Vodafone well positioned to build market share in the TV world

Vodafone NL plans to enter the TV market with its new ´Vodafone Home Internet, Phone and TV´. Services will initially be offered in the nine areas where Reggefiber is assessing interest in fibre; from October, Vodafone wants to be active on Reggefiber’s entire network. The operator will buy access from Reggefiber Wholesale and KPN Wholesale, while TV services will be bought from Glashart Media, a Reggefiber unit. Customers will be able to choose from 30, 50 and 100 Mbps symmetric for EUR 50, EUR 60 and EUR 75 per month respectively. The deals will include television (both analogue and digital, as well as access to catch-up services and VOD) and telephony. Vodafone has no plans (yet) for a massive marketing campaign. 

On the one hand, Vodafone is a latecomer to the Dutch TV market. KPN and Tele2 launched services as challengers to the incumbents (Ziggo, UPC and other cable companies) and satellite companies (CanalDigitaal). There is thus already quite a lot of competition, paving the way for a rough road for Vodafone. On the other hand, Vodafone is one of the first big names, alongside KPN and XS4All, on Reggefiber’s fibre networks. It is the less familiar names such as XMS, Concepts ICT and Plinq which actually determine the competitive landscape. KPN set its sights on FTTH and so has rapidly increased its market share. Vodafone is now opening up its own big brand name, while Online (T-Mobile) and Tele2 are still on the sidelines. 

Vodafone’s move into the TV market has other implications as well:  

• a strong commitment from the Vodafone Group to the Netherlands; 
• a new revenue stream for Vodafone NL, in addition to mobile and Vodafone Enterprise Services (which serves the regular commercial market); 
• a major new customer for KPN Wholesale, Glashart Media and especially Reggefiber, which can now count on significant support for its projects assessing interest in fibre, before roll-out.

There are still limitations to the choices facing Vodafone NL:

• limited marketing, with the company relying initially on the ‘below-the-line’ campaigns conducted for fibre interest assessment projects, and on ‘upselling’ among the existing customer base;
• a maximum speed of 100 Mbps, while Reggefiber can give 1 Gbps and KPN announced 500 Mbps; 
• no 'quad plays', with only triple play deals on offer.

All that being said, we ask the question: how can a provider stand out in the triple play market? The operator could address and remove the limitations detailed above, but could do more:

• Price: The announced prices look more attractive than at KPN, which for 30, 50 and 100 Mbps respectively calculates a price at EUR  55, EUR 65, and EUR 85 per month (apart from promotions).  KPN also offers fewer HD channels than Glashart Media and no analogue TV.  Concepts ICT is cheaper than Vodafone, with 30 Mbps for EUR 45 per month, 50 Mbps for EUR 53.50, and 100 Mbps for EUR 73.50. Further, oroviders often launch price promotions or offer equipment for lower prices or even for free.

• Service, helpdesk: Vodafone really wants to differentiate itself here;

• Quality of TV/video service: in theory FTTH offers a maximal quality for picture and sound because of the large available bandwidth, but that is not a  guarantee. We will have to wait and see there;
• Quantity of TV/video offering: catch-up TV services and VOD are now standard for most providers. A VOD portfolio could offer a point of differentiation.
• ‘Content discovery’: a good EPG and a smartphone/tablet which can be used as a remote control make up some of Vodafone’s ambitions. The question is, when will these Vodafone apps become available?
• Freedom of choice: all providers limit choice. Composing your own package of channels is still limited because of the way rights are negotiated.

Pricing is as you would expect: KPN charges a premium for its trusted brand name; Concepts ICT is satisfied with a small discount.  KPN offers its own television services, while most other fibre service providers, including Vodafone, buy from Glashart Media.  Sooner or later, you can be sure KPN will combine its TV unit with Glashart Media, which will reduce the differences in content.  Providers are also converging on other fronts, as differences between triple plays deals get smaller. Meanwhile, cable and satellite offer their own advantages.  CanalDigitaal offers the widest choice of channels, and UPC will soon be coming out with its Horizon box, bringing more broadband content possibilities (over-the-top: OTT) to the TV.

Where all providers are increasingly seeing product offerings converge is with this last point, OTT, probably the ‘next frontier’. Offering OTT content on TV is difficult enough, both technically and from a rights point of view. But options such as ‘second screen’ (TV content on your iPad or smartphone), ‘multi-screen’ (all TV/video services available on all devices in the home), ‘TV everywhere’ (content available everywhere where there is broadband access), ‘social TV’ (integrating social media like Twitter and Facebook) and interactivity (between broadcast content and the OTT content) only worsen the challenges. Vodafone has the advantage here that it is part of the Vodafone Group, which in other countries has experience with IPTV and OTT services. Partner SFR in France, for example, is a pioneer in this field with its Neufbox, developed with Netgem (hardware) and Wyplay (software).

Note: Rights will remain a national issue as long as the European Court of Justice (ECJ) gives no final ruling on the case pitting the British Premier League against pub owner Karen Murphy. Murphy offers football viewing in her UK pub, the Red, White & Blue in Portsmouth, with equipment and an inexpensive smart card all purchased in Greece.  It is possible that the ECJ will conclude that national borders are inconsistent with the freedom of trade promoted within the European internal market, and that TV/film rights should be pan-European. Should it go so far, large international suppliers such as Liberty Global (UPC) and Vodafone may be in an advantageous position to acquire rights.

In short: for Glashart Media and Reggefiber, the arrival of Vodafone on the TV market is very good news.  And Vodafone will probably build up market share without too much of an effort, because competition on the FTTH market is still limited. In addition, because Vodafone is offering triple play, it will also be in position to extend its position in the broadband (and fixed telephony) market. This is an important point because that is where the money gets earned. Finally, Vodafone is well positioned to differentiate itself from other market players. For the short-term, it will benefit from a better offering from Glashart Media, when compared to KPN (analogue TV, more HD, OTT offerings via the 0900-TV service) and in the longer term, the expertise of sister organisations, especially France’s SFR, can only play a positive role.