Ron Thomson is CEO of Cameron Thomson Group, a Toronto-based business development company specializing in providing corporate development and investment banking services to the media, IT and entertainment industries.

All around the world, television is morphing into something different – something portable and something so much more entertaining and interactive than most industry experts would have predicted.

Technology is, of course, the driver. But it’s not the technology of transmission – that is somewhat the same. The lesser known ‘under the hood’ global story that this piece will explore are two drivers: the receiving and distribution of video, audio and interactive gaming media – the business end of the digital TV revolution – and content and new platforms for cell phones.

In fact, two parallel technologies are driving this revolution under the overall digital umbrella. The first is ‘smart card’ and voucher-based systems for digital access and security, and the second is interactive cellular telephones. Many have heard of the joint Motorola/Apple iTunes music phone – that is just the beginning.

In high-tech Germany, even MTV is becoming involved with smart cards. In a joint effort with Norway’s Conax AS and TechniSat, MTV is encrypted and made available free of charge for one month on the cards distributed with TechniSat set-top boxes (STBs). This concept differentiates the TechniSat offering, helping the company to maintain its position as the market leader in providing STBs to the German market. Scratch cards with sealed numbers are produced with MTV logo and product info and sold through the TechniSat distribution network. This implies that the consumer, after the free trial period, can buy further access to MTV by reporting the scratch card ID and number to Conax’s back-end system.

‘The introduction of an open platform for Germany can be healthy for this market,’ notes Geir Bjørndal, Conax’s VP sales and marketing.

Some of the former low-tech countries are adopting high-tech digital television solutions. In Ukraine and former Communist countries of eastern Europe, for example, old television systems have been junked, and advanced systems have been installed, providing unprecedented choice at a relatively small capital investment.

As an example, Volia, launched in the 1980s, is the top cable system in Kiev, the Ukraine’s capital. The Kiev system is very similar to those in North America, according to Valery Salyamov, Volia’s VP strategic planning and development. ‘We have packages and tiers just like in North America – basic, extended and movie and sports packages,’ he says.

‘In 2000-2001, people started asking for more interesting content. It was a challenge to offer more channels quickly,’ Salyamov says in recounting his move to digital. Volia had to accomplish that while increasing subscriptions, revenues, penetration, and increasing profits.

‘We quickly had to digitize the network,’ Salyamov adds. ‘Even though the network was old, we tested digital content on it. Instead of one analog channel, we could provide up to 10 digital channels, easily converting three or four analog channels into 40 digital channels. That was the quick solution to the problem.’

Rebuilding the network as broadband would take at least six years of work and more capital than would likely be available.

To Salyamov, one of the conditions for digital delivery was content protection. In Soviet times, television was free, even if it was three or four channels at most. ‘It was a challenge to tell people that the company was buying content and that they had to pay for it,’ Salyamov says.

In Finland, a relatively high-tech country and home of Nokia cell phones, ‘Everyone agreed that it was good for the market and good for the consumer to go for the same kind of conditional access,’ says Anu Nissinen, president of cable company Helsinki Television.

‘Reliability and the security were critical to the choice,’ Nissinen continues. ‘Finland features an open market for cable TV. Anyone can go to any retail store and obtain a smart card from the retailer or the cable company, depending on the kind of service desired. There is no proprietary system for set-up boxes, which cost about 100 Euros. Anyone can import and buy a set-top box for any system as long as it meets the system requirements. On top of the box, of course, they need a smart card, which we rent them for 20 Euros a year. It’s modest. All of the intelligence is in the card.’

Another trend Nissinen cites is the change to automated services, including ordering by web or SMS. HDTV is also coming to Finland soon, and HTV Finland intends to be a player in that, too.

The worldwide race to provide content and new platforms for cell phones is globally the fastest-growing and largest new mass media market. Mobile telephone users are expected to reach two billion worldwide by 2006. The wireless games industry in Europe and the U.S. is expected to grow to $6 billion this year, according to Datamonitor, which also states that ‘wireless games will be the single most important driving force behind next-generation mobile devices.’

The implications for Canada are immense. When consumers can be more mobile with a product, they will buy gadgets and services, as the iPod proved so well, and we are already anticipating the revolution that will occur as a result of the new video iPod. Smart cards offer this same potential as well as many cellular telephone possibilities. Television will also be ordered by cell phone in the future we are outlining.

There is a definite need for new ideas in the digital future. To rely on cumbersome older technology here in Canada, especially in digital television, is counterproductive to the high-tech society we are trying to create. The cell-phone operators, some of whom are also in the cable television business, appear to understand this very well when it comes to their handset business.

In digital television, the consumer knows he or she wants choice and ease of use, and yet they are stuck with the same old STBs and top-down technology. To think that the digital revolution began in North America and that other providers are advancing it to a greater degree than companies here is certainly something to think about as the many pitches at the Canadian Association of Broadcasters are heard.

www.cameronthomson.com