Connected TV

Reuters has reported that Microsoft is in talks with pay-TV networks to roll out its own subscription service based on a “virtual cable operator” model. According to Reuters’ confidential sources, the service would not roll out for at least another year.

There is increasing availability of over-the-top content (catch-up and premium) on the Internet – but lack of standards for non-PC connected devices has made it hard for content providers to reach multiple distribution channels, as virtually every device requires adjustments to their service.

Initiatives such as YouView in the UK and Google TV in the USA are examples of ‘topware’ – specialised over-the-top middleware specifications that can be used across devices – and could represent a step forward in the standardisation of OTT services for connected devices (see image below – click to enlarge).

However, as demonstrated by the ‘Internet TV Principles’ charter published last week by French broadcasters, content providers are inherently uncomfortable with players such as Google TV, who they fear will sell advertising over their content. Walled-garden connected platforms such as Youview* and country-specific HbbTV initiatives (such as TNT 2.0 in France) are more likely to succeed in developing a secure environment where content providers feel under control.

As more premium content becomes available online and more devices implement topware specifications, the major challenge for these platforms will be to ensure that content is secure and specifications are correctly implemented by manufacturers.

With its dominance in the DRM space as well as the TV middleware experience acquired through its Mediaroom product, Microsoft will be the platform best-positioned to address connected devices and become the de facto standard for over-the-top services – provided it can make content providers comfortable with its approach.

*As of November 2010, Youview (former Canvas) shareholders include the BBC, Channel 4, Arqiva, ITV, BT, TalkTalk and Five

BSkyB has announced that any extra bandwidth incurred by usage of its new Anytime+ VOD offer will count towards subscribers’ monthly download allowance.

Anytime+ is currently being rolled out as an optional upgrade to owners of Sky HD boxes who also take Sky’s broadband service (Sky has 3.2m HD customers, and a total of 2.8m broadband subscriptions). The VOD service allows subscribers free access in on-demand mode to some of the content they are entitled to under their current subscription package.

However, for users on Sky Broadband’s cheaper package, the download of around three 30-minute standard definition programmes a month would already reach the maximum 2GB usage allowance, creating the incentive for users to upgrade to Sky’s uncapped package.

This approach differs from that of rivals BT Vision and Virgin Media, neither of which counts VOD usage towards their broadband usage caps.

As ISPs increasingly add free VOD and catch-up TV to their own subscription services, the presence or absence of bandwidth caps and guarantees on quality of video streaming will become increasingly important as tools to differentiate their offers from those provided through over-the-top devices and services.

BSkyB is an early example of this trend, and is gambling that its customers will accept paying extra for broadband as a fair exchange for access to a free VOD offer.

South Africa’s telecoms regulator, ICASA, has awarded its second licence for DVB-H mobile TV broadcasting to MultiChoice. Multichoice and e.tv, the first licensee, will share a DVB-H multiplex and have 12 months to launch services. At the same time, South Africa is reconsidering whether it should adopt Japan and Brazil’s ISDB-T instead of pursuing the deployment of DVB-T. Meanwhile, the Brazilians are conducting tests to prove that the ISDB-T standard can be deployed in the 8MHz bands currently used throughout the African continent.

The lack of definition regarding the DTT standard at the same time that DVB-H licences are being awarded raises questions about the potential profitability of future mobile TV players:  will a DVB-H network be built in the next 12 months only to compete with potential free-to-air 1-seg broadcasts?

As it stands, 41 African countries could still opt for ISDB-T, influenced by South Africa’s decision, corresponding to approximately 1.4 billion people. This would significantly add to the current ISDB-T market, which is currently limited to Latin America and Japan and covers 580 million people (click on diagram below).

The conflicting signs given by the government of South Africa are symptomatic of widespread confusion in the continent: the debate over transmission standards has been plagued by misinformation, and governments are mixing the attributes of each standard with the benefits of particular network configurations, compression and interactive middleware choices.

Farncombe believes that countries choosing a transmission standard should focus on maximising the economic benefit of DSO transition, and carefully analyse the following issues:

• Price of set-top-boxes: Although prices tend to decrease with time, there are still significant differences between technologies. This might have a strong impact on the duration of simulcasting, and force governments to implement wider subsidy schemes, and must be carefully analysed against the risk of creating a legacy base of set-top-boxes.
• Incentives from standards’ proponents: Benefits offered by countries interested in expanding the reach of their technologies may prove persuasive.
• Overall long-term objectives: If one of the overarching objectives for DTT migration is to enable interactivity, then interactive functionality must be mandated; otherwise it will be ignored by the vast majority of manufacturers.

The French regulator, the CSA, will shortly advertise three new pay-TV and two new free-to-air HD slots on its DTT platform. Meanwhile, France Ô, the public service channel targeted at viewers from the country’s overseas territories, will be rolled out nationally in the coming weeks.

The decisions result from a public consultation triggered by two pay-DTT channels, AB1 and Canal J, handing back their licences last year.

The new services will launch next year, and will be spread across the six existing multiplexes (R1-R6) as well as two new ones, R7 and R8, which will be opened up as a result of analogue television being switched off region-by-region between now and the end of 2011.

Farncombe’s interpretation of today’s CSA announcement is that the new DTT multiplex configuration will be as in the table below:

R1	R2	R3	R4
France 2	i>télé	Canal+ HD	M6
France 3	BFM TV	C+ Cinéma	W9
Local/ France 3	Direct 8	C+ Sport	Paris 1ère
France 5	Gulli	Planète	NT1
France Ô	Europe 2 TV	TPS Star	Arte HD
LCP	France 24	New pay-TV slot TBA
R5	R6	R7	R8
France 2 HD	TF1	New pay-TV slot TBA	Gifted channel to TF1 TBA
TF1 HD	LCI	New pay-TV slot TBA	Gifted channel to M6 TBA
M6 HD	Eurosport	New FTA HD slot TBA	Gifted channel to Canal+ TBA
	TMC	New FTA HD slot TBA	Other channels TBA
	NRJ12
	TF6
	Arte

Source: CSA, Farncombe analysis (Note: Pay-DTT channels in italics, HD channels in bold)

The allocation of three new pay-DTT channels is designed to boost the attractiveness of pay-TV on the French DTT platform, which has so far performed poorly.Meanwhile, the creation of new free-to-air HD channels should make it easier for the DTT platform to compete with satellite and cable, which both enjoy superior bandwidth and much larger HD offers.

French rules which mandate the inclusion of HD DTT tuners in TV sets already favour the platform. With 46.1% of French homes owning an HD-compatible TV display at the end of 2009, the new services should be able to benefit from a mature addressable market.

After choosing the Japanese ISDB-T standard for their digital terrestrial TV (DTT) system, the Brazilian authorities have invested much money and diplomatic effort in spreading the Brazilian variant ISDB-Tb and the Ginga middleware to other countries. They were partially successful: Ecuador has recently announced it will adopt ISDB-Tb, after Argentina, Chile, Peru and Venezuela. A few African countries, including South Africa, are reconsidering their previous inclination to adopt the European DVB-T standard.

However, political will is not enough to convince Brazilians it is worth buying a set-top box to watch DTT. Despite tax incentives, quotas on TVs, incentives for mobile TV handsets and intensive marketing, Brazilians continue to be confused about what ‘DTT’ means.

Farncombe recently visited several large electronics stores in Brazil, and despite the availability of integrated DTT TV sets for sale, the vast majority of salesmen confused DTT with high definition or with digital pay-TV (pay-TV operators use the European DVB standard).

Three years after launch, Farncombe estimates that less than 2% of households view DTT services, and most DTT tuner sales are “accidental”, as they are integrated into large TV sets (in which DTT tuners are mandated), mobile and portable devices.

Farncombe believes that the key reasons for the challenges faced by Brazilian DTT are:

• Lack of exclusive DTT content: DTT services are HD versions of analogue TV ones and most cities with DTT coverage only receive the top one or two broadcasters.
• Competition from pay-TV services: the launch of new DTH operators has decreased the pay-TV entry price and driven a 20% increase in the number of pay-TV subscribers in the last 12 months. In addition, the focus on HD as DTT’s differentiator makes DTT attractive only to HD-set-owning higher-income households, which are more likely to subscribe to pay-TV.

In spite of the slow adoption of fixed DTT in Brazil, mobile operators have launched several handset models with integrated DTT tuners and broadcasters are investing in in-fillers to improve DTT mobile reception. Meanwhile, other countries have learnt from the Brazilian experience and are allowing multichannel DTT and subsidising decoders to create an initial viewing base for DTT services.

Farncombe’s experience advising broadcasters and governments planning their transition to DTT has taught us that careful planning to ensure the platform’s attractiveness to viewers is more important than the choice of transmission standard (ISDB-T, ISDB-Tb, DVB-T or DVB-T2), which can have very similar end-user functionality depending on the network configuration. Technical specifications that are not mandated and officially certified are often ignored by most vendors, and the high degree of fragmentation of the receivers’ base makes it commercially unfeasible to offer advanced TV services.

To know more about Farncombe’s experience in DTT transition please contact us at strategy@ftl.co.uk