June 9, 2006

Incumbents' Triple-Play Profitability Crunch

Hybrid IPTV/DTT Strategies Are European Incumbent Telcos' Best Hope

This is the second document in the "Making Broadband Triple Play Profitable" series.

by Lars Godell

with Andrew Parker, Lizet Menke , Andrea Carini, Michelle de Lussanet, Paul Jackson

Executive Summary (This is a document excerpt)

Western European consumers are slowly warming up to the idea of broadband triple play. Meanwhile, facing combined competitive pressure and massive vendor hype, several incumbent telcos have launched their own first-generation triple-play services. Forrester thinks all incumbents need to take a deep breath before proceeding further down the IPTV path, as the odds are stacked against telco success with TV services. Telcos should see TV services as purely defensive and forget about any potential revenue and profit uplift. Forrester's new, detailed bottom-up P&L model looks at the profit potential from 15 main revenue categories across 17 countries and shows that the vendor-recommended solution would be financial suicide. On average across Western Europe, we predict a cumulative subscriber loss of €3,742 in year 10, thanks to low revenue growth and massive backhaul costs. The only way to improve the P&L is to bet on a hybrid DTT and IPTV strategy that keeps DSLAMs centralized and copper loops at today's lengths.

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