Freeview's grand vision could be a digital debacle

It's hard not to notice Freeview, the recently launched digital TV service advertised with morphed visions of John Simpson and a Tweenie, or Terence Stamp and Dot Cotton peeling off their faces.

Freeview last week made grand claims of one million expressions of interest in the service and 35,000 new customers every week.

But the Government's plans to switch British viewers over to multi-channel digital TV using Freeview could cost as much as £25bn and won't be achievable until some 15 years after the target deadline, according to David Elstein, former head of Channel 5.

He is not alone in his view. Rupert Murdoch, the media mogul who chairs satellite digital service BSkyB, described the Government's target as "very ambitious" last month. BSkyB is a partner in the Freeview consortium, along with the BBC and Crown Castle, as well as one of its main competitors.

It seems the experiment could turn into a cash drain with no guarantees of success.

The Government wants us to switch off the old-fashioned analogue TV service, which gives us five channels over the airwaves, by 2010. But this target has often been questioned. Mr Elstein does not believe it can be done before 2020 at the earliest: "The Government's original timescale of 2006 to 2010 is completely incredible."

Until now, consumers have had the choice of getting digital through BSkyB's Sky service or the struggling cable TV operators. Until May we had the option of ITV Digital, which gave us digital TV through a normal aerial. Then it collapsed and its owners, Granada and Carlton, had to write off £1.2bn of shareholders' funds.

The rescue mission for the digital project is Freeview, which offers a similar service. It involves only the one-off cost of an adapter, in contrast to its predecessor's rental business model.

Launched at the end of October, Freeview claims it will revive the digital dream. It offers around 30 channels free of charge to anyone who buys a £100 adapter, and says reception will improve.

A total of £10bn has already been allocated to getting digital terrestrial TV up and running. This includes the cost of funding the BBC's new digital channels, such as BBC Four; the cost of transmitting both analogue and digital signals in parallel; and the Government's digital payout to Granada and Carlton for launching ITV Digital.

But switching off analogue TV could cost a further £10bn, says Mr Elstein, because of the problems associated with replacing aerials and converting the multiple TV sets and video recorders that exist within many homes.

"The cost of building the Dome would be lost in the margin for error here," says Mr Elstein, who now works as a consultant. "This emperor has no clothes."

There are signs that viewers won't be too tempted by the service, despite initial interest. Some 40 per cent of British consumers still say they don't want digital TV.

Hidden costs could put them off, says Peter King, an analyst at Strategy Analytics. He says that many people will find they need a new aerial to receive Freeview, which will add a further £150 to £180 to the cost. "If it's not plug and play, there is the risk that there will be a lot of dissatisfied people out there," says Mr King. "Digital terrestrial TV has been given a second opportunity in this country and it can't afford to jeopardise that."

A further twist is BSkyB's plan to sell its own "Digibox" set-top box for the same price as a Freeview adapter. This will give viewers 137 free-to-air channels, including BBC digital channels, as well as a raft of digital audio channels. The package will include the most popular choices available on Sky Digital now, such as UK Gold, Sky One and Discovery, which Freeview customers won't get. As Mr Elstein says: "It would be an odd consumer who prefers Freeview."

Consumers also find digital TV equipment offputting. It was deemed one of the six most complicated pieces of equipment to operate, along with flying an aeroplane and using a sewing machine, in a survey carried out by Easy TV.

Unfortunately for the Government, its Freeview plans are being unpicked all too easily.