Sky broadband: more chess than checkersWednesday 01 August 2012 14.28
Sky's announcement that it is to introduce broadband and telephone services sounds like good news for customers but a lack of detail in the official news release suggests there might not be as much to shout about as you think.
What we know for sure is that Sky is hiring 900 customer service staff for its Dublin operation over the next 18 months. Beyond that we have assurances that Sky Broadband will be available 'later this year' and that Sky Talk will show up in 2013. If you're sold on that much detail you can pre-register your debit or credit card and will be contacted in "in due course". Sign me up!
Interviews with Sky management have been similarly murky. Speaking on Today FM's Last Word last week, Sky Ireland's managing director JD Buckley would only confirm the service would be competitively priced and there would be national coverage from day one. That last part bears repeating: national coverage from day one. Forget pricing, contention, data caps and customer service, here we have a service claiming full coverage, something no other fixed line operator in the country is managing.
The Government must be delighted with this news. It can take a breath and not worry about completing the Rural Broadband Scheme bringing data to places where commercial entities fear to tread for lack of profitability.
Sarcasm aside, let’s plug a few gaps in knowledge, or at least provide some informed speculation. One fact from the official release that yields the most inside into Sky's plans is its choice of network provider. Sky will not be investing millions in its own fibre network as UPC has done, it will use existing infrastructure with its branding.
Negotiations began with Eircom and BT in February, the latter coming out victorious. Having exited the consumer space in 2009, BT focused its Irish operation on the business market and the wholesale of telecommunications services to other companies, who in turn set their own pricing. This is exactly the kind of deal it has struck with Sky.
According to BT Ireland's website, its networking capabilities are a mix of undersea cables, fibre broadband and digital subscriber lines unbundled from Eircom exchanges. BT's advertised wholesale speeds vary from 1Mb/s up to 24Mb/s, comparable to Eircom's packages. This is par for the course in the broadband market in Ireland, where Eircom still owns the national network and competitors have to pay the dominant player in the market to get access to their network.
Sky will provide a fixed line alternative in name only, the backbone ultimately is still made up of Eircom's bitstream technology. According to Comreg's report for the first quarter of 2012 broadband penetration remains below 25%, Sky entering the fray will do nothing to improve this figure, but it will increase competition for access to the infrastructure.
Next we have to look to the big picture: why Sky would want to enter the Irish market in the first place. Right now the broadcaster has 675,000 TV subscribers. Its biggest competitor in this field is UPC on 922,600, 255,000 of which are also broadband customers. The attraction of fibre broadband with speeds from 25Mb/s up to 100Mb/s, a phone service and multichannel TV is sapping Sky's subscriber base, a trend that is set to continue as its on-demand service gets more content.
Sky's goal is to create a similar ecosystem where content and delivery services are natural partners. UPC undoubtedly will have an edge over Sky on speed but superior customer service and content library could be deciding factors in retaining market share and even clawing back a few lapsed subscribers.
It is a cocktail that has yielded spectacular results in the UK. Financial results for the year ending 30 June 2012 released last week showed profits had gone up 14% to £1.2 billion thanks to 10.6 million TV and 4 million broadband subscriptions.
HD, Sky Go and Anytime+ mobile and catch-up services are proving vastly popular and a proposed £30m investment in Netflix and Lovefilm competitor Now TV (launch date to be confirmed), which will open up Sky's vast back catalogue of movies and television shows on a pay-as-you-go basis.
Are we likely to see the broadband market boil down to Sky versus UPC? Not likely. Eircom still dominates the fixed line market and wireless services are set to become a lot more compelling as long-term evolution networks eventually come on-stream.
Eircom also has plans to enter TV later this year. It had better have some damn good ideas to match up to that kind of competition.
Niall Kitson is editor of TechCentral.ie www.techcentral.ie