Market Insight

DTT goes live in Israel

August 04, 2009

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Israel has launched Digital Terrestrial Television (DTT) services with a single multiplex dedicated to free-to-air channels. At launch, multiplex carries five channels— two channels from the public broadcaster IBA (IBA Channel 1, IBA Channel 33), the two commercial channels (Channel 2, Channel 10) and the Knesset Channel. According to regulator The Second Authority for Television and Radio, capacity for digital radio stations and one additional digital TV channel exists on the multiplex, although it is unclear which TV channel will be awarded the space. Digital radio is currently not under the Second Authority's remit, and sources at the Authority indicated that the Israeli parliament (the Knesset) is currently debating reforms within the sector, including further expansion of the DTT channel line-up post analogue switch off in 2010 and provision of regulatory authority of digital radio to the Second Authority. Timing of any reform is unknown.

While set top boxes are priced independently by manufacturers, sources at the regulator indicated that the first batch of boxes were being sold for NIS400 ($111). Set-tops and Integrated digital television (iDTV) specifications, however, have been set by the regulator-with all hardware to be MPEG4 and HDTV compatible, and mandatory HDMI outputs installed.

DTT services will remain in trial phase for first three months, during which time signal quality and transmission coverage are to be tested and monitored. A hot-line for the public to phone in complaints has been set up, and the regulator has stated that one of the options it is examining to ensure signal strength in far flung areas is to install mini transmitters. Prior to service launch, a public information campaign was carried out in the local press by the regulator, and a second round of TV advertising is slated to begin in September-though these plans are still tentative.

Israel's pay TV market currently operates as a duopoly between cable operator HOT and satellite operator Yes. However, recent months have seen both platforms pressed for subscribers—cable operator HOT has seen its subscriber numbers drop in six consecutive quarters, while satellite operator Yes has seen its base stagnate since the end of 2008. This could be further exacerbated with the launch of free DTT services.

Screen Digest estimates that pay TV penetration in Israel has dropped by 4.8 per cent since 2002, while TV households have increased by 11.8 per cent in the same period. The introduction of free DTT services has a strong potential of worsening this situation in the long run-by taking share away from pay TV platforms, as has been in many Western European countries. Although services are currently restricted to five free-to-air channels from public broadcaster IBA and commercial broadcasters Channel 2 and Channel 10, the mandatory roll-out of HDTV/MPEG4 set-tops and the Knesset's debate on television regulatory reform indicates that the channel line up on DTT may be expanded to include far more channels after analogue switch off—due in 18 months—and the possible introduction of HD channels. In such a scenario, both operators will need to start looking towards their additional value added offerings like Video-on-Demand, catch-up services and PVRs for continued subscriber acquisition, revenue growth and churn reduction.


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