BT challenges Sky with broadband TV

channel, BT Vision Sports, and a partnership with Warner Bros.

The sports option, which will be made available from mid-2007, hands BT
Vision the rights to 46 live Premiership games through its partnership
with Setanta.

Lorna Tilbian, a media analyst at Numis, said BT Vision would "take
customers away from Sky in the short term", but she questioned if
selling premium content at a discount in the long term "was a viable
option".

At the launch of BT Vision this week, Gavin Patterson, the managing
director of consumer at BT, argued that the company had opened up a
"third way" between more expensive services, such as Sky and cable, and
the free-to-air-service, Freeview.

BT Vision customers, who will receive the service via a set-top box
called the V-box, will have access to a library of on-demand content via
their broadband connection, as well as more than 40 Freeview channels
through their aerial.

BT is attempting to undercut the pay-TV services of Sky and ntl and
high-street rental shops such as Blockbuster in the home film market
through agreements with film content providers such as Warner Bros. BT
Vision will charge less than £3 for the latest films.

However, David Wright, an analyst at JPMorgan, said Sky should not be
overly worried by BT's attempts to stake a claim on its territory. "With
Sky Sports priced at £11 per month, Vision would need to be at a
material discount in our view," he said.

Ian Livingstone, the chief executive of BT Retail, said BT Vision would
be profitable in three to four years, and was targeting two million to
three million customers by 2010.

Wright said: "It should help BT to reduce customer churn following the
strong challenge established by Sky and the Carphone Warehouse."

It is not clear how BT's Vision's ad model will work, but Dan Marks, its
chief executive, said it would be similar to the "usual hybrid revenue
model based on cost per thousand".

Interactive options

BT Vision will offer advertisers interactive opportunities including
targeted advertising and user-generated content tie-ups.

The interactive services will roll out throughout 2007, with the
majority set to launch in the second half of the year.

Options include viewer participation based on quiz show formats and
video telephony and instant messenger, allowing BT Vision customers to
communicate with each other during broadcasts.

There will also be opportunities for advertisers to buy DALs (dedicated
advertiser locations), special interest programming and retail and
gambling services.

BT Vision is also venturing into the area of user-generated content,
with the launch of the BT PodShow.

"The speed of processing inside the V-box means the download time for an
interactive page is faster than we've seen before. Users will not have
to wait for the page to download," Antony Carbonari, the director of
interactive and commercial media at BT Television Services, said.

Serious about sport

BT has also struck a deal with the Irish pay-TV sports broadcaster
Setanta to show 46 live Premiership football matches next season.

The agreement forms the backbone of a special sports division - BT
Vision Sport. This will be offering Setanta's new sports channel,
Setanta Sports, from next season.

The deal means BT Vision customers can watch three- quarters of all next
season's Premiership matches in full.

The Setanta tie-up is one of 25 content deals negotiated by BT. Other
partners include Dreamworks and Disney.

- Comment, page 40.