The Transition to Digital Television

Jerome Adda, University College London, and Marco Ottaviani, London Business School

1/01/2005
(Original Publish Date: 2004)

This paper develops a methodology to evaluate the impact of policies for the transition fromanalogue to digital television. After reviewing market outcomes and government intervention in television markets, we construct a micro-founded model of the diffusion of digital television.Television viewers can receive the digital signal only if they purchase new costly equipment for digital reception. Until the almost totality of households have converted their equipment, it is not politically feasible to switch off the analogue signal. The fact that the switch off policy is conditional on aggregate adoption introduces strategic effects. The policy makers can affect the speed of take up of digital television by: (i) controlling the quality of the signals and the content of public service broadcasters, (ii) intervening in the market for digital equipment with subsidies, and (iii) publicising the conditions and date of switch off of the analogue signal. The model is simulated to predict the impact of these and other government policies on the take up of digital television.