UK satellite broadcaster BSkyB is to launch a free-to-air satellite service with almost 200 television and radio channels together with interactive services. The company also announced plans to launch high definition television subscription services in 2006.

The service will be available for a one-off payment of £150 with no monthly subscription obligation. The package will include a Sky digibox, minidish, viewing card and standard professional installation and will provide a 24 month free-to-air viewing entitlement.

At this price, the satellite television operator is effectively subsidising the cost of receiving satellite television in order to provide an attractive alternative to free digital terrestrial television while hoping to up-sell viewers to subscription services at a later date.

Significantly, the free-to-air satellite service will offer an easy upgrade path for viewers who choose subsequently to add a pay television service to their viewing options. This will be available as an instant upgrade with a single telephone call to Sky.

Sky’s announcement at an investor conference in London surprised the industry as a dramatic departure from their pay television business model. The reality is that the majority of the channels involved are already freely available on satellite, but the Sky package will make them considerably more accessible to the consumer while re-inforcing Sky’s platform dominance, exploiting their strengths in marketing and customer service.

The City responded positively to the news, which demonstrates a determination by Sky to maintain the advantage in digital television. Following results that indicated a slowing in subscriber growth, this was the first major announcement to come from the new Sky Chief Executive James Murdoch, recently appointed with the blessing of his father Rupert.

The move will also appease regulators, as Sky was keen to stress the new free-to-air satellite proposition is part of their commitment to ‘Digital Britain’ and will support the Government’s proposed switchover to digital-only broadcasting by providing an additional subscription-free option for viewers not currently attracted to pay television.

With a free-to-air satellite service potentially available to the vast majority of the country, the prospect of analogue switch-off appears somewhat more attainable, which will no doubt endear Sky to the authorities.

Bold move
The move to launch a free-to-air satellite service may be seen as a direct response to the threat of Freeview, the digital terrestrial television package, available to viewers with a digital receiver costing from around £50.

Freeview has been surprisingly successful in attracting viewers and is now available in around 3.5 million homes, overtaking cable, while the growth in Sky subscriptions has fallen. Most analysts consider that the success of Freeview was a significant factor in the slowdown in the subscription growth of the satellite operator. Sky is a member of the consortium backing Freeview, together with the BBC and the transmission company Crown Castle.

Sky’s announcement pre-empts the BBC, which had also also been considering the possibility of a free-to-air service on satellite, dubbed Freesat. The public service broadcaster previously dropped the use of Sky’s conditional access encryption service, effectively making BBC channels available to satellite viewers without a subscription. Commercial broadcasters, who use the conditional access system to provide regionalised services and regional advertising, did not follow suit.

BBC director of marketing Andy Duncan officially welcomed the Sky announcement, saying “This is good news for our viewers as it provides another route to all the BBC’s digital services without subscription. This follows the BBC’s own view that free-to-air digital satellite is an important missing piece in the jigsaw to achieving a fully digital Britain.”

BBC sources have suggested that the corporation may continue with its own proposals for a free-to-air satellite service and may co-operate in a joint proposition. The public service broadcaster has heavily promoted the Freeview service and is likely to want to communicate a similar message about freely available BBC channels on satellite, which might be more sensitive if it is closely associated with Sky. It may even be in both parties mutual interest to extend the Freeview brand to include the satellite offering.

Sky’s announcement effectively makes it much easier to receive existing free-to-air services by satellite and makes it more difficult to argue for an open free-to-air satellite platform.

By continuing to establish the Sky brand as synonymous with satellite television in the UK, it will continue to ensure the dominance of OpenTV as the platform for interactive services in this market. As a result, any opportunity to migrate to an open standard such as MHP for a free-to-air platform is considerably reduced.

The Sky announcement could have a crushing effect on Top-Up TV, the initiative to offer limited subscription services on the terrestrial platform. With a free-to-air satellite service providing the potential to add-on individual subscription channels from a much greater range, Top-Up TV may be seen by consumers as a comparatively weak offering. That at least may offer some comfort to the BBC, which initially opposed the service fearing that it would confuse the Freeview message.

More significantly, if free-to-air services are predominantly received through digiboxes equipped with a proven subscription mechanism, it could have considerable consequences for the case for the licence fee and its current system of collection.

More details, including news on Sky+ and Sky's plans for high definition television available at http://informitv.com.