Memorandum submitted jointly by Data Broadcasting
International and SimpleActive Ltd
INTRODUCTION
1. This paper concerns Data Broadcasting
International Limited ("DBI") and SimpleActive Limited
("SA"). These companies have similar ownership and control
and each holds a Commercial Additional Service Licence ("CASL")
granted pursuant to the Broadcasting Act 1990 (as amended) (the
"1990 Act"). DBI provides services using the Channel
3 ("Licence A") television signal and SA that of Channel
4/S4C ("Licence B").
2. The commercial additional services are
data broadcast services and occupy spare capacity known as the
Vertical Blanking Interval ("VBI") lines within the
signals carrying television broadcast services. In layman's language
it is data broadcast within the present analogue TV signal for,
say, Channel 3, on three "spare" video lines right at
the top of the screen just before the start of the actual picture
content. The data and the picture content (a "field")
are updated 50 times per second. Each of the three lines is able
to carry 45 Byes of data giving a total gross data rate for each
channel of 54kb/s.
3. DBI's Licence A goes back to 1992 in
its first instance (although it began broadcasting services in
1985 through its relationship with Oracle Teletext). The licence
was last renewed in 2001 for a further 10 year term. The Select
Committee will see that the last renewal was in 2001 for Licence
A. Licence B was originally advertised alongside Licence A but
no other applications were received. However, following a subsequent
invitation to apply the licence was given after competition to
SA. This licence was last renewed for a period of 10 years at
the beginning of 2004.
4. The businesses of DBI and SA have their
roots in the original closed user group or subscription service,
data broadcasting to which such services were initially limited.
Such uses include, for example, broadcasting data material to
Coral Betting Shops and credit card checking details for garages.
The essence of the business is in being able to provide data instantaneously
and simultaneously to large and/or geographically dispersed user
groups. Some capacity has been sub-licensed by DBI and SA to Teletext.
A further attraction of the service is that its coverage is the
same as that for broadcast television, ie it reaches up to around
98.5% of the population.
5. VBI exists only in respect of analogue
broadcasts. There is no VBI in respect of digital broadcasts.
Similar services can be sent in digital form but rather than the
signal being "interleaved" with the broadcaster's signal,
a separate portion of data capacity within one of the digital
multiplexes will be needed to be allocated to enable the same
information to be sent. The amount of data required from a DTT
multiplex to migrate the analogue of services of DBI and SA to
DTT is a nominal 100kb/s—ie less than 0.5% of the available
data capacity of a single Multiplex.
6. DBI and SA have recognised the obvious
that when broadcasts are switched over from analogue to digital
their business would have to obtain digital capacity from one
of the digital multiplex licensed operators to be able to broadcast
their signals in the future. . . However astonishingly and unfairly,
DBI, SA and their customers have been "uniquely excluded"
from digital switchover, but in particular the way in which the
switchover is now proposed to occur makes a nonsense of their
recently renewed licences and will effectively destroy their businesses
many years prior to the final switchover date in 2012.
ANALOGUE TO
DIGITAL SWITCHOVER
7. The then Culture Secretary, Chris Smith,
when analogue digital switchover was first promulgated, suggested
that switchover could come as early as 2006 and be completed by
2010 although the speech suggested 2012 as the most likely date.
He clearly suggested that there will be switchover only when all
viewers could receive digital. During the period between 1999
and 2004 investigation of the relevant press releases on the DCMS
website does not indicate any reference to a timetable. However,
on 22 July 2004 a press release was issued with a reference to
the switching sequence beginning in 2007 with a complete switch
off date of 2012. The Ofcom consultation on Digital Replacement
Licences of 14 September 2004 makes it clear that switchover is
now to be attempted on a region by region basis and that in effect
some regions will be entirely digital for a considerable period
(four years) before the final switchover in 2012.
8. On 21 September 2004 Ofcom wrote to DBI.
The letter (from Dave Toman, Head of Television Planning and Licensing)
notes that switchover will have a significant impact on DBI's
coverage area and future of the service. It stated that Ofcom
would be serving a notice to vary the licence and would seek to
consent to bringing forward the end of the licence period to coincide
with the switchover date. DBI/SA immediately responded that same
day by denying such consent and requesting that either Ofcom honours
the analogue licenses or (very reasonably) facilitates access
to replacement digital capacity so that they could participate
in the digital switchover program.
9. The consequences of digital switchover
as proposed in the consultation document and the proposed Digital
Replacement Licences are such that the businesses of DBI and SA
will be significantly adversely affected. To state the obvious,
the end of the licence period which Ofcom want to see foreshortened
to 2012 has effectively been brought forward. Less obvious is
the fact that somewhat before the end date for digital switchover
the businesses will be in effect destroyed. This is because the
switchover will be on a region by region basis. It is not a case
of the UK being covered by a new digital network and then the
old analogue being switched off. Instead, the changeover will
take place piecemeal on a regional basis. That will mean (unless
DBI and SA are given access to replacement spectrum) that DBI's
and SA's businesses will effectively be reduced in effectiveness
at the time the switchover starts in 2008 as is projected. The
estimate by, say, 2010 is that much of the UK will be still covered
by analogue although this will not provide DBI/SA customers with
the coverage level that they require and fundamental to their
businesses. Moreover, knowledge in the industry and customer base
that there is to be a gradual reduction in coverage area with
no digital migration path has killed off prospects of new business
and loss of existing clients. This is now being brutally demonstrated
with Ladbrokes, CardClear and even with Gemstar who are fed up
of waiting for Ofcom to actual deliver the replacement capacity
which can be operated under the digital data service licence sold
by Ofcom to DBI. DBI and SA will have to be careful to ensure
that their contracts with customers reflect the reality of what
they are able to broadcast which will be a diminishing coverage
area over time.
10. A degree of uncertainty has existed
since 1999 in respect of the timetable for digital switchover.
This timetable seems to have been clarified since July 2004 but
before that there was no indication of the Government's or Ofcom's
timetable other than a form of switchover in the period 2012 to
2014. When relatively recently there was the renewal of the DBI
and SA licences, Ofcom or its predecessor (the ITC) should have
made clear assumptions made about the timing of analogue switch
off. When in August 2004 in respect of the SA renewal the company
was asked by the ITC about the assumptions made concerning the
timing of analogue switch off SA replied as follows (15 September
2003):
"We have made the assumption that analogue
TV transmissions will not be completely switched off until the
end of the licence in 2013 but there will possibly be a transition
period in the last 12 to 24 months of the licence during which
time analogue transmitters will be progressively reduced in power
and/or switched off.
More importantly, given the lack of a definitive
Government statement on the issue will be the perception in the
marketplace as to availability, reliability and quality of analogue
broadcast. The licence will provide significant reassurance to
our prospects but we have assumed that due to the impending switch
off, no more contracts will be concluded from 2008 and that existing
contracts will start to end in 2010 as they migrate to alternative
networks."
DBI does not believe that the question of analogue
switch off was raised by either party during the application process
for the renewal of the DBI licence and at the time that occurred
in 2002 no one expected digital switch off before 2012.
11. DBI and SA therefore believe that they
entered into their new licences in the expectation that, in the
case of DBI, there would not be any significant impact on their
businesses except for the renewal of contracts coming at the end
of licence period and in the case of SA that they might be affected
by 2010. On neither occasion of recent renewal did the ITC or
Ofcom provide any warning or even comment about an early enforced
switchover to digital.
12. In November of 2004 on taking the advice
of Leading Counsel, DBI/SA engaged in a dialogue with Ofcom. It
looked very likely, however, at that time that it would be necessary
for DBI/SA to commence proceedings before getting any satisfaction
in terms of the grant of digital capacity or a promise that its
licences would be honoured. DBI/SA also gained the support of
Don Cruickshank, the former Director General of Telecommunications,
and he wrote on their behalf to Stephen Carter, the Chief Executive
of Ofcom. That elicited a response in which Ofcom promised, inter
alia, to provide DBI/SA with a digital additional television service
licence to enable it to provide services on a digital platform
and to facilitate the necessary conversations with multiplex operators
for capacity on a timely basis. Sadly it is the case that as yet
DBI/SA have not been offered any replacement capacity on any multiplex
despite them having made strenuous efforts to contact and talk
to all of the multiplex operators including the BBC. Part of the
problem seems to DBI/SA that the multiplex operators do not want
to parcel up any of their capacity in small units such as that
required here. They want to put spare capacity into large TV channel-size
segments. Another "restriction" on DBI/SA getting some
digital capacity is the "10% rule" which is being reconsidered
by the DCMS at the moment. This is the rule by which data and
radio services (for some reason lumped together) cannot take up
more than 10% of the capacity of a multiplex leaving no room for
additional data services.
13. DBI/SA have worked very hard not to
have to enforce their legal rights. The time is coming, however,
where they may be forced to do so because at some stage Ofcom
will have to try and amend their licence to enforce the switchover
timetable. DBI/SA have been advised that Ofcom does not on specific
technical legal grounds have the power to terminate their licences
in whole or in part simply to accommodate analogue digital switchover.
DBI/SA therefore have, it would appear, the legal means to hold
up the switchover process before it starts. Needless to say Ofcom
do not agree with that legal view and also disagreed with DBI/SA's
view that Ofcom could in fact force a multiplex operator to provide
this nominal replacement capacity for them.
14. DBI/SA are the Cinderella companies
in this digital switchover process. They are the only ones left
out in the cold with no digital capacity to replace that which
they are going to lose when analogue services cease. DBI/SA are
going to be uniquely disadvantaged in the whole process. Moreover,
Ofcom seems set on trying to renege on the promises it made on
the licences it granted very recently for the present services.
15. The questions that DBI/SA would like
answered are:
— Is Ofcom so toothless that it has
not even got the power to make sure that such nominal amount of
replacement capacity has to be made available on the multiplexes?
It seems to be gross negligence not to have included such provisions;
— Why and how should a body like Ofcom
be allowed to renege on the clear promises that it gave in respect
of licence periods given to DBI/SA as recently as 2003?
There is widespread knowledge of why the Government
wishes to have region-by-region switchover process—so that
it can increase the revenue more quickly from selling off Spectrum
but that must not be allowed to override and rights and kill the
long standing business of DBI/SA—the Government and Ofcom
must either honour DBI/SA's licences or find them alternative
capacity and do so very quickly or the business will be ruined
and a legal spanner thrown in the works of switchover.
7 November 2005
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