Recent trends in dynamic markets such as the UK and France presage future directions of the overall European market. Faced with a competitive broadband market and increasing demand, service providers are aggressively shifting their strategies from plain-vanilla broadband access to value-added and bundled services and fixed-mobile convergence features.

In addition, they are investing more resources in next-generation broadband technologies such as fiber and WiMax and reshuffling their assets to focus on quadruple-play packages in key markets.

LLU (local loop unbundling) was a major driver for the competition in France and the UK In 2000, France's telecom regulator forced the former state-owned monopoly France Telecom (FT) to open up its network to rival operators, allowing telecom upstarts such as Iliad/Free and entrenched carriers from other countries to rent access from FT and offer competing broadband services.

FT, in turn, improved its own prices and services and became one of the most innovative incumbent telecom operators in the world.

Value Added and Bundled Services :

Over the past several years, service providers have maintained the same price level while providing much higher connection speed. As it's difficult for service providers to increase ARPU (average revenue per user) through higher bandwidth, they are looking to sell more appealing value-added services (VAS).

British Telecom has had some early success with several such offerings. BT noted that its Home IT Advisor service (a digital home management and support service) had 40,000 customers as of May 2007, with 2,000 new subscribers signing up each week. Further, the Advisor service has a 96 percent satisfaction rate among users.

In its most recent quarterly financial report, BT disclosed that it had over 300,000 customers for its Broadband Digital Vault service, which provides secure online digital storage. To further enhance its VAS portfolio, BT recently announced a potential partnership with Google and FON, a large hotspot community operator; plans to add Sony's PlayStation 3 and PlayStation Portable to its network, enabling video and voice-call capabilities; and engagements with more than 600 startups globally for new innovations.

Another key strategic focus for leading European operators is bundled services. Independent service providers such as Iliad/Free and FastWeb (before it was acquired by Swisscom) have used triple-play bundles to gain strong footholds in France and Italy, respectively.

In September 2007, Free reported 2.8 million subscribers, all of which subscribe to a triple-play package. Its pricing strategy is extremely aggressive -- Free offers its customers 100 Mbps/50 Mbps broadband with TV and free domestic fixed-line calls for just 29.99 euros ($43.25) per month, prompting similar offerings from Orange and Neuf Cegetel.

As a result, France is now the most competitive triple-play market in the world. According to Global Digital Living II, France has the highest consumer interest in bundled services among the six European countries we surveyed. It also serves as an excellent test market for innovations in bundled services.