Apsattv
11-12-2007, 09:13 PM
From http://www.theaustralian.news.com.au/story/0,25197,22902725-5014253,00.html
NEW Labor Communications Minister Stephen Conroy shows promise. He's undaunted by Telstra's headline-grabbing histrionics over broadband and the CDMA switch-off date. His comments on TV broadcasting are even more heartening. Following the Coalition's wasted decade spent pandering to vested free-to-air network interests, Conroy seems highly committed to implementing sensible reforms.
He's already set a firm analogue-to-digital TV switchover date (December 2013) and expressed interest in considering a "fourth FTA licence when we turn off the analogue spectrum". He likes competition and consumer choice.
Last year, the Coalition deferred its original December 2008 switchover date to 2010-2012. But its do-nothing policies wouldn't have met those dates anyway. In contrast, Britain's first regional switchover started in October. The US switchover is February 2009 - only 14 months away.
It's great that Conroy wants a firm switchover date, but six years is too far away. One year is better - he should stick to the original date: December next year.
The FTAs must simulcast analogue and digital until switchover. The direct cost of simulcasts (over unicast) is at least $200million a year. But the opportunity cost dwarfs this. The auction value of the spectrum freed up at switchover is billions of dollars. Even more important, switchover eliminates a huge entry barrier (spectrum scarcity) - thereby enabling sorely needed new competition and services.
After seven years, Australia's free digital TV take-up is a pathetic 28 per cent of households. Only homes with an expensive digital TV or a digital set-top box can receive FTA's digital broadcasts. Until the FTAs launched separate digital TV channels the Coalition gave them gratis, the sole benefit in doing so was a bit better picture.
While Conroy must be careful with taxpayers' dollars, he can give them a great return on investment - simply by giving all non-digital households a set-top box. This idea isn't new - Fairfax proposed it seven years ago. Consulting firm AT Kearney then calculated it would cost $3.7 billion. But the case for box giveaways is stronger now, thanks to plummeting box prices and partial digital TV uptake. I estimated the cost to be only $600 million in mid-2005 (Digital Jam, BRW). But with box prices now as low as $39, the giveaway would cost only $220million (less with government bulk purchase discounts). Chickenfeed compared to a PC for every senior high school student.
The payback is enormous. It's quick, simple and easy - enabling a December 2008 switch-off, five years earlier than Conroy's plan. This saves at least $1 billion in simulcast costs and brings forward the auction of valuable freed-up spectrum.
Our digital failure contrasts starkly with Britain, where switchover is under way. We required FTA networks to simulcast from January 2001. Britain followed a very different path. After an initial failure (digital broadcast pay-TV), the Independent Television Commission awarded licences to Freeview, a BBC-led consortium.
Freeview launched a free digital broadcast service, with 27 channels in October 2002. By mid-2003, it was on the primary TV of 7.2 per cent of British households; less than 2 per cent of Australian homes had free digital TV. By mid-2005, Freeview had jumped to 20.8 per cent of British households - and had sparked satellite pay-TV company BSkyB to launch a free satellite digital service; in total, free digital TV was on the primary TV of 22.7 per cent of British households - versus Australia's 10.8 per cent. By mid-2007, it had reached 39.6 per cent of British homes, to Australia's 28 per cent.
Britain's free digital uptake was more impressive in the face of very strong digital pay-TV (satellite and cable) which, in mid-2003, was on the primary TV of 38.2 per cent of households, versus none in Australia.
Britain's 39.6 per cent of primary TVs with free digital fairly measures incremental take-up due to government policy - as it's the only way to watch digital TV other than subscribing to pay-TV. This contrasts with Australia, where a digital TV is all you need. Therefore, our 28 per cent statistic grossly overstates the impact of government policy on digital take-up. It counts anyone with a digital TV, which includes many pay-TV customers. Both Foxtel (pay-cable) and Austar (pay-satellite) began switching to digital in March 2004 and reached 100 per cent digital by February 2007. As of mid-2007, their combined digital subscribers represented 25.2 per cent of households. Because many pay-TV subscribers have digital TVs, only 30-35 per cent of households are really digital. In contrast, 84 per cent of British households have at least one of digital free or pay-TV on the primary set.
Freeview worked so much better because it focused on customer wants. Whereas (until recently) Australia's free digital TV viewers received the same programs as FTA analogue viewers with only a bit better picture, and had to buy an expensive digital TV or set-top box to get it, Freeview viewers got 27 channels (now 40 TV and 20 radio channels). It appealed to many households who wanted greater choice without the expense and commitment of pay-TV.
The Howard government failed to provide a compelling digital TV offer because it pandered to vested interests; an Australian tradition - previous governments had denied citizens cable TV for more than three decades for the same reason. But Howard ministers' pandering stopped market forces boosting digital uptake, as it had in Britain.
The Coalition refused to consider a fourth FTA network, but a digital-only fourth network would have greatly boosted take-up. Giving large slabs of spectrum to the FTAs to simulcast in digital suited them - it made spectrum scarcer, keeping competition out. The Coalition's usage constraints on spectrum that it did offer meant that no one wanted it. Senator Richard Alston's "datacasting" concept - digital transmission constrained to looked nothing like TV - was so silly he had to cancel its auction. Even last year, then minister Helen Coonan proposed auctioning two digital channels but constrained their use to "snack" TV and mobile-TV services and even let FTAs bid on one channel. To top it all, it gave the FTAs responsibility to drive digital uptake - the last thing they'd want to do, as that would free up spectrum - thereby enabling competition. As Conroy has observed, the FTAs "have been sitting on their hands".
As the Australia-Britain comparison highlights, markets are much better than governments at deciding what consumers want - and they don't pander to vested interests. Coonan's rationalisations of stalling on a fourth FTA network - like "that's an old model, we've tried to do something new and innovative for consumers" - were pathetic. How would a minister know if consumers would rather a fourth (or fifth?) FTA network over alternatives to placate FTAs? Snack TV and datacasting indeed!
In releasing her ironically named "Digital Action Plan" in November last year, Coonan rationalised her switchover deferral with: "Market forces have failed to drive digital take-up to a level that would enable that timetable to be met." She seemed entirely oblivious to the fundamental problem: she hadn't let competitive market forces work in the first place.
Here's what Conroy should do:
Fast-track the switchover to December 2008 by giving away set-top boxes.
Auction the two dormant channels now.
Auction spectrum freed at switchover.
In these auctions, don't prescribe use - nor let FTAs bid.
Don't let FTA interests affect reforms.
NEW Labor Communications Minister Stephen Conroy shows promise. He's undaunted by Telstra's headline-grabbing histrionics over broadband and the CDMA switch-off date. His comments on TV broadcasting are even more heartening. Following the Coalition's wasted decade spent pandering to vested free-to-air network interests, Conroy seems highly committed to implementing sensible reforms.
He's already set a firm analogue-to-digital TV switchover date (December 2013) and expressed interest in considering a "fourth FTA licence when we turn off the analogue spectrum". He likes competition and consumer choice.
Last year, the Coalition deferred its original December 2008 switchover date to 2010-2012. But its do-nothing policies wouldn't have met those dates anyway. In contrast, Britain's first regional switchover started in October. The US switchover is February 2009 - only 14 months away.
It's great that Conroy wants a firm switchover date, but six years is too far away. One year is better - he should stick to the original date: December next year.
The FTAs must simulcast analogue and digital until switchover. The direct cost of simulcasts (over unicast) is at least $200million a year. But the opportunity cost dwarfs this. The auction value of the spectrum freed up at switchover is billions of dollars. Even more important, switchover eliminates a huge entry barrier (spectrum scarcity) - thereby enabling sorely needed new competition and services.
After seven years, Australia's free digital TV take-up is a pathetic 28 per cent of households. Only homes with an expensive digital TV or a digital set-top box can receive FTA's digital broadcasts. Until the FTAs launched separate digital TV channels the Coalition gave them gratis, the sole benefit in doing so was a bit better picture.
While Conroy must be careful with taxpayers' dollars, he can give them a great return on investment - simply by giving all non-digital households a set-top box. This idea isn't new - Fairfax proposed it seven years ago. Consulting firm AT Kearney then calculated it would cost $3.7 billion. But the case for box giveaways is stronger now, thanks to plummeting box prices and partial digital TV uptake. I estimated the cost to be only $600 million in mid-2005 (Digital Jam, BRW). But with box prices now as low as $39, the giveaway would cost only $220million (less with government bulk purchase discounts). Chickenfeed compared to a PC for every senior high school student.
The payback is enormous. It's quick, simple and easy - enabling a December 2008 switch-off, five years earlier than Conroy's plan. This saves at least $1 billion in simulcast costs and brings forward the auction of valuable freed-up spectrum.
Our digital failure contrasts starkly with Britain, where switchover is under way. We required FTA networks to simulcast from January 2001. Britain followed a very different path. After an initial failure (digital broadcast pay-TV), the Independent Television Commission awarded licences to Freeview, a BBC-led consortium.
Freeview launched a free digital broadcast service, with 27 channels in October 2002. By mid-2003, it was on the primary TV of 7.2 per cent of British households; less than 2 per cent of Australian homes had free digital TV. By mid-2005, Freeview had jumped to 20.8 per cent of British households - and had sparked satellite pay-TV company BSkyB to launch a free satellite digital service; in total, free digital TV was on the primary TV of 22.7 per cent of British households - versus Australia's 10.8 per cent. By mid-2007, it had reached 39.6 per cent of British homes, to Australia's 28 per cent.
Britain's free digital uptake was more impressive in the face of very strong digital pay-TV (satellite and cable) which, in mid-2003, was on the primary TV of 38.2 per cent of households, versus none in Australia.
Britain's 39.6 per cent of primary TVs with free digital fairly measures incremental take-up due to government policy - as it's the only way to watch digital TV other than subscribing to pay-TV. This contrasts with Australia, where a digital TV is all you need. Therefore, our 28 per cent statistic grossly overstates the impact of government policy on digital take-up. It counts anyone with a digital TV, which includes many pay-TV customers. Both Foxtel (pay-cable) and Austar (pay-satellite) began switching to digital in March 2004 and reached 100 per cent digital by February 2007. As of mid-2007, their combined digital subscribers represented 25.2 per cent of households. Because many pay-TV subscribers have digital TVs, only 30-35 per cent of households are really digital. In contrast, 84 per cent of British households have at least one of digital free or pay-TV on the primary set.
Freeview worked so much better because it focused on customer wants. Whereas (until recently) Australia's free digital TV viewers received the same programs as FTA analogue viewers with only a bit better picture, and had to buy an expensive digital TV or set-top box to get it, Freeview viewers got 27 channels (now 40 TV and 20 radio channels). It appealed to many households who wanted greater choice without the expense and commitment of pay-TV.
The Howard government failed to provide a compelling digital TV offer because it pandered to vested interests; an Australian tradition - previous governments had denied citizens cable TV for more than three decades for the same reason. But Howard ministers' pandering stopped market forces boosting digital uptake, as it had in Britain.
The Coalition refused to consider a fourth FTA network, but a digital-only fourth network would have greatly boosted take-up. Giving large slabs of spectrum to the FTAs to simulcast in digital suited them - it made spectrum scarcer, keeping competition out. The Coalition's usage constraints on spectrum that it did offer meant that no one wanted it. Senator Richard Alston's "datacasting" concept - digital transmission constrained to looked nothing like TV - was so silly he had to cancel its auction. Even last year, then minister Helen Coonan proposed auctioning two digital channels but constrained their use to "snack" TV and mobile-TV services and even let FTAs bid on one channel. To top it all, it gave the FTAs responsibility to drive digital uptake - the last thing they'd want to do, as that would free up spectrum - thereby enabling competition. As Conroy has observed, the FTAs "have been sitting on their hands".
As the Australia-Britain comparison highlights, markets are much better than governments at deciding what consumers want - and they don't pander to vested interests. Coonan's rationalisations of stalling on a fourth FTA network - like "that's an old model, we've tried to do something new and innovative for consumers" - were pathetic. How would a minister know if consumers would rather a fourth (or fifth?) FTA network over alternatives to placate FTAs? Snack TV and datacasting indeed!
In releasing her ironically named "Digital Action Plan" in November last year, Coonan rationalised her switchover deferral with: "Market forces have failed to drive digital take-up to a level that would enable that timetable to be met." She seemed entirely oblivious to the fundamental problem: she hadn't let competitive market forces work in the first place.
Here's what Conroy should do:
Fast-track the switchover to December 2008 by giving away set-top boxes.
Auction the two dormant channels now.
Auction spectrum freed at switchover.
In these auctions, don't prescribe use - nor let FTAs bid.
Don't let FTA interests affect reforms.