Broadband for Joe
By Kate Bulkley
Monday December 1, 2003
The launch this week of NTL's 15-channel package may turn broadband into a consumer must-have, says Kate Bulkley
Broadband is about to become a compelling mass consumer product rather than a dry concept, as cable giant NTL this week launches a 15-channel broadband package of family-oriented music, gaming and education to its 910,000 broadband subscribers.
Selling broadband has hitherto mostly been about offering fast, always-on internet access, plus features such as anti-virus software. Now, however, NTL believes it is about bundling exciting content such as MTV Live!, Frost TV, Encyclopaedia Britannica, Pure World Cup and the BBC's Tweenies. And with the total UK broadband market due to hit almost three million by the year end (and estimated by Jupiter Research to double by 2006), there is finally a critical mass of subscribers to sell to.
"We are looking to cross the chasm from geeks to the regular Joes on the street," says George Fraser, general manager of Real Networks for Europe, Middle East and Africa, an NTL broadband rival. "Regular Joe wants premium content services. He won't say, 'Broadband's great because it gives me faster emails or anti-virus protection'. For him, it's about World Cup rugby, music and gaming."
NTL Broadband Plus launches this Wednesday with its bundle of 15 channels, using the same business model as multi-channel TV, which has been bundling content for years.
"Broadband Plus is about appealing to the new family market that we now see developing in broadband," says Chris Bunyan, head of core internet services at NTL. "We think the sheer simplicity of it will be very important. They can get hundreds of thousands of music tracks, hundreds of games, a full schools' curriculum, but without going through the pain and cost of getting it from the web."
The bundled content will cost £3.99 a month plus the price of NTL broadband connection, which ranges from £17.99 to £34.99 a month, depending on the average speed of the connection. The company admits its slowest and cheapest connection, which delivers a connection speed of 150kbps for £19.99 a month, is "not best-suited" to Broadband Plus. "Broadband Plus is optimised for the 600kbps service [£24.99 a month] because it should feel, if not exactly like TV, then certainly like the sort of thing you would be willing to pay for, with no jerkiness or endless time waiting for things to download," says Bill Goodland, NTL's director of internet.
At £3.99 a month the bundle of channels itself is a real deal. If you went on the web and signed up individually for all 15 of the NTL Broadband Plus services it would cost just over £30 a month. "It is the volume model," says Goodland. "We do all the hosting, marketing, billing, and running the payment mechanisms for the content providers so we are an end-to-end distribution partner, which creates a reasonable margin for the content providers and gives subscribers something very interesting."
The bundling of services on the web was pioneered by Real Networks, which now has 1.2 million subscribers worldwide. Real's Super Pass offers more than a dozen content services from CNN to football to theatrical trailers at £9.99 a month, and recently it launched a standalone Radio Pass product as well. But the difference is that Real is out there on the world wide web, fighting for attention and delivered by whatever connection speed a customer happens to be using.
Fraser applauds NTL's moves to bundle content, though he admits it could harm his commercial arrangement with NTL World, NTL's portal site, which has a Real link on it. "The thing I like about what NTL is doing with Broadband Plus is that it is another indication of what we have been doing since 2000," he says. "People have been very cynical about paid-for content on the web, but this is changing and other ISPs will have to look at what NTL is doing as well."
One of NTL's content providers is Vidzone, a video music streaming service that rotates its playlist, adding 100 new videos a week, and is also available as part of the Real service. "With Real One we are available on the world wide web," says Adrian Workman, founder of VidZone. "With NTL, it is a captive audience. Real has been a ground-breaker but never had a captive audience. I believe that what NTL is doing will turn the tables in broadband take-up."
Ian Fogg, broadband analyst at Jupiter Research, says the cable players are ahead of companies such as BT, which provide broadband over phones lines using ADSL technology. "There are more tiers of broadband connection speeds available from cable in the UK but this is changing," says Fogg. "The next question for operators is if entry-level connection tiers start to cannibalise their higher-speed and higher-priced tiers."
Fogg believes that one answer to this dilemma is to add content. "For cable, now that it has a customer base, it is all about how it can boost its revenue per user. It is in this business with TV already so it understands it and can do it with broadband. It also has the potential to tempt people with content to upgrade to a higher-speed broadband connection, which is also higher margin for it - so it is like a double-whammy."
It will be interesting to see how the rest of the market reacts to what NTL is doing. At AOL the philosophy has long been to create a "value pack" where the ISP bundles in "as much as possible for a reasonable price," says AOL UK spokesman Jonathan Lambeth. But AOL, with an estimated 200,000 UK broadband subscribers, has so far focused on offering the connection and the content together under one price and using "big events" such as Big Brother video and Wimbledon to attract new users.
Meanwhile, BT had its fingers burnt in the broadband content game when, through BT Openworld, it offered access to different bits of content, all priced separately, making it an expensive proposition for customers and almost as unwieldy as going directly to the web. BT Yahoo!, its newest broadband partnership, gives users access to the content of Yahoo! and has an interesting ability to link to certain gaming consoles, including Microsoft's X-box and PlayStation 2, but the marketing push still centres on communications features such as a customisable toolbar, anti-virus protection, firewalls and some à la carte content.
Content is not yet the key way to sell broadband for Matt Whittingham, head of information services at MSN. "We believe that most people are still upgrading to broadband primarily because they want the internet, but faster, and it is only when they get it that they discover they can download music or whatever." As part of the world's biggest software concern Microsoft, MSN also has a different business focus. "We definitely believe that content is part of the story, but we see it as a wrapper for the core services such as a web-based calendar and other communications products and increased functionality."
The UK's other cable provider, Telewest, does not have a bundled broadband content package and re-launched its blueyonder website in September with a focus on offering "the tools and applications customers need to discover the internet on their own". But Telewest has 389,000 broadband subscribers and is still extricating itself from financial restructuring, so its priorities are not the same as NTL's.
To give its new service a jumpstart, NTL is offering Broadband Plus free for three months to new and current broadband subscribers. There is also no intention to offer the 15 channels as a bundle to non-NTL-area subscribers. And the cable operator will still run its NTL world portal site, which is the access point for both its dial-up and broadband subscribers.
It is not clear how successful NTL's proposition will be, but Suscom, a US cable company in Pennsylvania, launched a similar broadband bundle of channels in August for $8 (£4.65) a month extra to its high-speed cable modem connection service. So far 65% of new customers have subscribed.