Digital vision evolving

We’re going through an evolution. All phone companies are becoming Internet companies, all Internet companies are becoming phone companies and in a couple of years we’ll all be TV companies as well. Companies that do triple play with a single billing relationship and bundled services will have an advantage long-term. I can’t see that not happening. Seeby Woodhouse, Orcon, 2006

The visual media landscape was being challenged by revolutions at all ends of the spectrum from wider, flatter screens, and the imminent arrival of HDTV in the lounge, to the trend for lighter, slimmer phones that doubled as cameras with viewers for MTV music clips, movies, and mobisodes of the latest soapies.

It was expected that by 2015, 90 percent of all households in the developed world would have a home media centre managing digital voice, data, and video content and services. The uptake of media centre PCs would be driven by TV operators, telecommunications companies, ISPs, and consumer electronics businesses, all hungry for a slice of the new digital home entertainment business, according to Paul Budde’s 2006 Global Digital Media report.

On a trip to Paris on Singapore Airlines early in 2005, I gained a first-hand insight into the capabilities of on-demand media with an in-flight entertainment system delivering a smorgasbord of content. Halfway through a bad movie it dawned on me that I was no longer at the mercy of a programmer. I could stop, rewind, fast-forward, or pause any of the 60 movies; many of them still at the box office in New Zealand, and browse a host of other content at my leisure. And that was all on six-year-old technology. Soon after that flight Air New Zealand launched a similar service on its new 777 aircraft promising 50 blockbusters, classic and children’s movies, and a similar number of TV shows and documentaries plus a wide selection of music and games.

Sky TV had the digital pay-TV market to itself while free-to-air broadcasters weren’t even at the starting gate despite years of discussion about how they might transition to digital. Competition for that prime space was the focus of increasingly fierce marketing, as the walls between computing, telecommunications, and broadcasting began crumbling. All indications were that if the broadcasters didn’t wake up, Telecom, TelstraClear, and ISPs would start delivering on-demand or downloadable video and beat them at their own game.

New generation DVD recorders and hard disk-based personal video recorders (PVRs) could record over 100 of hours of programming to play back at your leisure. Xbox and PlayStation gaming machines not only played and recorded DVDs and delivered on-line gaming but also had huge hard disk capacity. New ‘media centre’ software allowed users far greater control over their entertainment options, and the imminent arrival of IPTV, which all the big telcos were beginning to drool over, threatened to reshape the entire viewing experience.

On its own the Internet was delivering an increasingly richer experience and people were spending far more time exploring the options. There were thousands of sites where music, movies, and TV programmes could be legally downloaded, and a host of niche channels you could stream to your computer or flat-screen TV. Free Internet in France had come up with a business model with a feel of the future.

It had installed its own equipment on France Telecom’s local loop and was providing 20Mbit/sec fast Internet, phone services, and free calling to much of Europe with no line rental charges plus 100 TV channels, with video-on-demand at $4 a pop. Subscribers got a wireless router with a hard drive to store content and could buy a mobile wi-fi handset for calls in their home and at external wi-fi hotspots. The entire bundle had no data cap and cost NZ$57 a month.

HomeChoice in the UK and Fast Web in Italy had similar deals and Yahoo! Broadband in Japan delivered triple play services at 100Mbit/sec speeds. In Australia ABC and Disney were offering the latest episodes of Lost and Desperate Housewives on their web site the next day for $1.99 each, or free for streaming if you didn’t mind the ads. The TV download service was available to anyone, including Kiwi viewers.[1]

In its 2007 report on trends and developments in the UK communications market UK telecommunications regulator Ofcom said broadband use had skyrocketed since the local loop had been unbundled and as a consequence digital TV over the Internet had overtaken satellite broadcasting. More than 50 percent of UK households had broadband. “Different platforms offer competing services with digital TV, satellite, cable and IPTV and telecomms operators eating into each others’ space to the benefit of the end users lured by increasingly attractive bundles,” said market research company Ovum.

As a result, more than 40 percent of households now took a bundle of more than one communication service – double the EU average. “All traditional terrestrial platforms have now diversified their offer onto digital and/or Internet-based on-demand services. Digital terrestrial television now has more viewers than satellite, with a staggering 80 percent penetration,” the report said. And according to Ovum, the social networking boom meant Brits now spent 29 hours a month on the Internet, using broadband connections with average speeds of 4.6Mbit/s (nominal). They mostly read news and socialised, with eBay, the BBC, Facebook, MySpace, and YouTube amongst the ten most visited sites.”[2]

Rear vision mirror

The first hint of digital television becoming a reality for New Zealand’s free-to-air broadcasters came late in 1997. BCL, the State-owned infrastructure company that managed the towers and the distribution of signal for most radio and TV in the country had been trialling new technology and said it could be ready by the end of 1998. BCL rebroadcast TV2 for ten days in digital format to a van moving around Auckland streets to test signal strength and picture quality. It used equipment from UK-based manufacturer NDS and a standard UHF transmitter at Waiatarua in the Waitakere ranges broadcasting to a prototype set-top box in the van. “We will be doing more digital trials this year and launching digital television for all the free-to-air broadcasters as early as the third or fourth quarter,” were the confident words from BCL general manager of networks Rob Sweet.

“It was easier than we thought. It proved that digital reduces reception problems and provides a better quality picture especially on bigger screens. We had two 29-inch Panasonic TV sets side by side showing analogue and digital. You could see there was a significant improvement,” said Sweet. Digital opened the way for more channel choice. The set-top box would also have a plug for a phone service as a return channel which could be used for Internet access, for example. BCL was gearing up to simulcast both analogue and digital television. The set-top box would be an interim solution for existing television users during the transition to digital TV sets.[3]

The only obstacle according to BCL was the availability of commercial quantities of digital video broadcast (DVB) chips for set-top boxes but at broadcaster level there was another more pressing issue to be sorted out. The industry had been lobbying for several years to have the government free up Crown-managed radio spectrum to make room for digital television. There was only enough spectrum available for the existing free-to-air channels and Sky to simulcast existing programming. Nothing had been set aside for new players, growth in the number of channels or interactive or fast Internet services. Sky owned four national frequency sets, BCL, the TAB, and Prime Television had one each and the government had two. The Crown-managed channels and adjacent frequencies were the only ones left for digital.

The rest of the world was moving rapidly into the digital space and TVNZ-owned BCL had been experimenting with digital broadcasting but without spectrum there was only uncertainty ahead. Rob Sweet said an important part of the digital television trials in Auckland was to extend the number of channels that might fit into the maximum spectrum available. “If this doesn’t work we’re in trouble. This issue has to be dealt with … There’s not enough spectrum for Internet and interactive services such as home shopping and banking or more pay or free- to-air television.” Meanwhile the Ministry of Commerce had received a number of submissions requesting more spectrum and legislation and ways to free up spectrum were being looked at.[4]

With little in the way of leadership from the government, bewildered broadcasters were trying to determine how to convert to digital with sufficient added value to take their audiences with them and still end up paying their way. The transition to digital was expected to cost the free- to-air channels tens of millions of dollars not only in converting their networks and transmitters but also swapping users to new set-top boxes. In 1999 an independent evaluation by the Institute of Economic Research suggested it would add at least $150 million to overall operating costs for free-to-air broadcasters over ten years. The New Zealand Broadcasters Council, which comprised TVNZ, TV3, Sky, Prime, and the TAB, had been working on a shared strategy for digital but was still in the early stages.

Coitus interruptus

Pioneering ISP Ihug remained determined to add TV and video to its offerings any way that it could. Back in 1999 it was engaged in serious set-top box software development promising to deliver up to 42 channels via satellite. In May 1999 Sky TV proposed to take a 30 percent shareholding believing there was a synergy in their digital strategies. Price, however, was an issue, as was the way forward. Ihug had already launched its own high-speed satellite-based Internet service. Initial uptake was slow, with only about 600 customers, however, director Nick Wood said that number was soon in its thousands. The digital TV service which would ‘blow the rest of them out of the water’ had been in a holding pattern until discussions were completed with new partner Sky.[5] By November the deal was over.

The merger fell apart through conflicting business plans and some said unrealistic demands by the Wood brothers. All that remained of the digital TV plans at the end of 2003 was a pay-per-view system in a few hotels and motels. The digital TV transmitter and remaining boxes were gathering dust in the Ihug basement. Then in February 2000 Ihug tried to get into bed with cinema owner Force Corporation but that too failed to be consummated. Then it purchased 51 percent of video chain Video Ezy but sold its shareholding back to the original owners a year later.

Ihug tried another approach in November 2000 aimed at delivering Internet access to those who didn’t want a PC. Its Ihug Surfboard with infrared-connected keyboard was previously only available in hotels plugged into the TV set, enabling those with no PC skills to surf the net on the TV screen, and download or send email. The device had picture within picture (PnP) so viewers wouldn’t miss their favourite programmes while on the Internet.[6]

“The Ihug Surfboard will be perfect for newcomers. It will have special appeal for the many seniors who are increasingly interested in email as a way of contacting young relatives. People with little or no computer experience have been up and running in minutes,” said Ihug director Tim Wood in a press release in November 2000.

Early in 2004 Ihug’s general manager of sales and marketing Duncan Shand conceded that without access to unbundled DSL services at 256kbit/sec and higher there was little incentive for ISPs to develop relationships with content providers or deliver other value-added products.

“We’re trying to help customers use more intensive content but we can only do this on the JetStream starter package, even then the customer has to pay $29 to Telecom on top of the ISP fee so it’s still pretty ugly.” It was impossible to compete against Sky without higher speed when ISPs and customers were charged by the megabyte. While the flat-rate 128kbit/sec JetStream starter package invoked a sense of déjà vu from the ISP that toppled the dial-up Internet charging model in 1996 it wasn’t sufficient to get Ihug back into providing video services. “We never really had the marketing muscle to drive our IDTV offering. Sky lost millions getting their service to profitability but we didn’t have that kind of resource behind us. It was just too hard,” said Shand.[7]

Iconz research and development manager John Russell also believed Telecom’s pricing of DSL was the biggest show stopper for deployment of broadband services. “With an uncapped higher throughput service there’s a thousand things that will suddenly become available.” In early 2004 Iconz was talking to a number of content providers with the idea of having time-shifted channels with specific movies and TV shows, live video, multicast events, and video from static points including traffic feeds.

It was in the process of making a substantial investment in database technology for interactive searching and constructing billing models. Set-top boxes were also in the plan. “We see ourselves as a partner. Every effort will be made to keep this open so we can integrate with other people’s services … a channel partner for mainstream broadcasters … We’ll provide a whole new delivery method and revenue stream for their content,” said Russell. A major announcement was expected before the end of the year.[8] Within a year it was all over.

Iconz had been forced to back off by Telecom’s Internet access charges despite being confident the technology and the business case were there. “If the market had opted for unbundling the local loop we would probably be delivering a service by now,” said Russell. At the time Telecom had just been given the nudge by the Commerce Commission to share 2Mbit/sec streams with the other ISPs. Even then it was ‘still absurdly expensive and hard to get a great deal of data to a customer’s home.’[9]

What we were seeing was a classic case of the incumbent carriers not wanting anyone else to play in their sandpit until they had worked out how to win the game. While ISPs and customers kept pushing for faster Internet connections at lower cost without the data cap, they were typically told there was already more than enough bandwidth available for Web browsing. “As long as it stays that way Web browsing is all we’ll get. No one’s going to develop interesting, new and innovative content when they can’t push it out to the customers or let the customers interact with it at a reasonable speed,” said Russell.

Spectral nightmare

In 2003 Cabinet finally reserved spectrum for digital TV but there was still “technical and commercial policy work” to be done to move things forward. The same year Telecom signed a five-year exclusive deal to bundle Sky TV’s existing content under a single billing arrangement for its customers with the ability to repackage the programming for its own DSL-based services, if it ever headed down that track. Sky remained king of digital, and the major content provider, hosting TV1, TV2, TV3, TV4, and Prime on its satellite-based digital service. The only competing offering was from TelstraClear, which had 38,000 customers in 2004 and was in the midst of shifting its cable network in Wellington and Christchurch to digital in preparation for launching 25 new channels. It was also locked into an exclusive content agreement with Sky. which viewed the partnership with Telecom and TelstraClear as simply another way to get its content to market.

Sky had about 550,000 customers, the majority on digital, which offered close to 90 services including 56 TV channels embracing movies, news, sport, free-to-air, music, games, gambling, weather, and pay-per-view. The eight pay-per-view movies at $7 a shot – were served up from an nCube server at TelstraClear’s data centre in Wellington. Meanwhile Sky was upgrading its internal technology to move up to the next level of service delivery and in the early stages of assessing a next generation set-top box, which would include a hard disk for recording movies. Sky’s precious transponder space, however, was full and more capacity wouldn’t be available until at least 2005 when Optus swapped its existing satellite with a new generation bird.

There was no such thing as VoD in 2004. The closest we had were hotel systems provided by Maginet and Movielink, which offered a selection of movies soon after their big screen release. Sky TV delivered eight pay-per-view channels and TelstraClear provided four channels in Christchurch and Wellington soon after video store release. While the broadcasters were sorting out their identity crisis, telecommunications carriers and Internet service providers were trying to reinvent themselves as entertainment and content providers. This meant upgrading billing systems to cope with converged content and optimising networks to deliver videos, movies, and interactivity. This was forcing carriers and broadcasters to review their traditional business models, their partnerships, and their role in the converging world of digital communications.

The first signs of consumer readiness for the wider digital experience began to emerge in 2003 through the widespread take-up of LCD and plasma flat-screen TVs, which could handle PC and Web content with clarity. Then there was the plethora of hybrid devices in the home electronics stores designed to interface with the TV including games consoles with hard disks that played DVDs, PVRs with over 100Gb of capacity and wi-fi equipment that enabled music, games, and movies to be shared around the house.

Richer media content was appearing on TVNZ’s web sites, where you could watch the night’s news and key sporting and other clips. Numerous overseas sites allowed you to preview movies and, with its Windows Media Server, Microsoft was delivering a kind of on-demand service through Xtra’s broadband Web channel where short movies, music video clips, rugby, and news footage were available for those who could afford it. There were two Windows Media Servers in the background delivering content optimised for Media Player 9 over high-speed DSL connections.

In 2004 Jay Templeton, Microsoft’s product marketing manager for its Windows Client division, had built up his own version of a Microsoft Media Centre PC in his home, using pre-release software. It sat alongside his TV with a 256Gb hard drive and allowed him to play DVDs and stored content, watch Xtra’s broadband clips and surf the Internet. His entertainment hub was a glimpse of the future, integrating with his sound system through a Bluetooth-connected wireless keyboard that gave him full control over the viewing experience. The system was ready for VoD if the service was made available. The biggest impediment was the formatting to watch local TV optimally on a CRT TV and the lack of ‘true flat rate real broadband’ to make on-line content economical.[10]

The Internet was raising expectations for on-demand access and increasing the level of frustration about our slow and data-capped broadband services. The idea of setting aside three months of Thursday nights to watch the latest series of 24, interrupted by the highest ratio of ad breaks in the world, was turning entertainment into irritainment. The video stores were fighting back, offering box sets of TV series that were only a season behind the air date and in some cases pre-empting the on-air plans of some channels. Sky TV was hedging its bets with ‘no-late fees’ DVD hire.

A pivotal convergence point with the television was the official release in October 2005 of Microsoft XP Media Centre which enabled high-powered PCs to double as entertainment servers. Media Centre presented a challenge to many devices now competing for customer attention. Through a 30-minute buffer you could rewind to the beginning of a programme while it was still recording or fast-forward through the ads. However, the electronic programming guide (EPG) wasn’t as useful as it could be, as local broadcasters denied Microsoft access to scheduling. The application would be rolled into Microsoft’s high-end Vista operating system.

Artifical ceiling

The main obstacle for competitors who were looking to use Internet access to deliver rich media services for things like Microsoft’s Media Centre was the artificial ceiling placed on broadband access speeds. Improvements in video compression would continue to make it easier to run fatter services down narrower pipes but dial-up would never cut it in this brave new world and neither would the 128–256kbit/sec entry level that had erroneously been called broadband in New Zealand’s recent past. Microsoft, the de facto standards maker, had begun to address that with its Windows Media 9 player, which was capable of delivering compressed TV at 1.5Mbit/sec, although most experts suggested a minimum access speed for acceptable Internet-based video would still be 4-5Mbit/sec.

Seeby Woodhouse, director of Orcom Internet, said all ISPs were interested in triple play but without high-speed broadband it was a long way off. Orcon would bide its time, gradually expanding its capabilities into voice services and upgrading its internal capacity to 10Gb ready for delivering QoS that would sustain video. “We’re going through an evolution. All phone companies are becoming Internet companies, all Internet companies are becoming phone companies and in a couple of years we’ll all be TV companies as well. Companies that do triple play with a single billing relationship and bundled services will have an advantage long-term. I can’t see that not happening.”

The government’s Digital Strategy aimed for 5Mbit/s to most residential homes by 2007 and 50Mbit/sec by 2010. That seemed a daunting task when ‘broadband’ penetration – 256kbit/sec or greater – was just hovering around ten percent in 2005 with data caps deterring the download of any more than a couple of TV programmes or movies each month if you were lucky.

Ian Quinn, lead systems engineer with Juniper Networks, suggested the way forward might be in incremental steps with different classes of service. Data caps would certainly stifle the development of local content unless a new model was introduced; for example subscription fees for gaming or video.

“When that happens, and access to bandwidth increases, video will come in as another service.” Juniper was already providing a way for ISPs to charge separately for content through its ERX edge routers, used by both Telecom and TelstraClear, and its intelligent SDX software layer for services deployment. Working in with billing software the ISP could easily identify traffic from a subscriber and charge differently for games, local video or streaming radio content.

If you can’t join them beat them was the philosophy of Cisco, literally on the outer as far as delivering IPTV or triple play services in New Zealand. A key player in enterprise computing, Cisco was happy to operate on the edge or last mile. It had acquired Linksys in 2003 and now had a distribution deal with Dick Smith to resell its ADSL2+ complaint broadband and wireless routers for the home market. It also acquired large Denmark-based Kiss, which made set-top boxes and DVD recorders. While removing data caps and improving last mile bandwidth might go some of the way to opening up the market to competitive services, Aaron Scott, Cisco’s senior consulting engineer, said the key impediment would be ownership of content. “Even if you have all the bandwidth in the world the majority of content here would still be licensed to Sky TV.”[11]

There was now more incentive than ever to record pre-selected TV programmes and skip the ads, a task made easier with new DVD recorders and set-top boxes. Sites around the world offered movies for download but there were still legal and logistical issues to work through before there was a local offering. Broadcasters remained defiantly loyal to their formats and over protective of their advertising clients but their traditional market, unchallenged since the 1960s, was on fast track for erosion. True convergence with broadcasters and ISPs partnering up for rich multimedia services to the home surely couldn’t be too far away?

The May 2005 ‘Public Broadcasting in the Digital Age’ report continued to echo around the industry, suggesting the only way around the ‘pervasive air of paralysis’ was government incentives and ‘the stick of regulation.’ Paul Norris and Brian Pauling of the New Zealand Broadcasting School and Christchurch Polytech Institute of Technology warned that without government leadership and public funding, free-to-air television was in trouble. With broadcasters likely to be competing directly with telecommunications companies in the newly converged space, they believed it was time to follow the United Kingdom and Australia with a regulator responsible for both.

The update to their 2001 report commissioned by New Zealand on Air said TVNZ in particular must maintain significant impact to fulfil its role as a public broadcaster. Stronger leadership was necessary for the transition to digital and to ensure programming was accessible to audiences anywhere, anytime, and anyhow, regardless of device or delivery platform. The most striking point made by the report was the failure of broadband, which it saw as the cornerstone of an effective digital communications environment. “The evidence is well documented, as is the pattern of incremental creep, that competition only occurs when the government threatens action or regulation. Competition is essential if new services are to emerge and flourish.” Norris and Pauling said the government’s ideal of establishing nationwide 50Mbit/sec broadband access by 2010 was a long way from current reality and might require further intervention.[12]

Free-to-air broadcasters had been digitising their internal systems for five years but had remained in the dark for close on a decade, battling with bureaucrats over how much spectrum they could have and how much it would cost them. While keen to make themselves available on as many outlets as possible they were aware their own delivery platforms were at risk from new technology. They were starting to look like glorified content providers for Sky or possibly even Telecom. Sky had shown only token interest in creating local shows over 15 years, preferring to operate as a digital distribution channel for other parties. As the dominant player in the digital and pay TV market it had already herded all its potential competitors under its wing.

Sky Network merged with Independent Newspapers in 2005, becoming the country’s biggest media company. It had 619,000 subscribers as at April 2005 – about 87 percent of them on digital. Its My Sky PVR was launched in December, enabling the recording of two channels at once, and through its buffering technology subscribers could pause and rewind ‘live TV.’ It stored about 60 hours of programming on a160Gb hard drive. The EPG made it simpler to determine what to watch and when. Sky commissioned five new transponders on the Optus D satellite from mid-2006, giving it room to double its offerings to around 160 channels if it wished.

The only competing offering was from TelstraClear, which had finally upgraded its cable TV system to digital status in 2005 for delivery to 40,000 customers in Wellington and Christchurch. With a cable modem and set-top box, and obligatory phone line with TelstraClear, subscribers on a high-end plan could access 10Mbit/sec broadband plus free-to-air TV channels, traditional Sky packages and 27 pay-for-view movie channels. VoD was on the way. The ability to bundle multiple services or triple play’ (data, voice, and video) was a big incentive to carriers to add value to their business model and it was happening worldwide. Telecom was looking seriously at how to play in that game as was everyone else, including the ISPs who had so far been disappointed in their attempts to add video to the mix.[13]

No spectrum shortage

The availability of spectrum for the free-to-air channels had been cause for concern for some time but the government’s own report showed there was a large amount of unused UHF spectrum. “The government has struggled to engage on the issue of spectrum and when it has engaged it has come up with conclusions that are different from the industry,” said Bruce Wallace[14], executive director of the New Zealand Television Broadcasters Council (NZTBC). ‘Proper’ digital terrestrial TV needed to offer new content and technical features.

“It is illogical and confusing if we have to buy that extra frequency. As well investing in internal equipment for broadcasting to transmitters there’s the cost of distributing analogue and digital signals concurrently with the same advertising revenue stream.” While Wallace insisted the transition was in the public interest there was little incentive for broadcasters to dig into their pockets. “We need a sophisticated digital platform. It only requires the government to allocate free spectrum, which is nothing more than has happened in other countries.”

CanWest’s director of operations, John Allen, had looked at all the options and even considered pay TV or Webcasting but remained convinced there was still a strong place for digital free-to-air broadcast television. The lack of any concession from the government on frequencies was a growing concern as the months ticked by. While interactivity may bring in additional revenue it remained a niche activity. “Extra transponder space and massive back office and transmission infrastructure are required if people are downloading different things at different times. We’re keeping it in the back of our mind.” William Earl, TVNZ’s special advisor on policy and planning, said the level of co-operation required to make digital television happen was quite unprecedented. “The sooner we hear the full story the better. A high degree of agreement on the operating platform, set-top boxes, satellite and transmission facilities is essential.”

The prospect of crisper, clearer, more colourful images, better sound, and compression that could deliver ten times as many channels over similar spectrum was an attractive proposition for the free-to-air broadcasters. Even more enticing was the fact that the old analogue networks and transmitters were nearing their use-by date – no one was making that equipment any more – and at an as-yet-unknown date the government was planning to flick the analogue off-switch. Still no one would confirm how much spectrum they would be allocated or whether they would have to pay for additional frequencies. State-owned BCL was also taking its time announcing its technology and business case.

Meanwhile there was work to do, to get widescreen infrastructure in place so the 4 x 3 aspect ratio didn’t make newsreaders and pop idols look bloated. And another challenge was the next quality leap of HDTV. Broadcasters looking to add mobile to their offerings also needed to take into account the new terrestrial DVB-H format, to transmit to mobile phones, in-car TVs and public transport. Interactivity might add value but would also require huge investment. However digital evolved it would need to be open and flexible enough to embrace changes and enhancements that hadn’t even been considered yet.

By the end of 2005 the NZTBC, comprising free-to-air players CanWest TV Works, TVNZ, Sky, Prime, and the TAB, were nearing a consensus to deliver terrestrially to most cities and towns and by satellite to outlying and difficult-to-reach areas. To avoid the need for a separate dish they’d have to acquire space on the Optus satellite used by Sky. TVNZ had been running terrestrial digital TV trials in 2005, broadcasting to 150 staff members in different parts of Auckland, using BCL’s Waiatarua site in the Waitakere Ranges. The outcome was being shared with Prime and CanWest.

The broadcasters couldn’t invest in transmission systems unless they had the spectrum and an affordable deal with BCL to deliver digital terrestrial television (DTT). BCL was no stranger to digital broadcasting, having been involved in trials for over a decade. It had undertaken a thorough analysis of the technical and deployment options in line with the DTT technical standards adopted in 2001 but wouldn’t move unless it had a business arrangement with the broadcasters. It had already invested $40 million upgrading its microwave backbone network but needed some kind of commitment before installing new digital terrestrial microwave transmission equipment across many of its 400 nationwide locations. It was still catch 22.[15]

And then there was the issue of content. If free-to-air broadcasters had to invest in new digital channels would that eat into their creative budgets? Sky TV held all the aces as the de facto digital distributor even for public television. And what about all that archived content the public tax dollar had enabled? The big hoarder of sought-after local content was government-owned TVNZ. What were its plans for digitising and delivering its decades of archived programming? And when it did deliver on its charter imperative to move to digital, would it still be free-to-air? Would it encourage a new generation of documentary and film makers to get involved? Would it work in with existing metropolitan niche TV channels or use the extra channels digital had enabled to wipe them off the planet?

Analogue off-switch

Without significant local and interactive value being added to the experience there was little incentive for New Zealanders to move up to digital unless they were in remote areas with bad reception or were blackmailed by an analogue switch-off date. In their submission to the Ministry of Culture and Heritage, The Creen Production and Development Association (SPADA) and the New Zealand Screen Council both recommended the switch be flicked in 2012. The Screen Council said New Zealand needed to keep pace with its primary markets, in particular Australia, which had an analogue switch-off scheduled for 2009, the United Kingdom, which would begin regional closure from 2008, Japan, 2009 and the United States 2009.

Regardless, consumer uptake might still fall below the necessary threshold targets. SPADA, which represents independent producers and production companies, believed the key to consumer conversion would be high-quality programming and diversity of content. This depended on the health and growth of the independent screen production sector. SPADA continued to express concern over the lack of regulation in the broadcasting environment, notably, constraints on foreign ownership of media companies and on cross-media ownership; particularly ‘in a highly competitive international market dominated by vertically-integrated multinationals.’

It said New Zealand needed to facilitate the delivery of high-quality, locally made programmes and ensure its content producers received their share of value generated by new media, rather than devaluing the worth of that new media by ghettoising the programming that goes on it. “It is only during the transition period that a distinction between delivery platforms exists. When the switch-off date arrives, New Zealanders will only be basing their choice on content,” said SPADA chief executive Penelope Borland.[16]

While the debate about digital broadcast television was nearing some conclusions, telecommunications carriers, ISPs, broadcasters, PC manufacturers, and home electronics companies were still eyeing the Internet as the dominant alternative. There was huge interest in multimedia offerings on-line, including the growth of social networking sites, and with the music download revolution now legitimised, the focus was on accessing TV programming and movies. There was also increasing pressure to go big, flat, and wide, with buyers having to ask a range of questions to ensure they were future-proofed for the next five years. Do you want LCD or Plasma? Does it have the right inputs to plug in the DVD recorder, VCR, My Sky, sound system, and PC, and more importantly, does it have high definition multimedia interface (HDMI) the new single cable approach for digital including high definition TV?[17]

Essential components in moving the digital home concept forward were new hardware and software tools to create, download, record, play, and manage digital content. These ranged from hard disk and DVD recorders and players to highly configured PCs and Macs, games consoles that doubled as content management systems and enhancements to Microsoft’s operating system, media player, Web browser,[18] and media centre software – capable of managing the entire digital home concept. Increasingly people were hooking their computer systems up to their TV and home theatre systems to record direct to hard drives, play music, store photos, and stream media throughout their home.

The leapfrog effect

Acer’s chairman J. T. Wang believed that after several false starts the digital home would take off from 2007, as new devices and software hit the market and users began to replace their home entertainment equipment with digital devices. The growth in media player products and increasing willingness of the entertainment industry to sell movies and music over the Internet was an important factor.

Intel’s government and telecommunication business development manager Sean Casey was concerned about the impact of all this fancy new technology on New Zealand’s economic development. He was part of a worldwide team lobbying governments to lift their game ‘beyond the processor’ in the global digital playing field and believed local loop unbundling was an ideal opportunity for New Zealand to catch up. It was critical to be digitally connected and broadband was essential if we were to maintain a competitive advantage. Our biggest threat he suggested was coming from emerging markets, including third world nations, which were going straight to leading-edge technology.

Rather than struggling through legacy systems they were part of ‘the leapfrog effect,’ jumping straight from ‘greenfields’ into high-end PCs and broadband. “They recognise the importance broadband delivers in educating citizens and the place technology can play in improving their economic outlook and are embracing this with open arms.” Casey said a raft of technologies were waiting in the wings, including new services such as VoD and IPTV, but this would only happen in countries where there was affordable broadband. “Soon you’ll be able to watch what you want, when you want and where you want but broadband needs to become economically viable or you prevent that becoming reality.”[19]

In February 2007 Broadcasting Minister Steve Maharey reiterated the government’s support for the free-to-air broadcasting consortium which had branded itself Freeview, while warning the country’s rite of passage into the digital age was tightly aligned with our future economic transformation.

Maharey said independent research had revealed New Zealand stood to gain an estimated $230 million if it made a full transition to digital television with analogue switch-off by 2015. If this didn’t happen, the net cost to the country could be as high as $156 million. “The transition to digital is not without challenges for public service broadcasting. Digital technology and more efficient use of spectrum open the door to an increasing number of broadcasting competitors. That proliferation of channels is already happening in the pay TV sector in New Zealand.” He said increased competition and competing consumer choices through the development of new platforms including satellite, cable, Internet protocol, and mobile telephony consumers would challenge traditional advertising revenue models and increase fragmentation of audiences.

Government support would help ensure that digital technology enhanced public service broadcasting, rather than overwhelming it. The proposed new channels would allow more local content, extra screening opportunities, and time-shifted viewing so special interest programmes could be more accessible. “They will be a testing ground for innovative content, provide space for in-depth material beyond the constraints of commercial programme lengths and greatly enhance TVNZ’s ability to meet its public broadcasting objectives as reflected in its Charter.” The new channels would get $79 million through to 2012 to help achieve content with a strong local emphasis and cultural relevance. “We expect TVNZ to reclaim its role as champion of New Zealand content and culture…and demonstrate to New Zealanders that it is delivering on ‘charter’ objectives.”[20]

Maharey said broadcasting was a powerful and pervasive medium which had a huge influence on how we perceived ourselves, our world, the information we have access to, and how we respond to important issues:

Channelling chaos

Broadcasters were looking sideways at telecommunications carriers, and carriers and ISPs were looking at every option to add value to their platforms. Global trends clearly indicated TV and video were the next wave. Sky TV and Vodafone had launched their mobile platform at the end of January, with eight channels including cartoons, news, sport, and MTV reality shows delivered to Vodafone’s 3G mobile customers. In February they announced more than 10,000 New Zealanders a day were logging on to their mobiles to watch up to 20,000 video streams. Sky TV saw the partnership as another way to offer content to customers anytime, anywhere, to watch what they want, when they want, said Sky TV CEO John Fellet. Customers could watch all eight channels for $2.50 a week.[21]

Then in September Vodafone added an adult TV channel and about to offer its mobile customers access to YouTube videos. A new music channel and full-length movies were also planned. Customers would pay 50 cents to view the X-rated channel, with Vodafone claiming it would donate the income, less costs, to charity. Meanwhile state-owned Kordia (formerly BCL) was trialling a digital broadcasting technology called DVB-H which would enable mobile phones to act as fully functioning mini-TV sets to pick up free-to-air TV channels. For Auckland coverage it was thought it might cost as little as $10 million to add DVB-H capability to Kordia’s digital terrestrial television network, and it was looking for the right business case to go ahead.[22]

In March TVNZ launched its Web-based TVNZ Ondemand service, a mix of free streamed clips and paid-for downloadable shows users could purchase using PlayPoints – the equivalent of $2 for a 22-minute programme – as currency. The site launched with 300 videos from 100 shows including news and current affairs. Its offerings included classic coverage from the Wahine disaster and the first 1966 All Blacks-British Isles test in Dunedin. This was part of TVNZ’s new five-year strategic plan to be on ‘every screen’ and its popularity was expected to grow as broadband penetration became mainstream. A minimum broadband speed of 500–600kbit/sec was required for a good user experience with a speed of 5–7Mbit/sec considered ideal.[23] TV3 had launched a service earlier in the year but it was mainly focused on downloading newsclips. TVNZ said it hoped to make $40 million a year from downloads by 2010.

Although flat-screen TVs had been a huge selling consumer item for several years and made up around 95 percent of all new sales, the fact was a high percentage of New Zealanders were still happy with their old, square, 4:3 ratio CRT sets. The freebie channels available on Sky for a couple of years had begun converting their technology over to the new aspect ratio. On old sets the outer edges were being trimmed out or black bars top and bottom left a narrow image in the centre. Some programming filled the screen, but increasingly new episodes of The Simpsons and other modern programming shrunk back to leave black borders. Many of the old-school TV viewers were not happy.

TV3’s largely unannounced switch to 16:9 ratio widescreen broadcasting in April was the first warning that things were changing. TVNZ followed suit in September, and within a decade widescreen would be mainstream. “The problem when you migrate to widescreen is that you haven’t instantly got all of your programme material in widescreen format so you have to convert it,” said Doug Stevens, TVNZ’s resources manager, who was overseeing the conversion. “We’ve got this transition period of at least a year, depending on how many thousands of hours of content we’ve got in 4:3.”[24] Square set viewers should have been alerted to the problem, if that’s what it was, much earlier as the majority of DVDs were released in, or had been converted to, widescreen format. To fill the screen required using the zoom button, something not available on the TV set.

What was described as ‘the most significant event in New Zealand broadcasting since the launch of colour television in 1974’ hit the airwaves when Freeview went live on Wednesday 2 May 2007. Backed by a consortium of TVNZ, CanWest MediaWorks, Maori Television, and Radio New Zealand, it claimed its role was “to promote access to the very best in high resolution, digital quality television and radio services with no monthly fees and no contracts.”

Which box does what?

Consumers needed to invest anywhere between $160 to $650 depending on whether they purchased an official Freeview set-top box or needed to have a satellite dish installed.

The Freeview consortium approved only two set-top box makers, Zinwell and Hills Signalmaster, which sold through home electronics chains for around $300, which was $100 more than originally indicated. The boxes would deliver digital TV and radio reception, an EPG, favourite channel settings, an output for audio streams delivered in Dolby Digital surround sound and widescreen support. Boxes incorporating hard disk-based digital recorders were on the way. Those with an unused Sky TV satellite dish could simply plug their Freeview digital set-top box into the existing connection to get the satellite feed, as Freeview was delivered from the same Optus D1 satellite used by Sky.

Meanwhile parallel importers or local creators of set-top boxes were hawking their Freeview-compatible boxes. One company had taken delivery of 4000 boxes from China for as little as $160. A more advanced version with a 160Gb hard drive sold for $595. Peter Escher, managing director of Satlink, went head to head with Freeview offering viewers a set-top box and new module for their satellite dish at $180, so they could pick up the Freeview channels and more than 20 foreign language and religious channels broadcast unencrypted over the Pacific. “Freeview has slightly lost the plot as it has got nothing going on air like the BBC, just local content. The response from a lot of folk is disinterest, as they can already watch TV One, Two, Three and C4,” said Escher. Computer enthusiasts were also busy building their own digital TV-capable media centres, using PC and satellite tuner cards. While they couldn’t pick up the official Freeview programming guide, the electronic TV listings were available unofficially for download on the Internet.[25]

NZ On Air’s Local Content Report showed the highest ever levels of New Zealand content on television in 2006, with 10,255 hours of local content on free-to-air television – nearly double that of 1999. There were just 2111 hours of local content on TV when official reporting began in 1988. According to Steve Maharey:

A government scoping paper released in June, ahead of a review of broadcasting regulations, suggested digital television was leading to convergence of broadcasting, telecommunications, and the Internet and new forms of ‘market concentration.’

It was possible Sky TV might be forced to carry the new channels and let customers download Internet TV programmes to its set-top boxes on terms and conditions set by regulators. The Culture and Heritage Ministry’s director of digital broadcasting strategy, Jo Tindall, would not rule out forcing Sky to open up its pay TV network to programme-makers on set terms, noting that local cable companies in the United States faced similar ‘must carry’ obligations, although there might be areas in which industry self-regulation would be the most appropriate avenue.

Tindall said digital TV had “changed the nature of competition” with devices such as electronic programme guides giving broadcasters a new means to control how programming was positioned. She said the government’s goals in relation to digital TV related to national identity or cultural identity, economic transformation, the government’s ownership interests, and the fundamental principles of public broadcasting. “An issue around cultural identity is obviously predominant when you are looking at a policy response like NZ On Air, or funding for TVNZ’s digital services. But an objective around economic transformation may be more dominant when you are looking at issues of infrastructure.”

Freeview voluntarily embraced the ‘must carry’ approach, issuing a code of practice within weeks of its launch giving any TV company or content provider an opportunity to use its free-to-air network on common terms for a $25,000 set-up fee. The ministry planned to publish a discussion paper on digital regulation and Steve Maharey would make recommendations to Cabinet based on that.[26]

TVNZ continued to ramp up its ‘every window’ strategy, announcing in June that it had entered a partnership with Google to bring TVNZ content to YouTube, where it now had its own TVNZ channel, offering short videos including interview segments and edited highlights from its archives right through to current programming. Viewers could comment on clips, rate them, recommend them to friends, and add them as favourites. The deal, allegedly the first of its kind in Australasia, followed a similar arrangement YouTube had with the BBC.[27]

Then the clamour started. First National Party Broadcasting spokesman Jonathan Coleman had a dig at the government’s plans to review the charter, which was up for evaluation anyway. He described the feel-good nature of the charter as a diversion from discussing the real financial problems of TVNZ. He said there was nothing against which to measure the Charter’s objectives, and redrafting it was unlikely to make any difference to what the public saw on their television screens.

The next day Coleman slammed the low level of content being offered on Freeview, wanting to know how many converts there were two months down the track. He wondered whether New Zealanders were getting value for the investment in public digital TV:

Meanwhile Freeview began gradually adding new members to its stable. State-owned Kordia agreed to subsidise moving community TV station Triangle Television to digital. The Auckland-based company broadcasts a mix of news, entertainment, ethnic, and other community-based programming 24 hours a day and invites viewers to make their own programmes. It had come to an arrangement for nationwide broadcast on the Freeview satellite platform. Founder and chief executive Jim Blackman had previously criticised the government for choosing not to contribute to the costs involved in moving community TV stations to digital, saying these were daunting. Kordia’s decision to offer cheap access to Freeview was seen as one way of using the public purse to help meet costs.[28]

Recycling content

In early August Freeview announced its numbers. Sales figures showed more than 21,000 set-top boxes had been purchased in the three months since launch, making the total number of households with free-to-air digital satellite reception close to 41,000. Freeview general manger Steve Browning said the target was 40,000 households, or 100,000 viewers within a year. Since its launch Freeview had announced the addition of TVNZ Sport Extra, TVNZ 6, and a satellite exclusive version of Triangle Television. Everything was on track to reach the target of 12–15 services by the end of 2008.[29]

The first of the new state-owned ‘advertising-free’ channels, TV6 would feature “between 5-75 percent local content” targeting preschoolers, families, and adult viewers. The programming schedule, however, suggested rather than fresh new content, a high percentage would be reruns, for example, children’s puppet show Fraggle Rock and old favourite It’s In The Bag. TVNZ Kidzone for pre-schoolers promised 15 percent of content would be newly commissioned. The family viewing segment undertook 27 percent new local content and adult programming would offer 22 percent new material. In March 2008 TVNZ 7, the second new state channel, would launch, featuring news and current affairs shows.

Unitec School of Communication senior lecturer Peter Thompson said repeating local shows wasn’t necessarily a bad thing. “Some of the repeats aren’t just there because they don’t have anything better to put on … Some of it is going to be there in order to make sure you get the maximum reach across the audience … If it was the same thing over and over again, I’m sure anybody would say ‘wait a minute, this isn’t really 75 percent local content, it’s not new local content.’” He wondered whether the content would be sufficient to attract the audience necessary to propel New Zealand towards analogue switch-off.[30]

In August TelstraClear was completing a $1.3m transmission upgrade on its network, allowing it to expand its channel capacity and optimise picture quality. By November its 70,000 plus InHome TV customers in Wellington, Christchurch, and on the Kapiti Coast where the company had its origins as Kiwi Cable, would have 15 new channels. It would also add additional pay-per-view channels.[31] That would take the number of channels including the free-to-air offerings and those taken directly from Sky TV to more than 90.

The guano started to hit the fan in September with Sky and the free-to-air broadcasters posturing over the way forward, and consumers concerned about how many set-top boxes they might need to get access to all the digital TV offerings. Would viewers be locked in by the next generation box they selected? TVNZ chief executive Rick Ellis announced he had no plans to make TV6 and TV7 available to Sky TV subscribers after its content contract expired in 2011. Sky TV chief executive John Fellet responded in kind, saying he doubted whether his free-to-air channel, Prime, would be available on Freeview’s digital terrestrial platform in 2008. However he suggested getting access to TVNZ’s new channels shouldn’t be a technical problem as more than half of Freeview subscribers were already using non-approved set-top boxes, and he didn’t think there would be any legal impediment to viewers tuning them in to the MySky mix.

Rick Friesen, chief operating officer of TV3 and C4 owner MediaWorks, said Freeview needed to compete against Sky as the pay-TV company was “a threat to the mass-market audiences that make free-to-air TV possible . . .” Paul Norris, head of Christchurch Polytechnic’s broadcasting school, warned TVNZ’s stance in denying Sky access to its new channels could be a ‘public relations disaster,’ given that taxpayers had contributed a share of the $79 million allocated to fund the new channels. The government he said should want the channels to reach ‘as wide an audience as possible.’[32]

After the free ride

Norris[33] said New Zealand had been very slow in embracing digital television and the digital television framework. We hadn’t necessarily done anything wrong; it was more about the size of the country and its inability to make major investments to broaden our options. In fact coming in late might have its advantages as any bugs should have been ironed out. “We’re not rushing into anything.

We’ve had the launch of Freeview by satellite and in 2008 we’ll have Freeview by terrestrial and there will be two new channels, which all sounds faintly ludicrous, when you think about who’s going to be viewing them and how quickly they might gain an audience. The Freeview take-up is going to be a very slow, long ritual.”

The big question, said Norris, was what happens after the six-year government funding runs out for the new state channels. “How will TVNZ fund those non-commercial channels? Will they suddenly become commercial channels? Will TVNZ add more channels in the meantime?” The debate continued as to whether there was sufficient incentive for viewers to switch to Freeview unless they were in a remote location with bad reception. Even then the equivalent cost of a satellite dish and set-top box would most likely cover a couple of year’s subscription on Sky, which offered more content. There were also some obvious consumer cautions. Both Sky TV and Freeview expected to begin selling next generation set-top boxes that could connect to the Internet as well as receive programmes broadcast by satellite and terrestrial transmitters in 2008. The new Mpeg 4 hard disk-based boxes could cost $300–$500 per unit.

If you had just paid $200–$300 for an existing FreeView box you weren’t going to be too happy about that, particularly when you could only flick between existing free-to-air channels and two new high-definition channels, with a high percentage of repurposed content.

Sky was spending $50 million transferring its archives and studio systems from magnetic tape to computer disk in preparation for its next step service. Among the benefits of Internet-connected set-top boxes, said Sky TV chief executive John Fellet, was that subscribers would be able to view any episode of Friends when they wanted and besides, TV channels that streamed content at scheduled times might become redundant over time. Sky would begin supplying a ‘second-generation’ HDTV-based My Sky box with a 320Gb hard disk drive and Internet capability by late 2008.[34]

The new HD boxes, being developed in conjunction with subscription television provider Foxtel in Australia and made by UK-based Pace, would have an Ethernet port for Internet access. In November Sky had more than 700,000 subscribers, of which 26,000 subscribed to MySky and there were nine different versions of boxes in use.[35]

Then there was the issue of digital rights management (DRM) required before any major content provider would allow retransmission of their material in high-definition format. While existing content was already out of the bag and unlikely to be controlled in the near future, downloads from the TVNZ’s Ondemand web site already had an internal trigger that rendered clips unplayable after seven days. Freeview’s HDTV service from 2008 would only allow programmes to be recorded on designated devices and that content was likely to have a finite life. TVNZ chief Rick Ellis said it was fair to limit the life of a recorded television item, even substantially locally generated TVNZ news programmes, many of which had clips inserted from sources such as the BBC, which had its own terms of distribution.[36]

IPTV on pause

Paul Norris, a respected media commentator, said the paper he co-authored with Brian Pauling on the future of digital television in 2001, with a revision in 2005, had the broad picture fairly right in isolating the key contenders and aspects of development. This was confirmed at the National Association of Broadcasters convention in the Las Vegas in April 2007, where IPTV and delivery to mobile devices were seen as the two key drivers.

He thought it was a good move that Broadcasting Minister Steve Maharey and ICT Minister David Cunliffe were talking about ways to bring their portfolios closer. “It’s inevitable and just another aspect of convergence. Broadcasting, if you think about it as the conveying of signals of information or entertainment from the content provided to a viewer or listener, should now embrace telecommunications. The transmission system will be as much a part of telecommunications as it would be of traditional broadcasting via microwave links or satellite; and as soon as we start talking about IPTV it’s obviously the field of the telcos.”

In June 2007, Ernie Newman, CEO of TUANZ said:

[missing text]

Norris wasn’t surprised Telecom had pulled back from delivering IPTV until 2009. “IPTV really depends on having a good broadband network across most of the country; at least 2-4Mbit/sec. We’re nowhere near that; most of us on broadband are still struggling with 200-300kbit/sec.” IPTV also depended on having access to good content. “Telecom’s not going to make content, so it will need to partner with people who’ve got content. There’s no evidence of them actually having done any deals which would lead to IPTV tomorrow, or even next year to be honest.”

He said IPTV was unlikely to be a killer application that knocked television of its perch or brought in the end of broadcasting. For a start most New Zealand households wouldn’t be connected to fibre in the foreseeable future. “Some of us have a vision for the future that is very digital, very connected and very much video but this doesn’t happen overnight. We already heard the quote ‘television is dead’ in the mid-1990s and a similar quotes from MIT, giving evidence to a US select committee saying ‘forget TV and TV sets, in three years there won’t be any.’ So the evangelists and enthusiasts are always well ahead of the game.”

Rather than everything morphing onto a single set in the lounge Norris believed the future would be on many screens. “In the long run there will be a series of screens in the house and they will all be fed by computer-like devices which will be able to store things digitally and present you with electronic programme guides so it won’t really matter whether you are viewing content over a large flat plasma set that could double as a computer screen.” However viewers would demand quality content. “That’s where IPTV and many of the download systems fail because they haven’t always had access to good content which typically still remains with the broadcasters who are ideally the content specialists.

They need to get that content out to prospective viewers on every platform possible. That’s why you’re finding more material delivered by the television schedule also on web sites and downloadable to iPods and mobile phones.”

However, asking what the consumer wants is not that easy, said Norris. “There are no simple answers; we’re not really one society. There’s no single set of wants that you can prescribe to everybody. The younger generation in their approach to the media are behaving very differently to people have in the past. The habits of my children who are teenagers, or in their early 20s, and the students here at the broadcasting school, are very different. They’re all into their social networking sites like MySpace and Bebo and FaceBook. They’re using media in a different way but that doesn’t mean they don’t want to sit back and watch a good TV programme from time to time.”

Major broadcasters were escalating their plans to make TV content available for download or streaming over the Internet or on cellphones and mobile devices as the ‘third screen.’ What was unclear was the business model, the role of advertising, and whether securing payment for on-line rights would be by subscription or advertising attached to free content. “There are a lot of issues to be worked through and it would take a long time before we are truly a digital, or digitally connected nation.” So ideally television and the Internet – how will that work? “Well they have to be accessible, ideally from one device. And that’s where the hybrid box comes in which can receive say digital TV and access the Web. That would be a big step forward,” said Norris.

While Telecom backed off from its plans for IPTV, that didn’t mean no one else was preparing to step up. Video remained the third and most attractive portion of the triple play equation for the traditional carriers and ISPs that were growing up to be full service providers. James Watts of Palmerston North–based open fibre provider Inspired Networks was eager for true, unconstrained access to Telecom’s network but continued extending his own network. He’d been in Canada in 2006 evaluating a full HDTV platform which could be delivered within an IPTV framework. CallPlus had its sights set on IPTV as a third content component of its wireless-DSL hybrid strategy alongside voice and data.

From early in 2006 Orcon had been making serious investment in the kind of backroom advances that would enable it to manage and bill for IPTV. It had a $30 million five-year plan with Siemens and Juniper and even talked of delivering 50 channels of TV over fast DSL. From June 2007 Orcon certainly had the perfect partner to expand those grand convergence plans when it was acquired by broadcast distribution and infrastructure owner Kordia. Anything was possible and behind the scenes all players, at varying stages of readiness, were watching the starting line nervously as the full details of naked DSL were ironed out to free up competitive, full-speed Internet access on Telecom’s network.

Content is still king

Philip King, Telecom’s general manager of video services, believed the extra 18 months of grace before an IPTV launch would give the carrier a chance to streamline its roll-out of light-speed fibre cable closer to the curb with shorter copper loops enabling DSL2+ to perform optimally. “You need guaranteed traffic classes for video and voice and a minimum of 5Mbit/sec to the home to deliver pay TV, or normal TV over IP, plus high speed Internet and a voice over IP connection. You don’t want pixelating if someone else in the household jumps onto the Internet at the same time.”

There were many non-trivial things to work through in terms of investment in IPTV software and the IT capabilities. The helpdesk, for example, needed to have control and monitoring systems that identified whether the customer problem was with the TV picture, the set-top box, the home wiring, the home gateway, the video pump, or encoding of the video at the head end.

In Telecom’s consumer division, King’s team was shaping up the proposed IPTV offering with a focus on the customer experience. Anyone else planning to use the Telecom network for IPTV would need to go through a similar planning process within their own organisation and have to strike a deal with Telecom Wholesale for delivery when that wholesale product was made available. Telecom’s Flatbush trials were largely based around technology and were highly experimental, having little bearing on the ultimate Telecom IPTV roll-out. In 2006 a further internal trial of IPTV was conducted with Sky and Telecom staff. This time it was more about the user experience, looking at how future service deployment might be driven using a range of video-on-demand and interactive applications.

So what can we expect come 2009 when Telecom finally lets IPTV out of the can? “IPTV is TV quality content, delivered over the carrier’s IPNetwork to your TV in a very managed way. This is a TV experience not an Internet experience,” said King. While he doesn’t like the term ‘walled garden’ that is in effect what is being proposed: a closed system, although that doesn’t necessarily exclude using your keyboard to navigate outside of that to surf the Internet. “People will get to the Internet another way; that’s not what people will subscribe for. IPTV’s a lean-back, be entertained experience with an on-demand environment, providing you with the content you want, when you want to watch it. Initially it would augment free-to-air or pay TV offerings which would get bundled with it. Over time the world is moving increasingly towards an on-demand lifestyle for content.”

As well as having a set-top box where you could save content or programmes from live channels using an EPG, you could have a catalogue of 2000 movies available on-demand, very much like the service on international flights. In fact King believes the airline analogy is a good one. “In the old days with broadcast TV, it was like having the one screen at the front of each cabin of the plane and they showed you one movie. Then they moved to systems where you had about eight channels on two hour rotates. Now you have a truly on-demand systems where you can pause, fast forward or rewind from a wide range of content.”

Telecom could leverage its existing retransmission arrangement with Sky for the new IPTV offering and also work with the free-to-air players. But where will that big database of hundreds of movies on-demand come from? “All the studios are happy to talk to us and are interested in exploring those possibilities. That’s a big change over the last ten years. We first started looking at pay TV with First Media in the 1990s when it was hard to get Hollywood’s attention,” said King. “These days, they’re watching TV platforms develop over the world and are increasingly interested in working with telcos. Content is in many ways easier to get but no less expensive; that remains a barrier to entry for anyone getting into this.”

Telecom doesn’t see itself as a content originator; it’s just another conduit taking other people’s content and using it in different formats. One of the services consumers have expressed interest in is catch-up TV, where previously screened top-rated shows are available on-demand for the next seven days. A range of different tariffs would be necessary. “You might give catch-up TV free because you want to build an audience for a show or you might bookend it with advertising to sponsor it.”

There might be scope for successful Web-based providers like TradeMe to create a TV show, or YouTube might be able to make the transition, but somethings are better suited to the Internet. “The TV remains the TV and the top shows still rate. What’s really interesting to me is that the output of the studios is not growing. There are still 20 blockbusters released every month and the key studios in the US only release so many top-rating shows, sitcoms, and drams each season and the volume is not increasing significantly.”

The number of content of channels has proliferated greatly in the United Kingdom from ten years ago when there were 90, to 500–600 now. However the number of channels people watch hasn’t grown that much. On average people only watch about 7 channels. “What you have is a fragmentation occurring at an alarming rate with more niche channels and content developing but the high-rating TV series remain more important if you want to reach that mass market. And there’s a hell of a lot of recycled content, which increases as each year goes by.”

So why is Telecom getting into IPTV? “To help us complete the triple play offering to customers; voice, broadband, and video which is now the most powerful new service we’ll deliver in an IP world. While customers are interested in bundles this whole notion of on-demand TV is what is turning them on.” Telecom’s core partners for IPTV are Alcatel and Microsoft although other platforms are being investigated. “There’s been a lot of consolidation. Nokia and Siemens have come together, Ericsson bought Tandberg, Cisco bought FibreTech Atlanta and they’re developing their own IPTV platform. BT and Simco have also launched IPTV services.” Telecom is still looking at set-top boxes, which would need to comply with the studios’ requirements and their digital rights management so it won’t have a slot for a recordable DVD and even content on the hard disk would be watermarked.

While Telecom was holding back until 2009, Ian Taylor, of Taylormade Media and Animation Research, had already jumped the gun on IPTV, broadcasting from Valencia while covering the 2007 America’s Cup races. He found telecomms partners to help cover the Monsoon Cup, a prestigious yacht race held in Malaysia, and covered the 2007 Wanaka aerobatics show. At the Out of the Box – New Broadcasting Futures conference in August, Taylor showed high-resolution TV from Spanish-Australian joint venture dargo.tv. Dargo’s web site claimed full-screen HDTV was possibly over a 1.2Mbit/sec link, with the help of client software on the user’s machine. Representatives of the Gibson Group also described how they created children’s programme The Simon Eliot Show from Eliot’s bedroom, featuring live television feeds from camera-equipped PCs supplied to four quiz contestants. Their faces show on cartoon television sets parked on Simon’s furniture; the show was broadcast using a dedicated network, provided by Kordia.[37]

Web spreads to tv

While the statement ‘the TV is for TV’ used to hold some weight, the PC, laptop, and cellphone soon became second and third screens, and now some Web applications were refocusing on a bigger screen experience. Certainly the lines were blurring. New web sites including Veoh, Joost, and Babelgum were improving video quality, attracting professionally produced content, and transmitting via peer-to-peer technology with advertising included. A number of web sites were working hard to make watching video on-line more like watching television, including software that enlarged the image proportionally to fill the computer or TV screen.

Though YouTube, which attracted home-made entertainment as its staple, had the option of a full-screen mode, video was typically watched in a smaller screen that could be embedded in other sites. “The experience of on-line video is still very poor. Companies like Veoh and Joost are trying to create a more TV-like experience for viewers,” said Veoh founder Dmitry Shapiro. Babelgum’s slogan was: “TV experience, Internet substance.” Veoh touted: “VeohTV makes watching Internet as simple as watching television.” Joost simply stated: “The new way of watching TV.”

Babelgum planned to embed its platform in set-top boxes by the end of 2008, making its content viewable on traditional TV sets. Apple offered such a box for video purchased on iTunes, and more video companies were expected to follow suit. YouTube, owned by Google, was reportedly considering a TV channel using videos from its web site.

Joost, owned by Janus Friis and Niklas Zennstrom, founders of the Internet telephone company Skype and the music-sharing service Kazaa, had created enough buzz to attract a million beta users by late 2007. “The early stages of video content on the Internet was a lot of user-generated stuff, stuff like my grandmother and her cat … What we’re trying to do is evolve that experience into something that the viewer doesn’t view just out of interest, but actually builds an affinity with that particular programming content,” said Joost CEO Mike Volpi. Joost had inked deals with Viacom, CBS, CNN, the NHL, Sony, and others.

James McQuivey, Forrester Research TV and media technology analyst, believed people would grow more accustomed to ‘long-form’ material as it became easier to download. “If there’s anything that Joost does, it moves the ball forward … It tells people that the TV and the PC are not two separate worlds. But as long as we’re still mimicking the TV on the PC, we’re failing to appreciate the value of combining those two worlds.” He said YouTube shouldn’t be worried because its interactivity had ‘created a social kind of viewing.’[38]

Senior technical specialist and NZNOG member Dean Pemberton was interested to see how the roll-out of broadband helped or hindered video-on-demand or rich media applications. “It’s common in some parts of the US where they’re closer to the media servers and not paying anything for the bandwidth to get video-on-demand. However you can’t download any more than one and a half movies a month on any sort of plan in New Zealand without blowing your cap. Downloading the equivalent of a DVD at 7-9Gb would be more than most people’s data caps, without even considering high-definition content at around 20Gb. There certainly needs to be a major change in the billing model or the content delivery model,” said Pemberton.

If the content was delivered locally it could be cheaper. “We need to look overseas, see what people are doing and add a little Kiwi ingenuity. That’s what TradeMe did. We didn’t wait for eBay to start up an eBay.co.nz and we got MySky rather than TiVo. I think we will start to see rich media moving around the place but it’ll be done by New Zealand companies because we’re too small for overseas companies to be interested. It’s all about getting eyeballs close to the content. The problem at the moment is the content isn’t close, so we’re having this debate about peering. If every ISP was two hops away from some server that delivered video-on-demand they wouldn’t need to bother about peering across exchanges.”

Pemberton was keen to see what various ISPs did once true unbundling wass unleashed. “A lot of them have been complaining that lack of access to the local loop is the only thing stopping them from moving ahead. It will be interesting now this is happening whether they put their money where their mouth is. Will they start deploying their own networks and where will they do it? They’ll most likely go for the main centres and I don’t imagine Napier or Twizel will get a whole lot of choices in terms of DSL2+ provision any time soon.”

There’s no doubt we were seeing the end of the passive one way take-it-or-leave-it broadcast era. New players were contending for all three screens and while the traditional broadcasters might have an edge on content provision, like Web providers they had to keep it sticky or eyeball attention would wander. State broadcaster TVNZ was already feeling the pinch, posting a $4.5 million loss for 2007 for the first time in its history and warning it would not be returning to the profit levels of the past anytime soon. The broadcaster would not be paying a dividend and continued its incredible shrinking exercise, creating 125 redundancies in the year to June, restructuring costs of $11 million. Advertising was softening and viewer numbers had dropped drastically.[39]

Without greater choice and ultimately an on-demand option where viewers took greater control of their own programming experience, advertiser and viewer loyalty was at risk. The new model was to take the bundle of services that gave you best bang for your telecommunications buck with TV and video services as the ultimate added value; or mix-and-match viewing from all sources using a combination of hard disk–based recorder and management software supplied by broadcasters, independent software developers, or computer companies. The Web opened our eyes; why would you shape your life around the TV set when the potential was now there to shape the viewing experience around your schedule?

It was inevitable the amount of content being created, downloaded, or recorded for later viewing on home entertainment centres would grow exponentially, requiring careful management to free up space. Even terabyte archival storage capacity, previously seen only in large businesses, was finding its way into media-savvy homes. By 2010, once true last mile broadband access was available to competing parties, the digital home would become a real-time node on the high-speed global network, delivering voice, video-on-demand, streaming audio and video, lightning-speed Internet, and a wide range of on-line services for viewing on any number of screens at our leisure.

Sidebars

Footnotes

[1] Investigate magazine, June 2006

[2] Ovum based on Ofcom 2007 communication report, 24 August 2007

[3] Article by Keith Newman in NZ Herald, 27 January 1998

[4] Keith Newman, ‘Broadcasters call for digital TV free up,’ NZ Herald, 30 July 1998

[5] Keith Newman interview with Nick Wood, 1999

[6] Ihug press release: Internet Now Available on TV,’ 20 November 2000

[7] Keith Newman, ‘Unbundling essential,’ Telecommunications Review, June 2004

[8] Keith Newman, ‘Broadband charging stifles rich content delivery,’ Telecommunications Review, April 2004

[9] Keith Newman, ‘Video over IP looks for a network,’ Telecommunications Review, April 2004

[10] Keith Newman, ‘Broadband charging stifles rich content delivery’

[11] Keith Newman, ‘Video over IP looks for a network,’ Telecommunications Review, April 2004

[12] Keith Newman, ‘Broadband charging stifles rich content delivery’

[13] ‘IP on TV brings channel challenge,’ e.nz (professional engineers) magazine, November 2005

[14] Bruce Wallace, executive director of the NZ Broadcasters’ Council, died in July 2007, a few days after his 60th birthday. He was a leader in the golden years of TV current affairs, a published author and advocate for getting a fair deal for the free-to-air channels to transition into the digital realm for many years

[15] Keith Newman, ‘Video over IP looks for a network’

[16] SPADA’s Response to Ministry of Culture and Heritage (MCH) Discussion Paper: Analogue Switch-Off (ASO): Issues for Consideration, 21 January 2007

[17] Keith Newman, ‘Flat screen TVs take over,’ Home Technology, November 2006

[18] Microsoft is believed to have 82 percent of the world browser market. The balance is largely made up of Mozilla’s Firefox which has also had a major makeover (2006)

[19] Keith Newman, ‘Cure for communications constipation,’ Investigate magazine, July 2006

[20] Broadcasting Minister Steve Maharey’s speech notes for the MediaNZ Conference, Victoria University, 12 February 2007

[21] Paul Clearwater, ‘Over 10,000 customers logging on to SKY Mobile TV,’ The Line, 23 February 2007

[22] Tom Pullar-Strecker, ‘Adult TV channel on phones,’ Dominion Post, 1 September 2007

[23] Ken Lewis, ‘TVNZ quietly launches Web-based television offering,’ The Line, 21 March 2007

[24] Steve Deane, ‘‘‘Future TV’ “angers viewers”,” NZ Herald, 28 April 2007

[25] Peter Griffin, ‘Set-top box firms launch price war for Freeview dollar,’ NZ Herald, 28 April 2007

[26] Tom Pullar-Strecker, ‘‘Must carry’ rules may be imposed on Sky TV,’ Dominion Post, 4 June 2007

[27] TVNZ press release: ‘TVNZ opens YouTube channel,’ 25 June 2007

[28] Tom Pullar-Strecker, ‘Kordia helps Triangle TV get on to Freeview,’ Dominion Post, 23 July 2007

[29] ‘Freeview announces numbers,’ TVNZ, 13 August 2007. Freeview announced it had hit 100,000 customers 0n 16 April 2008

[30] Maggie McNaughton, ‘Reruns star in TVNZ’s digital diet,’ NZ Herald, 17 July 2007

[31] Telstra Saturn, press release, ‘InHome TV to get 15 new channels,’ 23 August 2007

[32] Tom Pullar-Strecker, ‘Broadcasters cast doubt on channel sharing,’ Dominion Post, 3 September 2007

[33] Paul Norris joined the NZBS as Head of School in September 1996, after working for many years as a television journalist and executive. He worked for BBC News and Current Affairs in London as a reporter, producer, and programme editor before returning to New Zealand in 1987 to join TVNZ as the company prepared for deregulation and competition. He was director of news and current affairs from 1987 to 1994, and then as group director until 1996.

[34] Tom Pullar-Strecker, ‘Telecom places TV revolution on pause,’ Dominion Post, 16 July 2007

[35] Ulrika Hedquist, ‘SkyTV upgrades to high definition,’ Computerworld, 6 November 2007

[36] Stephen Bell, ‘High definition or long life – your digital TV choice,’ Computerworld, 6 September 2007

[37] Stephen Bell ‘Telecom promises IPTV in 2009, but rivals say they can deliver it now,’ Computerworld, 11 September 2007

[38] Jake Coyle, ‘Turn On the New Tube,’ Tech News World, 2 September 2007

[39] Michael Field, ‘Fewer viewers blamed for TVNZ loss,’ Dominion Post, 11 September 2007