BT and Sky mull deal to deliver TV via ADSL

A tie-up between media giant Sky and BT could intensify the broadband war

Speculation is mounting that BSkyB and British Telecommunications are on the verge of a deal that could see TV delivered via ADSL.

BT launched its ADSL service BTopenworld at the end of last month after a series of delays. Initially available to 35 percent of the population, BT (quote: BT) hopes to double that figure by the end of 2001.

In 2001 restrictions preventing BT from delivering broadcast services to homes is lifted. As ADSL creeps across the UK BT is keen to secure major content deals.

For BSkyB experts suggest the deal would open up a host of interactive possibilities, including home shopping and banking. A BT spokesman would not confirm whether the telco is close to a deal with Sky. "Broadband is all about content and we continue to talk to a number of partners," he says.

As broadband becomes more popular and falls in price, experts expect a number of high profile deals between content and backbone providers. A tie-up between such well-known brands as Sky and BT would undoubtedly increase the intense battle between the telco and its cable rivals. Last month Telewest started a broadband price war, slashing its cable broadband service Blueyonder to £33 a month. BT OpenWorld's ADSL service is priced at £39.99 a month.

John Moroney, principle consultant at analyst firm Ovum believes the deal will be of little consequence to Sky which just "wants to be on all platforms". For BT, though, the deal could be a backwards move he thinks. "BT is just placing itself where the cable operators were ten years ago. In some ways they will then become beholden to Sky."

Analyst with research firm Bloor Mat Hanrahan disagrees and thinks a BT/Sky tie-up will be beneficial to both sides. "It is an obvious broadband merger. Sky can't access the cable market but with BT they can reach a new audience. For BT the deal is good because BT hasn't got any content," he says. Hanrahan believes the deal will definitely intensify the battle for broadband being fought between BT and the cable companies and predicts Telewest and ntl will be eyeing the content-rich AOL Time Warner deal as a possible partner if the EC and FTC (Federal Trade Commission) allow the merger to go through.

With local loop unbundling happening next summer, BT will be forced to look for alternative ways of making money. Moroney is not sure broadband TV is the answer. "There is already huge competition between terrestial, digital terrestial, cable and satellite. BT has to think of new interactive services other than entertainment to make the most out of broadband," he says.

Kingston is the only operator in the UK offering television via ADSL at this time and it already a deal with BSkyB. It is currently only available in the Hull area but Kingston plans to expand nationwide when the local loop is unbundled next year.

Graham Roberts, head of marketing at Kingston said he could not see why BT was teaming up with Sky, "It really doesn't make a lot of sense to me."

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