185. The largest current indirect subsidy for public
service content is the scarce analogue spectrum allocated to the
public service broadcasters. The BBC, Channel 4 and S4C each have
an allocation of free spectrum. ITV and Five have privileged access
to subsidised spectrum: these broadcasters make licence payments
which include an implicit payment for use of the spectrum. It
is generally recognised that the most valuable spectrum in the
UK is between around 200 Mhz and 1 Ghz. The spectrum used to broadcast
analogue television occupies nearly half368 Mhz or 46%of
186. The UK's analogue television signals will be
switched off, region by region, between 2008 and 2012. In principle,
this means that all 368 Mhz might be available for new uses and
technologies, including mobile television, wireless broadband
and digital television services in both standard or high definition.
However, the Government had previously decided that 256 Mhzor
70%of the 368 Mhz should be used for digital terrestrial
television and be allocated, at no cost until at least 2010, to
the public service broadcasters.
This leaves a remaining 112 Megahertzknown as the
"digital dividend"to be released for new uses.
187. It was suggested that some of the scarce spectrum
that has not already been allocated to the public service broadcasters
might be given in future to help sustain public service content.
For example, Caroline Thomson, Chief Operating Officer of the
BBC, told us that one lever for supporting public service content
could be to offer broadcasters additional free or subsidised spectrum
in return for commitments to provide public service content.
Channel 4 said that it is particularly keen to identify alternative
means of indirect support such as access to additional digital
terrestrial television spectrum.
188. The way spectrum is managed, both in the UK
and elsewhere, is changing. Spectrum is increasingly recognised
as a valuable resource with many alternative uses. There is rapid
innovation in wireless services, and every type of wireless device
needs access to spectrum. It is therefore increasingly important
to ensure that the way spectrum is managed creates incentives
to use it efficiently, so that the use of spectrum changes when
this benefits society. For this reason, most users of spectrum,
including the Ministry of Defence, the emergency services and
telecommunications companies, currently pay for access to spectrum.
189. If the
Government decides that additional forms of support are needed
for public service content, we believe that this support should
be provided using direct, accountable subsidies. On balance, we
believe that the benefits of direct funding outweigh any risks
to broadcasting independence. In particular, we believe that the
Government and Ofcom should not interfere further with the spectrum
market to pursue broadcasting policy, for example by allocating
additional spectrum to support the provision of public service
190. In June 2007, Ofcom announced that from 2014,
digital terrestrial radio and television broadcasters will be
required to pay an annual feeknown as Administered Incentive
Pricingthat reflects the amount of spectrum they use.
Ofcom's policy was criticised by broadcasters. Caroline Thomson,
Chief Operating Officer of the BBC, stated that the proposals
to introduce spectrum pricing for broadcasting would increase
the pressures on the public service broadcasters.
Lisa Kerr, Head of External Affairs at the RadioCentre, argued
that the existing public service content which commercial radio
provides could be threatened because of the introduction of Administered
191. Ofcom maintains that a requirement to pay merely
brings broadcasters into line with most other spectrum users.
It adds, furthermore, that it has a duty to secure optimum use
of spectrum and that that duty is best met by providing incentives
to users to adopt technologies which enable effective and minimal
use of spectrum. In evidence to our New Media and Creative
Industries inquiry, Ofcom suggested that the likely cost to
broadcasters, maybe in the region of £3 million per
year for a channel such as ITV1, is comparatively small in relation
to their previous licence fee payments and other regulatory burdens
imposed on commercial broadcasters, and could be absorbed.
192. We support
Ofcom's decision to introduce Administered Incentive Pricing for
spectrum used for broadcasting. We note that broadcasters have
benefited from a long immunity from paying for the spectrum they
use and that the introduction of Administered Incentive Pricing
will merely bring broadcasters into line with other users of the
spectrum, such as the Ministry of Defence.
193. Pressure is being applied upon Ofcom to reserve
some of the "digital dividend" spectrum for high definition
television services. For example, the public service broadcasters
and manufacturers and retailers of high definition televisions
(including Sony, Toshiba, Samsung and Dixons) have established
a campaign"HD for all"which aims to ensure
that Ofcom, in allocating the spectrum released by digital switchover,
reserves adequate spectrum for public service broadcasting in
high definition to ensure "that the social value of universal
digital terrestrial television is not lost and the public interest
194. Greg Dyke, former DirectorGeneral of the
BBC, told us that some spectrum should be given away for high
definition television as, without high definition, Freeview could
become a transitory technology and not a longterm technology.
Michael Grade said that Ofcom's forthcoming allocation of the
spectrum released by digital switchover "threatens to disadvantage
digital terrestrial television viewers".
195. Other broadcasters have suggested that some
of the spectrum released by digital switchover should be reserved
for "socially valuable broadcasting". For example, Teachers TV,
a channel directly funded by the Department for Children, Schools
and Families, told the Committee that "noncommercial
social broadcasters" such as itself were failing to fulfil
their potential for social impact due to restricted access to
the digital terrestrial television platform. Teachers TV proposed
that Ofcom should amend its auction model to achieve greater social
value from the released spectrum.
196. The Government has declared that it supports
Ofcom's proposals to auction, on an open basis, the spectrum released
by digital switchover and views such an approach as consistent
with the Government's established policy.
In our Report on New Media and the Creative Industries,
we concluded that a persuasive case had not been made to justify
reserving spectrum for high definition television following digital
switchover, and we endorsed Ofcom's approach of not favouring
any particular technology or application in the framework being
drawn up for reallocation of spectrum.
197. We reiterate
our support for Ofcom's technologyneutral approach to auctioning
the spectrum released by digital switchover. We have continued
to listen to the arguments but we fail to see how transmission
of extra high definition digital terrestrial television channels
delivers sufficient extra public value to justify intervention.
In any case, we note that Ofcom and the public service broadcasters
have agreed in principle that it is technically possible to transmit
up to four channels in high definition within their current allocation
of spectrum. We agree that the most appropriate use of the vacated
spectrum is best determined by market mechanisms and note that
this will still allow the broadcasters the option of purchasing
additional spectrum in the marketplace.