01 Jun 2007

JK Rowling has it easy. Creating the four houses in Harry Potter's Hogwart's School of Witchcraft means she has the power to change what they do and how they perform. Gryffindor, Hufflepuff, Ravenclaw and Slytherin are clearly defined places for the courageous, the clever, the fair, and the ambitious to hang out well under the radar of the Ministry of Magic.

In the real world, end of term reports are due in from the four houses at Tessa Jowell's UK Media School of Ever-Changing Fortunes. The houses - BSkyB, Virgin Media, BT Vision and Tiscali - are just as well-known as their Harry Potter equivalents, but in the real world the marking gets a bit more complicated. Anyhow, the latest school year is about to end, so let's see which house is in best position to be awarded the Goblet of Most Broadband Subscribers and which has the best chance at grabbing the Golden Snitch of Triple-Play Success over the coming school year.

BSkyB: the pupils in this house are usually pushy and innovative, and rivals don't like them much. Head pupil Murdoch junior is a chip off the old block (witness Sky's decision to buy a 17.9% stake in ITV to stop it falling into rival hands, for example). Broadband is an important growth area for this house, given that with over eight million pay-TV subs the UK is no longer an early-adopter market and digital-terrestrial platform Freeview is considered by many to be just enough digital TV, thank-you. The younger Murdoch's plan to spend £400m (€589m) to develop a broadband business has been vindicated by strong take-up of about 22,000 broadband subs a week this year, reaching 553,000 by the end of April. Sky wants 70% of homes to be able to subscribe to Sky Broadband by July.

Maybe it's OK to be pushy. But then there is that referral of Sky's ITV stake to the Competition Commission, the punch-up with Virgin Media about Sky channels (of which more below) and Sky's churn is also up at 13.7%. This is above Sky's own stated "acceptable churn" benchmark of 10%. ARPU held up and even increased. End of term mark: B+.

Virgin Media: there are a lot of problems in this house. It changed its name recently, and its most outspoken pupil and shareholder, young Mr Branson, may have had his own face all over the £25m re-branding, but he's not so happy and neither are some of his fellow investors. The reason is that subscribers have been leaving this house faster than your average Quidditch ball. It recruited 97,000 new broadband customers in the first quarter, but its market share has declined while cable TV subs, cable phone users and even mobile customers are down. The phrase "could do better" is apposite. And if that wasn't enough, the Virgin Media and Sky houses are in a noisy dispute over the appropriate carriage fees for Sky channels that has all the hallmarks of a schoolyard brawl. There is a lot of pulling up of socks needed if shareholders and particularly Branson are to stay on board. ARPU is falling. End of term mark: C-.

BT Vision: what a pleasant change to report that this house is doing well. Of course that may be because it is new. The boys and girls here only launched their IPTV offering last December. But with a lot of content, BT Vision seems to have all its ducks in a row. It is banking on the success of BT Broadband - already in 3.7m homes and adding 19,000 new ones a week - as a launch pad for its video-on-demand coupled with Freeview's service. The house is also riding on the coat-tails of the success of Freeview as a route to more TV without a monthly charge. At the moment, the BT Broadband potion is working well, especially as cheaper broadband offers from the likes of Carphone Warehouse have disappointed. All seems well in this house if it can just get used to the idea of being liked by so many people. Of course it is early days and BT does not have a good track record in the content business. ARPU not clear yet. End of term mark: A-.

And finally, Tiscali: this is new house created by the merger of Tiscali and HomeChoice, with the ambition of chasing the triple-play broadband, phone and TV prize, but it has inherited both some pluses and a lot of minuses. There is also some evidence at least that it is short on long-term commitment to graduation. Tiscali TV only launched in March this year (a re-brand of HomeChoice) but its ambition is much bigger than its 40,000 subscribers might suggest. With plans to offer its service outside of the London area (at least 10m homes should be able to subscribe by the end of the year) Tiscali is the cheapest of the four houses for broadband, TV and phone - just £19.99 per month (£14.99 for just broadband and TV) and taking a page from rival houses' play-books, it is promoting a magical new set-top box later this year with 160GB hard drive, HD-capability and DVR. Tiscali could ramp up its national rollout (planned in 2008) through a mooted deal to buy alternative network Pipex. But where is the secret sauce from these housemates? They can't promise forever without delivering. ARPU not available. End of term mark: C+.