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Austrians go naked

  • 07-06-2006 11:06am
    #1
    eircomtribunal
    Closed Accounts Posts: 1,144 ✭✭✭


    Often talked about, but seldom spotted, Austria's incumbent is the "world first" to offer naked DSL:
    From TMCnet article
    Telekom Austria launches naked DSL service
    (Total Telecom Via Thomson Dialog NewsEdge)Boris Nemsic claims mobilkom was the first mobile network operator in the world to launch commercial GPRS services.
    Now he is chief executive of Telekom Austria, mobilkom's parent company, Nemsic is claiming another world first - this time for naked DSL.

    And Nemsic is showing other European telcos how to market broadband services based on naked DSL, by bundling them with mobile.

    "Mobile voice is so cheap that VoIP is no longer an advantage to the broadband consumer," said Nemsic, in an interview with Total Telecom on Friday.

    First, TKA is offering a product bundle consisting of A1 Mobiles Breitband and aonSpeed Internet access services, priced from 29.90 euros per month, instead of 58.90 euros if the two were bought separately.

    Second, it is offering aonPur (an ADLS naked broadband Internet access) for 39.90 euros per month instead of 64.90 euros per month, providing the user also takes three A1 mobile tariffs at no monthly rental charge.

    Subscribers will be charged for services on top. For example, for 3 euros a month the mobile user will be able to make unlimited calls to all fixed lines in Austria. For another 5 euros they will get unlimited calls to other A1 mobile numbers.

    "Put it together, and for eight euros a month you can reach 8 million subscribers in Austria," said Nemsic.

    Naked DSL is pure broadband; the operator sells an Internet connection only to the consumer, who is then free to subscribe for voice and video applications from the same operator or alternative service providers.

    It is the next stage in product strategy for incumbent telcos. The customer does not pay a monthly telephone rental, but they are at least using the incumbent's broadband connection.

    Consultants like Analysys say telcos should embrace naked DSL.

    Investment analysts are a bit more cautious.

    Analysts at JP Morgan said in a report on local loop unbundling earlier this year that breakeven ARPU for broadband services - comprising connectivity and ISP - was about 23-25 euros a month. However, it estimates that marginal costs of a fully unbundled line could be covered at 15.90 euros.

    The economics of unbundling are anyway complicated by other factors: line density at the local exchange makes a crucial difference between profit and loss.

    Analysts at Merrill Lynch said in a recent report on European Broadband that Telekom Austria would receive only 15 euros a month from wholesaling a fully unbundled telephone line to an alternative operator like Inode. That compares with ARPU of 52.50 euros a month, which the bank estimates TKA currently gets from a broadband subscriber to the incumbent's ADSL service.

    TKA's bundled broadband/mobile strategy may not suit other national telcos trying to find a model to offset declining switched voice revenues and competition from alternative service providers.

    Nemsic admits that TKA has less to lose than many telcos.

    "Our market share is low in terms of broadband - cable operators have 70% share in Vienna," he said.

    Merrill Lynch estimates that Austria's cable network operators, led by Liberty Communications-owned UPC, hold only 24% of the national broadband market. But UPC accounts for 60% of cable broadband, and it has a stake in unbundler Inode. What's more, Merrill Lynch estimates cable telephony penetration in Austria has reached 16%, compared with 11% across Europe.

    Nemsic said the new service packages are just the first from a newly streamlined Telekom Austria. He said the group will now have two operating companies, one for fixed and the other mobilkom, with a separate holding company responsible for group strategy. Previously only the mobile company had operating independence, and the wireline business was directly managed by the holding company.

    The new holding company will comprise Nemsic, Rudolf Fischer, the current chief operating officer, and Stefano Colomco, chief financial officer. Nemsic said Fischer will become chief executive of the fixed operating company, a name for which has still to be decided.

    Nemsic has been interim CEO since January. His appointment became official on Thursday.
    P.


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