Examination of Witnesses (Questions 380-399)
ARQIVA, NATIONAL
GRID WIRELESS
20 DECEMBER 2005
Q380 Chairman: Which of you is going
to have responsibility for the new masts which may have to be
erected?
Mr Holebrook: Any new masts that
are erected will have to be erected at the same site as the existing
mast. There may be a situation where one or two new masts may
need to be erected to fill in for communities and that is an issue
that will need to be resolved as we go forward. They are not going
to be very large masts in those circumstances. Replacement
masts are due because of the need to make the masts stronger and
support the additional equipment which will be located at the
same location as the existing infrastructure and therefore will
be the responsibility of the existing site owner to provide.
Mr Marshall: In addition to that
we may have to offer reserve masts whilst we dismantle and decommission
certain equipment.
Q381 Mr Evans: And the old masts
will then be moved as a responsibility of the owner of the site,
will they not?
Mr Holebrook: That is right.
Q382 Mr Evans: As far as the timetable
is concerned, is it realistic?
Mr Ward: The timetable is certainly
challenging but we do believe it is achievable in terms of building
out the infrastructure. As Mr Holebrook said, we have been ramping
up our resources over the last couple of years to deliver the
network in terms of the technical resource and also engaging with
suppliers and developing the network design. Within the next six
months we will be finalising that network design with the broadcasters
and completing our conversations and negotiations with Ofcom on
the regulatory aspects of the roll-out. In June of next year Ofcom
will be completing the negotiations for the network in the Regional
Radio Conference for the European area.
Q383 Mr Evans: You say it is challenging,
but what is the worst thing that you foresee that could happen?
Mr Ward: One of the particular
challenges is the fact that the switchover sequence has to be
maintained so that the interference that inevitably occurs between
transmitters as they are modified and frequencies are changed
is minimised. So a lot of work has gone into making sure that
the sequence hopefully provides a totally seamless transition.
Any delays or severe problems on one of the sites could disrupt
that sequence and we cannot really progress until we have solved
that problem. That is really one of the key risks that we face
as the infrastructure providers.
Q384 Mr Evans: Do you think in the
Border region there will be fewer problems than in the ones after
that when they start to cross over one another, particularly in
the Granada region which has over eight million people? Do you
think that that is where the problems may lie or do you think
that even within the Border region there could be problems?
Mr Ward: It is challenging throughout,
both in the Border region and the Granada region. Our colleagues
in Arqiva are actually responsible for the majority of the work
and so perhaps I could hand that question across to them.
Mr Holebrook: It is a challenging
project, it is of a significant scale, but we have been working
on it for two or three years now and addressing those problems
and those issues. The things that keep me awake at night are the
things that I cannot control and primarily that is the weather
because I cannot control the weather. When you are working at
1,000ft and you are trying to install a new antenna you are very
dependent upon the weather. That type of work can only be done
in the summer. As a consequence of that what we are planning into
the timetable is two clear summers to enable us to do work at
any particular site. We have a very hard end date that we know
we have to work towards and we are putting a contingency at the
front end. We are making sure that we can do the aerial work upfront
so that if we do have a bad summer we always have the next summer
to rely upon without it causing a problem to the programme.
Q385 Mr Evans: Have either of you
found any difficulties in finding the technicians that you need
to be able to do this challenging task?
Mr Holebrook: It is an international
business. We will be working with international suppliers and
calling upon their expertise. We have our own in-house high mast
engineering riggers that we are capable of calling upon as well.
We are confident that we will be able to get the proper expertise
in place. We will be working with other parties to ensure that
we can bring in additional expertise to complement our own. For
the last year we have had 30 people in Arqiva working on it and
I am sure that National Grid has had about the same volume, so
it is not as though we are not applying the resource to it. This
year alone it has been about 30 man years-worth of work that we
have put towards it.
Mr Watson: In order to give you
an idea of the depth of the plan we have brought along a copy
of the detailed plan for the Border region which we would be very
pleased to leave with the Committee.
Q386 Chairman: Can you do it all
in advance or do you have to do some work at the moment of switch-off
or in the transition period?
Mr Watson: The majority we can
do in advance. The plan is to do the antenna work two years in
advance and that gives us a summer's buffer season just in case.
During the six months prior to changeover the transmitter work
on the ground will be done. That will be all in place. There will
be the opportunity to test the complete system prior to the first
changeover. So in essence what happens on the first night is a
bit more complicated but not much more than unplugging one and
plugging the other one in.
Q387 Mr Evans: We will all pray for
good summers for you!
Mr Watson: Thank you. This is
an exercise we have done many times before because over the years,
quite seamlessly, the entire ITV network has been replaced using
exactly the same strategy as we propose using now.
Q388 Paul Farrelly: When we visited
Berlin to look at the experience there we learned that they had
adopted a 95% DTT coverage target against the UK's 98.5%. At a
previous hearing we heard some strongly argued evidence that here
98.5% allows the whole process to be sold to consumers and for
consumers to be informed, it makes it much easier. What we are
trying to establish is the marginal costs associated with that.
I just wondered whether you could share your views on how the
costs rise per percentage of penetration and whether there is
any point at which it becomes cheaper to fill in the extra few
per cent satellite.
Mr Marshall: Alan has done some
calculations.
Mr Watson: Perhaps I can comment
on the cost and we can take it from there. The figure that we
have both put out is that the cost for the transmission element
of this across the industry is about £500 million. That is
a figure that we have independently put together, largely agreed
on and it has had a degree of external scrutiny, so it is a fairly
credible number. If you divide that number now, 80% of that money
goes on the first 200 sites and it is the remaining 20% or £100
million that takes you from the 200 sites to the 1154 sites. As
you rightly say, the difference in coverage between the two is
about 6% of the population. If you translate that to numbers of
people then that is approximately four million people. Four million
people and £100 million means it is approximately £25
a head to get you from the 200 sites to the 98.5% coverage.
Q389 Paul Farrelly: Is there any
point at which satellite becomes much more cost-effective on the
basis of the figures that you have just cited? Is that a spurious
argument for people to make?
Mr Watson: As to whether it is
cost-effective, I think that probably becomes questionable. It
always exists as an option. It is important to go into what 98.5
means and what the remaining 1.5 means because it is easy to take
98.5 as a simplistic figure. What it actually means is that 98.5%
of the population will be able to receive all three public service
multiplexes at what will be regarded as an acceptable quality
level. That is taking into account what we believe to be the case
with incoming European interference, so to a large extent we are
taking the worst case scenario. If you take the 1.5% that is left
over, it is the negative of that and that 1.5% will divide into
three groupings. There will be a grouping that can receive all
three of the multiplexes but not at the quality level that we
would deem acceptable and in most cases better aerials and some
improved installation will get them over that hurdle. Then you
will have a group of people that will get one or two of the multiplexes
and then a very small group will not get anything. In the main
that will be the same group that do not get anything now. When
you look at those last two groupings then satellite is obviously
a very viable option for them and may be their only option.
Mr Marshall: I think this is about
offering additional platform choice as well. If you were to proceed
with satellite coverage then that would limit platform choice
to a large number of the population. It is clear that in terms
of the public perceptions and requirements, satellite requires
third party installation whereas digital terrestrial television
does not; you walk into your local retailer, you purchase a set-top
box, which are as low as £26 these days, and you take that
home and plug it in yourself. It should be that much easier from
a user point of view.
Q390 Chairman: The evidence we have
received from Sky says, "Access to digital transmissions
is to be achieved by a costly and wasteful conversion of all 1,154
analogue transmitters to digital. On our own estimates it would
at best be cost-effective to convert between 200 and 500 transmitters
. . ." Would you agree with that?
Mr Watson: In the main there is
a factor that has been missed from a number of the calculations
I have seen in public and that is the fact that if you do not
convert many of those smaller sites the only option is to remove
them, so there is an extra cost line there. It is not a case of
do not convert at zero cost, it is do not convert with the obligation
to take away a transmitting station and returning it to a greenfield
site. Once you include that figure in there it alters the picture
somewhat. My own belief is that the economics are certainly in
favour of converting those sites out to the smallest.
Q391 Chairman: Right the way through
the entire network?
Mr Watson: Yes.
Q392 Chairman: So even the 1,154th
transmitter site—
Mr Watson: When you get down to
site number 1154 then all of a sudden we are talking about something
that is smaller than a telephone box, with a mast about the size
of a telephone pole and in a square of ground maybe 15 feet square.
The actual cost of conversion of that is really quite small and
continues to fall and will fall between now and when it is done.
We are talking in terms of tens of thousands of pounds, certainly
no more than that.
Q393 Chairman: Have you actually
tried to calculate whether there is a case at any point for providing
alternative reception facilities such as satellite rather than
rolling out DTT to the full extent?
Mr Watson: I have done some calculations
right down to that smallest station. Again if we take the
smallest station, number 1154, the cost of conversion is between
£10,000 and £15,000. It is difficult to know exactly
how many people it served, but let me work on the basis that we
put these sites in in the first place and our obligation was to
serve population centres down to 200 people, that was in the 1980s
so one can assume they have grown a bit. If we stick at 200 people,
so it will be a £15,000 cost to the broadcaster to serve
200 people, I think that comes out at £75 a head or £150
a household. It is still a very comparable figure even at site
1154.
Q394 Chairman: You also talked about
the coverage of the three main PSB multiplexes. What proportion
of people is not going to have access to the non-PSB multiplexes?
Mr Marshall: The non-PSB multiplexes
are expected to be built out to 80 sites at the same coverage
that we have today. That should give them similar population coverage
to what we have today, which is 73%. That might increase slightly
with the higher power output, but it is going to be in that range.
Mr Watson: In the spectrum plan
there are sites available for the non-public service broadcasters
to go out to 200 sites. It is entirely their choice as to how
many—it will be between the 80 and the 200—they go
to. In fact, it is a total of 212 sites. If they exercised that
choice and built out to that they could achieve just over 90%
population coverage.
Q395 Chairman: So it is an economic
question for them to determine.
Mr Watson: For them, yes.
Q396 Chairman: In terms of the cost
which you face, you have to pay the entire cost upfront. What
is the mechanism by which you are going to recoup that from broadcasters?
Mr Marshall: We will provide the
network to the plans required specification of the broadcasters.
We will price the cost of developing that network for the broadcasters.
The site access element of that will be reviewed by Ofcom and
will be determined by Ofcom and then the broadcasters will reimburse
us for the provision of that service over the length of the contract,
say over 20 years.
Q397 Chairman: But the actual cost
of the infrastructure is intended to be met by the BBC, is it
not, at some future date?
Mr Marshall: By all of the broadcasters
collectively.
Q398 Chairman: The BBC put in a specific
bid as part of their licence fee settlement of £700 million
for digital infrastructure. Do you recognise that figure?
Mr Marshall: I do not recognise
that figure. I assume that that reflects the cost that they believe
will be levied to them for their share of the infrastructure.
Mr Holebrook: The BBC with their
two multiplexes take approximately a third of the infrastructure
cost in terms of the build out.
Q399 Chairman: But £700 million
sounds an awful lot of money, therefore, on the basis of the kind
of figures you have been quoting.
Mr Holebrook: The BBC is looking
at taking additional responsibilities in terms of providing the
expenditure for Digital UK for the marketing and the cross-promotion
and some of those things. I am not sure whether that is included
in those numbers.
Chairman: That is included separately.
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