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IPTV and VOD in Europe: Growing, Slowly but Surely
While outsiders see Europe as a unified economy, it’s anything but. In reality, it’s a highly fragmented market, and Internet TV initiatives vary from nation to nation.
by Gary Flood

The UK is one of the most broadband-happy economies in the world—London-based analyst group Datamonitor predicts that up to 8 million UK households will have broadband by 2008 (out of a total population of 55 million). UK government figures say broadband now makes up 57% of all Internet connections. Yet it currently has just one company that derives the majority of its income from video on demand (VOD): Video Networks, which operates a service called HomeChoice. What’s more, the service isn’t even available nationally—it is limited solely to the London metropolitan area. Some estimates put its subscriber base at 30,000, in a city of 7.4 million.

Meanwhile, the first national VOD service has cropped up in tiny Belgium, a country of just 10.4 million people, where telecommunications firm Telenet delivered Europe’s first truly open architecture VOD service in September 2006. Did we say nationally? Well, kind of—Belgium is made up of two language groups, Flemish and Walloons, and it’s to the 1.6 million Flemish subscribers that Telenet is offering its 85-channel VOD package. As of this writing, no national VOD service has been rolled out in mighty Germany or France, two of the world’s top ten economies by GDP. Indeed, Belgium actually has two such services now, as the Telenet service comes on the heels of a so-far less-than-wildly successful initiative by local national telco Belgacom.

Still a Fragmented Market
Some might draw the conclusion that Europe just still hasn’t "gotten it,"–and this in a geography where UK telco BT was trialling early VOD as far back as the early 1990s. Europe, famously seen from the outside as a unified economy, is, as the inhabitants know too well still a radically diversified continent. It may be economically "unified," but language and cultural differences still mean that what on paper is a trading bloc of some 25 countries and 456 million people (versus 292 million in the U.S.) is in reality a highly fragmented market.

But European VOD and IPTV players say it’s too early to write off the European on-demand economy. That same Datamonitor survey forecast that within two years 60% of all European households will have broadband, creating a tremendous potential market for the right service. And a number of interesting moves in the UK seem to be adding up to at least some real capability in 2006.

BT was one of the first to trial VOD in Europe, and it’s still committed to it. In the UK, BT has selected Microsoft as the software platform for its broadband TV service and Dutch electronic giant Philips as set-top box provider, and the service is scheduled to launch in the second half of 2006. It’s prepped the thing very fully, with content deals with three of the world’s biggest entertainment companies, BBC Worldwide, Paramount and Warner Music Group, National Geographic Channel, and children’s TV programming suppliers HIT Entertainment and Nelvana.

Microsoft began tests of the service using its IPTV Edition software in the first quarter, including both standard- and high-definition broadcasts, digital video recording, and interactive program guides. BT has said it believes IPTV will be an "essential service" offering to promote its forthcoming 21st century network, an update to its current fixed and data carrying network slated to eventually transform its UK public switched telephone network (PSTN) into a complete nationwide IP network.

Meanwhile in Italy, Telecom Italia launched its IPTV service last December, offering users in four cities premium broadcast content direct to their TV sets via DSL. Alice Home TV was initially available to two million homes in Rome, Milan, Bologna, and Palermo, and is being slowly expanded to include 17 other cities. The telco is investing around EUR350 million ($417 million) to roll out IPTV and is planning to launch a new 20Mbps asymmetric digital subscriber line (ADSL) broadband package to complement the service next year. And in Spain, Telefónica de España says it has signed up 200,000 users to its Imagenio IPTV service. Telefónica launched Imagenio in Madrid, Alicante, and Barcelona in early 2004, before expanding the service to Valencia in March 2005. Since then, the telco has been deploying ADSL2+ technology throughout its network to support the service. Imagenio offers 48 television and 15 audio channels, and is available as a standalone service or as part of a triple-play package; it is now available to more than four million households in 140 municipalities.