Maybe the costs involved in introducing MPEG-4 tech outweigh the costs of increasing bandwidth on the network. Which I doubt.
From personal experience, compressing a 15mbps CBR MPEG-2 sample of BBC content with Mainconcept's h.264 encoder, it was ~half the size and bit rate whilst retaining similar quality to the original. Obviously I'm guessing broadcaster's much more efficient hardware encoders and compressing from an uncompressed source would produce a better result but along the same lines.
For just jamming on MPEG-2 HD, as far as the network goes as it is now, I doubt the entire spectrum of ntl's coax network is being used; all 2gbps of it. It all depends on how much of it is useable, less for the crappy parts and whether the STBs can take it. On face value of official ntl propaganda, there should be oodles of bandwidth left for HD. Otherwise, changing to EuroDOCSIS and varying modulation as far as an operational network will allow are the only upgrade paths I can see.
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MPEG-2 quality it much better than MPEG-4.
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Mails Crushed, that is not true. I would question if you ever actually have seen an HD MPEG-4 stream.