Supplementary memorandum submitted by
the BBC, ITV, C4 AND C5
NOTE ON PUBLIC SERVICE BROADCASTING AND ACCESS
THROUGH SATELLITE SET TOP BOXES
This note represents the views of the BBC, ITV,
C4 and C5. It is designed to supplement the written and verbal
evidence of each of these organisations and provide a focussed
series of amendments that we believe need to be made to the Draft
Communications Bill on the issue of access/must carry. The aim
of all these proposals is to guarantee universal and easy access
to public service broadcasting, across all distribution systems,
Currently the regulatory framework ensures this
for public service broadcasters in the case of digital terrestrial
and digital cable, through guaranteed spectrum and guaranteed
carriage respectively. But satellite viewers have no such guarantee
that they will be able to access public service broadcasts on
the satellite platform. Indeed, the regulator, OFTEL, has explicitly
stated in its recent statement on conditional access pricing that
it does not have the mandate to consider either the special status
of public service broadcasters or whether it is fair that PSBs
are obliged to pay huge sums to access one platform, including
contributions to its set top box subsidies, whilst this is not
the case on either DTT or DCable.
These issues need addressing before switchover.
Guaranteed access to the public service broadcasters will itself
help create the conditions for switchover, rather than being something
that can wait until after it has occurred. PSBs will need to be
present on all three digital platforms to deliver universal access
to viewers. Of the three, satellite is currently the platform
of choice, with over 5 million households depending on digital
satellite to access all public service channels. In some parts
of the UK satellite is the only option available to viewers wanting
to go digital.
For these reasons we would urge the Joint Scrutiny
Committee to propose the following five amendments to the Draft
1. Public service broadcasters must be present
on all digital distribution systems, particularly if switchover
is to be achieved. This should be recognised by a "must offer"
obligation on the public service broadcasters and matched by a
similar "must carry" obligation on packagers and retailers
of satellite channels to guarantee viewers' access to public service
broadcasts, together with the associated interactive elements.
2. Measures to guarantee access to public
service broadcasts across all major digital distribution systems
must be effective before switchover. This is already the case
for DTT and DCable. Similar measures to guarantee access through
digital satellite set top boxes should not wait until switchover
and should be written into the draft Bill now.
3. The Government's policy document states
that it is considering provisions to ensure that OFCOM will be
obliged to consider the special position of public service broadcasters
when regulating the price of conditional access. In our view the
Bill should specify that the charging regime for public service
broadcasters' access through satellite conditional access sytems
be separate from that applied to wholly commercial players with
no PSB responsibilities. Public service broadcasters should expect
to pay the marginal cost of conditional access minus the
value that their service brings to the platform. They should not
be expected to contribute to the costs of set top box subsidies
designed to drive pay penetration or other features of the platform
beyond their control and not related to the distribution of free
to air services.
4. The Bill should also impose an obligation
on distributors or digital TV services to provide unbundled servicessuch
as postcode data for regionality-to broadcasters. Currently public
service broadcasters are obliged to purchase a conditional access
system designed to protect pay broadcasts simply in order to ensure
that the current regional version of their services reaches viewers.
Regionality is delivered as a matter of course on both DTT and
DCable, but on satellite the operator has not offered to provide
the postcode data that ensures regionality, separate from conditional
access. This bundling of two unrelated services should be prohibited.
If public service broadcasters were able to resolve the rights
overspill problems associated with satellite transmission and
broadcast unencrypted they should be allowed to purchase access
on a marginal cost basis to the postcode data, allowing regionality
separate from any obligation to purchase conditional access.
5. The Bill should also require OFCOM to
monitor the charging for non-pay satellite customers, to end the
current excession charges. If satellite viewers who have end their
Sky subscription are to continue to receive the free to air channels
through their set top box, they must be issued with a separate
smart card. The costs of these cards is currently born by some
of the public service broadcasters and comes on top of what they
already pay in conditional access charges.
The price charged by BSkyB for the conditional
access for each card for non-pay satellite viewers (again under
the Oftel CA pricing regime) bears no relation to its true cost.
As we approach switchover this will impose continuing excessive
charges on non-pay satellite viewers or free-to-air broadcasters.
Neither would be acceptable and the current charging regime will
become even less acceptable as non-pay satellite viewers require
new cards for each of their TV sets. In the cast of non-pay satellite
viewers, conditional access should be charged at incremental
We also thought it might be helpful to reiterate
our position on the main must carry/access questions raised in
the context of the oral and written evidence from the public service
broadcasters and platform operators. We therefore attach a brief
series of Q & A's as an appendix.
JSC EVIDENCE SESSIONS
Why is the current Oftel regime guaranteeing fair,
reasonable and non-discriminatory access to satellite insufficient
for public service broadcasters?
The Oftel FRND regime does not guarantee
a carriage deal between the broadcaster and the satellite operator.
It merely leads to extremely protracted negotiation, such as in
the case of the BBC, which took 18 months to get agreement with
BSkyB over the tools to offer interactive elements such as Interactive
FRND is a piece of economic regulation
aiming to regulate a commercial negotiation. It applies to all
channels and treats them all alike, regardless of content;
The regime therefore does not distinguish
between a pay TV channel, which needs to encrypt its services
to raise revenue, and a public service channel which needs CA
to fulfil its public obligation of delivering the right regional
service to each viewer;
Oftel also maintains that FRND cannot
take account of the clear disparity between the three digital
platforms in terms of PSB carriage, ie the fact that statutory
must carry obligations exist for cable, and effectively, DTT,
but not satellite;
Oftel's most recent statement on
CA pricing (The Pricing of Conditional Access and Related Issues,
8 May 2002) reiterates that it is not able to resolve the difficulties
experienced by PSBs on satellite, as these are matters of public
Specifically, Oftel acknowledgdes
(in Chapter 4) the various "funding arrangements, benefits
and obligations in place for public service broadcasting"
(eg must carry, licence fee) and suggests that if these arrangement
need to be addressed "to ensure that [these broadcasters]
are able to fulfil their obligations due to the costs associated
with delivering content on different platforms, then that is a
seperate public policy issue".
Earlier in Chapter 3, Oftel stresses
that it is not mandated to consider the potential distortions
of having different rules for different platforms: "Oftel
only has responsibility for conditional access and is not able
to correct any of the other variations that exists between platformsmust
carry rule, spectrum allocations, etc".
It is our view that any new OFCOM CA pricing
regime must be able to take into account both economic and public
policy objectives, as discussed above.
PSBs have to pay the market rate for satellite
capacity (transponders), electricity, camera crews etc, why shouldn't
thay do the same for CA?
Providers of electricity or transponder
capacity derive no extra value from supplying the PSBs. They are
simply providing a service for which we rightly pay the market
rate. This isn't the case with BSkyB which has a direct relationship
with UK television viewers and derives real value for their platform
from carrying our channels.
We do not object to paying the marginal
cost of CA on satellite after the value of our channels to the
platform is taken into account. Similar logic is applied by the
Government to cable, where the cost of carriage is offset by the
value derived by the cable operators from carrying the PSBs. The
same principle must be extended to satellite. What we do object
to is BSkyB being allowed to charge PSBs for a contribution to
their set-top-box subsidy, something which no other pay platform
operator is allowed to do. This results in the PSBs being charged
tens of millions of pounds each year for CA rather then a few
hundred thousand pounds that we estimate the true cost to be.
Sky claim there are differences between the platforms
which justify payment on satellite. Is that true?
There is nothing to suggest that
the "value" of the PSBs differs from one platform to
Sky's main point is that cable operators
derive revenue from PSBs by retailing them as part of their basic
packages, and that Sky does not as the PSBs are offered entirely
free to air on satellite and not part of any Sky package;
This situation would change under
the proposal that we have put forward. The PSBs would be packaged
by Sky in exactly the same way as on cable, and offered to subscribers
along with other basic channels, included in the monthly subscription
cost collected by Sky. Non-Sky satellite viewers would then receive
a new card so that they could continue to receive the free to
air channels through their satellite set top box.