Examination of Witnesses (Questions 200
- 219)
TUESDAY 6 JUNE 2006
BT
Chairman: Can I welcome British Telecom
(BT), Dan Marks, Emma Lloyd and Mita Mitra. I apologise that you
have been kept waiting, although you may have found the previous
session of perhaps some interest. Can I invite Nigel Evans to
begin.
Q200 Mr Evans: Can you tell us how
your trial went recently? You are launching the service this summer,
are you not?
Ms Lloyd: The BT Movio trial;
yes. We undertook a six-month trial at the end of 2005 which completed
in December, the first component of which was technical, to prove
that television could be delivered successfully over the DAB platform
to a standard which consumers would find acceptable and indeed
would pay for. The second aspect of the trial was understanding
what kind of TV content and other content people were interested
in consuming, when they were using it, how they were using it,
and then their propensity to pay for it. Just to run you through
some of the key findings of that; first of all, in terms of the
outcome of the technology, the technology pilot did prove that
the DAB technology, and indeed the internet protocol version of
delivering multimedia over the DAB network, was successfully proved,
as was the application of digital rights management to protect
the content of the broadcasters and the owners of that content
on that network. That was obviously key to ensuring the commercial
success of this, because content providers would put their content
on this platform only if we could ensure that it was protected.
Moving on then to the second aspect, in terms of the more commercial
aspect of the trial, we undertook two phases of research; one
about a couple of weeks into the pilot, this was with 1,000 users,
the second was very close towards the end of the six months, so
two waves of quantitative research undertaken by a third party
agency. The headlines of that were that 59% of those partaking
in the pilot found the TV and radio service to be either appealing
or very appealing. They watched on average 66 minutes of television
per week, and, on average, 95 minutes of radio listened to, and
watched, because there is a visual aspect to digital radio. In
total, two hours and 41 minutes was the average across this 1,000
users which represented a very broad cross-section, from 16 year
olds up to 50 year olds, with mobile spend from £10 up to
over £40, a 50-50 gender split, etc. At the very highest
level, we found those results commercially to be very attractive
and certainly gave us a good degree of confidence to move forward
from investing in the pilot to investing in the commercial launch.
Q201 Mr Evans: Can you tell us what
the biggest complaint was from the 1,000 people about the service,
what did they complain about most?
Ms Lloyd: We asked them what the
main inhibitors were to them using the service and there were
about 10 areas actually that we directed them to, in terms of
a check-list, and then they were asked to add others. About 80%
of the reasons why people said they were either not using it more
or did not use it at all were around some of the technical issues.
For example, during the pilot we had a limited number of additional
DAB transmitters in the London area, so reception was not as reliable
as we would have liked, so reception challenges were one of the
big reasons. The fact that, obviously, people are wanting primarily
to use mobile TV in the London area on their commute meant that
some of the modern trains, the metallised trains in which you
cannot even get a mobile signal, we were also having challenges
getting the DAB signal into those. By far the majority of complaints
were around reception quality.
Q202 Mr Evans: What about the paucity
of the number of channels?
Ms Lloyd: Because we have a limited
amount of capacity, we have 20% of the Digital One multiplex,
and currently that is the regulated maximum, we have deployed
the DAB technology in a way which really utilises that very efficiently.
Certainly compared to the Korean version of DAB which John saw,
where probably you will get one or two TV channels per multiplex;
we have got three TV channels and 20% of the multiplex. A lot
of work has been done by BT and Microsoft and other technology
partners really to optimise the quality, the video, down at that
level. That is one aspect. We were very keen to understand whether
three channels were going to be sufficient as a launch proposition
and what we found was that actually 58% of the pilot users felt
that five channels was the optimum number for them. We believe,
over time, that is going to change, so over time people will become
accustomed to getting more and more content, so five channels
at the start might be sufficient, over time they are going to
expect more. We do not believe that DAB has to deliver all of
those channels, going back to the comments made by the mobile
operators earlier; certainly we do not see DAB as competing with
3G. We see DAB to deliver TV as a very complementary technology
and commercial service alongside 3G. Indeed, the work that BT
Movio has done on the device side and the application side is
very focused on creating one consumer experience for them to get
access to TV content from multiple sources, from 3G, from DAB,
in the future from DVB-H and indeed through plugging your `phone
into a PC and side-loading TV content as well. Consumers will
get content from all of those sources, and what we are looking
to do, from the BT Movio side at the moment, is make sure we are
future-proofing what we are doing to enable consumers to do that
very easily.
Q203 Mr Evans: Which is the better
technology, 3G or DAB?
Ms Lloyd: That question needs
to be qualified, because if you are making a voice call or any
kind of point-to-point activity, for you to get your e-mail there
is only one option, it is 3G. DAB is a broadcast technology and,
by definition, therefore, you have a limited amount of capacity,
you always will have a limit on that one-way broadcast. DAB is
ideal for delivering content that is very data-rich, so large
numbers of megabytes, and which lots and lots of people are going
to want. You would not use DAB technology to deliver Teachers'
TV because there is a limited audience for Teachers' TV; you would
use DAB technology to deliver one of the big terrestrial channels
because we know that there is a big audience for that.
Q204 Mr Evans: Are you in discussions
with the BBC?
Ms Lloyd: We are, but we have
not reached any agreement with the BBC. Just to clarify the point
from earlier, there has been a misunderstanding between the trial
that was launched yesterday, which is a technical trial, which
we have agreed to participate in and contribute our technology
to, between the Korean Government and some activity that the DTI
have facilitated, which does have Teachers' TV and the BBC on
it. That is nothing to do with the BT Movio commercial national
service which is launching this summer, for which we are in commercial
negotiations with a number of potential providers, including the
BBC, but no agreement has been reached and so I cannot say today
whose those channels are going to be.
Q205 Mr Evans: Why is there such
a problem with the BBC?
Ms Lloyd: There is not a problem
with the BBC, as far as I am concerned. We are in negotiations
with them; we have not reached agreement. One of the angles, certainly,
from our side, with the BBC, is that this is broadcast technology,
so it is scalable. Certainly there are issues for delivering potentially
that kind of content over 3G networks which are not encountered
on a DAB network, and paying for carriage versus paying for content
is an issue, and that is something which is not encountered on
the DAB network.
Q206 Mr Evans: Are you confident
that we will have the Olympics in a DAB version, come 2012?
Ms Lloyd: I am, yes. I think it
will be a hybrid scenario; multiple technologies will be delivering
the Olympics to us in the mobile environment. I think DAB will
be one of the formats. I think, at that stage, some of the country
will have DVB-H and 3G will also play an important role, because
there will be some personalised services for downloads and catch-up
Olympics highlights, etc., which will be delivered over 3G, so
all three technologies will play an important role, as will radio.
Radio 5 Live and Talksport have millions of listeners and they
deliver a compelling sports service, and that will be important
as well.
Q207 Mr Hall: Can you tell us something.
I have just been reading the brief on this, which says that because
of the speed of broadband and the digital video compression we
can now get television via the telephone cable and that BT have
got plans for a hybrid box which brings in terrestrial television
and television through the telephone line; there is huge potential
then for viewing Freeview, pausing live television, recording
stuff for future use. When is this hybrid box actually going to
be launched and how much will it cost?
Mr Marks: We have said that we
will launch the service, which is called BT Vision, in the autumn
and, although there are parts which are very complicated technically,
very complicated enterprises that are not entirely under our control,
so far we feel that we are on track for that launch. We have not
announced the price for the box but we are going to price it—
Q208 Mr Hall: You can do it now,
if you want.
Mr Marks: Thank you for the opportunity.
Q209 Mr Hall: We are live on close-circuit
television.
Mr Marks: We have said it is going
to be modestly priced. The principle of BT Vision is that we are
making these services, and I can talk more about exactly what
is in them, available to people on a completely flexible basis.
Whereas, up till now, you have had pay television, additional
television to free broadcast, sold in a bundle, a very significant
bundle, and on a subscription basis, we are making these services
available to people on any basis, "pay per view" or
subscription, "on demand", we are making it available
to people pre-pay or post-pay, so really you can have complete
flexibility about the way in which you consume those services.
In other words, we are handing a very nuanced version of control
to customers. If you want only to pay for what you use, that is
fine; if you wish to use subscriptions as a means of capping your
bill, we encourage that too. The box is a one-off payment which
allows you access to these services; after that it is entirely
your choice how you wish to pay for them.
Q210 Mr Hall: The only way this will
work, with any real interest to people, is that there will be
a huge amount of programmes available, which means that you will
have to sign up those particular programme providers and producers.
How far along the line have you got with that?
Mr Marks: I think we are doing
pretty well. Yesterday we announced a licensing deal with VPL/PPL,
who represent the 900-plus independent music companies in the
UK. Previously we concluded a deal with Warner Music and we expect
to be announcing further deals with music companies as we go along.
We have a very significant `on demand' deal with the BBC and we
are engaged in conversations with a whole raft of independents
and broadcasters. In the television space we have signed deals
with Nelvana, Hit, Cartoon Network, Turner and National Geographic.
In the movie space we have agreed deals with Paramount and Dreamworks;
we have further studio deals coming out, we are talking to the
independents. We have, we think, a very significant line-up. A
couple of weeks ago I announced that we had bid successfully for
`on demand' Premiership football rights, so from the 2007-08 season
we will be offering our customers 242 Premiership games per season,
on an "on demand" basis, available from 10 o'clock on
match day for 50 hours, all paid for by "pay per view"
or subscription, whichever way customers wish to take their programming.
The other programming that we think is perfectly suited to an
"on demand" platform such as ours, and we have not made
announcements in this area but we will do shortly, is niche programming,
and I suppose you could broadly categorise the niche programming
into two blocks. One is the more commercial niche; line-dancing,
for instance, would be a good example of that. There are very
large numbers of niche activities whose participants are passionately
engaged in those activities, who want to see video content, who
are motivated to go and find it, who cannot get it anywhere else,
it is not available on broadcast, who want to communicate with
one another, who are ready to subscribe to clubs or magazines,
and those kinds of services are perfectly placed to move on to
an `on demand' service such as ours, particularly when associated
with the kinds of communication functions that BT can offer with
the service, like Instant Messenger, like video-telephony.
Q211 Mr Hall: The one thing that
everybody is going to need for this technology to work is to contract
with BT for a telephone line?
Mr Marks: The one thing that everybody
is going to need is a BT broadband subscription; that is right.
Q212 Chairman: So they are paying
a subscription but as a BT broadband subscriber?
Mr Marks: Indeed; that is right.
Q213 Rosemary McKenna: That is important.
It is necessary to have the BT broadband connection and a subscription
paid, but once that is paid people can have access to Freeview
without any additional payment, is that correct?
Mr Marks: That is correct: Freeview
and also to the PVR, the digital video-recorder, which will allow
them to stop and pause and store broadcast streams, and also,
very likely, to a certain amount of catch-up television, subject
to rights being made available.
Q214 Rosemary McKenna: BT therefore
could fill the gap that is going to come at analogue switch-off.
You can fill that gap because we know there are going to be areas
of the country which are not going to have access at that time.
BT would cover, I would think, 100% of the country, and by that
time would you expect to be in a position to cover 100% of the
country with broadband?
Mr Marks: This service is based
on two Mbs access to the box, and at the moment I believe, I checked
earlier, that BT offers two Mbs access to 93% of the UK population,
so it is likely that it will be ubiquitous, or near ubiquitous,
fairly shortly; in any case, broadband speeds are moving up from
two Mbs. It is important to note that this is a hybrid service
at the moment, where the broadcast signals are carried over Freeview,
and so if you are not in an area which has Freeview reception
we are not proposing to deliver those Freeview signals down the
DSL line. We are using the DSL line only for `on demand' services
and for communications and other kinds of services. So if you
did not live in a Freeview area you could still have the box and
you could still have the `on demand' services but you would not
be able to get Freeview, today.
Q215 Rosemary McKenna: Surely with
the advances in technology, will there be a necessity for terrestrial
television at all in 10 years' time?
Mr Marks: Ten years is too far,
I am afraid. It is certainly true that compression rates are coming
down, we are only at the beginning of the curve of efficiency
which, characteristically, compression goes through, each compression
technology; we are just starting on the one that we are using
now, which is MPEG4, and broadband speeds certainly are going
up. The point at which broadband speeds go up sufficiently and
compression comes down sufficiently to allow BT's network to be
used for multicasting, rather than point-to-point use, which is
how we are using it at the moment, one assumes that is at some
point in the future but it is not on our immediate road-map.
Q216 Chairman: Do you think it is
possible that BT Vision could evolve into a service which does
not use Freeview for the live reception but actually might stream
everything down your cable?
Mr Marks: I think it is technically
possible, that in the future the network will be engineered for
those kinds of capacities. I am really not making a comment about
BT Vision's intentions in that area.
Q217 Rosemary McKenna: Recently we
did the analogue switch-off report. It is an interest that we
have, in looking at those areas where there are going to be difficulties
when analogue switch-off happens and they will not have access;
it is of interest to the Committee.
Mr Marks: I appreciate that. I
think that there are other ways in which BT can be helpful, in
driving towards analogue switch-off. This is a service where BT
has got a very profound reach into the UK and it can provide the
kind of support that many customers will need in order to get
them from the analogue into the digital world.
Q218 Chairman: As we put to the previous
witnesses, question about rights: generally do you take the same
attitude, that you do not mind too much where the rights should
lie, you just want it settled as soon as possible so you have
clarity and an ability to reach an agreement? Is that fair?
Mr Marks: Yes, principally, that
is a fair summary of our position, with respect to Ofcom's review,
of the independent production sector.
Q219 Chairman: Are you concerned
about the proposals for windows, so that certain programmes would
not be available for a defined period before they would be made
available for, say, mobile broadcast, or indeed on your BT Vision?
Mr Marks: We encourage an active
market in those rights and we think that we are perfectly able
to participate in that rights market. It is of less concern to
us how the rights are carved into windows than it is that there
is a market in those rights and that we have fair access to those
on commercial terms.
Ms Lloyd: From the BT Movio perspective,
our current strategy is sourcing simulcast channels and so at
the moment we are not looking at effectively using broadcast for
catch-up TV, which therefore does not impact on the window.
Chairman: Yes, I understand.
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