Tuesday, April 3, 2007

Basic cable service basically on its way to oblivion

Countries in Europe already switching off analog connections

Peter Nowak, CanWest News Service
Published: Monday, April 02, 2007

TORONTO - Television subscribers who haven't upgraded to digital won't have a choice for much longer -- basic TV is going the way of the dinosaur.

Basic cable television, where the set receives its signal from a plug in the wall or over an antenna, is being turned off around the world in favour of digital, which offers interactive features plus higher-quality video and sound through a decoder box that connects to the TV.

In December, the Netherlands became the first country to turn off basic television, otherwise known as analog, with all subscribers now on digital.

At least five European countries are set to follow this year, including the United Kingdom, Sweden and Finland. The United States will shut off in February 2009. Even China is tuning out, in 2015.

The governments in these countries have mandated the switch-off for a number of reasons, all of which inevitably come down to revenue. Turning off analog will free up a good deal of airwaves, which the government can auction off for other uses. It will also free up space on cable providers' pipes, which they can use to sell more high-definition programming.

Television makers will also benefit through increased sales of digital sets.

The downside, observers say, is that the consumer will end up paying for it. "It's all to sell more televisions," says Thomas Astebro, associate professor of strategic management for the Rotman School of Management at the University of Toronto. "The equipment producers have an interest in people upgrading. It's giving a boost to this whole industry."

Canada's approach is unique in that the government has not ordered a switch-off and will instead rely on market forces. It won't be a forced death like elsewhere, but analog will still die in Canada.

Toronto-based Rogers Communications Inc., Canada's largest television provider, has 2.27 million total subscribers, 1.13 million of whom are on digital. The company is adding new digital customers or converting basic subscribers at a rate of 220,000 to 250,000 a year. At that pace, Rogers says it will have a digital box in each of its households within three to four years.

Digital is more lucrative for a cable provider in that customers must rent a box -- $3.99 a month in the case of Rogers -- and can use on-demand services such as pay per-view movies for an extra fee. Increased digital uptake is thus translating into better monthly average revenue per user.

The nation's second-largest cable provider, Calgary-based Shaw Communications Inc., has about 31 per cent of its 2.21 million TV subscribers on digital, but the pace of conversion is ramping up as well. In the company's third quarter ended Nov. 31, digital subscriber additions grew twice as fast as basic.

Jim Shaw, the company's chief executive, has echoed Rogers' sentiments saying he would "never" shut off analog.

The choice may not be in the hands of the cable companies, however. Television makers are ending production of analog-capable sets for the U.S. That production will have a spillover effect into Canada.

© The Edmonton Journal 2007

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