Jeremy Warner's Outlook: A brave new world beckons as BT finally launches its long-threatened pay TV assault

Such a wonderful song does not deserve to be used in the following, irreverent manner, I admit, but for some reason the long expected launch of BT's stab at the pay-TV market - BT Vision - brings to mind the lyrics of Sam Cooke's famous civil rights lament: "It's been a long time coming, but I know, a change is gonna come".

BT first started talking about the delights of pay-TV and video on demand down the telephone line as long ago as the early 1990s when the internet was still a barely invented concept. Its delay in arriving is too wearying a story to rehearse at any length here; suffice it to say that even after regulatory and technological constraints had been overcome, BT has taken an extraordinarily long time to launch into this exciting new market for telecom incumbents.

It was only comparatively recently that BT got round to applying for a TV licence. A number of other European telecom companies have been in pay-TV for some years now, while BT itself originally planned to launch the service breathlessly announced to the world yesterday as long as a year and a half ago. Still, better late than never, and in some respects yesterday's "vision" does genuinely seem to leapfrog anything already around which is directly comparable.

BT is also deploying some neat, though not entirely original, marketing tricks to wheel in the punters. The enabling set-top box will be free to those who sign up to the basic BT broadband package of £17.99 a month for a minimum of 18 months, and unlike any other form of pay-TV, it can be accessed on an entirely pay-as-you-go basis. No need for further monthly subscriptions.

BT reasonably points to the success pay-as-you-go innovation achieved in driving mobile phone penetration in the late 1990s. Whether it can achieve the same thing in pay-TV, at present only available through subscription packages, is unfortunately rather more questionable.

The test will be in the execution - deliberately low key at present to avoid a repeat of the response which overwhelmed the Carphone Warehouse broadband offering - and in the content, which as it stands is insufficiently compelling to make the service a must-have facility. BT has had to pay dearly to get the major Hollywood studios on board, and though its price of £3 a movie is cheaper than anyone else, the size of the pay-per-view movie market is still open to debate. The football rights are also a pale shadow of what Sky offers.

Nonetheless, it is a start, and there is little doubt that some of the roughly half of British households who don't take pay-TV - either through Sky or cable - will find the offer an attractive one. We'll forget for the time being the installation charge of anything up to £140 (there really is no such thing as "free", I'm afraid).

Nor, if BT meets its target of two to three million customers in four years, will this be a business to be sneezed at. The £100m cost in the first year - mainly on customer acquisition - is a big investment, even for a company as large as BT. It also helps explain BSkyB's own launch into broadband, a previously scorned area of activity for the pay-TV incumbent, and perhaps also its highly controversial acquisition of a 20 per cent stake in ITV. Old demarcation lines between previously separate forms of media and distribution are fast breaking down as the number of ways of accessing content and services proliferate.

The stone cutter may strike his quarry a hundred times to no visible effect, but each blow weakens the structure, and on the hundredth strike, the stone may dramatically split asunder. Sky has so far defended its patch with masterful cunning, but as its move on ITV demonstrates, there is only so much that can be done in an age of rapid technological change to prevent the onslaught of competition. In order to maintain its position in the media landscape, it must reach for new horizons. BT must do the same in fixed line telephony.

Grid surrender likely over pricing review

Regulatory reviews almost always follow the same pattern. In the lead up to the review, there are a series of dire warnings from the utility as to the consequences if the regulator doesn't agree to the gold-plated investment plans proposed and the usually excessive rates of return demanded. When the regulator publishes his first determination suggesting much less, the utility screams and shouts in agony, protesting loudly that it cannot be done for the stipulated price, and that services will go to the dogs if implemented in the way proposed.

In the final determination the regulator compromises just a tiny bit, and after much huffing, puffing, and general shedding of crocodile tears, the utility accepts, leaving the regulator thinking that maybe he shouldn't have compromised at all. He'd be right, for invariably the utility, like a union negotiator, will have massively overstated its case. In the rare instances where the utility opts for arbitration before the Competition Commission, they almost always end up with a much worse deal.

National Grid's dance with its own particular regulator, Ofgem, seems to have conformed almost entirely to this pattern. Encouraged by the 4.8 per cent rate of return allowed for local electricity distributors, National Grid initially demanded 5.1 per cent. It also suggested that £5.6bn of new investment would be required, on top of the £500m of already agreed spending on renewables, to reinvigorate and improve the network. The regulator then suggested 4.2 per cent might be the appropriate level, together with a smaller investment programme.

National Grid said it couldn't be done. The regulator has now compromised - this for the stated purpose of giving the Grid the necessary incentive to invest in timely renewal - but only just a little, and miraculously, the impossible can now somehow be achieved. At least that was the mood music from National Grid last night, though it has not yet formally agreed to the 4.4 per cent rate of return the regulator has settled on.

What a difference just 20 basis points seems to have made, the more particularly as the regulator has introduced a new "safety net" rule, which automatically triggers a fresh review if the company drops discretionary investment spending or sinks 20 per cent below budget in any one year.

National Grid is probably too big a bite for financial buyers, though nothing is certain any longer in the increasingly ambitious world of private equity. Yet the safety net rule may prove a powerful deterrent, effectively preventing highly leveraged bidders from turning off the investment taps to pay down debt and recapitalise. It will be interesting to see if the Civil Aviation Authority proposes the same thing for BAA in whatever it has to say today in its review of airport charges.

The CAA's director of economic regulation, Harry Bush, has already said he will take account of the lower cost of capital BAA's new financial owners have achieved through use of debt leverage in the allowed rate of return. A "safety net" rule might be a further blow to Ferrovial and its partners.

RHM's ugly duckling attracts suitor

I'm only partially going to eat my words over RHM, the Hovis bread to Mr Kipling cakes group which I roundly condemned as a dog when it was refloated on the stock market in June last year. Investors are now able to exit with a reasonably healthy return, yet until Premier Foods came along with its bid proposal, the shares had been going absolutely nowhere.

As it happens, I also said that it would be a much better solution for RHM to be sold to Premier's Robert Schofield than floated on the stock market. If this had not been so obvious, I might even be demanding a commission for my musings. The only real surprise is that it has taken Premier so long to figure out the merits of such a transaction. Unusually for a takeover, the more so as the offer is partially in equity, the bidder's share price rose on the news yesterday together with that of the target. This looks an excellent deal for all involved.

j.warner@independent.co.uk