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Do telcos and TV really mix?

I know, the question sounds ‘so last century’. Today, it seems natural that any organisation that possesses the infrastructure that can carry content to the home should do so – it is a competitive necessity.

There is no argument on that, and many telcos have made a big success of their television proposition either acting as ‘passive’ carriers to a content provider or through JVs and other arrangements. What they leverage is that infrastructure and a longstanding relationship with the home that they can parlay into becoming the trusted provider of TV as well as communication services.

Some, particularly in America, have sought success by taking over media companies wholesale. Others – and this is where the doubt creeps in – have tried to become media companies alongside their other activities.

There is a long tradition of this not going very well. And it isn’t just telcos – infrastructure providers and device makers have a pretty spotty history too: Siemens, Ericsson, Samsung as well as a long list of telcos have all ‘had a go’ at content provision with very mixed results (by which I mean poor).

A case in point is BT. Which may seem like I’m picking on my home PTT (remember when they were all called that), but it is a good example and it’s not like it hasn’t been there before. A few years ago I wrote a piece wondering whether corporations could actually absorb the lessons of past failure into their DNA and, thereby, avoid them in the future.

BT got into and then out of the cable business and the content business in the 1980s and 90s. Now it is investing very heavily in the TV business again mainly, it seems, to protect and boost its position in broadband provision. To that extent it is working and BT retains a dominant market share in domestic broadband supply. But that, many argue, has as much to do with its continued control of the wholesale market – i.e., it controls competitors access to the infrastructure – as it does with its media proposition.

Ironically, though, its focus on providing a TV service may yet cost it its wholesale status. BT has fought off break-up attempts to take BT Openreach – its wholesale division – away from the corporation completely. Regulator Ofcom has lost patience with foot-dragging and empty promises and is increasingly of the view that complications over pension liabilities and the like will just have to be sorted because BT’s indolence on infrastructure is going to cost UK plc its global competitiveness.

Gavin Patterson the BT CEO has lead the charge in television – he headed the TV business before ascending to the top – and he is a TV kind of a guy; exactly the sort that telcos normally lack when they play their media card. Trouble is, it seems he’s not so much of a telco kind of a guy. Spending billions on football rights and the attendant glitz is a lot more interesting (I’m guessing) than spending a fraction of that and doing the work to sort out lamentable customer service (BT always ranks worst in broadband customer surveys). It is also easier to go on saying the UK has ‘the best’ broadband service in Europe – meaning on aggregate more homes have a slightly faster service then the aggregate elsewhere – then to recognise the truth that most European countries have a vastly quicker service to the majority of their homes and soon will have a much faster service to all their homes.

Every parent knows TV can be a distraction from the homework. Is it why BT missed a £500 million fraud in its Italian unit? Certainly, TV is always top of mind. Last week, Patterson publicly lamented the inflation in soccer rights driving content costs too high. He said this out loud, knowing BT’s entry to the market drove Premier League prices up 70 per cent in the last round, and that BT had already put £1.2 billion (up from £900 million) in the envelope for its Champions League bid this week, which it won; probably by more than it needed to (Sky doesn’t want to achieve monopolistic dominance of all football when it is about to face a takeover review).

BT Openreach should be removed from BT for the good of UK infrastructure. Perhaps TV should be taken away for its own good.

 

 

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