Digital TV makers slam ‘free’ market

The electronics giants are up in arms over Labour’s strategy of allowing market forces to determine the analogue switch-off date.

While the BBC was facing a grilling from the Commons Culture Committee last week, culture secretary Chris Smith came under fire from a more unexpected source.

The big electronics companies, which have millions of pounds riding on the digital revolution, are unhappy with the Government’s plans. They have invested heavily in integrated digital television sets (IDTV) but the market has been wrecked by ONdigital and BSkyB’s set-top box giveaway.

Manufacturers fear they are being shut out of the revolution.

They also believe that if it is not handled correctly consumers will turn against digital, believing they have been bullied by a greedy Government, which could make up to £8bn from the sale of analogue frequencies.

The consequences for manufacturers, which are relying on digital TV to act as a platform for a range of other products, are serious. One insider says: “It is not good enough for the Government just to let Sky and ONdigital fight it out among themselves. There needs to be a common standard.

“We have had to make big investments to develop products. We don’t seem to be getting any guidance. What if something happened to one of the broadcasting companies? Is the Government going to underwrite it?”

Philips, which has more money invested in digital than most, wants the Government to set a date for the analogue switch off, and stick to it, dropping the caveat that it will not act until 95 per cent of the population has adopted the technology.

Philips TV brand director Paul Reilly says: “The analogue switch off is an emotive issue for the public. We need to know how the Government arrived at its figures and how it sees the market developing over the next five years. It needs to work more closely with manufacturers.”

Privately, many in the industry expect Smith to stick to the 2010 deadline, no matter what, and to offer subsidies to those who cannot – or will not – go digital of their own free will.

However, the Department of Culture, Media & Sport (DCMS) is holding the line that digital will be driven by the market.

A source at a digital broadcaster comments: “At this point, it would be dangerous for the Government to announce there will be incentives to switch to digital. It would stall the whole process. People would wait for the incentives to come in.”

So far, take-up has exceeded all expectations. SkyDigital has about 1.8 million subscribers; ONdigital is heading towards 500,000. But many observers believe adoption will stall at about a third of UK homes.

According to research by Philips, up to 75 per cent of consumers are hostile to pay-TV, which is still how most people perceive digital. The new free-to-air channels, largely provided by the BBC, are woefully unpopular.

Last week, the corporation was forced to admit that less than 10,000 people watch its digital channels without subscribing to a pay-TV service. The introduction of a digital licence fee would, many observers argue, only exacerbate the problem.

In an effort to improve the situation, Sony has proposed a central fund to promote free-to-air services. Sony Consumer Products deputy managing director Steve Dowdle told a recent Digital TV Group conference that promoting free-to-air was “the only way to expand the digital market and achieve total conversion”.

He added: “If we fail to take heed of the misunderstanding in the minds of the consumer, that digital TV means pay-TV, then we haven’t got a hope of achieving the switch-over date set by Smith.”

Even with better-promoted free-to-air services, some believe the digital figures simply don’t add up. An industry insider says: “There are about 40 million TVs in the UK, if you count second sets in people’s bedrooms and kitchens. And about 4 million new TVs are sold each year. For the Government to meet the 2010 target date, every TV sold from now on will have to be digital, and that is not going to happen.”

Toshiba, which was forced to axe its premium range of set-top boxes in the face of Sky and ONdigital’s giveaway strategy, is planning an IDTV launch in the spring. Richard Dry, product development manager at Toshiba UK, says: “Everyone assumes the manufacturers can’t lose. We are committed to digital, but there is a lot at stake. The introduction of free boxes put the IDTV market back two or three years and we need to know how digital will be phased in.

“We must be sure we are not investing in inappropriate technology.”

Europe’s biggest manufacturer of set-top boxes, Pace Microsystems, has more riding on digital than most and is understandably reluctant to speak out on the Government’s policy.

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