| 20 & 30 Euro Triple Play: What the Eff? |
| Written by Dave Burstein |
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"Competition can work," was my quick answer. 30-32 euro was the standard French price for a decent triple play since 2002. Bouygues, the #3 wireless carrier, has jumped in and gained more than 100K customers in the quarter. They offer quadplay, including wireless, for 44 euro. Numericable has solved most of the operational problems, is broke and needs more customers fast. So they began the price cuts. Pacesetter Xavier Niel responded by offering a robust triple play for 19,90, including all the equipment, 60 channels of TV, unlimited calls to over 40 countries with all the premium calling features, and "up to 28 Mega ATM, or 22.4 Mega IP (with a few catches, but not too many.)
For that price - about $30 - you can't even get 1 meg DSL in some parts of the U.S. (Frontier Tel,) much less a phone and TV package included. For triple play comparisons, however, it better to use the price of 30-32 euro ($45-50,) which comes without restrictions. Those prices are unbelievable in the states and highly improbable in Germany, Italy, and many other high priced countries. Britain starts at £30 http://bit.ly/7JJvYY for Virgin cable triple play or £44 at Sky http://bit.ly/73EKv1. The U.S. runs $95-140 with a more robust TV package. Can anyone make money at those prices? Each service (broadband, phone, TV) costs between $4 & $12/month at the margin. The surviving French carriers are running lean, so generally are at the lower end of that. So the marginal cost of two services is probably $14-18, and of three $21-$27. Iliad/Free is a listed company and highly profitable, so we know the 30 euro ($45) price is practical. They are running very thin at 20 euro, however, unless a significant percentage of the customers upgrade to higher packages. Numericable is set up well for that, with numerous add-on TV offerings. Free.fr is likely soon to get the fourth wireless license, so that will be a natural upsell. Labor and equipment costs are roughly similar across the developed world, but the comparison is not that simple. The states have a very high Hollywood fee for programming ($15-20/month) and the "rural subsidies" of $4-8, so the input costs are higher. That said, the right question is not why the French prices are so low. Why the eff is the U.S. and some others so high?
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"Jubilation!" proclaimed Les Echos, as French prices dropped. "What the eff?" came the note from Washington. "How can Numericable in France sell 30 meg cable service for 14,90 and 100 meg DOCSIS + a phone package for 19,90? Or a triple play for 20-32 euro? Something has to be wrong here." U.S. prices are generally two and three times as high, so he couldn't understand.
