What next for DTT? The case for implementing T2 at the same time as 700MHz clearance

01/03/2014
Project
Client: Arqiva
Author(s): Phillipa Marks, Sam Wood, Tony Lavender
Broadcasting

Plum assessed the social and economic impact of adoption of a more efficient transmission technology (i.e. DVB-T2) on digital terrestrial television (DTT) at the time of 700MHz clearance (assumed to be 2019-2021).

If the 700 MHz band (694-790 MHz) is repurposed from broadcasting to mobile use, the spectrum available to broadcast TV would be reduced by 30%. This would result in a 30% reduction in broadcast TV capacity, and the number and variety of services offered by the DTT platform. The 6 million households that will be able to receive an expected 10 HD services from two new multiplexes launched next year will lose reception of these services when 700MHz clearance occurs. Moreover, the reduction in capacity will reduce DTT’s ability to offer HD services, which require up to 8 times the capacity of standard definition services. To keep up with consumer demand for HD services and to remain competitive with other platforms, the DTT platform will need this capacity.

A move from the current DVB-T standard to a more efficient broadcast standard (i.e. T2) would help maintain the capacity of the DTT platform and allow it to better meet consumer needs. A platform-wide transition to T2 technology means that, after clearance, the capacity of the DTT platform is roughly the same as it was prior to clearance – 241.2 Mb/s vs. 250.1 Mb/s respectively. However, to receive T2 transmissions, consumers need T2-compatible equipment. Over 25% of primary-DTT households (i.e. 3m households) may not have T2 compatible receivers (TVs or set top boxes) by the time of clearance.

While a transition to T2 would be socially beneficial, it is unlikely to occur through a market-led process for three reasons:

  • Advertising market failure. TV advertising rates are the same for HD and SD services, meaning that advertising funded broadcasters cannot capture much of the consumer benefit of HD services and so will be unwilling to pay for the additional capacity required for HD services
  • Co-ordination problems. The “first mover” to T2 loses reach and so broadcaster customers. Each operator’s best strategy is to stick with DVB-T and seek to attract the audience or broadcasters that the “first mover” loses.
  • Regulatory barriers. PSBs are expected to provide a near universal service and any significant loss of audience is unlikely to be acceptable

The report argued that Government/Ofcom intervention is needed to achieve a DTT platform transition to T2 and this intervention should take place at clearance. The potential scale of the net economic benefit of intervention was estimated to be in the range £0.3-2.5bn. There are also likely to be wider societal benefits from having a competitive and sustainable DTT platform.