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The transition to DTT in Italy - economic and market aspects -
Lisa Di FeliciantonioAGCOM, 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
Regulatory model gives leadership to terrestrial channelsIncumbent 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 marketTerrestrial broadcasters are interested in keeping the broadcasting environment as it is
State of the market
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DTT start up in Italy: line-up
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
State of the market
RAI: 2 mux
(experimental phase)
Simulcast of the 3 analogue channels;RAISatSport; RAINews24, RAI Edu (educational content)2 new RAI digital channels: Raiutile (local information, RAI doc (archive) RAI radio channels (3)channels by 3-4 independent providers
Mediaset: 1 mux
(experimental phase)
Sole 24oreTV (financial news); Class financial network (financial news); Coming soon TV (movie trailers, preview and backstage), Video Dj (music) BBC World (news)other channels to be announced
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DTT start up in Italy: key features
Free-to-airPoor in terms of new content (no children’s programming, no entertainment, etc.)
No coordination between platformsAmbiguous attuitude towards DTT by terrestrial operators
Very little information /awareness campaignLimited investment for coverage and content
coverage limited to approx. 50% of populationonly RAI has developed two new channels
Only RAI has so far planned interactive features
State of the market
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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?ThreatsA more open and competitive marketAudience fragmentationA new paradigm for television and communication business
Opportunities
new revenue sources better competition with satellite/cable/convergence operators For PSB: repositioning of public service
Why should terrestrial broadcasters go digital
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
0
5
10
15
20
25
30
35
1998 1999 2000 2001 2002 2003
BBC1
BBC2
ITV
Channel 4
Channel 5
Other
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The “Murdoch effect” in the UK
Why should terrestrial broadcaster go digital
Advertising market shares 1998-2003
0
10
20
30
40
50
60
70
80
1995 1999 2000 2001 2002
ITV Channel 4 Channel 5 Cavo-satellite
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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
Supporting the development of DTT and interactive features could give back to the PSB a new leadership and a role:
Bridging the digital divideProviding new digital free-to-air content in a pay-tv dominated broadcasting environmentProviding access to its networks and capacity to independent broadcasters and new operators.
Why should terrestrial broadcaster go digital
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Summary
• DTT in Italy: state of the market• Why should terrestrial TV go digital: threats and
opportunities of the transitionCost & benefits
• Public policies and regulatory actions to support the take off
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Costs and financing
Three different kinds of costs involved in the development of DTT for the operators & the community:
Cost to build the networkRAI : 20M € to build the networkMediaset 70M € (acquisition of the frequencies + network development)
Cost for new content and additional enhanced/interactive featuresRAI has budgeted 3,7M € for new content in 2004
Cost to subsidize the receiver150M € for subsidies (150€ per family for 1M receivers)Important role to be played by electronicindustry: provide a extensive range
of receivers at different prices
Cost & benefits
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Potential revenues & benefits
Broadcasterssegmentation – increased, more targeted advertising T-commerce and interactive service revenuesincreased “customer loyalty”
CommunityRationalization of frequency spectrum and capacity left to other useIncreased choice and pluralismA step forward the e-society
Cost & benefits
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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
time
DTT penetration
50%
80%
100%
DTT development left to market forces
Introduction of public policies
Timely switch off date
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Financial and regulatory measures
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
Public policies to support DTT take-off
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The right regulatory modelHas 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
Public policies to support DTT take-off