Kate Bulkley, Media Analyst.

An easier way back

By Kate Bulkley

Financial Times

Feb 10, 2003

For owners of satellite dishes who got a busy signal when they voted for their Great Briton using their remote control, a consortium across the channel may have a solution. Spurred on by falling costs for chip sets and other necessary technology consortium led by the European Space Agency and SES, the operator of the Astra satellite system, unveiled ambitious plans in Paris recently for a new, two-way satellite television system.

Dubbed Satmode, this E49m project claims it will provide satellite TV viewers with faster, easier-to-operate and less expensive interactivity. Using the satellite rather than a phone line to vote in the next instalment of Big Brother will cut your phone bill and be a lot faster than waiting for the modem to dial. “The idea is to avoid the busy signal,” says Christophe Duplay, SES Astra vice-president of services development. “It takes a fraction of a second to interact using the satellite versus the 30 seconds to a minute when there is a dial-up modem.”

French satellite TV platform Canal Satellite, a member of the consortium, is a prospective adopter while for free-to-air broadcasters like RTL, which transmits its channels to satellite homes across Europe, having two-way interactivity as standard could open up new opportunities for advertising-supported interactive services.

But Europe’s biggest pay satellite TV company BSkyB (which denies that the busy signal problem has been an issue) has a “watching brief” on Satmode and so far remains unconvinced that two-way satellite makes business sense. “We think that the telephone return path is ideally suited to the kinds of interactive services we currently offer because the volume of data you need to send back (through the system) for an e-mail or to vote or to bet is very low,” says Robert Fraser, a Sky spokesman.

Critics also say that although technology costs are falling, the estimated E50 cost of adding two-way technology to satellite receiving equipment is still high. For consumers, Satmode means either, at worst, getting a new dish and set-top box or, at best, just a new dish nose cone (called an LNB by the technicians) and a “cigarette-box sized” module that could be plugged into the existing set-top box.

"There are inherent advantages to this technology,” says Roger Lambert, chief technologist for direct broadcast services at set-top box maker Pace, which is not part of the European consortium behind Satmode, “but the total cost of implementation is still high.” For example, the E50 price tag does not include the cost of physically installing the new satellite dish or replacing the nose cone of existing dishes.

The other “downside” is that Satmode will only offer 64kbps of bandwidth for sending information back up to the satellite, which is not much more than the 56kbps offered by standard dial-up modems.

SES Astra and the Satmode partners, including chipmaker STMicroelectronics, set-top box maker Thomson and Canal Satellite, say the two-way satellite technology will help increase the “competitive advantage” of satellite against cable TV and digital terrestrial television. They say that for interactive TV applications like voting, TV-based SMS messaging, live TV chat, e-mail (without attachments), home shopping and betting, 64 kbps is all the bandwidth you need.

Sky has talked to SES Astra about Satmode, but the UK satellite TV giant is very happy to let Canal Satellite be the guinea pig for testing Satmode.

Besides, by the time Satmode is launched commercially – scheduled for early 2005 – Sky could have begun offering a return path from viewer to satellite using faster DSL telephone modem technology. In fact, last summer Sky showed analysts a prototype DSL modem in a set-top box, which could replace the 56kbps dial-up modem that are standard in Sky’s boxes today.

With a DSL line Sky would also have the opportunity to sell a true broadband internet connection to its subscribers. But of course it would have to do it in partnership with a telephone provider, most likely BT. And consumers would still have to plug their set-top box into the telephone plug. Sky and BT already market each other’s services to their respective customers as a way to counter the triple-play, TV-telephone-broadband internet offers available today from cable operators.

In theory Satmode could match this increase in return path capacity, but the technology would probably be prohibitively expensive for use at home.

As Sky Digital’s market matures, the emphasis of its commercial strategy is beginning to shift from simply signing up new subscribers to selling more services to its customers. Sky will need to increase the average revenue per user or ARPU, a key pay TV metric. Today the revenue contribution from Sky’s interactive services is still tiny at about 4 per cent of total ARPU (£14 of the total £348).

In future, Sky plans to move its interactive TV figure as much as three times higher and a two-way satellite connection may be a way to help achieve that target. But at the moment Sky can afford to wait and see.


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