01 Nov 2005

If the European cable industry was a boxer, I wonder what it's win-loss record would be by now? It's had a good number of unsuccessful bouts against competitors like Sky over the years. On the continent, local councils, legacy technology systems and telcos have landed some punches. Recent scuffles with video-over-DSL could be viewed as disputed draws. However, the prospect of more fights is inevitable. What are European cable's chances of putting more victories in its win column?

Well, the knockout punch for cable continues to look like the triple-play. Led by Liberty Global, European cable is beginning to land triple-play revenue punches. The combo of telephone, TV and broadband is yielding Ebidta on average three times the level of the utility-style, continental cablers of old, according to new research by Solon Management Consulting. And in the UK and Spain, where TV and telephone have been bundled since the beginning, revenues are higher still. The combined NTL/Telewest had ARPU of £41.71 (€70) in the second quarter of 2005 and 28% of its combined subs were triple-play customers, a number that the new combined company is keen to increase.

Along with continuing consolidation among operators - NTL and Telewest in the UK and Liberty's purchase of Switzerland's Cablecom - cable is a lot more financially solid than it was and the deals are creating scale. This allows the cable guys to think about the bundling, packaging and marketing of content in a more proactive way.

"The triple-play gloves are off," declared Liberty Global's strategy head Shane O'Neill to an audience of programme suppliers at Mipcom last month. The only way to keep up cable's momentum in the face of increasing competition and commoditising prices for its telephone and broadband products, says O'Neill, is for cable to get more creative in how its bundles are put together and that includes its content offers. In fact, the new landscape is forcing cable to think of content as a strategic asset rather than an afterthought. Content, said O'Neill, is "a key competitive differentiator" for cable.

I feel like I have heard this content riff before. Only this time cable may be telling the truth; certainly the threats to cable are serious and are coming from all sides.

With telephone call prices plummeting and broadband set to outpace pay-TV penetration by 2009 in many of Europe's biggest countries, the onus is on cable to make the move from lightweight to heavyweight contender. The telcos have already woken up to IPTV and broadband, making cable's triple-play offer less unique. In the UK, BT is set next year to launch a VOD IPTV service attached to a Freeview box, Spain and Germany already have telco TV up and running.

Meanwhile, satellite companies are adding more services. In Germany, Premiere is set to launch HDTV, while in the UK, Sky has used part of a recent £1bn bond issue to buy UK broadband company Easynet and launch a new unit called Sky Broadband. The satellite platform also recently launched Sky Mobile TV with Vodafone. Both are moves that other satellite operators are sure to follow.

Meanwhile, Germay's largest cable company Kabel Deutschland GmbH is trading up to digital and in The Netherlands, Liberty is giving away digital set top boxes to all its subscribers. It's a critical race. The majority of cable systems (78%) are still analogue and so are hamstrung in offering compelling and differentiated content.

Satellite companies meanwhile are rushing to roll out PVRs and push VOD services. Yet cable operators are more hesitant because of cost and because they think that once they get their networks up to speed they can offer networked PVR-type services. The danger in that thinking is timing.