TDC turns back the clock by withdrawing super-fast broadband offer

By Rob Gallagher

Are Europe’s former state-owned telecoms monopolies still so powerful that they can halt the march of technological progress? That’s the charge levelled at Danish incumbent TDC by one of the Denmark’s leading fibre-to-the-home operators, aggrieved at the low take-up of its super-fast broadband products. Certainly, TDC’s decision to take its 50Mbps fibre-to-the-cabinet/VDSL offer off the market is unusual, but perhaps understandable given the lukewarm reception other incumbents’ super-fast offers have received elsewhere in the world.

TDC stopped advertising its 50Mbps service earlier this year in order to concentrate on supporting demand for dual- and triple-play bundles of voice, TV and broadband with speeds of between 4Mbps and 20Mbps. The incumbent says that more than 50,000 customers have signed up to these TDC Home packages since launch on Jan. 26, when it was expecting the product to attract only about a quarter as many subscribers.

The company says customers can still subscribe to 50Mbps service if they specifically ask for it over the phone, but they won’t find it advertised on the company’s website or any other promotional material.

The aforementioned rival suggests TDC also wants to neutralise the threat posed by the growing number of FTTH networks operated by utilities and startups:

“In Europe, we have extremely strong incumbent players that can advertise the market backwards. Customers are not connecting [to super-fast services] because the advertisements say they don’t need to.”

Most of Denmark’s many FTTH operators have attracted a relatively small number of subscribers. And most of these aren’t interested in the networks’ USP, super-fast speeds. Two of the country’s larger operators say that only a quarter take super-fast speeds, but many of the rest use relatively slow connections to access mainly bandwidth-light applications, such as online banking.

Is this TDC’s fault? I’m not fluent in Danish, so I can’t judge on how persuasive the incumbent’s marketing is. But I suspect that many people in Denmark found the number of applications that require super-fast speeds wanting and made up their own minds about whether super-fast broadband is worth the extra expense.

It’s also true that a number of other incumbents that have tried to “advertise the market forwards” have seen lacklustre take-up of their superfast services. Deutsche Telekom, which has been offering 50Mbps services in Germany since Autumn 2006, was one of the first operators to learn this painful lesson. At a conference I attended late last year, a senior executive with the operator admitted that take-up had been “very disappointing so far”:

“Our customers are not willing to pay a significant, or not even a little, price premium for higher-bandwidth services.”

This is not so surprising. Deutsche Telekom has typically charged more than double for its 25Mbps-plus TV and broadband bundles compared to similar packages from cable operators. But take-up has also been low in countries where operators have typically priced next-generation broadband at only a few euros more than first-generation offers.

The chart below from Finland’s Ministry of Transport and Communications says it all. Speeds of 2Mbps or less are by far the most popular, despite the fact that nearly half the country’s households can access 40Mbps connections.