Sky is to cease broadcasting its channels free-to-air on Freeview and has announced plans for an incremental pay-television proposition currently called Picnic. This will provide digital television, broadband and telephone services and will be operated as a standalone business. In a classic spoiling tactic, the British satellite broadcaster announced the service on the eve of the launch of the new Virgin 1 channel on cable.

BSkyB currently broadcasts three channels on digital terrestrial television in the United Kingdom: Sky News, Sky Sports News and Sky Three.Sky announced plans in February to develop a new subscription service. Sky has applied to the regulator Ofcom to vary its licence.

Sky is initially proposing to replace the existing free-to-air channels with subscription services, broadcast in MPEG-2. In conjunction with multiplex operator National Grid Wireless, Sky is in discussions about moving to MPEG-4 compression to allow it to offer additional channels.

The proposed channel line-up will be Sky Sports, Sky Movies and Sky One, providing similar services to those on satellite, with the option of separate promotions and advertising. Sky is proposing to carry a children’s channel and a factual channel from two third party broadcasters in the daytime on Sky Movies and Sky One. Sky is also asking for permission to carry Sky News as an additional channel.

Sky is proposing to encrypt these subscription services with conditional access technology provided by NDS, the News Corporation subsidiary that provides these services for Sky on satellite. It says the technology can be licensed from NDS by any manufacturer for a nominal fee to cover integration costs, and that they will be free to include support for other conditional access modules using a common interface.

The use of MPEG-4 encoding and NDS encryption will require a new set-top box specification and Sky says it is already in discussions with manufacturers. It says it will ensure that these boxes are compatible with both existing and future services on Freeview, including interactive applications broadcast using MHEG-5 1.06.

Set-top boxes could also contain an integrated digital video recorder, which could support the Freeview Playback specification, and they could also be capable of receiving video-on-demand services streamed via a broadband connection.

Sky will offer broadband and telephone services, available both as standalone services and as part of a bundle, using the Easynet fibre network it has previously acquired and now says will be available to around 70% of homes in the UK.

Sky is also envisaging viewing of its services on personal computers and is in ongoing discussions with manufacturers and operating system providers regarding the incorporation of both digital terrestrial television tuner and the necessary conditional access and copy protection software.

Sky has once again demonstrated its mastery at manipulating public relations, choosing to announce its Picnic package on the night that its rival cable operator launches its Virgin 1 channel.

The Sky announcement adds a little more detail to plans that the satellite broadcaster first announced in February and for which it is seeking regulatory approval.

In tying the availability of its Sky News channel to the use of MPEG-4 compression, Sky is effectively offering to maintain a plurality of news providers in exchange for technical innovation that will enable it to offer more channels. MPEG-4 compression is also likely to be a requirement for any high-definition channels that could be offered on the digital terrestrial platform.