Broadcasting in the digital age

Alison Gillwald

Research ICT Africa and University of Cape Town

National Association of Broadcasters, Johannesburg’

22 August 2014

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OutlineFrom industrial silos to ICT ecosystemGlobal trends

South Africa?Mobile access and useInternet access and useComputer access and use

Arising policy issues

Deregulation enable entry of new competitors in the production and distribution, digitisation create opportunities for innovation television services and and disruptive business models.

End of linear model- Industrial

3

Broadcasting Telecom Postal

100100100

More than infrastructure...Broadband ecosystem

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Source: Kim, Kelly, Raja (2010)

Offering of services across traditionally distinct broadcasting and telecommunications platforms as a result of digitalisation and liberalisation of markets

Convergence

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Internet as a global distribution network, stimulated by convergence between media, telecommunications and IT, facilitated the provision of TV programming over converged IP networks, across multiple devices - ‘TV anywhere’. Digital context of television production, distribution and consumption has evolved into a complex ecoystem.

ICT ecosystem

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Theory of disruptive competition and innovation pioneered by Clayton Christensen explains how and when a business model is likely to succeed through innovation and disruption of the market.

Disruptive competition

‣ http://www.claytonchristensen.com/key-concepts/

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http://www.claytonchristensen.com/key-concepts/

Up to a two line subtitle, generally used to describe the takeaway for the slide

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Price of cable, satellite or IPTV services on the one hand, the innovative service and content available on the internet on the other coupled with the increasing quality of service of broadband delivery and easier access to Internet content on TV contribute to the switch to over the top services.

Global trends

‣ Linear television model based on privileged access to TV set providing competitive advantage

‣ ‘Cutting the cord’ or ‘cord shaving’ or ‘cord shifting ‘no cord’

‣ traditional broadcasting ‘push’ model to individualised ‘pull’ model

‣ changes to the structure of the industry , in advertising and business models and to policy.

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To what degree are TV channels able to leverage their linear programming to play their aggregator role in an on-demand market?

Responding to disruptive competition

‣ Accelerate internal processes, major investments and a willingness to give up some control

‣ invest in IT and review trade off between linear and on-demand distribution

‣ partner and merge • (NBC Universal and Comcast) - ‘vertical integration from camera

lens to eyeball’ - Eli Noam• Mitigate chord cutting with channel cutting• Content providers disintermediate themselves by going to viewers

directly10

Value chain for video distribution characterised by ongoing struggle between various business players to influence and control access that consumer have to content and applications.Net neutrality refers to the actions by operators that limit open access that end users have to the Internet.Limitations in the access that end users have to disruptive applications, VOIP

OTT video and net neutrality

11electronics manufacturers are relevant in this context. Apple TV and Google TV thus come tofunction as new platforms (and potentially also gatekeepers) for online streaming videocontent. Their selection of video content as well as their navigation menus, presentation andranking of video content will affect which content users will find most easily. In this domainthey compete with network providers, especially with those offering sophisticated EPGs andother navigation tools, either as separate services or included in proprietary set-top boxes.

2.2 Control points in the value chain

There are a number of important assets or control points in the video value chain. A properunderstanding of these control points is crucial to come to a useful value-chain basedanalysis of net neutrality. Other authors have also pointed at the importance of taking intoaccount the full value network or full internet ecosystem in assessing the need or desirabilityof regulation, instead of concentrating on the activities performed in isolated markets. Ballonand Van Heesvelde (2011) investigate the role of platforms and associated control points inICTs in general, while Ballon and Walravens (2008) study their role in mobile services inparticular. They point at the specificity of ICT markets, which are often characterized by thecreation of multi-sided platforms with different types of business models, involving differentdegrees of control over assets and consumers. Herzhoff et al. (2010) present asystems-theoretical analysis of mobile VoIP, starting from so-called tussles that emergearound control points. Eaton et al. (2010) develop models for analyzing business modelsbuilt around control points in the value network for mobile internet and telephony.

In this paper we distinguish the following crucial assets in the value chain for internet video:

B A first asset is the possession of content or content rights, which is ultimately whatconsumers watch and pay for, either in money or in exchange for ‘‘eyeballs’’, i.e. attentionto commercials.

B A second important asset is the possession of a direct relationship with customers,enabling payment and billing transactions and, especially in combination with informationon consumer profiles, sophisticated marketing and consumer loyalty campaigns.

B Third, the ability to guide people’s attention and thereby their preferences andconsumption patterns through search engines, electronic program guides, openingscreens, and other navigation tools is also becoming an increasingly important asset inthe online world.

Last but not least, access to networks and bandwidth of course remains crucial.Thedistribution of these assets over the different players determines their position andnegotiation power. All of these assets might come into play when content providers and(vertically integrated) network and service providers negotiate agreements on transport anddelivery of video content.

Figure 1 Value chain for video with a two-lane distribution model for complementing (andpartly competing) OTT and managed video services

PAGE 48 j infoj VOL. 14 NO. 6 2012

Source: Nooren et al. Net neutrality and the value chain

Distribution of these assets over different players determines their position and negotiation power and come into play when content providers and vertically integrated networks negotiate agreements on transport of video content.

Value chain asset for Internet video

‣ Possession of content or content rights that consumers watch and pay for (either in money or exchange for eyeballs

‣ possession of direct relationship with customers, enabling payment and billing transactions, especially in combination with information on consumer profiles, sophisticated marketing and consumer loyalty campaigns

‣ Ability to guide people attention and preferences and consumption patterns through search engines, EPG, opening screen and navigation tools

‣ Access to networks and bandwidth 12

Policy measures aimed at the public internet lane transfer issues to other parts of the value chain where struggle by players in video distribution value chain are trying to influence and control access that consumers have to content and applications.

Net neutrality

‣ Transparency as first, non-intrusive measure • provide end users with meaning insight into traffic

management measures to make informed choices• focus at the public internet lane in the distribution par tof

the value chain• response constrained by bundled (triple play) strategies

‣ No blocking/throttling as next step • Reasonable network management

‣ No retail tariffing by ISPs of OTT as business

‣13

Do these measures promote neutrality and openness of the public internet lane as intended or do they make the public internet lane less attractive for network operators as they introduce a number of obligations and restrictions in the network management and business models?

New net neutrality issues

‣ Interconnection and peering • conflict driven by strongly asymmetric traffic profiles associated with

large scale distribution of streaming video• Operators widen the managed services lane and focus their

resources there

‣ Steering eyeballs: EPG, app stores, devices, cloud services

• Search and navigation increasingly linked to devices and apps than to tradition search engine on the open used in battle for eyeballs and advertisers.

‣ CONTENT RIGHTS, PEERING, RESOURCE ALLOCATION, SEARCH

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Census vs RIA ICT Survey dataICT access in South Africa

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CensusCensus RIARIA

Household with fixed line

Household with computer

Household with ratio

Household with TV

Household with internet

Cellphone ownership (household)

2006 2011 2007 2012

18,5% 14,5% 18,2% 18%

15,6% 21,4% 14,8% 24,5%

76,5% 67,5% 77,7% 62,3%

65,5% 74,5% 71,1% 78,2%

35,2% 4.8% (household)15% (individual)

19.7% (household)

33.7% (individual)

72,7% 88,9% 62,1% 84,2%

Source: 2012 RIA ICT Survey; StatsSA 2011

Radio still main source of informationTV luxury good in several countries

Kenya

Uganda

Rwanda

Namibia

Ghana

Nigeria

Botswana

Tanzania

South Africa

Ethiopia

Cameroon 34%

41%

62%

63%

66%

70%

72%

72%

72%

77%

81%

Households with Radio

South Africa

Botswana

Kenya

Ghana

Nigeria

Cameroon

Namibia

Tanzania

Uganda

Ethiopia

Rwanda 9%

10%

13%

18%

41%

44%

53%

54%

54%

59%

78%

Households with TV

ga

Share of households with a working computer

South AfricaBotswana

NamibiaKenya

CameroonGhanaNigeria

UgandaRwandaTanzaniaEthiopia 0,7%

1,6%

2,0%

2,2%

6,6%

8,5%

8,6%

12,7%

14,7%

15,7%

24,5%

Share of households with a working Internet connection

South AfricaKenya

NamibiaBotswana

NigeriaGhana

CameroonUganda

TanzaniaRwandaEthiopia 0,5%

0,7%

0,8%

0,9%

1,3%

2,7%

3,4%

8,6%

11,5%

12,7%

19,7%

Less than a quarter of households have a computer and even fewer Internet access

ga

Share of households with fixed-lines

South Africa

Namibia

Botswana

Ethiopia

Ghana

Kenya

Cameroon

Tanzania

Uganda

Rwanda

Nigeria 0,3%

0,2%

1,5%

0,4%

2,2%

0,6%

1,8%

4,0%

15,0%

11,5%

18,0%

0,1%

0,3%

0,9%

1,8%

2,3%

2,6%

7,6%

11,0%

17,4%

18,2%

2007/8 2011/12

Fixed-lines on the way out except Botswana,

Cameroon, Uganda and Rwanda

ga

Income disaggregation - BoP vs RoP in South Africa

Internet use and social networking

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Internet acces and use BoP RoP Difference

15+ using the internet

Used the internet first on a computer

Used the internet first on a mobile

Are you signed up for any social network?

18,4% 40,3% 21,9%

52,5% 70% 17,5%

47,5% 30% -17,5%

52% 78% 26%

Source: 2012 RIA ICT Survey

Urban VS RuralInternet access and use

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Internet acces and use National Urban Rural

15+ using the internet

Used the internet first on a computer

Used the internet first on a mobile

Are you signed up for any social network?

33,7% 41,3% 21,4%

65% 64,2% 67,2%

35% 35,8% 32,8%

74,9% 78,9% 60,8%

Source: 2012 RIA ICT Survey

Gender disaggregationInternet use

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Internet acces and useInternet acces and use National Male Female

15+ using the internet (2012)15+ using the internet (2012)

Why individuals do not use the internet

Don’t know how to use it

Why individuals do not use the internet

no computer/internet connection

Why individuals do not use the internet

Don’t know what the internet isWhy individuals do

not use the internet Too expensive

Why individuals do not use the internet

no interest/not useful

Why individuals do not use the internet

too slow, limited bandwidth

33,7% 40,6% 28,6%

69,1% 67,6% 70,6%

66% 66,6% 65,5%

64,4% 60,5% 68,2%

55% 53,8% 56,1%

38,3% 38% 38,5%

13,4% 15,9% 11,2%

Source: 2012 RIA ICT Survey

Ranking and cost of cheapest prepaid mobile product available in SA and Africa for OECD 40 calls/60 SMS basket

Mobile prepaid voice prices

22

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5,28 5,2 4,853,47 3,36 2,79 2,41 2,46 2,27 2,27 1,39 1,37 1,37 1,37 1,37 1,2 1,1

Cheapest in Africa in USD SA basket price in USD SA Rank

OECD baskets by operators

23

1GB basket in USD

24

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Download/Upload speed kbps

25

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Airtel Uganda Orange Botswana Vodacom Tanzania

MTN Rwanda Airrtel Rwanda

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Vodacom Mozambique MTN Uganda

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MTC Vodacom South Africa

Telecom Namibia Mobile Safaricom

Average Combined kbps Average Download kbps Average Upload kbps

Combined average speed in kbps/1GB price in USDQ1 2014 - Value for money index

26

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Can traditional public service broadcasting value be preserved in this environment? What are the unintended consequences of retaining ‘positive’ content regulation? Can ‘negative’content regulation (child pornography) be enforced?

Emerging public interest issues

‣ Net neutrality in broadcasting and video streaming?

‣ Prevent the ghettoising of public broadcasting?

‣ Public service broadcasting or public broadcasting service?

‣ Public broadcasting service funding or public service content funding?

27

Up to a two line subtitle, generally used to describe the takeaway for the slide

Policy bottlenecks‣ Institutional arrangements (interplay between

state, regulator, market)• New executive arrangements impact on sector• Legal challenges• Enabling environment for growth and development of

sector, economy, job creation• Impact on investment

‣ Digital migration - digital dividend• Set top box standards and subsidisation• Spectrum re-farming and assignment• Dynamic assignment technologies - white space• No DTT - the satellite and broadband solution? 28