Memorandum submitted by NTL
1. INTRODUCTION
TO NTL
1.1 NTL is a major communications company.
It has three operating divisions which provide services to homes
and businesses in the UK and Ireland.
NTL Home provides telephony, internet and television
services to 3 million residential customers. NTL Business provides
a range of telephony, data and internet services to business customers
and public sector organisations and NTL Broadcast is the leading
provider of broadcast transmission services for television and
radio (both analogue and digital) in the UK.
NTL is playing a major role in the growth of
broadband in the UK and in the spread of digital television. NTL
is the largest broadband internet service provider in the UK with
over 1 million customers.
Following a successful recapitalisation programme,
which was completed in January 2003, and under the leadership
of a new senior management team, NTL has now delivered five consecutive
quarters of growth and announced break-even operating income for
the first time in May 2004.
2. DIGITAL TELEVISION
TECHNOLOGIES
2.1 As a provider of television services,
NTL's primary objectives are:
— to provide its customers with choice
and value for money - choice in this context refers to the widest
possible choice in the number and range of channels available;
and
— to exploit available opportunities
to extend its own coverage (and hence provide services to customers),
outside the confines of its existing franchise areas.
2.2 Today, digital television is delivered
to customers via three platforms, namely:
However, broadband technologies using the local
loop can provide an additional mechanism for delivering digital
television into residential and business premises.
In many homes and businesses broadband digital
subscriber line ("DSL") technologies are already being
used to deliver high speed internet access services over the telephone
line and the technology exists to deliver digital television services
in a similar manner. However, there are some fundamental differences.
2.3 The majority of broadband internet services
provided over the telephone line are delivered via a wholesale
agreement with BT. In practice, the telephone line from the customer's
premises is connected to BT's own DSL equipment located in the
local exchanges. This equipment is capable of delivering broadband
internet services but not digital television (it should be noted
that although "streaming video" is possible over the
internet, the services are of variable quality).
2.4 To enable the delivery of broadcast
quality television services, the "broadcaster" would
need to install its own equipment in the local exchanges and the
customer's telephone line would need to connect to this equipment.
This process is known as Local Loop Unbundling ("LLU").
This equipment would also enable the delivery of other services
over the same, single, access circuit.
2.5 The services delivered could include
digital television, video on demand, interactive electronic programme
guides and rich interactive environments coupled to micro-payment
systems suitable for online purchases, gambling and premium content
delivery. Services not directly associated with broadcast television
delivery would also be possible. These could include high speed
internet, voice and video conferencing services. The combination
of digital television and high speed internet enables an especially
rich interactive environment ideal for both education and entertainment.
The provision of fixed link, high speed, two-way
connectivity between the "broadcaster" and the viewer
will always provide the most flexible service delivery environment.
Satellite and terrestrial systems have a broadcast capability
but in order to provide interactivity and a rich, multi-service
environment where traditional broadcasting is mixed with internet
and telephony services, they require an additional communications
link. It is possible, therefore, that satellite and terrestrial
systems will remain confined to the delivery of digital television
with only limited scope for the provision of interactivity and
other services whereas a combination of digital television and
a rich, multi-service environment will be provided via cable and
local loop broadband. This provides excellent service choice and
variety for the consumer, coupled with competition at the service
provision level.
2.6 A number of telecommunications companies
elsewhere in Europe have successful deployments of "broadband
television"—eg France Telecom, Deutsche Telekom and
Telefonica. The countries where deployment has been successful
are those which are also leading Europe in the unbundling of local
loop access. In the UK, which is lagging behind many European
countries in LLU, "broadband television" has, so far,
been less successful. Only one operator, "HomeChoice"
has created a business around the delivery of "broadband
television" although reports suggest that it has struggled
with its business model. The main barriers to successful and economic
service delivery have been the costs associated with LLU and the
location of equipment in BT exchanges. If the UK is to have a
viable "broadband television" capability, the current
model for LLU will require considerable improvement.
3. NTL'S PERSPECTIVE
ON THE
RENEWAL OF
THE BBC CHARTER
3.1 NTL is a carrier of television channels
and does not create or provide television content itself. It has
commercial carriage agreements with numerous channel providers
and its relationships with the public service broadcasters, including
the BBC, are set against the backdrop of the "must carry"
provisions contained in the Communications Act 2003 ("the
Act"). It is probably true to say, therefore, that some of
the issues on which the Select Committee will be hearing evidence
concerning the future of the BBC, affect NTL less than other parties.
3.2 That said, NTL recognises the unique
role which the BBC has played and continues to play in the lives
of UK citizens and the respect in which it is held throughout
the rest of the world. NTL believes that a healthy and adequately-resourced
BBC will continue to have a key role in delivering public service
broadcasting ("PSB") benefits for the foreseeable future,
including after analogue switch off.
3.3 Moreover, NTL believes that the BBC
also has the potential to play a key role in promoting the take
up of digital services and, to use a phrase coined by the Office
of the e-Envoy, in promoting a "Digitally United Kingdom".
The BBC's recent initiative, as part of the D-Day commemoration,
to encourage people to post details of their wartime experiences
on the People's War section of the BBC website, is a good example
of incentivising people to participate in a digital environment.
NTL understands, from a discussion with Age Concern, that this
initiative produced significant interest among elderly people
and gave many elderly people their first experience of using the
internet.
3.4 But this is an example, albeit a very
commendable one, of the BBC driving usage of its own website.
In NTL's view, a question which needs to be addressed is whether
the BBC should have a broader remit to support and encourage other
digital services through the provision of access to its key content.
3.5 There has been debate concerning the
length of any future Charter for the BBC. While NTL acknowledges
the force of the argument that a 10 year Charter provides certainty
and stability, not only for the BBC but also in the context of
the wider broadcasting market, NTL notes that this is out of step
with the duty of Ofcom to carry out a review of PSB at least once
every five years. This raises the question whether it would be
possible to take corrective action under an existing Charter if
Ofcom identifies a problem with the BBC during the course of one
of its own reviews?
3.6 As mentioned above, NTL's relationships
with the public service broadcasters (including the BBC), as a
carrier of their services, are set against the backdrop of the
"must carry" provisions of the Act. So far as the BBC
is concerned, NTL has an obligation to carry all licence fee-funded
services.
NTL expressed some concerns during Parliamentary
debate on the Act at the prospect of an ever-growing list of "must
carry" channels because, even in a digital environment, capacity
constraints on networks do not disappear entirely. The current
"must carry" channels and associated interactive services
are heavy users of bandwidth and NTL incurs significant cost in
providing the necessary capacity on its networks. The public service
broadcasters claim that they are neither able nor liable to pay
or to contribute towards these costs.
A particular concern highlighted by NTL was
in relation to the opportunity cost incurred in carrying any further
"must carry" channels at the expense of other services.
Although the Minister gave assurances that, before adding any
new services to the list of "must carry" channels, the
Secretary of State would take the issue of opportunity cost into
account, the Government preferred not to include this within the
Act itself.
None of this detracts from NTL's support for
PSB and, indeed, NTL sees itself as an important partner of the
public service broadcasters, including the BBC, in achieving high
audience reach for their services. However, while the carriage
of channels in a "must carry" environment continues
to take place in a non-commercial, non-negotiated context, NTL
must retain the flexibility it needs to deal with as many other
channels as possible on a commercial basis.
NTL is conscious of the debates which are taking
place concerning the future funding of PSB and, specifically in
the context of the Select Committee hearing, the future funding
of the BBC. NTL believes that if certain BBC services were no
longer funded from a licence fee and, for example, BBC Three and
Four became subscription channels, the consequence would be that
these would be removed from the "must carry" requirement.
18 June 2004
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