DTT DTT DevelopmentDevelopment in Italy in Italy

Egidio Viggiani Egidio Viggiani GeneralGeneral SecretarySecretary

Sarajevo, 22 May 2008Sarajevo, 22 May 2008

INDEX

Digital television

DTT: Regulatory Framework and Governance

Digital Terrestrial Television

Regional Switchover

Back up: Market Overview

Outstanding points

Digital Television

16,4%23,7%

36,2%42,4%

49,7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003 2004 2005 2006 E2007

Cavo/Iptv Satel l i te Tdt Analogico terrestre

Since 2004, digital tv penetration has grown significantly thanks to the launch of dtt.

Digital tv reaches today 50% of households

In the absence of cable, satellite and dtt are the two major digital platform, while IPTV is still at an early stage.

DTT: Regulatory Framework (1/2)

Due to lack of spectrum, analogue broadcasters were allowed to build dtt multiplexes by converting analogue frequencies in their use into digital and by acquiring new frequencies on the market through trading.

The PSB (Rai) had an obligation to create at least 2 multiplexes and 3 free to air channels.

Broadcasters with more than one analogue concession must reserve 40% of transmission capacity on their muxes to third parties, in order to allow them to broadcast in dtt.

DTT: Regulatory Framework (2/2)

The activities of network, service and content providers are subject to separate licensing schemes and must be accounted for separately (the Network operator must also be a separate company).

Dtt take-off was supported in 2004 and 2005 by means of interactive STB subsidies (150€ per 700K STBs in 2004, and 70€ per 1,5 M STBs in 2005)

The deadline for the switch off is set at 31.12.2012 (postponed twice from 2006 and 2008).

At the end of 2007, a new law established that analogue tv sets can no longer be sold after April 2009, and that from February 2008 analogue tv sets must be tagged to inform consumers that they cannot receive digital signals.

“Comitato Nazionale Italia Digitale” (August 2006)

Chair: Minister for Communications

Participants: DGTVi, AGCOM, Conferenza Unificata (State, Regions, Provinces and Municipalities), National & Local Broadcasters, Cable and Satellite operators, Consumers, ‘All Digital’ Regions.

Expertise Group Co-Chair: AGCOM and DGTViParticipants: Minister for Communications, digital broadcasters, cable and satellite operators, Invited: Consumers, All Digital Regions, Enterprises (manufacturers, vendors).

Communication Research &Data

Customer Care

Networks Set Top Box RegulationLegislation &Regional S.O. Plan Contents Co-ordination

among platforms

Plan of ActivitiesMonthly report

9 Working Groups

Digital Switch Over process: Governance

Digital Switch Over Process: DGTViInstitutions

“Comitato Nazionale Italia Digitale”

Institutions

“Comitato Nazionale Italia Digitale”

Industry

Technical standards

Industry

Technical standards

Distributors & Vendors

Info Web

Distributors & Vendors

Info Web

Consumers

Info Web

Consumers

Info Web

Other PlatformsOther Platforms

DGTVi is the Italian Association of Digital Terrestrial Broadcasters (www.dgtvi.it). Since the launch of DTT it has promoted the development of an open advanced DTT Platform, with MHP middleware and interoperability of different CAS systems.

Digital Switch Over Process: DGTVi

DGTVi has promoted the use of special logos (so called “bollino blu” and “bollino bianco”), to help consumers identifying products that will work through switchover.

“Bollino blu”: certifies that a STB can receive all services offered via DTT (Fta channels, PPV offers, interactive services/MHP).Most STB manufacturers (>90% of market) have joined the initiative.

“Bollino bianco”: certifies that a Tv set, can receive Fta channels and PPV offer (integrated CAM). This logo is designed for Tv manufacturers. When applying this logo a Tv manufacturer agrees to implement the MHP standard in its Tv sets by 2009.

OperatorOperator N. MuxN. Mux Population coverage

Population coverage

22

2+1 DVBH2+1 DVBH

22

11

>70%>70%

82%& 79%82%& 79%

87% & 75%87% & 75%

73%73%

1 1 55%55%

LOCAL TVLOCAL TV >180>180 N.A.N.A.

DTT: Multiplex coverage

Satellite

Cavo digitale/Iptv

Tdt

Analogico terrestre

0

2

4

6

8

10

12

14

16

18

20

2003 2004 2005 2006 E2007

Mln households

DTT: Growth Rates

Sustained dtt growth in 2004/05 due to stb subsidies and the launch of the ppv premium soccer offer.

Dtt growth is expected to continue at high rates until completion of S.O. in 2012.

Dtt penetration is expected to overtake satellite (pay and free) in 2008.

DTT: Devices sell out

TOTAL SELL OUT: 8.069.889 (Feb04-Mar08)

24,3%

75,7%

Stb (6.108.817)

Dtt receiver (1.961.072)

Source: Panel GfK Marketing Services Italia.

95% of STB are Mhp, thus allowing for advanced interactivity.

Total sell out is estimated to be over 11 mln at the end of 2008.

DTT: Households

DTT penetration is estimated in 26,5%, if all families owning a STB are included. If however we include only households connected to the STB, the penetration rate is 24,3% (Mar 08).

Source: Makno

giu 07 ott/nov07 mar08

4.532 4.571 5.613

4.702 4.961 6.103

Famiglie DTTDecoder DTT

DTT offer: Free to air channels

TeleshoppingTeleshopping

Public Utility ChannelsPublic Utility Channels Movie/Cinema Movie/Cinema Religion ChannelReligion Channel

Infotainment: All-news, Finance, InternationalInfotainment: All-news, Finance, International ChildrenChildren

Music ChannelMusic Channel

Sport and Sport News ChannelsSport and Sport News ChannelsFTA-TV Channels in simulcastFTA-TV Channels in simulcast

Brand new DTT ChannelsSimulcast

DTT offer: Fta channels per operator

28 channels offered on dtt, of which 9 in simulcast, 10 provided by operators already present in analogue tv, 9 provided by other operators.

3 32

1

5

3

1

12

1 1 1 1 1 1 10

1

2

3

4

5

6

7

8

Rai

Mediaset

T.I.M

edia

L'Esp

resso Dfree

Class E

ditori

Anica

Sitco

mC.E.I.

Puntosho

pBBC

Tf1-Fr

ance T

V

Canali anche analog. Canali TDT Free (no simulcast)

DTT Fta channels: broadcasters’ strategies

Incumbents: like in other countries, after some initial uncertainty due to the small return of investments in dtt, incumbents are now investing in multichannel as a way to compensate the inevitable loss of audience.

Public Service Broadcaster (Rai): greater role to be played by the PSB in the development of new dtt channels, as well as in the transition to dtt (communication/information).

New comers and smaller broadcasters are waiting to see how the platform develops. Greater certainty on the timing and regional planning of switch off and on policies and regulation in favour of dtt would help attracting investments onto the dtt platform. The absence of investment in fta dtt channels reflect the difficulty of attracting advertising resources.

DTT: the ppv business model

PPV on DTT

Smart Card at selling point

1

3

Long term Card replacement

(every two (years)

4

Easy access to events

(via remote control)

2

Smart Card re-charge

CallCentre /Web /

Voucher

Innovative business model based on “à la carte” offer of single premium events.

Prepaid, anonimous, free from subscription.

DTT STBs are open and horizontal, thus allowing to receive all ppv offers available (3 different CAS systems).

Price range:- soccer match 6€- movie (1st release) 4€- fiction/library 1-2€

At present there are three ppv offers on dtt: Mediaset premium, Pangea and La7 Cartapiù. Ppv offer accounts for around 10% of the pay tv market.

DTT value added services: interactivity and HD

Interactive services: Mhp applications (80% of all devices) allow for advanced interactivity in broadcasting, with excellent graphic performance. Most popular services are play-along games, games for kids, interactive services connected to soccer offer, original audio for movies and fiction. 50% of viewers are estimated to use these services weekly.

High Definition: timing and technological standards still to be defined in detail. Rai will offer Euro 2008 Football Championship in HD (in Rome, Milan and Turin). The new industrial plan foresees one HD Mux after S.O. and the launch of one HD Channel in 2009. Mediaset will offer HD content progressively as regional switch-off takes place. TIMedia will follow the same strategy, depending on frequencies availability.

DTT value added services: DVB-H

2 DVB-H multiplexes:

1. H3G offers tv channels (2 of which – 3 Live and 3 Sport - are produced specifically for mobile tv) and on demand contents.

2. Mediaset carries contents and services aggregated by Tim and Vodafone, in accordance with various broadcasters.

While the sell out of dvb-h devices is good, there is still no official data on use and revenues from mobile services. The pay model is yet to be confirmed.

DTT: regional S.O. in Sardinia and Valle d’Aosta

MARCH ‘07 SEPTEMBER ’08 CAGLIARI

OCTOBER ’08 VALLE D’AOSTA

Switch off:

S.O. of analogue

transmissions

Switch off:

S.O. of analogue

transmissions

Switch-Off Time plan

650.000

households involved

Switch off of 2 analogue channels (Rai2 and

Rete4) in the Area of

Cagliari and Valle d’Aosta

Switch off of 2 analogue channels (Rai2 and

Rete4) in the Area of

Cagliari and Valle d’Aosta

Digital tv penetration rate has reached 89,1% in Sardinia and 92% in the area of Cagliari (December 2007).

Next All Digital Areas

• Piedmont Region and Trento Province

Nov‘08 March’09 Turin and Cuneo

October ‘09 Trento

Switch off:

S.O. of analogue transmissions

Switch off:

S.O. of analogue transmissions

Switch-Off Time plan

2.050.000

households involved

Switch off of 2 analogue

channels (Rai2 and Rete4) in the Area of Turin and

Cuneo

Switch off of 2 analogue

channels (Rai2 and Rete4) in the Area of Turin and

Cuneo

Final Switch off:

Whole Piedmont Region

Final Switch off:

Whole Piedmont Region

March ‘11

DTT: audience share in Sardegna

3,9%

43,2%

35,0%

0%5%

10%15%20%25%30%35%40%45%50%

Italia Cagliari (switch over) Sardegna

Italia Cagliari (switch over) Sardegna

Italy vs Sardinia and Cagliari

12,5%

43,2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Cagliari (february 07) Cagliari (december 07)

Cagliari before and after switch over

Audience data reveal that notwithstanding a good penetration rate the use of the dtt platform is still low. The situation is much better in the regional areas where switch over has taken place. In Sardinia and in the Cagliari area dtt audience share on all tv sets has reached 35% and 43,2% respectively. Before switch over in the Cagliari area dtt audience share was only 12,5%. National Penetration Rate of the DTT Platform: 4,6% (source: Auditel, March ’08)

DTT: frequencies planning in Sardinia

Frequencies planning in Sardinia is the result of an agreement among the Ministry, AGCOM and broadcasters on the basis of the criteria set by AGCOM and in line with Geneva 2006: safeguard of universal coverage and public service, safeguard of investments and transmission of existing broadcasters, safeguard of local tv networks, access for new entrants, development of new technologies and mobile tv.

21 UHF frequencies (>80% territory)• 14 to national broadcasters• 7 to local broadcasters

2 VHF frequencies (>80% territory) to national broadcasters6 frequencies (50-70% territory) to national broadcasters10 frequencies (sub-regional coverage) to local broadcasters

2 frequencies are reserved for new entrants and 5 sub-regional frequencies for national or bilateral negotiations.

DTT: open issues

Open issues:• Fta offer still not sufficiently attractive, and ppv offer cannot be the

sole driver in the transition to dtt • Lack of an EPG and a clear identity • Different Mux coverage• Weak role of PSB in the transition to dtt• Uncertainty on regional planning and timing of S.O.

Lessons from regional switch over:• Regional switch over and switch off is the way• Setting a deadline and working in steps allow broadcasters to plan

S.O. and work closely with the Institutions.• Partial switch off (of 2 analogue channels) was the driver for

penetration and use of dtt in Sardinia and Valle d’Aosta• Successful agreement between broadcasters and the institutions

over frequencies planning in Sardinia.