By the end of last year 24pc of European and US households still relied on analogue terrestrial signal for their TV viewing, amounting to 70 million consumers yet to decide whether to invest in digital terrestrial television, satellite, cable or IPTV technology.
The report from Understanding & Solutions says that analogue switch-off (ASO) has already taken place in the Netherlands.
Apart from cable and satellite services from providers like UPC and Sky, Ireland has yet to make the transition to digital terrestrial television (DTT) services.
After a successful pilot, Communications Minister Noel Dempsey TD has set in motion plans to switch off Ireland’s analogue network after 40 years in use.
“The proposed legislation allows for analogue switch-off in the future when the time is right and viewers have switched away from analogue television. Switch-off will free up valuable spectrum for more broadcasting and other new services,” Dempsey said at the publication of the Broadcasting Bill before Christmas.
“In addition to impending ASO,” said Graeme Packman, principal consultant with Understanding & Solutions, “key drivers for digital television include consumer demand for more channels, a better picture quality and interactive services.
“This is coupled with service provider ‘push’, driven by the higher revenues that can be derived from digital services. However, ASO is changing people’s traditional TV viewing habits, and the pay-TV industry is being forced to react to the reality that DTT is bringing subscription-free multi-channel viewing to many homes for the first time.”
In recent weeks RTE’s technology development manager Marcus O’Doherty confirmed that the State broadcaster has been working on the Department of Communications’ DTT pilot since last August and is actively looking at the provision of interactive services.
“Another opportunity we see is the convergence between set-top boxes and broadband. We see that as a key development. We have lots of streaming content, over 400 hours of radio content every week and 50 hours of new TV content every week.
“At the moment streaming content is a very PC-centric proposition but we see the development of internet-enabled consumer devices as a key step,” O’Doherty told siliconrepublic.com.
Although the satellite industry is still adding subscribers in a number of countries – notably Central Europe – Understanding & Solutions says that satellite subscriber growth is slowing in most and will rely upon new house builds for growth rather than securing subscribers from other platforms.
The analyst firm estimates satellite (both pay and free-to-air) supplied 76 million (25pc) households with their primary TV viewing last year and this will increase to 85.2 million (27pc) by the end of 2011.
Growth will be driven by two key factors, namely the launch of new services in Central Europe and the ability of key operators such as Sky to stay ahead by offering services like triple-play, high definition (HD) and personal video recording (PVR).
For the cable industry, threats come from three main directions; the growth of satellite, the rollout of DTT services and the launch of IPTV services. Cable has responded in varying degrees to these challenges.
In the US, the UK and selected other markets, cable operators have rolled out PVRs and triple-play services, and explored content deals. However, in less lucrative markets such as Central Europe, there has been little sign of cable gearing up to respond to these challenges.
Understanding & Solutions predicts that cable will lose overall share of TV households from 41pc in 2006 to 39pc in 2011. The US cable industry, despite digitising its networks and rolling out high definition, PVR and other services, will lose customers primarily to IPTV operators, which are making huge investments in their bid to attract subscribers.
“One factor in cable’s favour is that in many European countries it is deeply ingrained to the point where householders receive it as part of their tenancy agreements,” said Packman. “This locks subscribers into cable as effectively as any PVR service, and the result is that cable is better placed to defend its share of the market than it might otherwise have been.”
However, free DTT services enjoy the advantage of a soft target of 73m analogue terrestrial homes, which have so far resisted the temptation of signing up to pay-TV, but have to make the switch to digital in the next few years.
IPTV households, whereby TV pictures are delivered to a television set by means of Internet protocol via a set-top box, will grow from an estimated 2.8m in 2006 to a massive 30m by 2011.
However, take-up has been relatively slow so far and IPTV will remain a ‘slow burner’ in the short term, although a significant growth spurt will occur towards the end of the forecast period.
BT in the UK has rolled out its BT Vision IPTV service with a hybrid box that relies upon the DTT feed for freely available channels, whilst routing through to BT’s broadband network for the extra content.
This hybrid system saves BT’s network from handling more traffic than really necessary. Other operators such as Free in France, Fastweb in Italy and Deutsche Telekom in Germany are also now rolling out boxes incorporating DTT tuners.
For all digital operators, the issue of legacy MPEG-2 technology in both set-top boxes and IDTVs (integrated digital TVs) will prove to be a barrier.
MPEG-4 advanced vision coding’s more efficient compression technology offers the carriage of 30-50pc more standard definition channels within the same capacity as MPEG-2.
The promise of a greater ability to carry high definition services using smaller file sizes, will also allow VoD operators to send more content to subscribers’ PVRs without exceeding the capacity of their hard drives so easily.
However, MPEG-2 has been available for 15 years whilst the standard for MPEG-4 AVC was only finalised in 2004. As a result, there is a substantial installed base of STBs and IDTVs that are unable to handle MPEG-4.
Consumers in many markets have only recently invested in MPEG-2 products to receive DTT services and are likely to resist spending more money to replace their devices so soon. An extreme case in point is the UK, which now has an installed base of over 14m IDTVs and DTT set-top boxes, over half of which were bought within the last two years.
By John Kennedy