[Satellite News – 5-9-08] U.K. telecommunications giant BT Vision has perhaps one of the hardest tasks of any major operator in Europe in terms of penetrating the TV market.
    BT is attempting to gain a foothold in a market where satellite operator BSkyB has nearly 9 million pay-TV subscribers. The terrestrial alternative, Freeview, also has nearly 10 million households, while cable operator Virgin Media has more than  3.3 million digital-TV subscribers. This week, the BBC and ITV also unveiled the launch of Freesat, a new free digital satellite TV service.
    So how does BT Vision compete in this crowded market? Dan Marks, CEO of BT Vision, discussed the company’s plans to become more of a force in the digital TV market, the competition and how the dynamics of the digital TV market in the United Kingdom are changing with Satellite News Associate Editor Mark Holmes.

Satellite News: What impact do you think BT is having in the TV market?

Marks: BT Vision is going well. At the end of September, four months after we started marketing the service, we had 60,000 customers. We doubled that number in the next three months to Dec. 31 and we announced that we had more than 150,000 customers at our last quarterly results on Feb 7.  We remain committed to our medium-term growth target of 2 [million] to 3 million. Incidentally, this growth rate compares very favorably with that for Sky, who took two years to achieve a customer base of 100,000 for Sky+.
    … I think in terms of what we have built on the service it is a very compelling proposition. We now have the largest on-demand offering in the United Kingdom with over 4,200 hours of content. … We are finding that our subscribers are using the service a lot and getting an enormous amount of pleasure out of it. It is really changing in a fundamental way their patterns of television viewing. I think we are doing a number of things in the market. We are offering people a flexible, attractive alternative to Sky and cable. It is something that gives them more convenience and more control than Freeview..

Satellite News: Are there going to be fundamental differences in the service in the next 12 months?

Marks:  The most significant developments this year is we will be changing the nature of television services themselves. Up until now, BT Vision has been a mainstream, entertainment-on-demand service connected/allied to the Freeview channels and a [personal video recorder]. Over the course of the year, as the Microsoft platform becomes more capable and we add applications to the service, we are going to be offering our customers a range of services such as retail opportunities and participation games, all of which are going to be accessed in the living room on the TV. That is going to bring together the immediacy and emotional impact of the TV and accountability of the Internet.
    In 12 months time I think you will see a range of really new innovative types of interactive services on the TV set. We are going to be launching a variety of rich, immersive, interactive games on the TV. These are the sorts of things that are restricted to the PC. They are the sorts of things that many people want to have access too in the living room, but up to now, that has been impossible.

Satellite News: What lessons have you learned since service launch?

Marks: I think we have learned some old lessons actually. I would prefer not to tell you what they are. There are some basics, which we are now doing better than we used to do. Our growth has been as a result of that. I can’t say I have been shocked by any aspect of consumer behavior. I think we all know enough about the pay-TV market to know what we need to do. The devil is in the detail.

Satellite News: What do you see as the potential competitive advantages of telecommunications providers in the TV market??

Marks: It is a very attractive alternative. We have a very, very good broadband service. It is the most popular service in the United Kingdom and with good reason. It is reliable and good value for money. We are offering BT Vision on top of that. It makes it a cracking proposition. Customers don’t have to pay anything for their [set-top box]. As long as they are BT Broadband customers and sign up to an extended subscription, we will give them the box. We will allow them to take programming when they want. Most people still want to subscribe because they are good value. These are programs that are not on Freeview, these are programs from an early release window, you can get them whenever you want them. They are high quality. That is a wonderful proposition.

Satellite News: When does BT Vision plan to launch high-definition (HD) services?

Marks: We have three ways to get HD content to the TV. All of our boxes are HD ready. Firstly, you are going to have HD content broadcast on [digital terrestrial television]. That seems like that will happen. That will some technical changes but Ofcom has recently published a paper on how that could be technically feasible. We will see how that develops. If it does develop, we would be interested in supporting that. The second way to get HD programming is to stream it across the network. At the moment, when are basic broadband product is up to 8 megabits per second and we require over 2 megabits per second lines to support BT Vision. It is in fact, not easy to stream HD over the network, it takes too much bandwidth. Two things are happening, compression is getting better and bandwidth is increasing as we move out to ADSL2+. Although I could not give you a date as to when it would become possible to stream over the network, it is much closer than people may think. The third way to get HD programming, and something we will do over the next 12 months, is to push it over the network to the hard drive on the [set-top box] and allow people to access it from there. That is something that will be launched later in the year.

Satellite News: France Telecom is looking to offer television services via direct-to-home service to supplement its IPTV offer. Is this a possibility for BT?

Marks: I am not quite sure what that France Telecom plan is. We think the combination of Freeview and DSL lines for on-demand programming is pretty good. At the moment, we don’t see any better way of distributing channels than over Freeview. We think that is sufficient distribution to reach some pretty significant customer numbers.

Satellite News: Will BT have to get even more aggressive on price, such as matching Sky’s significantly lower broadband price?

Marks: There is no doubt that the broadband business is exceptionally competitive in the United Kingdom and that works enormously to the advantage of the U.K. citizen and consumer. There have been consistent drops in price and increase in speeds over the last few years. The regulator has created an exceptionally competitive environment. I would imagine that will continue for some time. The key question for the entertainment service is, ‘Are we able to offer something that good that customers want to take-up?’ I think as a combination of broadband and entertainment, we are offering a good, differentiated from Sky and cable, in terms of how they access it and how they pay for it.

Satellite News: Is there a market perception issues for telecommunications entering the TV market?

Marks: I can’t speak for other, and I think it is a sterile discussion to say it hasn’t been a problem. I think the answer can be answered practically by looking at our customer number and I think we are doing just fine. I think it is a relatively big step from customers to go from analog into digital but a relatively small step to move between digital services. I think it is a less big step than people think when you think of moving between broadband and entertainment.