Digital TV: an international perspective

With South Africa on the brink of the digital migration of its TV services, it is useful to have an international perspective

Recently the USA went through this process and had to postpone its introduction for some months as the industry was not ready. This article discusses digital migration from a world perspective.

The transition to digital broadcasting doesn’t have to be all pain and no gain. By thinking outside the square, broadcasters can leverage digital technologies to deliver enhanced services that can not only help with audience share, but also lead to new sources of revenue.
 
On a global scale, it’s an interesting time in the world of digital broadcast television. On the one hand, some countries in Europe and the USA are in various stages of finally switching off analogue signals, thereby ending long digital/analogue simulcast periods. Meanwhile, other broadcasters ? particularly in Asia ? are cautiously trialling the latest technologies and contemplating the massive task of migration. Add to this the vast numbers ranged somewhere in between, and the result is an industry undergoing metamorphosis one gradual element at a time.

Yet it is not only the advent of digital that has changed the broadcast industry. For several decades, pay TV platforms such as cable and satellite have enjoyed high penetration in many markets. Moreover, new services such as IPTV, mobile TV and internet downloads have dramatically altered the way in which people view their favourite programs. Audiences are demanding more choice and more voice as to where and how and when they watch TV, inevitably preferring those platforms that provide the greatest flexibility. Terrestrial television has not been the default option for years in many countries, and the battle for audience share is now escalating.

Confronted by stiff competition and a tough economic climate, it is perhaps little wonder that some broadcasters are dragging their feet in making the transition to digital. At first glance, it might appear that not much is gained for significant cost. However, as evidenced by several highly successful digital terrestrial television (DTT) launches in Asia Pacific and Europe, creative and strategic use of the DTT platform can lead not only to broadcasters regaining market share, but also to new sources of revenue as the result of enhanced services.

The bottom line

According to David Astley, secretary general of the Asia-Pacific Broadcasting Union (ABU), the single biggest consideration in Asia is cost ? for both broadcasters and consumers. Broadcasters must suffer the capital expenditure of deploying the network, upgrading their production studios, investing in human resource development and content acquisition, and in most cases simulcasting with analogue services. Consumers meanwhile are faced with upgrading their television sets or purchasing digital set top boxes, while governments are often faced with having to provide incentive packages for both parties.

"But whereas the cost to governments can be largely offset by the sale of spectrum freed up, and consumers will reap the benefits of improved video and audio quality, more channels and the prospect of enhanced interactive services, there is little cost benefit to broadcasters in the short term," Astley says. "Thus far, the returns are not commensurate with the investment."

Despite this perceived lack of business case, industry pundits agree that staying with analogue is not really an option. Astley points out that long term operational costs will be lower with digital and, moreover, maintains that broadcasters will have to make the transition to compete with new entrants offering new digital services.

This view is shared by Mike Dallimore, vice-president international business development for digital broadcast specialist, Broadcast Australia. "Broadcasters will be left behind if they don’t have the features that are going to be available with digital," he says. "People will come to expect digital, just as they did colour TV when it was introduced. It will be essential for maintaining market share."

Dallimore concedes that the cost of digital transmission is significant, but suggests this can be eased by infrastructure sharing. Recent studies by his company show that the total capex can be reduced by around 40% for two broadcasters sharing common radio frequency (RF) infrastructure, with greater savings achieved through a shared multiplex. Moreover, there are ongoing opex efficiencies as well.

"It depends on the preparedness of broadcasters to cooperate," Dallimore says. "Infrastructure sharing is not common in most parts of Asia, where broadcasters often compete on coverage instead of content. But this mentality is going to have to change in a digital broadcast environment, where the protection ratios between services must be met to prevent interference. In an environment where coverage is legislated and competition is on the basis of content alone, there are huge cost benefits to using a common network."

Imagination pays

Given the inevitability of the transition to digital – and the increased need to compete on the basis of content - the onus is on the broadcasters to make the most of it. In fact, says Dallimore, although the timeline and approach in most countries has been significantly influenced by governments seeking the ‘digital dividend’, the transition is now gaining momentum among broadcasters, who are keen to get something out of it as well. "There are many more benefits if you start to make full use of your imagination and the capabilities of the platform," he says.

Ross Biggam, director general of the Association of Commercial Television in Europe, has been observing the digital transition in Europe for almost a decade now, and cites one of the most notable success stories as leading Finnish broadcaster, MTV3. Finland is leading the way as a digital nation, with all analogue cable, satellite and terrestrial services switched off in February 2008.

"When faced with the government’s decision to go digital, MTV3 managed to seize the opportunity and turn it around to their advantage in two significant ways," Biggam says. "Firstly, it enabled them to deliver more than one channel, which has allowed them to offer special interest programming; secondly, it gave them a route into pay TV."

Special interest (or thematic) channels, such as movies and sports, have traditionally been a stalwart of subscription cable and satellite services, and are proven audience – and advertiser – drawcards. Moreover, the ability to broadcast more than one channel opens up opportunities for cross-promoting and cross-scheduling. According to Biggam, the challenge for terrestrial broadcasters, which conventionally provide free-to-air (FTA) services, is competing for the necessary content rights. This is where the "pay TV" element comes in.

"In Finland, MTV3 have used some of their capacity to provide special interest channels, including a sports channel, and here they have introduced a subscription element for major sports events such as Formula One racing. The launch of this service has been phenomenally successful," Biggam says. "This example alone demonstrates the viability of pay TV as a top-up option for terrestrial broadcasters."

Searching for synergy

Broadcast Australia’s Dallimore agrees that pay TV is a promising top-up option for broadcasters, subject to an appropriate regulatory environment. "Ideally, you would need a small mass of pay TV services available," he says. "One option could be the allocation of a whole shared multiplex for subscription services; or for a single pay TV service to be offered within each MUX. If the content is good enough, the audience will pay."

David Astley’s view is that pay TV is a completely different business model, requiring its own investment and viability decisions. "In many countries, cross-media ownership restrictions would prevent a FTA broadcaster also operating a pay TV service; but, where it is permitted, there could be operational synergies," he says.

Introducing hybrid pay/free terrestrial services is just one option available to broadcasters who need to compete with the growing number of video viewing platforms. It illustrates how the enhanced functionality and flexibility of digital can lead to completely new sources of revenue than were available in the days of analogue only.

An alternative new revenue-earner is to sell-off part of the MUX to niche players and specialty groups. Both Dallimore and Astley see the rise of so-called "narrowcasting" as a key element of the new digital paradigm. "The very name ‘broadcasting’ is probably becoming inappropriate to describe the industry we are in, given the fragmentation that is occurring," Astley says.

It is nevertheless still the battle for audience that lies at the heart of the terrestrial TV business challenge-and here again the functionality of the digital platform offers new ammunition. High-definition TV (HDTV), interactivity and catch-up TV are three new services making headlines in most parts of the world. In the terrestrial arena they allow broadcasters to potentially offer enhanced services on a par with other platforms.

Diversify and differentiate

HDTV is an interesting case in point. According to Biggam, HDTV is increasingly being used to differentiate between platforms in Europe. He considers this to be one of the challenges ahead for DTT competing against cable and satellite, owing to limited spectrum availability. In Asia, where DTT implementation is not as far progressed, the situation may be redeemable. Astley says broadcasters in some countries are fighting to be allocated enough spectrum for HDTV services in addition to extra channels.

"However, it will ultimately come down to broadcasters making best use of the spectrum that is available," Astley says. "In some countries, securing sufficient spectrum for HDTV services may be the priority, while for others it might be establishing more digital channels to cater for niche audiences."

As for interactivity, most in the industry agree that it is still premature to state unequivocally what its impact will be. "The technology seems to be there, but it hasn’t taken off yet, most likely due to a lack of proven business case," Biggam says. "Catch-up TV, on the other hand, where programs are available for free download for a set period after airing, is already proving popular in the UK and other European markets."

The rise of catch-up TV and its sister, video-on-demand, exemplify the viewing habits of a new generation, in which audiences demand greater flexibility in viewing – in terms of both time of day and video platform. Here, the Internet is playing a significant role as well. One way of leveraging this trend in the favour of terrestrial broadcasters, says Dallimore, is to embrace hybrid personal video recorders (PVRs) such as TiVo.

"Hybrid services are the merging of television and Internet," Dallimore says. "They allow terrestrial FTA broadcasters to offer similar services to pay TV. Viewing habits are changing. People want to watch TV when they’re ready, and smart PVRs simplify the process. Yet it leaves control with the broadcaster, who can also reap extra revenue through paid downloads of movies, for example."

Adapt or die

Despite tough competition from other platforms, digital terrestrial television is thus expected to stand firm ? particularly in its "free" incarnation in today’s economic climate. "Those that adapt to change and respond innovatively to competitive pressures will be the ones that survive in the long term," Astley says. Both Biggam and Dallimore agree wholeheartedly with this sentiment.

"There are many new ways of consuming TV, and broadcasters must be open to these and make sure they are part of it," says Biggam. "The traditional model of selling advertisements around programs will hold, but you need to build other things onto that. In many ways, broadcasters need to reinvent themselves – they are no longer limited to delivering simple programs by terrestrial means alone, they can consider a range of new services and platforms to provide a complete entertainment solution."

Digital TV discussion

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