"Inside the Space Station" © Discovery Channel

The boob tube is about to get smarter. Cable and satellite broadcasting are undergoing a digital renaissance. Barry Brophy tunes in to find out more.

The age of digital cable and TV services has finally descended upon Japanese soil. Beginning this month, cable companies have finally got the go ahead to upgrade existing lines to fiber optic cables that not only will boost the lagging penetration levels of Japan' multi-channel, specialty TV services, but bring the country's Internet standards, literally, up to speed. A host of new services are on the way: two-way TV, complete with programming systems that allow viewers to use a remote or cordless keyboard to scroll TV listings; choose programming from an interactive guide; shop; send emails; play along with game shows and choose the camera angles for the programs they're watching. Just how and when viewers can expect this miraculous transformation of cable and satellite services from a broadcasting industry that has recently come out of the dark ages is another story.

Broadcasting's backstory
Japan's terrestrial and cable broadcasting industries have certainly come a long way since their respective inceptions in 1953 and 1955. By the end of last year, these highly fragmented industries contained 129 terrestrial broadcasters and over 375 multi-channel cable operators. On the surface, these numbers insinuate that subscribers have been on the receiving end of a plethora of programming. The reality is that Japan's cable and satellite services have been less than user-friendly: The household penetration levels tell the real story. As of March 1999, the total number of subscribers to cable systems was some 7.94 million, of which approximately 2.9 million were hooked up to multi-channel cable operators, offering the likes of CNN, BBC WORLD, ESPN, J Sky Sports and various movie channels, and the rest to local broadcasters, re-transmitting terrestrial programs and local service broadcasts. In real terms, however, these are measly subscription figures with a household penetration level of just over ten percent. And with respect to Japan's 46.8 million TV-crazy households-99 percent of which, according to the Ministry for Posts and Telecommunications (MPT), have color television sets-a glaring anomaly.

But why has the industry in Japan, where viewers spend more hours glued to the TV than any other nation in the world, been so slow to develop? The reasons for this stunted evolution are manifold, not least of which is the rash of government restrictions and regulations placed on it and only lifted in 1993. These guards prevented companies from owning more than one operator, limited them to operating channels only in their own local area and placed restrictions on foreign ownership.

Keanu Reeves in The Matrix © 1999 WB and Village Roadshow Film Ltd./Photo by Jason Boland

But the situation hasn't changed overnight since deregulation. Nor is it likely to. "Cable hasn't just flourished since deregulation. Japan is an extremely difficult market to get into," according to a spokesperson for Jupiter Communications (J-com), Japan's largest multi-channel cable operator.

As of the end of September this year, the company had nearly 740,000 subscribers to its cable TV service, 59,000 for its telephony and just under 100,000 for its high-speed Internet. It is currently generating as many as 45,000 new customer sales a month, still small numbers given the market potential.

For one, an adequate infrastructure for cable transmission barely exists. "With such a high density of multi-dwelling units, i.e. apartment blocks, an almost unilateral decision by owners not to invest in wiring the buildings for cable when they were being built has made it difficult to make real progress in the short-term," says J-com.

But the company is hoping that the high percentage of young people who traditionally live in apartment complexes, and for whom cable's IT offering would be most attractive, will help to accelerate the process of cabling and making the maximum number of homes and buildings marketable.

Consumer demand does have a limit, of course. Ninety percent of Japanese homes have access to six or more channels that are offered for free and new BS (broadcast satellite) digital broadcasting services, beginning this month, may also be free to a certain extent. Moreover, the relatively late relaxation of broadcasting controls has meant that cable companies have been forced to jostle with a glut of program providers, not to mention omnipresent video outlets, for customers. Local cable operators have also been limited by technology; they can distribute anywhere from 20-50 channels, depending on their bandwidth capabilities.

This stands in stark contrast to countries with high penetration levels like the US, where cable services like HBO, CNN, and ESPN and MTV were afforded a much freer hand in trying to attract customers in advance of the video explosion of the '80s.

"Japanese cable companies just don't have the luxury of that window of time, a la cable in the US before video took off," according to J-com. "In the States, they were able to get it going before any other alternatives were available. In Japan it's the opposite. It's a whole different dynamic."

Bet on Internet
But the market is changing rapidly. And ironically it's not TV programming that the operators are pinning their hopes on to lead a cable charge.

"Cable TV per se may not drive penetration up, but it's our hope that computer convergence and interactivity could bump it up to 40 or 50 percent," says J-com. "Cable offers the opportunity for other products-like telephony and high speed Internet-that alternative mediums like satellite just can't. What the cable companies are looking to do is to accelerate the convergence of what you can do on the Internet and what you can do with your TV, but in a TV-centric way, which a lot of customers would be more comfortable with."

Tokyo-based cable company Mediati are just one group, alongside more established names like J-com and Tokyu Cable, that are aiming to hitch onto the impending marriage of home entertainment and information technology to exploit an insatiable public appetite for audio, video, games and interactive content. Operating since May, they currently provide general programming including ESPN, BBC WORLD, CNN, J Sky Sports 1, 2, and 3, as well as a variety of movie channels. This is coupled with high-speed Internet access and, from next year, interactive features. Along with many companies, they are now in the process of upgrading to fiber optic lines and are currently establishing a digital, interactive TV center.

"Up until now, while cable's been important for individual communities, it's not been a very progressive medium. It's generally been pretty underdeveloped," according to John Flanagan, Mediaiti's vice president of products and marketing. "At present, the big companies are bringing existing, smaller cable companies together to form a more homogenous group. This consolidation, and the efficiency that it brings with it, will allow us to launch much more interesting services through the medium that individual operators don't have the means or the resources to."

In September this year J-com became even bigger, merging with Japan's second largest cable operator, Titus Communications. J-com, which distributes Shop Channel, Discovery Japan, LaLa and Nikkei CNBC amongst others to Japanese homes, have already begun to replace existing cables with fiber optic ones. Fiber optic lines can carry information some 450 times faster than conventional telephone lines, and once installed they will allow users to download digital video and audio material into the home with minimal reduction in quality.

"The cable operators are starting to offer bundled services, with Internet access and telephony, along with standard distribution and multi-channel services," says Steve Hofmann, vice president of finance for Jupiter Programming Co. (JPC). "They are effectively becoming all-in-one communications companies."

The advances will enable broadcasters to offer value-added services such as electronic program guides and interactive services, including home shopping, gaming, and pay-per-view. The MPT reckons that digital broadcasting implementation nationwide will be completed by the end of 2006. The next generation of TV will also be able to support web browsing, email and video-on-demand.

Interactive TV, the jewel in the cable broadcasters' crown is already being widely touted as the next generation of the Internet. Microsoft has already announced that the next consumer version of its Windows program, due in 2001, will not only let viewers watch TV on their PCs, but join in as well. "A new breed of PC appliances is emerging aimed at home entertainment rather than workplace productivity," said John DeVan, senior vice president of Microsoft's TV division.

Plenty of sports action is aired daily © NFL

Microsoft's Enhanced TV is designed to allow such things as interactivity with content, playing along with game shows, email, chat features and personalization, including customized electronic program guides. Viewers will be able to easily transmit data from their TVs to personal computers and other Internet-compatible devices.

In the not-too-distant future your boob tube will be a lot smarter. "For example, if you're watching a show, and you like the dress on one of the actresses-you can find out who made it, how much it costs, and buy it there and then," says Flanagan.

Some available set-top boxes include an 8.5GB hard drive that can record and replay a broadcast before the end of the show. So if you miss the start of your favorite program you can watch from the start while it's still recording. In the US at present, some viewers can receive trailers that integrate with the electronic programming guide. So if you click on a still frame from Ally McBeal, you'll get the broadcast trailer of that episode, working up to a week in advance.

Eye in the sky
Variety has been the buzzword for satellite television, already in the digital age. But with nationwide cable lines getting a technological facelift, broadcasters like SKY PerfecTV! will have a fierce rival. "Cable is a very powerful competitor to satellite, and will become even more so as it digitizes its infrastructure. It has the one-stop shop advantage of being able to offer terrestrial BS and CS television services, which the DTH operators can't match," says an industry source.

Satellite television is currently the most popular form of pay television service in Japan. At present, however, only SKY PerfecTV!, founded in 1996, is offering open-platform, i.e. pick-and-choose, satellite programming. SKY PerfecTV!'s main rival in Japan, DirecTV Japan, announced in March that it was to terminate its Digital Broadcasting services, having failed to compete sufficiently strongly in Japan's crowded marketplace. Although the price of cable and satellite for comparable packages is roughly the same in terms of subscription fees, SKY PerfecTV! is able to offer over 174 channels as compared to local cable operators, who distribute anywhere from 20 to 50 channels, depending on their bandwidth capabilities.

Currently, SKY PerfecTV! punters must install a set-top box and a satellite dish receiver. That equipment usually retails for around JY16,000 - JY32,000 and is available from most large electronics stores as well as large merchandisers like Ito Yokado. Alternatively, customers can acquire the equipment through an installment purchase or lease, although the three- to four-year financial commitment present in many cases can be a big turn-off for customers. On top of the initial set-up cost, customers then pay a basic monthly fee ranging from JY950 to JY7940. Set-up fees for cable, on the other hand, are presently somewhere in the region of JY15,000-JY35,000 for installation, with a monthly fee paid thereafter.

"America's Most Wanted" © Twentieth Century Fox. All rights reserved

As of August this year SKY PerfecTV! had over 2,226,000 subscribers and recently was listed on the Tokyo Stock Exchange, hoping to use the proceeds of the sale of shares to acquire the rights to Serie A football and the 2002 World Cup amongst other things. The company has also expressed its intention to provide interactive services using new set-top box technology, including the use of built-in hard drives to record programming. However, the nature of SKY PerfecTV!'s satellite broadcast at present means that the company can't offer the same types of telephony, Internet and two-way interactive features that the cable companies can without a degree of latency. In layman's terms, satellite TV, which still relies on existing phone lines to transmit information as the viewer interacts, will always be slower than digital cable lines.

The concept of two-way, or truly interactive TV is what the cable companies are hoping will help them to overtake satellite as the medium of choice for the square-eyed. However, despite their broad range of programming and data services, satellite and cable TV still face stiff competition from those channels, existing and forthcoming, offered by NHK and Wowow. In particular, NHK's BS channels had a subscriber base of over 10 million as of March of this year, while Wowow, operated by Japan Satellite Broadcasting Inc., is estimated to have had around 2.5 million subscribers. BS broadcasters currently offer four television channels-two from NHK (BS1 & BS2), one by Wowow, and one used for pilot broadcasts in the Hi-vision (High-definition) format.

Moreover, new broadcast satellite services using digital technology are also set to begin in Japan this month. Six broadcasters, five of which are affiliated to the terrestrial broadcasters, have obtained licenses to participate. They are expected to offer a total of ten channels, five of which will be free. Some of the channels will also integrate data broadcasting functions. In addition to television programming on the new channels, eight broadcasters have announced plans to launch interactive services similar to those being touted by the cable companies.

So what does the December launch mean for the industry and the consumer? "The whole premise of BS digital is high-definition TV. And the types of programming available will certainly be enhanced by the new format," according to J-com. As yet, that programming remains somewhat of a mystery, but the cable companies may well be concerned that BS digital's capacity to utilize fiber optic lines is a direct threat to their own big-selling point over satellite and other transmission forms. Ultimately, however, it seems likely that many prospective customers will delay a decision as to which format to plump for until they can weigh up the respective merits of each system and how long they may have to wait for the benefits of fiber optic cable to reach their household. Indeed, playing the waiting game may be the best policy, since prices across the board are likely to fall to some extent as the various operators try to attract customers to their offering in an increasingly competitive and cramped market.