The final few filings of the quarter (Telecom Austria still to come) give a fairly clear picture of IPTV in Western Europe, growing rapidly ahead of both cable, which is focused on driving broadband and VoIP, not customers, and DTH, which in most parts of Western Europe is now slow growth.
Things operate very differently in Eastern Europe and pay TV penetration is hampered by the lack of sufficiently buoyant economies, insufficient fixed lines in the ground and little locally produced content. Mostly in the East analog cable dominates with schemes such as pay as you go satellite DTH.
But in the West IPTV has all of the landmarks for success, and in the end IPTV was invented here and continues to thrive, up by 81% during a 12 month period which has included the worst economic conditions in recent memory.
The penetration across ten incumbent telcos represents 6.3 million homes to date and a net increase of 665,715 homes in just one quarter, across a territory that houses 360 million people, about 20% more than the US. And remember this is NOT all the IPTV nor is it all of the Pay TV. In most of these countries there is at the very least one major cable and one DTH player additionally, as well as some pay TV using DVB-T and in some cases another one or two IPTV players.
It is a very different equation to the US and Asian markets. In the US pay TV is more accepted, and even in the UK, the most developed of these markets for pay TV, only 50% of homes have pay TV compared to something over 80% in the US. So in Western Europe there remain green field homes, whereas in the US almost every sale is against an incumbent, branded pay TV supplier (See PDF version for table).
But still these numbers are pretty incredible, showing just how resilient IPTV growth is right now.
France Telecom is the largest in any single country and just about the largest overall, with Telefonica rapidly catching. Telefonica may only have 610,000 IPTV homes in Spain, but around the world it has some 2,421,600 Pay TV subscribers with 1.7 million of them in South and Central America, and more than a few in the Czech Republic. It is surprising the extent to which Telefonica has become so focused on triple play.
In its results it refers each time to bundle deals, which in many cases involve pay TV or broadband being supplied as a third service for free or almost free, which has improved ARPU a little, but mostly stabilized and reduced churn.
By comparison France Telecom has few TV customers outside of France and additionally a few DTH customers as well as ADSL TV delivery, but these add less than 10% to its numbers, so it actually has around the same total pay TV subscribers as Telefonica globally. Telefonica in these non-European territories is also far earlier in its growth curve, and will therefore continue to accelerate rapidly. During the past year overall Telefonica grew from mid-2008 to mid-2009 by 19.4% some 397,000 pay TV customers.
Another interesting couple of facts relate to Microsoft Mediaroom. If we take only those three which actively use this software, BT, Deutsche Telekom and Swisscom, we find they only make up around 10.6% of total homes in this sampling, which is surprising since we have spent since 2004 bemoaning the fact that Microsoft took such a decisive and sudden lead in IPTV, hurting the existing players. However the growth rate of those three operators, all who have suffered long delays, is now averaging around 250% compared to the overall 81%, so this is likely to be a growing market share across incumbents in Western Europe and if it carried on at this rate, would come to represent over 3 million customers in another year.
You get a much slower progression, much more like 45% growth, if you take only the last quarter’s adds for these companies and simply say they will do the same for the next four quarters, which would leave Mediaroom closer to 2 million customers a year from now among the companies in this sample.
If you do that for the entire group, you find that you get a considerable acceleration of installations, at around 200%. But all of this just tells us that there are wide ranging quarterly variations in IPTV uptake and that the April to June quarter is probably one of the better times of year to be driving uptake.
The fastest growth has been achieved at Deutsche Telekom over the past 12 months, but funnily enough that is now slowing somewhat and although it says that it is on track for 1 million homes this year, the past two quarters of 135,000 and 86,000 show that it is far from predictable and varies with whatever offer is on the table at any point in time.
The next highest growth was at Portugal Telecom at around 343% growth, but this is unlikely to be repeated in percentage terms and, like Deutsche, came about either because it came into the market late, or got its pricing and content offering right rather late, and so each began from such a small base.
Portugal Telecom’s Meo service achieved this because it was marketing the services ‘ IPTV and Broadband ‘ virtually as a single bundle.
The only two countries growing at under 50% were Telefonica in Spain and TeliaSonera in Sweden and in both cases this is likely due to the fact that both companies have focused on trying to take the proposition and move it out to other regions and have perhaps fumbled the marketing ball at home, perhaps temporarily.
At Belgacom we also see references to moving customers from a ‘single-play’ to a single ‘multi-play’ with a converged ‘All-in-One’ pack which came out in April. Belgacom offers fixed and mobile calling, fixed and mobile internet and TV all in one, as a full quad play bundle.
In our report on Quad Play a few years ago, it was obvious that those few companies which had managed to put all of their four services into a coherent offering had picked up great benefits in reduced marketing costs, lowered churn and marginal ARPU increases, but few companies were in a position to try this. Mostly the convergence of both billing and help desks slowed them down, adding a couple of years to the process of fully introducing quad play, instead of offering four unrelated services.
Belgacom is now moving through the gears and introducing VDSL2 across its TV footprint and this is bringing a much higher takeup of the TV offer (87% of VDSL2 customers take TV) and it adds the spice of HD services to its appeal.