Regulatory Implications of the Adoption of Digital Television in Chile
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Regulatory Implications of the Adoption of Digital Television in Chile Sergio Godoy Etcheverry, MBA PhD Pontificia Universidad Católica de Chile Introduction pared with only 90% of Chileans with mobile tele- The present study offers an assessment of the reg- phones. In contrast, an estimated 48% of people access ulatory implications of the adoption in Chile of digital the Internet (one of the highest rates in Latin America) terrestrial television (DTTV, i.e., open digital televi- and 30% of households receive pay TV. At the rate of an sion), particularly following the November, 2008 sub- average of about three hours of viewing per capita per mission in Congress of the draft presidential reform day, TVA provides the foundation of the notions of law to regulate all television (No. 18,838) and after the “reality” in the minds of the average Chilean. This adoption of the Japanese ISDB standard in September, occurs not only through news programs, but in the mod- 2009 in line with Brazil, Argentina, and Peru. This els and stereotypes in the genres of entertainment, as study applies to this vision of the entire television sys- well as the advertising messages that finance the entire tem, including its public policy, economic, industrial, package. Because of its massiveness and immediacy technological, and social dimensions. In addition I will (which makes it very effective), TVAhas attracted more give priority to the public’s perspective as to how digi- advertising for decades: according to the Chilean tization may enable them to access (or not) more and Association of Advertising Agencies (ACHAP), in better television, at a reasonable cost, with more and 2008, it captured half of the advertising pie ($933 mil- better content developed locally. lion), one of the highest ratios in history. This work has three parts. The first outlines the TVAis “open” because of the characteristics of its context of television in Chile, in terms of its social rel- transmission medium, the electromagnetic spectrum. evance and the changes in the business and production First, the spectrum as a natural resource is freely avail- models due to digitization. The second part presents able. The sender needs only an antenna to transmit and, three models of analysis that help manage the regulato- before digital technology, could not charge people who ry discussion: liberalism/restrictions (Curran & Seaton, had receivers; they, in turn, are accustomed to receiv- 1997), public service television, and parameters of ing television content for free. Thus, broadcasters had quality television for the various social actors and ana- to find finance by third parties: advertisers, govern- lytic levels. Each of these applies to the present as well ments, or sponsors. Second, the spectrum is finite: as the historical reality of the legal frameworks of there is no room for an unlimited number of broadcast- Chilean TV. This section also refers to the British sys- ers, unlike what happens with other media, like print. tem of DTTV—Freeview—whose success has much to Third, when not regulated, the use of the spectrum do with a consistent and updated regulatory frame- leads broadcasters to interfere with each other work, one of which targets the common good. The third (McQuail, 1998; Wood, 1992). part analyzes and assesses, based on the models and For all these reasons, the received wisdom holds detailed background in the previous sections, the legal that the electromagnetic spectrum serves as a national reform project of the government to allow DTTV. asset for public use, franchised by specific criteria to individuals or organizations selected by some mecha- nism, hopefully (but not always) unbiased. Countries 1. The Context often require certain compensations to the concession- aire in return for this privilege, which vary from coun- A. The importance of television try to country (McQuail, 1998). In Chile, among other Along with the radio in 2008, almost 100% of things, television broadcasters must allow a segment of Chilean households receive broadcast televison (TVAin electoral advertising at election time and ban obscene its Spanish acronym, referring to terrestrial broadcast- or violent contents, subject to penalties by the National ing, not to be confused with satellite distribution), com- Television Council (CNTV). COMMUNICATION RESEARCH TRENDS VOLUME 29 (2010) NO. 2 — 25 B. Digitization ship based on a general audience, and advertising estab- TV receivers in Chile cannot capture both analog lished to raise finance. The amount and type of audience and digital signals, unless they add an adapter to con- attracted, as measured by a survey (electronic, in this vert from one format to another. But digital video case: the people meter) by a separate company, already exists in the forms of DVDs, pay TV (which Time/Ibope, serves as the basis for advertising alloca- requires a decoder or set top box), and the Internet. tion. The need to attract mass audiences encourages TVA channels require a legal change to transmit with operators to imitate each other, with the consequent loss new digital technology, since the public needs to of program diversity and sense of few alternatives from change their receivers or get a decoder. And contempo- the audience (Ishikawa, 1996; Godoy, 2000). rary societies assume that universal free access to TV TVA filled seven channels (2, 4, 5, 7, 9, 11, and has become an acquired right, something that applied 13) in the VHF band, with each license given to a dif- to neither the Internet nor cable. ferent operator since the existing law prevents the con- But apart from the change in the reception equip- trol of more than one channel per operator. This variety ment, the digital formats amend the premises on which of operators (one state, three universities, and three pri- the industry built the conventional TV model. vate, although one university licensee ceded operations Digitization encodes images, sounds, and text using the to a business, controlled by the newly elected presi- protocols of computers, thus not only allowing one to dent, Sebastián Piñera) ensures reasonable levels of mix previously separate media (like news, music, TV, editorial quality and diversity, considering the limited or movies) but also telecommunications, because wire- possibilities of a middle-income small country like less and cable networks can transmit any kind of bina- Chile (Godoy, 2006, 2000, 1999). The law has pre- ry data. This process of technological convergence lies vented the concentration of ownership that exists in at the heart of the switch from analog to digital, which other countries and media sectors; it also requires sta- correlates today to mergers and acquisitions. tions to compete fiercely with each other for a share in This means, first, that analog TVA no longer pro- the advertising pie, with ratings based per minute (this vides the only type of television. Digital protocols allow prevented the development of analog UHF channels recourse to a wide range of delivery mechanisms and during the 1990s—there was almost no interest for /or combine them. Thus, there are TV direct-to-home licensing analog television in the UHF band available satellite systems (DirecTV and Sky, for example), cable since 1990 because of difficulties in financing it: each systems (VTR, Zap, Telefónica), conventional terrestri- license requires the operator to compete and sell adver- al broadcasting (TVA or open television), and broad- tising in isolation without being able to merge channel band Internet. In some respects, they complement each operations, Godoy, 1999). other; in others, they replace network television. To dis- Along with this traditional set-up, pay-TV also tinguish it from the “other” digitized television, we operates in Chile, funded largely by direct charge to the speak of digital terrestrial television (DTTV), which is user (and also marginally by advertising sales). As in open digital TV, transmitted using antennas located on many countries, a single large company dominates pay planet Earth (as opposed to transmission by satellite TV (VTR concentrated 71% of subscribers in 2007); mounted antennas floating in space). The distinction the company provides subscribers with dozens of chan- between DTTV and other television matters because nels, both general and specialized, with different pay- they involve different viewing experiences for the pub- ment options depending on level of service for each of lic and also various operational and business models, them (basic signals, Premium, and pay per view). The although they often share the same screen at home. VTR subscription revenues, totaling some $360 mil- lion in 2007 (equivalent to almost 80% of the revenues C. The television business model: Deep change of all broadcast channels together) have the added The business model of the TVA and its regulatory bonus that subscriptions are more stable than advertis- framework is old. It is actually very similar to AM ing sales. broadcasting in the 1930s to the 1950s, with relatively Like Telefónica, VTR (Chile’s subsidiary of few licensees (four nationwide, three in the regional cap- Globalcom) gets additional revenue through links to ital, Santiago). In general, channels developed most of Internet telephony and broadband, and will add mobile the content they broadcast, the programming arranged in phone service during 2010. This triple pack of telepho- a grid, the spectrum distributed through a grant relation- ny, Internet, and television is the core business of these 26 — VOLUME 29 (2010) NO. 2 COMMUNICATION RESEARCH TRENDS companies, and the relationship of television income creating content for mass appeal in Chile. And by act or with respect to telephony and the Internet is about one omission, the regulatory framework defined for DTTV to ten. And while pay TV still has a theoretical ceiling affects that. of 65% to 70% of Chilean homes that have not yet signed, broadcast or network television has nowhere to 2. Evaluation Parameters grow: There are no new homes to gain, and a couple of This section discusses policy and analytic models decades ago the advertising pie reached the GDP ratio that help to frame the legal reforms under discussion.