How broadband could banish dishes and aerials

Listen to analysts talk about the full potential of broadband internet access and it is easy to see why Carphone Warehouse is plotting an assault on the market.

Experts believe television will in future be sent to homes via a broadband connection, rendering the satellite dish and rooftop aerial redundant.

Home phone calls may increasingly be made from a laptop as consumers take advantage of low prices and a service pioneered by the likes of Skype, which was bought by online auctioneer eBay for £1.4bn (€2bn) in September.

According to the British Office for National Statistics (ONS), 64.2% of people in the country with access to the internet at the end of last year used broadband, compared to 35.8% for dial-up.

What interests companies such as Carphone is that this figure is increasing fast. Wind the clock back a year and dial-up was the dominant means of surfing the web, compared with the 42.7% of connections via broadband.

In a note to clients, Investec analyst Christian Maher said the market was heading for a “broadband bloodbath” as Carphone turns up the heat on incumbents such as BT.

Offering customers a package of UK and international voice calls and broadband access plus line rental for a total of £21 (€30.20) a month was tantamount to Carphone firing the gun on a price war in the telecoms sector, he said.

Mr Maher said: “We expect the offer to be very popular with potential customers, as Carphone drives for a land grab.”

The challenge, and potential rewards, facing Carphone are huge. Its broadband service is currently dwarfed by that of BT Retail, which hooks up 2.3 million people, and the 2.8 million customers of cable giant NTL.

Ambitions to capture customers at a faster rate through its Talk Talk landline service have been hampered by the fact that Carphone has no option but to resell BT’s wholesale broadband product.

To tackle this, Carphone is investing £60m (€86.3m) to install its own broadband equipment in 1,000 BT exchanges.

This move, known as local-loop unbundling, will enable Carphone to reach nearly 70% of the population and give it much more control of the speed, price and service standards of the broadband products it is able to offer.

Angel Dobardziev, senior analyst at telecoms consultancy Ovum, said: “Fixed-line is a dying market. If you want to be in fixed services then you need to be in broadband and that is why Carphone is looking at this.”

Landlines are under attack on three fronts, including mobile-phone operators which offer bundles of voice calls and texts that many users are unable to exhaust each month.

BT, the UK’s largest fixed-line telecoms provider, has put forward a series of flat-rate tariffs to fend off competition from new telecoms firms, while there is also the emerging threat from Voice over Internet Protocol (VoIP) providers such as Skype.

Signs that the broadband market is becoming the battleground for telecoms firms have emerged over the past few months, with BSkyB paying £211m (€303.3m) for Easynet so that it can offer its customers pay TV, internet access and fixed-line calls.

Mr Dobardziev said: “It’s still very much in the land grab phase where everyone is fighting for customers, as the mobile-phone market was two or three years ago.”

Carphone acquired Onetel and Tele2’s UK businesses last year, which doubled the number of customers using its Talk Talk landline services to 2.4 million and consolidation in the market is expected to continue.

“The main thing is that prices of pure broadband access are coming down and it’s becoming less and less profitable,” Mr Dobardziev said.

“The challenge is how to make money on top of broadband for customers.”

Television broadcast over the internet is an enticing prospect for viewers who could choose among scores of shows in standard as well as high-definition formats.

Key to its success will be the speeds of connections, which must become faster so pictures are not disrupted.

But Mr Dobardziev cautioned: “It is a long way from becoming actual reality and even longer (for firms) to make money out of it.”