Satellite broadcaster BSkyB is expected to announce the acquisition of broadband service provider Easynet in preparation for increased competition from cable television.

The deal would put Sky in direct competition with cable, as well as BT and other residential broadband providers, and enable it to offer a ‘triple play’ of video, voice and data services to its existing customer base of 7.8 million satellite television subscribers.

Last week British Sky Broadcasting raised over £1 billion in a bond offering which could be used to fund acquisitions. According to reports, Sky could pay up to £150 million for Easynet. A source confidently predicted to informitv that the acquisition will take place.

The Easynet Group plc is listed on the London Stock Exchange. Last year it turned over £144 million. Easynet operates a high speed network across Europe, in the UK, the Netherlands, Belgium, France, Germany, Spain, Italy and Switzerland.

In the UK Easynet is the market leader in installing its own equipment in telephone exchanges, in a process known as local loop unbundling, and offers a wholesale broadband product known as LLUStream in competition with BT.

The Easynet consumer arm, UK Online, already provides an 8Mbps broadband service, and is about to offer 24Mbps, based on the next generation ADSL2+ technology.

Such data rates are more than enough to deliver video services, even high-definition services, using a technology known as internet protocol television, or IPTV.

Easynet is able to support multicast internet protocol delivery over its own network, potentially enabling it to offer hundreds or even thousands of live video channels to millions of personal computers and suitable set-top boxes.

Video Networks already provides its HomeChoice broadband television service to a limited number of subscribers in the London area, including Sky channels, a service known as Sky By Wire.

A deal with Easynet would give Sky access to a broadband footprint that can reach 4.4 million homes in the major metropolitan areas of England and Scotland, with a planned rollout to another 3 million homes.

Sky has previously announced a broadband service, offering movies and sports clips for download to personal computers, expected to launch later this year. Its next generation of set-top boxes will also include provision for a network connection.

However, it seems that its broadband ambitions may extend beyond this, and further announcements may be expected.

“Within a decade, video services delivered over broadband networks will be firmly established as an alternative platform to digital satellite, terrestrial and cable television transmission,” said William Cooper, principal consultant at informitv and co-author of a recent report on the impact of broadband on the broadcast industry. “In the longer term, some proponents suggest that the majority of audio and video services will be delivered over broadband data networks rather than through conventional broadcast means.”

A move by Sky into broadband will provide an upgrade path to enable it to offer customers not only video-on-demand, but also integrated telephony and high speed data services to compete with cable television and future video services from BT.

While there is evidence that demand in Britain for satellite pay-television services is slowing, broadband is booming, with a new customer connecting every ten seconds.

This could provide a new engine of growth for Sky, which will come under increasing pressure from a single national cable company, following the announced merger of NTL and Telewest. It will also anticipate plans by BT to offer a video-on-demand service in conjunction with digital terrestrial television.

Sky is declining to comment on its plans, but has said it “intends to continue to set the pace of change in media content and distribution”.