Why VTR is betting on HFC

Tuesday, April 11, 2017

Chile has such demand for bandwidth that broadband plans offered by VTR, the country's largest provider of cable TV and residential internet, start at 30Mbps, and half its client base has at least 50Mbps.  To support the demand, the company is upgrading to high capacity hybrid fiber coaxial cable infrastructure.

Meanwhile, the operator is seeking to achieve synergies with other units of parent company Liberty Global. BNmericas spoke to VTR CEO Guillermo Ponce to find out more about the company's plans.

BNamericas: VTR continues to invest in hybrid fiber coaxial cable infrastructure. Is there an advantage to HFC over just fiber?

Ponce: HFC networks have proved to be superior to other technologies, certainly more cost efficient, and have the capacity to evolve to higher speeds. HFC is becoming the dominant technology in many parts of the world for high speed.

BNamericas: How is your HFC infrastructure rollout looking for 2017?

Ponce: In 2016 we doubled the number of new homes we connected with HFC to 130,000 and this year we are aiming for 170,000 homes. We are also upgrading our existing networks, many of which are still analog, in order to offer new speeds and digital offerings. As of March all new broadband plans have a minimum of 30Mbps. Today 48% of our client base has speeds of over 50Mbps, and when we complete our upgrade program in 40-60 days there will no customers left with under 20Mbps; the average will be over 100Mbps with a maximum of 200Mbps. Our bestselling plan, Vive Mas, is 120Mbps, and has 70 HD channels.

BNamericas: What percentage of your channels are HD?

Ponce: We add HD channels as they become available, but that depends on programmers not us. We expect that eventually all channels will be HD.

BNamericas: How much is VTR investing in infrastructure upgrades?

Ponce: In recent years we have been investing 20% of our income.

BNamericas: VTR has partnered with Netflix to offer it as a complementary TV service. When did you realize that working with over the top players was the best strategy?

Ponce: We are very focused on what our end consumers want. We believe that leaving one platform like cable and entering Apple TV or Netflix is uncomfortable for our clients. The ideal is for it to be a seamless experience.

BNamericas: What are you doing to achieve that?

Ponce: We're working on three fronts. One is the VoD interface that we launched in November last year. The second is the digital programming boxes we are working on that will incorporate Netflix. The third is the new functionalities of Replay TV and Catch-Up TV we're working on.

BNamericas: What is the difference between the two?

Ponce: Catchup TV refers to content that is recorded and stored on a VoD platform, a kind of library. Replay TV on the other hand allows you to go through the programming guide of previous days, select something you missed and replay it. We're working to have those operating as soon as possible.

BNamericas: Tell me about the new broadband router Mercury.

Ponce: Mercury is a next generation router jointly developed by VTR and Liberty Global. It aims to bring the technology and capacity of corporate routers that cost some US$2,000 and bring them at a price that is accessible to the residential market. Mercury has a lot of capacity to reduce interference from neighboring networks. Using beam forming, users can aim it so that the router targets and covers a blind spot like a balcony. So it is useful for tailoring to large homes.

BNamericas: When will it be available and how did you bring down the cost?

Ponce: It's been available since March and we've reduced the cost through economies of scale.

BNamericas: VTR has started targeting its offerings more at niche business segments.

Ponce: Yes, we launched in April last year a bundle aimed at SMEs with 200Mbps and a telephone line. It also comes with dedicated customer service that understands SME needs and promises to resolve any connectivity problems within 12 hours. That's why it's called AM/PM. We ended 2016 with 36,000 clients and believe there is a lot of room to grow.

BNamericas: Have you thought about offering connected home services?

Ponce: It is part of our strategic vision but is not in our immediate plans.

BNamericas: Are you seeing any synergies now that your parent company, Liberty Global, acquired Cable & Wireless Communications?

Ponce: A lot of synergies. We can leverage scale and size to negotiate lower pricing with programmers. We also plan to centralize regionally certain functions that are currently being done locally.

Then there's the transfer of best practices. CWC Panama, for example, is strong in mobile but has little fixed line, while we are the opposite. So we can exchange experiences in both.

BNamericas: CWC also has datacenters and a big corporate communications area. Is there potential for a new corporate VTR offering?

Ponce: They are very strong in B2B, an area that we don't have in Chile, so it's an area to explore.

BNamericas: You just announced plans to pilot a fixed wireless offering using your AWS band that is currently not in use. What was the reasoning behind that?

Ponce: The three large telecom incumbents started offering fixed wireless services in March, so we also want to leverage our existing infrastructure and the spectrum we hold to get into this niche. We only launched it two weeks ago and are still fine-tuning the price, speeds, etc.

BNamericas: Have you been encouraged by the recent number portability figures that show VTR as one of the fastest growing mobile operators?

Ponce: We're the second fastest growing operator in postpaid. Some 30% of new clients come from outside our client base. I can't imagine VTR in 10 years without a mobile offering.