Will terrestrial digital TV get off the ground, or has BSkyB already doomed it to failure?

The future of British television, or a white elephant? The jury is resolutely still out on the prospects for digital terrestrial TV (DTT), the Government's favoured platform for the digital age. Late last week, the Independent Television Commission issued its "invitation to apply" for licences to provide DTT services. Applicants have until 31 January 1997 to come forward, and must provide detailed plans about their programming, financial arrangements and marketing plans.

Unlike the ITV licences, which give their holders the monopoly on Channel 3 advertising in their regions in return for an annual licence fee payment, winners of DTT licences will pay nothing - at least at first. They will, of course, run up serious bills producing the new services, not least on transmission charges. But there will be no initial licence fee.

That is a measure of the Government's realisation that we are talking big risk here. DTT will provide up to 18 full channels (more if applicants want to use less capacity to produce lower definition broadcasts or non- TV services). Compare that to digital satellite's 200 channels. And, worse, the DTT platform won't be launched until 1998 at the earliest, while Rupert Murdoch's BSkyB is planning to introduce its digital satellite service from autumn next year.

Moreover, there are still big question marks surrounding the DTT system. For a start, the Government is still working on the necessary national and international frequency clearances. As well, there are huge uncertainties surrounding the equipment that viewers will need to receive the service.

Let's go back a step. DTT is a "through the air" broadcasting system that will allow us to receive digital television signals on our existing aerials. A good thing, then, for those who haven't wanted to put up an ugly satellite dish and for those whose local councils won't allow them to. But we will need some new kit - either a digital television set (with a converter built in) or a "set-top box" that serves to reintegrate the ones and noughts of the digital transmission into images and sound.

These boxes will also allow broadcasters to provide certain TV services on a subscription basis. That means we will only get an unscrambled signal if we have paid. Services likely to be pay-only include movies, sport, and maybe some special pay-per-view events (big boxing matches, top football).

These boxes will have to be bought by viewers themselves, and could cost a princely pounds 400 or so - unless, of course, DTT's promoters decide to subsidise the kit in order to jump-start the market. (Compare that to a satellite dish and receiver for the current 40 channels on bog standard analogue satellite, which can be had for pounds 99 in the high street.)

BSkyB's box will, of course, be on the market earlier than DTT, and those with a passion for multichannel television will be able to get Sky's digital offerings by paying just pounds 200 or so for the box (BSkyB has already decided to subsidise the equipment, in league with several partners, including BT).

So you can see the problem. Why would anyone buy the DTT box to get 18 channels when they have already bought the Sky box to get 200 channels?

One answer is to assume that BSkyB's service will be "open access". That means that DTT will be available to viewers who already have the Sky box. But it is by no means certain that such a "common interface" will be available: if you were Murdoch, would you offer a compatible box that could help your competitors reach bigger audiences?

The more likely outcome is for the Government to insist that Sky gives access to all broadcasters on an open and equitable basis - so that any digital service seeking carriage will be allowed on to the BSkyB system on transparent terms and at a fair price. BSkyB still gets to run the digital service, though, and maintains its role as "gatekeeper".

Let's assume all this gets sorted out, as the Government clearly thinks it will. Certainly it has a commercial interest in seeing that it does. By migrating all existing analogue terrestrial television to digital, it frees up huge analogue capacity that can be auctioned off for other uses.

What will digital terrestrial television look like? We know for sure that the BBC will be part of it. The public service broadcaster has agreed to "simulcast" its existing services (BBC1 and BBC2), with the added benefit of wide-screen and CD-Rom standard audio. Auntie will also give us a 24- hour news channel, and some "extended services."

ITV and Channel 4 have also agreed to take up guaranteed capacity on DTT. Thereafter, there are four multiplexes up for grabs, capable of carrying perhaps 12 channels. Licence A, which will reach about 90 per cent of the UK population (depending on the clearances), must carry Channel 5 and S4C in Wales.

Licences B, C and D can carry any services the operator wants (subject, of course, to existing broadcast standard rules - so no hard-core pornography, for instance).

So who is likely to bid? For a start, major transmission and electronics companies such as NTL or Racal could well have an interest in operating a multiplex. Broadcasters themselves - Carlton Communications looks interested - could apply for the multiplex licences, perhaps in partnership with other media companies. The BBC might want additional capacity to transmit its planned pay-TV channels. To ensure that DTT has the best chance possible of getting off the ground, the Government has even allowed foreign companies to bid.

Will it work? I'm still on the fence. But good God, what a lot of money it is going to take to develop a technology that may start life as an also-rann