BT is moving deeper into the media business by launching a division that will supply online games and other audiovisual content, to broadband subscribers.
The operation, which is called BT Entertainment, will begin work in January 2005. BT insists that it is not becoming a fully fledged broadcaster -- a prospect that has alarmed city investors in the past -- and says it has no plans to create content itself.
Instead, the telco plans to use its ADSL broadband network as a backbone to supply video-on-demand services.
Andrew Burke, named on Monday as BT Entertainment's chief executive officer, said ADSL isn't a good medium for broadcasting, but was suitable for unicasting -- where a limited number of users would request a certain piece of niche content.
"We want to use broadband for what it does best, to create a service that delivers video-on-demand to the consumer," said Burke. He cited a recent lower-league football match between Aldershot and Barnet that had been successfully streamed by BT to 2,000 subscribers.
"There's no other medium that could deliver content economically at that scale," Burke added.
The launch of BT Entertainment shows telcos are looking to content as a way of attracting and retaining subscribers. It also heralds a future where broadband revenue will no longer come predominantly from the basic monthly subscriptions.
"The key to maintaining healthy demand is compelling content that will make people want to buy BT," said Mike Cansfield, a research director at telecoms analyst Ovum.
"This is what today's announcement is all about -- BT recognises this is so important it has decided to spell it out and build a dedicated team that will include the staff of Project Nevis, BT's TV-over-broadband trial using Siemens equipment," Cansfield added.
Another challenge facing broadband operators is that just over half of UK homes include a PC, which places a cap on the number of potential high-speed Internet surfers.
BT hopes its new entertainment wing can get around this problem, and make broadband a useful service for those without a PC.
Burke said BT was interested in iPod-like devices that could play video, suggesting that people could take broadband content out of the house and view it on the move. He also predicted that broadband content could soon be viewed on non-PC devices such as televisions.