Lead IoT expert at IDATE DigiWorld
We can already observe the integration of IoT technologies in industry assets – which is commonly called smart factory – and emerging use cases, reducing costs and increasing productivity strikingly.
In our latest study we propose an analysis of the heterogeneous industrial landscape on three major axes: Infrastructure (Industry assets), Offering (innovative products accompanied by related services) and Relation with customers.
Industrial Internet is gaining momentum, but still needs several years for larger adoption and especially for an establishment of common standards – today several technologies and concepts coexist and only the fittest will survive when market maturity is reached.
The industrial infrastructure of industrial assets will be optimised through the development of the smart factory concept by implementing new manufacturing practices that take advantage of ICT innovations. This aims to go beyond the introduction of new technologies in the production process. The core principle is the increase in connections and integration of the different ICT-enabled components in a single networked system. The developments of the smart factory result in gains in production costs as defects are eliminated and automation reduces the intensity of human resources in production tasks. Value thus shifts to research and development and design tasks on the one hand, and to after-sales services on the other hand. These shifts impact players, enabling the development of smaller-scale units focusing on the design and engineering of products on the one hand, and the emergence of platforms and ecosystems on the other. Adoption is still limited as we are but in the early years of the smart factory. Major industries now adopting the smart factory encompass aeronautics, automotive and consumer electronics. Energy and transportation are also deploying IoT solutions along their distribution network architecture.
The Industrial Internet (IIoT) is also considered as a way to improve the appeal of core products by providing more services associated with machines rather than expecting new revenues. As a consequence, vertical players are tending to lower their expectations for data monetisation, focusing essentially on using data for process optimisation mainly, bringing more value to their core products. This is even more true for very expensive machines (aircraft, heavy equipment). However, some industries like automotive still aim to generate additional recurring service-based revenues over time through additional interactions (rather than standalone product sales with renewal several years later). They are pushing their subscription-based services, even though the real adoption is still under interrogation (even for premium manufacturers).
In addition, servicisation is also used to increase customer loyalty, where the traditional product purchase (transaction relationship) is being transformed into a recurrent relationship between suppliers and clients. Moreover, new innovative and disruptive pricing models will be introduced, with the example of tyre manufacturers which sell services (on a per-km basis through Tyre-As-A-Service) for professional fleet managers.
Data will play an important and central role in the future as many players aim to leverage the data collected from the connected objects, chiefly for business reasons. There are still questions around the real monetisation of the data as it is based on the ownership of the data itself and its related control. Early initiatives show data use for internal use, circumventing data privacy issues. To build data-managing platforms, the biggest industry players are tending to develop their own digital solutions. For smaller players, data will likely be exploited by third parties, as they lack the appropriate technical expertise and capacity to combine with other data.
The market of the Industrial Internet will be driven by the enabling technologies (LPWA and big data chiefly) which provide disruptive features. Moreover, different national and international initiatives such as Industry 4.0 or the Industrial Internet Consortium (IIC) support the development of these new technologies led by the automation and engineering industry giants.
However, in addition to doubts around data monetisation, the market is also facing such barriers as security and reliability concerns, interoperability issues and potential societal impact on workforce training and employment. Furthermore, this is leading industrial giants to have their own data-oriented department and they are required to acquire new skills and expertise around data – a process which also takes time.
Get more insights on infrastructure, products and services, customer relationship related to Industrial Internet as well as an analysis of the value chain, possible monetization of data and general drivers and hurdles.
The independent telecoms, internet and digital media analysts at IDATE DigiWorld have announced a number of trends to look out for over the next decade in its annual DigiWorld Yearbook report, out this month.
These include cheaper smartphones, dwindling sales of tablets, the increasing use of IoT technologies, Artificial Intelligence (AI) and Virtual Reality (VR), and sustained growth in the digital economy. The European think-tank expects to see a continued rise in cyber-attacks and trust issues surrounding digital companies, which will lead to enhanced security protocols as consumers embrace the Internet of Things (IoT), especially to help protect their connected cars or smart homes. Improved connection speeds, especially for Europe, and better reliability for mobile and household internet services are also on the cards, with a gradual move from 4G to 5G and fibre-optic broadband (FTTH).
In its research, IDATE DigiWorld looks at how further consolidation in the telecoms industry could be replaced in future by more cross-industry mergers between networks, technology, television, media, transportation and industry: for instance, companies like Google and Apple making further in-roads into the automotive industry; or major telco and tech companies buying more into television and streaming services.
With sustained growth in online services, the industry experts at IDATE DigiWorld expect a gradual shift away from owning to using: for example, people sharing cars via an app; or streaming music and video-on-demand films, rather than buying CD’s, DVD’s or downloads. The move towards more on-demand, subscription services is likely to be driven by the increasing use of ad-blocking software which, in turn, could make the abundance of free internet services (like YouTube) a thing of the past.
“A wide range of services are sold for a minimal per-unit cost and consumed en masse, which helps to build a gigantic digital services market for telecoms and internet, estimated at more than €2,900 billion in 2025, or almost 7% annual growth,” said the report.
The two-hundred-page report also considers how Bitcoins, blockchains, mobile payments and crowdfunding will impact the future of banking and finance, arguing that further development in internet services will help ‘cut out the middleman’ in other industries too, like travel and retail. Other considerations include Big Data and how EU legislation is coping with data privacy and protection, as well as how, in future, more access to personal data might affect people’s insurance premiums or requests for loans.
“We’re riding a wave of innovation that’s never been seen before, especially in the business sector with the continuing migration to the Cloud and the prospects that the Internet of Things, Big Data and Artificial Intelligence might bring. However, at the same time, this throws up a number of potential issues, such as how the Public Cloud is now in the hands of tech giants like Amazon, Google and Microsoft,” said François Barrault, President of IDATE DigiWorld.
Despite a context of relative saturation, as shown by recent stagnation in smartphone sales, IDATE DigiWorld predicts modest growth returns for Western telcos and digital media companies during the years ahead; but bigger gains in China, India and Africa, where further global consolidation is expected both at the European and worldwide level. In television, Asia/Paciﬁc will become the world’s largest market during the next decade, while growth in the main European markets will be weak, and possibly even negative.
“European markets are also still very much weighed down by a very tough competitive and regulatory climate for telecom carriers whose revenue has been on a downward slide since the late 2000s,” said Yves Gassot, CEO of IDATE DigiWorld. “Internet services continue to enjoy double-digit yearly growth of nearly 15%. The segment is expected to represent close to 10% of the entire digi-world in 2016, a ﬁgure that will only increase in the near future: in just two years from now, internet services will be out-earning television and video services, which will nevertheless continue to grow by 3% to 4% a year.”
The DigiWorld Yearbook 2016 has been compiled using its own datasets, market reports and 2025 prospective analysis with the support of many leading players in telecoms, IT, internet, TV and digital media, with more than 50 members that include Accenture, AT&T, BT, Google, Gemalto, Huawei, IBM, Microsoft, Orange, Tata and Samsung.
The findings of the report are being presented this year to various industry chief executives keen to share their outlooks on the 2025 digital economy, through a series of DigiWorld Future conferences: in Brussels, on the 25th May; in London, on the 2nd June; and in Paris, on the 14th June. The complete programme is available at www.digiworldfuture.com
DigiWorld Yearbook infographics
Buy the DigiWorld Yearbook 2016 Edition on our website !
Senior Consultant IDATE DigiWorld
Disappointing results for the mobile industry and satisfactory results for broadcasters and the satellite industry.
World Radio Conference-15 key outcomes
Spectrum is vital for many industries – allocations are decided at a WRC. At the most recent WRC, late in 2015, many hot topics were raised, including the allocation of new frequencies to International Mobile Telecommunications and to satellite services. Globally, WRC-15 led to some very important conclusions. In the end, it delivered disappointing results for the mobile industry and satisfactory results for broadcasters and the satellite industry.
Focus on item 1.2: the 700 MHz band, 96 MHz identified for IMT use in Region 1 and in few countries in Region 3
The 700 MHz frequencies are very valuable and often considered as golden spectrum because of its propagation characteristics. The 700 MHz band is of critical importance for players both in the MEA and in Europe. In Europe, broadcasting carries a considerable weight in the industry, something that is less clear in MEA. These differences required caution on the part of the authorities.
In Europe the band corresponds to the second digital dividend. In the USA, 700 MHz frequencies correspond to the first Digital Dividend in the USA (1997-2008). In Region 3 (Asia-Pacific), the 700 MHz band corresponds to the first Digital Dividend.
At present, the 700 MHz band is still being used by digital television services in Europe (despite the WRC-12 allocation to IMT use). In some countries it is used by mobile services. It is being freed up for mobile broadband in many parts of the world.
It has been a long journey to freeing up 700 MHz frequencies.
• In 2007, 108 MHz of spectrum (698-806 MHz) for mobile services in Region 3 were identified at WRC-07.
• In 2008, the USA auctioned 700 MHz spectrum.
• Four years later in 2012, WRC-12 agreed on allocation of 700 MHz to mobile services (except aeronautical mobile) as a co-primary use with broadcasting in Region 1.
• As a kick-start to 700 MHz freeing up, the EC mandated CEPT in 2013 to develop harmonised technical conditions for the 700 MHz band in Europe.
• In 2013 and 2014, some Middle Eastern, Asian and Latin American countries auctioned 700 MHz frequencies with spectrum to be freed up as from 2015.
• During the year 2015, the first 700 MHz spectrum auctions took place in Europe.
In June 2015, more than 5 billion EUR were collected in auctions covering multiple frequencies (700, 900, 1800 and 1500 MHz). Bids for 60 MHz of spectrum in 700 MHz frequencies’ auctions alone reached 1 billion EUR (12 eurocents per MHz per 10 years).
In France, 700 MHz auctions which ended in November 2015 raised almost 2.8 billion EUR for 60 MHz on sale (35 eurocents per MHZ per 10 years), almost three times the amount reached in Germany. Finland and Sweden expect to auction 700 MHz spectrum before 2017 (respectively in January and April). The UK will make the 700 MHz available for mobile services by early 2022 and earlier if possible. In other European countries, the future of the 700 MHz is being considered.
• During the year 2015, the first LTE-700 MHz commercial services were launched.
WRC-15 outcome for the 700 MHz band
The 700 MHz topic had raised an intense debate before the conference. Broadcasters tried to defend their positions while mobile operators wanted to attract additional spectrum.
As expected, the selection of the 700 MHz (694/698-790 MHz) band as an IMT band was decided at the WRC-15 within Region 1 and 16 countries in Region 3 (including Australia). Broadcasters succeeded in protecting their services with the WRC-15 promise of “full protection” for DTT services.
Harmonisation between regions in the world was at stake. Before the conference a number of band plan options had been considered, especially in Europe, while other countries aligned to the APT700 plan, a harmonised band plan for 698-806 MHz for Region 3 which was approved by ITU. The entire band, according to the APT plan, enables the use of 2x45 MHz for FDD operation. A TDD plan has also been defined.
Access the full report Key Outcomes from WRC-15 to get more background data, decisions on items and what will shape the WRC-19 and WRC-23.
Published in DigiWorld Economic Journal DWEJ No. 102
"Mobile dynamics: the path to 5G"
Interview with Wassim CHOURBAJI
Vice-President, Public Policy and Government Affairs, Europe, Middle East and North Africa, Qualcomm
Conducted by Denis LESCOP, Télécom Ecole de Management, Evry, France
DW Economic Journal: "What do you really mean by 5G from a technology perspective?"
Wassim CHOURBAJI: As we did with 3G and 4G, Qualcomm is leading development of technologies for 5G. We are designing a unified, more capable 5G platform to meet expanded and radically diverse requirements. 5G will be much more than just a new generation with faster peak rates. We are building a 5G platform to connect new industries, enable new services and empower new user experiences in the next decade and beyond. The foundation of this platform is a new OFDM-based 5G Unified Air Interface that is scalable across all services and spectrum. 5G will usher in the next era of enhanced mobile broadband experience with more uniform high data rates everywhere, lower latency and lower cost per bit. It will connect massive numbers of things through the ability to scale down in data rates, power and mobility. It will enable new mission critical services with ultra-reliable low latency links. It will provide edgeless connectivity with new ways for devices and things to connect and interact. 5G will be also a platform for all spectrum bands and types, designed for licensed spectrum from below 1 GHz for coverage to mmWave for extreme bandwidth as well as for unlicensed and shared spectrum.
How will 5G impact the everyday life of people?
Wireless connectivity transformed human communication. With 5G, we're extending its reach and adding intelligence to transform everything else. 3G and 4G have enabled people to experience broadband on their smartphones and tablets, wherever they are, indelibly changing the way we communicate with one another. We take this for granted now, but it was actually science fiction less than two decades ago. The next step, which is quintessential to the long-term realisation of 5G, is the massive social and economic impact of the tens of billions of devices and things that will get connected to each other, to the cloud and to people, unlocking greater efficiencies, personalized services and new user experiences. This will profoundly change our lives.
Where devices such as smartphones and tablets are now still the endpoint of communication, countless methods of connectivity and interaction will emerge in homes, cars, cities, healthcare and more. Where data services are now limited to certain providers and insights, there will be near unlimited insight available thanks to a broad expansion of all kinds of discovery services. It will not just be devices that will be "smart", it will be the connectivity itself. Intelligence will be found at the place where interactions are happening and will no longer be buried in the data centre or confined to a wall garden – it will make those interactions more intuitive, immersive and secure for people.
How will 5G impact the everyday life of enterprises? Can we say that 5G will open tremendous business opportunities?
The transition that businesses will experience towards 5G will be as sweeping as that experienced by consumers, and arguably even more so because the stakes in terms of competitiveness, economic growth and job creation are extremely high. I think it is fair to say that there are tremendous opportunities for businesses big and small, but the value created by spurring technological innovation with 5G will strongly depend on the policies under which industry at large will digitize and evolve.
Businesses have so far had to adapt to a changing environment where the internet has expanded to cover most, although not all, processes related to selling and distributing goods and content. To name but two obvious examples: e-commerce has metamorphosed retail and wholesale distribution operations; and the web has completely revolutionised publishing and journalism. These changes were basically driven by the fact that people could suddenly buy things and access content online. It's a process that started in the early days of landline internet connectivity, but which has really been boosted by mobile thanks to anywhere, anytime connectivity.
But as I said, with 5G the change will not simply be about connecting people to the Internet – more people, in more places and at faster speeds – but crucially about bringing intelligent connectivity to everything. So it is not just the sale and distribution of goods that will come into play – it is the very products you are developing as a business that will be affected. You used to be a company that was top-notch at designing and manufacturing this great product, but now you need to think in terms of your connected product – what you want to do in this new environment is deliver greater efficiencies, personalised services and new user experiences. You need to stay relevant to the user or people will be drawn elsewhere. You need to be skilful in doing that because there are many other companies out there which will take any opportunity they have to disrupt your market.
How are regulators – and especially the European Union – supporting (or not) the emergence of 5G?
I think the European Commission has really embraced the vision of 5G as a cornerstone of Europe's competitiveness. In April, the Commission earmarked 5G as a technology standards priority. The fact that Europe has leadership positions in so many key industrial sectors and that European industry needs to take advantage of the business opportunities that will potentially be enabled by 5G connectivity is not lost on Vice President ANSIP, Commissioner OETTINGER and the Commission as a whole.
I see the Digital Single Market as essentially a statement that Europe cannot afford to waste this opportunity. I like the fact that it goes back to the concept of the Single Market, one of the greatest achievements not just for Europe but arguably for humanity – there is no other place that equals Europe's level of social and economic unity, imperfect though it may be, between peoples, countries and interests that used to be so disparate. Implicitly, what it says is that the key to making the Single Market stronger for Europe and the world in the 5G digital era is to stay true to its core values of integrating differences.
When you transpose integration from different countries to different industrial players, the process is actually not that different. And when you translate integration into digital terms, you are talking about interoperability. That is why I think we see a strong emphasis on facilitating more cross-sector partnerships in the European Commission's recent Communication on ICT Standardisation Priorities for the Digital Single Market. We need more collaboration and strategic vision to bring together "traditional" non-ICT industries, the telecoms industry and the rest of the value chain to deliver on the promise of interoperable 5G connectivity. Europe can turn its apparent complexity into an asset.
There are a lot of initiatives that the Commission is facilitating with a view to 5G, such as the Alliance for Internet of Things Innovation (AIOTI) and the 5G Action Plan. Where I think Europe needs to act more quickly is spectrum and the review of the regulatory framework. Notably, I think Europe should decide fast and by 2017 on a list of "pioneering" 5G bands in the low, mid and high ranges, as well as a roadmap for the harmonisation and coordinated release of these bands across Europe. This will help industry players to invest and develop interoperable 5G standards globally and pave the way for commercial deployment in 2020. In Europe, there is a lot of potential in bands such as 700 MHz and 3.4-3.8 GHz, which are suited for IoT and "Industry 4.0"-type deployments, as well as in the 24 GHz and 31 GHz bands, which can deliver extreme mobile broadband bandwidth.
How should the framework be modified to better support 5G initiatives?
In terms of policy direction, I think we need to be aware of the paradigm shift between the old Digital Agenda for Europe and the new Digital Single Market strategy, which should very much reflect the shift from connecting people to connecting everything that I've talked about earlier.
We are used to having Digital Agenda targets that are linked exclusively to "fast internet access for all", called broadband objectives, like for instance 30 Mbps for 99% of people. That is good if you are trying to connect more people, in more places and at faster speeds, but if our aim is to bring, with 5G, intelligent, reliable and secure connectivity to new industries, which have different kinds of requirements, then these targets are no longer sufficient and we need new ones. These new targets should also address the vicious circle of the 3 "lows" the mobile industry is facing in Europe, and which I and others have talked extensively about. Low revenues, low use and thus low investment. The current targets solely address the supply side, with network coverage and speed obligations, and I think new targets should also address the demand side. This is key for takeup and revenues, bringing both the mobile industry and verticals together.
So I think the Digital Single Market targets should be specified for example as 1-Gigabit connectivity by 2030; 70% penetration of connected vehicles by 2025 and 100% by 2030; 100% road coverage by 2025; 60% penetration of remote monitoring for chronic patients in 2025 and 100% of low latency, very high data rate cloud access by the same date. I think these targets are far more meaningful from both a societal and economic perspective. I believe there are ways to incorporate these new elements in the upcoming review of the EU telecoms regulatory framework to make it futureproof and 5G-ready.
Does 5G raise issues pertaining to standardisation?
Yes, the main issue being that we'll need standardisation like we've never needed it before. As you expand the need for connectivity beyond people to literally everything, you can easily imagine that there is going to be a need to invest billions and billions of euros to create and evolve interoperable solutions that can cater to the many different requirements coming from the different sectors. The 5G platform is expected to be introduced with 3GPP release 15, forecast to be complete in 2018 for 5G commercial launches in the 2020 timeframe.
We will need high-performance standards, incorporating intensive levels of interoperability. If we only end up with extremely basic functionality incorporated in standards, we'll see much less interoperability, follow-on innovation and competition along the value chain. The bulk of the technology that consumers will be interested in may end up being developed by one or a very limited number of players that will control it in full. That is going to be bad for consumers and the rest of the market.
What this means is that standardisation needs to remain a priority for Europe. As I said, given that 5G will be about complexity, thanks to its leadership in standards Europe has a real chance of turning what many perceive as a weakness – the need to intermediate between contrasting interests, be it Member States or industrial sectors in our case – into an asset. So I welcome the Commission's intention of facilitating cross-sector partnerships for standardisation – I think this initiative can unlock situations where market players aren't naturally inclined to sit together at the table, which results in them losing commercial opportunities and the entire market not moving forward.
At the same time, one cannot forget that the investment needed to develop and evolve highly interoperable standards will come first and foremost from industry players. If standardisation is not an appealing option for them, they will not participate and we won't have the standards we need. And as one can easily imagine, fair return on investment is a top priority for businesses, including when the decision has to be made as to whether or not they want to contribute their inventions to standards and thus allow access to those inventions. There is always the option of going proprietary if participating in standardisation is not generating fair value for you. And, as I said, this would represent a risk for society in that it would lead to less interoperability, less follow-on innovation and less competition.
How are actors positioning themselves around the question of standardisation and intellectual property?
Balanced and effective intellectual property rules are essential, on the one hand, to incentivise companies to contribute their technology to standards and, on the other, to enable access to standardised technology. It is a balance that we absolutely need to get right as there is too much at stake.
I think the dynamics of the IP and standards debate haven't fundamentally changed in the last few years. Repeatedly, concerns are raised about Standard-Essential Patents (SEPs) and Fair, Reasonable, and Non-Discriminatory (FRAND) licensing. These concerns, which took centre stage during the ill-famed "smartphone wars", have proven to be tragically unfounded when it comes to smartphones and tablets. As mobile communications standards have improved and included more and more patented technology in the various iterations of 3G and 4G, average device prices have been falling dramatically and we have witnessed a proliferation of new products with new features. Irrespective of any theoretical debate about "patent thickets" and "royalty stacking", it is quite clear we simply haven't seen any thickets or stacking in the actual market, which on the contrary has been incredibly successful in achieving innovation, competition and consumer choice.
That being said, there are now what I think are valid discussions about standards and intellectual property in the new context of the IoT. As the number of players who will need to implement standards in their different industrial products grows, including SMEs, there is a need to simplify access to standards for them. In this context, the Commission has announced plans in its Communication on ICT Standardisation Priorities to facilitate fast, predictable and efficient access that can keep in place the right incentives for companies to contribute technology to standards. We welcome this approach, which I think is shared among the major standards contributors, and we look forward to working with the Commission and other stakeholders to this end.
Key to a balanced environment for investment in and access to IoT and 5G standards is flexibility. The IoT and 5G are going to be new markets, and the different parts of the value chain are still in the process of figuring out how best to structure new business models and how to create and reward value. The proverbial "one size fits all" will really not work here. However, some vested interests are promoting inflexible interpretations of FRAND that would force companies to license their technology to lower parts of the value chain or at the level of the smallest-saleable unit. This would for sure devalue standardisation – what it amounts to is guaranteed destruction of value for technology contributors to standards. And as I said earlier, companies will not contribute their technology to standards if standardisation is not generating fair value for them. If we in Europe care about interoperability, we really shouldn't go down that route.
Wassim CHOURBAJI is Vice President and head of Government Affairs for Europe, the EU and MENA. He is the Managing Director of the EU Brussels Office and oversees Qualcomm's public policy, regulatory affairs and senior government relations. Wassim is member of Qualcomm Europe leadership. He leads an EMENA-wide senior team responsible for innovation, technology, intellectual property, telecoms & digital economy, spectrum, standardization, security, data protection and antitrust policy. Wassim is chairman of the Communication Policy Council of TechUK, the policy arm of the UK digital industry. He was previously chairman of the spectrum group at DigitalEurope, the Brussels-based EU industry association, and chairman of the European spectrum group at the GSMA. Prior to joining Qualcomm in 2006, Wassim was the head of spectrum for the France Telecom Group, overseeing the group's fixed, mobile and satellite spectrum strategy across its operating companies. He was also designated by European administrations as lead coordinator on 4G spectrum for Europe at the ITU World Radio Conference. Previously, he served as regulatory manager for SkyBridge, Alcatel Space global Internet satellite project. He started his career as a spectrum engineer at French mobile operator Bouygues Telecom. Wassim holds a master's degree in wireless communications and is a graduate engineer from Supelec France.
More information on DigiWorld Economic Journal No. 102 "What do you really mean by 5G from a technology perspective? on our website
Senior Consultant, IDATE DigiWorld
This market is considered one of the most promising in the Internet of Things sector with a number of connected things could climb from 200 to 900 million between 2015 and 2025.
The concept of the smart home can be understood as home automation for the Internet era, but it is a concept that has not yet really caught on.
It encompasses all of the machines in the home that could potentially be connected to the Web. It also includes a wide array of applications, from consumer electronics to home appliances, by way of light bulbs and presence sensors. Today’s market is focused mainly on selling hardware with a built-in connectivity module and which can be controlled remotely using a mobile app. But it now also includes hubs, i.e. central systems that allow the different devices to talk to each other.
Many of the currently available products are connected to managing energy consumption and personal security, as consumers are more inclined to invest in solutions that allow them to lower their electrical bill and/or feel safer in their own home.
A large and heavily populated ecosystem
The digital home ecosystem is vast, populated by a multitude of players from a wide range of industries, including veteran CE and appliance manufacturers, along with power companies and players from the lighting and security industries. Samsung is particularly active in this market, especially since it acquired the start-up SmartThings in 2004. The South Korean giant is selling a complete smart home solution, including a hub to which both the manufacturers’ and its competitors’ equipment can be connected. Philips also has a solid presence in the smart home market thanks to its Hue line of smart bulbs.
The marketplace is also populated by newcomers such as pure players specialised in connected devices – marketing smart thermostats, light bulbs and security cameras. Telcos too have joined the fray, taking advantage
of their modems already deployed in customers’ homes to roll out new initiatives. The Internet giants are also on hand: Google through its acquisition of Nest, a start-up that specialises in smart thermostats, and Apple with its HomeKit smart home development platform.
An ecosystem awash with solution providers means that there are multiple communication protocols at work. The current battle for supremacy between standards is pitting a number of initiatives backed by industry giants against one another.
Adoption of the smart home raises severalquestions
This market, fl edgling as it is, is considered one of the most promising in the Internet of Things sector. IDATE estimates that the number of connected things could climb from 200 to 900 million between 2015 and 2025. Most of the market’s revenue today comes from hardware sales, whose prices are still too high compared to virtually identical products without smart capabilities. Several issues, then, need to be resolved before the market can really take off: the price of connected devices and appliances, privacy concerns raised by the use of personal data, a business model that needs clarifying (including monetising data) and the fragmentation of core technologies.
Discover the perspectives, key trends, and scenarios about the Internet and Smart Living market for the next decade through our dedicated report.
Florence Le Borgne
Head of the TV & Digital Content Practice, IDATE DigiWorld
Generally speaking, the arrival of Netflix in a new market results in increased programming costs for its competitors.
Using North America as an example, this trend is expected to continue and grow in the coming years, which will question the profitability of such investments.
There are generally three types of pay video-on-demand (VOD) services:
• TVOD (Transactional Video-On-Demand) services, which include:
• EST (Electronic Sell-Through), also known as DTO or 'Download To Own', is like the traditional sale of physical videograms, but in digital form.
• DTR (Download To Rent) is like the traditional rental of videograms, but in digital form.
• SVOD (Subscription Video-On-Demand) services, which are based on the dominant pricing model used for linear pay-TV: subscriptions
It is common for the same service to offer several pricing models.
Business models and service positioning
The transactional video-on-demand model is based on revenue sharing between the service provider and the rights holders. Contracts between these two parties can be exclusive, but rarely so. The catalogues of transactional video-on-demand services are usually very large (from 10,000 to hundreds of thousands). Although most TVOD services are non-specialised, consumption is mainly focused on movies.
The business model of SVOD is similar to that of pay-TV. Content rights are purchased at fixed price, regardless of actual consumption. The rights may be exclusive for a given period of time and territory. SVOD catalogues have tended to be available for unlimited consumption so far, including many non-exclusive and older titles (over 5 years old). Although most SVOD offerings are non-specialised, fiction series tend to be promoted and consumed the most. Original and exclusive new content is increasingly used for differentiation. There are currently two contrasting marketing strategies used: strategies based on a volume/cost ratio; and differentiation strategies based on premium or special interest positioning.
The VOD sector as a whole is witnessing strong growth in Europe, driven by a large increase in the number of services emerging in most countries. Between February 2012 and December 2015, the number of services available in the EU increased by a factor of 5.7 on average.
Although the market share in value terms is still dominated by DTR in Europe (56.5% of the total VOD market), this market segment has been the slowest growing segment over the last five years (+215% on average in EU countries between 2010 and 2015). Revenues from subscription services are experiencing stronger growth: a growth rate of 1,824% over the same period. They generated nearly one-third of VOD revenues in Europe in 2015, whereas they only accounted for 7.6% in 2010.
The true start of the SVOD market in a particular country is often whenever Netflix launches there. Note that Netflix is often the main beneficiary of the rapid growth in subscribers that its launch creates. The arrival of the North American giant does, however, trigger a response from the main players in FTA television and pay-TV. It is the combination of all these elements that contributes to better awareness of these services among the general public and facilitates their adoption.
The growth and success of video-on-demand services can be very different depending on the market. There are various internal factors:
• the propensity for local consumers to pay for access to content;
• the price differential with local pay-TV offerings;
• the prevalence of piracy of audiovisual and cinematic content;
Find out more about the various internal factors
Various issues specific to the structure of on-demand services and players' strategies also play a role:
• the relevance of the marketing positioning of the services;
• the existence of partnerships with distributors who already have a subscriber/equipment base;
• the effectiveness of recommendation systems, which help increase consumption and provide a better user experience;
More information about these issues
Profitability conditions and the challenge facing Europe
The issue of achieving profitability with transactional services is not as critical as for subscription services. Because most transactional service costs are variable costs, proportional to consumption, these services are not expensive to create and only become so when the content is actually consumed.
Therefore, there are no real obstacles to creating new services and the costs of entry into the market are low. This explains the abundance of existing services and the great diversity of players in this segment.
The economy for SVOD services is more delicate: as well as technical and marketing costs, content acquisition costs can be regarded as fixed costs because the content is purchased at a fixed price, regardless of consumption. To that can be added costs related to development or acquisition of a recommendation tool. Subscription services therefore have significant costs even before they have started to recruit subscribers.
If the European industry cannot create some European champions of their own to compete with the US giants, many European players may disappear as the market rationalises.
For the publication of the 16th edition of the DigiWorld Yearbook (pre-order now), IDATE is organizing a conference based on the detailed analysis of the current situations and some forecasts by IDATE experts on the major digital sectors, the discussion will deal with the great trends and challenges that will disrupt the digital markets by 2025.
Directeur de Business Unit Strategies, IDATE DigiWorld
the number of mobile customers worldwide should top the 8 billion mark by the end of 2018 (+16% compared with end of 2014) and increase by a further 200 million the following year (+14% between the end of 2015 and the end of 2019).
With global penetration more than 100% in 2014, subscriber growth is expected to gradually slow down over the next few years. The number of fixed Internet subscribers is increasing at roughly the same pace, but customer numbers are eight times smaller. The one billion mark is not expected to be reached before 2020 and traditional landlines continue to loose ground as VoIP and mobile gain ground.
The spread of broadband
the number of fixed broadband subscribers is expected to reach 900 million worldwide by the end of 2019. The number of LTE customers is shooting up, with services based on carrier aggregation no longer being limited to just the more developed countries.
Three major factors will play in favour of the spread of broadband:
• The success of bundled offers (fixed telephony, VoIP, TV, mobile telephony) and the appetite for video applications.
• The investment of telecom operators in the migration of their infrastructures to mobile or fixed broadband.
• The comfort provided by ultra-fast mobile broadband and the new uses it enables.
Revenue from telecom services
the global revenues from telecom services will grow from 1,111 billion in 2014 to 1,196 billion in 2019, representing an average annual growth of 1.8%.
• Revenues from mobile services will grow by 8% between 2015 and 2019 (+1.9% per year on average), reaching 729 billion EUR in 2019.
• Revenues associated with data transmission and Internet will grow more strongly (+18% between 2015 and 2019, i.e. +4.3% per year on average), to reach 319 billion EUR in 2019.
• The turnover of fixed telephony will continue to decline significantly (-11% between 2015 and 2019, i.e. a decline of 3% per year on average), to be at 147 billion EUR in 2018.
Disparate performances from operators in emerging countries
The top telcos in emerging countries experienced a slower rate of growth for their revenues in 2014, with the notable exception of América Móvil. China’s three telcos are reporting stagnant revenues, and China Unicom actually posted a 3.5% decrease. Their margins are come in line with industry standards: between 30% and 40% of EBITDA margins. Several of these operators are actively engaged in an international expansion into Africa and Latin America, but also into advanced markets, particularly in Europe.
European operators always in trouble
European operators continue to suffer. Virtually all of them, except for Deutsche Telekom and Telenor, saw their revenues shrink once again in 2014. Their spending on LTE and superfast fixed access networks (FTTx) has not yet paid off and helped to bolster ARPU.
For the publication of the 16th edition of the DigiWorld Yearbook (pre-order now), IDATE is organizing a conference based on the detailed analysis of the current situations and some forecasts by IDATE experts on the major digital sectors, the discussion will deal with the great trends and challenges that will disrupt the digital markets by 2025.
Director of Studies, IDATE DigiWorld
The connected object market today shows a real complementarity between the major players in terms of their current positionings, aligned with their core business.
In the longer term, however, IDATE DigiWorld anticipates that competition will grow in ferocity, around the platforms and services which are set to be the next source of revenues.
The automotive market
Around the connected car business, is key for Internet giants and telcos. Competition today is, in the main, on the platform side as both telcos and Internet giants are aiming to position themselves here today. Indeed, it is the platform that is the cornerstone of the next connected car strategy. Looking further ahead, the main competitors will most likely be OTT service providers, as they will offer services by exploiting the data generated by sensors in the vehicle – Uber-like companies are one example. Some industry incumbents are already engaged in the battle: earlier in 2016, GM invested half a billion USD in Lyft, the main competitor to Uber. The major involved players are AT&T and Verizon on the side of the telcos and Google (and Apple to a lesser extent) for Internet players.
The wellness market
This market is very recent. Telcos are absent from its value chain, with the exception of very limited volumes of cellular objects. They only focus on the distribution side, where the reselling business can grab them a sale commission on wearable objects, linked to smartphones. OTT Internet players are eying this promising consumer market for the opportunities it will offer in the near future to manipulate and monetise masses of personal data.
The healthcare market :
A specific market for a long time, its very promising market has been in the growing numbers of potential ‘clients’ as their age increases. The key objectives of healthcare applications are to optimise the treatment of disease and to save costs for national healthcare services. Even though solutions will be provided in partnership with experts, both telcos and Internet players will be push platforms and services.
The smart home market
It will be the arena for immense competition in the next few years. It is considered as a growth area for fixed telcos which are already facing competition from cablecos. On the side of the OTT Internet player, smart home applications are seen as a complementary way to follow their consumers/audience, even though they have different approaches. Competition – again, it will be heavy – will on the platform and services side as all players will be wanting to manage the data.
Today, the industrial Internet market is considered as an extension of the Industrial M2M business for telcos. The Internet giants are notable by their absence, even though some could provide cloud-based tool: Google, and Amazon with its specific IoT AWS offering, are prime examples. Analogous with traditional online services, the main threat for telcos is that they yet again become the pipe, and only the pipe. They have, however, anticipated the connectivity commodity trend by offering data platform solutions and related services. The ARPU from connectivity is very limited and the telcos expect only a small share of connected devices will be equipped with a SIM card. Before services, telcos have backed their core business, by setting their eyes on LPWA technologies (SIGFOX or LoRa) or collaborating on LPWA-like cellular ones such as the NB-IoT ahead. They are also backing the next 5G technologies, which aim to empower various verticals, including healthcare, manufacturing, smart cities and the automotive. It will be a tough battle, given that Internet giants are global by definition. Moreover, compared with traditional Web services, the main difference is that Internet giants manufacture their own objects, providing almost an end-to-end solution of product, platform and services on top. Faced with this kind of solution, traditional players in the industry will also suffer from the invasive nature of the OTT Internet players and their fierce competition.
Find out more information on "Telco's Connected Objects Strategies" in our dedicated market report
Directeur Général, IDATE DigiWorld
For several years now – and not without reason – an idea had taken hold in Europe’s ailing telecoms landscape that consolidation was a mandatory rite of passage for closing the chapter on endless price wars that were incompatible with the massive investments required in fixed and mobile superfast systems.
Hence the largely accepted view that, after the deals that took place in Austria, Ireland and especially Germany, national mobile market competition would be reduced from a four to a three-operator structure. In the wake of these earlier M&A deals, a similar project was announced in France, albeit one that was more complex and which fell through even before it got a chance to be examined by the country’s antitrust authority, while other major deals were quashed in the UK (sale of O2-Telefónica to CK Hutchison) and in Italy (joint-venture between Wind, owned by Vimpelcom, and Tre Italia, owned by CK Hutchison).
O2 turns down the CK Hutchison offer
It came as no surprise, after the series of negative signals from Britain’s Competition and Markets Authority (CMA) and its telecoms regulator, Ofcom, that the European Commission’s DG Competition ultimately nixed the sale of O2.
Telefónica will therefore need to look for other ways to keep its debt-reduction plan on track. Meanwhile, CK Hutchison will find itself in a very tenuous position in the UK, as a small operator that lags well behind the competition. It seems unlikely that it can continue on as is, not least because the situation could attract other potential buyers. There are some from outside the UK which are bold and confident enough (Iliad’s name came up several months back) to believe in their ability to forge themselves a position despite British operators’ slim margins. It seems more likely, however, that in the short or medium term CK Hutchison will find a domestic buyer from amongst veteran wireline telcos such as Sky (No. 2 in the broadband market), Virgin Media (tied for second spot, owned by Liberty Global) or TalkTalk (No. 4), all of which have been shaken by the advent of the heavyweight created by the merger of the country’s largest mobile operator, EE, and its fixed market leader, BT.
When consolidation rhymes with fixed-mobile convergence
In Europe, national markets’ reduction from four to three mobile operators over the past two to three years is no longer the sector’s only, or even its main, consolidation option. We need to picture the mobile network of the future as an essentially fixed network, with wireless connections in the last 100 metres to service microcells. With this in mind, if a relatively dense fixed infrastructure does not exist, mobile operators’ backhauling costs could go through the roof. We naturally think of Vodafone back when it was a mobile pure player, which kicked off the trend with the successive takeovers of Kabel Deutschland and Ono. But the synergies of a consolidation based on fixed-mobile convergence are not confined to anticipating integrated infrastructure. We also need to factor in the cross-selling synergies enjoyed by a convergent operator, along with those to be had in the use of customer files, amortising retail outlets and in brand management, and possibly investments in video platforms, not to mention the boost to customer loyalty levels amongst quadruple play subscribers. We saw this in France when Iliad entered the mobile market. Telenet’s takeover of mobile operator Base in Belgium, Numericable’s takeover of SFR, Ono’s sale to Vodafone in Spain, or the recent joint-venture between Vodafone and Dutch mobile operators Ziggo, are some examples of this consolidation that rhymes with fixed-mobile convergence.
We should also note that an additional advantage lies, apparently, in competition authorities’ relatively positive attitude towards these mergers, as they continue to draw a distinction between the relevant fixed market and the relevant mobile market – viewing their substitutability as still imperfect at best. But national fixed-mobile consolidation has its limits: in the era of superfast access (once we move outside the ADSL market), the main alternative to the fixed integrated operator is typically the cable operator (most national cable markets are highly concentrated) – even if we must not entirely overlook alternative fibre operators which are typically found only in the largest cities, or fixed DSL operators that are subject to regulation. So there are not that many possible combinations that will enable a market’s four or even three operators to become integrated fixed-mobile operators.
Attitudes towards the Wind – 3 deal could give an indication of the DG Competition’s pull-back
A refusal in Italy after the one in the UK, itself on the heels prohibiting the merger between Telia and Telenor subsidiaries in Denmark, is being seen as a worrying pull-back of the Commission’s policy, and perhaps the end of the sector’s consolidation wave in Europe.
We need to remain prudent, however. The particular details of each M&A deal can justifiably alter national trust authorities’ or the Commission’s views. Without making a prediction on their ultimate ruling which is due before August, it is worth noting several differences between the situation in Italy and the one in the UK:
• The new O2 would have become the UK’s number one player, ahead of EE and well ahead of Vodafone. In Italy, however, Tre-Wind could continue to trail Telecom Italia by a little and be only slightly larger than Vodafone. An additional indicator is that Wind is significantly outdistanced by both Telecom Italia and Vodafone when it comes to 4G coverage in Italy.
• The deal in the UK was complicated by pre-existing infrastructure sharing agreements between Three and EE on the one hand, and between O2 and Vodafone on the other.
• British authorities were very clear about their opposition to the Three – O2 merger, whereas Italian authorities have remained discreet. The upcoming Brexit vote in the UK may have persuaded the Commission not to deviate from British authorities’ (CMA, Ofcom) positions.
And what about structural remedies?
We will add that, in certain cases, the DG Competition’s approval of a merger–acquisition deal is contingent on the parties agreeing to a structural remedy. By this we mean a remedy that requires they divest themselves of frequencies and, when applicable, of a portion of infrastructure such as cell towers, to enable the creation of a new operator and so maintain the “magic” number of four operators. We can also imagine (although this is not the first option) that the entity created by the newly merged Wind and Tre in Italy should have enough spectrum – and little opposition to their sharing their towers – to satisfy a structural remedy imposed by the Commission. We can also continue to speculate by imagining a fixed market player (and MVNO) such as FastWeb (there is no cable in Italy) interested in becoming an MNO, provided its owner, Swisscom, accepts the risks. This fictional analysis is only meant to underscore that, as in the UK, failed mobile market consolidation could open the way to fixed-mobile convergence deals.
Are cross-border deals the ultimate outcome?
In any event, antitrust authorities’ refusal to greenlight mergers will not be able to freeze an unsustainable market structure over the long term. If national market concentration raises legitimate concerns over its impact on retail market prices, there is also a danger of seeing countries and consumers penalised by growing delays in fibre and 4G (and soon 5G) rollouts, once operators have exhausted the margins of their cost-cutting schemes.
So, if national market competition cannot be made more economically efficient by domestic mergers and acquisitions, there may be opportunities for cross-border deals for some. As with fixed-mobile convergence deals, the Commission tends to take a more kindly view of them since they have a less direct impact on the relevant market’s concentration level. Of course, potential synergies are less obvious (the same number of infrastructures are competing) and the inherent risks of the deal will depend on valuation. We can nevertheless believe that, for some operators with ambitious business models, e.g. in their acquisition of TV rights, the drive to achieve critical mass could become a key objective, and one that is vital to their future.
Published in DigiWorld Economic Journal DWEJ No. 101 "Towards a single digital audiovisual market?"
Interview with Adam MINNS
Executive Director, COBA, London
Conducted by Sally BROUGHTON MICOVA
The Commercial Broadcasters Association (COBA) is an industry association whose members include digital, cable and satellite broadcasters, both linear and on-demand. The association is active on policy and regulatory issues primarily in the UK, and also in Europe.
DW Economic Journal: When the Audiovisual Media Services directive was drafted it was designed to be platform neutral, maintaining a distinction only between linear and on-demand services with the intention of future-proofing it for potential changes in technology and markets. To what extent has that held up?
Adam MINNS: The European broadcasting sector is a success story, worth more than 74.6 billion euros annually, according to the European Audiovisual Observatory. Audiences have more choice than ever before, with the number of linear channels growing across the EU and the gradual emergence of on-demand services (a recent study by the European Audiovisual Observatory put the number of on-demand audiovisual services established in Europe at 2,563) .
We therefore see no need to tamper with the fundamental principles of the directive, i.e. a technology-neutral approach that applies varying levels of regulation according to consumer expectations and the nature of different services. Indeed, radical change creates a risk of damaging the successful growth of the European audiovisual sector. That said, there is a case for a moderate level of reform regarding certain, specific aspects of the rules for commercial communications for linear services. In some areas, these are overly prescriptive and it is difficult to see the consumer purpose these are serving in a world of rapidly changing behaviour and the ability to access content from a multitude of different devices and services.
Does it still make sense to regulate linear and on-demand differently?
Yes. The directive's two tier approach to regulation has helped underpin this growth and innovation. In comparison with linear channels, non-linear services, while growing, generate a relatively small amount of revenue for COBA members, and the regulatory burden must reflect this if it is not to dampen investment. Many "Catch-Up" VoD services are loss leaders, for example, and are provided to viewers at no additional cost.
In addition, one of the directive's guiding principles, that consumers exercise more control in regard to non-linear services and therefore a lower level of regulation is appropriate, holds true today.
There have been calls to revisit the "country of origin" principle that is at the core of how audiovisual media services in Europe are regulated. How important is that principle to the business of commercial broadcasters?
Few pieces of regulation are more important for our members' businesses than the Country of Origin principle set out in the Audiovisual Media Services directive – but the key point I would like to make is the benefit to EU audiences.
For the avoidance of doubt, I am referring throughout this piece to the principle set out in the AVMS directive, not to any other directive. The AVMSD's Country of Origin rule enables a broadcast or on-demand service – licensed in one EU Member State – to be made available in another country without having to separately obtain another licence at the service's destination. Where, for example, costs and content can be shared amongst channels tailored to multiple Member States, because they comply with a single set of rules, a channel is viable for a more niche audience in each market. This creates more choice for audiences, and supports media pluralism and freedom of expression.
For example, the British Sign Language and Broadcasting Trust (BSLBT) is an organisation in the UK that, supported by broadcasters, provides sign-presented content to the deaf community. It makes a range of signed content available on its on-demand service to viewers in Member States across Europe. Deaf communities in Germany, France, Estonia, Spain and many more countries are watching this content, which is made available under a UK-based notification under the Country of Origin principle in the AVMSD.
The example of the BSLBT is from an independent report COBA recently commissioned on the AVMSD Country of Origin principle from Olsberg SPI. Olsberg are still finalising the report, but their clear conclusions are that the AVMSD's Country of Origin principle has supported the growth of the European broadcasting sector and is critical for unlocking the potential of European non-linear services. Testifying to this, some 41% of linear channels established in Europe are available under the Country of Origin rule, and 34% of on-demand services (this excludes services licensed from outside the EU).
So-called Catch-Up VoD services are particularly dependent on the Country of Origin rule. These are provided by broadcasters to give their audiences on-demand access to their programming for a given period after the original transmission. These are some of the most popular VoD services in Europe (accounting for 29% of all VoD services), but are in general provided to viewers at no additional charge, so there is a real need to keep the costs of providing them down. As you would expect, they are nearly always licensed (or notified) in the same Member State as their parent channel so they can re-use content complied for the linear channel.
Around a third of these (nearly 300 services) are made available under the Country of Origin (mirroring their parent linear services). In a situation where non-linear services were not able to benefit from the Country of Origin rule, these services would clearly be at risk.
As you might also expect, smaller Member States in particular stand to be harmed by the loss of the Country of Origin principle. According to Olsberg's analysis, 41% of linear channels across the EU operate under non-domestic licences supported by the AVMSD's Country of Origin principle. In the ten smallest markets (by population), however, that rises to 75%, reflecting the greater need for economies of scale in markets that might not be able to support a stand-alone channel. To give you an idea of the kind of range and choice these channels offer, in some smaller markets the only children's channels available are provided under non-domestic licences.
COBA's view is that the AVMSD's Country of Origin principle has underpinned economic growth, consumer choice and media plurality in the European audiovisual sector to date, and for the same reasons is set to be pivotal in the on-demand era.
What do you think are the prospects for creating a single market for audiovisual media service in Europe? Is it even desirable?
I would say that it depends on how you define single market. The AVMSD has successfully enshrined an important set of European values, providing for a minimum level of standards and protection for consumers and, through the Country of Origin principle, safeguarding freedom of speech and media plurality, and supporting innovation and the growth of Europe's creative industries, as I have outlined above. At the same time, Member States rightly have the flexibility to prioritise according to national sensibilities. The current balance seems right.
In some of your recent policy papers and consultation responses you have reported impressive growth in the investments of your members in UK original content. As some of your members are large transnational players that operate in multiple European Countries, to what extent is that trend mirrored in the rest of Europe?
These are hugely exciting times for European television content. It's almost a cliché now but television has become the new film, with a range of players all investing in ambitious, high quality original content. Funding has become more fragmented than ever before, flowing from broadcasters, on-demand services, and the production companies, not to mention public support, but that is the new reality.
The most important factor to remember is that it is a mixed ecology. Many COBA members are multi-national, but others are focused on the UK, and some are relatively small. All are investing in different ways, and that mixed approach builds strength into the overall ecosystem, which is less reliant on any one funding stream. QVC, for example, is a shopping channel, that creates 17 hours a day of live television. That high volume of production provides an exceptional training ground for crews and technical staff who go on to work across the industry. It is all part of a mixed ecology, continually building critical mass.
Our analysis of content investment has been focused on the UK so I don't have detailed figures for other Member States. But you can see that investment growing across other markets. Take, the recent European Film Market at the Berlin Film Festival, which held a television drama event to promote investment in European production. At that one event we saw announcements from HBO Europe, Sony Pictures Entertainment and Sky Deutschland involving production in Scandinavia, Germany, Italy and the UK. There is a lot more.
What can be done to boost investment by transnational commercial broadcasters in original content in Europe?
Again, I am not just referring to transnational broadcasters, but to commercial sector broadcasters generally. For COBA, there are two key factors in encouraging investment, and both take time. Firstly, encourage a mixed ecology, where a genuine range of players can grow. That increases creative competition, plurality in commissioning and strengthens the sector as a whole by diversifying funding streams. Frankly, in the world today, where so many different players are investing in content, and production more than ever relies on a patchwork of funding sources, fostering such a mixed ecology seems like common sense.
The second point I would make is to allow the industry to make content that audiences want to watch. That sounds obvious, but it doesn't always happen when companies are forced into quotas or other relatively blunt regulatory instruments. In the UK we have recently experienced something of a transformation, with non-domestic European drama now appearing on our screens in prime time slots, backed by significant marketing. Most importantly, they are achieving record audiences – most recently, German drama Deutschland '83 went out in prime time on Sunday evening and was watched by more than 2 million people.
This didn't happen to fulfil a quota; it is the result of a steady stream of high quality European dramas like Gomorrah on Sky, The Killing on BBC, and The Returned on Channel 4 – broadcast on a range of channels, including both commercial and public interest - breaking down UK audience's preconceptions about foreign-language content.
Of course, it takes time – a lot of time – to develop an industry capable of making shows that resonate with audiences on any consistent basis. I don't mean the funding, which is perhaps more available than ever now, but the creative skills. I found it fascinating, for example, that Denmark has consciously reproduced the American model of the "writer's room" and the primacy of the writer/creator, with of course its own vision. As much as anything, that creative process has established Denmark as one of Europe's key creators of high quality drama, and in the process done far more to promote Danish and European culture abroad than a quota would ever achieve.
And of course underlying these points, the principle of territoriality is still an absolute cornerstone in how production is financed, so needs to be maintained. Undermining the ability of rights owners to tailor how they licence their rights from market to market would harm their ability to generate a return, and so reduce the incentive to invest in creating that content in the first place.
Adam MINNS is Executive Director of the Commercial Broadcasters Association (COBA), the trade association for UK multichannel broadcasters and on-demand services. He leads COBA's work on a range of UK and European legislative and regulatory matters, reporting to COBA's board. He joined from Pact, the trade association for UK independent production companies, where he was Director of Policy and played a key role in Pact's work on the Terms of Trade and a range of other UK and European issues. Prior to Pact, Adam was UK film editor of Screen International, the film business publication, covering the British and European film industries. He has written for the Financial Times and the Independent on Sunday.
 The Development of the European Market for On-Demand Audiovisual Services, European Audiovisual Observatory, March 2015.
More information on DigiWorld Economic Journal No. 101 "Towards a single digital audiovisual market" on our website