Q3 2011: Can new services breath life into a stagnating DSL market?

The number of fixed-line broadband connections in Germany climbed to a total of 26.9 million during the third quarter of 2011. Customers, however, increasingly opt for internet access via cable instead of the traditional DSL connection. While the three major German cable providers have won 165,600 internet subscriptions in Q3 2011, the number of DSL customers with the five biggest DSL providers remained on the level of the previous quarter.

Number of DSL subscriptions remains stable

Despite the general decrease in new DSL customers, until now, the total number of DSL broadband connections provided by the five largest German DSL providers had grown in every single quarter. In the 3rd quarter of 2011, however, the overall market saw zero growth. The number of DSL connections with the five largest DSL providers sank by 8,400 to 22.026 million.

Vodafone DSL and 1&1 reduce customer churn

Contrary to the negative trend in customer acquisitions, the customer numbers of most DSL providers have somewhat stabilized compared to the previous months. Both Vodafone and 1&1, for example, lost significantly less DSL customers than in the first two quarters of the year (9.000 and 10.000 line losses respectively). Market leader Deutsche Telekom meanwhile acquired 48,000 additional customers, which constitutes a large drop-off compared to the previous quarter but is in line with the result for Q3 2010.

The two German Telefónica brands o2 and Alice experienced a sudden slump in Q3 2011. After two years of continuous customer growth, the Telefónica tandem effectively lost 17,000 DSL customers this quarter. Versatel pressed further ahead with its reinvention as a B2B provider. As a consequence, the private customer segment, despite still providing the biggest share of the company's overall revenue (37% in Q3 2011), was pushed further into the background. The number of private DSL customers, which had already been on a sharp decline for the last two years, dropped by another 20,400 to 582.000.

While mobile internet is the strongest growth factor in the telecommunications market right now, new services like IPTV and video on demand could provide a much-needed shot in the arm for the stagnating fixed-line business. Telekom Entertain, the IPTV service of Deutsche Telekom, for example, reached a total of 1,375 million customers by September 30, 2011. Compared to last year, the customer base for Telekom Entertain has grown by 32 percent. Telekom Entertain Sat, a new satellite-supported version of the service, has launched very successfully on September 1st. Until the end of the month, Telekom was able to market 50,000 Entertain Sat units, 14,000 of which were activated by the end of September.

The competing service Vodafone TV was started in February and reached a total of 34,000 subscriptions by the end of Q3 2011. In addition to the reception of TV programmes via internet, the Vodafone TV hardware is also capable of processing satellite and cable TV signals. The fact that Vodafone TV and Telekom Entertain Sat work as hybrid solutions greatly increases the availability of both products. While live streaming of television requires a high-performance connection, the additional features of Vodafone TV and Telekom Entertain, like video on demand and the electronic program guide, can be used with far lower data rates.

After its successful launch, Vodafone TV probably won't take long to overtake the third competitor, Alice TV, in terms of subscriptions. While Alice TV was introduced as early as 2006, it has never been able to reach a particularly broad market and counted only 83,000 subscribers at the end of Q3 2011.

While the DSL providers are making inroads into the television market, the cable providers are rapidly taking over market shares in the internet access segment. Unitymedia, a provider that is active in Hesse and North Rhine-Westphalia, was especially successful during Q3 2011. Unitymedia was able to raise the number of its internet subscribers by 63,700 to 964,200 (excl. 5,900 smallband connections). The biggest German cable provider is Kabel Deutschland, which was able to increase its internet customer base by 62,900 to 1.277 million. Kabel BW added 39,000 additional internet subscriptions in its state Baden-Württemberg, reaching a total of 779,000 broadband subscriptions by September 30th 2011. All in all, the number of broadband internet customers at Kabel Deutschland, Unitymedia and Kabel BW totaled 3.1 million, which translates to a combined market share of 11.6 percent.

Each individual market report serves mainly as a snapshot of the current market situation. To provide a fuller picture of long-term developments, DSLWEB also keeps all previous editions of the Broadband Report readily available.

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