DigiTAG

Web Letter

November 2005 | # 45

DigiTAG seeks to inform members and non-members about important developments in the digital terrestrial television market. Each month, DigiTAG distributes its web letter with news updates and further exploration of one topic. This month, we examine the European Commission's role in digital switchover.

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The European Commission's role in digital television switch-over

The European Commission (EC) ruled yesterday that the digital terrestrial television (DTT) subsidy given to commercial broadcasters by the media authority in Berlin-Brandenburg, Germany (MABB), amounted to illegal state aid. This could suggest that the Commission is taking a strong position against encouragements to the speedy roll out of DTT.

In reaction, Dr Hans Hege, MABB director and architect of one of the first examples of successful and rapid changes of digital switch-over in Europe, is quoted as saying "You would think that success is being punished."

However, this ruling by the Competition Directorate should not be seen as a reversal of earlier communications on digital switch-over from other Directorates in the Commission. Rather, the Information Society and Media Directorate has continually demonstrated that it is strong proponent of an early move to an all-digital broadcast environment, citing such benefits as improved range and quality of services as well as spectrum efficiency (1).

The Commission has shown a significantly different approach to analogue switch-off compared with its approach to spectrum management.

In recent pronouncements on spectrum management, it has called pro-actively for a European-wide coordinated release of frequencies from what it believes to be a considerable 'digital dividend' of broadcasting spectrum following analogue switch-off. But the Commission appears to have limited its role in the process and seems content to allow Member-States to manage the analogue switch-off process in their local markets.

Independently, through its recommendations and inquiries, the Commission has tried to ensure that the European Union (EU) rules governing competition have been upheld.

Digital switch-over at the national level

The Commission advocates a market-led approach to digital switch-over. Calling for market forces and consumer demand to drive digital switch-over, it notes that "the challenge is to stimulate demand so that it is a service-led process rather than a simple infrastructure change with no perceived added-value for citizens (2)."

However, the Commission recognises that the digital switch-over experience will vary between countries based on local circumstances and as such there can be "no single switchover pattern or formula (3)." The management of digital switch-over is left to Member-States although they are reminded to abide by European Union law.

Not coveting a role dictating digital policy, the Commission has instead attempted to position itself as an knowledge coordinator, providing Member-States with information on DTT planning and publishing Member-States intentions on digital switch-over (4).

Commission recommendations

With the move to an all-digital broadcast environment, the Commission has espoused a position of platform neutrality noting that digital switch-over is a "'multi-network' or 'multi-platform' process (5)" that goes beyond DTT. However, this does not prohibit some government intervention since "the principle of technology neutrality...does not preclude a Member-State from taking proportionate steps to promote specific technologies for transmission of digital television as a means for increasing spectrum efficiency (6)."

The Commission has recommended that Member-States switch-off their analogue terrestrial television transmission by 2012. It recognises that the "economic and social benefits for the EU as a whole will only be fully achieved once all Member States have completed switch-off (7)." The Commission urges Member-States to begin the digital switch-over process, noting that "the earlier the transition from analogue to digital broadcasting is started at the national level and the shorter the transitional period, the sooner these benefits are realised (8)."

Recognising the importance of information, the Commission recommends that Member-States put in place a strategy to inform consumers of the digital switch-over process. It states that "consumer information is crucial to drive digital equipment sales" which will allow for digital switch-over (9).

Using the spectrum dividend

The Commission has taken a much more pro-active role concerning spectrum management. Declaring that a "spectrum dividend" exists, the Commission has defined it as some 300-375 MHz (10).

The Commission has also tried to apply market principles to spectrum policy. The Commission calls for approximately one-third of the terrestrial broadcasting spectrum to be made subject to tradability and flexible use by 2010 and estimates that the net gain from spectrum trading and flexible usage to average between €8-9 billion per year (11).

The Commission calls for a "coordinated spectrum policy in order to enhance a genuine single market for radio services and equipment (12)." By ensuring a coordinated approach to spectrum, Member-States will be able to satisfy demands for pan-European services.

Financing switch-over

Member-State policy intervention on digital switch-over must be "transparent, justified, proportionate and timely (13)." Fearing the contrary in Germany and Sweden, the Commission opened inquiries into their DTT financing in July 2004.

In Germany (14), the media regulatory authority in Berlin-Brandenburg provided compensation to commercial broadcasters in order to help finance the cost of launching services on the DTT platform. Following complaints received from the cable industry, the Commission has decided that the compensation violates the state aid rules of the EC Treaty since it is judged liable to distort competition. The broadcasters will be required to reimburse the compensation.

In the case of Sweden (15), satellite operators have complained that the network operator Teracom received unfair state aid since the public broadcaster SVT may have been overcharged for the costs of transmissions. In addition, Teracom has also received government funding to help cover the costs of digital switch-over, although these funds may only constitute a loan that Teracom is prepared to reimburse.

On 21 March 2005 (16), the Commission issued a statement formally requesting Sweden to end Teracom's monopoly. Because broadcasters are required to use Teracom's network to transmit their terrestrial television services, it effectively has a monopoly that appears to be in contravention with the EC directive on competition in the electronic communications market (17).

The Commission has also received a complaint from the satellite provider Sky Italia concerning the government subsidy given to consumers towards the purchase of an interactive set-top box in Italy. However, at this stage, the Competition Directorate has not opened an enquiry due to the subsidy's apparent adherence to the principle of platform neutrality.

Financing DTT activities is not completely prohibited. The Commission has noted that "policy intervention can facilitate switch-over process under certain circumstances, contributing to achieve general interest goals (18)." However, defining general interest goals may be difficult and merit further explanation from the Commission. In its report prepared for the EC, the consultancy firm Analysys has called on the EC to provide "explicit guidelines" on policy intervention (19). An initial attempt has been made in the Commission's recent decision on state aid in Berlin-Brandenburg (20).

Conclusion

The Commission has adopted a multi-faceted approach to digital switch-over. Somewhat aggressive in terms of its keenness to recover a digital spectrum dividend, it has left it to Member-States to manage digital switch-over and has assumed a role of information coordinator. It has, however, advocated a market-led approach to digital switch-over and has monitored adherence to EU law closely.

Its recommendation for a common date for analogue switch-off in the European Union deserves consideration. While it is unlikely that the target date of 2012 will be attained by many Member-States, the Commission has brought the issue to the forefront and applied some pressure on those Member-States that have not yet launched digital services to consider an initial timescale.

Footnotes

1.COM(2003) 542 final, "on the transition from analogue to digital broadcasting," 17 September 2003, page 4.

2.COM(2003) 542 final, page 12.

3.COM(2003) 542 final, page 8.

4.These submissions can be found on the EU website at: http://europa.eu.int/information_society/policy/ecomm/todays_ framework/digital_broadcasting/switchover/national_swo_plans/ index_en.htm

5.COM(2003) 542 final, page 6.

6.COM (2005) 204 final, "on accelerating the transition from analogue to digital broadcasting," 24 May 2005, page 5.

7.COM (2005) 204 final, page 3.

8. Same as above.

9.COM(2003) 542 final, page 16.

10.COM(2005) 461 final, "EU spectrum policy priorities for the digital switchover in the context of the upcoming ITU Regional Radiocommunications Conference 2006 (RRC-06)," 29 September 2005, page 4.

11.COM(2005) 400 final, "a market-based approach to spectrum management in the European Union," 14 September 2005, page 5.

12.COM (2005) 411 final, "A Forward-Looking Radio Spectrum Policy for the European Union: Second Annual Report," 6 September 2005, page 3.

13.COM(2003) 542 final, page 3.

14.http://europa.eu.int/rapid/pressReleasesAction.do?reference =IP/05/1394&format=HTML&aged=0&language=EN&guiLanguage=en

15.http://europa.eu.int/rapid/pressReleasesAction.do?reference=
IP/04/912&type=HTML&aged=0&language=EN&guiLanguage=en

16.http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP
/05/343&format=HTML&aged=0&language=EN&guiLanguage=en

17. Directive 2002/77/EC of 16 September 2002

18. COM(2003) 542 final, page 25.

19. Analysys, "Public policy treatment of digital terrestrial television (DTT) in communications markets," 26 August 2005, page x.

20.http://europa.eu.int/rapid/pressReleasesAction.do?reference =IP/05/1394&format=HTML&aged=0&language=EN&guiLanguage=en


Source: Natalie Mouyal, DigiTAG Project Office

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DigiTAG aims to encourage and facilitate the implementation and introduction of digital terrestrial television services using the Digital Video Broadcasting Project's Standard (DVB-T). It has some 60 members from broadcasting, network operators, regulatory, and manufacturing organisations throughout Europe and beyond.

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DTT NEWS ROUND-UP

For all articles, please go to DigiTAG News

European Commission rules DVB-T aid in Berlin illegal

The Commission had decided that the subsidies worth approximately €4 million granted to commercial broadcasters for the use of the DVB-T network in Berlin - Brandenburg violate EC Treaty state aid rules (Article 87(1)).

The Commission decided that the subsidies, which had not been notified to the Commission, must be paid back insofar as already paid over to broadcasters (about half the total).

According to the Commission, the subsidies indirectly favoured the DVB-T network over competing TV platforms, thus disregarding the principle of technological neutrality.

However, according to the Hans Hege, director of the MABB, digital switchover was a complete success that would not have happened without the subsidy. "You would think that success is being punished."

Source: EC Press Release

United Kingdom - Ofcom report on cost implications of digital switchover

With an estimated 10% of households reluctant to move to digital voluntarily, Ofcom has commissioned a study which sets out the associated cost and power consumption requirements for those who would not have switched. The study has been conducted by Scientific Generics.

Key findings of the study include the following:
- By 2008, the average purchase price for a Freeview set-top box will be around £26.

- At a per-household average of two television sets and one VCR, indicative equipment purchase costs for all-digital television viewing over DTT together with simultaneous digital recording would be £132.

- Preparing the last 10% of households for all-digital television broadcasting between 2008-12 will cost £572 million, equivalent to 2% of UK consumer spending on all home entertainment equipment over the same period.

Source: Ofcom Website

France - Publication of report on accelerating DTT roll-out

A report on the further roll-out of DTT services in France has beens submitted to the Prime Minister. The report had been requested by the Prime Minister and the broadcast regulator CSA.

The report highlights the necessary conditions and requirements in order to ensure that 85% of the French residents can access DTT services by March 2007. It also examines some of the options possible in order to ensure that 100% of the population can access the free-to-air services available on the DTT platform.

Source: CSA Website

France - Ready for pay-DTT launch

The final two administrative obligations necessary for the launch of pay-DTT services have taken place. First, the government has published its decree allowing service providers to offer pay-DTT service bouquets. Second, the broadcast regulator, CSA, has allocated a number slot for each of the pay-DTT services.

Pay-DTT operators will now be able to begin offering their services to subscribers. Canal+ is ready to launch services on 21 November, at which time its MPEG-3 standard definition set-top boxes will be delivered. TPS is planning to launch services by the end of the year.

Source: Les Echos

Sweden - DTT viewers increase

The Swedish DTT service provider, Boxer, has added 33,000 subscribers in the third quarter of 2005.

By the end of September, Boxer had a total of 483,000 DTT subscribers. In 2005, the number of DTT subscribers will have grown by 108,000.

Source: Broadband TV News

United Kingdom - New Freeview slot available

National Grid Wireless (formerly Crown Castle) has made a new television programme service slot available on Multiplex D.

Bidding has begun for the slot which has a minimum asking price of £5.5 million per year. Interested broadcasters include Flextech, Viacom, Five, ITV, Channel 4 and Disney.

The slot will run for 18 hours per day, from 6.00 - 24.00. It is expected to become available on 1 December.

Source: Digital Spy

Australia - Digital television in 22% of homes

The Australian Communications and Media Authority has published results on its research on digital television. Since the launch of DTT services in 2001, 22% of households have adopted digital services. Of these, 13% use free-to-air DTT services.

Digital television has grown tremendously in the past year. Of the adopters, 86% are satisfied with the technology. The main reasons for the adoption of digital free-to-air television include improvements to picture quality, better reception, and extra services.

However, the research also showed that 17% of non-adopters have not heard of the technology while 45% of non-adopters do not know whether they can receive DTT in their area.

Source: advanced-television.com

United Kingdom - BBC Two to lead analogue switch-off

BBC Two will be the first service to switch-off its analogue terrestrial television signal when the process begins in 2008.

The analogue switch-off of BBC Two will be followed by a several week "grace period" before the remaining four terrestrial channels cease analogue transmission.

According to Ford Ennals, chief executive Digital UK, "You'll probably have a ticker tape at the bottom of your TV giving you a countdown as to when switchover happens. On the day after switchover you'll be told that if you want to get BBC Two now it's available digitally for you and you need to make sure you switch."

Analogue switch-off will take place on a regional level between 2008 - 2012.

Source: Digital Spy