[opendtv] Digital TV transition: Tour de Europe

  • From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
  • To: <opendtv@xxxxxxxxxxxxx>
  • Date: Thu, 21 Dec 2006 18:09:12 -0500


December 20, 2006

Digital TV transition: Tour de Europe

The countdown to the digital switchover deadline in Eurpoe

By Harry Wang, Parks Associates

1.0 The Migration to Digital

The countdown to the digital switchover deadline began years ago in
Europe, when each country passed legislation to set the final date for
turning off analog broadcasting and switching on digital broadcasting.
The motivations are multi-fold: digital broadcasting is a more efficient
use of existing spectrums; freed-up spectrums can be re-allocated for
other civil uses, or auctioned off to the highest bidders for a nice
windfall for the treasury.

Figure 1 provides a summary of major European countries' time tables for
digital switchover and the progress of migration in those nations.

In execution of the transition, each country's policy orientation and
market dynamics lead to different development paths to a digital TV
market. Local TV infrastructure, strengths of incumbent service
providers, aggressiveness of emerging competitors, and finally
consumers' attitudes toward new TV services either expedite or slow down
the uptake of digital TV services in these countries.

The uneven pace of digital TV transition is best illustrated by the UK,
German, and Italian markets. Italy had the most ambitious plan among the
three, originally planning to complete the switchover by the end of
2006. But slower-than-expected adoption of the Digital Terrestrial TV
(DTT) service, coupled with role confusion among regional authorities
and broadcasters, had forced Italy's Ministry of Communications to delay
the deadline twice since early 2005. The Italian authority has now set
the final deadline for 2012, six years later than it had planned.

In Germany, the story is more encouraging. The German TV market is
regulated at the state level, and each state media authority operates as
a more autonomous entity, although the federal government still governs
the spectrum allocation. Germany originally set the switchover deadline
for 2010, but the country began regional switchover trials as early as
November 2002. After a successful analog switch-off in the Berlin region
in March 2003, the Germans have accelerated their execution. Further
launches have taken place in the Northern Germany, North Rhine
Westphalia, and the Rhine Mainz areas. The most recent switchover trial
was carried out in Munich, Nuremburg, and parts of southern Bavaria. As
a result, Germany now is expected to complete the switchover sometime in
2008. A contributing factor is that Germany has a relatively high
penetration of cable and satellite services. Only 5-7% of German
households depend on terrestrial TV services; therefore, the task is
more manageable.

In the UK, digital transition also appears to be running ahead of
schedule, aided largely by consumers' interest in DTT and pay-TV
services. From Q4 2002 to Q4 2005, the number of DTT households
increased from less than one million to almost seven million, and the
DTT overage has been extended to 73% of the TV households in the UK.

Although the final switch-off will not occur until 2012, Ofcom, an
independent regulatory authority for the UK's communications industry,
predicts that by 2010, more than 95% of the UK's TV households will have
adopted a digital TV service.

2.1 The Rise of Digital Terrestrial TV Service

The switchover mandate has led to a burgeoning digital terrestrial TV
(DTT) market in Europe. In countries where cable or satellite services
are not dominant, the need to jumpstart the digital terrestrial service
is particularly strong. But DTT launch was not a smooth sail in many
countries initially. Debacles like Spain's Quiero TV and the UK's ITV
during 2001-2002 put a damper on the over-zealous service providers and
programming partners lined up for broadcasting licenses. The reasons for
these failures varied, but it appeared that both services were built on
a pay-TV model which ran afoul with DTT's target audience in these two
nations. New DTT services were re-launched subsequently and repositioned
as free-to-view services. Apparently such changes paid initial
dividends. Spain sold almost two million DTT set-top boxes after a
little more than seven months of operation. The UK's Freeview DTT
service is regarded as a major success, with a user base closing in on
that of BSkyB, the dominant pay-TV platform in the country. Similar
success stories can be found in Finland, Sweden and France, although
pay-TV channels are also included in the DTT service offerings in these

Encouraged by neighboring countries' success, Portugal, Norway, Denmark,
Switzerland, and Ireland have also launched or plan to launch their own
DTT service. We estimate that more than 15 million households across
Europe used DTT services as of June 2006.

Figure 2: European DTT Subscriber Population

2.2 The Growth Pursuit

Competitors of the DTT providers "mainly cable and satellite operators"
(sic) are increasingly wary about the strong DTT uptake in countries
where commercial deployments or trials are taking place, and the impact
on their ability to expand subscriber base. The European market for DTV
is already very competitive because of the fragmented local TV
infrastructure, the traditionally strong user base of free analog
broadcasting networks, and the inroads that telcos have made into the TV
market. DTT adds another option to European TV households, and adversely
disrupts incumbent TV service providers' plans to entice analog
broadcast viewers to sign up for their DTV platforms. To pursue further
growth, DTV service providers in general choose one of the following
three paths:

Horizontal migration to other TV platforms: This path involves either
making a strategic investment in alternative TV delivery platforms or
providing hybrid services concurrently to targeted consumers.

Vertically strengthening content/channel offerings, providing
value-added services to retain existing users and attract new customers.

A combination of these two approaches

Canal Plus Group, the No.1 multi-platform pay-TV operator in France, has
taken the first approach. Capitalizing on the popularity of DTT
services, it first launched a DTT service in early 2005 and later began
to distribute a hybrid set-top box capable of receiving both DTT and
satellite programming in November 2005. It is estimated that more than
400,000 of these boxes had been shipped by the end of April 2006.
Telenor, another multi-platform service provider with a strong market
position in the Nordic region, also acquired DTT license to operate in
Norway as a means to expand its service appeal in the regional TV

Existing cable operators and telcos usually take the second approach.
Kabel Deutschland, the largest cable MSO in Germany, is committed to
upgrading its existing analog cable subscribers to the digital tier in
response to competitive pressure from DTT and satellite services. Its
blueprint calls for a continual network digital overhaul until 2009 and
the ability to offer six hundred digital channels and triple-play
services in addition to such value-added services as pay-per-view and an
enhanced interactive programming guide. NTL/Telewest, the largest cable
operator in the UK, promotes to its user base interactive TV services
like VoD, gaming, TV e-mail, and one-button access to multiple screens.

The telcos' video strategy is to strengthen the breadth and depth of
video programming and add PVR, PPV, and VOD capabilities in order to
match competitors' offerings. At the same time, telcos can leverage the
two-way capability of the IP network to offer additional interactive TV
content for service differentiation. Italy's FASTWEB, for example,
includes functionalities such as video conferencing on the TV, on-demand
gaming, checking e-mail on the TV, and TV voting in its FastWeb TV

British Sky Broadcasting (BSkyB), the UK's top pay-TV operator, has
taken the third approach. Besides being aggressive in launching digital
and interactive TV services on its traditional satellite TV platform,
BSkyB has been actively expanding service scope and tapping
opportunities to distribute its video programming through other
platforms. In 2004, it made a strategic investment in a TV consortium
that later successfully acquired the operating license of the UK's DTT
service (now Freeview). In 2005, it partnered with Vodafone to launch a
mobile TV service. And in early 2006, it acquired Easynet, a broadband
networking company, to begin offering broadband access services and
distributing Sky TV content through the Internet. These strategic moves
helped the company to quickly build a cross-platform TV package and
extend the "Sky" brand to millions of consumers in the UK and Ireland.

3.0 The Future is in Integration

Recent trends and developments in Europe's communications and home
entertainment market clearly indicate that its TV market cannot be
analyzed in isolation anymore. As the entire consumer market is moving
toward a converged, multi-platform, multi-play service model, TV/video
service will be the core offering in any package. All service providers
understand this fact and will move aggressively to acquire network
capability and content distribution rights. But the long-term success of
their strategy hinges on the ability to integrate. In particular, they
will be able to achieve:

Integration of the network infrastructure and provisioning capability to
flexibly deal with network resource requirements from different service
categories like voice, video, and data; quickly diagnose network
problems; and proactively manage network traffic at the back end and
head end.

Integration of hardware, software, content, and third-party services to
create an enjoyable experience in using customer premise equipments
(CPE) for consumers.

Integration of multiple billing systems and customer service operations
to give consumers a superior service experience.

Integration of all of the above three links in a multi-platform delivery
environment to score utmost customer satisfaction.

All of these integration jobs are easier said than done and require
operators to invest heavily over the next decade. Due to resource
constraints, diverse operation backgrounds, varying levels of
competitive pressure, and split views on market dynamics and corporate
competences from decision-makers, operators are selecting different
integration approaches. European cable operators might follow their U.S.
counterparts' step to deploy switched video solutions instead of
overhauling to a complete IP network. Satellite companies, like BSkyB,
are choosing to be a platform aggregator (versus a service integrator
from one platform) as the current strategy to deliver triple-play
services. But in the future, if they can get their hands on a more
robust network infrastructure (such as WiMAX), no one can rule out the
possibility that they can launch their own mobile voice and data
services to replace the current Vodafone partnership, and/or deliver
fixed/mobile broadband access services beyond Easynet's footprint. As
for the telcos, although they choose to base their services on the IP
network, there are still the architecture choices of using the existing
DSL infrastructure, or the fiber technology (FTTP, FTTN, or FTTC) that
requires heavy upfront investment. No matter what their final choices
are, the first three integration tasks are mandatory for successful
execution of operators' video strategies in Europe.

About Parks Associates:

Parks Associates is a market research and consulting firm focused on all
product and service segments that are "digital" or provide connectivity
within the home. The company's expertise includes home networks, digital
entertainment, consumer electronics, broadband and Internet services,
and home systems. Founded in 1986, Parks Associates creates research
capital for companies ranging from Fortune 500 to small start-ups
through market reports, multiclient studies, consumer research,
workshops, and custom-tailored client solutions. Parks Associates also
hosts multiple fall events and co-hosts CONNECTIONS (in partnership with
the Consumer Electronics Association) each year. www.parksassociates.com

About the Author

Harry Wang studies the consumer electronics and entertainment service
industries with a focus on fixed and portable CE hardware, software, and
associated applications and services. He also covers online media trends
and the advertising industry, as well as the emerging digital home
healthcare market. Harry has presented his research at numerous industry
events including CES, Digital Hollywood, Photo Marketing Association
Annual Show, CONNECTIONS, and Fall Focus. Harry earned his M.S. degree
in marketing research from the University of Texas at Arlington. He also
holds an M.B.A. degree in finance from Texas Christian University and a
B.A. degree in international business from Guangdong University of
Foreign Studies, P.R. China. He can be reached at

This article is printed with the persmission of Parks Associates.

All material on this site Copyright 2006 CMP Media LLC. All rights
You can UNSUBSCRIBE from the OpenDTV list in two ways:

- Using the UNSUBSCRIBE command in your user configuration settings at 

- By sending a message to: opendtv-request@xxxxxxxxxxxxx with the word 
unsubscribe in the subject line.

Other related posts:

  • » [opendtv] Digital TV transition: Tour de Europe