Wednesday, July 19, 2006

Sky Falls In

In the UK a major announcement from Sky, part of Murdoch's NewsCorp, that they are to offer free broadband to their 9m customers following last year's acquisition of ISP Easynet.

They also say that they plan to roll out an IPTV service at the end of 2007.

There's little doubt that this will be attractive to many consumers - particularly since the Sky marketplace tends to be somewhat downmarket and therefore may largely address non-early adopters of broadband (the overall figure for broadband penetration in the UK is currently approaching 40% of the population).

However, this does represent the next step in a vicious price war, when TalkTalk and Orange have already launched ostensibly 'free' packages (tied in to mobile bills).

This is bad news for NTL/Telewest and BT, both of whom charge for their broadband services, as it is for many small ISPs who will rapidly need to look for added value services to retain and grow their market share.

Of course, it's great news for the UK consumer in the short term.

What effect it will have in the longer term is difficult to predict - the goal is clearly to maintain control of the 'box in the corner' and my take is that this is largely a defensive strategy by Sky to prevent the likes of BT from eating into their market when the telecoms company launches its IPTV service later this year.

It's also worth noting that Freeview, the free-to-air digital terrestrial service has been taking market share from Sky and there is a clear challenge to the satellite broadcaster to up the ante.

Watch this space...

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