Sunday, October 10, 2004

Sunday Papers

UK weekend paper The Business today carries an article which highlights just the sort of risk we have been expecting in the UK market for some time now. It claims that France Telecom's broadband ISP unit Wanadoo will launch a marketing offensive in January 2005 which will see its agressively-priced DSL offering (GBP17.99 per month for 512kbps) add unlimited national calling to fixed lines via VoIP for no additional cost. This is hardly a surprise, but it is nevertheless a perfect confirmation of the nightmare scenario we have long envisaged - wherein PTTs adopt the strategies which attackers have used so effectively against them in their home markets (France Telecom should understand this better than anyone) to create market share gain opportunities in other European markets where they already have a reasonable foothold.

We already expect this of Tiscali in a number of markets, where it has contracts out with UT Starcom for an IP triple play solution. France Telecom may prove to be another proactive spoiler in the Netherlands and Spain, as may T-Online in France and Spain, should it wish to pursue such a path. For those markets where this dynamic is at work, we expect the end result to be some significant volatility in price points for both consumer broadband and pay TV. It is difficult to see what sort of comeback players like BT or KPN may have in this scenario, given their respective lack of consumer ISP businesses in Europe with which to strike back.

The article contains one tasty bit of market forecasting from the chief executive at DeTeWe UK: "...telecoms incumbents worldwide generate around $450bn in free cash flow. By 2007, 30 - 40% of that will be sucked into the black hole of voice over internet."

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