BBC's Comments

The strongest theme within the study is that the future is IP-based. The BBC also believes that the Internet, delivered via numerous access devices, will play an increasingly important role within society.

Increasing convergence of services and delivery platforms will deliver huge benefits to the UK. Not least where electronic networks are used for the delivery of high quality e-society and learning services alongside e-commerce; this will empower consumers, educate and inform citizens, improve access to public Government services and enhance the quality and accountability of the democratic process.
However, the opportunity for the UK to build on its success as the World’s digital TV market leader and deliver the knowledge society depends upon consumers being able to access these new services.

Not all consumers will gain access to this richness of services via a PC. Internet access is presently the privilege of the minority. If Internet access is to become universal then there will need to be decreasing reliance upon the PC as the primary access device. Many consumers will access convergent services via other access devices, some of which will offer only a restricted range of these services.
With analogue TV present in 99 per cent of UK homes, digital TV is the only medium which is likely to make available all of the opportunities of convergence to all consumers. Yet digital TV is characterised by more powerful, effective, gatekeepers than exist in the online world where vertically-integrated market players are constructing walled gardens reinforced by their control of proprietary technology.

At present, most digital TV viewers do not have access to the full and diverse range of information and services available on the Internet. The BBC views this situation with concern, yet we believe that walled gardens will be an unattractive, minority pursuit by 2010, with most consumers opting for access devices which offer full Internet access. Digital TV operators will respond to the changing consumer demands. In the meantime, the UK fails to reap the benefits which this will bring.

But even when all digital TV receivers provide access to the Internet, digital TV broadcasting will still hold a powerful position within the converged, communications market. Broadcasting will always be an efficient means of delivering large quantities of data simultaneously to a mass audience; the increasing use of local storage will maintain the viability of broadcasting even as consumption of audiovisual services moves increasingly to an on-demand future.

By increasingly combining broadcast content with content and services sourced from the Internet, servers and local storage, broadcasters will remain an essential component of the multimedia mix. It will therefore remain essential that broadcasters continue to have access to sufficient spectrum.

Given the likelihood that later adopters of digital TV will not be platform-neutral but will only adopt terrestrial television, broadcasters will continue to need access to terrestrial spectrum. If the public service broadcasters are to continue to be central to the universal delivery of digital TV, and to the delivery of additional functionality which is not dependant upon commercial viability, then that access must continue to be free. Although other delivery platforms will become increasingly substitutable for terrestrial TV, that will not be the case for all consumers.

It will be essential that the UK’s future regulatory framework must be appropriate to promote competition while not losing sight of public interest objectives. Chief amongst these will be ensuring that, in a more competitive marketplace of converging services and service delivery, the universal service obligations of the existing public service broadcasters can continue to be met – and that future public services, including the Government’s e-services, will not be unduly denied access to radio spectrum as a result purely of competition concerns.

Radiocommunications Agency Study: Mapping the future of convergence and spectrum management

The BBC welcomes the study, which will stimulate the debate on the future demands for spectrum and how those demands might be managed. However, as the study acknowledges, technological developments are running ahead of changes in consumer behaviour; this must be factored into any proposed changes to the UK’s regulatory structure. Indeed, the study assumes a relatively a fast track to one or more of the four "endstates". Notwithstanding the recent rapid adoption of mobile ‘phones, digital TV and the Internet, each of which is still used by only a minority of consumers, perhaps a more credible scenario would be one of a slower take-up of new technologies based on existing platforms.
The BBC agrees that convergence will increasingly divorce content from delivery. This has profound implications for the regulation of communications which has traditionally regulated different platforms or delivery systems in different ways. Technological developments now require Government and regulators to be far sighted and consider how the regulatory framework should be adapted to prepare for this.
The UK’s interests in the development and convergence of these new technologies, markets and services, include:

ensuring British businesses are competitive within the UK and globally;
encouraging investment in the UK;
ensuring a strong voice for British culture around the globe;
promoting the widespread take-up of broadband communications technology;
releasing analogue spectrum for other uses, as the dividend of switch-over;
providing a wide range of quality services, accessible to all;
supporting the growth of an inclusive e-society, providing new opportunities for education, consumer and social information and democratic debate;
protecting the consumer.

Realising these interests will depend upon effective collaboration between government and business, and on establishing the right regulatory and competition framework. The framework must be light-touch to support market development, but must be effective in promoting competition, preventing market foreclosure and ensuring consumer access to the range and quality of services which will both drive the market and bring associated social, educational and cultural benefits.
Yet it will also be essential that Government and regulators do not run too far ahead of consumers, removing or altering consumer certainties before the implications of convergence have become a reality for more than a small minority. Consideration of regulatory changes will also need to balance the natural desire to remove barriers to the delivery of converged services (and, in the process, to the UK establishing an early European lead in their commercial exploitation) with a recognition that some barriers exist to deliver public policy objectives which will remain viable even in a digital world of full convergence. Nowhere is this more true than the regulation of spectrum usage, in particular where there will be many competing uses for spectrum currently assigned for broadcasting use.

One of the key benefits of digital technology is that it allows the transmission of much more information through any distribution system. In the case of radio transmission, this means that a unique, scarce and potentially valuable resource can be used more efficiently. In due course, once universal roll-out of digital broadcasting has been achieved, much of the spectrum currently occupied by analogue broadcasting could be released for other services of economic and/or social value.
While the BBC recognises that the special position of broadcasting, comprising the "old media" of radio and television, is likely to be increasingly challenged, we strongly believe that it will continue to play a key role in providing information, education and entertainment for the majority of the population. Indeed for many, broadcasting will probably play almost as central a role in their leisure time as it does today. Although the nature of broadcasting services will, of course, change to take advantage of technological developments.
The continuing important role of broadcasting is based upon two factors:

Firstly, broadcasting is an efficient manner in which to deliver large quantities of information point to multipoint; when combined with local storage this will enable content to be transmitted only once yet to be easily available on demand for millions of consumers;
Secondly, broadcasting utilises ubiquitous, easy to use, access devices. This is already leading to additional functionality being built into these devices (eg displaying text alongside digital radio, Internet access via TV sets). We see no reason why this trend should not continue with new technologies (eg DSL) converging with broadcasting rather than supplanting it. Beyond the early adopters, this is likely to be the best means of making convergence a reality as many consumers relate to new technology by reference to something familiar.

Broadcasting, and in particular public service broadcasting, fulfils a role which is unique. It is in the interests of UK consumers, and of the UK production sector and creative industries generally, that there continues to be a small group of broadcasters who undertake to ensure universal access to high quality, largely UK-originated, free to air television. The public service broadcasters, to varying degrees, satisfy the following key criteria:

they are free to air;
they are universally accessible;
they have a high proportion of UK-originated content;
they serve diverse tastes and interests;
they meet other higher order public interest standards, such as sensitivity the individual and to society; and
they nurture new talent.

These are not just the objectives of "old media". The public service broadcasters will be instrumental in pushing forward convergence, educating and stimulating interest in new media. It is clearly advantageous for the UK that these objectives should continue to be met – in particular, that access to these services should be available widely across all of the delivery platforms which it is practical for those broadcasters to arrange to be carried on. In return for undertakings from the public service broadcasters that they will continue to meet broad public service criteria, they should continue to receive the regulatory privileges they need to achieve universality – must carry, must offer, due prominence, and, crucially, access to sufficient terrestrial spectrum which is both guaranteed and free.
Ahead of universal digital roll-out, those existing broadcasters who have a statutory or other obligation to provide universal national services – the BBC, ITV and C4 – have no choice but to do so via analogue terrestrial transmission. The spectrum to enable them to achieve universality is allocated to them as part of the package of privileges and obligations under which they offer their public services. Without the freedom to decide to switch to alternative means of distribution ahead of universal digital TV roll-out, it would not be appropriate at this stage to seek to impose charges for the spectrum used by the universal free-to-air broadcasters for their analogue terrestrial services.
There could also be a public interest case for continued free access to terrestrial spectrum for services operating under Restricted Services Licences (RSLs) which provide local broadcasting against a backdrop of increasingly national and international services. For many RSLs, paying for spectrum would never be viable.
Meeting the demanding DTT universality objective set by the Government may actually require additional terrestrial spectrum to be made available for public service DTT use at the point of analogue TV switch-off. In addition, if it was desirable that DTT be capable of addressing mobile reception, there would be a case for additional free terrestrial spectrum to deliver this. We note that, in two of the study’s four scenarios, it is anticipated that more spectrum will be necessary for digital video broadcasting than is the case today.
Considering the potential implications of convergence for broadcasting spectrum usage, the BBC recognises that there is likely to be growing pressure within the international bodies concerned with spectrum management (such as the ITU, CEPT and, more recently, the European Commission) for new definitions to be considered which, if broadcasting were to be redefined under a generic classification, might lead to a situation where broadcasters had access to additional frequency bands – and other users might have access to what had traditionally been broadcasting bands. Such redefinitions should not be considered lightly, not least because of their potential effect on the extent to which the digital TV broadcasters can drive the take-up of converged services. When redefinitions are considered, the BBC will participate fully through the Radiocommunications Agency and within the ITU.
Of course, the implications for broadcasters extend beyond that of access to suitable spectrum for broadcasting services. For example, we note that there is clearly great demand for spectrum in the 2 GHz region, which raises concerns in respect of Electronic News Gathering (ENG), Outside Broadcast (OB) and possible future cordless camera operations.
One aspect of future spectrum usage will undoubtedly be increasing trading of rights. The BBC believes that, subject to national law, spectrum trading should be permitted widely and should not be constrained in the manner proposed by the European Commission.

The importance of free to air television services in driving the penetration of converged services

Convergence is leading to an increasing demand for spectrum. It is to be expected that there will be providers of alternative services willing to pay significantly for access to spectrum currently used for broadcasting. Yet if the implication of this was that public service broadcasters would be required to pay for terrestrial spectrum, they would not be able to meet their obligations of DTT universality ahead of analogue TV switch off, and their investment in the very services which will help drive digital take-up, and so in time produce the digital dividends of releasing analogue spectrum, would reduce.
The free to air public service broadcasters have a unique role in driving analogue TV switch-over:

by providing additional, high quality free to air services, and a real incentive for audiences to switch to digital, without necessarily committing to expensive subscription payments; and
by working with Government and other players in the sector to find a cheap way for the more reluctant adopters to make the switch, via a simple digital converter delivering free to air services alone, combined with online access.

Digital television can offer more broadcast services and smart, computer-style functions, offering extra value to households prepared to switch from analogue. It can overcome social exclusion and the danger of a "digital divide" between those with access to this new world and those without. And once the UK goes digital, analogue spectrum can be freed up for other uses; the recent auction of radio frequencies to mobile telecoms operators suggests that the value to the Exchequer of spectrum currently used for analogue television could be in excess of £12bn.
In addition, the BBC is heavily involved in promoting consumer interest in interactive services – in many cases, before commercially viable business plans have been developed. In this manner, the BBC is making convergence a reality. Already the BBC’s Online site is the largest content site in Europe and the BBC’s streaming of World Service broadcasts is the most accessed audio website in the world. Whereas currently online services can only carry text, audio streaming and low-definition video clips, in future, consumers will be able to access broadcast-quality linear and non-linear audio-visual material. And with services such as Interactive Wimbledon, the BBC is also testing the limits of what Digital Terrestrial Television (DTT) can offer consumers without using a return path. With the roll out of digital cable and the imminent launch of the ATVEF-compliant net box from ONdigital, consumers will increasingly be encouraged to jump from broadcast content directly to associated websites. The BBC will ensure that the opportunities for consumers to take advantage of this technology to become better informed and more involved will not be limited purely to those subjects from which revenue can be earned.
However, the UK will not achieve these macroeconomic benefits without a universal switch from analogue to digital television combined with a return path. It is clear from research, however, that between 30 and 40 per cent of households are likely to be content to retain their existing four or five analogue television channels, and have no interest in subscribing to digital pay TV packages. If that large proportion of the population is to make the switch to digital, they must be offered something other than the opportunity to buy new pay channels: they need to be offered the ability to access a wider range of high quality free to air services from a variety of broadcasters, including the BBC, ITV and Channel 4.
However, in order for the public service broadcasters to play these roles, in particular in accepting a higher level of responsibility for bringing high quality, diverse, largely UK-originated, free-to-air services to every home, those broadcasters must continue to have free access to sufficient spectrum to achieve universality and must secure regulatory backing to ensure that they are carried on all platforms and that all such facilities as they need from platform operators to ensure that consumers have access to them must be offered to them at no or marginal cost.

The BBC agrees with the study’s terms of reference: technological developments are running ahead of changes in consumer demand. Given the uncertainty which this produces, we concur that constructing a series of scenarios and devising appropriate strategies to deal with their implications is a practical approach to take. We also agree that there is likely to be interaction between these scenarios as the various demographic groupings of consumers are attracted to first one communications "solution" and then to another, in reaction to the stabilisation of technologies and their prices and to their altering consumer demands. Irrespective of which of these scenarios might prove to anticipate consumer and market behaviour by 2010 most accurately, the BBC agrees that there will be increasing reuse of content between the Internet, linear digital TV and interactive digital TV –this is already a reality.
Each scenario raises a different set of potential concerns, although common to all is the concern that, in the digital future, gatekeepers will increasingly be in a position to intermediate between consumers and the content and services which they might wish to access. These gatekeeper positions, and with them the ability to distort the development of effective competition and undermine innovation, will be strengthened where those gatekeepers are either vertically-integrated with content and service providers and/or utilise proprietary technology to reinforce the gates. While convergence may increasingly offer service providers opportunities to reach consumers across a range of access devices and distribution networks, switching costs, minimum contract periods and consumer inconvenience will limit their ability to bypass specific networks to reach their consumers and accordingly, reinforce the power of those networks’ gatekeepers. This is discussed in greater detail as part of our comments on scenario B below.

The BBC agrees that the Internet is likely to become much more important. At present, most of the UK population does not have access to the Internet and there are millions of consumers who have never accessed it and who do not see what all of the fuss is about. We believe that that will change as the Internet becomes increasingly integrated into existing services. Consumers will increasingly benefit from the Internet without, in many cases, having taken a conscious decision to access it.
But the Internet is unlikely to be the means of accessing every entertainment or information service. As we have said above, broadcasting will still play a key role. In addition, we have doubts that open standard Internet protocols will have been adopted within 10 years by every network and media access device (for example, the Internet may not form the basis of every interactive TV service).
Despite improvements in compression technology, fatter pipes into homes and offices, and upgrading of the Internet’s backbone, broadcasting (often in conjunction with Internet access) will still be central to the lives of most consumers. Indeed, the breadth and depth of information which the Internet will be capable of providing consumers in conjunction with broadcasting will, even as new non-broadcast audiovisual services proliferate, serve to enhance the position of those broadcasting services which exploit convergence the most.
Public service broadcasting obligations will not only still be viable but essential as it will be these broadcasters, and in particular the non-commercial BBC, which will encourage the millions of late adopters to join the information, or e-, society. Without digital TV and the role played by the public service broadcasters the late adopters, discouraged by the costs of access and unfamiliarity, may never share in the benefits of the convergence revolution.
Consequently, as recognised in the study, even in a future of widespread Internet convergence digital TV will play a key role. For broadcasters, and in particular the public service broadcasters with universal service obligations, to fulfil this role they must continue to have guaranteed free access to terrestrial spectrum. Indeed, with the increasing importance of digital TV and, potentially, digital radio (DAB), it could be argued that additional terrestrial spectrum should be made available to the public service broadcasters.
The increasing proximity of Internet-delivered interactivity and broadcast services will pose a challenge to the appropriate form of regulation to be applied to these converged services. It may not be appropriate to encompass broadcasting within a light touch regulatory regime adopted for the Internet. Current UK broadcasting regulation does not assume informed consumers willing and able to exercise choice when accessing content – if the Internet approach to regulation is to be applied to broadcasting too, it may take more than 10 years before UK viewers would be in a position to accept that.

From both social and competition viewpoints, Scenario B is the most alarming, not least because it suggests little improvement upon what consumers are offered today in respect of interactive services.
In the UK, the PC is unlikely to be adopted universally. Television will become a critical consumer access device for e-society services. Digital television will be a cheaper multimedia access device than a PC and will, despite the increasing "computerisation" of receivers, be more technically accessible. Digital TV is also a natural upgrade from the analogue TV present in 99 per cent of UK homes.
With this ubiquity and ease of operation, digital TV should become the key way of accessing entertainment, education, news and e-commerce while at the same time offering citizens the opportunity to be involved in and informed about civic life at a local national and European level. DTV is the only medium which is likely to deliver all of these opportunities to everyone. The possibilities are enormous. On the other hand, full availability of all on-line services via DTV is far from inevitable, since digital and interactive TV will be characterised by more powerful, effective, gatekeepers than exist in the online world.
Television (particularly pay-TV) has been characterised historically by vertically-integrated operators which have used gateways in the distribution chain to restrict consumer access to services and service providers’ access to consumers. With the TV as the access device for e-society services, competition in the supply of those services may well be restricted by vertically integrated operators’ closed networks which they control by:

proprietary technology;
a lack of interoperability;
control of local caching and memory, including personal video recorders.

Currently NTL is the only cable company which permits full Internet access for non-PC owners (ie for display on TV screens). CWC and Telewest both offer only walled gardens (although the BBC hopes that NTL’s take-over of the CWC systems will, in time, permit those consumers to have full Internet access too). BSkyB has adopted the walled garden approach with Open for SkyDigital viewers. ONdigital has yet to launch its net box, but we expect that it will offer full Internet access.
Vertical integration means that even when interactive TV providers can offer access to the Internet, they may either limit access to a walled garden or use navigation to ensure that as few of their customers as possible leave the walled garden. This is the strategy successfully adopted by AOL, where its electronic service started life as a walled garden, and its closed nature was maintained for long enough for it to attract brand name third parties (with access charges reflecting that) - inertia, familiarity and ignorance contribute to keeping many of its consumers within the walled garden, out of reach of many smaller players with innovative services.
Yet the BBC remains confident that increasing knowledge about the Internet, and the increasing necessity for those providing services over it to make a return on their investment, will make walled gardens an unattractive, minority pursuit by 2010. What we have less confidence in is whether the walled gardens presently being erected by digital TV network operators will be torn down in favour of full Internet access in the short or medium term.
One of the reasons the Internet has been such a phenomenal success in promoting competition in the provision of both e-commerce and e-society services has been the guarantee of access to a widely available distribution medium. In essence, such guaranteed access has made the barriers to entry (and the risk associated with entry) to offering such services very low.
By contrast, the very existence of a walled garden, and the need for a potential content provider to negotiate with the gatekeeper for access, acts as a deterrent to potential content providers (particularly start-up companies) since the success of their venture may depend on securing distribution which is totally outside their control.
But the impact of walled gardens goes beyond that of denying customers access to the full range of e-commerce services or even of inhibiting innovation. Unlike the Internet, walled gardens are presently principally electronic high streets without the rich and diverse information resources of the Internet. Because of the gatekeepers’ preference for third party content and services for which viewers can be charged, the e-society services (from which they would probably extract little revenue) which the Government, and the BBC, see as being essential to the knowledge-based future of the UK may not be universally accessible.

Those commercial players with an interest to protect have already, working with Governments, made great strides in making the content and services accessed via the Internet more reliable and safer. Of course, its international nature and low barriers to entry is likely to ensure that the Internet will always contain its fair share of the untrustworthy. But, as they do already, consumers will place their trust in familiar brands. The BBC does not believe that safety concerns should be used by network operators as a justification for not offering their customers full Internet access. Neither do we believe that, when offered the choice, many consumers would knowingly opt exclusively for a "managed choice".
While some consumers may be initially attracted to walled gardens, the BBC believes that, with increased familiarity with interactive services and a free and easy choice, most of those who value these services will ultimately opt for full Internet access. What concerns the BBC is that network operators, relying upon inertia and consumer switching costs, may attempt to deny their customers that choice.
The longer that UK consumers who cannot afford or do not want a PC are denied access to the richness and diversity of services provided via the Internet, the longer before the UK can reap the full macroeconomic benefits of this. The BBC believes that regulators and competition authorities will increasingly need to consider the negative implications for competition and society generally of walled gardens controlled by vertically-integrated players.

The BBC believes that wireless, as a means of accessing services, will increase in importance and there is likely to be a small, but growing section of the population for whom wireless will be the preferred access medium for all multimedia services – even when a wired alternative is readily available.
However, mobility usually comes at a price premium. Even with UMTS, there will be services (for example, accessing a full motion audiovisual service) which would sufficiently test the limits of the platform’s functionality and spectrum availability that we do not expect this premium to have been competed away within 10 years.
In addition, coverage will play its part in mobile access. Even with the significant theoretical coverage of GSM today, there are many areas of the country with poor or no coverage – 9 years after the first GSM900 services started in the UK. UMTS, which is likely to be essential if consumers are to become totally mobile, will take many years to roll out reliable coverage beyond the densely populated and wealthy urban and suburban areas.
For these reasons, the BBC believes that broadcasting and fixed telecoms access will continue to have a strong part to play in delivering multimedia services. While neither can substitute for wireless for those who need to be truly mobile, we expect consumers to increasingly adopt a combination of local wireless (eg DECT, Bluetooth), broadcasting and fixed telecoms in addition to cellular to meet their demands. Indeed it is likely that, rather than convergence leading to all services being accessed on a single device, for many it will lead to more services being accessed via more devices and delivery media than before – but all capable of being integrated in a way which is largely impossible at present.
When considering the increasing potential of wireless services, we believe that the role which DAB might play in 10 years' time as a mobile multimedia device should not be overlooked, in particular where technology will permit unicast and broadcast/multicast capabilities to converge in a single terminal (i.e. incorporating a DAB chip into a mobile ‘phone). DAB’s ability to deliver pictures and web pages (and to do so efficiently) were demonstrated long before people even started to think about the possibilities for broadband wireless telephony.
The potential for DTT to address mobile reception should also not be discounted. However, this would require additional spectrum to be made available for broadcasting at lower bit rates (for example, Germany is contemplating implementing 16QAM DVB-T, providing about 14 MBit/s, whereas UK broadcasts currently utilise 64QAM, which provides about 24MBit/s).

This scenario is based upon two key propositions:

that there will be consumer demand for fast data-intensive access which can be met at prices which those consumers will be wiling to pay; and
that broadband wired networks will be universally (or close to universally) available.

The BBC is not about to predict the consumer demand for data in 10 years’ time. However, it seems unlikely that broadband access will be universally available at affordable prices by then. Broadband cable presently passes only about 53 per cent of UK households and there are technical limitations to universal ADSL roll out. Of course, if consumer demand for broadband access is sufficient, we would expect both cable and ADSL to be made available to the vast majority of the population. But it is still unlikely that, within the next 10 years, either technology will penetrate very far into rural or remote areas. It is also far from clear that Broadband Fixed Wireless Access, even at 40 GHz, will extend access to the broadband revolution much beyond the build-out of wired cable.
It is far more likely that, as with Scenario C, there will be some consumers who will adopt the broadband revolution but that the majority will either have access to broadband to use when required or most convenient (possibly at work only) or have no access to it all. Given that point to point communications are an inefficient method of delivering content which has mass appeal, the BBC believes that broadcasting will still play a central role in entertaining, educating and informing consumers – even if many of those consumers choose to access that content later from local storage and to interact with it using a broadband return path.

BBC's Comments on the Radiocommunications Agency Strategy Document, "Mapping the Future of Convergence and Spectrum Management"