Government on the horns of a TV dilemma

Will the Government start handing out free Sky dishes now that the satellite broadcaster has leapt on the “free digital” bandwagon?

Sky’s free-to-air service, expected to start this autumn, is widely seen as vital to the Government’s ambition of switching the whole nation over to digital broadcasting in the next few years. The rival Freeview service, which uses ordinary television aerials, has surprised everyone with the speed of its take-up, but it cannot be received in a quarter of UK homes.

By contrast, Sky’s satellite signal can be picked up everywhere, provided people are willing – and can afford – to install a dish. Its new deal would offer customers the dish, the box and installation for a one-off fee of &£150, with no subscription.Sky’s move has been welcomed by the regulator, Ofcom, which recently said that free digital satellite broadcasts must be made more easily available, to speed up the move to digital switchover. Its chief executive Stephen Carter said more choice in digital TV was clearly a good thing. But ministers have been more circumspect. Officials are privately welcoming Sky’s decision but there’s been no public endorsement yet.

So why might the Government start handing out free dishes? Simply because it’s already proposing to hand out free Freeview boxes (and digital video recorders) to up to 350 households that could shortly have their analogue TV signals switched off. If it can do that for Freeview, at some stage it must surely do it for “Freesat” too.

The 350 homes are set to be the guinea-pigs in a government pilot scheme paving the way for digital switchover. They’re in two Welsh villages – Ferryside and Llansteffan, either side of the River Tow in Carmarthenshire, currently served by the Ferryside transmitter. Local residents are being consulted about whether they want to make the switch, and to identify any reservations they may have. The Government hopes to make a decision in the middle of next month. If it gives the go-ahead, a technical trial will take place in November. If this is successful and residents approve, the analogue signal will be switched off permanently in January or February next year.

Broadcasting minister Andrew McIntosh said the area had been chosen because it was relatively small and enclosed and all the homes received their analogue signal from a single transmitter. Another reason is that Wales leads the UK in its take-up of digital television. Fifty six per cent of Welsh homes can already receive digital services via satellite, cable or Freeview. That’s partly because analogue reception can be patchy and partly because many viewers want Channel 4 rather than the Welsh version, S4C.

The Government has set a target switchover date of between 2006 to 2010. Ofcom has recommended that a more detailed timetable should be announced and that switchover should be phased in, region by region. It says that in those areas, one or two analogue TV channels, such as BBC2, could be switched off first, to release spectrum to boost the digital signals.

The question now is whether the Government will launch a pilot switchover scheme in one of the areas where Freeview cannot be received, via Sky’s free satellite service – and if so, whether it will pay for the receiving equipment. Sky’s price of &£150 is three times that of the cheapest Freeview box.

And here, of course, is the flaw in the Government’s pilot scheme – it’s paying the customer to make the switch. Most people would be perfectly happy to be given new digital equipment to receive extra channels, provided it worked properly and they didn’t have to pay for it.

Unfortunately the Government can’t afford to foot the bill for everyone. But Sky isn’t braced for a government handout. Though it sees the political advantage in helping ministers achieve their digital ambitions, it believes its free-to-air service makes sense on its own. With its own sales figures slowing, and Freeview’s growing, it can no longer ignore the fact that most people who want pay-TV have already got it, or that a sizeable minority want more choice but don’t want to pay a monthly subscription.

Sky won’t make much money on its free service in the first instance, but it hopes many of the new customers will later upgrade to the paid-for channels and that they can also be encouraged to pay for interactive services, such as voting for Big Brother via their red button. Sky can also market directly to them, since it knows where they live, and it can charge interactive advertisers if they respond to the interactive red- button advertisements.

And it can also hope that, come the year 2010 (if the optimists’ hopes are to be realised), the Government will mop up the last few thousand digital refuseniks by buying them a free Sky system. Torin Douglas is media correspondent for BBC News