Let's get digital - Business - News - The Independent

Let's get digital

It's not too late for British television companies to join the technological revolution, says Stephen Barden

When individuals and organisations feel powerless in the outside world, they turn inwards and try to be big in their own backyard. So it is with the British television establishment. They can- not compete with the unfamiliar, are terrified of new oppor- tunities and fail to recognise new threats until it is too late.

Perhaps you can't blame them. The BBC, the one broadcaster recognised internationally, has thought it more important to cut itself to the bone and keep its licence fee, than look outward.

ITV was not devised to create world competitors but a club of parochial regional monopolies. Their existence depended neither on entrepreneurial skill nor innovation (and certainly not on their ability to create new markets) but on suitably kow-towing to their regulator: the government's watchdog, the Independent Television Commission.Worse still, because ITV does not see itself as an entity in its own right, it lacks the self- confidence of the independent creative spirit and the true entrepreneur.

All of which - to my mind - goes a long way to explaining British TV's response to digital broadcasting initiatives by News International boss Rupert Murdoch.

Digital technology is enormously important, not because it will deliver a vast array of programming on hundreds of TV channels, but because it is flexible enough to beam all sorts of information, video and telephone services into the home.

Rupert Murdoch saw that, which was why we - at News International's technology arm - did not find it difficult to persuade him, as early as 1993, to fund the development of a digital system for satellite services. When I left Murdoch in early 1995, I was convinced of two things: that digital technology systems would inevitably be the future means of delivery for all communications services; andthat if earthbound British television did not get its act together, it was in very real danger of being obliterated by satellite.

This was not just because digital satellite broadcasting would have 500 channels against terrestrial's 30, as now foreseen by the 1996 Broadcasting Act. The crucial point was that how we control those channels would, ultimately, completely change the way we watch TV and how broadcasters make money from it. It is like the difference between managing a library of 30 books and one of 500 or 500,000.

Eighteen months ago we met the chief executives of the top ITV companies, the BBC and Channel 4. It was not a "stop Murdoch" campaign. We just said they should compete with him and were in a strong position to do so. It was an appeal to the terrestrial TV companies to do their job properly.

We put together a strategy which proposed that they:

Agree and commission a digital decoder - the set-top box that would carry both satellite and terrestrial signals;

Agree a common smartcard system that allows only paying customers access - the so-called "gateway" to the digital service;

Create a customer service operation to handle each company's own pay TV operations;

Form a common strategy to buy sports and Hollywood movies for the huge amount of programming needed.

We also saw the heads of several cable companies, some newspaper publishers and National Heritage Secretary, Virginia Bottomley. We presented them all with arguments, business plans, revenue projections and cost estimates. We met them individually, made presentations, attended briefings, meetings and more meetings - for six months and all at our own expense

The reactions were varied, but with one frightening theme: the vast majority wanted to know "what would Rupert say". Quite a few wondered whether "digital TV would really work", even though it was already up and running in the United States and going ahead in Europe. One of the ITV chiefs dismissed the threat entirely. After all, he said, ITV spent millions more on programming than satellite, so viewers would follow quality - now or in a digital future.

Several events made our life quite difficult. Firstly, someone leaked our confidential plan to Murdoch, who made it clear that he was not at all happy with what we were doing. Then, late last year, Murdoch bought the digital division of NTL, the leading developer of digital terrestrial TV, which had been sold off in 1991 by the old Independent Broadcasting Authority. We had been at an advanced stage of negotiations with NTL to invest in our project. Not surprisingly, these talks suddenly went cold.

Finally, the TV establishment told us they did not think our plan was the way forward andthey would meet the challenge by doing "what we do best": programme making. Since then, one by one the ITV companies, including Carlton and Scottish TV, have started to come under Murdoch's thrall. The BBC is also now beating a path to his door, pleading for satellite access.

Granada has gone one better. Soon after our talks, it joined with BSkyB to form GSkyB to transmit new channels. Murdoch's satellite decoder will now be the first on the market and the TV establishment is pleading for BSkyB to allow them access.

But if the industry had set out a coherent policy on the structure of digital television, we would not now be so far behind the US and Europe and in such disarray. If the TV companies had taken the initiative, they would not have been forced to run pleading to the Government (again). If they had taken the bull by the horns, ministers would have done their bidding. As it is, they now face regulations that satisfy none of them.

They may have lost the first great Battle of Set Top Box, but the war can still be won. The British TV establishment now needs to take a step back and form a view of the future of the entire communications industry - not just TV.

My belief is that the key to the digital future will be viewer control. With a vast library of services pouring into the home,consumers should be able to see what they want, when they want it and how. Otherwise 500 channels of digital TV will be like having a library with no index and the librarian dictating what book you should be reading, when and at what pace.

Viewer control will not end there. If you are choosing your favourites from among 500 channels, there are bound to be clashes in broadcast times. So you will need to reschedule items to your convenience and store your schedule until you are ready to see it.

This form of customised viewing will lead quickly to two further changes. First, most TV revenue will move away from advertising into subscription. And that will be replaced even more quickly by a revenue structure based on payment per programme and per item rather than payment per channel or package of channels. Why should you pay for the whole rack of magazines at W H Smith when all you want is two or three?

There is, however, a problem - and an opportunity. The terrestrial TV companies cannot do it at present, but neither can BSkyB nor cable. They will all tell you that their digital systems will be "interactive", that they will have "video on demand", and that we'll be able to do anything from cook the chicken to buy a house at the flick of a remote control. Well, it's not true.

The current TV operators do not have the crucial frequency channels, or "bandwidth", to allow the viewer real control. The digital transponders, on earth or satellite, that beam the signals can only handle five or six channels each. Two-way signals, from the viewer and back, will take hundreds more - at great cost.

What most broadcasters mean by interactive TV, for instance, is not like putting the local Blockbuster Video store in the home. Video on demand? No. True VoD is the ability to access your film instantly and stop, rewind or fast forward it when you want. What the satellite broadcasters call VoD is no more than a cumbersome pay-per-view system: they will put the same movie on, say, six transponders so that you wait no more than 10 minutes to see it. There's nothing wrong with that, but it is not an on- demand service.

They tell you you'll be able to schedule your own programming from across the channels. Yes you will, providing the broadcast times don't clash. You won't be able to reschedule programmes.

The simple fact is that none of the current broadcasters is equipped to go into the "second digital revolution" - least of all satellite. And don't forget it was the second industrial revolution that was the real thing, not the first: steam power was invented in the mid-18th century, but George Stephenson's Rocket came 70 years later.

So who will be the key players in the future? And who will deliver these consumer-controlled services?

Cable can do it, if it moves quickly and is prepared to make another huge investment to upgrade its fibre-optic cables.

The major telecoms companies can do it. BT has been testing a wire-based technology called ADSL, which squeezes video down the phone line into an expensive black box decoder. It can do much of what I have been describing but I believe it will have capacity problems very quickly. The big question there for the broadcasters is whether they really want to hand their gateway to another monopolist.

The third way is by radio technology. Or, if you like, that wonderfully genteel word, wireless. That is where I am putting my money and where the TV establishment can compete.

There is no doubt that radio offers the quickest, cheapest and most flexible broadband system around and there are several frequencies with enough capacity to do everything I have been talking about - and a lot more if it is cleverly structured.

Radio has the ability to support, for example, a beleaguered education system by providing extra classes for GCSE or A levels, using two-way video and full participation from the class or home. It can easily supply high-speed video Internet and extremely local services - down to communities of 1,500 people. And you can integrate the whole thing with any standard digital decoder.

Over the past few years I have heard the word "convergence" - of broadcasting, telecoms and computing - more times than I care to remember. Over recent months I have actually seen it in action with radio technology. We have dealt with telecoms operators, cable companies, software developers, graphic design- ers, engineers, radio designers and decoder manufacturers. And very few, if any, are not excited by the concept.

I have not talked to any broadcasters. I dread having to do the rounds all over again because I still do not believe they have the self-confidence to prepare themselves for the future.

After our last meeting, on 13 November 1995, I wrote a last-ditch plea to the heads of the major terrestrial TV organisations. I said: "Do not discard our proposals simply because they may be moving you with uncomfortable speed on to unfamiliar ground

A week later, Peter Coleridge of Granada TV, replied on behalf of Granada, Carlton, Channel 4 and the BBC. After assuring me that our proposals would not be ignored, he said there had been a joint decision to do "some further work on the content plan whilst exploring transponder capacity flexibility". He ended: "We will get back to you in due course once our thinking has advanced."

That was over a year ago. He has not got back. So I can only assume their thinking has not advanced.

Stephen Barden was general manager of BSkyB in 1992 and chief executive of News International's News Digital Systems division from 1993 to 1995. He is now chief executive of London-based multi-media services company WorldPipe.

TV, Murdoch and the march to digital

1990 BSkyB forms from merger of Sky and British Satellite Broadcasting.

1992 BSkyB secures exclusive on Premiership football, renewed this year in a pounds 670m deal stretching from 1997 to 2002.

1994 BSkyB in pounds 4.4bn flotation.

Aug 1995 Government announces plans for 18 digital terrestial TV (DTTV) channels.

Murdoch announces plans for single digital decoder and 120 satellite channels.

Dec 1995 OFT review of BSkyB's dominant position.

Murdoch buys NTL's digital technology arm to join News International's smartcard operation.

Granada forms GSkyB joint venture, admits Murdoch dominance in pay TV.

March 1996 First UK pay-per-view programme, Bruno v Tyson match on BSkyB.

May 1996 BBC launches "Extending Choice in Digital Age" programme.

BSkyB announces 200 digital channels from end of 1997, with up to 500 eventually.

July 1996 BSkyB sends out decoder specifications, forms digital alliance with Germany's Kirch Group.

OFT lets BSkyB off monopolies review.

Oct 1996 BBC, ITV, Channel 4 and new Channel 5 commit to at least 20 DTTV channels.

Nov 1996 Government publishes draft regulations on decoders, rejects TV firms' pleas for compatibility with satellite.

ITC advertises DTTV licences to be awarded in January.

Dec 1996 BBC calls for curbs on BSkyB, concedes it is powerless to stop Murdoch dominance.

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