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BT vs BKyB

July 2013 

What the internet does best is to allow us to send anything in digital form over gigantic distances as close to instantly as makes very little difference.

This, rather unexpectedly, makes it ideal for transmitting television, which is entirely digital these days.  This simple fact has set an electronic cat very firmly amongst the commercial pigeons.

There’s big money in television, and where there’s big money, big arguments soon follow.  To prove the point, there is a cracker of a battle going on between the BskyB, 40% owned by Rupert Murdoch, and his corporate antithesis, the once state-owned behemoth that is British Telecom (or BT).  The entertaining part is that Murdoch has, once again, threatened a self-important bunch of vested interests and stirred up an overcharging industry.  Whatever you think of him, you can’t but admire his appetite for a fight, especially as he undoubtedly qualifies as a genuine oldie these days.

It’s all because BT owns the means of delivering Broadband (the copper wires, telephone exchanges and so forth).  To counter this monopoly, the law obliges BT to make the infrastructure available to other Broadband providers. 

Despite this, BT remains the biggest supplier of Broadband, but their position is under constant threat.  From a standing start a few years ago, BSkyB now has over four million Broadband customers.

It’s their television service that has been winning us over.  BSkyB has been selling TV to us through satellite dishes for years, but transmitting TV over the internet makes all of us their potential customers, without having a satellite dish disfiguring your house.

The television is just the bait; the real profits come from providing Broadband, so BskyB has made it especially attractive to buy a triple TV/phone/broadband package from them, and they’ve frightened BT.  About half the BSkyB television customers still buy their broadband from BT; if Murdoch can do no more than tempt them to move over to BSkyB, it would cost BT over £700m a year in income, with minimal reduction in their overheads.

These are not small potatoes, so BT has reacted by starting its own TV service (BT Sport) and spent £730m on sporting rights.  The original plan was for BT to pay BskyB for access to their programmes as well, and re-broadcast BSkyB with BT television on BT Broadband.  That way BT would be the one-stop-shop for all sport on TV, and since BT Broadband would be needed to watch it, they’d clean up. 

BskyB went to law, and to BT’s consternation, those pesky courts ruled that BSkyB need not sell BT anything, if they don’t want to, and they certainly don’t.

It’s all a bit embarrassing for the BT bosses who have spent probably £1bn but only managed to end up with some relatively modest but very expensive TV sports rights that they don’t really need and a certain amount of egg on their faces.

BSkyB is running commercial rings around BT, so in what looks like a fairly desperate move BT have decided to write off the many millions already spent on sports rights and simply give their TV service away to BT Broadband users for nothing; not a penny.

Remember that it’s the Broadband delivery contract that both companies really want; that’s the treasure-trove.  BT must hope that giving their TV away will stop the stream of their customers to BskyB.   But make no mistake, this is a fight to the death; BskyB want to reduce BT to a provider of telephone poles.  And who bets against Murdoch in such matters? Taking him on at his own game is usually a mug's game.