Lack of ambition would presumably not be the most obvious failing of a new company which styles itself under the label “Everything Everywhere” (EE for sake of brevity). The name was chosen to represent the combined UK operations of both Orange (France Telecom) and T-Mobile (Deutsche Telekom), which now form a 50-50 joint venture and which announced their first results at an investors meeting in London yesterday. It would be a tad unfair, given the company’s core network technology assets, to assume that EE would be branching out into home pizza delivery any time soon, even though casual observers might assume “everything everywhere” might encompass all manner of exciting goods and services. Nevertheless, it was perhaps a little disappointing to discover from EE’s tagline – “Creating a new mobile champion” - that the network will apparently only serve network-based communications and applications to customers who happen to be moving around at any given time. Taglines are tough to get right, of course, and inevitably cannot please everyone. As the management presentations progressed, it became clear that mobility was not after all an absolute requirement for any future products and services which EE may choose to emphasise. Indeed, although they remain well hidden beneath the inevitable deluge of mobile phone and wireless network-centric commentary, fixed broadband and IPTV (for big screens) are very much alive and kicking as key elements in EE’s strategy. Executives even went as far as to designate IPTV as a “key part of a converged play” and that fixed broadband was “strategically hugely important”. This should come as a relief, perhaps even a surprise, given that fixed networks have played no part in T-Mobile’s UK business to date, and have been losing money (£80m in 2009) from the few customers Orange alone had managed to acquire. Given this performance the new venture might have been forgiven for abandoning fixed network businesses altogether as a lost cause. Instead we were assured that Orange’s broadband profitability was “already improving”, and that the recently announced deal to outsource network, IT and customer service to BT will have the desired impact of returning “Home” EBITDA to positive territory by 2012. Specifically EE will increase targeting of home broadband to its existing Orange mobile customers initially, and also introduce it to T-Home customers during 2011. Marketing will also encourage take-up of fixed voice by Orange and T-Home customers, since EE claims that the BT deal means that acquiring fixed voice customers would no longer have a negative margin impact on overall performance as was previously the case. The company is planning for 80% of new broadband customers to include fixed voice as part of their package. Potentially even more significant will be EE’s plans for IPTV, once they are finally confirmed. The company announced that it is looking at IPTV opportunities, including Canvas, the BBC-led over-the-top initiative. It would not join Canvas as a shareholder, but is considering affiliate membership. Whatever decision is eventually made on IPTV, EE will not become a major content player, which will come as a relief to shareholders and a disappointment to content rights holders looking for new competitors in the distribution market in order to boost values. EE even has the UK’s long-awaited fibre rollout on its radar. Its agreement with BT allows for access to the new fiber network by EE, although no specific plans have been agreed. Other emerging opportunities on EE’s radar include M2M (machine-to-machine), in which the company includes connected home devices and home automation as specific “high growth” verticals. M2M is a broad concept which may certainly one day lead to services and applications which approach “everything everywhere” capability. In the meantime, EE has probably has enough on its plate just to meet its growth and profitability targets in its core mobile and broadband businesses. Client Reading: Global Broadband Forecast 1H2010

Embarrassing Apology of the Week Award goes to Sky for the following email just received by its UK customers: “In our recent newsletter - 'This week on Sky Player' - we did not make it clear that in order to watch live Sky Sports for free on Sky Player until 31/12/2010, you need to subscribe to Sky Sports 1 & 2 on Sky TV. We apologise and hope that this did not cause too much confusion.” The company presumably has received complaints from confused customers who do not currently pay for Sky Sports on TV and assumed, naturally enough, that when Sky told them they could watch Sky Sports for free on Sky Player, they could watch Sky Sports for free on Sky Player. In fact, the email should clearly only have been sent to customers who already pay for Sky Sports on TV, or worded very differently for all customers. No doubt the company’s apology is also intended to ward off any possibility of a regulatory wrist-slap. It’s a little unfair, if rather easy on this occasion, to pick on Sky for its misleading communications over bundled service offers. But this episode does highlight the age-old question of when “free” really means “free”. My own father, who was fond of repeating the well-worn cliché “there’s no such thing as a free lunch”, would probably say “never”. And perhaps consumers in the 21st Century have been bombarded by so many unlikely offers that they are simply inured to misleading advice. The details, after all, are usually in the fine print, if anyone can be bothered to check. What’s the difference, after all, between Sky offering “free” Sky Sports to its paying customers, and mobile phone customers offering “free” texts to its paying customers? Or “free” mobile phones to customers who have to pay money to use them every month? To quote Orange’s current Monkey offer: “Get free music, texts and a free daily internet pass, just for topping up £5 on Monkey”. So, spend money to get something free. These “offers” are such an established feature of bundled service marketing (and commercial life in general) if anything it's surprising that Sky felt the need to respond. A liberal deployment of asterisked fine print should help Sky avoid similar problems in future. Client Reading: Apple TV: Still Just a Hobby? Or Another Nail in Pay Television's Coffin?

As we reported today, the global IPTV subscriber base reached more than 30 million households last year. It's difficult to imagine that major vendors such as Alcatel were predicting 100 million by this stage a few years ago. That sort of over-optimism is hardly new, but in this case reflected a failure to appreciate the strategic challenges facing telcos as they entered the TV market. My colleague Ben Piper suggests that the IPTV market globally may be hitting a speedbump: perhaps it just never built up much speed in the first place. IPTV was supposed to be different. The built-in ability to integrate communications services with content delivery, together with one-to-one targeted delivery, would enable powerful and compelling new features and experiences which would help telcos leapfrog their established competitors in the cable and satellite industry. But instead of changing the game most telcos which offer IPTV today still play to the rules originally fixed by the incumbents. Most could not avoid getting dragged into content rights battles and disputes, and few if any have deployed the sort of exciting advanced capabilities which have been on show at countless exhibitions over the past decade or so. Which brings us to this year's IPTV World Forum, opening tomorrow at London's Olympia. Ericsson gave us a preview of its announcements this evening, which are encompassed by the new tag-line “End-to-Endless Television”, or “E2E TV” for short. Sure enough they include subjects such as on-demand advertising, new connected IP devices and hybrid solutions. Without doubt what I am most looking forward to seeing is Ericsson's IPTV Remote. Someone will explain to me one day why a home device with no obvious cellar network implications was launched at Mobile World Congress; in any case now that the mobile phone industry has seen it we await reaction from its core target customer base. Ericsson describes the IPTV Remote as the best thing they have done in a long while. The challenge for Ericsson, like its competitors, is that it does not sell these products to consumers, who are the end users, but to service providers and operators, who decide what they think their customers will want and will make them money, before making them available to the likes of you and me. Ericsson carries out a lot of its own consumer research to identify future customer needs, but it still has to persuade its operator customers of the validity of these predictions. Many of these scenarios sound good in a Powerpoint; Ericsson’s own presentation sees the future of TV as “blended services”, “converged interactive communication”, and “your media anywhere, anytime”. I hate to sound like a weary old cynic, but we have heard these promises more than a few times over the years. But I do look forward to seeing the IPTV Remote in action, and maybe, just maybe, this 10” touchscreen “tablet” (definitely not an iAnything) will persuade operators that their customers might value their service over their competitors for the privilege of using a particular device, rather than receiving targeted ads or first run movies. Our own research showed TV viewers are waiting for touch screen controllers, so Ericsson may be on to a good thing. David Mercer Client Reading: Orange's IPTV Challenge: Create a Non-Content Differentiator

In a report to be published in the few days, my colleague Martin Olausson and I talk about the new challenges facing France Telecom (Orange), in light of a recent ruling by the French Competition Authority. According to a commission appointed by France's Competition Council, Orange’s exclusive carriage of channels on its “Orange TV” IPTV platform “has drawbacks in the short, medium, and long-term,” rendering it “undesirable to maintain.” This decision could potentially have repercussions on the entire industry, and Orange will need to fundamentally alter its marketing strategy to stay in the game. A few thoughts…

If not content, then what?

Strategy Analytics has long held that content—particularly exclusive content—would be a key differentiator and driver of IPTV uptake. Recent developments in the hyper-competitive French market threaten to change that model.  Orange, which was unable to differentiate itself on the basic services level, has pursued an aggressive content strategy in recent years, spending over €200 million to acquire exclusive rights to sports and other content, packaged under its Orange Sport and Orange Cinéma Séries brands. The strategy has worked quite well for the operator, and utilizing exclusive content to market its pay TV services has led to rapid growth of its pay TV segments. Now all of that is in limbo, and the operator will need to find other ways to stand out.

Pricing matters…but differs by region

One of the takeaways of a report we published back in September was that platforms don’t matter to customers—features do.   Well, features and price. Further customer survey work we have just completed confirms that price as a churn motivator depends largely on the individual market. Our research shows French consumers to be the least motivated by price, and those in the UK most influenced. Much of this has to do with consumer perception. In France, all the major triple play service providers offer very similar packages at essentially the same price. Our interpretation is that the typical French consumer might not feel it worth the time to make a switch—even for a 20% discount. The perceived disparity is much greater in markets such as the UK, where pricing and bundling disparities are much more pronounced.

Challenge is in finding ‘non-content differentiators’

The recent ruling by France's Competition Council suggests that the “traditional” differentiation through content may not be viable for much longer. As such, operators will be forced to find other ways to differentiate and “own” the customer. The easiest way to do this, in our opinion, is to control the gateway into the home and offer a better QoE, and more value for money (i.e. better bundles) for the consumers than the competition.

We’ve just published our European Broadband Tracker for Q3, focusing this month on the happenings in the UK market—a market that witnessed a significant change in landscape in the third quarter.  With its acquisition of Tiscali for a “fire sale price,” Carphone Warehouse now finds itself in the number two slot in the UK.  Three providers in the market now claim over 4 million subscribers; however, BT Retail still maintains a commanding 780,000 subscriber lead ahead of its nearest competitor.  Sky remains the fastest growing broadband service provider in the UK, though the company’s quarterly growth has slowed down from double digits a year ago to half of that this quarter. Nonetheless, Sky is poised to potentially approach three million subscribers by the end of 2010. While Orange’s subscriber loss in the UK market persists, we believe that the impending Orange and T-Mobile merger—reported to be on fast track from the Office of Fair Trading (OFT) –could potentially help to stave off further subscriber churn, through a combination of multiplay bundling and innovative service deployments. Indeed, we  expect to see accelerated M&A activity in the UK market in the upcoming year, with Carphone Warehouse a potential acquisition target.

The battle between French media and communications powerhouses Orange (France Telecom) and Vivendi is boiling up nicely, and French viewers are about to see the results on their TV screens. From today, Orange has stopped selling its Orange Sport TV channel to new subscribers, following a court ruling. Orange Sport broadcasts live French football matches on Saturdays. Existing subscribers will continue to receive Orange Sport for the moment, although the channel’s future depends on further court rulings. Football fans can still get other live matches by paying for Canal Plus (owned by Vivendi). The two firms split the current 12 Ligue 1 football rights packages between them – Canal Plus paid €460m a year for nine packages, and Orange paid just under €200m for the remaining three. The football authorities are concerned that Orange will stop offering football altogether, drastically reducing the game’s income. At the heart of the dispute is bundling of media and communications services. Orange, which operates both fixed broadband as well as mobile networks across many countries, is offering its Orange Sport channel only to customers who also take its ADSL broadband service. Competing broadband service providers Free and SFR have lodged complaints that Orange is competing unfairly and should offer its football rights on a wholesale basis to competitors. It would take a brave soul to predict how the French authorities will eventually rule on this case. As we have seen in other disputes (notably Sky/Virgin in the UK) these things can drag on for months, and blank TV screens look like an increasingly realistic prospect. Twitter: twitter.com/DavidMercer_SA Client Reading: Broadband Satisfaction and Customer Churn: France Survey Results 2H'08

Free, the (for English speakers) annoyingly named French broadband service provider, tops our recent survey in customer satisfaction. 81% of Free’s customers report themselves to be somewhat or very satisfied with their broadband service. Free set the French broadband market alight several years ago now when it became the first provider to introduce a triple play bundle (TV, phone, internet) at the then unprecedented monthly fee of €29.99. Other providers quickly followed and €29.99 became the standard offer in the French market. Anecdotally I’ve heard varying reports about Free’s advantages and disadvantages over the years. While some customers clearly rave about the company, I have heard of some complaints about quality, particularly regarding its IPTV service. In fact, our survey suggests Free is not number one on every metric: in terms of reliability it is beaten by Alice, Neuf and Orange. Numericable is seen as significantly less reliable than its competitors. Not surprisingly, it is on value for money that Free is seen as the best performer, which is entirely in line with the company’s strategy. Twitter: www.twitter.com/dmercer15 Client Reading: Broadband Satisfaction and Customer Churn:France Survey Results 2H'08

BT launched its Total Broadband Anywhere service today. It is available to Option 3 broadband customers starting at an additional £5/month and includes a free smartphone. The contract is for a minimum of 18 months. The “50” option (£5/month) includes 50 minutes and 50 texts over Vodafone’s network. Higher price packages are available, up to £35/month, which includes 600 minutes and 700 texts. All packages include unlimited WiFi downloads and 10MB of data over GPRS connections. Two BT ToGo smartphones are available initially, both from HTC (whose brand is also on the devices) – the HTC S620 and S710. BT’s Gavin Patterson told us that he was working with other phone vendors and expected more devices to be available in future. 3G is also a possibility for the future, although BT does not believe it is necessary today, and clearly there are other network access technologies, such as Wimax, which may come along as well. The basis of BT’s Anywhere package is WiFi, so the devices will connect to the home wifi network, BT FON hotspots (currently 82,000 in the UK and an additional 190,000 worldwide), and 2500 BT Openzone hotspots in the UK and Ireland. The devices are based on Windows Mobile and preconfigured with customers’ BT Broadband settings, so that BT Yahoo email works “out of the box”. Other email accounts are also set up easily, simply by inputting an email address. Mobile security is also integrated. BT Broadband Talk is available at WiFi hotspots. I asked BT if this announcement represented the company’s mobile strategy, and the answer is a qualified “no”. It is first and foremost an extension of the company’s broadband offer, and gives customers the option to use a portable broadband device in mobile situations. If BT Broadband customers choose to drop their mobile service provider, the BT ToGo phones clearly allow them to do this, at a cost. Although BT wouldn’t put a number on it they clearly expect that a reasonable number of broadband customers will use BT ToGo as their main mobile service over time. At the same time they claimed they were not going “head to head” with other mobile service providers like Vodafone and Orange. If ToGo does start displacing mobile phone contracts, this could clearly change. The biggest concern with BT's approach is that it relies on a network partner's 2.5G service outside of WiFi hotspots. 10MB does not go very far for web browsing or any serious media applications, and while BT suggests most people will be happy just to download a few emails, it remains to be seen whether this will be a limitation for most users. Client Reading: Google-backed FON Movimiento: Peace, Love and Free WiFi

We're attending this leading IPTV event at London's Olympia today. The conference kicked off with presentations from Orange and the BBC, amongst others. Orange's Eric Abensur suggested that quadruple play services are already gaining a significant foothold across Europe, with 16% of homes now "equipped" to receive such services. He also emphasised Orange's view that it is necessary for any operator to "control the mobile and broadband infrastructure in order to control the customer experience". This suggests a disregard of competition from any web-based service such as Joost (see here). Indeed, Mr Abensur seemed bemused by an audience question on the threat from Joost - it was not clear if he had heard of the service or whether there was something lost in the question - but in any case he dismissed the idea that Joost and similar services are a real challenge to managed IPTV services, arguing that they had no clear revenue model and that TV ultimately always has to be paid for. I suspect he may need to read up on what Joost and others are planning... The BBC's Ashley Highfield as always gave an interesting perspective from the UK's leading public service broadcaster. It contrasted with Orange's approach in discussing IPTV as a web-delivered service that should not be targeted to compete directly with the UK's existing digital TV services from Sky and Virgin Media. Instead, IPTV should be seen as changing TV by offering improvements in engagement, amplification, distribution, discovery, innovation and navigation. The BBC's iPlayer is of course the foundation of the BBC's strategy in IPTV. The BBC is still learning how its users want to search the vast archives of TV and video content that may one day become available, but it believes that the discovery element of IPTV is likely to prove one of its critical USPs. Mr Highfield also touched on the controversy over the BBC's choice of Microsoft's Windows DRM platform. He suggested that they would be "happy to work with Apple if they supported time-based DRM". The BBC sees it as critical that its solution can support 7-day online access to broadcast programming that is now a standard part of its rights contracts. We also look forward to hearing more about the BBC's plans for a hybrid DTT/IP set-top box. As I suggested recently, this is a further sign that the DTT platform in the UK is fragmenting, and I hope to hear more from Ofcom on this subject at this afternoon's DTG meeting.