Freesat is facing a difficult birth, with public confusion over what it offers, fierce competition from Sky and poorly prepared retailers. Katy Elliott reports on what may - or may not - turn out to be the future of satellite HD.

Another week, another digital TV offering. As the BBC and ITV proudly unveiled their new service last week, the question on everyone's lips was whether Freesat will prove another Freeview-style success story or an ITV Digital-style disaster.

The platform's name - Freesat - bodes well as it sounds like a hybrid of Sky and Freeview: both strong digital TV brands. Like Freeview it requires a one-off, no-strings-attached payment, but like Sky it's a satellite service requiring a dish and installation.

All the channels offered by Freesat, apart from ITV HD, are already available on Sky's own Freesat service, which offers about 200 TV channels for a one-off charge of£150 or£20 for existing Sky customers.

The question is, given its belated launch five years after it was first proposed, is Freesat going to confuse consumers or will it be the service that succeeds in converting the remaining 13% of analogue households to digital?

Consumers already face a dizzying array of choices. There are satellite, cable and terrestrial platforms. There are numerous pay-TV packages and pricing tiers from Sky, BT Vision and Virgin. There are hard drive recorder boxes, HD packages, different levels of interactivity and continual upgrades to be made.

The evidence suggests that there is real confusion among consumers about digital TV. Asked about her understanding of Freesat one high street shopper who was looking to upgrade from Freeview says: “I think it's a way of getting more TV channels without signing up to Sky or cable. I've read it's something to do with HD, but I don't know what HD is. Is that what everything is changing to?”

Alison Hopkins, senior policy officer at the National Consumer Council, says the organisation is relieved Freesat is available at last because it gives people a choice of satellite options for switching to digital. But she adds: “Consumers are already confused about how to compare the digital options, so it will be crucial to give them clear information about what Freesat has to offer and how much it will cost.

“This is even more important now that HD TV is part of the mix. [Freesat] will have its work cut out to get the message across effectively. Now [consumers] will also have to work out how much ‘free' HD TV will cost them and whether it's worth paying the extra now.”

Freesat believes it has a pretty straightforward proposition. Its campaign hinges on four key elements. First, after an initial one-off payment, Freesat is free. Second, it boasts full coverage, whereas at the time of digital switchover around 10% of UK TV homes will still not get the full Freeview service.

Third, and perhaps most importantly, Freesat claims to offer free HD TV for the first time with BBC HD and the soon to launch ITV HD, the latter being exclusive to Freesat (although this is disputed by Sky which says its own Freesat service already offers BBC HD).

“There are currently 9.6 million HD-ready TV sets sold now,” says Freesat chief executive Emma Scott. “But HD-ready doesn't mean you're watching in HD - you still need to subscribe to a service. Freesat releases the potential of HD-ready sets with a one-off purchase of equipment.”

Scott says that through a national press campaign, the company's comprehensive website, its retail partners (Argos, John Lewis, Comet, Currys, Dixons and independent retailers) and its own helpline it will seek to explain what “HD ready” means and how viewers will experience five times the picture quality and surround sound with HD. In addition, ITV and the BBC will carry out their own platform-neutral campaigns to drive viewers to their HD services.

Fourth, Freesat will keep adding more services including the BBC iPlayer and the Kangaroo catch-up TV service developed by the BBC in partnership with ITV and Channel 4, plus an additional 20 to 30 new channels a month to bring it up to 200 within its first year. The products will be fully updateable through over-the-air downloads, meaning consumers won't have to buy a new box each time a new service is available.

“But it's not just plug in and play like Freeview,” concedes Scott. “We want to make sure there's a level of assistance with the sale. We've done a lot of work with the stores to make sure they know about the installation process and to make sure they are working with accredited installers.”

But Freesat may have its work cut out at a retail level. A message on the Freesat website reveals that there is currently a shortage of boxes in shops. “We are working with retailers and manufacturers to increase supplies as soon as possible.” Meanwhile sales support is also an issue, as a visit to my local Curry's demonstrated. An assistant asked me to wait while she found someone who could explain the product. A quarter of an hour later she gave me a leaflet. Eventually I managed to corner the manager who said he didn't really have any information and that they weren't expecting any boxes for weeks.

A Freesat spokesman assured me that I would find the sales team at John Lewis in Oxford Street totally on message but conceded it was an uphill task informing every salesperson in electrical retail. “It's very hard to get through the retail chain but we're doing all we can.”

While many continue to question the need for another service given that Sky can provide universal digital satellite coverage and has its own Freesat offering, there will certainly be some who are attracted to the service because of its close association with the BBC and ITV brands.

“How well Freesat succeeds in its tussle with Sky will depend on the perceived added value of its HD and DSL offerings,” says Toby Syfret at Enders Analysis, adding that he anticipates the BBC and ITV extending their HD services and being joined by a C4 HD service as well.

“But, there will also be associated extra costs and doubtless heavy extra promotional investment as the public service broadcasters champion their Freesat in the teeth of fierce opposition from Sky. ITV and C4 could hope for slightly higher viewing shares on FreesatÉ but, extra ad revenues are likely to be marginal.

“Once again, we have a tale of the digital age throwing up new opportunities, but adding to the overall costs without significant benefits to commercial media.”