DTT Commercial Multiplexes (was OneVision, Boxer etc...)

scath wrote: »

God that's all we need, more uncertainty.

Digital picture is anything but clear
Sunday, September 20, 2009 - By Samantha McCaughren Business Correspondent

As aerials around the country cease to function in the coming months, more and more television viewers will take an interest in digital terrestrial television (DTT).The switch off of old analogue TV signals is already happening in Britain, but the road to DTT in Ireland has proved to be a rocky one.

The EU has decided that the analogue service must be switched off across Europe by 2012, and RTE has been ordered to build the new network for the digital free-to-air signal at a cost of over €100 million.

Its success depends on commercial stations being shown on the service, so viewers will sign up for the set top boxes.

Timing is crucial in the popularity of DTT. It will compete with Sky Digital and UPC for subscribers, which are both picking up thousands of new customers while DTT stalls. Sources involved in the DTT project say that the commercial side of the business is becoming less and less viable as each month passes.

The slump in the Irish economy also reduces the commercial attractiveness of the project, as consumers will have less money to spend on premium packages - which is where the real money is for investors.

One of the main stumbling blocks that DTT has faced was the decision of the initial commercial operator chosen by the Broadcasting Commission of Ireland (BCI) to pull out. Last May, the Denis O’Brien-backed consortium, Boxer, walked away from talks to run the multiplexes, or TV packages, which would broadcast on the network.

Talks are now ongoing with OneVision, a consortium made up of Eircom and other firms. Boxer cited the changed economic environment as one of its main reasons for pulling out, an issue also facing OneVision.

RTE, meanwhile, has slowed down its investment on the building of the network. The government has ordered RTENL, the transmission business of the state broadcaster, to build the network, but RTE decided during the summer to cap immediate investment at €40million on the project until June 2010. It does not want to build the DTT transmission network at significant cost if there is no commercial backer to run the multiplexes.

Some €25 million had already been spent by RTE up to February 2009, leaving just €15 million available between February and June 2010. RTE had initially been expected to spend €40 million in this period.

It was originally estimated that the DTT network would cost €120 million for RTE to build, but this has since been revised down to €111 million - and may drop even further. RTE insiders are confident that a bank will fund the project, despite a tightening in bank lending.

The broadcaster has one multiplex on which it will air its stations, as well asTV3 andTG4.This will be a key component of DTT; however, commercial multiplexes will air the likes of Sky, Living TV and the premium movie and sports stations, which will draw in subscribers.

RTE needs to be sure that a commercial operator will do a deal with it and the BCI, as transmission fees from this operator are the only way the broadcaster can recoup its investment in the network.

Communications minister Eamon Ryan is bullish about the prospects of a launch next year, and his department is adamant that plans are on track. A spokeswoman said legislation was provided for RTE to develop a national DTT network and have it completely operational by the end of 2011. ‘‘The BCI process is still ongoing, and the department is hopeful of a successful conclusion to this process in the near future so that the work of launching DTT services can commence,” she said.

However, some involved in current negotiations are less optimistic, and believe that financial support from the government is needed.

‘‘The government just expects everyone to work it out. When there is major national infrastructure involved, the government has to drive it completely,” said one source close to the DTT project.

For example, a major marketing campaign has been run in Britain to inform the public of the changeover from the old analogue or television aerial system. One informed source said a comparable Irish campaign would cost €20 million. However, there are no plans by the government to invest significant funds at this point.

The OneVision consortium is being driven by Eircom and British broadcast network company Arqiva.

Setanta and TV3 are also investors, although their role has recently been diminished.

Industry sources said that Eircom needed the DTT offering in order to compete with UPC, which is offering customers a ‘triple play’ - broadband, digital television and home phone line in a single package.

Eircom is losing broadband and phone line customers to UPC, hence, getting into digital television would put them on an equal footing. The OneVision group is understood to be spending between €20 million and €30 million on DTT.

But many stumbling blocks remain. The group may well sign up with the BCI and RTE for DTT, but it is not a certainty. Speaking to The Sunday Business Post, BCI chief executive Michael O’Keeffe said: ‘‘I am satisfied with the way the discussions are progressing with the OneVision Consortium but I would say the next month will be critical.

‘‘It is complex, and I think the more challenging economic environment hasn’t helped. But the engagement with OneVision has been positive.” A source close to OneVision said that ‘‘a lot of very difficult issues have to be agreed’’.

Another source involved in the DTT project said that a launch of DTT next year was close to impossible.

‘‘It’s one thing for people to wish for things to happen, but people have to actually do things for DTT to happen. I think we are miles and years away from DTT, unless the government gets its skates on.”

It is unlikely that the government will introduce any new financial initiatives for DTT, spending cuts are what is driving current planning, rather than new spending. OneVision is reviewing its original business plan in light of the drastic change in the economic environment, and the consortium will have to get approval from the BCI on these changes. The BCI has given the group a draft contract and negotiations are ongoing.

Separate to these discussions have been talks with RTENL. RTE sought a €20 million bond or guarantee from the original consortium, and is seeking a similar one from OneVision. This proved to be a sticking point for Boxer, and is also of concern to OneVision.While the group plans to spend around €25 million on DTT, it has not budgeted for the €20 million bond.

Another major issue is the tariff system RTE has established for DTT. RTE will make back its investment in DTT through fees for running the commercial multiplex, and RTENL will also charge RTE transmission fees for the public service multiplex.

RTE plans to charge €3.5 million per multiplex, which would equate to annual One Vision payments of over €10million.The group sees this as too expensive; however, RTE insiders said that this pricing plan was necessary to fund the project.

There are also concerns about the pre-analogue switch off, which will take place across Europe in 2012.The government wants DTT to be available for several months ahead of the switch-off, but there would be little incentive for customers to switchover. During this period, One Vision would pay almost full DTT transmission fees to RTE, but would have only small customer numbers.

The DTT project is also facing pressure from UPC and Sky from a pricing point of view. One of the main attractions of DTT is the low price, but rival platforms are getting cheaper. As the aerials start to come down, RTE and the government will hope that all these problems can be ironed out.

TV3 and Setanta reduce stakes in DTT group OneVision
Sunday, September 20, 2009 - By Samantha McCaughren Business Correspondent

Television stationsTV3 and Setanta have reduced their stakes in the Digital Terrestrial Television (DTT) commercial consortium OneVision.

The group, which is in talks to run the commercial side of the new state-owned platform, is now being driven by Eircom and British transmission company Arqiva.

OneVision is understood to be planning to invest between €20 million and €30 million in the project.

The group began negotiations with RTE and the Broadcasting Commission of Ireland (BCI) in May after the original consortium, Boxer, pulled out.

Eircom, Arqiva, TV3 and Setanta were to be equal partners in OneVision. However, it is understood that Eircom and Arqiva will each hold 40 per cent of the company while TV3 and Setanta will each hold 10 per cent. This is subject to approval from the BCI.

RTE has been mandated to build the new network for the digital free-to-air signal at a cost of more than €100 million. The old analogue free-to-air service received by aerial has to be switched off by 2012 by order of the EU. DTT’s popularity among Irish consumers depends on commercial packages being available, as well as the public service stations such as RTEO ne and RTE Two.

OneVision is in talks with the BCI about its contract for the commercial service and with RTE regarding transmission on the new network. The changed financial environment has meant that the business proposition behind the DTT project is weakened.

However, industry sources believe that DTT still provides a very attractive commercial opportunity for the likes of Eircom, as it would allow them to offer ‘triple play’ packages comprising broadband, phone and digital television.

Minister for Communications Eamon Ryan is confident that the project will proceed, and a launch is expected to take place in a year’s time.

This stage of the talks has been described as ‘‘critical’’ by sources close to the process. Other insiders said there were still obstacles to an agreement.

The sticking points include the €10 million transmission fees being charged by RTE and the amount of a security guarantee RTE wants from the commercial operator. RTE wants to ensure that a commercial player is fully committed to the DTT project before continuing with the investment.

It will have spent €40 million on DTT by June next year.