BSkyB to contribute to Astra costs

BSkyB, the pay-TV giant, is to meet up to half the costs of launching a new Astra satellite in return for sharply lower rental fees in the future, the Independent has learned.

The innovative arrangement gives BSkyB 14 transponders on the new digital satellite, enough to carry 150 channels, at a fraction of the usual rental cost.

The leased capacity is earmarked for the transmission of digital television services from 1997. But the company will have to make an upfront payment that could reach pounds 85m, according to industry experts.

The construction, launch and insurance costs of the digital satellite are estimated at about $250m (pounds 170m). BSkyB makes annual payments of about pounds 30m for its current satellite transponders, which are used to broadcast channels such as Sky One and Sky News.

By becoming an "anchor" tenant on the new satellite, BSkyB has reduced rental costs by as much as 50 per cent. That savings will provide the flexibility either to accelerate or to slow down plans to introduce digital services, depending on market demand and the actions of competitors.

The satellite deal is part of a wide-ranging plan at Sky to minimise the high costs of the switch to digital. The company has already moved to reduce the costs to consumers of digital set-top boxes, to encourage wider takeup. As well, it has reached revenue-sharing deals with many programme suppliers to reduce fixed costs for pay-per-view services.

BSkyB's chief executive, Sam Chisholm, has said the company would offer as many as 200 digital channels once the new service is available. This is expected to include between 60 and 100 channels dedicated to "near video-on-demand" - the rolling broadcast of several Hollywood films, whereby viewers are never more than 20 minutes away from the start of a chosen movie.

BSkyB is also talking to other broadcasters, including Virgin Communications, Richard Branson's media development arm, which has tentative plans to launch a pay-TV channel.

The deal with Sky marks the first time Luxembourg-based SES, which operates Astra, has used a cost-sharing approach.

"This certainly gives BSkyB a guaranteed presence on the Astra digital system," said one analyst. "But it also gives SES some comfort on the financing side and increased capacity to sell to other users."

Critics of Sky's dominance in the pay-TV market are concerned that the company's long-term contracts for transponder capacity will force other broadcasters to deal exclusively with Sky to gain access to the digital distribution network.