Regulation of Information and Communication Technologies - Digital Terrestrial Television - Case Study Example

Innovation and Regulation of Information and Communication Technologies Introduction Several economic as well as regulatory factors are responsible for the conversion of the Digital Terrestrial TV (DTT) from a failure to a success after 2001. The initial launch of the DTT in the different European countries met with limited success in the decade of the 1990s. Gradually helped by policy changes, a viable economic model was developed which facilitated the successful implementation of the DTT. It also replaced the Analogous Terrestrial Television System in the various European countries. This paper attempts to enumerate the process and factors behind these developments. Economic and Regulatory Factors responsible for the Success of Digital Terrestrial TV after 2001 According to a new global report on Digital Terrestrial Television (DTT) published together by Digital Technology Consulting and Screen Digest, long-term success of the DTT depended on whether broadcasters were successful in developing specific revenue streams from the DTT broadcasts and also how they adapted their business models to local market conditions. If the business models of DTT are studied in the different European countries, three distinct business models can be noticed. The first model includes the Pay – TV Platform where the DTT services were offered as the premium content in direct competition to cable and direct-to-home (DTH) satellite services. UK, Spain and Sweden adopted this as the original business model of DTT. The second model consists of the FTA Platform where DTT was offered as a variety of free-to-air (FTA) channels. Italy, France and Germany adopted this as their business model. This also happens to be the business model of UK since 2002. The third model comprises of the Hybrid Platform where the DTT service combines a number of FTA channels within a limited payment. UK, Sweden, France and Finland have migrated to a hybrid DTT model (Oberst, Obradors & Garcia 2005, p 5; Starks 2007 p 168-172). Further analyses help to infer that the FTA Platform has contributed mainly towards expansion of the DTT services among the major European countries. The United Kingdom first operated on the Pay-TV Platform from which it switched to the FTA Platform. It now operates on a hybrid of Pay-TV and FTA Platform. Germany previously operated on the FTA Platform from which it now operates on a Pay TV using DVB-H trials. France used to operate on the FTA Platform from which it has now switched to combination of the FTA Platform and Pay-TV. Previously, Finland operated on the FTA Platform and now it operates in the FTA Platform and the Pay Channels. Sweden was on the Pay-TV Platform from which it has switched to a combination of Pay-TV Platform and FTA Channels. Italy used to operate on the FTA Platform from which it migrated to a combination of FTA and PPV (Oberst, Obradors & Garcia 2005, p 6). A Successful DTT Launch There have been four factors identified as necessary to a successful DTT launch: Firstly, there should be the availability of low Cost Set Top Boxes. These are widely available over an attractive range. Secondly, there must be co-operation between the various key and DTT stakeholders. Development of the DTT service requires the amalgamation of the interests of a range of stakeholders which includes policy makers, regulators, content owners and also multiples and network owners. Thirdly, there must be strong communication of DTT offerings and benefits to the potential customers. It has been found that consumers are not aware of the value of DTT. So a successful implementation of a DTT service requires a strong campaign of market communication informing the potential buyers about the presence and content of the DTT offering, the subscriber benefits, the technical issues including coverage, set top boxes etc. and exact switch-over dates of the service. Fourthly, there has to be an attractive offering of tangible and affordable benefits to the subscribers (Oberst Obradors & Garcia 2005, p 8; Starks 2007 p 168-172). The success of a DTT service also depends upon the market situation in that particular economy. It is found to depend on the following conditions: Content: The content that is offered through the DTT service (including interactive content) must be unique in both quality and quantity from that which is already available in the market at the same price Cost: The success of a DTT service depends on the total cost of the supporting platform which includes subscription charges and one-off costs Technology Improvements: The success of a DTT offering also depends upon the technological improvements that the service can offer its subscribers from time to time which include improving sound and picture quality, facilitating portable indoor reception etc The DTT Service offered on the FTA Platform has been found to meet these criteria in a number of countries. (Oberst Obradors & Garcia 2005, p 9). Technology as a Differentiator; not Interactive Services During the launch of the DTT service in their respective countries, UK, Spain and Finland strongly propagated the potential of the Interactive Services offered through the DTT. However in all these cases, this was not adequate to generate demand for the DTT service. On the other hand, in countries like Germany and Netherlands where consumers had access to existing powerful multi-channel offerings even before the introduction of the DTT services, the technical facet of the DTT service being portably receptive helped it to differentiate itself from its competitors. (Oberst, Obradors & Garcia 2005, p 11) Different countries have adopted different strategies to popularize the digital terrestrial TV. One of the key driving forces for the success of digital terrestrial TV has been the simultaneous expansion of a number of analogous services. DTT gained early success in the UK where it was found to be accessed by 600,000 households in as early as 1999. The reason for this success was that in UK where the consumers had limited offerings of multi-channel, the DTT was introduced as a multi-channel pay service. Among the Nordic countries, Sweden was the first to introduce digital terrestrial TV in around 2002. Denmark was preparing to introduce it in 2005. In Denmark, digital terrestrial satellite TV providers pursued a policy of aggressive marketing and also provided attractive schemes to their subscribers. For example, if the consumers subscribes to their services for more than a year, they were entitled to free set top boxes. The satellite and the cable service providers of the country also provided free set top boxes to their premium customers. In addition to this, they had stopped the parallel simulating of these services. Major preparations were done in the terrestrial network for the introduction of digital TV in Denmark and it was possible to have three Multiplexes due to the available spectrum resources (Brown and Picard, 2005, p 248). Factors likely to influence the relative success of Satellite, Cable and Terrestrial Digital TV following the analogue switch-off during 2008-2012 In the 1980s Europe had developed its own analogue satellite system which included high definition and was called MAC. This was embodied in a European Directive and was actually a reaction to the Japanese development of analogue HDTV. Gradually, a successful model was developed for switch off that could successfully overcome the hurdles in the transition from the analogue system to DTT. (Starks 2007, p168) Germany completed the first digital switchover in the world in 2003 in its capital city of Berlin. Cable and satellite dominated the German television market and only 2.6 million households (out of 36 million households) relied on terrestrial television reception. Thus, the analogue terrestrial switch-off in the country directly affected a relatively small number of people (Starks, 2007, p 174). This switchover in Berlin demonstrated that regional switchover was feasible because it was easy to distribute the Set Top Boxes due to the limited geographical area. This also lowered the risk for the broadcasters (Starks 2007, p 172). A regional switchover model along the similar to that of Berlin was put into action in other parts of Germany, UK, Sweden and the other member states (Oberst Obradors & Garcia 2005, p 15). The Effects of the Analogue Terrestrial Broadcast Switch-off and the Shifting towards Digital Television The switch-off of the analogue broadcast will produce many beneficial results. These include access to a higher quality of television and the releasing of spectrum which can then be used in other activities, An important question to be considered is will digital terrestrial television simply replace analogue terrestrial television or should the latter be replaced by a combination of digital television platforms (Oberst Obradors & Garcia 2005, p 17; Starks 2007 p172) Over the past two decades, developments in the technological field have led many technological platforms to provide digital television. Firstly, there has been the development of Digital Terrestrial Television. Secondly, many satellite (DTH) operators of Digital Television have been launched. Thirdly, Analogue terrestrial TV cable networks have been upgraded and new digital cable networks have been constructed. Fourthly, recent broadband networks have also been established as strong digital television platforms. Among these, the first two: DTT and DTH have a wireless reception means. Only the Digital Cable Network uses wireline reception. (Oberst Obradors & Garcia 2005, p 19) In recent times, compared to the Analogue Terrestrial Television the digital television platforms offer greater potential with respect to Coverage, Capacity, Local Content, Interactivity and Information and Communications Technology, CPE Cost and Robustness. It has also been found that wireless platforms (DTT and DTH) incur lower transmission costs than the wireline platforms (Digital Cable Network). (Oberst Obradors & Garcia 2005, p 20) In the absence of the Analogue Terrestrial Television, it can be presumed that the digital television service will be voluntarily provided by the broadcasters being driven by commercial gains. The real challenge lies in expanding the digital television service to non-urban areas which might not be commercially viable. Since Digital Cable Networks would incur high transmission costs, in this case the DTH Network will prove to be the only alternative to the DTT service. (Oberst Obradors & Garcia 2005, p 22 Starks 2007 p172) Considering the viability of the different forms of digital TV in countries of different size, it has been found in an analysis that implementing the DTT service would be cheaper in small countries. On the other hand for medium-large sized countries, implementing the DTH service has been found to be more economical than the DTT coverage. (In this case, the annual transmission cost per channel per household covered in EUR in case of DTH and DTTs were compared) (Oberst Obradors & Garcia 2005, p 23) Regulatory Aims and Strategies relevant in this area The DTT Service is not in the interest of the incumbent broadcasters as it has potentially higher costs. It also tends to generate more competition. For this, policies need to be devised to provide incentives to incumbent broadcasters of the DTT offering because Firstly, the Public Service Broadcaster (PSB) with a significant stake in DTT faces strong competition and secondly the Commercial Broadcasters (CSB) require a viable business plan (Oberst Obradors & Garcia 2005, p 13) Thus policies consistent with Community Law need to be devised to provide suitable incentives to such broadcasters The various incentives already provided to the Commercial Broadcasters include a significant Stake in DTT where the award of multiple channels helps to maintain the viewer base. A set of Must-Carry Obligations are given on alternative platforms. The Lower Transmission costs of the DTT Service render it cheaper than the Analogue service. There has also been Multi-platform competition. Subsidies have been also been provided as in the Berlin case (Oberst Obradors & Garcia 2005, p 14) The earlier ventures of the DTT were mainly undertaken under an unviable business model. The commercial broadcasters were burdened with high-coverage obligations. The earlier ventures also resulted in expensive set top boxes resulting from an excessive technical focus. However, recent regulatory developments have taken care of these issues. (Oberst Obradors & Garcia 2005, p 37 ; Brown and Picard, 2005, p 248) Thus the introduction of Digital Terrestrial Television has been implemented through different stages. After its introduction, it gradually replaced the Analogue Terrestrial Television Network in the various countries. Market conditions characteristic to a particular location have helped the development of the DTT in that place. Regulatory factors in the form of incentives have also facilitated the growth of this form of television. 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