BT boss blasts 'free' broadband-wagon

Published on Sunday 23 July 2006 00:41

SIR Christopher Bland, chairman of BT, has launched a withering attack on rivals who are offering so-called 'free' broadband and phone services.

Bland was speaking after BSkyB, the satellite TV group, unveiled an aggressive drive into the UK broadband market which will cost 400m over the next three years. The group, led by chief executive James Murdoch, will offer broadband 'free' to its 8.1 million TV subscribers - albeit with a 9 line rental charge. Carphone Warehouse has made much of its "free broadband forever" package for users signing up to a Talk Talk phone deal.

Last week, the Advertising Standards Authority upheld complaints from BT that the ad was misleading and ordered the group's chief executive, Charles Dunstone, to change it.

Bland told Scotland on Sunday in an interview that companies including Carphone and Skype, the voice over internet protocol (VoIP) business acquired by eBay, would find it unsustainable to provide "free" services.

He said: "Free is not a very distinguished business model, and I think Charles Dunstone is about to find that out. Just as Skype will find out. To say that phone calls can be 'free' in a business that eBay has paid $2.6bn for is a very odd approach to business."

BT has placed broadband and global IT services at the centre of its strategy for growth as revenues from its traditional fixed-line phone business have declined, but it faces competition from the likes of AOL and Orange, and now Carphone Warehouse and BSkyB.

Bland said he was not concerned about competition, and said rivals could not match BT's breadth of service because they would concentrate on urban areas which are likely to yield higher profits.

This is because they offer services in places where they pay BT to install their broadband kit in its local exchanges in order to turn the group's copper wiring into a high-speed internet conduit - a process known as 'local loop unbundling'.

Bland said: "It's a highly competitive market and BSkyB is the latest entrant. You have to remember that because of unbundling they will be customers of BT Wholesale as well as competitors.

"Who's the biggest and who knows the most about broadband? You won't see Carphone Warehouse or BSkyB in Scotland. BSkyB is not going to Kinlochbervie. The Highlands are not likely to have a visit from Charles Dunstone or James Murdoch."

BSkyB will this week report full-year figures which are expected to show a surge in profits. Pre-tax profits are expected to come in at around 799m for the year to June 30, 2006, up from 631m last time.

Revenues are expected to rise from 3.86bn to 4.05bn.