The next four years are expected to be stellar for MPEG-4 AVC (H.264) video compression and DVB-S2 satellite modulation technologies, but while MPEG-4/DVB-S2 adoption is typically credited to growing demand for HDTV, much of that growth could come from emerging markets like India offering plain old standard-def DTH video.
A new study from satellite research firm NSR reckons that worldwide equipment demand for DVB-S2/MPEG-4 will grow nearly 40% a year on average between now and 2012, which works out to almost 43 million DVB-S2/MPEG-4 units sold and over $8.2 billion in sales.
Much of that will be driven by replacement sales as DTH service providers upgrade their users to HD capability, although NSR analyst and report author Carlos Placido says there will also be 'strong demand for DVB-S2 and/or MPEG-4 equipment to support a growing need to implement satellite broadband with adaptive code modulation, HITS [headend in the sky] platforms that facilitate cable digitization and telco TV, and digital media content distribution.'
Surprisingly, however, SDTV could play a role in driving DVB-S2/ MPEG-4 thanks to the Telecom Regulatory Authority of India (TRAI), which proposed new rules at the end of January for HITS and DTH services that would, among other things, require new DTH players like Reliance Entertainment and Bharti Telemedia to adopt MPEG-4 and DVB-S2 for their upcoming SD services. And while the mandate might not technically apply to existing DTH operators Dish TV and Tata Sky, they could be forced to upgrade to DVB-S2/ MPEG-4 if Reliance and Bharti prove successful.
The rules are something of a gamble in that DVB-S2/ MPEG-4 has never been a popular choice for standard-def DTH. While standard-def DTH operators can save a bundle on satellite capacity with DVB-S2/ MPEG-4, those savings are erased by the high cost of SD set-top boxes, which cost around 50% more than their HD counterparts. That won't do in a low-ARPU market like India where HDTV penetration is miniscule, which is why Indian DTH players would just as soon stick with mature and relatively cheap DVB-S/ MPEG-2 for basic SD services.
Playing for scale
But a TRAI-enforced DVB-S2/ MPEG-4 mandate could actually work in their favor thanks to the sheer potential scale of the Indian DTH market, which is also the fastest-growing DTH market, says the NSR report. India has five million DTH subscribers today and is expected to quadruple that by 2012. If it hits that target, it will have built up a subscriber base in five years that took DirecTV and EchoStar 15 years to build in the US.
That growth could in turn translate into enough demand to bring the price of standard-def DVB-S2/ MPEG-4 STBs down by lowering the market risk for STB makers and chipset companies, NSR says - not just in India.
That's assuming, of course, that TRAI's proposed rules are formally adopted. And there could be more at stake than the price of standard-def STBs, says Placido.
'Growing economic concerns in the US economy may hinder consumer appetite for HD and premium services and somewhat slow down the HD set top box replacement process,' he says. But, Placidos adds, with more economists anticipating a higher degree of decoupling between the US economy and emerging market economies, it could be India's DTH players, rather than US operators, keeping DVB-S2/ MPEG-4 development on track.