BT chief Danon plans to muscle in on BSkyB's broadband TV manor

BT broadband

BT is preparing to go head-to-head with BSkyB with plans to offer a television service over a broadband network.

BT is preparing to go head-to-head with BSkyB with plans to offer a television service over a broadband network.

The project is being led by Pierre Danon, the chief executive of BT Retail. Aimed at driving the take-up of broadband, it would mark the company's first big foray into broadcasting.

BT has approached ITV and BBC about providing content for the project, provisionally called "Sky Plus Plus" - a reference to Sky's personal video recorder, Sky Plus, which enables viewers to record any programme shown over the previous eight days on to a set-top box.

BT wants to host a much larger archive of up to three months of programmes. It would transmit them to customers for viewing using its broadband network.

The original plan, which had been set for an October launch, was to sell a digital terrestrial television box with a broadband modem for £40. Consumers would then have had to pay an extra £30 per month for broadband access.

But BT has delayed the launch, on the grounds that the planned package would be too complicated for customers, and has gone back to the drawing board. It has not decided whether customers will have to have a PC or whether they will be able to watch programmes transmitted by broadband on their television sets. The company has also not decided whether the revised package will be a more limited "video on demand" service, or one allowing live streaming of programmes.

Watching television via broadband is the holy grail for advertisers and broadcasters as it allows much greater interactivity with the viewer. Compared with digital satellite or terrestrial television, it is far easier for broadband viewers to send information - whether casting a vote or purchasing products shown on television.

This is key to increasing broadcasters' revenues as they move away from a subscription-only model. About four million homes have the free-to-air digital terrestrial service Freeview, launched 18 months ago, more than half the total of Sky subscribers. Last month, Sky announced it was launching its own free-to-air digital satellite service, dubbed "Freesat", later this year.

The idea for BT to use its broadband network for broadcasting was first mooted when Sir Christopher Bland, former chairman of the BBC, was appointed BT chairman in 2001.

BT is suffering from declining revenues in its core fixed-line telephone business because of fierce competition. It is turning to the rollout of broadband as a way of supplementing this.

But Stephen Pentland, partner at the technology consultancy Spectrum Strategy, said BT's plan would require "huge investment" in what is called the local loop - the telephone exchanges and the last mile of copper wire to people's homes.

"Television is all about peak viewing from 7pm to 10pm," said Mr Pentland. "If everyone tried to use BT's broadband network at the same time, this would put a huge stress on the network."

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