Anne Stetter, Sonia Strube Martins
The market for IPTV: Service availability, market structure, access issues
No. 328 / December 2009
In recent years cable network providers in Germany have changed completely the basic conditions for telecommunication operators as main actors in the IPTV market. Upgrading their network facilities by applying fiber-optics to the NE 3 layer and by rebuilding the NE 4 network architecture of most of their customers they started to market Triple Play services quite successfully and managed to enlarge their customer base for broadband internet access from 0,3 Mio. in 2005 to 1,7 Mio. in 2008. In addition competition by digital satellite and terrestrial broadcast service providers has increased continuously and still will do within the next years.
Our analysis pinpoints, that great challenges for the sustainability of the telcos business model have arisen. The enhancement of the service portfolio by content provision via IPTV therefore has become a severe matter of defending their market position while only offering "bitpipe" services. With respect to the saturated German market for television services the question arises, whether the additional value of IPTV can be transformed into a value added service for customers, stimulating their demand as well as their willingness for payment. The uncertainty of answering this question reflects the uncertainty of the future development of the German IPTV market. The attractiveness of a large number of high quality Free-to-air-programs has to be taken as a matter of fact, which implies, that the number of German IPTV subscribers will not exceed 1 million by the end of 2009. All in all it has to be stated that these characteristics of the German IPTV market depict large barriers to market penetration dynamics in middle range terms.
In addition the emergence of IPTV creates a number of regulatory challenges that can be addressed by intervention at the appropriate wholesale access level. A key area of concern is wholesale access to content. Market failures may occur in particular where broadcasters acquire and accumulate exclusively rights for the provision of Premium Content. Established operators of cable or satellite platforms may leverage market power related to Premium Content and channels into retail markets. The key point of action is outside the e-communications regulatory framework. Competition concerns relating to wholesale access to content must be addressed by the effective application of competition rules. Further, IPTV adds an additional transmission platform to the established platforms on markets for (unbundled) TV services and therefore holds the potential to increase competition on those markets. The effect of IPTV on (unbundled) broadcasting markets will depend on whether in the context of market definition IPTV can be regarded as a substitute for other transmissions or rather as a complementary transmission platform. Once separate retail markets for Triple Play emerge in the future, such markets are more likely to be characterised by single dominance or joint dominance, at least in parts of the national territory in question. Provided that the national regulatory authority can establish the existence of a Triple Play market, and identify single or joint SMP, wholesale broadband access for the purpose of providing IPTV services could be a required remedy where local loop unbundling alone is not sufficient.
(Full version only available in German language)