A phoenix from the ashes of ITV Digital

Attempts to salvage some good news from the collapse of ITV Digital seem futile to many observers. There is scepticism about whether moves by the Independent Television Committee (ITC) to reassign the three former ITV Digital digital multiplex licences will lead to the creation of a successful digital terrestrial platform. Some observers even doubt there is a rationale for the Government to pursue its aim of switching most households to digital TV, and turning off the analogue signal, by 2010.

Government plans to move TV viewers to digital and then sell off the analogue spectrum to mobile phone companies now make little sense, according to Pedro Avery, broadcast trading director at BLM. He says the sale would be unlikely to bring in sums comparable to those raised from selling the third-generation (3G) mobile licences. He adds: “The pressure on the Government to switch off analogue is not there any more, because they cannot bleed the mobile companies again.” He believes it is not even clear if all the 3G mobile phone licencees will go ahead with their plans, let alone whether mobile companies will seek a larger share of the analogue spectrum.

According to Media Planning Group head of broadcast Andrew Canter, some 187,000 homes a month would have to sign up to digital services for more than 90 per cent of households to have digital by 2010. He says: “Sky attracts about 70,000 to 80,000 subscribers a month in the good times. Put it this way, 2010 is just not reality.” Sky would have little interest in signing up such a large volume of new subscribers, as its main interest lies in increasing revenue per user, rather than being swamped with new, low-spending customers.

But none of these arguments have persuaded culture secretary Tessa Jowell to err from the planned 2010 analogue switch off. “We are not going to be blown off course by short-term events,” one of her spokesmen says. Last week, the Media Select Committee stated that the Government’s position was untenable and suggested giving out free set-top boxes.

The committee’s scepticism is supported by Jim Marshall, chairman of the Institute of Practitioners in Advertising’s media policy committee. He says: “The Government needs to rethink its whole approach. To simply say let’s re-advertise the digital terrestrial licences is a classic case of head in the sand. If the country’s two main broadcasters cannot make it work, why is anyone else going to?” He doubts digital terrestrial will ever be a driver of digital uptake, and says it has not worked in any European market.

A number of small phoenixes may rise from the ashes of ITV Digital, however. The tender for the failed channel’s three digital multiplex licences holds out the prospect of a number of new players entering the market. Applicants will be announced by the ITC in four weeks, and the winners announced in six weeks. The Freeco consortium – consisting of the BBC, ITV, Channel 4 and Channel 5 – is meant to have prepared an application to run a service from the set-top boxes already located in former ITV Digital customers’ living rooms. It is also thought that Crown Castle International, responsible for ITV Digital’s transmission structure, is considering making a bid, along with BSkyB, to run subscriptions. It also emerged last week that the BBC and Channel 5 are working on plans for a terrestrial service offering 16 channels for £60, independently from Freeco.

From a situation where the digital choice was between ITV Digital and Sky – or a cable company if one operated in your street – there could be a proliferation of digital terrestrial offerings. But it is unclear if any of them will gain the extensive take-up needed to fulfil Jowell’s vision. The omens are not good – set-top box manufacturer Pace says it has “prudently constrained” supply of its new digital terrestrial adapter because of uncertainties over ITV Digital. Only 50,000 have been supplied so far, half Pace’s original target.

The Incorporated Society of British Advertisers’ director of media and advertising affairs Bob Wootton says he hopes to see an intermediate level of digital terrestrial, that would allow viewers to watch for free and add premium channels as they want them. He says: “What hasn’t quite emerged yet is a well-segmented market in which there are intermediate levels. The interesting work is the area between nothing and quite a bit – there is quite a lot of space in that market.”

For brand owners, the demise of ITV Digital is of little consequence, since its viewers will continue to watch commercial TV. But as Gillette European media director Michael Winkler says: “What people [brand owners] are talking about is: does this mean more money for ITV to produce a better schedule? ITV always had the biggest budget, but that doesn’t mean it had the best programming; it doesn’t mean it will turn around the ratings decline. With a change of management, will it be in a position to produce better schedules?”

A layered digital terrestrial service sounds attractive and could be worthwhile for mainstream broadcasters. They would benefit from additional ad revenue and would win extra viewers for their free-to-air digital channels. But few observers think the 2010 switch-off is a relevant date in this decade’s digital diary.