Global Insight Perspective | |
Significance | Deutsche Telekom has started to offer IP TV services over conventional broadband lines, using the ADSL2+ technology. |
Implications | The German incumbent has expanded its IP TV offering beyond its VDSL fibre-optic network, which is still available in only 10 cities. |
Outlook | Deutsche Telekom will continue to upgrade its broadband infrastructure to the ADSL2+ technology, complementing its VDSL coverage. Global Insight anticipates that the move will significantly boost Deutsche Telekom’s IP TV customer base as ADSL2+ is less costly to roll out than VDSL and will enable a quicker time to the market for IP TV services. |
Domestic customers of Deutsche Telekom are now able to receive IP TV services over traditional ADSL lines as the incumbent continues to deploy the ADSL2+ technology. The telco offers the same bundle of TV channels as it does via its VDSL fibre-optic network, with the exception of HDTV.
Deutsche Telekom offers three IP TV packages: ‘Entertain Basic’ charged at 49.95 euro (US$68.67) per month, ‘Entertain Comfort’ at 59.95 euro per month, and ‘Entertain Comfort Plus’ at 74.95 euro per month. ‘Entertain Basic’ offers on-demand access to an archive of TV programmes, as well as a video-on-demand (VoD) service charged at between 0.99-3.99 euro per movie, and a flat rate for calls to fixed-line numbers, together with a flat rate for ADSL2+ broadband-internet access. The premium ‘Entertain Comfort’ package includes more than 70 TV channels, time-shifted TV, personal video recording (PVR) and an electronic programme guide (EPG), while ‘Entertain Comfort Plus’ offers more than 100 TV channels, two German football (soccer) first-division (Bundesliga) games per week, a TV listings magazine (TV Digital), an email and security package, as well as a flat rate for T-Mobile’s Wi-Fi internet hotspots and reduced rates for calls to mobile numbers. There is also a one-off charge of 99.99 euro for hardware, including the IP TV T-Home X 300T receiver, the Speedport W700V router and the ADSL splitter. Customers have to commit to a minimum contract duration of 24 months.
Outlook and Implications
Speedier IP TV Roll-out: The ADSL2+ upgrade first announced in the beginning of January this year is part of Deutsche Telekom’s strategy to lower the costs of the hefty 3-billion-euro fibre-optic roll-out and speed up the commercial deployment of IP TV. The expansion of IP TV over ADSL lines will significantly increase the incumbent’s geographical coverage, with 17 million households in 750 German cities expected to be passed by ADSL2+ network by the end of this year. This compares to a further 26 cities Deutsche Telekom planned to link to its VDSL network this year, and a total of 50 cities targeted by 2008. ADSL2+ technology enables download speeds of 16 Mbps, which is a minimal data rate for IP TV services. It is capable of delivering a maximum of 24 Mbps, but only to customers located within 0.5 km of the central exchange. Currently, IP TV services are offered in ten cities over its ultra high-speed VDSL network, backed by a 500-million-euro investment in 2006. Deutsche Telekom targets 1.5 million IP TV customers by the end of 2010, compared to 25,000 at end-2006 (see Germany: 12 January 2007: German Broadband Cable Subscribers Triple in 2006 and Germany: 15 January 2007: Deutsche Telekom Changes Its VDSL Roll-Out Strategy).
Cost-Base Watch: Deutsche Telekom strongly relies on the mass-market deployment of IP TV to boost its ailing domestic operations. The telco expects that IP TV services will help increase its customer retention rates, with users tied to new 24-month contracts and bundled services. The move to switch to a more intensive ADSL2+ roll-out also reflects Deutsche Telekom’s efforts to reduce its cost-base on the back of stagnating growth (see Germany: 29 January 2007: Deutsche Telekom Issues Profit Warning on Fierce Competition and Weak Dollar and World: 10 May 2007: Deutsche Telekom Posts 4.1% Y/Y Increase in Q1 Revenue, Profitability Affected by Fixed-Line Customer Losses). At the same time, the speedier roll-out of IP TV will enable Deutsche Telekom to leverage its dominant market position against rival IP TV offerings from its competitors. In May this year, Vodafone’s German fixed-line unit, Arcor, began trials of its IP TV platform, branded ArcorTV, in the city of Kassel, while the national roll-out is planned for the second half of this year (see Germany: 28 May 2007: Arcor Starts IP TV Trials and Germany: 15 March 2007: Arcor Plans IP TV Launch in May).