There's a war currently being waged between France Telecom and Canal + here in France on access to content (See a pair of articles in La Tribune dated June 12th). Canal + is a French TV conglomerate who are both one of the main TV producers in France - with dozens of channels in its portfolio including the prestigious Premium TV offer Canal + - and the main digital sattellite distributor.
Triple play has dented Canal +'s distribution monopoly over the last few years, and it seems from the latest announcements on fiber that the writing is on the wall: not only will satellite no longer be the exclusive distribution route for TV content, it will most likely no longer be the default route either. However, Canal + accurately analyses that the success of multiplay and particularly of fiber offers will only be a reality if these offers provide easy access to premium TV content. Which Canal + more or less has a stranglehold on.
So far, in order to maintain it's lead on the subject, Canal + provided xDSL ISPs with a global subscription package for its customers called CanalSat, which includes a whole bunch of premium channels (but excludes Canal + itself) for 34,90 EUR/month. Access to Canal + itself is an additional 31,90 EUR per month. Roughly, access to all this premium content trebles the subscription cost. More importantly though, Canal + remains the sole package builder: either the DSL provider resells their packages, or they sell nothing. Compared with micro-payments for individual channels, such a steep offer obviously generates unrealised revenues for the DSL providers (and for Canal +, but they have alternative distribution solutions).
What Orange wants now, and they're dragging Canal + in front of the European Commission over it, is the ability to access the channels and repackage the content as they see fit. They probably have a case in that Canal +'s position as a distributor does not allow they to browbeat other content providers into giving them exclusivity. We'll see how that goes.
I'm wondering, however, if there's not a deeper game going on. It's commonly known amongst telecom observers that Canal + has been wondering about entering the DSL market itself for the last couple of years. In 2006, household appliances and electronics retailer Darty launched the first FVNO DSL offer in France, and while its success remains to be evaluated (figures after 9 months of operation weren't very sexy...) it prompted a lot of brain turmoils amongst non-telecom players, and particularly media players.
When you think about it, offering a multi-play offer under their own brand-name would make a lot of sense for Canal +. So far, the triple play market in France has emerged mostly with broadband and high bandwidth as the core service, and Free TV/IP Telephony as on-the-side services both from the ISP's perception and in the average customer's sensitivity to QoS. Obviously, Canal + couldn't - if they wanted to launch their own service - focus the service on broadband, they'd have to focus it on premium TV. And that's where they could really make a difference: aiming for high value customers, with a quality VoD offer, and broadband/telephony as the secondary aspects of the service.
I don't believe Canal + will go down that route, however. Their whole success resides on an image of quality of contents. They're always the first to show premium blockbusters, prestigious football matches, etc. Their subscribers (DSL, satellite or otherwise) pay over 30 EUR a month to access these contents. They can't afford to rely on an unstable network to provide such premium service. The potential for image deterioration would be too big. Since they can't afford to go unbundling themselves in order to control the QoS (and even doing that and doing it well would leave them open to issues due to the DSL technology itself) they would be required to rely on wholesale DSL providers (Neuf, Completel or France Telecom) whose quality is notoriously improvable. I think they'll never take the risk. As it stands, an unhappy Canal + subscriber over DSL blames the QoS issues on the ISP, not on Canal +.
The emergence of FTTH, however, changes things substantially. The technology is much more stable, the available bandwidth for TV allows for a better control of image quality, faster VoD access, thus an overall better QoS. My suspicion is that Canal + is already thinking about (and possibly even working on) a fiber offer over Free or Neuf's FTTH access (France Telecom's technological choices will make an unlit wholesale offer from them unlikely in the short term). They could market such an offer at a premium price (significantly more than the triple-play market price of 30 EUR/month) since their existing customer base already pays that amount for access to Canal + alone. They have the leverage, they could have much better margins than their competitors, they have the image to work on that and market successfully.
It wouldn't be a piece of cake, there's lots of things you need to do well when you leverage an image of quality to enter a new market (process, distribution, customer installations, etc.) but I think it could be a paying gamble. Additionally, Canal Plus' ownership - the Vivendi group - already has its hands deeply deeply in the telecoms pie with majority participation in SFR (the 2nd mobile operator in France) and, through SFR of Neuf telecom (the second fixed line operator in France). Hence long term possibilities that would make such short term steps worthwhile...
So if I was Canal + right now I'd hold on to my premium content as long as I can in order to retain my first mover advantage when I moved to my fiber offer. Hence the deeper game I mentioned earlier. And if I was France Telecom, I'd do all in my power to break these exclusive controls before Canal + launched their offer so as to make it look less innovative and less "good value" when it comes out.
Interesting times ahead!
