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Digital satellite - Pay TV Homes

Pay digital satellite

	Q1, 2004	Q2, 2004
Pay-TV homes	6,956,000*	7,032,000*
ARPU (annualised)	(GBP) £382	(GBP) £380
Churn	9.4%	9.7%
Base package price	(GBP) £13.50	(GBP) £13.50

Source: BSkyB Q2 2004 results

* These figures are for the UK and exclude Sky's subscribers in the Republic of Ireland.

Sky's UK subscriber base reached 7,032,000 during the quarter with 76,000 net additions to its pay-TV service during the quarter. This was an increase in the rate of take-up from Q1 2004, when 66,000 subscribers joined Sky.

Annualised average revenue per user (ARPU) for the quarter was (GBP) £380 - Sky aims to increase this to (GBP) £400 by 2005. Churn increased slightly during the quarter from 9.4% to 9.7%. but has remained below 10% for over a year..

Digital satellite - Free-to-view homes

Free-to-view digital satellite

	Q1, 2004	Q2, 2004
Free-to-view homes	231,000	305,000

Source: Sky, Channel 4, and Ofcom market estimates

Following the BBC's decision to stop encrypting its services on satellite, the scheme run by the BBC to provide free-to-view "Solus" conditional access viewing cards came to an end. During 2003, Sky upgraded its conditional access system, replacing all old "P1" conditional access cards with new "P2" cards. Any "Solus" viewers left with old P1 cards lost access to the digital satellite services of ITV 1,Channel 4, Five and S4C and therefore ceased to be digital homes, (although they can still receive BBC digital services). The same happened to viewers with P1 cards who had been subscribing to Sky pay services but had "churned off", becoming free-to-view homes.

Those viewers who had lost their free-to-view services had the opportunity to obtain a new "Solus" card under a scheme operated by Channel 4 between July 2003 and January 2004. Around 145,000 did so and this scheme has now come to an end.

A further 160,000 viewers are estimated to have churned-off Sky subscription services but have a P2 card and so for the time being still receive all of the free-to-view public service channels.

Cable

The operating statistics for the key cable companies below are as at Q2 June 2004.

	ntl		Telewest Broadband
	Q1, 2004	Q2, 2004	Q1, 2004	Q2, 2004
Homes passed and marketed	7,861,100	7,798,000	4,678,182	4,682,777
Total residential subscribers	2,923,200	2,981,500	1,742,144	1,752,553
TV homes connected	2,048,900	2,070,600	1,285,797	1,288,272
Digital TV homes connected	1,371,000	1,408,700	1,029,759	1,052,855
TV penetration rate	26.10%	26.60%	27.50%	27.50%
ARPU (annualised)	£502.92	£496.56	£540.60	£539.76
Churn rate*	12.40%	14.40%	14.40%	15.20%
Basic package price	£18	£19	£13.50	£13.50

Source: Telewest Broadband and ntl Q2 2004 results

* Telewest Broadband and ntl churn rates relate to their total consumer division.

By 30 June 2004, the total number of UK cable households was 3,367,750. Of these, 2,070,600 subscribed to ntl, 1,288,272 to Telewest Broadband, and the remainder to Omne Communications and Wightcable. Telewest Broadband showed an increase of 2,475 subscribers in the quarter, whilst ntl saw an increase of 21,700 subscribers.

Overall, the cable industry saw an increase in total subscribers of 24,175. The number of digital subscribers also continued to grow, reaching 2,469,326 by the end of Q2 2004 - an increase of 60,796 or 2.5% from Q1.

Digital terrestrial television (DTT)

DTT

	Q1, 2004	Q2 , 2004*
ITV Digital STB	500,000	500,000
Freeview adapters	2,832,800	3,264,785
IDTV's	596,400	659,700
Digital terrestrial units in market	3,929,200	4,424,485
Adjustment for 2nd sets	-461,133	-535,426
Total DTT households	3,468,067	3,889,059

Source: Freeview Q2 sales figures, and Ofcom market estimates

An adjustment has been made to account for the number of households which have digital on more than one set. Ofcom estimates that 15% of sales of Freeview adapters over the last three quarters were bought for use on second sets by people who already have digital (either Freeview or Sky or cable) on their main set. An adjustment has also been made for previous quarters of 12%, as it is estimated that a smaller proportion of adapters were used for second sets in earlier quarters. No adjustment has been made to the Sky or cable figures as these are already shown net of second receivers (e.g. a household with two Sky boxes is only recorded once).

DTT showed another strong quarter of growth, adding over 420 000 households during Q2, representing an increase of 12.1% on the previous quarter. Of these, Ofcom estimates that around 3,389,000 use new Freeview adapters or IDTV sets, with the additional 500,000 using former ITV Digital set-top boxes.

Set-top boxes have reduced in price and a number are now available for around (GBP) £50, compared with (GBP) £99 since launch. It has also been possible to obtain free-to-air digital decoders at lower prices.

TV over ADSL

Homechoice and Kingston

	Homechoice		Kingston
	Q1, 2004	Q2, 2004	Q1, 2004	Q2, 2004
Homes passed	155,530	1,247,906	105,000	105,000
TV homes connected	3,300	3,870	5,364	5,204
TV penetration rate	2%	0.30%	5%	5%
Churn rate	9%	0.30%	6%	5%

Source: Homechoice and Kingston Q2 2004 figures

The total number of subscribers to TV over ADSL increased by 4.7% in Q2 2004 to 9,074. Of those homes taking TV over ADSL, 5,204 subscribed to Kingston Interactive and 3,870 to Homechoice. Homechoice's penetration rate dropped in the quarter due to a large increase in the number of homes passed and marketed.

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