London -- ONdigital upped the ante in the British digital
race last week by matching British Sky Broadcasting Group plc's recently announced offer
of free set-top boxes.
Starting June 1, digital-terrestrial platform ONdigital
will offer new subscribers free decoder boxes worth about $300 in return for annual
ONdigital CEO Stephen Grabiner said he expects the package
to cost the company an additional $300 million over the current and next financial years.
As a result of the free set-top offer, he added, ONdigital
forecasts "in excess of 2 million subscribers within three years," with digital
TV now "affordable in every home." ONdigital launched in November, and it
claimed 110,000 subscribers at the end of March.
The service's current customers will see their subscription
prices frozen until Jan. 1, 2002, while new entrants will pay an extra $3 per month.
The ONdigital offer represents a dramatic shift by
Grabiner, who said last May that he was "confident that there will be no set-top-box
war, because it is in nobody's interest to have one."
ONdigital's decision heightens competition between
Britain's three competing digital technologies, with digital direct-to-home platform BSkyB
and ONdigital both giving boxes away, and cable widely expected to follow suit.
In a prepared statement, BSkyB said programming choice
would be the determining factor for consumers. BSkyB has close to 200 digital channels,
compared with ONdigital's 36.
A British press report suggested that ONdigital owners
Carlton Communications plc and Granada Group plc "may want to pull out [of ONdigital]
if Sky streams ahead."
Carlton CEO Stephen Cain brushed off the report, saying his
company is committed to digital "because the media is going digital. Some
[businesses], such as ONdigital, are longer-term investments."
Still, one analyst said, the ONdigital move "smacks of
desperation." Less than three weeks ago, the company launched a promotion giving a
free box to anybody spending $300 or more on a new TV set. At the time, Grabiner admitted
that Sky "has changed the parameters in which the market operates."
Analysts believe BSkyB is well on course to attracting 1
million digital subscribers by October, one year after its launch, and it is pushing to
reach 1.3 million homes before Christmas. To be sure, BSkyB has a 10-year-old, 3
million-subscriber analog-DTH operation on which to build.
ONdigital aims to have 300,000 to 400,000 subscribers by
year-end. By that time, cable will kick in nationally with its digital products, and the
current two-way digital battle will become a three-way fight.