Joint submission by BBC, ITV, Channel 4, Channel 5, S4C, Arqiva 1 and SDN to Culture Media and Sport Committee inquiry into Spectrum

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1 Joint submission by BBC, ITV, Channel 4, Channel 5, S4C, Arqiva 1 and SDN to Culture Media and Sport Committee inquiry into Spectrum 1. Introduction and summary The above-named organisations welcome the opportunity to make a joint submission to the Committee s inquiry into Spectrum. As public service broadcasters and multiplex operators on the Digital Terrestrial Television (DTT) platform, we have a clear interest in policy about future spectrum use. As broadcasters and multiplex operators, we have played a key role in delivering consumer and citizen value, and have enabled the future roll out of 4 th generation mobile services by working to free up spectrum: Our investments and efforts in driving Digital Switchover (DSO) and the roll out of DTT have created a vibrant, free to air TV platform, highly valued by viewers. This has incentivised consumers to take up digital TV, thereby making the process of DSO much easier and so helping to free up large amounts of analogue spectrum for new uses. We have also co-operated fully with Ofcom s process to amend the post-dso spectrum plan so as to clear DTT from the 800 MHz spectrum band thereby directly enabling the auction of the 800 MHz spectrum for mobile uses on a harmonised basis. The multiplex operators are investing hundreds of millions of pounds to build out a universal DTT network, and the public service broadcasters and multiplex operators have funded the management of the Digital Switchover (DSO) programme by Digital UK. Consumers have made significant investments in DTT reception equipment with more than 65 million digital TV Freeview devices sold in the UK. Consumers have made these investments based on the Government s promise to deliver universally available television via DTT they will therefore expect continuity of service. 1 In addition to this joint response Arqiva has a separate response that addresses specific matters relating directly to the use of spectrum for the provision of mobile internet services. Page 1 of 6

2 At set out in Section 2 below, we have continued to deliver on the viewer interest through services on the DTT platform, and have evolved the platform to deliver new HD services via existing spectrum. Looking to the future, we consider that any spectrum release process whether that carried out by Ofcom in relation to the spectrum released by DSO, the Government s public sector spectrum release process, or any future release programmes needs to take full account of the interests primarily of DTT viewers (as well as of broadcasters and multiplex operators). In this regard, Section 3 of this submission proposes a series of principles that we believe should underpin the future of the DTT platform. However, and as we highlight in Section 4 below, there is a significant risk that these principles will be undermined by the planned 800 MHz auction process, as new 4G mobile services in the 800 MHz spectrum are likely to create significant interference for DTT viewers with Ofcom s analysis suggesting that 760,000 UK households could be affected. Given the potentially significant impact on DTT viewers, we believe that the Committee should urge Government and Ofcom to ensure that interference is managed proactively i.e. before it affects consumers and ideally by putting in place guard bands to ensure that DTT is properly protected. 2. The DTT platform delivers significant consumer and citizen benefits DTT is a highly successful broadcast platform, which delivers very significant value to UK consumers. Importantly, all indications are that DTT will remain highly important to UK viewers for the foreseeable future: Take-up of DTT: DTT is the most popular UK television platform 2 : As at the end of 2010, 92.5% of UK homes have digital TV on at least the main TV set DTT is the most common digital TV platform, providing the primary means of receiving TV for 39% of UK homes and almost three quarters of UK homes use DTT on a primary or secondary set More than 65 million digital TV Freeview devices have been sold in the UK Key driver of platform competition and economic value DTT has brought with it a huge expansion of choice (via both the PSB and the Commercial multiplexes), with new services available for free to virtually all of the UK. Indeed, we note that, prior to DSO, DTT was considered so important that Parliament required the PSBs to build out the DTT platform to 98.5% coverage (the same as analogue television). DTT drives significant consumer value and competition particularly for households unwilling or unable to pay for subscription TV, and for the great majority of multi-set households. In the absence of a DTT platform of scale, platform competition would be weakened, to the detriment of UK consumers. DTT is an open, gateway-free platform, offering both free and pay services. 2 All data in the sub-bullets which follow are from Ofcom Digital TV Update, Q Page 2 of 6

3 DTT has created wider economic benefits, by stimulating a horizontal consumer equipment market. Further, in 2010, 40% or c. 1.3bn of the TV advertising market was delivered via DTT (enabling brands to reliably reach mass audiences and to drive product sales) 3. Efficiency and innovation The UK s DTT multiplex operators are committed to investing hundreds of millions of pounds in the platform. The transmission contracts with Arqiva run significantly beyond the current multiplex licence periods, with the costs spread over a longer period in order to reduce risk. The broadcasters and multiplex operators investment in the DTT platform is creating a universally available free to air TV platform, and in so doing has enabled the release of 156 MHz of spectrum freed up by Digital Switchover. The DTT multiplex operators have worked together and with Ofcom to introduce HD services in the existing spectrum, using the most advanced and efficient technologies (DVB-T2 and MPEG-4) to enhance the platform in the interests of viewers. By innovating in this way, DTT has continued to drive platform competition including helping to drive innovation by pay TV operators; has brought new technology to everyone in the UK (thereby addressing the digital divide); and has used new services to incentivise consumers to take up digital TV thereby enabling the freeing up of large amounts of analogue spectrum for new uses. Looking to the future, all indications are that the DTT platform will be of enduring significance for the next decade and beyond: Future DTT take up Forecasts suggest that DTT will account for c.40% of primary set homes in 2020 and, including secondary set connections, will remain the single most popular TV platform (55% of all television sets) 4. Future content preferences We expect that demand will continue to be strong for production and broadcasting of live news and events such as the Royal Wedding and General Election debates and other mass-audience event TV that brings the nation together. Linear broadcast of such events and programming will continue to be important, and DTT as the key free to air platform of scale will be central to enabling access to these events by viewers unwilling or unable to pay for subscription TV. Future technologies: HD is likely to become even more important in the future as the standard for all TV sets and the norm for content production. Consumers are likely to expect at least their main channels to be broadcast in HD on a free to air basis, and so the role of DTT will be critical here. 3 Based on an allocation of 2010 TV Net Advertising Revenues, by platform according to the volume of adult commercial impacts delivered 4 3Reasons Limited 2011 Page 3 of 6

4 Whilst we expect only modest growth in demand for 3D TV, it has the potential for unexpectedly high take-up. There will be some demand for major events broadcast in 3D, requiring flexibility to enable it to be offered on an ad-hoc basis. 3. Key principles for the future of the DTT platform In light of the very significant benefits delivered by the DTT platform, we consider that any consideration of the future of the platform and UK spectrum policy more generally needs to be informed by the following five principles: i) Meeting consumer expectations: As set out above, consumers do (and will continue to) place significant value on DTT services, and indeed consumers have made significant investments in DTT reception equipment. They will therefore expect continuity of service, and it is in the public interest that these expectations are met. ii) Securing platform competition: In the absence of a DTT platform of scale, platform competition would be significantly weakened thereby creating consumer detriment. DTT must retain the ability to compete with the other, predominately pay-tv platforms. iii) Safeguarding infrastructure investment: As set out above, the UK s DTT multiplex operators are investing hundreds of millions in the platform. These investments are of such a scale that the multiplex operators should have sufficient certainty that the investments will be safeguarded in order to enable an appropriate return on investment. This is line with the Government s Principles for Economic Regulation, which state 5 : the framework for economic regulation should provide a stable and objective environment enabling all those affected to anticipate the context for future decisions and to make long term investment decisions with confidence the framework of economic regulation should not unreasonably unravel past decisions, and should allow efficient and necessary investments to receive a reasonable return, subject to the normal risks inherent in markets iv) Enabling evolution of the platform: We recognise that the DTT platform needs to evolve in order to continue to deliver consumer benefit in order to enhance the platform going forward, this may involve improving spectrum efficiency over time and harnessing new technologies to deliver further HD and 3D services.. v) Supporting the delivery of public service content: Public service content is of enduring value to UK citizens. Therefore, any decisions about the future use of DTT spectrum also need to consider the implications for the funding of PSB 5 Page 7 of BIS, Principles for Economic Regulation, published April Page 4 of 6

5 content we consider that Ofcom should ensure that its recommendations seek to maintain and strengthen the quality of PSB in the UK. In summary, we expect the DTT platform to remain very attractive to consumers although it may need to evolve to offer enough HD services, some 3D opportunities, and an interactive complement. We therefore consider that UK spectrum policy needs to take full account of the principles set out above. 4. Interference to DTT from new 4G mobile services in the 800 MHz band It is possible, however, that Ofcom s process to release the 800 MHz spectrum will undermine the above principles due to the fact that, as Ofcom s own analysis has demonstrated, new 4G mobile services in the 800 MHz spectrum will create significant interference to DTT reception. It is useful in this context to recap on Ofcom s own policy position as set out in Ofcom's statement on "Digital Dividend: clearing the 800 MHz band", published on 30 June 2009 that disruption to DTT viewers must be minimised. Specifically, Ofcom made clear (at paragraph 1.16 and elsewhere in that document) that it is "very important to protect the integrity of the DSO programme and ensure that any disruption to DTT viewers is minimised". In this regard, it is worth highlighting two of Ofcom's DTT migration criteria, namely: "existing authorised and planned users of channels 61 and 62 should not bear extra costs that must reasonably be incurred in order to clear the spectrum" "any solution should be consistent with existing policy objectives for DTT coverage after DSO, and the process should aim to minimise the impact on viewers of broadcasts from the existing DTT multiplexes" These criteria mean that the existing DTT multiplex operators should not bear additional costs as a result of this process, and arguably most importantly in the current context that DTT coverage should be maintained, and disruption to DTT viewers should be minimised. Ofcom stated (at paragraph 1.17 of the above-named statement) that: "We have therefore decided to adopt the DTT migration criteria and we will develop plans for implementation [of the 800 MHz clearance programme] with reference to these." Given this commitment, it would be inappropriate if Ofcom were now to implement the 800 MHz award in such a way that would permit significant and harmful interference, and which would therefore undermine the consumer benefits delivered by the DTT platform. However, Ofcom s consultation on co-existence of new services in the 800 MHz band with DTT television (published on 2 June 2011) set out Ofcom s own analysis that Page 5 of 6

6 new 4G mobile services could adversely affect DTT reception in 760,000 UK households. As far as we are aware, the 800 MHz award represents the first time in the UK that a regulator will license a new service knowing in advance that the new service will adversely impact on an existing service, and moreover that the regulator has expressed a view in advance that it is acceptable for some users of the existing service to have their access to that service either impaired or completely removed. In the past, conditions would have been placed on the new licensee requiring it to protect existing services rather than to adopt post-event mitigations as Ofcom is now exploring. In contrast to Ofcom s apparent approach, we consider that the appropriate starting point would be for Ofcom to put in place effective intervention to prevent interference before it happens. We consider that the ideal solution would be to put guard bands in place to ensure that DTT is properly protected and that any deviation from this approach would have to be clearly justified. It is also important to be clear that managing viewer issues for DTT interference is likely to involve questions of a significantly different kind to those that have arisen during the DSO process. Whereas switchover concerns events on specific dates, with any side issues arising primarily in the weeks and months following the specific DSO date, DTT interference will be much more complex and could happen over a period of many months or even years. Therefore, if Ofcom decides not to implement guard bands to minimise the interference risk, due to this complexity we consider that the licences for new services in the 800 MHz band should contain stringent information, notification and staggering provisions around the roll-out of new services, so as to ensure that there is sufficient time and scope for effective consumer communication and remedial action. Helpfully, Ofcom has expressed its intention to work with DTT stakeholders, Government and new licensees in the 800 MHz band to ensure that DTT is properly protected, through the appointment of a single organisation to manage the DTT interference issues. Ofcom is currently consulting on its high-level approach, and intends to issue a further more detailed consultation later in 2011 regarding the DTT protection body. We hope that DTT interference will be properly mitigated, and therefore that adverse consumer impacts will be minimised. However, we would urge the Select Committee to keep a watching brief on this issue, and to encourage Ofcom and Government to ensure that new mobile services do not create a threat to the very significant consumer and citizen value delivered by the DTT platform. Page 6 of 6

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