BSkyB O2 Telefonica deal is “significant”

Hands across the waterThe acquisition of UK Telefonica’s O2 broadband by BSkyB is “significant” for both customers and the industry, an expert has said.

The comments by Andrew Ferguson, editor at ThinkBroadband, come as BSkyB announced it would buy its rival’s 500,000 customer accounts for £180 million, including the O2 and BE consumer broadband and home phone businesses. It said the by gobbling up its rival it would be able to provide advantages of scale for its home communications business.

Currently BSkyB has around 3.6 million customers, who pay for the company’s TV, broadband and telephone services

The deal is due to complete by the end of April, subject to regulatory approval. Once it has been signed off, all O2 and BE broadband customers will be switched to BskyB’s all-fibre network.

“The acquisition is significant both for the customers involved who have elected to join a partial LLU service, rather than the fully unbundled options sold by TalkTalk and Sky and for the industry overall, as we now have a new second largest retail broadband provider,” Mr Ferguson told ChannelEye.

“For the industry as a whole the sale of the O2/Be customers means that the last significant partial LLU service (where telephone is left on the WLR platform and only the broadband is ran over the providers own hardware) is vanishing, at least in terms of the consumer retail arena. This means that the vast majority of the unbundled services in the UK actually have both their telephone and broadband service provided over a Sky or TalkTalk MSAN (MSAN being a DSLAM providing multiple services).”

However, he added that the acquisition would also remove the Be retail network “which while  has remained small was well loved by its generally loyal customers”.

The company was also the provider that pushed ADSL2+ onto the UK market and also gave the people control over the various parameters of the ADSL2+ service, meaning customers could tweak the performance of their line to be the best in terms of line speed and latency.

However, this could be both good and bad news for both smaller providers.

“The Sky LLU platform tends to favour stability at the expense of a small amount of connection speed and latency, this means we are expecting to see a fair number of Be customers migrating to other smaller providers,” Mr Ferguson said.

“In terms of the regulatory position, it means Ofcom is now really regulating just five major players which control 94.4 percent of the retail sector in the UK.

“The problem with this dominance by a handful of major players is that it will be increasingly difficult for the small providers who service the pro-sumer and SME sector to get their voice heard,” he added.