UK Digital Terrestrial Television Awards
ITV main looser in DTT award July 2002 By Tony Morbin

Now that the BBC-led consortium ' called Free To View', has been awarded the UK digital terrestrial television licence, (see News Archive, and further details below), its main rival among the six bidders, ITV, is facing increasing difficulties.

ITV in a consortium with Channel 4 had bid for the DTT licence despite having lost more than E1.5 billion in the failure of ITV Digital, the precursor DTT platform jointly owned by Carlton Communications and Granada. After dominating UK TV for some 20 years, ITV now finds its self third, after the BBC and BSkyB, without its own platform or digital route, and with limited resources. It faces declining advertising revenue, has been weakened by losses at ITV digital, and faces increasing competition from Channel Four, and to a lesser extent, Channel 5 and the proliferation of new channels which are also taking market share and advertising revenues. In addition, ITV's head of programming, the highly respected David Liddiment quit the previous day (Wednesday 3/7/02), following the earlier departure of ITV Chief Executive Stuart Prebble, adding to the company's woes. ITV's bidding partner Channel 4 also faces problems, and as it will now have to review the future of its loss-making FilmFour and E4 pay services.

While some commentators suggested the failed bid could delay a Carlton/Granada merger, Tony Ghee, analyst at Ashurst Morris Crisp, commented to advanced-television, "A merger of ITV is now inevitable. It may also then become more of a take-over target for some international conglomerate, but who is going to buy it that can do a better job? Liberty Media? Their expertise is not really in content. ITV is certainly in a difficult place. But the BBC is going to need ITV and Channel 4 content for its platform, including ITV 3, and particularly the ITV sports rights."

BBC Director General Greg Dyke commented, "We believe that a simple, entirely free-to-view digital option has the best chance of success with consumers," but he too has previously hinted that the corporation would still consider a premium pay option.

Both the Government and the regulator previously indicated that they favoured pay TV on the digital terrestrial platform, despite rejecting the ITV option which had a pay element. In addition, there are no technical constraints. Martin Bell, Director of Communications at the UK's Digital TV Group commented, "It a straightforward option to add conditional access at a later date; its easier and cheaper than the ITV Digital rout of subsidising boxes."

Ghee comments, "There is still the opportunity (for the BBC consortium) to add pay-TV later as an add-on - and given that BSkyB is supporting the BBC, they'll be able to get the content. But the subscription-only model didn't work with just 40 channels compared to 300, while the problem with pay per view is the limited capacity in terms of video streams. However, sport is largely a package product and most people have to buy the channel to get what they want - which will put Sky in the position of deciding what it is prepared to do. But its still better to have Sky inside your tent facing out, than the alternative... "

However, this does put BSkyB in the position of being able to control the roll out of pay TV on DTT. But as long as it is not seen as competing with the satellite operation, then BSkyB could well want to increase its involvement, selling the offer itself, providing access, delivering customer services and encryption. One potential disincentive for the BBC to provide a pay option is that a less 'public service oriented' government could decide that the BBC ought to start charging for its digital channels rather than 'subsidising them at the taxpayers expense,' an argument likely to be supported by the commercial broadcasters.

Although the current award by the ITC stipulates that BSkyB may supply the three channels named in the application on Multiplex C but may not manage a multiplex, there will be a change of regulator (to Ofcom) in the next year or two who could take a different view.

Rival bids were made by ITV and Channel 4 with pay-TV operator Freeview Plus; Digital Television Broadcasting (DTB), backed by venture capital firm Apax Partners, and from SDN, led by United Business Media and the cable television operator NTL. Ghee commented that the SDN/NTL option of an open access platform would still have the problem - from the regulator's point of view - of what would be shown on it? And also, what incentive would there be to market the specific content.

Ghee concurred with industry sentiment that the BBC award "Was the only one to choose. It's a trusted brand with quality content, and has the ability to explain the premise of digital to its terrestrial viewers in cross promotion." But he added the rider that market dominance and use of tax payers money (the licence fee) to fund commercial ventures will become increasingly important issues for the future.

Strictly, the conditional DTT awards made yesterday were for Multiplex Service Licence B to the BBC and Multiplex Service Licences C and D to Crown Castle.

A statement from the regulator said, "The ITC considered carefully all the applications received but decided that the BBC/Crown Castle applications were best suited to achieving the required objective." That objective being facilitating the government's planned 2006 to 2010 timetable for switch off of analogue by encouraging uptake of digital TV. Sir Robin Biggam, Chairman of the ITC, noted how the BBC bid would, "target those viewers who have not been so far attracted by digital TV and will help facilitate the move towards digital switchover."

One particular aspect of the bid which impressed the ITC was the BBC's marketing strategy for the whole DTT platform, reported to amount to some E30 million - its biggest ever marketing campaign - with extensive cross promotion on terrestrial TV. The proposed establishment of 'ServicesCo' a new not-for-profit company which will pool the resources of the BBC, Crown Castle and BSkyB to market the platform was viewed particularly favourably, as were the BBC and Crown Castle's undertakings to offer participation to other multiplex operators so that the DTT platform can be marketed as a whole.

Subject to these conditions (see table), the 12 year licence is expected to be granted by the end of July, with the service up and running within months.

The programme line-up is set to include the five existing terrestrial channels, all the BBC's digital channels, (BBC Choice, BBC Four, BBC News 24, CBBC, CBeebies and BBC Parliament), a new BBC Channel, BBC History, children's television channel Boomerang, and a new channel from UKTV. ITV 1, ITV2, Channels 4 and 5, Sky, Sky News, Sky Sports News and Sky Travel, CNN, ITN News Channel, QVC and an as yet unnamed music channel are included. BBC interactive channels will be added when they become available, and the BBC's six digital radio stations can also be accessed from the system. A BSkyB spokesman was quoted as saying, "By contributing three Sky channels to the DTT platform, we look forward to participating in a strong and diverse line-up of free-to-air services."

Viewers can buy a E150 digital adaptor, use the old ITV Digital boxes (which are officially owned by the ITV Digital liquidator, but likely to prove uneconomic to collect), or an integrated digitial television set.

Of the six bids for the DTT licence, five proposed a change to the 16 QAM transmission mode. Martin Bell, Director of Communications at the UK's Digital TV Group explained how his organisation had made the recommendation that 16 QAM mode 3/4 was used as this would provide the highest quality to the maximum number of viewers. This was as a result of an initiative by the DTG to conduct 'live, home reception tests,' the first time this had ever been done, taking advantage of the three multiplexes on the Crystal Palace masts that were vacated when ITV Digital went off the air. In cooperation with Crown Castle, NTL broadcast, the BBC and a range of manufacturers, the tests were completed by mid June.

The tests showed the 16 QAM system to be much more robust, with impulsive noise interference greatly reduced - and for totally eliminated for many recipients. Consequently the ITC is now supporting a change the technical specification for DTT to 16 QAM in time for the launch of the new services.

The system is described by Bell as, "Not so much extending, as deepening the signal. It reduces capacity from 24 MB to 18MB but makes the signal stronger."

In addition an equalisation programme has started in which the power levels of the C and D multiplexes is being doubled to bring them into line with the others. So far five transmitters have had their power doubled - an increase of 3dB. Bell explains, "Initially the power level for DTT was set at 100th of the equivalent used by analogue, so as to avoid interference with the analogue receivers, but this turned out to be over cautious. We predict the change will mean that the number of viewers able to receive the DTT signal over their existing aerial will increase from 40 per cent to 60 per cent of the population, and the numbers able to receive it with a new aerial will increase from 60 to 80 per cent."

The balance between strength of signal and extent of reception are in inverse proportion to each other, so robustness can be traded for capacity. ITV Digital chose capacity to compete with BSkyB - while at the other extreme there are systems in Germany which can receive a strong signal in a car going at 150 MPH, but only carry a couple of services. The number of services an operator chooses is thus a business decision on the part of the operator, including assessments of the level of quality that the viewers will tolerate.

The BBC says its proposed line up is less than the previous 36-channel service provided by ITV Digital to ensure better quality reception. Peter Abery, President and Managing Director of Crown Castle, has pledged to get the digital terrestrial platform up and running quickly, "free from the technical problems that dogged ITV Digital."