Digital TV restrictions for set-top boxes cause ruckus

Freeview has given two to three manufacturers and distributors exclusive rights for the first 12 months. Picture / Paul Estcourt

An industry fight is brewing over who will get to supply the set-top boxes needed to receive digital TV when it launches next year.

Set-top box distributors are angry that they are being excluded from an accreditation programme set up by the Freeview consortium comprising the companies that will implement free-to-air digital TV: TVNZ, CanWest, the Racing Board, Radio New Zealand and Maori TV.

Freeview has given two to three set-top box manufacturers and local distributors 12 months of exclusivity from the launch of satellite digital TV, scheduled for March next year. During the first year, these as-yet unnamed companies will be the only accredited suppliers of Freeview certified equipment, which Freeview claims will be sold mainly through traditional electronics stores.

The Government expects 37 per cent of the population to be using free-to-air digital TV by 2015.

If 1.5 million set-top boxes are sold over the next nine years at an average price of $200, the market for set-top boxes could be worth $300 million. Satellite and aerial antenna installation costs would add substantially to that figure.

The deal is a major blow for the independent set-top box distributors that want to tap into that market.

They accuse Freeview of trying to exert "market control" and are considering making a complaint to the Commerce Commission.

Several distributors contacted by the Herald said they had been told they would not be accredited because their set-top boxes did not meet the required specifications. They have been forbidden from using the Freeview name in marketing their products, despite the fact that the Freeview consortium has no trademark over the word "Freeview".

"They're carving the turkey up on the table," said one distributor who did not want to be named.

"It means less choice for consumers because they'll be reluctant to buy set-top boxes that don't have the Freeview stamp on them."

Existing MPEG-2 digital set-top boxes will be able to receive digital TV broadcasts and are already able to pick up a test signal from the Waiatarua TV mast covering Auckland.

But the main stumbling block for existing set-top box manufacturers is meeting Freeview's standards for so-called MHEG-5 middleware, which would let you access interactive services through your TV.

"The digital set-top boxes will work, however, for Freeview to be capable of anything other than linear TV, you have to have certain smarts in the box," the Freeview spokesman said.

Interactive services could include casting votes by pressing a button on your remote control or bringing up on-screen text to add greater context to a programme.

Interactivity is seen as an attractive choice for advertisers, because it would let consumers order their products at the same time they saw the advertised product on TV.

The interactive component would use your phone line to return information to a central computer in the same way that Sky's set-top boxes connect to your phone line to provide interactive services such as its TV email service.

Another requirement known as "blind scan" automatically finds new channels and adds them to you channel list as they become available.

Freeview said it contacted 30 set-top box manufacturers more than a year ago to inform them of its requirements.

"A number of the Asian-based manufacturers aren't interested in doing [interactivity]," said the spokesman. He said the exclusive deal for the first year was necessary to get manufacturers and retailers on board.

"We're asking [manufacturers] to do something on a satellite box that hasn't been done before," he said.

"Retailers will walk away if they get more than 2 per cent [of sold set-top boxes] back as warranty returns."

But set-top box distributors spoken to by the Herald said the standard was too onerous and that interactive services were unlikely to have mass appeal.

One distributor said he sold 20 models of set-top boxes, none of which included interactivity but all of which could receive digital TV. His cheapest set-top box sold for $159 and he would discount it further to compete with the accredited boxes, which were expected to sell for around $200.

Freeview would consider applications from local distributors further down the track, but wanted to regulate the supply of set-top boxes to avoid the "complete mess" that occurred in the early days of Australian digital TV.

Satellite expert Bob Cooper weighed into the Freeview argument in his SatFacts newsletter, saying the move by the consortium set a high quality standard but would limit the options for consumers.

"TVNZ in particular fears a flood of cheap, stripped-down set-top boxes, the kind that retail for $100 or even less, primarily because there remains at TVNZ a cadre of folks who are firmly committed to Teletext and 'interactivity', whatever than may ultimately mean."

But he added: "For TVNZ to mandate through an inward-looking 'certification process' that only [interactive] complaint units be sold 'with their approval' will result in less choice, giving them a marketplace power perhaps never intended by the Government," wrote Cooper.

But while Freeview has set the bar high for some digital TV services, it will be sticking with the current MPEG-2 video encoding standard rather than the more advanced MPEG-4 standard needed to receive high-definition television, which is already available in other countries.

The newer standard boxes are in hot demand but short supply.

BSKyB in Britain has had problems launching a high-definition satellite service because satellite receiver makers have been unable to make the equipment available in sufficient quantities.

"You'll need a higher-specified set-top box for high-definition TV," said the Freeview spokesman, who expected 80 per cent of the market to go to accredited set-top box makers.

"It's just a guess, it depends on how many [consumers] choose to go the accredited route," he added.

Peter Escher, of Auckland satellite distributor Satlink said a group of distributors would band together to market and sell non-accredited set-top boxes.

"This Freeview 'proactive group', does not support restrictive supply and marketing practices, hence we are offering direct to the New Zealand public a cost-efficient alternative, which incorporates a wider channel availability to the public."

He claimed to be able to offer a set-top box that would receive the digital channels provided by Freeview as well as other channels received via one modified satellite dish.

"There are up to 40 channels available compared to Freeview's 18."

While TVNZ originally applied for a trademark on the "Freeview" name in 2004, it abandoned the application last year. Escher now has his own application in for the trademark and has reserved the web domain www.freeviewnz.co.nz.

But distributors have been told to drop the Freeview name from their marketing.

"They've made me stop putting Freeview in the description and they don't have any right to do that," said one distributor.

The Freeview spokesman said the "Freeview" name was used informally and might no longer be used when the service was launched.

Freeview was also looking at applying for a modified trademark that might incorporate the name.