Greg Dyke on television

Has BSkyB unwittingly served its competitors a free lunch?
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Television is changing so rapidly that even those in charge of running the industry are unable to fathom its future.

Almost exactly a year ago the Royal Television Society held its bi-annual conference in Cambridge - the biggest management get-together in the industry's calendar. The convention was called "The End Game" and tried to predict who would be the winners and losers in television by the time Britain switched off the analogue television signal and went completely digital, something which is now likely to happen by 2012.

That week in Cambridge, the convention discussed a range of possible scenarios but virtually all came to the same conclusion: that BSkyB would be the big winner. Twelve months on, things don't look quite as certain as they did back then.

The runaway success of Freeview, with the number of boxes out there likely to reach more than 5 million by the end of this year, means that almost certainly by the time Britain goes completely digital there will be 50 per cent more Freeview homes than BSkyB homes. This prospect is increasingly making life difficult for the Murdoch-run operation. If so many people are going for free digital, where does the future growth of their pay business come from?

The irony of the situation is that, at the crucial moment, it was BSkyB which helped to create Freeview. When the BBC were trying to bid for the licences which ITV Digital gave up when it went bust, very few partners were willing to join the project. The failure of ITV Digital and the loss of £1.2bn of Granada and Carlton's shareholders' money had given digital terrestrial television a bad name.

Both ITV and Channel 4 were offered the chance to join the consortium bidding for the licences but both turned it down, a decision they both now regret as they scrabble around trying to get Freeview capacity for new free-to-air channels they are planning.

The whole Freeview project was only saved at the last moment when BSkyB asked if it could join the consortium. Although competition rules prevented it becoming a full partner, it did underwrite the cost of three channels, which was enough for the BBC and its other partner Crown Castle - the company which had built the digital terrestrial infrastructure - to go ahead. So why did BSkyB join the party?

One can only guess that they had no idea how successful Freeview would become, because by establishing Freeview the BBC has created a way for millions to go digital and to get more television channels with only boxes (which can't be upgraded) to pay for. Bad news for BSkyB. Of course, by helping the BBC win the licences BSkyB probably prevented another large-scale pay operator coming into the market to compete with it, but what the company has helped to create instead is a free-to-air digital system which people have turned to in their millions. The word in the industry is that next month BSkyB will finally launch its response to Freeview. For £150 you will be able to get a dish, a box and access to 80 free satellite channels. The crucial difference with Freeview will be that this box will be upgradeable to pay-television. Not everyone at Sky is confident this is a good move as it could lead to a lot of basic-tier customers "spinning down" (a technical term) to the new free service.

BSkyB wants to call the new service Freesat, but it has a problem. The BBC already owns the name, having registered it soon after launching Freeview, and is not very keen to give it up. BSkyB also wants the BBC to promote the new free satellite service, just as it promoted Freeview for the BBC. Again the Corporation is reluctant, because it's genuinely worried that from the very moment a Freesat box is installed, BSkyB will simply pester consumers to upgrade to pay-TV. That way, BBC promotions for Freesat (or whatever it ends up being called) would effectively be promoting Sky's commercial channels, not something it either wants to do, or is allowed to do under the terms of its charter.

Negotiations between the two are continuing.

Charles Allen, the great survivor

It's not only the economic prospects of the broadcasting industry which have changed since the RTS convention 12 months ago. In the last session at Cambridge, leaders of the British television industry sat together to discuss the future. A year later, only one of the five executives who sat on the platform that day is still in the same job.

Of the rest, Michael Green, chairman of Carlton and due to become chairman of ITV after the merger with Granada, was fired by his shareholders; Tony Ball of BSkyB stepped down so that James Murdoch could take his place; the BBC governors decided they could live without me; and Mark Thompson resigned as chief executive of Channel 4 to take over at the BBC.

The only one of the five executives still in his job is Charles Allen who was then chief executive of Granada and CEO-elect of the merged ITV.

It's a funny old world.

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