BT Vision, which launched yesterday, has been given a cautious welcome by industry experts.
The telco's combined IPTV and Freeview service is in a good position to give Sky and NTL a run for their money, according to senior Ovum analyst Annelise Berendt.
"BT is using a very different approach by leveraging the existing digital terrestrial television base which in many ways provides it with a headstart in building a new line of business," she said.
"The ability to continuously innovate will also be key, as the competition is not standing still and there is a danger that BT will find the goal posts moving faster than expected."
Berendt also believes that BT is future-proofing its offer. "The V-box is HDTV-ready and BT is planning interactive feature upgrades next year," she said.
"New interactive services, including video telephony, rich gaming and gambling, are on the horizon for next year, and if the consumer appetite for such services is strong, BT will certainly give the competition a run for its money."
For BT to be successful, however, it must focus on its marketing strategy, according to Mike Cansfield, principal analyst at Ovum.
"The key to how successful BT will be with this move is how well it executes its marketing strategy," he said.
"This is much more than acquiring customers, and involves how well BT competes with NTL and BSkyB, and whether it can explain to customers the power they now have to take control of what they view and when they view it."
Nate Elliott, a senior analyst at Jupiter Research, praised the content and the V-box, but was unsure about consumers' willingness to pay for on-demand content and the high installation fee.
"BT has great films and great kids' content, but with yesterday's Setanta partnership, they've got good, but still not great, sports content," he said.
"Great content is table stakes for a TV service. If you haven't got great content, people simply won't pay for the service, but BT did better at launch than I thought it would.
"Two Freeview tuners, a network port, a 160GB DVR hard disk and HDMI interface means that BT is selling a box that's much better than the 10.2 million Freeview boxes already out there."
The analyst believes that, although this will be key to convincing Freeview households to upgrade to BT Vision, the start-up costs are high for consumers.
"To get up and running, people need to spend £200 ($500) on the set-top box (or sign up for a new BT retail broadband plan), plus £90 ($225) or a BT Home Hub, plus £60 ($150) for installation, plus £30 for connection," said Elliott.
"That's a £380 ($950) set-up cost, or £180 ($450) if you sign up for a new broadband plan. Either way it's far too much to ask when consumers can get a Freeview + DVR at Tesco or Comet for under £100 ($250)."
The reliance on on-demand content could be a problem, according to the analyst.
"Only 11 percent of UK consumers say they're willing to pay for on-demand TV programs, and the historical numbers from the cable operators look even worse, " he said.
According to Jupiter, 77 percent of UK households already use multi-channel TV services today.
Some 10 million UK households use digital terrestrial TV, 8.6 million use satellite TV, and 3.3 million use cable TV. Around 45 percent of UK households pay for TV services today. However, fewer than 100,000 households in the UK use IPTV services.
Jupiter forecasts that approximately 200,000 UK households (one percent of UK households) will use IPTV by the end of 2007, and that IPTV will eventually reach 1.1 million households (four percent of UK households) in 2011, still far less than digital terrestrial, satellite and cable.
Analysts give verdicts on BT's Vision
By Will Head on Dec 6, 2006 8:57AM