Parks Associates Blog

Friday, November 16, 2007

Is Competition Good for the Incumbents Too

I've been doing some research on European broadband service providers in preparation for our Connections Europe event. One thing that was really interesting is that the two incumbents, British Telecom and France Telecom, which operate in hyper-competitive markets, are performing much better than Deutsche Telecom and Telecom Italia. Now if you think about France and the UK, both markets are featured by fierce competition due to local loop unbundling and upstart companies quickly moving up the ladder of investment and building out their own networks. In France, Free and Neuf are both offering triple play bundles for 29.99 euros, which include voice, video/TV, and 10Mbps HSD services. France Telecom had to respond with their own low-priced bundles. Competition definitely made FT and BT much more innovative. BT is investing in its 21CN networks, providing B2B services, and partnering with Google, Sony, Fon, and more than 600 upstart companies to develop innovative broadband applications. FT has become the No. 1 IPTV service provider, the No. 1 service provider in deploying residential gateways, and the No. 1 company in providing fixed mobile convergence voice services. In contrast, Germany and Italy are lagging behind in the broadband race due to regulation. You would imagine that the incumbents there will be sitting on fat margins but the financial performance of DT and TI has actually been lagging as well. So is competition good for the incumbents too?

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