The British Broadcasting Corp. (BBC) is unlikely to reverse its decision to broadcast its eight TV channels unencrypted on BSkyB, a UK satellite broadcasting affiliate of Rupert Murdoch’s News Corp. The BBC’s move means it will no longer use BSkyB’s conditional access (CA) system and that BSkyB subscribers will be able to see the channels without a Sky viewing card using any digital satellite receiver.

The decision is expected to save the BBC GBP85 million ($133.1 million) over the next five years. It has been speculated that the BBC’s decision could be part of a ploy to drive down the fees paid for CA. So, would the BBC reconsider its decision if BSkyB reduced its charges? Carolyn Fairbairn, director of strategy and distribution at the BBC, told Interspace, “I don’t think so in that we really don’t think that we need conditional access any more. As it is a service we no longer need, there doesn’t seem to be very much point in having a contract to receive it.”

Fairbairn added that, “We had informed [BSkyB] six months ago that we were seriously considering this route. This should have come as no surprise to them.”

The BBC’s move is a significant one, according to media equity analyst Sarah Simon at Morgan Stanley. “This move … may set a precedent for other broadcasters that currently encrypt but would broadcast in the clear if they could do for a lower cost. ITV, for example, has indicated it would be interested in following BBC’s lead. Equally, Channel 4 has indicated that this move could result in it paying lower fees to [BSkyB] on a long-term basis.”

The BBC will also be moving its channels from Astra 2A and 2B satellites to the Astra 2D satellite, all operated by SES Astra. One of the reasons the BBC paid for CA was to make sure its channels were only seen in the United Kingdom. By moving to the Astra 2D satellite, the BBC dramatically reduces the reach of its channels outside the UK.

Rights Issues

The BBC said that using Astra 2D “removes the need to encrypt for rights purposes.” Rights contract holders, such as studios and sports leagues, have contracts that cover the UK only. One issue is how they will react to possibly having their content available, albeit on a limited basis, in other territories. Since this was one of the main reasons for paying for CA, it has the potential to create some problems for the BBC. Fairbairn comments: “We have ongoing discussions with our rights holders all the time. We have informed them. We are continuing to deal with any questions they might have and so far, I think our rights holders understand why we have done it. Some have been highly supportive, in fact. We have had no sense that they are uncomfortable with it.”

But, one of the questions about moving to Astra 2D is the potential reach of the BBC outside the United Kingdom. In Interspace’s sister publication Inside Digital TV, Editor Barry Flynn pointed out that with a standard 60 cm dish, the BBC’s signals would be receivable across the whole of the Republic of Ireland, most of France, and most of Belgium. With a big 90 cm dish, the signals could be picked up by still more territories. On this issue, Fairbairn argues that in the Republic of Ireland, the BBC is available to all of the homes already through analogue transmission, and therefore it is not an additional coverage area.

In terms of picking up signals in France, Fairbairn comments, “In Northern France, the orbital direction that satellite dish has to face to receive 2D is different from the direction it has to face to receive French services. So, unless you think there are a lot of people in northern France that are going to stop getting their domestic services in order to get the BBC, it is unlikely that you are going to have a major amount of viewing in northern France.”

In terms of the larger dish, Fairbairn adds, “It is true that if you get a bigger dish, you will be able to get 2D further away. Again, you have to look at who is going to do that. It is because of this orbital direction issue that it will mainly be ex-pats. It is going to be people with a primary interest in receiving BBC services, rather than the domestic services of the country they are in.”

FTA Satellite

The other potential interesting aspect of the BBC’s decision is that it could potentially create a free-to-air (FTA) satellite market in the United Kingdom. The irony here is that the BBC-led digital terrestrial TV service Freeview has been doing well in recent weeks, with customers showing an appetite for a multichannel free services. If ITV and Channel 4 follow the BBC’s lead in broadcasting unencrypted channels, this could result in development of a large FTA satellite market in competition to Freeview. Fairbairn is aware of such a possibility, but is not unduly concerned. “It is certainly conceivable that a FTA satellite market could develop. But, I have to say in terms of comparative cost, it is going to be quite significantly cheaper for most people to get Freeview than to get FTA satellite because you don’t need to get a dish. We expect if there was a choice between the two, a number of people would still choose Freeview.”

For BSkyB, there are a number of potential implications. For a start, it is losing revenue from the BBC and could lose a lot more if ITV and Channel 4 decide to follow suit. Simon said in a research note, “A further impact on [BSkyB] could be dissatisfaction among its overseas customer base if they cannot receive BBC channels. Although [BSkyB] is not allowed to sign up customers with an overseas address, it’s not difficult to sign up using a UK address and then take the smart card overseas so as to access the service in France, Spain and Portugal.”

One area where BSkyB could recover some revenue is through charging higher fees for listing on its program guide service, called EPG (electric programme guide). The BBC pays fees to have its channels listed on BSkyB’s EPG, as well as the positioning at the top of the EPG. The fees increased significantly this year for all channel providers, but for those not paying for CA, the costs for listings will be significantly higher. Those channel providers that broadcast unencrypted will now have to pay GBP75,000 ($117,465) a year to have a channel listed on the EPG. For encrypted channels the cost is significantly less, at GBP35,000 ($54,817). Last year, the charges were GBP28,000 ($43,854) for both encrypted and unencrypted channels.

–Mark Holmes

(Contact: Sao Bui-Van, BBC, email: [email protected])