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Select Committee on BBC Charter Review Minutes of Evidence

Examination of Witnesses (Questions 1719 - 1739)


Professor Martin Cave and Dr David Cleevely

  Q1719  Chairman: Professor Cave and Dr Cleevely, welcome. You will know that we have already produced one report and we are now producing another. One thing we are interested in is very much this issue of spectrum. We have known for some time that you, Professor Martin Cave, were coming. Dr Cleevely, I think you are a fairly recent addition to the cast list.

Dr Cleevely: I think you can put that down to me not responding to emails.

  Q1720  Chairman: I have great sympathy. We have your biography, so we will not ask you to repeat that. Professor Cave, obviously we have your report. Could you explain why you were asked to make this report in the first place?

  Professor Cave: Certainly. I have in fact done two reports: one in 2002 was a general review of spectrum strategy for the UK, which covered the whole range of spectrum use, both public sector and private sector; the second report, which the Treasury commissioned at the end of 2004, was specifically to address the question of what could be done to improve the efficiency of spectrum employed for public purposes. It was characterised as an audit of major spectrum holdings, up to 15 GHz, which includes the most valuable spectrum. In fact, a large part of that is used by organisations such as the Ministry of Defence and the Civil Aviation Authority for public purposes. There was a focus upon that. As you may know, it specifically excluded broadcasting, which had been dealt with by other means. I think the concern behind it was that whereas, as far as private spectrum users are concerned—mobile phone operators and people of that kind—they have a strong incentive to use their spectrum efficiently because they have had to pay for it in many cases, and ordinary commercial pressures impose a kind of operational discipline on the way in which it is used, on the other hand, with the public sector, a lot of the spectrum is just allocated free of charge for them to use; therefore, they have an incentive to ask for a lot of it and they have a further incentive not to give any up if they do not necessarily need it to use it very intensively in the future. So the question then becomes: how do you try to challenge their holdings of spectrum and how can you introduce a regime which imposes some kind of financial discipline upon them which actually gives them a continuing incentive to cut back on their spectrum use and return unwanted spectrum.

  Q1721  Chairman: That is very clear. I am always very suspicious when I hear that the Treasury want to set up a review to improve efficiency. It always seems to me that that might be another way of saying raising money.

  Professor Cave: I am not really in a position to do anything except take their motives and their remit at face value. I must say that personally I have always regarded it as a huge mistake to use spectrum as a way of raising money, just simply because in order to raise the money you have to restrict its use, and by restricting its use, you are depriving consumers of lots of benefits. I have always been very strongly opposed to that particular approach. Indeed, I believe it is contrary to European legislation to do that, although identifying what is happening is of course rather difficult.

  Q1722  Chairman: You say, as of course we knew, that broadcasting was excluded from your review. Why was that?

  Professor Cave: Most of the focus of the work was on public sector, unexplored aspects of spectrum use, particularly involving the Ministry of Defence. It was, to a considerable extent, pretty virgin territory as far as investigations of this kind are concerned. There may have been a feeling that it was quite a big pay-off to making a start with drilling down into those areas. On the other hand, the broadcasting issues have been subject to very considerable debate following my earlier report and the Government's response to it, which allowed it to introduce spectrum charging for broadcasting under certain conditions. No doubt, there was a feeling that quite a lot of work had been done on that and, moreover, we had now got to the stage where analogue switch-off was being imminently decided. Presumably any advice that I could give them on this rather difficult issue was superfluous. I think that is why it as not included.

  Q1723  Chairman: Explain to us for the purposes of the minutes of our report the importance of radio frequency spectrum for broadcasting.

  Professor Cave: It used to be of absolutely fundamental importance because in the world before 1980 all telephone calls went on wires and all broadcasting went over the airways. What we have seen since then is the development of a range of multi-purpose platforms, which are capable of providing services, such as telecommunications services and broadcast services, some of them wireless and some of them using wired methods. As a consequence, we now have a much greater degree of choice over how broadcasting services should be delivered to households. You can obviously rely upon analogue terrestrial transmission or digital terrestrial transmission or satellite, which uses much higher frequencies. Obviously all of these are spectrum using technologies. Then, in addition, there are cable TV networks, and also increasingly the use of a telecommunications network upgraded to provide broadband services, which is capable of providing video on demand. In a sense, the importance of spectrum for broadcasting has diminished to some degree by the introduction of these other alternatives but that, of course, makes it particularly important that we devise ways in which pressure can be put upon people providing communication services to provide those in the right way. There are some services which have to be provided using spectrum, like mobile communications. There are many services like broadcasting where you actually have a choice. In a sense, the introduction of these degrees of freedom and the existence of these multiple platforms makes the issue of spectrum management much more difficult and it is much more important to get it right, just simply because the demand for spectrum has increased in so many different ways.

  Q1724  Chairman: Dr Cleevely, have you anything to add to that?

  Dr Cleevely: No, not really; I think I would agree with Martin on this but say in particular that there is enormous economic potential value, not in the sense that you were talking about with the Treasury, in spectrum. It is a significantly under-exploited resource, both for broadcasters and for other potential users of spectrum. It is very important that over the next 10 or 20 years, in a world where we are talking about broadcasting that is going to move to multiple platforms, we get the economic incentives correct so that then people can take the right kinds of decisions and innovation can take place. That is where we are going to create the greatest amount of economic growth and the greatest benefit for the people of the United Kingdom.

  Q1725  Lord Armstrong of Ilminster: As I understand it, the spectrum is the property of the Government. I believe our access to it is controlled by international agreement. I would be grateful if you could confirm that. The other question is: to whom is the BBC now accountable for its use of spectrum? Is there any process by which their use of it is reviewed and justified?

  Professor Cave: I will try to deal with those points in order. I think there still may be some residual uncertainty about precisely to whom the spectrum belongs. Clearly it belongs in the Government camp, or it is to be disposed of by government. The Government has committed itself through a United Nations treaty-based organisation, the International Telecommunication Union, to respect certain rules concerning the use of spectrum. Broadly speaking, these rules say that particular tranches of spectrum under this international treaty should be used for particular very broadly defined purposes, such as broadcasting or telecommunications or things of that kind. That does not, however, necessarily impose very strong restrictions on what happens within the United Kingdom. It obviously leaves it open within the United Kingdom for the Government to assign spectrum to particular firms and organisation in order to fulfil the very general functions which are set out in the international treaty. As far as the BBC is concerned, I think I am right in saying that the BBC holds a wireless telegraphy licence, which permits it to have access to spectrum. That spectrum is, to a large extent, planned by the BBC in conjunction with the Radiocommunications Agency previously and subsequently Ofcom, and decisions are made in conjunction with other broadcasters about how precisely spectrum should be used in order to maximise broadcasting efficiency.

  Q1726  Baroness Bonham-Carter of Yarnbury: Pursuing the questions from a point of real ignorance, you mention the fact that cable does not use spectrum. Is that correct?

  Professor Cave: That is broadly correct. It is a wire-based technology

  Q1727  Baroness Bonham-Carter of Yarnbury: Who owns/controls the cable access to channels?

  Professor Cave: Companies like Telewest and NTL hold franchises to run cable networks and then they decide which channels they want to admit to those cable networks.

  Q1728  Baroness Bonham-Carter of Yarnbury: Is there an infinite number of potential channels?

  Professor Cave: No. They would have something of the order of 250 channels on an upgraded cable system, whereas of course the limitations for DTT are in a 50 to 60 level at the moment, depending upon technological developments, whereas satellite is 500 plus, very large numbers.

  Q1729  Baroness Bonham-Carter of Yarnbury: Is the fact that spectrum is so important because the Government has decided to do analogue switch-off and the BBC and so on will be using spectrum?

  Professor Cave: As I have said, spectrum has traditionally been the foundation of all broadcasting. Twenty years ago, just about every broadcast was delivered by spectrum. What has happened now is that people have moved, first of all, to other frequencies, which are satellite frequencies, so we have both terrestrial and satellite delivery using spectrum, and also both cable companies and telecommunications companies like BT are now capable of delivering broadcast services to homes using wire5 rather than using spectrum.

  Q1730  Baroness Bonham-Carter of Yarnbury: The television channels could pursue an alternative way of getting channels, other than through spectrum?

  Professor Cave: Yes, they certainly can but, of course, whereas satellite is available to just about everybody, even though only about 10 million households take it up, cable networks are only available to two-thirds of the population of the country and have a relatively low take-up level. Analogue terrestrial and in the future digital terrestrial will be available universally. If you want to get through to everybody, the simplest way of doing it is by getting on those platforms.

  Q1731  Lord Maxton: I am not contradicting you because you are the expert and I am not, very far from it. ADSL and DSL technologies surely are potentially available to anybody who has a telephone line and that, in theory, particularly in terms of some experiments actually being done by some companies in London, is already being done and they are providing television services down the line. Does that not mean that basically potentially everybody can get broadcasting without using spectrum?

  Professor Cave: Yes, that is certainly true but the number of subscribers to broadband in the UK at present is, say, 25 per cent of the population. If you actually have a channel and you wanted to make it available via ADSL only, then you would have a limited clientele. I believe there are also some doubts about the capacity of DSL to deliver broadcasts to those who are located some distance from the exchange.

  Q1732  Lord Maxton: Is not that the mistake that we made in this country and in other countries they have not made in not ensuring that the country is properly cabled to take this sort of television?

  Professor Cave: I think that is a very difficult question to answer because the costs of going snap on a particular technology at any particularly point in time and of laying down a permanent universal infrastructure are very considerable indeed. It is very nice once you have done it because you have it; on the other hand, it may turn out to be a bit of a white elephant.

  Q1733  Lord Maxton: Countries like South Korea and Japan have done it and it has been very successful in terms of providing television by a different route. I see Dr Cleevely nodding.

  Dr Cleevely: Steam will come out of my ears presently, if I am not careful!

  Q1734  Chairman: You may come in at any stage. Do not wait to be asked.

  Dr Cleevely: On the issue that was first raised, which was about whether you can use spectrum or whether you can use cable, Martin has been quite correct in talking about the "as is". My view will differ from Martin's because I will not talk about the "as is" but what might happen over the next 10 to 20 years. What you will see over the next 10 or 20 years is what is already happening -as you say- in Japan and South Korea. You can get far more capacity: hundreds and thousands, if not millions, of channels, if you wanted to, over wire line or optical fibre systems. If you actually do the calculations over a greenfield site for the UK, economically that has now started to make a great deal of sense. You have to ask yourself: why are we still broadcasting? The answer is that we still have satellites flying around in the sky and we still have people with television transmitters. What we are actually looking at is the period of transition from a point where most of this stuff goes over the radio waves and is broadcast, to a position where the vast majority will be accessed by cable systems because ultimately they are economically a great deal more efficient. Indeed, you can change the way in which you access the broadcast channel. In fact, broadcasting over the next 10 to 20 years might start to start to look rather antique; to be honest, because if I want to watch something, I want to watch it now. I can do that off a personal video recorder, if that is what I want to do, but it is a lot more convenient if the supplier, as in Japan for example, simply allows me to watch whichever programme I want to at whichever time. Broadcasting is an incredibly inefficient and wasteful way of doing that. It is much more cost-effective to do that using other wireless systems.

  Q1735  Chairman: Why is it inefficient and wasteful?

  Dr Cleevely: That is because, as Martin has said, for example with satellite, you are broadcasting to the whole of the United Kingdom but only 10 million households take it up. In the meantime, satellites are using as much spectrum as the military do, below 15 GHz. There is a lot of fuss made about the military using a great deal of spectrum. I declare an interest in that of course. You have to understand that you are now broadcasting huge amounts of data for large amounts of people, many of whom do not necessarily want it. Where you have such a huge amount of information being broadcast, it is probably better to start to build systems that are directed to the people who actually want that, as opposed to just about anybody who could receive it.

  Q1736  Lord Armstrong of Ilminster: The underling base of this is that the spectrum is a finite resource and the wire systems are infinite.

  Dr Cleevely: Yes, almost, but spectrum is not a finite resource. Let me justify that very unexpected statement on the following grounds. If I have a transmitter that is covering 10 or 100 square kilometres of territory, then I need a certain amount of bandwidth to transmit a certain amount of information. But if I have a transmitter that is covering 100 square metres, I can use the same bandwidth to transfer the same information and a few hundred metres away I can re-use that spectrum. Just in the same way as mobile telephony chops up the territory into smaller and smaller pieces in order to be able to carry more and more traffic in the same amount of spectrum, we could continue to do that with broadcasting and any other use of the radio spectrum. It is a very simple piece of arithmetic to do a calculation to demonstrate that for 2 GHz, (and the audit that Martin did was for 15 GHz from 0 to 15 -not quite 0 of course), you could give everybody in this country 100 megabits per second quite economically; 100 megabits per second translates into several simultaneous high definition TV channels, plus all the mobile telephony they want, plus all the internet access they want. Of course "infinite" is a word that is used with precision by mathematicians and very loosely in a context like this. There is no real shortage of spectrum. The pricing that Martin has been involved in, for example, is specifically directed at opening up this resource, so that we can actually use it more efficiently and more effectively and not be constrained in the thinking that we have had for the lat 50 to 100 years.

  Q1737  Chairman: Professor Cave, do you want to respond to that? I read from your report here that spectrum is a finite resource. That seems just to have been slightly challenged.

  Dr Cleevely: I was using the term loosely.

  Professor Cave: I think David has used the term "infinite" rather loosely. At any point and with any given set of technologies, there is only a certain amount that you can do with it. Just jumping over that point, if I may, I have tried throughout to avoid taking a position about what is the most efficient or the most desirable way of delivering services to people. As far as I am concerned, I am somebody who advises governments and regulators, and I do not think they should take that kind of decision. I think that is a decision that ought to be taken by people who make the investments.

  Q1738  Chairman: I do not know if you can, but if you were to take that hat off and express a personal view, would you have sympathy with the point that Dr Cleevely has put?

  Professor Cave: No, because spectrum is available free; it is a non-depletable resource. It is going to be there for ever. We should use it as much as we possibly can because it is a very valuable input. Subsequently, we may have to resort to other technologies to achieve different things. Basically, I think we are going to end up with a quilt of different colours involving different technologies and providing different services and also, perhaps most fundamentally, constantly changing as new technologies come in. For anybody to try to control that process, except through very general regulatory parameters, I think is a huge mistake.

  Q1739  Chairman: May I ask one very obvious question? What determines the range for a broadcast signal? You said that you could use the same bandwidth for 100 kilometres or for a much small range. What is the other variable, as it were, which determines whether it is going to be 100 or 10? Is it the strength of the signal?

  Dr Cleevely: It is the strength of the signal; it is the amount of power that somebody uses. Your mobile phone, for example, which transmits generally over relatively short distances and is very sensitive to how far it has to get to the transmitter, and actually transmits at extremely low power so as to conserve your battery, for example. The BBC transmitters for broadcasting can be transmitting in hundreds of watts; they are very powerful and go over a very long distance. May I also add that Martin and I may appear to be slightly at odds but we are coming at exactly the same point but just from slightly different directions? The real issue here is that in the directing of spectrum pricing, particularly as applies to broadcasting in this case, I share Martin's view that that will then generate this innovation, which will, in the end, determine, through people's preferences and the operation of the market, without any single regulator or any central body determining what technology is best; a whole series of things, many of which we have no idea about yet, apart from vague ideas that are sitting around in laboratories and in people's heads. I am absolutely at one with Martin on that.

  Chairman: I hear what you say. I would like to move on to the world as it is, which I think was the point that you were putting, Professor Cave, and the impact of spectrum pricing.

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