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Pierre Danon Chairman, eircom

Pierre Danon Chairman, eircom. The Broadband Imperative. Pierre Danon Chairman eircom. 18 months. 12 months. 8 months. 100K. 200K. 300K. Broadband in Ireland is growing fast. If we started at the same time. Encouraging signs. Encouraging Signs.

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Pierre Danon Chairman, eircom

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  1. Pierre Danon Chairman, eircom Telecoms Convergence and Infotainment

  2. The Broadband Imperative Pierre Danon Chairman eircom

  3. 18 months 12 months 8 months 100K 200K 300K Broadband in Ireland is growing fast If we started at the same time... Encouraging signs Encouraging Signs Ireland Vs EU15 Penetration after 54 months • Country comparison from the time broadband introduced • Take-up in Ireland exceeds other countries by 28% • Further broadband appetite must be encouraged LUX 26.2% NETH 24.6% IRE 19.8% DEN 18.7% PORT 17.4% 17.2% SWE BEL 16.7% EU AVG 15.50% FIN 14.9% Accelerated Growth in Ireland UK 14.40% ITA 13.90% 10% FRA 13.30% 50% 50% 300K 10.6% AUS SPN 10% 200K 9.1% GER GRE 5.5% 100K Source: Group Business Intelligence, from ECTA and OECD Data

  4. Current estimate September 06 Comreg 10% Significant growth…more has to be done EU Broadband Penetration, October 2005 Getting to 100% NL 23.79 % • Despite recent growth Ireland still behind • Experience shows that accelerated growth can be achieved through: • Price • Competition • Availability • Relevance DK 22.51% UK 14.90 % DE 11.49 % MT 11.13 % PT 10.84 % IT 10.00 % CZ 5.55 % IE 5.34 SK 1.83 % PL 1.72 % 10% 50% 50% Source: EU Report on European Electronic Communications October 2005

  5. 900 800 700 600 500 400 300 200 100 Pricing trends OECD National Residential Basket May ‘06 Prices Are Competitive • Ireland is significantly below EU average for residential and business baskets • Overall Ireland well positioned • High line rental mitigated by low call costs • Rural population distribution and wage costs drive high line rental costs AVG Cost $US SW DN UK GR LX SP AU IE NT FN IT BL FR EU GR SL PR HU CZ PO In February 2006, Ireland was ranked “six places better than the EU average in terms of price for this basket.” ComReg September 2006 50% 50% $ 17.70 Source: Comreg Sept 2006

  6. €20.65 Ireland Austria €24.92 Germany €24.92 UK €26.57 France €25.00 €28.69 Finland EU Average €29.61 €32.90 Greece Spain €39.07 Switzerland €40.48 Broadband Pricing Prices Have Fallen for 1MB DSL Prices Are Competitive • Broadband prices in Ireland are competitive despite perceptions • eircom prices are at or below EU average • 1MB price down 87% since ‘01 • Wholesale / Retail price reductions Sept 2006: • 1MB, 2MB, 3MB eircom ‘always on’1MB pricing €165 €139 €89 €33.05 €24.79 €20.65 Oct ’01 May’ 02 Apr ’05 Jan ’06 Oct ’06 Mar ’04 European Comparison 1MB Monthly Prices 50% Source: Tarifica 2006

  7. Always-on DSL vs. flat rate Dial-up pricing Dial-up cheaper than ADSL Switzerland - €16.53 Ireland France Portugal Netherlands Denmark Sweden Spain UK Belgium Austria Germany The EU Average is € 16.74 Italy More expensive than ADSL Greece Finland Dial-up versus ADSL Pricing Dial-Up Pricing Monthly charge for 25 hours off-peak usage Spain €26.6 Norway € 25.96 Portugal € 22.64 Finland € 21.89 Belgium € 21.05 € 18.83 UK Greece € 17.60 Denmark € 16.11 Sweden € 15.89 Italy € 14.95 Germany € 14.66 Austria € 13.65 Netherlands € 11.72 Switzerland € 10.27 France € 8.36 Ireland € 8.26 Pricing ex VAT. • Ireland has the cheapest dial-up prices in Europe • Ireland has the widest gap between dial-up and broadband Source: Tarifica (Sept ‘06); Group Pricing.

  8. Competition is intense Structure of the market opening in telecommunications, EU15 members Open Market • Local Loop Unbundling • Number portability • Migration • Backhaul 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% DNK ITA IRL PR GBR SWE ES FR NL BEL AUT DEU GRC FIN LUX Source: Copenhagen Economics, Market Opening Milestones database Broadband Market Share 500K 450K 400K 350K 300K 250K 200K 150K 50K Q1’04 Q2’04 Q3’04 Q4’04 Q1’06 Q2’06 DSL Fixed Wireless Access Cable Other Source: Comreg Sept ‘06

  9. Broadband Availability Broadband Availability Getting to 100% • eircom will remain frustrated until broadband is available to everyone who wants it • There are currently two hurdles: • Uneconomic rural exchanges • Technical Issues Can have broadband Broadband line failure Rural - Not in Broadband area 15% 10% 75% Technical Issues 40% 60% Long line - distance from exchange Carriers - more than one person sharing a line

  10. The Solution to Availability • Faster rollout of new exchanges - 100 exchanges in 2007 • Take all orders in urban areas • Deploy WiMAX where sensible in urban areas to address long lines and carrier issues • Call for Government tender where investment is uneconomic

  11. The eircom broadband commitment 1. Broadband is our number one priority • Availability is improving and will continue to do so • In conjunction with Government & industry partners we want to increase availability towards 100% • Prices are competitive and will be maintained so We need to improve relevance and provide more value added services 2. Provide a first class network and reasonable access to providers • Efficient, modern, accessible network with ongoing delivery of first class service at the most economic prices • Service Providers have a choice between two sound business models - bitstream or LLU which should enable differentiated and fair competition

  12. The Digital Landscape is changing Provider-controlled pipe Provider controlled pipe, aka “smart” pipe Programmed television Monetization • Subscription • Advertising • Interactivity • Commerce Video Video-on-demand User controlled pipe, aka “dumb” pipe Consumer User-controlled pipe Web Monetization • Direct distribution • Advertising • Subscription • Long tail content • Commerce • Interactivity Content Direct distribution Aggregator Portal Provider/Relationships Consumer generated media Forum Value capture from a user-controlled pipe requires aggregating content and/or audiences 9

  13. Unlimited shelf-space creates opportunityEverything is available at any time Key Takeaways The ‘long tail’ argument Democratization of content • Consumer preferences are fragmented • Virtuous cycle The right content finds the right consumer • Search engines are expanding • Digital catalogues, enhanced search and targeting • Consumers matched with content The supporting infrastructure is developing • Compression technology and fat pipes • Storage capability is getting cheaper The ability to make money is real • Low revenue/title can still be profitable • New ways to monetize content and stay relevant “The 80/20 rule does not apply in a world without the constraints of physical media” Sales Titles Tier 1 Overlooked Tiers Community Content -Gumtree.ie -Youtube.com -Autofinder.ie How-to content -Cooking shows -DIY HGTV Tier 1 Music videos - Irish Independent music artists i.e. Jape, Beautiful Unit - Trustmeiamathief Back episodes User Generated Content - Al Gore Current.TV Small audience - Irish Club Rugby Galwegians RFC

  14. Advertisers budgets are still skewed towards TV and print but should grow significantly as... …consumers are spending more and more time with interactive media % of total time US Households spend with each media type Hours per person per year in consumption of consumer media, 1999 - 2009E CAGR % of ad spending on each media type TV 44% Recorded Music (5.2) % 32% Newspapers (2.2) % 30% Newspaper Total broadcast television (1.6) % 8% (1.0) % Consumer books 13% Consumer magazines (1.0) % Radio 20% Box office (.6) % (.5) % Satellite radio 8% Magazine 6% 3.4 % Total cable & satellite TV Video games 5.2 % 6% Internet 34% Home video 9.3 % Consumer Internet 12% Advertisers shift media budgets to align ad spending with consumer habits Source: PwC “The Rise of Lifestyle Media”, 2006; Veronis Suhler 2005

  15. DTT will revolutionise the broadcasting landscape • Revolutionise the delivery of TV & interactive services • Provide universal coverage and free to air technology • Increase the number of channels, choice, quality and television content • Irish context: • Ireland is starting late - we need to catch up • Late start allows us to use the latest evolution of DTT -> HDTV • Greater eGovernment services will lead to eInclusion

  16. Combination of DTT and Broadband IPTV could revolutionise the Irish market • Broadband IPTV complements DTT & provides innovative new services: • Catch up TV • Video on demand • User generated content • Social networking • Interactive services

  17. The current way of watching tv The current way of watching TV • Whatever programme • Available at that moment • Available on that channel • One size fits all concept

  18. IPTV - A new way of watching TV IPTV - New way of watching TV TV will become a door instead of a window • Real time play along content • Voting & Access to deeper content • Send me now & Send my details • Catch up tv and archiving Personalisation - Make it your TV • Intuitive search methods • Store, share and send • Personal content • Content recommendation • Customizing the TV service Openness • Open platform • Remote access & management of services • User generated content

  19. hybrid FTA DTT + IPTV proposition in Italy offers two propositions in market DTT and Mine Interactive TV set to launch hybrid service using DTT Freeview + VOD Launched DTT and now introducing IPTV Multichannel TV Markets: DTT & IPTV co-exist

  20. Entertainment is an imperative for telcos Current Revenue Share New Opportunities • IPTV provides bundled services in a market with declining voice revenue and growing competition • Extends the reach of broadband to TV • Introduces new revenue streams • Reduces customer churn • Creates new models and opportunities for advertising • More focus / targeted advertising • New models e.g. Google Search Voice Traffic Access Traffic Other

  21. The battle for the digital living room ? ? Broadband / content aggregators Traditional service providers Gaming Non-fiction Movies Data / IP Tier I content Consumer generated media Sports Interactivity Voice Commerce • Fully integrating DVR and DVD-burn functionality as alternative to linear content programming • Expanding VOD applications • Investing in interactivity • Locking up Tier 1 live content and sports • Bolstering data offering • Investing in HD/content enhancement technology • Consumer electronics devices are familiar and easy to use but still dependent on physical media • Consumers fundamentally want to own a content library • CE devices and PCs capturing most consumer generated media and music • Interoperability and proliferation of digital devices increasing the complexity • HD content largely unavailable The battleground: How consumer gets content, what content consumer gets, where consumer gets the content Enabling Technologies • Compatibility • Ease of use • Storage • Portability • Search / discovery • Commerce 11

  22. Providing Relevant Content • Exclusive live access to Setanta Sports via broadband • Access to VOD programming for 7 days • Free for eircom broadband customers

  23. The eircom commitment • Broadband availability improving and will continue to do so • Broadband prices are competitive and will be maintained • Competition exists and will be fairly supported • eircom will work as part of an eco-system of industry players, partners, associations and public stakeholders to make Ireland successful in the broadband revolution

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