SABC Digital Terrestrial Television Update to Parliamentary Portfolio Committee on Communications

1. SABCDigital Terrestrial TelevisionUpdate to Parliamentary Portfolio Committee on Communications June 2010

2. Introduction • SABC has been a committed and active participant in the Broadcasting Digital Migration process • Over the past 2 years, the SABC has done extensive planning and testing of the DTT service in anticipation and preparation of a commercial launch • The DTT trial was an important phase of the migration • Many lessons have been learnt which will inform what we do next • Many critical aspects that will enable successful rollout of the next phase are however still not in place

3. Critical Success Factors To achieve a successful consumer led launch, several critical success factors need to be in place… SUCCESS FACTOR IMPLICATION KEY ROLE PLAYERS More channels New channels licenced Development of new channels ICASA Broadcasters Affordability of STB Low priced STB Subsidy Broadcasters/ Manufacturers, Govt. Education and marketing Extensive marketing campaign Broadcasters Digital Dzonga Customer Support National Call Centre Co-ordination of activity Digital Dzonga Coverage Quick rollout of DTT network Dual illumination period Broadcasters Signal Distributors

4. DTT Value Chain … and many role players need to co-ordinate activities to achieve the migration BROADCAST INFRASTRUCTURE CONTENT NETWORK Production of Digital Content or Digitisation of Analog content Packaging of content into channels [Roof-top aerial] Playout Encoding and Multiplexing STB Broadcasters/Production Industry Broadcasters Broadcasters Broadcasters Signal Distributors TV CUSTOMER SUPPORT Digital Dzonga Customer Support Digital Dzonga/ Broadcasters Marketing and Communication Broadcasters/ signal distributors Platform Management

5. Phases of Digital Migration … over several years and several phases • To begin first phase rollout of transmitter network • To allow for feedback, refinement and evaluation • To prepare and test services • To complete regulatory processes PHASE ONE PHASE TWO PHASE THREE • To make DTT services available to the market • To expand transmitter network to full coverage • Analogue and digital networks running in parallel • To begin phased switch-off of the analogue network • Reduced dual illumination as analogue is switched off • Maintenance of DTT network • Planning for digital dividend • Mass rollout of help schemes PILOT PHASE DUAL ILLUMINATION PHASE MIGRATION PHASE Pilot switch on We are here 2011 2013/2015 Nov 08

6. Implementing the Pilot Progress has been made through the first phase with the SABC led DTT Pilot project • Achieved 33% coverage of population (JHB, Pretoria, Durban) • 10 channels, 19 radio stations and limited semi-interactive services • Required participation of broadcasters, signal distributors, STB manufacturers, regulator, research company, installation support, call centre, consumers, content providers • In excess of R80 million already spent on the pilot by the end of March 2010 • Just under 3000 active participants! • Has proved to be significantly more complex than anticipated and has provided very valuable insight into what can be expected at commercial launch

7. Key Lessons From Pilot Phase (1) Many important lessons have been learnt about how to make DTT successful • DTT does offer valuable benefits to the consumer: • Better quality picture and sound • More public service content opportunities • More free to air channels choice • Opportunities for additional services (information services and e-gov) • Digital migration is an extremely complex process to rollout • Requires a clear plan and extensive co-ordination and monitoring • Requires time to reach all consumers • Requires an immense amount of communication and education • Requires a very clear plan • Digital migration is an expensive process • Adequate customer support (call centres, installation assistance, communication) must be in place and resourced appropriately • Content investment is substantial for broadcasters • Will take time before broadcasters can generate real return on investments as audiences will take time to adopt new technology • Significant investment in co-ordination and project management is required • Significant amounts of research will be required to monitor progress

8. Key Lessons From Pilot Phase (2) Many important lessons have been learnt about how to make DTT successful • The attitude towards the new technology was very positive. 87.2% of the trialists stated that it was worth the effort to install the DTT STB. • The technology works: MHEG, DVB-T, MPEG-4, HE-AAC for South Africa’s DTT requirements • South Africa has the intellectual property and skills in order to locally design and manufacture Set Top Boxes. • Interoperability between free to air and Pay TV was tested successfully and works. • Access services on DTT is an essential service for persons living with disabilities. • Network redundancy, fault monitoring & detection is vital for a DTT network. • Accurate coverage predictions are essential.

9. Phases of Digital Migration But several critical aspects MUST be in place before we can move to phase two making the earliest possible public launch date Mar 2011 • To begin first phase rollout of transmitter network • To allow for feedback, refinement and evaluation • To prepare and test services Requirements to move to phase two PHASE ONE PHASE TWO • DTT Licences • Confirmation of funding for key stakeholders • Clear rollout plan • Customer support • Entity to co-ordinate all aspects of migration (Digital Dzonga) • Conformance regime • STBs available • Platform mgmt. company • 56% coverage minimum required • New channels launched • STBs in retail • Does not require subsidy DUAL ILLUMINATION PHASE PILOT PHASE DTT Licences Conformance in place Channels ready Testing Pilot switch on Earliest Public launch DTT Regs Dzonga resourced We are here Mar 2011 Nov 08 Feb May 10 Sep Dec Dec Minimum 6 months from licences to launch

10. Phases of Digital Migration Nov 2011 is not achievable! Only 8 months to Nov 2011 Phase three (switch-off) cannot occur without sufficient penetration and the help scheme implemented which makes November 2011 impossible. Requirements to move to phase three PHASE TWO PHASE THREE • Help scheme in place for at least 5 million households • Confirmation of funding for help scheme/customer support (+R3 billion) • Clear switch-off plan • Entity to co-ordinate switch-off (Digital Dzonga) • Subsidy scheme in place and tested • Regulatory framework for digital dividend • 56% coverage minimum required • New channels launched • STBs in retail • Does not require subsidy • 80% coverage minimum • +90% penetration per area • Minimum 5m STBs • Subsidised STBs and Help Scheme DUAL ILLUMINATION PHASE MIGRATION PHASE Public Launch Switch-off can only be planned once sufficient penetration is achieved Mar 11 Jan 10

11. Critical Success Factors But more than anything, NONE of the critical success factors are in place yet SUCCESS FACTOR IMPLICATION KEY ROLE PLAYERS More channels New channels licenced Development of new channels ICASA Broadcasters Affordability of STB Low priced STB Subsidy Broadcasters/ Manufacturers, Govt. Education and marketing Extensive marketing campaign Broadcasters Digital Dzonga Customer Support National Call Centre Co-ordination of activity Digital Dzonga Coverage Quick rollout of DTT network Dual illumination period Broadcasters Signal Distributors

12. The Impact of Delays There are implications for the SABC if DTT is delayed significantly. • TIME TO LAUNCH: • Potential of missing 2015 deadline for analogue protection which will affect SABC’s analogue services • STRATEGY: • Could result in a satellite pay-TV led migration as satellite pay-TV players (DSTV and TopTV) continue to grow rapidly • Increased competition in the market will erode SABC’s audience share and consequently SABC’s revenue base • Will compel SABC to explore other digital distribution platforms until DTT is launched

13. Solving the Critical Issues There are several steps to be taken to unlock the process. • To move forward in the digital migration process, the following key fundamental issues need to be resolved; • Issuing of broadcast licences for new DTT channels • A STB Conformance Scheme to enforce compliance to the SABS STB standard SANS 862 • Making affordable STBs available to ensure swift take up and access to all citizens • Putting in place a comprehensive customer support scheme • Development of a well coordinated and clear national rollout plan which requires the re-establishment of a co-ordination body • Confirmation of sufficient funding to support the process until completion

14. Conclusion • SABC has already invested significant resources and put in place extensive plans in preparation for a DTT launch • Significant progress has been made and valuable lessons learnt through the pilot phase and SABC is much closer to being able to launch DTT as a result • However, finalisation of our plans are dependent on resolution of the key outstanding factors • Delays in the digital migration process will impact on our sustainability in an increasingly competitive environment • However, we remain committed to the process and will work closely with all stakeholders to find solutions to the current challenges