Monday, April 16, 2007

IPTV: Tough Going in Western Europe

It's a good thing U.S. consumers like television quite a lot. Because IPTV results so far from Western Europe are sobering. While 11 Western European incumbent telcos have launched IPTV services, Forrester Research’s says consumer interest remains low, and revenue potential remains modest. Forrester predicts 25 percent of European xDSL/fiber broadband subscribers will have IPTV within 10 years. In the U.K. market Forrester expects 13 percent penetration in a decade. In France, Forrester expects 33 percent penetration in year 10.

Lars Godell, Forrester Research principal analyst says “Europeans are generally unwilling to pay much for TV content, and a discount scheme is needed to entice them to buy triple play."

In a mature TV market, this means incumbents will need to price IPTV below competing cable and satellite TV services. Assuming the typical provider gets a third of the market, annual IPTV revenue will work out to about €11.24 in net annual IPTV revenues. Remember that 50 percent or more of the actual gross retail value has to be given directly to the content owners and packagers.

At the end of June 2006, Belgacom, FT, and Telefónica had only achieved 1.7 percent, 1.2 percent and 1.8 percent IPTV household penetration, respectively. Telefónica has been the most successful in tapping into its retail broadband subscriber base, with 8.3 percent IPTV penetration among broadband customers.

DT wants to get to one million IPTV subscribers, representing 2.5 percent of German households, by the end of 2007.

Forrester estimates that IPTV investments will generate a cumulative €3,742 in losses for an average broadband subscriber over a 10-year period.

That is not to say telcos should nix the construction of fiber deep access networks or entering the video entertainment market. It is simply to point out that such efforts are fundamentally strategic matters, not revenue generators per se.

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