Croatia is currently developing the Strategy for the transition of digital terrestrial television to DVB-T2 standard and the assignment of the frequency spectrum at 700 MHz, i.e. the second digital dividend, for mobile services. The main goal of this Strategy is to make an additional part of RF spectrum (694-790 MHz) available for the mobile broadband services, but also to assure the competitiveness of the digital terrestrial television platform until 2030.
Impacts and Benefits of Transition to DVBT2 and Assignment of Second Digital Dividend Ana Katalinic Mucalo 1, Kresimir Mazor 1, Ivana Drazic Lutilsky 2 Croatian Regulatory Authority for Network Industries, Roberta Frangesa Mihanovica 9, Zagreb, Croatia University of Zagreb, Faculty of Economics and Business, Trg J. F. Kennedy 6, Zagreb, Croatia ana.katalinic@hakom.hr Abstract Croatia is currently developing the Strategy for the transition of digital terrestrial television to DVBT2 standard and the assignment of the frequency spectrum at 700 MHz, i.e. the second digital dividend, for mobile services. The main goal of this Strategy is to make an additional part of RF spectrum (694790 MHz) available for the mobile broadband services, but also to assure the competitiveness of the digital terrestrial television platform until 2030. This extensive process includes several key aspects, namely technical, economic and regulatory, which need to be carefully assessed in order to provide economically and technically sound background for the development of the market of electronic communications While technical and regulatory aspects are more straightforward and adequately covered, the socioeconomic aspect is a more complex matter as it includes also deeper impacts on the national economy and society. This paper addresses the economic impact and benefits of the transition to DVBT2 standard and the release of the second digital dividend. The costs of the transition to DVBT2 have been analyzed and presented. The spectrum pricing, methodology and conditions for the assignment of the 700 MHz band have been assessed and discussed this spectrum available for mobile services by 2020 This process affects all layers of society, namely citizens, industry and state, and needs to be planned carefully Croatia is currently drafting the Strategy for the transition of digital terrestrial television to DVBT2 standard and the assignment of the frequency spectrum at 700 MHz, (hereafter: Strategy), which should be adopted by the end of 2016 Keywords spectrum pricing; second digital dividend; DVBT2 transition; 700 MHz frequency band The Strategy includes several aspects and its implementation challenges have been discussed in [2]. Technical aspects cover all relevant issues regarding the transition of DTT to DVBT2 standard (different multiplex scenarios, coordination issues, interference analysis, equipment issues etc.) and the assignment of the second digital dividend (e.g parameters and procedure for managing interference between LTE and DVBT2 devices), while regulatory aspects, including appropriate revision of the national legislation, are rather straightforward and in service of the strategic decisions. The social and economic aspects, however, which are in focus of this paper, are more delicate matter since they directly tackle all stakeholders, including end users. They include all direct and indirect benefits and impacts to the (state) economy and society, as well as promotion and informative campaigns, which in fact should justify the whole process and answer the simple question: why we are doing this? I INTRODUCTION Allocation of 700 MHz frequency band (694790 MHz), i.e second digital dividend for IMT (International Mobile Telecommunications) is a hot topic in the field of spectrum management The background is obvious: the expansion of mobile services all over the world, increased number of users and the constant need for more capacity, have led to the growing demands of mobile industry for additional RF spectrum Thanks to its very convenient propagation characteristics, which provide better coverage and service accessibility, 700 MHz band, along with 800 MHz (790862 MHz) band, has become one of the most attractive parts of RF spectrum. The Strategy has two main goals: (1) to make 700 MHz spectrum available for mobile broadband, in line with European decisions and strategy; and (2) to preserve the competitiveness of the DTT until 2030. By allocating 700 MHz for mobile services this spectrum will be harmonized on international level, which besides all other benefits, opens additional opportunities for the development and implementation of new services and technologies. On the other hand, the question of preserving DTT has broad social and cultural effects, especially in countries where this platform is dominant for TV signal transmission, such as Croatia. All DTT services have to be accommodated adequately in a smaller part of spectrum, which is financially and organizationally challenging process. The 700 MHz band is currently used for digital terrestrial television (DTT), which needs to be migrated in order to make This date is defined by the DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the use of the 470790 MHz frequency band in the Union [1] II SOCIOECONOMIC ASPECTS As mentioned in the introduction, the migration of DTT, which is a fully built and operational network, in order to release the 700 MHz spectrum and make it available for a different kind of services, has an impact on everyone. While this can be technically and economically justified, its social impact, especially consequences for every end user, need to be addressed as well and included in the national Strategy In general, economic aspects include all market analysis, transition costs and financial framework of the Strategy, while social aspects include all activities related to the information and public awareness campaign and customers education. In both cases immediate and longterm impacts need to be analyzed Immediate socioeconomic aspects which are prerequisites for building the Strategy include: analyses of the costs of the transition from DVBT to DVBT2 standard; analysis of the spectrum prices that could be achieved for the second digital dividend; delivery of public awareness and information campaign; financial framework for the implementation of the Strategy (includes all direct costs for the above mentioned activities, necessary for the implementation of the Strategy). social effect of bypassing the digital divide between welldeveloped urban and underdeveloped rural areas; increased GDP and economic growth motivated by the availability of high speed broadband Clearly, some of the aspects listed are straightforward and can be easily quantified, while the others are just expected (positive) outcomes that cannot be guaranteed. However, they should be supported by specific activities and incentive measures included in the Strategy, as will be discussed in the following sections III COSTS OF THE DVBT2 TRANSITION AND SPECTRUM PRICING FOR THE SECOND DIGITAL DIVIDEND A Transition of DTT to DVBT2 Standard Almost 50% of households in Croatia use DTT platform exclusively. Fig. 1 shows the current state of market of digital television Deeper and longterm effects of the transition to DVBT2 and the assignment of the second digital dividend for mobile services should justify the whole process: better TV quality and new services available to more than 95% of population; competitive DTT market compared to other platforms (IPTV, cable TV etc.); better, faster and cheaper communications available to all citizens; availability of a larger number of multimedia content that directly affects the effectiveness of business and educational processes on all levels, which can reflect on the general increase in population education and economic growth; better productivity due to the access to broadband and application of new ICT services, as well as decrease of operational costs; opportunity for new economic subjects and increased number of new jobs; better life quality due to the service and content availability, especially in rural and remote areas, which has positive effects on equal regional development in the Republic of Croatia; infrastructure investments which motivate the market in the first place, but also the entire information society; Figure 1. DTT market overview with different technologies [3] Other platforms have significantly lower share (IPTV has a share of 25.88%, cable TV 10.35%, and satellite TV 11.17%), although there is a tendency of increasing those shares since more and more operators offer packages of internet and TV services Currently deployed DTT platform for freetoair (FTA) programs is based on DVBT standard and MPEG2. Part of the DTT platform is used for Pay TV, which has the market share of 4.11%. The only Pay TV operator, EVO TV, uses DVBT2 standard with MPEG4 [3]. DTT FTA programs are available to more than 96% of population (MUX A and MUX B) free of charge, which is why it is in the national interest to preserve it. However, in order to set appropriate conditions for the development and sustainability of the DTT market until 2030, it is necessary to reconcile current and future demands for the additional TV content and new services or better quality of the existing services. More thorough analysis can be found in [2]. Based on the discussions and conducted analyses related to Strategy [2, 4], the transition to the most advanced platform, i.e. DVBT2 standard with H.265/HEVC coding is the most promising scenario for the transition of DTT in Croatia. DVBT2 standard provides higher data rates and better robustness, thus enabling significant capacity improvements compared to DVBT standard and better availability, while H.265/HEVC introduces additional benefits to the capacity This combination allows better quality (HD TV) with the same bitrate (and the same costs) and it also enables further development and introduction of both technology and services in DTT. The transition to DVBT2 includes significant costs at different levels that need to be taken into account and assessed. Besides only listing and calculating the expenses, it is also important to analyze and apply all the possibilities for their reduction The most considerable part of costs lies on the network operator which needs to make technological adjustments. This includes costs of the network replanning, equipment replacement, adjustment to the HD transmission, transition period (simulcast) and cost of the information and public awareness campaign. End users will have to invest in new receivers. The mitigating factor for the network operator is the fact that the transition is targeted around year 2020, which ties in with the natural depreciation of equipment of 10 years (the equipment has been implemented during the transition in 2009 and 2010). As for end users, during the first digitalization the state provided subventions by issuing vouchers for citizens who were paying TV fee that partially covered the cost of a receiver The same principle is expected for this transition. However, this cost can be significantly reduced by adequate preparation of the market for the upcoming changes This includes timely delivery of the specification on minimal technical requirements for the equipment and appropriate promotion and information campaign as soon as possible. This would give the market approximately 3 years to adapt to the future changes by reducing the number of noncompliant receivers Conducted and planned analyses rely on lessons learned and costs from the first digitalization, i.e activities and implementation of the Strategy of transition from analogue to digital terrestrial television [5, 6]. The exact data are available online to a limited extent within the published annual and final reports2). B Spectrum Pricing of the Second Digital Dividend One of the direct benefits of the release and allocation of 700 MHz frequency band to mobile services is the expected price of the spectrum that can be achieved. Due to its scarcity, but very favorable propagation characteristics, there is a huge interest in 700 MHz band. Some countries (e.g. UK [7]) did an extensive research which clearly showed benefits, where projections of expected gain from second digital dividend exceeded the anticipated cost of the DTT transition eCroatia 20042011, available at https://uprava.gov.hr/o ministarstvu/ustrojstvo/upravazaehrvatsku/arhivaprojekata/e hrvatska20042011/916, June 2016; Transmitters and Communications Ltd., Annual reports, available at: http://www.oiv.hr/tvrtka/izvjesca/izvjescagod/izvjescagod_hr.aspx High expectations for the second digital dividend are usually compared with the results achieved for the first digital dividend, i.e 800 MHz frequency band, but this has been argued by many. An overview of the spectrum pricing for the first digital dividend (frequency band 800 MHz) in Europe has been given in [8]. However, several parameters should be taken into account before setting conditions for 700 MHz auction. For example: interest and suitable timing of mobile operators to invest in 700 MHz – both depend on the number of users and necessary capacity Bigger interest can be expected from operators which do not have 800 MHz, but this assumption cannot be taken for granted as RF spectrum is a scarce natural resource and obtaining additional RF spectrum can be a strategic decision; interest of operators for other frequency bands for mobile service (900 MHz, 1800 MHz, 2100 MHz, 2600 MHz) – although 700 MHz and 800 MHz are attractive due to their ability to provide wide coverage with less base stations, higher frequency bands are quite suitable for building up the additional capacity. Considering that the highest capacity demands are in urban areas where smaller cells are required, the interest for those bands (above 1800 MHz) could surpass the one for 700 MHz, especially having in mind that most operators have already established the adequate coverage; decision on having the auction for 700 MHz only or joint megaauction for several frequency bands – both approaches have been applied for 800 MHz across the Europe and the decision will depend on the previous two conditions Current licenses in Croatia expire in 2024. At the moment, the operators are not interested in megaauction, due to necessary investments, but it could be reconsidered depending on the conditions offered; additional requirements for coverage obligations – 700 MHz is suitable for covering “noncommercial” locations, which should be promoted by the state. However, imposing this condition affects the final price. The same applies for imposing minimum requirements for the quality of service (QoS); Apart from that, before assigning the spectrum the interest for other services (SDL, PPDR, M2M, PMSE) should also be taken into account There are also other parameters that are specific to a certain country, which should be considered. Some theoretical approaches have been systematized and described in [9] Croatia for example has a distinctive geographical diversity, including a large number of inhabited islands, which has a deep impact on the population density distribution, leading to a large number of rural and remote (noncommercial) areas It is therefore crucial to encourage investments in those areas in order to decrease the digital divide between different regions, which can be successfully achieved by LTE technology in 700 MHz frequency bands TABLE I. COMPARISON OF 700 MHZ AND 800 MHZ 60 MHz @ 700 MHz 60 MHz @ 800 Germany Total EUR/capita3 Total EUR/capita France band 1.000.445.000,00 12,37 2.798.976.324,00 44,56 MHz 3.576.475.000,00 44,23 2.639.087.005,00 42,01 At the moment, only France and Germany have assigned 700 MHz band [10, 11]. France has sold 700 MHz spectrum for the total price of 2.8 billion euros, which is near the value achieved for the 800 MHz band. Germany on the other hand assigned this spectrum in the joint megaauction for 700 MHz band, the GSM bands (900 MHz and 1800 MHz) and the L band (1452–1492 MHz). The achieved price of total 5.1 billion euros was quite a success, but the expected prices for 700 MHz have not met the expectations and the band attracted “only” 1 billion euros, i.e less than the value of the first digital dividend. A brief comparison for French and German auction for 700 MHz and 800 MHz are given in the Table I. It is hard to draw any conclusions based only on the cases of France and Germany, but there are some lessons that might be learned. For example, the joint auction in Germany showed a great interest for 1800 MHz band, which has smaller coverage than 700 MHz, but it is more convenient for high density urban area, where most users are settled. This could be explained by the fact that the existing operators had already established the coverage, which is the main advantage of lower frequency bands, and the additional spectrum is for the capacity increase only IV THE STRATEGY AND INCENTIVE MEASURES It is evident that both transition of DTT to DVBT2 standard and the assignment of 700 MHz band to mobile services will bring many benefits In order to create an environment where all advantages could be exploited, it is important for the state and all other stakeholders to take their roles in the implementation of the Strategy The incentive measures planned in order to support the implementation of the Strategy include: starting the promotion and information campaign as soon as possible. This will give all market stakeholders enough time to prepare for the transition; educate citizens about benefits of the new standard and to assure all citizens access to information and the assistance during the transition; deliver specification on minimal technical requirements as soon as possible (preferably by the end of 2016, effective as of 2017). This can be done only after all main decisions on standard and chosen coder have been agreed (DVBT2 and H.265/HEVC). The equipment in compliance with the specification will be properly marked and certified This will allow the market to adapt in time, leaving only a smaller number of households not in a compliance with the given specifications., by the end of the transition process; Population (est. 2015): Germany 80.854.408; France 62.814.233; Central Intelligence Agency: https://www.cia.gov/library/publications/the worldfactbook/fields/2119.html#gm plan and assure sufficient financial means for the implementation of the Strategy and smooth transition to DVBT2. This includes subventions for the switchover to DVBT2 standard for end users, financing promotional and information campaign, establishing a fund for managing interference between DVBT2 and LTE and all other costs; set conditions for the further development of DTT platform, including the introduction of UHD/4k content and other services in the future. revise the existing legal and regulatory framework in order to provide more flexible approach to content providers. This more liberalized model will contribute to building sustainable and competitive DTT market; set conditions for encouraging (infrastructure) investments in mobile networks in noncommercial areas; assure means for managing the interference caused by LTE This procedure has already been established in Croatia after the first digitalization and, based on the positive feedback from the users and operators, similar procedure will be anticipated after the second transition as well In order to reach aforementioned goals, an intensive and continuous collaboration between all stakeholders should be established, namely the Government and state institutions, regulatory bodies, broadcasting and mobile operators, network operators, equipment manufacturers and distributors, different associations etc V CONCLUSIONS The paper addressed some of the key socioeconomic aspects of the future Strategy for the transition of DTT to DVBT2 standard and the assignment of the frequency spectrum at 700 MHz. DTT market is fully operational, traditional and widely available, which is why all changes in that area have deep social and economic impacts. On the other hand, allocation of the second digital dividend for IMT is mostly directed to enabling additional networks for the mobile broadband The infrastructure that will enable high data rates is one of the prerequisites for the further social and economic development of the country based on digital technologies. The paper provides some steps foreseen by the Strategy that should prepare the market for the upcoming changes around 2020. The paper does not analyze potential risks in the Strategy implementation, especially regarding the decisions that need to be delivered by the government. Nonetheless, they are also one of the crucial elements of the future Strategy REFERENCES [1] Proposal for the Decision of the European Parliament and of the Council on the use of the 470790 MHz frequency band in the Union, available at: eurlex.europa.eu June 2016 [2] M Gosta, B Zovko Cihlar, “Challenges in Developing and Implementing the Strategy of DVBT to DVBT2 Transition”, ELMAR 2015, 2830 September 2015, Zadar , Croatia [3] Croatian regulatory Authority for Network Industries (HAKOM), Market overview fro 1Q 2016, available at www. hakom.hr, June 2016 [4] E. Dumic, S. Grgic, K. Sakic, “Subjective Quality Assessment of H.265 versus H.264 Video Coding for HighDefinition Video Systems”, Contel 2015, 1315 July 2015, Graz, Austria [5] Strategy on transition from analogue to digital terrestrial television, available at www.hakom.hr , June 2016 [6] D Frank, E Dumic, “Planning the migration of digital terrestrial broadcasting in Croatia to DVBT2 standard”, Medijska istraživanja, Croatian journal for Journalism and media 20(2), 2014, pp. 193211 [7] Decision to make the 700 MHz band available for mobile data – statement, costbenefit analyses and consultations for OfCom, UK, November 2014 [8] K. Mazor, I. Drazic Lutilsky, “Spectrum Pricing Overview for Digital Dividend in Europe”, ELMAR 2015, 2830 September 2015, zadar, Croatia [9] I. Drazic Lutilsky, K. Mazor, “Theoretical Approaches for Spectrum Pricing”, ELMAR 2015, 2830 September 2015, Zadar, Croatia [10] T Youell, “German multiband auction raises €5.1 billion”, Policy Tracker – The spectrum management newsletter, June 2015 [11] T Youell, “France assigns 700 MHz band for €2.8 billion”, Policy Tracker – The spectrum management newsletter, November 2015 ... online to a limited extent within the published annual and final reports2). B Spectrum Pricing of the Second Digital Dividend One of the direct benefits of the release and allocation of 700 MHz frequency band to mobile services is the expected ... Deeper and longterm effects of the transition to DVBT2 and the assignment of the second digital dividend for mobile services should justify the whole process: better TV quality and new services available to more ... capacity increase only IV THE STRATEGY AND INCENTIVE MEASURES It is evident that both transition of DTT to DVBT2 standard and the assignment of 700 MHz band to mobile services