BSkyB May Offer Free Broadband to UK Customers

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12:50 am on July 4, 2006 | Category: Business, Telecom Services, Internet, Television

UK satellite broadcaster, BSkyB, will reveal the details of its long-term broadband internet strategy on July 18, said News Corp chairman, Rupert Murdoch, at a recent investors conference.

Many analysts expect the company to offer free high-speed internet access to select customers, in an aggressive effort to build the market share of its triple play services. Such a move would attract new users, while encouraging existing customers to pay more for top-tier service plans.

BSkyB first entered the broadband market last year with the £211 million purchase of Easynet, a high-speed internet provider. The company has since been installing its own network equipment at BT telephone exchanges, which will allow Easynet to serve half the UK population by late December.

“Unbundling will allow Sky to extend its reach in urban areas into blocks of flats and will enable it to offer a triple-play service for the first time. Unbundling will increase competition, principally in urban areas and particularly for basic TV services, and will undermine the relative position of cable, Sky’s main competitor,” predicts market research firm, UBS.

UBS analysts also warned, however, that short-term profits will take a big hit if BSkyB does bring in free broadband. The new service could initially lose £70 million to £100 million, as it seeks to compete with the free and low cost internet offerings of BT and NTL.

In the long run, however, the Easynet service should boost profits by reducing “churn rates” and “locking in” television and digital phone customers who might otherwise turn to another provider.