Select Committee on Culture, Media and Sport Minutes of Evidence


Examination of Witnesses (Questions 360 - 379)

THURSDAY 8 FEBRUARY 2001

MR TONY BALL, MR RAY GALLAGHER AND MR MICHAEL RHODES

Ms Ward

  360. Yesterday we were told by a witness that of the number of televisions being sold at the moment only a very small proportion were digital. Clearly, the need to buy digital televisions because of the planned switch-off in future is not a message that is getting across to the public. How do you believe that people can be persuaded of the need to change? Do you think that it is just about channel provision, or is it much more than that?
  (Mr Ball) One does not need to buy a digital television to receive digital television programmes. If one has an ONdigital box, or preferably a Sky box, one can receive digital services and play them into an analogue television. I do not believe that consumers necessarily need to go out and buy digital televisions now to receive full digital services; they can be received through the box.

  361. But people are making the clear choice to buy analogue and not digital televisions?
  (Mr Ball) But it is a question of price. Digital televisions are far more expensive than analogue televisions. I venture to suggest that they are probably twice the price.

  362. Do you believe that people are moving towards digital television services because they are convinced about what is there, or essentially do they just believe that it is a matter of channel provision rather than services? Would you like to see the provision of a broader range of services?
  (Mr Ball) I believe that to make digital televisions "fly" there needs to be a more compelling set of digital channels available on DTT, and there is not. Most people would go the route of an ONdigital or Sky box where they could also receive premium channels and services.

  363. How do you believe we should encourage the market to provide those digital services rather than channels? Do you think that, for example, there is scope to encourage people to provide more e-mail or other shopping services?
  (Mr Ball) Speaking for Sky, I believe that we satisfy that in the market. One can get into digital television via a free box. The only cost involved is for the installation of the satellite dish. One receives not only the digital channels but the services of which you speak: e-mail and e-commerce services, a WML Internet browser and WAP-configured web sites. There is enough there. Five-and-a-quarter million people have signed up for the biggest digital platform in Europe by two and see it as a benefit.

  364. What is your age profile?
  (Mr Ball) The demography skews quite young.

  365. And families in particular?
  (Mr Ball) It is very popular with young families.

  366. What do we do about older people? How do we persuade them of the benefits of these services?
  (Mr Ball) We are busy trying to market them.

  367. What is your marketing strategy?
  (Mr Ball) It is a matter of demonstrating the availability of channels which are not there on regular television. It is also a matter of making the financial barriers to entry very low. If one looks at any of the pay channels, one is looking at a cost of £40 with a subscription of about £11. One has 15 times more channels than on regular television.

  368. What are the most watched channels on your services?
  (Mr Ball) Obviously, the big terrestrial universal channels are the most popular, and after that it is Sky One.

  369. In that sense, is it not difficult to try to persuade a 60 year-old to subscribe to Sky digital, or any other digital services, when effectively he or she will continue to watch terrestrial services—BBC1, ITV and so on?
  (Mr Ball) One has to educate people. When people have multi-channels the amount of terrestrial viewing year on year goes down. I think of multiplex film services where at any one time there are 11 screens running. They are attractive to the kind of demographic profile to which you refer. I agree with you that it is not easy; it is a tough market to crack.

Miss Kirkbride

  370. In answer to Mr Keen you said that you were unhappy with the recommendations in the White Paper because you thought that they had been rather overtaken by the world as it is now. Can you amplify that?
  (Mr Gallagher) You mean the question of subtitling? All the digital terrestrial television channels have the compulsory subtitling requirements through the Broadcasting Act 1996, with which Sky complies. When it comes to satellite and cable platforms, we have advocated a voluntary rather than legislative approach to subtitling. All of these channels do not have the benefit of the licence fees or universal frequencies that the traditional channels have to finance the new services. Compulsory requirements on new niche channels in particular may place burdens on a number of those channels. But Sky has a creditable record on a voluntary basis. As Mr Ball says, we plan to increase that across the platform, including Sky News in particular.

  371. When you talk about the world today being different, that does not apply to the wider aspects of the ownership of commercial television or television in general. Your concerns about the White Paper are to do only with subtitling, not the structure of ownership?
  (Mr Ball) I think that we have misunderstood the question.
  (Mr Rhodes) We are concerned about both. I mentioned briefly that the world had moved on considerably since 1990. One need look only at the number of channels that are now available. At that time Sky had a handful of channels and there were only four analogue terrestrial channels. We are now looking at a world which has about 250 television channels. The viewership of the universally available analogue terrestrial channels is diminishing. In multi-channel homes their significance to those viewers is diminishing. The prescriptive regulation put in place to control the ownership of those channels seems to be becoming less relevant as people have more and more avenues of access to information and entertainment. People are less dependent on those channels and so it is less relevant to control prescriptively who owns them. We believe that by and large that could be dealt with by merger control. Parts of the White Paper suggest that the consolidation of ITV even further than to date is an issue that could be judged solely by the Competition Commission under the Fair Trading Act. It seems to be slightly odd to single that out and yet leave in place some of the other provisions. As far as we are concerned, the evolution in the world should be seen in a broader sense. The proposed relaxation to allow a further consolidation of ITV subject to merger control can be applied more widely.

  372. So, television can be like any other company, whether it is soap or anything else?
  (Mr Rhodes) There comes a point when there are so many diverse ways to gain access to information that the uniqueness of television disappears.

  373. Do you not have any concerns in the brave new world that you have outlined for plurality of voice or the political bias consequences of perhaps having fewer media organisations? Perhaps "control" is not the right word. I have in mind the idea of something so influential being governed entirely by the market and not some sense of fairness and reasonableness?
  (Mr Rhodes) I do not think that we do away entirely with impartiality. There are requirements on broadcasters, and certainly news providers, to provide their service in an impartial way. I do not suggest that that should go but that a basic principle of avoiding economic concentrations should be sufficient to provide plurality and diversity. But that would be backed up by the requirements of impartiality.

  374. And a regulator?
  (Mr Rhodes) Yes; we have not suggested otherwise.

Mr Faber

  375. Mr Ball, you said earlier that you were happy to make your platform available to all channels?
  (Mr Ball) It is an open platform.

  376. When ONdigital was here yesterday it said that the most watched channel on its platform was ITV, followed by BBC. Presumably, as you do not carry ITV, BBC1 is your most watched channel. Can you explain a little more about the rate card for your platform and how it works? You are an open platform and so anyone can apply to be on it?
  (Mr Ball) Anyone can come up with a channel onto our platform. A conditional access fee must be paid. That figure, which was set about three years ago, was regulated by Oftel.

  377. How does that fee work? Is it a flat fee?
  (Mr Rhodes) We have sufficient flexibility under the conditional access régime to negotiate rates with individual broadcasters. What we publish is a per subscriber fee. In the case of ITV it is a per card-entitled fee, but we have the ability to negotiate that.

  378. That fee would be per 5.5 million subscribers?
  (Mr Rhodes) It is per viewer. There are a number of boxes in the market which do not subscribe. The free-to-air services are entitled for all the cards, even those for non-subscribers. That applies to the BBC at the moment.

  379. In its evidence to us ITV claimed that access to your platform would cost it £20 million a year. Is that a figure with which you agree? Are you involved in ongoing negotiations with ITV?
  (Mr Ball) We have had various meetings with ITV over the past six months or so. Yes, with the rate-card for conditional access, it could be at the top end of that.


 
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