Examination of Witnesses (Questions 1980
- 1999)
WEDNESDAY 18 JANUARY 2006
Mr Michael Grade CBE and Mr Mark Thompson
Q1980 Chairman:
What does this do to your argument about top slicing? You are
giving help to Channel 4; you are giving help, which is questionable,
in social policy as well. Do you not think you are sliding into
that?
Mr Grade: It is a one-off cost. This is a unique
event in the evolution of broadcasting in this country. It brings
huge benefits for viewers and listeners and so on. The problem
with top slicing the licence fee, which is another argument for
another day, is that it would be an annual event and it would
entirely confuse the public as to where their money was going,
who was responsible for the spending of their money and it really
cuts right against what the whole of the governance reform and
the reform of the BBC is designed to achieve, which is a direct
link between the trust and the licence fee payers.
Chairman: I have to say that they might
not be entirely unconfused by this targeted help situation for
the over-75s.
Q1981 Baroness Howe of Idlicote:
I just want to clarify one small point. I understand that targeted
help will be rather costly for the over-75s, not least in getting
over to them how everything works, but having said that, are we
also taking into account any extra costs of actually getting the
digital wavelength, whatever you call it, to the areas which cannot
receive it currently? Is that your cost?
Mr Thompson: Yes. Within the licence fee bid
are estimates for the cost of building out the digital terrestrial
transmitter and repeater chain to a level of coverage at least
as good as the current analogue television coverage in the United
Kingdom.
Q1982 Baroness Howe of Idlicote:
That is not very good in some areas.
Mr Grade: It is 98.5 per cent of the population.
Mr Thompson: It is 98.5 per cent; at least as
good as that. We should like to be better.
Q1983 Baroness Howe of Idlicote:
And what is going to happen to the remaining percentage? Will
they have to be dealt with by going through Sky and that being
paid for by Government or by whom?
Mr Grade: It is hard to predict, but we are
working on the possibility with other partners of a free satellite,
the satellite equivalent of the Freeview box, which would be the
answer to all those small pockets.
Q1984 Baroness Howe of Idlicote:
Free of charge?
Mr Thompson: A low-cost single payment satellite
solution for people who, largely for topological reasons to do
with the physical geography of the United Kingdom, cannot get
line of sight to a transmitter.
Q1985 Baroness Howe of Idlicote:
What does low cost mean under those circumstances? Would somebody
on social security be exempted from paying the low-cost charge?
Mr Grade: We are not anywhere close to struggling
with that issue yet.
Mr Thompson: It is worth saying that so far
the only proposed help that the Secretary of State has announced
in switchover relates to the groups that I have mentioned: households
with serious disabilities and those over 75.
Q1986 Chairman:
So the over-75s are definitely in. Okay.
Mr Thompson: Definitely in.
Q1987 Baroness Bonham-Carter of Yarnbury:
Presumably the DTT, which you are financing, would be accessible
through Sky. So in a sense you are subsidising Sky?
Mr Thompson: No. I am sorry this is so complex.
The proposal emerging around targeted help is that a sum of money
will be made available and households would have a choice about
which digital platform they wanted the money to be spent on so
we are platform neutral. I have to say that the very low cost
of digital terrestrial television means DTT is moving very quickly
through the population and may make all of these questions less
difficult than they appear now. Freeview now costs below £30
and, by the way, quite apart from targeted help, is spreading
at an extraordinary speed; a million Freeview boxes were sold
just in December last year, about ten million boxes have been
sold. People will have a choice. To be clear, there is a difference
between offering people, as we all believe we have to, universal
access to free-to-air public service, indeed other free-to-air
channels and the whole issue of whether people want to elect to
subscribe to pay services. This exercise is about making sure
that every household can continue to receive television after
analogue switchover. Sky and other pay operators will continue,
of course, to market pay services to the public, as they have
every right to do.
Q1988 Baroness Bonham-Carter of Yarnbury:
Freeview does help ITV and Five.
Mr Thompson: There is a very small number of
households using digital terrestrial television for pay services,
the top-up TV venture with a few hundred thousand subscribers,
but the overwhelming majority of people using Freeview are using
it to watch free-to-air channels, the public service channels
and also some other free-to-air channels.
Q1989 Baroness Bonham-Carter of Yarnbury:
There are already rumblings and grumblings about analogue switch-off.
Are you worried that the BBC's very close association with it
might possibly lead to a lack of popularity?
Mr Grade: The industry organisation has been
set up to manage the switchover. Digital UK will manage it and
the issues of where the risk will settle are yet to be discussed.
Q1990 Lord King of Bridgwater:
Having had a constituency with a number of curiosities about reception,
it seemed to take an awful long time to sort out. Am I right in
thinking that when you switch over a lot of it will be suck-it-and-see
and find out where actually the new problems arise? When you said
you were going to move towards better coverage, how quick can
this be for people who you find to your surprise cannot get the
reception and then you start to do something about it?
Mr Grade: I hope it is going to be fairly predictable
in the sense that if you can get the analogue signal now from
a transmitter or a booster station or a feeder station, that will
pretty well guarantee that you will be able to receive the digital
signal. I do not think that is a real problem.
Mr Thompson: We have very, very good predictive
computer modelling now of signals.
Q1991 Lord King of Bridgwater:
You are putting yourself on the record and I am very pleased to
hear it.
Mr Thompson: That is the first thing. The second
is that we are still sending people out in Land Rovers to test
the signal on the ground to make sure. There are sometimes signal
problems which relate to a chimney pot or a tree or something
which literally relates to a single house. There are some parts
of the country where houses, particularly in hill country, have
unique attributes because of the topography around an individual
house or new building developments. By the way, generally when
we cannot solve a signal problem quickly, it is because there
is some, as it were, in principle problem. However, I believe
that we shall deliver a very, very high level, to the level we
said, 98.5 per cent or higher, everywhere where we do the switchover
at the time of switchover. It is worth spending a moment perhaps
on one of the reasons why we cannot do it before switchover. In
many areas where analogue reception is difficult because of topography,
in addition to the main transmitters, we also need a number of
repeater stations which irradiate from the main transmitter, the
Rhondda Valley would be a good example. The sweeps of these repeaters
overlap with each other and you have to use a lot of different
frequencies to stop the repeaters interfering with each other.
In areas like the Rhondda Valley we are using much more frequency
to deliver our 98.5 per cent than we are in London or elsewhere.
What we shall do, as we plan switchover, is get the entire alternative
DTT system ready to go and there will be a day when we pull one
lever and pull another one and you flip to a system of a DTT master
transmitter and DTT repeaters.
Lord King of Bridgwater: I live in hope.
Q1992 Lord Holme of Cheltenham:
If you look at the whole switchover project, if you think of it
as a switchover, it has costs, which you have been discussing,
and the issue of who should bear them. Equally, it has now become
apparent that there are revenue benefits in terms of spectrum
becoming available. We have been told by the Government that the
value to the economy as a whole might be between £1.1 and
£2.2 billion, but as well as that general economic benefit
to the country there is also the question of what the sale of
spectrum itself will represent as a revenue stream for someone.
At the moment, Ofcom sell it on behalf of the Government. If you
look at the project as a whole, one cannot help wondering why
the revenue, that is the spectrum, is not offset against the costs
so that you look at the project as a whole. I just wonder whether
the BBC have themselves got any estimates of the likely value
of the spectrum sold.
Mr Grade: Are you referring to the sell-off
of the analogue?
Q1993 Lord Holme of Cheltenham:
Yes.
Mr Grade: No, we have no fix on that at all.
Mr Thompson: I have to say that the spectrum
is a great public resource, it does not belong to us in the end
and you can see why it is not part of our bid. What I want to
say as a public service broadcaster though is that it is our position
that we do not have enough spectrum. We are unable to show BBC
Parliament full screen currently on Freeview. We believe that
going forward important developments are happening in television
in particular, radio as well but television in particular. I mentioned
high definition television. There should be a public debate on
the best use of the spectrum as it becomes available. It would
be very worrying for the long-term future of public service broadcasting
if free-to-air public service broadcasting were unable to keep
up with developments in broadcasting. Although the band width
used by high definition will reduce, it will be very considerable
and, in my view, we shall begin high definition transmission on
satellite and cable this year. As a trial, we hope to show the
World Cup in Germany in high definition. We shall also do some
test transmissions from at least one digital terrestrial transmitter
in high definition. If we are to safeguard the future of free-to-air
public service broadcasting on all platforms, there needs to be
a debate about exactly what the use of the spectrum is. In other
words, should it be sold off or should the value of the spectrum
be gifted, not just to the BBC but to the public service broadcasters,
so we can maintain and indeed improve the quality of our services?
Q1994 Lord Holme of Cheltenham:
That is very interesting and, if I may say so, quite a persuasive
point. In a way, what it underlines is that the analogue spectrum
will have value, however that is utilised.
Mr Thompson: Yes; definitely.
Q1995 Lord Holme of Cheltenham:
I just wonder whether there is any view within the BBC, rather
than going back to the licence payer to pay for this or the taxpayer
in general, about whether there would not be a symmetry about
using potential revenues from the spectrum sale to offset the
costs of digitalisation.
Mr Grade: It is a matter of public policy and
a matter for the Government, not a matter for the BBC. The difficulty,
not insurmountable, is that it is much easier to predict the costs
of digital switchover than it is to predict how the market will
value vacated analogue spectrum. Very difficult.
Q1996 Lord Maxton:
My concern with all this is that by using DTT as your method of
ensuring you are going to get the digital switchover, firstly,
particularly if you are going to provide high definition television
on that and interactive services much better than you can do at
the present time, you are actually going to use a large amount
of spectrum; of digital spectrum I accept but it is digital spectrum.
Surely what we should be looking at is how we can do the switchover
using means which do not use any spectrum such as cable or telephony.
BT are moving into the television market this year. They are going
to provide television services. I do not know what their penetration
is in terms of landlines, but it must be not that far short of
your 98.5 per cent; it is not that, but I think over 90 per cent
have landlines.
Mr Thompson: It is not as high as that yet for
the delivery of broadband.
Q1997 Lord Maxton:
I accept that. We are talking in 2006 now and we are talking about
switchover in 2012. Go back six years and see how technology has
changed; move forward and undoubtedly telephony will provide that
in 2012.
Mr Thompson: The broad point to make first of
all is that we are not solely relying on Freeview to achieve switchover.
There is already an installed base of eight million households
with Sky digital television. There are some millions of households
with cable. It is possible that we shall see some households who,
quite quickly, do their entire viewing via ADSL or some other
fibre optic or other landline technology. All of this is possible.
We do think, however, that the public should have a choice of
platforms. We think that the extraordinary rate of sales of Freeview
suggests that the particular proposition of being able to buy
a very simple low cost receiver with a single payment without
the complexity of a subscription or a bundling of your television
viewing with your choice of telephone is something which manifestly
many, many millions of households are opting for. Almost everyone
else, in particular, understandably, the telephone and cable operators,
have models which are based on subscription. Their basic model
is subscription. I am not suggesting that they will not, in some
cases, offer free-to-air television perhaps as a free add-on to
subscription. In some ways what Freeview offers the public is
a rather reassuring continuation of what they expect from broadcasting,
which is that you purchase a receiver, it then works and is free
at the point of delivery forever. You do not get phoned from a
call centre; nobody tries to tell you that in order to get this
you have to take this subscription out. It is very, very straightforward
and, as a matter of fact, in the last couple of years the enormous
movement of people into Freeview suggests that this is one of
the most powerful platforms in their view of how they want to
convert to digital. You may say that the public are wrong, but,
as I say, there are many, many millions of them out there now
making the choice.
Q1998 Lord Maxton:
Why then, are we not developing a Freeview box which can be expanded
to be used by other digital broadcasters?
Mr Thompson: It is worth saying that the BBC
does not make Freeview boxes. Freeview is a standard for a decoder
of the DTT signal. We are already beginning to see boxes which
use DTT and which can be used for pay television, top-up television.
We are seeing Freeview boxes which have personal video recorders,
hard disks built into them. I am sure that you will see, both
with Freeview and we hope free sat, boxes which combine that with
broadband and so forth. It is not for me to say that you are going
to see an extraordinary plethora of diverse boxes for getting
content from PC to television, to record, to playback, to have
a return path and so on. I should say the more choice the better.
The only point I am making is, given what is actually happening
in terms of the public take-up of digital and terrestrial at the
moment, it is manifestly a solution which is working for many
millions of households.
Q1999 Baroness Bonham-Carter of Yarnbury:
Last time we were talking together you said that in the digital
age there was no shortage of spectrum, which does not seem to
be the view of lots of other people and indeed there is a feeling,
you mentioned high definition television, that the BBC is potentially
a bit greedy about it. As you know, Ofcom have stated that they
are going to consider charging companies who use the spectrum
from 2006 and that that would give broadcasters an incentive to
use as little as possible. What do you think the effect of charging
for spectrum would be on BBC and indeed public service broadcasting
and do you think it would increase efficient use of spectrum?
Mr Grade: May I respond to my comment about
unlimited spectrum? That was in the context of looking at the
digital world against the analogue world. In the analogue world,
pre satellite, pre digital, spectrum was a very, very scarce commodity.
It took British broadcasting 50 years to get to five channels,
because of our proximity to the continent, frequency agreements
and so on. It was a very scarce commodity. Comparatively speaking,
the digital world is a world of plenty. Now we see what the demand
is for the spectrum, obviously there is more demand than there
is potentially supply outside of the satellite option, but you
can always add on satellite capacity, so there is in a sense unlimited
capacity. It is the terrestrial, the use of the analogue, the
use of DTT now, which is finite. It has added considerably to
viewers' choice and listeners' choice but it is finite. In respect
of spectrum charging, it is reasonable to make a distinction between
the private sector for-profit organisations and the BBC. There
seems to be a lack of logic. The justification for charging the
private sector for-profit organisation for the use of the spectrum
seems to me intellectually perfectly justifiable in the sense
that this is a national resource, the airways belong to the nation,
shareholders are making hopefully a decent return on their exploitation
of that publicly owned utility. They should therefore pay something
back to the nation; give the nation back a return on its own resources.
It seems to be inconsistent to apply the same logic to the BBC,
because the BBC is there to provide a public service for which
the public pays and to take money back through spectrum charging
seems to me to be fundamentally illogical. That is not to say
that some mechanism needs to be arrived at which ensures that
the BBC is an efficient user of spectrum, but to penalise the
licence fee payers for the use of spectrum seems to me to be unacceptable.
| 
