Memorandum submitted by Milestone Group
PLC
MILESTONE GROUP
PLC ("MILESTONE")
1. SIX TV: Milestone operates two
Ofcom licensed "RSL" local TV channels in Oxford and
Southampton—both of which are branded as SIX TV. These two
channels represent a multi-million pound investment made by the
commercial sector in local public service broadcasting.
INTRODUCING CHANNEL
6—A NEW TIER
OF PUBLIC
SERVICE BROADCASTING
INDEPENDENT OF
THE BBC
2. Local TV underdeveloped in UK:
It has long been widely accepted that local TV services in the
UK are underdeveloped in relation to almost the whole of the rest
of the free world. Localness, a sense of community belonging,
and a desire for local news, information and entertainment—are
key drivers in the success of local television in many countries
around the world. The US has more than 2,000 local television
channels, France around 100, Italy around 500 and Spain around
1,000 (Digital Local: Options for the future of local video
content and interactive services, Ofcom, January 2006).
3. Local PSB: Digital switchover
offers a once in a lifetime opportunity to plan a new tier of
public service television—a patchwork quilt of independent
local channels focused on local communities and local production.
The original ITV1 regions divided the UK into areas far larger
than the counties and cities which sustain many long standing
commercially successful regional newspapers and heritage radio
stations. By its very nature, local TV can "drill down"
closer than traditional TV to the audience served, becoming more
relevant and therefore having a greater impact on people's lives.
Local TV allows citizens to see and question local decision makers;
encourages viewers to make the most of local facilities and helps
to bind the community together.
4. Audience Demand: Both Ofcom and
ITC have amassed considerable evidence of the audience demand
for a range of local TV programming. As long ago as October 2002,
the ITC commented: "Most dissatisfaction concerns the
lack of local news, with 52% stating they are not well served
in this area. " (New News, Old News, Independent
Television Commission). Most recently, according to research commissioned
by Ofcom for its Digital Dividend Review (DDR), 78% think it is
either important or very important that new local TV services
"are made available to all UK citizens" (A
report of consumer research conducted for Ofcom by Holden Pearmain
and ORC International, Ofcom, December 2006).
5. High ratings: Local TV (sometimes
described by advocates as "Channel 6") has the potential
to be one of the most popular TV services in multi-channel homes.
There is a mass of evidence that people desire more local TV services—almost
wherever local TV has been trialed in the UK (including SIX TV
in Oxford and Southampton) independent research has suggested
it has gained a 50%+ weekly reach of the available audience—higher
than most comparable commercial radio stations.
6. Promoting citizenship: A local
TV network has the potential to deliver immense social gain, promoting
active citizenship. Television is the only medium capable of uniting
large audiences from different cultures and backgrounds with a
single programme. The wide and mass appeal of Local TV, due to
its local focus, makes it one of the most tangible mediums for
engaging citizens with content that supports tolerance, understanding,
self-improvement and mutual respect.
7. Full service: Local TV is capable
of becoming a major contributor to public service broadcasting
in the coming decade, delivering local news, debate, discussion,
arts, history, wildlife and education initiatives. Milestone advocates
"full service" local PSB channels that, through a range
of on-air programming supported by interactive and "on demand"
services, encourage public debate, reflect all aspects of local
life, promote public access and encourage engagement with local
formal and informal learning opportunities.
8. A more level advertising playing
field: It is crucial that policy makers do not underestimate
the importance of providing television advertising outlets in
a market economy. Local TV will provide effective TV advertising
to local businesses, many of which are crying out for a more level
advertising playing field to compete against the UK brands that
currently dominate all commercial TV advertising. In seeking to
develop a free and fair society, it would appear highly inequitable
for not one single free-to-air TV channel (out of 30+ on Freeview)
to offer realistic affordable advertising solutions to local businesses
seeking to enhance their own profitability.
9. Protecting public access to public
spectrum: Local TV is a form of "common" land—comparable
to public parks and highways. Whilst requiring a loose form of
licensing, the principle of protecting some public spectrum for
local access and production is an extension of the "commons"
principle that is accepted by Ofcom. At the time of its establishment
in 1997 SIX TV expressed its intention "to create a public
space where issues of local concern can be presented in entertaining
and inclusive ways, where health, education and economic resources
in the community can be promoted, where local talent and initiatives
can be celebrated, and most importantly, where residents can be
given the opportunity to participate in and shape their programming."
10. The real digital dividend: Ofcom
Chairman, Lord Currie, is quoted by the House of Lords Select
Committee on the BBC's Charter Review (November 2005) as saying:
"In 10 years or even five years time, we will have a monopoly
provider of public service broadcasting. " This was never
the intention of digital switchover. Yet, local DTT could be a
major contributor to PSB in the coming decades, delivering truly
local and innovative channels reaching an extremely high audience.
Alongside local news and discussion, the new services can and
should work together to share truly innovative creative content
at a region, nation and UK level, developing fresh new talent.
As such, local TV could make a major contribution to spreading
the economic benefits of PSB programme-making outside London and
the South East of England.
11. PSB plurality: It would seem
perverse if the major UK commercial networks, which have increasingly
diluted PSB commitments, are not joined on Freeview by new local
TV channels carrying significant PSB content.
12. Education and basic skills:
Local TV channels can provide a platform for public sector initiatives
to attack the problems of, inter alia, poor literacy and
numeracy. Those who do not read or write gain nearly all of their
information from television. Whilst there is a role for on-line
learning for adults, free-to-air television is the most obvious
medium to target those lacking in basic skills. Crucially, local
TV is able to target its programming to promote local projects
and initiatives, creating partnerships with local schools and
colleges. Existing RSLs such as SIX TV have produced compelling
examples of the need for local TV to support local self-improvement
and community cohesion projects. The South East England Regional
Skills for Life Campaign recently concluded that SIX TV in Oxford
provided "pound for pound, the most effective impact"
for its recent basic numeracy campaign.
13. Engaging citizens: As channels
and choices continue to proliferate a new local TV sector is capable
of providing a local voice that fulfils all main objectives of
public service broadcasting—informing ourselves, reflecting
cultural identity, increasing knowledge and supporting tolerance.
By providing opportunities for training, employment, local advertising
and public participation local TV will be able to empower viewers,
not only enabling them to feel part of the media but also more
involved in their own area.
SUMMARY OF
CURRENT PUBLIC
POLICY ON
LOCAL TV
14. Government working on local TV for
over six years: In December 2000, the DTI/DCMS stated in the
Communications White Paper, A new Future for Communications:
"All television RSL organisations face
a problem of spectrum uncertainty. The Government's spectrum management
strategy gives priority to the roll-out of digital terrestrial
television services. This limits business confidence in RSL operators.
However, the increased availability in spectrum after switchover
may enhance the potential for further RSL services in the future.
A post-switchover plan will therefore be developed to give RSL
organisations a clearer indication of long-term prospects for
local television services. "
15. Communications Act provides for
Local TV Order: Section 244 of the Communications Act 2003
specifically included provision for the Government to introduce
new dedicated public service local TV channels on DTT by the enactment
of a Local Television Order. As the Secretary of State, Tessa
Jowell, wrote to Milestone on 26 March 2003: "... the
Communications Bill provides for a licensing regime... when digital
spectrum becomes available. Licences granted for reception in
a particular area or locality will be expected to provide social
and economic benefits to the area or people living in the area
and to broaden the range of programmes available in the area and
made about the area. " The legislation also allows the
community radio fund to potentially be extended to support local
television services.
16. Ofcom work limited: Following
its PSB Review, Ofcom produced a preliminary report on options
for local TV in January 2006. This report concluded that the decision
on whether and how to intervene to ensure spectrum is used for
local TV channels is ultimately a political judgment to be taken
by Government, following public consultation (source: Digital
Local: Options for the future of local video content and interactive
services, Ofcom, January 2006).
17. DCMS planning Local Television Order:
On 18 February 2005 then Minister, Lord McIntosh wrote: "We
plan to consult publicly on the contents of a digital local television
order. " On 7 June 2006 the Government published it's
response to the Culture, Media and Sport Select Committee's report
"Analogue Switch-Off; A signal change in television".
In it, the Government confirmed: "We are continuing to
work on the policy options for local digital services... "
Shaun Woodward re-iterated the Government's intention to imminently
consult on a local television order soon after taking office as
the new Minister for Creative Industries and Tourism.
18. DDR Proposals: On 19 December
2006 Ofcom published for consultation its Digital Dividend
Review. This confirmed that it had identified spectrum suitable
for local TV: "Interleaved UHF spectrum is particularly
suited for local rather than UK-wide services. Ofcom therefore
proposes to release through auction more than 40 assignments of
interleaved UHF spectrum for particular geographic areas."
However, Ofcom did not propose to require that any "locally
packaged" spectrum assignments are actually used to provide
local TV. Consequently, there is a danger that "local assignments"
could simply be amalgamated by a network operator to create one
single quasi-national non-PSB and non-local channel. This is broadly
in line with Ofcom's general policy not to intervene in the allocation
of spectrum unless mandated to do so by Parliament (as is the
case with the "retained" spectrum that Ofcom is required
to use to enhance Freeview coverage).
19. DCMS supports local TV trials:
In 2005, James Purnell wrote on behalf of the DCMS: "We
have raised with Ofcom the possibility of simulcasting local television
services. We envisage that this would be limited to existing analogue
commercial broadcasters... " There is no good reason
why existing RSL licences cannot be varied to allow digital transmissions
where technically feasible. RSL operators have much of the infrastructure
in place to launch local digital trials almost immediately—and
to therefore provide further meaningful data to assist in policy
making and investment decisions on the future of local TV.
ADDRESSING THE
RISK OF
MARKET FAILURE
IN LOCAL
PSB20. Local TV cannot prosper without DTT: Local
TV will not reach its commercial or public service potential if
it is not available on DTT. Local TV business modeling commissioned
by Ofcom—though ultra prudent—concluded that local
TV will not generally be commercially viable if not available
to the mass market on DTT. Ofcom's consultants stated: "In
metropolitan scenarios, the greatest impact is felt when DTT is
extracted, suggesting that this platform is core to the delivery
of a profitable service. " (The economics of delivering
local digital audio-visual and interactive services, Spectrum
Strategy Consultants, November 2005.)
21. Market failure: The market is
likely to deliver some form of local video content on a number
of platforms—but there is a grave danger that this will
be patchy and inadequate. There is a therefore serious danger
of "market failure" without some form of public policy
intervention. The scarcity of UHF spectrum means that it is not
comparable to any other "input" in the local TV production
process—failure to access suitable spectrum is the single
factor most likely to prevent local TV from achieving its commercial
and PSB potential in the UK.
22. Strong case for intervention:
According to Ofcom's research: "Many of the current Freeview
channels were thought to be of poor quality... proliferation of
new channels would be no guarantee of better quality, and indeed
could lead to a `dumbing down'" (source: Digital Dividend
Review, A report of consumer demand research conducted for Ofcom
by Holden Pearmain and ORC International, Ofcom, 19 December
2006). It is generally accepted that local TV is not necessarily
the profit maximising use of spectrum. Rather than developing
local TV services of high public value, there is a prospect that
interleaved spectrum could ultimately be used or "sold on"
to develop quasi-national DTT channels or put to some other commercial
use. If this "locally packaged" spectrum is amalgamated
to create a new gaming or shopping channel, this would represent
more than just a minor market failure, it would be a once in a
lifetime opportunity to develop local PSB squandered by Ofcom.
23. Direct subsidy cannot guarantee
local TV: Ofcom has suggested that direct subsidies from local
government or other public institutions could be one method of
addressing the risk of market failure in local TV provision. However,
it is difficult to envisage any circumstances in which direct
subsidies could be applied to guarantee the roll out of local
PSB channels if the requisite spectrum is generally acquired for
other uses. It could not possibly be known what level of financial
assistance (state aid) is required by local TV operators to "win"
a spectrum auction until after any such process has been completed.
For the state to then attempt to "buy back" the spectrum
that had just been sold by Ofcom would perversely involve the
Government or other public institutions offering a significant
windfall to the successful bidders. In reality, whoever is successful
in Ofcom's spectrum auction would be in a position to effectively
hold the Government to ransom over the implementation of broadcasting
policy. However, it is simply not possible to place a purely monetary
value on such socially desirable outcomes as educated citizens,
quality of life, access and inclusion and cultural understanding.
24. Communications Act: Parliament
accepts that commercial public service broadcasting is not guaranteed
to be delivered by the market alone. That is why Parliament required
Ofcom in the Communications Act 2003, inter alia, to secure
a wide range of broadcast services from different providers, with
a particular requirement to consider the benefits of "PSB"
and "the different interests of persons in different parts
of the United Kingdom". It is entirely clear that, in
framing the Communications Act 2003, Parliament expects Ofcom
to intervene where necessary to protect and enhance local and
regional PSB content.
25. Ofcom's PSB duties: Milestone
believes it is unrealistic and wrong for Ofcom to rely upon other
public institutions to protect and enhance local and regional
news and other locally produced PSB content across the UK. There
is only one public institution that has a statutory duty to ensure
spectrum is used to develop PSB plurality in the nations and regions
of the UK and that is Ofcom itself. There is certainly no evidence
to suggest that DTT will cease to be an important distribution
platform for free-to-air PSB content in the foreseeable future.
Unless or until such evidence becomes available, local TV must
be considered as a prime candidate for reserved DTT carriage.
26. Opportunity costs low: There
are always opportunity costs and risks associated with intervention
in the market which need to be fully assessed. As Ofcom is aware,
for the "interleaved" channels within the "retained"
spectrum, the costs and risks of reserving access for local TV
channels can be demonstrated to be low. This is partly because
there are few other prospective candidates for this spectrum beyond
local DTT. The technical conditions on restraint of use (imposed
by Ofcom to protect the six UK-wide DTT multiplexes) will severely
restrict the use of interleaved assignments. There will be little
or no impact on the UK-wide spectrum market—the amount of
spectrum in question represents a tiny propotion of the "digital
dividend". The real question for policy makers is whether
one channel on Freeview (which itself represents a major intervention
in the allocation of spectrum to support PSB) should be reserved
for local PSB content and local advertising—or whether all
available local frequencies should be allowed to be amalgamated
into another "national" service. As such, any suggestion
that local authorities and other public bodies are better placed
than Ofcom to properly assess the opportunity cost of allocating
spectrum to local TV is, to say the least, questionable.
27. Prospective bidders require comfort
they will not be operating in isolation: Ofcom does not seek
to maximise public revenue when framing spectrum policy but it
is required to consider the risks of market and regulatory failure.
Since no prospective local TV operator will be able to confidently
factor partnering with neighbouring local TV operators into their
business modelling, the value of the interleaved spectrum will
be significantly depressed when bids are being formulated. Ironically,
this will only serve to reduce the ultimate proceeds for the Treasury
from Ofcom's auction of local spectrum assignments.
28. Local radio and internet: The
public policy case for commercial local TV is compelling and,
arguably, even stronger than the case for commercial local radio
which enjoys significant public policy support (despite generally
producing very low amounts of local news content). Ofcom's own
research shows that "radio's importance as a source of
local news is gradually decreasing: 10% of UK adults said radio
was their main source of local news in 2005, compared to 14% five
years ago". In terms of the internet, Ofcom notes: "recent
audience research indicates that only one in five use the internet
to access news at all (ie not as a main source) and that consumption
is highly stratified, with men, the young and middle class more
likely to access online news than other groups." (Review
of Media Ownership Rules, Ofcom, November 2005). Local DTT
could be an important factor in promoting media literacy and driving
traffic to local "on demand" services available on the
net.
29. Impact Assessment: It is important
the Government assesses the impact of proposals to introduce Channel
6 as local PSB. A successful local TV industry could have some
impact on existing local media (including local newspapers) but
only if audience and advertisers choose to directly substitute
one for the other—if this is the case it is the market working
to benefit consumers. Local newspaper groups generally recognise
that readership and revenues are declining and there is a need
to develop new outlets for their content. Any denial of access
to DTT on sensible terms would act to impede opportunities for
existing local media providers who are seeking to further develop
their businesses. In almost all other countries in the developed
world local newspapers and local television co-exist successfully—often
working in partnership.
LOCAL TV MUST
NOT BE
GHETTOISED ON
MINORITY PLATFORMS
OR PAY
TV
30. Broadband will not deliver full
service local PSB: Milestone believes local TV should not
be ghettoised (ie just provided outside of peak times or as one
of hundreds of channels on pay-TV platforms or broadband) but
available to a mass audience 24/7 free-to-air on digital terrestrial.
As Ofcom's own research demonstrated (Digital Local, January
2006), if local TV does not have access to DTT and the opportunity
to develop a network it will not be able to fulfill its full PSB
potential.
31. Local TV worldwide depends on guaranteed
access to main TVs: Having reviewed the local TV market internationally,
Ofcom's own consultants concluded that "economies of scale,
offered by larger audiences and/or by the efficiencies of a network-affiliate
model, appear crucial to the commercial sustainability of local
services" (The economics of delivering local digital
audio-visual and interactive services, Spectrum Strategy Consultants,
November 2005). Ofcom's current "DDR" proposals are
likely, at best, to lead to an "ad hoc" development
of local TV content and channels in the UK. Previous experience
in the UK and internationally suggests that such an uncoordinated
approach is unlikely to allow local TV to reach its full potential,
denying the opportunity for a UK network to develop economies
of scale. Regional and national advertising is also likely to
be important to the long term success of local TV. A patchwork
quilt of local channels with holes in many parts of the UK is
the least likely model to be commercially successful.
32. Access to capital markets: As
has been seen over recent years, the more successful the DTT platform
has become the greater the demand for capacity. Ironically, so
long as the DTT platform remains the predominant platform for
the dissemination of PSB content there is a strong danger access
could be priced beyond the reasonable capability of local PSB
providers. This is particularly as incumbent UK-wide TV operators
(seeking to protect and enhance their "national" revenues
and market share) are likely to have greater access to capital
markets than prospective local TV operators at the time of auction.
33. Limitations of PSP: Whilst it
is conceivable that a very limited amount of local content could
be funded by some form of public service publisher or other direct
funding, failure to deliver local PSB on DTT will not just deny
access to local content to the widest possible audience—it
will also deny the important benefits to local advertisers of
being able to gain access to one DTT channel on sensible terms.
BBC LOCAL TV WOULD
PUT UK OUT
OF STEP
WITH ENTIRE
DEMOCRATIC WORLD
34. BBC local TV: No other country
in the democratic world is considering allowing its dominant state
broadcaster to provide local TV services, whether on satellite,
cable, IPTV or any other platform.
35. BBC proposals based on commercially
viable areas: The BBC's planned local TV geographic "areas"
appear to correspond almost precisely with the size of area that
Ofcom's consultants concluded in their ultra-prudent analysis
of local TV business models would be viable if provided by the
commercial sector (Digital Local, Ofcom, January 2006).
What is more, the BBC's model for lone video journalists using
hand-held cameras to produce 10 minute local TV news bulletins
(together with user generated content) offers considerably less
public value to citizens and consumers than the commercial services
which Ofcom concluded would be financially viable.
36. BBC local TV over-stretched:
The Laughton Report, produced by Roger Laughton on behalf of BBC
management (November 2006) admitted that the BBC sources local
news "from local newspapers". Laughton suggested:
"Newspapers employ far more journalists... than the BBC
and can offer a far more comprehensive coverage of local affairs...
. Ten minutes (a day of local news) may well have been a longer
time slot to fill than the news gathering resources (of the BBC)
could support. "
37. A direct substitute: Ofcom's
DDR research appears to imply that BBC local TV could be a direct
substitute to commercial local TV by suggesting: "One
local TV channel appears to satisfy most of the demand for local
TV... The increase in value associated with offering three local
TV channels instead of one appeared to be marginal, suggesting
that the incremental value of local TV channels might drop rapidly
after the first channel. This is consistent with the deliberative
research. " (Digital Dividend Review, A report of
consumer demand research conducted for Ofcom by Holden Pearmain
and ORC International, Ofcom, December 2006).
38. Free riding: Whilst it remains
to be seen if the BBC management will review their plans for local
TV following the announcement of the licence fee settlement, it
is wrong in principle for the BBC to enter a new market by "free
riding" on the superior local newsgathering resources of
the commercial sector. Even if the BBC honours a recent suggestion
to pay local newspapers for content, it is clear the BBC's local
news resources are comparatively weak. Whilst the BBC dominates
much existing TV and radio consumption, it has unconvincingly
insisted that it is not intending to become a dominant supplier
of local TV. If this claim is true, it raises the question why
the BBC is planning to enter the market for low cost hand-held
camera news—rather than focusing its resources on the production
of high quality news and current affairs.
TWO MAIN
TECHNICAL OPTIONS
FOR LOCAL
PSB
39. There are essentially two methods that
have been proposed to deliver Channel 6 as a local PSB service
on DTT across the UK:
— Interleaved spectrum: The
first is to use the spectrum interleaved between the six existing
DTT multiplexes to provide a seventh multiplex (ie taking frequencies
that are already used elsewhere to deliver "Freeview"
and re-using them on a small scale basis in other parts of the
country). Ofcom's research, conducted by LS Telecom, suggests
that 44 of the 50 main station DTT sites in the UK are suitable
for the transmission of a new local DTT multiplex. There are also
likely to be further assignments available at the main relay stations.
Ofcom estimate that this could provide around 70% UK coverage,
including most urban and metropolitan areas. The "Local PSB
Multiplexes" would complement the "National PSB Multiplexes"
by targeting specific localities but with a low capacity—enough
for a single (standard definition) local TV channel and some interactive
services perhaps with a rolling local news loop.
— Add/drop: The second method
of delivering Channel 6 is to reserve capacity when it becomes
available on one of the existing six DTT multiplexes and use "add/drop"
technology to enable local service "opt outs" at each
major transmitter site. This could offer 90-97% UK coverage, but
may have the disadvantage of not offering capacity for additional
local interactive services. It would also require one of the existing
multiplexes to give up some of the additional capacity that will
become available to them at digital switchover.
MAIN ISSUES
FOR PUBLIC
CONSULTATION ON
CHANNEL 6
40. Public consultation: Whichever
technical method is adopted to deliver Channel 6, the Government's
proposed consultation on a digital local television order should
consider, inter alia, the degree of flexibility to be conferred
to Ofcom to set down:
— The minimum local PSB content, production
and public access conditions to be contained in each local franchise
consistent with an otherwise liberal and market led licensing
process.
— The minimum ownership restrictions
necessary to protect PSB plurality and commercial competition.
— The size of local franchise areas
and related technical coverage requirements.
— The minimum licence term.
— Appropriate exemptions from the advertising
minutage restrictions set out in the EU Television Without Frontiers
Directive (as is permissible if channels cannot be received outside
the UK).
— The case for maintaining independent
producer status for local franchise operators.
— The case for must carry status on
cable franchises.
— Technical requirements for integration
of service information with the Freeview electronic programme
guide.
— The benefits of adopting an early,
simple and transparent award process (in 2007-08) to provide comfort
to local television investors and allow for the planning of the
launch of new local franchises at switchover.
41. Light touch: Milestone supports
a "light touch" regulatory approach to the development
of local TV with the minimum licence conditions necessary to protect
the essential character of a local PSB service. The commercial
radio model, in which the regulator micro manages the minutiae
of programming, would not serve the interests of consumers or
citizens and could not be emulated in the relatively mature digital
TV market.
CONCLUSION—LOCAL
PSB PROVIDING A
FUTURE FOR
COMMERCIAL PSB
42. Clear choice: The UK has a clear
choice. In the coming years, Channel 6 as a local PSB channel
could be delivered by commercial organisations, helping to stimulate
local economies and supporting local education, employment and
training initiatives. Alternatively a limited form of local TV
could be delivered by one single dominant state-owned UK-wide
broadcaster, funded exclusively out of the licence fee.
43. Recommendations: If Parliament chooses
to now actively support proposals to require Ofcom to reserve
spectrum for commercial local TV, it will be creating a legacy
of social good in local communities for many years to come. Parliament
should therefore call upon the DCMS to bring forward its consultation
on a local television order as a guarantor of free-to-air local
PSB as a matter of urgency. We would, further recommend permitting
existing RSLs, wherever feasible, to implement digital transmissions
for the duration of their current licence term in order to compensate
for the diminishing analogue audience and to provide further evidence
to help inform Ofcom and the industry's implementation of the
digital local television order.
January 2007
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