= Tech costs slow Brazil's digital migration

Candice Jones
By Candice Jones, ITWeb online telecoms editor
Johannesburg, 15 Jun 2010

Only 2% of Brazilian homes now have access to a free-to-air digital channel, and the slow rate of penetration can be directly linked to the costly technology standard the country is using in its digital TV migration process.

This according to an independent study commissioned by the National Association of Broadcasters in SA, and conducted by Farncombe Consulting Group.

The release of the study follows controversial debates between local broadcasters and the Department of Communications (DOC), on the processes and technologies that should be used for SA's digital migration process.

The DOC recently instigated a review of SA's decision to implement the European DVB standard, introducing a Brazilian adaptation of the Japanese ISDB standard as a possible alternative. The decision to begin the review so late in the migration process has left the broadcasters frustrated and angry, since many are chomping at the bit to get digital TV rolling in SA.

ITWeb recently revealed that the department may well be pushing hard to get the Brazilian standard adopted in the Southern African Development Community (SADC) region, and has claimed that local trials on the European standard have been fraught with difficulties.

The DOC has repeatedly said it has made no decision to change the standard; however, it has also maintained it must make a decision that is economically good for SA.

“The minister stated unequivocally when he presented to the Portfolio Committee on Communications last month that we are simply conducting a review of what's the best possible deal for SA now, given that technology has evolved since the adoption by cabinet of the DVB-T standard.”

Big screen TV

The DOC's reasons to review the standard to be used by SA at this late stage in the process has left many in industry unconvinced and, given the results of the study, stakeholders will be less happy about the possibility of going the Brazilian route.

The Farncombe study shows that, despite an early start to digital migration, in 2007, the digital migration process in Brazil has not only been slow, but its timelines have been set back by several years.

The penetration of 2% access is also generous, since - according to the study - more Brazilian households have bought into large-screen TVs with integrated decoders, rather than buying separate decoders.

Integrated digital TV sets are more widely available than set-top-boxes, driven by the country's governmental mandate to produce all TVs from 32-inches upwards with built-in digital receivers. However, Farncombe's study suggests that those TVs are purchased primarily by higher income earners, who are more likely to have bought them for pay-TV services and not digital migration.

“It is likely that a significant share of households with a fixed DTT device are also pay-TV subscribers and, therefore, do not watch terrestrial television on their main TV set,” the report reads.

The report does say that these TVs have come down in price significantly over the last few years in the country. However, with many South Africans living below the breadline, a 32-inch plasma TV remains a distant dream, and they will need subsidised decoders to access digital TV.

No buyers in sight

Manufacturers of decoders have had a tough time selling their wares in Brazil and many of them have either scaled down production, or stopped the development of the devices entirely.

The study interviewed three of the primary developers of the technology: Positivo, Proview and Comsat. Positivo suspended production in 2008, the year when most households should have been clamouring for decoders, saying it could only sell 25 000 of the 40 000 devices it made.

International TV technology powerhouse Proview limited production to 25 000 boxes per month and Comsat left the market in 2009, after it only managed to sell 2 000 devices. Retailers are also not stocking individual decoders.

There are four models of decoders available in Brazil, and only one can be bought for under $200 (about R1 500 at the current exchange rate). Local manufacturers are expected to keep the cost of decoders under R700 in SA.

Troubling times

Brazil has five times the number of TV viewing households that SA has, and the struggle for local manufacturers will be that there is no market outside of SA to sell the boxes.

Some of the SADC countries have already started the migrating process on the European standard, meaning that those countries will not be interested in our locally produced decoders. Mauritius is already 80% of the way through its digital migration, and Namibia and Tanzania have already started.

In other parts of Africa, Kenya, Uganda, Rwanda, Burundi, Ghana and Nigeria have all started migrating to the European standard. This leaves only the South American countries and Japan as potential markets, if the ISDB standard is adopted.

What now?

Local broadcasters will want a resolution from the DOC on which digital standard should be implemented as soon as possible, since many are ready and willing to start the digital migration process.

MNet and etv presented to media last week a successful trial digital TV service on the DVB standard, and have lambasted the delay caused by the standards review. Both broadcasters say that if the department decides tomorrow to continue using the existing standard, the broadcasters will be ready to release a commercial digital TV product in nine months.

However, they agree the expected deadline for SA's analogue switch-off in November next year is now completely impossible, since decoder manufacturing and roll-out will not happen in a year.

There is also a real possibility that SA will not make the international deadline of 2015 if any more delays are pushed into the mix.