Digital terrestrial TV tender: So what’s up, really?

  • Some doubt Puncak Semangat’s Digital TV win is a lucrative deal
  • Sceptical telco players think it is a play for the 700MHz spectrum
Digital terrestrial TV tender: So what’s up, really?

SOME of the headlines announcing Puncak Semangat Sdn Bhd winning the tender to build and operate the infrastructure for Malaysia’s Digital Terrestrial Television Broadcast (DTTB) service have gushed about how lucrative and coveted the deal is.
 
Part of this could be due to the fact that anything tycoon Syed Mokhtar al-Bukhary touches seems to turn to gold. Puncak Semangat is just the latest in his stable of companies to win a government tender.
 
Yet the fact is that Puncak Semangat will have to invest its own money to build the network that it has no experience in. Industry players estimate it will have to invest between RM800 million and RM1 billion to build the network, with the likelihood that it will hire foreign experts from Europe to help it where digital TV rollouts are quite mature.
 
[RM1 = US$0.30]
 
It will also have to appoint a CEO to head this project; indications are that it has not done so yet.
 
At the same time, it has committed to making available set-top boxes that will convert users’ TV sets into digital TV sets. Since Malaysia did not commit to a firm deadline to switch from analogue to digital, there has been no real rollout of digital-ready TV or iDTV sets in the country.
 
It will be a public relation disaster for the Malaysian Government if citizens, especially those from the lower-income brackets, do not have new iDTV sets or set-top boxes when the time comes to switch off the current analogue terrestrial TV services.
 
[More so when the lower-income group and even the middle-class are already feeling the pain of the Government rolling back subsidies, and with toll and utilities set to rise. – ED]
 
This switchover from analogue to digital is called ASO or Analogue Switch Over in industry lingo, which is when analogue broadcast signals stop being transmitted and non-digital TV sets will have no reception.
 
In preparation for this, Puncak Semangat will make available two million set-top boxes. Current indications are that each box will cost around RM100 to RM150.
 
The boxes will not be subsidised by the Government, with industry regulator the Malaysian Communication and Multimedia Commission (MCMC) telling Digital News Asia (DNA) that is will not use the Universal Service Provision (USP) Fund to subsidise the set-top boxes.
 
Meanwhile, one of the companies that made a bid for the DTTB tender tells DNA that it projected a ROI (return on investment) in the single digits over the duration of the 15-year contract.
 
“In 2003 when the plan was first presented to the Malaysian Cabinet, perhaps it was potentially lucrative, but in 2013, I think the business model for DTTB does not stack up,” says a broadcast industry player who was involved in preparing a submission for the DTTB tender. The executive declined to be quoted as he is not authorised to speak to the media.
 
One of the key reasons is the delay in pushing out DTTB in Malaysia. The MCMC presented the first briefing paper to the Malaysian Cabinet in 2003, with the rollout planned for 2010, but the rollout kept getting deferred, especially due to lack of enthusiasm from broadcasters.
 
While this was happening, Astro Malaysia Holdings Bhd was going about connecting more and more households to its satellite TV service. As a result, today almost 54% of Malaysian homes are connected to Astro.
 
Furthermore, a report issued by RHB Research Institute in June 2013 projected Astro would penetrate 80% of Malaysian households by its 2018 fiscal year, with 20% coming from its free service NJOI.
 
Furthermore, since 2010, Telekom Malaysia Bhd (TM), through its HyppTV service, has been rolling out IPTV (Internet Protocol Television) to over 500,000 Malaysian homes, bundled in as part of its UniFi broadband service.
 
Tenants required
 
Why should this impact Puncak Semangat? Because it limits the broadcasters that would want to rent the DTTB network that it will build.
 
As the media statement from MCMC stated, the initial migration to digital will see TV1, TV2, TV3, ntv7, 8TV, TV9, TV Alhijrah and Bernama TV migrating.
 
Beyond this, it is difficult to see who else is going to come onto the scene to take up the channels available from Puncak Semangat.
 
The reality is that that the Malaysian market is relatively small, even when radio stations are thrown in the mix as being potential users for its digital infrastructure.
 
As it is, Media Prima Bhd produced 5,500 hours of content in 2013. “How much more can they produce to take up more channels from Puncak Semangat?” asks the broadcast industry player.
 
Changing consumer behaviour is yet another headwind. “The reality is that many consumers are today consuming traditional TV content ‘off TV’,” says a veteran content player. All the broadcasters are well aware of this trend and are moving into offering multi-platform content.
 
“The question is, how does this impact Puncak Semangat a few years down the road when its network is ready?” poses the veteran content player, who nonetheless hails the move of appointing a single operator for the digital TV infrastructure.
 
“This further democratises the TV space in Malaysia as anyone can become a TV operator if you have the rights to any channel that you can show in Malaysia,” he says, admitting to working on this himself.
 
Next page: Breathing space for Puncak Semangat

 
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