Hot Birds take off for a digital future

Digital TV can `compress' a moving picture, allowing broadcasters to offer hundreds of channels, rather than dozens

The launch of a new TV satellite promises greater choice for British viewers. Steve Homer assesses its chances of success

Last Tuesday a new Eutelsat satellite started test transmissions to Europe. Nothing unusual about that - Eutelsat, owned by telecom companies, is one of the world's biggest satellite operators. What is special about Hot Bird 1, though, is that it marks the introduction of digital satellite television to Europe. That in turn is a sign that satellite is determined to hang on to its position as a supplier of programmes direct to homes, rather than slipping to become no more than a subcontractor to the cable companies.

In the US, direct satellite digital TV has attracted almost a million subscribers since the launch of DirecTV last June. Nobody expects take- up to be as rapid in Europe, especially in Britain, but Eutelsat believes it will make its mark within two years. "1995 will be the year of the digital satellite TV pioneer in Europe," says Giuliano Berretta, its commercial director. "Towards the end of the year, some other pioneers will go on to direct-to-home broadcasting. By the middle of 1997, digital TV will be a real star."

Next September, Eutelsat will launch Hot Bird 2, and Hot Bird 3 will follow in February 1997. SES, the private Luxembourg-based owner of the Astra system, which BSkyB uses, plans to launch the all-digital Astra 1E in September, 1F next March and 1G in 1997. Other satellites will be feeding digital TV into French and Scandinavian markets, giving a total capacity of well over a thousand channels by the end of 1997.

Digital television has been pondered ever since the growing power of computers made it possible to convert sound and pictures into strings of digital codes. Until recently, the emphasis was on quality: just as digital compact discs brought us better-quality sound, it was argued, so digital High Definition Television would bring us better pictures.

The trouble was, the marketing people found it difficult to believe consumers would queue up to pay a fortune for a slightly sharper image. What they would pay for, they believed, was greater choice.

Unlike analogue television, where a transmission has a set quality and takes up a fixed amount of broadcasting space, digital television allows a pay-off. It will allow a few high-quality transmissions, or many lower- quality ones. It is particularly effective at "compressing" a moving picture, which normally consists of thousands of separate images. Digital television stores an image and sends only the differences in the next frame. Depending on the material being sent, it is possible to compress it by between five and 15 times.

That means a digital broadcaster can offer hundreds of channels, rather than dozens. These can be used either for tightly themed, special-interest channels, such as the Golf Channel or the Sci-Fi Channel, or for near video on demand (NVOD). With this, the same movie is transmitted on four or six channels with starting times staggered by 20 minutes or so. If you want to watch Terminator 5, you will never be more than 20 minutes from the start of the movie. NVOD gobbles channels, which is why it is conceivable only with digitalisation. DirecTV has 150 channels, about half of which are devoted to NVOD.

Every broadcaster and distributor is wondering how it should be tackling digitalisation. They all know they will have to make the shift sooner or later - even though the potential problems and costs are daunting.

The satellite companies have taken the lead among the distributors, although in the UK NTL, the privatised group that owns the ITV transmitting masts, recently announced it would introduce a digital system. Cable companies are more cautious, because their wallets will be hit harder than anyone by the switch to digital broadcasts.

Satellite subscribers will probably need a new aerial or at least a new receiving horn, called an LNB, in the centre. New LNBs that operate in both conventional and digital frequencies are just beginning to become available: it might be worth paying an extra £10 or so for a "digital ready" LNB.

But the real cost will come in replacing the set-top boxes that decode cable and satellite signals. These cost several hundred pounds each - and this is where the cable companies are facing a financial crunch. Consumers are used to buying their own set-top boxes for satellite, but they expect the cable operators to provide them as part of the service. Unless the cable groups can persuade their customers to share the cost, they will be faced with a massive bill.

Not surprisingly, the markets that are furthest ahead in digital television are those that do not have a large installed base of cable or satellite equipment. DirecTV in the US has been successfully aimed at rural areas, which do not have cable and where terrestrial reception quality is often poor. The French are also moving ahead with digital because cable has failed to have much of an impact.

For the same reason, Britain is likely to be a laggard. BSkyB, which has a vice-like grip on satellite, will not move until it must. Cable companies have also been much more successful recently - albeit mainly on the back of their telephone services. Neither relishes the thought of telling their customers that they will need new boxes and dishes - though both will have to make a switch eventually, for fear of being outflanked by the other.

Meanwhile, satellite will have to overcome the one big technical disadvantage is has compared with cable. It is not interactive: it is impossible to send a message back from the television handset to the broadcaster. This ability will become increasingly important as ancillary services such as home shopping and games - for which digital television is particularly suitable - are introduced.

Already, considerable ingenuity is being deployed to overcome this problem. The French electronics giant Thomson, which owns Ferguson in the UK, has produced a set-top box for the pay TV operator Canal Plus. If viewers wanted to buy a product advertised on a home shopping channel, they would click on their remote control and put a "smart" bank card in the box. The receiver would then dial up a telephone number on its own modem in the middle of the night and send off the order. It is not as neat as a proper "return path", which is possible on cable, but it works. And it could help to give satellite the edge it needs to keep itself in orbit.

In the UK, the introduction of digital television theoretically gives a new operator a chance to challenge the dominance of Rupert Murdoch's BSkyB. So far, there are no signs of such a challenger emerging. But if a deep-pocketed group was prepared to bid for the all-important sporting rights, it could jump in with all hands digital and lure customers from Murdoch. BSkyB controls the rights to the Premier League only up to May 1997. The window of opportunity is there, if anyone wants to jump through it.