Deutsche Telekom has agreed to use MicrosoftTV’s IPTV Edition middleware platform for their deployment of IPTV in the second half of 2006. The Deutsche Telekom deal is Microsoft’s second largest with the largest presumably being the deal with AT&T for $400 million. Deutsche Telekom is upgrading its DSL infrastructure to VDSL2 in order to increase the bandwidth per home to up to 50 Mbps, enough for multiple HDTV streams.
The agreement with Deutsche Telekom brings the number of commercial agreements Microsoft has to 10. Three others, Bell Canada, Reliance, and BellSouth are for trials, not for commercial launches. Of course, if BellSouth is combined with AT&T, they are expected to use Microsoft in the former BellSouth territory.
The agreement is not surprising as T-Online subsidiary Club Internet began a pilot project with Microsoft in mid-2005. DT owns 90% of T-Online. T-Online also offers broadband in Spain as Ya.com, Portugal as Terravista, Austria, and Switzerland. Deutsche Telekom also has stakes in Slovak Telecom, T-Hrvatski Telekom of Croatia, and Magyar Telecom of Hungary, which in turn owns stakes in telcos in Montenegro and Macedonia. As the others launch video services, they too may follow the parent company’s choices. T-Online plans to offer triple-play services in France and Spain as well in 2006.
In Germany, T-Online has offered an entertainment service called T-Online Vision with on demand content available via the Internet for a few years. A set top box is available for those wanting to watch the content on their TV rather than their PC, but first-generation boxes were expensive so few were sold.
German cable operators have increased the pace of their network upgrades over the past year to offer their own triple-play services. There are 18 million cable TV households in Germany with 1.9 million digital subscribers. While the digital number seems low, it has doubled over the last 12 months.
About 15 million German homes do not subscribe to pay-TV, instead using satellite reception equipment to receive about 30 channels that are broadcast unencrypted via satellite. Deutsche Telekom will need to be a great improvement over traditional digital TV services in order to convince German households to become subscribers.
Recently I have attended several industry events in China on topics ranging from Internet usage, to semiconductors, and the digital home to P2P streaming video. People are always discussing how to grow business and win competition in the vast China market. China, as an emerging single unified market, is always a heated topic of debate on whether the opportunity is real and how foreign companies can grab market share. But, people need to know that even native Chinese sometimes feel overwhelmed by this dynamic market.
As a global market research organization, focused on the high tech sector, In-Stat has an experienced team in China, who has seen a lot of ups and downs in this market. To enable us to provide actionable insight for emerging markets, we usually organize brain-storming sessions internally to discuss interesting business cases in China and to ask ourselves what the secrets are to win in the China market. We strive to look deeply at the special business environment that exists in China so that we may provide practical advice instead of just offering theories.
When we get to the bottom of it all, we find there are three underlying principles that can help provide a leg up on your competition in China. Whenever we discuss why a particular business is successful, or which business models makes sense, these three principles often appear like heavy undertones in the main rhythm, always reminding us. So here I write down those three principles, in an effort to be inspiring.
Number 1: Don't believe that you are the first to do business in China. No matter what business you are in, you are likely not the first to be there. You can’t perform the same kind of Internet-based due diligence for China that you can for the US, as an example. Only 10% of China’s companies have an online presence – unless you have much experience on the ground in China, you are not going to be able to have a strong gauge on potential competition in this market.
Often, when we discuss a new business or model, we will be very excited and feel our ideas are very bold and innovative and that surely, no one has had these ideas before. However, usually we find that there is somebody already thinking about this, maybe several years ahead. The hard-core fact is that there are 1.3 billion brains “thinking” about things in China. The golden rule of US marketing to "be first" is somehow difficult to do in China.
For example, as In-Stat China is focusing on emerging areas, we recently launched a series of reports, including topics like IPTV, Mobile TV, Digital Music, 3G and RFID. From those in-depth reports we see that those are currently just small emerging markets, but there is already fierce competition. Who dares to say "be first"?
Maybe principle number 1 is a bit frustrating, but principle number 2 is good news: If you are relatively qualified, you have a higher chance to beat your competition as there is a high percentage of professionals in China that just aren’t professional enough. Please reconsider my first principle. It said that in China, you will have plenty of competition, but it didn't tell you how good or bad those competitors are. As a rule of thumb, your competitor in China will have plenty of problems with resources, strategy and execution, etc.
Since customers have had to bear inadequate service for a long time, they are already complaining about this and they are looking for replacements. China is a huge market and demands are insatiable, so to find a qualified vendor is more difficult than to find a qualified customer. A typical story we usually tell is how difficult it is to buy an apartment in Beijing. You must gain the seller's favor to sell to you, totally opposite of the situation in the US. Therefore, if you are just marginally better than your competitors, and don't commit huge errors every day, you are already ahead of the game in China.
Use an example from our Digital Music report. Once we went to the R&D center of China Mobile. Our customer told us that they had studied this market two years ago, and the conclusion at that time was that the demand for copy-right protected music wasn’t big enough. Our analyst smiled and said: "Not anymore, we find there is sufficient demand from 70 million Chinese middle class consumers and the problem now is how to consolidate the value chain to provide the best end-to-end user experience for music like iPod/iTunes”. If you can launch a service such as this in China in time, the demand will be enormous.
Then, how to get the long-term competitive advantage? We need to explain principle number 3: The only way to win competition is to stick to your core business long enough. When most of your competitors can no longer bear the challenges of a particular market segment and get out, you will be successful. One of my friends owns an event organizer company. Recently he bid successfully for the opening and closing events of 2008 Beijing Olympics. When I asked him why he was so successful, he said "It's simple, I have worked for ten years, and my major competitors retreated on year 8 or 9.”
Therefore, from the below series of China market research reports, you can see there are still plenty of opportunities in IPTV, Mobile TV, Digital Music, 3G and RFID, in China, though there are plenty of "unprofessional" competitors. Our reports will give you the contextual intelligence for you to be able to continuously invest in and build your competitive edge for a long-term win in the massive China market.
For further information on these market segments, see the following reports:
In-Stat finds that among VoIP providers, those offering free PC-based applications are currently more popular than those offering broadband IP telephony service. Based on In-Stat survey results, Vonage, a for-fee broadband IP telephony provider, had the greatest number of users, however, the other top four providers offered free PC-based VoIP applications.
Vonage accounts for nearly one-third of respondents using a broadband IP telephony solution and is the definitive market leader.
Yahoo, Skype, and MSN were respectively the top three providers of PC-based VoIP applications. Among PC-based VoIP providers, Yahoo and Skype are the market leaders based on the In-Stat survey, both with over 20 percent of respondents. MSN is the only other provider accounting for more than 10 percent of respondents.
AT&T and Verizon both accounted for roughly 15 percent of respondents and other broadband IP telephony providers accounted for less than 10 percent.
Most providers account for less than 10 percent of respondents, demonstrating the fragmentation of the market in which no one solution yet dominates.
