The 'triple play' gamble - Europe

Telecommunications International, Feb, 2002 by Peter Bell

Is the 'triple play' strategy adopted by cable operators a flawed business model? Looking at the mounting debts and slowing subscriber growth of both NTL and UPC, it's tempting to conclude that it is. After investing heavily in digital upgrades (which allows bundled 'triple play' packages of television, telephony and internet services to be delivered to their customers) money is rapidly running out for these two.

However, if telcos take the view that the triple play model is fundamentally sound and the likes of UPC and NTL are simply finding it difficult to raise enough money to execute it, they might be tempted to take a slice of this particular action. According to French companies Alcatel and Thomson Multimedia, the equipment is available if telcos want to go down this route.

Alcatel has already equipped Canadian telco Aliant with triple play capacity and the operator has been impressed with the results, claiming that its new bundled service offering has virtually turned its business around, while at the same time turning the table on the cable companies. Aliant claims that customer churn rates have fallen to almost zero as a result of its new services.

Alcatel's vice president of carrier services market development, Mike Wilkinson, is confident that the same thing can happen in Europe: "As wholesale DSL prices come down we'll see significant levels of [triple play] adoption. In the UK, BT could probably reach as many as 70 per cent of households with its current access network."

But it appears that not all telecoms operators are interested in providing bundled services. BT's chairman Sir Christopher Bland has played down speculation that the telco is about to enter the triple play market, putting broadcasting at the bottom of BT's current list of priorities.

In the UK it seems that the cable operators will have no serious triple play competition for some time. Malcolm Padley, head of media relations at the UK's largest cable company, NTL, sees little threat from telcos. He points out that BT has attempted to provide triple play services in co-operation with both digital satellite provider BSkyB and digital terrestrial broadcaster ITV Digital and neither of these h has met with much success.

The introduction of DSL services has also 'flopped' in the UK according to Padley, with only around 100,000 customers in a country with a population approaching 60 million. "None of these have succeeded in replicating triple play," he says. "From a cable point of view, however, it is working and working well." He has a point: NTL currently claims around 2.9 million customers in the UK, of which around 2.1 million -- 72 per cent of its subscriber base -- are taking at least two services.

The picture is similar elsewhere in Europe. "We are not afraid of competition," says Toon Diegenant, press officer at UPC in the Netherlands, although his company has not been able to capitalise on triple play as operators such as NTL and Telewest have done in the UK. UPC has around 7.1 million cable television subscribers across several European markets, but less than seven per cent of these take two or more services. Diegenant is confident, however, that UPC can compete effectively with DSL providers, and he says pricing is the cable operator's main weapon.

Cable TV operators have taken the lead in the triple play market in recent years by muscling in on the telephony and high-speed internet sectors, leaving fixed-line operators to count their falling subscriber figures. It seems that their bundled packages are popular with consumers and that the current financial troubles of NTL and UPC are more to do with the current economic climate than any problem with their services. But the technology is now available to enable the telcos to fight back. Do they, however, have the stomach for the fight?