Tim Bourne

Tesco VoIP: Further Pressure on BT
BT’s dominance of the UK home telephone is coming under fresh pressure as the phone call market becomes the most liberal in Europe. Previously, their pricing levels have had to be agreed in advance with the UK regulator Ofcom, but with it understood that this is going to be lifted soon, price cuts are expected.
In a sign that the gloves are well and truly off, Tesco has unleashed a price-busting Voice over IP (VoIP) package designed to lure customers from the incumbent operator.
It’s further proof (if any were needed) that VoIP continues to shake things up in the voice phone market.
The Tesco package will be marketed at just under £20 and will include a ‘normal’ phone handset that plugs in to a broadband-enabled PC’s USB port, and the software need to drive it. Calls will be made at a fraction of the current cost.
Many other companies continue to pressure BT. Talk-Talk, the landline phone service by The Carphone Warehouse, has already consolidated two of the traditional landline competitors and it’s likely that Sky would also welcome call revenue via its recent Easynet acquisition.
Pressure is also coming from outside the UK. US giant AOL has BT in its sights with a programme to exploit the Local Loop Unbundling (LLU) agreement BT made with Ofcom, which permits AOL and others to house high tech Voice over IP equipment at exchanges throughout the country.
Technical-savvy Skype callers have for a long time taken advantage of VoIP calling to obtain free or cheap calls.
The danger for BT is that the trickle of the public away from its traditional services over recent years could become a torrent, as more content, including broadband TV starts to be delivered by IP, BT could lose their in-built advantage as the default delivery gateway to UK homes.
Is all of this price cutting good news for British consumers? Well, certainly lower call prices will benefit the majority of UK call makers, but there is a question mark in the long run. It could bring mixed blessings for the UK’s telecoms infrastructure as BT tries to cut costs and investment to ensure that its institutional shareholders remain happy as they operate on slimmer margins.
23 January, 2006
ITV: Takeover Rumors, Poss BT
Speculators with a wad of cash might like to consider convert said cash into an ITV plc share holding in the next few days some feel.
Rumors in the city on Friday that BT was seriously considering making a bid for the UK’s top-rated commercial broadcaster have already driven the ITV share-price up. While this particular risk adverse suitor might not make the deal, ITV is looking an increasingly attractive proposition to a variety of companies.
Even without a takeover, ITV has been tipped by financial commentators to outperform the sector having come out the other side of a restructuring process as a more focused media company.
BT, despite having previously stated that it has no desire to enter the content market, needs to consider the competition from both BSkyB and a revitalised NTL. This could force BT’s into making an early move before other predatory companies come out of the shadows but will need to balance this against the cost of such an acquisition.
Google has already done a deal with ITN, part owned by ITV (and its contracted news provider), to access the company’s extensive archives and is busy beefing up an alliance to take on Microsoft and Yahoo.
Away from the ‘Search goliaths’, mobile companies also see an opportunity in DVB-H TV services. This would provide revenues but the mobile operators would be in a position where they’d need to split revenues with broadcasters or content owners. Perhaps they would like to get a hold of a strong broadcaster to pay for those expensive licenses?
Unlike Sky, which is principally a broadcast platform owner and call centre operator, ITV actually has what companies with desires to be fully-grown media giants badly need; content and a fifty year plus heritage of making TV programmes.
Until a financially-pressed Chancellor of the Exchequer looks at the anomaly that is the Channel 4 company (effectively a state owned UK TV company), there’s not a lot else available in Europe that sustains close scrutiny. The UK’s Channel 5 is embedded with RTL and it is unlikely that the BBC will be considered for privatisation until after the next Royal Charter is granted.
In the current frenzy of consolidation, ITV a relative minnow in global terms is sure-fire shark bait to Telcos, mobile operators and Internet giants.
9 January, 2006
Sky Broadband UK Delivery, With Microsoft Surprise
Interestingly, after Sky made a decision to use a non-Microsoft solution for its HD TV service in the UK, Bill Gates has revealed a deal has been done between BSkyB and Microsoft that will enable Sky’s UK subscribers to access a “Video on Demand” service using Microsoft Media Centre”.
The agreement, which will allow Sky content to be made available to subscribers over a broadband connection, is likely to worry the major UK telco, BT, who is also planning a UK video on demand service for 2006.
Mr Gates, speaking in the keynote address at the Consumer Electronics Show (CES) in Las Vegas, evangelised the “arrival of the much-trailed ‘digital lifestyle’” (which of course, we here at Digital Lifestyles just loved when Bill started using it at last years CES).
The deal dovetails nicely into Sky’s acquisition of the Easynet ISP and creates a powerful alliance between a content focused Sky and the technology titan Microsoft.
Sky’s asked us to drop by next Tuesday to run through a demonstration of the product and give an outline of where they’re going with it. Expect more details.
6 January, 2006
BBC iMP Trial Extended – Trialist React
The BBC has decided to extend the trial for the iMP Player until 28th February 2006, telling trialists that the extra time will enable it to “understand what you want from the service and how you are using it”. A new upgrade of the software is due to be rolled out to the participating trialists in January.
Once this is over, the data from the trial will be processed to form a ‘Public Value Test’. That will then be put to the BBC Governors, who will use this to make a decision on the viability of launching a service.
We’ve had mixed report from iMP trialists, which we found surprising – we thought everyone would be totally wowed by it, watching it 24 hours a day.
The not-watching-24-hours-a-day could be explained by the frustration felt by a lot of trialist – that the content available is somewhat limited choice, and the content’s seven day expiry time.
Content-wonks, like us and we suspect you, are aware that these limitations are a result of the need to negotiate and pay for the rights to distribute Radio & TV content via the Internet. Members of the public, who have other lives to lead, are naturally less aware of the reasons for the restrictions.
Frankly it is easier (and cheaper) to obtain the relevant permissions for BBC content, than independently produced content and brought in content, such as films.
The BBC’s reaction to such sniping is consistent, if not a little bland
- This is a research trial
- Their main focus is to assess the impact that iMP has on viewing habits
- They want to understand if there’s possible appetite for such a service
We think that providing a good range of high-quality content is a key to encourage users to try out the iMP and importantly, keep them using the application during the trial. Otherwise interest will fade – which is the experience we’ve heard from many trialists.
Questions have been also raised on the iMP users forum about the integrity of the Microsoft DRM software, designed to limit the use and copying of the downloaded programmes. Strong security will be key, if the service is to be widened to include non-BBC content.
It will be interesting to see if the service survives, and how the BBC’s own commercial trading unit “BBC Worldwide” reacts, having signed a content deal with BT whose own service is due to launch in 2006.
BBC iMP
21 December, 2005
Pressure Builds – No Christmas Cheer For BT
BT has been hit by two further blows, bringing into stark relief the height of the mountain it must climb to achieve its TV ambitions. Secondarily, drawing into sharp focus the changing landscape for domestic phone calling, as the competition begins to consolidate.
The bad news for the BT TV proposition, is that BSkyb has got its 8th millionth customer. These customers are, by and large, the sort of customer BT badly needs for its triple play TV offering to be a success. They’re high-delivering ARPU (Average Revenue Per User) viewers that will delight the beleaguered BT finances.
Sky’s achievement of the 8 million target is also likely to be a blow to the ambitious NTL. Expect little let up from Sky as it battles to reach the 10 million mark by 2010 and continues to push its Sky+ and multi-room offerings.
Separately, a consolidating Carphone Warehouse has been on the acquisition trail and agreed the purchase of Tele2’s UK and Ireland operations, and separately, Onetel.
The deal with Tele2, the Swedish telecoms company, at a price of £8.5 million plus the £2 million cost of a planned restructure, will add around 188,000 customers in the UK and a further 36,000 in Ireland to Carphone Warehouse.
The deal appears to makes sense for Carphone Warehouse, and they expect the transaction to add to their earnings in the current financial year. They intend to migrate the purchased companies customers onto its own network, under the TalkTalk brand.
The purchase of Onetel from Centrica for £132 million includes £37.1 million, while will be delivered if Centrica deliver a targeted number of customers in the next three years via its British Gas operations. The Carphone Warehouse will also pay Centrica an additional £22.2 million if higher sign-up targets are met.
Onetel’s residential customer portfolio is made up of 1.1 million Carrier Pre-Select (CPS), 250,000 indirect access, 60,000 broadband, 40,000 mobile. There are also 50,000 CPS business customers. Carphone Warehouse are upbeat about this purchase too, saying the acquisition will “increase current year pre-tax profits by approximately £4m, and next year’s pre-tax profits by approximately £20m.”
Here at Digital Lifestyles, we expect competition to be even fiercer in 2006 as both BSkyb and the Telcos battle to capture high spending subscribers.
20 December, 2005
ITV News Channel To Close
Sad to report that UK News organisation ITN has decided to end its ITV News Channel. Despite much favourable comment, they feel that there’s no room in ITV’s multi-channel world for a dedicated News Channel and the channel will close in January.
In a move that will rattle confidence at the news providers Gray’s Inn Road headquarters, the rumour mill has been in overdrive despite the announcement having been widely predicted for some time. It’s still likely to leave a hollow feeling in the stomach of staffers there in the run up to Christmas.
With the launch of ITV 4 in November, a scarcity of resources on Freeview forced a cut in the ITV news Channel to 12 hours per day. This immediately called in to question the channel’s long-term survival and with a recent re-launch of Sky News, the ITV news service looked increasingly marginalised.
ITV, under the leadership of Charles Allen, seems set to jettison its remaining Public Service commitments after digital switchover and, unless ITN becomes 100% owned by ITV, there’s a real danger that ITV will make a deal for a budget news service, leaving ITN in a position where it lacks the critical mass of BBC News 24 and Sky News.
Both Mark Wood, current ITN Chief Executive, and his predecessor, Stewart Purvis, have attempted to reinvent ITN with News deals to mobiles and other ‘new media’ but it looks like the 50 year old commercial news provider is facing hard times ahead.
ITN
ITV News Channel
14 December, 2005
BT’s IPTV Content Deals: Too Little Too Late?
In the week that BT and Sky both saw their triple play offerings potentially trumped by a possible NTL/Virgin ‘quadruple play’, BT chose to release details of its upcoming content deals with BBC Worldwide, Paramount and Warner Music Group.
Ian Livingston, chief executive of BT Retail, talked up the deals, “Whether you are a music fan, love films or hooked on drama you will get the best in entertainment when you want it. BT is defining next generation TV.”
Against a backdrop of whispered rumours of delays with Microsoft’s IPTV Edition, the BT service is slated for launch next year.
BT’s TV service will piggyback on-demand programming, delivered by a high speed Internet connection to a Philips terrestrial Freeview receiver, and the PVR component of the box will hold 80 hours of downloaded programming.
The service will not be a monthly subscription like that of NTL and Sky, instead it will follow a ‘pay-as-you-go’ model, where individual downloads and viewing can be charged.
An agreement with BBC Worldwide that covers on-demand rights for BBC programming and charges for viewing, will provoke controversy as the BBC is paid for by a universal levy on TV viewers in the UK.
Problems won’t be confined to BBC programmes if ITV programming is carried, advertisers are bound to be unhappy that time-shifting viewers will skip the paid for messages.
You might be able to tell that we’re not that excited about this deal. At least BT seems to recognise that viewers watch content rather than technology … or well negotiated deals.
With so many digital TV homes in the UK subscribed to Sky or cable, we’re just not sure if BT will be able to muscle into the Digital TV space.
A major question mark hanging over them is whether the content promised so far is enough to encourage current subscribers to switch or, even more difficult, if they can get the so called “digital refuseniks” to join BT’s TV.
13 December, 2005
Liberty Media Bids For Provide Commerce
Takeover mania isn’t confined to one side of the Atlantic; Liberty, the media group that includes QVC and holds a majority stake in IAC/Interactive Corp, is buying Provide Commerce whose mission is “To become the leading e-commerce marketplace for the delivery of perishable products direct from the supplier to the consumer,” whatever that means.
Provide Commerce has a number of branded Websites geared to rapidly ship perishable goods ordered on the Web, with brands including Cherry Moon Farms.
Liberty is paying Provide Commerce shareholders a 12% premium on Fridays’ closing price valuing the company at $477m, that’s $33.75 for each and every share.
The Liberty purchase, is subject to approvals from US regulatory bodies as well as Provide Commerce shareholders, if all obstacles are cleared then the acquisition should complete in the second quarter of 2006.
John Malone the multi-Billionaire Chairman of Liberty was clear on the acquisition goals, “We believe in the power of video to drive television and web-based retailing businesses and Provide is a compelling addition to our strategy.”
Bill Strauss Provide Commerce’s CEO was equally direct,
“We look forward to working with the other Liberty Internet and video companies to accelerate profitable growth.”
Malone is a titan in the media world who rivals Murdoch Senior in terms of reach and ambitions (in fact Liberty holds a substantial share of Murdoch’s News Corp).
Dr Malone has rarely been wrong footed by developments in the media landscape and we expect he’ll soon be reaping benefits from this deal including the leveraging of IAC/Interactive Corp’s strength in retailing and service sectors alongside potential tie-ins to QVC’s somewhat gullible customers.
Liberty
Provide Commerce
8 December, 2005
Uniting ITV’s New Friends
Friends Reunited and ITV have decided to make it legal; after a short romance, a deal’s been agreed. Rumours they’d been seeing other suitors that included BT, News Corp and that bastion of middle England the Daily Mail & General Trust, did little to cool the ardour of an excited ITV.
The ITV deal values Friends Reunited at £120m (€178m) and there’s a potential further pay off in 2009, designed to keep the project on target of up £55m (€81m).
A gushing Friends Website summed it up:
“When ITV approached us we immediately clicked; they share our values, they’re a national institution that is trusted and well loved, and by joining with them, Friends Reunited will become the UK ‘s 8th most visited site giving us access to a vast audience so we can connect even more of you even more of the time.”
An equally emotional ITV press release went all lovey-dovey about,
“A powerful consolidated online advertising sales proposition. 53% of Friends Reunited users are in the ABC1 demographic and 40% are in the 16-34 age range – both key audiences for advertisers. It will contribute additional advertising synergies as ITV Internet sales will have increased scale, becoming a one-stop-shop for media agencies in the online space.”
To some of us, there’s a distinct whiff of Déjà vu. The former commercial ITV giants Carlton and Granada lost a tidy sum on the former Internet lovely, Jeeves, but ultimately there was little chemistry and even less synergy, some city analysts are more positive about this deal seeing strategic and financial benefits to come.
But is ITV Plc paying heavily for an attractive database or will the two remain friends for many happy years?
7 December, 2005
Digital TV: Confusion Over European Support For Move
The words European and Commission, when used together rarely equate to clarity. This is holding true with the mixed signals on the financial support that will be permitted in the transition to Digital TV across Europe.
Last week the EU ministers of Transport, Energy and Telecommunications met. They agreed on the need to accelerate the switchover, and a 2012 deadline for the move from analogue to Digital TV. Currently ten member states are expected to complete the switchover by 2010.
But this push to digital comes somewhat bizarrely against the background of a recent European Commission ruling. It subsidies the commercial broadcasters in Germany use of the digital terrestrial television (DVB-T) network, violating EC Treaty state aid rules. Subsidies valued at close to €4 million were granted to the German Land of Berlin-Brandenburg, with beneficiaries that included German broadcasters RTL and ProSiebenSat.1. The commission says they are illegal and the sums already paid (around €2 million) should be returned.
The Commission made clear that it supports the transition to digital broadcasting, and that Member States have a variety of methods to assist the digital switchover, that fits in with EC Treaty state aid rules.
Neelie Kroes the Competition Commissioner said, “The Commission is firmly committed to encouraging the transition to digital TV, which has many advantages for consumers and innovation. However, state support must be based on objective criteria, address specific issues where the market does not provide solutions and avoid distortions of competition, particularly between terrestrial, cable and satellite platforms.”
The single market in Digital TV would facilitate the economies of scale for both ‘head-end equipment’ (the digital gizmos that transmit the TV services) and domestic set top box makers that include European giants, like Pace and Phillips.
Europe could benefit economically and socially, by a concerted approach across Europe to the ‘liberated’ spectrum. The EC wants to see trading in radio wavebands (much championed by the UK regulator OFCOM) and believes that this could assist European firms in launching innovative products and services. A study commissioned by the executive indicated that the move to Digital would have potential benefits of around EUR 9 billion for community members through greater efficiencies.
Let’s hope that European bureaucrats can get their act together on this one.
5 December, 2005