BT is persisting with its television offering, planning to supplement its BT Vision broadband video service with additional broadcast bandwidth to deliver Sky Sports channels for its subscribers, who still number less than half a million. The British telecommunications company is a partner in the proposed Project Canvas platform but it is not entirely clear how this will fit with BT Vision. BT also plans to extend its investment in bringing fibre closer to customers, within reach of two-thirds of the country, enabling it to offer bandwidth comparable to cable.
BT hopes to offer the Sky Sports 1 and 2 channels in time for the next football season at under £20 a month, after a recent ruling by the regulator Ofcom that Sky must make the channels available to both BT and Virgin Media at £10.63 per subscriber a month.
BT believes that there is a large unsatisfied demand for competitively priced premium sports. It cites research from Incite suggesting that 59% of respondents feel they are paying too much but have no choice, while 55% want premium sports without paying for other channels and 50% would consider buying if the price came down.
The Sky Sports 1 and 2 channels could be offered not only through the BT Vision service but potentially as premium channels on other compatible devices and displays as part of Project Canvas.
Whether this will actually translate into any real revenues for BT, after it has paid for the programming, distribution and marketing of Sky branded channels, is another matter.
BT has reached an agreement with Arqiva to provide digital terrestrial television capacity to broadcast the channels. Arqiva provides national television transmission services and is also a partner in Project Canvas.
BT Vision is a hybrid service, combining broadcast television with video delivered on demand over broadband. The BT broadband network does not currently have the capability to deliver multicast channels. “To enable delivery of these channels we have chosen to work with Arqiva for DTT capacity,” said Marc Watson, the chief executive of BT Vision.
The BT Vision customer base stood at just 467,000 at the end of March 2010. That is just 16,000 more than at the end of 2009 and only 44,000 more than a year previously.
Sky, reaching nearly 9.8 million homes, added 452,000 television subscribers over the same year, almost as many as BT has acquired in four years. Virgin Media added 192,000 digital television customers over the last year, reaching 3.7 million homes. BT had originally aimed for 2-3 million customers by 2010-2012, a target it subsequently dropped.
The number of views per BT Vision customer per month has now risen to just over 40, up from 32 a year previously. That is twice as many video on demand views a month as the average Virgin Media cable television subscriber. However, these are not necessarily paid views as they may be part of package bundles. BT does not break out operational revenues, or costs, for its BT Vision service.
Despite a 2% decline in full-year revenues at £20.9 billion, BT reported pre-tax profits up 7% to £2.7 billion. It pledged to invest an additional £1 billion over the next five years to extend the roll-out of its fibre network.
BT said television is a potential growth area for the company and one that will benefit from the roll-out of faster broadband.
“We are investing in the future of our business, enhancing our TV offering,” said Ian Livingston, the chief executive. “Assuming an acceptable environment for investment, we see the potential to roll out fibre to around two-thirds of the UK by 2015. This will take our total fibre investment to £2.5 billion.”
With the launch of BT Infinity, download speeds of up to 40Mbps are available to customers close to cabinets that are connected by fibre, which is comparable to the broadband services offered by cable and is sufficient to carry multiple high-definition television channels.
BT Vision has offered little threat to cable television so far, but a hybrid combination of broadcast and broadband, with or without BT, whether or not Project Canvas goes ahead, remains likely to become a mass-market proposition.