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BSkyB: Free Broadband

The broadband pricing war is heating up in England, reports the BBC, with satellite firm British Sky Broadcasting (BSkyB) launching a free service for its subscribers (pdf).

BSkyB, Rupert Murdock’s European satellite television service, today unveiled a “free” broadband offer for Sky Digital customers. The pay-TV broadcaster is offering broadband internet packages as low as…nothing.

The “free” (Base) option, provides a 2Mb speed and monthly usage of 2Gb to Sky customers for no extra monthly fee.

For £5 a month (US$9.14), Sky Broadband’s Mid package offers 8Mb speed and 40Gb monthly usage, while the Max offering gives customers 16Mb and unlimited monthly usage for £10 a month.

All three products are available to any Sky digital customer and ship with wireless routers.

Customers pay for connection and installation. Customers choosing the ‘base’ offer pay a £40 ($73) connection fee plus a £50 ($91) installation charge. That cost drops to £20 for the connection plus the £50 installation for the ‘mid’ package and no charge for the ‘max’ deal.

The cost of gear and installation of a satellite receiver is a big hurdle for most subscribers (and operators). Having consumers pay most of the upfront costs lowers their cost. Free internet is the incentive.

British Sky Broadcasting (wikipedia) operates Sky Digital, the most popular subscription television service in the UK and Ireland. It also produces TV content, and owns several TV channels.

More than a third of the equity is owned by News Corporation, an American company chaired by Rupert Murdoch, who also acts as Chairman of BSkyB. Sky bought the broadband ISP Easynet in October 2005, for £211 million. This acquisition allows BSkyB to compete with the “triple play” TV, Telephone and Broadband services offered by its rivals.

James Murdoch, BSkyB’s chief executive, said he was confident the satellite broadcaster would grow its broadband business quickly with some 3 million customers projected by 2010, 30% of its projected subscriber base.

The company is writing to all of its 8 million-plus customers to update them on its broadband plans and how quickly they will be able to sign up to the service. At the moment Sky’s broadband coverage will reach 28% of UK homes, using the “local loop unbundling” process that allows broadband operators to go into telephone exchanges and build a connection to households.

Sky is aiming to have access to over half the country by Christmas and 70% by the end of 2007. Sky estimates that its broadband service - which will take £400m off operating profits and cost £250m in capital expenditure - will start to break even in 2009 or 2010.

It could happen here.

DirecTV and Echostar are working together on a joint bid for AWS frequencies for the (3G) auction by the U.S. FCC next month. The Aug. 9 auction is expected to raise as much as $15 billion, making it the FCC’s second-biggest ever. It will allow cable and satellite providers the chance to offer a wireless component to their services.

Rupert Murdock (right) has also been quoted as being a big fan of WiMAX for broadband access. A triple play might include cellular, WiMAX and satellite television.

UPDATE - Hollywood Reporter has the inside line on Murdock’s WiMAX plans:

Approval is imminent for the project that could take at least two years and $2 billion, providing News Corp. and DirecTV a valuable wireless interactive broadband loop with consumers to directly sell content, advertising, goods and services.
“I would expect to have wireless broadband advanced in at least two or three cities before the end of this year, and then it might take two or three years to build it out across the entire country,” Murdoch said.
As an alternative, DirecTV also has been exploring the possibility of partnering with other WiMax spectrum owners such as Mobile Satellite Ventures (MSV) or acquiring its own WiMax spectrum when such rights are auctioned off by the FCC on Aug. 9. In such cases, DirecTV would have to pull together, on its own, more of the elements needed to build its own WiMax network.
Some sources say that EchoStar could join DirecTV in providing a united domestic satellite-backed WiMax alternative to cable and to telephone competitors such as Verizon, Cingular and Sprint Nextel.

The share price of EchoStar rose to a 17-month high yesterday following speculation that DIRECTV majority shareholder News Corporation is mulling a bid for the company.

Anti-trust authorities blocked EchoStar’s earlier attempt to acquire DIRECTV from Hughes back in 2002. News Corp. eventually won the battle to acquire DIRECTV, the leading satellite platform in the U.S.

DirecTV needs to partner with a national ISP and broadband wireless service. Any guesses? AOL and Clearwire are already partnering but so are Sprint and cable operators. Eligible suitors might include AT&T, MSN and Earthlink.

And don’t forget the mobile tv component. Aloha Partners has a 12Mhz DVB-H system at 700 Mhz (HiWire), Verizon is going with MediaFLO and Cingular could go with Modeo. HiWire and Modeo are using DVB-H (at 700 Mhz & 1.7 GHz respectively).

Sprint brings political baggage with cable operators so a Clearwire partnership for broadband wireless might be an easier deal to do.

How about a DirecTV partnership with Earthlink/MySpace/Helio phones. Mobile tv from Modeo. The synergy at 1.7GHz would be awesome with AWS phones, MSS satellite and Modeo DVB-H.

But if DirecTV starts giving away free broadband wireless in the United States at 1.7 or 2.5 GHz there will be war. And a revolution.

Rupert Murdock might out Google, Google.