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Sunday Star - Times; Wellington, New Zealand

By HUNTER TIM

THE GOVERNMENT will be the big winner out of free-to-air digital television as broadcasters wrestle with higher costs.

Analysis by Spectrum Strategy Consultants says the value of analogue spectrum released by going digital could be $131 million - money that would go directly to the government's bottom line.

It could be more, one well placed source told the Sunday Star- Times last week.

"I regard that number as extraordinarily conservative," he said.

"At the back end it's the government that gets the benefit."

A spokesman for Broadcasting Minister Steve Maharey said: "It's certainly a damned good deal for the taxpayer."

Broadcasters, meanwhile, face higher operational and programming costs but little expectation of more advertising revenue.

The Spectrum report noted: "The launch of a digital (free-to- air) platform will not increase overall TV advertising revenues. The launch... only serves to increase audience fragmentation and redistribute viewing shares between broadcasters."

TVNZ chief executive Rick Ellis was putting a brave face on it last week.

"It is really good news for TVNZ," he said.

"The infrastructure we have today is ageing and rapidly becoming obsolete... so we need digital television infrastructure to migrate to."

But as for the impact on advertising revenue, he said: "I don't think really anyone's prepared to predict what that might be.

"The unknown piece is what commercial value we can build around digital services. That's the challenge over the next three to five years."

Spectrum said the outcome of introducing digital television would be negative for broadcasters in every scenario except one - where the switch over was wildly successful and there was no investment in extra programming for new channels.

This is also the least likely - other countries switching to digital have found that better content is crucial to persuade people to make the transition.

Unless existing analogue services are switched off, the report found, free-to-air digital penetration would still lag analogue in 2015.

Brent Impey, chief executive of TV3 and C4 broadcaster CanWest, said although negotiations over spectrum were continuing with government infrastructure company BCL, Freeview would probably be good for broadcasters.

Freeview would allow the company to launch an extra four channels, he said, giving greater ability to serve the market.

"It's no different from the radio business," he said.

"If you go back to the late 1980s there were four FM stations in Auckland. Now, with the launch of The Breeze, there are 50. Out of that fragmentation, if it's done carefully over time, is a positive growth for the business."

Impey said the Freeview deal, involving broadcasters, the government and BCL, was a classic New Zealand solution.

Practicality had produced a way forward, he said, and the government's contribution was "fair and reasonable".

WHAT IT'S ALL ABOUT The government announced a deal to support free-to-air broadcasters on Thursday.

It means TVNZ and CanWest can lead a consortium called Freeview to deliver digital TV over satellite and terrestrial platforms.

Consumers will need a $150 set-top box to see digital TV. Some will also need a satellite dish.

The new service will carry additional channels compared to TVNZ's existing digital service.

The government is contributing $25 million over five years to support Freeview, and offering spectrum relief worth $10m to broadcasters during the switchover.

Freeview is expected to begin next year.

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(c) 2006 Sunday Star - Times; Wellington, New Zealand. Provided by ProQuest Information and Learning. All rights Reserved.