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Statement: Digital Replacement Licences offered to Channels 3, 4, 5 and Public Teletext

Summary

S.1 This document sets out the most important points of general interest made by the respondents to the Ofcom consultation on digital replacement licences ("DRLs") issued on 14 September 2004 ("the DRL Consultation"). It explains why Ofcom has reached the various decisions it has in relation to the conditions included in the DRLs offered to Channel 3, Channel 5 and Public Teletext, and in the final draft DRL for Channel 4.

Statutory requirements

S.2 Section 215 of the Communications Act 2003 ("the Act" ^(-1-)) obliges Ofcom to make an offer of a DRL to all sixteen Channel 3 licensees and to Channel 5. The offer must be made and, if accepted, the replacement licence issued no later than 28 December 2004.

S.3 If an offer is not accepted the Act requires the existing Channel 3 or Channel 5 licence to cease to have effect at a date to be decided by Ofcom. This date cannot be later than 18 months from the date when the offer closes.

S.4 Section 221 of the Act requires Ofcom to make an offer of a DRL to Public Teletext following the same procedure and timetable. Section 231 also requires Ofcom to replace Channel 4's existing licence with a DRL. Channel 4 cannot refuse the new licence but it has a right to comment on a draft.

Summary of conclusions

S.5 The DRL Consultation closed on 25 October 2004. Ofcom received 23 detailed responses to the DRL Consultation, most of which were confidential. Ofcom also received a few letters from members of the public. Many respondents stressed the importance of digital switchover ("DSO") and the potential benefits it could provide. A number also stressed, however, the complexity of the process leading to digital switchover. Ofcom has taken account of the responses and, in consequence, some of the original proposals have been changed.

Ofcom's approach to DRLs

S.6 Some respondents argued that the grant of DRLs and the inclusion of DSO-related conditions should be separate. Ofcom considers however that it is appropriate for the two processes to occur at the same time.

Digital coverage

S.7 Ofcom has the necessary legal powers to insert DSO-related conditions in the DRLs, including the proposed digital coverage obligation to apply as from DSO set out in condition 2(2)(b).

S.8 Ofcom wishes to retain the explicit discretion to decide the level of digital coverage included in condition 2(2)(b). This condition has been retained unchanged in the relevant DRL offers.

S.9 Some respondents expressed concerns that holders of DRLs would still face significant uncertainty as a result of this condition. In January 2005 Ofcom therefore plans to commence a public consultation on the issue of digital coverage under the DRLs, focussing on what "substantially the same" digital coverage at DSO for a DRL should mean and whether Ofcom should require any change of transmission mode. Ofcom aims to publish the results of this consultation by March 2005 and amend the DRLs as a result as appropriate. By these means, Ofcom aims to give licensees and other stakeholders appropriate certainty about digital coverage.

S.10 Ofcom considers it is premature to decide definitively in December 2004 whether or not 1154 DTT transmitters will be needed to achieve a satisfactory level of digital coverage at DSO. If Ofcom concludes that fewer than1154 transmitters are needed, the DRLs will be amended accordingly.

Co-operation

S.11 Ofcom believes that a general duty of co-operation with other parties involved in switchover should be included in all DRLs. Ofcom has, however, decided for the moment to delete all references to Switchco from this obligation. The reasons for this decision are detailed in section 3.

Annual report and information

S.12 Ofcom has retained unchanged the obligation on holders of DRLs to provide an annual digital switchover report and DSO-related information to Ofcom. Ofcom proposes to issue informal guidance on appropriate content for DSO Annual Reports before 31 December 2005 .

Information for viewers

S.13 Holders of DRLs will be obliged to inform viewers about certain matters relating to DSO, e.g. on the DSO timetable and the relevant regional switchover date. Ofcom has amended the proposed obligation however to respond to concerns that licensees should not be responsible for marketing digital TV or DSO in general.

Switchover dates

S.14 A backstop switchover date of 31 December 2012 is included in the DRLs. Several respondents pointed to various risks which could endanger this timetable. Ofcom considers these risks are manageable and acceptable.

S.15 To help manage the risks, Ofcom wishes to confirm the DRL regional roll-out sequence as soon as possible. Detailed proposals for the roll-out of DTT on a regional basis will be set out for discussion as early as possible in 2005. Ofcom's views on the regional sequence will be informed by that discussion. DRLs will be varied accordingly by the end of April 2005 at the latest.

S.16 To help manage uncertainty about the DSO date in the licences Ofcom has amended the wording to allow the date to be changed subsequently as a result of Government decision or agreement between Ofcom and the licensee.

Seventh multiplex

S.17 Ofcom has decided for the reasons set out in this Statement that it will not make available any additional interleaved capacity within the retained spectrum for a seventh multiplex.

Timetable for roll-out

S.18 The proposed sequence for regional roll-out of DTT will be published as part of the process referred to at S.15. Once finalised, the appropriate sequence will be inserted in DRLs early in 2005 to provide greater certainty for planning and regulatory purposes, including financial reviews.

Timetable and process

S.19 The offer of the DRLs remains open for 2 weeks until 5pm on Monday, 13 December 2004. All acceptances must be notified by post or fax to Ofcom by this time and date.

S.20 The final deadline for any comments by Channel 4 on the final draft of its DRL is 5pm on Monday, 13 December 2004.

S.21 All DRLs will be issued to licensees between 14 and 23 December 2004 inclusive. They shall take effect as from 28 December 2004.

S.22 If a current Channel 3 licensee, Channel 5 or Public Teletext refuses the DRL it is offered then its existing licence will automatically cease to have effect as from 13 December 2005, i.e. 12 months after the closing date for DRL offers.

S.23 The deadline for all Channel 3 licensees, Channel 5 and Public Teletext to agree to bring forward the expiry date of their existing licence (if appropriate) is 5pm on 13 December 2004.

Regulatory impact assessment

S.24 Having considered the responses made by respondents, Ofcom considers that the conclusions set out in the Regulatory Impact Assessment ("RIA") of the DRL consultation remain valid. Specifically, Ofcom continues to consider that it is reasonable and proportionate to include the DSO-related conditions in the DRLs. In relation to the roll-out of DTT, Ofcom continues to consider that the interests of citizens and consumers are likely to be best served if all existing analogue transmitters are converted to DTT, although we propose to retain some flexibility on this issue (see S.10).

Other issues

S.25 Several licence-specific issues were raised by licensees in relation to various content issues and the application of the Tier 2 quotas (e.g. relating to original and regional production programming).

Footnotes

1.- In this Statement all references to sections and sub-sections are to provisions of the Act unless otherwise stated.

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