Romtelecom, a telecommunications provider in Romania, is looking to have a strong impact in the nascent satellite pay-TV market there, and could offer a template for other telcos in the region to exploit the TV space.
Romtelecom launched its Dolce direct-to-home (DTH) platform in November 2006, and by the end of March had attracted 170,000 customers.
John Younis, general manager of Romtelecom’s video services division, said that it was vital for the telco to enter the DTH arena to combat lower revenues in traditional markets. “A big part of the future is about delivering different types of services rather than just relying on legacy voice,” he said. “This is the main reason why we decided to move into this area, and we found [that] the best way to do this was to launch a DTH platform. In time, we will move into content delivery over copper.”
Romtelecom also plans to launch an IPTV service as early as 2008, Younis said. “This would not be a full broadcast service. There would be a video-on-demand (VOD) element to the service, but we are still investigating things like [a personal video recorder] and on-demand,” he said. “The IPTV service will have more interactivity and have things like VOD, which you can’t have on satellite.”
Combining IPTV and DTH appears to be at the core of the operator’s strategy. “There will have to be considerable investment to launch anything that is concerning IPTV,” said Younis. “Within the next 12 [to] 18 months we will be investing heavily in this area. This would mean a new set-top box, which would likely be a hybrid DTH/IPTV set-top box. So we will need to upgrade the headend as well as our copper network. There will be a lot of activities in this area.”
Entering the TV market is an intriguing strategic move for Romtelecom, said Paul Erickson, a media analyst at IMS Research. “It seems counterintuitive, because you think the telco would be more interested in utilizing the infrastructure they already have and concentrating their resources on IPTV,” he said. “But for many of these telcos, dabbling in DTH services or partnering with DTH providers, for them it is a strategic necessity in the short-term.”
The state of the network could also be a key reason behind the strategy to pursue DTH as well as IPTV, Erickson said. “It is probably a strategic consideration for them to gain as strong a foothold as they can in the market as possible, particularly on the pay-TV side, because perhaps the reach of their infrastructure is not quite strong enough in the near term to offer enough bandwidth to capture a lot of people with a reliable TV service,” he said. “So between DTH and IPTV they are still able to offer people a pay-TV solution, and at some point they could move over to IPTV.”
Romtelecom is working with NDS, a conditional access and middleware vendor. For NDS, partnering with new DTH platforms in Eastern Europe is a significant opportunity, said
Philip Waterman, NDS’ director of platform sales.
“In the large countries with low population densities — Russia, Ukraine, Kazakhstan — DTH makes a lot of sense,” Waterman said. “Although there are some very modern TV-capable networks in many major urban centers, accessing the national backbones to distribute TV services is problematic. Either the capacity is not there or a different operator owns the trunk, so commercially viable access can be problematic. As soon as you are forced to distribute the content via satellite, starting with a DTH operation seems logical if the regulations permit.”
Yet while DTH opportunities may exist in Eastern Europe, the fact that one of the region’s major telcos is being so aggressive in the DTH space is a bit unusual, said Waterman.  Romtelecom’s launching of DTH services could have “taken some observers by surprise, [but] we know that satellite provides a cost-effective delivery mechanism, particularly where fixed infrastructure has diverse and fragmented technical capabilities,” he said. “Clearly, Romtelecom can now leverage this content platform in parallel with the development of TV capable fixed and mobile infrastructure.”

Heavy Competition
 
While IPTV may be on the mid-term agenda for Romtelecom, the company’s initial focus is on making its DTH platform a success. Romtelecom competes against a number of other DTH platforms in Romania, but Romtelecom potentially has a competitive advantage with its brand.
“Romtelecom is behind this service and Romtelecom has a history of being a reliable company,” Younis said. “We have a big organization in terms of systems, processes, call centers etc., and this helps being able to provide a very high-quality service.”
Brand and quality of service are key, because the high number of platforms means low average revenues per user for most companies, meaning DTH players cannot afford to invest heavily in content. “The way that the industry is right now, it would be too much of a risk for anyone to invest in exclusive content to get back your customers,” Younis said. “It is a really price-sensitive market here, and to invest in exclusive content means your margins would go down significantly.”
Another potential differentiator could be high-definition (HD) services, but there are differences of opinion within Romtelecom as to when HD might be launched in Romania. “I have people in my team who are HD evangelists and there are opposites,” Younis said. “My theory is that if the market was to remain as it is now in terms of what the consumers are asking for and what the technology and hardware can do, I would be very hesitant to say that we would be launching HD in the mid term.”
But an upswing in the Romanian economy could bring HD services on the scene faster, said Younis. “If they were to happen we could launch HD before the end of 2008,” he said.
As Romtelecom expands its offerings, Younis expects to see responses from its competitors, most likely in the form of price cuts. The most likely result of any price battles will be a cut in the number of competitors, though not any time soon.
“After 12 months I think we would probably see a consolidation in the DTH-only providers, because out of the five there are two of them that only offer DTH services,” he said. “There is a big question mark in what is going to happen to them, but I don’t see any change there within in the next 12 months.”