Video-on-demand faces threats from all sides
Companies which are trying to offer services using fast ADSL technology have serious obstacles to overcome. But Dan Clays thinks the idea still has a future
For most of 2000, “broadband” was top of the list of media buzzwords. Close behind came “ADSL”, a system which enables vast amounts of data to be transmitted at high speed through copper telephone wires.
It all turned out to be a damp squib. “Homechoice”, the video-on-demand (VOD) service, spent &£6m on marketing digital TV but has found its way into only 10,000 homes. The same has been true for broadband Internet services. Freeserve Plus has scaled back its plans and many who registered for BT Openworld last summer are still waiting for their extra bandwidth six months on.
The cause of this stuttering start has been soft regulation, which has enabled BT to drag its heels in allowing competitors access to the all-important local exchanges. Ntl and Telewest have jettisoned plans for ADSL (for homes without cable).
There is, however, a glimmer of hope. BT has been ordered to allow the sharing of 25 exchanges in major urban areas by April this year. This is good news for the likes of Homechoice and Freeserve.
The problem with ADSL TV is the length of time it will take to build coverage. BT may have been ordered to open up 25 of its exchanges, but this is from a total of over 600 across the UK. By April, digital TV penetration will hit 8 million. While this still leaves two-thirds of homes with analogue access only, the brand awareness of SkyDigital, ONdigital, ntl and Telewest will be streets ahead of any VOD operators.
The idea of receiving TV through the phone line is going to need heavy promotion, and ADSL’s offer of true video-on-demand will soon be matched by advances in set-top technology on terrestrial, satellite and cable platforms – in particular the latter.
VOD operators will need to survive a long period of crippling overheads. Oftel is investigating the cost of lines to customers, and BT’s exchange tenancy charges, but for the foreseeable future any offer of TV via ADSL in the UK will be a loss leader. Homechoice pays BT &£60 per subscriber per month – in Hong Kong, operators pay the network provider &£10. Yes, TV will launch ventures in both Hong Kong and Australia this year, but these are markets where more bandwidth is available at a much cheaper price.
It would be a shame if VOD operators were prevented from a full-scale commercial launch in the UK. Their arrival would add further competition to the digital TV market, although this could confuse consumers even more than they are already.
The eventual outcome may be that the consolidation seen in the cable market will be replicated in ADSL – VOD operators will link up in order to share both the cost of technology and the marketing of their product.
ADSL should still play a key role in the future of interactive TV. Broadband technology should lead to the growth of strategic partnerships between media, telecommunications and technology companies – providing the regulators allow it.
Dan Clays is deputy head of interactive television at Quantum New Media Services
