Microsoft deal may give BT edge over broadband rivals

Experts believe that teaming up with Microsoft is a winning strategy for BT's 'no-frills' broadband service

BT's alliance with Microsoft will help the telco to achieve market domination with its "no-frills" broadband product, an industry expert has predicted.

The pact between the two companies was announced earlier this week. It will see BT and Microsoft working together on a range of broadband applications to complement BT Broadband, the high-speed Internet access package sold by BT Retail.

BT Broadband does not include services such as email accounts and Web space, services that many broadband service providers include as standard in their packages.

Zeta Tsatsani, senior analyst at Ovum, told ZDNet UK that the alliance with Microsoft will widen the range of services that BT will make available to BT Broadband customers, for an additional fee. "The tactic is to charge the lowest fee possible, and on top of that BT will provide every possible service that they can charge for. This way, the customer feels they are in control," said Tsatsani.

The tie-up with Microsoft could well help BT to appeal to the less tech-savvy who may associate the software giant with easy-to-use software and the popular Hotmail service.

"The most important factor in the broadband market is branding, even more so than price. Most broadband packages are very similar. BT Broadband is really the only differentiated offering in the UK market," explained Tsatsani.

Angus Porter, the managing director of BT Retail's consumer division, said in June that he hoped BT Broadband would have captured at least half of the UK's consumer ADSL market by next summer -- something the Ovum senior analyst thinks will be achieved.

"I believe BT will hit all their broadband targets," Tsatsani predicted.

BT Broadband costs £28 per month, or £27 per month by direct debit. Both AOL and Freeserve charge £27.99 per month for their broadband services, which also include email accounts and broadband content.

This has led some in the broadband industry to claim that BT Broadband is poor value, especially as some smaller ISPs such as Pipex and Plusnet are selling broadband for several pounds less per month.

Tsatsani believes, though, that ISPs may soon stop charging a single flat-fee for their broadband accounts and will move to a tiered charging system where the cost depends on the amount of bandwidth used each month as well as factors such as service level agreements.

"Every broadband customer doesn't use their account for the same amount of time, or for the same services. How can an you charge someone who just sends emails the same amount of money as someone else who is heavily into peer-to-peer file swapping?" Tsatsani said.


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