Will the BBC's satellite dream ever take off?

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Greg Dyke’s decision in March to cancel the BBC’s conditional access agreement with digital satellite broadcaster Sky threw the industry into disarray.

What was essentially a very technical change to the BBC’s broadcast agreement with Sky, marking the end of a contract mooted to be worth £85m over five years, sparked off speculation that all of the commercial broadcasters would follow suit, depriving Sky of precious revenue and possibly even leading to the launch of a standalone, free-to-air digital satellite service similar to Freeview.

At a conference last week, Independent Television Commission chief executive Patricia Hodgson said that the BBC’s move was “the most extraordinary development since the start of cable and satellite broadcasting”.

“This is going to change the broadcasting ecology in a way that nobody anticipated,” she added.

After two months of wrangling, the BBC and Sky have now announced a compromise over what was the main sticking issue – the positioning of the BBC channels on the Electronic Programme Guide. Further, it has now been agreed that Sky will continue to provide the BBC with one of its paid-for, conditional access services – regionalisation – which ensures that, when viewers turn on their Sky TV services, it automatically shows them the right BBC channel for their region.



Power shifts
In reality, these behind-the-scenes shifts in power between the two media giants have made little difference to the consumer – at least so far. Before the BBC cancelled its conditional access agreement with Sky, viewers could already watch all of the BBC channels free-to-air on digital satellite without being Sky subscribers – the only difference being that, beforehand, they would have needed to obtain a free Solus card, from the BBC, to put in their set-top boxes, whereas now they can just plug and play with no need for a card (there is a whole slew of other free-to-air channels available to viewers in this way – more than 90 TV channels and 60 radio channels, including Turner Classic Movies and Euro News).

In the same week that this new development emerged from the two broadcasters, terrestrial channel Five revealed that it had renewed its conditional access agreement with Sky for the next five years, demonstrating that as yet, the BBC’s move has not prompted it, and a raft of other commercial broadcasters, to abandon conditional access agreements with the satellite giant.

Despite director general Dyke’s posturing earlier this year, at which time he said: “We think this demonstrates that we don’t need Sky,” the BBC is, in fact, still paying Sky for conditional access services. It is also shelling out for its slots on the EPG, and BBC3 and BBC4 have been “promoted” up the EPG from channel numbers 160 and 161 to 115 and 116.

Could it be that Dyke’s dramatic move earlier this year was nothing more than bluster and bravado to give him more power in negotiating a cheaper deal with Sky? MPG broadcast director Andrew Canter thinks so.

“It was a posturing exercise and all part of the negotiations,” he says.

“They’ve now agreed the parameters, with a bit of a u-turn on the part of the BBC.”



Motivated by politics
One cynic said: “This was the BBC coming out with a whole lot of bluster in March, motivated by politics and not technical knowledge.”

Or, on the other hand, could it be that the BBC’s Dyke was in such a hurry to strike a blow to Sky that the technical implications of the deal weren’t thoroughly examined, leaving the BBC with no choice but to U-turn on the EPG and regionalisation issue that it didn’t realise at the time that it would need?

A source close to the deal said: “The decision was led more by those at the top than those in the technical know. The BBC thought it had a birthright to due prominence on the service”

“We were hoping to pay Sky a charge for a one-off upgrade to the EPG which Sky couldn’t do, which is why we have to pay for the slots,” said a BBC spokesman this week, conceding that the broadcaster has not severed its pay relationship with Sky.

An insider at Sky said that there was no way that the BBC was getting around having to pay.

“We’re unable, by law, to discriminate in favour of the BBC as it’d be to the detriment of the other broadcasters on the platform. We couldn’t give them regionalisation services for nothing.”

That said, the BBC is paying significantly less than it was before the furore. Not only has it abolished the Solus card scheme, which had significant costs, but it is no longer paying Sky for encryption.

It would seem that, in the short term, the move by the BBC has not rocked the media boat as much as was anticipated. Five has decided to stay put, and Channel 4’s conditional access agreement with the broadcaster isn’t up for renewal for another three years.

However, those that see this issue as being one that could change the broadcasting landscape as we know it are thinking in longer terms. It could be that Five is erring on the side of caution and waiting for the dust to settle on the BBC’s new deal with Sky before it goes down the same route. That, and the fact that Five is the smallest terrestrial broadcaster and doesn’t have as much weight to go into the ring against Sky.

David Yorath, managing director of digital TV agency Guerillascope, says: “The BBC are the only ones who will ever be in a position to do this – a commercial broadcaster would be foolhardy to take on Sky.”

Who knows what the media scene will look like after three of four years? The industry is holding its breath over the future of the proposed ITV merger, which threatens to turn the television world on its head and could set in motion a whole stream of consolidation. And when Ofcom comes into power later this year, the floodgates for a stream of acquisitions could open, and Five could find itself becoming part of Murdoch’s Sky empire.

When news of the BBC’s decision to go free-to-air on Sky initially broke, it was mooted that the BBC could launch its own satellite version of Freeview, “Freesat”, and that was an idea backed by the ITC’s Hodgson last week.

She suggested that, within the next three years, the BBC will have launched its own EPG and that TV viewers will be able to receive digital terrestrial and satellite services through the same TV.

It’s certainly possible – although launching its own EPG will prove costly to the BBC, and one could argue it’s not the best way to spend public money when Sky has already sunk £2bn into the creation of a perfectly good digital satellite system that’s available for use by all broadcasters.



Sky incentives
It’s also worth noting that people buy into Sky because of incentives such as movies and sport and those that don’t want those features are currently being absorbed by Freeview – the new free-to-air DTT venture jointly owned by both broadcasters. By the time the BBC got round to launching a hypothetical free-to-air satellite service in three years’ time, there may not be many punters left to sign up for it as they will have Sky, Freeview or cable.

MPG’s Canter isn’t sure that this is the way things will develop, but he’s certain that the winds of change are blowing.

“Things are set to change dramatically in the broadcast market and the BBC promises to be a dominant player whichever way you look at it.”

In fact, as the BBC and Sky joint venture Freeview continues to go from strength to strength as a runaway high street success, the public service broadcaster is warming up for its next round with the satellite giant as it prepares to bid against Sky for the television rights to the Premier League, which, as the result of a new package structure, could return to free TV.

The love/hate relationship looks set to continue for years to come.