Franz Büllingen, Christin-Isabel Gries, Peter Stamm
Stand und Perspektiven der Telekommunikationsnutzung in den Breitbandkabelnetzen
Nr. 286 / Januar 2007
Summary
Although nearly 21 million households (55%) in Germany are connected to broadband cable networks the process of odernisation in order to offer broadband internet access as well as telephony impressively lacks behind the most developed international markets. The heterogeneous market structure between level 3 and level 4 operators, which is worldwide unparalleled, is the main reason why it is so difficult to build a nationwide integrated cable network allowing market players to realise economies of scale as well as economies of scope. However, in the last two years more or less strong signals indicate a change in market dynamics.
Firstly, some important mergers of operating companies could be observed, reinforcing the process of horizontal and particularly vertical integration. The group of the leadinglevel 4 operators has decreased to Orion Cable and Primacom only. Both focus their business activities on regions being supplied by level 3 operator Kabel Deutschland.The remaining other level 3 operators Unity Media and Kabel Baden Württemberg, succeeded in taking over a considerable number of level 4 networks in their regions, strengthening their - economically most important - vertical integration.
Secondly, it can be observed that these level 3 operators invest large sums in order to raise the quality of their network infrastructure. At the end of 2006 nearly 50% of the homes passed in their networks will be modernized to a full service broadband network. Until 2009 this number shall be exceeded to a range between 90 and 100%.
Thirdly, cable network operators have started some time ago to market their new services aggressively. Different bundles of services (double play, triple play) are being offered undercutting sharply the price level of competitive services marketed by telcos.
Finally an important treaty (“simulcast agreement”) between the cable network operators and content providers has been undersigned at the beginning of the year 2006, which opens a manageable path for migrating broadcasting services from the analogue to the digital world. In some areas of Germany where cable networks are already fully modernised, customers are able to make use of a several hundred digital channels offer. Therefore it has to be observed how successful cable network operators will be in a given space of time influencing the decisions of customers at their choice of providers and services.
Furthermore it is difficult to predict how the digitisation of programs and services will affect future market strategies of level 4 operators since the heterogenity of operators will remain a crucial barrier for successful marketing of telecommunication services.
It is pinpointed in our study that successful marketing strategies and attractive product bundles, like they are offered for instance in the US and in the Netherlands, will enable operators to raise their ARPU by several factors. [only a german version available]
Diskussion Paper is available for download.