Why ONdigital should be saved from jaws of Sky

Digital terrestrial TV has a key role to play in the switchover to digital. However, the rescue of ONdigital may come at a high price for advertisers.

In June 1997, the Independent Television Commission stopped BSkyB joining the Carlton-Granada consortium which was bidding for the Digital Terrestrial TV (DTT) licence. It would, said the ITC, give BSkyB too dominant a position. But in the week that ONdigital is turning to ITV to reverse its fortunes, the Government’s decision to hold off legislation lifting cross-media ownership restrictions may mean that BSkyB could provide the only rescue plan for DTT in the UK.

Should BSkyB be prepared and allowed to take a stake in ONdigital, concerns over BSkyB’s domination of the market will put any fears that advertisers had over an ITV monopoly into sharp perspective.

Condemning ONdigital to the scrap heap is premature and certainly avoidable. The real issue is: where will ONdigital be even if it does hit its own break-even target of 1.7 million homes by 2003? According to Quantum forecasts, it is possible that by that time over 11 million homes will be connected to digital through BSkyB or cable.

ITV also faces a £300m a year bill for changing from analogue to digital. The transition actually reduces costs for BSkyB.

To maintain a DTT service, ITV admits it needs a third partner. A telecommunications company would fit strategically – offering broadband capability and a ready-made nationwide coverage. However, in the current climate it is unlikely that the likes of BT will consider extra spend outside of their core business.

DTT is key in the battle to persuade analogue viewers to switch, and the Government would not want to forfeit revenues derived from DTT frequencies. On this basis alone it makes sense for the ITC to listen to Carlton and Granada’s pleas for more frequencies, reduced licence costs and a definite switch-off date.

But perhaps the ITC’s apparent lack of response suggests a more lenient reaction to BSkyB taking a stake a second time around. Buying a share of a business that has obvious shortcomings may deter Rupert Murdoch. However, the opportunity to cement a position of control over the UK’s digital TV market would be a major incentive. And with competition reduced there would be no need for BSkyB to offer free set-top boxes.

ITV’s first priority should be to seek a solution from the Government. But even if Carlton and Granada do walk away from being a joint platform provider, their heritage as TV’s premier content providers should not be forgotten. And ITV will remain the most effective channel for communicating brand messages to a mass audience for some time.

Competition is good news for advertisers wanting to exploit the benefits of digital and interactive TV, so there is logic in the Government coming to ONdigital’s aid. Hopefully shareholders’ patience will not run out before it acts.

Dan Clays is Associate Director of Quantum Media

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