BT Group plc (NYSE: BT; London: BTA) finally lifted the lid on its long-awaited IPTV service Monday, revealing the model, pricing, and rollout plans behind BT Vision. (See BT Launches IPTV.)

The approach is clear: BT is aiming to capture subscribers by making the pricing simple and affordable, and by offering as many hours of British football (a.k.a. soccer) programming as it can get its hands on -- and that's a big draw in the U.K., where armchair sports is a major pastime.

The way BT is tackling TV and video content delivery is no secret: It is using its Home Hub gateway, Microsoft Corp. (Nasdaq: MSFT)'s IPTV Edition platform, and set-top boxes from Royal Philips Electronics NV (NYSE: PHG; Amsterdam: PHI) to deliver on-demand movies, music, and archive TV programs across BT broadband connections. (See Microsoft Wins at BT, BT Gets a Gateway, and BT Picks Philips Set Top Boxes.)

Broadcast TV content will not be delivered over the broadband connection, but comes over-the-air and via the set-top box, dubbed the V-box. That box, which is HD (high definition) ready, has been specially designed with a connection to ingest the Freeview digital TV channels, of which there are about 40, including all the mainstream BBC and commercial channels. Freeview TV is, as the name suggests, free.

The on-demand content includes a broad range of movies, music, and TV programs both recent and old, courtesy of a wide range of content deals the carrier has struck. (See BT Strikes Content Deals, BT Signs More IPTV Deals, BT Adds Music Video Deal.)

The jewels in the BT Vision content crown are the soccer deals. BT had already secured a deal to show near-live English Premiership action starting next August (the 2007-2008 season), with the games being made available a few hours after the final whistle.

But it supplemented that package today by announcing a deal with Irish Pay TV specialist Setanta, which has been building a package of sporting content based on live Scottish soccer, golf, horse racing, and other sports, but which, again from August 2007, will also include live English premiership games. (See BT Scores Soccer Deal.)

Slow start
That its key content isn't available for another nine months could explain why BT is in no rush to engage in an immediate massive marketing campaign, and why it believes customers will be prepared to wait to get hooked up to the service.

BT has been collecting details of BT broadband customers who want the BT Vision service and claims it has more than 10,000 names signed up.

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Now the carrier says it will start connecting people who have registered their interest. And while the carrier says the service is available anywhere across the U.K., it can only be delivered to customers who have a broadband connection that is at least 2 Mbit/s. A BT spokesman says about 87 percent of BT's 3 million broadband users qualify.

And it'll take some time to get folk hooked up. BT says it has no qualms about asking people to wait, and doesn't believe that will affect demand. If they have enough bandwidth, customers will get the set-top box and Home Hub gateway free, but have to pay a £30 (US$59.34) connection fee and £60 ($118.68) engineer installation fee to get up and running.

While the initial rollout phase is quite relaxed, BT expects to have hundreds of thousands of customers hooked up to BT Vision by the end of 2007, and aims for the service to be profitable within three to four years.

The carrier says it has spent "tens of millions of pounds" getting BT Vision to this point and expects to spend another £100 million ($198 million) on the service -- including marketing, content deals, customer acquisition, and so on -- in its next fiscal year, which begins April 1, 2007.

Pricing at the low end
Apart from the soccer content, BT reckons its approach to pricing will be its big attraction. The carrier says that, unlike other IPTV or pay TV deals from the likes of Sky and cable operator ntl group ltd. (Nasdaq: NTLI), there is no monthly subscription fee for the content (though, of course, there is a monthly fee for the broadband connection).

While subscription packages are available for those who know they will want regular access to on-demand music or children's content, for example, customers can simply buy the content on a pay-per-program basis. If no content is viewed, there is no charge. That, says the BT spokesman, will likely be an attractive offer for Sky TV subscribers who are paying a monthly fee but mostly watch the channels that can be accessed for free via Freeview.

The pay-per-view charges are also very competitive compared with Sky and NTL, with movies costing between £1.99 and £2.99 ($3.94 and $5.91), a lower fee than both its main rivals, and Premium Music Concerts costing £2.99 each. (See the on-demand pricing table below).

Table 1: BT Vision On-Demand Prices

Ovum Ltd. analyst Mike Cansfield believes BT has got its approach right. "It means that BT can offer content to its customers and not simply be the fat-pipe provider, thus enabling it to compete with the streamed-video from portals segment of the industry," notes the analyst in a research note.

"What BT is providing is greater choice... and control," Cansfield says. "This is putting the consumer in charge of what they watch when they watch it, and potentially heralds a fundamental change in the way we watch TV."

What's not there yet
The service is also starting slowly in terms of special features. The carrier says that in addition to more specialist content being added in 2007, next year will also see the introduction of interactive services such as voting, gaming, gambling, and inter-subscriber communications, whereby BT Vision users will be able to set up video calls. The capability to upload user-generated content will also be added next year, BT says.

— Ray Le Maistre, International News Editor, Light Reading