While we spent a few thousand words the other week decrying IPTV as ‘slow growth’ when compared to the instantaneous possibilities of web video, there is more and more evidence this week that the dream that is IPTV is on track and picking up a head of steam. It may well be a slower growth market than web TV, but early IPTV pioneers like France Telecom seem about to reap the fruits of their labor as they report IPTV customer numbers up to 768,000, a huge increase on the 229,000 subscribers it had last year.
It seemed like it took years to build up to the point where what used to be called MaLigne TV in France reach the 200,000 level and it seemed like it was staying roughly there, making a mockery of the triple play dream that telcos across the globe have clung to, with its twin promise of offering reduced churn and higher ARPU (average revenue per user).
When you compare this far higher number, which may make France Telecom the biggest IPTV operator in the world, with the number of fixed line customers it has in France or the number of mobile customer that Orange has globally, it’s either 3.2% or under 1% of those totals, so it still has a long way to go.
France Telecom has around 25 million fixed lines in France, and already has some 6.3 million of these taking ADSL in the home, and this is growing at around 20% per annum or 5% a quarter. France Telecom is now adding around 178,000 new IPTV customers each quarter. Even at this continued rate it will mean it is adding ADSL customers around twice as fast as it is adding IPTV customers, so IPTV will have to accelerate markedly before it can make inroads into voice erosion in France.
As France Telecom brings online its IPTV efforts in other countries, it has TV efforts starting up in Spain, Poland, Senegal and Mauritius and already has around 23,000 of its 768,000 IPTV customers outside of France. It is expected to launch in some other stronger Europe markets too.
So these new markets, with native populations of 40 million, 38 million, 12 million and 1.2 million mean that France Telecom has a chance to accelerate and to almost double its IPTV run rate, if those territories get even close to the French uptake rate (which they may not, and even if they do it will take a while).
So we might expect the triple or even quadruple play to continue to rise in run rate across all of France Telecom.
Already it is selling Voice over IP to French customers, and doubled its installed base over the past year to 3.2 million customers. That’s a bigger number than IPTV, but it really needs something on the scale of its landline losses, around 15% of revenue dropped this year from fixed lines, to turn this into fully fledged net growth, not shrinkage.
What France Telecom is resting on here is forced cellular fixed line substitution, but where the fixed line is left in place for broadband and where VoIP is offered on a cellular handset, using a wireless router and a dual mode handset. This strategy is called Livebox within France Telecom and the number of Liveboxes sold in Europe this year was 2.4 million taking the installed base to 4.8 million, effectively doubling in a year.
This idea was pioneered by British Telecom in its Blue Phone service in the UK, which it was poorly implemented, and failed in its first iteration to use wi-fi. In the Orange version at France Telecom the customer uses their mobile for all calls, but when at home a wi-fi link picks up the call and transmits it across a broadband line to the Orange mobile gateway, treating it as VoIP. There are various new packages for this double voice service priced at either €10 ($12) a month or €22 ($26) a month based on how many mobile minutes are pre-ordered, and VoIP calls included in the price. Since September this service has been marketed under the brand of Orange Unik in some territories, with Nokia, Samsung and Motorola all offering handsets for the service. It offers a single telephone, with a single phone number and address book as well.
With almost 5 million customers for this, France Telecom is well on the way to a converged voice deal that is genuinely cementing fixed lines, and from there it can market broadband and IPTV for a full triple play.
France Telecom calls this its ADSL Multiservice business and said that during the first quarter it shipped a further 619,000 new Liveboxes and added 655,000 customers for VoIP.
The net result is that France Telecom is riding out the erosion of its voice revenues and combined with Orange had a 1.8% improvement in revenue, and a stable operating margin, despite losing 15.7% of its fixed line revenue. In one year, the number of telephone lines rented to consumers dropped by 7% to 24.8 million lines from 26.6 million.
That erosion rate seems to be accelerating and the volume of metered telephone calls fell by 19.8% in the first quarter of 2007 compared with an annual drop of 13.9% in 2006.
What with Neuf Cegetel and Free, each having 2 million ADSL customers and both having an IPTV offering, it’s expected that France will shortly have over 1 million IPTV subscribers.
Elsewhere around the globe there are similar IPTV gains. We hear this week that even Canada has managed to reach 120,000 IPTV subscribers with MTS reaching 70,000 customers in the last quarter, and Sasktel getting over 50,000, a 30% rise over this time last year.
There are no released numbers for the other IPTV services there at Aliant TV and Telus, so the number way well be higher.
And Verizon has just released its new subscriber numbers and says that it has 348,000 FiOS customers. Our US associate MRG (Multimedia Research Group) tells us that it counts these as IPTV because of the IP used for VOD and interactive services. This represents an increase of 141,000 subs from the last quarter of 2006, which means that it is doing a whole lot better than AT&T.
AT&T has just announced that it has a new CEO, in the form of 25 year AT&T veteran Randall Stephenson, who previously served as AT&T’s COO. Speaking this week he talked about how TV will become the next big thing for AT&T, but not if it cannot scale its customers rapidly into the millions.
AT&T admits that its U-Verse IPTV product is now taken by just 18,000 subscribers, and the company has just launched it in Los Angeles. However the company said its installation rate has gone up by a factor of 5 to over 2,000 new customers a week, but even at that new rate it really can’t expect to have more than 100,000 by the end of 2007, not unless the run rate continues to accelerate.
Another indicator of the rising tide of IPTV might also be taken from Thomson this week, buried in its quarterly results, where it said it had shipped 5.3 million set-top boxes in just the last quarter.
This included 2.1 million satellite set-tops, down on this time last year, while there were just 600,000 shipped to cable operators and the rest, some 2.6 million devices went to telcos, and of course these include the BT Home Hub and the France Telecom Livebox.