1. Case Study: DTT (Digital Terrestrial Television) Warsaw, February 2004 Roberto de Martino Autorità per le Comunicazioni

2. Index AGCOM Introduction Italian TV market overview DTT technical aspects Regulatory Framework Conclusions

3. AGCOM Introduction Section 1.

4. AGCOM Introduction AGCOM (Autorità per le Garanzie nelle Comunicazioni) established by Law n. 249/1997 Council assisted by two Commissions: networks and services Regulatory Authority for both Telecommunications and audiovisual Convergent Authority Responsabilities also in press and publishing sectors

5. AGCOM Introduction AGCOM activities and responsabilities: Interconnection Verification of dominant position (TLC, TV) Accounting separation Universal service Audiovisual frequency plan TV monitoring Numbering Plan Italian PNRF (official comments to Tlc Ministry)

6. AGCOM Introduction AGCOM activities and responsabilities : Tarifs Mobile market competition Services quality TV-SAT Political pluralism Advertising, Audiovisual production quota Press

7. CONTENTS TRANSPORT BROADCAST Regulatory interventions: Decoder unico DISTRIBUTION Respect of programmation quotas and of production content Publicity quotas Minor tutela, Information ecc., … Licencers and authorizations, … Antitrust rules etc…

8. Italian TV market overview Section 2.

9. Italian TV market overview GENERAL INFORMATION: 11 national terrestrial channels +600 local TV, +1000 radio About +2,5 milions satellite pay-TV subscribers 1 satellite digital platform (SKY) Cable Tv: strong growth switch off (ATO) date: end 2006 Previous Tele+ frequencies have been sold to a consortium (Ben Amar/TF1) to give birth to Sport Italia (Europa TV) and D-free (Prima TV)

10. Italian TV market overview RECEPTION PATTERNS: –Households: more than 20 millions –Terrestrial Tv: 88/89% (50% EU average) –Satellite Tv: 10/11% (21% EU average) –Cable Tv: 1% (29% EU average) – Terrestrial analogue TV still dominates the market

11. Italian TV market overview TV SERVICES : Terrestrial FTA: Two major national players (RAI, Mediaset), strong local character Satellite Pay-TV: One main Pay-Tv operator Sky Satellite FTA Cable TV: optical fiber, and ADSL

12. Italian TV market overview

13. DIGITAL OFFER: Total Digital TV penetration: 12/13% (EU average 18%) DTH: 12/13% (EU average 12%) DTT: trials/experimentation (EU average 1- 2%) Cable: 0.1/0.2 millions HH (EU average 4%)

14. Italian TV market overview: Alternative services to analogue terrestrial Tv

15. Italian TV market overview CONCLUSIONS ITALIAN TV MARKET MAIN CHARACTERISTICS : Analogue terrestrial TV still dominates the market Presence of 2 strong national operators which own 3 TV channels each Strong presence of local operators (more than 600) Vertical model in the analogue terrestrial TV (the operators manage the transmission capacity, own the frequencies, content production, advertising ecc.)

16. Italian TV market overview CONCLUSIONS ITALIAN TV MARKET MAIN CHARACTERISTICS : Satellite Pay-TV is the strongest alternative so far to conventional analogue terrestrial Tv Digital penetration is in the EU average Still weak penetration of cable TV (even with quick growth and ADSL coming soon) New entries in the Italian broadcast market DTT started (5 Mux, +20 programs) DTT expected growth (switch-off set end 2006)

17. DTT Technical aspects Section 3.

18. DTT Technical Aspects DTT BENEFITS: Better Picture/sound quality Increase capacity and efficiency of networks Reduce transmission costs Better spectrum efficiency Lower entry barrier, increased competition

19. DTT Technical Aspects DTT Play-out elements: Encoder Multiplexer OFDM Modulator EPG CA

20. DTT Technical Aspects

23. DTT distribution network: SFN MFN Network adapter

24. DTT Technical Aspects Analogue frequency TV Plan (Analogue PNAF): Issued in 1998 by AGCOM AGCOM Delibera n 68/98 Two level plan approach: First level plan- optimization of resources Second level plan- once completed the first level plan optimization (integration) of left resources

25. DTT Technical Aspects ANALOGUE TV PLAN REQUIREMENTS: VHF frequency band (I and II) UHF frequency band (IV and V) 45 channel (frequency) available in UHF band for planning 6 channel (frequency) available in VHF band for planning Total: 51 channel (frequencies)

26. DTT Technical Aspects ANALOGUE TV PLAN REQUIREMENTS: Quality objective: 4 on the ITU-R scale One third of capacity to be reserved to local programming Utilize European channelization in VHF band Territorial coverage objective: 80% of the Italian territory (with inclusion of all Italian capoluoghi di provincia) Power > 200 W Transmission infrastructure positioned on the same position (site) Total number od transmission sites: 480

27. DTT Technical Aspects ANALOGUE TV PLAN (I LEVEL) RESULTS: 3 channels (frequency) per TV network National coverage with 17 TV channels 6 TV channel reserved to local TV 11 TV channel reserved to national TV All requirements set satisfied

28. DTT Technical Aspects ANALOGUE TV PLAN (II LEVEL) REQUIREMENTS: II level TV plan total number of sites: 480 Constraint regarding maintenance of coverage established in the I level TV plan Power greater than 200 W Regional coverage area Provincial coverage area

29. DTT Technical Aspects ANALOGUE TV PLAN (II LEVEL) RESULTS: AGCOM Delibera n 95/00/CONS 126 regional area covered 1502 provincial area covered

30. DTT Technical Aspects

31. Digital frequency TV Plan: Issued in 2003 by AGCOM AGCOM Delibera n 15/03/CONS Two level plan approach: First level plan- optimization of resources Second level plan- once completed the first level plan optimization (integration) of left resources

32. DTT Technical Aspects DIGITAL TV PLAN REQUIREMENTS: VHF frequency band (I and II) 52,5 – 68 MHz and 174-223 MHz UHF frequency band (IV and V) 470 – 854 MHz 48 channel (frequency) available in UHF band for planning 6 channel (frequency) available in VHF band for planning Total: 54 channel (frequencies)

33. DTT Technical Aspects DIGITAL TV PLAN REQUIREMENTS: Quality objective: 95% service probability One third of capacity to be reserved to local programming Utilize European channelization in VHF band Territorial coverage objective: 80% of the Italian territory (with inclusion of all Italian capoluoghi di provincia) Transmission infrastructure positioned on the same position (site) 260 planned sites

34. DTT Technical Aspects DIGITAL TV PLAN (I LEVEL) RESULTS: 3 channels (frequency) per TV network (multiplexer) National coverage with 17 TV channels 6 TV planned network (multiplexer) reserved to local TV 12 TV planned networks (multiplexer) reserved to national TV 64 QAM better exploits available resources All requirements set satisfied

35. DTT Technical Aspects DIGITAL TV PLAN (II LEVEL) REQUIREMENTS: II level TV plan total number of sites: 260 Constraint regarding maintenance of coverage established in the I level TV plan 16 QAM (more robust) Power greater than 200 W Regional coverage area Provincial coverage area

36. DTT Technical Aspects DIGITAL TV PLAN (II LEVEL) RESULTS: AGCOM Delibera n 399/03/CONS 126 regional networks served 1272 provincial networks served Toal number of served networks: 1398

37. DTT Technical Aspects Example: Spectrum Benefit Comparison between terrestrial analogue TV and DTT planning based on the analogue TV plan (PNAF) and digital TV plan both developed by AGCOM Plan resources: 51 (54 in the digital case) TV channels 6 TV freq. channels VHF-III band 45 (48 frequencies in the digital case) TV freq. channels UHF-V band

38. DTT Technical Aspects Planning Exercise Results: National TV Program Regional TV Programs Total Tv Programs (National and Regional) Analo gue 11126137 DTT48/60 (12x4/5) 378/504 (126x3/4) 426/564

39. DTT Technical Aspects Planning results: DTT multiplies the resources (program number) by a factor of 4/5 in the case of national programs DTT multiplies the resources (program number) by a factor of 3/4 in the case of local programs

40. DTT Technical Aspects Decoder definitions: Zapper: only conversion between TV analogue format and digital TV format Interactive decoder: enhances zapper because it allows the user also to utilize interactive applications iDTV: it combines in the TV set the decoder functionalities CA: for pay-TV applications API: tied to interactivity (operating system analogy for PC)

41. DTT Technical Aspects Decoder market: + 40 Million TV sets + 20 million Households Zapper price: about 150 Euro (25% marin) Interactive decoders price: about 300 Euro (25% margin)

42. DTT Technical aspects Application Program Interface (API): MHP platform has been chosen by the biggest broadcast operators MHP Applications in terms of enhanced TV MHP applications tied to interactivity for regional/local/government services

43. DTT Technical Aspects Interactivity: Program-tied interactivity to enhance program content T-learning T-government in collaboration with local entity, University, Tegion and Public Administration Application: On-line bet market Return channel: wireless or cabled SIM card (to identify user requesting a certain service)

44. DTT Technical Aspects Major broadcasters have invested in DTT Investments cover head-end and regional hubs, distribution network and transmission network As a rule of thumb: 45% transmission network, 35% distribution network, 15/20% play-out (head-end)

45. DTT Technical Aspects DTT started with: DTT networks operating Multicast of same programs available in terrestrial analogue Multicast (satellite) of other programs Some (still limited) new editorial programs

46. DTT Technical Aspects Rai DTT Experimentation phase status (N.B. press information source): DTT network in operation 2 multiplexer RAI 1, RAI 2 and RAI 3 Some satellite RAI program (News, sport, Edu) Some new program (Rai Utile, Rai Doc)

47. DTT Technical Aspects RTI Experimentation phase status (N.B. press information source): DTT network in operation 1 multiplexer Rete Quattro (analogue TV channel) Some programms also available via sat (BBC World, 24 Ore TV, Coming Soon, ecc.) Some local TV program

48. DTT Technical Aspects Other Broadcaster activity (N.B. press information source): Some other broadcaster starting DTT experimentation: Telecom Italia Media which is the holding of La 7TV, MTV Italia 1 multiplexer La 7 TV, MTV Italia programs in the DTT bouquet

49. DTT Technical Aspects Other Broadcaster activity (N.B. press information source): Prima TV: Ben Hammar/TF1 1 DTT multiplexer bouquet includes: Canale 5, Italia 1, SportItalia, La Chaine Info and a child program

50. DTT Technical Aspects Some other DTT activity: Government subsidies (Finanziaria 2004 Law) Government decoder contribution 150 Euro per decoder with interactive features Total: 110 Meuro (available in the Finanziaria 2004 Law) User involvment in the experimentation (user monitoring to gather data and information about user preferences) Family panel to verify user taste and preferences

51. DTT Technical Aspects DTT information campaigns: TV ADS, SPOTS Press Conference Press campaigns DGTVi association (in collaboration FUB, RAI, Mediaset and La7 TV) to promote DTTV penetration in the Italian maket UK experience

52. DTT Technical Aspects CONCLUSIONS: Benefits pertinent to Italian market: Spectrum: a more efficient utilization of the spectrum to reduce the frequency overcrowd New entry: minor entry barriers to push the national TV market which is now concentrated around two main actors Digital culture: with a fast introduction of STB to favor interactivity applications and Internet among users

53. DTT Technical Aspects CONCLUSIONS (based on press information source): : Experimentation phase DTT networks (5 multiplexer) Both national and local broadcaster partecipation New programms online (terrestrial) Some DTT incentive campaign: TV ads, government incentives

54. Regulatory Framework Section 4.

55. Regulatory Framework Four main steps have been completed: Libro Bianco on the introduction of DTT by AGCOM issued in 2000 Law n. 66/2001 Delibera n. 435/01 which contains the text of the Regulatory document for the DTT start-up (until 2004) Adoption of digital PNAF by AGCOM

56. Regulatory Framework Libro Bianco (White Book) on DTT Propose ATO dates between 2006 and 2010 Suggests two alternative transition phase; one based on the analogue PNAF (2010) and the second based on a spontaneous market evolution (fast switch-off 2006) DTT frequency utilization following the analogue PNAF Based on island-by-island switch-off

57. Regulatory Framework Libro Bianco (White Book) on DTT: Suggests the incentives (e.g. STB subsidies) to favour and accelerate the transition phase for all the market actors (operators, final users and industry) Suggests the not necessarity of simulcast (in the first phase of transition) but recommends a transition in which a wider and diversified content program offer is available to DTT users

58. Regulatory Framework Law 20 marzo 200, n. 66 : Target date for terrestrial ATO: 31/12/2006 Demand to AGCOM to define a specific regulatory framework (regolamento digitale) to set the rules for licences and authorization (by mid- 2001) Release of the DTT licenses and authorizations by Ministry of Telecommunications Adoption by AGCOM of the digital PNAF by end 2002 Defines the principles for the regolamento digitale

59. Regulatory Framework Law 20 marzo 200, n. 66 : Separation of the content provision from the network provision Provision of rules which favour the infrastructure sharing between operators Definition of the license and authorization obbligations Prevision of the analogue-to-digital transition phase towards ATO Suggest obbligations for FTA broadcasting

60. Regulatory Framework Regolamento DTT main points: Separation between network operator, content provider and service provider Distingueshes the obligations, restrictions beteween the content and service provider which in the analogue world were assigned to the only existing concessionario Network provider Licencse; Service and Content Provider: Authorization Defines the rules set for the start-up DTT phase which will last until 2004

61. Regulatory Framework Regolamento DTT:roles separation Content provider: Authorization regime Commitments concerning: Advertising Production quotas Protection of minors Political pluralism

62. Regulatory Framework Regolamento DTT:roles separation Network operator: license regime Specific rules concerning: Neutrality with respect to content providers Siting and RF characteristics Infrastructure sharing Accounting separation for holders of license and authorization

63. Regulatory Framework Start-up phase: Will last until 2004 During this phase the existing TV operators (and consortia) can request the title (abilitazione: temporary license) to operate DTT experimentation The operators which request the abilitazione and the ones which hold more than one concessione can keep their frequencies but shall reserve to third-party entities at least 40% of their trasmission capacity (Mux capacity)

64. Regulatory Framework At the end of the start-up phase (2004) AGCOM will issue a second DTT Regolamento by the end of the transition phase (2004); after the issue of this second DTT Regolamento the abilitazioni can be converted in full licenses if the operators comply with the obligations Main contents: Access guarantee rules to content providers Rules regarding Pay-TV Criteria for the assignation of further licenses Rules regarding accounting separation

65. Conclusions Section 4.

66. Conclusions (1) – DTT Benefits Main advantages for the Italian TV market from migration to DTT: Spectrum: a more efficient utilization of the spectrum to reduce the Italian frequency overcrowdproblem New entry: minor entry barriers to push the national TV market which is now concentrated around two main actors Introduce Horizontal model in the chain value Digital culture

67. Conclusions – ATO strategy (2) Phased approach to reach the switch-off: DTT White Book (2000) Law 66 (2001) DTT Regolamento (2001) Digital PNAF (end 2002) Final DTT Regolamento (2004)

68. Conclusions (3) – ATO Strategy Start-up Phase (Until 2004): Content provider market entry requesting Authorization title Actual TV operators can partecipate to the process requesting an abilitazione title to start to operate DTT Holders of more than one concessione can keep their frequencies but shall reserve to third-party entities at least 40% of their trasmission capacity Issue of the digital TV PNAF

69. Conclusions (4) – ATO Strategy From 2004 to end 2006 final migration phase regulated by the second DTT Regolamento: Access guarantee rules to content providers Rules regarding Pay-TV Measures regarding accounting separation of subjects owning licenses and authorizations Conversion of the abilitazione to license if obligations maintaned during the start-up phase Criteria for the release of further licenses because of Concessioni expiration (end 2006), excess frequencies available