"We are taking away the barriers of the communications infrastructure," says William Priest, head of global strategy at the company's Equant unit, which now will be known as Orange Business Services.
Orange isn't the only European telecom operator scrambling to break out of its traditional business model. On May 29, only two days before Orange unveiled its plan, Europe's No. 1 mobile operator Vodafone (
VOD) said it would expand into broadband and fixed-line phone services.
ECONOMIC REALITY. Former British phone monopoly BT (
BT), which already offers a mobile-plus-fixed phone package, plans to expand the offering later this year to include digital TV and video-on-demand. And British cable operator NTL is promising a quadruple-play offering once it completes its planned takeover of Virgin Mobile.
The scramble is driven by harsh economic reality. The price of traditional voice services is plummeting -- especially under pressure from flat-rate voice-over-Internet calling plans and free alternatives such as Skype (
EBAY). To keep customers in the fold and revenues on the rise, telcos are banking on new services such as broadband and TV-over-the-Internet.
Orange is further along this path than many of its rivals, but even so, the company won't immediately begin offering seamless packages of services to all customers. Among the issues still to be tackled: setting up unified billing and customer-service operations for its far-flung holdings. "All they have done so far is make an announcement," says Lars Godell, an Amsterdam-based telecoms analyst with Forrester Research.
PACKAGE DEALS. Indeed, phone companies worldwide are still struggling to master the so-called "triple play" of fixed-phone, broadband, and television. Reliable middleware, the software that will allow TV viewing over the Internet, is not yet widely available, Godell says. That helps explain why in the U.S., the leading triple play providers are cable companies which already have TV capability in place. For all operators, adding mobile phone service to the mix makes matters even more complex.
Orange says it will roll out its new services gradually. The offerings available immediately will include a package deal for British customers including mobile-phone and broadband service for $56 a month. In France, where the company already offers phone-Internet-TV packages to individual customers, it will expand its offerings to business clients, allowing them to buy blocks of telephone time that can be used either on fixed or mobile phone lines.
It's no surprise that Orange and its peers are hungry for such package offerings. "When you sign people up for these deals, it reduces your churn rate," says Martin Olausson, an analyst with Strategy Analytics in London. "Your services become stickier and stickier, and it becomes more difficult [for rivals] to steal away your customers."
STILL SMALL. Indeed, France Telecom began aggressively pursuing bundled services after it was hit by an upstart competitor, French company Iliad, whose triple-play offering, called Free, has signed up more than 1.4 million French subscribers (see BW Online, 12/5/05,
"The Telecom Exploits of Iliad").
It's still far from clear, though, whether customers are ready to move en masse to bundled services. In a Forrester survey of consumers in seven major Western European markets last year, only about one-third said they would be interested in receiving phone, Internet, and TV services as a package. Currently, only about 5% of customers Europe-wide are triple-play subscribers, Forrester says, with Britain topping the list at 10% and France and Spain in second place at 8% each.
For residential customers, the key issue is price. Forrester's survey showed that 62% of broadband customers would look at a triple-play bundle if they could get a discounted price. Other considerations such as simplicity of billing were less important. Orange's $56-a-month offering in Britain should do well, says Olausson of Strategy Analytics, since many existing broadband-alone services cost almost that much.
FIGHT FOR FOUR. What about business customers? Orange predicts they will welcome the arrival of one-stop shopping for phone and data services. But Godell says while that might be the case for smaller companies, bigger corporations "want to be able to pick and choose. They have their own dedicated IT and telecom staffs, and they want best of breed," he says.
Orange executives point out, though, that they've already signed some important package deals with big corporate customers. They include Universal Music Group, which signed a deal in March for combined phone and data services.
It's too soon to say whether Orange will stay out in front on the path to digital convergence. But with its push towards quad-play, Orange is clearly squaring for a fight.
