House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Fourth Report

The TV set, the PC and home technology

40. The proposition that the Internet and the opportunities it brings will rapidly transform the market in the home for broadcasting was questioned by some witnesses. For example, Mr David Elstein said:

"I am not convinced that people will merge their Internet behaviour or their interactive behaviour with their viewing-for-leisure behaviour ... You sit much closer to the screen for interactivity on the whole and it is much more a one-to-one relationship than a family activity and still there is quite a lot of viewing in groups or in families."

He did not expect the Internet to represent "a quantum leap" or to have a qualitative impact over a ten year period.[97] The ITC also expressed scepticism about the speed with which the functional differences between the television and the personal computer would grow less distinct.[98]

41. BDB told us that the first set-top box which it would be subsidising and marketing for digital terrestrial television would offer only limited interactivity. It was exploring the possibility of incorporating Internet access in a more advanced set-top box which might be made available during 1999.[99] BSkyB laid emphasis on the immediate difficulties of developing a set-top box which could provide access to the Internet. The box would not initially possess the memory to provide Internet access comparable to that of a PC. It was more attractive to repackage Internet information, to provide a "walled garden" Internet.[100] Mr David Chance of BSkyB thought that, "over time, Internet-based solutions are going to be probably the most likely way forward, in terms of the interactive approach"; Internet capacity could be down-loaded via satellite subsequent to launch; he believed that "we will have in the satellite domain a fully integrated box earlier than the cable companies".[101] Cable & Wireless Communications was of the view that "Internet-based interactive services, Web access and e-mail will be significant drivers of take-up of digital television". The software for their set-top box at launch later this year would be Internet-based, providing the company with "the capacity to integrate Internet and television, develop interactive TV applications, and control our own network and customer-branding".[102]

42. The set-top box is the first step along a path which, according to some, would lead to a convergence in the capacity of the TV and the PC. Such a convergence is unlikely to lead to the development of one device to be used universally for one purpose as the television receiver is now. A set-top box could be viewed as a low cost PC.[103] Mr Mathew Horsman believed that the set-top box would be superseded by "an integrated something".[104] According to Hughes Olivetti Telecom, the distinction between the PC and the TV would become one of utilisation rather than of technology. This would be an outcome with no particular winner or loser, "although device manufacturers may have different views".[105]

43. To judge from the evidence we received and what we learnt during our visit to the USA, the balance between the contributions of television manufacturers and computer companies could greatly influence whether, when and in what form "an integrated something" arrives. The British Radio and Electronic Equipment Manufacturers' Association (BREMA) placed emphasis on the design and manufacture of integrated digital terrestrial television receivers as the successor product to the conventional TV set and the most suitable equipment "to ensure an orderly, reasonable but not over-extended transition from analogue to digital technology". These would be launched soon "at the top end of the market". BREMA considered that computing and television-viewing would remain distinct and that the market for a combined TV/PC had been overestimated. However, a multi-media television including Internet capacity would be available well within five years.[106] BSkyB drew attention to differences between the traditions of computer and television equipment. Computing progressed through rapid improvements in software, which in turn necessitated not infrequent purchases of new hardware. Consumers expected their television sets to last rather longer than their computers. Consumers did not expect their television to "crash".[107]

44. Yet the converging of TV and computers is beginning to happen already. Many of those we met during our visit to the USA were much more forward-looking than the representatives of the manufacturers who gave evidence to us about the timetable for the arrival on the mass market of an integrated PC/TV. They stressed the advantages of the computer industry's track record of innovation combined with striking price reductions in arguing the likelihood that it would be the prime mover of home technology convergence.[108] In this country, there is a reprehensible contrast between the attitude of television set manufacturers to the upgrading of microchips in television to improve teletext services (which remain dependent on 1970s technology to the frustration of many users)[109] and the storage potential of a software-based PC/TV.

45. Insofar as there is convergence of home technology, it will be a convergence of functionality not of function. Though it will be possible to interact with the Internet on a television set in the lounge and watch television on the computer in the study, this does not necessarily mean that they will actually be used in the same way. Several witnesses pointed to the prospective development of a digital home network for both television and computer use, based on wired or wireless technology within the house. Different display devices principally employed for different purposes within the home would become inter-operable.[110] Viewed in terms of capacity rather than utilisation, the distinction between the PC and the TV set will diminish to vanishing point. Both will become "The Screen".

46. Some of those to whom we spoke in the USA envisaged a timetable of three to five years for the arrival of The Screen. Others envisaged a slightly longer period for its spread as a mass market product. It was widely accepted that its success and speed of impact depended greatly on the "user interface": providing computer technology with the ease of operation of a television set. Mr Lees of Microsoft Limited foresaw use of the Internet and PC-based products by those who were not even aware of its nature.[111] As we were told in the USA, The Screen itself could learn to respond intelligently to the viewer, based on knowledge of viewing preferences for example. The remote control which, rather than the mouse, is becoming the operating mechanism for TV-based Internet services, should be superseded in due course by voice recognition, greatly improving the ease with which the range of entertainment and information offered through The Screen could be accessed.[112]

Transmission systems

(i) Introduction

47. Today, nearly three quarters of households in the United Kingdom receive their television signal exclusively by terrestrial transmission. A number of the new products available to the viewer, most notably the addition of the Internet, will not be deliverable in the near future through terrestrial transmission. Digital compression technology advances mean that different transmission systems are becoming, at least from a technical perspective, interchangeable.[113] Consideration of the different systems, their potential and their limitations, is essential to an understanding of the economic, social and regulatory implications of convergence.

(ii) Cable

48. The cable network in the United Kingdom is relatively young, developing as a result of policy initiatives in the early 1980s.[114] The cable companies have invested £7 billion to date in what they claim to be "the most advanced communications network in Europe and perhaps in the world"; they expect to invest a further £5 billion in the next few years.[115] This investment has been in "laying an extensive broadband fibre-optic network to give customers a wide range of services through one single connection". The Government has acknowledged that "the cable operators ... have brought broadband capacity to the home and delivered a step change in innovation and competition to the core telephony market".[116] Cable has been from its beginnings a multi-functional network. The principal services now offered to customers are telephony and television. The cable industry sees itself as ideally placed to provide additional services for the information society, including high speed access to the Internet and other interactive services. Unlike satellite or telephony systems, the cable network already has the infrastructure for an integrated high capacity return path which will not require an additional telephone connection. It is a "future-proof platform".[117] Despite uncertainties about standardisation and demand, the cable industry is expecting shortly to introduce cable modems. These are already available in the USA, transforming, for example, the speed of Internet delivery: a three and a half minute video-clip might take 46 minutes to download from the Internet on a normal telephone line; it can be downloaded in twenty seconds through a cable modem.[118]

49. While cable's strengths are undoubted, it is a far from universal platform. Its spread has been based on a local franchise system now operated by the Independent Television Commission (ITC). Over 150 individual licences have been awarded covering over 17 million homes (75 per cent of the country's population). Mr Stephen Davidson, the then Chairman of the Cable Communications Association (CCA), did not foresee an immediate economic case for extension of the network to remaining areas covering a further five million homes.[119] Existing and planned coverage has a strong urban bias.[120] Where cable is available, it is far from universally adopted. Over 10 million homes are now passed by the cable network; over two million subscribe to multi-channel television; over three million use cable telephony. The nationwide penetration of cable is 22 per cent, which Mr Davidson expected to double over about ten years.[121]

(iii) MVDS

50. The Multi-point Video Distribution System (MVDS) has been considered for some time as an alternative or supplement to cable for broadband transmission.[122] We saw a helpful demonstration about its potential at the ITC. MVDS involves the use of very high frequency microwave transmissions for television signals or other services. It is suitable for transmission within small areas, ideally 5 kilometres or less, but obviates the need for cabling. The reception equipment is a small, roof-mounted dish, together with a set-top box. The dish aerial must have a strict line of sight to the transmitter. Some evidence questioned the potential of MVDS for return path provision, but Dr Brian Evans argued that it could be used for a wireless information superhighway if an additional frequency band were made available.[123]

51. MVDS is developing fast in the USA and in the Republic of Ireland; its development in the United Kingdom has been slower.[124] The relevant part of the spectrum is currently reserved for the use of MVDS to extend cable licensees' services. So far, no licensee has sought to use this spectrum commercially. Mr Davidson said that one cable company was testing MVDS, but thought that "this is some years away from a practical introduction".[125] The ITC and the Office of Telecommunications (Oftel) were both more optimistic: the ITC felt that MVDS was "now a realistic commercial prospect"; Oftel considered that the falling price of technology was "likely to make this more economic than cable in the future".[126] The Government has recently announced its intention to consult later this year on the wider use of microwave frequencies for the delivery of broadband services.[127]

(iv) The telecommunications network

52. In contrast to cable, the telecommunications network is almost universal in its coverage. The infrastructure developed by BT is estimated to have cost £100 billion at today's prices; it uses 3,000 million kilometres of fibre, a greater amount of fibre per head than anywhere else in the world, as well as radio transmission for outlying areas. For most homes, the telecommunications network means a copper wire telephone line. It was developed for telephony, which requires over a thousand times less bandwidth than uncompressed broadcast television.[128] Employing a modem, the telephony system has become the main home delivery system for the Internet.[129] ISDN (Integrated Services Digital Network) technology facilitates higher speed transmission for voice and data applications, including the Internet, with existing copper wire; it is available to 96 per cent of customer sites, but has been developed largely for business use. To employ the comparison used earlier in relation to a cable modem, a video clip which can be downloaded in 46 minutes using a normal modem can be downloaded in ten minutes using ISDN.[130]

53. Digital technology and advances in compression might make possible transmission to the home over copper wire on a commercial scale at a far higher rate than ISDN. The enabling technology is known as xDSL (x-Digital Subscriber Loop or Line where x refers to the technology of the moment) and was invented in the late 1980s. Its most common form is ADSL (Asymmetric DSL) which is currently the subject of a trial in West London by BT. ADSL offers transmission at a speed of 2 MBits/s from the operator to the user, sufficient to carry more than one video channel, as well as a more limited return path from the user to the service provider; the video clip already referred to could be downloaded this way in less than a minute. More advanced systems such as HDSL (High Data Rate DSL) are also the subject of trials. ADSL remains a high cost product (about £1000 for an ADSL modem), but BT is also seeking to develop a lower cost version of DSL. One of the great appeals of DSL technology is that it can be embedded into a computer or set-top box. Some evidence was optimistic about the market potential of DSL, not least for high speed Internet access.[131] The Government has stated that "upgrade to technologies like ADSL would require new exchange equipment, but would not necessarily involve new lines".[132]

54. There remain reasons for caution about this largely unproven technology. It will currently only operate within a range of up to 5,000 metres, making it inappropriate for remote households. There are question-marks over the capacity of the technology to perform given the variable quality of the existing copper network.[133] For the foreseeable future, BT did not believe that fixed networks would be competitive with digital satellite and terrestrial broadcast for the mass delivery of digital broadcast TV services. A digitised copper network would be highly competitive for services such as video on demand and high speed data services such as the Internet, but it would complement rather than compete directly with digital terrestrial or digital satellite television services.[134]

(v) Geo-stationary orbit satellites

55. Transmission via geo-stationary earth orbit satellites direct to home as well as via cable has multiplied choice in the British broadcast market in recent years. It is an important competitor in the digital television arena. It also possesses several advantages for the multi-media transmission market. First, it offers services across the European market.[135] Second, it is available today as a broadband delivery system at the same marginal cost to any user, rural

or urban.[136] Hughes Olivetti Telecom explained to us the high-speed Internet service it already offers, in which the user accesses the Internet in the normal way through a telephone modem and receives all of the return Internet information via a satellite link at speeds 10 to 20 times faster than a typical terrestrial modem. The receiver can be a normal dish used for television reception. Current use is predominantly commercial, but it is available to domestic consumers. It could be used to deliver video services.[137] ASTRA has just launched a product for the high speed transmission of multi-media content; although primarily for business, its use for distribution of education data to schools in Luxembourg is being developed and it might eventually become a general consumer product.[138] Mr Don Cruickshank, the then Director General of Telecommunications, told us that he expected Internet traffic increasingly to by-pass telephone companies in these ways, beginning with the business market.[139]

56. At present, satellite has one striking limitation in the multi-media market—the lack of an integrated return path. ASTRA expected a high-speed return path for truly interactive communication or entertainment networks to be in place by 1999.[140] BSkyB was excited by this prospect, believing that, given the development of return path demand, "satellite, as a system architecture, is more flexible, has more capacity, than broadband cable".[141] Any return path transmission will, however, suffer from a half-second delay for simple reasons of distance, rendering it less competitive for certain services, such as telephony.[142]

(vi) Some future possibilities

57. Communications transmission technologies are changing rapidly. The potential of existing transmission networks is being enhanced. Further possibilities are in prospect. First, Universal Mobile Telephone Service (UMTS), otherwise known as "third generation" mobile telephony, will be made possible in the United Kingdom by a spectrum auction next year and services are likely to launch in 2002. This should make possible the transmission of highly advanced broadband interactive multimedia products, such as high-speed Internet, by terrestrial radio.[143] Even further ahead, analogue switch-off should free at least half the current analogue television spectrum for uses which might include wireless services such as mobile television.[144]

58. The next generation of satellite technology will offer new broadband capacity, mainly in new frequency bands, from about 2001 or 2002. Some of the satellite systems utilising these new opportunities will be in low earth orbit or medium earth orbit and a launch programme for such satellite constellations is underway; this will overcome the time delay inherent in two-way communications through satellites in geo-stationary orbit. The risk and investment required in such ventures are enormous, but the potential range of applications is immense, drawing on the prospect of global access to the same spectrum, and facilitating the creation of a worldwide multi-media market including many areas where a telephony service is unavailable.[145]

59. Prototypes are under development for the use of electricity power lines for high speed data transmission which Mr Smith considered had "the potential to be enormously significant, not just for the telephone providers, but for cable television and for the broader development of communications as a whole".[146] A recent study commissioned by the Government voiced scepticism about the potential of power lines as a television distribution medium.[147]

(vii) Conclusions

60. This consideration of the prospects of further transmission systems demonstrates the broad-ranging impact of digital technology and compression and the consequent trend to multi-functional transmission systems. Competition between different systems is becoming much more direct. It is unlikely to be a market in which there is one winner. Each system has particular advantages and disadvantages. For many people and many services, use is unlikely to be confined to one option and some are complementary. There is no room for dogmatic judgements in this market. Novelty and ingenuity do not guarantee success. Some technologies, including MVDS and xDSL, have been of long gestation. Some might prove still-born. And, as Mr Paul Styles, a Director of KPMG, observed, "I do not think we will ever be finished in this market-place because there will always be something else coming along".[148] However, for the Internet to achieve its full potential, broadband networks must first be available.

Digital radio

61. Digital Audio Broadcasting (DAB) is the application to audio transmission of the same basic principles underlying digital television: sounds are converted into digits, and reconverted to analogue electronic mimicry in time to drive a loudspeaker.[149] It is worthy of separate consideration, not least because it is less likely than television to be affected by convergence in the short or medium term, at least while convergent platforms deliver to a wired point.[150] Radio has survived, prospered and expanded despite innovations such as television. It retains several distinctive characteristics:

it is a portable and "wireless" medium so that "it is there in every part of our lives";[151]

it is a "secondary" medium which can accompany other activities;[152]

listeners tend to have a relationship with a particular station rather than any particular programme that it broadcasts.[153]

Digital radio is designed to enable the retention of these distinctive qualities in a new era.[154] It will offer improved reception, better sound quality and greater ease of tuning.[155] The BBC will provide a range of additional services.[156] It should be possible through DAB to store programmes for listening at a time of the listener's choosing.[157] Data, graphics and text can also be transmitted, facilitating new radio services, such as racing results in text form. Data services could comprise up to 150 teletext-type pages per second.[158] Mr Quentin Howard of the Commercial Radio Companies Association (CRCA) thought that digital radio offered sufficient advantages to "revolutionise the way that people use the radio".[159]

62. The revolution wrought by digital radio seems likely to be slow. A vast range of radio stations is already available through analogue transmission, meaning that DAB cannot offer a clear advantage of content multiplicity comparable to digital television.[160] Coverage will not be universal at first: although the commercial national multiplex will have the potential to cover all of England, Scotland and Wales, the BBC's digital radio service initially covers only 60 per cent of the population, although it is committed to achieving full national coverage in co-operation with the Radio Authority and national and local commercial franchise-holders; local radio multiplexes will initially cover 55 per cent of the population, and there are enough frequencies to cover around 75 per cent.[161] DAB requires the consumer to purchase a new radio. At present, the cost of digital radio receivers is about £1,000, although it is not yet a mass market product.[162] The initial target market for DAB will be in-car radios, sold through car manufacturers; another early market might be in PCs through DAB sound cards. Prices will depend upon the achievement of an international market; DAB development in the United Kingdom is said to be in advance of that in most other European countries. BREMA expected British manufacturers, including hi-fi companies, to be able to offer "a low cost DAB receiver to the public" which could be on sale "by the end of 1998", but a recent study by National Economic Research Associates (NERA) commissioned by the CRCA considered that it could "be as long as five years before affordable portable DAB receivers enter the market".[163]

63. The BBC is committed to digital radio as the best way to provide an improved radio service in the digital age.[164] Attitudes in the commercial sector are less certain. The NERA study was sceptical about the viability of the licences to be awarded, particularly for local services.[165] The CRCA and others stressed the long-term nature of the investment required, with "costs up-front" and no commercial return likely for seven to ten years. Capital Radio questioned whether there was any additional programming strand to make digital radio successful.[166] The speed and success of digital radio matters because, in the longer term, new transmission systems with multi-media capacity might offer the portability which is currently radio's main distinction.[167]

97 Q 698. Back

98 Evidence, p 281. Back

99 QQ 670-673; Evidence, pp 542-543. Back

100 Evidence, p 275. Back

101 QQ 832-834. Back

102 Evidence, pp 544, 543. Back

103 Q 673. Back

104 Q 3. Back

105 Evidence, p 189. Back

106 Evidence, pp 116-117; QQ 328-336, 338, 341-343, 379, 381. Back

107 Evidence, p 274. Back

108 See The Emerging Digital Economy, p 5 for information on the price of computer power. Back