DIGITAL SWITCHOVER & THE BBC S ROLE

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1 DIGITAL SWITCHOVER & THE BBC S ROLE Dr David Levy Controller, Public Policy BBC OXFORD UNIVERSITY, JULY

2 2

3 What s special about Digital TV? Changing standards is relatively common Gas, Currencies etc Similarities Near universal impact Strong Government role Differences with DSO Multiple players > Market Entry > New Services Belief in universal nature of TV challenged by DSO 3

4 Why Digital Terrestrial? DTT > more services today DTT > more efficiency tomorrow Spectrum returned TX costs reduce DTT > universal coverage tomorrow After DSO terrestrial coverage can increase Ends Digital divide No of Services & quality can increase 4

5 A decade of Digital Policymaking Focus on terrestrial transmission Limited penetration of Cable & satellite Consumer Familiarity Offers prospect of returned spectrum National Control Satellite not dependent on UK jurisdiction Terrestrial spectrum under UK control Avoids prospect of Satellite monopoly DTT > Guaranteed PSB availability Market entry for new pay TV players 5

6 A decade of Digital Policymaking Guaranteed access for public & commercial PSBs Lure of zero licence payments but commercial players must subsidise STBs ITV Digital platform wins Sky eliminated from partnership after EU intervention DTT Services launched in

7 The ITV Digital Saga Head on competition with Sky for pay TV is tough Rights No of channels Coverage Slow take up & payback on subsidies Robustness of signals questionable Divided management at ITV Early BBC services lack adequate investment DTT lacks a clear consumer proposition > Collapse of ITV Digital in 2002 > Creation of Freeview -Horizontal STB market -No subsidies -No pay services 7

8 The BBC Charter A new approach to PSB From services > outcome focussed purposes Sustaining Citizenship Promoting Education & learning Stimulating creativity & cultural excellence Reflecting the UK s nations, regions & communities Bring the UK to the world & the world to the UK Building Digital Britain a leading role in making digital switchover happen 8

9 Year switchover begins 2008 Border Westcountry HTV Wales Granada HTV West Grampian Scottish Yorkshire Anglia Central Meridian Carlton / LWT Tyne Tees Ulster 9

10 Why should the BBC have a leading digital role? BBC role in innovation > digital New BBC digital services PSB requires universal availability across platforms DTT Universality requires DSO/ASO 10

11 How will the BBC help take up? Services Digital channels Interactivity Promotion Industry confidence cf. Freeview Spectrum planning Support to Digital UK 11

12 Digital Purpose (1) Extending the digital network Building out DTT coverage More consumer choice of platforms Accommodating Five & S4C 12

13 Analogue TV 1150 transmitters 98.5% coverage DTT 80 transmitters 73% coverage 13

14 DTT 1150 transmitters 98.5% coverage 14

15 Digital Purpose (2) Informing the Public Communicating DSO Support for Digital UK s marketing 15

16 Dramatic change over last 8 years. Over 70% of the UK now has at least 1 DTV Digital vs Non-digital TV homes 25,000, m 25.0m 20,000, m(72.5%) 15,000,000 10,000, (17.5%) 5,000,000 (24%) 0 Q3, 1998 Q1, 1999 Q3, 1999 Q1, 2000 Q3, 2000 Q1, 2001 Q3, 2001 Q1, 2002 Q3, 2002 Q1, 2003 Q3, 2003 Q1, 2004 Q3, 2004 Q1, 2005 Q3, 2005 Q1,2006 Digital TV Homes Non Digital TV Homes Homes fully converted to digital Source: Ofcom, * Sky s interim report and BBC estimates for DCab & DTT 16

17 And Freeview is now the driving force in the DTV market and is on the way to becoming the most popular platform Digital homes by Platform m (30.3%) m (28%) Introduction FTA set top box Demise of ITV Digital Launch Of Freeview Change of Solus Card 2.8m (13.1%) m (2.5%) Q3, 1998 Q1, 1999 Q3, 1999 Q1, 2000 Q3, 2000 Q1, 2001 Q3, 2001 Q1, 2002 Q3, 2002 Q1, 2003 Q3, 2003 Q1, 2004 Q3, 2004 Q1, 2005 Q3, 2005 Q1,2006* Dcab DTT Pay Dsat (Sky) FTV Dsat Source: OfCom, Digital TV update June

18 Sales are up year every year. Box prices have fallen to below 30 with an average price of s Monthly sales set top boxes and idtvs 2002 vs 2003 vs 2004 vs Demise of ITV Digital Christmas Campaigns Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % difference v % difference v % difference v 2004 Source: GfK Lek 18Trak

19 In December % of set top boxes sold were under % Distribution of set top box sales by price (%) 1% 0% 3% 90% 80% 70% 60% 50% 18 % 9% 9% 11.8 % 40% 30% 20% 46 % 10% 0% Total Sales Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 UP TO 50 50,01 TO 60 60,01 TO 70 70,01 TO 80 80,01 TO ,01 TO ,01 TO ,01 TO ,01 TO ,01 TO ,01 TO ,01 TO ,01 TO 250 OVER 250 Source: GfK 19

20 100 The level of people with no intention of going digital has declined. Likelihood of getting digital in next 12 months % Resistors Feb 06 11% May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Definitely will not access Can't decide Active considerers Already have DK Base: All adults *Q wording changed in Nov 2003 Sample size in February 05:

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24 BBC campaigns have a real impact 100 Likelihood of getting digital in next 12 months BBC s 8 Berkoff channels Monkey 1 Monkey 2 Boxer I Boxer 2 Faces % Resistors Feb 06 11% May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Definitely will not access Can't decide Active considerers Already have DK 24 Base: All adults *Q wording changed in Nov 2003 Sample size in February 05: 691

25 Digital Purpose (3) Helping the most vulnerable TV viewers Over 75s & those with severe disabilities Funding from LF for technology neutral scheme to provide Equipment Advice Issues to resolve Quantum Structure Avoid adverse impact on WTP or LF funded services 25

26 In summary funding targeted help plus Frequency planning Support Digital UK Promote the BBC s digital channels Build out transmission network 26

27 One of the BBC s goals for the new Charter is to deliver on the promise of HD The BBC s plans: We have a commitment to produce 100% programmes in HD by 2010 We are undertaking a limited duration trial of HDTV broadcasting on all platforms (satellite, cable, DTT and broadband) 27

28 And DTT will need updating Part of the Ofcom digital dividend should be some HDTV on DTT: booming sales of HD-ready TV sets shows growing consumer demand; and anything else means digital terrestrial will be a second class platform - a poor message in the run-up to switchover. 28

29 Conclusion PSB requires universal access Digital available through multiple platforms DSO/DTT is essential to true universality BBC has a key role to play to help build digital Britain Some HDTV is essential to the long term future of DTT 29

30 DIGITAL SWITCHOVER & THE BBC S ROLE Dr David Levy Controller, Public Policy BBC OXFORD UNIVERSITY, JULY

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