Dialogue: TVNZ digital adventure could be a costly waste

BY TOM FREWEN

In his Dialogue page examination of Television New Zealand's latest digital adventure, Paul Norris looked first for the potential benefits for viewers, and found few.

Estimating the cost of receiving apparatus capable of decoding digital signals into pictures and sound for analogue television sets at up to $500 a home, he concluded there would not be many buyers for a service that was significantly inferior to that of its competitor, Sky Television.

Then, dismissing consumer demand as irrelevant, he turned to the supply side. There he discovered wondrous long-term benefits for the state-owned broadcaster. The proposed joint venture with Telstra-Saturn, he asserted, was a way of securing TVNZ's digital future and maintaining its value as a state asset.

So how is TVNZ's joint venture with Telstra-Saturn going to secure its digital future without the viewers that Mr Norris says it is unlikely to attract in significant numbers?

It won't, even if TVNZ's long-term strategy relies on a future government forcing viewers to buy digital receivers by shutting down the analogue transmission system which delivers free-to-air television to 99 per cent of homes.

Reports that the British have set 2010 as their deadline always omit the qualification that analogue transmission will cease then only if 95 per cent of homes have acquired digital receivers. Right now, about one in four homes in Britain can receive digital television. While that might seem encouraging evidence of consumer enthusiasm, growth depends on the uptake of pay television.

To pay television's tried-and-true buyer incentives of live sport, movies and porn, digital technology adds more channels, better pictures and, combined with a phone line, interactivity in the form of e-mail, shopping and banking.

The importance of exclusive live sport, especially rugby, in the growth of pay television in New Zealand is apparent in Sky Television's newspaper advertising.

If Mr Norris is worried about Sky's Rupert Murdoch controlling our access to television through his set-top boxes, he should take a look at the advertisements' emphasis on its monopolistic control of live television coverage of our national sport.

Indeed, it might be argued that Mr Murdoch's control of rugby television rights has already damaged our most precious cultural icon, the All Blacks, by exhausting the players with countless games to attract more subscribers to Sky.

Even with the rugby, which is the key to pay television subscriber growth, it has taken Sky almost a decade to sell its service to just over one in four homes. And of those, only about a third have switched to Sky's multi-channel digital service. Sky faces the challenge of getting the balance of its subscribers to go digital.

But Sky's analogue subscribers receive both TV One and TV2 and all other free-to-air channels such as TV3 and Prime through the one set-top box via the one remote control. If they switch to digital, they won't get TV One or TV2. Why? Although TVNZ says digital transmission of its channels will be free to air, they will be encrypted so they cannot be decoded by Sky's set-top box.

If a signal cannot be translated into pictures on the screen, it is not, by definition, free to air. A set-top box is simply an extension of the aerial or dish. It has two main functions - the translation of digital into analogue signals and the decoding of encrypted signals, both analogue and digital, carrying pay television channels and pay-to-view movies and programmes.

Which brings us to the real question: are Sky's digital decoders technically capable of decoding TVNZ's free-to-air digital signals into pictures and sound? The answer, contrary to Mr Norris' assertion, is "yes," providing TVNZ uses the same transmission standards.

By refusing to do that, TVNZ reveals that its long-term strategy is really about using digital as an excuse to get into the pay television business.

Given that Sky's most optimistic forecasts extend to attracting 40 per cent of households as subscribers to its pay television service, TVNZ hopes to capture the remainder. Without the rugby? I don't think so.

But before TVNZ gets a second shot at testing consumer tolerance for adding more hardware and another remote to the growing pile around their television sets, its management will have to persuade shareholding ministers that the proposed joint venture with Telstra-Saturn is not a form of partial privatisation.

If the joint venture is similar to the one in TVNZ's first digital plan, it will be outside the control of the ministers.

But TVNZ's pay television ambitions will most likely be spiked by an action that the Government must take soon - a standard for broadcast transmission of digital television. A broadcast transmission system is a piece of infrastructure, like a railway but with 1.3 million branch lines. They all have to be the same gauge to allow competing firms free access to all consumers and vice versa.

A uniform standard for free-to-air satellite digital television will ensure TV One and TV2 will be available through Sky's set-top box, securing TVNZ's digital future at the same time as removing the main buyer incentive for its pay television.

The Government needs to hurry. TVNZ blew $14 million on its first digital plan before it was rejected. A much larger amount would be involved if TVNZ is already committed to leasing at least one satellite transponder, possibly two.

At about $7 million annually for, say, five years, it could be an expensive waste if, in securing the country's digital future, the Government has to kill off its television company's pay television plan.

* Tom Frewen is a Wellington writer and broadcaster.