Sky broadband pips the one million mark

Sky's expensive foray into the high-speed internet sector has started to bear fruit after the company yesterday said it had racked up one million broadband customers in little more than a year, bolstering its pay TV subscriber figures and heaping more pressure on arch rival Virgin Media.

Since it launched its broadband services last summer Sky's growth has outpaced its rivals in the internet sector. Having passed the one million customer mark in just 14 months, it is now the fastest-growing broadband supplier in the country. In the three months to the end of June, Sky added nearly 260,000 new broadband users, streaking ahead of BT with 146,000 new users, Carphone Warehouse with 126,000 and, most starkly, Virgin Media with only 50,000.

However, unlike its rivals, Sky does not have to factor in customers it has lost as it is a new entrant to the internet sector.

Sky launched broadband to ensure that its customers were not lured away by the likes of Virgin Media and BT who can offer digital television and high-speed internet as part of one package. Early signals suggest that it is from those two competitors that it has won most of its business.

The company also views the broadband and telephony markets as strengthening its growth profile, transforming the company from being dominant in the £7bn market for pay TV services to a strong challenger in the £25bn market for entertainment and communications services.

Early indications suggest that not only has Sky's broadband launch locked down many of its existing pay-TV users but also attracted new subscribers to its satellite TV services with around 30 per cent of its high-speed internet users being new customers. It added that while basic broadband is free for its TV subscribers, around 70 per cent of customers were choosing to pay extra to get a better internet service.

Yet the progress it has made operationally has been somewhat overshadowed by the regulatory threat surrounding the company.

In response to a Competition Commission enquiry into the influence it could wield over ITV after it purchased a near-18 per cent stake in the broadcaster late last year, Sky has suggested giving up some of its voting rights to appease the regulator's concerns.

In response, Virgin Media has reiterated its call for the regulator to force Sky to sell its entire stake in ITV.