BSkyB’s Easynet acquisition fits the pattern of satellite seeking VOD and moving into broadband

Europe’s largest satellite operator, BSkyB, completed its acquisition of the UK DSL service provider Easynet in January, providing a high-profile example of how established Pay TV companies are now ready to exploit DSL has an access network and turn it into an opportunity, rather than just a threat. With a number of European cable operators either using or considering the use of DSL as a way to expand their networks beyond their existing HFC infrastructure, this marks a potentially significant development in the IPTV marketplace

VOD over DSL?

BSkyB is being cagey about its use of the Easynet local access networks for the delivery of video, although deployment of true VOD services is going to be a high priority for all satellite platforms during the rest of the decade. Satellite operators do have a means to offer on-demand access to movies using push-VOD, where files are downloaded into a PVR and then made available for subscribers who buy the rights to access the stored content. This quasi-VOD service has been deployed by the German Pay TV giant Premiere since last summer with a selection of around 30 movies, updated weekly.

Push-VOD is an efficient way to deliver a limited selection of popular titles but it cannot provide access to the vast libraries of content that are becoming commonplace on VOD systems using two-way wired networks.

As major content owners, satellite companies can also use the public Internet to offer broadband VOD services – as BSkyB is now doing with ‘Sky by Broadband’, which has begun with 200 movies. However, it is still early days for Internet video and it remains a PC-based hobby rather than a mass-market business today.

Ethernet set-tops

BSkyB is considering whether to introduce push-VOD services using its popular Sky+ Personal Video Recorders and all Sky+ recorders currently shipping include reserve storage capacity that could be used for such a service. The next generation of Sky set-top boxes, including the HDTV set-tops that will be deployed this year, will also carry an Ethernet port, pointing to a fusion of satellite and broadband DSL that will surprise nobody.

A BSkyB spokesman comments: “We are looking at the opportunities that exist for a service like push-VOD and we also think that the capability for a broadband connection to the same set-top box will open up new models for managing content and generating value from a library of content. On-demand services to the television definitely do form part of our plans and fit broadly within the Easynet acquisition.”

This deal also provides the means for BSkyB to become a full triple-play operator, with chief executive James Murdoch emphasising the “exciting opportunities that now exist to combine quality entertainment with significant high-speed connections.”

Paul Erickson, research analyst at the US research and consulting firm IMS Research, sees broadband as a natural next step for satellite operators - and not just in the UK. He says the emphasis in the digital entertainment market is now on increasing ARPU (Average Revenue Per User) and this requires that all operators sell as many services as they can.

Jim Penhune, an analyst at Strategy Analytics covering US media and communications operators, believes there is a chance that US satellite operators will also seek to offer a triple-play service. But without the generous Local Loop Unbundling regulations seen in Europe it will be much harder for DIRECTV and EchoStar DISH Network to exploit DSL as a last mile broadband access network. Thus the rumoured interest from DIRECTV in WiMAX broadband wireless. DIRECTV declines to comment but has confirmed that “we are exploring opportunities in the broadband arena."

Amid speculation that Echostar could be a buyout target for AT&T, America’s other big satellite operator will only say it “continues to seek ways to offer a competitive solution for broadband.” A spokesman comments: “We are exploring multiple ways [to market] including two-way high speed via satellite, terrestrial service and marketing relationships with telcos, such as we have in place today with AT&T and Century Tel and other regional Bells.”