Network+: A digital revolution

Television is about to undergo the biggest revolution since its birth, and your computer is likely to be a part of it, too. Next March, if all goes to plan, with a pounds 200 box on top of your TV, you will be able to receive dozens of satellite channels. Next summer, for roughly the same price, you will be able to receive around 30 channels from your existing rooftop aerial. As for cable TV - probably the creme de la creme of our digital future - well, you might have to wait another year or more.

Digital TV will deliver excellent pictures, in wide-screen cinema style and with CD-quality sound. It will also allow you to make instant purchases and sensibly navigate what could be hundreds of programmes.

BSkyB has the most to win or lose from digital TV. It must persuade existing subscribers not to desert to other services and, at the same time, it has to attract new viewers. So News International, the major stakeholder in BSkyB, has joined BT, the Midland Bank and Matsushita to form British Interactive Broadcasting.

BIB will spend pounds 35m over four or five years, subsidising the cost of the set-top boxes that will decode digital TV in your home, and getting the service off the ground. Four companies have been given exclusive licences to manufacture the boxes to the same, tightly controlled design. So far, specifications have not been released. What is certain is the box will contain a powerful processor and a modem to allow you to communicate with BIB. However, BIB is not a charity. The cost of the subsidy will be recouped by charging service providers to use the system.

BIB plans to offer games, magazines and an interactive wonder world. "People will be able to respond to an advertisement, to order a brochure or book a telephone call to get a response or they will be able to request a test drive for a car. They will be able to register their interest in all sorts of things," says Chris Townsend, acting commercial director of BIB.

Much of this limited interactivity will be common across terrestrial, satellite and cable. The TV programme you will see on the screen is just part of a vast data stream. Your set-top box will descramble it and display just the pictures and sound of the channel you want to watch. But buried in the picture data will be more data that says "if the consumer presses button B jump to this bit of data". So you push the button and your modem dials out and tells BIB that you are interested a product and in the post two days later is your shiny brochure.

This is not the information superhighway but rather a strange hybrid world. The graphics will be sent by satellite while the text-based information will be delivered by a telephone cable connected to the back of your set- top box. The advantage over the Internet? You get prettier pictures more quickly and you get them in your sitting-room. Apart from that, not a lot.

Many TV distributors, especially the American cable companies, have tried more sophisticated systems but interactivity has thus far failed to sell. Phil Laven, technical director of the European Broadcasting Union, is a technophile through and through, but he too has doubts. "We have been told about all sorts of things people will be able to do eventually with interactive television. Change the ending of a play, look at a scene from different camera angles, vote and so on. This may have great novelty value but novelty rapidly wears off."

For a successful service Mr Laven believes you need greater interactivity, a television equivalent of the World Wide Web so the viewer can go on "a voyage of discovery". And Mr Laven is by no means alone.

"The next five years, most TV will be just a mutation of existing TV," says Patrick McGarvey, senior new media business analyst at Datamonitor. In fact, getting customers used to any form of interactivity is going to be a hard slog. "One problem is going to be turning what is essentially a passive medium into an active one. Interactive services will be accepted over time by younger people as they move on and grow up, but it will be a slow process."

David Docherty, the BBC's recently appointed director of television, thinks customers will be interested in more channels and new services. "I don't think anyone will take to "digital" as such. What they will be interested in is new content or better or new services." Pushed to pick a winning service, Mr Docherty favours banking. To check your bank balance, you will click on a button, enter your PIN and up will pop the balance on the screen.

For true interactivity, many believe some sort of PC is inevitable and the computer industry believes it knows the shape of the future. "There are soon going to be three types of device on the market," says Bob Sterns, senior vice-president for technology and corporate development at Compaq. "PCs capable of doing TV, devices which merge the full capabilities of both, so they have a big screen and can be controlled by a remote control but have full computing functionality, and TV appliances, intended solely for digital TV use, but which contain some basic processing capabilities."

But there are many who disagree about any significant move to a hybrid PC/TV. Giuliano Berretta, commercial and development director of Eutelsat, is dubious. "In future some TV programmes will go by the PC but only a tiny amount. The synthesis of PC and TV will not happen. There will be a small overlap market, but the two should be kept quite separate. The PC is a product you utilise on your own where a TV is a communal thing."

One company with deep pockets, long-term ambitions and a firm belief that interactivity will take off is Microsoft. Bill Gates has tried a couple of times to get the TV industry interested in using the Windows operating systems to control the set-top box but has failed. After mounting a charm offensive at US and European television trade shows this year, Microsoft now wants in on the action.

But while Microsoft is ready to offer the hand of friendship to the European TV industry, the industry is, unsurprisingly, very suspicious. "Everyone is frightened of Microsoft. They are convinced that it is trying to put Windows 2000 or whatever on every TV set," says one industry insider.

"Microsoft may try to establish [Windows] CE as the operating system for the industry, but most of my customers would prefer it if they did not," says David Hood, joint chief executive and co-founder of the electronics company Pace, which is producing some of the set-top boxes for BIB.

While Europe has managed to develop a common transmission system, no agreement has been reached for a Europe-wide operating system for the set-top box. Digital Video Broadcasting, the industry group that has fast- tracked Europe's digital TV efforts, is not unduly worried. The first generation of boxes are not very sophisticated and do not require a proper operating system.

"We started originally with straightforward linear broadcasting," says Theo Peek, DVB chairman. "Now we are going to try and look for a common [operating] system. We will just have to wait and see what we can agree on."

One of the big players Microsoft will encounter is Nokia. The Finnish electronics company has a contract to supply one million set-top boxes to the German market. It is not too worried if Microsoft eventually moves in and dominates the market. "We are not in the software business," says Helmut Stein, Nokia's senior vice-president in charge of technology.

When Nokia first showed its set-top box two years ago it had to have some sort of operating system. "There was no Java, no Windows CE and so we had to develop our own," says Mr Stein. Java is, unsurprisingly, mentioned often by worried industry executives. But for the moment the consensus seems to be that it is too memory and processor intensive.

As well as interactive television, Microsoft is also interested in bringing the TV to the PC. Microsoft has incorporated support for digital TV into Windows 98, due out early next year. It has also enabled the next version of Internet Explorer with buttons that look suspiciously like channel select buttons on your TV. These can be set up to point at Web-casting sites and essentially be used to bring different TV channels on to your PC.

But if TV is coming to the Web the reverse is certainly true. WebTV is probably the best known of the boxes to bring the Web to your sitting- room. Microsoft bought WebTV Networks earlier this year for $425m. A WebTV box is essentially a stripped-down computer that allows you to access the Web over your telephone line and display the image on your TV. It will be released in Europe later this year.

One big change will be the replacement of WebTV's original operating system with Windows CE. And Microsoft sees WebTV with CE as the first step towards a Windows CE set-top box. "Windows CE, in combination with the WebTV system give us a basis to propose a fairly broad range of digital video-based appliances including digital set-top boxes," says Craig Mundie, senior vice president, consumer platforms division.

But WebTV will be coming into what could soon be a crowded market. NetStation, a system developed by Acorn founder Hermann Hauser, is attracting a lot of attention, while in France NetGem has its own solution. Nokia will be adding Web browsing to its set-top box next year and there are many others.

Digital TV will also bring in totally new ways of delivering the Internet. BIB proposes several ways - none as yet finalised. Its most basic service will involve some 20 Web sites (totalling perhaps several thousand pages). These will be broadcast over the air in a sort of carousel with some information stored in the set-top box's memory, like a sort of super teletext. One of BIB's main claims for this service is that it is a "walled garden". The company will know exactly what is on show and will make sure there is no unsuitable material. "Most of the Web's most popular sites are pornographic ones," says Mr Townsend. "The regulator [the ITC] is very keen that we do not put anything on the screen that might cause offence."

Eventually, the winner for Internet access will probably be the cable TV industry. In the US, cable modems, typically with speeds of between 10 and 30Mb per second, are just beginning to find their way into homes. The most successful company introducing these services is @Home. It has just 15,000 subscribers, but when it launched as a public company investors valued it at over $20bn.

But cable faces huge problems converting to digital. It is not simply a question of installing a new set-top box. "The cable system itself will have to be re-engineered in many areas and even the wiring in people's homes will mostly have to be rebuilt," says Dermot Nolan, director of CDG media consultants. But Mr Nolan is scathing of the level of interactivity of most systems. "It isn't possible to obtain real interactivity with digital TV. By definition all you can do is respond to an ad, or click for a service. You can only get true interactivity with some sort of switched system." Mr Nolan says a modern cable TV system can offer such facilities but he warns that the telecoms companies are catching up fast.

But the surprise of digital TV has been the way that digital terrestrial television has gone from being a disparaged also-ran to being seen as perhaps the most attractive offering. Even BSkyB wanted in on the picture. It was a founder member of British Digital Broadcasting, the winner of the franchise battle for the new commercial digital TV frequencies, but was forced to quit by the Independent Television Commission.

Satellite offers more channels, but it is not a DIY technology. For a start the satellite is in the wrong place. While many current BSkyB customers could take digital signals from the equipment on the roof and plug their existing satellite cable into a new digital box, BSkyB decided to use satellites in a different part of the sky for its digital service. Your satellite dish also has to be accurately pointed at the satellite and your wiring has to be "clean" to receive any pictures at all. Expect to pay at least pounds 100 to have your dish installed or repositioned.

By comparison digital terrestrial signals can be received on a cheap indoor aerial. The disadvantage is that it will have limited channels and limited coverage, initially at least. Not all of the country will be able to receive all of the digital channels. For around pounds 10 a month British Digital Broadcasting will supply you with 12 channels and you will pay extra for two Sky Movie channels and for sport.

Now while this compares unfavourably with over 100 extra channels on digital satellite (many of which will actually be broadcasting the same films at different intervals), digital terrestrial is easier to receive. Just buy a box, plug it into your TV and that's it. Initially the set- top box will cost from pounds 250-pounds 300.

Digital television, whether it is delivered via satellite, cable, rooftop aerial or even a twisted coat-hanger, is certain to mark the next - and perhaps most important - phase of the information revolutionn