Don't forget the voice. This was the message from Stefano Pilari, Telecom Italia's president of domestic services, speaking at Marconi's press and analyst conference in Genoa. Many incumbent operators, terrified at the potential losses in revenue from VoIP and broadband cable operators, have been looking for new sources of income, such as TV on demand. However, Pileri acknowledged that, while this is important, they shouldn't ignore voice.
Yes, new operators pose a threat, with cheaper services, but voice is still the cash cow, the killer application. In fact, voice revenues make up over 50% of TI wireline's total and, despite the emergence of successful triple-play operators in Italy, most notably FastWeb, this revenue fell only 0.8% in the last year.
As Pilari put it, "Voice is still our first priority." The trick in maintaining high voice revenues is, according to Pileri, in making voice more exciting to the customer, with extra features. "Now there is a new world we have to propose to our wireline customers that involves value added services. We must defend our core voice business, increasing loyalty and expanding usage though innovative terminals and value added services."
Risk of migration
One main risk, he explained, is "the migration from fixed to mobile", which would be almost a certainty if the incumbent operator "doesn't invent products to maintain voice".
It is for this reason that TI is embarking on a quest to dramatically alter the experience of wireline users in Italy. Pileri spoke of a household where each member would have their own handset, much like a mobile, with their own personal number. Installing a wifi point in the home would give access within a limited area but enough for every member of the household.
Calls to each member of the house would produce a different ringtone, so that the right person could pick up the phone. Added features for the wireline user would include SMS messaging, a personal phonebook and video calling, all available "only if we use the approach of IP".
And this isn't something Pileri sees as a future prospect. "We expect the wifi connectivity approach in homes by the end of 2004 or into 2005". Indeed, later in October Telecom Italia launched its Alice Mia option, routing calls over broadband internet and making it possible for six numbers to be carried into the home. Over a single phone line, using Telecom Italia's system, three phone calls can now be made at the same time.
During his energetic talk, Pileri even managed to pull off something that perhaps only an Italian could do with style. After letting his mobile ring — on silent — throughout the morning discussion, he eventually answered it in front of the assembled analysts and journalists, declaring his preference of phones.
"I am a wireline man, mobiles don't work with me." Unfortunately, with my Italian not progressing further than "Si", I was unable to ascertain whether the caller was someone from TI, or his wife wanting to know where he had left the car keys.
A "sexy product"
Speaking later at the annual event organized by Marconi, a main provider of equipment to TI, Gionata La Torre, director of consumer internet, outlined the value added services that would be included. "Until 2003 the value added service was the alarm clock on the phone," he claimed.
To compete with the others, La Torre said that TI had to add the kind of feature already available on the mobile. And how did they do that? "We just copied it," announced an unashamed La Torre. Making something that was customizable, with personal numbers and a PIN to protect its use, a new handset range, the Aladino, was introduced. It even looks like a mobile, creating what La Torre described as a "sexy product".
This product converts the old fixed-line telephone into a terminal with a colour display, icon-based menus, predictive text SMS messaging and a vast range of ringtones and games.
Without any remorse, he admitted that they hadn't even bothered to try to invent something new. "Why bother, we just copied Nokia. Most people know their handsets, so we just copied their menu system." For a later addition to the Aladina range of handsets, La Torre admitted that they had simply copied Motorola's idea, and introduced a flip screen.
There are distinct advantages over the mobile, La Torre claimed. "Many people speak of video communication being a killer application for mobile phones, but I don't think that it is, it won't work." He enthusiastically acted out the potential difficulties to the delegates. "You can't walk, talk, look at your phone and still look where you are going."
However, on a fixed phone within the house, "it is the killer application". He spoke of future ideas being considered for fixed handsets, including IP Radio. "My dream is to have instant messaging". TI wants to have these phones in all Italian households. In just five months, numbers of these phones have grown from 221,000 to over 500,000.
La Torre later admitted that the strategy of copying the mobile market had spread into TI's broadband offering. Due to the nature of the Italian market, he said that most people weren't willing to sign up to monthly contracts that they might not use. To combat this, with an eye on what mobile operators had been doing for many years, they introduced pre-pay and pay-per-use onto broadband.
Alice and Big Brother
Actually, within TI, La Torre announced that broadband had become a banned word. When it was first introduced it hadn't been that popular, being an unknown entity and using English words that many Italians wouldn't understand.
According to La Torre, the majority of broadband's original users when it was first launch in 2001 were "geeks" who tended to "stay indoors, without any friends". Sales started to rise more steadily when they changed the name of the service to "Alice" (pronounced "aleechay"), complete with attractive imagery. Since then the word broadband had been forbidden.
In order to make the service popular and profitable, it is essential to create content, said La Torre. "If you want to make money in the internet business, many told me that the only way is through online gambling and pornography."
However, he admitted, perhaps with a hint of disappointment, that gambling and pornography was strictly off TI's menu, his bosses having told him that they were not part of their strategy. "Therefore, we needed something with the same appeal."
Perhaps to garner the same attraction as gambling, TI acquired the game rights to 16 Italian football teams for three seasons, offering their customers the opportunity to pay per match or for the whole season. Looking more towards the pornographic side of things, rights to the Italian version of reality TV show Big Brother were acquired, and customers could pay to watch and also pay to vote.
With this type of content, La Torre sees the main competitor as pay-tv companies, such as FastWeb. "But," he added, "we are cheaper, much cheaper." GTB