Speed of the essence in broadband battle

By Kate Holton - Analysis

LONDON (Reuters) - BT's super-fast broadband network plan shows speed is key in the fiercely competitive market, pressuring Carphone Warehouse (CPW.L) and BSkyB (BSY.L) while highlighting Virgin Media's (VMED.O) advantage.

"BT's plan highlights the importance that it now sees in higher broadband speeds," analysts at Goldman Sachs said. "Virgin will have a minimum two year head start."

Cable operator Virgin Media will shortly offer faster speeds to customers who want to watch bandwidth-hungry video on sites like YouTube.

BT Group (BT.L) announced plans on Tuesday to invest 1.5 billion pounds in rolling out super-fast broadband to 10 million homes by 2012.

It said however it would only push ahead with the plan if industry regulator Ofcom sets the terms in such a way that it would result in a decent return on its investment.

The announcement knocked BT's shares down 5 percent as analysts wondered if the group was investing in a network with an unknown return, but it had an even greater impact on some of its rivals, who have spent years building their own copper networks.

Under the new plan, rivals such as Carphone, BSkyB and Tiscali (TIS.MI) could offer their clients access to the same faster broadband through BT wholesale agreements, but that could cut the margin advantage they had built up through developing their own networks.

"This could change everything," one analyst said.