The transition to DTT in Italy economic and market aspects

1
The transition to DTT in Italy - economic and
market aspects -
Lisa Di Feliciantonio AGCOM, Italian Authority
for Communications Warsaw, 25 February 2004
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Summary

• DTT in Italy state of the market
• Why should terrestrial TV go digital threats and
  opportunities of the transition
• Costs benefits
• Public policies and regulatory actions to support
  the take off

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Some country peculiarities
State of the market

• Regulatory model gives leadership to terrestrial
  channels
• Incumbent terrestrial broadcasters pushed to
  develop DTT not as market choice but as a legal
  strategy
• Mediaset RAI both need to develop DTT in order
  to avoid antitrust and anticoncentration measures
• Very strong duopoly in the terrestrial market
• Terrestrial broadcasters are interested in
  keeping the broadcasting environment as it is

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DTT start up in Italy line-up
State of the market

• Transition to DTT led by terrestrial incumbent
  broadcasters
• Two additional multiplex due to be launched
  shortly
• 1 by terrestrial broadcaster La7 (Telecom
  Italia)
• 1 by a new terrestrial operator consortium led
  by TF1 and media entrepreneur Tarek ben Ammar

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DTT start up in Italy key features
State of the market

• Free-to-air
• Poor in terms of new content (no childrens
  programming, no entertainment, etc.)
• No coordination between platforms
• Ambiguous attuitude towards DTT by terrestrial
  operators
• Very little information /awareness campaign
• Limited investment for coverage and content
• coverage limited to approx. 50 of population
• only RAI has developed two new channels
• Only RAI has so far planned interactive features

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DTT coverage
50 population coverage of mediaset DTT network
only main cities are served
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Summary

• DTT in Italy a brief history and state of the
  market
• Why should terrestrial TV go digital threats
  and opportunities of the transition
• Costs benefits
• Public policies and regulatory actions to support
  the take off

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DTT threat or opportunity?
Why should terrestrial broadcasters go digital

• Threats
• A more open and competitive market
• Audience fragmentation
• A new paradigm for television and communication
  business

• Opportunities
• new revenue sources
• better competition with satellite/cable/convergenc
  e operators
• For PSB repositioning of public service

Very ambiguous attitude towards DTT
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The Murdoch effect in the UK
Why should terrestrial broadcaster go digital
Audience share in the UK 1998-2003
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The Murdoch effect in the UK
Why should terrestrial broadcaster go digital
Advertising market shares 1998-2003
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Digital pay-tv and broadband in Italy
Why should terrestrial broadcaster go digital

• 2.300.000 subscribers to Sky Italia (and
  growing fast)
• Digital cable (FTTH) rolling out in major urban
  areas offering triple play
• 1.620.000 DSL broadband lines potentially able
  to receive broadcasting and VOD services

Terrestrial TV is at a crossroad
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DTT a new mission for PSB
Why should terrestrial broadcaster go digital

• Supporting the development of DTT and interactive
  features could give back to the PSB a new
  leadership and a role
• Bridging the digital divide
• Providing new digital free-to-air content in a
  pay-tv dominated broadcasting environment
• Providing access to its networks and capacity to
  independent broadcasters and new operators.

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Summary

• DTT in Italy state of the market
• Why should terrestrial TV go digital threats and
  opportunities of the transition
• Cost benefits
• Public policies and regulatory actions to support
  the take off

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Costs and financing
Cost benefits

• Three different kinds of costs involved in the
  development of DTT for the operators the
  community
• Cost to build the network
• RAI 20M to build the network
• Mediaset 70M (acquisition of the frequencies
  network development)
• Cost for new content and additional
  enhanced/interactive features
• RAI has budgeted 3,7M for new content in 2004
• Cost to subsidize the receiver
• 150M for subsidies (150 per family for 1M
  receivers)
• Important role to be played by electronicindustry
  provide a extensive range of receivers at
  different prices

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Potential revenues benefits
Cost benefits

• Broadcasters
• segmentation increased, more targeted
  advertising
• T-commerce and interactive service revenues
• increased customer loyalty

• Community
• Rationalization of frequency spectrum and
  capacity left to other use
• Increased choice and pluralism
• A step forward the e-society

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Summary

• DTT in Italy state of the market
• Why should terrestrial TV go digital threats and
  opportunities of the transition
• Cost benefits
• Public policies and regulatory actions to
  support the take off

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DTT penetration scenarios
Public policies to support DTT take-off
DTT penetration
Timely switch off date
100
Introduction of public policies
80
50
DTT development left to market forces
time
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Financial and regulatory measures
Public policies to support DTT take-off

• policies to support network operator
• Reduction of the fee paid by the broadcaster for
  the frequencies
• Financial support to PSB for the creation of the
  network
• policies to support content providers
• Financial support to PSB
• Asymmetryc regulation
• financial aid to new editors if they committ to
  DTT for a medium term period (5 years)
• Tax reduction
• policies to support the penetration of digital
  receivers
• Labeling of equipment
• Financial incentives to families

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The right regulatory model
Public policies to support DTT take-off

• Has to take into consideration the country
  specificities but so far some lesson can be drawn
  by other experiences
• Allocation by channel or by multiplex
• Free to air or basic pay
• Let the existing incumbent operator in other
  platforms play a role or not
• Give the leadership role to existing terrestrial
  channels (if they have also market startegy and
  real resaon to support DTT)
• Establish or not the switch off date