Sky Television and Ihug are in discussion about a partnership on internet service that could see Sky Digital and Ultra delivered through the same Ihug dish.
Sky appears to be near overcoming the technical impediments to launching interactive applications based on the OpenTV software platform and has been contacting customers to make sure the phone jacks installed along with Sky Digital decoders and dishes are operational.
Sky CEO John Fellet says the company is four to eight weeks away from loading OpenTV software onto all digital decoders, as a an over-the-air firmware upgrade.
Despite its name, OpenTV is a proprietary interactive platform designed specifically for use with digital TV. It is not the same as the internet, but Fellet says the broadcaster has recognised there is also a market for internet access via TV.
"My feeling is that we can do the internet. You've seen the box that Ihug has that does internet on the television - there's a market for that and I think that we'll get around to that, working with an ISP so that we can focus on our business. We'd rather not learn the ISP business."
Fellet says Sky has talked to several ISPs, "but Ihug is out there doing it right now". He says he does not regret the collapse of Sky's attempt to buy into Ihug in 1999: "I don't know that the cultures would have worked out well - and as it turned out that market didn't do as well as everyone expected. We would have been buying in at probably the highest point of the market.
"That's not to say anything against the Wood brothers because I have the greatest respect for them and what they've done."
Fellet says a single-dish system for Sky and Ultra would be a potential way for the two companies to work together.
Ihug director Nick Wood confirmed that Ihug has been experimenting with a dish with dual LNBs – one to point at the Optus satellite used by Sky and one at the PanAmSat bird that provides the direct-satellite version of the Ultra service.
"We've done tests and it works into the same dish we use now with a dual LNB and we've been discussing how that might work. There is a potential that that could be happening shortly," says Wood.
"It's perfect for people that live out in the sticks and want fast internet and they can't get it from anyone but us. It beats having a dish farm on your roof."
For Sky, the first task is to prepare and deliver the OpenTV upgrade to its boxes. Fellet says it currently has engineers from OpenTV, both its decoder manufacturers and the company that provides encryption for the TV service, NDS.
"They're making sure nothing they do trips up the other side. The worst thing I could do is download OpenTV and shut off 240,000 boxes."
Fellet is reluctant to declare technical problems solved until the software is actually installed on the decoders, but says engineers have successfully installed a beta version of the software on "experimental boxes".
"The thing you have to be careful about is that there are boxes from two manufacturers out there and even though they're supposed to be compatible we've just got to make sure that some command doesn't force a channel change or something."
The company's first interactive service – pay-per-view movies – has actually been using home phone lines as a return path since October. Fellet says the company racked up 70,000 movie purchases in December, amounting to $500,000 in revenue.
E-mail and other services will follow the upgrade, but Fellet says the first feature most customer notice will be an improved interactive programme guide.