Piers Daniell

We laughed in the office on the news that Easynet is finally being sold off by Sky as I have been saying it would happen for over a year. Some believed me, some didn’t but my reasoning was sound. Ever since Sky bought Easynet it has been an uneasy marriage of a vast consumer brand and a very business focused one. Easynet was one of the first to get involved with LLU (local loop unbundling) in the UK and were able to launch products way ahead of BT. Something Sky obviously liked when they paid well over £200m for the business even though, by then, they were actually buying an old network and much of it needed to be upgraded.

Unlike O2, who at the same time, paid a fraction of that (£50m) for BE. They had a much newer infrastructure, and after all the upgrades to make it fully national was less than Sky originally paid for Easynet. But when you look at how Sky treated Easynet it was still segregated within the organisation and divisions were created to ensure a nice clean break when the time came to offload it. I think they did very well to get £100m for it, especially as the actual valuable part, the network, has remained in Sky’s hands meaning Easynet are now just a third party with a good supplier agreement. But again, like when Sky bought Easynet originally, it was done by a company who didn’t understand data communications and this time they found some bankers who obviously were taken in. I don’t think the amount demonstrates value for money and it will be a difficult business to float/sell in a few years when the venture capitalists decide they want their money back.

Obviously for us it probably means a bit more competition in the coming months as the business gets some much needed direction, but with no innovation over the past four years they are going to struggle to catch up. While they have an enviable client list, I am sure the customers coming to the end of their dire 5-year terms will be ready to for a change. So good luck Easynet – you are going to need it!

With the announcement last week that BT will be offering Sky Sports through its BT Vision product, I am convinced, more than ever that BT will focus on becoming a media company rather than a telecom provider. By using the premise of providing fast internet access (BT has earmarked over £2.5 bn into the investment into fibre based products, FTTC and FTTH), it has been able to create a platform to compete directly against Sky and Virgin Media.

While the rollout of these products is currently low, the footprint will bring the fight directly to Virgin’s door. And while Virgin may offer internet access it gets nowhere near the support from government as it is perceived as being a media company and not as a technology enabler, like BT. So while BT gets good press on bringing faster internet to the masses, and not its actual intentions on competing against Sky & Virgin, the others are treated, rightly, as a media companies.

This action further ruins BT’s reputation within the telecom industry as customers needs are being put to the bottom of the pile, while saying publically they are at the top. The BT Vision product, for example, is given priority across the BT backbone to ensure the TV quality is comparable to the competition. This means that other traffic is left to fight it out over the remaining space reducing quality. A niche ISP who has worked with BT for many years even put a public notice out on their blog about the issues their customers are experiencing because of the reduction in capacity. And this situation can only get worse as BT’s plans to become a media player grow.

My message, therefore, is don’t believe the headlines. Unless you are going to become a direct BT Vision customer then I can only see you being disappointed with BT’s connectivity plans.

Interesting developments going on at Tiscali. With shares suspended and talks at an end with Sky, the company is currently worth about €100m. With debts of over €500m they are having big problems keeping their head above water and some reckon there will now be a fire sale on a number of assets.

From my perspective this is no bad thing. For a number of years Tiscali has been bullish in the marketplace and always over promised and under delivered. With their purchase of Bulldog last year when they took on Pipex it was inevitable that they would hit the buffers as that client base does appear to be one very hot potato. It nearly brought Cable & Wireless to its knees (sold for £12m even though it cost C&W closer to £120m), ruined Pipex and now making it’s mark on Tiscali. It may be a coincidence but with Tiscali eager to just gain market share at any cost it was a telling sign that they were prepared to take on the Bulldog client base when buying Pipex.

What does it mean to us? Well it adds to the point I have made before that the consolidation in telecoms market has not been to the benefit of users and that dealing with a large multinational does not provide any level of guarantees or security. At least with a smaller company you have more visibility in how it is performing and in dealing with a business such as Fluidata risk is spread as multiple networks are used to deploy services.

Business already using Tiscali’s platform for DSL and MPLS are already starting to hit the phones to minimise risk and move off the network. If Tiscali don’t move quickly to stabilise their position they could find they don’t have a client base to sell.

Virgin Media this week launched their 50 Mb/s home service. I have written here before on their offering and misuse of the term ‘fibre’ and will be interested to see exactly how this service fairs. Theoretically at this speed users should be able to download at 5 MB/s meaning a 700 MB video (such that you get on Sky or BBC Iplayer) should take no more than a few minutes.

However I don’t believe take up will be high for a number of reasons. Firstly it costs £50 per month which is too much for the vast majority of home users – kids who are going to want to use this kind of speed are going to have a hard job convincing their parents that £600 per year is well spent. Secondly even though we are a business only ISP are seeing more attempts by media owners to track down IP addresses from where they believe illegal downloads have taken place. It must be a complete nightmare on consumer networks so companies like Virgin are either going to have to put restrictions in place or media owners will make more effort to prosecute. Problem is that if you remove the ‘free’ aspect of videos and music then I believe a lot of the requirement for high downloads will reduce, not increase.

Until HD video is widely distributed through IP home users aren’t going to see much of a difference between 20 or 50 Mb/s. Be There for example have been selling ADSL2+ in the UK for the past few years and with their extended footprint on the back of Telefonica O2’s investment have I believe a kind of glass ceiling in how many users require their service. Their service and quality of network is better than Virgin, so if they are selling a vastly cheaper but not much slower connection then how is Virgin going to compete?

Another factor is the speed at which the websites operate at. We have had 20 + Mb/s in our office for a number of years now and I know that downloading video or music can take an age, even though I know there isn’t any problems with the network (as it is Fluidata’s!). So the line can support more than 2 MB/s but real world tests show only 300 KB/s is possible due to capacity issues with the website.

Something else that is in the small print is the measly 1.5 Mb/s upload (equates to 0.15 MB/s) which I think will be a bigger problem going forward. More people are now logging into their home from outside or getting their home to send data like video out to the internet using technology such as Slingbox. The speed Virgin is offering is ok for most current services buy why pay more for less than half the speed other carriers offer?

As I say, consumers watch this space.