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  • Thanks to increased coverage, FASTWEB has strongly increased its market share of BB net adds over the 9M, which is now at 13% Considering an average population coverage of 26% during 2005, that implies an approx 50% market share in the covered areas The growth of Italian BB market has slightly slown down compared to last year, but as you can see this is not affecting at all FASTWEB’s performance
  • __Aless_Petazzi_FAST..

    1. 1. Multiplay on Broadband: first lessons and impact on the ARPU - FASTWEB Case Study Alessandro PETAZZI Marketing Manager, IPTV Services IDATE 27 th International Conference - Montpellier, 23 November 2005
    2. 2. AGENDA Company and Market Marketing Strategy for Multiple Play Focus on IPTV
    3. 3. Company Overview <ul><li>FASTWEB provides voice, Internet connectivity, data transmission and TV services over a single connection by using Fiber-to-the-Home/Office and DSL access technologies </li></ul><ul><li>The company offers its services to both companies and families </li></ul>Integrated triple play offer <ul><li>Founded in September 1999, FASTWEB is the leading alternative operator of fixed broadband telecommunications services in Italy’s main urban areas (7.5 million households, or one third of the Italian population reached as of Sept. 2005 ) </li></ul><ul><li>FASTWEB created a fully IP-based network totally independent from the incumbent’s infrastructure </li></ul>The 2 nd wireline network in Italy <ul><li>Recognised pioneer in broadband and triple-play </li></ul><ul><li>World first fully IP based network </li></ul><ul><li>FTTx or DSL access as relevant to maximize return on invested capital </li></ul><ul><li>Trusted supplier for mission critical application </li></ul>Technological leadership Vision from day one (back in 1999) Rely on full-IP network to offer multiple services to both companies and families  compete on differentiation and operate with higher capital efficiency
    4. 4. Foudation of Business Model - Creating a Triple Play Service ARPU ~ € 900/year residential ARPU > € 8,000/year Small business ARPU ~ € 2,000/year SoHo ARPU Opex Semi-fixed cost structure Gross Margin ~ 75% Gross Margin on both residential and business segments End-to-end infrastructure ownership and control Highly capital intensive with high barriers to entry Both business and residential markets served by the network Single fully integrated IP network with no legacy technologies and IT systems Selective geographical coverage (7.5 mln households today, 10 mln final target vs 21 mln in Italy) Triple play approach coupling higher ARPU with competitive commercial offer
    5. 5. Broadband Market Share Evolution <ul><li>13% of national broadband net additions in 9M 2005 with an average population coverage of ~ 26% </li></ul><ul><li>Strong increase in market share thanks to increase in coverage during the year </li></ul>Increasing Market Share Thanks To Network expansion Upgrade to certified 6 Mbit/s ADSL connection Enrichment of IPTV content offering… … while other players still lagging behind in terms of service offering Market Share of National Broadband Net Adds 12% 11% 9% 7% 13% ‘ 000 of Access
    6. 6. Broadband Co-leader in Covered Areas <ul><li>Telecom Italia is taking the highest share of b roadband market, as its services are deployed with a 90% national coverage like all the other alternative players </li></ul><ul><li>With 644k customers FASTWEB is the #2 Italian Broadband player despite a significantly lower market coverage and is leader or co-leader with TI in the covered areas </li></ul>Market Shares of Total Broadband Market (September 2005) 100% = ~ 5. 8 Mln BB Connections T elecom Italia Broadband Penetration on Covered Market (September 2005) (*) FASTWEB Penetration on Areas Covered since 2000 (**) FASTWEB Penetration on Areas Covered since 2002 (***) Overall FASTWEB Penetration (***) (**) (*) 100% = Number of households passed Tin.it Alice ~ 20 % ~ 21% ~ 17% ~ 9 % ~ 6 % All Other Operators
    7. 7. FASTWEB Residential Offer FASTWEB Base Mega Internet Options TV Options Voice Options <ul><li>FASTWEB’s residential offer: </li></ul><ul><li>FASTWEB Base: Compulsory entry level </li></ul><ul><li>Voice options: Optional flat and pay-per-use offers </li></ul><ul><li>Internet options: Optional flat and pay-per-use offers </li></ul><ul><li>TV options: Optional premium contents offers </li></ul>FASTWEB’s residential offer is very flexible and can be customized in order to fully satisfy customers' needs
    8. 8. FASTWEB Base <ul><li>FASTWEB Base is the entry level that enables customers to experience 300 min per month of: </li></ul><ul><ul><li>Carrier-class Voice over IP service (national and local land line calls included) and </li></ul></ul><ul><ul><li>Broadband Internet @10 Mbit/s for Fiber, 6 Mbit/s certified for DSL </li></ul></ul><ul><ul><li>In addition: </li></ul></ul><ul><ul><li>Voice mail from phone, PC and TV </li></ul></ul><ul><ul><li>4 mailboxes included </li></ul></ul><ul><ul><li>Option for a diversified bouquet of premium video contents </li></ul></ul><ul><ul><li>Option for TV-based Video-communication </li></ul></ul><ul><li>FASTWEB Base costs: </li></ul><ul><li>One off activation fee: 95 € with number portability or 170 € with new number </li></ul><ul><li>Monthly fee: 25 € , currently promoted at 19 € forever  low entry level point , possibility to add flat voice/Internet and TV options on top </li></ul>FASTWEB Base Mega Internet Options TV Options Voice Options
    9. 9. Calculating a Sustainable Price Point <ul><li>Value-based pricing </li></ul><ul><ul><li>Flat Fee vs Subscription Fee: selling bundled value vs charging back industrial costs </li></ul></ul><ul><li>Need-based segmentation </li></ul><ul><ul><li>Different value bundled for different customer needs: Voice, Internet and TV Options  triple play operators must have the best offer for all customer segments, not only for triple play customers! </li></ul></ul>19€/month better than 15€/month 150 6€ 30 + 15 2€ 150 4€ free 10€ free 1€ 25€ Up to 21€ 15€ Up to 2€ Monthly Fee Voice Minutes Bundled BB Internet Minutes Bundled E-mail access Voice Mail Value Value Pay-per-use None Pay for use None n.a. None 19€
    10. 10. Flat-Fee Voice Options Italia Senza Limiti Città Senza Limiti 20€/month 14€/month On top of FASTWEB Base, 2 flat-fee voice options are available Unlimited national land line calls Unlimited local land line calls “ Italia Senza Limiti” and “Città Senza Limiti” can not be cumulated FASTWEB Base Mega Internet Options TV Options Voice Options
    11. 11. Flat-Fee Internet Options Unlimited broadband Internet access Giorno e Notte 40€/month On top of FASTWEB Base, 3 flat-fee broadband Internet access options are available 600 minutes per month flat Internet access 10 ore 10€/month “ Giorno e Notte”, “30 ore” and “10 ore” can not be cumulated FASTWEB Base Mega Internet Options TV Options Voice Options 1 , 800 minutes per month flat Internet access 30 ore 20€/month FASTWEB’s answer to the market need of a price point at 20 € for ‘flat’ Internet
    12. 12. FASTWEB TV To access TV contents , value added services and a S-VoD package , customers need to pay 8 €/month (and they get the STB for free until they keep their subscription) True triple play with FASTWEB starts at 27 €/month (19€ with voice/Internet minutes included + 8€ for STB and S-VoD) FASTWEB Set Top Box provides access to free TV content and value added services Free to air channels Free to satellite channels FASTWEB Base Mega Internet Options TV Options Voice Options VoD and S-VoD <ul><li>8 vod ‘channels’ with 1.300 programs (not movies) always available included in the fee </li></ul><ul><li>Network PVR </li></ul><ul><li>700 m ovies on-demand from 3.5 € to 6€ each </li></ul><ul><li>Dolby Digital 5.1, original language </li></ul>
    13. 13. TV Options VoD and S-VoD 8.0 €/month 7.5 €/month 16 €/month 16 €/month 28 €/month 2 €/month each 4 €/month each FASTWEB Base Mega Internet Options TV Options Voice Options 8 €/month each <ul><li>Free STB rental with ONtv subscription </li></ul><ul><li>8 vod ‘channels’ with 1.300 programs (not movies) always available included in the fee </li></ul><ul><li>Network PVR </li></ul><ul><li>700 m ovies on-demand from 3.5 € to 6€ each </li></ul><ul><li>Dolby Digital 5.1, original language </li></ul>PAY TV A-la-carte Channels <ul><li>Italian “Serie A” football at 5€/match and Champions Legue at 8€/match in pay per view </li></ul><ul><li>Week-end Calcio: “Serie A” at 10€ for all the matches of the week-end </li></ul>46 €/month combined <ul><li>Movies on-demand in DVD quality from 3 € to 5 € each </li></ul>
    14. 14. How Triple Play Drives ARPU Total ARPU € /year As of September 30 th , 2005 % residential customers, by TLC service take up 100% ~500 K 100% = 887€ TV services ARPU, €/year (on non-for-free TV service customers) 100% ~ 320€ TV service penetration ~ 30% <ul><li>More than 2/3 of total ARPU comes from flat monthly fees </li></ul><ul><li>Both Voice and Internet relevant, with Internet ARPU increasingly important </li></ul><ul><li>80% of non-for-free TV service has VOD; 60% has Pay TV; 10% has thematic channels </li></ul><ul><li>~ 13 VOD views per video customer per month, 1 buy </li></ul><ul><li>¼ of total video customer are PVR users, 10 recordings per month per user </li></ul>TLC services 817 70 TV services 35% Flat Bundled 30% Flat Voice 25% Flat Internet 10% Pay-per-use only 35% VOD 65% Pay Tv & Thematic Channels
    15. 15. Focus on TV: FASTWEB in a Global Supply-side Perspective… World largest IPTV providers – Thousands of customers (Sept. 2005) Telefonica (ES) Free (FR) France Tel (FR) PCCW (HK) FASTWEB 100 142 160 160 441 Telefonica (ES) Free (FR) France Tel (FR) PCCW (HK) FASTWEB 10% 30% 51% 3% 3% <ul><li>World second largest IPTV provider in terms of customers and penetration of the total customer base… </li></ul><ul><li>… first for TV ARPU … </li></ul>22% pay 31% pay TV ARPU: 320 €/year TV ARPU: 138 €/year IPTV penetration on broadband customer base
    16. 16. … and in a National Demand-side Perspective SKY DTT FASTWEB 160 15% 30% on customer base 12% 10% <ul><li>… but relatively small among Italy’s digital TVs… </li></ul><ul><li>… with a high penetration among customers interested in the triple play concept ( TV as a ‘value extractor’ )… </li></ul><ul><li>… and a lower one among total addressable customers (FASTWEB is first of all a telco supplier) </li></ul>2,600 3,300 SKY DTT FASTWEB 2% on addressable families Free sat dishes 2,200 Free sat dishes FASTWEB Digital TV platforms in Italy – Thousands of customers Penetration on potential customers
    17. 17. IPTV in FASTWEB strategy <ul><li>1. Increase customer NPV through value extraction </li></ul><ul><ul><li>Not necessarily triple play customers have longer average life </li></ul></ul><ul><ul><ul><li>High speed of innovation required </li></ul></ul></ul><ul><ul><ul><li>Special retention initiatives needed </li></ul></ul></ul><ul><ul><li>TV has not been a strong ‘reason to buy’ FASTWEB for those who are not interested in its voice or Internet offers </li></ul></ul><ul><ul><li>However TV customers have a significantly higher ARPU </li></ul></ul><ul><li>Multiple play can have little to do with churn… </li></ul><ul><li>And giving away premium content to subsidise broadband adoption is not necessarily a smart move… </li></ul><ul><li>… but multiple play does impact customer NPV </li></ul>2. Contribute to differentiation vs other broadband offers
    18. 18. Consequences on IPTV positioning <ul><li>1. Linear services are important for customer experience but </li></ul><ul><ul><li>Difficult to differentiate vs satellite competitors only with them </li></ul></ul><ul><ul><ul><li>Only part of SKY premium content available through FASTWEB </li></ul></ul></ul><ul><ul><ul><li>Limited rationale for bidding for (expensive) exclusive linear content </li></ul></ul></ul><ul><ul><li>Difficult to act as pure neutral carrier (due to strong ties between content producers and existing TV platforms) </li></ul></ul>2. IPTV P&L must be self-sustaining <ul><li>3. Opportunity to differentiate TV services by leveraging technology </li></ul><ul><ul><li>Better and richer VOD product </li></ul></ul><ul><ul><ul><li>More majors, shorter time windows, balanced buy-rates (library vs current) </li></ul></ul></ul><ul><ul><ul><li>Push for pricing and bundling flexibility: collection VoD, SVoD, … </li></ul></ul></ul><ul><ul><li>Other non-linear services </li></ul></ul><ul><ul><ul><li>Retroactive PVR, ‘personal TV’, new interactive and community services, … </li></ul></ul></ul><ul><ul><li>Better customer experience </li></ul></ul><ul><ul><ul><li>Replicate and enhance DVD experience </li></ul></ul></ul>
    19. 19. Recent Actions on IPTV and next planned steps Actions Taken Next Actions New Majors New Interactive Area s New VoD Channels and Content New user friendly interface and remote control 2005 2006 Maintaining focus on enhancing: VoD Content – Not only movies Interactive Services User experience Disney Touchstone Miramax 7,000 Subs 500,000 games per month in the new gaming area New dedicated channels for music, fictions, reality shows and kids content 150,000 music video - clips watched in September World first experiment of edu-tainment on-demand New Services
    20. 20. Contacts Thank you Alessandro PETAZZI Marketing Manager, IPTV Services [email_address]