December 1, 1999 Web posted at: 9:08 a.m. EST (1408 GMT) by Laura Rohde

From...

LONDON (IDG) -- There is no escaping it in Britain -- digital TV has become the catch phrase in the British broadcasting and communications industries.

Especially since the U.K. was slow to embrace cable and satellite television technologies, there has been a determination to make up for lost time by becoming one of the leading countries in the development and establishment of digital terrestrial television (DTT), generally known as digital TV.

TV stations in the U.K. could go from broadcasting on the current 4 to 5 channels that have an available range of 48 separate frequencies on analog wavelengths to 30 to 36 channels via DTT. Along with the dramatic increase in channels, online interactivity can become available through the television set when used in conjunction with telephone lines, opening up potentially lucrative markets in e-commerce.

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"The digital revolution will bring massive benefits, for viewers and the industry, and confirm Britain's position as the world leader," U.K. Secretary for the Department of Culture, Media and Sport, Chris Smith said in a speech delivered to the Royal Television Society in Cambridge on Sept. 17.

"It is your job to make the digital revolution happen," Smith told the assembled executives from the digital TV industry. "It is my job to make sure that it happens in the interest of the consumer."

In the speech, Smith said that the government believes the process for a complete switch over from analog TV wave signals to digital could begin as early as 2006 and completed by 2010. Two "critical tests" had to be met for the switch over to happen, Smith said.

First, 99.4 percent of the U.K. population who receive the analog signals must be able to access digital signals and the equipment for receiving DTT has to "be affordable for the vast majority of people, including those on low and fixed incomes and older people."

The government's interest in DTT is not purely altruistic for the British consumer as the government stands to raise considerable amount of money by selling the old analog lines/frequencies to other telecommunication companies such as those who supply the mobile telephone market.

"The government's push is to sell lines for mobile and other telecommunications as the frequencies, or spectrums, are extremely valuable," said Patrick von Sychowski, a digital TV analyst for Screen Digest.

The common estimate has the government standing to make about 8 billion pounds (US$12.8 billion), from the sale of those lines, according to a report written by the media consulting firm ECON for the British Broadcasting Corp. (BBC).

And it's not just the government that sees profits in digital TV. The full push for DTT has arrived in the U.K. with just about all British TV stations having already gone digital. Those who are not transmitting DTT now will have to in the very near future. It is estimated that 380,00 to 400,000 televisions are already receiving DTT transmissions, von Sychowski said.

The reaction to DTT by television stations has been fairly positive. "The BBC liked it so much it already wants even more space than was originally allotted to it. It had to borrow transmission space to launch a children's educational content channel on DTT," von Sychowski said.

DDT was first demonstrated to the public in Devon in January 1993. The market for DTT in the U.K. began to take off in 1995 when the government first laid out the framework for DTT and the subsequent establishment of the Digital TV Group. The group, which includes the BBC, British Telecommunications PLC (BT), Channel Four, ITV, Motorola, NTL, and Sony sought to establish standards and promote the DTT industry with the U.K.

Quickly, companies began to prepare themselves for the change from analog to DTT. BSkyB, owned by Rupert Murdoch's News Corp. and which already had a huge advantage in the satellite television market with its satellite service (which has plans for up to 120 digital satellite channels), announced it was launching a digital TV division.

BSkyB originally launched the British Digital Broadcasting (BDB) as a joint venture along with Carlton TV and Granada TV, but BSkyB left the partnership to develop DTT programming on its own. In July 1998 BDB changed its company name to ONdigital and became the only company offering paid subscriptions in the DTT format only.

ONdigital felt that the simplicity to DTT was its main advantage. With DTT there would be no need for cable installation or for a satellite dish.

"Having a dish on your house is a big cultural thing here in the U.K. People don't really like it," ONdigital spokesman, Andrew Marre said. "DTT provides a gentle transition for mainstream audiences."

But users would still need a way to convert their analog signals to digital terrestrial signals without having to buy new, and -- for the near future -- extremely expensive television sets.

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The first digital television decoders -- known as the "free-to-air" box, or set-top box -- that allowed for the reception of unencrypted digital satellite services were developed by Nokia in March of 1997. A standard for the set-top boxes was established by November 1997 by the Digital Multiplexing Group (DMUX), a group made up of all the primary DTT broadcasters.

"The set-top boxes originally cost about 200 pounds each and it wasn't until the pay subscription channels offered free set-top boxes with sign-up that the digital terrestrial television format became something that users were interested in," von Sychowski said.

Pay subscription channels such as ONdigital began giving the set-top boxes away in May of this year as a way to entice viewer to pay to watch its channels. ONdigital offers a basic subscription package of 6.99 pounds per month, but even its own spokesman says you don't get much for that price. "The package most people are going to want starts at 9.99 pounds per month," Marre said.

The driving factor for all interactive television -- DTT included -- has been football [soccer in the U.S.] and films. "But it's mainly football," von Sychowski said.

The paid subscription channels are buying up exclusive rights to football matches in the hopes it will open up the wallets of sports fans. ONdigital has bought rights to broadcast the UEFA Champions League along with ITV2. Viewers get 16 games per week with 96 match games in total.

Sky Television has three separate channels devoted to sports that are available through satellite and DTT, plus a channel completely devoted to the Manchester United professional football team called MUTV.

Not surprisingly, Murdoch's Sky TV tried to buy the powerhouse Manchester football team outright this year, but was blocked from doing so by the government. But it does demonstrate how the lines between sport, entertainment, media companies and telecommunications are becoming very burred in the age of digital TV.

With the for-pay channels offering free set-top boxes as well as more and more football becoming available to viewers, the government felt that public acceptance of DTT would quickly grow making the transition to full DTT a reality in the near future. But though officially all groups are backing the target 2010 conversion date set forth by the government, off the record people within the industry think 2020 is a more realistic date for full DTT transmission.

"This country has never really embraced subscription TV," Martin Cook support manager of the Digital Television Group (DTG) said. With the government's own number for conversion being 99.4 percent, pay-TV is not going to lead the way to full conversion.

The ECON study for the BBC also reported as much, noting that "not much more than 55 percent of households are potentially interested in pay-TV."

The report went on to say that the pay-TV industry will have a hard time "winning over the final 45 percent of homes because prices will rise as digital television is rolled out."

Full conversion to DTT will come when consumers can buy television sets that are already DTT capable. "Integrated television is the way to go and unless the government gets its head around that, a quick conversion is not going to happen," Cook said.

There are now about 10 DTT compliant television models on the market, with 25 expected to be available by the end of the year, with that number expected to double the year after that.

The market for television replacement in the U.K. is large with about 4.5 million televisions being replaced each year. "Telly replacement is going to drive DTT but for full conversion, about 60 million televisions need to have something done to them," Cook said.

As more U.K. viewers begin to buy televisions that have DTT integrated in them, enthusiasm for DTT will build. "If people have the technology readily available to them they will use it, but they aren't going to go out and buy it," Cook said.

The Teletext service currently available on most TV is being used by a wide cross section of viewer. In fact, 10 percent of all holidays booked in the U.K. are done through Teletext. "Teletext is already very popular and it will just get better with DTT," von Sychowski said.

The BBC is already testing new digital Teletext pages and plans to roll out 700 pages on its own service. And whereas current Teletext services aren't interactive -- when someone sees a holiday package on Teletext, they have to order it by the telephone -- DDT opens the door to interactivity when a modem is used.

HSBC became the first U.K. bank to launch digital TV service last September. Users can only view account details for the time being, but the bank plans to have online bill payment and money transfer services available by the end of the year. Abbey National and Barclays Bank also have plans to launch interactive banking over digital TV in the future.

DTT is coming to the U.K. and viewers are willing to make the change from their old analog sets ... just as long as they don't have to pay extra for the privilege.