Strategy verdict - BT Vision

return path and processing power.

BT Vision should change this. By offering a Freeview personal video
recorder with broadband connected to the back of the box, it allows
newly emerging TV services, like catch-up and video-on-demand, to be
offered on a pay basis alongside free channels.

There are strong content partners for these on-demand services,
including Universal, Premier League football, Disney and MTV.

The big question is whether this extra content and functionality is
sufficiently compelling to win customers. They either have to attract
people who do not currently pay for TV, or steal customers from the
other digital platforms. Given the complexity of the service, BT appears
to have a hard communication challenge ahead.

People without a digital box will be hardest to convert, as they are
either the least sophisticated parts of the market, or those for whom
pay TV holds little interest. Existing Freeview consumers need to be
convinced the extra content, functionality and services are worth paying
for.

Football and movie fans probably already have a subscription to another
service and will need to be enticed to switch. However, they may turn
out to be the easiest to recruit, as they have seen the benefits of
future TV and are able to compare features and funct-ionality with the
eye of an informed consumer. Our research shows that there is
dissatisfaction among these groups about the amount they pay for TV. The
existing platforms will need to lock these customers in with unique
content or services.

BT Vision's proposition is highly competitive in every area except live
sport. For those who need to see the live games not shown on a
terrestrial channel, BT Vision may not be attract-ive. For everyone
else, Vision is a highly compelling new service - the biggest challenge
will be explaining why.