General

IPTV Grows in Europe — continued

FastWeb will still have formidable competitive advantages, he claims. Its high-speed Internet service is the fastest of its kind on the Italian market, for example. "We are perceived as the market leaders of innovative technology, and we also have the most flexible packages," Petazzi says.

The company's television proposition is an attractive one for a couple of reasons. In the Italian market, some channels are available free via satellite, but the consumer has to purchase a dish and receiver to get them. Others are free to air, but require a different antenna and receiver. If Italian consumers want to record programs off the air, they need a VCR—yet another box—and the cabling becomes fairly complex.

Competing with content
With FastWeb, they need just one set-top box to receive all the free-to-air and free satellite stations, the premium pay TV stations, including those from Sky Italia that FastWeb resells, and FastWeb's video on demand (VOD) content. The company also offers a network PVR (personal video recorder) service that lets consumers set up off-air recordings just as they would with a PVR in their home, except that the recording is made by FastWeb and available over the network any time.

FastWeb's pitch is that it can replace three boxes with one—and there's no dish or antenna on the roof. "That's very important for us," Petazzi says.

The VOD content is also important. FastWeb is the only TV provider in Italy with a true VOD service as opposed to pay-per-view channels showing the same content at different times. FastWeb subscribers can request a movie or other VOD content to be shown at any time, and they can view it as many times as they like for up to 24 hours. The library already includes more than 5,000 titles and continues to grow.

In most cases, FastWeb had to negotiate directly with content owners to secure broadcast rights, including the major North American and European film studios and broadcasters of premium content such as Disney, CNN and ESPN. The one exception was content from Sky Italia—which includes an 11-channel movie package and a 5-channel sports package. FastWeb secured all of it under one contract.

"We would very much prefer to have a collective negotiation with some sort of aggregator," Petazzi says. "But there is none." Negotiating rights in the early going was difficult because content providers weren't familiar with IPTV. It's easier now, he says. In fact, FastWeb is currently negotiating deals with other studios and producers for additional VOD material.

FastWeb's competitive position on TV is not ironclad. The regulations that forced Sky Italia to wholesale its content to resellers like FastWeb did not force the satellite operator to release all its channels. This means FastWeb doesn't have all of the channels Italian consumers want. Some of the missing channels are operated by Sky Italia itself. In other cases, it has exclusive distribution deals with the broadcasters. FastWeb is hoping to persuade those broadcasters to grant it distribution rights as well in future.

Consumers may also balk at FastWeb's price structure under which they pay $31 a month for very little. Unless they lease or buy the VideoStation, which is required to receive the 14 free TV channels, Basic service doesn't give subscribers very much. The 300 minutes per month of Internet connect time works out to about 10 minutes a day—not enough for most users. The 150 minutes free minutes of phone calling may be a somewhat better incentive in a market where people pay per minute even for local calls, but it still works out to only five minutes of talk time a day.

FastWeb then offers a sometimes confusing array of Internet access, phone and TV options for additional fees, often quite hefty. Always-on, unlimited-use Internet, for example, costs $50 a month. Adding one of the Sky Italia packages costs anywhere from $20 to $35 a month. Individual premium channels cost as much as $10 each per month. Voice services, local, Italian and International, are charged per minute.

The future
FastWeb has lots of money to burn, and a sizeable head start on competitors. But the competitors have substantial resources as well. Wind and Telecom Italia both have a much greater reach, covering most of the Italian population. While FastWeb has a reputation as a technology innovator, that may be a double-edged sword—impressing some parts of the market but intimidating others. FastWeb is trying to change that perception with a new advertising campaign.

As Petazzi says, "Our challenge for the future is to go more mainstream. All the technology fanatics are already our customers. We need to move to a mass market now. We have to become simpler, we have to also become something for the average Italian family."

—End

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