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Tiscali merges with Homechoice
Monday 14 August 2006 12:32:00 by Andrew Ferguson

The last week has seen speculation of deal with Tiscali and Video Networks International, now the speculation can end. A deal has been announced whereby Video Networks International who own Homechoice will sell the business in return for a 11.5% stake in Tiscali UK. The Independent and The Guardian has more on the news.

Tiscali already has a broadband user-base of around 1.2 million customers, so it is not so much a move to acquire the 45,000 Homechoice customers, but access to the technology and experience that Homechoice has in the video over broadband arena. Homechoice has had its video over DSL product available since 2000, and is available in London and Stevenage. The original product relied upon a BT Wholesale product called BT Videostream, but with the advent of unbundling it has created its own network of 145 LLU enabled exchanges where it can offer video over broadband, up to 8Mbps ADSL service and telephone packages.

It is possible that with the increased marketing opportunities that Tiscali brings that the Homechoice products may see an increase in demand, a lot depends on what Tiscali do next. With the arrival of Sky in the broadband market, and new deals from ntl:Telwest the TV/broadband/telephone arena has lots of competition so for Homechoice to survive there was a need to give itself a larger profile.

It would be no surprise if the next few months did not bring news of more acquisitions by various providers to increase customer numbers, but also to acquire expertise. Whether the smaller providers can survive in a market where prices are continually falling in the face of pretty much fixed costs, those companies without a large cash surplus or deep pockets will struggle to win customers. If just one of the new services plastered over the national press gets the balance right of low cost versus a reasonable level of service, many will question paying £20+ for a broadband connection. The biggest question is how many niche customers are there in the UK, certainly back in 2000 there was not that many willing to dig deep to buy ADSL in its initial incarnation of £40 to £50 for a 0.5Mbps connection.

Those who have predicted the UK ISP market shrinking to just five providers, appear to be seeing their vision come true, the chance that just five providers will home 95% or more of the market is very likely. Back in the first quarter of 2006, the top five providers held around 80% of the UK broadband market (ntl & Telewest figures were combined).


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