Telecom giants face off in tussle for new customers

Cablecom is hoping to ring in the changes and challenge Swisscom's monopoly Keystone

Cablecom and Swisscom – both dominant players in their respective fields – look set to do battle in each other’s traditional heartlands this summer.

Phone giant Swisscom is about to enter the lucrative television market, promising up to 500 channels through its existing fixed line network.

This is in response to Cablecom’s increasingly aggressive drive to poach telephone customers from Swisscom and other providers using an emerging digital phone service.

On Tuesday the company said it would begin offering its digital customers free weekend and evening calls within Switzerland from July 1.

A Cablecom pilot scheme launched in early 2003 has convinced around 32,000 households to sign up to the new service, which bypasses the so-called “last mile monopoly” held by Swisscom.

Rather than using traditional phone lines, which must be rented from Swisscom, Cablecom uses spare capacity on its broadband cable network to link people to the phone system via a modem.

Cablecom chief, Rudolf Fischer said the new call rates were to be permanent, adding that he wanted to have 80,000 new customers by the end of 2004.

Disputed last mile

The majority government-owned Swisscom says the new technology – and Cablecom’s pricing strategy – is evidence that the “last mile monopoly” does not exist.

“It proves that there is competition on the last mile and therefore any government or regulatory intervention [to unwind it] is unnecessary and will be damaging to Swisscom,” a Swisscom spokesman told swissinfo.

Helping to convince potentially sceptical customers to ditch their traditional phone service are Cablecom’s competitive prices. The current monthly access charge is SFr20 ($16), versus Swisscom’s rate of SFr25.25.

It also claims its regular daytime call charges are up to 50 per cent cheaper than its much larger competitor.

Cablecom said its new discounted rates were designed to inject “new life into the Swiss telecommunications market”.

It’s a challenge that Swisscom, emboldened by a SFr10 billion ($8 billion) war chest, says it will meet head on – this time, in Cablecom’s territory.

Stagnating fixed network

In late March, Swisscom’s chief executive Jens Alder told investors that the firm would spend more than SFr1 billion on new technology to pipe television signals into living rooms.

Alder’s move is a direct challenge to Cablecom, which supplies about two million Swiss homes (or 50 per cent of the market) with cable-delivered television and radio channels.

Over the summer, Swisscom plans to deliver TV to several hundred homes. If the trial proves successful, Alder said the company would begin marketing the service across the country, starting next year.

Alder has repeatedly said that Swisscom has no choice but to enter the TV market, given the increasing threats to its fixed network – not least from regulators who have vowed to remove its last-mile rights.

Although the fixed network generated SFr5.8 billion in revenue last year, Alder says the business is stagnating, largely because of rising costs and competition.

Triple play

“We have to invest in the fixed network so we can offer an alternative to Cablecom. One which delivers telephony, fast internet and digital TV from a single source,” said Alder in an interview with the “NZZ am Sonntag” newspaper.

However, Swisscom’s move to provide this so-called “triple play” service is not without technical challenges.

Because a standard phone line does not have the bandwidth to deliver hundreds of channels simultaneously, Swisscom is banking on some clever technology.

A Swisscom TV customer zapping through a seemingly endless selection will not actually be changing channels on his television set. He will in fact be changing the network.

“It’s something the customer should not notice,” said Alder.

“The net must be able to switch extremely quickly back and forth. If we manage to do it, we’ll have an advantage; instead of having just 50 channels, our exchange could have 500 channels at the ready.”

swissinfo, Jacob Greber in Zurich

Key facts

Swisscom is 67% owned by the federal government.
Regulators are moving to undo its so-called “last-mile monopoly”.
Cablecom offers a digital phone service through its internet infrastructure.
Swisscom plans to invest SFr1 billion over 5 years in new TV delivery services.

In brief

Cablecom versus Swisscom

Telephony:
Swisscom has 4 million fixed net customers in Switzerland; Cablecom has 32,000.

TV:
Cablecom has 2 million customers; Swisscom will offer TV services to several hundred households in a trial starting this summer.

Internet:
Swisscom has 596,000 ADSL customers; Cablecom – unknown.