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Digital TV Development: Techno-Economic

Planning Considerations

John YipChief Engineer

Radio Television Hong Kong28 March 2007

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1. Introduction Proposing a systematic and practical

methodology for analyzing the numerous factors influencing the rollout/ growth of digital TV technologies.

Focusing on the application of basic economic concepts to facilitate strategic development. Reducing guesswork.

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2. Delivery Systems

DTT/HDTV ATSC ISDB-T DVB-T DMB-T/H

The choice of a delivery system may affect rollout/ growth. However, growth depends also heavily on market dynamics and rapid technological adaptation of manufacturers.

IPTVADSL/ADSL2(for IPTV-SD)

ADSL2+/ VDSL2(for IPTV-HD/SD)

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2. Delivery Systems

Mobile TV(Broadcast)

T-DMB S-DMB DVB-H MediaFLO

CMMB / STiMi

T-MMB DMB-T/H

Mobile TV(Cellular)

3G3.5G /

HSDPAUMTS/ MBMS/

TD-CDMA(TDtv)

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Driving Force, DF

= function of (soft factors, hard factors)

= M (r, p, m, o) * H (G, g)where M = soft factors (rregulatory, ppricing,

mmarketing, oother), and

H = hard factors (GG for macroeconomic, gg for geo-physical)

3. Generic Growth Equation and Methodology Equation (for current/ future digital technologies)

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Soft Factors Hard Factorsr : Licensing, spectrum

allocation, etc.

G : GDP, GDP-per-capita

p : Pricing (subsidies,

bundling, penetration or

predatory pricing) etc.

g : Geographical or physical,

such as terrain or the area of

a city.

m : Marketing and promoting.

o : Content, consumer

habits, preferences, etc.

Generic Growth Equation, soft and hard factors

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Figure 1. S-Curves with picture quality as the performance measurement

Source : Technology Strategy, 15.912, Spring 2005,

MIT, Sloan School of Management

S-curves of technological diffusion

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Growth (Penetration,

%)

Baseline growth

Soft factor effects

Time (Years)0

Generic Growth Equation, illustrating acceleration by soft factors

S-curve for growth (growth at 15% pa or more is strong; 5% pa or less is weak)

Critical Mass

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GDP-per-capita is significant if there is a significant outlay, e.g. for an HDTV display, and/ or a recurrent fee, e.g. in a pay-TV service, over an initial service period of 1-2 years.

Regulation can prevent new players from entering the market; minimizing barriers enhances growth.

International cooperation and IPR ie transaction cost minimization could allow world-wide use of a digital TV system, analogous to the Coase Theorem (R. Coase, 1959) in economics, on the allocation of property rights re radio frequencies.

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Proposed process : Form a development team. Analyse hard factors, to form a baseline. For r, p, m, o, compile separate lists of

relevant considerations. Assess soft factors through group discussions/

market surveys (eg using Delphi Method). Analyse critical issues; synthesize a roll-out

strategy. Liaise with the government where necessary.

Methodology, using growth equation

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4. HDTV

Soft Factor

Hard Factor

GDP * GDP-per-capita, (or AI relative to 100)

Mh (r, p, m, o)

Propelling Factor, HDF

= Mh (r, p, m, o) * (GDP * GDP-per-capita)where GDP is based on the PPP (Purchasing Power Parity),(GDP * GDP-per-capita) = Affordability factor, and

Mh is a function of regulatory/ pricing /marketing /other factors.

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4. HDTV

AI Rank (2004)

Economies Regions AI (' 04) AI (' 06)AI actual (2006)

% AI Change (2006/ 2004)

AI Rank (2006)

1 United States N. America 100 100 5.65E+17 0.0 1

2 European Union EU 66.5 66.5 3.76E+17 0.0 2

3 Japan Asia 23.4 24.7 1.40E+17 5.7 3

4 Germany EU 14.4 14.4 8.12E+16 -0.2 4

5 United Kingdom EU 11.2 10.6 5.98E+16 -5.5 6

6 France EU 10.6 10.0 5.63E+16 -5.9 7

7 Italy EU 9.5 9.1 5.13E+16 -4.4 8

8 China, mainland Asia 8.6 13.5 7.60E+16 56.5 5

9 Canada N. America 6.8 7.3 4.10E+16 6.8 9

10 Spain EU 4.6 5.1 2.89E+16 11.2 10

11 Australia Asia 4 3.9 2.19E+16 -2.9 12

12 Korea, South Asia 3.8 5.1 2.86E+16 33.1 11

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On breaking down function M,HDF = (Ar * Ap * Am * Ao) * (GDP * GDP-per-capita)

Ar - mandating early rollout / cessation of analog TV, built-in digital tuners in TV sets, on-air HD quota, spectrum allotment, licensing regime, standardization;

Ap - subsidies by governments / operators, assisting viewers eg on HDTV STB;

Am - promotional/ marketing campaigns, to promote viewers’ awareness;

Ao - quality leap using HD (eg USA and S. Korea, using ATSC, have achieved fast rollout), increasing HD production and sourcing attractive HD programs.

4. HDTV

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5. IPTV

Propelling factor, IPDF

= Mi (r, p, m, o) * GDP-per-capita * Population Density,

= Mi (r, p, m, o) * GDP/population * population /areaHence

IPDF = Mi (r, p, m, o) * GDP /area

GDP/area (ie US $billion/ sq. km, PPP, pa) is analogous to annual crop yield in economic farming and harvesting; GDP is computed yearly; it is dimensionally similar to speed.

IPDF applies only to a city-sized economy but not to countries with large barren areas.

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Cities GDP (PPP)

(US $billion)

Area

in sq. km

Yield,

pa

Hong Kong 227.3 1,092 0.21

Singapore 124.3 693 0.18

Paris (Metro) 454 2,730 0.17

Potential, IPTV-SD

Estimated (GDP/ area) yields:

Source Data from World Fact Book and Wikipedia

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Cities Area

in sq. km

Yield,

pa

New York (City) 1,214 0.37

New York (Metro) 17,405 0.05

Tokyo 2,187 0.53

Potential, IPTV-HD, using IPDF estimate

Source Data from World Fact Book and Wikipedia

Estimated (GDP/ area) yields, these to be considered together with AI for HDTV:

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IPTV, Soft Factors (r, p, m, o)

Regulatory- licensing, cross-platform content-flow control;

regulatory hurdles to be minimized eg allowing cross-platform (terrestrial/ cable/ satellite) content-flow and leaving the market to decide.

Pricing

- smart and competitive bundling of channel services/ STB plus services, to entice consumers; penetration pricing, using a bundling of attractive program channels plus broadband internet/ VoD and other value-added applications.

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Marketing/ promoting

- advertising and promoting increase awareness and the perceived value (total use value or TUV) of the IPTV services.

Other factors

- varied contents could be offered, as there are numerous channels. Interactivity, shopping, games and VoD could be offered. FTTH/ FTTP will cater for a very wide range of services on PON (passive optical networks).

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Mobile TV is a complex subject due to numerous factors, including

Spectrum allocation Emerging standards and system maturity Handset designs/ functions and pricing Competition between broadcast and cellular

system operators Viewing habits/ reluctance/ lack of understanding Reception reliability in a heavily built-up city;

continued investment in maintaining mobile

reception reliability.

6. Mobile TV

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Propelling Factor, MDF = Mm (r, p, m, o) * GDP-per-capita *T

where T is the Terrain Factor (0 < T =< 1),

and MDF applies to a city-sized economy.

6. Mobile TV

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Terrain includes hills and housing estates. If terrain is flat, T = 1. T is a retarding factor, critical for pay TV. Dependent on frequency band, eg VHF for

T-DMB or UHF for DVB-H, and on technology (eg satellite/ terrestrial).

By combining satellite, terrestrial and cellular networks, T can be enhanced.

Terrain Factor

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Factors (r, p, m, o)

Regulatory- government-led or market-driven development.- allocation of RF spectrum (VHF, UHF, L and S bands)- licensing for broadcast and cellular operations.

Pricing

- handset cost and design eg battery life, antenna size, unit size and weight, screen size, channel switching/ signal recovery times, reception frequency bands, etc.

- Competition between broadcast/ cellular operators.

- In a built-up city, the costs of providing and maintaining a reliable network will be off-loaded onto consumers.

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Marketing / promoting

- to increase awareness of the technologies/ benefits and to raise the perceived value of services, hence increasing the demand.

- Promotion could take advantage of the young generation’s attraction to fashionable handset designs/ styles and to cultivate consumers’ habits.

Other factor

- content offerings (news, other real-time information, drama, sports, interactivity, short clips of compelling content including UGC).

- consumer habits and attitudes.

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6. Comparison. (G, g), (r, p, m)

GDP GDP/ capita Pop. Den. Terrain Regulatory Pricing Marketing

HDTV H H L L H H H

IPTV (HD), pay H H M L L H H

IPTV (SD), pay L M M L L M H

Mobile TV, pay L H L H H H H

Hard Factors (G, g) Soft Factors (r, p, m)

Table 1: Digital TV, Hard and Soft Factors (H/M/L = High/ Medium/ Low)

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6. Comparison. Soft Factor (o)

Content Consumer Habits Device Attributes Quality Leap

HDTV H L M H

IPTV (HD), pay H L M H

IPTV (SD), pay H L L L

Mobile TV, pay H H H L

Table 2: Other soft factors, eg large quality leap from NTSC to ATSC

Soft Factor (o)

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Use slide show and to animate. g= generic model, usable for powering your Digital TV boat)

Don’t miss the boat, the “Digital TV” boat.

Thank you.