Vodafone has admitted that its Arcor IPTV service in Germany is in trouble. It now plans a new service, but it will take over a year to build and in the meantime it will not take on further customers on the existing service, and will do no more marketing on it.
The service launched 18 month ago very quietly told us that it began with an elongated free trial which Vodafone said went to hundreds of thousands of people. Now it emerges that as few as 50,000 homes took the service once Vodafone asked for money and now it has stopped taking customers. The news came out of an interview with senior executives published in Die Welt (The World) newspaper in Germany.
Vodafone built its service using Alcatel-Lucent’s older OMP middleware instead using Alcatel’s preferred Microsoft Mediaroom IPTV software. Harmonic provided encoders, set tops came from Pirelli and NDS supplied conditional access.
This or a similar combination of building blocks were also used at operations like Telecom Italia’s Alice Home ITV service and Austria’s aonDigital TV system, both relatively successful, so it is probably not the technology’s fault that the service isn’t taking off, but the growing threat from Deutsche Telekom. That threat due to the realization by Deutsche that it had to price its own Mediaroom driven IPTV service at a reasonable price, and successive price cuts have meant the incumbent now offers a pretty decent rival to the virtually unheard of Arcor. Deutsche initially aimed to wire up 50 cities with VDSL2 throughout 2007 but later slowed this roll out rate down and its first IPTV services came out at astronomically high €65 to €90 pricing tiers. Now that has all been swept aside and it has a large national footprint and sane pricing.
Arcor only offers up to 50 channels at around €12.95 a month, as well as a triple play price of €39.95 for VoIP, 16 Mbps broadband and the 50 TV channels, so can’t really go any lower on price. Part of the problem is not just competing with the HD oriented IPTV services of Deutsche but also with a rejuvenated cable TV industry. Recently market leader Kabel Deutschland was reported as being in the Vodafone crosshairs as a target for acquisition, but so far nothing has come of it.
We have already noted that Mediaroom middleware was preferred when Vodafone launched in Portugal, and we speculated that it would now copy one or other technical spec when pushing into its other European strongholds of Italy, Spain and the UK.
In France its SFR service relies on software from Netgem, but that’s outside of Vodafone’s control, because Vivendi owns the majority stakes at SFR.
But the effect is a patchwork of local IPTV services with little content or software bargaining power, and it is likely that Vodafone will try to fix its German (and Portuguese) operations before moving on to other markets. In Portugal its service is also understood to be suffering, once again by comparison with the local fixed line incumbent Portugal Telecom, which is growing its IPTV customer base almost as fast as Deutsche is in Germany.
What’s interesting is that Vodafone has been quite innovative in tying the two IPTV services to its strong handset position ‘ allowing the TV EPG to be viewed from the handset, and DVR recordings to be initiated from them.
Germany’s pay TV market is really a three horse race between Deutsche’s IPTV, Sky Germany’s DTH service and the local cable operators. Vodafone’s Arcor and Telecom Italia’s Hansenet have both been trying to gatecrash the party and we have said in the past that the two services need to be merged to have any long term chance of survival there. Part of the problem in Germany is that unbundled line access to Deutsche Telekom’s network is too expensive, making the local cable operators the only alternative as a broadband wholesale option for a wireless player.
Although it is native of the UK, Vodafone is strongest in Germany with $11 billion in cellco revenues plus $2.1 billion and rising revenues from the fixed line Arcor, which it acquired when it bought Mannesmann many years ago.