Is there room for CanalDigitaal as triple play provider?

Friday 17 January 2014 | 10:54 CET | Market Commentary

On 15 January 2014, Dutch satellite TV operator CanalDigitaal took a new step as triple play provider by signing an agreement with Telio Netherlands, the subsidiary of Norwegian-based VoIP provider Telio. Under the agreement, Telio will be responsible for providing VoIP services to all 145,000 CanalDigitaal/Online.nl customers that use fixed telephony services. The transition of those customers to Telio's VoIP platform will start this year. Earlier in January, the Dutch regulator ACM approved the acquisition of T-Mobile Netherlands' fixed network activities known as Online.nl by CanalDigitaal. This is the basis on which CanalDigitaal is going to push its way into the crowded Dutch triple play market.

What preceded the acquisition?

T-Mobile Netherlands came into possession of fixed network activities when it acquired Orange Netherlands in 2009. The operator has had trouble to place those activities within its organisation and strategy ever since. After the acquisition, Orange Breedband became Online positioning itself as challenger on the broadband and fixed telephony markets. It continued to unbundle DSL locations and started to offer TV services. First reselling CanalDigitaal’s satellite TV services (stopped in 2012) and since 2011 partnering with KPN to offer its Digitenne service.

Following three name changes from Online to T-Mobile Online ending with Online.nl and the closing of Online’s own office in Amsterdam, the fixed network activities were bundled in Euronet. One year earlier, Deutsche Telekom had positioned T-Mobile Netherlands as a mobile-only smart challenger thus implicitly putting the fixed network activities for sale.

In the same period, CanalDigitaal started to transform itself from a TV-only operator to triple play provider. In 2011 the company signed a wholesale agreement with KPN for broadband and fixed telephony via DSL, which was extended in 2013 with a similar contract for Reggefiber’s fibre networks.

There is potential…

Based on numbers from Telecompaper’s fixed market reports for the third quarter of 2013, CanalDigitaal/Online.nl had 1.26 million RGUs at the end of the quarter, slightly more than Tele2 (1.13 million including mobile), but clearly less than KPN (more than 7 million RGUs without mobile), Ziggo (more than 6 million RGUs) and UPC (almost 3.7 million RGUs). The new combination has a strong position on the TV market with a market share of 10.5 percent and the market shares on other fixed markets are much lower with 4 percent for broadband, almost 3 percent for fixed telephony and almost 2 percent for triple play. 

There is a potential for cross-selling broadband and fixed telephony services to CanalDigitaal’s existing TV customer base to increase its share on the triple play market, but if they will succeed is still a question mark. Looking at the business models, CanalDigitaal and Online.nl are complementary with the first having a lot of knowledge about the TV market plus to a lesser extent experience with fibre networks and the latter having experience on the broadband/telephony markets.

… if distinctive services are chosen.

The company will need to find services that will make their portfolio stand out. For which CanalDigitaal’s channel portfolio, with more than 360 TV channels can be the centerpiece. Not offering VoD and interactive TV services is a negative point. There several possibilities to use the strong point and solve the weak point: 
  • Partnering with existing OTT video providers like Netflix, Videoland; 
  • Setting up an own OTT service as its peer Sky did in Germany and the UK; 
  • Launching HbbTV service to offer interactivity and VoD services; 
  • Deploy so-called smart LNBS to offer VoD via satellite. 

With regards to broadband and fixed telephony, CanalDigitaal/Online.nl could become distinctive from the rest by for example standardisation of 1 Gbps broadband connections via fibre as part of its triple play packages. Another possibility is to add free calling with Europe to its basic telephony package. 

Another possibility to stand out is following the example of Polish peer Cyfrowy Polsat that partners with a mobile operator to offer broadband via LTE by placing a LTE antenna to the existing satellite dish. Thus there are enough possibilities for CanalDigitaal/Online.nl to stand out in the crowded Dutch triple play market, as long as they make sure that they are the first.

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