Freeview. Response to Information Request: Digital Terrestrial Television Broadcast Licences

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1 Freeview Response to Information Request: Digital Terrestrial Television Broadcast Licences 30 th May 2014

2 1 Introduction This document is Freeview s response to the Ministry of Business Innovation & Employment information request. Our submission concentrates on Freeview s direct concerns -- the allocation principles for the use of digital broadcast spectrum after Digital Switchover, with particular reference to the future requirements of free-to-air broadcasters. Freeview welcomes this opportunity to provide information and asks that we be advised as soon as possible of the process and timetable of the consultation processes that we presume will follow.

3 2 Freeview and free-to-air broadcasting 2.1 Background to Freeview After extensive industry-wide consultation and planning, Freeview was established as New Zealand s free-to-air digital television and radio platform and to create an equitable transition from analogue to digital free-to-air television. Freeview ensures that those television and radio services are free at the point of access, are available to all New Zealanders in the digital age, allows for parallel supplementary broadcast IP systems, and ensures there is room to add new broadcast services (HD/3D/4K) and content. The national network broadcasters on the Freeview platform currently are TVNZ, MediaWorks, Maori Television, ParliamentTV, CUE Television, Al Jazeera English, CUE TV, Firstlight, Shine TV, Sommet sports television, TVSN, YESSHOP, TheShoppingChannel, Chinese Television, Sky Television (Prime). The regional broadcasters are Television Media Group, Channel North, CTV, Ch39 Dunedin, East Coast Television, TVHB. Radio services using the Freeview platform are Mediaworks, BASEFM radio, and Radio New Zealand.

4 The positive consumer response to Freeview is evidence that New Zealanders want free-to-air digital television and radio services % of New Zealand homes are using at least one Freeview device for their Television viewing. Source: Nielsen CMI Q MASTER Weighted by: Population The Nielsen Company 14 February 2014 / 15:44 Freeview s two principal and continuing objectives are: To provide consumers with alternative means of access to digital services, and to distribute compelling digital content independently provided by the free-to-air (FTA) broadcasters in a manner which supports national identity. To facilitate open competition in FTA digital broadcasting on terms that are fair, reasonable, transparent and non-discriminatory. Meeting these objectives depends on the broadcasters continuing to enhance their existing services and developing new services in terms of quality (more High Definition (HD) and 4k/3D services) and diversity (more channel choices). These developments

5 will provide niche viewing alternatives in the regional, cultural, multi-cultural, and special interest programme genres. Freeview therefore needs to provide the whole FTA sector with the platform enabling each broadcaster to make their own choices about the nature and pace of their expansion. This, in turn, means the availability of enough spectrum to allow for these developments, both from broadcasters who hold their own licences and those that acquire them from third parties. What is not known is when these new services will be launching and further investigation and consultation is needed to determine the timing of this future demand. 2.2 The future Innovation has been rapid in the international markets that have completed DSO. Major productions are now almost all recorded in HD format, and 4K television distribtion is being trialled in the United States. The result is improved creative and content opportunities and the improved experience demanded by viewers. The technical convergence of IP and traditional broadcast delivery systems is also welladvanced. The combined impact of these developments will reach New Zealand well within the life-span of the frequency decisions being discussed. Exhibit 1 illustrates the significant rate of growth of HD enabled households in developed markets with New Zealand also experiencing a similar rate of growth in HD enabled TV s ; the difference being in the number of DTT HD services we have a available FTA is low when compared to other countries.

6 Exhibit 1: the majority of homes in the UK, US and Australia have HDTV s and HD services Source: Ofcom research, September 2013 Broadcast delivery systems will continue to provide the most cost-effective way to distribute large amounts of video data e.g. HD / 3D / 4K pictures with surround sound; to this expanding household market. This mass distribution system will be complemented by IP-based delivery systems that are effective for delivering shortform programming services e.g. catch-up TV and genre-specific services to niche audiences. DTT network capacity will ultimately need to be expanded to deliver these benefits. The timing and extent of the transition to HD and IP-based delivery is, however, a matter for each broadcaster providing the services. Freeview believes that the public policy decisions on frequencies and their allocation should allow each radio and television FTA broadcaster to innovate in a way that facilitates competition for consumers and enhances the commercial health of the broadcasting sector. This, we believe, reflects the public interest more significantly than the modest revenues to the Crown from the immediate sale of frequency licences.

7 3 Demand for spectrum 3.1 The Freeview perspective At DSO Freeview had delivered more than 60% household penetration to the broadcasters using the platform. Sustaining this public access to free content depends on the broadcasters themselves keeping pace with technology opportunities and delivering more viewer choice and diversity. Uncertainty amongst broadcasters about the future provision of sufficient spectrum (bandwidth) to allow for the services and technologies described above means that the Freeview proposition for consumers will remain incomplete. Existing broadcasters on the platform, and new entrants, could lead to the situation described in Exhibit 4 (below). The current and potential future use of spectrum illustrates the importance of ensuring that the licenses are allocated in a manner that guarantees continued consumer access to the developing FTA services. Note :- there is still unused capacity on the WTV/K2 mux. Exhibit 4: - Current and potential service allocation delivered by DTT Spectrum allocation with future development for new FTA services and existing FTA SD moving to HD TVNZ TVWorks Kordia 1/JDA WTV/Kordia 2 Igloo Te Putahi Paoho Regional Broadcasters TBC TBC TBC TVONE HD TV3 HD MTS SD TVSN SD All SD services Existing SD HawkesBay( Existing SD Existing SD service to HD Freeview) service to HD service to HD TBC TV2 HD FOUR SD PTV SD CTV9 SD Existing SD Timaru(Non service to HD Freeview) Existing SD Existing SD service to HD service to HD TV2+1 SD TheEdge TV SD Prime SD YESSHOP SD New HD service Nelson (Non Freeview) Existing SD Existing SD service to HD service to HD TVONE+1 SD TV3+1 SD CTV8 SD AJE SD FOUR+1 Regional SD(CUE, CTV, TV33 etc) APNA SD Firstlight SD tbc Sommet sport SD tbc Choice TV SD tbc

8 3.2 Allocation and management of additional spectrum licences In the major European markets spectrum has been ring-fenced to allow for broadcasting expansion. This avoids the situation where the additional spectrum released at DSO is auctioned and broadcasters are outbid by companies whose business models allow them to make significantly higher commercial bids, and who can manage longer-term capital risk. Freeview therefore recommends that all of the potential license sets be guaranteed by the Crown for broadcasting use only, with the allocation of capacity on these license sets being made by an independent third party authorized and monitored by the Crown. We therefore recommend that MBIE, in formal consultation with broadcasters, review the international experience and precedents relating to the allocation of spectrum to provide for the future growth and viability of the FTA sector. 3.3 DTT coverage and interference The lack of consistency in DTT coverage is affecting viewer households in some areas. The best solution to these issues is not yet clear, and Freeview therefore recommends that no decision is made on the allocation of the remaining spectrum until any and all re-stacking and other wash-up matters arising from DSO have been resolved to the satisfaction of the Ministry and Freeview. There is also conflicting evidence on the likelihood of interference from 4G devices and transmission. Freeview also recommends that a decision on allocating spectrum is delayed until after 4G services have been launched and consumer devices are in regular use.

9 4 Feedback on options The Freeview position is that allocation of the FTA spectrum should be made on a public benefit basis that will result in continuing growth in the number and quality of services available to viewers on the DTT platform. 4.1 Option 1 Allocate full nationwide licence sets only, to individual parties. There is still capacity on existing licence sets. Until broadcasters have enough information about households passed and connected to the UFB it is too early for them to commit to the mix of services they would spread across the two delivery systems. Our point at 3.3 (above) also applies. 4.2 Option 2 Allocate full nationwide licence sets, shared amongst a consortium of parties. This could suit individual parties that wish to broadcast fewer than twelve standard definition channels. This approach would make it extremely difficult and expensive to provide service information (SI) and the EPG. It is only possible to deliver this information at a mux level, so viewers would not have access to a universal and complete EPG or be able to record content. 4.3 Option 3 Allocate individual licences for particular transmission sites (regions). This could suit regional broadcasters There would be significant viewer impacts unless these broadcasters were on the Freeview platform. Apart from Sky s pay platform Freeview is the only one with significant consumer uptake and a nationwide EPG. Further, Freeview is an open platform, and access to its EPG is non-exclusive, non-discriminatory and selfregulated.

10 4.4 Option 4 Pricing Freeview does not own and will not purchase spectrum licences, and does not provide transmission services using those licences. We believe that all broadcasters should be treated on the same terms (including price) for the same spectrum right, with the benchmarks being the current licences. 4.5 Option 5 Implementation requirements Use or lose is essential to prevent broadcasters, or anyone else holding licences, limiting competition, creating or reinforcing dominance in the provision of any broadcasting-related service or hoarding spectrum. We do not support the creation of a secondary market for the allocation of broadcasting spectrum. 4.6 Option 6 Normal licensing process This needs clarification. Although DSO is complete, we do not agree that the allocation authority and process for broadcast spectrum should immediately revert to MBIE. Freeviews preference is noted at 3.2.

11 5 Summary Licenses should be allocated in a manner that guarantees continued consumer access to developing FTA services (HD/3D/4G and new content services). There is currently excess supply of spectrum however this will be filled but it is unclear as to the timeline for this. The license sets remain as they are currently configured and are not split up Consideration should be given to an independent entity to allocate licenses as the demand for new services is realised. Freeview recommends that MBIE, in formal consultation with broadcasters, review the international experience and precedents relating to the allocation of spectrum to provide for the future growth and viability of the FTA sector.

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