Broadband is an adjective

Dylan Reeve and I were arguing about fibre uptake and the role of television content as driver. Dylan doesn’t believe IPTV will drive uptake of fibre as there are too few customers to drive a provider to deliver and there’s a problem with our retail ISP market – too many resellers of connectivity to make a fist out of offering a service. There’s also the small problem of our content market and the limited choice in that market.

I don’t disagree with him on those points. There are only a handful of customers using fibre today so anyone setting up in business offering service to those customers will have a pitiful return on investment for year one. The ISP market is fragmented and most do, indeed, resell Chorus wholesale so unlikely to have the margin to buy content. And as we’ve noted elsewhere, Sky dominates the pay TV market in New Zealand and the deals it has with ISPs are under review by the Commerce Commission for potentially breaching the Fair Trading Act.

All of which really tells me that IPTV is vital for a successful fibre rollout and for the future of paid content in New Zealand.

Let me explain.

I’ve just been to Kuala Lumpur courtesy of Huawei to have a look at its fibre to the home rollout (we also talked LTE in Hong Kong but I’ll cover that elsewhere). Uptake of FttH services has been good – around the 30% mark, which is among the best in the world, and customers get free national calling, relatively fast internet access and 100 channels of television (many in HD) for around NZ$100 a month.

The competition has come in with the same deal but has 250 channels of TV.

Malaysia is very damp – it rains a lot every day – and because of that, rain fade on satellite TV is a real problem. Moving TV on to a fibre makes perfect sense, and the way it’s provisioned by Malaysia Telekom,  a 10Mbit/s channel is allocated for TV and nothing else. The picture is crystal clear and there’s no hesitation or buffering, even when changing the channel.

The speeds customers get are relatively low. Entry level is 20Mbit/s and it goes up from there, but that’s after you’ve taken out the 10Mbit/s channel for TV, which changes things somewhat.

What is clear is that customers aren’t signing up for broadband, they’re signing up for television that is delivered over broadband. Many years ago I met a chap from Ericsson Australia who talked animatedly about how we should all stop talking about broadband as if it were a thing and start treating it as an adjective – broadband describes something else, so broadband internet access, broadband television and so on. I suspect he’s right.

A quick Google for “triple play drives uptake” reveals a wealth of stories and releases from around the world on this subject. BskyB’s May 2012 financial update points to the triple play package as delivering increased customer numbers in the UK:

“The telco noted that the number of triple-play subscribers on its books had risen to 3.2 million, up 24% compared to end-March 2011, while adding that triple-play penetration had reached 31%”.

Dutch telco Ziggo also reports higher growth which it puts down to offering a triple play package.  Year on year from 2009 to 2010 it saw an increase of 67.5% in subscriber numbers as a result.

Even our own Commerce Commission has concluded that differentiated video content will help drive demand for UFB services.

For a customer like me, running a business from home with a media-bent and a desire for faster access to all things electronic, moving to UFB is a no brainer. I won’t see it in my street for the next five or six years but I’ll leap at the chance.

For the average mum and dad sitting at home, there has to be an incentive, a reason to move. Faster internet access isn’t it – but 250 channels of television and free national calling (for which you need UFB) might just do it.

DISCLAIMER: I travelled to China and Malaysia courtesy of Huawei