1. DTT Policy in the UK –
Regulating Broadcasting and Telecommunications: Intermediate Course,
London School of Economics
Julian McGougan, Group Strategy, 6 September 2012
julian.mcgougan@arqiva.com
IM2442.5
2. Disclaimer
Opinions expressed are personal and
may not be those of Arqiva.
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3. The UK Public Service television landscape
Unlike many countries, the UK benefits from a range of PSBs, whose public service
obligations varied considerably.
Also some PSBs are regionalised (for programming and/or advertising).
This PSB landscape influenced the network topology (technical and spectrum
planning) for the DTT multiplexes:
Television Government Government Advertising and
Licence (no grant (no grant and Sponsorship
advertising) advertising) Advertising
Publicly owned BBC TeleG (Scotland S4C (Wales only) Channel 4
only)
Privately owned ITV
Channel 5
Teletext
All analogue terrestrial services were PSBs.
Channel 4 was created to give a boost to independent producers (Channel 4 is prohibited
from having in-house production) and to broadcast programming catering for tastes not
catered for by the existing broadcasters. Originally ITV sold Channel 4’s advertising.
Channel 5 was created to provide greater choice to advertisers (and therefore to act as a
constraint on ITV’s slot prices).
3 Prior to the launch of DTT about 80% of homes could receive all 5 services, but about 20% of
homes couldn’t receive Channel 5.
4. The policy goals of licensing DTT multiplexes
Each multiplex had to launch at 81 transmitter sites selected by the regulator,
mostly on the grounds of population served, but a few sites were selected on
political grounds.
For interoperability (and to minimise consumer confusion) all DTT broadcasts
had to use the same technology –
the DVB-T transmission standard, the 64QAM 2k broadcast mode (at the
suggestion of the BBC – this would prove disastrous) and MPEG-2
coding.
The platform should offer a diverse range of channels (a balance of Free-To-
Air and pay-TV) deemed likely to be attractive to consumers.
Legislation reserved “gifted capacity” for PSB services –
to guarantee their presence
to encourage the PSBs to invest in new, digital-only services.
Strong pay-TV operator (ONdigital) was needed to market the DTT platform
because pay was likely to be the only mass market means of obtaining DTT –
The first unsubsidised Set Top Boxes (STBs) only became available in 2002
The first integrated digital television (idTVs) were very expensive.
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5. Awarding spectrum for DTT
Spectrum wasn’t auctioned in the UK before 2000, so the spectrum for each DTT
multiplex was awarded by comparative selection (“beauty contest”).
Although regional franchises for the ITV commercial PSB were auctioned in 1991,
programme commitments and financial viability were also criteria for award.
In any event, there was considerable risk in launching a new platform when
research showed that:
Most consumers were content with the analogue PSBs
Those consumers who wanted to pay extra for pay channels were already well served by
Sky (almost 100% coverage) and cable (about 50% coverage).
In addition:
Multiplex licences would come with launch coverage obligations
Universal coverage could never be achieved until analogue TV was switched off – and
who knew how long that might take?
The regulator would have a say in the service line-up.
So even if auctions had been the default method of awarding spectrum in 1997-98,
arguably beauty contests may have been adopted for these multiplexes anyway.
The BBCs multiplex was awarded directly by the Government and is
unlicensed.
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6. The 6 DTT multiplexes at launch in 1998
As with analogue, all spectrum was shared by DTT multiplexes – no multiplex had exclusive spectrum.
The 2 PSB multiplexes (“1” and “2”) received spectrum preference to ensure that they had the highest coverage.
The resulting differential coverage meant that ONdigital (the pay-TV operator) effectively only marketed the DTT
platform line-up to consumers who could receive all 6 multiplexes.
Service type Specific Licence Obligations
Mux Licensee Expiry date Regionalised Free- Pay Gifted capacity Coverage Fair,
multiplex? to-air (81 Reasonable &
(FTA) transmitters) Non-
Discriminatory
(FRND)
1 BBC No expiry – √ √ N/A √ X
UNLICENSED
2 ITV/ 2010 √ √ 48% ITV √ X
Channel 4 48% Channel 4
4% Teletext
A S4C-led 2010 √ √ √ 50% S4C (Wales only) √ √
consortium 50% Channel 5
TeleG (Scotland only)
B ONdigital 2010 X √ √ X
C ONdigital 2010 X √ √ X
D ONdigital 2010 X √ √ X
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7. The DTT multiplexes: 10 years of evolving
Launch of Freeview - October 2002 The UK DTT platform today
Low power alongside analogue High power - analogue switched off
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Key:
Free-To-Air services
Pay-TV services
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Multiplex payload (Mbit/s)
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10
Multiplex name 1 2 A B C D 1 2 3 4 5 6
Modulation scheme 16QAM 64QAM 64QAM 16QAM 16QAM 16QAM 64QAM 64QAM 256QAM 64QAM 64QAM 64QAM
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Transmission standard DVB-T DVB-T DVB-T DVB-T DVB-T DVB-T DVB-T DVB-T DVB-T2 DVB-T DVB-T DVB-T
8. Simplified layers of regulation for DTT
Originating Service Key obligations How enforced As part of the current Communications Bill
Regulation Layer process, the Government is considering
Multiplex Technical standards Licence whether the separate broadcast layer of
Offer bandwidth on FRND terms regulation is still required.
Gifted capacity
Service line-up (wide and diverse etc)
While it is highly unlikely that service
licences would be abolished, this process
Broadcasting Act
Service "Fit and Proper Person" Licence
Programme standards - does provide an opportunity to ask: is a
Child Protection/Watershed
multiplex licence still needed?
Harm and Offence
Editorial integrity
Fairness, Impartiality, Privacy For multiplex licensees, currently:
Programming formats Ofcom prescribes the technology –
Independent production quota
Only DVB-T/MPEG-2 or DVB-T2/MPEG-
"Listed Events"
4 for DTT (and Ofcom has a veto over
Out-of-London production quota (PSBs)
FEC changes)
Access Services (subtitling, signing)
Ofcom has to be consulted on changes to
service line-up.
Wireless Spectrum Location Licence (currently
Telegraphy (where Technical Licence Conditions cannot fine for
Neither mux 1 (BBC) nor mux 2 (ITV/C4)
face a requirement to offer bandwidth on
Act relevant) Antenna height and pattern breaches - revocation
Fair, Reasonable & Non-Discriminatory
the only penalty)
Terms – so why do multiplexes 4, 5 & 6?
No multiplex licences are proposed for any
new DTT multiplexes.
There’s no equivalent licence for satellite
8 transponders.
9. Awarding spectrum in the UK
Most spectrum which is now in private hands was awarded by administrative allocation (i.e. not by
auction), for a specific use or technology, and the licence wasn’t tradable.
In recent years Ofcom has been making spectrum licences tradable and technology-neutral, however:
to minimise interference, there are restrictions on the characteristics of alternative technologies which
could be deployed
the secondary market for spectrum remains illiquid and most private demand for spectrum continues to be
met by Ofcom.
So far, virtually all broadcast service licences have been awarded by “beauty contest” (administrative
allocation by comparative selection), as have all multiplex licences.
However Ofcom is now considering, if there are to be additional DTT multiplexes, how their spectrum
requirements should be awarded.
Very few spectrum auctions have actually been completed in the UK so far:
Minimum UK-wide Auction proceeds
Spectrum band Auction Date licence term licences? Number of licensees (US $ m) Current use
2.1 GHz April 2000 20 5 35,345.9 3G
28 GHz Nov 2000 15 6 54.4 None
1.8 GHz
(DECT guard band) April 2006 10 12 (shared) 6.8 2G (in-building)
412 MHz Oct 2006 15 1 (Arqiva) 2.8 Public safety
1.8 GHz May 2007 15 1 0.7 ?
(plus some
10 – 40 GHz Feb 2008 15 regional) 10 (inc. Arqiva) 2.8 Backhaul
None (mobile data
1.5 GHz (L-Band) May 2008 15 1 16.2 downlink likely)
9 DDR (local TV) Jan 2009 16 2 0.0 None
10. Spectrum auctions (1)
Supported (finally) by the European Commission, market mechanisms
(essentially auctions) are now the default method of spectrum release.
Regulators are unlikely to know better than the market what the optimal use of
spectrum might be
An auction of technology-neutral and service-neutral spectrum licences enables
spectrum to be clearly awarded to the uses with the highest value
If a service fails, a licensee can sell the spectrum or launch something else.
Ofcom’s current preferred auction model is the combinatorial clock auction
(which Ofcom has endlessly perfected), which has distinct advantages to
bidders when there are a range of different (i.e. not homogeneous
packages) of spectrum on offer -
The Supplementary Round enables bidders to submit bids for every
combination of spectrum which they would be willing to be awarded.
No Aggregation risk
Minimises the likelihood that any spectrum is left unsold.
Most successful bids are actually a result of the Supplementary Round.
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11. Spectrum auctions (2)
All auction proceeds must be passed by Ofcom to the Treasury.
Maximising proceeds isn’t an auction objective for Ofcom beyond the role of maximum
total bid price determining the allocation
Current auctions adopt the Second Price Rule to avoid the “winner’s curse”.
It is currently not easy to –
Offer incentives to evict lower value uses from spectrum
Set up procedures to mitigate anticipated interference.
Pay for, or subsidise, replacement equipment.
The Government is considering how to improve that.
All registered bidders lodge funds with Ofcom prior to the start of the auction,
designed to cover bids for the first few rounds.
Ofcom will then require top-ups of funds on deposit as bidding escalates.
Licences must be paid for in full (which may require a final payment after bidding
stops from winning bidders) before they are granted.
Licences don’t have to be granted immediately (for example, to allow time for a network
to be built prior to commercial launch).
Ofcom refunds to bidders any excess funds on deposit a few days after the end of
an auction.
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12. Determining market value of spectrum
The value determined by bidders is affected by a range of factors:
The timing of spectrum availability (not necessarily the same thing as the timing of the
auction).
How restrictive the Technical Licence Conditions are (to avoid interference into neighbouring
spectrum users, licences cannot be strictly technology-neutral).
The spectrum Band Plan.
Spectrum packaging.
Equipment availability, a function of –
international standardisation
release timing (ideally bidders want equipment available from multiple suppliers, with known
costs and performance before they bid for spectrum).
Financial terms (permitting payments to be spread will tend to increase proceeds, but carries
a risk – as the U.S has discovered).
Policy objectives e.g. -
Coverage obligations
Access obligations (FRND, roaming, MVNO etc)
Favoured types of bidder (as the U.S has experimented with – not always successfully).
Restrictions on spectrum trading or leasing.
Minimum licence terms (and the prospect of licence extension).
Plus, never under-estimate bidders’ willingness to exceed their determined maximum
value if they see competitors bidding more.
Reserve prices are usually set to discourage frivolous bidding (as is the requirement
that bidders must be companies, not individuals), rather than to signal anticipated
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proceeds.
13. Awarding spectrum for DTT multiplexes
The market value for multiplex licences at the launch of a DTT platform will be
affected by:
Minimum licence term (over which the necessary heavy investment in the transmission
network will be amortised)
Potential for new, competing multiplexes to be awarded.
Perception of competitive threats to future income.
Emerging consumer preference for HDTV (and then 4k), which DTT will tend to be less
able to offer than other linear platforms.
Competitive threats to linear broadcast platforms:
IPTV
2nd screen.
DTT will be arguably be more vulnerable to these threats than other linear platforms
which offer a greater range of services (and, in the case of cable, also offer a return
path).
In addition, DTT’s access to spectrum is threatened by –
Mobile broadband
White Space devices.
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14. Linear television is far from dead
In recent years, too many industry experts have forecast the imminent death of
traditional linear television based on a combination of what new technology can do
and how early adopters use those technologies.
But early adopters are not indicative of the majority of consumers.
Familiarity is a major determinant of usage.
Brands also matter – and major broadcasters often have the kind of brand value
which disruptive new entrants would kill to have.
Every day in the UK there are 52 hours of first-run programmes on the PSB channels
alone (source: Deloitte).
The consumer desire for easy access to lots of “lean back” entertainment isn’t going
away.
So despite all of the competing devices and services clamouring for attention, in the
UK television –
Still has a weekly reach of about 95% of the population aged >4
And still serves up 49 measured ads per viewer per day (source: Deloitte).
And television remains the most trusted source of news.
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15. The threat of IPTV
IPTV is currently all about catch-up TV, not true VOD.
Watching programmes commissioned for, and already broadcast by, linear
TV.
The convenience of Connected TV (that is, where consumers have actually
connected them) offering IPTV on the same display, without the need for
consumers to use a 2nd device, will drive take-up, but –
Many displays capable of being connected aren’t connected.
Manufacturers' desire to offer proprietary app stores, and minimise the role of
broadcasters, acts as a drag on usage of those displays actually connected.
The direction of travel may be clear, but for now IPTV is used principally as
a modern replacement for VHS tapes.
So arguably more of a threat to the PVR/DVR (in >50% of UK homes) than
to DTT.
Although “+1” channels will probably lose much of their purpose.
In the UK, the PSBs drove the recent launch of YouView to ensure that the
15 demand for IPTV from DTT users stays within the DTT ecosystem.
16. But how much of a threat to broadcast is IPTV?
Despite consumer familiarity with PVRs, with plenty of time to then change their content selection priorities, they largely
haven’t:
Linear remains the default, with storage – and then cloud – as the fallback when schedules disappoint.
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17. Obstacles which delay IPTV truly challenging broadcast
How universally available is broadband?
How fast, and reliable, in peak hours is broadband?
How much investment has been made in multicast technology?
How affordable is broadband?
Unlike Free-To-Air DTT, IPTV is never truly free.
Does the average broadband subscription have data caps so low that a
household’s average viewing, if all IP, would result in financial penalties?
Have rightsholders made available the most popular programmes on terms
which make IPTV a substitute for broadcast?
Not every rightsholder is ready to acquire a direct relationship with consumers.
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18. The threat of 2nd screens
At least for the most advertiser-friendly audiences, this is the future of TV
consumption:
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Source (this slide & the next two): Viaccess-orca, 2012.
20. 2nd screen is both threat and opportunity
The 3rd, 5th and 6th (possibly the 4th, too) activities below suggest that this is
an audience waiting to be engaged by broadcasters…
…or a “parasitic” 3rd party which gets there first.
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21. 2nd screening is more about talking about programmes than
interacting with them
Frequency of communication in the UK via messaging, email, Facebook & Twitter about the TV
programmes being watched:
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22. 2nd screen is both threat and opportunity
Some broadcasters are getting spooked by 2nd screens
But there have always been distractions for viewers, it’s just that when
those distractions are connected they are measurable.
So are 2nd screens going to become more engaging for viewers than
magazines, books, newspapers, conversation and food have always been?
2nd screens add the return path which DTT and satellite usually don’t
have.
2nd screens can effectively increase advertising beyond the constraints of
regulated broadcast ad minutage.
There is a range of programme-related information which broadcasters are
in the best position to provide:
Cast, locations, theme & incidental music (with click to iTunes to
purchase?).
If broadcasters don’t assist the communication about the programmes they
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transmit – someone else will.
23. The spectrum threat: how much will DTT be left with?
The UHF spectrum principally used by DTT has good propagation
characteristics, it –
covers long distances
bends around hills and buildings
goes through walls (for good in-building coverage).
Those characteristics also make this spectrum attractive for mobile
broadband use, which was accorded “co-primary” status for this spectrum by
the ITU at WRC-07 (for 800 MHz) and now WRC-12 (for 700 MHz).
Despite the fact that the demand which mobile (i.e. cellular) operators are finding
hard to meet is for urban/suburban capacity, not suburban/rural coverage.
The challenge is to re-plan DTT to:
make more efficient use of spectrum
increase DTT capacity to enable the launch of more HD services
clear more spectrum for future mobile demand.
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24. More DTT and more mobile, too?
Stage 1: Pre-Digital Switch-Over (DSO)
Television: 5 analogue services + 6 DTT multiplexes
21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69
Radar Radioastronomy PMSE
Stage 2: Post-DSO - 2012
DTT: 6 multiplexes
21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69
600 MHz cleared for re-use PMSE
Stage 3: Post-DSO clearing DTT from Channels 61 & 62 and auctioning 800 MHz - 2013/14
DTT: 6 national multiplexes + local TV + "white space devices" 800 MHz LTE "4G"
21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69
600 MHz cleared for re-use PMSE
Potential Stage 4: 6 existing DTT multiplexes re-planned to make more efficient use of spectrum
+ 2 new multiplexes + clear more spectrum for mobile ("700 MHz") to be auctioned later
DTT: 8 national multiplexes + local TV + "white space devices" 800 MHz LTE "4G"
21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69
PMSE 700 MHz cleared for mobile broadband
Notes on the above:
(i) Numbers in diagrams above are television Channel numbers (each 8 MHz)
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(ii) Number of national multiplexes shown in Stage 4 is indicative only of the additional capacity (with required regionality) which might be required to secure a solid, sustainable
future for the DTT platform and to maintain vigorous inter-platform competition.