Fastweb was a precursor in IPTV. Will they be a precursor in abandoning it?

4 Jun

It_dpLast week a Milanese newspaper announced that Fastweb was abandoning its IPTV offer (in favor of distributing Sky's satellite Pay-TV solution). Fastweb blames the abandon on dwindling subscriptions and a tough economic climate. As Teresa Mastrangelo highlights in an excellent blog post entitled FastWeb Says “arrivederci” to IPTV; Is Telecom Italia Next?, that's part of the story certainly, but only part of it. 

Teresa suspects that Telecom Italia may be leaning the same way soon. More broadly, I've been wondering if IPTV isn't a con's game for most broadband providers. In a recent study that we undertook for the FTTH Council Europe and that will soon be published, we asked 13 service providers to rank their various services in terms of attractiveness to end users and profitability. IPTV systematically came on top in attractiveness and at the bottom in profitability. 

The fact is that running an IPTV as a broadband provider is expensive business, not only because the technical architecture requires significant investment but even more because no matter how effective you are on the technology side, the cost of content rights will skewer your business model. I'm constantly amazed that even small FTTx operations insist on building their own head-ends and deliver TV service despite the high costs and (likely) lack of profit it generates. 

A few years ago, I would have argued that despite the fact you couldn't make real money with it unless your scale is considerable, you had to have TV on offer just to attract customers to your new platforms. I'm increasingly of the view that this is no longer necessary, or at least will soon no longer be. As I argued in my speech at Freedom to Connect in a shameless parody of the late great Gil Scott-Heron, the (Fiber) Revolution Will Not Be Television. I'm puzzled that neither Netflix nor Verizon in the US seem to have seen the opportunity: with over 1m fiber lines in small rural or muni networks struggling to deliver even a decent TV service and probably losing money over it, there's a clear business case for offering to bundle their TV service there and take market share from Direct TV who seems to be the king of no-added-value wireline broadband + satellite TV bundle deals. In Europe, that future may not be so close as we're still missing a strong brand in OTT delivery, but it'll come sooner or later.

Going back to Fastweb for a minute, while their FTTH woes in Milan may not be representative of their market positioning (their DSL footprint far outweighs their fiber footprint), the fact that they never built a significant take-up in Milan itself may be representative of broader issues with the company's strategy and explain in part why they in the end never managed to build the scale at which IPTV may work.

So the real question now for all those who – like me – looked at Fastweb in awe in 2003-2004 (at the time their ARPUs were through the roof…) is "will they be the first to quit after being the first to join?" or is this the result of specificities of the Italian market…

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