Pacific Century CyberWorks Ltd. (PCCW), the Hong Kong Internet startup that last year acquired its hometown telecommunication carrier, announced Wednesday it will lay off 340 employees in the business that less than a year ago it touted as a platform to take on the world: broadband business to consumer (B-to-C) services.
The decision was made while PCCW was developing its new strategy for the business unit, which has been focused on the Network of the World multimedia portal as well as the Netvigator Internet access and iTV interactive television businesses it acquired when it bought Cable & Wireless HKT Ltd. PCCW is scheduled to outline the strategy on Wednesday. NOW is made available via satellite and on the Web at http://www.now.com/, and offers music, sports, environmental and other programming via the Internet and over satellite TV. At its launch, the company envisioned cable TV operators across Asia picking up the service, though it has yet to produce any significant non-English content.
Since its launch in the third quarter of last year, NOW has failed to attract the service-provider deals that it needed to put it on TV around the region, and PCCW has cut back its investment in the service. When PCCW announced a net loss for 2000 of more than HK$6.9 billion (US$884.6 million), Executive Vice President Jeffrey Bowden said the company would hold B-to-C losses to no more than HK$200 million per year. PCCW announced the layoffs in a statement but did not specify in which parts of the B-to-C business the jobs will be eliminated. The employees concerned will be on paid leave until August 20, in compliance with a 12-month moratorium on staff layoffs that was promised at the time of the Cable & Wireless HKT purchase last year.
Despite the poor acceptance of NOW, PCCW still has a dominant share of the broadband Internet access market in Hong Kong, and a plan that successfully leverages that asset could hold lessons for broadband players around the world that aim to make a profit in a so-far daunting industry.
The company has a great opportunity to sell services such as music downloads, games and video on demand to residential customers, but it has to change its approach from content to proprietary services, said Andrew Chetham, an analyst at Gartner Inc., in Hong Kong, in a telephone interview Wednesday. NOW is waging an uphill battle to become a content provider amid leagues of more experienced creators, and makes its offerings available to everyone via the Internet, he said.
"I really can't see any value in keeping NOW. It would be better to start again with something people want," Chetham said.
PCCW needs to buy or create more engaging content and tie it to its broadband service as some broadband players in South Korea have done, he said.
"If you're just in the content game rather than in content plus access, you have to have good stuff. If you can lock people in to your access and steer them to your page or give them better quality of service than they can get on the Internet, then you have a better model," Chetham said.
Whereas the exciting broadband services in most Asian countries have come from competitors to former incumbent carriers, PCCW's domination of the access market gives it a chance to put broadband multimedia on the map in a dynamic consumer market.
"When a company has clearly the ability to get mass-market coverage . . . it's interesting to see what they'll do with it," Chetham said.
PCCW, in Hong Kong, can be reached at +852-2514-8888 or http://www.pccw.com/.