Examination of Witnesses (Questions 360
THURSDAY 8 FEBRUARY 2001
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
(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
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
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
(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 servicesBBC1, 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.
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
374. And a regulator?
(Mr Rhodes) Yes; we have not suggested otherwise.
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.