Who will rule the airwaves?

Those outside the BSkyB camp fear Murdoch is poised to `do it again'

As broadcasters push for a slice of the digital broadcasting cake, British regulators are racing to catch up, writes Maggie Brown

Viewers think television is about programmes; media barons know it is about money. But the future for broadcasting is increasingly being dictated by technology. And for technology, read digital.

This summer the Department of National Heritage expects to rush out a Green Paper on how to regulate the imminent digital broadcasting revolution. The Government is under pressure to sort out some sensible domestic framework of regulation - fast.

Which body is to allocate the new digital frequencies and should they be auctioned off? What sort of programme standards or restraints, if any, should be put on them? These questions must be resolved much faster than was anticipated when the 1990 Broadcasting Act was passed orwhen the BBC White Paper was published last year.

Digital broadcasting involves compressing TV or radio signals toexpand capacity. In the case ofthe UK's four terrestrial channels, this would mean quadrupling capacity to 16 channels - 12 of them new. For satellite- delivered services using higher-powered signals from pan-European craft, the capacity per channel rises tenfold, which makes predictions of 500 channels no idle boast but a concrete reality

NTL, the UK's privatised transmission company, and BBC engineers predict Britain could have 12 new terrestrial TV channels by 1997, provided (and it is a huge proviso) that investment is available. Meanwhile,an experimental UK digital radio service organised by the BBC, with French and German public service broadcasters, is preparing to start later this year.

Oncedigital transmission investment is assured - and arguments are raging about whether this would be hastened if the BBC's transmitters were privatised or bought up by NTL - manufacturers of set-top receivers (and eventually new digital TV sets) are expected to pile in.

Britain's domestic terrestrial digital plans are lagging way behind the satellite broadcaster Socit Europenne des Satellites (SES), which operates the Astra satellite operation based in Luxembourg. This privately run company revolutionised European TVwhen it started up in 1989, operating outside established conventions and thereby forcing the EC and affected governments to make policy on the hoof. At a stroke, it allowed Rupert Murdoch's Sky Television the crucial means of kick-starting pay satellite TV and tapping a golden seam of British subscription income - although it has yet to match the scale of the France's PayTV giant Canal +.

Astra has three digital satellites (code-named E, F and G) which will be launched this autumn, next spring and in 1997. Eutelsat, the Paris- based operator, is also launching a second "Hot Bird" satellite with digital capacity next year.

A large proportion, perhaps 20 per cent of these new Astra channels, will be operated by Rupert Murdoch, with other established Astra broadcasters such as Kirch and RTL also taking large chunks of capacity. This explains why established broadcasters (especially public service ones) throughout Europe are poised anxiously on the edge of their seats.

And it is here that what viewers want and will pay for is crucially important. What is to be put on all these new channels? And how much will people pay?

According to media research on PayTV in Europe by Goldman Sachs,the main "killer applications" are films and sport. But with the introduction of digital TV, it says, these should be augmented by interactive games, home shopping, video on demand, news on demand, gaming, infotainment and edutainment.

British broadcasters (who both fear and embrace the chance of more channels) are busily devising schemes to justify expanding on to some, if not all, of the 12 new channels.

Channel 4's chief executive, Michael Grade, says the channel's first priority would be to "simulcast" (broadcast the same service on two channels). This would be a way of providing Welsh viewers who are currently confined to S4C with Channel 4.

The BBC also views digital TV as a way for it to provide extra pay services and supplement the licence fee: deputy director general Bob Phillis has been anxious to put a positive case for the corporation's plans. ITV will want its share, too.

However, the Independent Television Commission, the most obvious candidate to regulate and allocate channels, is coming round to the view that no favours should be handed out. One hard-headed view is that new operators would exploit new opportunities best. (It points retrospectively to the mistake it made in allowing ITV to develop the teletext service).

But the heart of the debate centres on the issue of "conditional access", the gateway to consumers for future services.

This is the encryption standard to be used for subscription digital TV and to ensure certain countries which are not entitled to see programmes are excluded. Conditional access is the basis of PayTV.

Part of Rupert Murdoch's UK dominance lies in the brilliant way he backed and invested in the Videocrypt system, which, licensed to BSkyB in 1990, has allowed signals for premium channels to be scrambled and for PayTV to rake in revenues.

This is the business tool which has made his investment in Premier League football, and Rugby League, profitable. In Europe, the two other main operators, Canal + and Payco, have their own encryption systems

Rupert Murdoch has created a de facto UK monopolyof the gateway which other operators need to use if they want to launch pay satellite systems serving the UK. This has led to the recent investigation by the Office of Fair Trading into the way BSkyB packages its channels. Its arrangements with Videocrypt are still beinginvestigated.

Put crudely, the experience of the past five years has terrified everyone outside the BSkyB camp who fears Murdoch is poised to "do it again", but on a far largerscale Europe-wide, with digital TV.

This fear may explain why delegates to last month's oversubscribed "Dash for Digits" conference, organised by the Royal Television Society, listened with fascination to a speech by Robin Crossley, technical adviser to SES Astra. Mr Crossley is also the chairman of a European-wide Digital Video Broadcasting group (DVB), set up 18 months ago to agree a common European standard on conditional access. This group, on which 147 broadcasters are represented, has struck a basic agreement. The problem for the sceptics -including the BBC - is that Mr Crossley is so closely identified with the main player. "You couldn't get a fag paper between him and BSkyB," said a senior broadcaster at the conference.

Mr Crossley explained that the committee's common standard avoided the nightmare of viewers needing to buy and stack up different set-top decoder boxes for different services. The encryption system also needed to be so secure and to deter pirates (a BSkyB headache).

Last month, agreement was struck on a two-tier scrambling conditional access system, so secure in fact that secret services around Europe have made representations about its impregnability. And the DVB, under pressure from broadcasters such as the BBC, has agreed that the new system can either be simulcrypt or multicrypt. In other words, the common standard decoder can have either one single slot for a proprietary smart card or two slots or more, allowing a variety of access systems to prevent a monopoly.

The multicrypt option is privately being dubbed as a concession for the slow starters. Everyone, including the BBC, admits that the first digital pay systems to arrive are expected to be set top receivers with single slots, just like the current Sky-compatible decoders.

And you cannot find anyone in the industry who does not concede that BSkyB and Rupert Murdoch are miles ahead.

The DVB group has also agreed a short-term voluntary code of conduct to handle access disputes among potential programmers. This is causing many broadcasters, including the BBC, great concern, but it is hard to see what the objectors can do.

All media operators, however, are lobbying in Brussels as broadcasting policy is a European-wide issue. Mr Crossley says Astra believes the DVB agreement represents a good balance. "This is less to do with terrestrial TV satellite or cable, more to do with what drives a marketplace," he says. "Those who drive the market at the beginning want to protect their market and they wantsimulcrypt. Those who don't want to be debarred, favour multicrypt." He is certain that the first digital decoders marketed next year will be subsidised.

So what will be put on these extra channels? David Elstein, programme director of BSkyB, suggests there will be four new types of service. For example, it will "multi-plex" existing channels, giving viewers more choice of when to watch. It willstagger the start time of films with perhaps 15-minute intervals, a near video-on-demand application. It will also use one tier to provide premium - in other words, more expensive - services. And eventually there will be pay per view events - customers buy a home ticket on the day for a concert or big entertainment.

But everyone knows that this is a hotpotato. Mr Elstein says that for all the suspicion of BSkyB, it would not launch until European-wide standards were firmly agreed (in other words Brussels does not intervene).

"We have to be sure whatwe do is feasible," he says. "It depends on the European market, not just the UK. The degree of reinvention is enormous. Rupert is not just going to press a button. The sums of money are far too large."