Digital Television

Digital Television
• Nearly nine out ten UK homes now have digital television, standing at 89.8% at end of Q2 2009,
according to Ofcom.
• Freeview remains ahead of BSkyB as the market leading digital TV platform, with the service now in
9.7 million homes.
• Merrill Lynch forecasts digital terrestrial television’s share of multichannel TV homes to continue to be
the market leader in the UK, with satellite being the second most popular option.
• Digital switchover began in October 2007 in Whitehaven, Cumbria, with the remainder of the Border
region completing the switch in 2008.
• All regions will have their analogue signal switched off on a region by region basis by 2012.
• Full digital conversion has now occured in seven European countries.
• The US switched off its analogue signal in June 2009.
Highlights

Platform Take-Up
The UK currently leads the world in terms of digital
TV penetration, with Ofcom claiming 89.8% of
households were already digital by the end of Q2
2009; see Table 1 overleaf.
Looking at the main household television set,
Ofcom claims digital terrestrial services remains the
number one choice with 37.6%; see Figure 1.
Across all 60 million television sets in the UK,
analogue terrestrial still has 19.8% of share; see
Figure 2. However this figure is declining rapidly,
having been at 49% one year ago. Every television
set around the home needs to be made digital
before switchover, otherwise they will no longer be
operational.
Of the TV sets that have already been made
digital, the majority are covered by digital terrestrial
television.
Ofcom states that 80% of all television sets had
converted to multichannel television by the end of
Q2 2009, which is up by 11 percentage points year
on year. Almost 70% of all secondary TV sets have
been converted, up by around 15 percentage points
in a year.
Sky
According to figures from Ofcom, BSkyB’s satellite
service sits at 8.9 million subscribers in Q2 2009;
see Table 1 overleaf.
Official figures released by Sky, meanwhile,
are slightly higher than those of Ofcom. The
broadcaster recorded net customer growth of
462,000 subscribers in the 12 months to June 2009,
taking its total figure to 9.4 million customers.
BSkyB has been hugely influential in converting subscribers from analogue to digital, with all of its subscribers
now receiving digital satellite. In addition, its Sky+ High Definition push and price cuts have boosted its
subscriber base. The service had 534,000 net additions since January 2009, reaching 1.3 million subscribers,
while Sky+ is now in 5.5 million households, or 58% of its customer base.
Sky plans to launch a new 3D channel in 2010, the first in the UK. Users of the Sky+ HD box will be able to
view the channel through special glasses and if they have a new “3D ready” TV set. The current retail price
of a Hyundai 3D-ready TV set is £2,500. However, the broadcaster hopes in time prices will come down to a
similar amount that consumers would be willing to pay for a standard HD plasma screen.
UK Digital TV Market
Digital Television
Brian Sullivan, managing director of Sky’s customer group, said: “3D is a genuinely ‘seeing is believing’
experience [and] next year we will make our HD boxes work even harder for customers by launching Europe’s
first 3D TV channel.”
Jeremy Darroch, chief executive of BSkyB, believes the company remains on course to hit its target of 10
million satellite TV subscribers by 2010, however he warned that Sky isn’t recession proof and said “looking
ahead, we expect the overall consumer environment to be challenging.”
Freesat
According to the latest estimates from Ofcom, there are 0.7 million free-to-view digital satellite homes in the
UK, an increase of around 200,000 from the previous quarter. This figure also includes viewers who are no
longer Sky subscribers but still receive the public service channels through their set-top box.
There are two free-to-view satellite television offerings in the UK, which allow access to digital TV to households
who may have been unable to access DTT due to the geography of the area. Freesat from Sky was launched
in October 2004, while BBC/ITV’s freesat was launched in July 2008.
Sky’s service currently offers more than 240 channels for a one-off £150 installation charge, while the BBC’s
service has 140 and includes free HD programming.
Nick Markham, Top Up TV chief executive, speaking at a Broadcast conference in February 2008, thinks that
the BBC/ITV competitor service will struggle to take off because Sky has already made the satellite business
its own.
He said: “Sky has spent years perfecting its service and made sure that every home with satellite TV had it
through Sky devices. There is no way it will just sit back and allow a new competitor to just come along and
take a slice of the market. If freesat does that, Sky will just undercut it on price.”
Digital Terrestrial Television
DTT, or Digital Terrestrial Television, has shown the greatest growth in recent years, with the platform offering
the cheapest way of making the transition to digital TV.
It has experienced strong take-up since its launch in October 2002 and has overtaken Sky to become the
leading provider of digital TV in the UK.
Since launch it has seen total sales of 46 million units, comprising almost 22 million IDTVs (Integrated Digital
Televisions) and over 24 million Freeview DTT set-top boxes. IDTVs have outsold set-top boxes since Q3
2007 and are likely to overtake the cumulative total of set-top box sales in 2009.
The total number of homes using DTT equipment
has now reached 9.9 million and the number of
homes using DTT on any set has reached 18.2
million, according to GfK/Ofcom; see Table 2 and
Figure 3.
Freeview’s appeal to first-time switchers and
existing digital viewers who want quality free-to-air
digital TV throughout their home is reflected in the
growth of Freeview equipment used for secondary
sets. The average home owns 2.4 TV sets, so there
are around 35 million secondary sets in the market.
By Q2 2009, around 24.3 million, or 70% of these
had been converted to multichannel using either
the Sky Multiroom service, a second cable box or a
Freeview receiver.
Freeview has launched a hard disk digital TV
recorder, called Freeview+ which it hopes will be in
12 million homes by 2012. The device is intended to replace VCRs, which will not work properly following
digital switchover and will include basic boxes, DVD recorders, DVD and VHS combination recorders and TVs
with Freeview+ built in.
Rob Farmer, Director of Marketing Communications at Freeview, said: “Freeview+ is the next chapter in our
story as the champion of free TV in the UK. It lets you record great programmes with no subscription, no
contract, no fuss. It’s the obvious choice for recording TV in the digital age.”
Not every UK household is able to access digital TV through Digital Terrestrial TV (DTT), with 27% of homes
not currently having access. The current level of digital access is at its maximum possible until switchover
enables signals to be broadcast more widely across the UK. According to Ofcom, gaps in current coverage will
be filled by transmitters converting to digital and the power levels of the signal will increase after switchover.
Cable
NTL:Telewest was rebranded as Virgin Media in February 2007, following the merger of the two cable giants in
2006 and their subsequent takeover of Virgin Mobile, allowing the media giant to offer quadruple-play options
for the first time in the UK.
The cable service passes 12 million homes in the UK, or 50% of the population, offering VoD, a PVR, IPTV
services, HD and telephony services.
Ofcom’s latest figures for Q2 2009 state that the number of digital cable subscribers fell slightly on the previous
quarter by 0.7 % points, with total subscribers of over 3.1 million.
Virgin Media, however, puts this figure higher, reporting 3.7 million subscribers in Q2 2009. Its digital video
recorder service, V+, added 56,600 subscribers in Q2 to reach 668,500 in total, or 18% of its subscriber
base.
Digital Television
Market Forecasts
Merrill Lynch’s long-term TV penetration forecast
shows that by 2018, it expects pay and free satellite
services (DTH – Direct To Home) to reach 39.0% of
TV homes, down from 40.2% in 2009.
Digital terrestrial television (DTT) is currently
at 43.7% multichannel homes penetration but is
forecast to show a slight growth to 44.2% by 2017;
see Table 3.
The proportion of UK TV homes receiving analogue
broadcast signals is forecast by Merrill Lynch to
dwindle from 7.1% in 2009 to 0.1% by 2012, and
then down to zero at the completion of switchover.
Freeview is expected to remain the platform
of choice over the next few years, with homes
expected to increase from 10 million in 2009 to 11.1
million in 2018, as shown in Figure 4.
Satellite penetration will also increase from nearly nine million in 2009 to 9.6 million by 2018; see Table 4.
Looking Forward
There is no doubt that the key driver of digital uptake over the past few years has been Freeview, and interplatform
competition has been encouraged as a result.
In his review of the BBC’s digital services commissioned by the Government, Patrick Barwise of the London
Business School, claims that while the BBC’s digital services contribution to the success of Freeview has
been modest and their contribution to the take-up of digital pay-TV minimal, continuing digital penetration
seems likely. This, he says, will be driven by BSkyB (including Freesat) and Freeview, potentially supported
by some growth in cable penetration through conversion of the remaining analogue cable homes to digital.
New forms of competition are emerging in the digital TV market, using broadband as the distribution channel.
While starting from a low base, they have the potential to dramatically change the way TV is viewed in the
future.
Whether or not and how the emergence of broadband as a distribution platform will change the balance of
power remains to be seen.
Despite likely developments in the market, Freeview and Sky will continue to be market leaders for the
foreseeable future as the market continues to grow towards each UK region’s switchover date.

Analogue Switch-Off
Digital switchover is now in full flow in the UK. It began with Whitehaven and the surrounding area of Cumbria
switching to digital only signals in October 2007, with the rest of the UK facing switchover on a region-byregion
basis until completion in 2012.
At present, digital terrestrial signals reach 73% of all UK households. Due to the already crowded nature of
the analogue UHF spectrum, it is not possible to extend DTT coverage significantly beyond this level without
first switching off the analogue transmissions.
Digital UK, the independent, non-profit organisation that was set up to co-ordinate the UK’s move to digital,
put a heavy emphasis on extracting research from each step of the complex process of switching Whitehaven,
as its demographic breakdown essentially represents ‘1,000th of the UK’.
Following Whitehaven, the remaining Border
region encompassing the Scottish borders as well
as Cumbria and the Isle of Man were switched off
during 2008 and early 2009, while the West Country
was also switched off in 2009. Granada is going to
be switched off by the end of 2009 and Wales is
currently in the process of being switched off, and
this will be completed in 2010.
The process then continues as outlined in Table 5
with some regions making the final switch in 2012.
Areas will have 100% digital penetration on
switchover date. According to Ofcom: “those who
do not choose to adopt digital TV after switchover
will churn out of the base of TV homes and
therefore it is a truism that digital TV penetration in
any given region will trend to 100% at the point of
switchover.”
At a recent MediaTel Group “Future of TV” seminar,
panellist and media journalist Ray Snoddy, stated
that he did not believe switchover will greatly
alter current audience behaviour. “Where is the
revolution in viewing behaviour as a result of all
the old age pensioners being bullied into getting
digital television?” he questioned. “I don’t know the
answer. Maybe analogue switch off is not such a
big deal and will not actually tear up the roots of
British broadcasting after all.”
Speaking at the Westminster Media Forum, Jon Zeff, head of broadcast policy division at DCMS, stated that
there are three reasons for switchover. The first is greater access and choice. Currently, only three quarters
of the population can access Freeview, but by switching off the analogue signal it frees up spectrum, thereby
allowing more people to access it. In the space it takes to occupy one analogue signal, you can get six digital
channels.
Secondly, it creates possibilities for new services and new technological developments, as the freed up space
on the spectrum can also be used for more television channels, HDTV, mobile TV or new wireless broadband
networks.

Digital Television
Finally it is much more efficient to switch the signal off, as currently broadcasters have to simulcast in both
analogue and digital.
Freed Spectrum
In order to decide who will obtain the freed frequency following the analogue switch-off, Ofcom launched
a digital dividend review, to ensure that the spectrum is spread fairly. Greg Bensberg, financial director of
Ofcom, states that the main aim is to maximise the benefit for the UK that the spectrum offers.
Freeview is taking some of the freed spectrum for high definition channels. Viewers using new receiving
equipment should be able to get up to four new high definition channels as digital switchover is completed
in the UK in 2012, with the first three available as switchover takes place in the Granada and subsequent
regions from 2009.
Ofcom says the upgrade can take place without the loss of existing television services currently available
to viewers on DTT. The watchdog believes that the process will deliver major benefits for viewers and
broadcasters, with viewers able to access an array of new channels and services through their television
aerials and new HD set-top boxes, and broadcasters able to deliver a greater range of services.
12
Digital Television
Global Outlook
The UK is not the only country switching off the analogue signal; countries across Europe as well as the US
have also set target years for switchover with some already completed.
Europe
In Europe, seven countries have completed digital switchover: Andorra, Finland, Germany, Luxembourg, the
Netherlands, Sweden and Switzerland.
The majority of these countries only had a low penetration of households relying on the terrestrial platform for
their primary television reception but this wasn’t the case for Finland and Sweden.
A further eight countries, including the UK, have begun the analogue switch-off process: Austria, Belgium,
Czech Republic, France, Italy, Norway, Spain, and the UK.
US
The US switched off their analogue signal on Friday 12 June 2009. In a different approach to the UK, the US
decided to go for a blanket switchoff, with the whole country switching at that point.
US television viewers were bombarded with a series of adverts warning them that the analogue signal would be
switched off on that date. The adverts urged them to buy converter boxes if they did not want to lose reception,
creating a steep increase in demand for both boxes and TVs. But many people remained confused by the
challenge of switching to digital, resulting in around one million homes facing a blank screen.
It is estimated that the cost to the US government was approximately $2bn, in order to smooth the transition.
Coupons worth $40 were sent to around 60 million households, to help cover the cost of the conversion.
Asia Pacific
Over the next few years, Asia’s digital TV market is expected to continue to show significant growth, according
to Informa Telecom & Media’s report, Asia Pacific TV.
Adam Thomas, Media Research Manager, Informa Telecoms & Media, stated: “At end-2014, the Asia Pacific
region will have more than 250 million digital homes, more than double the end-2008 figure.
Asia Pacific countries continue to offer a range of attractive opportunities for international TV players and
investors. The upgrade of analogue to digital continues to make steady progress. But with IPTV making some
inroads in the region, there is evidence of cable now looking to upgrade with greater urgency.
Emerging giants such as China and India are rich with potential for those with the requisite information. An
already positive environment will only improve, with a period of extensive merger and acquisition activity
Quick Glossary of Terms
DTV – ‘Digital Television’: with digital TV, sound and pictures from the broadcaster are converted into ‘bits’
of information and sent through an aerial, satellite, telephone line or cable. This digital signal is then turned
back into sound and pictures by a digital box or a digital television set. This offers new ways to experience TV:
extra TV channels as standard, improved picture quality and new features, including on-screen TV listings,
true widescreen picture and red-button interactivity.
DTT – ‘Digital Terrestrial Television’: digital television which is delivered via a normal rooftop aerial.
DTH – ‘Direct to Home’: Satellite transmissions received into the home via a dish aerial, as distinct from
satellite transmissions relayed via a cable system.
ADSL – ‘Asymmetric Digital Subscriber Line’: is a technology for transmitting digital information at high
bandwidth on conventional phone lines. ADSL is asymmetric in that it uses most of the channel to transmit
downstream to the user and only a small part to receive information from the user.
DSL – ‘Digital Subscriber Line’: is a technology for transmitting digital information at high bandwidth on
conventional phone lines.
IDTV – An Integrated Digital Television (IDTV or iDTV) set is a television set has a built in digital tuner, doing
away with the need for a set top box.
Analogue – Historical mode of transmission, uses standard wave to transmit television services