What is the true market impact of the BBCi iPlayer?

The BBC iPlayer is proving more of a hit with viewers (or should we be called users?) than even some of its strongest supporters had hoped. The remodelled system, which no longer requires punters to download a separate player to their desktop, pulled in a million users downloading 3.5m programmes in just two weeks after its launch on Christmas day. That's twice as fast as the BBC predicted - and industry analysts forecast that this growth pattern is sustainable and likely to continue for some time to come.

Largely because of this success, some rather difficult questions about the iPlayer's market impact - virtually ignored (or at least glossed over) in the BBC Trust's public value test (PVT), which authorised the launch of the service - are racing back up the public policy agenda. According to a report last week, the BBC is already inhibiting the growth of commercially financed on-demand services by leading viewers to expect such services to be free. This issue was discussed at the time of the PVT but led to no firm conclusions - largely because at that stage the market hardly existed.

But there is another even more pressing issue that the BBC Trust appears to have considered and then passed over - the question of the huge increase in demand for UK bandwidth caused by people using the BBC iPlayer, and who pays for it.

The summary of Ofcom's "market impact assessment" - conducted as part of the PVT process - flagged up the issue and urged the BBC Trust to consider it fully. From that moment on the buck was effectively passed.

But look at the full Ofcom report and you can see just how important it thought the bandwidth issue was. On the basis of relatively conservative estimates of iPlayer usage, it predicted the need for a "significant amount of infrastructure build". Ofcom went on to say that in its view these costs - which could run close to a billion pounds - "are relevant to an overall assessment of the value to consumers of using the iPlayer". At the very least, prices to all consumers - most of them licence payers - would be likely to rise once internet service providers sought to pass on the costs of their investment.

The BBC Trust initially attempted to downplay Ofcom's estimates of the likely costs and said that capacity constraints was an issue to be resolved by competition in the broadband market. In its final report, the trust conceded that the BBC might discuss the issue with ISPs.

But Britain's internet infrastructure is heading for the buffers, and who pays for the necessary increase in capacity, and how those costs are recovered, are pressing questions. If, as is most likely, consumers pay with increases in their broadband subscriptions, and if that results in reduced use of the iPlayer - at least among the less wealthy - the BBC Trust will have to look at this again.

Whichever way you look at it, the iPlayer is unlikely to be "free" for long.

Why is Worldwide touting for cash?

There are lots of reasons to be concerned about BBC Worldwide as it struggles to maximise commercial returns to the corporation. Strategic decisions to develop own-brand channels, to set up overseas production outfits and to buy equity stakes in UK independents - not to mention buying Lonely Planet - all raise questions about Worldwide's risk profile. Meanwhile the company and its chief executive John Smith have been on a prolonged PR campaign to talk up the business and themselves.

Last week's story about it seeking partnerships with venture capitalists to overcome the restrictions of the government-imposed borrowing limit of £350m was just the latest instalment.

In reality, however, Worldwide might need the money for something rather closer to home. BBC videos and DVDs are sold through a joint venture with Woolworths called 2Entertain, which is valued at about £300m. It appears that Woolworths now wants to exercise its right to exit the business. But here's the rub. The contract was set up as a "shoot-out" whereby if the BBC declines to buy Woolies' 40% shareholding at a price dictated by the retailer, then Woolworths has the right to buy the BBC's share at the same price. In other words - pay up or lose control.

That might not represent the bright new shiny future, but it would almost certainly push Worldwide over its borrowing limit.

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