From July 1st, Cable And Wireless will offer a digital cable television service on networks in North West England. It will roll out the service on it's London nets in October. The move is one of the greatest threats to Sky Digital and perhaps to OnDigital, the UK's terrestrial digital television broadcaster.

Though the UK has traditionally lagged behind the rest of Europe with a cable penetration in the region of 20%, cable delivery of digital television is seen as the most logical and reliable delivery path. Furthermore it is easier to implement value added services such as telephony and internet access over a cable net. The new service will be priced at £9.98 per month for the basic tier of channels and a telephone connection.

One of the fundamental shifts that seems to be occuring is that what was previously carried over the air is now being carried via wire and what was previously carried by wire is now being carried over the air. This switch is called the Negroponte switch after Nicholas Negroponte of MIT who first postulated it. Over the air bandwidth is, in satellite terms at least, a very finite resource. While digital satellite methods seek to use every last bit, the bandwidth is limited. With cable, or more precisely fiber optic, the bandwidth problem is not so severe. And it offers one thing that satellite does not - two way traffic.

Since the advent of the WWW, two way traffic has become more relevant and most of the back channel traffic is routed via telephone dial-ups. With digital television, internet access is a  necessity and a cable connection offers a far more economical back channel than a dial-up connection could offer and far greater bandwidth. Above all else it offers convenience.

The urban centres will logically be the most heavily cabled since they have the highest concentrations of population. Satellite delivery would tend to be more successful in the non-cable areas. Ireland has a far higher cable penetration than the UK with some 80% of the population on cable in most cities. In these areas, off-air reception is rare and sales of UHF/VHF antennas is almost non-existant. The Negroponte switch with Irish television started in earnest over twenty years ago. Almost correspondingly, sales of SkyDigital and even analogue BSkyB has traditionally been poor in Ireland and largely limited to outside the cable and MMDS nets.

While digital cable television will not totally destroy digital satellite television, it will outpace it in terms of the increasingly important added value services such as telephony and internet access. SkyDigital will have to rely on deals with telcos such as British Telecom for a back channel. At the moment, this back channel would be via an ordinary dial-up line. The roll out of ADSL is happening in the UK though cablemodem rollout is a reality for many of the cablenets in the UK. Ironically this could result in a situation of "getting there first with the mostest" for the cable companies. Though ADSL is a superior technology, the slow deployment could be very dangerous for satellite as it could deprive digital satellite television of a high bandwidth back channel in a critical growth period.

The programme deals that BSkyB has arranged will offer it some insulation. It has a monopoly on certain sports events and thus it can bring some very heavy firepower to any programme rights negotiation with cable companies. But these deals have a finite lifetime and a better funded competitor could always beat BSkyB in future bidding wars. With talks of consolidation of cable companies in the UK and investments by Microsoft, the digital television market is not just programming any more. It is becoming an interactive hybrid of programme and net. The result could spread BSkyB's resources over too many areas: free digital IRDs, new and existing programming deals, back channel and internet setups. Ironically BSkyB and SkyDigital could find themselves in a situation not too dissimilar to that of British Satellite Broadcasting prior to it's takeover by Sky - vulnerable.