Digital TV development in Eastern European countries: Lithuanian experience

Tomas Lamanauskas Deputy Director Communications Regulatory Authority

European Forum for Mobile TV 2006 Page 1 Outline of the presentation

• TV broadcasting in Lithuania: long path of evolution • Outlook to the market • Regulatory measures • Challenges to digital TV development • Ways to overcome the challenges • Role of regulator • Considering possible means to DVB-T encouragement

European Forum for Mobile TV 2006 Page 2 TV broadcasting in Lithuania: long path of evolution: outlook to the market

2004 2007-12 1975 1993-04 2005-07 2006-02 2003-08 2004-10 2009 2012 1957-04 1989 2003-05 2005-09 2006-07 2005-04 2001-03

Pilot Digital Terrestrial TV First TV transmission in Pilot TV via DVB-T transmissions Vilnius by 53rd TV mobile networks in channel transmitter (GSM/UMTS) Live mobile 5 biggest Cable TV phone TV cities network (GSM/UMTS) Radio TV programs deployed broadcasting Beginning of programs via Internet Full analogue TV via launch in Colour TV turn-off Internet Digital Vilnius broadcasting Cable TV, Contest for and 40 km MMDS DVB-T around At least one networks DVB-T network coverage - 95 Issued DVB-T Digital Pilot Digital TV % of territory Commercial broadcasting Satellite TV broadcasting TV started and re- promotional broadcasting project in licenses Vilnius trolleybuses

European Forum for Mobile TV 2006 Page 3 TV broadcasting in Lithuania: long path of evolution: outlook to the market

Beginning - 30 analogue TV sets

9 April 1957 - First television transmission – about 30 TV sets in Lithuania. 9 End 1957 - already 1.5 thousand TV sets. 9 2005 – 94 % of households had colour TV set.

9 Public TV – 2 national terrestrial analogue TV channels. 9 1Q 2006 – 25.5 % of households were cable TV and MMDS subscribers.

Vision for 2012 – Almost every household will be able to use digital TV, of which >400 000 households (about 30%) use DVB-T Aim - > 98% of households equipped with digital TV (DVB-T, DVB-C, DVB-S, IPTV)

European Forum for Mobile TV 2006 Page 4 TV broadcasting in Lithuania: long path of evolution: outlook to the market Competition aspects in broadcasting market (1)

350

60 295,5 55 55 55 55 280 50 253,8

49 239,5 234,5 226,3

46 225,8

40 38 41 210 198,2 30 31 31 162,8 26 27

140 120,9 20 10 70 36,0 35,0 34,8 3 444 31,1 0 0 2002 2003 2004 2005 1997 1998 1999 2000 2001 2002 2003 2004 2005 Radio TV Cable TV MMDS Cable T V MMDS Dynamics of the number of participants in Cable TV and MMDS subscribers number the broadcasting market, 2002–2005. dynamics, thousand Source: Radio and Television Commission of Lithuania . Source: Communications Regulatory Authority.

9 As of the end of 2005, 71 cable TV and 5 MMDS networks were operated in Lithuania.

9 In 2005 the number of cable TV subscribers grew more than 16 per cent (average 1997 – 2005 growth of cable TV subscribers was 12 per cent), the number of MMDS subscribers grew by 12 per cent.

9 Data on number of digital TV subscribers was not collectible for the meantime.

European Forum for Mobile TV 2006 Page 5 TV broadcasting in Lithuania: long path of evolution: outlook to the market Competition aspects in broadcasting market (2)

TV3 25,7 80 73,7 69,5

57,7 LNK 24,8 60 48,3 42,9 LTV 13,0 40

BTV 9,8 20 2001 2002 2003 2004 2005 PBK 4,7 The revenues of all broadcasters and re- broadcasters in 2001-2005, EUR million 0 5 10 15 20 25 30 Source: Radio and Television Commission of Lithuania . The most popular TV programs in Lithuania (per cent of the watched time), 2005 Source: TNS Gallup .

Balticum auksinis – the first DVB-C programs package, introduced in 2004. Balticum auksinis started with 6 TV programs in 2004, followed by 40 programs in 2005 and 60 programs in 2006. Balticum TV UAB is expecting to increase the number of programs to 100 by the 2006. Also in 2004 Balticum TV UAB had introduced programs package over the

European Forum for Mobile DVB-TTV 2006 network, available by that time in a certain area of Vilnius city.Page 6 TV broadcasting in Lithuania: long path of evolution: outlook to the market Competition aspects in broadcasting market (3)

9Two mobile operators of began mobile TV translations in 2005

9In February 2006 licences of 3G (UMTS) networks were granted, so development of services is expected.

9UMTS services launched April 2006.

9Up to now 21 TV channels are available via 3G network of one mobile operator.

European Forum for Mobile TV 2006 Page 7 TV broadcasting in Lithuania: long path of evolution: regulatory measures Order of Director of the RRT Concerning the Approval of the Rules for Allocating and Using of Law on Provision Radio Frequencies / Channels of Information to Strategy for the Assignment the Public of Radio Frequencies to Strategic Plan for the Broadcasting and Order of Director of RRT on Assignment of Radio Transmission of Radio and Digital Terrestrial Television Strategic Plan of Frequencies to Television Broadcasts Development Plan the Development of Broadcasting and (Government Resolution) Informational Transmission of Society of Lithuania Radio and Television Strategy of the (Government Broadcasts Development of Resolution) Informational Society of Lithuania (Government European National Radio Resolution) Law on the Convention on Frequency National Radio Transfrontier Allocation Table Law on Services and Television Television (Government of Information Resolution) Society

1996 1997… 2001 2003 2004 2005 2006

Conceptual Framework of the National Information Model of Implementation of Law on Amendment of Digital Television in Lithuania Republic of Lithuania Law Society Development of on Provision of Lithuania (Government (Government Resolution) Resolution) Information to the Public European Forum for Mobile TV 2006 Page 8 TV broadcasting in Lithuania: long path of evolution: regulatory measures DVB-T - step by step 9 Winners of the DVB-T broadcasting tender were announced: 9 6 broadcasters: Balticum TV, LNK, Tele-3, TV1, Spaudos televizija, LRT. 9 2 re-broadcasters: Mikrovisatos TV, Tele-3. 9 40 TV programs in total. 2006 9 DVB-T translations started in Vilnius and 40 km around. 9 Initial stages of information campaign 9 Basic information on DVB-T announced on RRT internet site

9 Radio frequencies’ licenses for DVB-T networks were issued to LRTC and TEO LT. 2005 9 Exemptions for licenses holders - DVB-T networks - were introduced. 9 Plan of DVB-T promotional measures was drafted by RRT in partnership with Ministry of Transport and Communications.

2003 9 The start of pilot TV programs transmission in DVB-T format (LRTC AB)

European Forum for Mobile TV 2006 Page 9 Challenges to digital TV development

Audiovisual and communications sectors undergo a fundamental change due to technologic progress : formerly clear borders between content and transmission are blurring. 9Unlimited number of audiovisual content delivery channels, i.e. the same content can be delivered over different transmission means: - cable TV, satellite TV, MMDS, terrestrial TV, IPTV, mobile TV – Currently different means are licensed separately – No clear reason for licensing – formal administrative burden only – Some transmission means risk to be ignored due to the lack of legal ground 9States’ borderlines are no more restrictive factors: – Increasing popularity of internet TV and radio – Target audience can be easily reached from abroad – Digital technologies enable personal program individualization 9 Necessity to develop a flexible regulatory structure; 9 Need for consistent, pro-competitive and stimulating expansion of the digital economy regulatory system.

European Forum for Mobile TV 2006 Page 10 Challenges to digital TV development

Supply side Demand side

Investments Ability to pay/ value for money • How broadly to invest? • Am I able and why should I pay • Which investment strategy to for extra equipments and choose? services?

Technologies Needs • Which one is the best and • Do I need digital TV? which one to choose? End users’ equipment • What extra equipments do I Services need? • What services to supply in Awareness order to meet customers • What do I know about digital needs? TV, its benefits and costs?

European Forum for Mobile TV 2006 Page 11 Ways to overcome: role of regulator

Supply side Strategies for regulator: 1. Direct intervention Investments • Compensations; • How broadly to invest? • Capital injections. • Which investment strategy to choose? 2. Staying away. 3. Indirect influence • Creating preconditions.

In Lithuania we chose the 3rd option: Exemptions for licenses holders in DVBT networks were introduced: - fee for the supervision of radio frequencies (channels) was reduced by 30 per cent; - payment of fee for the supervision of radio frequencies (channels) was rescheduled for 1 year period from license issue date. Clear date of the beginning of switch off of analogue TV by 2012 was announced in 2004.

European Forum for Mobile TV 2006 Page 12 How to overcome: role of regulator

Technologies Compression standard – MPEG – 4? • Which one is the best and which one to choose? Pros Cons • Better compression •Relatively new standard possibilities : transmission of (adopted only one year ago), up to 10 standard quality TV •Currently is not very programmes common. • Saving resources of radio •Small supply of TV sets and frequencies (channels) In Lithuania: set top boxes in the market. The winners of the digital terrestrial television broadcasting tender - Lietuvos Radijo ir Televizijos Centras AB and TEO LT, AB in end of June 2006 began to provide services of transmission of digital television using MPEG 4 compression standard in the digital television networks. The standard was chosen voluntarily.

Also use : France Planning to use: Estonia, Norway, Brazil Also a range of countries are considering possibility of usage the MPEG-4. European Forum for Mobile TV 2006 Page 13 How to overcome: role of regulator

Technologies Interactivity standard? • Which one is the best and which one to choose? European Commission promotes MHP as the most advanced open applications program interface (API) standard in Europe, But… It also calls for voluntary use of interactive television standards. And… The European Commission has decided that compulsory technical standards imposed by regulators are not necessary for the roll-out of interactive digital television services in Europe. So… Lithuania, taking in account opinion of market participants, in the late 2005 presented to European Commission project of the legal act on determination of uniform and compulsory standard of digital interactive television (MHP), but the Commission didn’t countenance it and the legal act wasn’t approved. Therefore… To inspire voluntary agreement between participants of the Lithuanian market of digital terrestrial television on usage of uniform standard for digital interactive television on purpose to achieve best benefit for themselves and customers of digital terrestrial TV – is the next reasonable follow-up. European Forum for Mobile TV 2006 Page 14 How to overcome: role of regulator

Services • What services to supply in order to meet customers needs? According to research of Consumers Association (UK) – the most important driver of digital television take-up is the availability of extra channels. The vast majority of adopters subscribe to a basic channel bundle, while more than half also pay for premium channels. Almost three quarters of adopters mentioned a particular channel type, mostly films and sport, as an important factor in their choice. In Lithuania: 6 broadcasters and 2 re-broadcasters will offer 40 TV programs in total. New national commercial TV companies.

European Forum for Mobile TV 2006 Page 15 How to overcome: role of regulator

10 6% 5,40% 5,00% 5,00% 8 Demand side 4% 6

8,4 4 7,39 7,41 2% Ability to pay/ value for money 2 • Am I able and why should I pay

0 0% for extra equipments and 2003 2004 2005 services? Expenses for communication services, EUR per month per 1 household member The part within the total household expense The dynamics of household expenses for communication services and the expanse part within the total household expense structure in 2003-2005. Source: Statistics Lithuania

In I quarter of 2006 25,5 % of households were connected to CaTV or MMDS in Lithuania. This means, that 25,5 % of households are already paying for TV services. These consumers might be already over the barrier of paying extra for their television before they get digital. Still for the majority of Lithuanian inhabitants paying for TV is not a commonplace. According to the experience of other countries, free-to-air model might be a digital TV penetration driver. Therefore in Lithuania, at least 5 programs to be broadcasted free-to-air were foreseen in the legislation. As the result of digital terrestrial television broadcasting

tenderEuropean14 Forum TV for Mobileprograms TV 2006 will be broadcasted free-to-air in Lithuania. Page 16 How to overcome: role of regulator

15 2004 116

19 2003 111 End users equipment • What extra equipments do I 18 2002 106 need?

0 50 100 150

Color TV set Black-and-w hite TV set Provision of Lithuania’s households with television sets in 2002-2004, number of sets per 100 households Source: Statistics Lithuania Challenge No 1. Lack of set-top boxes and TV sets with digital function. Market wasn’t prepared because of uncertainty about the compression standard. Now the MPEG-4 is in place, and considerable amount of devices will reach the market by end-2006.

Challenge No 2. The price of set-top box varies from 60 to 400 Euros. Having in mind non- willingness and tiny ability to pay for extra TV services by Lithuanian inhabitants, introduction of a compensation mechanism, partial financing or tax reimbursements system in order to stipulate digital TV penetration in Lithuania during the transitional period might be the options for consideration in Lithuania. European Forum for Mobile TV 2006 Page 17 How to overcome: role of regulator

Demand side

Lack of information about digital TV, its benefits and costs is not incentive to purchase supplements for watching DVB-T or switch to another digital TV platform. According to research of Consumers Association (UK), reasons for going digital are changing over time. Early adopters in UK were Needs particularly keen on access to sports channels • Do I need digital TV? whereas more recent adopters are more likely to mention other features. More recently, new services such as email and internet access have attracted more consumers to go digital. Awareness In Lithuania awareness problem is much more • What do I know about digital tangible. TV, its benefits and costs? Therefore… Overall Informational Campaign is a necessity for successful digital TV development

European Forum for Mobile TV 2006 Page 18 Ways to overcome : Considering possible means to DVB-T encouragement 1. Informational measures batch 2. Financial measures batch

9 Periodical researches about current DVB- 9 Income tax concessions for all households, T cognition determining what information purchasing set top boxes; about DVB-T is essential; 9 Aggregate purchase of set top boxes for 9 Creation of information infrastructure: schools, social care/ foster institutions and dedicated internet site and free-of-charge other public institution; info phone line; 9 Inducement of set top boxes lend to 9 Informational campaign in purpose to households for determinate time period. introduce DVB-T to as much potential customers as possible; 3. Other measures batch 9 Announcement of exact date of final turn- 9The promotion of voluntary agreement among off analogue TV; DVBT market participants regarding usage of 9 Development of interactive DVB-T uniform standard for digital interactive television; services guides. 9Sufficient state financing for national broadcaster; 9 Concession of broadcaster’s licence European Forum for Mobile TV 2006 supervision tax. Page 19 Future vision of digital TV

Market vision 9Main trend – individualization and personalisation, to meet needs of any individual consumer.

2006 2007 2008 2009 2010 20119 2012TV channels, sets of TV programs, timing and devices of TV watching will DVB-T DVB-S DVB-C Analogue be up to choice like books in bookstore. Regulatory vision 9 Digital TV, TV via PC and mobile phone - inter-compatible. Mobile TV 9 Revised licensing system moving to fully complements digital TV. liberalized one; 9Trend of miniaturisation of mobile 9 New approach to content regulation – securing phones – discontinuation. vested interests of consumers and no artificial restrictions to content provision; 9No limitations to number of channels. 9 Closer cooperation internationally.

European Forum for Mobile TV 2006 Page 20 Thank you

Tomas Lamanauskas

Communications Regulatory Authority, Algirdo 27, Vilnius, Lithuania Phone: +370 5 210 5627 e-mail: [email protected]

European Forum for Mobile TV 2006 Page 21