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Foreword

This is a time of intense innovation and change in UK television. Digital technologies are bringing choice and variety to viewers as never before. Digital platforms, like cable, satellite and broadband, are developing rapidly. They are making new types of content available and new ways of experiencing it, from High Definition to video-on-demand.

Digital Terrestrial Television (DTT) is one very important part of this new television landscape. Digital switchover will mean that DTT services are available throughout the UK – allowing DTT to become the way in which we ensure that the whole country has access to Public Service Broadcasting, free-to-air.

Under the Communications Act, Parliament gave Ofcom important responsibilities for the regulation of DTT. These are wider and deeper than our responsibilities for other television platforms, reflecting the role that DTT has in making PSB content available to all.

We think it is very important that the regulation of DTT allows it to stay at the forefront of broadcasting - adopting new technologies, so it can offer new services, and make the very best use of valuable spectrum. This document sets out our thoughts on how the DTT platform could evolve over the next few years.

In brief, it describes a tremendous opportunity - to begin upgrading DTT by embracing the latest technologies. These have the potential to bring huge increases in capacity to the platform, enabling it to offer richer and more varied services, including High Definition.

Our proposals describe how this huge prize can be achieved without needing more spectrum, while protecting existing viewers’ access to the existing PSB services.

I encourage all those who support the development of the DTT platform – broadcasters, multiplex operators and consumer groups – to work with us to turn this prize into reality.

Ed Richards, Chief Executive

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Executive Summary

DTT – now and at DSO

1.1 Digital terrestrial television (DTT) is an important part of the landscape of UK broadcasting. It will become even more important as digital switchover (DSO) is completed between 2008 and 2012.

1.2 Today, the DTT platform already offers viewers a vastly greater choice and variety of content than analogue broadcasting. Like other digital platforms, it uses the superior efficiency of digital technology to ‘pack’ much more information or content into any given capacity.

1.3 But DTT is presently only available to around 73% of the population. The platform is organised into six multiplexes, each of which carries a number of television and other services. These multiplexes cannot cover more of the country because of the constraints imposed by the need to exist alongside analogue television broadcasting.

1.4 At DSO, those constraints will be removed. DTT will be made available throughout the UK, reaching as many people as analogue - 98.5% of the population - and offering all viewers a wider choice and variety of content. At the same time, DTT will become the means by which we can ensure that viewers have ready access, free-to-air, to Public Service Broadcasting (PSB).

1.5 The DTT platform will therefore have a critical role in ensuring the delivery of high quality television to the people of the UK. This is a role reflected in successive decisions by Parliament , the Government , and Ofcom.

1.6 It is also a role that has already been recognised explicitly in decisions about the future use of the radio spectrum. In particular, in 2003, the Government decided that 70% of the spectrum currently used for analogue television should be reserved specifically for use by DTT from switchover (256 of 368MHz).

1.7 This decision will allow the coverage of DTT to expand, to match analogue television. It will also allow the capacity of DTT to increase, for a variety of reasons, by at least 20% - the equivalent of more than a whole extra multiplex.

Purpose of this document

1.8 The purpose of this document is to set out proposals for building on the success already achieved by DTT, and the decisions already made, to ensure that the platform continues to develop – maximizing the benefits it can bring to citizens and consumers.

1.9 In brief, the document describes an exceptional opportunity that exists to upgrade the DTT platform over the next few years by introducing new technologies that will greatly increase the capacity available. This upgrade will in turn enable the platform to offer a wider, richer and more varied set of services - including the potential for services in High Definition (HD).

1.10 The document describes how this opportunity can be realised without requiring additional spectrum, and while protecting viewers with existing equipment.

1.11 For viewers, the effect of these proposals should be to increase significantly the choice that is available to them without requiring a reduction in the number of services that can be received through existing DTT receivers (ie set-top boxes (STBs) and integrated digital televisions (IDTVs)). That said, the composition of the platform will of course continue to change between now and DSO and beyond – and some services may as a result of these proposals need to move between PSB and commercial multiplexes.

1.12 Realising this opportunity is technically complex. But in brief, it exists for two key reasons:

• the emergence of new technical standards that are more efficient than those presently used on DTT;
• the extra capacity that will be created on DTT at DSO, and the scope for more effective use of existing capacity.

New standards – and use of extra capacity

1.13 Digital broadcasting technology, unlike analogue, is subject to a process of continuous evolution and improvement. This is a phenomenon familiar from other digital technologies - for instance Moore’s Law in computer hardware, albeit the rate of progress in that case may be higher.

1.14 We have identified two technical advances that together could result in a very significant increase in the DTT platform’s capacity. These relate to improvements in the standards used (a) for coding (compressing) information, to squeeze as much as possible into a given amount of spectrum, and (b) in its physical transmission.

1.15 The two changes are:

• An improved video and audio coding compression standard called MPEG-4 . This is expected (over time) to operate at up to double the efficiency of the coding standard that is used at the moment on DTT, MPEG-2. This means that a DTT multiplex could carry up to twice as many services using MPEG-4 as can currently be achieved using MPEG-2, whilst maintaining similar picture quality.
• A new transmission standard, known as DVB-T2. This is expected to deliver an increase of at least 30% in the capacity of a DTT multiplex over the current standard, whilst maintaining the same coverage. This standard is a development of the existing DVB-T standard used in the UK since 1998. DVB-T2 is still undergoing development by DVB in Geneva, but is expected to be finalised in spring 2008.

1.16 It is important to note that MPEG-4 and DVB-T2 differ in one important respect. MPEG-4 can be introduced within a multiplex (so it can offer a mix of services coded in MPEG-2 and MPEG-4). But the introduction of DVB-T2 requires a whole multiplex to be converted from DVB-T. This is, of course, a larger step-change.

1.17 The introduction of these two technologies could, if combined, increase the capacity of a multiplex by up to 160%. This is a very large increase. It is the equivalent of raising the number of Standard Definition (SD) services that can be carried on a DTT multiplex from around eight currently to around 13-15 at DSO, and over 20 in the longer term. HD is generally regarded as unfeasible on DTT in the UK without use of MPEG-4: but with the use of these two technologies combined, a single DTT multiplex could in time offer at least four HD services.

1.18 However, there are important consumer issues that need to be considered in relation to any development of the technical standards used on DTT. At present, all DTT digital receivers marketed for use in the UK use the existing standards, MPEG-2 and DVB-T. Services broadcast using the new standards will only be receivable on equipment designed to the new standards (though that new equipment will also be able to receive services broadcast using the old standards, MPEG-2 and DVB-T ).

1.19 This means that some important factors need to be considered if the new technologies are to be introduced in a way that meets the interests of all DTT viewers – both those with existing equipment and those who acquire new equipment. In particular:

• The new technologies need to be deployed in a way that helps to avoid displacing existing services from the platform - so that viewers with existing equipment are not disadvantaged.
• The new technologies need to be deployed in a way that creates strong incentives for viewers to buy new equipment, such as new STBs, if they wish to do so – so that the benefits of the upgrade are maximised.
• There needs to be a high level of co-ordination in introducing new technologies, especially between the operators of the DTT platform and the manufacturers and retailers of consumer equipment, but also other interested parties such as Digital UK and consumer groups.

1.20 In some ways the most important of these conditions is the first – as it is a precondition for subsequent action. This is one reason why the existence of extra capacity on the DTT platform at DSO is so important – because it will enable new services to be offered, using new technologies, without having to reduce the availability of existing services using existing technologies.

1.21 The extra capacity on DTT itself has several sources, detailed in this document. The most important is DSO – which will allow a change in the existing transmission standard (the ‘mode’ of transmission) used by some DTT multiplexes, increasing the capacity of the platform as a whole by some 20%. Other sources include gains in technical efficiency already being planned by various multiplex operators.

The case for intervention

1.22 This document sets out how, using the extra capacity available on DTT at DSO, a whole multiplex could be converted to use the new technical standards, MPEG-4 and DVB-T2. It explains how this can be done without requiring either a reduction in the number or picture quality of services carried on the platform, or any additional spectrum – while still enabling a significant gain in the depth and variety of services available on DTT.

1.23 However, this is a complex task. In particular, services displaced from the converted multiplex need to be carried on other multiplexes if they are still to be available - in effect requiring a reorganisation of at least part of the platform, shuffling services between multiplexes to create a clear multiplex that can then be upgraded.

1.24 We have considered carefully whether this upgrade, or one similar to it, could be achieved by the DTT multiplex operators without active regulatory intervention. Ofcom’s regulatory principles are to avoid intervening unless it is clearly necessary to do so, and the benefits outweigh the costs.

1.25 However, our analysis in this consultation suggests that not intervening in this case risks a worse outcome for citizens and consumers. The DTT platform would probably still be upgraded eventually, but the upgrade is likely to be smaller in scope and/or delayed.

1.26 There are several reasons for this:

• First, the upgrade proposed is a large step-change and it needs very effective co-ordination. But the mechanisms available to the parties who would have to co-ordinate are fewer than in a normal commercial context. This is because the DTT platform is, for important reasons, subject to significant regulation. DTT multiplex operators are also subject to regulation in varying degrees, which can affect their incentives and behaviour. Both these points can make co-ordination of the right kind more difficult to achieve.
• Second, there is an important public interest in the use of the capacity on the DTT platform and the capacity that can be created through this process. This public interest may not in all cases be perfectly aligned with the interests of the parties who would need to co-ordinate.
• Third, the issue is urgent. We need to resolve the path for future development of the platform quickly, if we are to maximise the benefits that can be delivered during DSO, and to provide certainty to the many other parties with an interest, notably manufacturers, retailers, and consumers. Non-intervention would create a material risk of delay and uncertainty.

1.27 Our judgement is that, without intervention, there is a significant risk that the adoption of these new technologies will be delayed, at best, and that a worse outcome will result for citizens and consumers.

1.28 We have tested this assessment with quantitative analysis. Our modelling indicates that the net present value of the benefits to consumers of the strategy we propose could be in the region of £3-5 billion over 25 years.

Detailed proposals

1.29 On the basis that intervention is likely to be needed, the document sets out detailed proposals for how this could happen.

1.30 There are three key steps in the process:

• The identification of a multiplex to be cleared and upgraded.
• The reorganisation of other multiplexes to absorb services displaced from the cleared multiplex.
• The allocation of capacity on the cleared multiplex, so that new services can be launched.

1.31 In preparing these proposals, we have sought to identify the approach that best meets our statutory objectives, notably our duties to secure optimal use of the spectrum and the availability of a wide range of high quality television services throughout the UK which appeals to a variety of viewers. We have also sought to ensure that our approach is fair, transparent and proportionate, and that it constitutes the minimum intervention necessary to achieve public interest goals.

1.32 Our proposals are set out in summary form below.

Clearance and upgrade of a multiplex

1.33 We propose that one multiplex should be cleared of existing services in order to be upgraded to the new technologies, MPEG-4 and DVB-T2. We propose that these new technologies should be introduced together, to reap the combined benefits and to avoid a proliferation of different types of consumer equipment for free-to-air DTT services in the UK.

1.34 We suggest that the multiplex selected should be one of those presently carrying fewest services on the platform, in order to minimise the scale of platform reorganisation required. We also suggest that it should be one of the PSB multiplexes, as these will be available to 98.5% of the population from DSO. This will ensure that the new services are universally available.

1.35 These two factors point to selection of Multiplex B, which is operated by BBC Free to View Ltd. Under our proposals, the BBC would continue to operate the multiplex but it would be cleared of existing services (which comprise BBC4/CBeebies, BBC Parliament, three interactive video services, ten radio and two data services). These services would be accommodated elsewhere.

1.36 Our analysis suggests that the multiplex could be upgraded to use new technologies from late 2009 or early 2010. This would mean that new services (such as HD channels) could be made available in time for DSO in the Granada region. The new services and new consumer equipment could then be available, as an additional option for DTT viewers, as DSO occurs in most UK nations and regions. (The new services would, of course, also be made available in Border and West Country shortly after DSO in those regions, probably in late 2009 or 2010.)

Reorganisation of other multiplexes

1.37 We propose that the services displaced from Multiplex B should be accommodated on the other two PSB multiplexes. These are Multiplex 1 (also operated by the BBC) and Multiplex 2 (operated by Digital 3 and 4).

1.38 Our specific proposals are that the majority of the BBC services should move from Multiplex B to Multiplex 1, and one BBC video service should move from Multiplex B to Multiplex 2. Capacity should also be made available on Multiplex 2 for: one video service in each of Scotland, Wales and Northern Ireland; and for Five, which should move to a PSB multiplex (it is presently carried on a commercial multiplex) in order to ensure universal access to this service from DSO.

1.39 The effect of these proposals will be to ensure that sufficient capacity is available for all PSB services on Multiplexes 1 and 2 but that their capacity will be used more intensively than it is now. S4C, the Gaelic Digital Service (GDS), and TG4 will each be available on a PSB multiplex in, respectively, Wales, Scotland, and Northern Ireland (subject to any other agreements or consents required); and Five will be available to 98.5% of the UK population via DTT.

1.40 As a result of this reorganisation, some non-PSB services are likely to be displaced from Multiplex 2 in order to make room for PSB services, which need to be available universally. It will be a matter for the operators of Multiplex 2 (the Channel 3 and 4 licensees) to determine which services these are, and more generally the future of their commercial services, taking into account the capacity available elsewhere on the platform. However, the effects of this displacement are limited. We estimate that:

• one UK-wide commercial service will need to be displaced from Multiplex 2 to accommodate a BBC service; however, Five’s departure from Multiplex A will free up a slot for another commercial service on that multiplex;
• another commercial service on Multiplex 2 will not be available in Scotland, Wales and Northern Ireland in order to ensure PSB capacity is available to carry S4C, GDS and TG4.

1.41 Our proposals for a regulatory reorganisation are limited to the three PSB multiplexes; Multiplexes B, 1 and 2. We are not proposing to require the operators of the three commercial multiplexes (Multiplex A, operated by SDN, a wholly-owned subsidiary of ITV plc; and Multiplexes C and D, operated by National Grid Wireless (NGW)) to make capacity available for particular services.

1.42 However it is relevant that DSO will increase the capacity available on commercial Multiplexes C and D as well as on PSB multiplexes. To ensure this capacity gain is realised at the same time as the other changes discussed here, we propose a change in the technical requirements for Multiplexes C and D, so that these use the same transmission mode (known as 64QAM) as other multiplexes. This will help ensure that the DTT platform as a whole develops in a co-ordinated manner.

Allocation of cleared multiplex

1.43 We also need to consider the process for allocating the upgraded capacity on Multiplex B, so that it provides the maximum benefit for citizens and consumers.

1.44 This document looks at a range of options for this process, consistent with the powers available to the Government and Ofcom. It identifies three key objectives, consistent with the statutory regime and the status of Multiplex B as a PSB multiplex. These are:

• promoting efficient use of the spectrum, particularly through the adoption of new technologies;
• promoting the purposes and characteristics of PSB; and
• promoting the range and variety of high quality television services across the UK.

1.45 Our proposals are:

• to invite the organisations with PSB status (principally the BBC, the Channel 3, 4 and 5 licensees, and S4C) to put forward proposals for the use of the capacity;
• to hold a comparative selection process that provides a fair, transparent and objective means of deciding between these proposals, using criteria that reflect the three key objectives above;
• to award capacity in blocks that are large enough to offer an HD service, but to give PSBs the flexibility to propose different options for the balance between HD and SD services (for example, in different parts of the day);
• to award three such blocks next year, for services to begin in late 2009/early 2010; to award a fourth block in 2010, for services to begin in 2012.

These proposals will create the opportunity for PSB broadcasters to offer three HD services on the DTT platform from 2009 or 2010, and four from 2012 – or to offer a mix of new HD and SD services.

Alternative proposals

1.46 This document describes one way of implementing a complex and intricate set of changes, to reorganise and upgrade the platform. There may be other ways of achieving this goal that could deliver the same or greater benefits to viewers.

1.47 We would welcome alternative proposals to this end, and will assess those proposals against the three key objectives identified above.

Longer-term development of DTT

1.48 In the long-term, the benefits of upgrading the DTT platform will be greatest if we can achieve a ‘virtuous circle’ in which more and more consumers have equipment using the new technologies, more and more services are made available in this way, and the cost of equipment with the new technologies keeps falling.

1.49 Virtuous circles of this kind can be seen in many other mass-market communications technologies – from mobile phones to other digital TV platforms. One of the aims of these proposals is to help initiate the next virtuous circle in the development of DTT.

1.50 Our analysis shows that the potential benefits of this development are enormous. However, we also think that the process is one that will need to be managed carefully, for two reasons.

1.51 First, it is very important that PSB services continue to be available universally to DTT viewers who have existing equipment. This means that, for the foreseeable future, we think that the multiplexes carrying existing PSB services (Multiplexes 1 and 2, under these proposals) must be required to continue operating in DVB-T and MPEG-2.

1.52 Second, in relation to the commercial multiplexes, we think that any change in technical standards will need to be evaluated carefully, case by case, to ensure that it does not unacceptably diminish the range, variety and quality of services available to DTT viewers.

1.53 The statutory framework exists to allow the regulator to oversee such changes, and to promote the best interests of viewers as a whole. We propose to clarify the regulation by amending the list of technical standards that can be used by commercial multiplexes. We will also make clear that any change in the standards used must first be agreed with Ofcom.

Next steps

1.54 This consultation closes on 30 January 2008.

1.55 Some of the powers that could be used to reorganise the DTT platform rest with the Secretary of State for Culture, Media and Sport, while others rest with Ofcom.

1.56 The Government and Ofcom have agreed that the issue needs to be approached in a co-ordinated way, and the Secretary of State has asked Ofcom for advice on how his powers might be exercised so as to promote the public interest. This consultation is being undertaken in part to inform the advice that Ofcom expects to give the Secretary of State.

1.57 We think it is important to take this issue forward quickly so that there is the best possible chance of upgrading the DTT platform quickly, maximising the benefits to citizens and consumers. Depending on the outcome of this consultation, we will therefore:

• aim to issue a Statement by the end of March 2008
• at the same time, issue an invitation to the PSBs to make proposals for the use of the cleared capacity
• allow two months for the submission of such proposals, which would need to be received by the end of May 2008;
• conclude the comparative selection process by the end of July 2008.

1.58 Implementation would then follow in the rest of 2008 and 2009, with new services available on the DTT platform in late 2009 or early 2010.

• The Future of Digital Terrestrial Television [pdf]
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