BT Group plc (NYSE: BT; London: BTA) plans to launch a home gateway product called the BT Hub during the second quarter of this year as it gears up to launch new broadband services such as IPTV.

The carrier has developed its product -- designed to provide wireless networking, next-generation TV services, broadband voice, video telephony, high-definition voice, monitoring services, and remote diagnostics -- with French vendor Thomson S.A. (NYSE: TMS; Euronext Paris: 18453) and with North American vendor 2Wire Inc. , which will provide the monitoring and diagnostics capabilities, according to a spokesman for the operator.

Broadband service providers believe that providing customers with home gateways will help them sell more services, raise average household revenues, and reduce churn rates. But the cost of developing such products, and to what level they should be subsidized by the carriers, has been a sticking point. (See Home Gateway Group Puts on Specs, Telcos, Vendors Battle Over Gateway, and BB Forum: Gateway Goals for Carriers.)

BT says it doesn't have any details yet about how it will price and charge for the Hub.

Carriers such as BT "increasingly see residential gateways as a key mechanism in the battle both to deliver higher-value services over broadband and to gain better control over customers," states Heavy Reading senior analyst Graham Finnie in a new report, DSL Gateways: Beyond the Router. (See The DSL Gateway Dilemma.)

Finnie, who examined carrier and vendor home gateway strategies for his report, reckons BT has chosen two good technology partners in Thomson and 2Wire.

"Thomson has put a lot of effort into developing home gateway products specifically for carriers, and is already a supplier to Orange (NYSE: FTE), while 2Wire is a leader in remote diagnostics and autoconfiguration, and an existing supplier to BT," says Finnie. (See BT Does VOIP – With Strings Attached.)

BT needs this kind of product for a number of reasons, says the analyst. "Sorting out problems remotely will help BT cut support costs, and should certainly help reduce churn. Customers become much more tied to a service when a home gateway is supplied by the service provider, as it makes it harder to switch to another provider. BT needs to retain customers more than most, because it doesn't have the strong broadband market share that many other European incumbents have."

BT, which plans to launch its IPTV service towards the end of 2006, currently has 2.33 million DSL customers, which gives it about 31 percent of the DSL market in the U.K., well below most of its European peers. That market share drops even further, to less than 25 percent, when the total U.K. broadband access market, including cable modem connections, is measured.

— Ray Le Maistre, International News Editor, Light Reading

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