Can Triple Play Pay?

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If it works, multiplay would be a huge departure from the traditional structure of Europe's telecom industry, and the product both of deregulation and technological progress. And the bets are large: BT, long the dominant telephone provider in Britain, is spending $17.4 billion upgrading its network to provide triple-play services over a single line. In the process, BT is providing services not usually associated with a phone company. Last month, BT signed deals with bbc Worldwide, Paramount and Warner Music Group for content to be used in the multichannel TV and video service it will launch in the fall. "We're moving from being a telco ... to being a participant in other markets, some of which don't even exist today," says BT Retail chief executive Ian Livingston.

After lagging behind countries like France and Italy, Germany is also taking to high-speed Internet bundled with basic telephone and television. Kabel Deutschland, Germany's largest cable-TV operator, created in 2003 when regulators forced Deutsche Telekom to sell it, is spending €500 million over three years to make its network triple play ready for 90% of the 15.3 million homes it covers. Right now, just 3.7 million of its homes can receive the service. Deutsche Telekom itself plans to roll out its "Conquer the Home" strategy — bundling telephone, 100 television channels and T-Online Internet access and delivering them over fat, 50-megabits per second lines in 50 cities — pending completion of its takeover and reintegration of T-Online. Chief executive Kai-Uwe Ricke aims to have 1 million triple-play customers by 2007 to help replace basic telephone revenue that slipped 5% in the first half of 2005 and prompted it to cut 32,000 jobs in its fixed-line business over three years.

There remain significant obstacles to the triple-play strategy. Broadband uptake is a key limiting factor — it currently reaches only 22% of European households. That figure is expected to rise to 41% by 2010, according to Forrester Research. But it will ultimately top out at about 60% in advanced markets, according to research firm Datamonitor, because not everyone will have access to a connection or want to pay for it. VoIP usage is even further behind. Only 3 in 10 Europeans have heard of it and only 2% use it, says Forrester Research. Then there's customer service, at which the industry has never been great. In some parts of Europe, it can still take a month or longer to install telephone or broadband. Sound and picture quality aren't reliable everywhere, either. And using traditional utility-like companies to sell cutting-edge service packages is bound to perplex many. "Consumers are confused and they've got every right to be confused," says BT's Livingston. "A huge number of people are selling services to them ... They don't know their usb from their wi-fi from their gsm from their Voice-over-IP from their gprs."

But get multiplay right and the dividends could start rolling in. One of France Télécom's fastest-growing offerings is a VoIP service that has picked up half a million customers in its first two years. Even bargain hunter Dave Tuttle says he'd consider shifting to a quadruple-play package, provided he was confident of its quality and the price was right. A single bill "would be very useful," he says. One thing is clear: the telecom industry's future depends on winning over tough customers like him.