The headlines last week painted a picture of UK broadcasting embracing the internet. But, as Dominic Timms reports, many companies are still not fully realising the potential of the web.
Has Tony Blair's warning to UK business that the internet could become a threat if it is not fully embraced been received loud and clear by the broadcasting industry?

The evidence? A sudden spate of internet hugging. Take last week when the BBC was said to be looking at a possible sale of around 30 per cent of its commercial site, beeb.com, while Carlton was poaching former beeb.com director Rupert Miles.

BSkyB unveiled details of its media streaming website, Sky Rocket, and even Kelvin MacKenzie launched his stab at internet broadcasting, World Interactive Television. You could be forgiven for thinking that UK broadcasters were at the bleeding edge of the worldwide web, the online exception in an offline UK.

But while the headlines trumpeted UK development, the reality is that the vast majority of UK broadcasters are only just getting to grips with Sir John Birt's self-styled 'third broadcast medium'. Perhaps the most telling news was Media Secretary Chris Smith's decision to hire a panel of his Creative Industry Task Force to investigate why some UK media firms were making large strides with the internet while others were not.

While the UK isn't necessarily lagging behind the rest of Europe, it's possibly two years behind the US and there's a feeling among many web pundits that broadcasters could be doing a lot more.

Dermot Nolan, director at media consultancy TBS, is one. 'UK broadcasters are still very much in the foothills of the internet,' insists Nolan.

'There's a belated recognition that the internet represents big business. If you look at all the money invested in hardware and telecommunications then the net is already a $200 billion (£123 billion) business worldwide. It's massive compared with broadcast.'

Colin Donald, managing director of internet consultancy Futurescape, adds that few UK broadcasters are maximising their online assets, although most can point to some web presence. 'Running a broadcast operation is very different to running a website. Broadcasters are only just trying to come to terms with the internet,' he says.

Even the BBC, which has long enjoyed a reputation for being ahead of the pack, is lagging behind US broadcasters such as NBC and CNN, say critics.

Beeb.com's audited figures for March 1999 indicate the service received 8.7 million hits from a user base of around 403,000 - CNN, meanwhile, is claiming a daily hit rate of around 800,000.

With one eye cocked on Gavyn Davies' recommended sale of 49 per cent of BBC Worldwide and the other on US internet hypervaluation, it's not difficult to see why Worldwide is exploring the possibility of outside investment in beeb.com. Conservative estimates say a deal could net BBC Worldwide, which runs the site,£400 million for a 30 per cent stake.

The entire operation could be worth as much as£2 billion.

While£400 million would go some way towards filling the£900 million of private investment that Worldwide head Rupert Gavin is thought to want, the real reason could be more to do with beeb.

com itself. Insiders say beeb.com's technology partner, computer company ICL, is less than impressed with the joint-venture so far and is 'unlikely' to renew its relationship once its contract expires at the end of this year.

Critics say beeb.com's lack of news, its late entry into the free service provider market and its emphasis on BBC programme-related content has hindered its development.

As one analyst put it: 'When beeb.com first launched, ICL was supposed to provide the cash and the BBC the content and acclaim. It doesn't appear to have worked'. Hardly surprising then, that former beeb.com director Rupert Miles, who is thought to have restructured the operation four times in two-and-a-half years, decided to call it a day.

But if the BBC is having difficulties with beeb.com, what chance does Miles have at Carlton? With beeb.com thought to be eating up£20 million per year, Carlton's initial commitment to£20 million over three years looks small fry. While the three sites, Jamba, Simply Food and Popcorn, are well thought out, they have hardly set the online world alight.

Carlton also has an impressive archive library that it has yet to exploit fully online.

TBS' Nolan argues that the UK's commercial broadcasters are in particular danger of lagging behind. 'ITV doesn't appreciate the power of the net in the same way as some US broadcasters. The mindset of UK commercial TV operators is making a packet from analogue terrestrial franchises.'

However, Granada Media director for online and interactive media Julian Turner - who recently launched its service provider, G-Wizz - argues that the criticism is unfounded. '(UK) broadcasters have taken a more calculated view rather than throwing funds at it for marketing reasons.'

The web is hide-bound by bandwidth restrictions, he insists. 'There's a perfectly good medium for video for the mass market right now called TV. It's not the case that we see nirvana as chucking out video over the net. As ADSL (technology allowing dial-up services) and cable become more ubiquitous then that's the time to think about it.'

With less than 15 per cent of UK consumers online Turner's argument holds for the short term. But with media players scrapping to provide lucrative 'last mile' high-speed connections to the home it won't be long before broadcasting mutates into a different beast. Those who aren't prepared will suffer.

Internet analyst Miles Saltiel, a director at WestLB Panmure, sums up: 'The net has the potential to totally disrupt the broadcast market. It will be a knife to the heart of the current content model.'