Channel 5 talks to cable firms about retuning project

Channel 5 Broadcasting is in advanced negotiations with UK cable operators over plans to retune millions of VCRs and set-top boxes before the Channel 5 service is launched in January.

If the talks succeed, cable companies such as Telewest, Nynex CableComms and Bell Cablemedia will visit homes in their franchise areas on Channel 5's behalf to retune equipment, and could take the opportunity to market their own pay-TV services to current and potential cable customers.

Channel 5 Broadcasting, a consortium of Pearson, United News & Media (formerly MAI) and CLT, the Luxembourg-based broadcaster, is also in negotiations with the country's two largest TV rental companies, Granada and Thorn EMI, to cover rental equipment in homes. Both companies would use their own staff, or temporary workers, to retune up to 4 million sets.

Granada has also reached a separate deal to train all retuners on behalf of Channel 5.

The retuning exercise is viewed as one of the main obstacles to the success of the UK's last "free-to-air" TV channel. As many as 10 million homes in the UK will have to be visited, with about 5 million likely to be affected by interference from the playback signals of VCRs. Channel 5 originally planned to spend pounds 30.8m to mount the operation, plus another pounds 24.3m for marketing and administration, although TV rivals expect the amount could end up being far higher.

It is widely believed in industry circles that the retuning project is already well behind schedule and under-financed. Rivals for the licence bid double the amount set aside by Channel 5 Broadcasting, and most promised more supervisors and at least as many retuners for home visits.

"Everyone believes this has started too late," said an ITV insider, whose company will be competing directly with Channel 5. "There has to be some question about whether they meet their targets in time."

According to ITC requirements, at least 90 per cent of homes in affected areas must be retuned before the service is switched on in early 1997. Audience share will be crucial to the channel's early months on the air, when it will be seeking to build core advertisers.

Channel 5 has yet to agree a price per household to be paid to cable operators and the rentals companies if the sub-contracting arrangements go ahead. According to sources close to the situation, cable operators want as much as pounds 10 per household visited, while Channel 5 is offering far less.

Cable operators also differ over how many homes they want to cover. Some smaller companies have offered to cover customer homes only, while others see the visits as a prime marketing opportunity.

Channel 5 is still reserving the right to limit the amount of "sub-contracting". It is concerned about security and cost, and may elect to oversee the entire retuning exercise itself.

Channel 5 declined to comment on the talks with Thorn and Granada.

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