fiber pulled through - so that's ample capacity to expand corporate services in Caracas, Maracaibo and Valencia.

We were the first triple-play provider in Venezuela for a long time because we positioned ourselves primarily as a telecoms company, not a cable TV operator, so we have corporate quality circuits - the largest data circuits sold in Venezuela. We have some STM-4 customers on 622Mbps speeds, who resell to their customers or who are transporting from their sites out to the international cables.

BNamericas: Your website also mentions VDSL. Is that only for the corporate clients?

Minionis: Yes. It's part of our Metro-Ethernet corporate network, the only one in Venezuela. Some residential customers are on a quasi-cable service, where we use the metro-Ethernet to deliver it to the port or node that serves a subdivision, but once inside a subdivision, they get regular cable.

BNamericas: That brings us to FTTB and your plans for IPTV. Is the Caracas IPTV launch basically a trial program?

Minionis: No, it's a true commercial launch. We acquired a portion of a Panamanian company, Viva Telecom, that's 100% IPTV and already operating in Panama City.

This is a very modern, new subdivision being built in Caracas. They've taken a whole mountainside to develop. It's going to be a unique selling proposition with [an emphasis on] security, and it's going to have seven separate control rings for access. They wanted a technologically advanced partner to deliver the transport for the security systems that will be put in place.

We were the preferred supplier and will have 100% of the [communications] business in this new development. Our commitment is that we'll deliver the most sophisticated technology available to customers there.

BNamericas: Building on that idea, would you ever consider entering the data center business?

Minionis: No, the data center business is pretty much a real estate business. Our business is to deliver metropolitan services with good capillarity. In fact, we hardly have any proprietary long-hauls ourselves. Two years ago we acquired a company that had microwave capacity between Maracaibo and Caracas because we think that in time the incumbent's quality may deteriorate, so we wanted our own transport infrastructure. But our specialty is neither long-haul nor data hosting.

BNamericas: Is this the first IPTV venture in Venezuela?

Minionis: Yes. However, the announcement was originally made in 4Q09 and unfortunately the country has since created a law prohibiting [property] developers from indexing the price of apartments. That pushed back our timeline by six to nine months.

If you buy a Greenfield apartment today, if you're buying in bolívares and say it takes two years to build the apartment block, there could be 35-40% inflation - probably higher this year - so [the developer] will be adjusting the monthly quotas as per whatever inflation rate the government announces. That is what the government has now declared illegal, not only going forward but it also applies to previous sale agreements, which must now be renegotiated. This brought all Venezuelan developers to a halt [and many new, top-end housing projects have the latest TV and security facilities built into them from the start].

BNamericas: You are geared entirely to fiber and copper technologies. Do you have any plans for wireless service, if spectrum comes up for sale?

Minionis: It's a matter of money. We'd love to be active in that, but we compete against huge companies that can buy whatever spectrum they want. We're attempting to raise money to participate in a spectrum auction that is going to be offered to non-incumbents or non-mobile operators in Colombia. If we raise funds for that, we would have a wireless play in Colombia.

BNamericas: So that's the reason for the upcoming bond issue?

Minionis: No, the bond issue is specifically for Venezuela.

BNamericas: How much of your operations are 100% VoIP?

Minionis: Not everything. I would say about one-third of our lines are VoIP. That's summing up both the corporate and residential business lines. In Colombia, 100% of our LD calling centers are VoIP, and we have 600 of those in Bogotá [where the general public come in to make LD calls].

The technology for about half of our residential telephone lines is TDM, using Tellabs hybrid technology for data and voice - TDM services built over the HFC network, but we're phasing that out in a move to Docsis 2.0, which will deliver quality of service to the voice side. We're holding back on pushing VoIP to residential customers until we are fully Docsis 2.0.

AboutGilbert Minionis
Minionis is a chemical engineer with 35 years' experience in management. He worked for Dupont Venezuela during 1975-93, eventually becoming general manager for the whole of South America. He then moved into the telecommunications sphere as president of Infosat, and occupied the same position in firms such as Corimon, Tecnosal and Bantel, before becoming NetUno president in 2000.

About the company

Founded in 1995, NetUno now covers nine cities, which equate to 70% of the country's telecoms market. The company operates a corporate network of 2.5Gbps fiber rings based on Synchronous Data Hierarchy (SDH) technology, plus a hybrid coaxial-fiber network serving the residential segment.

The corporate network also incorporates VDSL technology for Metro Ethernet capability in Caracas, Valencia, Maracaibo, San Cristóbal and Maracay.