BT 'over-estimating' appeal of video by phone

BT MAY be over-estimating the market for video rental over telephone wires, according to report by CIT research.

The study forecasts revenues from video on demand at about pounds 1bn by the end of the decade, half the amount BT is said to project.

CIT says the cost to BT of providing video on demand would be about pounds 400 per home, a total investment running to billions of pounds. It adds that BT appears to assume that people would sign up for the service much faster that they did for satellite television, which is among the fastest-selling products launched in Britain.

Liz Baker, CIT's project director, said: 'It is impossible to compare like with like, because video on demand has never been offered before. But from everything we know about entertainment services and hardware in the past, BT's plans seem wildly optimistic.'

BT said that it did not recognise the figure of pounds 2bn for projected revenues and that no financial predictions for the service had been given by the company. It is completing trials of video on demand in the homes of 60 employees in the Ipswich area and plans to launch full commercial trials in 2,500 households around the end of the year.

The CIT report also predicted a growth in the number of cable television subscribers to 3.8 million by 2003 compared with 610,000 last year. Revenues are projected to increase from pounds 150m last year to pounds 1.1bn, excluding revenues from cable telephony.

CIT says the number of telephone lines installed by cable firms will increase to 2.5 million over the same period from 107,000 in 1993. The telephony revenues will increase to pounds 923m in 2003 from pounds 33m last year. These figures fall short of projections by the Cable Television Association, which says that 4 million telephone lines will be in place within 10 years.