Sky gets into broadband

Rupert Murdoch’s pay-TV company Sky, on Tuesday launched the UK’s third ‘free’ broadband service which will be bundled with its satellite TV package. The broadcaster said it will invest £400m in the service.

The move has been widely expected since Sky’s acquisition of internet service provider Easynet in 2005. Since then, Orange and Carphone Warehouse have both launched internet services tied-in with mobile phone contracts.

Sky Digital customers can begin registering for the service today with sales due to begin in earnest in August. As expected, Sky will provide a 2Mb service to its existing customers, complete with 2Gb download limit, for no charge. This service matches those of Carphone Warehouse and Orange who started the free broadband trend earlier this summer.

For £5 a month, Sky will offer what it dubbed a ‘Mid’ package, which includes an 8Mb line and 40Gb download limit per month. The ‘Max’ offering provides a 16Mb line with unlimited downloads.

Regardless of which package customers choose, they will have to sign up for Sky Talk which costs £5 a month but requires a BT line (which costs another £10/month). Sky Talk gives unlimited UK landline calls.

Mark Newman, chief research officer at Telecom.com’s parent, Informa Telecoms and Media says the strategy is a preemptive strike against NTL and BT. “Part of Sky’s strategy will be to use broadband to deliver its own TV content to people who don’t subscribe to Sky services today,” Newman says. “The main motivation for offering Sky to existing pay TV customers is to thwart competition from cable players like NTL and preempt BT’s expansion into triple play.”

There were few surprises at the launch of the service, except perhaps the admission by James Murdoch, chief executive, that the venture will not start making money till around 2010. “The business case is clear,” Murdoch said. “We believe our investment will enhance top-line growth, be earnings enhancing from 2010 and with the benefits of scale, deliver increasingly attractive returns thereafter whilst offering substantial savings and compelling value to customers. This is a transformational new initiative for Sky.”

New customers can join Sky digital for £15 a month with a minimum 12 months commitment and sign up for Sky broadband at the same time.

Sky digital customers who are not covered by Sky’s broadband network can sign up to Sky Broadband Connect, which is similar to the Mid package and costs £17 a month.