BT - the bad boy again?
In the light of recent events in Europe, such as Mario Monti’s investigation of mobile phone charges and online music vendors, the possibility of an anti-competitive scenario arising in this area and drawing real fire from the European community has become far higher. If Deutsche Telecom or Teila seriously began such a campaign, there would surely be complaints. So why haven’t we seen BT offering such services before?
Well, during the 80’s BT was forced to sell its cable TV interests (now Telewest and NTL’s networks) so that the as yet undeveloped cable market could secure investment and grow outside the then-monopoly. This was backed up by regulation that has, would you believe it, expired earlier this year. There are those that argue the cable companies have not yet had time to grow sufficiently, especially considering the current share prices of their peers, but this could not be expected to stop BT. The essence of the deal with Sky and ITV is that from 11 August 2001, residential BT customers can either front a monthly £19.99 and get ITV Digital or between £10-34 for Sky.
Angus Porter, BT Consumer MD, said: ‘Our customers sometimes mistakenly believe they need to move their telephone line to a cable operator to get access to digital TV. That's absolutely not the case.’
Of course, BT has had to put up with the likes of NTL undercutting prices in both telephony and internet access, so the move to stop customer seepage makes a certain amount of sense from this point of view, and may well provide greater uptake of digital TV. As Jon Florsheim, Sky's Director of Sales & Distribution, concurred: ‘BT's initiative can only help to further drive digital take-up’ - digital penetration is currently around 32% in the UK.
A worrying point here is that both digital TV companies, in search of more interactive services, have been investigating the use of phone lines as a back channel. In fact, Sky has been trialling VOD provision via ADSL lines. Suddenly the lack of UK broadband access issue comes back to the fore - if Sky and ITV need an ADSL back channel, BT is their only option for the UK. This is because BT has been torturously slow to allow anyone else access to their exchanges - with such a deal on the cards, why would they be quicker?
Andrew Howells, MD BMPtvi, said: ‘BT was un co-operative in terms of Local Loop Unbundling (LLU), and has successfully maintained artificially inflated prices. If it maintains the same strategy, this announcement represents a huge backward step.’ Porter offers little encouragement here: ‘This new deal takes us one step further in our goal to continue to be the main communications provider of choice in the UK.’
Interestingly, the Communications White Paper, launched last year by Chris Smith, Minister for Culture, Media and Sport, expressly prohibits the holding of digital TV licences by: ‘bodies with undue influence in the opinion of the regulators.’ While the casual viewer may think that this might refer to BT, Howells is not sure: ‘This issue is, presumably, still open to debate!’
Robert Bell, partner and head of telecoms sub-group at law firm Nabarro Nathanson, agrees in part: ‘Although this deal as it stands looks like simple affinity marketing, if BT was to offer preferential interconnection pricing to ITV or Sky it could constitute a monopolistic situation.’ Bell continued to point out that the deal also prohibits current Sky or ITV Digital customers from taking up the offer: ‘It’s like the situation with the building societies - new customers are poached with very attractive interest rates, a financial position supported by older customers, who recognise this and are therefore more likely to be poached in turn.’ This kind of money-go-round is more likely to achieve high churn rates rather than increasing penetration.
Disturbingly, BT’s response to the Communications White Paper states: ‘It is tempting to regulate to preserve what we know. The burden of dealing with regulatory regimes can stifle enterprise. The internet has flourished with a minimum of regulation. If regulation is allowed to take hold, the dynamism, initiative and creativity that have been its hallmark will be lost.’
Readers may recall the dynamism and initiative of LLU, the patenting of hyperlinks, the overhyping and subsequent death of WAP and the unmetered access/FRIACO fiasco. Although BT’s position seems legitimate at the moment, it seems a fair bet that this is but a taster of what is to come from this direction for the iTV industry. Howells: ‘BT really hasn’t revealed its cards yet, it’s sitting on the sidelines - this is just a forerunner of forthcoming intentions - basically, a warning.’