The video-over-DSL service awaits the funds to go national and rumours persist that it is for sale. Whatever the outcome, the platform is a shining example of good on-demand TV. John Moulding reports

Sale speculation

Various potential buyers have been suggested including the UK satellite operator BSkyB, Google and AOL. The official line from Homechoice is that it hired investment bankers Credit Suisse late last year to seek new investment. No overall figure has been given, but chairman and CEO Roger Lynch said in January that the company needed £30 million to take a DSL-based service past 10 million additional homes. That appears to be the network cost without reference to marketing, customer acquisition and customer care.

Homechoice was one of Europe's TV-over-DSL pioneers and offers flexible video, broadband and telephony bundles. Its Replay TV (television programmes made available for seven days after broadcast), television-on-demand and movies-on-demand package is among the most sophisticated in the world. Ninety per cent of customers watch on-demand content of some kind each month and just over one-third of subscribers rent a movie per month. ARPU (Average Revenue Per User) is £420 (EUR 617) and Lynch has been promising new revenue streams from HDTV, PVR, second set-top boxes (multi-room), advertising and gaming this year.

Slow growth

The service is viewed favourably by its customers (based on Londoners known to us who use the service). Yet customer acquisition has proved difficult. Homechoice took four years to reach approximately 15,000 customers at the start of 2005. Recent progress has been much better, with 38,000 subs recorded by the end of last year and a further 7,000 added by this May. However, competition is growing too. Besides satellite operator BSkyB and its Sky+ PVR (which blunts Homechoice's greatest differentiator - its on-demand services), there is the rapid expansion of digital terrestrial TV to consider. Other threats are the new VOD and Replay TV services offered by cable operator NTL/Telewest (now merged), plus HDTV on the former Telewest networks and now from satellite operator BSkyB. Homechoice needs an ADSL2+ upgrade to introduce this service. Meanwhile, the incumbent telco BT is introducing a hybrid DTT broadcast/DSL VOD service later this year and France Telecom has said it will launch IPTV in the UK in 2006 (via Wanadoo and possibly branded as Orange TV). Other ISPs are thought to be interested in a UK video offering.

Homechoice, however, views the rapid uptake of IPTV as a potential opportunity, as well as a competitive concern. Lynch has confirmed that the company "is in discussions with a number of providers, both in the UK and Europe, about offering our platform and product as a turnkey solution." This echoes the way Telefonica is allowing Lucent Technologies to market its Imagenio IPTV platform solution to the global service provider community. Lynch does not rule out offering other TV providers access across his network either. "It is possible that we could provide a complete solution to third-parties and have begun to do so in partnerships like the one we announced with Digital Bridge," he comments. That government funded project, in East London, delivers residents of Shoreditch with TV, VOD and WebTV as part of a regeneration project, and includes 'Shoreditch TV'.

On-demand lessons

Many IPTV operators - whether interested in a ready-made television platform or not - could learn from what Video Networks has created. Operating on ADSL and using Local Loop Unbundling since late 2002, the company has built a network that passes 2.4 million homes, mainly in London. It was the first network operator of any kind, anywhere in the world, to migrate live commercial TV channels to MPEG-4 Part 10 (AVC/H.264) encoding, in the summer of 2005. But the real achievement is its early conquest of on-demand video.

The company clearly believes that on-demand content is the equal of linear broadcasting. Rather than separate on-demand services in their own 'portal', accessed from the main menu, the company mixes them with broadcast TV inside the EPG. Thus National Geographic Channel On Demand, Discovery Factual On Demand and Discovery Lifestyle On Demand (to name three) are listed in the EPG in the same place as their linear channel siblings, National Geographic Channel and Discovery Channel. Replay TV is accessed via the linear channel you are interested in. So once you select BBC ONE and enter the programme listings for that service, you can press 'select' again on the remote control to enter the BBC ONE Replay TV service. The programmes available (all of which were broadcast in the last seven days) are listed. These 'old' programmes have full trick-play functionality.

Replay TV

Replay TV is currently available on all BBC channels (including its digital-only channels like BBC THREE) and the UK's main commercial broadcast channel, ITV1. These services are available to all subscribers, regardless of which Pay TV package they buy. Homechoice also aggregates on-demand television programmes under its own branded channel, C1, which is listed at No.6 in the EPG (with only the UK's main terrestrial channels above it). C1 Taste is a scaled-down version of C1 for subscribers to the basic package. Basic subscribers (£18 per month [EUR 26] including 2Mbps broadband with options for higher broadband speeds at extra cost) have access to 18 television-on-demand offers. This is in addition to Replay TV. None of it is premium content, however. Channels include Disney Travel and Thomson TV (travel). C1, National Geographic and most Discovery on-demand content appears in the middle-tier package (from £28 [EUR 41] with the lowest [2Mbps] broadband option). Top tier subscribers (£38 per month [EUR 56] with 2Mbps broadband) get Cartoon Network, Disney Treasures and Discovery Kids on-demand, plus Homechoice's own children's on-demand channel, Scamp. These high-end subscribers also have access to ten Homechoice-owned on-demand music video channels, branded V:MX and separated by genre. There is also a channel called V:MX Download where the music tracks can be ordered for download to the PC. Recorded television is also available on a pay-per-view basis. Homechoice has just struck a deal with Channel Four to make seasons one and two of Lost and Desperate Housewives available at £0.99 (EUR 1.45) per episode. This buys unlimited views for 24 hours. Homechoice has a 'MyTV' feature that allows users to build up their own on-demand channel. Virtually every on-demand television asset on the system can be added to this 'favourites' list. Thus favourite TV episodes or music tracks can be aggregated in one place and accessed through one button (MyTV) on the remote control. Since all on-demand assets are stored on servers in the network, the system effectively duplicates the existing links to video assets.

ITV London Tonight, a news magazine programme made available on-demand to all subscribers, can be searched according to the type of news you are interested in, like entertainment. The relevant sections of a specific news broadcast are played out. Meanwhile, WhatCar? (the brand that originates from a popular car magazine) provides on-demand access to video car reviews, selected according to vehicle model. Elsewhere in the system, popular adverts can also be watched on demand. Homechoice gives its subscribers a high degree of control - even allowing them to fast-forward or rewind the barker (promotional) channel. Small children are given some ownership too, thanks to their own remote control (the brightly coloured Minimote) that can access children's TV channels only.

Behavioural changes

On-demand TV has made a real impact on consumer behaviour. The average Homechoice household spends around 20 hours per month watching on-demand content and half of subscribers use the BBC's Replay TV service. According to Lynch, branded on-demand offers are boosting linear schedules too. "When we launched Cartoon Network on Demand [now being re-branded as Cartoon Network Now], the on-demand channel became very popular and it also drove up the broadcast viewership of the linear channel,"he points out.

Homechoice offers nearly 40 television-on-demand channels in total, alongside its 50 plus linear broadcast TV offerings. There are also six movie channels including its Movies Now brand (£3.50 [EUR 5] for a new release). Free VOD is a central part of the Homechoice strategy. According to Lynch: "Most of our VOD is included in different subscription models. Our strategy is to drive on-demand usage and we believe the best way to do that is to avoid charging for everything the customer watches."