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Brema Response to the ITC/OFTEL/OFT Consultation on Digital Television |
ANNEX to the BREMA response 8th June 2000
It is noted from the accompanying News Release, that the results of the consultation will be used by regulators to give advice to Government on regulatory or other action necessary to improve the affordability, accessibility and availability of digital TV to consumers in the UK. Particularly to be addressed are barriers to the take-up of the wider choice of digital channels, the take-up by consumers primarily interested in the existing free-to-air services and access to new services such as the Internet.
The consultation document (Clause 6) notes that the Government has identified the opportunity through digital TV to provide access to Government Services and as a key weapon in tackling social exclusion.
In responding to the consultation, BREMA has accepted the format of the consultation document. This does not necessarily mean that we agree with the implied priorities and this is inherent in our comments. The following responses correspond to the consultation questions by number.
Market Conditions
2.1 Yes, all of these conditions are necessary and additional work is required on most of them if the targets are to be met, particularly at the early end of the switch-off time scale. Additionally:-
2.2 In relation to the first condition of Clause 9 on near-universal availability, this must be provided, in so far as economically feasible, by terrestrial broadcasting to enable, amongst other things, portable television reception. In this sense "portable" should be taken to include the majority of individual television installations which currently use a set-top aerial. The requirement for set-top aerial reception will place considerable demands on service planning, the use of spectrum and product design. Domestic re-distribution of signals, via cable or radio, is feasible but will add cost.
A further additional requirement is the availability of a replacement for, or alternative to, current video recorders. At the moment there are at least twenty-five million video recorders in use. These will continue to function after switchover, when connected to the analogue outputs of digital receivers. However, in this mode they are not able to receive and record programmes other than that to which the digital receiver is tuned. Video recorders will continue to be capable of re-playing into the analogue inputs of digital receivers. There are a number of new technologies available and developing that provide for digital recording and which will offer considerably more facilities than are available at present. However, market opportunities have yet to be precisely identified and developed.
In considering video recording, consideration should be given to the copyright aspects described in the response below to question 3.7.
2.3, 4 Specifically, regulatory action is not required in most cases except as regards ensuring ease of movement between digital platforms eg: satellite to terrestrial. Further powers may be required to ensure the necessary hardware compatibility as well as vigilance in exercising the existing powers.
2.5 See below.
Impediments
3.1 The barriers set out in the consultation document and those included in this response identify the major problems to be resolved in order to achieve analogue switchover. A key aspect, of course, is the open-standard idTV receiver and its cost, both in absolute terms and also relative to other digital hardware offers. It must be appreciated that whilst the industry is fully committed to digital TV and a competitive market, the cost of equipment depends on a number of external factors. One is the size of the market; economies of scale will apply both to the finished product and the components used. Potentially the market extends to the rest of Europe and internationally, depending on system harmonisation which is being facilitated by the DVB.
However, the manufacturing cost of an idTV as a mass market product can never be lower than the equivalent analogue receiver. This will also be the case after switchover when it will no longer be necessary to include an analogue front-end. The inherent additional costs of digital relate to extra processing and memory and interactivity (modem). Of course, this premium will reduce in time, but a factor that cannot be altered is IPR which adds a further estimated £33 to the retail price. Similar economic considerations apply to unsubsidized set-top boxes.
3.2 The consumer electronics industry has been a major contributor to the development of digital television and industry investment to date has been considerable. More sophisticated production techniques, allied with competition, have always driven down prices and this will be the case with digital receiving equipment. However, the industry cannot be expected to forego profitability in order for the government to be able to claim that cost is not a major barrier and there is no digital divide. The industry already faces severe economic conditions which have resulted in cut backs in manufacture and more severely in exports. The costs due to other factors which are being imposed, for example, by environmental regulation and extending consumer guarantees, already put into question the profitability of this industry, which operates in a highly competitive market in the UK. It is neither right nor fair for the government to expect industry to pay for government’s social policies, especially if the coincidental outcome may provide government revenue through spectrum auctioning.
3.3. Subsidy by broadcasters and service providers has given a major impetus to the development of the market but, equally it distorts competition. If the perceived cost of the subsidised set-top box is zero, and the consumer cost relates solely to additional pay services, then the expectation of the free-to-air only viewer is that product costs also should be zero.
3.4 A significant barrier to manufacturers entering the digital market is uncertainty. Since it is impossible to achieve all of the Government pre conditions, (unless the barriers identified in this consultation process are removed) then the time scale and eventual switchover are in question. In these circumstances, and particularly in light of the cost factors mentioned above (3.2), manufacturers must think very carefully before significantly investing further in development and manufacture of digital television receivers.
The consultation document identifies (Clause 15) the 40% to 50% of the population whose interest is primarily in free-to-air public service channels. That market is a vital incentive to manufacturers and it can only be exploited if additional free-to-air services, television and other, are sufficiently attractive.
A further factor, mentioned above (3.1) in attracting manufacturers to the market is the degree to which it has commonality with markets in Europe and elsewhere. It is therefore essential to maximise international harmonisation of product design, based upon open-standards that are multi-platform applicable or compatible, and that do not tie products to the services of specific vertical operators.
3.5 If the barriers are correctly identified, addressed co-operatively by all interested parties, and assuming that the resolution of these issues can be satisfactorily communicated to, and understood by the public, then switch-over is feasible within a decade. However, public confidence must have been established well within the first half of this decade so that there will be complete confidence when purchasing equipment. See also comment 3.8 and 9 below.
The central requirement is the availability of significantly attractive additional digital services. In the absence of these, the consumer of free-to-air receivers will always see the analogue receiver as the most inexpensive option. Whilst that market persists it will be satisfied by analogue products, even though these may be imported, unless there is some form of prohibition. In such circumstances the viability of switchover is an ever receding prospect.
3.7 The regulators must have sufficient powers, particularly with respect to extending terrestrial coverage and to ensuring interoperability and programme quality. It is for the regulators to consider whether they have sufficient powers, particularly in light of the European Commission’s proposals regarding a common regulatory framework for electronic communications.
Tight regulatory control is not required in most areas except as regards ensuring interoperability and ease of movement between digital platforms eg: satellite to terrestrial. Further powers may be required to ensure the necessary hardware compatibility as well as vigilance in exercising the existing powers.
If a new regulatory structure is to be proposed, this must maintain the experience and ability that has been demonstrated by the ITC. Furthermore, broadcasting must continue to be seen as a unique medium and not merely one technology in the generality of communications.
The draft EU Directive on copyright is likely to be adopted by the European Parliament by the end of 2000. The current text is a less than satisfactory compromise, which will do little for harmonization across the European Union and leaves much to be interpreted in implementation legislation by individual Member States.
Digital television brings a much broader range of services including interactive pay-per-view and video-on-demand; and new ways and technologies of recording are being developed.
It is important that government and industry establish working arrangements to address the complex issues which will bring increasing pressure on the means of interpreting copyright issues in light of the impending directive. Not to do so risks stalling the progress of digital television.
3.8, 9 Even assuming that all of the above mentioned barriers can be overcome, there are bound to be a significant number of viewers who for whatever reason will not have taken up digital by the switchover date. As stated above (3.5) the analogue option will, for them, remain the inexpensive option. If the inevitable cost differential, which at a minimum relates to IPR, is closed either through subsidy or tax breaks then it can be expected that the normal replacement cycle will ultimately complete digital take-up. If this process is to be further accelerated, analogue viewers will need to be provided with the incentive of free upgrades, the cost of which can only be met by commercial subsidy and tax breaks, both of which could be related to potential revenue from spectrum auctioning.
3.10 Clearly a whole variety of issues are raised above, and in the consultation paper, which may give rise to special measures. Further issues will, no doubt, arise out of the government development of its proposed Communications White Paper and the EU Commission activities on electronic communication regulation.
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