Making Difficult Digital Choices

Michael Hedges September 15, 2011 Follow on Twitter

Decisions surrounding digital television transition have been studied, proposed, discarded, studied again and on and on and on. Engineering geniuses just keep inventing better, faster and smarter stuff. The complications are confounding, except the part about money or lack thereof.

French media regulator CSA (Conseil supérieur de l'audiovisuel) president Michel Boyon has recommended that new digital terrestrial television (DTT) channels will use the DVB-T2 standard that offers more channels, better HDTV and, of course, the possibility of 3D. Digital TV channels operating in France currently use the older DVB-T standard. DTT receiver penetration in France is 60%, meaning that all those people will need new receivers or decoders, none of which will be available to TV viewers for 12 to 18 months after the new standard is officially approved.

Some of those eight or so new channels will go to new entrants to the DTT market; NRJ Group, NextRadioTV and Groupe L’Equipe. Some will go to the incumbent private sector broadcasters TF1 and M6 as well as pay TV operator Canal+ as part of “bonus channel” plan meant to off-set their sunk costs for previous digital transition. The incumbents aren’t happy because they’ve learned that new channels cannibalize audience reach and ad revenues. The CSA decision, current moment at least, will delay by 12 to 18 months the launch of any new DTT channels, seen as a decision favorable to incumbents.

Last year the European Commission (EC) voiced concerns that the French plan to award a “bonus channel” to each of the three incumbent private sector broadcasters “to repair structural disadvantage” might just be considered disproportionate State aid. “Back in the (last decade), and specifically for digital switchover, the incumbents already benefited from several important advantages,” wrote EC Competition Commissioner Joaquin Almunia to then French Foreign Minister Michèle Alliot-Marie (November 24, 2010). “One might think that there would be, at least, a risk of overcompensation.”

Defending the bonus channel deal, the French government, in its response to the EC (February 24), said launching three new channels promoted media pluralism and there could be no discrimination because the incumbent broadcasters, unlike new entrants, had to switch from analogue to digital. By April, obviously after informal communication with EC DG Competition, the French government suggested it might hold off on the gifts to incumbent broadcasters until 2016 to coincide with the cut-off of advertising from public broadcasters France Télévisions.

“These channels are owed to TF1, M6 and Canal+ to compensate for losses due to transition from analogue to digital,” said TF1 CEO Nonce Paolini to Le Monde (July 28). One CSA report showed television advertising revenue in France rising less than 2% from 2005 to 2010 and actually declining more than 10% for the incumbent channels over the same period. The EC has yet to issue its reasoned opinion. Analogue television in France is set to shut-off November 30th.

Broadcasters interested in entering the bidding for the new DTT channels are not pleased. “It’s a poisoned chalice,” said NRJ Group chairman Jean-Paul Baudecroux. “We will have to pay the high transmission costs without viewers.” Per-channel technical cost estimates range from €35 million to €45 million. Some see this as a barrier to market entry. Some see it as another “bonus” to incumbents.

“It’s very bad for viewers who don’t know what to think,” said NextRadioTv CEO Alain Weill, quoted by Les Echos (September 13). “This will create a two-speed DTT with with some channels reserved for those who have means. This is not good for pluralism of information nor for democracy.”

“The premature announcement of a major development (introducing) a non-backwards compatible standard… could be very damaging to the entire industry as buyers postpone their purchase decision pending the availability of new compatible hardware compatible, penalizing the market and even delaying the economic balance of services offered,” said French digital TV support group HD Forum in an open letter to Minister of Industry Eric Besson.

“This requires making difficult choices,” explained M. Boyon. “The launch of new channels will not necessarily be delayed as they can be received without the need for additional equipment via ADSL, satellite and some cable networks, which covers about 45% of the population.” From a technical and frequency management perspective, the CSA recommendation for adopting the DVB-T2 standard is well founded. However, broadcasters might sit on their money or avoid the market entirely, as evidenced from floundering take up of the DAB and DAB+ digital radio standard, until the new TV standard is well in place.

EC DG Competition is taking the new developments in France under advisement and will make its view clear in a few more weeks.

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