Analysts praise BT Vision but warn of tough market

By Matt Whipp

Posted on 4 Dec 2006 at 17:47

Analysts have expressed a cautious welcome for BT's new broadband TV service: BT Vision.

Jupiter Research's Ian Fogg warned not to judge the success or otherwise of the new platform in the immediate future. He suggests the BT move to offer content was as much a push as a jump.

He describes it as being about adding value for consumers to enable BT to resist churn and price pressure.'

As we reported, it looks likely that ISPs will look to offer TV services over broadband connections in an attempt to stimulated continued uptake of broadband, demand for which is predicted to slump by half in the coming years, despite continued price drops.

In fact, so enamoured is France Telecom, owner of Orange, in getting into movies, that it has set up its own film unit to acquire film rights and co-produce features.

Fogg expects BT to have to play a canny game in the UK, where the market is dominated by Sky and the united cable giant of NTL/Telewest.

Aside from the fact that both are long-established, Sky has its HD card to play that ISPs will struggle with over existing copper networks. HD streams take around 25Mbps of bandwidth. Far in excess of anything available to the consumer today, and until VDSL is rolled out, anyone hooked up to broadband via a standard copper connection will be looking at alternatives for HD.

'The UK is a hard place to be a new entrant TV operator,' he warns, and BT Vision will be judged on all sorts of fronts, not just viewing figures, but also the fiscal outcome on its balance sheet.

Jupiter's Nate Elliott also had reservations, pointing out the extroardinary cost of buying into the service. 'That's a £380 set-up cost, or £180 if you sign up for a new broadband plan -- either way, far too much to ask when consumers can get a Freeview + DVR at Tesco or Comet for under £100. Especially if you're targeting consumers who are "frustrated" with the pricing over at Sky, which BT say is a key target,' he writes.

The other issue he notes is BT's highlighting on-demand content, with quite having the stomach to give it away for a free trial. Historically, he said, NTL and Telewest's on-demand services accounted for one tenth of one per cent of all UK viewing hours in the first year and a half.

He said he remained impressed at what BT had done with BT Vision, but that it was unlike to change the picture for IPTV in the UK.

'I' more impressed than I thought I'd be - but I still stick by my IPTV forecast, which shows less than 200,000 UK IPTV households by the end of 2007, and only 1.1 million in 2011,' he said.