FACTORS AFFECTING ADOPTION OF INTERACTIVE TELEVISION IN SRI LANKA Bethmage Priyantha Rodrigo Perera (08/9053) Degree of Master of Business Administration in Information Technology Department of Computer Science & Engineering University of Moratuwa Sri Lanka December 2011 FACTORS AFFECTING ADOPTION OF INTERACTIVE TELEVISION IN SRI LANKA Bethmage Priyantha Rodrigo Perera (08/9053) Dissertation submitted in partial fulfillment of the requirements for the degree of Master of Business Administration in Information Technology Department of Computer Science & Engineering University of Moratuwa Sri Lanka December 2011 i Declaration I declare that this is my own work and this dissertation does not incorporate without acknowledgement any material previously submitted for a Degree or Diploma in any other University or institute of higher learning and to the best of my knowledge and belief it does not contain any material previously published or written by another person except where the acknowledgement is made in the text. Also, I hereby grant to University of Moratuwa the non-exclusive right to reproduce and distribute my dissertation, in whole or in part in print, electronic or other medium. I retain the right to use this content in whole or part in future works (such as articles or books). Signature: Date: The above candidate has carried out research for the MBA in IT Dissertation under my supervision. Signature of the supervisor: Date: ii Abstract The world we live in today is greatly influenced by mass media. In fact, it would not be wrong to say that mass media is the most powerful force in our contemporary life that has an unstoppable force and capacity to drive the behaviour of people, influence the policies of a government, cause business empires to rise or fall and dictate the technologies that takes us to the future. The evolution of mass media from its inception to the recent past has been restricted by technology to be largely a uni- directional media. The newspapers and the television, which had as its potential target audiences scaling from a large province in a country to an ultimate global viewership, delivered to the mass market what the majority of the audience would be receptive of. Advances in technology have changed this scenario and the wide availability of interactive television allows operators to offer tailor-made program packages to selected customer segments and subscribers to customize their program selections based on a completely individual preferences list. With interactive television becoming available in Sri Lanka, it is pertinent to study the interplay between market potential and sociocultural impact of this very important mass media technology. The research presented in this thesis is an in-depth study of factors affecting adoption of interactive television in Sri Lanka from the dual perspectives of subscriber and operator. One of the most noteworthy findings presented in this research thesis is the fallacy of the conventional wisdom of content driving the market. In respect of interactive television programming in Sri Lanka, the research clearly indicates this often repeated belief to be wrong. The researcher also found the local interactive television industry to be misguided in its assessment of affordability of consumers. While entry costs to the technology remains relatively affordable, the belief of operators that consumers are within an affordability range for costs in terms of selective programming is proven to be false. The research also highlights the impact on adoption of interactive television in Sri Lanka due to limited knowledge possessed by consumers on the technology. This iii scenario is further aggravated as operators have limited knowledge on the consumer attitudes to interactive television. This has led to a negative feedback structure wherein consumer uptake of interactive television is further retarded due to limited offerings while on the supply side, the operators await further expansion of customer base before investing in more services. The research presented in this thesis empirically proves the need for operators to have greater focus on cultural issues in programming instead of variety of programming to overcome adoption barriers. iv Acknowledgement This dissertation would not have been a reality without the support and cooperation from many individuals through various means. After a difficult and challenging effort, it is really a great pleasure to pay my gratitude to all of those who helped me to make this research study a success. First and foremost, I would like to extend my sincere gratitude to my supervisor Dr. Chandana Gamage, Head of Department, Department of Computer Science & Engineering, University of Moratuwa, who provided continuous and invaluable guidance beyond a Supervisor from the beginning to the end. I also extend my sincere gratefulness to Dr. Chathura De Silva, University of Moratuwa, for allocating his time for me and giving invaluable guidance at the initial stage of the research. I also extend my sincere gratitude to all other academic/non-academic staff, department of Computer Science & Engineering, University of Moratuwa, for giving their support and the guidance throughout the research. Further, my special thanks go to my MBA batch mates and other friends who helped me a lot in order to make this effort a success. Next, I would like to pay my sincere gratitude to Mr. Hemantha Welivita, Chairman, HS Communication Private Limited by giving permission to dedicate enough time for the research and providing guidance to make my research a success. Further, I would like to pay my sincere gratitude to all telecom professionals, subscribers of iTV and others who filled my questionnaires by allocating their time and gave me an invaluable feedback. Without their input, this study would not be successful. v Lastly and most importantly, I would like to thank my wife Chathu with my two kids, my parents, for bearing up with me and constantly encouraging me. Without their help and encouragement, this endeavor would have been impossible. Bethmage Priyantha Rodrigo Perera MBA/IT 08/9053. vi Table of Contents Declaration .................................................................................................................... i Abstract ........................................................................................................................ ii Acknowledgement....................................................................................................... iv Table of Contents ........................................................................................................ vi List of Figures ............................................................................................................. ix List of Tables................................................................................................................ x List of Abbreviations................................................................................................. xiii 1. INTRODUCTION ............................................................................................... 1 1.1 Background and Motivation .......................................................................... 1 1.2. Problem Statement ........................................................................................ 3 1.3. Research Objectives ...................................................................................... 3 1.4. Significance of the Study .............................................................................. 3 1.5. Research Methodology .................................................................................. 5 1.6. Nature & Form of Results ............................................................................. 5 1.7. Structure of the Dissertation .......................................................................... 6 2 LITERATURE REVIEW..................................................................................... 7 2.1. Introduction ................................................................................................... 7 2.2. History of Interactive Television ................................................................... 7 2.3. Benefits of Interactive Television ................................................................. 8 2.4. Risk of Interactive Television ....................................................................... 9 2.5. Factors Affecting Global Adoption of iTV ................................................. 10 2.5.1. Social Factors ....................................................................................... 10 2.5.2. Technological Factors .......................................................................... 13 2.5.3. Business Factors ................................................................................... 14 2.5.4. Regulatory Factors ............................................................................... 21 2.6. Global Adoption for iTV ............................................................................. 21 2.7. Reason for Non- Adoption .......................................................................... 27 3. RESEARCH METHODOLOGY ....................................................................... 28 vii 3.1. Introduction ................................................................................................. 28 3.2. Exploratory Study Approach ....................................................................... 28 3.3. Descriptive Study Approach ....................................................................... 29 3.3.1. Conceptual Framework ........................................................................ 29 3.3.2. Hypotheses Development .................................................................... 34 3.3.3. Research Design ................................................................................... 35 3.3.4. Sample Design ..................................................................................... 38 3.3.5. Data Collection..................................................................................... 40 4. DATA ANALYSIS & DISCUSSION ................................................................. 43 4.1. Introduction ................................................................................................. 43 4.2. Reliability Analysis ..................................................................................... 43 4.3. Descriptive Analysis .................................................................................... 44 4.3.1. Descriptive Analysis of Demographic Response ................................. 44 4.3.2. Descriptive Analysis of Variables ........................................................ 46 4.4. Analysis of Hypotheses ............................................................................... 63 4.4.1. Testing Hypothesis 1 ............................................................................ 64 4.4.2. Testing Hypothesis 2 ............................................................................ 65 4.4.3. Testing Hypothesis 3 ............................................................................ 67 4.4.4. Testing Hypothesis 4 ............................................................................ 69 4.4.5. Testing Hypothesis 5 ............................................................................ 70 4.4.6. Testing Hypothesis 6 ............................................................................ 72 4.4.7. Testing Hypothesis 7 ............................................................................ 74 4.5. Overall Result of the Study ......................................................................... 75 4.5.1. Market of iTV in Sri Lanka .................................................................. 76 4.5.2. Issues Related to iTV ........................................................................... 76 4.5.3. Key Drivers for iTV ............................................................................. 77 5. CONCLUSIONS AND RECOMMENDATIONS ............................................ 79 5.1. Conclusions ................................................................................................. 79 5.2. Future Directions ......................................................................................... 82 5.3. Recommendations ....................................................................................... 83 viii 5.3.1. For Operators ....................................................................................... 83 5.3.2. For Authorities ..................................................................................... 85 5.4. Future Research Directions ......................................................................... 86 References .................................................................................................................. 88 Bibliography ............................................................................................................... 91 Appendix A ................................................................................................................ 93 Appendix B ................................................................................................................ 99 B.1. Introduction ................................................................................................. 99 B.2. Testing Hypothesis 8 ................................................................................... 99 B.3. Testing Hypothesis 9 ................................................................................. 100 B.4. Testing Hypothesis 10 ............................................................................... 102 B.5. Testing Hypothesis 11 ............................................................................... 103 B.6. Testing Hypothesis 12 ............................................................................... 105 B.7. Testing Hypothesis 13 ............................................................................... 106 B.8. Testing Hypothesis 14 ............................................................................... 108 B.9. Summary of the Appendix B ..................................................................... 109 ix List of Figures Figure 3-1: Conceptual Framework ........................................................................... 32 Figure 4-1: Percentage of use of iTV service operator wise ...................................... 46 Figure 4-2: Histogram of level of adoption of iTV .................................................... 48 Figure 4-3: Histogram of level of availability of contents. ........................................ 50 Figure 4-4: Histogram of acceptability of contents.................................................... 52 Figure 4-5: Histogram of affordability of service ...................................................... 54 Figure 4-6: Histogram of socio-cultural issues .......................................................... 56 Figure 4-7: Histogram of end user experience ........................................................... 58 Figure 4-8: Histogram of operator motivation ........................................................... 61 Figure 4-9: Histogram of license and regulations ...................................................... 63 x List of Tables Table 3-1: Operational definition of variables ........................................................... 33 Table 3-2: Variables and dimensions ......................................................................... 37 Table 3-3: Population, confidence level, confidence interval and sample size ......... 41 Table 4-1: Reliability statistics for individual variables ............................................ 43 Table 4-2: Reliability statistics for individual variables with single questions ......... 44 Table 4-3: Use of iTV service operator wise ............................................................. 45 Table 4-4: Descriptive statistics of level of adoption of iTV ..................................... 47 Table 4-5: Frequency analysis of level of adoption of iTV ....................................... 47 Table 4-6: Descriptive statistics of level of availability of contents .......................... 48 Table 4-7: Frequency analysis of level of availability of contents ............................ 49 Table 4-8: Descriptive statistics of contents acceptability ......................................... 50 Table 4-9: Frequency analysis of contents acceptability ........................................... 51 Table 4-10: Descriptive statistics of affordability of service ..................................... 52 Table 4-11: Frequency analysis of affordability of service ....................................... 53 Table 4-12: Descriptive statistics of socio-cultural issues ......................................... 55 Table 4-13: Frequency analysis of socio-cultural issues............................................ 55 Table 4-14: Descriptive statistics of end user experience .......................................... 57 Table 4-15: Frequency analysis of end user experience ............................................ 57 Table 4-16: Descriptive statistics of operator motivation .......................................... 59 Table 4-17: Frequency analysis of operator motivation ............................................ 60 Table 4-18: Descriptive statistics of license and regulations ..................................... 62 Table 4-19: Frequency analysis of license and regulations ...................................... 62 Table 4-20: Correlation between availability of contents and the adoption of iTV 1-Tailed Test ...................................................................................................... 64 Table 4-21: Correlation between availability of contents and the adoption of iTV 2-Tailed Test ...................................................................................................... 65 Table 4-22: Correlation between acceptability of contents and the adoption of iTV 66 Table 4-23: Correlation between acceptability of contents and the adoption of iTV 66 Table 4-24: Correlation between affordability of services and the adoption of iTV . 68 Table 4-25: Correlation between affordability of services and the adoption of iTV . 68 xi Table 4-26: Correlation between socio-cultural issues and the adoption of iTV ....... 69 Table 4-27: Correlation between socio-cultural issues and the adoption of iTV ....... 70 Table 4-28: Correlation between end user experience and the adoption of iTV ....... 71 Table 4-29: Correlation between end user experience and the adoption of iTV ....... 71 Table 4-30: Correlation between operator motivations and the adoption of iTV ...... 73 Table 4-31: Correlation between operator motivations and the adoption of iTV ...... 73 Table 4-32: Correlation between license / regulations and the adoption of iTV ...... 74 Table 4-33: Correlation between license / regulations and the adoption of iTV ...... 75 Table B-1: Correlation between availability of contents and the adoption of PeoTV 1-Tailed Test ...................................................................................... 100 Table B-2: Correlation between availability of contents and the adoption of PeoTV 2-Tailed Test ...................................................................................... 100 Table B-3: Correlation between acceptability of contents and the adoption of PeoTV 1-Tailed Test ...................................................................................... 101 Table B-4: Correlation between acceptability of contents and the adoption of PeoTV 2-Tailed Test ...................................................................................... 101 Table B-5: Correlation between affordability and the adoption of PeoTV .............. 102 Table B-6: Correlation between affordability and the adoption of PeoTV .............. 103 Table B-7: Correlation between socio-cultural issues and the adoption of PeoTV . 104 Table B-8: Correlation between affordability and the adoption of PeoTV .............. 104 Table B-9: Correlation between end user experience and the adoption of PeoTV .. 105 Table B-10: Correlation between end user experience and the adoption of PeoTV .............................................................................................................. 106 Table B-11: Correlation between operator motivation and the adoption of PeoTV .............................................................................................................. 107 Table B-12: Correlation between operator motivation and the adoption of PeoTV .............................................................................................................. 107 Table B-13: Correlation between license / regulation and the adoption of PeoTV . 108 Table B-14: Correlation between license / regulations and the adoption of PeoTV .............................................................................................................. 109 Table B-15: Summary of the appendix B ................................................................ 110 Table B-16: Comparison of summary of the research .......................................... 1101 xii xiii List of Abbreviations Abbreviation Description ABC Australian Broadcasting Corporation DRTV Direct Response Television DTH Direct To Home DTTV Digital Terrestrial Television DTV Digital Television DVR Digital Video Recorder EPG Electronic Program Guide GDP Gross Domestic Product IMF International Monetary Fund IPTV Internet Protocol Television iTV Interactive Television PC Personal Computer PRGT Poverty Reduction and Growth Trust PVR Personal Video Recorder SBS Special Broadcasting Service SLT Sri Lanka Telecom STB Set-Top-Box TRAI Telecom Regulatory Authority of India USP Universal Service Provider VBI Vertical Blanking Interval VCR Video Cassette Recorder T-Commerce Television Commerce TRC Telecom Regulation Commission