The ITC is the public body responsible for licensing and regulating commercially funded television services provided in and from the UK. These include Channel 3 (ITV), Channel 4, Channel 5, public teletext and a range of cable, local delivery and satellite services. In addition, the 1996 Broadcasting Act gives the ITC responsibility for licensing digital terrestrial services. It does not license or regulate non-commercial services provided by the BBC or by S4C, the fourth channel in Wales. ITC licensed services are financed mainly by the sale of advertising airtime and subscriptions.
‘Qualifying’ revenue, which is the basis for the assessment of various payments by licensees of Channels 3 and 5 and additional services, refers to all payments received by a licensee and any ‘connected person’; these are mainly advertising, sponsorship and subscription income. Fuller details on the assessment of qualifying revenue are in the ITC’s publication Qualifying revenue and multiplex revenue: statement of principles and administrative arrangements under the Broadcasting Act 1990 and the Broadcasting Act 1996. The breakdown of ‘qualifying’ revenue in 2002 was as follows:
Qualifying revenue 2002
Distribution of qualifying revenueEstimated £m Qualifying revenue by sourceEstimated £m
Channel 3 incl. GMTV 1,779 NAR 98%
Channel 4 646 Sponsorship 2%
S4C 9
Channel 5 243
Additional Services 74
Total 100%
Total 2,751
The Broadcasting Act 1990 requires that Channel 3, Channel 5, public teletext, commercial additional services and local delivery licences are awarded by the ITC after a process of competitive tender. The provision for renewal up to four years before the end of the 10-year licence period was made in the Broadcasting Act 1990. Eleven Channel 3 licensees applied to have their licences renewed with effect from 1 January 1999, and eight licences were granted on 31 December 1998. A further 1 Channel 3 licensee applied for renewal from January 2001 and the final 9 for renewal from 1 April 2001. The Teletext licensee accepted renewal terms to renew their Public Teletext Licence for the 10-year period commencing 1 January 2002.
Channel 3 and Channel 5 Additional Payments
Additional payments, which are the payments to the Treasury for each licence, have two components. The first is a percentage, of the licensee’s qualifying revenue. The second is a fixed cash sum, which is index-linked and payable annually. The two components of payments for 2003 are as follows:
Licensee PQR (%) Cash sum in 2003*(nominal prices in 000’s)
Border 2 £77
Central 17 £7,796
Channel 0 £1
Grampian 6 £108
Granada 15 £4,173
LWT 17 £5,050
Scottish 11 £1,755
Anglia 17 £3,541
Carlton 20 £17,408
GMTV 23 £4,412
HTV 7 £2,265
Meridian 23 £12,579
Tyne Tees 16 £2,184
Ulster 5 £596
Westcountry 13 £1,257
Yorkshire 22 £8,314
Channel 5 8* £24,567
*Channel 5’s new PQR rate of 8% was effective beginning 1 April 2003. A revised cash sum of £4,381k will be due in 2004.
Upon application for a Channel 3 or Channel 5 licence, each applicant was required to satisfy the ITC, by the submission of a confidential business plan, that the service would be maintained throughout the 10-year licence period. Channel 5’s licence was renewed as of 1 April 2003 for a ten-year period.
Local Delivery Services
Since 1999 the ITC has set nominal cash bid of £1 and a zero PQR rate for non-exclusive local delivery services licences.
Assessment and Collection
Additional payments are charged on the grounds that it is by the use of a scarce resource (the broadcasting spectrum) that monopoly profits accrue to the licensees who are granted the sole right to broadcast in their area. Although the ITC is responsible for assessing the calculation of the additional payments, collecting the amounts due and paying them to the Government, they do not form part of ITC revenue. Payments are generally made to the ITC by monthly instalments, one month in arrears. .
In 2002, total additional payments amounted to £292m, with cash bids accounting for £95m and the percentage of qualifying revenue for £197m. (This includes additional payments raised from Channel 3, Channel 5, Teletext and Additional Services licensees).
The Broadcasting Act 1996 makes provision for additional payments to be made by digital multiplex operators, but in recognition of the start-up costs of digital terrestrial TV, no additional payments will be payable for the first 12-year term of the licence.
Statement of Principles
The ITC is required under Schedule 7 of the Broadcasting Act 1990 to publish, after consultation with the Secretary of State and the Treasury, a Statement of Principles setting out how the qualifying revenue of licensees will be ascertained and the procedures for collecting additional payments. There is a similar requirement under Schedule 1 of the Broadcasting Act 1996 to draw up a Statement of Principles of Multiplex Revenue. In April 2001 the Commission agreed a revised 4th edition of the Statement of Principles which was laid before Parliament in October 2001.
Licence Fees
ITC fees, payable by its licensees, cover the costs of licensing and regulating all UK commercially funded television services and include expenditure on technology research and development and audience research which the ITC is required to undertake. Tariffs are published annually for terrestrial licences (Category A), licensable programme, satellite and commercial additional services (Category B) and cable and local delivery licences (Category C). The tariffs for categories A and B relate to the licensees’ qualifying revenue and are progressive in that licensees pay proportionally more as their revenue increases. Category C fees relate to the number of homes connected in the licensed area. Licence fee tariffs for 2003 will provide for a total fee income of £20.3m.
ITC Pubications
ITC notes 2-37 cover all aspects of the ITC’s functions and activities
April 2003
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