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Lord Crickhowell: My Lords, perhaps my noble friend will forgive me for intervening. I declare an interest as chairman of HTV. Does my noble friend agree that one of the problems that the Government must address is provision of the coverage that we all want? In parts of Wales there will be massive problems in providing a desirable scale of coverage. It is rather misleading to talk of percentages in the high nineties

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because there will be areas in which it will be extremely difficult to achieve adequate coverage. That is a matter that must also be addressed.

Viscount Astor: My Lords, my noble friend is entirely right. Percentages are difficult. The present figure is 99.6 but in some remote rural areas reception is much worse. That is a challenge to the industry so that switchover does not take place until digital television is at least as good as current analogue coverage.

One other issue that I briefly highlight is the recent campaign by BSkyB to attempt to force ITV to put its programmes on digital satellite. BSkyB claims that the public is losing out. I believe that that is not so. Under its licence agreement ITV must broadcast its regional services in both analogue and digital. ITV is committed to achieving parity in coverage before analogue is switched off. No viewer is disadvantaged or discriminated against. On 23rd March the ITC announced that it agreed that there were no grounds to require ITV to supply ITV2 to digital satellite. The issue is now before the OFT.

I welcome the announcement made by the ITC. The three methods of broadcast--terrestrial, satellite and cable--are different and not the same. They are competitive; their platforms, systems and channels are different. They offer choice to the consumer and compete. I am sure that the Minister will address the concerns that I have raised this evening. Although broadcasting in its formative years evolved very slowly, in the past few years it has advanced at near-lightning speed.

6.44 p.m.

Lord Thomson of Monifieth: My Lords, I thank the noble Viscount, Lord Astor, for introducing this debate. He said that I was once chairman of the Independent Broadcasting Authority. I used to be told then that I had the great privilege to be at the very frontier of broadcasting technology. I was always clear as to where I was at the frontier of broadcasting technology--down on my knees with my bottom in the air trying to master the video cassette recorder. I confess that I find it even more difficult to master the concept of digital multiplexes. But there is no doubt that the whole future of broadcast television in this country now lies in the transfer from analogue to digital. I believe that the challenge for public policy is to make that future happen as soon as is practicable but also to ensure that it happens as effectively as possible, with proper regard for the quality of broadcast output.

I convey the apologies of my noble friend Lord McNally, who normally looks after these matters on behalf of my Front Bench but is presently indisposed. Currently, he is president of the British Radio and Electronic Equipment Manufacturers' Association (BREMA) whose annual general meeting he addressed last week. He said then:

    "The start of digital television broadcasting in the UK last year was a momentous event for all concerned and required huge investment and very considerable resources from both broadcasters and manufacturers".

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    He went on to make the point--which I had not realised--that for once in this field of manufacturing technology Britain was rather in the driving seat. We are a world first in this field and it holds great potential for us. The majority of digital receiver equipment will be designed and produced in the United Kingdom. Therefore, it offers big opportunities both in this country, depending on the development of digital broadcasting, and in markets in Europe and elsewhere.

As the noble Viscount has said, it will take a good deal of time. I recall that the time required for the transfer from black and white to colour television was of the order of 15 years. I was in the chair of the IBA at the time that it finally occurred and well remember the occasion. The government of the day, as with all governments--including no doubt the present one--were very cautious about grasping the nettle and switching off the black and white transmission system, totally convinced that inevitably it would be the poor widow in a remote part of rural England who would be immediately affected by it and she would write to her Member of Parliament. It was only when one of our transmitters in the ITV system went out of action in rural Norfolk for two weeks without anyone noticing that the Government finally plucked up the courage to do so. Therefore, I echo the words of the noble Viscount that, although it will take a considerable time--I suspect that his suggestion of 10 to 12 years is not an underestimate--in this case to have as firm a target date as possible would be an immense help in concentrating everybody's minds.

What can be done to speed up the transfer from analogue to digital television? The noble Viscount recited some of the practical things that could be done. The ITC and Ondigital, for whom he speaks in this respect, have been working rather hard on various practical proposals. I shall not repeat what he has already put before your Lordships' House, but certainly a good deal of progress can be made in this field.

I think we have to face the fact that in the development of this digital revolution there are some extremely fierce conflicts of interest. The noble Viscount mentioned the one between BSkyB and its digital programming and the ITV system. I think the noble Viscount is right in saying that certainly the BSkyB case is not as simple as it is made out to be. Satellite broadcasting in the digital field is not as universal in its coverage as is sometimes thought because of all kinds of physical considerations. The ITC looked at this and it is the guardian of the public service broadcasting interests in this matter. It decided that there was no case to answer but, as the noble Viscount said, we are expecting in quite a short time the report of the Office of Fair Trading on the competition aspects of this dispute.

There are also quite seriously conflicting interests in the digital development field between the BBC and the commercial broadcasters. The BBC has been floating the idea that perhaps in order to finance its side of digital television there ought to be a supplement to the licence fee for those who wish to use the new digital equipment. Of course there is a precedent for this. That is what happened in the development of colour

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television. There used to be an increased licence fee for that, as against black and white television. This of course is something that will need to be looked at.

However, I think that the commercial broadcasters have a point in arguing that, if it is in the national interest to make a transition which is as speedy as possible from analogue to digital, a supplementary fee for it would be a deterrent to people who want to use the new equipment. I am bound to say, having seen the development of digital television in its laboratory stage in the past, that there is a distinct difference between the transfer from black and white to colour and between the transfer from analogue to digital. Black and white to colour was such an obvious advantage--a great quantum leap--in the quality of what we could all see, and to anybody who has tried to go back and watch a football match in black and white there is no doubt about the change brought about by colour.

Digital television has advantages. It produces a better quality picture and also a different shape of picture, more in the cinema style, and in my experience that makes a great deal of difference to the pleasure of watching a film on television. Nevertheless, I do not think that digital television has such a spectacular and clear-cut advantage over analogue television that it will represent the same sort of incentive as happened between black and white and colour.

I rather suspect that the BBC will have to look carefully at the total philosophy of its approach to developments in broadcasting. It still has a deep, instinctive feeling that, with everything that happens in broadcasting, the BBC has to be there in the forefront of it and devoting its resources to it. It may need to take a more rigorous view of its priorities in terms of the various forms of broadcasting development in which it competes.

Then of course there are conflicts of interest in terms of the manufacturing technology as between terrestrial digital, satellite digital and cable digital. There is a big consumer interest there which demands the Government's close attention. Regulators, encouraged by the Government, should seek to bring about as far as possible standardised sockets and software interfaces that will allow manufacturers to make cheap plug-in devices which will allow users to have access to services provided by other networks. The technological obstacles in all this are fairly formidable but, in the interests of the consumer, it is important to overcome them as far as possible.

I end, as a sort of old public service broadcasting chap, with some sobering thoughts on the broadcasting quality side of these exciting developments in broadcasting technology. The tide of technology is something that cannot be denied in the world in which we live, but we always ought to bear in mind that technology, although a marvellous servant, can be a bad master unless one is careful about some of the consequences.

We now have the possibility, as the noble Viscount said, certainly on the satellite digital side, of having 300 or 400 channels. On my own cable system I have the possibility of 50 or 60 channels, but I find in practice

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that I regularly watch only five or six channels. I think that has been the general reaction of the consumer to the proliferation of channels. Of course, the five or six, or seven or eight, channels that each person watches will be different in each case, and there are certain benefits to be gained from widening the range of channels that begins to create what has become known as the electronic bookstall.

The fact is that broadcasting is now just a relatively small part of a global information technology world-- a sort of seamless web of information technology around the world--in which all the old tidy frontiers between broadcasting and telecommunications, between broadcasting systems and national Post Office systems and so on, have simply disappeared. Against that background it is important rather consciously to look after the interests of that section of the information technology world which is broadcasting, because it is broadcasting that, more than anything else, shapes what might be called the climate of the kind of society that we live in.

I remember a famous editor of The Times in London many years ago between the wars, Wickham Steed, using a phrase which always stuck in my mind as a young journalist--that the raw material of the newspaper media was moral values. That is even more so now that the television media particularly so shapes our life and our outlook on the world and one can see the impact that it has from the habits of our children and through the shaping of foreign policy during a tragedy such as that which we are now witnessing in Kosovo. It is extremely important that, as far as we can, we ensure that in seeking the benefits of the new broadcasting technology we do all that we can to ensure that it produces wholesome results in terms of the content of broadcasting.

6.58 p.m.

Baroness Anelay of St. Johns: My Lords, I thank my noble friend for giving us the opportunity to debate this issue. It is indeed a timely matter and it is an important time for the companies involved. That is true, first, in a technical sense as relating to the publication last year of the NERA report. Secondly, the statutory deadline prescribed by Section 33 of the Broadcasting Act 1996 is the 19th December 2001. However, the Government have said that they envisage starting the process well before that deadline. Thirdly, the OFT report is due soon on the ITV2 issue which was mentioned by my noble friend Lord Astor. Finally, Ondigital have made it clear that they want the Secretary of State to exercise his discretion again to enact a further piece of secondary legislation that would increase the points limit and thereby enable Ondigital to carry Sky Sports Two.

In a far broader sense it is an important time for the public, the consumer. It is a time of great change in the broadcasting business. When we consider the future of digital terrestrial TV it will always be within the general context of a digital industry as a whole; an industry which, as the noble Lord, Lord Thomson, mentioned, is one in which the United Kingdom can lead the world.

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We see platforms for the delivery of services changing rapidly. Satellite, cable and aerial, are all developing. There is an expanded availability of the number of channels overall, and great potential for an explosion in interactive services. There is an explosion in the increased use of the Internet, not only for interactive services but for access to broadcasting services too.

Yet at the same time as we face change there are constants. The public continue to demand good quality programming, a choice of a range of types of programmes--sports, news, entertainment, films, education--all at a time when they also wish to have an affordable price and easy access to that service.

So providers must continue to battle with all the usual problems: competitiveness with each other; the cost of setting up and developing new platforms, new services; and the cost of attracting and retaining new customers. I understand and appreciate the problems faced by both Ondigital and Sky. When we were in Government we were careful to ensure that the 1996 Broadcasting Act permitted competition between the various digital broadcasting platforms. I am aware that there is nothing in the Act which requires ITV to make its material available to Sky subscribers. Granada and Carlton are investing heavily in Ondigital and feel it is essential that this high risk venture should retain some exclusivity within their schedules. I am also aware that BSkyB argues that ITV's decision (with regard to ITV2) means that 4.3 million people will not be able to receive ITV digital services simply because digital terrestrial TV does not have universal reach.

We on these Benches remain of the view that it is a matter for the competition authorities. Sky has referred this case to the OFT which is expected to report shortly. But overall the task facing both BSkyB and Ondigital is immense. They need to convince the 18 million people who watch only the traditional terrestrial TV channels that they need digital services if any or all of the competing companies are to succeed. That task must have been made all the more difficult by the publication this month of the Consumer Association Which? report on digital broadcasting. The report concluded that the digital TV revolution is failing to live up to its own hype. Researchers for the report claim that picture and sound quality are not better than on traditional analogue TV sets. I quote from the report:

    "We don't think you'll notice any difference in picture quality unless you live in an area with a poor analogue signal and currently suffer from ghosting or a snowy picture".

I am not too sure whether consumers suffer from snowy or ghosting pictures. That was certainly true in my case, and the reason that I went to digital via satellite. I can now view BBC1 perfectly for the first time in all of 26 years.

But as the report points out, whichever service the consumer chooses, BSkyB or Ondigital, the consequences may not be 100 per cent beneficial. They need to choose what suits them best. Each has its drawbacks as well as its advantages.

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It is certainly a highly complex subject, as noble Lords have said. It is so complex that it even caused the Minster to stumble slightly recently. Since he is acknowledged as an expert in this field, certainly by myself and other noble Lords, perhaps I may be forgiven for teasing him just a little. The last debate before the Easter Recess was on design. It was a DTI debate and I did not attend it but I watched it later on the BBC Parliamentary Channel via Sky Digital. In that debate my noble friend Lady Seccombe mentioned that at home she has one of the new digital boxes. When the Minister responded he remarked, at col. 493 of the Official Report of 31st March,

    "I have to say to the noble Lord, Lord McNally, with his example of digital radio, that maybe the noble Baroness, Lady Seccombe, can afford these but before many people can have access to them they, first, had better bring down the price below £800".

The digital box that my noble friend mentioned was of course the Sky Digital set top box for TV, not digital radio, and far from costing £800, it costs less than £200, because she was an existing subscriber. Even without that it would have been just under £200. Over 350,000 people have already signed up to Sky Digital. Ondigital announced on 8th April that it has signed up 110,000 subscribers. Integrated Ondigital TV sets will be available from June at a cost of about £500. Against that background, access to digital TV cannot surely be considered quite so much of a luxury.

I realise that for some consumers signing up to digital services may incur a variety of extra costs. The NERA Executive Summary of the Study to Estimate the Economic Impact of Government Policies Towards Digital Television (a title which puts anyone off reading it, although I managed to stagger through it) makes the problem painfully clear. Paragraph 5 points out that a proportion of households (estimated at less than 30 per cent.) will also need to purchase new antennas to receive DTT, while digital satellite and cable households will also have additional installation costs (for example, modifications to satellite dishes and a new cable for those households not subscribing to analogue services.) Households may also need to purchase new VCR equipment. This will make the life of the noble Lord, Lord Thomson, even more difficult on this matter. In the digital environment, existing VCRs will offer only limited functionality: the viewer will generally be restricted to recording the channel currently being watched. Full VCR functionality will require either the purchase of a set top box for each VCR or the purchase of a new digital VCR when those become available.

A potential extra cost has only just been identified. There are press reports in the past week that the BBC is lobbying the Government to introduce a supplementary licence fee of about £30 for digital TV viewers. I appreciate that the Minister cannot commit the Government at this stage for or against such a measure while the licence fee review is taking place, but what assessment have the Government made of the impact of a digital TV licence surcharge on the potential growth of the take-up of digital TV? What impact could such a surcharge have on the timing of the Government's decision to turn off the analogue signal? At what level of consumer take-up of digital TV--I mean "take-up"

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and not the spread, the availability to get at it--do the Government believe it is necessary for the United Kingdom to reach before the Government turn off the analogue signal and force us all to sign up to digital, or simply not receive?

As consumers sign up for digital services they will need to be able to make informed choices. At present that does not always happen. If the information provided to potential customers were as clear as some of the lobbying information provided by the companies to Members of this House, then the consumer would have an easier job of making that choice.

The companies responsible for developing digital services still have much work to do in developing technology to support services; developing their markets; developing customer support services; and improving the quality of information given at the point of sale. There are exciting commercial opportunities for them. Let us not underestimate those. There are equally exciting entertainment and education opportunities for the consumer. I look forward to hearing the Government's response to my noble friend's debate.

7.10 p.m.

Lord McIntosh of Haringey: My Lords, I am grateful to the noble Viscount, Lord Astor, and to other noble Lords who have taken part in this short but high quality debate. The noble Viscount issued me with a challenge to define multiplexes. Perhaps I should respond to that quickly so that I can get it out of the way. The word "thing" is a good description of a multiplex because it is a package of spectrum. Of course, it can be in a wide number of forms, but it is a package of spectrum which permits the broadcast of a certain number of channels. The variables which determine how many channels it can broadcast are, first, power, as with existing analogue channels, and, secondly, the degree of compression. Compression technology has reached a certain stage and is continually advancing. The number of channels which can be broadcast on a multiplex is, for the purposes of the 1996 Act, assumed to be six. However, by the time we have a widespread use of digital there could be more than that. Therefore, "thing" is better than a definition in electronic terms.

The noble Baroness, Lady Anelay, chided me for my usual fault of elliptical speech when I mingled comments on the contributions of the noble Lord, Lord McNally, and the noble Baroness, Lady Seccombe. She is right that a set-top box costs more like £200 than £800, which is the cost of a new digital radio transmitter.

I take it that my responsibility tonight is to deal with four different points: first, geographical coverage; secondly, analogue switchover; thirdly, interoperability; and, fourthly, the points system, referred to by the noble Baroness, Lady Anelay. I cannot give a great disquisition on the future of digital broadcasting and it would not be appropriate in this debate.

Perhaps I may begin with the issue of coverage. The ITC and the BBC are jointly responsible for the provision of digital terrestrial television services. As has

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been recognised, the launch phase comprises an 81-site transmitter plan which is projected to enable more than 90 per cent. of the UK to obtain digital services. I have in my hand a lovely map which, according to the rules of the House, I am not supposed to display, but I should like to have a screen on which to show it at the very least. There are significant gaps, notably in mid-Wales and the north of Scotland. The first multiplexes to be licensed vary from 93 per cent., according to which of the digital multiplexes one counts, down to 86 per cent. or even less. But technology is continually advancing. It is expected that the first of the Ondigital multiplexes will in a reasonably short time be able to cover 93 per cent. of the population. The BBC, ITV and SDN will cover more than that.

The important point is that the analogue switchover will provide more possibility of geographical coverage. At present, the power available of the multiplexes is restricted by the danger of interference with analogue television. Therefore, there will be a considerable increase in coverage when it is possible to switch over from analogue. That must be taken into account in considering the issue of analogue switchover.

In March, the ITC announced the result of its preliminary research which yielded the new predictions for digital terrestrial television. The reach of DTT will be increased to 93 per cent., using the initial 81 transmitter sites and further relay transmitter sites. A project is in hand for considerable increase in the number of transmitter sites which would make a significant difference.

There is now a memorandum of understanding between the ITC, the BBC and the transmission providers, NTL and CTI, which permits them to develop the DTT network within the United Kingdom. The ITC has already commissioned research on how to extend DTT provision beyond the initial 81 sites. It has commissioned new research into the provsion of DTT after the switchover from analogue to digital transmission. That is the Genesis Project. Therefore, it is fair to say of geographical coverage that considerable progress is being made.

I turn to analogue switchover. The noble Viscount, Lord Astor, made three suggestions. The first was that we should set a target date as soon as possible. The second was that we should phase in the switchover on a regional basis. The third was that we should increase the power level. I have already dealt with the third issue by saying that it is not possible to increase the power level now but it is possible to predict the effect of increased power levels when the switchover has taken place.

I do not want to come down on any one side about the announcement of a date and the nature of a decision. We shall make a further statement--it may not be a final statement--before the summer. I am not in a position to anticipate what it will be, but I wish to suggest some pros and cons. The argument for setting a date now is that it would make people believe that it is going to happen and provide greater planning certainty. It would give manufacturers an incentive to mass produce and therefore bring down the cost of equipment. It would enable the earlier release of spectrum for broadcasting

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with enhanced services to tackle the coverage issues and, as has been said, a lot of money from the Government at which no one will turn a cold eye. It would help us to remain at the forefront of DTT technology and it would force the pace of development.

Against that is the issue referred to by the noble Lord, Lord Thomson, with all his experience; that many people would lose traditional free-to-air services. He talked about the changeover to colour from black and white. I have been thinking about the changeover from 405 to 625 lines. Both changes required people to buy new sets, but once they had acquired them there were no problems with geographical coverage. Therefore, this case is a good deal more complicated than those to which reference has been made.

Similarly, analogies with other countries are not good. The United States has announced an analogue switchover date of 2006. The problem with that is that no one believes it. Germany has announced a switchover date of 2010, with a review of that date in 2003. The review might be more important than the original announcement. Japan has also announced a target, but that is at 85 per cent. coverage, which they believe will be in 2010 or later. I do not believe that we learn a great deal from that international experience.

Among the arguments against the decision are the turning off of traditional free-to-air services and the lack of a real digital dividend. One of the real faults with the implementation of the 1996 Act was that insufficient pressure was put on the providers who obtained the multiplexes to produce new and better quality programmes. The noble Lord, Lord Thomson, referred to that. Initially, we will not receive from digital significantly better quality of programming than we receive from analogue. I yield to the noble Baroness: I have not read the Which? report about quality of picture. What she should remember is that in the longer term it is the availability of interactive services, telephony and so on which may be more significant than the quality of picture, against an earlier decision that we do not yet have a clear frequency plan and certainly do not have enough evidence of consumer choice or acceptability by consumers of digital services. There are all sorts of issues which we still have to determine before we make a final decision: on penetration, on the geographical coverage, on affordability (and we are still a long way from the affordability which is going to be necessary), on the commitment from industry to fund schemes for assisted access for the poorest people in the community.

We still have not really had field tests for switchover in a small area to establish how to do it. We have not solved the problem of the issue of multi-set households where we can convert all sets through a single piece of

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kit. Indeed, as has been said, there is the whole problem of the compatibility of VCRs or the ability to convert existing VCRs.

The phased switchover alternative which the noble Viscount referred to would of course be enormously attractive to manufacturers because, if it were phased over a period of years, their manufacturing schedules would have less of a peak than if there were a single switchover. It would be very advantageous to them and it would possibly make it easier to release spectrum in difficult areas. Against that there would be huge disputes at the boundaries of areas which had switchover and those which did not, and there would be a potential disincentive for take-up in areas which were known to be down the line. That is a really difficult issue for regional switch-off, which was the noble Viscount's second suggestion. Although we want to ensure that the United Kingdom remains at the forefront of digital technology and we want to move to as early a switchover as possible, there are still many issues to be determined before we can move forward. We hope to say more about this in the summer.

The third issue was that of interoperability, which was referred to by the noble Lord, Lord Thomson. The ITC has been making progress. It announced the results of its consultation in September of last year and put technical specifications in force in November of last year. There are two issues. One is for set-top boxes, and it has assured us that set-top boxes will be interoperable, subject to the provision of a plug-in module to feed the satellite or terrestrial signal into the box. For integrated television it has said that with proprietary technology it must be possible for competitors to plug into those boxes. For both of those issues the ITC and Oftel will be acting as regulators.

On the point system and on the issue of the ITV refusal to make its channels available to the digital satellite platform, yes, we have already revised the point scheme. We revised it last November to correct assumptions which were made when the 1996 Act was drafted. We are certainly prepared to reconsider it from time to time when necessary. On the issue of the ITV refusal, we agree with the noble Baroness, Lady Anelay, that this is a matter for the competition authorities and there is no scope for ministerial intervention.

Those were the four issues that I wanted to cover. I conclude by saying that all of this has to be seen in the light of the very much wider issues of convergence of telecommunications and broadcasting, which was the subject of a consultation paper last year. We have completed the consultation. We hope to be reporting our views fairly quickly. Above all, behind this is the issue of the public interest. The public interest remains that of public service broadcasting and of the quality of the programmes, regardless of the technology which is used to deliver them.

        House adjourned at twenty-five minutes past seven o'clock.

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