Portugal has one of the lowest penetrations of digital terrestrial television (DTT) in Europe, subscribed by 17,8% of families on an exclusive basis and 32,7% in combined use.

The number of DTT channels in Portugal (7 SD) is lower than in the rest of Europe. The current DTT business model is based on a concession that ends in 2023. So the country needs to take decisions now in order to prepare in time for the new business model post 2023.

Given this challenge, ANACOM, the regulator of the communications sector in Portugal, was under pressure by the national Parliament to evaluate the DTT performance and to propose models for future development, taking into account European best practices. Based on the findings of this work, the Government, the Parliament and the regulator will define new policies and strategies.

LBC was selected to conduct this evaluation, considering various dimensions: consumer satisfaction, quality of service, variety of offering, DTT social value, economic contribution, technological characteristics and challenges, regulatory issues and, looking forward, possible business models to widen the DTT service offer and DTT uptake by the population.

Causes for the DTT low penetration

DTT was introduced to viewers in Portugal in 2009, but the low quality of the transmission signal, the weak offering (few channels and no HD) and the weak brand of DTT (regarded often as low quality minimal public service) as led to low adoption.DTT was introduced to viewers in Portugal in 2009, but the low quality of the transmission signal, the weak offering (few channels and no HD) and the weak brand of DTT (regarded often as low quality minimal public service) as led to low adoption.In addition, the current business model is not conducive to a strong and attractive offering via DTT. Fiber to the home is very well developed and precedes DTT by several years, locking faithful viewers into its very strong and varied TV offering, plus integration of television, internet and voice packages at very attractive prices. The incumbent operator of DTT in Portugal operates only one MUX in free to air, has no autonomy over the contents and also manages the DTT transport and transmission infrastructure. The current incumbent has no incentive to widen the DTT service offer or channels, given the pricing model and the fact that this incumbent also owns and manages a competing FTTH offering, which it does not want to weaken. 

Methodology: industry analysis, European benchmark, and modeling

LBC conducted a very thorough industry analysis comprising of legislative and contract review, analysis of official data, consumer habits and aspirations, technological performance, nationwide inquiry and focus-group analysis into DTT users and viewer habits, and a wide range of interviews with industry and public entities, including television producers and operators, advertising agents, telecommunication companies, consumer associations, retailers, competition regulator, political parties.LBC conducted a very thorough industry analysis comprising of legislative and contract review, analysis of official data, consumer habits and aspirations, technological performance, nationwide inquiry and focus-group analysis into DTT users and viewer habits, and a wide range of interviews with industry and public entities, including television producers and operators, advertising agents, telecommunication companies, consumer associations, retailers, competition regulator, political parties.This was complemented by an exhaustive European benchmarking exercise which included countries such as Belgium, France, Italy, Germany, Netherlands, Spain, Sweden and the UK.LBC defined five potential technological models for the development of the DTT platform in Portugal and evaluated them according to five criteria: improved services and quality, savings to the viewer, savings to the State, State capacity to intervene, risk levels. All these models were defined in quality, technological, regulatory and financial terms.The above work was conducted with the participation of IR Telecom and LS Telcom of Germany. Legislative measures were proposed with the participation of the Anglo-American law firm DLA Piper.

Recommendations

According to José Pedro Melo, the LBC partner in charge of this project, “LBC provided in-depth and comprehensive information, tools and models so that public decision makers could take the best options regarding the short-term and long-term future of DTT in Portugal and the country’s audiovisual sector”.

It is clear in the study that structural changes need to be made in order to avoid DTT’s stagnation through the bundling with other services, more TV channels and combination of free to air with pay TV.

New sources of revenue need to be opened, which implies changes to the legal and contractual framework to open up access to more players.

The following measures should be evaluated by decision makers:

1. Reinforcement of the DTT platform – upgrade of the DVB-T2 platform in order to accommodate new channels and services.
2. Separation of transmission and contents in terms of the value chain.
3. Opening up of two new MUX, with potential new business models, e.g., in a pay per view or pay TV basis.
4. Synchronization and amplification of over the top offering (via internet, hybrid platform HbbTV and/or LTE via OTT video – Android or iOS) focusing on convergence and connectivity and user experience.
5. Changes to the TV legislation in order to stimulate new content providers.
6. Stimulate DTT operators with connectivity packages in wholesale (FTTH, HFC and mobile broadband) to allow for bundling of TV and connectivity offers. 5G might bring new opportunities to integrated offering.
7. Introduce new pricing rules and models to promote efficiency gains and a wider offering.
8. Conduct a strong and widespread marketing campaign in favor of DTT.

The status quo is not an option for DTT in Portugal. Bold and decisive measures are needed to promote this technology in the Portuguese territory. The example of other European countries stands to show that this is possible.

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