Market Insight

30 must carry channels to launch on Ukraine's cable TV networks

September 02, 2012

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Ukraine's National Broadcasting Council (NBC) has changed must carry regulations to require cable TV operators to offer all digital terrestrial channels broadcasting in the area on their networks.

At present, only analogue channels - usually from eight to 12 channels, depending on the region - are must carry. These are usually offered as low-cost 'Social' packages. The NBC initially extended the must carry list to all channels broadcast by the country's DTT operator, Zeonbud, but has now slightly modified its rules to include all terrestrial channels available in the network's area, which is still up to 32 channels. Cable operators have been given some time for preparing the necessary changes, as they will be required to broadcast all DTT channels in their Social package only after the conditions of their licence change, for example if they launch digital TV.

Market players responded to the new regulations suggesting a few changes, including a proposal for the maximum number of must-carry channels to be set as one third of all channels on a given network. Cable operators which currently offer about 50 analogue channels, or fewer, would find it difficult to adopt the new regulations requiring them to provide more than half of their channels for a low cost. It remains unclear whether operators will be required to provide all their DTT channels in digital quality, or whether they will be allowed to launch them using analogue technology. NBC suggested the changes should be made by 2015, the year analogue switch-off is planned in Ukraine.

DTT roll-out has affected must-carry regulations in a number of countries across Europe. Nevertheless, with over 30 channels listed by NBC as must-carry, Ukraine stands out. In many European countries the number of must-carry channels increased only slightly (often by one to four new channels). Some countries where the must-carry group would have grown considerably decided to freeze must-carry regulations, or to apply them to public national channels only (such as the Czech Republic, Hungary, Lithuania, Poland, Sweden and Slovakia).

As Ukraine's authorities decided to apply a new DVB-T standard, DVB-T2, enabling a higher number of channels, as well as HDTV, the number of DTT national channels reached 28 soon after launch at the end of 2011. All are available free-to-air.

There are over 600 cable TV operators in Ukraine, vast majority of which are small players offering only analogue TV services with up to 50-60 channels. For those players, the consequences of extending the must-carry list will be particularly hard, as on the one hand the purchase of digital technology will likely exceed their financial capacity; on the other hand, launching digital TV services on a too small network may prove unprofitable. Moreover, all players are likely to increase the price of their services in order to make up for the loss of income from the channels moved to the must-carry group.

It is also possible that a high number of must-carry channels on cable TV networks will cause a migration of subscribers from higher cost packages, additionally decreasing the operators' revenues. Also, the change in regulation may increase the number of acquisitions, as some small players, unable to fulfil NBC's requirement will be more likely to sell their networks. Ukraine's cable operators remain sceptical with regard to the time given them by the NBC for preparing all changes. Cable TV licences in Ukraine include the operator's channel line-up, so launch of any new channel requires approval from NBC and is in fact a change in the operator's licence. According to the operators, NBC may try to enforce launch of DTT must-carry channels on the occasion of any change to the operator's licence.

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