Will the NBN kill digital TV as we know it?

Summary:As the NBN bypasses the airwaves and offers a new pipe into 90 per cent of Australia's homes, could long-languishing IPTV services spell the beginning of the end for TV as we know it?

How hard it must be to be a free-to-air (FTA) executive these days. After 50 years of unfettered monopoly over television distribution, the world's most popular mass communications medium is struggling to reinvent and even justify itself in an instant-gratification era where PVRs, BitTorrent, YouTube, Foxtel, and most recently the government's National Broadband Network are threatening FTA networks with death by a thousand cuts.

In calling on the memory of many of Australia's favourite TV moments during its minute-long spot to promote Freeview last week, the FTA operators were making a very clear point: over the years, the TV is the first place we go to experience these memorable moments together. From Neil Armstrong to Guy Sebastian, Tom Cruise to the Black Saturday bushfires, we saw it first on FTA television.

The problem, of course, is that after we see it on FTA television, we now go online to get more in-depth coverage, and to watch the video over and over again. Think about it: did you see Susan Boyle and Shaheen Jafargholi by waiting until Britain's Got Talent airs on TV here, or did you go to YouTube and join the millions of viewers who have made them overnight global celebrities?

These days, we learn about new events on online news sites; watch the video online; and perhaps visit YouTube for some related footage. FTA networks — which rehash popular online footage in an attempt to appear relevant — are simply no longer the go-to destinations where people get their content, a point that was inadvertently made when Freeview invited standbys including Kerri-Anne Kennerley, B1 and B2 and veterinarian Dr Chris to its recent public launch.

No offence to Ms Kennerley, Dr Chris or either of the Bs, but in launching a media blitz around years-old news events and 90's-era celebrities, Freeview is hardly casting itself as a champion of the new interactive media. And the voice-over on the widely-publicised More Moments ad did little to clarify things by exhorting viewers to "switch to Freeview digital television now and get more — more moments, five more channels, for free".

In launching a media blitz around years-old news events and 90's-era celebrities, Freeview is hardly casting itself as a champion of the new interactive media

The problem is that viewers are already switching to online viewing and getting more moments, and a massive variety of content, for free. US and Canadian broadcast networks have aided this trend by launching ad-supported online viewing sites — the NBC and Disney-supported Hulu most prominent among them — that let viewers watch quite a number of shows online rather than downloading them via BitTorrent.

In the UK, broadcasters have focused on the Freeview model — but offer dozens of channels for free in a bundle to which consumers have flocked in droves. Meanwhile, Australia's FTA networks have pinned their hopes on a dressed-up bundle of existing channels that really offers very little that customers can't already get. Broader sports and kids' programming may tap into latent demand from some viewers, but will still fall far short of the variety available elsewhere.

The networks' strategy is based on playing the numbers: pay TV cable only reaches around 30 per cent of Australian households, so Freeview is being pitched at the other 70 per cent (and yes, satellite is an option for some but doesn't offer the triple-play possibilities and long-term expansion of HFC). It is, simply, a strategy to prevent those subscribers from looking into other possibilities. And it is going to fail spectacularly.

I don't mean today, or next month. But as the NBN makes its ponderous way across the country, it will deliver fibre-optic pipes capable of carrying HD-quality video via IPTV to 90 per cent of Australia's households. Even Foxtel seems to be preparing itself to take advantage of the soon-to-be expanded distribution network.

Already available for some time through providers like TPG, IPTV is a far more flexible option than pay TV: because it's all IP based, your IPTV provider could easily (latency notwithstanding) be located across the country or across the world. It could be a niche broadcaster selling nature documentaries, wrestling videos, home renovation shows or anything else that interests you: pick and choose your channels online, and they're available when you want them.

In theory, at least. After all, content is expensive: by at least one account, pay TV operators lose 40 per cent of their revenues to content licensing deals, and content producers are constantly gunning for more. This is why cable operators won't let you order specific channels but sell services in cross-subsidised bundles. Since IPTV providers can't justify the costs of these services against the minuscule revenue the services bring in, they have so far been limited to cheaper foreign-language and news programming.

Broader availability of IPTV will do for television what VoIP did for voice calls: remove the service premium and deliver a content service driven solely by competitive forces. Disintermediation will be the death of FTA TV, held off only by the speed of the NBN roll-out and the strength of incumbent broadcasters' long-established relationships with content providers.

Disintermediation will be the death of FTA TV, held off only by the speed of the NBN roll-out and the strength of incumbent broadcasters' long-established relationships with content providers

It will take time, of course: the Freeview operators will still have the better advertising story to sell, so they will continue to have a monopoly over the country's most popular shows. But in the long term, there's no reason why you won't be able to buy Discovery Channel documentaries via your IPTV service, straight from the Discovery Channel.

Freeview boxes can go online too, thanks to a built-in Ethernet port. But with the networks relieved of their access exclusivity, they'll be squaring off against companies like Apple and TiVo — whose Apple TV and eponymous set-top box already offer an easy way to order and manage TV content. TiVo's new Blockbuster Movies on Demand service is an example of how easily new content can be delivered — and in the era of IPTV, that content will be easily streamable from anywhere in the world.

Also shaping the transition will be the government, which faces a difficult choice: despite policies that have historically favoured content-restricting legislation to preserve the value of the FTA spectrum licences, it also needs to generate as much NBN revenue as possible. Loosening broadcast restrictions is a bold and difficult move for government regulators to take, yet they cannot be seen to be compromising the NBN's value because of antiquated ideas about content licensing and ownership.

In the NBN world, barriers to entry in TV broadcasting evaporate. Any ISP will be able to offer IPTV services, securing content from anywhere in the world. And as the installed base of IPTV-ready homes rockets skyward, FTA broadcasters will no longer be able to claim all Australian viewers as their sovereign right: they'll have to fight, and content providers will be more receptive to licensing popular content to IPTV providers as well. The end result in this battle for viewers is anybody's call, but it's going to be an interesting fight to watch.

Topics: NBN, Broadband, Hardware, Tech Industry, Telcos, Telstra

About

As large as the US mainland but with a smaller population than Texas, Australia relies on ICT innovation to maintain its position as a first-world democracy and a role model for the developing Asia-Pacific region. Award-winning journalist David Braue has covered Australia’s IT and telecoms sectors since 1995 – and he’s as quick to draw le... Full Bio

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