Memorandum submitted by David Elstein
I am here in a personal capacity. I have been
involved in broadcasting for more than 40 years, and for the last
decade have been a persistent voice in questioning the wisdom
and efficacy of the proposal to switch off the analogue television
system whilst tens of millions of households remained wholly or
partially dependent upon it.
Part of my critique has been based on my experience
at Channel Five, where a legal requirement to retune individual
household videos that might suffer interference from Channel Five
signals was a condition of launching the service in each transmitter
area.
We visited 10 million homes. We spent nine months
and £165 million doing so. As it turned out, the task was
almost wholly unnecessary, as only 2% of videos were ever affected
by Channel Five's signals, and a cheap blocker could have been
posted to each affected home that would have instantly halted
interference.
Retuning visits were simple: in ten minutes
or so, any video (and very few houses had more than one) could
be tuned to an unaffected frequency, or a blocker installed. A
screwdriver was the only equipment needed. Very simple training
was all that the temporary workforce required. By comparison with
this exercise, analogue switch-off (ASO) is vastly more complex,
with more potential for chaos and consumer revolt than any other
civilian project in our history, including North Sea gas conversion
and decimalisation.
The most relevant precedent was the replacement
of 405-line VHF TV transmission with 625-line UHF transmission.
That process was driven by an irresistible consumer proposition—colour
television and a third channel—not available by any other
route (unlike digital television); was aided by the prevalence
of TV rental companies, who supported the changeover (rental has
virtually disappeared these days); was eased by the small number
of TV sets in use (less than 25 million) and complete absence
of videos (which had not been invented); and was helped by the
relative speed of household replacement of TVs at that time (modern
sets can last 20 years, compared with 6-7 in the past).
Even so, we waited 21 years from the introduction
of UHF before the last VHF transmitter was switched off: at which
point a mere 15,000 homes were still dependent upon 405-lines.
Yet ASO is being launched just 10 years after
the introduction of digital, and when the number of analogue devices—TVs
and videos—numbers between 80 and 100 million, and is rising
by 5-7 million every year. The potential for consumer confusion,
dismay and resistance is huge. The potential costs are vast. The
supposed benefits are negligible. So why are we doing it?
It's important to make a clear distinction between
DSO—Digital Switch Over—and ASO—Analogue Switch
Off.
DSO is a natural process whereby consumers progressively—and
voluntarily—upgrade their television reception and video
recording equipment from analogue to digital, so as to enjoy the
greater choice and flexibility that digital offers.
ASO should be a consequence of DSO. As consumers
become less dependent upon analogue television transmissions,
broadcasters and policymakers can make informed and carefully
measured judgements as to when to withdraw analogue transmissions,
area by area, region by region.
It is a truism to say that digital broadcasting
is more efficient than analogue. Nothing follows from this as
far as the consumer is concerned. Virtually every household in
the land can enjoy the benefits of digital choice without losing
the many other benefits of analogue continuation.
As long as analogue signals are required for
the functioning of tens of millions of TVs and videos, in which
consumers have invested billions of pounds, there would be immense
consumer loss if those signals were arbitrarily withdrawn. Only
a very strong economic argument would begin to justify the great
upheaval and welfare loss that would result from premature ASO.
There is no such argument. All the evidence
is that the very modest benefits that might be derived from re-allocation
of analogue spectrum—and even those are mostly non-cash—are
overwhelmed by the cost of premature ASO, let alone the massive
disruption it would cause. The likelihood, in any case, is that
released spectrum would be re-used for more television channels,
marginally improving the appeal of just one of the many means
of receiving digital television.
Chris Goodall and Andrew Wheen have put into
their written submissions a set of considerations in relation
to both cost and practicability. The cost estimates they have
generated cover different areas.
Andrew looks at planning and building new DTT
transmitters; a decade or more of parallel transmissions of analogue
and digital terrestrial television; post-ASO spectrum re-arrangement
and upgrades; fill-in arrangements at the edge of DTT coverage;
upgrading existing analogue TVs and VCRs; upgrading rooftop aerials
and communal aerials; and managing the transition process. My
estimate of these costs approaches £8 billion.
This total absorbs both the Consumer Panel's
estimate of help to the vulnerable and Chris Goodall's estimate
of household costs of reception. It does not include his estimate
of the NPV of a proportion of the added electricity costs of using
equipment that needs to be left on all the time: £3.5 billion
is his figure.
Nor does it include a range of costs that arise
from a series of policy decisions associated with the pre-emptive
launch of digital terrestrial television—DTT—and the
pressure to deliver ASO as a consequence. These include the unnecessary
bribe to ITV to induce it to take part in the DTT adventure, with
a cost to the Treasury in excess of £1 billion; the parallel
decision to allow Channel 4 to squander the Treasury's share of
its surplus revenues on DTT transmission and new digital channels—another
£500 million; and the permission given to the BBC to launch
a raft of digital channels, which would surely never have been
granted just for transmission on cable and satellite—at
least £3 billion.
Some people have noted that if the amount spent
so far on the BBC's new digital channels—purportedly designed
to help drive digital take-up, but actually barely watched—had
instead been spent on providing free satellite dishes, digital
take-up in the UK would now be 95%, rather than 62%, and the fraught
process of ASO would look a little less daunting: though we should
never forget that figures for digital take-up only ever refer
to one TV per home, which is between a third and a quarter of
all analogue devices, nor that attaching a digital set-top box
to a video can never fully restore its current functionality after
ASO.
That 95% take-up figure, by the way, was originally
set as a pre-condition for ASO by Chris Smith in 1998. It has
now been abandoned. Ofcom currently forecasts that in 2010—half
way through the intended switch-off period—there will still
be five million homes without any digital connection, and only
41% of all TV sets will be digitally enabled: a situation seemingly
designed to engender consumer fury. Indeed, Ofcom itself notes
that the costs of ASO will be borne "primarily by some consumers
who would not purchase digital TV otherwise and by the larger
number of households who would not choose to convert secondary
TV sets and video recorders". This is the consequence of
forcible state intervention in the realm of consumer choice.
So, I repeat, why are we doing this?
The nominal reason is advanced in the government's
green paper on the future of the BBC. "27% of households
will be unable to get digital terrestrial services until the analogue
terrestrial signal is switched off. We will therefore pursue digital
switchover as the only way to ensure that the benefits of high
quality free-to-air television are available to all".
Surely there has never been such a blatant non
sequitur in a government publication. The "benefits of high
quality free to air television" are already available, through
satellite delivery, to effectively all of those 27%. Indeed, the
chances are that 30-40% of the 27% already have a digital connection,
through cable or satellite. It is bizarre that the least useful
of all digital platforms should be regarded as an essential requirement
for all consumers, irrespective of the cost of provision. DTT
offers the fewest channels and least choice, little interactivity
and only modest opportunities for upgrading to new technological
services, such as high definition.
Moreover, it is a well-attested fact that delivering
digital television to the most remote 5% of households is far
more expensive through DTT than through satellite. The optimum
number of DTT transmitters is between 80 and 120. Yet the government
is committed to the conversion of all 1,154 terrestrial transmitters
to DTT, even though the additional cost, in capital and operating
expenditure as compared with satellite, runs to hundreds of millions
a year.
So we should ask: cui bono? Obviously,
it is not the consumer or the public purse. The only real beneficiaries
are the vested interests with something to gain from ASO, led
by the terrestrial broadcasters.
It was the BBC that pursued DTT when no-one
else supported it. Suitably induced, the other terrestrial broadcasters
have joined suit. What they see is a digital platform, to which
they have been granted privileged access, which tightly restricts
the number of channels available, and so protects them against
new entrants and their audience share against digital fragmentation.
In Freeview homes, the terrestrial channels and their spin-offs
obtain nearly 90% of all viewing: by far the best outcome achieved
on any digital platform.
Channel 4 recently revealed that it captured
a 14% viewing share in 5-channel homes, 11% in Freeview, and 7%
in homes with access to 400 channels. For Channel 4, 11% is survivable;
7% not.
The BBC has a further motive. Greg Dyke revealed
in his memoirs that the primary motive in launching Freeview was
to establish a large population of digital set-top boxes without
a conditional access slot, so as to block any attempt to push
the BBC into a digital subscription (as originally advocated by
Gavyn Davies before he became BBC chairman), or any move to replace
the licence fee as a whole with voluntary subscription.
Bizarrely, the BBC currently argues that one
of the reasons for ASO is to end the unfairness of a significant
minority of licence fee payers funding the BBC digital channels
for years without having any access to them. These non-digital
households are predominantly the poor and the elderly: so the
BBC now proposes to compensate for those years of unfairness to
them by increasing the licence fee burden with which so many of
them already struggle.
At least Greg Dyke has come out against using
the licence fee to pursue ASO, which is the government's current
proposal, in which the BBC has concurred. The foolishness of involving
the BBC in the making of discretionary payments to householders
in order to assist the passage to digital is only matched by the
impropriety of using the most regressive form of public funding
in our society, whose purpose is supposedly the provision of broadcast
services, to promote a government engineering project.
Of course, politicians have been complicit in
this process from the start, persuaded that leaving the digital
future—let alone the BBC and regulated television—to
the likes of US-financed cable firms and Murdoch-dominated BSkyB
was unwise. The prospects of billions from post-ASO spectrum sales
underpinned the original DTT proposition. Those prospects, like
the idea of universal Internet access through the TV, have faded
or disappeared. Instead, we have chosen to re-invent spectrum
scarcity in the age of spectrum plenty: and tried to explain to
consumers that the enormous cost of doing so is in their interests.
Like Brer Rabbit and the tar baby, government
has become attached to ASO, and does not know how to detach itself.
Instead, plunging onward and hoping for the best is chosen policy.
Reluctant to face the odium of the potential failure of this high-risk
strategy, ministers invite the BBC to bear a significant proportion
of the most visible costs. The BBC, trying to defend its Charter
and its licence fee—and, almost laughably in these circumstances,
its independence—has succumbed.
In yet another priceless non-sequitur, Michael
Grade has said: "if the government wants to use the licence
fee to achieve an objective that is at the core of the BBC—universal
coverage, universal availability—I don't see how we can
object." That digital television already enjoys effective
universal coverage and availability does not seem to enter the
argument. As we can see, the cost of the ASO project is not just
monetary.
So we are committed to using a compulsory and
regressive tax to pursue a compulsory and regressive policy, at
least partially in defence of that compulsory and regressive tax.
On top of massive sunk costs, we will sink even more massive costs,
with open-ended consumer pain arising from an ill-thought-through
and daunting technical operation on an unprecedented scale. And
we have yet to think of a good reason for the premature imposition
of what will either happen naturally or need not happen at all.
8 November 2005
| 
