Satellite pay-TV operators throughout Europe are facing more competition in the digital TV space.
As well as competing against revitalized cable operators who are beginning to offer services such as video on demand, the competition from Internet Protocol (IP) TV also is increasing. While the cable threat has existed for years, the emergence of telcos into the television market could pose a much more serious threat. Like cable operators, the telcos have the ability to offer a triple play of services and with strong balance sheets they are likely to be aggressive in their pursuit of video customers.
But how much of a threat will telcos offer to the satellite competition?
Bob Larribeau, a media analyst at MRG told Satellite News that the emergence of telcos could actually aid the satellite players. "My initial reaction is that IPTV will not be a huge threat to satellite, at least in the short run," he said. "In fact, the marketing that the incumbents will put into IPTV will probably help the satellites by creating more interest in pay TV services. This may actually increase interest in satellite services."
Paul Erickson, a media analyst at IMS Research added, "I see them being a fairly valid threat in those countries where there is advanced enough infrastructure to offer viable throughput for triple play -- if it is going to take two years to build out an infrastructure that will support 5-megabits-per-second ADSL -- then this is less of a threat for the incumbent satellite operator," he said. "In those countries where you have strong xDSL penetration and faster flavors of DSL already implemented, then the opportunity is there for a healthy offering to be launched that will cause problems for pay-satellite operators. The problem for satellite operators is not necessarily programming. It is broadband. Unless they partner or acquire, it's not something they can easily solve."
Certainly, satellite pay-TV operators are not standing still in the face of this growing competition. BSkyB, one of the most progressive pay-TV operators in the world, has acquired Easynet, a telecoms company, and will launch IPTV services later in 2007 as it bids to supplement its direct-to-home (DTH) subscriber base of more than 8 million.
"The satellite provider without exclusive content or partnerships will be more vulnerable," said Michelle Abraham, a media analyst at In-Stat. However, unlike the U.S. where DirecTV and Dish do very little of their own programming, more European satellite providers have developed their own channels."
Other satellite pay-TV operators have gone down the partnership route and teamed up with telcos to offer IPTV services. A classic example is Canalsat and France Telecom. Canalsat is in the midst of merging with France's other DTH platform, TPS, but will this trend continue or are these partnerships of convenience while telcos build their strategies here?
"There are two things working here," Larribeau said. "The first is that IPTV service providers need content, and the satellite companies have already put together attractive packages. The second thing is that satellite antennas are not permitted in many cities in Europe. I have heard that there are satellite police in Paris that seek out illegal satellite antennas and confiscate them when they find them. I know this is an issue in France and Italy and I think it is an issue in other countries as well. The IPTV companies see the IPTV providers as a distribution arm that brings them into significant new markets."
Erickson said, "I expect it to continue out of necessity, especially when time-to-market is critical. Most satellite operators are not a Sky, DirecTV, or Echostar, and cannot afford to independently acquire or build a broadband business. To acquire the broadband capability they need to stay competitive in an age of triple play, they will likely need to partner. For the telcos, similarly many are not financially able to build out an entire video delivery and content business and it is easier and faster to partner with satellite."