Europe’s digital challenge

Four groups bidding for DTT licenses

LONDON — After months of turmoil, the future of digital terrestrial TV (DTT) is looking bleak in Europe. Pioneering platforms have collapsed in the U.K. and Spain, and France has once again delayed its plan to launch DTT services.

Patrick Lelay, topper of Gallic web TF1, expressed the views of many broadcasters across Europe when he dismissed DTT recently as a “bad project.” With digital satellite and cable operators already forced to consolidate, many question whether there is room for yet another platform.

But governments, who dream of the day when they can switch off the analog signal and sell off the frequencies, are determined to push through DTT — despite loss of consumer confidence and doubts over a business model to support it.

According to consultancy firm Strategy Analytics, the biggest impact of recent developments, such as the collapse of the U.K.’s ITV Digital and Spain’s Quiero, is that only 300,000 Euro households will acquire DTT this year, half earlier estimates. By 2008, 11% of Euro homes are predicted to have it, compared to 32% cable and 29% satellite.

Pubcasters awash with government funds and, in many cases, ad coin as well, are the key players in DTT introduction. And in some territories, they will probably be part of the rescue efforts.

Over the next 18 months, France, Germany, the Netherlands and Portugal will launch platforms, and by 2005 almost all Euro countries will have caught up.

Bu existing platforms in the U.K., Spain and Sweden have had difficulty competing with cable and satellite because they could not offer more channels, premium film and sport services or reliable reception.

According to a recently published European Broadcasting Union report, ITV Digital did well to recruit over 1 million subscribers in three years, but the average expenditure per subscriber fell far short of the figure for satellite homes — and its 22% churn rate was too high.

To achieve its impressive sub count, the company paid dearly. The costs of subscriber acquisition and programming were 140% of total subscription revenue.

Four groups are bidding for DTT licenses freed up by ITV Digital’s collapse, and the Independent Television Commission will announce a winner July 4.

The BBC has put in a joint application with transmitter operator Crown Castle under the banner Free-To-View. The pubcaster has made great play of abandoning pay TV in favor of a free-to-air offering.

Controversially, the venture will carry three free channels from satcaster BSkyB (Sky News, Sports News and Sky Travel), plus several new services from the BBC and other suppliers, including CNN.

Alan McKeown, the former owner of SelecTV (he also produces “The Tracey Ullman Show” for his wife), tried to interest major U.S. broadcasters in putting together a U.K. bid but couldn’t convince anyone to back a business that had already lost ITV Digital $2 billion.

“You can’t do a free-to-air service because it’s too expensive to be covered by advertising so you have to do a mixture of free-to-air and pay,” says McKeown. “That can only be done with the BBC because they are the only company that has money to spend.”

In Spain, delivery problems undermined consumer confidence — especially as one of Quiero’s selling points was no-fuss installation and operation — and churn hit 40%.

“Quiero also suffered from inappropriate marketing,” says Michael Turner, director of content and channels at Spanish channel provider Media Park. “They had 90% recognition for the logo, which is fantastic, but only around 9% of respondents were able to say what Quiero was actually offering.”

The Spanish government forced two free-to-air DTT platforms that won licenses two years ago — Net TV and Veo — to soft-launch their platforms on June 18. But only 200,000 former Quiero subscribers can get the services because digital decoders won’t be available until later this year. At present only minimal programming is offered.

State backing prevents the collapse of Sweden’s DTT platform Senda. The platform has nearly 100,000 subscribers and needs funds to expand coverage.

In, France the deadline to award DTT licenses has been pushed back from July to October. Broadcast regulator the Conseil Superieur de l’Audiovisuel must choose 33 out of more than 60 station proposals. Eight will go to pubcasters, three for regional stations and the remaining 22 for a mix of free-to-air and pay channels.

But it remains unclear who will be the platform operator. Regulators seem to prefer existing pay platforms to manage the pay DTT venture rather than see the rise of a competitor. Indeed, Canal Plus has been lobbying to be the sole operator if it can get favorable conditions, but TPS is also a contender.

The Italian government is studying the criteria for a gradual conversion from analog to digital and may subsidize Italians to give up their conventional TV sets.

At the end of last year, the number of DTT set-top boxes was 400,000, a number expected to rise to 2.5 million by 2005.

Germany may pull off the first successful DTT launch and analog shutoff in Europe.

The project is limited to Berlin, but its performance will dictate national strategy for the introduction of the technology. Coordinated by the local government and including all the region’s terrestrial broadcasters, DTT will launch by the end of 2002; analog will be switched off six months after that.

The frequencies made available will be used for a six-multiplex digital platform making many more channels available to compete with the 30-plus that cable households take for granted.

A critical issue, according to Alexander Shulzycki, senior media analyst at the EBU, is whether DTT is backed by strong, broad-based operators.

“Whatever the platform it needs to have broad support,” says Shulzycki. “It can’t have just one owner like ITV Digital. In Spain there were no broadcasters involved in the platform.

‘What we are seeing in countries that are launching soon, like Portugal, Netherlands and Denmark, is involvement of pubcasters, commercial broadcasters, transmission companies and sometimes telecom operators. It gives everyone an interest in its success and preempts the competition from trying to destroy you.”

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