Analyst warns of IPTV woes

As BT gears up to launch its IPTV service next week, industry analyst Forrester Research has warned of low consumer interest and only moderate revenue potential for the technology in Europe.

Even after a slow ramp up, Forrester predicts only one in four European xDSL/fibre broadband subscribers will have IPTV by 2016. Although this average figure masks a big gap in the UK figure where the analyst only expects 13 per cent penetration within 10 years.

By comparison, France is anticipated to reach 33 per cent IPTV penetration in 2016.

Lars Godell, principal analyst at Forrester Research, said “Europeans are generally unwilling to pay much for TV content – and a discount scheme is needed to entice them to buy triple play. In a mature TV market, this means incumbents will need to price IPTV below competing cable and satellite TV services.”

By adjusting for incumbents’ 33 per cent IPTV revenue share, Forrester expects the average incumbent to get only Eur11.24 in net annual IPTV revenues (gross margin) per broadband user in ten years time.

To date, Deutsche Telekom, France Telecom, Telecom Italia, and Telefonica are among the European incumbents to have launched IPTV. BT is set to launch next week and Portugal Telecom is expected to launch within the next six months. Eircom, OTE, P&T, Telenor, and TeliaSonera’s efforts are still at the drawing board.

Only a handful of providers have published any figures for their IPTV subscriptions suggesting an immature market and teething problems. At the end of June, Belgacom, FT, and Telefonica had only achieved 1.7 per cent, 1.2 per cent, and 1.8 per cent IPTV household penetration respectively.

Godell said incumbents should “take a deep breath before proceeding down an IPTV path that will generate a cumulative Eur3,742 in losses per average broadband subscriber over a 10-year period – assuming telcos pursue the capex-intensive, vendor-recommended deep fibre/VDSL route to deliver IPTV. Telcos should view IPTV only as a defensive, not a profit-generating, activity.”