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Multi-Play Strategy: When to Discount, or Not

According to Pyramid Research, Belgium�s Telenet does not follow the traditional triple play model of offering bundles with a discount. Rather, the operator is betting on the price value and service differentiation of each individual product (telephony, broadband access and television) to simply sell itself.

Telenet is successful; both revenues and revenue-generating units (RGUs) have grown by 8 percent in 2005. Conversely, the largest cable provider in the U.S., Comcast, is offering as much as $50 in discounts per month for triple play adopters over the total price for these services if they are purchased individually. Are triple play discounts necessary, or could Belgium�s altnet be onto something?

Pyramid found two main reasons why Telenet has deviated from the bundling path. First, until mid-2005, bundling services in Belgium was illegal. More importantly, however, the company simply does not see a current need for moving to pre-set bundles given the success it is experiencing in selling two or three services on an �unbundled� standalone basis.

Linked to this, there appears to be no real competitive pressure to offer discounted pre-set bundles. In broadband, the company has secured leadership on bandwidth speeds; for telephony it offers a very competitive flat-rate tariff, and has actually seen its share of fixed-connections in Belgium grow. In TV, no other major cable TV operators compete in Telenet�s franchise area in a meaningful way. Furthermore, there is no tradition of DTH in Belgium, with Belgium�s first DTH satellite TV provider - TV Vlaanderen � only launching services in Q1 2006.

Meanwhile Belgacom�s IPTV service, despite being available across Belgium, has experienced low uptake since its launch in June 2005, partially as end-users are unfamiliar with taking services from a traditional telco, but also because Belgacom�s price points are higher. In April 2006, Belgacom had 50,000 IPTV subscribers. Of these, Telenet estimates that only 10,000-15,000 subscribers were in its TV network coverage area.

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