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Global Digital Media Market Overview in 2009

Global Digital Media Market Overview in 2009

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    Digital Media Fact Book 2009 Digital Media Fact Book 2009 Document Transcript

    • Global Insights on Digital Media Analyses, forecasts and comments on the Global Digital Media market Fact Book 2009 Published by telecomsmarketresearch.com In association with Buddecomm January 2009 © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 2 Contents: Disclaimer, Legal Notices and Contact Information 3 Digital Media – A Global Perspective 4 The Developing Uses and Prevalence of Digital Media 4 The Digital Media Industry 8 Digital Media in Regional Markets 9 Africa 9 Morocco South Africa Asia 10 China Israel Japan South Korea Taiwan Turkey UAE Australasia 14 Australia New Zealand Europe 18 Austria Belgium Bulgaria Croatia Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Lithuania Netherlands Norway Poland Portugal Romania Slovakia Slovenia Spain Sweden Turkey Ukraine United Kingdom Latin America, Mexico & The Caribbean 26 Argentina Brazil Colombia Mexico Uruguay Venezuela North America (U.S. & Canada) 28 U.S.A. Canada Glossary of Terms 30 © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 3 BuddeComm & Chiltern Magazine Services Ltd. Published 1st. January 2009. Copyright 2009 Disclaimer and Legal Notices. Disclaimer. Every care has been taken in the preparation of this report to ensure that the information contained herein is accurate, factual and correct to the best of our knowledge, at the time of publishing. All opinions, suppositions, estimates and recommendations included in this report are solely the opinions of the authors unless otherwise stated. BuddeComm & Chiltern Magazine Services Ltd. accept no liability for any loss or damage or unforeseen consequential loss or damage arising from the use of the information contained within this document. The opinions, suppositions, estimates and recommendations within this report cannot be guaranteed, and readers use this information at their own risk. The information published in this document is subject to change without notice at any time, and BuddeComm & Chiltern Magazine Services Ltd. accept no liability or obligation to inform the reader of such changes. BuddeComm & Chiltern Magazine Services Ltd. do not promote or endorse any specific companies or products, the views and opinions we express in this report are wholly our own assessments, and independent from any external interest or influence. Many terms and phrases and trade names used in this document are proprietary and BuddeComm & Chiltern Magazine Services Ltd. recognises and acknowledges that all trademarks are copyright, belonging to their respective owners. Where possible, this document accords such terms and phrases and trade names to their respective owners. All Rights Reserved. No part of this document can be copied, shared, redistributed, transmitted, displayed in the public domain, stored or displayed on any internal or external company or private network or electronic retrieval system, nor reprinted, republished, reconstituted in any way without the express written permission of the publisher. Forwarding of this electronic document without the correct legal licence is theft. It’s unethical, immoral and against the law. If you have any questions about the legal licence conditions under which this report has been distributed, please contact Chiltern Magazine Services Ltd. at keithw@cmsinfo.com. If you did not buy this report and a colleague or associate has sent it to you, do not assume you are legally entitled to read it: it is your responsibility to ensure you have the correct legal licence to read this document. Published by: Chiltern Magazine Services Ltd., P&A House, Chesham, Bucks. HP5 3HB, England. Telephone: UK +44 (0) 1494 771734 Fax: +44 (0) 01494 778994 Registered Office: 2a Altons House Office Park, Gatehouse Way, Aylesbury, HP19 3XU, UK Registered in England and Wales No. 3240740 VAT No. GB 685 4343 10 © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 4 Digital Media: A Global Perspective The Developing Uses and Growing Prevalence of Digital Media Entertainment The most hotly debated topic in the digital media industry is how to make money and it is the entertainment sector that many involved in the industry are directing their focus. The Internet, digital television, home media centres and mobile devices are all being used to deliver entertainment services. Set-top boxes are seen as the key to digital television service take-up around the world; HDTV, DVRs, home media centres and Internet services are also set to drive entertainment growth. Internet media companies (ie, Google, etc) are exploiting the added speed and capacity offered by broadband infrastructure, which will result in a whole range of new applications continuing to enter the market over the next decade. The UK continues to be a leader in digital television penetration; however, this is expected to change over the next five years as take-up accelerates in other parts of the world, particularly Asia. In 2008 Asia Pacific superseded North America and Europe in terms of set-top box sales. Furthermore, with the development of broadband, interactive TV is back in favour again. Many TV programs now have an interactive element to them, particularly in the Asian and European markets. The Multimedia Home Platform is beginning to assist in the progress of T-commerce around the world, particularly in South Korea. iTV and interactive content is also being incorporated into mobility, with further progress expected throughout 2009. Video applications over broadband have emerged over the last couple years. In only a few instances however do we see an opportunity for IPTV – the reality is that the telcos will find it pretty tough competing with cable and pay TV operators. However, as PCCW has shown, it can be done. The market is progressing; in 2008 there were initial global standards and architecture specifications in place and interesting developments are taking place in Europe (particularly France and Italy), China, Hong Kong and the Netherlands. Video consumption via the Internet is producing promising statistics and advertisers have begun to seriously take note. In the USA around one in every three videos watched online is done via a Google property (primarily YouTube) – evidence that this industry leader continues to dominate. In 2008 it has been interesting to watch the impact of Hulu upon the online video market in the US. Launched by NBC Universal and News Corp’s Fox, Hulu offers access to advertising- supported television shows, movies and other video – differentiating itself from sites such as YouTube which are based on content generated by the users. IPTV delivers broadband to the TV and puts the viewer in control. With the arrival of the Internet, content became more prominent and video-based applications were revived in order to deliver them over the Internet. The file-sharing features of the Internet created the success of Napster. Similar peer-to-peer file sharing initiatives show that multi-media file sharing remains a key application. More specifically, multi-media file sharing can be seen as a subset of webcasting, of which streaming data/audio/video and VoD are other examples. New DSL based-broadband networks are now rapidly moving into triple play business models, delivering voice, data and video services. The business model for IPTV however, is not viable. Customers are more interested in the web based broadband video applications rather than IP based TV. The Internet has increasingly become a forum for User Generated Content, from the early bulletin boards to today’s video blogs that allow for new levels of interaction. In recent times social networking has become a major focus – dominated by industry leaders MySpace and Facebook. Other competitors are also scrambling to capture market share. In 2008, AOL purchased popular European social networking site Bebo. Social network services are now evolving in order to maintain users’ attention. Mobile social networking services are also in development. Virtual worlds are another example of the developments occurring as part of the digital media evolution. The most high profile of these is ‘Second Life’; the popularity of this virtual world © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 5 has exploded over the past couple of years from around 1.5 million users in 2006 to nearly 13 million registered users in 2008. However, the departure of some high-profile companies in 2007 has the industry wondering if Second Life’s growth will continue unabated. Attention is turning towards its competitors such as There.com. With recent entrants such as China’s HiPiHi and the emergence of worlds designed specifically for teenagers and children, this sector has become a focus for marketing opportunities. There is currently a lot of interest in both the online gambling and gaming sectors, with both being readily adopted into mobile devices. The increased penetration of high-speed broadband is assisting in this growing popularity and recently developed online game consoles are driving video game growth. The innovation of placing advertisements within games is creating potential new revenue streams with one industry leader, Microsoft, making strides in this area. In terms of online gambling, the regulatory environment continues to create uncertainty but the industry is still growing and looking towards other markets beside the US. Several different industries are vying for networked home media sector. They all want to become the gateway to the customer. While most of the initial home automation efforts have concentrated on the PC, there is now a noticeable shift away from PCs as home media centres. Focus has shifted to game consoles but eventually we see the future will be based on TV and DVR players. The terms ‘digital or personal recorder’ refer to the range of devices that allow for the recording of broadcasting content. Some synonyms include DVR and PVR. Their growth has followed the rapid success of DVDs and is relevant to the digital TV market because consumer entertainment goods like plasma screen TV, DVDs and personal recorders look to be a major driver of digital TV adoption. The key to the success for DVRs is the Electronic Program Guide. The marketing industry still has concerns regarding the impact of DVRs upon advertising. One of the earlier developments in Digital Media was the concept of cable TV superhighways (offering more than just TV), which started to emerge in the early 1990s. Initially the cable TV operators were looking at Video-on-Demand services. This proved to be too difficult and other TV based services such as iTV didn’t have the right business model. At the same time, telephone companies indicated that they would move into video media. Cable operators towards the end of the 90s started to explore the more lucrative broadband services. This has been a great success story. The move is now towards the concept of ‘Triple Play’, providing voice, data and video services. Installed base of homes with network entertainment centres worldwide – 2009-2011 Year Homes (million) 2009 115 2010 140 2011 180 Source: BuddeComm estimates, 2008 Key Highlights By 2009 yearly sales of Set-top boxes are expected to reach almost 150 million worldwide. Digital cable is expected to grow significantly over the next few years as analogue cable switches to digital services. Legitimate sales of digital music have increased by 40% worldwide in the past 12 months. The US, Japan, UK, Canada, China, South Korea and Germany are considered the leaders in terms of HDTV. However, the penetration of HDTV sits at less than 10% of TV homes worldwide and the majority of these are located in the US. Despite © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 6 some governments mandating digital TV in its various forms, there was initially little evidence of a rush by consumers to buy it. This is slowly changing with the prices coming down somewhat and an increasing focus from the broadcasters on developing HD content. With the development of new handsets and next-generation consoles, spending on gaming is expected to increase with a CAGR of around 10-15% over the next few years. In 2008 DVR growth occurred in Europe and Asia; manufacturers are also escalating DVR exports to North America and the Middle East. The Asia region is at the forefront of service innovation for online entertainment development. South African mobile operator MTN has obtained exclusive mobile content rights for the 2010 Soccer World Cup for Africa and the Middle East for $65 million. The demographic makeup of the Middle East means that there is huge potential for the development of a dynamic entertainment industry. In the GCC countries, around 65% of the population is under 30. See 2008 Digital Media Technologies - Digital TV, Mobile TV, IPTV, MPEG E-Government, E-Health and Tele-Education Many governments around the world now understand that broadband infrastructure can provide real benefits – not just in delivering high-speed Internet, but also in delivering services that are critical to the communities they serve. Important social services that depend on high quality broadband infrastructure include e-government, e-health and tele-education. Around the western world we are facing a massive dilemma in relation to healthcare. New advances in medical technologies are increasing life expectations and improving quality of life. The cost of this however is enormous and we simply can no longer afford to finance these huge advances via the public health systems. In countries with proper broadband infrastructure, e-health is shaping up as a way that allows us to access these services at a more affordable cost. The alternative to not embracing e-health is to accept a significantly inferior healthcare service in the future. Countries that are lagging in these broadband infrastructure developments are going to face, not just a telecoms dilemma – but, more importantly, they are going to face a health crisis. There is no doubt that e-health is going to totally transform the national healthcare systems and that society will need time to make the adjustment. Training is vital, and not just of medical professionals. Equally important is the training of other carers, volunteers, and the patients themselves. This is where tele-education can play an important role. Tele-education is becoming more and more important, particularly in developing markets, as it offers the potential for millions of people to access education that they would not be able to otherwise. Telecommunication technologies, such as mobile devices, the Internet and associated Web 2.0 applications, have further broadened the quality and possibilities for remote education and the ‘virtual classroom’. Now that the broadband markets are moving in the right direction, we have shifted our focus from access to actual broadband services and applications – such as e-government. While one of the primary aims of e-government is to improve customer service for citizens; e- government applications can also assist in improving communication and information sharing between government departments. For citizens, one-stop services can reduce time and confusion when dealing with a number of departments. Interactions between government, business and industry can also be improved via e-government applications and the increased transparency of such services can lead to less corruption. In addition, streamlining services can lead to cost cutting and less waste of public resources. © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 7 Worldwide e-learning market value – 2008; 2010 Year Revenue (billion) 2008 (e) 25 2010 (e) 46 Source: BuddeComm estimates, 2008 Advantages of E-Health Reduced Travel Patient and doctor travel is minimised Improved Lifestyle Patient and aged care monitoring Local medical staff can consult with specialists Improved Consultation anywhere in the world Cost Savings Reduced hospital and related travel costs Specialist hospitals can spread their expertise Improved Services more widely Students can watch an operation being Training and Education performed thousands of kilometres away Source: BuddeComm Key Highlights The ‘business case’ for FttH networks is also no longer based solely on the commercial returns from Internet access and other communication services. It also incorporates the social and economic benefits provided by such infrastructure. Millions of people worldwide can potentially benefit from e-health applications. There is currently an estimated shortage of over 4 million doctors, midwives, nurses and support workers worldwide. In North America, many e-health initiatives are still in early formative stages, although during 2008 a number of significant ventures started moving from the drawing board to implementation. E-health schemes are pivotal to the broadband strategies of Europe’s Member States. Alleviating cost pressures on overburdened hospitals and health services is a key justification for governments to part-fund NGNs. While there are many successful examples of e-health development taking place in Asia, this is not widespread. Much more can be done in the health sector for providing basic health care and services, especially for the poor communities. Tele-education is being used around the world for training, vocational training and formal education. The E-education sector in North America has grown rapidly in the last 10 years, both at the secondary school and post-secondary level, and will continue its expanding role in the broader education sector. More and more countries are now investing in online government services and parts of Europe, Asia Pacific and North America are considered leaders in this area. Many have been implementing and developing their e-government strategies for a number of years and other governments around the world are now endeavouring to catch up. © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 8 Brazil is also considered a world leader in terms of e-government, especially in the areas of e-participation, electronic voting, online tax filing, and e-procurement. Chile is at the forefront in terms of e-government, its tax system having attracted worldwide attention because of the high filing rates achieved. For several years the US and Canada have had well-established policies for developing e-government services, including the Canadian Government On-Line Initiative and the US’s 24 E-Gov Initiatives. Ongoing improvements in broadband access and backbone infrastructure are set to bring further progress with e-services to Africa. See 2008 Global Digital Economy - E-Government, E-Health and Tele-education Expansion into the Mobile Data Market The mobile data sector offers enormous potential, reflected by the number of diverse players all vying for this market. Competition is increasing and there is some evidence that usage of mobile data content and services is starting to grow – albeit slowly. In 2008 the mobile operators continued to focus on IMS. This offers the potential to have interoperability of applications over various networks – a very powerful tool for telcos in their battle to maintain supremacy in the market. Mobile operators need to retain a competitive edge as mobile manufacturers and Internet Media companies (ie, Google) attempt to move into the mobile data space. Apple and Google have already set the cat among the pigeons; they are promoting phones that will make it much easier to access web-based services and, with Google’s proven advertising skills, this will almost certainly mean a lot of free services for the users. Google is also exploring mobile LBS; currently predicted as a mobile data growth area. Use of LBS is currently proving popular in North America due to services such as the Disney Family Locator. Car navigation systems are also increasing in popularity, particularly in Europe and the US. While we acknowledge that there is huge potential for wireless data, mobility services and media rich content, both the business and technical fundamentals of the current marketplace are not conducive to significant growth in mobile content. As a result, voice will remain the killer application for mobile for the time being, with data services included as support services and niche market services. It is predicted that wireless broadband (4G or WiMAX) is the real solution required to unlock the mobile data sector. See 2008 Global Mobile - Data and Content Markets The Digital Media Industry Advertising and Marketing In the digital media era the traditional media companies have made quantum leaps in comparison to the telcos in terms of advertising and marketing. While the Internet companies (ie, Google) have clearly been the leaders to date, media companies are now making great progress. New advertising models, permission-based marketing and premium sales activities are being used to attract people to events and services. New video applications are also emerging as the Internet media companies seek to exploit the added speed and capacity of broadband infrastructure. The most significant change broadband is bringing to the market is that it is opening up consumer markets. For decades, only corporate users have been able to afford data services. The Internet quickly used this new data development to create an enormous number of consumer applications. Broadband improved the quality, allowing for video-based applications, and, just as importantly, it made access to digital media affordable to the mass market. The rise of the Internet, mobile phones and other digital media is forcing marketers and their suppliers, including ad agencies, to adopt new business models and broaden their offerings. © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 9 Although the Internet still only accounts for a small percentage that will be spent on media advertising in 2008, its influence spreads much further than that. It is changing the way consumers are exposed to and interact with advertising. To date, traditional ad agencies have been accustomed to mass media advertising, with its one-way flow of communication. Digital adverting however will be led by the consumers; they will more or less have full control of the information that they wish to receive and the format will look nothing like traditional advertising. It will be highly personal and highly interactive. Mass advertising will not disappear. There are still good reasons for it to continue, but over time its role will be eroded. The trend will be the democratisation of advertising, necessitated by changing consumer behaviour in favour of the digital media. We are seeing the emergence of new advertising models as the industry gains confidence; driven primarily by the phenomenal growth in online advertising revenues. Online advertising formats can involve searching, games, online directory listings and other permission-based models. Video-based services on broadband and interactive digital TV networks are also becoming a whole new area for advertising opportunities. Social networks have also gained much attention in recent years, but in 2008 questions are beginning to be asked about the true potential of advertising over this medium. Personalised media and one-to-one communication will be the predominant mode on the Digital Media. Location Based Advertising has had a revival with the development of Location Based Services over mobile devices. Put simply, LBA is when advertisements are strategically communicated based on a consumer’s location. Mobile LBA is slowly becoming a reality with services starting to roll out around the world, particularly in North America, Europe and Asia Pacific. In addition to the marketers, major players in the mobile and Internet fields are also taking great interest in these developments. The biggest growth in advertising for the next ten years will come from digital media and this will most certainly involve massive changes for the traditional ad agencies. It is expected that by 2015, 65% of all New Media revenues will be based on permission-based marketing. The online advertising market stalled during the dotcom era, but a significant recovery began in 2003 and today online advertising is flourishing with over $60 billion to be spent worldwide in 2008. A reflection of the growing digital advertising market has been the growth in Internet advertising across Europe, which is taking an increasing share of total advertising spend. Four of the major Internet media companies in the US capture over 60% of US online advertising revenues. In South Africa, Vodacom has started selling text ads to be placed on the 20 million free ‘Please Call Me’ SMS that are sent through its mobile network every day. There is a small but fast-growing band of new digital marketing houses in Australia who are promoting their ability to deliver an end-to-end solution. See 2008 Global Digital Media - Advertising and Marketing Digital Media in Regional Markets Africa Broadcasting is an integral part of Africa’s development and a means of communication over the vast areas of the continent. Improvements in broadband infrastructure and the emergence of Third Generation (3G) mobile systems are now opening the way to convergence of conventional and digital media as well as telecommunications. With far greater ownership of TV sets compared to PCs in Africa, the broadcasters’ viewers represent a huge potential customer base for Internet services as well. Interactive TV, especially the variety using mobile phone text messages (SMS), has found its way to Africa and is growing fast. The PVR was © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 10 introduced in South Africa in 2005. At least nine African countries are currently trialing or planning to introduce Broadband TV and Video-on-Demand services, typically converged with voice and data services under so-called Triple-Play models. With poor fixed-line network infrastructure in most African countries, the extent of IP-based NGNs to support these services is still limited on the continent. There are, however, encouraging developments. Several countries have launched broadband initiatives and are rolling out dedicated IP networks and new fibre optic links. Morocco Morocco is one of the most advanced telecommunications markets in Africa and often seen as a role model for future developments in other parts of the continent. The boundaries between fixed and mobile are beginning to disappear as technologies and services converge. Innovative new services have been introduced such as the first commercial IPTV service on the continent. To accommodate the increasing amount of traffic, international connectivity and fibre optic national backbone networks are being expanded, and WiMAX is being rolled as the next-generation access technology. South Africa With its relatively well developed and diverse infrastructure, South Africa is taking a regional lead role in the convergence of telecommunication and information technologies with the media and entertainment sector, promising reductions in telecommunication costs and better availability of information and services. Billions of dollars are being invested into IP-based Next Generation Networks capable of delivering converged services more efficiently. ISPs are turning into phone companies, and vice versa. Both are moving into delivering audio and video content over their networks, while in turn the traditional electronic media carriers are discovering the potential of their infrastructure for telecommunications service delivery. DVB- H Mobile TV licences are expected to be issued in early 2009. Naspers pay TV subscribers in South and Sub-Saharan Africa, 2004-2007 Year Percent Sub- Percent South Africa Total ends Mar Digital Saharan Digital 2004 1,076,000 72% 291,000 97% 1,367,000 2005 1,148,000 78% 335,000 100% 1,483,000 2006 1,251,000 83% 385,000 100% 1,636,000 2007 1,382,000 88% 471,000 100% 1,863,000 Source: BuddeComm based on company data, 2008 See 2008 Africa - Telecoms, Mobile & Broadband in Northern Region Asia Throughout Asia there has been an increasing interest in exploiting the potential synergies between the traditionally separate industries of broadcasting and telecommunications. The push towards convergence, using common infrastructure and architecture has gained more momentum with the huge improvements in technology. This has led the market to actively explore the concept of converging services involving the combined provision of TV/video, telephony and Internet services. A number of the more highly developed economies in Asia have been moving into the area of convergent networks, and while many of the continent’s developing markets are yet to establish a digital media economy on even a small scale, economic giants such as China and Japan have been investing heavily in the market. © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 11 The Arab Middle East has a very flourishing pan-regional satellite TV market with over 300 FTA channels available, with most of the local channels based in Dubai, although most of the larger ones are Saudi owned, including the most watched FTA channel MBC, two out of the three pay TV operators, and up and coming TV and digital media company, Rotana. Despite many channels being launched for political rather than commercial reasons, the competition is generating some very interesting players. Lack of locally produced content in Arabic is a problem both for the Internet and TV sectors, though Qatar is home to the very popular Arab news channel Al Jazeera, which claims high viewer ratings in the Middle East with an estimated 50 million viewers. . Digital Media in the region is a small but growing market, though with imbalances; as Middle Eastern/Central Asian nations such as Azerbaijan lack some basic telecommunications infrastructure, Iran, Iraq and Yemen find themselves relatively undeveloped for their region and countries such as Israel and Turkey implement advanced services. See 2008 Asian - Broadband Market Major Markets China: One of the world’s leading and fastest growing Digital Media markets Cable TV is set to play a pivotal role in China’s converged media environment, as triple play services – which include the provision of television, telephony and broadband Internet access over a single network – begin to be delivered over cable TV infrastructure. China has the largest cable TV network in the world. By early 2008, 68 cities had completed digital cable TV conversion, with the penetration rate of digital cable TV reaching 24.33%. By end-2007, China Netcom and China Telecom between them, had over 1.2 million IPTV subscribers. Shanghai had 300,000 IPTV subscribers by March 2008, the highest in the country. In addition, China’s huge uptake of the internet, and in particular broadband, is partially as a result of the huge popularity and strong consumer demand for services such as online gaming and file sharing, with little doubt that China will soon overtake the U.S. to become the world’s largest broadband market. The transaction volume of China’s online business-to-business jumped 65.9% year on year to 2.1 trillion yuan (US$292 billion) in 2007. Revenues drawn from online B2B operations are expected to jump to 13.8 billion yuan (US$1.8 billion) in 2011 from 76 billion yuan (US$10.6 billion) in 2002. Online personal shopping reached US$8.2 billion, up more than 90% from 2006. Of China’s 210 million Internet users, 55 million shopped online in 2007. Online sales, which accounted for less than 1% of China’s total retail sales, are forecast to make up 5-8% of total retail sales by 2012. Sales of online games in China topped US$1.45 billion in 2007, up 61.5%. It is estimated that China’s massive online gaming population will hit 84.56 million by 2012 from 40 million in 2007. The online advertising market has yet to adjust to this market acceleration, however, as revenue reached US$1.3 billion in 2007, while US Internet advertising spending reached around US$21.4 billion in the same period. The Internet makes up only about 5% of advertising spending in China compared with 10% in the US. There has been a deal of censorship in the Chinese Digital Media market, most notably within the adult industry, and China saw a crackdown by authorities on pornographic websites until after the Olympics. In 2007, 44,000 porn sites were shut down and over 800 people were arrested. Illegal websites, computer markets and Internet cafes are also targeted as part of a campaign to rein in juvenile crime. There has also recently been a settlement between Yahoo! and the families of two imprisoned Chinese journalists serving 10-year prison sentences for engaging in pro-democracy efforts that the country’s authorities deemed subversive. The move enabled Yahoo! to escape the courtroom. Yahoo! had helped the investigation by providing China’s authorities with personal information culled from the email accounts and other online activities of the journalists. However, there is now clearance for RIM to sell its BlackBerry devices in China after eight years of trying. RIM’s move into China comes as it competes in the US with Apple’s heavily hyped iPhone, which is not yet selling in China. There has also been an active movement to combat online music piracy, with recent action © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 12 launched by Universal, Sony BMG and Warner in early 2008 against Baidu for allegedly pirating music files. The three companies, which lost a related ruling in December 2007, filed a case with fresh claims against Chinese Internet portal Sohu.com and its search engine, Sogou. Yahoo China also faces proceedings after refusing to comply with a December 2007 ruling by the Beijing Higher People’s Court, which confirmed that the company violated Chinese law by committing mass copyright infringement. Internet Statistics for China, 2004-2007 Number of Internet Internet Users Chinese Year Annual Growth Subscribers (millions) websites (million) (million) 2004 94 18.2% 71.7 0.67 2005 111 18.1% 73.2 0.69 2006 137 23.4% 79.5 0.84 2007 210 53.3% 87.4 1.5 Source: BuddeComm based on MII, Global Mobile, Point Topic and CNNIC data See 2008 Asia - Telecoms, Mobile and Broadband in China Hong Kong’s densely packed cable market that has estimated 2.3 million TV households, and incumbent PCCW ended 2007 with 882,000 video subscribers in Hong Kong with a paying base of 628,000. That still put it within striking range of i-Cable, which closed 2007 with 882,000 video subscribers. Besides losing its historic market share edge, i-Cable may also start shedding subscribers. This has PCCW stealing away cable customers in a highly competitive market considered one of the most mature and saturated in the world. Internet Statistics for Hong Kong, 2002-2007 Internet Users Internet Subscribers Year (millions) (millions) 2002 3.30 2.37 2003 3.50 2.34 2004 3.80 2.52 2005 4.10 2.57 2006 4.30 2.69 2007 4.88 2.84 Source: BuddeComm based on OFTA, ITU, Point Topic data See Asia - Telecoms, Mobile and Broadband in Hong Kong and Macau © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 13 Digital Media in Israel Thanks to one of the highest rates of development in the region (as well as the highest household broadband penetration level in the world), the Israeli digital media market is flourishing. Current market competition is very fierce, and centred around the battle between the incumbent Bezeq’s satellite TV subsidiary YES and cable TV operator HOT. Israel’s very high broadband penetration rate mixed with a strong entrepreneurial culture is providing great potential for triple play, e-commerce and digital media market developments and competitors are manoeuvring for position. Convergence, upgraded infrastructure and regulatory measures encouraging competition are disrupting the status quo leading to a time of change in this very interesting and advanced market. The advisory commission has also advocated giving independent content providers a real chance to operate on broadcasting infrastructure. IPTV is also operational. See 2008 Middle East - Telecoms, Mobile & Broadband in The Mediterranean & Levant countries The Japanese Digital Media Market Japan’s telecommunications sector is one of the most active markets in the world, making it a centre for new digital media. The telecommunications regulatory authorities in Japan have been instrumental in shaping the industry and as a result, Japan has assumed a dynamic leadership role in many aspects of global and regional telecommunications. The control that the incumbent operator, NTT Corp, has continued to exert over virtually all local customers remains a particular challenge for the regulator. In addition, a growing concern has been the development (and lack) of cyber law in a society that is increasingly spending its time online consuming this new media. Japan has been an early adopter of triple play models which provide TV, broadband Internet and voice telephony as packaged services from a single provider. This has been enabled through Japan being a world leader in broadband Internet. There have been continued copyright infringements following the 2007 launched Japanese language site of YouTube, resulting in action by a coalition of Japanese television, music and film companies. YouTube is still more popular than any rival Japanese video sharing sites. eBay also withdrew from the Japanese market in 2002, but have recently re-entered in association with Yahoo Japan. To combat the dominance of Google and other foreign search engines dominant in Japan, the Japanese government has allocated ¥14-15 billion (US$120- 130 million) through The Ministry of Trade for 10 Japanese partnerships to try to gain the lead in new search technologies. Interestingly, progress has also been made in Japan’s research and development on technology for a new generation of network that would replace the Internet, eyeing to bring the technology into commercial use in 2020. Popular valued added services for mobiles continue to be i-mode for Internet access via mobile phones, music downloads facilitated by linkage between the content providers and the operators, and Osaifu-Keitai which is a mobile wallet allowing subscribers to pay for train tickets and the like with their mobile phones. Out of NTT DoCoMo’s 53 million subscribers by September 2007, nearly 48 million used the i-mode service and 27 million the mobile wallet, an increase of 100% for the latter over the previous year. Japanese subscribers are well accustomed to accepting rich content advertising messages. Mobile operators establish their own mobile advertising agencies to support operators’ business models for mobile advertisements. By 2012, the total value of all mobile advertising and marketing is expected to reach US$1.2 billion in Japan. In March 2008 US brand Walt Disney launched as an MVNO on Softbank’s network. MVNOs are common outside Japan, though they have had mixed results. Disney last year hung up on an MVNO in the US that used Sprint Nextel Corp’s network, and in 2006 discontinued a similar service based on its ESPN sports TV network. © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 14 Internet Statistics for Japan, 2004-2007 Internet Users Year Penetration Rate (millions) 2004 77.3 60.6% 2005 79.5 62.3% 2006 85.3 66.8% 2007 87.5 68.5% Source: BuddeComm based on Softbank, MIC, TCA See Asia - Telecoms, Mobile and Broadband in Japan Digital Media in South Korea South Korea has one of the most vibrant and interesting telecommunications markets in the world, which has had a knock-on effect on the country’s digital media market. Supported by a visionary government program of stimulating development through liberalisation, deregulation and early privatisation of the incumbent, a creative and energetic private sector and a technology savvy population, the Republic of Korea continues to push forward on this front. South Korea is an early adopter of triple play models, which provide TV, broadband Internet and voice telephony as packaged services from a single provider. The South Korean government is committed to transitioning the country to digital terrestrial, digital cable and digital satellite TV broadcasting by 2010. Additionally, e-services such as e-commerce, online trading, e-banking, e-government and online gaming will be key drivers of the converged environment in South Korea. South Korea’s National Assembly also passed a law in early 2008 allowing the country’s telecommunications companies to offer real-time broadcasting over their broadband networks. This allowed KT and Hanaro to launch full IPTV services amid slowing growth in the traditional broadband and telephone markets. KT expected the number of its IPTV subscribers to rise to 1.5 million in 2008 from 330,000 at end-2007 when only VoD could be offered. Several other key regulatory changes took place 2008, all of which add up to mass uncertainty for operators but should see the country lose its reputation as one of Asia’s most heavily regulated markets. See 2008 Asia - Telecoms, Mobile & Broadband in North and South Korea Digital Media in Taiwan Taiwan has one of the highest TV penetrations in the world. In recent times, change has been the order of the day in Taiwan’s television industry - the establishment of a public television system, the legalisation of private cable TV operations, the increased popularity of satellite broadcasting, the promotion of digital television, and the employment of a whole range of new digital technologies. Cable television, which has been highly fragmented in Taiwan, has started to build itself into a healthier sector. Convergence is also starting to have an impact on the industry. The market is also specifically beginning to see plans by GPS navigation device maker Mio Technology to expand its product mix to include 3G GPS PDA phones in late 2008, using the 3.5G platform from Qualcomm. The handset would feature integrated application services, including photo navigation, TMC (traffic message channel) and LBS (location base service), along with growth in other mobile and internet applications. See 2008 Asia - Telecoms, Mobile and Broadband in Taiwan © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 15 Turkey’s Digital Media Market Turkey’s sizeable Internet user population, despite low Internet penetration, has fostered an emerging Internet economy, encompassing e-commerce, e-government and e-education services. The country’s broadcasting sector is comprised of a large number of free-to-air operators and a number of satellite and cable-based pay TV operators. Digital TV offerings are available and convergence offerings look likely to appear in the near future, given the liberalised telecoms market and growing broadband penetration. DTV developments are underway, with trials launched. See 2008 Middle East - Telecoms, Mobile & Broadband in The Mediterranean & Levant The UAE and its Relevance to Digital Media in the GCC The UAE has the highest broadband penetration rates of the Arab Middle East countries and levels are still growing quickly. Internet user penetration was over 50% in 2008, according to the TRA. This environment has assisted the growth of the digital media market. Government policy has included encouragement for media, IT and Internet-related businesses and Dubai has become a regional centre for the industry. Dubai is also a hub for the burgeoning satellite-delivered Middle East TV industry. Of the 300+ regional FTA satellite channels around 25% are based in Dubai. See 2008 Middle East - Telecoms, Internet, Broadband and Mobile Statistics 2008 Middle Eastern - Mobile Communications and Mobile Data Australasia While the digital media markets of Australia and New Zealand are well developed and offer several investment opportunities for future growth, the other nations making up the continent, the South Pacific Islands, more often have not received a high enough level of either internet or mobile penetration for digital media to be considered a profitable enterprise. As such, the digital media industry in the continent is almost entirely centred around Australia and New Zealand, with the former in a dominant position. The Australian Digital Media Marketplace Over the last two years the traditional media companies in Australia have well and truly established themselves in the emerging digital media market. While telcos tried to claim this territory, in the end they failed. Interesting new developments can be expected following the initiative taken by Lachlan Murdoch. Seven has indicated it will launch a TiVo service and it has also bought two telco companies. Fairfax media has grown from strength to strength. It is obvious that key new developments will come from the industry. By 2008, penetration of digital TVs (digital receivers or digital integrated TVs) stood at only 28% of Australian households, which still classifies digital TV as a niche medium. The move towards flat panel TVs has further accelerated with CRT TVs only constituting a very small proportion of TV sales as the price of the smaller screen LCD TVs and standard definition plasmas has dropped further. This trend will continue to accelerate through to 2009, by which time CRT televisions should have been totally phased out by retailers. Progress in the Australian Interactive TV market has been slow with limited new developments occurring, however Foxtel has revealed plans to implement a new interactive platform that will enable Foxtel and Austar viewers to receive ads based on their viewer profile and their viewing habits. Progress in the Electronic Program Guide market will continue to evolve with more mass market developments expected from 2009 onwards. Australia is a market in need of development in e-health and e-education, and it is hoped that the government’s planned$1 billion will give a boost to this somewhat stagnating market. This could become an anchor project for FttH – the government’s $4.7 billion investment in infrastructure will boost e-health and e-learning and will also have a multi-billion dollar effect © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 16 on the e-economy. Growth in e-learning is currently estimated at around 25% per annum, whil Australian universities and educational institutions are experimenting with the use of virtual worlds for education and training purposes. With regards to e-health, recent government research has estimated that with further development $30 billion could be saved over a 10- year period. While Australia might not be on the top 5 list, the country is certainly a leader in e- government. Last year the federal, state and territory governments suggested a national rollout of energy-saving smart meters, commencing in late 2007. Trials are underway in all states, some using off line solutions, others narrowband communications. Such a network would make economic sense, be good for the environment, cut operational network costs and open up opportunities for new home automation and home networking business opportunities. The new government is expected to take a broader approach in 2008, and it will consider the opportunities offered by smart grids. In terms of other services offered, filing tax returns online is becoming one of the most widely used e-government services. It has also been suggested that e-governance should include privacy and security policies, existence of publications and databases, contact information, and overviews of available online services. Most of the media companies have a vested interest in protecting their traditional businesses. Over the last 50 years they have been able to obtain certain political advantages that have allowed them to carve our monopolistic markets. The new digital media are undermining their privileges and their grip on their monopolies. Forced by these changes they are now all jockeying for a position in the new Internet economy. Key industries covered in this report include TV and radio broadcasting, newspaper publishers, film and video industries. The industry has turned the corner and is now well and truly underway to also dominate the digital media market, launching events using their traditional media and supplementing them through new media activities. However, they will increasingly receive more competition from overseas media companies. Rather belatedly many advertising companies have now also jumped on the digital media bandwagon. Their late arrival in this market of course left the door wide open for new companies in this market. Key companies in this market are BlueFreeway, Hyro, belong, Photon and Premium TV. Affiliate networks (the tail) poach advertisers from the high traffic portals and news and information sites. Existing advertising agencies will also be with us for a long time to come and will surely start increasing their share in the market as well. In the mobile market it are still the mobile operators still want to call the shots and are reluctant in opening their networks, however changes are starting to occur in 2008. In February 2008, DoubleClick announced a plan to launch its Advertising Exchange auction system in Australia to sell online advertising space, following a similar move by Yahoo! It is estimated that by 2015, broadband will add over $20 billion to the Australian economy – it will be a critical element in business models; distribution models, communication, e-marketing and as an electronic production tool. Over half of the Australian population uses e-banking, though financial institutions are still reluctant to throw their weight behind e-payments. Online advertising is also set to reach and exceed $2 billion in 2009, with the current split being roughly one-third each for classifieds, online advertisements and searches. However, significantly more innovation still needs to be brought into this market, and Google has been showing the industry the way forward here. Significant mergers and takeovers took place in a repositioning industry, with more to occur in the future. © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 17 Online Advertising Revenue in Australia, 2005-2010 Year Revenue ($ million) 2005 620 2006 1,000 2007 1,400 2008 (e) 1,800 2009 (e) 2,300 2010 (e) 3,000 Source: BuddeComm See 2008 Australia - Mobile Data and Content - The Wireless Broadband Explosion 2008 Australia - Internet, Broadband and Convergence Statistics The Digital Media Market in New Zealand Digital media companies will play an increasingly important role in New Zealand’s telecommunications market, whereas the traditional telcos will become more confined to providing the telecommunications plumbing with third party organisations such as YouTube dominating delivery of the content or services. The bundling of voice, data and video services (triple play) and mobile services (quadruple play) is currently only available in a limited fashion New Zealand. The market should slowly open up during 2009 and 2010 as more wholesale products become available through Telecom’s expanding NGN IP network. Although the dominance of FTA television as the country’s mass communication medium has been unsurpassed for many decades, the industry is now facing challenges from a number of fronts as incumbent broadcasters cling to their lucrative oligopolies. The FTA networks are expected to see intense competition for viewers and advertising in 2009 and beyond. Pay TV penetration stands at around 45% of New Zealand households; however it has been predicted within the industry that penetration will not continue to grow much further unless prices come down to more affordable levels. See 2008 New Zealand - Mobile & Broadband Overview and Analysis © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 18 Europe Digital Media, in particular the Digital TV market, has been a great success in Europe, following years of excellent fixed-line, mobile and internet penetration. This is particularly the case in Western Europe, where for example the UK has established itself as a leader in the European digital media marketplace. DTV will grow an average of 12% year-on-year, with particularly strong adoption in the near term as broadcasters terminate analog terrestrial television. For most national markets, the significant increase in DTV services will occur around 12 to 24 months prior to this termination. Driven by campaigns from national regulatory authorities and public service broadcasters, there will be a massive push to migrate consumers to digital platforms to free up valuable spectrum capacity. During 2007 the triple play model in Europe was expanded dramatically as an increasing number of incumbents and second-tier operators developed services to gain new customers and reduce churn. As a result of mergers and buyouts, the year also saw the first quad-play offers, notably in the UK, with mobile telecoms added to existing bundles of fixed-voice, Internet and TV. Mobile players such as Vodafone have also expanded into broadband and fixed-line telephony in several markets. Triple play offers a number of value-added services including broadcast and specialty TV channels, Video-on-Demand and VoIP. The model requires that combinations of high-bandwidth applications are supported by sufficient network capacity, essentially provided by hybrid fibre / ADSL2+ networks. See 2008 Europe - Telecoms, Mobile and Broadband in Central Europe 2008 Europe - Telecoms, Mobile and Broadband in Benelux 2008 Europe - Telecoms, Mobile and Broadband in Germany and Austria 2008 Europe - Telecoms, Mobile and Broadband in Russia, Belarus, Moldova and Ukraine 2008 Europe - Telecoms, Mobile and Broadband in United Kingdom and Ireland 2008 Europe - Telecoms, Mobile and Broadband in Italy and Malta 2008 Europe - Telecoms, Mobile and Broadband in Scandinavia 2008 Europe - Telecoms, Mobile and Broadband in the Balkans East - Greece, Romania, Bulgaria 2008 Europe - Telecoms, Mobile and Broadband in the Balkans West 2008 Europe - Telecoms, Mobile and Broadband in Spain and Portugal Austria Austria’s market for converged media benefits from excellent broadband networks and a strong TV market. Cable and DSL network upgrades support popular demand for triple play offerings including IPTV and interactive TV. Digital services have been available since 2006, with three multiplexes assigned to national and regional services and a fourth reserved for mobile broadcasting. See 2008 Europe - Telecoms, Mobile and Broadband in Germany and Austria Belgium Belgium has excellent cross-platform competition between the DSL and cable networks. Most people receive TV by cable. Cable operators, dominated by Telenet, have upgraded networks with DOCSIS 3.0 technology and 860MHz capacity to compete with Belgacom’s hybrid fibre/VDSL roll-out. A range of triple play packages as well as VoD are available and popular. The broadcasting sector is characterised by regional and language variations to accommodate the French and Walloon regions. See 2008 Europe - Telecoms, Mobile and Broadband in Benelux © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 19 Bulgaria Cable TV penetration is well above the EU average although the number of major service providers is decreasing due to consolidation. Triple play services have been launched as ISPs launch VoIP and broadband TV (IPTV) while cable operators add telephony to existing video and broadband offerings. Broadband accounts for the majority of Internet connections in Bulgaria, with healthy competition due to the number of competing technology platforms used to offer broadband access. See 2008 Europe - Telecoms, Mobile and Broadband in the Balkans East - Greece, Romania, Bulgaria Croatia Internet penetration in Croatia is the highest in the Balkans region, and is more in line with those found in the Eastern European EU countries. ISPs have focused on increasing broadband take up, with hopes of generating additional revenue through sales of recently launched IPTV and triple play services. DTTV and HDTV trials have been conducted and consolidation in the cable TV market has led to the emergence of a potentially significant alternative operator. See 2008 Europe - Telecoms, Mobile and Broadband in the Balkans West Cyprus Competing triple play offerings have been launched in Cyprus by both the cable and telecoms operators while the country’s growing broadband population is forming the basis of an emerging Internet economy. Broadband accounts for the majority of household Internet connections with ADSL the most popular broadband access platform. See 2008 Europe - Telecoms, Mobile and Broadband in the Balkans West Czech Republic The Czech Republic’s media market is evolving under the weight of digital TV and convergence trends. Take up of IPTV services is growing on the back of more affordable and faster DSL services while the cable TV market has undergone consolidation to create a major player sizeable enough to compete effectively against the telecoms incumbent. Analogue switch off is continuing on a regional basis in the Free-to-Air broadcasting market as take up of digital terrestrial TV improves. The re-instatement of DTTV broadcasting licences in 2008 is expected to pave the way for additional broadcasters to commence DTTV programming during the year. See 2008 Europe - Telecoms, Mobile and Broadband in Central Europe Denmark Denmark is among the more progressive in Europe in the take-up of broadband and digital media services. Cable TV companies, which access about half of Danish homes, have supplemented traditional pay TV and broadband packages with VoIP, VoD and mobile services. Analogue switch-off is scheduled for the end of 2009 while digital TV networks have progressed steadily. See 2008 Europe - Telecoms, Mobile and Broadband in Scandinavia © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 20 Estonia Estonia’s broadband market enjoys the highest penetration levels of all the Eastern European countries. Widespread broadband usage has underpinned Estonia’s emerging Internet economy, with various e-commerce and e-government services available and widely used. The cable TV market is well developed and hence cable TV operators have been well- positioned to offer triple play services. IPTV services have been launched by Elion. Finland Finland’s broadcasting market became entirely digital from March 2008. Digital Terrestrial TV has been operating since August 2001, interactive TV has progressed well, and mobile TV, with two competing providers, is among the most advanced in Europe. TeliaSonera, cablecos and other providers offer triple play services to a growing market, while network upgrades have helped consumer access to services. The government’s plan for every household to have fibre-based 100Mb/s connections by 2015 will dramatically improve the commercial potential of convergent services and IP-delivered content providers. See 2008 Europe - Telecoms, Mobile and Broadband in Scandinavia France France is one of Europe’s key markets for telecom convergence. It has Europe’s largest IPTV sector, while a fast-growing number of consumers have adopted dual- and triple play bundles. The success of this market largely rests on fierce competition which has brought most bundles to below €30 per month. DSL operators have invested in network upgrades incorporating ADSL2+, while the incumbent France Telecom is deploying a wide-reaching hybrid ADSL/fibre network providing high bandwidth services to meet consumer needs. The consolidated cable sector is now dominated by Numéricable, which has a largely upgraded 865MHz network capable of competing effectively with competing DSL offerings. Significant progress has also been made in France’s digital terrestrial TV sector, with ten pilot cities scheduled to end analogue transmission by the end of 2008. Germany Germany’s triple play and digital TV market has grown strongly on the back of excellent DSL infrastructure and cable. Digital TV has undergone regulatory and licensing processes, and successful roll-outs will have extended the service to about 90% of the population by 2009. The digital dividend from analogue switch-off promises bandwidth which can be used for advanced wireless services extending and enhancing the reach of converging media. The incumbent, Deutsche Telekom, has invested in a national VDSL deployment to meet consumer needs for converged applications, while the consolidated cable operators have invested heavily in upgrading their networks to 860MHz capacity. Mobile TV has not yet caught the public imagination: the national DVB-H licence holder Mobile 3.0 withdrew services soon after launch, partly sabotaged by network operators having introduced handsets allowing users to access free-to-air DVB-T channels. See 2008 Europe - Telecoms, Mobile and Broadband in Germany and Austria © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 21 Greece Broadband penetration in Greece is improving following the incumbent’s promotion of services and improving competition based on regulatory mandated network access. Increasing broadband take up and deployment of faster ADSL2+ networks has in turn supported the launch of convergence services such as broadband TV (IPTV), VoIP and fixed- mobile convergence (FMC). Triple play initiatives are being spearheaded by the telcos in the absence of cable TV operators. Digital TV services are commercially available via IPTV and satellite. See 2008 Europe - Telecoms, Mobile and Broadband in the Balkans East - Greece, Romania, Bulgaria Hungary Hungary’s market for converged media benefits from excellent broadband networks and a strong cable TV market, with triple play services also available. Legislative changes have paved the way for consolidation within the cable market, one of the most fragmented in the EU, and the launch of terrestrial digital TV services after a licence to operate all the country’s multiplexes was awarded in July 2008. See 2008 Europe - Telecoms, Mobile and Broadband in Central Europe Ireland The market for converged media and applications in Ireland has been hampered by poor broadband infrastructure. The position became brighter during 2008 as the main cable operator UPC Ireland upgraded its network, and as the incumbent eircom and providers such as Smart Telecom invested in NGNs and expanded their triple play services. Nevertheless, convergence in Ireland continues to suffer from limited fibre deployment beyond a few greenfield sites. See 2008 Europe - Telecoms, Mobile and Broadband in United Kingdom and Ireland Italy Italy’s market for triple play and converging media applications has been strengthened by the excellent broadband network and the expanding fibre footprint. The digital TV market has progressed well, with two regions having switched to digital terrestrial TV by October 2008. Satellite TV remains the main pay TV platform in the absence of cable TV, while IPTV has an increasing presence. Sky Italia controls Italy’s satellite-based pay TV operations. In common with Sky’s platform elsewhere in Europe (notably the UK’s BSkyB), it has branched into HDTV and has also added a further ten leases on the Eutelsat Hot Bird satellite to help with the expansion of its digital service. In October 2007 a further five channels were added, bringing Sky’s total (TV and radio) to more than 170, including five in the HD format. SKY Italia has also expanded its content offerings to include both broadband and mobile phone platforms. Sky Italia faces growing competition from broadband providers which offer an increasingly wide range of IPTV channels, and also from the expanding DTTV sector, including PPV offerings of soccer games previously available exclusively on the Sky Italia platform. The company is currently prohibited from providing a DTTV service under EC regulations. Partly to offset IPTV competition, Sky Italia has embarked on two strategies. Firstly, it sells content to IPTV operators directly: in December 2007 Tiscali signed a deal to take TV content from Sky Italia as also from Mediaset. Secondly, Sky has looked to tying in content with its main rival: the broadcaster recently entered into talks with Mediaset which could see some of Mediaset’s pay-TV content distributed on Sky Italia. Mediaset would gain exposure to more than four million of Sky’s subscribers while Sky would access Mediaset’s trio of Premium soccer, movies and other pay-TV programming. Mediaset’s three major network channels in © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 22 Italy collectively have a 42% TV market share. In addition, the operator controls the Dutch format house Endemol, which produces just the sort of content (Big Brother among them) which would appeal to Sky. See 2008 Europe - Telecoms, Mobile and Broadband in Italy and Malta Lithuania Triple play services in Lithuania are available from a number of operators including the cable TV operators and TEO while commercial digital terrestrial TV broadcasts have commenced. The country has a small but sophisticated Internet market, with broadband accounting for 99% of all Internet connections. ADSL is losing its share of total broadband connections as FttH/FttB and mobile broadband gains popularity. This has seen a spread in e-health, e- government and e-commerce systems throughout the country. The Netherlands The Dutch TV market benefits from a comprehensive cable network reaching almost all TV homes. The country was the first to complete the move to DTTV broadcasting, in December 2006. The country’s excellent broadband infrastructure forms the bedrock of popular triple play offers. The DSL infrastructure will be upgraded nationally by 2010 with KPN’s hybrid fibre infrastructure, while the duopoly of Ziggo, commercially launched in May 2008, and UPC Nederland provides triple play services to the greater part of the country. The government involved have also indicated that their policy focus has shifted from broadband access to broadband applications. See 2008 Europe - Telecoms, Mobile and Broadband in Benelux Norway Norway’s small but advanced broadcasting market is scheduled to be all-digital by 2009. The main operators have focussed on upgrading fixed-line networks to ADSL2+ in recent years, providing a solid infrastructure for delivering triple play services. See 2008 Europe - Telecoms, Mobile and Broadband in Scandinavia Poland Various convergence developments are underway in Poland as fixed-line incumbent TPSA, alternative operators and cable operators look to convergence services as a source of new revenue. Triple play services have been launched by the incumbent and cable TV operators, with growing competition in the broadcasting market expanding the variety of digital TV options available. Portugal Portugal has seen considerable development in the converged services market. Triple play services are available from Portugal Telecom, Sonaecom and the main cableco ZON Multimédia, sold by Portugal in November 2007. A second satellite service was launched in June 2007 while Portugal Telecom also launched a competing service in 2008 to complement its IPTV service. The digital TV platform lags behind the rest of Europe but should be completed by 2012. A licence for pay TV and Free-to-Air services was awarded to Portugal Telecom in May 2008. See 2008 Europe - Telecoms, Mobile and Broadband in Spain and Portugal © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 23 Romania Romania’s Internet and broadband market is experiencing strong growth, despite the country’s low fixed-line penetration rate. Broadband services are widely available from the cable operators as well as the fixed-line incumbent, RomTelecom. Triple play services have been launched by the cable operators, which pose a significant threat to RomTelecom given the reach of their networks. A number of satellite-based digital pay TV platforms were launched during 2005, with one operator expanding services internationally. Digital terrestrial TV services are still in development although an analogue switch-off date has been approved and developments are continuing. See 2008 Europe - Telecoms, Mobile and Broadband in the Balkans East - Greece, Romania, Bulgaria Russia Rising fixed-line voice competition in Russia has essentially capped the growth potential of fixed-line voice revenue, the main revenue generator for many fixed-line operators. Identifying broadband and video services as a significant revenue opportunity, both incumbent and alternative telcos are deploying or have deployed the necessary infrastructure to deliver these services to end users in the most cost-effective manner, namely IP-based NGNs. Hence a number of competing offerings have been launched, with operators often bundling their services into triple play packages designed to offer voice, video and broadband to consumers at a cheaper price, whilst maximising ARPU levels for the telecom operators. IPTV is the most common platform used to deliver the digital TV (video) content to end users. Competing against these rapidly-emerging video offerings, cable TV operators have also upgraded or are upgrading their networks to offer bundled broadband and voice services, thereby creating their own triple play packages and blurring the distinction between telecom and cable TV operators. Satellite pay TV services are also available while digital terrestrial TV developments are underway following the adoption of a national digital terrestrial TV migration strategy. See 2008 Europe - Telecoms, Mobile and Broadband in Russia, Belarus, Moldova and Ukraine Slovakia Slovakia’s Internet market is undergoing a transition as users migrate from narrowband to broadband access platforms, with broadband being sold as a platform through which telecom operators hope to sell additional services, such as broadband TV (IPTV), in addition to slowing the fall of fixed lines, while cable operators are using it to offer VoIP services. Riding on this trend is development of Slovakia’s Internet economy, which has received substantial EU funding to develop and improve access to e-government services. Digital terrestrial TV developments are underway, with three multiplexes to be launched by 2013. See 2008 Europe - Telecoms, Mobile and Broadband in Central Europe Slovenia Slovenia’s high Internet penetration is on par with western European nations. Unsurprisingly, triple play services have been launched and FttH networks are being deployed. The incumbent SiOL is facing increased competition as a result of an improved wholesale access regime and consolidation in the cable market. Slovenia’s growing Internet market has spawned the birth of an Internet economy, with private individuals, corporations and governments involved as stakeholders. See 2008 Europe - Telecoms, Mobile and Broadband in Central Europe © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 24 Spain Spain’s triple play market has grown alongside considerable investment in faster IP networks, largely based on ADSL2+ but including VDSL and some minor fibre launches. Cable operators are at the forefront of the convergence markets, having launched 100Mb/s services to provide multiple-channel IPTV as well as VoD. Satellite TV has seen considerable changes in recent years following the merger of Telefónica’s Via Digital with Canal Satélite Digital. Digital Terrestrial TV, re-launched in late 2005, has shown considerable progress, reaching about 40% of the population by October 2008 ahead of analogue switch-off in 2010. See 2008 Europe - Telecoms, Mobile and Broadband in Spain and Portugal Sweden Sweden’s investments in ADSL2+ and fibre networks in recent years have provided the infrastructure for triple play services to take off. The largest cable TV operators, Com Hem, Kabelvision, and UPC Sweden, have also upgraded their networks to provide data rates at up to 50Mb/s. Analogue transmissions were ended in October 2007, providing the government with the first opportunity in Europe to make use of the digital dividend for wireless broadband services. See 2008 Europe - Telecoms, Mobile and Broadband in Scandinavia Switzerland Switzerland’s sophisticated telecom networks and excellent broadband infrastructure supports one of Europe’s more developed markets for convergent media. Digital TV has developed well, while some areas of the country have already had analogue transmission switched off. The incumbent, Swisscom, and the principal cable network operator, Cablecom, have invested heavily in upgrading their networks to provide consumers with triple play and IP- delivered services. Ukraine Ukraine’s Internet market is entering its fourth year of steady growth. Internet access is improving due to rising PC penetration, fixed-line network modernisation and new network deployments by alternative operators, with broadband services available via ADSL, cable, FttH, LAN and WiMAX. A significant broadband user base exists although total population penetration is low. IPTV trials have been launched by a number of operators with the telecom incumbent planning to launch services by 2009. Web TV services have been launched. Triple play services are available from the cable TV sector and DTTV developments are underway. Ukraine is also home to a nascent mobile content and applications market, with future growth largely dependant on mobile data take up. See 2008 Europe - Telecoms, Mobile and Broadband in Russia, Belarus, Moldova and Ukraine United Kingdom The UK remains at the forefront of media convergence in Europe. The country’s universal DSL and extensive cable networks have been extensively upgraded and provide an excellent delivery platform for triple play and emerging quad play services. The digital broadcasting industry, including satellite, digital cable, digital terrestrial and IPTV services, is well- established. The UK has the highest level of digital TV penetration in Europe, with a substantial multichannel environment, and almost 90% of UK households able to view digital TV. DTTV is the most popular TV platform, followed by digital satellite from BSkyB and the BBC’s FreeSat service, launched in March 2008. The imminent aggregated IPTV service Kangaroo service would provide content from the BBC, ITV and C4. 2009 will see a further maturity on the quad-play market as operators such as Virgin Media, BSkyB, Vodafone and BT develop commercial interests beyond their historical areas of interest. The fast growing © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 25 Sky Broadband service ended caps on data usage in mid-2008, highlighting the robustness of its infrastructure and placing enormous pressure on competitors to lift their similar restrictions. See 2008 Europe - Telecoms, Mobile and Broadband in United Kingdom and Ireland © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 26 Latin America, Mexico & The Caribbean Convergence offers promising prospects in Latin America, a continent with about 570 million people, a soaring broadband sector, low teledensity, relatively high TV penetration, and a growing VoIP market. However, through much of the region there has been a slow uptake on internet and broadband, with internet penetration at 16%, which can be attributed to several factors, the main one being the high prices charged by providers, which in many countries have a virtual monopoly in their areas of operation. Other factors include low PC penetration, insufficient fixed-line infrastructure, highly unequal income distribution, a lack of economies of scale, and regulatory hurdles. Obviously this impacts greatly on the availability of digital media in all but the most developed nations, and even in this case there are often regulations withholding progress, for example those in place in Argentina preventing telcos from providing pay TV services, or those in Uruguay disallowing cable TV companies from offering internet or voice services. However, there is certainly progress within the market, with Chile as the regional leader in convergence with VTR – Latin America’s first triple player – and several other companies all offering triple play packages. IPTV is an interesting albeit uncertain proposition for Latin American operators. The cost of rolling out services, and the number of years before they can recoup their investment, is a concern for most telcos. See 2008 Latin America - Telecommunications Market 2008 Latin America - Telecoms, Mobile and Broadband Overview Argentina In Argentina, which boasts one of the most developed telecommunications and television networks in Latin America, media convergence suffers from regulatory battles involving the government, pay TV companies, and telecom operators, as a telcom company must ally with a cable TV operator to offer converged services, and as a result growth is greatly slowed, as one of the consequences of convergence is the start of competition between pay TV and telecom operators. In early 2006, the government said it would draft a new law on telecommunications, including clauses that would accommodate the process of media convergence and allow telcos to offer pay TV services. As a result, there are several planned IPTV developments, from incumbent Telefonica Argentina as well as Telecom Argentina, which began technical tests of IPTV in June 2008, and Iplan, which operates an FttX network; and telephone cooperatives Cotel and Cotelcam. In January 2008, Argentina’s IP Telephony Association (CATIP) submitted a request to the government for the award of pay-TV licences to telecom carriers, so that a local IPTV market may be allowed to develop. CATIP called for a new regulatory framework enabling Argentine citizens to access TV content through any physical means. The Cable TV Operators’ Association (ATVC) and pay TV operators, on the other hand, have urged the government not to allow telcos into the pay TV sector. They oppose any ruling that would allow telcos to offer television services over telephone lines, claiming that it would put them out of business. Argentine media giant Grupo Clarãn in particular has lobbied the government to keep telephone companies out of the pay TV market. The government has been in no hurry to finalise a new telecom law, and the regulator is still studying the implications of allowing telcos to offer bundled services over a single network. According to local analysts, there is no indication that the law will be changed in the short term, and regulatory changes are likely to take time because there are many different interests involved. It should be noted that while telecom companies are not allowed to offer IPTV, they are free to provide Internet or streaming TV, since this technology rides on existing broadband infrastructure. IPTV on the other hand is typically offered on discrete service provider networks. It guarantees far better quality than Internet TV, but with ever-increasing bandwidth on the worldwide web, the differences between Internet TV and IPTV will eventually vanish. Argentinean examples of Internet TV include mixplay and TerraTV. © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 27 Brazil In Brazil, delays in legislating on media convergence has led to much confusion and conflict, involving pay TV companies, telecom operators, and regulatory authorities. Incumbent telcos have been forcing the issue by entering the pay TV market before receiving authorisation to do so. Although regulatory issues still await resolution, both pay TV and telephone companies have been active in developing convergence strategies, and several operators offer triple or quadruple play packages. Digital Terrestrial TV was launched in December 2007, but is experiencing slow uptake. Despite what appears to be slow growth in other areas, Brazil is considered by many a world leader in terms of e-government, especially in the areas of e- participation, electronic voting, online tax filing, and e-procurement Colombia Colombia’s broadband penetration is slightly lower than the regional average, but is expanding at an impressive rate. Several operators offer triple play solutions, combining telephony, broadband, and television. The pay TV market has experienced a wave of consolidation, with the acquisition of five cable TV firms by Mexico’s Telmex, and of two cable TV firms by UNE-EPM. As a result, Telmex controls more than half, and UNE-EPM almost one fourth of the cable TV market. Mexico The main cable TV providers in Mexico, Megacable, Cablemás and Cablevisión, are also experiencing high growth in cable modem subscribers. Triple play packages are being offered both in the form of alliances between telephony and cable companies, as well as, due to recent regulatory reforms, in the form of single service provider triple play packages, in particular the addition of cable VoIP. Uruguay The Uruguayan government officially adopted Europe’s Digital Video Broadcasting (DVB) standard in August 2007. The DVB system supports High Definition TV (HDTV), and is used in at least 100 countries. Its supporters argue that it is the most popular standard for terrestrial digital TV around the world, and the large number of equipment manufacturers for this technology allows competitive pricing for transmission and reception devices. Uruguay was the fourth country in Latin America (after Mexico, Brazil, and Honduras) to elect a standard for Digital Terrestrial TV (DTTV). Mexico and Honduras chose USA’s Advanced Television Standards Committee (ATSC) digital TV standard, and Brazil opted for Japan’s Integrated Services Digital Broadcasting (ISDB) standard. There has been much discussion throughout the region over which digital TV standard to select. There were clear advantages to having a regional common system, as this would have boosted economies of scale when importing television sets. In 2001, there was a push to have all Mercosur countries adopt the same standard. But the hope of reaching a common standard has clearly evaporated. Reportedly, Uruguay opted for DVB because it allows software and local content development, which will have a positive impact on the local economy. The Uruguayan government will allow analogue and digital TV to co-exist for four- five years, before abolishing analogue altogether. Venezuela Internet penetration in Venezuela is lower than the South American average, leaving considerable room for growth, especially in consideration of the country’s relatively high GDP per capita. Despite this, Triple player Inter is the number two broadband provider and cable TV market leader. Meanwhile, the government studies which digital terrestrial TV standard to adopt. © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 28 North America (US & Canada) Digital Media in the USA Although the transition to digital TV (ie analogue switch-off) has been proposed for over a decade, by the end of 2008 an estimated 10 million US households were still relying on analogue television. Accordingly, in early January 2009, then president-elect Barack Obama requested Congress to consider delaying the switch-off date amid fears that millions of viewers were unprepared for the transition. Meanwhile, the interactive capabilities of digital TV continues to witness the growth of Video-on-Demand services, whilst sales of DVRs and HDTV simultaneously gather momentum. In 2008 the telcos’ had started becoming notable participants in the TV market, with Verizon’s FiOS TV making it close to the top-10 in terms of subscriber numbers. The market is thus moving to a triple play model in which the telcos, with their expanding fibre network deployments and new IPTV offerings, are likely to become a major force. The other significant trend is the increasing use of VoD or downloading as a means of video consumption. By early 2008 triple play services had started gathering momentum, largely driven by the rapid growth in cable VoIP, which adds the third limb of triple play to the cable companies’ TV and broadband offering. This in turn has compelled the traditional telcos to increase the pace of their entry into the TV market. The telcos have been successfully lobbying for TV regulatory reform as part of this push and by late 2008 Verizon had secured nearly two million FiOS TV subscribers and AT&T’s U-Verse TV had passed the one million subscriber mark. While most of the triple play services are still bundles rather than fully converged services, technological developments are increasingly allowing true convergence of triple play services on IP networks. The addition of wireless broadband services, such as via WiMAX networks, will usher in the growth of fully converged IP-based quadruple play services. In the meantime, quadruple play is also primarily in the form of bundles, either offered through alliances or through wireless group companies. Whilst E-health in the US has been a hot topic in recent years, it was not until 2008 that a noticeable number of ideas started moving from the drawing board to implementation. For instance, in February 2008 AT&T announced that it was working with the state of Tennessee to develop the US’s first state-wide health information exchange. The Tennessee eHealth network features two key AT&T patented solutions: a network-based health care information system to enable the secure exchange of electronic health care data among legacy systems of health care providers; and a virtual physician office system to enable the secure use of network based health care information systems and applications. The solutions are expected to increase the quality of healthcare whilst decreasing the cost thereof. The development of employee personal health record systems provides another illustration of the types of developments in E-health. For instance in October 2008 Wal-Mart became the first member of the Dossia employer-coalition to offer the consortium’s personal health record (PHR) system to employees. Nonprofit organisation Dossia was launched in December 2006 by Wal-Mart, Intel and other large employers for the creation of a secure, Web-based infrastructure to provide patient-controlled, electronic PHRs to more than 2.5 million workers, retirees and their dependents. Many other companies, including Google and Revolution Health, continue to explore other wide-ranging e-Health initiatives where health and communications technology meet. In June 2008 a House of Representatives subcommittee passed a bill to encourage the adoption of health information technology. The bill would provide incentives to doctors, hospitals, insurers and the government to use electronic formats for health information. The bill would require every US citizen to have electronic health records by 2014. The bill also establishes strict privacy rules and national standards for the handling of those records. © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 29 In the USA e-commerce has grown steadily over the past five years. During that period, the average rate of growth in the value of online sales has been approximately 25% per annum. During 2007 the growth rate dropped to approximately 17%, largely reflecting a slowing economy, although the growth rate still greatly outstripped GDP. By 2008 the value of e- commerce sales in the US was estimated at around $130 billion. This value amounts to approximately 3.3 percent of total US retail sales, up from around 1.5% in 2003. The share of retail accounted for by e-commerce is expected to continue to grow steadily over the next 5 to 10 years. In the short to medium term however, growth of e-commerce in absolute terms will remain constrained by the global financial crisis and the US recession. The fastest growing e- commerce sectors by mid-2008 included, for instance, video games, consoles and accessories, furniture appliances and equipment and sport and fitness. Other sectors during that period witnessed a decline in spending, such as computer software, music, movies and videos. See 2008 North America - Telecoms, Broadband and Wireless Statistics Digital Media in Canada The convergence of voice, Internet and TV continues to bring Canadian telecommunication and broadcasting operators together as direct competitors in the emerging triple play market. However, though the cable companies had made strong inroads into VoIP telephony by early 2008, the telco deployments of IPTV were still in their infancy. Canadian TV and video markets are experiencing significant changes, characterised by convergence with digital media, broadband and telecommunications services. Cable TV operators and telcos, and to a lesser extent satellite companies, are increasingly competing for the triple play consumer. The slow but steady transition from analogue to digital TV is increasing the use of new products and services such as VoD and High Definition services. Increasing broadband penetration continues to drive the triple play market, with close to 70% of all Canadian households subscribing to broadband by late 2007. Broadband penetration is also fostering the emergence of IPTV and is driving the migration from traditional circuit-switched telephone lines to VoIP telephony, with VoIP subscriber numbers growing rapidly during 2006 and 2007. See 2008 Canada - Telecoms, Wireless and Broadband © BuddeComm & Chiltern Magazine Services Ltd. 2008
    • 30 Glossary of Terms 4G: Fourth Generation mobility, as yet largely undeployed but set to replace 3G. 4G offers fully integrated data, multimedia and voice services at high data rates. CAGR: Compound Annual Growth Rate, terminology for the mean annual rate of growth. DTTV: Digital Terrestrial Television, a basic digital service offering transmission of FTA analogue and digital channels or pay channels. DVR: Digital Video Recorder, a device which records video or television onto its own hard drive for storage and future viewing. FTA: Free To Air FttH: Fibre To The Home, a private fibre-optic based broadband service capable of rapid speeds. HDTV: High Definition Television, a digital television format with greatly increased picture quality. IPTV: Internet Protocol Television, the distribution of television broadcasts using the internet. IMS: IP Multimedia Subsystem, a format for delivering and streaming various media through the internet. LBS: Location Based Service, a mobile feature that utilises the location of the user to find local services, directions or track other users. MVNO: Mobile Network Virtual Operator, as opposed to an MNO, is an operator that does not own its own mobile network, instead renting it from a competitor while setting its own price tariff. NGN: Next Generation Network WiMAX: Worldwide Interoperability for Microwave Access, a technology allowing wireless data transfer and internet access that has been adapted for mobile use. VoD: Video on Demand © BuddeComm & Chiltern Magazine Services Ltd. 2008