Friday, May 9, 2008

Deutsche Telekom has 154K IPTV Subscribers

Deutsche Telekom announced that it had 154 thousand subscribers at the end of 1Q08. It also announced that it had dropped the price of its starter package by 17 percent in March 2008.

Deutsche Telekom seems to be struggling with IPTV. It previously said that it had 150 thousand signed up at the end of 2007. Apparently, it did little more than install the unfulfilled orders during the first quarter.

I think that Deutsche Telekom must bundle a basic set of IPTV channels into its basic broadband service. This will be straightforward for ADSL-2+ customers but more tricky for VDSL users. It could use ADSL-2+ for the basic offering and VDSL for premium customers.

This approach has worked very well in France. Telia Sonera's IPTV service really took off only after it included IPTV channels in its basic offering. PCCW in Hong Kong has shown how this strategy can significantly increase ARPUs.


Anonymous said...

Why is it more tricky for VDSL compared to ADSL2 + ????

Anonymous said...

Why is it more challenging to bundle on VDSL vs ADSL 2+
And what do you mean by premiu offer for VDSL customers?

Bob Larribeau said...

The problem is a simple matter of economics. Deutsche Telekom is providing ADSL-2+ to any new broadband subscriber. The incremental cost for adding TV to the basic broadband service is small, consisting of the video acquisition and encoding costs along with the content fees. A number of carriers including those in France, Telia Sonera, and PCCW have taken this step already.

On the other hand, deploying VDSL is more expensive. It costs $300 to $500 per home passed to deploy VDSL. The carrier would have to absorb this cost as well as the costs described above to include TV as part of a basic subscription. Carriers such as Deutsche Telekom and AT&T provide VDSL only to their IPTV subscribers, which gives them a significant increase in ARPU to cover the VDSL deployment costs.

Deutsche Telekom could include IPTV as part of its basic ADSL-2+ data service and use VDSL for a premium customer. For example, use VDSL for an extra cost HD service or to support multiple TVs in the home. This will generate additional revenues to cover the VDSL deployment costs.