Joint Committee on The Draft Communications Bill Minutes of Evidence


Supplementary memorandum submitted by the BBC, ITV, C4 AND C5


  This note represents the views of the BBC, ITV, C4 and C5. It is designed to supplement the written and verbal evidence of each of these organisations and provide a focussed series of amendments that we believe need to be made to the Draft Communications Bill on the issue of access/must carry. The aim of all these proposals is to guarantee universal and easy access to public service broadcasting, across all distribution systems, before switchover.

  Currently the regulatory framework ensures this for public service broadcasters in the case of digital terrestrial and digital cable, through guaranteed spectrum and guaranteed carriage respectively. But satellite viewers have no such guarantee that they will be able to access public service broadcasts on the satellite platform. Indeed, the regulator, OFTEL, has explicitly stated in its recent statement on conditional access pricing that it does not have the mandate to consider either the special status of public service broadcasters or whether it is fair that PSBs are obliged to pay huge sums to access one platform, including contributions to its set top box subsidies, whilst this is not the case on either DTT or DCable.

  These issues need addressing before switchover. Guaranteed access to the public service broadcasters will itself help create the conditions for switchover, rather than being something that can wait until after it has occurred. PSBs will need to be present on all three digital platforms to deliver universal access to viewers. Of the three, satellite is currently the platform of choice, with over 5 million households depending on digital satellite to access all public service channels. In some parts of the UK satellite is the only option available to viewers wanting to go digital.


  For these reasons we would urge the Joint Scrutiny Committee to propose the following five amendments to the Draft Bill.

  1.  Public service broadcasters must be present on all digital distribution systems, particularly if switchover is to be achieved. This should be recognised by a "must offer" obligation on the public service broadcasters and matched by a similar "must carry" obligation on packagers and retailers of satellite channels to guarantee viewers' access to public service broadcasts, together with the associated interactive elements.

  2.  Measures to guarantee access to public service broadcasts across all major digital distribution systems must be effective before switchover. This is already the case for DTT and DCable. Similar measures to guarantee access through digital satellite set top boxes should not wait until switchover and should be written into the draft Bill now.

  3.  The Government's policy document states that it is considering provisions to ensure that OFCOM will be obliged to consider the special position of public service broadcasters when regulating the price of conditional access. In our view the Bill should specify that the charging regime for public service broadcasters' access through satellite conditional access sytems be separate from that applied to wholly commercial players with no PSB responsibilities. Public service broadcasters should expect to pay the marginal cost of conditional access minus the value that their service brings to the platform. They should not be expected to contribute to the costs of set top box subsidies designed to drive pay penetration or other features of the platform beyond their control and not related to the distribution of free to air services.

  4.  The Bill should also impose an obligation on distributors or digital TV services to provide unbundled services—such as postcode data for regionality-to broadcasters. Currently public service broadcasters are obliged to purchase a conditional access system designed to protect pay broadcasts simply in order to ensure that the current regional version of their services reaches viewers. Regionality is delivered as a matter of course on both DTT and DCable, but on satellite the operator has not offered to provide the postcode data that ensures regionality, separate from conditional access. This bundling of two unrelated services should be prohibited. If public service broadcasters were able to resolve the rights overspill problems associated with satellite transmission and broadcast unencrypted they should be allowed to purchase access on a marginal cost basis to the postcode data, allowing regionality separate from any obligation to purchase conditional access.

  5.  The Bill should also require OFCOM to monitor the charging for non-pay satellite customers, to end the current excession charges. If satellite viewers who have end their Sky subscription are to continue to receive the free to air channels through their set top box, they must be issued with a separate smart card. The costs of these cards is currently born by some of the public service broadcasters and comes on top of what they already pay in conditional access charges.

  The price charged by BSkyB for the conditional access for each card for non-pay satellite viewers (again under the Oftel CA pricing regime) bears no relation to its true cost. As we approach switchover this will impose continuing excessive charges on non-pay satellite viewers or free-to-air broadcasters. Neither would be acceptable and the current charging regime will become even less acceptable as non-pay satellite viewers require new cards for each of their TV sets. In the cast of non-pay satellite viewers, conditional access should be charged at incremental cost only.

  We also thought it might be helpful to reiterate our position on the main must carry/access questions raised in the context of the oral and written evidence from the public service broadcasters and platform operators. We therefore attach a brief series of Q & A's as an appendix.


Why is the current Oftel regime guaranteeing fair, reasonable and non-discriminatory access to satellite insufficient for public service broadcasters?

    —  The Oftel FRND regime does not guarantee a carriage deal between the broadcaster and the satellite operator. It merely leads to extremely protracted negotiation, such as in the case of the BBC, which took 18 months to get agreement with BSkyB over the tools to offer interactive elements such as Interactive Wimbledon;

    —  FRND is a piece of economic regulation aiming to regulate a commercial negotiation. It applies to all channels and treats them all alike, regardless of content;

    —  The regime therefore does not distinguish between a pay TV channel, which needs to encrypt its services to raise revenue, and a public service channel which needs CA to fulfil its public obligation of delivering the right regional service to each viewer;

    —  Oftel also maintains that FRND cannot take account of the clear disparity between the three digital platforms in terms of PSB carriage, ie the fact that statutory must carry obligations exist for cable, and effectively, DTT, but not satellite;

    —  Oftel's most recent statement on CA pricing (The Pricing of Conditional Access and Related Issues, 8 May 2002) reiterates that it is not able to resolve the difficulties experienced by PSBs on satellite, as these are matters of public policy;

    —  Specifically, Oftel acknowledgdes (in Chapter 4) the various "funding arrangements, benefits and obligations in place for public service broadcasting" (eg must carry, licence fee) and suggests that if these arrangement need to be addressed "to ensure that [these broadcasters] are able to fulfil their obligations due to the costs associated with delivering content on different platforms, then that is a seperate public policy issue".

    —  Earlier in Chapter 3, Oftel stresses that it is not mandated to consider the potential distortions of having different rules for different platforms: "Oftel only has responsibility for conditional access and is not able to correct any of the other variations that exists between platforms—must carry rule, spectrum allocations, etc".

  It is our view that any new OFCOM CA pricing regime must be able to take into account both economic and public policy objectives, as discussed above.

PSBs have to pay the market rate for satellite capacity (transponders), electricity, camera crews etc, why shouldn't thay do the same for CA?

    —  Providers of electricity or transponder capacity derive no extra value from supplying the PSBs. They are simply providing a service for which we rightly pay the market rate. This isn't the case with BSkyB which has a direct relationship with UK television viewers and derives real value for their platform from carrying our channels.

    —  We do not object to paying the marginal cost of CA on satellite after the value of our channels to the platform is taken into account. Similar logic is applied by the Government to cable, where the cost of carriage is offset by the value derived by the cable operators from carrying the PSBs. The same principle must be extended to satellite. What we do object to is BSkyB being allowed to charge PSBs for a contribution to their set-top-box subsidy, something which no other pay platform operator is allowed to do. This results in the PSBs being charged tens of millions of pounds each year for CA rather then a few hundred thousand pounds that we estimate the true cost to be.

Sky claim there are differences between the platforms which justify payment on satellite. Is that true?


    —  There is nothing to suggest that the "value" of the PSBs differs from one platform to another;

    —  Sky's main point is that cable operators derive revenue from PSBs by retailing them as part of their basic packages, and that Sky does not as the PSBs are offered entirely free to air on satellite and not part of any Sky package;

    —  This situation would change under the proposal that we have put forward. The PSBs would be packaged by Sky in exactly the same way as on cable, and offered to subscribers along with other basic channels, included in the monthly subscription cost collected by Sky. Non-Sky satellite viewers would then receive a new card so that they could continue to receive the free to air channels through their satellite set top box.

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