Sky-Easynet: Much More Than TV

Ian Fogg | October 21, 2005, 03:27 PM

BSkyB upped the ante today by purchasing LLU-owning broadband provider Easynet.

This is much more than a TV play. Sky will use Easynet's LLU network to market Internet access offers and, in time, VoIP telephony services. With Easynet, Sky is able to hedge its bets on IPTV prospects and ensure if there is a business opportunity in IPTV, then they are well positioned with their own network and so not reliant on other suppliers.

Broadband is still a fast growing sector. With Sky finding pay TV customers harder to acquire, yet having committed to a target of 10m homes by 2010, Sky needs new acquisition mechanisms. Ironically, this move enables Sky to copy its cable competitors and use the lure of broadband Internet access to acquire customers, and then up-sell those consumers pay TV and telephony.

The purchase is about revenue diversification too. This is a full multi-play strategic step, but it's not a 1990s-style cable triple play as many are discussing. Sky is following Wanadoo and UPC/Chello Netherlands into a platform agnostic strategy. Rather than invest in just one infrastructure and then sell multiple services across it (e.g. TV, telephony and broadband across HFC cable plant), Sky are positioning so they can offer communication and entertainment services to consumers on the most suitable platform, be it satellite or DSL.

IPTV and VoD are just a part of this play. Given Sky's announced roadmap timescales, IPTV and true VoD ('pull VOD' in Sky's language) are some way off at this stage. HDTV, telephony, push VOD and Internet access are much more pressing.

For broadband providers, one of the other big question is what will happen to Easynet's LLUstream product? It enables smaller ISPs to offer very high speeds, without deploying their own capex, and so remain competitive with the large ISPs now investing in LLU infrastructure (Pipex, Wanadoo, Bulldog, Easynet's own UKOnline, Be, etc.). This is an area for UK ISPs to watch closely as further details emerge.