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The UK experiment with delay TV, set up by British Telecom in the mid 1990s is about to come back to haunt it, with the company formed from that experiment about to challenge BT’s control of broadband in the UK, by joining other unbundled local loop suppliers.

An innocuous order with Alcatel, announced this week for €15m ($16.6 million) for DSLAMS, the equipment that connects broadband ADSL lines to phone exchanges, gives away the fact that Video Networks, the company that took over those ancient BT experiments into delay TV and Video on Demand, is about to begin making its own connections to BT exchanges, something that has only been allowed under BT protest and which very few other operators dare attempt. Previously in Europe most incumbent telecom operators which own the copper lines in the ground have had an unbeatable head start in running DSL broadband networks.

Operators have tended to focus on connecting to business, and as a result own virtually no copper lines to residential homes, with the exception of cable TV operators that offer cable modem connection. If you own no copper, the only way to offer a broadband service is by connecting to the local telephone exchange with your own DSLAMs, which BT has fervently resisted. That gives the incumbent telco a free run at ADSL lines.

However Oftel, the UK Office of Telecommunications, has cleared the way for unbundling at the local loop in the UK and Video Networks can attach its own DSL lines to phone exchanges, effectively unbundling the broadband last mile to deliver entertainment services.

The fact that Video Networks has ordered enough DSLAM connections to connect 1 million homes, effectively doubling the number currently connected in the entire UK, implies that it has approval from Oftel and BT to allow their connection. For some time now Video Networks has been talking about extending its Video on Demand service, called Homechoice, across all of London, and now it appears ready to make its move, by adding 1 million homes to those that British Telecom has already connected in the UK.

Alcatel gave the game away by announcing that it had been selected by Video Networks Limited (VNL), for its next generation of broadband internet services, to connect to over 1 million homes in the UK capital city of London, beginning in the 2nd quarter of 2004. Under the terms of the contract, Alcatel will provide VNL with DSLAMs and support services, enabling VNL to provide a full suite of broadband entertainment services including video on demand, broadcast TV and broadband internet data services. The DSLAMs will be deployed by this December.

Alcatel's announcement said it would be bringing London, in conjunction with VNL, an entertainment proposition that is unrivaled anywhere in the world. HomeChoice offers its customers a range of the biggest TV titles from the UK and the USA (including Friends, X-Files and The Office) and major new films (recent titles include Ocean's Eleven, The Scorpion King, Spiderman and Panic Room). HomeChoice offers subscribers access to almost 5,000 films, TV programs and music videos, which it says is more than any other TV-based VOD operator in the world.

Video Networks was founded in 1992. The company conducted early work with BT on the first video-on-demand trial in the UK in the mid 1990s. Video Networks then tested its service with a pilot operation in Hull from December 1996 to July 1999 and has provided a continuous interactive service since 1996. A subsequent pilot over BT’s ADSL network took place between July 1998 and September 1999. HomeChoice, the first consumer TV-based on-demand service in Europe, was launched in north west London in October 1999 and London-wide in September 2000, but is currently no taking any more customers until these DSLAMs are deployed.

Video Networks said recently that it has recently taken advantage of changes in telecommunications regulations and of ongoing developments in technology by designing a commercially attractive solution to the distribution of its services, based on the use of unbundled wholesale components of BT’s network. HomeChoice offers Video-on-demand programming, allowing customers to enjoy full DVD type control over their programming, enabling them to stop, start, pause, fast-forward and rewind all at the touch of a button.

It also offers replay television in what it calls Timeshift, allowing viewers to watch selected television programs shortly after their broadcast time. All HomeChoice customers can set up one or more PINs (personal identification numbers) when they subscribe. The PIN can contain age restrictions and so can be used to prevent underage viewers from watching restricted content.

Copyright © 2003, Rethink Research

Faultline is published weekly by Rethink Research and is edited by Peter White.

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