Kate Bulkley, Media Analyst.

Broadband from all

By Kate Bulkley

Cable & Satellite Europe

www.informamedia.com

01 July 2006

Free broadband. Broadband TV. Broadband bundles. Just how many more references to broadband can we take right now? Broadband is a bandwagon and it's standing room only as big players jump aboard and others get crowded out.

The UK - where 10m are already connected to broadband - is one of the fiercest fields of engagement and underlines how broadband has become the weapon of choice for both telecoms companies and media companies jostling for position. The stakes have been raised by the growth of Freeview. Neither BSkyB nor cable are pleased by a cheap alternative to multichannel TV and their concern grows as more and more Freeview set-top boxes add on a broadband connection.

Meanwhile, mobile and fixed-line phone provider Carphone Warehouse has courted bargain-hungry customers with an offer of "free broadband". What's interesting is not just who's ahead in the broadband battle and who's got the right formula to win, but just how the broadband fight has changed to being about how media and telco giants can reposition themselves to meet changing consumer demand for what, when and how they search for, find, use and consume media.

Perhaps the most intriguing player is BT. BT Vision - BT's latest attempt to create a content arm - has linked up with Universal to offer 150 films to broadband PC customers and later this year to IPTV viewers (on Freeview-ready hybrid set-top boxes). This is an alliance much bolder than anything BT has tried before in the content space. Previous content brand BT Openworld - cruelly known as Openwound among media pundits - tried and failed, but BT Vision management has some former TV top dogs in its line-up. Dan Marks, an ex-Universal and Sci-Fi channel boss who runs BT Vision, reports to BT Retail boss Gavin Patterson, former managing director of Telewest's consumer division.

From being a monopoly phone company, BT has a long way to go to become an effective broadband TV option, but it seems to be making more of the right moves than before. The engineers are no longer leading with the latest cool technology. The top guys at least know that content, ease of use and value-for-money are the keys to the success.

But BT isn't alone in trying to change its spots. CEO James Murdoch's supercharged presentation in July made the BSkyB of the near future look more like a telco than a satellite TV company. Add £400m (€585m) in investment over the next three years to the £211m paid last year to buy UK ISP Easynet, and by Christmas Sky will be able to offer 51% of UK homes its broadband service, with up to 70% of homes able to log on by December 2007. Most interesting of all, Murdoch Minor predicts that with three million customers the broadband access business makes money and, will help drive "the mix" of Sky products. This means that broadband should help Sky reach its important target of 10m subscribers by 2010 and, hopefully, add something more to the bottom line.

Several City analysts looked nervous during the presentation, but who would bet against Sky, a company with audacity built into its DNA? Rupert Murdoch has pulled off this kind of trick before, when Sky moved from analogue to digital.

The third major corner of the broadband triangle - NTL - is probably still that - number three in terms of general interest and potential. The company soon to be known as Virgin has decided to turn its much-maligned triple-play service into something bigger and better, adding mobile to the broadband, fixed phone and TV package. If that's not enough, cable fired its own salvo in the forthcoming broadband TV battle in July, offering a TV and radio package "free" when bought in conjunction with a paid-for phone service. However, marketing and customers service has been cable's Achilles' heel for so long that no one is making NTL a short-priced favourite for broadband domination.

The upside in the battle for the broadband consumer from the providers' perspective is a reinvention of their traditional businesses in a way that joins up new consumer demands with Web 2.0 offerings. Exactly how much upside all this has for the players involved is unclear. Certainly Sky believes that a broadband-enabled Sky Bet service and social networking-style usage by customers bolstered by the growth of internet advertising will add new revenues to help offset its investment, just as BT hopes that moving beyond a commoditised voice and broadband access business will give it a new grip on its customers as well as new growth engines.

In July Sky acknowledged that there is a bloodbath coming in broadband as the biggest players jockey for position, but the pay-TV giant said the blood wouldn't be on its front lawn. Maybe, but the blade will fall somewhere.

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