Telcos are still truggling to make a huge impact across pay-TV markets in Europe, according to some analysts.
    “Telco-led IPTV has not made the deep impact on European TV markets many had hoped at the beginning of the decade,” said Adrian Drury, principal analyst, media, broadcast and telecoms, Ovum.  “However, where services have had the regulatory and competitive market oxygen to evolve, a handful of telecoms operators such as France Telecom, Telefonica and Belgacom have successfully deployed IPTV services, securing a foothold in local TV markets, an audience asset and control of content distribution channels,” he said.
    Drury believes telcos have learned a valuable lesson in terms of competing in pay-TV markets. “The reality check for IPTV has been that commercial convergence is not enough. Bundling and cross subsidizing pay-TV services with fixed telephony and broadband is insufficient to secure a market position for IPTV services in a crowded market,” he said. “Market success also requires a content and service strategy that can credibly compete with cable and satellite pay-TV services. Customers want a focused video service. The advance of HD in markets such as the United Kingdom has also highlighted that DSL infrastructure alone is a poor transport medium for TV services.”
    Coming up with a winning TV strategy alongside telephony and broadband services is proving far from easy, as customers demand more sophistication than ever from their TV service provider. “Telcos are going to have to look closely at their network strategies, content acquisition and their service mix if they are going to maintain relevance in an evolved TV market. Cable and satellite MSOs are starting to incorporate sophisticated, recommendation engine-driven VOD (video-on-demand) services and increasingly advanced HD and multiplatform functionality. IPTV operators will have to invest to follow suit and protect their audience assets, or explore advanced partnership strategies with local broadcasters or content producers,” Drury said.
    To take their content strategies to the next level, telcos need to “bring more IP content to the TV and to use the IP network for addressable advertising,” said Michelle Abraham, an IPTV analyst at In-Stat. “Telcos need to have HD for sports and movies at a minimum due to competition.  As we saw earlier in North America, there has to be a wide array of HD channels before many consumers will consider paying more for an HD package.”
     Bob Larribeau, principal analyst, TelecomView, said telcos need to start taking advantage of their networks more. “The operators in Europe need to deploy more HD, DVR and whole-home DVR services. They also need to take full advantage of their IP networks and provide interesting interactive content and advertising.”
    However, while telcos look for winning strategies in terms of pay-TV, the landscape gets ever more complex. “The European broadcast landscape is in the midst of radical changes at all levels. Bandwidth availability, hybrid IPTV/DVB/DTH network strategies, increase in the sophistication of set-top box platforms, the emergence of key standards, and the disruptive influence of a fast moving, highly innovative web-TV market are forcing deep changes in the terms of trade between content producers, broadcasters, pay-TV platform owners and advertisers,” Drury said. “The most significant advance that the market is likely to begin to see in the third quarter or fourth quarter this year is the introduction of user-driven search and recommendation engines into mainstream pay-TV platforms. This will be a step-change in how VOD libraries are monetized and it will cement the need to combine IPTV over DSL with DVB or DTH into a hybrid service platform,” he said.
     However, while some telcos have struggled to have an impact on the market, others have done better than expected. “Belgacom and Swisscom exceeded my forecast as did Deutsche Telekom, even though it has been struggling,” Larribeau said. “The French operators – France Telecom, Free, and Neuf Cegetel, are doing well, but that is what I forecast. The biggest disappointment has been Telefonica in Spain, whose IPTV growth has fallen to modest levels. BT is doing as I forecast, but TeliaSonera in Sweden is struggling with falling growth rates and is behind the 2007 forecast.”
    All three analysts highlighted Belgacom as a standout telco in Europe for offering pay-TV. “Belgacom’s IPTV strategy and execution has been a standout,” Drury said. “A clear demonstration of the power of local soccer rights to draw a subscription audience to a pay-TV platform, backed-up by a strong VOD, HD and PVR service proposition, Belgacom has built an established market position for its service despite fierce competition from local cable operators.”