[Satellite News – 07-18-08] BSkyB, which serves around 1.4 million broadband subscribers in the United Kingdom, hopes to use that infrastructure to provide the next generation of content services to its subscriber base, a company official said.
    The satellite pay-TV provider launched its Sky Broadband offerings in 2006 following the acquisition of terrestrial service provider EasyNet. Now BSkyB wants to expand the use of that infrastructure as it faces more competition in the consumer market.
    “In the future, when our [set-top boxes] connect into broadband, people will be able to pull content over a broadband network into them as well as have content delivered over broadcast for either live viewing or local storage later. Broadband comes a very important pipe for the delivery of content,” Steve Nuttall, director, commercial group, BSkyB, told Satellite News. “We think there will be large demand for live programming and [high-definition] programming on a one-to-many basis. Satellite is very cost-effective, very flexible, very fast to deploy in that way. In addition, for less popular content and communications needs, a one-to-one personal broadband connection is very valuable. We think we have both means of delivery in a structure that is very fast and flexible and which is well aligned with what consumers we need.”

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Using telecoms infrastructure has been a key part of BSkyB’s plan to transform its business from a standalone satellite pay-TV operator to a triple-player operator, said Nuttall, “I think in the last years, we have transformed our business from being a linear pay-TV operator to a multi-product, multi-platform provider that operates in the communications and entertainment markets,” he said. “We have learned a lot about running broadband networks. We have learned an awful lot about how to interrelate with third parties in order to make that successful. Over the last two years, the number of sales we are making in a quarter has expanded very, very significantly. In the Christmas quarter, we did 1.4 million product sales. You compare that to three years ago, that has probably quadrupled the volume we are putting through the system that we previously had.”
    BSkyB’s broadband strategy has found early success, but the July 15 announcement by telecommunications company BT that it is planning a 1.5 billion pound ($3 billion) program to expand its next-generation broadband services puts more pressure on BSkyB and its transformation plans.
    “Around 30 percent of Sky’s base will be within the areas targeted by BT’s fiber rollout,” Daniel Kerven, a media equity analyst at UBS, said in a research note. “… Ultimately, Sky’s reaction and the implications for Sky will depend on the regulatory framework put in place by Ofcom. Key inputs will include the lifespan of unbundled exchanges, the wholesale price that BT can charge for a fiber product and the potential opening up of cable networks which would allow Sky to market directly to cable customers for the first time.”
    Innovative partnerships with Google and Sony also hint at the future direction for BSkyB. “We use Google for a high-quality email and communications services for our broadband customers,” said Nuttall. “We have many more people using that platform, too. There are a few things we are working on with Google and there’s an awful lot more to come out of that partnership. We are also just about to launch our [joint venture] on-demand service with Sony, whereby we are the entertainment content provider for the Playstation portable. Launching this summer in beta, it’s another good example of the types of things we are doing.”
    The transformation of numerous service providers is driven by changes in consumer behavior. “We have a general vision that we would like our content to be ubiquitous, available at all times and places,” said Nuttall. “We think the different distribution platforms are complementary to each other and by offering access to say, large sporting events on a mobile phone, it actually helps the Sky Sports proposition overall, rather than hinders it. The fact is, people want to have constant contact with content from us, especially sports and news. People are not sitting on a sofa all day. The fact they can have access to Sky all day on different devices is a good thing. Viewers now have more control.”
    BSkyB also will remain the dominant player in terms of securing the broadcast rights to attractive premium content, said Kerven. “With BT’s fiber rollout only targeting 10 million homes, Sky will remain differentiated by its national reach, complete content offering, staggered rights and its installed base (which has been built after many years of investment), which puts it in a strong position to secure rights,” he said. “BT and other providers would have to accept substantial losses over several years to establish a rival pay-TV offering. Furthermore, with the majority of homes outside areas covered by fiber, a rival service would have to seek satellite distribution.”