T-Online Hungary Deploys T-Home TV Service for Consumers
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1 T-Online Hungary Deploys T-Home TV Service for Consumers Deutsche Telekom Expands its Digital TV Footprint in Europe T-Online Hungary Deploys T-Home TV Service
2 Contents Customer Profile...3 Business Situation...3 Why T-Online Hungary Selected Microsoft Mediaroom...4 Trials Lead to Full Deployment of Microsoft Mediaroom...5 Market Research Drives Subscriber Acquisition Efforts...6 T-Online Hungary Deploys T-Home TV Service Page 2
3 Customer Profile The Magyar Telekom Group is Hungary s incumbent telecommunications provider. Deutsche Telekom (DT), Europe s telecommunications leader, owns 60 percent of Magyar Telekom; the remaining 40 percent is publicly traded. Magyar Telekom s T- Com and T-Online divisions provide fixed-line phone service and Internet access via ADSL, cable, dial-up, and virtual private network (VPN) to more than 500,000 subscribers. T-Kabel, T-Mobile, and T-Systems are also divisions of Magyar Telekom, which employs 12,000 people and has annual revenues of 2.5 million. Business Situation In November 2004, UPC, T-Online Hungary s main cable competitor, and a small handful of satellite companies began offering TV and video services in combination with voice and data. T-Online Hungary had yet to enter the video services market and was losing customers to attractively priced triple- and quadruple-play offers. Mobile phone companies, meanwhile, were getting traction in the residential market where consumers were eager to switch to a wireless phone service, further eroding T-Online Hungary s share of the voice market. And yet Hungary, a country of 10 million people, was in a period of tremendous economic growth. It had recently joined the European Union, opening doors for foreign investment capital and improving its trade status dramatically. Today Hungary has one of the highest per capita incomes in Eastern Europe and an unemployment level below that of its Western European neighbors. The average income level continues to rise, along with demand for consumer goods and, inevitably, home entertainment products and services. In late 2004, T-Online made a strategic decision to enter the digital TV market. The company essentially owned the DSL broadband market, and their cable competitors lacked the infrastructure and bandwidth to support personalized video on-demand (VOD) and had not yet adopted the MPEG 4 standard that high-definition (HD) broadcasting requires, giving T-Online Hungary an additional competitive edge. Pay TV and Broadband Market in Hungary Pay TV (000)Households Broadband Cable (% households) Broadband DSL (% households) Source: Screen Digest T-Online Hungary Deploys T-Home TV Service Page 3
4 T-Online set its sights on becoming the TV provider of choice in the country. They believed that because Hungarian consumers were accustomed to paying for TV, they would welcome an experience superior to that which was currently being one offered by cable and satellite providers. So to compete, T-Online Hungary would deploy T- Home TV, the best digital TV service available. Their goals were to reduce subscriber churn, attract new subscribers, and strengthen the T-Online brand among Hungarian consumers. In addition, the new TV service would be bundled with voice and data services and would also be part of a quadruple play through T-Mobile, Magyar Telekom s mobile phone business. Why T-Online Hungary Selected Microsoft Mediaroom In the spring of 2005, T-Online Hungary invited more than a dozen technology companies to pilot their IPTV solutions. Over the next year, pilots were launched with varying degrees of success. Some options were omitted because they lacked essential functionality or were otherwise incomplete. By early 2006, the only contenders remaining were Siemens and Microsoft TV, and Microsoft TV ultimately won the contract. According to András Tüdös of T-Online Hungary, the Microsoft TV pilot demonstrated the platform s superior video quality, TV functions, and network and content capabilities. We were also excited by the low-cost System on a Chip settop boxes and fantastic user experience, which was the best we d seen. And of course, we were very familiar with the Microsoft TV way of doing business. Microsoft TV had an excellent track record deploying IPTV services for Deutsche Telekom subsidiaries in France, Spain, and Germany. In the summer and fall of 2006, Club Internet/France and T-Home/Germany launched commercial services. Subscriber service orders, installations, and quality of service in both countries have met or exceeded DT s projections. A similar commercial service in Hungary would expand DT s IPTV footprint in Europe on a proven platform. A comprehensive solution that integrates Tandberg media encoders, digital rights management (DRM) technology, low-cost hardware, and System on a Chip (SoC) set-top boxes by Linksys and Sigma Designs, Microsoft Mediaroom enables telecommunication service providers to deploy TV services quickly and economically. And network operations management functionality is built in, saving service providers time and money over the long term. Microsoft Mediaroom enables advanced subscriber features such as: An attractive, easy-to-navigate electronic program guide Attributes-based search for live TV shows, VOD, and recorded content Channel Zapping, for instant access to TV shows and movies T-Online Hungary Deploys T-Home TV Service Page 4
5 Advanced picture-in-picture Multiview for watching up to six programs simultaneously Onscreen caller ID Digital video recorder (DVR) and remote DVR Photo and music sharing via TV/PC integration Customized subscriber applications Trials Lead to Full Deployment of Microsoft Mediaroom A limited T-Online Hungary field trial in Budapest, which included 18 broadcast TV channels and VOD and personal video recorders (PVRs), concluded in January A second expanded trial included 500 users and additional TV channels and enhanced video quality based on user feedback. During the summer and fall of 2006, solutions architects from Microsoft Mediaroom, technicians from T-Online Hungary, and Preferred Solutions Integrator Alcatel worked on the system design and deployment. Microsoft Mediaroom can be scaled to any IP network and number of subscribers, allowing service providers to budget for and expand network capacity to support growing subscriber demand. The platform is by definition distributed but could be easily modified for a relatively small and centralized DSL network such as T-Online Hungary s. Sixty percent of T-Online Hungary customers currently connect via ADSL 2/2+, supporting a downstream bit rate of up to 8 megabits per second (Mbps), sufficient for delivering high-quality live TV and VOD. Magyar Telekom plans to extend ADSL 2/2+ further across the country, providing more T-Online Hungary subscribers with access to the new TV service. (Future enhancements to the service that are also on Magyar Telekom s radar are the integration of HDTV, interactive gaming, and connected home services that require a very high-speed digital subscriber line (VDSL) network.) T-Home TV shares a live TV head-end in Budapest with T-Kabel of Magyar Telekom, which aggregates and distributes live TV content for the cable industry. VOD assets are acquired through a video head-end and data center located where content is encoded for distribution. A service branch delivers content and services to subscriber set-top boxes. The current system is designed to service up to 50,000 subscribers, and network capacity is being upgraded in stages to support increased traffic. T- Online plans to add 50,000 more subscribers to the T-Home TV service by the end of 2007 and to eventually acquire 150,000 new customers in addition to that, to reach its goal of 250,000 subscribers. The full commercial service launched in November 2006 in Budapest, Nyíregyháza, Debrecen, Székesfehérvár, Pécs, and Zalaegerszeg. Among other features, it T-Online Hungary Deploys T-Home TV Service Page 5
6 currently includes personalized VOD, PVR, an easy-to-use interactive program guide with attributes-based search, advanced picture-in-picture, Channel Zapping, and parental controls. T-Home TV subscribers have access to 54 live TV channels and three radio channels and may select video content in Hungarian, German, and English. The VOD library spans 950 movies from a variety of providers, including Téka, T-Online Hungary s download-and-play Internet service. In March 2007, T-Home TV and Téka signed a multi-year contract with Warner Brothers International Television for the VOD rights to Warner Brothers' films. T-Home TV subscribers will soon have access to new film releases such as Blood Diamond, Happy Feet, and The Departed, in addition to Lord of the Rings and Matrix trilogies and hundreds of Warner Brothers' classics. T-Online s free service and Iwiw social networking service will be integrated into the T-Home TV offering as well, enabling subscribers to send and receive through their TVs. As the service evolves, personalized content list sharing and music and photo sharing, among other connected features, will be integrated into T- Home TV capabilities. Market Research Drives Subscriber Acquisition Efforts Before the full commercial launch, market researchers at T-Online Hungary surveyed current voice and data subscribers to identify the early adopters of T-Home TV arriving at the conclusion that they would be well-educated urban males living in cities, earning an above-average income, and spending more than average on telecommunications. T-Online determined this critical group of subscribers would demand high-bandwidth, appealing content and a technically advanced TV product at a good price. The T-Home TV service was developed to meet these demands. Mainstream consumers would follow early adopters as public awareness of the service grew. Two of T-Online Hungary s triple play offers include data and voice and one of three TV packages the entry-level pricing, normal, or family package. Subscribers have the option of adding VOD, premium channels, a second set-top box, and increased bandwidth to the offer. T-Online Hungary is engaged in a strategic sales effort and marketing campaign to acquire subscribers. Online press forums and TV, Internet, and billboard advertising in Budapest and other large cities are helping raise consumer awareness of the T- Home TV service. T-Home TV is demonstrated and sold in T-Online s T-Pont retail stores via agents and online. Orders have met T-Online Hungary s expectations for the second quarter of fiscal year T-Online Hungary Deploys T-Home TV Service Page 6
7 For more information about Microsoft products and services, call the Microsoft Sales Information Center at (800) In Canada, call the Microsoft Canada Information Centre at (877) Customers who are deaf or hard-of-hearing can reach Microsoft text telephone (TTY/TDD) services at (800) in the United States or (905) in Canada. Outside the 50 United States and Canada, please contact your local Microsoft subsidiary. To access information using the World Wide Web, go to: Microsoft Corporation. All rights reserved. This data sheet is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY. Microsoft is a trademark of the Microsoft group of companies. T-Online Hungary Deploys T-Home TV Service Page 7
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