BT's Broadband Vision

IanFogg | December 04, 2006, 02:22 PM

Today's IPTV announcements are not about today, or about tomorrow. This is BT positioning for the medium and long term.

BT knows it must resist downward pressure in broadband prices, which we forecast earlier this year will continue. BT's Total Broadband is the response and BT Vision is a major part of that strategy.

BT are setting modest initial expectations of BT Vision customer numbers (tens this year, couple of hundred thousand next). They do not expect BT Vision to be profitable in its own right for 3 to 4 years.

But Total Broadband is about adding value for consumers to enable BT to resist churn and price pressure. By linking BT Vision to sign up for their retail broadband services they are hoping to boost broadband subscriber acquisition. By requiring an 18 month contract for customers signing up to the cheapest BT retail broadband service, but just a 12 month contract for customers committing to higher priced broadband, they are encouraging higher tier upsell. By offering BT Vision to existing BT Broadband customers willing to re-commit to a new contract lock-in, BT hope to boost customer retention.

The BT Vision service looks to be well put together. It has a shrewd mix of content offered at highly competitive on demand prices (at least until Blockbuster, ntl and Sky respond).

The problem for BT, is that their home market is tough: the UK has one of the strongest satellite TV players in the world, Sky, who will surely increase HDTV marketing in 2007 to expose BT Vision's Achilles' heal(1); the UK has a wildly successful free to air digital terrestrial TV offering with Freeview; and has a newly united cable provider that has a largely upgraded cable network.

The UK is a hard place to be a new entrant TV operator.

Yet BT have played a difficult hand well, so far. However, BT's success with BT Vision should be judged after many months or years, and not tomorrow. The score sheet will have to include BT Vision's impact on their retail broadband customer metrics and revenues, as well as more traditional TV service numbers.

This will be especially true if BT are forced by TV market pressure to cede the living room TV to satellite or cable. In this situation, BT Vision still adds value to BT's customers, but as a service for a homes' second or third TV set. As BT Vision has no mandatory subscription, but offers both a PVR and rich content, it is ideally suited to this role.

(1) Happy to explain about HDTV and BT Vision in more detail. Please ask: press or clients.