2007 Western European Convergence Market

This European market report covers developments in Europe’s burgeoning convergence market. In 2007 the region saw further strong development in triple and quad play models as network operators and content providers aligned themselves to meet growing consumer demand for a range of IP-delivered services. Although only a small proportion of the population took advantage of the bundled services in 2007, by the end of the decade the business model will be the norm for most consumers. Europe’s IPTV market is particularly strong, accounting for more than half of the world’s subscribers, while Video-on-Demand services are also well established. Consumer triple play has been underscored by all-IP networks from incumbents and new entrants. The report presents the latest statistics on triple play and digital media developments, as well as a range of regulatory considerations. It assesses industry re-alignments and strategies aimed at encouraging consumer take-up of services offered, and analyses current business models. An overview of operators, national markets and trends provides the necessary background to an assessment of how this important market will progress to the end of the decade. Among the markets covered in this report are:

France

The converging media market in France in 2007 continued to be supported by a strong broadband infrastructure. During the year the country a number of major operators expanded fibre networks in major urban areas. The ISP Free opened its fibre network commercially in October 2007, part of a €1 billion investment (through to 2012) which will reach 2.1 million people in the Paris region and connect more than ten million customers. France Telecom is also investing up to €4.5 billion over the next five years in its own fibre network, which it has opened to competitors. The government sees these roll-outs as fundamental to the successful take up triple play and other IP services. Significant progress has been made in France’s digital terrestrial TV sector - by April 2007 there were some 4.25 million households equipped either with a STB or an integrated digital television. The country has launched digital TV services in regions bordering Germany in cooperation with Germany’s DTV authorities. For the country overview, see chapter 6, page 51.

Germany

Germany’s triple play and digital TV market has grown strongly on the back of excellent DSL infrastructure and cable. Digital TV has undergone regulatory and licensing processes, and successful roll-outs in 2007 have extended the service to a number of regions. By August 2007 about 86% of households had converted to digital. Analogue terrestrial TV has virtually ceased to exist as an alternative access platform (around 2% and falling). DTV services were promoted by subsidies from Länder until October 2007 when the EC stopped Länder from using public funds to part-finance commercial broadcasters transmitting channels on the DTTV network. By the end of 2007 about 64 million Germans could receive digital terrestrial TV on the network being built by Deutsche Telekom’s T-Systems division. There were only about 500,000 subscribers to triple play offers in 2007, but dynamic growth is expected over the next few years. The regulator reported that some 96% of DSL subscribers were interested in triple play and that the triple play market may grow to three million households by 2010, generating €1 billon in revenue. To meet consumer needs, providers are investing up to €4 billion in broadband network upgrades. For the country overview, see chapter 7, page 54.

Italy

Italy is in the forefront of high-speed data access in Europe, with major fibre and ADSL2+ roll outs providing full triple play capabilities. Although triple play take up is relatively low, the country’s large population offers enormous potential for content providers. The two main providers - FASTWEB and Telecom Italia - have invested heavily in network upgrades: FASTWEB’s €3 billion investment in network expansion to 2011 was expected reach 2.2 million customers. Digital TV has had a difficult gestation in Italy thus far. Initially scheduled for 2006, digital switchover was set back to 2012: by mid- 2007 only 4.9 million of Italy’s 21 million TV sets were digital-ready. In early 2007 two regions – Sardinia and Valle d’Aosta – were the first in the country to go digital. The government promoted DTV by banning the sale of analogue TV sets from June 2009 and setting aside €60 million to fund switchover. For the country overview, see chapter 10, page 87.

Netherlands

The Dutch TV market benefits from a comprehensive cable network reaching almost all TV homes. The success of cable TV’s multichannel environment has restricted the development of both the satellite TV market and the development of digital terrestrial TV. The public broadcasting channels Nederland 1, 2 and 3 ceased broadcasting in analogue in December 2006. By mid-2007 only about 50,000 households still relied on analogue terrestrial. Digital terrestrial is offered to around 50% of Dutch households. The country’s excellent broadband infrastructure forms the bedrock of popular triple play offers. By mid-2007 about 40% of households received bundled fixed-line telephony and broadband from the same provider. For the country overview, see chapter 13, page 102.

Spain

Spain has a vibrant triple play market in 2007, largely resulting from the proliferation of ADSL2+ networks and increased investment in cable network upgrades which have provided the necessary infrastructure to manage high-bandwidth applications. Several operators provide multiple-channel IPTV as well as VoD. About a third of subscribers of the cableco ONO were triple play in 2007. By November 2007 about 85% of Spanish households (4.2 million) could receive DTTV services. DTTV accounted for 8% of total TV viewing, while analogue-terrestrial TV fell to 73%. In October 2007 the government decided to award a third DTTV multiplex to regional TV stations needing to extend coverage to neighbouring regions. The government also accepted the distribution of pay-TV services through DTTV, despite current legislation prohibiting it. For the country overview, see chapter 16, page 129.

Sweden

Sweden’s investments in ADSL2+ and fibre networks in recent years have provided the infrastructure for triple play services to take off. About 70% of broadband connections are DSL, 15% cable and 15% fibre. The largest cable TV operators, Com Hem, Kabelvision, and UPC Sweden, have also upgraded their networks to provide at least 10Mb/s bandwidth. Transmissions of DTTV began in 1999, which can be accessed by more than 98% of Swedes. The country switched to digital services in October 2007, ahead of the original February 2008 schedule. VoD and IPTV are increasingly popular. In 2007 TeliaSonera offered its broadband customers a free package of eight IPTV channels, comparable with the pay starter packages offered by cable operators. For the country overview, see chapter 17, page 141.

The UK

The UK is in the forefront of media convergence in Europe. The country’s excellent broadband infrastructure, served by universal DSL and extensive cable networks, offers a fast delivery platform for triple play and emerging quad play services. The digital broadcasting industry is well-established, and the UK now has the highest level of digital TV penetration in Europe, with a substantial multichannel environment and successful digital satellite TV, digital cable and DTTV platforms. In October 2007 the first region was switched to digital broadcasts, while the regulator has advanced plans for allocating released spectrum for a range of digital services. For the country overview, see chapter 19, page 160.

Data in this report is the latest available at the time of preparation and may not be for the current year.