1. A Presentation by Bob Peters Global Media Analysis at the Network Insight Institute Seminar Digital free to air TV: getting serious 12 August 2003 Sydney, NSW Digital Free to Air TV …Filling in Some Blanks and Summing Up

2. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 2 Digital TV Is An Enabling Technology Digital TV is an enabling technology which relates to the way in which programmes are processed and transmitted It allows for more efficient use of radio spectrum It also facilitates a number of new uses such as:  More channel choice (multicasting)  Improved reception & transmission quality (in both standard & high definition mode)  Additional enhanced services (interactivity, epgs, pvrs, t-commerce, t-emails)

3. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 3 Market Circumstances Will Determine Initial Emphasis & Usage The most appropriate initial usage will largely be determined by individual market circumstances In an already mature multichannel-service market such as the United States, where subscription television penetration is already high at about 90%, multicasting is unlikely to be a priority given that the typical American home already receives 82 television channels. Therefore HDTV has been the main initial digital offering by free-to-air and subscription service providers in that market In contrast, in a less mature multichannel-service market such as the United Kingdom, where multichannel penetration is still at only 50%, multicasting is seen as a key digital feature by both free-to-air (Freeview) and subscription (Sky, ntl & Telewest) television service providers

4. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 4 Digital TV Prospects in Australia With a multichannel penetration rate of less than 25%, Australia as a multichannel-service market more closely resembles the United Kingdom rather than the United States Therefore, what are the prospects for an Australian version of …

5. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 5 What is Freeview? Freeview is a free digital service which commenced in November 2002 which offers up to 30 free digital television channels and more than 20 free digital radio channels It is delivered via terrestrial transmitters to rooftop aerials The only cost to the consumer is the one-off purchase of a digital set-top box which initially cost about £99 ($250) [with newer basic models now priced as low as £50 ($125)] and perhaps a new aerial. There are no ongoing subscription costs As at the end of March 2003, 1.6 million households (representing 6.5% of the total) were receiving the Freeview service according to the Independent Television Commission Freeview set-top boxes are selling at the rate of about 100,000 per month and total numbers in use are forecast to exceed 2 million by the end of 2003 The shareholders in Freeview are the BBC, BSkyB and Crown Castle International For further information go to: www.freeview.co.uk

6. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 6 There is a sizeable proportion of television viewers who, although they would like the choice of some additional channels, are not interested in paying substantial monthly fees for the three types of programming which are the main drivers of subscription television takeup, those being: sport movies childrens Also, there is a limit to the amount of choice which the typical television viewer requires. Where a viewer has access to between 20 and 30 channels, he or she typically watches only 7 of the channels which are available. Where 120 or more channels are available, the typical viewer regularly watches less than 18 channels. Arguments in Favour of an Australian Version of Freeview

7. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 7 At Sky TV in the United Kingdom during FY 2002, sport and movie programming costs accounted for: 40% of total operating costs 71% of total programming costs The Main Drivers of Subscription TV Take-up are Costly

8. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 8 Freeview both now and in the forseeable future is unlikely to be commercially viable as a standalone operation Freeview’s predecessor, ITV Digital (originally known as ONdigital) which was a joint venture between the two major commercial ITV companies Carlton plc and Granada plc, lost more than £1.2 billion ($3.0 billion) in less than five years of operation commencing in 1998 and closing down in early 2002 The key difference between Freeview and ITV Digital is that unlike the latter, the former has two major shareholders in the BBC and BSkyB who are both well resourced and willing to heavily subsidise Freeview’s substantial operating losses on an ongoing basis in order to ensure that DTTV establishes itself as a viable delivery platform in the UK In Australia there are no equivalent players to match the capacity and commitment of the BBC and BSKYB to support DTTV Arguments Against an Australian Version of Freeview

9. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 9 Digital Free to Air TV in Australia It there currently any business model which is commercially viable for the comparatively small Australian market ?

10. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 10 Other Issues

11. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 11 Some Recommended Reading Television and Beyond: the next ten years Published by the Independent Television Commission September 2002 Available in pdf format from: www.itc.org.ukwww.itc.org.uk

12. Digital Free to Air TV – Filling in Some Blanks and Summing Up Page 12 The End (…or really just the beginning) For further information contact: BobPeters@GlobalMediaAnalysis.com