BT plans to charge a monthly fee of £15 (US$23.40) for its new package of TV services, which is to include what it claims will be Europe's first ultra-high-definition (UHD) sports channel, as it looks to mount a stronger challenge to market leader Sky in the UK's pay-TV sector.
The country's fixed-line telecom incumbent said customers would receive 47 premium channels as well as its forthcoming UHD sports channel, which will feature live coverage of major sports events including top-flight European soccer.
The monthly fee of £15 ($23.40) looks extremely competitive next to the £40.50 ($63.10) that Sky is currently advertising for new customers to its Sky Sports bundle, although Sky still boasts a broader selection of channels and sports content than BT Group plc (NYSE: BT; London: BTA).
BT first announced plans for the UHD service in June, indicating it was collaborating with Sweden's Ericsson AB (Nasdaq: ERIC) on the development of the technology, and it will hope the quality improvement gives it an edge over rivals still making do with older display standards. (See BT Preps UHD TV Channel With Ericsson.)
Sky has no immediate plans to introduce a UHD service and may be concerned about investing heavily in new technology when others have failed to generate much excitement among customers.
Although HD has proven popular, 3D TV technology has not garnered the same level of consumer interest despite the initial hype.
Rivalry between BT and Sky has been growing as the latter tries to build up its broadband business while BT targets a bigger role for itself in the TV market.
Dependent on wholesale agreements with BT, Sky is one of several operators complaining that BT's ownership of most network infrastructure gives it an unfair advantage over its retail rivals.
Recently, it has been arguing that BT should be carved up into separate infrastructure and retail businesses -- a move that regulatory authority Ofcom has indicated it is considering in its latest strategic review of the sector. (See BT Guilty of 'Under-Investment,' Says Sky and Ofcom Could Still Make BT Do Splits.)
In response, BT has been insisting that a lack of pay-TV competition has resulted in spiraling costs and poor experiences for customers, urging Ofcom to do something about Sky's dominance in this area. (See BT Demands Action on Sky's Pay-TV Dominance.)
Although it has spent heavily on sports rights to fortify its TV offerings, BT has failed to make the same kind of inroads into this market that Sky and other broadband retailers have made in broadband. (See BT, Sky Splash £5.1B on Premier League Rights.)
According to its own data, the broadband market now includes four major players and none has a market share of more than 32%.
By contrast, Sky still serves about 64% of all pay-TV customers, says John Petter, the CEO of BT Consumer.
Data published this week by Ofcom also suggests the pay-TV sector is less competitive than other parts of the communications market.
The regulator reckons just 2% of pay-TV customers switched provider last year, compared with 6% of broadband customers and 7% of mobile customers.
"We've just introduced an important change allowing people to switch provider over BT's network by only dealing with their new supplier and we're now considering whether similar processes may be appropriate for mobile and services bundled with pay TV, as consumers increasingly buy services this way," said a spokesperson for Ofcom when asked if there was concern about levels of pay-TV competition.
Despite offering TV services free of charge to its broadband users, BT had captured just 1.142 million TV customers by the end of March while boasting more than 7.7 million subscribers in the broadband market.
Sky does not break out customer numbers by product area but claimed to serve about 11.9 million customers across the UK and Ireland in March.
BT's ability to offer some TV services free of charge could also come under threat should Ofcom decide the operator is not leaving a big enough gap between its wholesale and retail prices for rivals to compete effectively.
To BT's chagrin, Ofcom has been including the costs of spending on TV rights in its "margin squeeze" calculations, meaning BT is closer to overstepping the mark than it would be otherwise.
— Iain Morris, , News Editor, Light Reading