Examination of Witnesses (Questions 100-119)
DEPARTMENT FOR
CULTURE, MEDIA
AND SPORT,
DIGITAL SWITCHOVER
HELP SCHEME
& DEPARTMENT FOR
BUSINESS, ENTERPRISE
AND REGULATORY
REFORM
MONDAY 10 MARCH
2008
Q100 Dr Pugh: In terms of the benefits,
we are apparently all going to benefit by £5.1 billion collectively
as consumers because of this. How?
Sir Brian Bender: The main benefits
come in two areas. One is the additional choice, basically, for
people who can have the extra services.
Q101 Dr Pugh: How can you put a £5.1
billion figure on choice? You either have choice or you do not
have choice. I do not see how you can quantify it.
Sir Brian Bender: I can give you
a note on how we did the calculation.
Q102 Dr Pugh: I would love a note
on how you did the calculation.[3]
Sir Brian Bender: Part of it is,
I think as Mr Stephens said earlier, only 80% of households can
currently access digital versions of public services. The switchover
will allow 98.5% to do that, as the Report says. That is one element
of benefit. The other is the freeing up of the spectrum, so the
analogue spectrum that is being freed up by switchover is going
to be auctioned. Ofcom will be running that auction and that is
the other main area of benefit, the benefits to consumers for
whatever new services are provided on that spectrum. Those two
together come to around £5 billion.
Q103 Dr Pugh: So the argument is
that, because the Government will make something on it, I as a
taxpayer will be providing less money for the Government?
Sir Brian Bender: No. The benefit
to the consumer because of the services that will be available
in the spectrum, whatever those services may be.
Q104 Dr Pugh: I am intrigued to know
how I am going to benefit or how we are all going to benefit by
£5.1 billion. I look forward to your note on that. My last
question is simply this. It says that departments do not have
an estimate of the cost to the public sector of switchover. I
would have thought that was the easiest thing to do a costing
on. Why do we not have a costing of the effect on schools and
councils and other bodies that use electrical equipment of all
sorts?
Mr Stephens: We do not have the
information on the numbers of televisions used for broadcast.
We are aware of the departments—
Q105 Dr Pugh: You do not have exact
information on the number of televisions in the country, do you?
You are doing estimates all the time. I do not think it is any
more difficult to estimate how many TVs schools have than it is
to estimate how many TVs a community has, is it?
Mr Stephens: For the purposes
of the overall cost benefit analysis, the interest is in the overall
benefit to the economy, and that is reflected in the cost benefit
analysis that was on the table.
Q106 Dr Pugh: There is a downside.
I was hoping as a taxpayer to gain enormously from the fact that
the Chancellor of the Exchequer was coming for less money because
he made so much on the spectrum sale but, of course, I could be
the other way because schools, which I also fund through my taxes,
are going to have to pick up the tab. Has that been factored in?
Mr Stephens: Schools generally
do not make extensive use of televisions for broadcast purposes.
They tend to use them for playing videos or DVDs or whatever.
Q107 Dr Pugh: So you do not have
an estimate but you think it is probably quite a small figure?
Mr Stephens: Yes.
Q108 Angela Browning: I would like
to pick up again on this question of what has happened out in
the retail market, because I do think these are really quite extraordinary
figures we are looking at in terms of what people are still buying
or have been buying in the last year out there. I wonder if I
could begin by asking Sir Brian whether the Department of Business
would recognize the term: "built-in obsolescence"?
Sir Brian Bender: Yes.
Q109 Angela Browning: As I have been
listening to some of the questions and answers on this, I have
been mentally picturing the scenario of the retail purchasers
talking to their suppliers, the manufacturers of these TVs, and
I would have thought, as retailers, they have had quite a whip
hand in getting some good deals from their suppliers, their manufacturers.
I will just say, Chairman, I was once a sales manager in the white
goods market, not in the brown goods market as this is but I just
think, as somebody who is a little bit familiar with this end
of the marketplace, just imagine the scenario of the conversation
that they have been having in recent years in order to get the
best price out of the manufacturers. Here we are in a country
where what they are trying to sell them is going to be obsolescent
within a few years but if they can keep buying them, and particularly
if they can keep selling them to their customers, the consumers,
just imagine how the profit margin on those individual sales could
be expanded for the retail trade. I wonder if you would just like
to comment on that.
Sir Brian Bender: 73% of TV sales
in December were digital. Twelve months earlier in December 2006
they were 37%. Production is now largely digital and, as I have
said a couple of times in this hearing, in January of this year
Currys became the first retailer to announce that they would discontinue
analogue sales. So the market is moving.
Q110 Angela Browning: It is moving
now. I am reading what the NAO have said on page 25 about what
some of these big household names have been saying they are going
to do now, but they have had a pretty good run in this trade,
have they not, at a time when one would have expected them, Chairman,
to be spending a lot more time in moving towards the change over
to digital and ensuring that their customers were properly informed
and making an informed decision on what they buy? It does seem
to me extraordinary that they have been allowed to get on with
this in such an unfettered way for so long.
Sir Brian Bender: You are right.
The right answer has to lie in the proper information for consumers.
That is what Digital UK are doing through the tick system. It
has 76% recognition now but there is more to be done, much more,
as the Chairman said earlier, in terms of training the retailers.
Q111 Angela Browning: Yet we know
from looking at paragraph 3.16 that, despite several attempts
to identify the amount of knowledge on the shop floor from the
people actually selling directly to the customers, that there
are still huge numbers who cannot give that informed advice when
somebody comes in to buy. Perhaps you might not want to say this
but do you think for one awful minute that we have a situation
where the purchasers, the companies, have been buying in, knowingly,
products with built-in obsolescence at a much enhanced margin
and at the same time not really going the full monty in making
sure their staff were fully trained, perhaps with some incentives
for selling particular ranges, in order to maximise profits? Do
you think that is a possibility at the consumer's expense that
has been happening for some years in this country?
Sir Brian Bender: I do not know.
I sincerely hope not.
Q112 Angela Browning: Should you
not know? Have you not had conversations with them?
Sir Brian Bender: On this particular
issue, Digital UK are addressing the question of understanding
among retail staff and, as I said earlier in reply to a question,
they have a whole series of actions in train to improve their
understanding: an advisers scheme, pocket cards, partnerships,
trade advertising. That is the direction we have been going down.
Q113 Angela Browning: It does not
concern you that maybe this has been quite a deliberate policy
in order to maximise profits right up to the point at which they
had to do what was necessary?
Sir Brian Bender: This is a consumer
protection issue and if there have been cases like this, certainly
we would want Trading Standards and Consumer Direct to take them
up.
Q114 Angela Browning: But if nobody
actually makes the point of finding out whether that is the background
to what has happened, in the light of these astonishing figures
in this Report, who would take responsibility for such an investigation?
Sir Brian Bender: I think it would
be—and I speak subject to correction—Digital UK as
part of their consumer protection strategy on this.
Q115 Angela Browning: They would
have the authority to do that, would they?
Sir Brian Bender: They have a
consumer protection strategy and they work with Trading Standards
departments and Consumer Direct on it.
Q116 Angela Browning: I would be
very interested, Chairman, to know whether such a scenario has
happened in recent years, because I cannot imagine why we are
looking at figures as great as this, at the trade coming in so
late in the day, both with training and changing the product,
knowing for several years that this was the scenario in front
of them. If it has been quite deliberately enhancing their own
margins at the expense of the customer, which is what that would
amount to, somebody surely must take some responsibility to find
out whether that is the case.
Mr Stephens: It is worth, if I
may, making the point that this is based on a considerable amount
of speculation, if I may say so, first of all that there has been
any loss to consumers because, as we have been making the point,
analogue televisions may well be available at a lower price and
can still be converted and still be used after switchover by consumers;
secondly, that there has been any excess profits engaged in by
the manufacturers and, again, I am not aware of any evidence to
that effect. It is also worth making the point that consumers
may rationally be choosing to purchase analogue televisions for
purposes that are not to do with receiving broadcast signals.
So the straight assumption that after switchover people will have
no use for an analogue television is not one that is supported
by the evidence.
Q117 Angela Browning: I am not convinced
actually, Mr Stephens, that anybody has looked at it in the light
of what I have said, and it would be interesting just to know
if somebody has investigated that hypothesis, but also, the more
analogue televisions sold, the greater the demand surely is going
to be on this fund that Mr White is looking after in order to
help, assist and advised people. If I could just come to this
point, because several of my colleagues have touched on this,
this question of a possible surplus or an underspend at the end
of it all, I think you have been very coy, Mr White, about what
might happen to it. Chairman, I would just like to ask the Treasury
Officer here about this because it is money coming through the
licence but it is money which, if it was a government department
that had underspent on a particular project, that department would
not automatically feel they had ownership of what was left. The
Treasury would, I would have hoped, almost certainly regard it
as something that came back to the Treasury if not on a paper
exercise.
Ms Diggle: In this particular
case what would actually happen should there be a surplus—and
we do not know, of course—a decision would be made by Ministers
in the light of circumstances at the time.
Q118 Angela Browning: That is, in
a way, encouraging to know that Ministers would look at that because
I was not sure from your answers, Mr White, although you were
not able to define exactly what would happen to the money, of
course, whether you actually thought somehow that it would still
remain somewhere within the BBC.
Mr White: No, the Scheme agreement
is very clear. The Scheme agreement says in Schedule 1, paragraph
3: "Similarly, if Scheme expenditure is less than the estimated
budget of £603 million, decisions on how this underspend
is dealt with will be taken nearer the time that any underspend
becomes apparent, possibly in the context of the next licence
fee period." So the Scheme agreement within which I operate
is very clear on how that is decided. I am sorry if I was unclear
on that.
Q119 Angela Browning: Thank you.
My time is nearly up but I will, if I might, just ask you a question
about my own constituency, which is Tiverton and Honiton in Devon
and therefore in the South West, one of the early regions to move
to digital. In a very helpful note specifically about by constituency
from the NAO I am told that, although there is a good understanding
among consumers in my constituency, however, the level of conversion
to digital is slightly below the national average and around half
the consumers in the region still have unconverted analogue televisions.
That worries me, Chairman, because not only do we have lower than
average wages in the South West but actually, in my constituency
I have lower than the average South West wages; the wages are
very low, so I am extremely concerned that although their awareness
is there, their willingness to put some money behind this is clearly
below the national average. I wonder if somebody would like to
comment in terms of how we are going to deal with regions like
this who really will find this quite a financial penalty, particularly
if they have all been sold analogue televisions in the last year
or two.
Mr Stephens: If I am looking at
the same sort of figures, it is 82% main set conversion in yours
constituency compared with a national average of 85%. So it is
lower but only very slightly so, and the existing take-up before
switchover of digital sets is influenced by a number of factors,
including the existing availability of freeview and other factors,
so it may not be influenced predominantly by cost. Indeed, the
evidence is that cost is not a significant barrier to take-up
of digital sets and the help scheme is available for those who
require assistance, and for those who are on income-related benefits
or Pension Credit it is free.
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