Operators as dissimilar as Belgacom
(click for details) and the Indian Bharat Sanchar Nigam Limited
(BSNL)/Atlas Interactive partnership (click for details) see
major commercial possibilities in the provision of TV over broadband
networks, adding the third leg to the so-called 'triple play' of
telecommunications, Internet access and entertainment. As you might
anticipate, systems vendors are equally enthusiastic, with Ericsson and
Siemens being two of the companies who chose last week's 'Broadband World Forum Europe' exhibition and convention in Venice to bang the telco TV drum.
The UK's Analysys consultancy isn't convinced, though. A new report - 'The Business Case for Broadband Entertainment'
- examines two business cases for rolling out DSL using unbundled local
loops. In the first, the broadband network operator offers only
broadband Internet access and the investment has a net present value
(NPV) of €317mn over five years from launch. In the second case, the
broadband operator offers a TV-over-broadband service alongside the
Internet access, incurring additional network investment costs as well
as payments to content owners, and the investment has an NPV of €284mn
over the five years from launch.
"The second strategy probably leaves
an operator in a stronger long-term position if it works", according to
report author Margaret Hopkins. "But it brings smaller profits and is a
bigger risk in the short term because it requires five times the
investment. The big potential difficulty with this approach is that the
operator is trying to give equal weight to two businesses with
fundamentally different dynamics, those of network operator and content
aggregator. It is not certain that they will remain aligned".
Another piece of analysis, this time
from London-headquartered Ovum, takes the line that telcos really have
little choice in moving to triple play to respond to the challenge from
cable. And Ovum is quite positive about the prospects in certain
markets. "The business case looks particularly good in markets, such as
the UK, where pay TV is already an established, revenue-generating
business", reasons Ovum principal
analyst John Delaney. For Ovum, where the wheels threaten to come of
this particular bandwagon is if, as has been widely reported to be the
case with BT in the UK, the idea is to include video on demand VoD) as
part of the deal. "We are less convinced about BT's intention to offer,
in addition, VoD services. VoD is not needed to match the triple
players' packages: so unlike broadcast TV, there is no business case
for offering VoD on customer-retention grounds", contends Delaney. "And
the positive (ie, non-defensive) business case is much harder to prove
for VoD than it is for broadcast TV".
Ovum's advice to BT and other incumbents is that VoD investments at present should of the speculative, toe-dipping variety.
John Williamson
