Multiplay on Broadband: first lessons and
impact on the ARPU
- FASTWEB Case Study
Alessandro PETAZZI
Marketing Manager, IPTV Services
IDATE 27th International Conference - Montpellier, 23 November 2005
AGENDA
Company and Market
Marketing Strategy for Multiple Play
Focus on IPTV
PG. 2
Company Overview

The 2nd wireline
network in Italy


Technological
leadership




Integrated triple
play offer

Founded in September 1999, FASTWEB is the leading alternative operator of fixed
broadband telecommunications services in Italy’s main urban areas (7.5 million
households, or one third of the Italian population reached as of Sept. 2005)
FASTWEB created a fully IP-based network totally independent from the
incumbent’s infrastructure
Recognised pioneer in broadband and triple-play
World first fully IP based network
FTTx or DSL access as relevant to maximize return on invested capital
Trusted supplier for mission critical application
FASTWEB provides voice, Internet connectivity, data transmission and TV
services over a single connection by using Fiber-to-the-Home/Office and DSL
access technologies
The company offers its services to both companies and families
Vision from day one (back in 1999)
Rely on full-IP network to offer multiple services to both companies and families
 compete on differentiation and operate with higher capital efficiency
PG. 3
Foudation of Business Model
- Creating a Triple Play Service
End-to-end infrastructure ownership
and control
Highly capital intensive with high
barriers to entry
Both business and residential
markets served by the network
Single fully integrated IP network
with no legacy technologies and IT
systems
Selective geographical coverage
Triple play approach coupling
higher ARPU with competitive
commercial offer
ARPU
~ € 900/year residential ARPU
> € 8,000/year Small business ARPU
(7.5 mln households today, 10 mln
final target vs 21 mln in Italy)
Gross Margin
~ 75% Gross Margin on both
residential and business segments
Opex
Semi-fixed cost structure
~ € 2,000/year SoHo ARPU
PG. 4
Italian Broadband Market Share Evolution
‘000 of Access
Market Share of National Broadband Net Adds
~ 1,200
Increasing Market Share Thanks To
Network expansion
~ 1,100
~ 1,000
Upgrade to certified 6 Mbit/s ADSL
connection
~ 750
~ 600
12%
73
1H03
13%
11%
9%
86
82
2H03
7%
1H04
BB Mkt Net Adds
148
Enrichment of IPTV content
offering…
79
2H04
9M05
… while other players still lagging
behind in terms of service offering
FASTWEB

13% of national broadband net additions in 9M 2005 with an average
population coverage of ~ 26%

Strong increase in market share thanks to increase in coverage during
the year
PG. 5
Broadband Co-leader in Covered Areas
Broadband Penetration on Covered
Market (September 2005)
Mkt Shares of Total Broadband Market
(September 2005)
100% = ~ 5.8 Mln BB Connections
100% = Number of households passed
~ 20%
Telecom Italia
Tin.it
Alice
~ 21%
~ 17% (**)
~ 9% (***)
All Other
Operators
~ 6%
(*) FW Penetration on Areas Covered since 2000
(**) FW Penetration on Areas Covered since 2002
(***) Overall FW Penetration

Telecom Italia has the highest share of broadband market, as its services are
deployed with a 90% national coverage (like all the other alternative players)

With 644k customers FASTWEB is the #2 Italian Broadband player despite a
significantly lower market coverage and is leader or co-leader with TI in the
covered areas
PG. 6
(*)
FASTWEB Residential Offer
Voice Options
FASTWEB Base
Mega Internet Options
TV Options
FASTWEB’s residential offer:
• FASTWEB Base: Compulsory entry level
•
•
•
Voice options: Optional flat and pay-per-use offers
Internet options: Optional flat and pay-per-use offers
TV options: Optional premium contents offers
FASTWEB’s residential offer is very flexible and can be
customized in order to fully satisfy customers' needs
PG. 7
FASTWEB Base
Voice Options
FASTWEB Base
Mega Internet Options
TV Options
FASTWEB Base is the entry level that enables
customers to experience 300 min per month of:
•
Carrier-class Voice over IP service (national and local
land line calls included) and
•
Broadband Internet @10 Mbit/s for Fiber, 6 Mbit/s
certified for DSL
In addition:
FASTWEB Base costs:
•
One off activation fee: 95 € with
number portability or 170 € with
new number
•
Monthly fee: 25 €, currently
promoted at 19 € forever 
•
Voice mail from phone, PC and TV
low entry level point,
•
4 mailboxes included
possibility to add flat
•
Option for a diversified bouquet of premium video
contents
voice/Internet and TV options
•
on top
Option for TV-based Video-communication
PG. 8
Calculating a Sustainable Price Point

Need-based segmentation
 Different value bundled for different customer needs: Voice,
Internet and TV Options  triple play operators must have the
best offer for all customer segments, not only for triple play
customers!

Value-based pricing
 Flat Fee vs Subscription Fee: selling bundled value vs charging
back industrial costs
Value
Value
Voice Minutes Bundled
150
6€
30 + 15
2€
BB Internet Minutes
Bundled
E-mail access
150
4€
n.a.
None
free
10€
Pay-per-use
None
Voice Mail
free
1€
Pay for use
None
Monthly Fee
25€
Up to 21€
19€
15€
Up to 2€
PG. 9
Flat-Fee Voice Options
Voice Options
FASTWEB Base
Mega Internet Options
TV Options
Italia Senza Limiti
On top of
FASTWEB
Base, 2 flat-fee
voice options
are available
Città Senza Limiti
Unlimited national land line
calls
Unlimited local land line
calls
20€/month
14€/month
“Italia Senza Limiti” and “Città Senza Limiti” can not be cumulated
PG. 10
Flat-Fee Internet Options
Voice Options
FASTWEB Base
Mega Internet Options
TV Options
Giorno e Notte
30 ore
10 ore
Unlimited
1,800 minutes per
600 minutes per
broadband
month flat Internet
month flat Internet
Internet access
access
access
On top of
FASTWEB Base,
3 flat-fee
broadband
Internet access
options are
available
40€/month
20€/month
10€/month
FASTWEB’s answer to the market need
of a price point at 20 € for ‘flat’ Internet
“Giorno e Notte”, “30 ore” and “10 ore” can not be cumulated
PG. 11
FASTWEB TV
Voice Options
FASTWEB Base
Mega Internet Options
TV Options
FASTWEB Set
Top Box provides
access to free TV
content and
value added
services
Free to air
channels
Free to satellite
channels
VoD and S-VoD
• 8 vod ‘channels’ with
1.300 programs (not
movies) always
available included in
the fee
• Network PVR
• 700 movies on-demand
from 3.5€ to 6€ each
• Dolby Digital 5.1,
original language
To access TV contents, value added services and a S-VoD package, customers need to pay 8€/month
(and they get the STB for free until they keep their subscription)
True triple play with FASTWEB starts at 27 €/month
(19€ with voice/Internet minutes included + 8€ for STB and S-VoD)
PG. 12
TV Options
Voice Options
FASTWEB Base
Mega Internet Options
TV Options
VoD and S-VoD
8.0 €/month
• Free STB rental with ONtv
subscription
• 8 vod ‘channels’ with 1.300
programs (not movies) always
available included in the fee
• Network PVR
• 700 movies on-demand from 3.5€
to 6€ each
• Dolby Digital 5.1, original
language
PAY TV
16 €/month
16 €/month
2 €/month each
28 €/month
46 €/month
combined
4 €/month each
• Italian “Serie A” football
at 5€/match and
Champions Legue at
8€/match in pay per view
7.5 €/month
• Movies on-demand in DVD
quality from 3€ to 5€ each
A-la-carte Channels
8 €/month each
• Week-end Calcio: “Serie A” at
10€ for all the matches of the
week-end
PG. 13
How Triple Play Drives ARPU
100% = 887€
TV
services

70
100% ~500K
100% ~ 320€
Pay-per-use
10%
only
of non-for-free
TV
80%
service
VOD has VOD; 60% has
35%
Pay TV; 10%Flat
has thematic
channels
25%

Internet

TLC
services
More than 2/3
of
ARPU
~ 13 VOD views per video customer per month,total
1 buy
Flat Voice

TV service
penetration
~ 30%
30%
¼ of total video customer are PVR users, 10
recordings per month per user
817
Flat
Bundled
Total ARPU
€/year
As of September 30th, 2005
35%
Pay Tv &
Thematic
Channels
% residential
customers, by
TLC service
take up
65%
TV services ARPU,
€/year (on non-forfree TV service
customers)

comes from
flat monthly
fees
Both Voice and
Internet relevant,
with Internet ARPU
increasingly
important
PG. 14
IPTV in a Global Supply-side Perspective…
World largest IPTV providers –
Thousands of customers (Sept. 2005)
441
142
160
160

100
Telefonica France Tel
(ES)
(FR)
Free (FR)
IPTV penetration on broadband
customer base
3%
TV ARPU:
140 €/year
TV ARPU:
320 €/year
30%
10%
22%
pay
Free (FR)
FASTWEB
3%
Telefonica France Tel
(ES)
(FR)
FASTWEB
World second largest
IPTV provider in terms
of customers and
PCCW
(HK)
penetration of the
total customer base…
51%

…first for TV ARPU…
31%
pay
PCCW
(HK)
PG. 15
… and in a National Demand-side Perspective
Digital TV platforms in Italy – Thousands of customers
3,300
2,200
2,600
160
FASTWEB
Free sat
dishes
DTT

…but relatively small among
Italy’s digital TVs…

… with a high penetration
among customers interested
SKY
in the triple play concept (TV
as a ‘value extractor’)…
Penetration on potential customers
30% on
customer
base
2% on
addressable
families
10%
FASTWEB
Free sat
dishes
12%
DTT
15%
SKY

… and a lower one among
total addressable customers
(FASTWEB is first of all a
telco supplier)
FASTWEB
PG. 16
IPTV in FASTWEB strategy
1. Increase customer NPV through value extraction
 Not necessarily triple play customers have longer average life
 High speed of innovation required
 Special retention initiatives needed
 TV has not been a strong ‘reason to buy’ FASTWEB for those
who are not interested in its voice or Internet offers
 However TV customers have a significantly higher ARPU
2. Contribute
to differentiation
other
broadband
offers
 Multiple
play can have vs
little
to do
with churn…
 And giving away premium content to subsidise broadband
adoption is not necessarily a smart move…
 … but multiple play does impact customer NPV
PG. 17
Consequences on IPTV positioning
1. Linear services are important for customer experience but…


Difficult to differentiate vs satellite competitors only with them

Only part of SKY premium content available through FASTWEB

Limited rationale for bidding for (expensive) exclusive linear content
Difficult to act as pure neutral carrier (due to strong ties between
content producers and existing TV platforms)
2. IPTV P&L must be self-sustaining
PG. 18
Consequences on future product priorities
Opportunity to differentiate TV services and sustain competitive
advantage by leveraging technology
 Better and richer VOD product
 More majors, shorter time windows, balanced buy-rates (library vs
current)
 More types of VOD content (eg.: Disney’s Magic English)
 Push for pricing and bundling flexibility: permanent rental, SVoD, …
 Other non-linear services
 Retroactive PVR, ‘personal TV’, multiplayer gaming, T-Betting,
community services, …
 Better customer experience
 Replicate and enhance DVD experience
PG. 19
Executing Planned Strategy:
Recent Actions and Next Planned Steps
Actions Taken
7,000 Subs
Disney
500,000 games
per month in
the new gaming
area
Touchstone
Miramax
Next Actions
New dedicated
channels for music,
fictions, reality shows
and kids content
150,000 music videoclips watched in
September
New VoD
Channels and
Content
New Majors
New
Interactive
Areas
2005
World first
experiment of
edu-tainment
on-demand
Maintaining focus
on enhancing:
VoD Content –
Not only movies
New
Services
New user
friendly
interface
and remote
control
Interactive
Services
User experience
2006
PG. 20
Executing Planned Strategy :
The new GUI (launched on November 21st )
New graphics, rules of navigation and editorial organization:



Easier access to content and services
Same rules of interaction and navigation across different content areas
Respect of existing customer base
PG. 21
Executing Planned Strategy :
The new remote (will be launched on December 1st)
The project of the new remote control has
responded to two different needs:
1.
USE: easier interaction with GUI (new
remote and GUI have been designed
coherently)
2.
LOOK and FEEL: coherence with
FASTWEB brand and image
Unified design (Pininfarina) to be
applied by all HW vendors
PG. 22
Contacts
Thank you
Alessandro PETAZZI
Marketing Manager, IPTV Services
alessandro.petazzi@fastweb.it
PG. 23