Why DTT is Dead and the Obvious Alternative for SA

25 July 2024
Patrick Conroy (CEO Telemedia)
Why DTT is Dead and the Obvious Alternative for SA

Why DTT is Dead and the Obvious Alternative for SA

I recently touched a nerve on the LinkedIn platform when I posted a comment saying it pained me how many South African politicians have failed to realise the death of Digital Terrestrial Television (DTT) and the promise of Direct-to-Home (DTH) as a solution to digital migration.

The implications of this single alphabetical change cannot be overstated, and yet there are still those in the political sphere whose policy documents favour a DTT solution, including the Democratic Alliance which now boasts the new Communications Minister, Solly Malatsi.

(In brief, DTT would utilize the transmitter sites of South Africa's state-owned signal distributor, Sentech, requiring specialised aerials on your rooftop or TV. On the other hand, DTH uses satellite as a single source of mass distribution requiring a satellite dish)

In the past week even the SABC has publicly rejected DTT as an alternative by launching its own satellite (DTH) platform in which it stated: "DTT, in its current form, is very limiting for the SABC and will not allow the organisation to grow the number of channels or be in control of its destiny".

The Mathematics Don't Add Up

It is finally becoming clear that the mathematics of DTT simply does not work.

According to Stats SA, as of 2022, the country had approximately 18.5 million households, of which half required Set-Top-Boxes (STBs). Government however committed to supply 5 million to lower income households.

On that basis the simple manufacturing costs of 5 million STBs will range from R2 700 000 000 to R9 000 000 000 given the average estimated cost of a box can range from $30 to $100.

Additional Costs:

  • Logistical costs of storing 5 million units
  • Distribution to households earning less than R3200 per month
  • Transmission programming costs

The Sentech Factor

The current DTT policy plan is to use Sentech, the state-owned signal distributor. Sounds simple enough, after all Sentech operates a network of over 183 transmission sites across South Africa, which deliver audio-visual signals to more than 12 million TV households.

The Cost Reality:

  • SABC complained to Parliament about high signal distribution costs
  • Requested reduction by R500 million
  • Sentech's 2023 revenue: R1.4 billion
  • Satellite costs would be less than R100 million

Can the SABC go it alone on DTH?

Yes, if it had several billion Rand to invest in the project. But the SABC is broke.

The SABC's Current Plan:

  • RFP issued on July 11 for DTH services
  • 26-day deadline for submissions (until August 5th)
  • Requirements include:
    • Finding partners
    • Studying specifications
    • Solving digital migration crisis

The SABC's Funding Model

The SABC RFP states:

"SABC is looking to partner with a service provider for a turnkey solution that will include: The uplinking of content to the preferred DTH satellite platform, procurement and manufacturing of STBs, distribution of STBs to retailers as well as a after sales service (call centre) at no cost to the SABC . This partnership will be for a period of five (05) years."

It adds: "The bidder is expected to cover the capital/cost of the turnkey solution. The bidder will propose the revenue share model to the SABC for consideration."

Potential Cost Scenario for Year 1

Formula: Number of STBs X ($30-$100 per unit) X Exchange Rate + Satellite Costs + Content Costs = DTH

Calculation for 1 million STBs:

1 million STBs X $30 (low end) X 18.27 (Exchange rate) + R75,000,000 satellite costs + 2 exclusive daily soap operas
R548,100,000 + R75,000,000 + (24min episode x 2) x R20,000 x 260 weekdays in 2025
R623,100,000 + R249,600,000

DTH in Year 1 = R872,700,000

An Alternative Option

South Africa's free-to-air channels, SABC 1, 2, 3 and e.tv, are already carried on Openview which has approximately 3.5million activated STBs in the market.

Openview's Advantages:

  • Estimated household viewership of 17.5million
  • Established infrastructure
  • Existing retail partnerships
  • Content deals in place
  • Required encryption and STB licenses
  • Nationwide coverage via Intelsat's IS20 satellite
  • Coverage map available here

Openview is a public-private partnership staring us in the face.

The Path Forward

A partnership between SABC and Openview could:

  • Expedite digital TV services rollout
  • Enable valuable sub 1Ghz spectrum allocation
  • Reduce data costs
  • Provide tiered STB options
  • Be operational within months
  • Avoid enormous startup costs

Conclusion

Audiences demand easy access to local content at low cost. If South Africa is to keep pace with global digital trends, then it must make pragmatic decisions based on the common good of its people.


About Patrick Conroy and full disclosure:
I am a former employee of eMedia and MD of Openview from 2016-17, after heading up eNCA prior to that. I have a tiny shareholding in the company (less than 0.0003% of authorized N shares).

I am currently the CEO of Telemedia. Our competitor Globecast manages eMedia's satellite distribution and Sentech uplinks Openview to the IS20 satellite.