THE FUTURE IS BRIGHT - THE FUTURE IS EICOM

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THE UK’s DIGITAL MEDIA FUTURE

For once we have something to be proud of - the UK is the world leader in
digital television – even though it is largely down to Mr Murdoch’s ambition
and extraordinary risk taking. Six years after the launch of this technology,
60% of all UK homes have started using digital television services - a faster
take up rate than colour TV, mobile phones or CD players. These homes
view digital television in a multi-channel environment and now, with BT’s
broadband service having passed the 4 million home mark, there is the real
possibility of genuine competition for the 3 dominant in-home entertainment
players – BBC, Sky and ITV.
Digital Television Facts
Digital television is a more efficient means of broadcasting than analogue.
Images and sounds are transmitted as compressed data, allowing more
services to be delivered in less space - a frequency used to broadcast a
single analogue television channel can carry at least 4 digital services. The
extra bandwidth is then used to provide additional TV or radio channels and
on-screen services including electronic programme guides (EPG) and
interactive services behind the red button.
Digital Television Platforms
There are three main digital television platforms in the UK – terrestrial,
satellite, and cable. Broadband digital television is currently only available in
some areas of London, and in Hull. However, as data compression techniques
improve and as higher speed broadband becomes available at more
telephone exchanges, it is expected that DSL television will become a more
widely available option (see our Broadband piece which is also in the Scope
section of our web site).
Digital Television Around the World
In August 2003, Berlin-Brandenburg in Germany became the first region in
the world to switch off analogue terrestrial television and by 2010 Germany
should be all digital. Italy plans to abandon analogue by the end of 2006.
Finland plans to switch off by September 2007. The USA hopes to turn
digital by 2007. Sweden plans to switch off analogue in 2008, whileAustralia
proposes to turn off analogue completely before 2009.
Digital Switchover in the UK

It will take around four to five years to complete the switchover process. It
will take place region by region (probably based on the ITV regions). Viewers
in each region will have a minimum of two years’ notice about when the
switching process will start in their region. In any one region, people can
expect changes to take place over a period of weeks. It is expected that the
process will start in 2007 in the North East.The Broadband Experience
The increase in broadband penetration in the key markets of America, Europe
and Asia will mean that more and more consumers will have faster Internet
connections. Download speed is essential to the success of an online video
distribution channel due to the relatively large size of video files. This was
not such a factor for the music market as audio files are far smaller in
comparison to video files and can be downloaded in a reasonable length of
time using slower connection speeds. However, there is evidence to suggest
that the increase in broadband penetration has helped accelerate the decline
in music sales. In the European countries where broadband adoption has
been the fastest there is a marked reduction in music sales. There is real
concern from Hollywood’s studios that the downward trend in retail sales
experienced by the music industry will be repeated in the home video sector
as broadband speeds and penetration increases.

The UK’s dominant telecommunications corporation, BT, has created a new
division called BT Entertainment within its Retail consumer business. The
strategic focus of BT Entertainment will be to drive BT's broadband activities
in entertainment and education, enabling content providers, including Eicom,
to target BT's broadband customers. The division’s tasks will include
developing, licensing and bringing to market value-added content services
such as on-demand movies, music, games and TV. This internal restructuring
at BT follows recent trials of the BT Freeview Plus video-on-demand platform,
which is expected to launch in August 2005, as the operator attempts to
break the competitive UK triple play market.
What does this mean for the consumer?

Much depends on our political masters; will any government be able to justify
the BBC’s License Fee in a totally digital world? Probably not.
Will ITV’s reliance on general advertising to fund its activities at the current level be sufficient to cope with a digital future? Almost definitely not.

Will small bouquets of niche, entertainment channels be able to thrive in this
new world? Yes, if they control and amortise costs and establish the right,
long-term relationships with content suppliers.
In 2002 we, the British public, spent £4bn on the BBC License Fee and Pay
TV subscriptions. Advertisers only spent £3bn. In 2003 Ofcom’s predecessor
forecast that Pay TV revenues would reach £8.5bn per year as opposed to
£4.6bn from advertising. The old order is rapidly changing.
A digital future seems to imply that there will be a much more conventional
market place for TV channel operators and content producers. Public Service
broadcasting will have to change (but not necessarily for the worse) as Video
on Demand becomes the norm for the viewing public. We need to think
about how cinema works and compare that with our in-home entertainment
experience.


Want to watch a movie? Pay for it by your phone or cable back path. Want
to watch the news? Subscribe to the service you want? Want education
material for your children? It’s all there to pay per course or subscribe for a
long-term service.
In other words, we will be paying for our use of television in much the same
way we pay for most of our goods and services. The true beneficiaries of this
new market should be the Eicoms of this world who will benefit from the
breakdown of the media monopoly in the UK, who will be able to be flexible
enough to cope with the more radical changes and who can stay close
enough to their customers to provide them with what they want at the price
they want to pay.