IPTV goes international: Swisscom eyes up Fastweb

Today presented a new chapter in the young story of IPTV: Swisscom made an all-cash offer of €3.7 billion for Fastweb, the Italian broadband company that has been a pioneer in IPTV and triple play services. If the sale goes through, it could mark the first instance of an international IPTV merger.

A tie-up would put Swisscom back on the map as an international player after it spun off/outsourced its international carrier network in a joint venture with Belgacom.

Of course, what Swisscom would be buying with Fastweb wouldn't be an international wholesale business but an Italian retail customer base and expertise in television/IPTV services. Fastweb, which has 1 million customers, was called an "innovation leader" by Swisscom's CEO Carsten Schloter in a conference call.

Reportedly, Swisscom had tried to expand last year by buying Telekom Austria (another IPTV leader) but that deal fell through.

Swisscom could do with the Fastweb experience: it has had some hiccups with its own IPTV service, Bluewin. Bluewin, which is powered by Microsoft's IPTV software and servers, launched last November, a year behind schedule (technical/quality of service issues were to blame, according to reports). The delay was a major embarrassment to Microsoft, which had been touting the Swisscom deployment as a key deal in its strategy to target the telco market for TV services.

From what I can see, telcos offering IPTV will have a long road ahead of them before those services are profitable. Operators in the US and elsewhere have spent billions on new networks. And even Fastweb, which has been around since 1999 and has benefitted from using some fibre that Telecom Italia had in the ground already, says that it expects turn a net profit for the first time only this year. With that in mind, getting some scale into the business through acquisitions will only help them along that road.

The week in review: new ideas for avatars

This was published last Friday on the Total Content + Media web site. For past weeks in review not posted here, go to http://www.totalcontentandmedia.com.

Today, Spanish telco Telefonica finally announced that it would start the process to sell off the remainder of its 75% stake in TV production company Endemol. The company is being valued at a whopping €3 billion. Since Telefonica floated 25% of its Endemol stock in November 2005, the share price of the company has gradually worked its way up from €9 per share to current prices of around €22 as speculation about interested buyers has ratcheted up over the last 15 months. According to this article, private equity firms including Apax, KKR, Providence and CVD are all circling around the company. Mediaset and Telecinco, bidding jointly, are among the media companies that have also expressed interest in the producer of formats like Big Brother and Deal or No Deal.

On Wednesday I shared a cowhide-upholstered sofa in Soho with Silvio Scaglia, founder of IPTV pioneer Fastweb in Italy, to talk about his newest venture, an online P2P video company called Babelgum. The company is coming in on a wave of online video aggregators, some of which are also based on peer-to-peer networking technology—BitTorrent (which relaunched the other week as a legit, commercial enterprise) and Joost among them. (Joost, incidentally, has signed a deal with Endemol.)

This is what Scaglia told me would be Babelgum's unique selling points: it will have a transparent pricing structure for content providers ($5 for every 1,000 CPMs when providers upload the content themselves); a strong mix of "professional" rather than user-generated content; and an intuitive "smart channel" service that morphs to your tastes based on what you choose to watch, and what you choose to skip. The channel will be advertising-supported and free to watch, as Scaglia says he doesn't believe people will ever pay much for these services.

Folks will be able to see for themselves when the site launches its beta later this spring, but I think Babelgum will have a challenge ahead of it amidst this glut of other online video contenders.

A case in point: online video market got another player this week in the form of Amazon linking up with TiVo for its Unbox service. Users of the service can now use their TiVo boxes to transfer their films directly to their televisions for viewing—something that seems simple and obvious but actually is not that common in the majority of video downloading services, which still largely expect people to watch programmes on their computer screens. I expect that with deals like the one signed between Yahoo and Akimbo at the beginning of this year, the area of transferring Internet content to televisions will be a focus for other companies too in the months ahead.

In another piece of news that underscores the bridge between the television set and the Internet, Sony this week announced a new dimension to its PlayStation 3 that will offer users the chance to play games with other users in "3D." The service, to be called Home, will use interactive elements, virtual worlds and avatars, a la Second Life, but all be accessible via your television rather than your computer monitor. Analysts have greeted the news positively—Sony's been lagging behind Microsoft's Xbox and Nintendo's Wii in the games console stakes and needs a boost of something fresh to drive sales.

I've thought of a good application for business people in this emerging 3D world: This week has been a big one for media conferences: the IPTV World Forum and the FT Media Conference and the Digital TV Group's Annual Summit in London; and the Bear Stearns annual media confab in Florida were among them. As we were finishing with the second issue of Total Content + Media magazine, I didn't manage to attend any of them. But it strikes me as a very good idea for these conferences to eventually move into the 3D world so that at least my avatar could have come in my place.