Original URL: http://www.theregister.co.uk/2006/06/08/europe_quadplay_war/
Orange rebrand a declaration of quadruple play war
Europe's single players in jeopardy
Posted in Mobile, 8th June 2006 09:42 GMT
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Comment When a company that is known universally as one of the worst managed operators in the world finally gets its brand unification act together, it is something of a landmark.
In the case of France Telecom finally unifying broadband, ISP services, IPTV, VoIP and mobile services under the Orange brand, this is effectively a declaration of war on the rest of Europe.
Under the banner of convergence the announcement says a lot of waffle, and simply put this is Orange, Wanadoo, Equant and Etrali brands across Europe changing their name to Orange, and a first stab at bundling, little more. Even the MaLigne IPTV service is expected to operate under the Orange name eventually.
But underneath that is a gargantuan effort of combining sales and service organisations, websites and helpdesk, and the beginning of meaningful new "converged" bundles across the quadruple play marketplace.
This is not just about France, this is the first blow in the long awaited confrontation between France Telecom, Deutsche Telekom, Telecom Italia, British Telecom and to a lesser extent Telefonica, which is likely to change the telecoms landscape in all of Europe and take in all the new Europeans, to the east, and Scandinavia, to the north.
It is a war that is based on using a quadruple play where unbundling of the local loop and broadband wholesaling legislation across all of Europe has made it possible for ISPs to enter other broadband markets.
It's a fight that's been brewing for some time and the opening shots are fired fairly and squarely at British Telecom with Orange announcing a totally free broadband line, running at up to 8 Mbps in the UK for Orange mobile monthly contract customers that spend more than £30 ($56).
Orange has also launched new VoIP services including one called Anytime, which offers free evening and weekend calls to UK landlines and has free calls to Orange mobiles for just £6 ($11) a month. Eventually Orange will bring in a "One Phone" offering, a mobile and Wi-Fi phone that works at home and at work through Wi-Fi connection and then is a cellular phone when on the move. Orange has also promised to merge address books across mobile and broadband telephony.
Orange has also said that it will launch music, gaming, communication and security services in the near future, but we would expect even more from the company, and an onslaught in hybrid IPTV services will be launched right across Europe.
Orange is also merging all of its enterprise telecoms offerings under the Orange brand, but that's not really what we’re analysing here. The visions for all of this goes back to early 2004 when France Telecom bought out the other 29.4 per cent shareholders in Wanadoo, at the time painting a future where it would offer IPTV, online games, VoIP and other broadband services Europe wide. It floated off its Yellow Pages operation after the acquisition of Wanadoo to help pay for the Wanadoo deal which it then integrated with its other ISP businesses.
Today Orange is one of Europe's biggest broadband providers with 8.1m broadband customers across Europe and it is these customers that are the heart of any challenge that Orange and France Telecom can mount outside of France.
In the meantime, much the same has been going on at Telecom Italia. Last month it revealed that its IPTV service in Germany, would launch on the back of the World Cup, selling the Alice brand of TV services that Telecom Italia has already launched in its home country.
The Alice service in Germany is very different from its home service and this difference gives us a ready made shape for the future of European Telecoms. The Alice services outside Italy, such as the German service owned by its subsidiary ISP HanseNet, is a hybrid DVB-T digital terrestrial TV service, with VoD over the internet, and the rest of TV broadcast through the air.
Even though the Alice service travels over ADSL2+ DSLAMs which can offer a service up to 24 Mbps if the customer is close enough to the exchange, this type of service is far cheaper and means that nothing new has to be put into the access network to make IPTV possible.
Upgrading old DSLAMs to routed ISAMs, upgrading exchange backhaul and providing Quality of Service protocols is really the strategy for an incumbent that owns the network, and not so appealing for a newcomer that is trying to invade the network with its own services Telecom Italia has already done much the same in France with its AliceBox service, enjoying the strong unbundling legislation in France.
Here it launched a hybrid with 100 broadcast channels, and unlimited VoIP calls to France and Italy, with 6Mbps broadband.
We think this was based on Verimatrix DRM, Sagem set tops and Alcatel OMP similar to the set up in Germany. In France, Telecom Italia has just 380,000 broadband but hopes to treble this by the end of 2006.
Because Alice outside of Italy is simpler, it has managed to bring it to market suddenly, with little network upgrade effort and beat German incumbent Deutsche Telecom to the punch, will be offering it on the back of the Football World Cup.
HanseNet's Alice services uses the old Alcatel Open Media Platform middleware for IPTV, Alcatel access nodes, Harmonic encoders, Nagravision conditional access, ADB set tops running with the ANT Fresco browser and BitBand VoD servers and offers 100 DVB-T TV channels, plus VoD for $12.70 a month. So far HanseNet only has 660,000 broadband customers, but it is a base to build out from within Germany.
Meanwhile, it has taken the German incumbent even longer than either of these to ready itself for broadband based all out war in Europe. Funnily enough, like Wanadoo across Europe and the Alice service, Deutsche will also be offering hybrid local TV services off the back of broadband lines in parts of Europe.
DT was held up by all the financial hurdles it had when it decided to re-merge its T-Online subsidiary back into the group and this has taken the greater part of a year. It then only announced its German based IPTV service two months ago, a fully fledged Microsoft-Alcatel combination similar to the US AT&T service, and where both Swisscom and Telecom Italia are likely to be at some point in the future. This will launch in ten of the largest German cities, starting with Berlin, Hamburg, Cologne and Munich.
But its breakthrough came in France almost a year ago, when DT's first move was to partner with Microsoft and Lucent to add IPTV services to the Club Internet ISP operating in France. Club Internet claims to have 14m clients across Europe and was already offering consumer VoIP services and will now do so over ADSL2+ and VDSL technology.
Since then, DT has also announced that it will launch IPTV through T-Online Hungary, and also in Slovakia. Already T-Online has acquired the Spanish network operator Albura also known as Red Eléctrica Telecomunicationes, from the Spanish group Red Eléctrica de Espana in preparation for doing the same thing.
This gives T-Online access to a core infrastructure throughout Spain, where it has also promised to target VoIP, internet access and IPTV. T-Online there has around 7,500 km of fiber an unbundled loop network of 160 DSLAMs which it is in the process of growing to 400 by the end of this year.
If we add to this the Cisco European wide IPTV contract with DT, offering a European wide network, designed purely to offer hybrid DVB-T, digital terrestrial TV broadcasting plus VoD over IP services, all merged together in an IP set top from Cisco's Kiss, then we have the beginnings of a quadruple play Europe wide war.
And naturally, Deutsche can offer juicy quadruple play services by tying up with T-Online, while Telecom Italia Mobile can do the same with the Alice services.
But where does this leave the rest of Europe?
In the UK, British Telecom is widely thought to have nowhere to go. It is a wireline operator that has no mobile infrastructure of its own (it has mobile on a Vodafone MVNO), and is fighting shy of offering full IPTV, because of the strength of satellite TV supplier BSkyB and terrestrials Digital TV in the UK.
This means that when Orange attacks both wireline revenue by including mobile bundles, and offers a hybrid DVB-T/ VoD over IP strategy, it will be able to steal customers. Granted that neither Telecom Italia or DT has a footprint in UK broadband lines, but that can be easily acquired as there are around seven independent unbundler operations operating in the UK, the biggest of which, Easynet, has already been acquired by Sky, and the next being Bulldog, already acquired by Cable and Wireless, but thought to be up for sale again.
Meanwhile, once Virgin Mobile has been acquired in the UK by NTL, it will form a digital cable based quadruple play, and it too can start offering innovative service bundles, including free broadband to mobile customers in the same way as Orange.
UK IPTV service HomeChoice is up for grabs, having placed itself on the market some months ago. This is an exceptional IPTV service, complete with internet access and VoIP, but not access to mobile bundling. So this might be another way into the UK for a BT rival. Acquired by DT or Telecom Italia it would make a perfect introduction into the UK market, but there's a better acquisition to be made.
DT could move to buy British Telecom itself. Many think that this is only a matter of time and price and that the price will only go down as BT spends aggressively on its switch to an entirely IP based network, and as it loses market share to encroaching VoIP services.
The excellent Europe wide enterprise services that BT has could be floated off, and DT might end up with a cut price acquisition, at the same time bypassing the effort of competing in the market against BT. Rumours appeared yet again in the UK press this week pointing at private equity involvement in this process.
In Spain, the virulently strong Telefonica bolstered by South American mobile and broadband revenues, is likely to yield little joy to anyone trying to enter its market in a quadruple play. It has IPTV growing at breakneck pace, it has huge broadband market share and it is the second largest mobile carrier in the world. Telefonica might be the next company to begin quadruple play bundling of its own, and a natural target would be the UK, because it owns local mobile operator O2.
So all of these major quadruple plays can be carried out in the UK, where the incumbent is weakened with no true IPTV service (it plans a VoD hybrid) and no mobile ownership, and in smaller European markets such as the nine new members of the European Union, mostly to the East, many of them neighboring the borders of either Germany or Italy.
To the north in Scandinavia where IPTV was invented, with playersv like Teliasonera and Telenor, the telecoms environment is less rewarding because of the smaller total market size and because there are so many operators making it more competitive.
With increasing recognition of how a quadruple play works, and with at least three, perhaps four major European telcos pushing it, where does this leave anyone that offers just a single service - whether that is single VoIP, pay TV or mobile?
In Germany, the Netherlands and Belgium, where does it leave the multiple regional cable operators which have no access to mobile services, specially if KPN and Belgacom, newly started in IPTV complete their own quadruple play service bundles?
Where does it leave IPTV founding father Fastweb in Italy, strong in triple play but with no friend in the mobile world? Obviously strong triple plays can do what NTL has done, and buy a mobile company, or start their own MVNO, but they don’t have much time to make their move before price squeezes begin to appear all over Europe.
What about independents in the ISP world like the Italian Tiscali which although it has 4.5m customers in Italy, Germany, Netherlands, UK and the Czech Republic, most of them are dial up, with only 1.9m on ADSL?
Which is why the fact that France Telecom and Orange, finally getting their act together puts all the single players in greater jeopardy and seems to us like a declaration of war.
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