The Major Competitors for the Digital Television Communication - Case Study Example

UK Digital Television Market: Competition, Benefits and Costs Introduction: The rapid advancement to the communication technology is bringing a number of advantages to the users of the improved technology. One of such advanced development is the digital television. While the consumers generally recognize the benefits of the advanced technology, they are also aware of the complexities and other disadvantages like intrusion and other anti-social incidents. The major objective of technology today is to align itself with the preferences of the consumers as to the ways in which they would like to enjoy their leisure time. This is becoming increasingly important as the customers depend on the improvements in technology for their day to day needs. In this context the Digital Television technology is offering a wide range of benefits to the consumers. At the same time the technology is not left without competition both in terms of the hardware and also from other kinds of service providers in the visual communication media. This report presents some ideas on the major competitors for the digital television communication and also its relative merits and cost advantages to the consumers. Competitors in Digital Television Market: The three different digital delivery platforms – terrestrial, cable and satellite – have operated as a potential hindrance to the growth of the digital TV market in the UK. The early market entrants have created proprietary systems that have affected the growth of the digital TV. “The competition between the satellite and terrestrial platforms is such that set-top boxes are now being provided free to digital subscribers.”(Europa) The other competitors that are identified to slow the progress of digital TV are the Internet Protocol TV (IPTV) High Definition TV (HDTV) and the mobile TV. IPTV: However out of these IPTV is not likely to pose any stiff competition presently to Digital TV despite the support from the service providers. “IPTV is primarily a defensive move by the major service providers rolling out services. While they have the potential to generate additional revenues for operators, the key driver of deployment - in the short-term at least - will be improving customer loyalty and adding greater depth to the services provided to consumers over ADSL networks.” (CBR) But in future this particular segment is sure to act as a major competitor for digital TV. Personal Video Recorder (PVR): Being an additional service offered by the Pay-TV operators the penetration level of PVR is not that significant in the UK context. Since PVR represents a time shifted viewing this segment may develop into a powerful competitor in the future as in the US already 18 percent of the households were having a PVR at the end of 2006 though the development in Europe is not that significant which remained at 2 percent of the household having a PVR. High Definition TV: Even though there is no potential threat of competition from the HD TV presently due to lack of HD programming in the UK the likelihood of this segment becoming a major development in the digital technology area is imminent. The promotion of free set-top boxes from the Pay TV operators has seriously affected the integration of the digital TV market. On the service side there are various service providers providing different forms of services to attract the consumers. ‘Freeview’ has an important role to play in the Television market offering over 40 channels delivering digital television through a standard antenna. All entertainment avenues in the form of music, news, sport and films are available freely to the customers and freeview is in hot demand with ‘no price’ as its selling point. “Sky provides a service for which people are willing to pay. Its base package alone provides a far greater choice than its free competitor, while those who wish to broaden this foundation are free to select from packages that will deliver everything from the latest blockbusters to live premiership football. Freeview is the standard, no-frills option; Sky opens up new horizons.” (Digital TV Review, 2007) Sky also offers the advantages of High Definition TV with a competitive pricing to its customers which offer a wide screen picture quality. Others in the fray are British Telecom attempting to enter the television market as an extension of its traditional telephone network. BT Vision “service is powered by a sleek V-Box and, while providing access to all the Freeview channels, the company has embraced the on-demand market.” (Digital TV Review 2007) BT is looking at the option of delivering the TV services over the broadband to get to the consumers the High Definition contents faster than the usual television broadcasting techniques. NTL Telewest is another service provider that always matches its programmes in straight competition to Sky. Benefits and Cost Advantages of Digital Television: “The UK remains the only country in Europe with over 50% of households having digital television services. It is estimated that, by 2010, 95% will have made the transition to digital TV and the UK will remain the most penetrated digital market in the region.”(CBR) “Digital TV is a new, more versatile form of sending information. Using the digital model, signals are more compact than the current analogue system; this allows for multiple channels to occupy the same air space that a single analogue channel currently resides in. Digital television benefits from a better image and sound quality than analogue TV, and reception is less affected by the weather.”(Digital-TV.Co.UK) The research commissioned by Ofcom the official UK television regulating authority entitled ‘Communications market: Nations and Regions Report (2006) has identified the following benefits of the digital Television to the consumers: Improvement in picture quality and greater ease of use are the two major advantages that have resulted out of the digital TV. The chance to view a greater number of channels is another distinct advantage that needs to be considered as the direct result of digital TV technology. The use of television sets as a way to listen to music, or a monitor for console games can also be claimed as the benefit of digital TV. “Two broad themes cover the more advanced digital TV functionality that consumers find most attractive: features that make it easier to watch when you want to (e.g. Personal Video Recorders), and features that make it easier to find what you want to watch (e.g. electronic programme guides).” (Ofcom) Digital programmes can also entertain the hearing and visually impaired viewers by having special features like audio description, subtitles, on-screen signing. The digital subscribers with service providers like Virgin or Sky can take advantage of the features like TV shopping, email through television, games and even the customers do their banking through television. Thus “most consumers are aware of digital TV, and recognise some of its benefits - but this often focuses solely on greater channel choice and improved picture quality. Consumers typically do not automatically associate digital TV with ease of use, information or control benefits, despite frequently believing that these would be valuable improvements to current TV services.”(Ofcom) PEST Analysis for Digital TV Market in the UK The following is the PEST analysis for the Digital TV market in the UK Political Factors: 1. The foremost political factor that goes in favour of the digital TV market is the switching off of analog TV region wise between the years 2008 and 2012. This enhances the market for the Digital Technology based television activities to a large extent. 2. The official telecommunication regulatory authority is in favour of introducing digital technology to the maximum possible extent to ensure a fair competition among the different service providers and also the authority is interested in brining the latest technology to the country in public broadcasting services for the free view of the common people. This encourages the digital TV market in the country. Economic Factors: 1. With the switching off of analog TV it is estimated that 95 percent of the households in the UK will change to the digital TV which ensures a steady growth for the industry. 2. With the provision of value added services like interactive TV or education TV to the consumers the market is only expected to grow over the period. 3. The introduction of High definition TV which can be received by the digital TV users is likely to take off in the near future once more attempts are taken to make programmes with the HD technology. This will improve the market for the Digital TV segment also. 4. Increased competition among the service providers has lead to a number of corporate mergers and acquisitions in the industry for a healthy economic development. Social Factors: 1. The distinct advantage of the Digital TV technology is the improvement in the quality of viewing by the consumers Quite unlike the analog TV presently in vogue digital TV provides an excellent viewing quality and the more number of channels is another social factor that needs consideration. 2. Interactive television will greatly benefit the education system and is of immense use to the universities and colleges. Already there is the provision of Shopping and email facilities being provided by service providers like Virgin on the digital TV. 3. Enhances free viewing on public broadcasting service is sure to improve the knowledge base of the people over various national and international issues which is important for the knowledge growth. Technological Factors: 1. Based on the digital TV technology several innovative services have been developed. The Digital TV is really a technical boon for the consumers. IPTV. HDTV and Mobile TV are the important technological developments that digital technology has contributed. 2. Interactive Media Player, Personal Video Recorder are some of the other technological excellence which are the offshoot of the digital TV technology. 3. “Digital TV also offers other benefits, such as a greater selection of widescreen programming, and on-screen electronic programme guide, interactive services, and in some cases, Dolby 5.1 surround sound” (Digital TV) as additional features to entertain the consumers. 4. The additional facility of recording one channel while watching another is a distinct technological feature of digital TV technology. With this facility the viewer can record a digital channel while watching a non-digital channel. Conclusion: Due to the regulatory intervention in the Digital TV market there has been a number of mergers and acquisitions forcing the companies to concentrate on the fight for the market share instead of looking in to the possibility of expanding the size of the market. This is definitely a factor that hinders the growth of the digital TV market. However there are other compensating factors like value added services in the form of high definition TV services and video on demand service. The introduction of ADSL is another area which provides a boost to the digital television market as the major telecommunication companies enter the market for offering PayTV and other transaction revenues. “The advent of unmetered internet access combined with a huge increase in the number of internet users in the UK is also likely to stimulate the market for internet-delivered audio-visual services.” (Europa) Ofcom’s Digital Television Progress Report for the first quarter of 2007 (January – March) reveals that there is a marked increase in the usage of digital television which stood at 80.5 percent with 20.4 mullion homes using the digital television in contrast to the 77.2 percent of the previous quarter. Chief Executive of Ofcom Ed Richards says "More than four in five UK households are now enjoying the benefits of digital television. It’s great news that we are continuing to see the market grow strongly as we approach the start of digital switchover." (Ofcom 1)This ensures the steady growth and sustenance of the digital TV market in the UK despite the developments of competitive forces. References: CBR ‘187 million digital TV households expected across Europe and the US by 2010’ http://www.cbronline.com/article_feature.asp?guid=925350F2-C1F9-4000-8060-AA33F12D23F6 Digital TV ‘UK Digital TV Explained’ http://www.radioandtelly.co.uk/digitaltv.html Digital-TV.Co.UK ‘Digital TV Benefits’ http://www.digital-tv.co.uk/digital-tv-benefits/ Digital TV Review (2007) ‘Sky Digital: Is the Sky the Limit?” http://www.onlinereview.org.uk/article/SkyDigitalReview.htm Europa (1999) ‘Development of Digital TV in Europe: United Kingdom’http://ec.europa.eu/archives/ISPO/infosoc/telecompolicy/en/Eurorep99uk.pdf Ofcom ‘Consumer Engagement with Digital Communication’ http://www.ofcom.org.uk/research/cm/consumer_engagement/ Ofcom 1 ‘Digital TV in over 80% of UK homes as Freeview overtakes Sky subscribers’ http://www.ofcom.org.uk/media/news/2007/06/nr_20070620 Read More