Brussels hurdles may force BIB to rethink strategy

Shareholders in British Interactive Broadcasting (BIB), the digital interactive television service backed by British Telecom and British Sky Broadcasting, could be forced to rethink the venture following new competition hurdles raised by the European Commission, it emerged yesterday. Chris Godsmark, Business Correspondent, reports on the latest blow to BIB's ambitions.

EC sources said yesterday that the plans by BIB for a digital satellite service including home banking, shopping and education channels, could damage competition in the rest of the digital-TV market. BT and BSkyB both have 32.5 per cent stakes in the venture, with the remainder held by Midland Bank and Matsuhita of Japan, which owns the Panasonic consumer brand.

The EC, which has been investigating BIB since June, is understood to want to force BIB to offer its technology to rival cable and digital terrestrial groups. The venture would invest some pounds 250m to subside the cost of the digital set-top boxes, which enable homes to access the channels. The boxes are planned to sell for around pounds 200, compared to the manufacturing cost of some pounds 500.

Commission sources warned yesterday that BIB's control over the boxes could "exclude competition." Most of the complaints to the competition arm of the commission came from rival cable companies, which are planning their own digital interactive television offering.

Another potential source of conflict from the EC has come over the roles of BT and BSkyB in the venture. Although their participation has been cleared by Oftel, the UK watchdog, the EC is concerned that BT could use BIB as an alternative to investing in improvements in its conventional telephone network.

One possibility is that the Commission would seek to cut the share stakes in BIB held by the two dominant investors. However, the shareholders have warned that no other potential backers are waiting in the wings to fill the gap.

BIB's shareholders are understood to have warned that the venture would be uneconomic if it had to be extended to terrestrial and cable groups. BIB claims neither rival medium has enough capacity to transmit the huge volumes of data essential interactive television.

It would mean reducing the number of services to homes, a move which has been prohibited on competition grounds. BIB has to offer the platform to as many service providers, such as banks or computer game businesses, as want to use the technology.