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An interesting and potentially disruptive theme that has emerged from our recent policy work is the potential for broadband (IP) networks to substitute for free-to-air (FTA) digital terrestrial TV (DTT) and satellite networks as the main TV distribution platform. Such a transformation seems likely, but it is uncertain when it will happen. This article examines the factors that will influence when platform substitution could take place.
Increasing high-speed broadband coverage means that the supply-side conditions for platform substitution could be met in 5–10 years
The European Commission (EC) has launched a major push to stimulate broadband deployment through its Digital Agenda initiative and elements of its recent Connected Continent legislative package. The two initiatives plan to deliver ubiquitous, high-speed networks with assured quality of service. Should these policy goals be met, then some of the necessary conditions for TV distribution platform substitution could be in place within the next 5–10 years. In some European countries, this could happen even sooner.
In the UK, the government has moved quickly to stimulate broadband deployment beyond the commercially viable footprint. The government aims for 95% of households to have access to broadband at speeds of at least 24Mbit/s by the end of 2017, and for at least 99% of households to be covered by the end of 2018. The speed ambition for this last 4–5% is not yet defined, but it seems likely that it will be sufficient to at least deliver broadcast and on-demand TV streams of standard definition content. For comparison, these expected coverage levels exceed that for commercial DTT multiplexers in the UK at 90%, and are close to that of public service DTT multiplexers at 98.5%. It is also highly significant that multicast – one of the key technologies to reduce the costs of delivering linear broadcast content over broadband – will be available as a wholesale product to communications providers serving 95% of households (and it could be extended beyond that depending on how the final 4–5% are served).
The UK is currently one of the leading European countries in this respect, but it seems inevitable that other countries will also reach very high broadband coverage levels. It remains to be seen whether the EC's ambition of high-speed networks being available to all EU households by 2020 will be reached.
Demand-side factors may ultimately dictate when IP platforms could substitute for DTT and satellite
The supply of the right infrastructure would not be sufficient to enable such a transformation in itself. The most-popular FTA content would also be needed, and public service broadcasters and other major content owners will need to consider the implications of making this linear content available on an IP platform. However, growing consumer demand for watching both linear and non-linear content on multiple devices, and the growing trend for the main household TV being connected to the Internet, suggest that content will ultimately need to be made available on all platforms (including IP) in equivalent forms. It is also evident that many leading content providers are already heading in this direction, for example, by experimenting with new approaches to delivering high-profile events over IP. Furthermore, hybrid DTT-IP and satellite-IP models are appearing that demonstrate that the DTT and satellite communities recognise the importance to users of the broadband-enabled experience.
It may be that demand-side factors ultimately dictate the timing of when IP platforms could fully substitute for DTT and satellite, or indeed if hybrid models exist in the long term. The propensity to connect the main household TV to the Internet will vary significantly by user segment, and will be affected by the installed base of TVs, set-top-boxes and in-home networks. Inertia will also undoubtedly play a part for some people. For the elderly and disadvantaged groups, it seems likely that FTA DTT in particular will remain important for a long time, because broadband take-up among these groups is currently low in most countries. However, many governments have already identified this issue as a priority – getting those who do not currently use the Internet online is critically important for social engagement and reducing the cost of delivering public services in the future. Hence, most of these people will eventually become Internet users.
In summary, we see strong alignment in EU and national policies that, by design or otherwise, will promote the deployment of a pan-European IP-based TV distribution platform as an alternative to FTA DTT and satellite. Aside from the numerous regulatory and licensing and demand questions this raises, the commercial and business model impacts could be transformational, particularly if IP-distribution platforms were to carry all FTA channels and be open to all ISPs at little or no incremental cost. For the traditional TV platforms the issue is not so much when IP platforms would serve most users; rather it is the impact on their business models of even a modest proportion of their users moving over to IP. Hybrid models may help, but their longevity is unknown at this point. The timing of when IP will become mainstream therefore depends on many factors.
Source: Analysys Mason
