NEWS: BT and Sky form new alliance

BSkyB is poised to forge a new partnership with the telecoms giant, BT, in a move which will help both companies counter the powerful combination of TV and telecoms offered by cable TV.

BSkyB is poised to forge a new partnership with the telecoms giant, BT,

in a move which will help both companies counter the powerful

combination of TV and telecoms offered by cable TV.



BT and BSkyB are now set for greater co-operation on the development of

digital satellite television and interactive services, following the

merger between BT and the US telecoms company, MCI.



Because MCI has a 13.5 per cent stake in Rupert Murdoch’s News

Corporation - which in turn owns 40 per cent of BSkyB - the proposed

alliance with MCI will give BT a stake in News Corporation.



MCI confirmed this week that its merger with BT would strengthen its

links with News Corp. The two are currently working together on the

creation of a US digital satellite service. This US offering will

include a 150-channel TV package modelled on BSkyB, but called ASkyB.



In Europe, the MCI/BT partnership is expected to pave the way for BT to

join BSkyB in the development of digital television. In particular, BT

is now rumoured to be keen to help subsidise the digital satellite

decoder which gives viewers access to BSkyB’s planned digital channels.

The decoders would ordinarily retail at a prohibitive pounds 500 each.

BSkyB is already prepared to subsidise this and prices of between pounds

200 and pounds 300 have been mentioned.



BT has been exploring ways of using its telephone lines for distributing

television channels, and has been experimenting with a video-on-demand

service. However, the company is precluded from broadcasting across its

network until at least 2001 under current government regulations.



But closer co-operation between BSkyB and BT could enable two-way

communications via a modem in the digital satellite decoder and BT’s

phone lines. This would help both companies stave off increasing

competition from the cable market.



BSkyB’s share price was rocked at the end of last month by the

announcement of a merger between the telecoms company, Cable and

Wireless, and a number of UK cable operators to offer a powerful

combined telecoms and TV service.



BT and BSkyB have already worked together on a number of projects,

including an Internet service, and the two companies were recently

censured by the telecoms watchdog, Oftel, for cross-promoting telephone

and satellite services.



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