1. DTT Development in Italy Egidio Viggiani General Secretary Sarajevo, 22 May 2008

2. INDEX  Digital television  DTT: Regulatory Framework and Governance  Digital Terrestrial Television  Regional Switchover  Back up: Market Overview  Outstanding points

3. Digital Television Since 2004, digital tv penetration has grown significantly thanks to the launch of dtt. Digital tv reaches today 50% of households In the absence of cable, satellite and dtt are the two major digital platform, while IPTV is still at an early stage.

4. DTT: Regulatory Framework (1/2) Due to lack of spectrum, analogue broadcasters were allowed to build dtt multiplexes by converting analogue frequencies in their use into digital and by acquiring new frequencies on the market through trading. The PSB (Rai) had an obligation to create at least 2 multiplexes and 3 free to air channels. Broadcasters with more than one analogue concession must reserve 40% of transmission capacity on their muxes to third parties, in order to allow them to broadcast in dtt.

5. DTT: Regulatory Framework (2/2) The activities of network, service and content providers are subject to separate licensing schemes and must be accounted for separately (the Network operator must also be a separate company). Dtt take-off was supported in 2004 and 2005 by means of interactive STB subsidies (150€ per 700K STBs in 2004, and 70€ per 1,5 M STBs in 2005) The deadline for the switch off is set at 31.12.2012 (postponed twice from 2006 and 2008). At the end of 2007, a new law established that analogue tv sets can no longer be sold after April 2009, and that from February 2008 analogue tv sets must be tagged to inform consumers that they cannot receive digital signals.

6. “Comitato Nazionale Italia Digitale” (August 2006) Chair: Minister for Communications Participants: DGTVi, AGCOM, Conferenza Unificata (State, Regions, Provinces and Municipalities), National & Local Broadcasters, Cable and Satellite operators, Consumers, ‘All Digital’ Regions. Expertise Group Co-Chair: AGCOM and DGTVi Participants: Minister for Communications, digital broadcasters, cable and satellite operators, Invited: Consumers, All Digital Regions, Enterprises (manufacturers, vendors). Communication Research & Data Customer Care NetworksSet Top Box Regulation Legislation & Regional S.O. Plan Contents Co-ordination among platforms Plan of ActivitiesMonthly report 9 Working Groups Digital Switch Over process: Governance

7. Digital Switch Over Process: DGTVi Institutions “Comitato Nazionale Italia Digitale” Institutions “Comitato Nazionale Italia Digitale” Industry Technical standards Industry Technical standards Distributors & Vendors Info Web Distributors & Vendors Info Web Consumers Info Web Consumers Info Web Other Platforms DGTVi is the Italian Association of Digital Terrestrial Broadcasters (www.dgtvi.it). Since the launch of DTT it has promoted the development of an open advanced DTT Platform, with MHP middleware and interoperability of different CAS systems.www.dgtvi.it

8. Digital Switch Over Process: DGTVi DGTVi has promoted the use of special logos (so called “bollino blu” and “bollino bianco”), to help consumers identifying products that will work through switchover. “Bollino blu”: certifies that a STB can receive all services offered via DTT (Fta channels, PPV offers, interactive services/MHP). Most STB manufacturers (>90% of market) have joined the initiative. “Bollino bianco”: certifies that a Tv set, can receive Fta channels and PPV offer (integrated CAM). This logo is designed for Tv manufacturers. When applying this logo a Tv manufacturer agrees to implement the MHP standard in its Tv sets by 2009.

9. Operator N. Mux Population coverage 2 2 2+1 DVBH 2 2 1 1 >70% 82%& 79% 87% & 75% 73% 1 1 55% LOCAL TV >180 N.A. DTT: Multiplex coverage

10. Mln households DTT: Growth Rates Sustained dtt growth in 2004/05 due to stb subsidies and the launch of the ppv premium soccer offer. Dtt growth is expected to continue at high rates until completion of S.O. in 2012. Dtt penetration is expected to overtake satellite (pay and free) in 2008.

11. DTT: Devices sell out TOTAL SELL OUT: 8.069.889 (Feb04-Mar08) 24,3% 75,7% Stb (6.108.817) Dtt receiver (1.961.072) Source: Panel GfK Marketing Services Italia. 95% of STB are Mhp, thus allowing for advanced interactivity. Total sell out is estimated to be over 11 mln at the end of 2008.

12. DTT: Households DTT penetration is estimated in 26,5%, if all families owning a STB are included. If however we include only households connected to the STB, the penetration rate is 24,3% (Mar 08). Source: Makno

13. DTT offer: Free to air channels Teleshopping Public Utility Channels Movie/Cinema Religion Channel Infotainment: All-news, Finance, International Children Music Channel Sport and Sport News Channels FTA-TV Channels in simulcast Brand new DTT ChannelsSimulcast

14. DTT offer: Fta channels per operator 28 channels offered on dtt, of which 9 in simulcast, 10 provided by operators already present in analogue tv, 9 provided by other operators.

15. DTT Fta channels: broadcasters’ strategies Incumbents: like in other countries, after some initial uncertainty due to the small return of investments in dtt, incumbents are now investing in multichannel as a way to compensate the inevitable loss of audience. Public Service Broadcaster (Rai): greater role to be played by the PSB in the development of new dtt channels, as well as in the transition to dtt (communication/information). New comers and smaller broadcasters are waiting to see how the platform develops. Greater certainty on the timing and regional planning of switch off and on policies and regulation in favour of dtt would help attracting investments onto the dtt platform. The absence of investment in fta dtt channels reflect the difficulty of attracting advertising resources.

16. DTT: the ppv business model PPV on DTT Smart Card at selling point 1 3 Long term Card replacement (every two (years) 4 Easy access to events (via remote control) 2 Smart Card re- charge Call Centre / Web / Voucher Innovative business model based on “à la carte” offer of single premium events. Prepaid, anonimous, free from subscription. DTT STBs are open and horizontal, thus allowing to receive all ppv offers available (3 different CAS systems). Price range: - soccer match 6€ - movie (1st release) 4€ - fiction/library 1-2€ At present there are three ppv offers on dtt: Mediaset premium, Pangea and La7 Cartapiù. Ppv offer accounts for around 10% of the pay tv market.

17. DTT value added services: interactivity and HD Interactive services: Mhp applications (80% of all devices) allow for advanced interactivity in broadcasting, with excellent graphic performance. Most popular services are play-along games, games for kids, interactive services connected to soccer offer, original audio for movies and fiction. 50% of viewers are estimated to use these services weekly. High Definition: timing and technological standards still to be defined in detail. Rai will offer Euro 2008 Football Championship in HD (in Rome, Milan and Turin). The new industrial plan foresees one HD Mux after S.O. and the launch of one HD Channel in 2009. Mediaset will offer HD content progressively as regional switch-off takes place. TIMedia will follow the same strategy, depending on frequencies availability.

18. DTT value added services: DVB-H 2 DVB-H multiplexes: 1.H3G offers tv channels (2 of which – 3 Live and 3 Sport - are produced specifically for mobile tv) and on demand contents. 2. Mediaset carries contents and services aggregated by Tim and Vodafone, in accordance with various broadcasters. While the sell out of dvb-h devices is good, there is still no official data on use and revenues from mobile services. The pay model is yet to be confirmed.

19. DTT: regional S.O. in Sardinia and Valle d’Aosta MARCH ‘07 SEPTEMBER ’08 CAGLIARI OCTOBER ’08 VALLE D’AOSTA Switch off: S.O. of analogue transmission s Switch off: S.O. of analogue transmission s Switch-Off Time plan 650.000 households involved Switch off of 2 analogue channels (Rai2 and Rete4) in the Area of Cagliari and Valle d’Aosta Digital tv penetration rate has reached 89,1% in Sardinia and 92% in the area of Cagliari (December 2007).

20. Next All Digital Areas Piedmont Region and Trento Province Nov‘08 March’09 Turin and Cuneo October ‘09 Trento Switch off: S.O. of analogue transmissions Switch off: S.O. of analogue transmissions Switch-Off Time plan 2.050.000 households involved Switch off of 2 analogue channels (Rai2 and Rete4) in the Area of Turin and Cuneo Final Switch off: Whole Piedmont Region Final Switch off: Whole Piedmont Region March ‘11

21. DTT: audience share in Sardegna Italy vs Sardinia and CagliariCagliari before and after switch over Audience data reveal that notwithstanding a good penetration rate the use of the dtt platform is still low. The situation is much better in the regional areas where switch over has taken place. In Sardinia and in the Cagliari area dtt audience share on all tv sets has reached 35% and 43,2% respectively. Before switch over in the Cagliari area dtt audience share was only 12,5%. National Penetration Rate of the DTT Platform: 4,6% (source: Auditel, March ’08)

22. DTT: frequencies planning in Sardinia Frequencies planning in Sardinia is the result of an agreement among the Ministry, AGCOM and broadcasters on the basis of the criteria set by AGCOM and in line with Geneva 2006: safeguard of universal coverage and public service, safeguard of investments and transmission of existing broadcasters, safeguard of local tv networks, access for new entrants, development of new technologies and mobile tv. 21 UHF frequencies (>80% territory) 14 to national broadcasters 7 to local broadcasters 2 VHF frequencies (>80% territory) to national broadcasters 6 frequencies (50-70% territory) to national broadcasters 10 frequencies (sub-regional coverage) to local broadcasters 2 frequencies are reserved for new entrants and 5 sub-regional frequencies for national or bilateral negotiations.

23. DTT: open issues Open issues: Fta offer still not sufficiently attractive, and ppv offer cannot be the sole driver in the transition to dtt Lack of an EPG and a clear identity Different Mux coverage Weak role of PSB in the transition to dtt Uncertainty on regional planning and timing of S.O. Lessons from regional switch over: Regional switch over and switch off is the way Setting a deadline and working in steps allow broadcasters to plan S.O. and work closely with the Institutions. Partial switch off (of 2 analogue channels) was the driver for penetration and use of dtt in Sardinia and Valle d’Aosta Successful agreement between broadcasters and the institutions over frequencies planning in Sardinia.