the transition to dtt in italy - economic and market aspects -

1

The transition to DTT in Italy - economic and market aspects -

Lisa Di FeliciantonioAGCOM, Italian Authority for Communications

Warsaw, 25 February 2004

2

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

3

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

4

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

5

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

6

DTT coverage

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

7

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

8

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

9

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

10

The “Murdoch effect” in the UK


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

11

Digital pay-tv and broadband in Italy


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

12

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.


13

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

14

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

15

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

16

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

17

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

18

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


19

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


the transition to dtt in italy - economic and market aspects -

Documents