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13|10|04

Ofcom publishes methodology of reviews for financial terms for Channel 3, Channel 5 and Public Teletext Licences

Ofcom today published a statement on the methodology for the reviews of financial terms for Channel 3 (ITV), Channel 5 and Public Teletext licences. The Communications Act 2003 and Broadcasting Act 1990 require Ofcom to set a value for the cash bid for the licences as if the licences were being auctioned anew.

Ofcom’s approach is aimed at determining a fair value for each licence as well as bringing clarity and transparency to the process. The valuation methodology is an important part, but only a part, of the overall valuation process which will also take into account a range of other factors including: projections of the growth in Net Advertising Revenue and the licensees’ projected share of NAR, the extent and cost of the licensees’ public service obligations and the licensees’ participation in the digital switchover process.

In its methodology for setting financial terms, Ofcom has sought to:

• Determine a fair value for each licence and to set licence payment terms according to a proportionate and objective process. The process should allow Ofcom to set payments that are reasonable within the context of the current market environment and that will continue to be reasonable throughout the licence period;
• Improve the clarity and transparency of financial reviews by providing applicants with more information and guidance than was made available in the past;
• Simplify the process by reducing information requirements and reducing uncertainty.

Ofcom agreed earlier this year to offer Channel 3 licensees the opportunity to align their licence review dates, rather than addressing the valuation of each individual licence piecemeal over a number of years when they would otherwise fall due for review. Ofcom believes that this will provide for a more clear and consistent regulatory environment.

Channel 3 licensees will therefore be able, if they wish, to apply for reviews from 31 December 2004 . 

Following a separate consultation in July, Ofcom is also offering the Channel 5 and Public Teletext licensees the opportunity to bring forward the earliest date they can apply for a financial review to 31 December 2004 . Ofcom has also published a statement today confirming this proposal. The same methodology will apply to these reviews as to Channel 3.

In determining its methodology, Ofcom has taken account of the responses received during the consultation period which followed publication of its proposals in June. Where appropriate, the methodology has been adapted to take account of respondents' views.

The reviews of financial terms will allow Ofcom to reflect any changes to licence holders' public service obligations that may result from its review into Public Service Broadcasting.

Separately, Ofcom last month published a consultation document on the digital replacement licences (DRLs) for Channel 3, Channel 5, Channel 4 and Public Teletext that will take the UK ’s commercial terrestrial broadcasters through to 2014.

The full statement on the methodology for reviews of financial terms for Channel 3, Channel 5 and Teletext licences is available under Related Items.

The full statement on the timing of reviews of financial terms for Channel 5 and Public Teletext licences is also available under Related Items.

NOTES FOR EDITORS AND CSEs

Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services.

CONTACT

Ofcom Media Office
mediaoffice@ofcom.org.uk
(+44) (0)20 7981 3033

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