BSkyB joins 'free broadband' war

[1]
bbc.co.uk | Tuesday, 18 July 2006

BSkyB's broadband is expected to be bundled with its existing services
The broadband pricing war has heated up with satellite firm BSkyB launching a free service for its subscribers.

Under the offer, existing network customers can get its 2MB "base" package for free. Sky expects 30% of its eight million users to sign up.

New subscribers to Sky Digital will be able to sign up for its broadband offering for as little as £15.

Sky said it would spend about £250m on the move, adding it expected to invest a further £400m over three years.

[2]

reuters

BSkyB unveils details of broadband offer
Tue Jul 18, 2006 4:29am ET166

LONDON (Reuters) - British pay-TV company BSkyB launched a broadband Internet access service on Tuesday that it will bundle with its satellite TV offering, taking on competitors including telecommunications giant BT Group.

The company, 38 percent owned by Rupert Murdoch's media conglomerate News Corp, said it anticipated investment of 400 million pounds ($727.9 million) of EBIT (earnings before interest and tax) over the next three years, and sees it becoming earnings enhancing from 2010.

[3]
ft.com
BSkyB joins broadband free-for-all
By Kate Mackenzie
Published: July 18 2006 11:19 | Last updated: July 18 2006 11:19

BSkyB on Tuesday launched a free broadband internet offering, in what is set to be a key move in the battle for customers between fixed-line telecoms companies, cable operators and broadcasters.

Its shares were 4.4 per cent lower at 517p on the news while competitor Carphone Warehouse, which is pursuing a similar broadband strategy, was 3.8 per cent lower to 265p.

The broadcaster will offer all its satellite television customers free broadband connections with speeds of up to 2 megabits per second and a data download allowance of 2GB - equivalent to about three CDs of data.

It will also offer connections up to 8 megabits, with a 40GB data allowance, for £5 per month and up to 16 megabits with “unlimited” data for £10 per month.

BSkyB will also use voice-over-IP technology to offer unlimited fixed-line phone calls within the UK for £5 per month.

It will invest £400m – about double the amount expected by analysts – over the next three years on building the broadband network it bought last year when it acquired EasyNet for £211m. BSkyB said the broadband product was expected to begin reaping profits in the year to June 30, 2010.

The satellite broadcaster has about 8m customers, but as the vogue for bundling communications services takes hold, it faces pressure from companies that were not traditionally considered competitors. Carphone Warehouse, best known for its mobile phone retail business, in April announced it would offer free broadband with unlimited national phone calls for £20.99, including line rental.

Orange, the mobile telecoms operator owned by France Telecom, has also moved into free broadband provision to its mobile customers.

However industry figures and analysts fear a scenario in which undifferentiated broadband and telephony products push down margins as service providers compete on price for a finite number of customers.

To combat this, providers are focusing on speed and added services. BSkyB’s broadband will include a 12-month license for anti-virus software and a free wireless router.

James Murdoch, BSkyB chief executive, said the company had no plans to branch out into mobile phone services. Its chief competitor in subscription television, ntl, recently bought Virgin Mobile in order to expand its own services.

However Mr Murdoch confirmed his company was considering a bid for AOL’s UK business, one of the largest broadband providers with 2.2m customers. He has previously said the company intends to be a major broadband player, operating “at scale”.

[4]

ft.com | Published: July 18 2006 11:19 | Last updated: July 19 2006 00:00
BSkyB to invest £400m for broadband arm
By Andrew Edgecliffe-Johnson, Emiko Terazono and Andrew Parker

British Sky Broadcasting will pour £400m ($728m, €581m) into building a broadband access business over the next three years in the hope of expanding from its £4bn pay television market to take a piece of the £25bn internet, telecommunications and entertainment market by 2010.

James Murdoch, BSkyB chief executive, said the satellite broadcaster was targeting 3m customers by 2010 – about one sixth of the households expected to have broadband accounts by then.

Its aggressive challenge to rivals such as BT Group, NTL and Carphone Warehouse will entail unexpectedly high upfront investment. Shares in BSkyB fell by 23½p to 517½p as analysts cut 2007 forecasts by as much as 10 per cent.

Expectations of an intensifying war for broadband customers also hit shares in BT Group by 3½p to 226¾p and knocked Carphone Warehouse by 12p to 263½p.

The BSkyB announcement came as Charles Dunstone, Carphone chief executive, was forced by the Advertising Standards Authority to abandon his “free broadband forever” slogan, which had helped the group attract 340,000 broadband customers between April and June.

BSkyB will offer all its television customers free broadband connections with speeds of up to 2 megabits a second and a data download allowance of 2GB. It will also offer connections up to 8 megabits, with a 40GB data allowance, for £5 a month and up to 16 megabits with “unlimited” data for £10 a month.

“For a lot of incumbent players who have been charging a lot [of money] for not a lot, it could be very uncomfortable,” said Mr Murdoch, who claimed consumers could save up to £300 a year compared with rival services.

Rivals disputed the claim, noting that the free broadband service would only be available to about 1m of BSkyB’s 8.1m customers until it took control of more of the landlines that run from BT exchanges to people’s homes.

BT, which has complained about Carphone’s broadband advertising, said: “BT’s broadband is available now, Sky’s tomorrow and Carphone’s ‘free forever’ has never been’.”

Mr Murdoch defended the upfront investment, saying: “It’s a couple of quarters of operating profit to build a franchise that is going to have the durability of decades and open up millions of customers. I’ll make that trade any day.”

The group is building on the Easynet broadband network it bought last year for £211m.

The bulk of the initial investment will include subscriber acquisition costs of about £80, on average, for a customer. BSkyB said the broadband product was expected to begin reaping profits in the year to June 30 2010.

Although SkyBroadband will offer online distribution for BSkyB’s content, including film and sports rights, it stops short of a full internet television service.

Mr Murdoch confirmed BSkyB was examining AOL’s UK internet access business, which has 2.2m customers, but cautioned it was wary about overpaying.

Additional reporting by Kate Mackenzie