Cable pirates thrive in Brazil

SAO PAULO, Brazil--In this dirt-poor shantytown called Jardim Angela on the southernmost tip of Sao Paulo, cable television is a luxury that most people cannot afford. That is why the local cable company, fearing it will not get a return on its investment, has been reluctant to wire the area.

Even so, just about every household in this sprawling neighborhood with a population of more than 250,000 has a reliable television connection that includes a handful of cable channels, thanks to savvy handymen like Antonio. A 32-year-old father of two who would speak only if his surname were withheld "to avoid problems with the police," Antonio, a technician for a local telephone company, supplements his monthly salary of 586 reais (about $204) by hooking up pirate connections for low-income residents all over the city.

	For the latest breaking news, visit NYTimes.com Sign up to receive top headlines Get Dealbook, a daily corporate finance email briefing Search the jobs listings at NYTimes.com Search NYTimes.com: Today's News Past Week Past 30 Days Past 90 Days Past Year Since 1996

"This is the only way that people around here can get cable TV," he said. "I'm just making a little money on the side by meeting that need."

He said he charged a one-time fee for his services, ranging from 450 reais for a makeshift cable connection to as much as 1,200 reais for a satellite dish. But in many favelas, as shantytowns are called here, people like Antonio have organized themselves into informal businesses with thousands of subscribers who pay a monthly fee for a clandestine cable hook-up. Most of these companies charge 12 to 15 reais ($4 to $5) a month, far below the 60 reais or so the regular providers charge for a basic subscription.

Because it is against the law here to distribute television programs without a government license, precise numbers on the size of Brazil's underground television market are hard to come by. The National Agency of Telecommunications, the government agency that oversees radio and television broadcasting, estimates that there are at least 600,000 illicit cable connections nationwide, mostly in urban areas like Sao Paulo and Rio de Janeiro.

But the Brazilian Pay TV Association, which represents licensed cable and satellite television companies, says the number is closer to 300,000, about 13 percent of all of the country's connections. Either way, providers like Net Servicos de Comunicacao and Sky Brasil collectively lose millions of reais a year in revenue to piracy.

But instead of cracking down on the pirates, which would probably set off an uproar from residents in the country's slums, the government is trying to find ways to turn black-market operators into legal businesses.

With the backing of some of the biggest pay television providers, the government is lobbying Congress to pass legislation by the end of the year that would allow the pirate companies to distribute cable channels legally in shantytowns.

Under Brazil's cable television law, which was passed in 1995, cable companies are required to install high-quality fiber-optic wiring in up to 90 percent of each municipality where they operate within 10 years of obtaining their government license.

But cable companies contend that it would not make economic sense to spend as much as $15,000 a kilometer for broadband networks in areas where most residents cannot afford a basic pay television subscription.

"We would be committing economic suicide if we built networks with that kind of technology in favelas," said Antonio Salles Teixeira Neto, an executive at a local cable company, Via Cabo TV, which is a unit of Adelphia Communications, of Greenwood Village, Colo.

"What we need is a change in the law to reflect the economic realities of this country," added Salles, who is also coordinating an antipiracy task force for the Brazilian Pay TV Association. "Otherwise, people in these communities are going to be forced to keep circumventing the law in order to watch something as basic as cable TV."

If Congress approves the change, cable companies would be able to essentially outsource the construction of cable networks in low-income neighborhoods to people like Giovander da Silveira, who runs an underground operation in Rio de Janeiro called GCG Telecom.

Silveira's company employs only eight people, but it distributes regular network programming, not cable stations, to almost 4,000 households in three hillside slums in western Rio, charging 12 reais a month for a package of 21 channels.

"If the law changes, all of a sudden my company becomes legitimate and I can start offering some pay TV channels to my clients," said Silveira, who is also the president of an association of 38 informal television companies in Rio.

For the extra channels, Silveira said, he will probably raise his subscription price to about 15 reais a month, part of which he would then pass on to Net, the cable company licensed by the government to operate in Rio.

"There's no reason we shouldn't have a business partnership with the cable companies," he said. "Both sides will benefit."

Net, Brazil's largest cable TV company with 1.37 million subscribers nationwide, declined to comment on the government's proposal to legalize pirate television operators. But Salles, of the Brazilian Pay TV Association, says most cable companies, including Net, have endorsed the plan.

"The cable companies are well aware that the problem of pirate television isn't going to be solved through police repression," he said. "We have to be intelligent. And that means letting a market that is already thriving continue to thrive by giving it the legal means to do so."

Entire contents, Copyright © 2004 The New York Times. All rights reserved.