The Impact of the iPhone 3G in Latin America:

Get ready for a boom in the ¨legal¨ video Internet in Latin America.  Until now, most internet hobbyists got their video content from P2P sites like bitorrent etc. and the rest of the population got their TV shows from paid TV and their movies from Blockbuster or other video rental stores (both legal and pirate).

The hobbyists will likely continue with their P2P activities (except for ¨Type A¨ hobbyists like myself who have a max time limit of 5 mins of surfing to find content in P2P after which they go to iTunes to purchase it) but the real impact of the iPhone is that it will bring much of the normal population onto the DRM video Internet.  This has not happened thus far due to the lack of local iTunes stores in Latin America.  So only folks like me with US credit cards were able to download content. With the roll-out of the iPhone, Apple is also planning to open iTunes online stores in Latin America (see link below): 

So all of a sudden you will have millions of iPhone users walking around Latin America with an iTunes account that is accessible from their mobile phone where P2P is VERY cumbersome to say the least.  Once they get used to the interface, you will start to see some major traffic growth start to happen.  For example, I currently download about 6GB per month of content from iTunes (between TV series, podcasts, music, and movies) and my overall media consumption is probably similar to the average household in the socio-economic market segment that would acquire an iPhone in Latin America.

At first blush you may think that the iPhone will have a hard time converting P2P users to iTunes users and you would be right. The only P2P users that would convert to iTunes are folks like me who value the convenience of iTunes over the cost of DRM content.  However, I believe that the real reason for a pending boom in video Internet in Latin America is that the iPhone will create millions of new iTunes account holders with high income who will move out of the cable TV and video rental market into the online iTunes environment or at the very least shift some of their current spending online.  In case you were wondering, shows like LOST are huge in Latin America and most people prefer to watch them in English with Spanish subtitles (iTunes would need to make subtitles available for Latam).

OK so who does this create a market opportunity for besides Apple?  The main winners will be the wholesale bandwidth providers like Global Crossing and the video caching providers like Peerapp who can help optimize the bandwidth consumption of the ISPs or cellular providers as they deal with this newfound demand for video content.  Stay tuned for more......

- MW