Examination of Witnesses (Questions 1740
WEDNESDAY 11 JANUARY 2006
Professor Martin Cave and Dr David Cleevely
Q1740 Lord Peston:
I am bit lost by what both of you have said. I am used to economics
and the concept of efficiency bears no relationship to economics
or what one of our witnesses was talking about at all, as far
as I know, but maybe the subject has changed. I am right that
you said in reply to Lord Armstrong that the spectrum in some
general sense is within the Government's domain. which might also
then be interpreted as belonging to the citizens of this country.
The Government then would use it for optimum public purposes.
Would that be a fair way of putting it? That is what we mean by
things being in the public domain.
Professor Cave: I hesitate to describe it legally
in those terms. In effect, it is at the Government's disposal.
Q1741 Lord Peston:
That is right. Normally, what is at the Government's disposal,
subject to some distinction, is meant to be allocated for the
benefit of the people of this country. That is normal. I used
to teach the subject and it is certainly what I used to say.
Professor Cave: It would certainly be a very
Q1742 Lord Peston:
Therefore, to take an obvious example, if one of the objectives
of the general views of what the people of this country wanted
would be virtually universal coverage of television, then that
would be a perfectly acceptable thing that they would want and
they may like spectrum to be allocated to achieve that. I would
be right on that, would I not, if that is what they want and if
that is what is regarded as in the public interest?
Professor Cave: The public interest would be
in the capacity of the population to receive broadcast programmes,
which may or may not be spectrum based.
Q1743 Lord Peston:
But if it were to be spectrum based, that would be one way of
doing it. The notion of universal coverage does not imply the
notion of universal watching. In other words, if I look at my
Radio Times, I want access to everything in the Radio
Times, but that does not mean I am going to watch everything.
I certainly do not regard the system where most of us do not watch
as inefficient, and that is why I regard your use of the word
efficient quite as quite erroneous. In other words, it is nothing
to do with the idea that if only a few people listen to Radio
3, that is not allocating the resources properly. Surely that
is a complete mistake as far as economics is concerned. I think
I am right on that. Now, let us go on to the point, and I entirely
accept the view that if we place a value on something, that requires
people to use it economically. It will also cause them to innovate,
we hope, to use it even more economically. That is commonplace.
Is not that experience of pricing that it also has all sorts of
other effects which may be adverse? Take your view, Martin, of
the Ministry of Defence. Can you imagine if we were involved in
some military conflict and the Minister of Defence said, "I
am sorry we lost that but of course we did an analysis of the
cost of acquiring some extra spectrum and we decided not to buy
it. It is too bad we lost 100,000 troops because we could not
communicate". The notion that you would even introduce that
idea into the analysis of defence would be regarded as ridiculous.
It does not solve the problem of how you allocate spectrum to
them. The answer that we did a cost-benefit calculation and that
was our answer would never stand up at all. A government would
fall within a minute.
Professor Cave: Could I interject here because
it seems to me that when the Government determines what is the
appropriate scale of the defence budget, it is making a balance
between costs and risks. It is abridging the nation's capacity
to respond because it costs money. It costs money to buy weaponry
from the United States. It costs money to employ people to be
members of the Armed Services and things of that kind. My view
of spectrum pricing is that because it is a resource which has
considerable alternative opportunities for use and there are therefore
substantial opportunity costs in using spectrum for one purpose
rather than another, it is important, if we are operating within
a kind of market economy of the kind I have described where you
buy defence equipment and you hire soldiers, sailors and people
to fly airplanes, that that discipline should apply uniformly
to all the inputs which are purchased. Only by that means are
you going to get people making appropriate trade-offs between,
for example, slightly more expensive American equipment, which
uses much less spectrum, and much cheaper American equipment which
uses a vast amount of spectrum and which therefore deprives, say,
Vodafone or Sky of access to spectrum which it would use to provide
a whole range of services to the British people whose interests
the Government is quite rightly encouraging.
Lord Peston: That is not my question. Really
what I am trying to get you to focus on, turning it the other
way round, is this. Supposing the generals and all the others
all say that we need this spectrum. Would not the system workand
Lord Armstrong understands this much better than I doif
the generals were to say, "We have got to have this".
Spectrum is priced at such and such and their budget will then
be adjusted so that they could buy the thing; in other words,
it would not actually economise in the sense in which economist
often talk. It is rather like the argument, looking at St Thomas's
over there, that if we attach pricing mechanisms to the NHS, which
this Government is keen on, it raises the point that there is
no point in keeping old people alive; the benefits compared with
the costs are just massive. It applies to me as well. If the Government
were to take note of pricing mechanisms seriously, it would lead
to results that no-one would be willing to accept. Supposing it
did lead in this case to the BBC not putting on the kinds of programmes
it wanted, could you imagine the Secretary of State saying, "It
is too bad. The spectrum has been priced. We need lots more mobile
phones. We do not need public sector broadcasting". Is there
not a certain naivety amongst us economists when we put this sort
of thing forward that we do not seem to understand the real world?
We have got back to the BBC now, which is good. How do you reply
Dr Cleevely: I reply on two counts. Firstly,
I apologise for being slightly short in the way that I explained
my argument about efficiency. It is simply that if you know there
are alternative technical means for providing exactly the same
level of service and you know that somebody is then using a resource
which they are getting free, and if they did not get it free and
it was traded in the market at a reasonable price they would use
some alternative method, then that does count for economic efficiency.
I hope we are back on sound economic grounds, even if the mathematics
earlier was a little bit risky. I think I have to talk about the
defence issue for a moment, if we may move away from broadcasting,
since I am a non-executive director of the Defence Communications
Services Agency, and some of this stuff impinges directly on this.
In fact, I was at a main board meeting yesterday. We sit there
and we take decisions of exactly the kind that you are talking
about. We have to allocate resources and we have to think about
how you meet the Treasury guidelines and the Treasury imposes
extremely strict views on exactly how much we spend on communications,
Q1745 Lord Armstrong of Ilminster:
Do you allocate frequencies?
Dr Cleevely: No, some of that is done within
other parts of the Ministry of Defence, although Martin recommended
that there should be some changes within the Ministry of Defence
as to exactly how some of that is done. That will undoubtedly
play out before the big stick that I think you were mentioning
comes along to beat up the Ministry of Defence at some time round
about 2007, but let us not get too much into that. To go to your
point, it is extremely important for defence, for example. I see
my particular role as a non-executive director as being absolutely
to make sure that defence is using resources effectively and,
if I dare say so, efficiently. When it comes to things like spectrum,
I see that as a major component of the way in which these things
work. It is absolutely vital that we start to bring prices to
bear on this stuff because otherwise you have no mechanism for
working out, in Martin's word, whether you are using the right
inputs to produce the desired outcome. That is precisely the problem
that we struggle with. I can see your point about losing 100,000
troops. Nobody would ever want to do that if it could possibly
be helped. I think we are moving to a situation where we are less
likely to do that than more likely.
Q1746 Baroness Bonham-Carter of Yarnbury:
Speaking as someone who has worked in broadcasting rather than
as an economist, I am going to ask a straight question, which
is: does the Government not need to allocate spectrum to ensure
public service broadcasting? By taking money from the broadcasters,
from the BBC and from Channel4 et cetera, to pay for spectrum,
is that not taking money directly out of programme-making budgets?
Professor Cave: The overall view of spectrum
management, which I have espoused, is that there should be two
processes going on. One is a process which relates largely to
commercial use of spectrum, and that is a market process. In essence,
you create spectrum licences as tradable property and you allow
various firms to buy and sell this property in order to achieve
a market objective of providing services to homes and customers.
That is the first world. There is also a second world in which
the Government, quite rightly, allocates spectrum for specified
public purposes, of which defence and public service broadcasting
are obvious examples. The difficulty arises to some extent in
the co-existence of these two worlds. Clearly, the commercial
spectrum users will be under commercial pressures to economise
on spectrum. There is, however, a concern in some sense that if
the public sector spectrum users get it free, they will get too
much and we will have an imbalance and consumers will be deprived
of the benefits they would otherwise have derived. For that reason,
I have proposed the extension of a system that was introduced
in 1996 which means that public sector spectrum users actually
make some kind of payment. A calculation is made of roughly what
the spectrum could have done had it been used for other purposes,
and they are charged that as an administrative incentive price
as an input into their decisions. I think that has two consequences.
Firstly, it makes transparent or more transparent how much public
services are actually costing. If the Ministry of Defence, for
example, is sitting on £5 billion worth of spectrum, and
you would normally expect it to earn a return of 10 per cent on
that, that is £0.5 billion pounds of expenditure, so that
the defence budget in a sense is more than we first thought. The
same of course would apply to the BBC and to Channel 4. It would
not apply to ITV and to Channel 5 because they have in some sense
been engaged in a competitive process to acquire their licences
and that competitive process includes an implicit payment for
access to spectrum which gives them the opportunity to broadcast
to households. It is really only the BBC and Channel 4 which are
involved in this particular discussion about the price of spectrum.
That is one reasontransparency. The second reason is that
pricing provides signals for broadcasters to make sensible decisions
about how to achieve their statutory or other objectives. For
example, they may have an objective to ensure that their programmes
are available as widely as possible and on as many platforms as
possible. Then, having an arrangement by which the platforms are
priced to reflect their actual economic cost, including the cost
of spectrum, is going to help them make those decisions. Another
issue is the question of analogue switch-off. Perhaps I could
just say in general terms that this is a transition. It is a margin
of discretion which is available to the broadcasting world, including
of course its regulators and the Government, and prices of spectrum
can play a role in generating sensible, rational and efficient
decisions which ultimately benefit consumers.
Q1747 Baroness Bonham-Carter of Yarnbury:
You do not think that that is money that should be being spent
on programmes or content?
Professor Cave: The administrative pricing for
spectrum is in respect of things which the Government declares
ought to be done: such and such defence capability, such and such
public service broadcasting. What I am suggesting is that the
Government should allocate the appropriate amount of money to
provide the level of defence services or public service broadcasting
services to cover all the costs. At the moment, the Government
allocates money through its licence to cover the BBC for the cost
of hiring its staff, the cost of paying for its transmission,
and the cost of buying its electricity, but it does not in fact
allocate money for the cost of buying its access to spectrum.
What I am suggesting as a general rule is that that should be
included as a cost and that there should be an appropriate adjustment
to the revenues which the BBC makes in order to cover that cost.
Q1748 Lord Armstrong of Ilminster:
In the case of the BBC, if we were charging for spectrum, it would
be up to the BBC to say whether they wish to recover this from
an increase in the licence fee or by reducing expenditure on other
things. That would be a BBC decision?
Professor Cave: Or possibly by reducing expenditure
on spectrum by identifying more efficient ways in which it can
use spectrum in order to achieve those objectives.
The difficulty, of course, that we have with the BBC is that if
you were to do that, if for the sake of argument you were to have
the impact Lady Bonham-Carter was talking about and you reduce
the programmes, and I think the fear is that this might take place,
the only way that money could realistically be raised in terms
of the BBC is by increasing the licence fee, which is already
a regressive tax?
Professor Cave: That is indeed a consequence
but, broadly speaking, if the BBC is making a lot of decisions
at the margin about the kind of activities which it would undertake
based upon the licence fee and if those decisions include margins
of spectrum use, then there is a considerable potential pay-back
in terms of greater efficiency by focusing their attention on
that amount. The second point to make is that we might not be
talking about vast sums of money.
Dr Cleevely: I was going to make precisely that
point. We are not talking about huge amounts of money.
What do you mean by that?
Dr Cleevely: If you moved to fully digital on
broadcasting, you save something of the order of £225 million
a year. I think that the BBC would cut its costs down: the BBC
would be paying out something of the order of £20-£30
million a year for that. We are not talking about a huge chunk
of their budget. Martin probably knows the figures better than
I do. I would not rely on my figures. By the same token, the BBC
is taking decisions about how it distributes its content, so it
is paying for IP streaming which costs roughly 20 to 30 times
the cost per viewing hour of a broadcast transmission. I cannot
see the argument, to be frank, for saying that they should stop
doing that because they should put the money into programmes or
that they should stop, as they are doing at the moment, distributing
content over mobile phones because they are taking a decision
about how they wish to reach their audience and fulfil their remit.
What we are doing here is actually giving the BBC considerably
more freedom to be able to do that kind of thing. In the long
run, whilst it is nice to think that the Government can somehow
decide how people should do things, frankly, it is better if the
people decide how these things are done. Obviously you have to
internalise some of the externalities of universal coverage and
so on; there are roles for regulation there. But we are talking
about giving all broadcasters a link to the market so that they
can actually start to do things which people prefer. People may
prefer in the long run to get what we now regard as broadcasting
over completely a different medium.
Q1751 Lord Maxton:
In a sense, that is my point. I am quite ignorant about this.
How much spectrum could a five-terrestrial channel use in comparison
to, say, a giant satellite? Have you any idea what the figures
are? Sky is providing up to 500 channels, you say. Is Sky using
a lot more spectrum in the five channels or are the five channels
using as much spectrum?
Professor Cave: Can I try to evade that question
by saying that even though there is a physical unit of spectrum,
the megahertz, across the whole range of very low frequencies
to very high frequencies, the actual economic value of it varies
so hugely that it is very difficult to compare quantities of terrestrial
transmission which uses spectrum absolutely at the "sweet
spot", the most valuable spectrum that there is, with the
spectrum that is used by satellite broadcasters, which is way
up there and is competing with much less efficient uses. I think
the broad answer to your question is that to provide a channel
of national coverage by satellite is, in spectrum terms, an awful
lot cheaper than it is to provide a channel of coverage by terrestrial
Q1752 Lord Maxton:
Perhaps I should not really ask this. Would not it be more efficient
and cheaper in spectrum terms to give everybody a satellite dish
or a telephone line, an ADSL, rather than going to terrestrial
Dr Cleevely: You do not know because it is about
people's preferences. If you go back to the point about where
people live and how they wish to gain access to these kinds of
things, you do not necessarily want to be forcing that decision.
That decision will be taken by people taking their own individual
decisions and the broadcasters using their inputs and producing
the outputs accordingly.
Professor Cave: Statements of that kind have
been made but the conclusion seems to be that the cheapest method
is to use a combination of all the known technologies, subject
Chairman: I want to move on to the value of
Q1753 Baroness O'Neill of Bengarve:
Professor Cave, we have found ourselves meeting a number of claims
both about the value of the price of spectrum, and I do not want
to get into the more metaphysical things because I can see that
you are looking for an array of things, some of which you may
say have no value whatsoever. Let us just stick to the price.
If it is marketised to a greater degree, then people will pay
and your argument is that they will use it more efficiently or
they will pay for bits of it and use it more efficiently. The
particular case that interests us is the consequence of analogue
switch-off. Will that analogue spectrum find purchasers or is
that an open question? If it does, what might it be sold for and
to whom might it be sold?
Professor Cave: Can I begin with a modest preamble
about the difficulty of answering that particular question? It
arises for the following reasonthat we have very few actual
observations of spectrum trades. We have some slightly aberrant
ones which date back to the year 2000 when the 3G licences were
sold and we have some rather interesting leasing contracts relating
to free-view channels, which give us some idea of the current
value in 2006 of access, but the position in terms of scarcity
of spectrum across the relevant bit of spectrum we are talking
about is likely to change very substantially over the period up
to 2012 and thereafter when the analogue switch-off spectrum will
be available for other uses for two reasons. Firstly, Ofcom has
published plans for very substantial spectrum awards, which it
proposes to carry out over the next three years. These include,
for example, a very large amount of spectrum in what is known
as the 3G expansion band, which can be used for a range of mobile
communication and broadcasting services. It also includes a plan
to auction spectrum licences in what is called the L-band, which
is a band which is particularly suitable for mobile broadcasting.
There will be a lot of additional spectrum coming on to the market
over the next, say, five years. As far as the demand is concerned,
there are various views that you can take. In the course of the
report which you referred to earlier, my Lord Chairman, we commissioned
some work forecasting the balance between supply and demand of
spectrum. It became apparent that there were some states of the
world in which very extensive use was made of wireless technologies,
for example, for broadband services using technologies such as
wi-max and then 4G mobile communications and its successors and
also for broadcasting. There were states in the world in which
there will be very substantial growth in demand for spectrum and
that would obviously have the consequence that any spectrum released
would increase in value. I guess the conclusion of this is that
any estimate that somebody gives you of the value of spectrum
over a period of 20 years after 2012 is going to be subject to
a very broad range of doubt. Having said that, I think there is
a way in which you can try to unpack the problem. Might I suggest
how that might be done? You can think of the value of the spectrum
licence as consisting of two components. One is the intrinsic
value of the spectrum based upon its capacity to provide services.
As I have said, some spectrum is better than others spectrum,
just as some land is more fertile than other land. Just simply
by making calculations about the extra productivity of particular
bits of spectrum, you can produce some kind of estimate of how
much spectrum at that level of scarcity would be worth. That is
one element of it; it is a kind of scarcity rent. The other element
of it is the degree to which ownership of a spectrum licence gives
you market power in some downstream market and enables you to
get some kind of monopoly profit in the downstream market. By
a process of calculation, you can try to figure out what the scarcity
value of spectrum is. Then of course you have to take a view about
what degree of monopoly power it is going to confer upon the owner
of the licence. That is obviously much more conjectural because
it depends upon market conditions that prevail at the time. I
am just coming to what I hope is the bottom line. If you address
the first element of it, then I think for the value of spectrum
you are likely to end up as an annual charge with something in
the range per MHz of £0.5 million to £1.5 million. If
you then gross that up at 112 MHz which are under consideration,
that gives you an annual charge of something between £50
million and £150 million. If you capitalise that, which I
propose you do very roughly by multiplying by 10, you get a value
of something of the order of £0.5 billion to £1.5 billion.
I do emphasise that this is based upon our current understanding
of technological capabilities, and it is subject to a very wide
margin of error. I am not suggesting that it will lie within that
range. I would not be at all surprised if it were more or it were
less. That provides, in my mind, some kind of general figure.
Q1754 Baroness O'Neill of Bengarve:
So the auction that went on in 2000 is no model for the sell-off
of analogue spectrum in this?
Professor Cave: No. I think that has no value
for precedent at all.
Dr Cleevely: Could I add that having been involved
in the original working in setting up the auction of 3G and doing
some of the technical economic analysis of 3G networks, (which
then led to the idea that we could have five operators and therefore
it would be possible to auction) the original estimates for the
value were of the order of £3 billion to £10 billion,
and the upper end of that was based on precisely what Martin said,
which is the market power; that is, you can extract more value
further down the chain and that is why that value was in there.
The inflated values that were paid of the order of £23 billion
were due to particular circumstances prevailing at the time. If
we go back to the spectrum that we are talking about, this broadcast
spectrum, Martin quite rightly points out that there is a huge
range. He also said that it is quite possible that we would lie
outside even the large range that he was talking about the £05
million to £1.5 billion. I would like just to give you a
couple of other pointers as to why it is as uncertain, if not
more uncertain, than Martin has just said. First of all, you actually
need some equipment or some technical reasons for wishing to use
that spectrum. We are sitting here in 2006; in 2012 we should
have some extra available spectrum but if it is only this small
group of islands here off the north-west corner of Europe that
is doing this, then we are likely to find technical solutions
that are relatively high cost and are not necessarily going to
be commercially attractive. The second point is that whilst Martin
was indicating, and he is right to do so, that generally lower
frequencies are of more value than high frequencies, in fact that
is not necessarily quite the case because if I have a relatively
low frequency, it tends to travel further. Therefore, if you recall,
I was talking about the idea of making small cells to make efficient
use of the spectrum; the idea that you can do that with lower
frequencies starts to become technically more difficult. Then
there is the final point that there is a huge momentum building
up, as Martin said, for example in the range of the 3G expansion
bands, which are in the range of 2.5 GHz plus. These seem to be
very high frequency and technically quite difficult, but, because
there is so much R&D going into using these things and so
much investment in technology going on, those areas start to become
rather more valuable. The whole thing could be described as a
mess or as us being a long way away from being able to put any
reasonable estimates on what this spectrum would actually yield.
We will be in for a surprise.
Baroness O'Neill of Bengarve: I think that is
a very full answer because it explains why there is uncertainty
about the answers in this area, which has been one of our problems.
We could go round this for a long time and not actually come,
in the end, to any better position than both of you have just
explained. There is uncertainly but I think we take away that
£0.5 billion to £1.5 billion. Would you accept that,
Dr Cleevely? There is a long pause here.
Dr Cleevely: I have a great deal of sceptism
about the long run, high value of spectrum. That is because I
think there are a lot of technical and technological developments
coming along which will enable us to do a great deal with very
little spectrum at very low cost. Because of that, then spectrum
as a substitute will command a relatively low price in the long
run, hence my long pause.
Q1756 Baroness Howe of Idlicote:
I have certainly picked up the message that the value of spectrum
and so on is changing literally moment to moment. I am just thinking
about the public service broadcasting and particularly about the
BBC, and I think somebody put a figure on the value of their spectrum
as £26-£30 million a year, something around that. Have
you any views about how well the BBC and other public service
broadcasters use spectrum they currently have? Let us give one
example at the present. Are their transmission networks geared
to best use and so on?
Professor Cave: I am afraid I cannot really
speak with great authority on the engineering aspects of this.
I believe it is generally agreed that, given the constraints of
providing near universal coverage in an environment in which there
are a lot of obstacles to it in the form of hills and valleys
and so forth, we do have a system in which the analogue spectrum
is used efficiently and subsequently the same basic structure
of 1,180 transmission sites will be used for digital, so I am
sure that, subject to that constraint, there will be reasonably
efficient technical use of spectrum.
Q1757 Baroness Howe of Idlicote:
Just comparing the BBC and Channel 4 and the other two which have
some degree of public service responsibilities, would you say
the second group, ITV and Channel 5, are more efficient in the
use because they have paid something for it?
Professor Cave: I do not think I would want
to make that claim in relation to the operation of the existing
transmission system. Clearly, of course, the actual transmission
activity is done not by the broadcasters but by Aqiva or the National
Grid Company, which actually does the heavy lifting as far as
the engineering aspects of it are concerned.
Dr Cleevely: Just to intervene on that, I would
expect whichever broadcaster to try to minimise their cost anyway,
so there are costs associated with transmission sites and things
that Martin was talking about, the 1,100 sites and so on, which
would reflect in some relatively reasonable use of spectrum. The
point is that those other broadcasters cannot trade that spectrum.
They cannot say, "I am going to give up a few MHz and get
some rent from doing so". They do not have the incentive
to be efficient in their use of spectrum. The question cannot
be answered. You say they were paid money for it, but it is not
linked directly to a decision about the use or non-use of spectrum,
so you would not expect them to behave any differently.
Q1758 Bishop of Manchester:
I visited the Australian Broadcasting GDS in Melbourne a few months
ago and for a short time dipped into a conversation not unlike
the one we have been having this morning, but then I was moved
on before I discovered what they were really up to. I gathered
that in Australia, and I think in New Zealand, they have been
moving towards the price of allocation of spectrum. I wondered
if you could clarify the position for us on that, if you do know
it, and whether or not the kind of experiences that they have
had on this issue are relevant to what we are talking about now.
Professor Cave: Australia and New Zealand have
led the way in introducing market-based methods of spectrum management.
However, the broadcasting systems in both countries are controlled
by an additional overlay of specifically broadcasting regulation,
which has imposed very considerable restrictions upon who can
own what broadcasters and the purposes to which they can be put.
I think that in practice they have a good framework for spectrum
but their broadcasting regulation is as idiosyncratic and restrictive
as it is in many other countries.
Q1759 Bishop of Manchester:
So it is not very helpful?
Professor Cave: I do not think in relation to
broadcasting you will find that particularly helpful.
Dr Cleevely: There is just one small point.
Particularly if you take New Zealand, it does not have as many
countries surrounding it as, for example, Germany might or the
United Kingdom, and so they can afford to experiment a little
bit. They a have conducted quite a few experiments in various
forms of communications regulation. The only problem that both
the Australian and the New Zealand markets have in engaging in
this kind of thing is in setting the price because the markets
are relatively small. Whilst you do not have the restrictions
that we have here, it is then very difficult to set a price, quite
apart from the very specific regulations that apply in the case
Q1760 Lord Kalms:
Would you agree that high definition TV would be one of the obvious
manifestations of the benefit of spectrum? Could you amplify a
little about the demand for spectrum from the wide number of sources
that will want to use this particular facility?
Professor Cave: HDTV is a very interesting challenge.
If very roughly you suppose that moving from analogue to digital
reduces the demand for spectrum by about five, going back to HDTV
increases it by five, so you end up with similar limitations on
the amount of spectrum that you will be able to have. I believe,
for example, that if you took the whole of the UHF band that is
currently used for analogue and you put digital high definition
signals into it you would end up with something like eight channels.
That means that a single HDTV channel has an enormous opportunity
cost in terms of normal definition channels and all the other
things which spectrum could be used for such as mobile broadcasting,
and mobile telecommunications. Heaven knows what will be thought
up by 2012 when this spectrum comes on the market. My inclination
would be to take HDTV as an indication that it is highly desirable
to have some kind of spectrum pricing regime which means that,
when decisions are made by a public service broadcaster about
whether to exhibit HDTV programmes on a terrestrial transmission
mechanism or alternatively to put them on a satellite or alternatively
to put them on a cable system or on ADSL, you will have some kind
of price signal which will encourage it to make sensible decisions.
I regard this HDTV decision as one of the key margins in the future
where having some kind of spectrum pricing will have a considerably
beneficial effect upon rational decision taking within the industry.
Dr Cleevely: I would absolutely agree. There
is one point that we have not mentioned, although it was hinted
at by Lord Peston, which was about the geographical split. It
is worth thinking about the fact that there are some areas in
the countrymid-Wales, for examplewhere there are
relatively few people and you can have quite a free rein with
quite a lot of spectrum; whereas in a dense urban area like London
it is a rather different matter. Going back to Martin's point
about why you might need many different ways of getting this stuff,
in an urban area like London the spectrum may be a very high price
and therefore it would be a strong incentive to go for cable,
for say HDTV. The same thing would not apply in mid-Wales or Scotland.
One of the advantages of this kind of mechanism would be, I would
hope, that we get better coverage for more people than you would
by any other mechanism. I just wanted to make that slightly non-technical
Chairman: It has been a fascinating session.
Thank you very much for coming. We are very grateful. Perhaps
if, as may be likely, we have some further questions we might
write to you and you can come back to us on them. We are enormously
grateful for the trouble that you have taken.