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Triple-Play, Only Without the Expected Profits

Here in the U.S. market, broadband industry analysts venture a guess at who will lead the 'profitable' race for multi-play service bundles -- assumed to be valued at more than $100 per month. In Europe, as a result of escalating competition, the situation is very different.

Informitv reports that NTL Telewest will now offer free digital television and video-on-demand with its home telephone service in the UK. The initiative is evidence of an increasingly competitive communications and entertainment services market.

The free package includes 36 television channels, including Sky One which is normally only available through subscription services. Customers can upgrade to other pay-television packages or a personal video recorder and high-definition. The latter are only available in former Telewest areas but will be offered to NTL customers by the end of the year.

The initiative comes in response to the dramatic growth of Freeview, which offers a wide range of free digital television channels over the air for the cost of an inexpensive set-top box. A number of channels are also available on satellite television without subscription. Later in the year, telephone company BT will launch "BT Vision" that combines broadcast and broadband video services, also without an ongoing subscription fee.

It brings into doubt once again the value proposition of the so-called 'triple-play' offer of video, voice and data services on a single subscriber bill. In an advanced competitive market, operators are becoming obliged to offer one or more of their core services effectively for free as part of a bundle in order to gain or retain market share. It increases the value to customers, but not to operators, who must rely on up-selling or cross-selling additional services.

The American telco and cableco current 'arrangement' with the FCC may change at some point in the future, and if that shift results in substantial competition then we may witness this level of price and profit decline. In the meantime, it would be wise if all broadband service providers heed the warning signs from the rapidly evolving trend within leading European markets.

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