Telewest strategy with broad focus

Broadband has been identified by Telewest as the key to differentiating its proposition from that of rival Sky. In recognition of this fact, the UK’s second-largest cable company, along with its subsidiaries Yorkshire Cable, Cable London and Birmingham Cable, have been rebranded Telewest Broadband (MW November 1).

Telewest Broadband sales and marketing director for the consumer division David Hobday says: “Sky has managed to ‘own’ the word digital and Telewest is moving to own the broadband space by using the very factor which differentiates Telewest from other platforms.”

UBS Warburg media analyst Melissa Earlam says: “I think Telewest recognises that the opportunity to try to dominate the pay-TV market has gone, as Sky has a strong position in the market and its branding is synonymous with pay TV.”

Sky’s latest results show it had 5,498,000 residential digital TV subscribers on September 30, leaving 77,000 other subscribers who are expected to transfer to digital by the end of the year now that the platform’s analogue service has been switched off.

Telewest, due to report new figures on November 15, had 564,000 active digital TV customers, representing 43 per cent of its total TV customer base of 1.3 million at the end of June. The UK’s largest cable company NTL, due to unveil its latest figures today (Wednesday), had 951,300 digital TV customers at the end of June, 41 per cent of its total TV customer base, while ITV Digital has 1.2 million subscribers.

Richard Oliver at Universal McCann says Telewest’s rebranding appears to be “an admission” that it is not winning the pay TV war. He adds: “However, broadband has been mooted as the next big thing for a long time now and it hasn’t really managed to take off.”

Confusion is rife when it comes to technology and some industry insiders doubt whether consumers understand what broadband offers – high speed, continuous Internet connection. It is available either through a cable modem connected to a fibre optic network or via ADSL (asymmetric digital subscriber line) using the twisted copper wire telephone network.

Interbrand Interactive managing director Jez Frampton says: “Some businesses will understand what broadband is, but I put money on the fact that most people don’t know what it is.” Telewest’s rebranding, he says, makes it sound like a technology company rather than “consumer friendly”.

The cable company has been planning the rebranding, created with the help of North Design, since March last year and had already dispensed with the services of Wolff Olins after the branding consultancy reportedly came up with names such as Circus and YoYo.

Earlier this year the cable company embarked on a joint advertising campaign with NTL to push broadband. But NTL has since opted for the back-to-basics approach, seeking to explain to consumers the benefits of cable – TV, Internet and telephone all offered down one line – in a &£10m branding push (MW September 27).

Even Telewest’s Hobday admits that broadband is a term that few consumers understand. But he claims that the practical benefits of broadband will be explained to consumers as part of an advertising campaign being created by Saatchi & Saatchi scheduled for next year.

Rebecca Allen, a media analyst at JP Morgan, says: “Telewest’s rebranding in terms of using the broadband name makes sense. Cable will receive a boost because of broadband Internet in the next two to three years. For consumers, the equivalent ADSL service is either not available or is much more expensive.”

The figures so far are not encouraging. Broadband is available to 4.3 million homes in Telewest’s area, but only 31,000 subscribers have signed up. In NTL’s area 4.7 million homes have broadband capability, but only 52,000 at the end of July had been connected. BT claims that 60 per cent of UK homes (13 million) are served by an ADSL enabled exchange, and that it had more than 100,000 subscribers at the end of October.

MediaCom broadcast director Mark Collins says: “I think it’s a little early for consumers to grab hold of the concept of broadband.

“I think the move demonstrates that it {Telewest} is grabbing hold of this, because it’s all it can grab hold of.”

Global Internet research company Jupiter MMXI estimates that by 2007, 20 per of UK households will have broadband.

Cable companies have priced their broadband services competitively at about &£25 a month, compared with BT’s &£40 a month. But City analysts claim the price will have to drop to &£10 or &£15 before broadband becomes a mass-market proposition.

There are also signs that BT is gearing up to push broadband in a big way. It has applied to the Independent Television Commission for a licence to run TV services over broadband cable or telephone networks.

With the battle for pay-TV customers apparently won by Sky, the debt-laden cable operators – Telewest owes &£4.7bn and NTL &£11bn – are banking on their multiple service offer to attract customers, to increase subscriber spend and hit break-even targets by 2004. But whether Telewest’s broadband-focused strategy will pay dividends remains to be seen.