BT steps up opposition to broadcast services ban

Telecoms fallout: C&W merger prompts BT challenge on entertainment services

BT looks set to step up its campaign to be allowed to run broadcast entertainment services down its vast local telephone network in response to the pounds 5bn four-way cable merger unveiled by Cable & Wireless on Tuesday.

Analysts argue that the C&W deal, which gives its telecommunications subsidiary Mercury access to a potential 6 million homes in cable areas currently run by Bell Cablemedia, Nynex CableComms and Videotron, could work to BT's advantage by emphasising that customers will for the first time have a genuine choice of service provider.

However, government sources yesterday discounted the chances of the policy, which the Conservatives have stuck to since the telecommunications industry was thrown open to full competition in 1991, being changed before the next election.

According to one senior government source, the ministerial view remains that ban on entertainment services is the spur to the pounds 2bn investment made by cable operators in the UK each year. "We know BT's view on this and they know our view. Nothing has changed," the source said.

BT has equally defended its argument that it can only justify investing pounds 15bn in providing fibre optic cables to residential customers, replacing existing copper wire technology, if it is able to pack extra services down the infrastructure.

The official policy has two strands. First, BT's ban on conveying broadcast pictures to local customers will be reviewed in 1998. Three years later, in 2001 and 10 years after the first combined cable and telephones franchises were awarded, the exclusion preventing BT from providing programming services will also be reviewed. There are no guarantees that either ban will be lifted.

One possibility is that an incoming Labour government could take a more favourable view of BT in the light of last year's controversial "deal" with the company announced by Tony Blair to cable up the country's schools.

The broadcast entertainment ban also applies to Mercury should it try to offer broadcast entertainment on its much more limited network, but C&W has dramatically circumvented this by taking over a block of cable franchises.

BT is not prevented from running some television pictures down its network as long as they are not broadcast contemporaneously, but its experiments with video-on-demand have apparently been disappointing.

In a trial of 2,500 households in Colchester and Ipswich, which ended in June, customers were able to order feature films or go home shopping with several leading retailers. The experiment proved for the first time that television pictures could be sent down existing copper telephone wires, which have a much lower capacity than the co-axial cables laid by cable operators.

However, BT has refused to divulge how many households actually used the services on offer and whether a country-wide service could be commercially viable. There are no plans to widen the trial further in its present form.