Telkom mulls over streaming TV, price plans for speeding up broadband adoption

Incumbent telecoms operator Telkom is considering following the lead of other large ISPs around the world and hosting IPTV services in order to stimulate demand for high speed broadband services. While the company isn’t looking at commissioning its own shows, yet, it is looking at potential partnerships with existing subscription TV companies.

“To make the business case for fibre work you’ve got to provide content,” Telkom chief operating officer Dr Brian Armstrong told the audience at the Southern Africa Telecommunication Networks and Applications Conference (SATNAC) in Port Elizabeth this morning, “There’s an opportunity and a necessity for Telkom to… be a content provider.”

Armstrong told that he had been looking carefully at carrier models in the US and UK, where network providers have become “triple play” operators offering TV, phone and internet. While IPTV isn’t the be all and end all of services Telkom needs to offer, he said, entertainment will be a predominant part of getting people to upgrade to fast, fixed line services at home. And in entertainment, TV is king.

“South Africa is over indexed for TV subscriptions compared to the rest of the world.” Armstrong said, “It’s where the market is at.

“If you don’t have the right mix of products and services that customers want in a way that’s easy to use, you’ll never get the uptake that you want.”

While rumours have previously suggested that Telkom was in talks with US-operator Netflix around streaming services, Armstrong seemed to suggest that the likely outcome of its current thinking would be a tie-up with a large, unnamed local operator.

“We looked at the full spectrum of options, Armstrong said, “We’re not sure yet where we’re going to strategically position in the content market. We do know we have to provide our customers with content somehow, with partners, ourselves and we lean towards partnerships generally. We’re not going to buy sports rights and become a producer of soapies.

“Our broadband customers will have a compelling media experience. Whether that is by becoming a media player or partnering with media players or some other form of mediation or just enabling a great over the top service… South Africa is unique in the content space in that we have one absolutely powerful pay TV operator in the country who has the content rights locked up. That’s the reality we have to deal with, so do you want to fight with the big guy in the content space? Probably not.”

Armstrong says that there are many interesting and promising ways of improving demand for fixed line services. These include distributing tablets to schoolchildren, as has been successfully done with surprising ROI in Turkey and on the cards for South Africa, and putting free WiFi in to taxis. But its entertainment that will convince people to buy broadband and then benefit from all the other advantages it brings.

Broadband traffic on Telkom's network has grown 40 times in five years.
Broadband traffic on Telkom’s network has grown 40 times in five years.

According to Armstrong’s research, the number of homes that will be addressable via a fixed line connection will double between now and 2020 – although at 2.9m that’s still less than one in five South African dwellings and compares poorly to the UK, where there are 21m households with internet access, mostly through fixed lines.

“The problem in South Africa is twofold,” says Armstrong, “The first is income disparity, South Africa is very concentrated on the top of the pyramid, so to speak, and the second is geographic dispersion. Put those together and it has real impact on the commercially addressable market for broadband in the country.”

Armstrong also told us that he believes that while fibre to the home will grow as an access technology, in 2020 copper will remain the dominant form. “VDSL will be the workhorse technology,” he said, “It’s about getting fibre as close to the home as possible, but if you want to be as efficient as possible, copper still has a role to play.”

Telkom itself is currently in the middle of a “turnaround” process, and Armstrong says that “consumer experience” is a major concern for company executives. The company aims to be the dominant force in the “digital home”, but Armstrong acknowledges that there’s a long way to go in terms of improving brand perception. The major concern for customers from all walks of life, however, remains price.

“The key question is affordability,” says Armstrong, “If you can consider broadband at R200 rather than R400, the potential size of the market grows considerably. Not double, but a lot.”

Things people care about, from a Telkom customer service. Price is the biggest bubble, top left.
Things people care about, from a Telkom customer service. Price is the biggest bubble, top left.

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