British Sky Broadcasting, which saw its third quarter proft fall 83 per cent, has confirmed it is to offer free set top boxes and Internet access to woo consumers away from cable companies.
Analysts are expecting BSkyB's agressive tactics to trigger off a bloody price war as companies battle for subscribers to get a head start on Cable & Wireless, Telewest and NTL. These are all expected to introduce cable services later this year - offering packages that will include TV, telephone and fast Internet access.
BSkyB, the second largest satellite broadcaster in Europe, said that its profits had taken a dive due to the company's increased spend on trying to win subscribers for its digital TV service.
From 1 June BSkyB confirmed that it will provide customers with decoder boxes for its service free of charge. They currently cost around #200, although most cable companies build their cost into monthly subscriptions. At the same time BSkyB will roll out a free Internet access service similar to Dixons Freeserve, dubbed Skynow. From 1 July BSkyB also plans to offer its customers a 40 per cent reduction on standard BT telephone calls.
BSkyB said that to off-set charges it will put monthly subscriptions up by a maximum of #2. BSkyB customers who sign up before the 31 May, however, will be excempt from the rise until September 2001.
Currently most cable companies build the cost of their set top boxes into monthly subscriptions.
This weekend, however, ONDigital confirmed it is kicking off a campaign for the month of May whereby if a consumer buys a TV for #200 they will get a set top box free if they subscribe to ONDigital, a joint venture between ITV companies Carlton and Granada.
ONDigital declined to comment on plans for a widely rumoured free Internet access service, but said, "BSkyB will trigger off a huge growth in the digital market and we plan to be extremely competitive in the services we offer - we have all sorts of plans and will talk when we are ready."
BSkyB has hit heavy losses in trying to push consumers over to digital. Today the group revealed a fall in its nine month profits from $134 million to just $69 million.
As of 3 May BSkyB had 551,000 digital customers, of which 212,000 were new. Whilst digital won BSkyB some new customers, satellite subscribers in the UK fell from 3,458 million at the end of last year to 3,445 million at the end of last month. Cable companies, however, saw their subscriber base jump from 3.04 million to 3.14 million during the same period. Many consumers opted for cable for telephone and Internet access.
BSkyB said it will suspend the payment of dividents to fund its huge investment in a digital future. The company claims it is still on target to hit its goal of one million digital customers by October.
BSkyB said it will cease delivering analog TV on the 31 December, 2002.
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