BT Retail has announced its intention to launch residential
40 Mbit/s broadband at similar price points to its existing two higher tier
broadband offers. While this looks unlikely on its own to create significant
additional shareholder value, it could eventually help BT retain existing value

The move is unlikely to seriously inconvenience other
players for the next year or so, but could encourage TTG and Sky to sign
wholesale deals with BT for higher speed broadband and, ultimately, make it
more likely that a demerged TTG is acquired by another player

BT Retail’s strategy is likely to accelerate the
implementation of state-backed rural NGA in the UK since end user demand
outside commercially viable areas will be greater than would otherwise have
been the case

Ofcom’s plan to review commercial airtime rules in 2010 with an emphasis on deregulation clashes with the Competition Commission’s provisional decision to retain the Contract Rights Renewal remedy (CRR) as it is, other than to extend the ITV1 definition to include staggercast and HD variants

The core issue is that it is impossible to address UK commercial airtime rules in isolation from CRR, which strongly motivates all parties to sell 100% of their commercial airtime inventories, and is seen by many as exerting a strong deflationary pressure on TV advertising spend

Even without CRR, the Ofcom aim of being in a position to effect change from the start of 2011 looks optimistic. Increasingly, it seems that meaningful relaxation of the existing rules will require primary legislation in order to circumvent the continuing competition issues that have led to CRR

This report examines Ofcom's proposal that independently funded news consortia (IFNCs) assume the provision of regional TV news, occupying the regional news time slots vacated by the Channel 3 licensees

IFNCs are to be composed of commercial news organisations (television producers, newspaper groups, radio stations or websites), and will operate as private commercial/publicly funded hybrid models of regional news gathering and provision, alongside the BBC and commercial news organisations

DCMS has invited tenders for three IFNC pilots covering Channel 3 regions in Northern England and the Borders, Scotland and Wales, to be awarded in May 2010 with operations to commence by summer 2010.

Three years into its pay-TV investigation, we expect Ofcom to impose a wholesale must-offer obligation with regulated prices on the Sky premium films and sports channels in its final statement scheduled for Q1 2010

The WMO could take effect by the middle of 2010. It appears unlikely that Sky will be granted a stay of implementation whilst its appeals against the lawfulness and substance of the WMO remedy are being heard

Assuming the WMO proceeds, its impact on the pay-TV market is likely to be small in the first three to five years, but could become significant in the long-term; the core issue throughout being the rate-card prices set by the regulator, Ofcom

Latest fiscal Q1 2010 results show continuation of the strong subscriber and revenue growth trends, but as Sky forges ahead of its rival pay-TV operators so attention is turning to competition issues

It is still unclear whether Ofcom will succeed in introducing a wholesale ‘must offer’ remedy with regulated pricing for Sky’s premium subscription films and sports channels; a proposal that Sky vehemently contests but, if put into place during 2010, this could have a significant influence over the longer term structure of the UK pay-TV market

Results for the telecoms business continued to improve, albeit on a more modest scale than in Q4 2009, with the cost base beginning to show signs of greater stability

Just-launched Sky Songs offers a ‘new’ online music model, combining on- demand streaming with credit towards DRM-free downloads, for a single monthly payment

Sky Songs combines the best features of Spotify and iTunes, with lower average per track prices for in-bundle downloads, which will appeal to the music purchaser, and drive industry revenues provided regular use is made of the service

Sky Songs is backed by the power of Sky’s brand, serving the UK’s most entertainment-conscious clientele, with initial promotions targeting Sky’s 2.2 million broadband customers

The impending Competition Commission announcement of its provisional decision concerning the Contract Rights Renewal (CRR) remedy is expected to make little change beyond extending CRR to cover variants of ITV1, such as ITV1 +1 and ITV1 HD

Extending CRR to cover ITV1 variants should benefit ITV NAR (Net Advertising Revenue) by improving ITV1’s overall audience share, but does nothing to ease the deflationary pressures now gripping the TV advertising medium, where CRR works hand in hand with the requirement on the commercial PSB channels to sell 100% of their advertising inventories

The current goings on underline the dichotomy between competition and public broadcasting policy objectives

This report looks at the UK broadband and telephony market up to Q2 2009. The key trend is that the steep reduction in UK broadband net additions continued in Q2 2009, to 176,100

According to recent speculation, Sky stands to benefit materially in the short-term from the replacement of Setanta by ESPN, but could suffer from rights inflation and worse in the longer term should ESPN become really successful

ESPN’s commitment to a pure wholesale channel distribution model across all platforms and lower outlay on rights gives a real chance of building a viable business where Setanta failed

But, profits will take time to build and there is little to suggest that Sky will either materially benefit from having ESPN rather than Setanta as a customer, or that ESPN will emerge as a serious threat to Sky’s own core premium sports business in the next three to four years

ITV reported a pre-tax loss of £14 million in H1 2009 as the advertising recession took a grip, with total TV NAR down an estimated 17% against H1 2008, while ITV family NAR fell year on year by 15%

Although visibility over future advertising spend is restricted to a couple of months, we expect significant further decline in total TV NAR over the remainder of 2009 and 2010, before recovery starts in 2011/12

Cost savings, debt-restructuring and disposal of non-core assets, including Friends Reunited and SDN, should see ITV through the worst and we expect it to benefit later on from regulatory changes to its core advertising business