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.

IPTV & the Music Industry

I attended the National Association of Recording Merchandisers (NARM) convention in San Francisco this week. This group represents music retailers including record stores as well as music etailers.

It held a Digital NARM conference that focused on the issues that digital media has brought to the music industry. CDs were developed before anybody thought that they could be read on a PC. Consequently, CDs were created without encryption or other copy protection techniques. This has made it easy to rip CDs and pull the tracks off of the CDs. It also enabled Napster peer to peer music sharing that generated a huge amount of distribution of music across the Internet.

While this was going on the revenues of the recording industry dropped by 40 percent, according to one of the speakers. The consensus was that only about 10 percent of the music tracks distributed over the Internet are purchased and generate revenue for the industry.

There were a number of interesting observations that were made by the speakers at the conference:

• The consumer is in charge. The industry has to provide what the consumers want to buy and not vice versa.
• The industry does not understand the degree to which free distribution stimulates sales.
• Several speakers said that it is possible to sell against free music. They pointed out that people buy water in bottles when they can get it free from a fountain. Others thought that was a weak analogy.
• Digital rights management (DRM) has created significant consumer dissatisfaction. Some speakers felt that DRM is dead. Others felt that DRM will be important in the long term, but the rules need to be acceptable to and understood by consumers.
• 80 percent of CDs sell less than 100 copies. Obscurity is more of a problem than piracy for most artists.
• The problem with long tail is discovery. People have to be able to find what is there.

The industry is searching for new business models. Track sales is the dominant method for buying digital music today. There is hope that subscription models will catch on, but there is no evidence that it will. There is also hope that bundling music with the device as Nokia will do with some phones later this year will catch on. (This is effectively a subscription service with the first year included in the price of the phone. Nokia will permit the tracks to be used even after the subscription lapses.)

There was one discussion that applied directly to video on demand, in my mind. A digital music executive stated that the digital content must be included as part of the over all marketing campaign. Digital music sales will be lost if the digital version is not available when the marketing campaign hits its peak.

I think this is a big reason why IPTV video on demand has not caught on. The video on demand release is generally after the DVD release and well after the theatrical release. By the time the video on demand release is made, the marketing campaign for the film has been complete for quite a while. The late video on demand release window assumes that the viewer will remember that he or she wanted to see the film and to wait all that time. This is just not likely to happen that often.

France Telecom at 1.4M IPTV Subscribers

France Telecom ended 1Q08 with 1.407 million IPTV subscribers across all of its European operations, an increase of 164 thousand in the quarter. These numbers break down as follows:

• 1.282 million IPTV subscribers in France with an increase of 133 thousand in 1Q08.
• 49 thousand IPTV subscribers in Poland with an increase of 9 thousand in 1Q08.
• 75 thousand IPTV subscribers in the rest of Europe with an increase of 21 thousand in 1Q08.

France Telecom also stated that it had 10,096 FTTH subscribers at the end of 1Q08 and that its service passed 187,322 homes.

France Telecom continues to make good progress with its IPTV service and is at or near the top of the list of IPTV service providers globally. I believe that France Telecom offers IPTV service in Spain, the Netherlands, and in Slovakia as well as in France and Poland. It plans to introduce IPTV service in the UK in 2008.

Fastweb adds 31.4K IPTV Subscribers in 1Q08

Fastweb added 31.4 thousand IPTV subscribers in 1Q08, which is an increase of 77 percent over the 17.7 thousand IPTV subscribers that it added in 1Q07. It did not announce its total number of IPTV subscribers.

Fastweb credits its increased sales in 4Q07 and 1Q08 to its introduction of a TV only service that does not require a broadband data or VoIP service. It has found that the churn rate of its IPTV subscribers is 24 percent lower than its overall customer base.

Fastweb seems to have breathed new life into its IPTV service with its single play IPTV service.

Swisscom IPTV has 64K Customers in 1Q08

Swisscom stated that it had 64 thousand paying customers at the end of 1Q08, adding 5 thousand during the quarter. The average cost per new customer, including installation, devices, and so on was reduced to under $US950. At the end of February, Swisscom added four HD , and launched an offering for first-time users, without a hard-disk recorder. It stated that its marketing activities were stepped up in April.

IPTV sales Swisscom appear to have slowed down in 1Q08. Stepping up its marketing efforts seems to be an appropriate thing for it to do.

KPN Does Not Announce 1Q08 IPTV Results

KPN announced that it added 56 thousand TV customers in in 1Q08, including both digital terrestrial and IPTV subscribers. It did not announce how many of these new subscribers were IPTV subscribers. It did say that it had stabilized its IPTV platform.

I made this post because I have seen two press statements that KPN added 56 thousand IPTV subscribers. This is wrong. Previously KPN announced that it was adding 1,000 new IPTV subscribers per week at the end of 2007. This probably means that it added about 15 thousand IPTV subscribers in 1Q08 and not 56 thousand.

U.S. Switched Access and ISDN Lines

If there are any old ISDN hands out there like myself you might like to see the charts I just published on my own website http://www.larribeau.com. They show that U.S. BRI and PRI lines seem to have stabilized over the last couple of years. BRI are declining slightly and PRI are now growing slightly. There was a big drop in 2002 through 2004, probably due the conversion of dialup to broadband, but since 2005, the number of PRI has grown.