Examination of Witnesses (Questions 341
THURSDAY 8 FEBRUARY 2001
Chairman: Mr Ball and colleagues, I apologise
for the delay in starting. I should explain that two colleagues
who are also members of another Committee will join us later this
341. Would you support the Government handing
out free set-top boxes to ensure early availability of digital
(Mr Ball) BSkyB already hands out free boxes. There
is no requirement to subscribe to our television services, unlike
any other company which offers a free box. If the Government did
subsidise the boxes perhaps the best way to do it would be by
way of a voucher system where the consumer could decide which
box to use in exchange for that voucher, whether he chose digital
satellite or DTT.
342. How many free boxes have you given out
(Mr Ball) Approximately, 4 million.
343. But they are linked to subscriptions, are
(Mr Ball) Not at all. Under the Sky model one does
not have to be a subscriber; one can take the free-to-air channels
that are available on digital satellite, which is all of them
with the exception of ITV. However, one must pay for the antennae
and satellite dish installation, which is about £100. If
one subscribes to Sky that figure is reduced to £40.
344. I do not query your sales acumen, or generosity,
but the boxes are linked to a payment of some kind to Sky. Someone
who does not want to subscribe to satellite, or anything like
that, cannot just contact Sky and say that he wants one of your
lovely free boxes?
(Mr Ball) We give you the box which is yours to keep
but we charge you to install the dish, just as if you had an analogue
or DTT system where payment would be required for installation
of the aerial. The difference is that the box belongs to the customer.
If one is a Sky subscriber who decides to cease subscription one
keeps the box.
345. Given Parliament and government have taken
a keen interest in who owns the nominated news provider for ITV,
which has been translated into statute under the 20 per cent ownership
rule, why have you put together a consortium which is about 60
per cent foreign-owned? Surely, that shows a distinct lack of
political sensitivity, certainly in relation to restrictions on
(Mr Gallagher) The news suppliers are all well established
and have supplied news in one form or another to British television
services for many years. They are also subject to the impartiality
requirement and full regulation of the ITC, so there is no "content"
aspect which would suggest a public interest problem.
346. But is not one way to get round the ownership
restrictions to bring in foreign companies, which we have not
anticipated, as you appear to have done?
(Mr Rhodes) I am not sure why you suggest that it
gets round the foreign ownership restrictions; it is entirely
consistent with them. Of the consortium members, only two are
foreign companies (CBS and Bloomberg) and the other three are
347. Which are the other three?
(Mr Rhodes) Ourselves, Chrysalis and Ulster Television.
348. Obviously, you hope that that will be successful?
(Mr Rhodes) Indeed. It is a very strong consortium
for which we have high hopes.
349. Is that consortium presently in situ?
(Mr Rhodes) Yes. We have established a company, Channel
3 News Limited, and intend to submit a bid for the ITV news provider
contract in due course.
350. When is that due?
(Mr Rhodes) I believe that that is in the gift of
ITV. The existing contract runs out some time during the next
(Mr Ball) It is not the first time that Sky News has
bid for a terrestrial news provision. We bid for the Channel 5
news slot last year and lost out to ITN.
351. To what extent will digital satellite television
be able to provide regional and local television in future?
(Mr Ball) It is a matter of increasing the number
of transponders used for regionality. At present, the BBC regionalises
its coverage on DSAT. If one looks to the United States, DIRECTV
has regional output for all the major cities. It is a question
of having additional transponder space and spot beams for those
regional services. That is completely feasible, and we do it at
present with the BBC.
352. Therefore, that is not a problem?
(Mr Ball) No.
353. I understand that your sub-titling for
the deaf is not very prominent, particularly on Sky News. Presumably,
you have plans to improve that dramatically?
(Mr Ball) We have plans to do that. For the next 10
years we have undertaken that 80 per cent of all DTT programming
will be subtitled. That is something that I want to bring forward
particularly in the case of Sky News. In about a year or so I
hope we shall reach about 80 per cent subtitling on Sky News.
354. Perhaps you would expand on your submission
on ownership rules.
(Mr Rhodes) The basic position is that since the adoption
of the 1990 legislation there has been a fairly dramatic change
in both the broadcasting but, more generally, the communications
sector. Much of the media ownership controls seem to us to have
been overtaken by events. There has been a large influx of new
channels with greater diversity in both ownership and the types
of services provided. We also see the services being provided
over many different media. For example, if one looks at news provision
we have many 24-hour news channels; and we also have news available
through the Internet. We believe that much of the prescriptive
regulation is now outdated, and we look to a far more simplified
régime with a particular focus on merger control. As long
as concentrations do not exist in the market, we believe that
the desired degree of plurality and diversity can be achieved
in the media sector.
355. Do you have plans to increase your own
production of programmes on a wider scale? Sky One seems to contain
(Mr Ball) Over the past 18 months Sky has increased
the spend on original programming by about 60 per cent. We invest
a lot in original programming. We spend about £45 million
in producing sports output just in Britain. We have launched Sky
Pictures which makes films, some for theatrical release. All of
those will end up on the Sky movie channels. Our plans include
bringing UK-produced original content to our channels.
(Mr Gallagher) The Sky One budget is now over 50 per
cent original UK content, and the proportion of air time is more
than 40 per cent UK content.
356. Am I right in understanding that, regardless
of the Government's decision about analogue switch-off, you intend
to have switch-off for your own customers? If so, have you yet
decided on a date for that?
(Mr Ball) We do intend to switch off our analogue
signal. We are now down to about 350,000 customers. Given the
way that we are tracking with conversions, it is feasible to shut
down the analogue service some time in the summer of this year.
As you say, that is totally separate from the Government's plans
for analogue switchover of the terrestrial signal.
357. Have you made any estimates of what your
penetration would be by then? How many customers, or what proportion
of UK households, do you expect to have signed up by then?
(Mr Ball) As of today, people have been signed up
to 5.25 million systems, although not all of them have been installed.
By the middle of this year we should achieve about 5.4 million,
which is over 20 per cent of UK households.
358. Right up to and including the creation
of Channel 4 everybody could receive everything free-to-air. With
the creation of Channel 5, although it is free-to-air it is by
no means universally covered on analogue or terrestrial. Your
system makes a large number of stations available to viewers and
your competitors' systems are not necessarily the same as yours.
Can you confirm that in terms of audio-visual communication we
have almost certainly reached the end of universality of access;
namely, that from now on both those who subscribe and those who
do not will be able to receive only a proportion, however high,
of what is on offer? Therefore, we are moving into what is, however
large, niche audiences. For example, at the last moment you signed
up to carry E4. You have 4.5 million subscribers. I understand
that E4 would be very pleased if it achieved an audience of 100,000.
Can you confirmif I am wrong, tell me sothat that
is now the environment into which we have moved and in which we
(Mr Ball) We believe in platform neutrality. We would
be happy to carry all channels and make all of them available
to our subscribers. What you are seeing is a "nicheness"
in the case of E4 and multi-channels; that is, the absolute number
of people who watch these individual channels will appear to be
low in comparison with the days when we had just four channels.
With the exception of Channel 5 which last year increased its
share, we are seeing the multi-channel share go up and the terrestrialsthe
four channels that you spoke ofgo down. I think that in
future all platforms should be able to carry all channels and
differentiate themselves by the quality of the service or services
that they offer to their customers. I am not sure that I have
completely answered your question.
359. I subscribe to Sky digital. I cannot get
the Performance channel on Sky digital and, unless there is to
be a major change, I shall not get it. If I subscribed to ONdigital
I would not be able to get the Artsworld channel. I read that
Universal is to launch a channel for old movies called The Studio
which for the present is not to be carried by Sky but will be
carried by cable. What I should like to clarify, not in any critical
sense, is that, even taking into account the strange anomaly of
ITV not being carried by you, which damages ITV, never again shall
we be in a world where everybody automatically gets everything?
(Mr Ball) I think that you are right; it is not automatic.
For example, you referred to the Performance channel. BSkyB is
an open platform; any channel can go up on it. We cannot prevent
someone coming onto that open platform. Therefore, if the Performance
channel wants to be on DISAT it can do so. There is a conditional
access rate card regulated by Oftel which means that it can gain
access to our platform. All other platforms are closed. Therefore,
there is a potential lack of choice. Some channels will be unable
to get through that gatekeeper. We argue that if all platforms
were open any channel provider, assuming it saw a market there,
could launch its channel onto that platform. One would have a
situation in which, say, Performance could be available everywhere
should it be thought there was a market for it.