Examination of Witnesses (Questions 192-199)
ITV
6 DECEMBER 2005
Q192 Chairman: Good morning. This is
the third of our public sessions looking at analogue switch-off
and today we are taking evidence from the commercial broadcasters.
We will be taking this in three sessions, the first of which we
are discussing with ITV. Could I welcome particularly this morning,
Clive Jones, the Director of News and Regions for ITV and Christy
Swords, Director of Regulatory Affairs for ITV. Thank you for
coming to talk to us today. Can I start by asking you to give
a general overview of the attitude of ITV to switch-off and what
you think it will mean for ITV beyond switch-off.
Mr Jones: Obviously we are totally
involved in switch-off and, more importantly, switchover, Chairman.
We are active members of the Digital UK board, which we think
has made a very good start to its work, and we recognise that
digital is inevitable. It is the future of broadcasting and we
are willing and happy to play our part in delivering that goal
so that the whole population can enjoy the benefits and increased
choice of digital television. We are currently involved in negotiations
with the transmission providers over contracts to build out the
post switch-off digital terrestrial network, and in many ways
it has opened up new opportunities for us that were not available
in the past, so we have now launched a family of channels: ITV
2, 3, more recently ITV 4, and of course ITV News. They sit alongside
ITV 1. ITV 2 is one of the fastest growing multi-channel offerings
in the UK. This new world of digital offers us a chance to explore
new commercial opportunities which we hope will enhance the viewing
experience of the people of the UK. New benefits like interactivity
and advertising hopefully, over time, will open up new revenue
opportunities for us as the biggest commercial broadcaster in
the UK.
Q193 Chairman: You have obviously
had some experience of digital previously, with ITV Digital, which
was not terribly successful. Would you tell us what lessons you
have learned from that experience and how you see the costs to
ITV of moving into the digital age and the benefits in financial
terms?
Mr Jones: It is obviously not
directly comparable. ITV OnDigital was a venture by ITV to establish
itself in pay television. Because of the nature of the technology
and the nature of the content offering that we were making at
the time and the economics of that particular business, sadly,
it resulted in failure. I think this time around one is talking
about a much more general generic process, about providing a range
of digital channels to the whole population of the UK. It is not
only about pay television; it is also about free-to-air television
and the provision of a range of signals on a range of platforms:
pay-to platforms like digital satellite and digital cable, and
free platforms like DTT and, fairly soon, Freesat. We are cooperating
with the BBC to deliver Freesat to the small number of people
who will not get the full range of DTT coverage. About 98.5% of
the population will get that and there is another 1.5% to go,
and, hopefully, we can help provide the signals with the BBC through
Freesat so that they have a continuing choice of free-to-air television.
What is it going to cost? It is going to cost us a lot of money—millions
and millions of pounds over the next five or six years in terms
of switching all our analogue transmitters to digital transmitters.
In the short term, we face the double-whammy of having to pay
and support the analogue transmitters alongside the digital transmitters.
That said, we suffer the pain now but we then enjoy the benefit
later, because, once we are switched over and we are all digital,
we think our costs of transmission will fall quite considerably.
In one sense, we are investing now for real benefits in the future
and, hopefully, benefits in terms of the viewing experience of
the general population as well because they will have increased
choice: more ITV channels, more BBC channels, more channels from
Channel 4, Channel 5 and other providers of free broadcasting.
Mr Swords: I think one of the
fundamental problems that OnDigital and ITV Digital faced was
the problem that the switchover process is specifically going
to address and that is the problem of limited coverage. When OnDigital
and ITV Digital were operational, coverage was as low as 50% for
DTT. That has now risen to about three-quarters of the population.
But we still have this chunk of the population which, until we
switch over, will not be able to get digital terrestrial—which
is of course for most people the cheapest and easiest way of converting
to digital.
Q194 Chairman: Have you made any
assessment of exactly what it is costing you to have to simulcast
at the moment?
Mr Jones: No. We are still in
close commercial negotiations with the transmitter providers.
There are still two providers. We are still in detailed negotiations
and I think it will be some months before we actually get a process.
Mr Swords: Currently, our simulcast
costs, our DTT costs, are relatively contained. The big additional
investment will come when we sign these new transmission contracts,
which in effect will build a new network for DTT over and above
the limited network that we run today.
Q195 Mr Sanders: On that point, could
you define what you mean by limited? Is that the entirety of the
transmission network?
Mr Swords: Today we have DTT broadcasts
which cover about 73-75% of the country. We do not have a comprehensive
DTT transmission system on the lines of the analogue service which
is broadcast out of 1,150 sites. We will be building essentially
that and that should broadly replicate the near universal coverage
that we get today from analogue terrestrial. That is the additional
quantum leap, if you like, that will take us to high 90s, nearly
100% DTT coverage at switchover.
Mr Jones: "Broadly replicate"
has to be taken in context. The digital map will not completely
follow the analogue map. There might be small regional variations.
That 1.5% of the population which do not get analogue signals
might be a different 1.5% which do not get digital signals.
Q196 Mr Sanders: But it will be picked
up.
Mr Jones: Yes. But, hopefully,
we can fill that in, as I said, through Freesat. I am sure, equally,
with the rapid development of technology, that phone signals,
possibly even DAB radio signals, could infill some of those areas
that may be without a digital terrestrial signal.
Q197 Mr Sanders: How do you see digital
switchover impacting on ITV's public service remit?
Mr Jones: I think this presents
not only us but the other commercial public service broadcasters,
4 and 5, with a real dilemma. In the past, public service broadcasting
in the UK has been supported by the fact that we have the BBC
with the licence fee as a major public service broadcaster and
we have had ITV 4 and latterly 5 being given free spectrum in exchange
for public service broadcasting commitments. Our spectrum charges
have fallen—they were many hundreds of millions of pounds—but
they are still £80 million a year. We are still paying considerable
sums. But our public service broadcasting commitments are costing
us around £250 million a year—that is, national news,
regional news, arts, religions, documentaries, current affairs.
Let me make it absolutely clear, we wish to remain a public service
broadcaster, but there is a dilemma going forward. At the point
of analogue switch-off, at the point of DSO, the value of the
free spectrum and, more crucially, the position of 101, 102, 103
for ITV in terms of the EPG and must-carry/must-offer obligations
contained in the Communications Act, is estimated to have fallen
to about £25 million. That is an estimate put on it, I think,
by Ofcom. So in ITV's case—and this is equally applicable
to Channel 4 and, indeed, to some extent Channel 5 with their
news obligations—we have £250 million in one side of
the scales and £25 million on the other side of the scales.
I think we need an urgent debate, a very urgent debate—and
I am sure it will happen in this Committee but also in the House
and with government—about what we want to do in this country
about public service broadcasting. Do we want a plurality of supply?
I think we do. I think it would be a desperate shame if public
service broadcasting became a monopoly activity for the BBC and
they were the only main providers of television news or television
current affairs. I would hope that we can come to a process which
would ensure that ITV, Channel 4 and 5 can continue in this way,
but it is going to be difficult, because £250 million for
ITV against £25 million does not really equate and we are
a commercial broadcaster and we have shareholders and we have
a fiduciary duty to shareholders. I think we have to have an active
process to try to work this through. Ofcom have suggested the
PSP (Public Service Provider), funded possibly by top-slicing
the BBC or an apportionment of the licence fee or possibly by
a tax on broadcasters. There may be other devices. But I think
it is very important that we start debating these issues very
soon, because we run the risk that we will not know what we have
lost until it is gone and digital switchover begins in the final
quarter of 2008 in the Border region. That probably shows it in
its greatest relief. The Border news service is unique. It is
not replicated by any other channel. The regional news service
in Border, on average, takes a 40% share every night of the week.
We are obviously committed to carrying that through, all the way
to the point of digital switchover, because we have signed licences,
so it is applicable until 2012, but whoever is running ITV in
2012 will have to make a decision, if there is not a new process
to support and buttress the plurality of PSP, whether it keeps
that rather expensive news service going or whether it chooses
to put in much cheaper programming in its place.
Q198 Mr Sanders: Can you predict,
then, if nothing happens, what public service content there is
likely to be after switchover?
Mr Jones: I could not predict
what public service content would be next year.
Q199 Mr Sanders: You say there is
a need for a debate. Presumably you must be able to predict what
the problem is.
Mr Jones: I can predict what the
problem is; I cannot necessarily predict the outcome. The problem
would be for ITV, as currently a major public service broadcaster,
that it would be faced with the equivalent of £250 million
of cost and £25 million worth of benefit. That is the dilemma
that ITV faces. I find it hard to believe that even a completely
hard-nosed commercial ITV would not wish to maintain its national
news service because that is one of the signature aspects of the
terrestrial channel. Whether it would be able or would choose
to maintain one of the most complex regional setups anywhere in
the world—we provide 27 regional and sub-regional news services,
which at six o'clock most nights are watched by between four and
five million people—I do not know. What is the benefit coming
back for that major cost? It is a cost of over £60 million
a year.
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