Dispute between SDN Limited and Channel Five Broadcasting in relation to the charges payable to SDN for the use of guaranteed capacity on Multiplex A

13 September 2005

Complainant: SDN Limited ("SDN").
Complaint against: Channel Five Broadcasting Ltd ("Five")
Case opened: 5 October 2004
Case closed: 31 May 2005
Relevant Instruments: Condition 7(2) of the Licence granted to SDN under the 1996 Broadcasting Act and the general powers conferred on Ofcom under Section 1 of the Communications Act 2003.
For the avoidance of doubt, Ofcom does not consider this determination as falling within Section 185 of the Communications Act 2003.
Issue: Condition 7(2) of the Licence granted by Ofcom to SDN under the 1996 Broadcasting Act sets out that payments from Five to SDN for the multiplex services are those which "are from time to time agreed between [Five] and the licensee or (in default of agreement) determined by Ofcom."

On 31st May 2005 Ofcom issued a Determination under Condition 7(2) of the Licence granted to SDN under the 1996 Broadcasting Act resolving this dispute. Ofcom will not be publishing the Determination for reasons of commercial sensitivity and confidentiality. However, a non-confidential summary has been prepared and is now available. Please see the link at the bottom of this page.

Ofcom Contact: Jonathan Porter, Principal Economic Adviser (e-mail: Jonathan.Porter@ofcom.org.uk)
Project ref: C1-10-15

Text published when the case was opened

Dispute between SDN Limited and Channel Five Broadcasting in relation to the charges payable to SDN for the use of guaranteed capacity on Multiplex A

Complainant: SDN Limited ("SDN").
Complaint against: Channel Five Broadcasting Ltd ("Five")
Case opened: 5th October 2004
Relevant Instruments: Condition 7(2) of the Licence granted to SDN under the 1996 Broadcasting Act and the general powers conferred on Ofcom under Section 1 of the Communications Act 2003.

For the avoidance of doubt, Ofcom does not consider this determination as falling within Section 185 of the Communications Act 2003.

Issue
Condition 7(2) of the Licence granted by Ofcom to SDN under the 1996 Broadcasting Act sets out that payments from Five to SDN for the multiplex services are those which "are from time to time agreed between [Five] and the licensee or (in default of agreement) determined by Ofcom. "

As a result of a failure to agree commercial terms, SDN have submitted a request that Ofcom intervene to determine the charges payable by Five to SDN.

Background
In 1998 the ITC was asked by SDN and Five to determine the price to be paid by Five to SDN for the use of the former's guaranteed capacity on Multiplex A. At the time the ITC decided that since the spectrum was a valuable resource, Five should pay a "commercial" price which would "reflect the value of the capacity to the multiplex operator". However, given that this was in the early stage of the development of digital terrestrial transmission (DTT) and that there was uncertainty about the financial projections used to determine the value of the guaranteed capacity, the ITC recommended that the charges be reviewed after a period of time when there was a better understanding of the emerging market and its future potential.

Current contractual arrangements between the parties provide that the charges payable by Five to SDN are to be line with the ITC's 1998 Determination but the parties would endeavour to agree to new pricing to take effect from 1st February 2004.

SDN and Five have had negotiations over the level of charges that Five should pay going forward but have not been able to resolve the matter. In default of an agreement, SDN has requested that Ofcom should now determine the charges that are payable by Five.

Scope:
Ofcom will make a determination which covers:

  1. the base price payable by Five to SDN for the provision of multiplex services for the period of 12-months commencing on 1st February 2004.
  2. The appropriate mechanism which should be used to adjust the base price determined in (a) in each successive 12-month period commencing on 1st February 2005.
  3. Ofcom expects the parties to make any payment adjustments between them that may be required as a result of its determination so as to give effect to the determination from 1st February 2004.
Ofcom does not intend the determination to cover:
  1. The level of "Additional Charges" payable by Five to SDN where Additional Charges are defined in the current agreement between Five and SDN.
  2. Whether Ofcom will amend the determination at some point in the futures on the basis of a material change in circumstances. Ofcom does not propose that its determination should be re-opened in future.

Submission of comments:
Stakeholders interested in the outcome of this determination should notify Ofcom by 29th November 2004.

Any submissions/representations on the matter of the determination should also reach Ofcom by 29th November 2004.

Ofcom Contact: Jonathan Porter, Principal Economic Adviser ( e-mail: Jonathan.Porter@ofcom.org.uk)
Project ref: C1-10-15