Lisbon, 17-18th of February, 2000
The transition from analogue to digital television is undoubtedly the most significant revolution
in this sector since the switch from black-and-white to colour TV. The introduction of digital
TV represents a crucial step in the emergence of the Information Society, and will transform
the television set into a gateway to the digital universe, accessible to all.
Digital television can be delivered to households via various systems, the most important of
which are terrestrial, cable and satellite. Terrestrial television has central importance for public
authorities and market operators, since it caters to the entire population.
In most markets, terrestrial broadcasting is the only system which offers coverage of over 90%
of the population, and is provided to households free-of-charge, with no on-going costs,
whereas cable and satellite television oblige viewers to pay on-going subscription fees.
Digital terrestrial television offers a series of benefits in comparison to analogue terrestrial
television, but its introduction also involves significant costs and raises a set of relevant
questions, with regulatory, economic, cultural and business implications.
We can safely predict that the audio-visual sector, as we now know it, will be radically
transformed by the introduction of digital television. Rather than a simple technological
evolution, we are faced by a genuine revolution, whose impact will be felt by various players
within the value chain.
This document focuses upon the key questions raised by the introduction of digital terrestrial
television, identified throughout the document for reasons of simplicity, as DVB-T,
corresponding to the norm adopted in all European countries for this service. Each chapter
concludes with a set of pertinent questions for discussion.
The different scenarios and business models, developed throughout the document are not
intended to be an exhaustive description of the options available, in either technical or
economic terms. Instead they intend to offer various possible paths for successful
implementation of the digital terrestrial platform - DVB-T.
2.1 Established Technical Concepts
The DVB-T system (“Digital Video Broadcasting for Terrestrial Television Transmissions”), based
on fully digital technology, is one of the ITU agreed systems for the transmission of digital
terrestrial television, and forms part of a wider range of compatible systems developed by the
European DVB Project.
The design of the DVB platform is guided by market and cost-benefit considerations and is based
upon a global “open” systems architecture, associated to a common set of MPEG-2 and MPEG
Layer-II video and audio compression standards and a wide range of receiver interfaces. The DVB
platform is capable of delivering a complete framework for the transmission of television
programmes and electronic data, via various distribution mechanisms.
DVB systems use the concept of data container (with a fixed size of 188 bytes) in order to transport
all types of data, practically error-free, across any distribution mechanism. In this manner, DVB
systems try to establish a “single” system, with a maximum number of common elements at a
global level, independently of the delivery mechanisms used for transmission of the digital signal whether terrestrial, cable, satellite or point-multipoint video.
DVB systems, which have been standardised by ETSI, constitute a wide family of compatible DVB
standards, which includes the European standard for the DVB-T system for terrestrial television
(EN 300 744), as well as other standards concerning distribution mechanisms such as cable
television (DVB-C), satellite television (DVB-S), point-multipoint video distribution (DVB-MS
and DVB-MC, respectively for frequencies above and below 10 GHz) and television distribution
from a satellite master antenna (DVB-SMATV).
The DVB family also includes an extensive range of other standards for additional and
complementary purposes: teletext (DVB-TXT); subtitling (DVB-SUB); service information (DVBSI, i.e. information used by the receiver for dynamic adjustment of its internal configuration, in
order to adapt programmes, events and available services); conditional access (DVB-CS and DVBSIM); common interface for conditional access and other DVB applications (DVB-CI), data
broadcasting (DVB-Data) and interactivity (DVB-I), via network-independent interactive
protocols (DVB-NIP) or via various systems used to provide the return channel (PSTN/ISDN,
cable TV, DECT, GSM, LMDS and SMATV).
The family of DVB standards, based upon fully digital technology, is also suitable for other
specific applications, such as Internet access and electronic selection of programmes via thematic
menus (EPG or “Electronic Programme Guide”). EPGs make it possible to browse, search, select
and record programmes and associated services.
DVB technology enjoys several competitive advantages over analogue television, given its high
versatility in terms of signal transmission:
“universality” – as a global solution, it enables the implementation of the service in any
geographical zone;
“interoperability” – as an open system, it enables the joint operation of equipment provided by
a wide range of manufacturers and associated services;
“transparency” – as a single system, it enables the transmission of any type of television
programmes and electronic data, as well as easy transfer of signals between different
distribution mechanisms such as satellite, cable and terrestrial.
In terms of the reception of DVB-T signals, two possible solutions are available in the market acquisition of a “set-top-box” in order to establish a link between the antenna and the conventional
analogue TV set; or acquisition of a more costly integrated digital TV set as a replacement for the
conventional TV set.
Both solutions are suitable for the reception and treatment of digital transmissions,
independently of the ITU agreed standard (European DVB, American ATSC or Japanese
BS-OFDM), the platform of origin (terrestrial, cable or satellite) or the type of content
(audiovisual or data). Both solutions are also able to convert the image format, in
accordance with the dimensions of the screen (4x3 or 16x9). 16x9 is the recommended
format for advanced television services and high-definition images.
2.2 Technical Concepts still under Development
One of the basic principles used in the initial development of the DVB-T system is the
identification of current and future consumer needs.
A set of functions were immediately considered to be important, such as interactivity, considered
by the DVB Project and DAVIC (“Digital Audio Video Council”) as one of the key areas for a
complete digital transmission system.
In terms of interactivity, over-air trials have already been made within the ACTS INTERACT
project, confirming the feasibility of an over-air return channel for a “site” using high power
transmitters (around 1 MW), even when using low power levels (around 1 W), from a typical
distance of around 25 km.
The ACTS INTERACT project expects to continue interactive over-air trials, in order to test new
transmitting configurations for the return channel, as well as proceed towards optimisation of the
various parameters in question and improve the performance of the system in an urban
The DVB-T standard also includes the possibility of hierarchical modulation, which enables
simultaneous transmission within the same frequency channel of the same programme in two
distinct conditions, one more robust and with higher priority, the other less robust and with a lower
level of priority. The technical feasibility of this option has not yet been confirmed.
Successful trials of mobile reception of DVB-T have been made in Germany and the IBC in
Amsterdam, as part of the VALIDATE Project, involving portable and fixed DVB-T receivers
operating in favourable transmission conditions. The MOTIVATE Project has also made extremely
successful trials of mobile reception of DVB-T in electric cars.
As a result of these successful mobile reception trials, the DVB project decided to reopen this
process, in order to study the development of mobile reception specifications, which it is hoped
may subsequently be standardised.
In the context of “multimedia convergence” (between television broadcasting, telecommunications
and information technologies), an Application Program Interface (API) is presently being
developed), based on Java programming language, and adopted as part of the DVB Project. The
API will enable the reception and manipulation in a harmonised manner of any type of digital
information related to multimedia programmes, services and software.
On the basis of API, the DVB Project is developing standards for the future launch of a Multimedia
Home Platform (MHP) including a domestic terminal (“set-top-box”, TV or PC), respective
accessories and a domestic digital network. In terms of software and services, MHP will include
high-definition TV, interactive services and Internet access. The aim is to establish a basis in
Europe for a fully competitive and un-fragmented horizontal market in the various stages of the
value chain.
2.3 Inter-relation between relevant DVB-T Technical Aspects and Operators’ Service
2.3.1 General Considerations
The value chain for DVB-T transmission includes various stages spanning from the
production of programmes to reception by consumers. Various technical aspects should be
highlighted in relation to the value chain, which may influence not only decisions by
regulatory authorities but also key options to be taken in terms of network configuration, in
function of the supply of the service in question.
In terms of spectrum management, special attention should be paid to the spectrum efficiency
facilitated by the DVB-T system, given that it offers significant spectrum economies when
compared to analogue systems, independently of the type of network adopted for spectrum
A preliminary technical aspect to be taken into consideration is the type of spectrum planning
chosen for a DVB-T network. A conventional model such as that of analogue TV networks may be
used, in which each station occupies a frequency channel (MFN or “Multi Frequency Network”).
Alternatively, a Single Frequency Network (SFN) model may be adopted, which takes advantage
of the various capacities of the new system, and synchronises all stations in the same frequency
channel. It is also possible to adopt a mixed strategy combining a MFN and SFN network.
The advantage of a SFN over a MFN is that it offers greater spectrum efficiency, especially in large
geographic areas. If the implementation of a national SFN is feasible, should make it possible to
share a single frequency channel by 4 programmes, e.g. of a 4x3 PAL format.
At the same time, SFNs have certain disadvantages when compared to MFNs, such as the need for
perfect synchronisation of SFN transmitters and a higher number of transmission stations.
A technical aspect linked to the configuration of a DVB-T network, which should be previously
defined, is the type of DVB-T technology based upon the COFDM modulation scheme (“Coded
Orthogonal Frequency Division Multiplexing”). This enables two types of operation, according to
the geographical zone for which coverage is desired.
There are two possible options concerning the number of carriers for the operation of a DVB-T
system - 2k mode (with 1705 active carriers) or 8k (with 6817 active carriers). The choice between
these modes depends directly upon the anticipated geographical coverage area for the networks.
The 2k mode is recommended in smaller geographic coverage areas, such as local areas using a
small SFN or a single transmission station suitably complemented with co-channels (“gap-fillers”).
The 8k mode is designed to operate in any type of transmission stations, isolated or forming part of
a SFN, and in any geographic area, including nationwide.
Another fundamental technical aspect is the modulation scheme. This combines the modulation
option (QPSK/QAM) with the multi-carrier OFDM signal, providing immunity from ghosting of
the DVB-T signal through the inclusion of a guard interval between every two OFDM symbols,
and codifying redundancy for the purpose of achieving a robust transmission.
There are also a set of parameters linked to the modulation scheme, which have to be previously
defined in order to configurate OFDM modulators located in network transmitters and
corresponding OFDM demodulators located in receiver “set-top-boxes”. This is necessary in order
to determine the configuration in which the DVB-T network should operate.
At the same time, the choice of configuration parameters for the DVB-T network, depends in turn
on a set of technical options linked to the type of service desired.
The dimensions of the service supply to be provided, in terms of bundling of the various
programmes to be transmitted and the respective image quality, directly influences the choice of
technical options in terms of the above parameters, and, consequently, the appropriate
configuration for the desired operation of the DVB-T network.
The parameters underlying each of the possible configurations in which a network may operate, are
as follows:
modulation (“QPSK”, “16-QAM” and “64-QAM”), which enables information to be
transmitted with more or less detail, determining the type of images which may be transmitted,
in function of the “sharpness of definition” [limited or LDTV (1.5 to 2 Mbit/s), standard or
SDTV (2.5 to 6 Mbit/s), enhanced or EDTV (8 to 12 Mbit/s) and high or HDTV (18 to 24
Mbit/s), whose analogue equivalents are respectively - VHS, PAL, PALplus and HD-MAC];
code rate (“1/2”, “2/3”, “3/4”, “5/6” and “7/8”), which defines the robustness level of the
transmission against noise, selective fading and interference, i.e. the protection level of the
signal required in order to guarantee efficient reception, even in adverse propagation
conditions, such as portable and mobile reception;
guard interval in function of the useful duration of the OFDM symbol (“1/4”, “1/8”, “1/16”
and “1/32”), which defines the extent of geographical coverage of the network.
This set of parameters for possible technical options, results in a 15 x 4 grid of possible
configurations for transmission of the DVB-T signal, each configuration with a maximum binary
rate which may vary between very different values, from around 5 Mbit/s to around 31,5 Mbit/s,
depending upon the option chosen.
This wide range of values, corresponds in practise, to an equal number of choice levels for
maximum transmission capacity associated to a pre-defined configuration for the operation of the
DVB-T network.
The supply of the service should take into consideration the maximum transmission capacity, in
order to link the needs of each programme to a specific level of capacity consumption.
The service quality associated to the reception of the DVB-T system is characterised by a very
rapid transition between almost perfect reception and zero reception.
It is therefore necessary to plan for a high percentage of coverage locations, 95% (“good”
coverage) or 70% (“acceptable” coverage), in order to protect against interference in a specific
reception location . It is desirable to define a percentage of 99% of time in which the usable signal
is not distorted by noise or possible interference.
2.3.2 Technical Options to be considered in the Configuration of a Network
For reasons of added value in terms of spectrum efficiency, the spectrum manager will in principle
attempt to plan SFNs, whenever possible, provided that there is adequate available spectrum for
this purpose.
In terms of the operational technology for DVB-T the choice seems to be clear cut – given that the
8k mode may be adopted without any inconvenience, and that it is likely that there will be growing
mass market penetration of such equipment. Receiver equipment is already available in the market
for the 8k mode and can also be used for the 2k mode. An 8k network also offers greater flexibility
and is viable for any level of geographical coverage.
The DVB-T network involves a new market player in the transmission value chain – the
“multiplexer”. The mutiplexer plays a key role in the DVB-T transmission value chain, and should
guarantee a flexible and well-dimensioned supply.
The flexibility in the supply of services, inextricably linked to multiplexing, requires the prior
definition of the conditions for commercial exploitation of the service - associated to the predefined configuration for the operation of the DVB-T network and, consequently to the maximum
transmission capacity as well.
In short, it is fundamentally important that certain strategic options for the configuration of the
DVB-T network be decided prior to other decisions, given that these options will define the
conditions of the commercial exploitation of the service.
The following parameters identify certain specific aspects of the type of technical options that
should be previously decided, in harmony with the type of supply desired:
modulation – the choice of QPSK will limit the definition of the type of image of the
programme to be transmitted, given that it establishes an upper limit of around 10.5 Mbit/s ,
but this may well be a good option if robust mobile reception is desired. On the other hand, the
choice of 64-QAM will enable higher data rates to be transmitted, thus permitting a more
diversified supply, including different types of programme such as high-definition, but is not
recommended for mobile reception;
code rate – choice of “7/8” will offer robustness of transmission, considered to be sufficient
for fixed reception but insufficient for portable reception. Greater protection is provided by the
choice of “1/2” or “2/3”, for example, although at the cost of a reduction in the maximum
capacity for the same guard interval;
guard interval – choice of “1/4” is recommended for a wide coverage network, but the
associated maximum capacity is lower than that offered by a local network (option “1/32”),
for the same code rate.
It should be noted that the use of statistical “multiplexer” equipment, would make it possible to
achieve a dynamic mix of different programmes and associated services. It would indeed be
possible to achieve automatic reconfiguration of the “multiplexer”, following a rearrangement of
the service supplied, in function of individual consumption of capacity by each of the programmes
to be transmitted.
This type of “multiplexer” widens the scope of the flexibility of services supplied, and its added
value is that it enables commercial exploitation of telecommunications services, such as data, for
dynamic use of excess capacity.
Finally, it is important to emphasise the inter-relation between commercial options concerning the
mix of services and certain technical parameters of network configuration, which should be
dynamically adapted to the aforementioned commercial decisions in order to permit optimal global
2.4 Questions
In relation to the technological aspects of DVB-T the following key questions can be posed:
What is the most suitable strategy for the planning of DVB-T networks (MFN, SFN or mixed),
including the mode of operation (2k, 8k) and the type of reception ?
What are the key characteristics and advantages of DVB-T, in comparison with other
television signal distribution mechanisms?
What are the perspectives for the development of digital television, across its various
platforms (terrestrial, cable and satellite), taking into consideration the likely evolution of:
associated transmission technologies?
costs of the network and its management/maintenance?
prices of reception equipment?
What is the likely evolution of the mix of services to be provided via DVB-T and what will be
the impact on the management of “multiplexers” and the radio spectrum?
What are the possibilities of remote control of dynamic reconfiguration of OFDM
demodulators of “set-top-box” receivers?
What margin of freedom should be granted to future operators in terms of dynamic
management of statistical “multiplexers” and configuration of the DVB-T network?
What is the current status of interactive systems related to the over-air return channel, in terms
spectrum occupation for the return channel;
level of free spectrum required for the return channel, for determination of the security
zone of the return channel in geographical and spectrum terms;
minimum number of radio channels for the “download” of programmes, in the case of
VoD or NvoD services, which justify interactivity for this purpose;
market segment for this type of service.
How important is high definition television and what should be the respective framework for a
market committed to a diversified supply of services?
What is the current state of technology associated to mobile reception of DVB-T:
results of conducted trials so far?
market segment for this type of service?
What is the current state of technology associated to hierarchical modulation of DVB-T ?
What should be the migration process and the transition period (“switch-over”) ?
What are the eventual advantages of a single date for switch-off of analogue TV?
What is the current state of the development of the Multimedia Home Platform (MHP)
and what will be its likely impact, in terms of convergence of television broadcasting,
telecommunications and information technologies?
What limits should be placed upon regulatory authorities when setting technical options
for the configuration of DVB-T networks?
3.1 Introduction
The transition to digital television will radically alter the current panorama of hertzian analogue
terrestrial television.
In addition to the provision of new services and functions as a result of the new technology, with
corresponding advantages for consumers, the transition to digital will also have profound
repercussions on the business structure of this sector and the corresponding value chain.
The revolution in terrestrial television broadcasting also takes place in the context of the increasing
competition from rapidly developing cable and satellite platforms that are also moving towards
complete digitalisation. This level of competition will soon be further multiplied by a range of new
multimedia services provided through Internet platforms via telecommunications networks, as a
result of wide band local access, using ADSL and FO.
3.2 Costs of the Transition to DVB-T
The transition to DVB-T will lead to considerable initial investments, throughout the value
chain, from the production of creative content to the consumer. These costs will be
particularly difficult to bear in smaller markets.
In the medium term, the conversion to digital is nonetheless likely to offer considerable
economies, in overall terms and within each stage of the value chain. This is due to
increased efficiency in the production and transmission of content, a rapid fall in the cost
of equipment to end consumers and economies of scale resulting from higher capacity.
The costs of transition to DVB-T may be summarised as follows:
a) Content and Programme Provision
The main additional production and post-production costs are associated to the need to adapt
studios to the advantages of the digital norm, including 16:9 and high definition transmissions.
Additional programming expenditure will also be required in order to feed new thematic channels.
b) Multiplexers and Associated Services
This category includes multiplexing - enabling various television programmes (up to a maximum
of 6 given the current state of technology) and/or new telecommunications services to be combined
in a single information stream that may be transmitted in a single 8 MHz frequency channel. The
category also includes a set of associated infrastructures that guarantee the management of new
services and functions, such as conditional access services, electronic programme guides,
interactive services and new telecommunications services.
These activities do not exist in the current analogue television business, and will represent
a considerable proportion of the initial investments, as a result of which the strategic model
to be adopted for the introduction of DVB-T should pay great attention to this category.
c) Transport and Transmission Network
The transport of the digital signal from multiplexers to transmission stations, in order to then
transmit the signal to consumer receiver equipment, may be achieved via existing digital
telecommunications networks, a dedicated network or a mixed solution which optimises investment
and operating costs, in accordance with the strategic options taken.
Costs associated to the transmission station network are higher than transport costs, due to the fact
that existing analogue transmission stations cannot be used for digital transmissions, apart certain
infrastructure elements such as buildings, antennae and energy resources.
d) Consumer equipment
The highest global cost associated to the transition to digital television, is the acquisition and
installation by consumers of new reception equipment. Existing reception aerials may continue to
be used, but either a “set-top-box” (STB) or an integrated digital television set (iDTV) must be
acquired together with either a separate STB or replacement unit for video recorders and other
storage devices.
In order to be able to guarantee rapid penetration of DVB-T and the ultimate success of the new
system, sufficient quantities of affordable equipment must be made available.
Existing television programmes that are transmitted free-to-air in the analogue terrestrial network,
should continue to be broadcast via analogue transmission after the introduction of digital
terrestrial, during a significant period, until the vast majority of consumers are equipped to receive
digital transmissions. Simultaneous transmission (simulcast) will impose significant additional
costs upon existing broadcasters. This should be taken into consideration in the analysis of possible
strategic models for the business.
3.3 Analysis of the Value Chain
The analytic model proposed (see diagram on page 3-9) identifies a set of elements in the value
chain, specifically, Content Provision, Programme Provision, Multiplexing, Transport Network,
Signal Transmission, Marketing and Distribution, After-sales services and the Consumer. These
elements may of course be subject to vertical integration1, but each stage may be analysed
Market Players
Using the different strategic options available for commercial exploitation of this new platform, it
is possible to identify a set of potential market players for each of the stages in the DVB-T value
chain, in light of the different options that may be chosen.
Television operators may intervene at the stages of Programme Provision, Multiplexing
(understood in its wider sense as specified in paragraph 3.2), Marketing and Distribution and After
It is likely that synergies may be achieved through the integration of different activities by the same economic
agent (Operator/Provider).
Sales Services. Television operators will be responsible for selecting content services to be offered
to consumers, and co-ordinating promotion and sales to the consumer.
In the digital universe, Network Operators may extend their activities to the sale of multiple
telecommunications services. It is therefore likely that such operators will be interested in
integrating their activities within the stages of Multiplexing, Transport Network, Marketing and
Distribution and After Sales Services.
The equipment manufacturing industry will also play a key role in the context of DVB-T,
intervening in and influencing almost all stages of the value chain - Multiplexing, Transport
Network, Signal Transmission, Marketing and Distribution and the Consumer. Equipment suppliers
are responsible for supplying hardware and software for the entire DVB structure, including
production, transport, distribution and consumer equipment (receiver and set-top-box).
From the perspective of Internet Service Providers, Marketing and Distribution and After Sales
Services play a key role in the development of the business. Internet is likely to play an
increasingly important role as an additional means of linking content providers with consumers, in
terms of marketing of creative content and after-sales assistance.
The other players within the DVB-T operational value chain are Content Providers, Transmission
Operators, Retail Trade and Consumers.
Vertical Integration - Scenarios
From a strategic viewpoint, it is likely that some market players will choose to develop multiple
areas of activity, spanning several stages of the value chain.
The business strategy of the Telecommunications Service Provider may extend to include the
functions of Multiplexing, Transport Network, Signal Transmission, Marketing and Distribution
and After-Sales Service. The extent of vertical integration may be either partial or total, including
all or only some of these activities. The option chosen will depend upon the business strategic plan,
and the political and regulatory decisions for the sector.
Integration of After-Sales Service, Marketing and Distribution, Multiplexing, Programme Provision
and Content Provision may be a strategic option for a Digital TV Service Provider. For a
Telecommunications Service Provider, vertical integration across two or more activities will also
depend upon its strategic options as a result of its perspectives of market evolution and the political
and legal framework.
Comparative analysis of these two strategic options (Telecommunications Service Provider and
Digital TV Service Provider) enables us to identify certain differences, in particular at the level of
Marketing and Distribution.
The Telecommunications Service Provider concentrates upon commercial exploitation of the
technical conditions for the development and supply of telecommunications services, for example
bandwidth, whereas a Digital TV Service Provider concentrates upon Programme and Content
Certain scenarios of vertical integration may be established, as illustrated below.
Programming may be integrated upstream with Content Production and downstream with
Multiplexing, ISP, Interactive Services and other Telecommunications Services. Integration of this
nature will be particularly advantageous for the Consumer, because it facilitates the offer of a set of
services tailored to different consumer needs, and avoids the “imposition” of the supply of services
which are of no interest to the consumer.
The integration of Transport Network and Signal Transmission activities with Multiplexing
and Telecommunications Services enable economies of scale to be achieved and makes it
possible to provide a co-ordinated supply of other telecommunications services. Such
associations will lead to possible reductions in operating costs.
The development of new services and market segmentation are closely tied to Marketing and
Distribution, which will enable manufacturers to achieve a better understanding of consumer
desires, and thus improve responses to consumer demand.
After Sales Services include Client Assistance and Billing services.
Analogue vs. Digital Model
When comparing the analogue and digital models the value chain is essentially the same, except for
the stage of Multiplexer, which does not exist in the analogue universe. The role of the multiplexer
should not be understood as solely the aggregation of data from different services, but rather as a
set of inter-related activities including conditional access, EPG, interactive software etc. which are
essential for the development of the business.
In the analogue television value chain, the most important stages are Content and Programme
Provision, followed by the Transport Network, Signal Transmission, and Marketing and
Distribution. After-Sales Services is principally focused upon advertising clients.
The value added by the Transport Network and Signal Transmission is considerably lower
than that of Programme and Content Provision. In the digital universe, Programme and
Content Provision become yet more important given that the new technological platform
enables a wider supply of services, creating conditions for the development of a market
with radically different characteristics. This new market will tend to increase the
requirements of consumers, which will encourage suppliers to step up their efforts to
provide Products/Services in anticipation of the growing needs of the market.
In this context, it is likely that Marketing and Distribution will play a more important role
by identifying and developing different market segments, given that this is an excellent
means of evaluating the level of demand for each segment and developing new services.
After Sales Services may be used as a feedback mechanism, enabling Content “suppliers”
to tailor their services to consumer needs.
A significant difference between DVB-T and analogue terrestrial, not directly reflected in
the value chain, resides in the strong inter-relation between the technical configuration of
the network and the service strategy. The network (including multiplexing functions,
transmission and broadcasting) must constantly adapt to the “mix” of services, which will
evolve over time in order to adapt to changing market demands.
3.4 Market Trends
The transition to digital television will accelerate the existing trend towards a customerdriven transaction-based business. We can identify three key historical stages in the
television industry.
Stage 1 (pre 1980s) – Simplified Analogue Universe
In this universe, all broadcasters provided free-to-air services and were vertically
Each broadcaster focused on management of its TV channel(s). The end client was the
advertiser, and the broadcaster’s sales activities focused exclusively on the sale of
advertising space. Some public broadcasters sold advertising space, others were financed
exclusively via license fees or public funding.
Stage 2 (1980s onwards) – Sophisticated Analogue Universe
From the 1980s onwards, a much higher level of competition was introduced into the
television market. Independent producers competed with in-house production departments;
and traditional free-to-air channels began to face competition from new terrestrial and
cable operators offering FTA and pay-TV channels, and thus commencing competition
between platforms.
In the face of higher competition, the quality of content became increasingly important to
secure commercial success. New pay-TV broadcasters, have developed sophisticated
conditional access and marketing capacities in order to secure subscription revenues from
end consumers. The first multi-channel packages also appeared in the market via satellite
transmission, involving television programme operators and satellite network operators,
who rented their transmission capacity to programme operators.
Stage 3 – Digital Universe
In the digital universe, a far greater competition will now be introduced throughout much
of the value-chain, and there will be considerable competition between existing platforms –
terrestrial, cable and satellite, and in the near future with other platforms based upon the
telecommunications network with access to end consumers (via ADSL and/or FO). As
bandwidth increases for cable and telephone networks, there is likely to be growing
convergence between Internet and television services.
A series of key market-trends can be identified for various stages of the value chain in the
digital universe.
a) Strategic shift of Broadcasters towards Content and New Services
Existing broadcasters will only be able to survive in the digital universe, if they can secure
rights to attractive content, and/or diversify their activities into wider service provision
including multi-channel packages, pay-TV channels and new services. Public broadcasters
face a particularly important challenge given their public-service mission.
b) Strengthening of Independent Content Providers
The importance of content in the digital universe will encourage the emergence of new
independent producers who offer high levels of talent and creativity. There will be a
growing trend to separate content creation and service provision activities as separate
business units.
c) Entry of Telecommunications Operators into the Television Industry
Telecommunications operators already own cable networks in most countries, and develop
strategies in order to draw the maximum advantage from the convergence of audiovisual
and telecommunications services. The existing strategic interests of such operators, their
expertise and considerable financial resources will mean that they will play a key role in
the future multimedia industry.
d) Convergence of the Offer of Television Channels across different Platforms
Just as cable and satellite networks have driven much of their subscriber base through the
offer of multi-channel packages, the introduction of DVB-T will also enable terrestrial
services to offer a wider range of programming.
Given that cable and satellite enjoy a much wider capacity than digital terrestrial, the
success of the latter will depend upon its “mix” of programmes, which should be
fundamentally different in nature, although certain key programmes may be
simultaneously distributed across all platforms.
e) Challenges to Traditional Commercial free-to-air Channels
Existing generalist free-to-air channels, financed by advertising, will face a series of
important challenges. The growth of new free-to-air and pay-TV channels and new
services will inevitably undermine the advertising revenue base of current generalist
broadcasters, which will make it increasingly difficult for them to survive when solely
providing free-to-air services.
f) Growth of pay-TV Services
An increasing proportion of digital television revenues will be transaction based, based on
demand for thematic categories such as sport, music and films, and new services offering a
greater or lesser extent of interactivity. In the digital universe, there will be a progressive
shift from “broadcasting” to “narrowcasting”.
g) Portability and Mobility
Portability (i.e. the possibility of reception of broadcasts via an aerial incorporated within
the receiver, thus eliminating the need for a physical connection with an external aerial
socket) and mobility (possibility of reception while in movement) are distinctive
advantages of DVB-T, compared to cable and satellite distribution, although the offer of
such functions implies additional costs in the configuration of the transport and
transmission networks.
It is likely that the commercial value of such functions, at least in some markets, will
justify the increased investment required and will tend to be offered on a general basis,
starting in the main population centres.
h) High-Definition Television (HDTV)
High definition television, as respective production and reception equipment costs fall, will
be increasingly important, especially in cable and satellite platforms, due to the high
availability of bandwidth in these delivery platforms.
The introduction of HDTV in DVB-T, faces radio-electric spectrum limitations, which will
mitigate its introduction and may imply the reservation of additional spectrum frequencies
for the DVB-T service, e.g. those frequencies liberated by the switch-off of analogue
i) Hardware Trends
In the short-run consumers will be driven by the attraction of new subscription-based
content and services. Over the medium-term hardware advantages will also be important in
promoting the growth of DVB-T
The transition from analogue to digital television requires consumers to acquire new
reception equipment, which may imply a considerable additional outlay for consumers in
the initial phase of the transition process. The main driving force for such an investment
will be the content advantages of the new service. Over the medium-term, due to the
natural fall in the cost of digital equipment, its greater sophistication and functions and the
normal replacement cycle of television equipment, the main driving force of the roll-out of
digital television to all consumers will tend to be hardware advantages.
In the short-run, therefore, the penetration of DVB-T will be almost exclusively driven by
content advantages, whereas in the medium-term, hardware advantages - cost, quality,
mobility, and functions will be important factors in motivating customers.
3.5 Questions
What type of services may be provided by DVB-T and what impact will they have
on the management of multiplexers and the radioelectric spectrum?
What will be the market impact of the implementation of DVB-T, in terms of:
Economic agents (content producers, television operators, telecommunications
operators and consumers)?
Creative content industry (audiovisual, cinema and multimedia)?
Transmission systems (infrastructures)?
Signal reception equipments (aerials, televisions and set-top-boxes)?
What will be the new value chain associated to DVB-T ?
Will solely conventional television activities (point-multipoint) be sufficient to
make it economically viable for television operators to use DVB-T?
What are the advantages and/or inconveniences, from a market perspective, of
concentrating the three technical aspects of digital terrestrial television –
multiplexing, transport and distribution – in a single operator?
How important will high-definition television (HDTV) be in commercial terms, and
what will be the best strategy for its implementation?
How important are portability and mobility as competitive advantages over cable
and satellite?
DVB-T: Value - Chain
- TV Operator
-TV Operator
-TV Operator
- Multimedia
- Content
-Operator of
the transmitters
- Equipment
-TV Operator
- Consumer
- Retailers
Related Activities - Telecommunications Service Providers Perspective
Marketing and
Related Activities – Digital TV Service Provider Perspective
for Vertical
of New
4.1 Public Interest Objectives
The public authorities must ensure that digital terrestrial television (DVB-T) is introduced in a
manner that safeguards public interest objectives, reflecting the common values of any
democratic society, which underpin EU policies for the broadcasting sector. These objectives
embrace principles such as pluralism of information, promotion of linguistic and cultural
diversity, consumer protection, combat against info exclusion, and the need to encourage the
development of a solid and dynamic industry, with the corresponding economic benefits.
The main practical questions directly associated with public interest objectives, which require
urgent consideration are summarised below. The responses to these questions will determine
the different implementation strategies for DVB-T to be adopted by public authorities.
Universal Service
Analogue Terrestrial Television is currently available to the vast majority of European citizens,
reaching around 98% of homes. DVB-T should achieve a comparable level of coverage, ensure
the provision of free-to-air public television services and certain new digital services to all,
within a reasonable time scale, and at an affordable price in order to combat info-exclusion.
The transition to DVB-T requires significant investments from current television operators, and
such investments will be particularly difficult to bear in smaller markets. This may affect the
speed of transition, if this aspect is not correctly taken into account in political decisions.
Conditional Access Services and Interoperability
Digital reception equipment (STB or iDTV) can operate as both a receiver of all digital signals,
and a decoder of encrypted signals. In practise, this means that television operators may choose
whether to offer their service via an encrypted signal, which can be viewed only in return for a
subscription fee, or via free-to-air services (FTA). A major driving force in the transition to
DVB-T will be pay-TV services that offer premium programming (in particular feature films
and sport) that will greatly benefit from improved picture and sound quality. Many viewers will
be willing to pay extra subscription fees in order to guarantee access to premium digital
programming, and pay-TV operators will also attempt to acquire exclusive rights to certain
events – in particular sports events – that will attract subscribers to their services.
Pay-TV operators may also attempt to offer an STB and iDTV that works exclusively with their
system in order to lock in their clients.
Conditional access service is a means of extending consumer choice, but should be introduced
in a manner that does not violate other public-interest objectives.
The question of interoperability between reception equipment of different manufacturers and
competing operators and platforms, is also a key question to be considered.
Efficient use of the Radio-Electric Spectrum
The radio-electric spectrum is a scarce public resource, which will be increasingly important
for communications in the Information Society. Correct timing of switch-off of analogue
television will bring obvious benefits in terms of spectrum efficiency and a possible increase in
the capacity made available for DVB-T.
Active co-ordination of switch-off at the European level is likely to further the pursuit of these
Promote Competition, Innovation and Diversity
The introduction of DVB-T should take into consideration the fact that alternative transport and
distribution mechanisms for digital television and associated services are in a rapid state of
development – in particular satellite and cable and in the near future Internet platforms via
telecommunications networks.
The options and implementation rules for DVB-T adopted by the public authorities, should take
the above questions into consideration in order to create an environment which does not unduly
favour any existing operator, and encourages the development of fair competition, innovation
and diversity in terms of technology and creative content.
4.2 Implementation Models
The framework for implementation of DVB-T is highly complex, encompassing the questions
raised in paragraph 4.1), the definition of the DVB-T value chain made in Chapter 3, the
inevitable limits of the radio-electric spectrum and the legitimate interests of existing operators.
All these issues should be taken into consideration when defining the most appropriate strategic
model for the transition to DVB-T.
The different DVB-T strategies so far adopted by European and non-European countries is a
result of the interplay of this complex set of questions.
The table provided in appendix 1, aims to provide a summary of the current situation of options
taken in various European countries in regard to a set of parameters which define the
implementation model.
In order to further reflection and debate, three overall DVB-T implementation scenarios are
presented below. It is obviously possible to develop many other variations of these scenarios:
- MODEL 1 –In this model, the entire capacity of the national spectrum available for digital
terrestrial television is attributed to a single DVB-T platform, i.e. the components of the value
chain relative to multiplexing and associated services, transport, transmission, marketing,
distribution and after sales services are bundled together within a single entity.
Content provision will be shared between existing broadcasters and the new licensed entity,
under commercial terms to be freely agreed between both parties.
Existing broadcasters would obviously require a safeguard of their legitimate right to broadcast
existing “free-to-air” programmes, and regulations for programme provision should uphold this
The driver for this model is the critical mass of business turnover. Critical mass is needed in
order to compete with other digital platforms such as cable, satellite and fixed
telecommunications networks.
This model assumes that the manager of the DVB-T platform will be free to sub-contract noncore functions, such as transport and transmission to third parties, or directly make the
necessary investments.
- MODEL 2 – This model is almost the direct opposite of Model 1, in which there will be as
many DVB-T platforms as there are multiplexers available. This enables each platform to
achieve full vertical integration across the value chain, and makes it possible for existing
broadcasters to tender for ownership of a platform.
This model implies considerable fragmentation of the DVB-T market, and its core criterion is
the promotion of competition within the DVB-T market, rather than competition across digital
platforms such as cable, satellite and fixed telecommunications networks.
- MODEL 3 – This is an intermediary model between the previous two models, in which the
available multiplex capacity is shared between two distinct, competing entities, with a degree of
vertical integration identical to that of Model 1.
This model aims to achieve a balance between the advantages of economic robustness provided
by the critical mass, and greater competition within the various stages of the value chain.
4.3 Questions
How imperative is the transition to DVB-T for Europe, from the perspective of:
public service television?
long term economic viability of existing broadcasters?
hardware and content creation industries?
What should be the main criteria used by public authorities in the choice of the implementation
What lessons can be drawn from the experience of countries in which DVB-T has already been
Is there a need to define minimum levels of service quality for DVB-T?
What is the importance and which strategies may be adopted for HDTV?
How long should simulcasting be maintained?
What coverage obligations should be established for DVB-T, before analogue TV can be switched
What interoperability obligations should be imposed upon licensed operators?
Does DVB-T, in the context of the convergence of television and telecommunications, justify a
new regulatory model?
Should there be harmonisation of the regulatory framework for the different digital multimedia
platforms – cable, satellite, terrestrial and fixed telecommunications networks?
Are there grounds for the creation of means-based incentives to enable citizens with lower
economic resources to acquire DVB-T reception equipment?
Which “must-carry” obligations should be established and for which platforms?
What type of public initiatives should be taken in order to inform consumers of the introduction of
What is the desirable evolution of DVB-T after the switch-off of analogue transmissions, in terms
of use of the radio-electric spectrum?
The main EU Directive with an impact upon digital television is Directive 95/47/EC of the
European Parliament and Council of October 24, 1995 on the use of standards for the
transmission of television signals.
The Directive’s prime objective was to establish a regulatory regime adapted to the start-up
phase of new digital TV services, including wide screen and high-definition television services
and television services which use fully digital transmission systems. The Directive provides a
measured balance between the objective of encouraging investment and “first mover”
advantage during the start-up phase, while protecting the consumer’s interest in a proportionate
way and promoting competition.
The Directive introduced two types of measure:
 technical rules in relation to transmission standards and basic interoperability
 certain behavioural rules for conditional access providers.
The European Commission published a report on the implementation of Directive 95/47/EC on
November 9, 1999 and also proposed adaptation to this Directive in the light of market
developments, in the 1999 Communications Review/Doc. COM (1999) 539 (“Towards a new
framework for Electronic Communications infrastructure and associated services”).
Key conclusions of the Commission’s report on Directive 95/47/CE include the following:
The inter-relationship between regulation and competition law must be constantly
monitored in relation to infrastructure and service provision;
A broader approach to access issues is needed in line with the convergence phenomenon;
Digital switch-over must be realised in a competition neutral way;
Interoperability and openness remain important targets;
Consumers require high quality, transparent information;
Special importance should be placed upon the principle that regulation should be reduced
to the minimum necessary to meet public policy objectives.
The 1999 Communications Review, also contains proposals for the audio-visual sector,
including the following:
A common framework should be created which covers all electronic communications
infrastructure and associated services (transmission and access);
This new framework is based upon three types of measures:
Sector specific legislation, including a Framework Directive and four specific
directives (Licensing and Authorisations, Access and Interconnection, Universal
Service and Telecoms Data Protection);
Non-binding measures;
Competition rules;
5.1 Key Questions
European Co-operation
Given the principle of subsidiarity between the action of Community Institutions and
the Member States, which issues should be subject to:
EU Directives?
EU-wide co-operation?
Exclusively national legislation?
Competition Law
In order to achieve regulatory objectives concerning fair competition, what extent of
concentration should be allowed within and between the following market players:
Transmission provider (s) and broadcaster (s)?
Multiplex operator(s)?
Television service provider(s) and new multimedia service provider(s)?
Content provider(s)?
In the context of convergence, how should competition rules be to different
platforms and different audiovisual and telecommunications activities?
Regulatory Framework
The European Commission’s 1999 Communications Review identified the need to establish a
new Directive for the regulation of digital television2.
If a new framework is developed for the regulation of different communications
infrastructure and associated services, how can this be implemented in a manner that is
compatible with regulatory obligations that apply to the content of broadcasting services?3
Should there be EU-wide co-ordination of regulatory activities in the field of
network provision
content provision?
“Digital TV markets and technology have evolved beyond the scope of the directive. Further clarification of the
regulatory framework for new services, including the interaction of sector specific regulation and competition law,
is therefore necessary.”
3 The European Commission’s 1999 Communications Review suggests the granting of two authorisations for the
broadcasting industry – one relating to operation of the network infrastructure and the transmission of broadcast
signals, and the other concerned with the content of broadcast transmissions.
In the present regulatory environment, should DVB-T licenses for transmission providers
and multiplex operators be granted as a single license or as separate licenses?
What licensing conditions (transparency, non-discrimination, open access, economic
measures designed to encourage the roll-out of DVB-T, programming requirements etc.)
should be placed upon transmission providers, multiplex operators and channel providers
in the context of digital television?
Should limits be placed on DVB-T multiplex operators concerning the extent of provision
of new transaction-based services?
Should licenses be granted solely at the level of multiplex operators, or at the level of each
channel/service provided?
Should an EU-framework be established for Electronic Programme Guides?
Content Requirements
How should existing content obligations (e.g. TSF Directive) evolve in the context of
What distinctions should be made in the content obligations for free-to-air channels and
pay-TV channels?
Should content obligations be harmonised for the main delivery platforms (terrestrial,
cable and satellite)?
Should derogations be allowed in terms of content obligations for new channels during
their start-up period?
What content requirements should be introduced to ensure universal access to certain types
of programming – notably films and sports – which risk being locked up by pay-TV
Access and Interconnection
The European Commission is developing an Access and Interconnection Directive for all
communications and associated services.
Is it possible to address all key issues in relation to DVB-T through a general directive
applicable to all communications and associated services?
How should interoperability of consumer equipment be secured, in terms of the
Applications Programme Interface (API) given that a norm will soon be established for
DVB’s Multimedia Home Platform (MHP)?
Should “must carry” rules be established for a) public-service broadcasters, b) all existing
terrestrial channels, on other delivery platforms. Should public-service broadcasters be
allowed to establish exclusive agreements with a particular pay-TV platform for their
publicly-funded channels?
Switch-off of Analogue TV Broadcast and the Transition Period
Should there be a national switch-off date set by each Member State?
To what extent should there be EU-wide co-ordination of switch-off?
Instead of specifying a switch-off date at this time, should a deadline be set for establishing
this date in the near future?
Should switch-off be dependent upon satisfying certain conditions – e.g. universal access,
affordability etc?
In the transition period, should simulcasting be a) an option, b) an obligation for existing
analogue broadcasters?
Annex 1
Features and Dates of Digital Terrestrial Television Services in Europe
Launch Date
Before 2001
65% /
18% / 52%
20%/ 50%
70%/ 90%
Analogue Switch
6 at launch
2010/2015 2009/2015
1/1/2012 2008/2012
DTT Services
Portable is
Possibly 3
at launch
2/3 (first
Allocation of
adopted or likely
to be adopted
2k & 8k
Service led Multiplex led
Service led Service led
(Digitenne) (NorDig) ANIEL
small SFN Gap SFN
Open TV / OpenTV /
Sources: Mostly - European Service Model (Digitag), January 2000
Allocation of frequencies, except Ireland, Finland and Norway - DTT in Europe The Full Report (CDG
Allocation of frequencies in Ireland, Finland and Norway – Final Report FM PT24 (CEPT)
Multiplex led: separate licensing of multiplex and programme services.
Service led: licensing of programme services on predetermined multiplexes operated by an infrastructure provider.
Also adopted in Japan.
Broadcaster led: allocation of one frequency directly to each incumbent broadcaster. Adopted in the USA.
* This list covers only those countries where significant information is available.
** Three multiplexes reserved to BBC, Digital Channel-3/4 and SDN. The remaining three multiplexes are reserved to
private operators – Granada and Carlton (ONDigital).
*** A consortium – DIGICO - will be established to give support to the transmission of the DVB-T signal.
**** A license to operate the two multiplexes was delivered to NORKRING – the main network operator in Norway.
API – Application Program Interface
CA – Conditioned Access
DTT – Digital Terrestrial Television
FTAC – Free-To-Air Channels
MFN – Multiple Frequency Network
MHP – Multimedia Home Platform
PPV – Pay Per View
SFN – Single Frequency Network
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