Examination of Witnesses (Questions 20-39)
OFCOM
17 APRIL 2007
Q20 Mr Hoyle: It is whether these
people have got the drift!
Mr Richards: We have got the message!
Mr Hoyle: I look forward to the answer.
Q21 Mr Whittingdale: Can I ask you
two very specific questions. First, you said that between four
and six HD channels could actually be fitted on to the existing
spectrum. You will be aware that that is hotly disputed by the
HD broadcasters who say you have miscounted the number of channels
that are already being used on Freeview. They are saying you have
worked on 32 whereas it is 37. How do you respond to that?
Mr Richards: We have just been
looking at it again. As ever in these situations, if someone says
they think we have got it wrong, we will go back and have another
look—and we have done. Interestingly enough, I was studying
the latest work on this yesterday: we still think actually that
we are broadly correct. We set up meetings with the broadcasters
to discuss this in detail with them over the next couple of weeks,
and that will seek to identify whether there are technical misapprehensions
and different perspectives and will try to get to the bottom of
it. We have got no interest in having a fight over a matter of
fact of that kind. Either you can get four to six in or you cannot;
and if it turns out that you cannot then we will correct our position.
It is not a matter of ideology for us; it is a matter of technical
fact.
Q22 Mr Whittingdale: At the moment
Ofcom's view is that the five terrestrial main channels could
be broadcast in HD on the existing spectrum without occupying
any of the DDR spectrum?
Mr Richards: We still believe
that that is the case, and the reason for that is because there
is a new compression standard now available. There will be a mode
change that will take place at the switchover, which will increase
the capacity available. There is a new transmission standard called
DVBT2 which, interestingly enough, is precisely the one that Sky
is using for satellite, which also increases the capacity available.
We think that, combined with some shuffling of channels within
the multiplexes, will enable you to do between four and six. We
are going to sit down with the broadcasters and ascertain where
the truth lies. If it turns out it is three or four we will move
on from there. At the moment we still think it is between four
and six.
Q23 Mr Whittingdale: On the compression
standards you mentioned, how do you react to the suggestion which
has been made by the broadcasters that you might lend them the
spectrum for a temporary period in order to allow the market to
undergo the transition from MPEG2 to MPEG4, and once you have
got the higher compression standard then you could carry out an
auction?
Mr Richards: I think we see that
as a very interesting idea. Our duty here is to optimise the efficient
use of the spectrum, and that kind of idea is the sort of thing
we were hoping to provoke in the consultation; so that is the
kind of idea we will be looking at very carefully in the coming
months. It is an intriguing proposal. We have to look at whether
the opportunity cost of it is justified by the benefits that might
flow through in due course; but it is an interesting idea.
Q24 Miss Kirkbride: I am just wondering
what your thoughts were on the BBC having access to high definition
TV, bearing in mind that it is paid for by the licence fee payer
and that would bring in other issues; and particularly if you
would be happy about defending not having it in 2012 when Britain
is hosting the Olympic Games and the public could not see it in
HD on a BBC TV channel?
Mr Richards: The BBC is already
broadcasting in HD. It is converting many of its programmes to
HD format—so it should do. We are entirely in favour of
that. You will see more BBC programming in HD made available on
satellite and cable no doubt. As I hope we have made clear, we
think even without the decision on what will happen to the released
spectrum in the Digital Dividend Review, they will be able to
broadcast in HD on Freeview as well. We think it is a good thing.
If viewers want high definition then important broadcasters like
the BBC should broadcast in HD. They are doing and we would expect
them to do more of it on other platforms in the future.
Q25 Miss Kirkbride: There is a guarantee
with the BBC that BBC1 and BBC2 will be in HD?
Mr Richards: What we must not
get into is a situation in which we are guaranteeing for the BBC
X, Y and Z. The BBC have to make their own decisions about how
they use the money they have and the spectrum that they have.
They have to make decisions which are efficient decisions in the
interests of viewers in the same way that every other organisation
should. It is a soft option just to put more free spectrum on
the table for everybody. You have to think that through very,
very carefully, because that has an opportunity cost. If we give
spectrum for free to somebody then it is not available to somebody
else. As I hope we have made clear, there are an enormous number
of people and organisations who would like to have this spectrum
for an enormous range of different uses. Nothing comes free in
spectrum any more; any allocation, any decision, has a cost attached
to it. To reiterate, because I do not want the Committee to be
in any doubt, it is entirely possible for the BBC to broadcast
in high definition on cable, satellite and, in the future, on
Freeview as things stand. There is a separate question about whether
additional spectrum should be made available or whether, indeed,
they would like to purchase additional spectrum for further capacity
for additional HD services, or indeed additional standard definition
services in the future. That is a separate and additional question.
Lord Currie of Marylebone: It
is no surprise (and at this point we have an open consultation
and are opening consideration of these questions) that many organisations,
including the broadcasters, are making the case that they should
be given additional spectrum. Of course they would do that. We
have to balance the arguments and the substance of those arguments
in our considerations.
Q26 Paul Farrelly: The reality is,
before all these questions are settled, that lots of people are
paying out a lot of money for very expensive bits of high definition
TV equipment. Some people may indeed be signing up with these
rotten retailers that sell these things on expensive hire purchase
and are paying interest rates of up to 30%. Should you not as
a regulator be doing something to warn people? Should not these
bits of equipment carry a health warning, "Don't buy this
now because you may not be getting what you're bargaining for"?
Mr Richards: It is a very good
point. I would describe that issue as being on the edge of our
remit. This is trading standards to some degree so we have to
be careful about making sure that we stick to our remit. However,
we do recognise this issue and we are planning to do some more
research which will identify how prevalent this is. If it is as
prevalent as anecdotally people suggest that it is then it would
be something of significant concern to us; but it is likely to
be something that we hand over to another body to pursue. This
is a trading standards issue really about selling someone a television
and, image the situation, saying, "Take this television home
and you will get high definition", if that is what is being
sold, when clearly, in many cases, that is not possible. It is
of course possible if, for example, you are on Sky and you subscribe
to the HD service. It depends what is actually said. It is a trading
issue, but we are planning to do some work on this.
Q27 Paul Farrelly: Through this Committee
then you would encourage people if they had been told when buying
this equipment with a guarantee from the retailer that you will
get this all-singing, all-dancing high definition television,
whatever that may look like, that if they have been given this
sort of guarantee as part of a sales pitch that they should write
to you and if you do not do something you may pass it on to Trading
Standards, and if the weight of complaints is sufficient you may
ask Trading Standards or the Office of Fair Trading to have a
look at the issue?
Mr Richards: Yes. Also through
this Committee I would encourage retailers to sell in a responsible
way in relation to high definition. I think it is important that
they do. It is a premium product at the moment and it is not available
to everybody yet and it is self-evidently important that
the sales pitch is a responsible one.
Q28 Mr Whittingdale: Digital UK are
spending a huge amount of money advertising in order to raise
awareness of the switchover. Do you consider that this is something
which they should perhaps include within the information they
are providing?
Lord Currie of Marylebone: That
is an interesting question that we will reflect on.
Q29 Mark Hunter: Can I move us on
to a slightly different area. I would like to ask you now about
the impact of delays in some of your decision-making. This Committee
raised with you last year the criticism from transmission companies
that delays in your decision-making might compromise some broadcasting
applications, for example transmission companies who need to employ
engineers to upgrade each television transmitter for digital switchover,
and if they know that, say, a further television multiplex was
likely to be created then they would be able to do the necessary
work for that alongside the digital switchover upgrade, and thus
save money. These very same concerns have been raised with us
again this year, twelve months on. Can you tell us whether or
not you think these concerns are being adequately addressed, and
perhaps say a little bit more about what precisely you are doing
to address those kinds of concerns?
Mr Richards: There is a specific
concern about the process of switchover and the timing of different
transmitter switch-offs. That has been addressed, and is being
busily addressed, over the past few months. I am not aware of
any delay that has arisen as a result. I think there is a much
bigger question, which I think is probably what you are driving
at, which concerns the conclusion of the negotiations around the
contracts for digital switchover and, therefore, the ability to
actually get engineers on the ground, up the transmitter, doing
the job well ahead of schedule. We should be very clear about
this—that is a commercial negotiation. That is not an Ofcom
responsibility, to make a decision. There are different companies
involved, and our practice in this area is not to intrude, and
not to seek to set the contracts for people until and unless it
is absolutely necessary for us to do so. If we do that we end
up regulating everything. We end up writing people's contracts
for them. We end up doing a commercial negotiation for them. That
is not the role of a regulator. The role of a regulator in these
circumstances is a backstop role. It is true to say that the commercial
negotiations in relation to digital switchover have taken a lot
longer than people expected, and a lot longer than they should
have taken. We have been involved in a facilitatory role to try
and move those things forward as quickly as possible; but the
primary responsibility for that is the conclusion of a commercial
negotiation by the different organisations involved. We are literally
doing everything we can to speed that process, and there is likely
to come a point, if commercial negotiation runs into the sand,
absolutely runs into the sand, they may have to come to us and
say, "We cannot do it by ourselves. We need your help; we
need you to determine this particular issue". We have always
made clear that we stand ready to do that; but the guidance we
have always had (as you would expect) from the companies involved
is that, "This is a commercial negotiation. We would prefer
to do it as a commercial negotiation". There are many different
commercial negotiations involved. Our stance has been to honour
that position. We stand ready to come in as an arbitrator or a
determinator of last resort as soon as that is necessary. As I
say, we have encouraged them to conclude these negotiations as
quickly as they possibly can.
Q30 Mark Hunter: Is it the case that
the concerns are not so much misplaced but they are not concerns
that need to be addressed by yourselves?
Mr Richards: I think there is
a whole range of different issues. The biggest one is the conclusion
of the negotiations. We need to have concluded contracts in place
so people know who is doing what; they know when they have to
do it by; they know how much they are being paid for it; and we
can all get on with it. That is by far the biggest issue. We have
been concentrating on that. There are always issues around that
where we can help and we can support. I can give you an absolute
undertaking that we are doing that and have spent an awful lot
of time in the last 12 months doing that.
Lord Currie of Marylebone: The
critical concern for us would be if we got to a point where failure
of these negotiations to be concluded jeopardise the digital switchover
timetable. We are not at that point. If we were to get close to
that point it would clearly be imperative that we intervene to
settle the position.
Q31 Mark Hunter: For the benefit
of fellow members of the Committee, what is that point? When do
you start to get nervous that in fact it is taking too long and
that the rest of the deadlines will not be met?
Mr Richards: I think we are not
very far from that point.
Q32 Mark Hunter: A couple of weeks,
a couple of months?
Mr Richards: More than that. Work
is proceeding. This hasn't stopped the work.
Q33 Mark Hunter: We understand that
it is a complex matter, and we understand that work is in progress
and that negotiations are at a delicate stage; but you will equally
appreciate from our point of view that it is helpful to have a
clearer idea of the expectation as to when these negotiations,
which have been ongoing for some time, might actually be concluded.
It would be wrong if we went away thinking everything is progressing
well and, therefore, it might mean a decision imminently if, in
actual fact, what you are talking about is perhaps something by
the end of the calendar year. I am just looking for some kind
of clue as to when that might be?
Mr Richards: We would expect some
resolution well before the end of the calendar year.
Q34 Mark Hunter: So autumn might
be a safe bet then?
Mr Richards: Certainly if I am
sitting in front of you in 12 months' time and those contracts
have not been resolved I would be very embarrassed.
Mark Hunter: Okay, I will leave it there.
Thank you.
Q35 Mr Binley: I want to talk about
your role as regulator in conjunction with the BBC. The Government
made it quite clear in the White Paper last March what they expected
the Trust to do, which was to "develop a partnership with
Ofcom, drawing on its valuable advice to support the decision-making
process". We have a pretty clear definition of how the Government
expects you to interact with the Trust. I am not sure whether
with the word "valuable" that it would be an expensive
exercise or of high quality, but other people might want to press
that. I am however concerned about the phrase "advice",
because I want to explore how much advice and pressure you can
bear; and how much what has been in the past seen by others to
be an autocratic organisation accepts your advice? I want to know
what big stick you might be able to use if that becomes necessary?
Lord Currie of Marylebone: Just
to be clear, our relationship with the BBC is a complex one. In
content regulation, for example, we have tier one powers on fairness
and privacy, harm and offence, not on accuracy and impartiality;
but we do have regulatory powers over the BBC in certain areas
and we exercise those regulatory powers in the same way as we
exercise them over other broadcasters. The change which has happened
with the creation of the BBC Trust is that the Trust has been
given important powers to regulate and oversee the work of the
BBC. We have an interaction with the Trust, in particular through
the processes around the public value test, which is applied to
new services. We have gone through the process whereby we do the
market impact assessment, the BBC does a public value assessment
and then the Trust brings it together as a value test. We have
done that exercise for the i-Player, and that process has worked
smoothly. We had a collaboration and interaction where I would
hope that the input Ofcom has provided has been "valuable"
in that process; but that process has worked well and, therefore,
our analysis on the market impact assessment of the i-Player did
indeed impact on the final decision that the Trust made on that
particular case. I am sure that will be true in the market impact
assessments and the public value tests that we do into the future.
Q36 Mr Binley: I wish to ask about
market impact assessment in my final question. Before I get there,
however, I want to know what teeth you really are prepared to
bring to bear? What power you are really prepared to bring to
bear? I hear two nice guys, talking in nice terms. I do not see
the sort of bite that I believe the BBC particularly needs at
this time. Have you encountered any difficulties in your dealings
with the Trust that you can tell us about? Then we will come on
to talk about market assessment. What difficulties have you encountered?
How have you dealt with them?
Lord Currie of Marylebone: I think
we have inevitably started a new process of this kind. We have
had teething issues about timing, about the way we interact and
so on. I think broadly speaking it has worked well.
Q37 Mr Binley: Tell us what teething
issues you have had?
Lord Currie of Marylebone: We
launched a consultation and we had to extend the period of that
because there was a need for additional time for people to respond
properly. The timetable which had originally been envisaged was
rather tight—issues of that kind which have been well managed.
The point I would make in response to your question is, you are
saying that the BBC needs teeth—
Q38 Mr Binley: No, you need teeth
to deal with them!
Lord Currie of Marylebone: The
Government has made a clear decision that that is not our role.
In this area the BBC Trust is the key regulator of the BBC. The
BBC Trust is building itself up and establishing itself and I
think you have to give it time to demonstrate its powers.
Q39 Mr Binley: I think you are the
watchdogs of the people, quite frankly, so I think you ought to
rethink that position a little.
Lord Currie of Marylebone: If
you wish us to be that give us the statutory powers that would
allow us to do so. We do not have those powers. Parliament has
quite consciously decided not to . . .
Mr Hoyle: I will get you a 10 minute
rule bill, Brian!
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