Economic News

22 Jul 2010
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The roll-out in early September of Malaysia's second pay-TV service provider, MiTV, marked the end of local satellite network provider Astro's monopoly. At the same time, MiTV's use of internet protocol (IP) sent over UHF transmissions also marked a world first - and something achieved entirely with locally developed technology.

While some analysts are suggesting that this move might eventually give MiTV the edge in competition, others hope that it will herald more home-grown technology being brought to the market. Making Malaysia a knowledge-based economy was after all one of the messages Prime Minister Abdullah Ahmad Badawi gave at the channel's launch.

"It is not an exaggeration to say that MiTV proved that the MSC [multimedia super corridor] policy has created a suitable environment for the development of local R&D [research and development] companies with the right attitude, vision and planning," he said, highlighting the government's high-tech development policy which aims to nurture such ventures.

The new service requires that customers buy a set-top box which they connect to a UHF aerial and to their television. As an introductory offer the firm has discounted the cost of subscription, but not the cost of the set-top box, which comes in at a cool RM1188 ($315). The first four months subscription service will be free for those buying early on; the normal monthly fee would otherwise be RM68 ($18) for all the channels.

The newcomer offers programmes aimed at the diversity within the Malaysian population, hoping to carve out a niche in what is dubbed "vernacular programming".

Hence MiTV carries Malaysia's three free-to-air channels and a further 25 in local languages, including Bahasa Malayu, Indian and a variety of Chinese dialects. Another 11 channels include other languages such as Korean, French, Filipino, Thai and English.

The international offerings come from large international broadcasters such as MTV, MGM and MediaCorp. However, these well known services make up only a small part of the MiTV service. This is in part driven by the fact that Astro has exclusive rights to many leading entertainment, lifestyle, and sports channels. Yet some see Astro's reliance on predominantly international channels as meaning there is potentially a niche for more specialised programming.

With Astro's entry-level package starting at RM50 ($13), the initial price difference is apparent, although consumers must pay significantly more to receive all 51 of Astro's channels. MiTV is expected to make different value packages available, know as "tiering", after a few years of operation.

"Tiering our channel packages will not happen at first," explained Dato Rosman Ridzwan, chairman of MiTV, when speaking to OBG soon after the launch. "That will require reaching a subscriber threshold. It took Astro three to five years to tier their packages, and we are not going to do that from the outset either."

The new service initially covers Malaysia's densely populated Klang Valley area, but will be spread up the west coast and across to east Malaysia over the next six to eight months, with plans to eventually roll out in East Malaysia too.

The fact that the signal is more localised and can be moved out incrementally like this is indicative of the fact that the firm does have some operational advantages over Astro. The area covered by Astro's satellite network is by many accounts in vast excess of what is necessary, an unavoidable result of broadcasting from orbit.

The terrestrial base of UHF broadcasting means not only that the expansion of the service can be controlled along with costs, but also that the roll out costs have been vastly lower than setting up an operation involving launching satellites into space.

Many consider the RM150m ($40m) rollout fee to be quite a bargain. As well as offering a cost advantage over satellite, the digital technology also opens the door for a host of value-added services which the firm will soon start marketing.

The home-grown technology sends packets of digital information over UHF to the customers' house. Whilst much of this is taken up by the 39 television channels, the signal also carries data to the set-top box in customer's houses which can be used for internet surfing, e-mail and instant messaging with other subscribers.

The firm will also be able to offer transaction based services such as video-on-demand, music-on-demand, computer games and mobile-phone ring-tone sales. The firm is currently fine-tuning the business model and the technology before launching all the services.

Analysts and technology gurus point to a further advantage for the technology too - namely the fact that it uses IP. This effectively gives the service a lot more flexibility, especially when it comes to the ever-converging nature of mobile phone handsets and PC hardware.

"The set top box is essentially a PC in a box," continued Rosman. "With devices becoming ever more closely integrated, we can tie into using the mobile handset as the uplink unit to interact with our services, and eventually to have the handset as a recipient of the services as well."

With 3G services available in Malaysia from multiple providers, including Digi, which has close links to MiTV, the timing will soon be ripe for the technology to make the leap to multiple platforms.

Astro has already made some moves to combat the apparent threat from the newcomer though, having demonstrated TV-to-handset earlier in 2005 in partnership with its associated mobile service provider, Maxis.

For now though, the battleground is pay-TV subscriptions and the question becomes whether Astro is well enough entrenched to stifle any inkling of competition.

"There's plenty of room to be number two in pay TV", Rosman added, "but we are not really in the same trenches as Astro at the end of the day. We have different technology, different services and that means different opportunities."

The market will be hard fought though, with both firms eyeing the 13m mobile phone users in Malaysia as potential customers for future services.

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