The IPTV service sector might still be in its early stages -- there were fewer than 22 million users worldwide at the end of 2008 -- but it has changed the communications services landscape in Europe, which is home to more than 11 million of that global total. (See Europe Dominates IPTV Landscape.)

And that's put a fire under the region's cable operators.

Not so many years ago, some cable operators could make a living delivering a suite of TV services over their infrastructure. Now, though, Europe's MSOs need at least a triple-play offer of TV, broadband, and voice to be competitive, and the stakes are being raised again as the region's telecom operators prepare to take their video service offerings to the next level. (See Europe Set for IPTV Upheaval.)

So can the cable operators compete with the increasingly integrated and sophisticated bundles the carriers are developing?

"IPTV will force cable operators to be much more innovative and more advanced in their service offerings," Manuel Kohnstamm, head of public policy and communications at Liberty Global Europe BV , told LRTV in an interview at the recent IPTV World Forum event in London:

And Europe's cable operators are up to the challenge. "We have the TV experience to engage in this battle," Kohnstamm told his audience during a presentation at the event.

That experience is one of the key tenets of his argument. "We know TV and, importantly, how customers react to TV," he said, noting that the slightest change in the way details are presented in an electronic program guide (EPG) can lead to potentially damaging customer dissatisfaction.

Having experience is useful, but not enough in the long run. That's why Kohnstamm says Liberty Global and other European cable players have been gearing up for an interactive, multimedia services environment where broadband capabilities will be a vitally important part of a services bundle.

That's why Liberty Global -- like other European MSOs such as the U.K.'s Virgin Media Inc. (Nasdaq: VMED) -- has been shouting loudly about its access network upgrades. (See Liberty Takes 120 Mbit/s to the Dutch, ONO! Another Docsis 3.0 Story!, and Virgin Media Sees Silver Lining.)

"DSL is reaching its limits -- it can offer 20 Mbit/s at best in many cases," whereas cable operators with EuroDocsis 3.0 deployments are offering downstream speeds of up to 100 Mbit/s and beyond. "Cable really starts where DSL ends," Kohnstamm proudly proclaims in his LRTV interview.

In terms of video services, Kohnstamm says Liberty Global Europe, which operates in 11 European markets, now offers digital TV and DVR (digital video recorder) services across the board, high-definition (HD) TV in all but one of those markets, and video on demand (VoD) in six countries. "HD, DVR, and VoD: These are the services people are willing to pay for today."

Now comes the next challenge -- the same one that the most advanced IPTV service providers are facing: integrating Web services and introducing targeted, interactive, and personalized advertising into the mix.

"Customers want to participate in the digital age... They want on-demand access to content and services, simplicity and functionality, quality of service, [service] bundles, and fair pricing. We have to make our boxes more intelligent to cope with all the personalization and on-demand services that people want, and we need to shift from zapping to searching. Cable needs to evolve, to integrate Web content and functionality, to ease the discovery of content, and to provide a sexier user interface. We will evolve without much difficulty."

Kohnstamm says upcoming service innovations include interactive advertising and programming, on-demand links to external services, such as the VoD services of the major movie companies, and the development of a content search tool that provides Google (Nasdaq: GOOG)-like capabilities.

Now it's a matter of whether cable operators like Liberty Global Europe can beat their telco rivals to offer such services. As Kohnstamm says: "Timing is everything in this race."

While the Liberty Global man is keen to talk up the potential of Europe's cable operators, the challenge they face from their telco and satellite rivals is considerable. Cable's top-end broadband services are very attractive right now, where they're available, but it won't always be compared with DSL alone: Fiber-to-the-home (FTTH) will be rolled out over the years (albeit slowly) and provide broadband speeds to rival the fastest cable speeds. (See Europeans Ramp FTTH Rollouts and FTTH Europe: Slow Growth Forecast.)

Kohnstamm isn't fazed by that development. "Cable operators typically have fiber-to-the-curb, with fiber within a couple of hundred meters of the households... We will be keeping step with the telco operators [that have FTTH] with the same functionalities."

Scale might also play a role. While Europe's cable sector is growing, the region's operators collectively generated revenues of €18 billion (US$24.1 billion) in 2008 from the 70 million households they serve. Liberty Global Europe generated nearly €6 billion ($8 billion) of those revenues from its near 11.9 million customers.

By contrast, Orange (NYSE: FTE), one of Europe's biggest IPTV service providers, with 1.7 million TV-over-broadband customers at the end of 2008, generated the same level of revenues from its domestic fixed-line services (Home Communication Services France) alone.

— Ray Le Maistre, International News Editor, Light Reading