Barry Cox. Chairman, Digital Stakeholders group
For Digital News April 2002.
By Kate Bulkley
As digital TV enters a most critical period in the UK, one man will have a key role in ensuring that the present crisis surrounding the demise of ITV Digital pay DTT platform doesnít completely wreck the industry's and the government's long term digital strategy. This interview with Kate took place a few days before ITV Digital went into administration in April 2002.
Q. The position is Chairman of the Digital Stakeholders Group and the press calls you the Digital Tsar. What is your role?
A. I am a 'high level liaison'. It is helpful to have somebody who isn't partisan, someone who isn't an active player to move between the different parties and take forward issues. Now, there are examples where that is already happening and to that extent high level liaison is an accurate description. Also Marcus Coleman (from PA Consulting), who is working with me, is trying to work with the project team directly to carry forward very specific project proposals and ideas
Q. Like what?
A. I can give you a very small example. The broadcasters were very unhappy about being excluded from the task force on spectrum planning so I helped get that resolved. They were offered a service status and I persuaded them that this was a good idea.
Q. So what are the big issues that you see that need resolving to get digital switchover to happen in the government's timeframe of 2006 to 2010?
A. One of the issues that I see as central is spectrum planning. We very much need the government to make clear which frequencies we should allocate to DTT on the way to achieving analogue switch-off as well as what it will be after analogue switch-off. The amount of frequency now is not enough to get us to switch-over. That only gets us to --and there is a dispute about the precise level-- but possibly 90% of the population for the public service multiplexes. There are also the questions of power levels and equalisation. What we do know is that under the current plan there would be a significant number of households that would only be able to get to switchover through satellite. That may be the outcome that is in the end agreed. But it certainly isnít agreed yet and we need a plan and an agreement in place so that the DTT build timetable can be completed.
Q. So this plan is especially about getting the DTT frequencies for non-BCC channels sorted out?
A. The BBC, or the public service multiplexes, have frequencies allocated to them at the moment and the coverage is fairly high but it less than 90% on the present basis. And you could say okay that's it that's what we will do and those not in the coverage area will have to get their digital in another way i.e. primarily through satellite. But that is not the government's position at the moment and the consultation currently underway is designed to help the government arrive at a decision about this. The problem is that while this is all being done very rationally, it is all taking time and in the meantime a lot of (other) issues for DTT are stalled. People are not willing to make investments until they can see the final plan. I am doing my best to try and speed up the process.
Q. Where are we with this now? Who needs a push? Does the government need to understand its options better?
A. The government absolutely understands it, but it has quite difficult decisions it has to make for instance how many of the current analogue frequencies does it wish to take away from TV and either hold back for other uses, most obviously mobile phones, that is a difficult issue. There is also a dispute about if TV should retain more of frequencies. I donít think the government has to decide now what they want to use the spectrum for, but what they do have to decide is how many they wish to reserve for potential other uses and where they are in the spectrum. The arguments are about which are the most sensible places to take these frequencies from. Now the ITC and the BBC have common views on this, which is useful and I hope that government will accept them.
Q. How do you think the frequencies should be allocated?
A. I think that the proposals coming from the ITC and the BBC offer a good basis on which to go forward. These would release back a number of (the 44 UHF) channels to the government for it to then decide what it wants to do with them. And they would accept and say that it is crucial to use some of the analogue frequencies to help digital switchover and there are implications there in terms of how the plan rolls out. Both of these seem to me to be entirely sensible approaches and I hope the government will accept them at least in part and if they do, fairly quickly, because then we can all get on with it.
Q. So what is the big stumbling block to getting this spectrum allocation plan to happen?
A. The stumbling blocks are you have to take a punt on what these things are going to be worth in the future, what the value is going to be. When we started this exercise two years ago it was in the middle of the dot com bubble and everyone thought that these frequencies were going to all be worth a massive fortune. Now of course we are not in the dot com bubble anymore and people are rather more sceptical about what these extra frequencies are going to be worth. There is all kinds of complex modeling going on inside the government about what all these frequencies might be worth. But of course there are also all kinds of technical issues too. We started off with DTT using a fill in process, using the buffer frequencies that are there to stop interference between analogue channels. That is a clever and ingenious way of doing it, but it is not the most cost effective and efficient way of delivering a final digital plan. The extent that one rolls back on the current plan and reconfigures it to get the optimal outcome in a fully digital era is one of the issues at stake. And you add to that what is the cost to broadcasters and viewers of making that happen. So there is quite a lot of complex stuff to be worked out which is why it is taking some time.
Q. Do you think that if the government starts realising that they are not going to get the kind of big money they got in the auction of 3G mobile frequencies that they might change their mind on DTT?
A. (Enhancing the treasury) is not the only reason for switching off analogue TV. Donít forget they have a Broadband Britain strategy of us all being digital and this is an element as well.
Q. So in terms of the frequency allocation plan, where do the commercial players fit into all of this?
A. The commercial broadcasters have a difficulty as to how much of an extension of DTT are they willing to subsidise or, better said, to finance. There are significant investments to be made and they have difficult calculations to be made on that front as well. So although I am saying the government needs to make a decision (about frequencies), so in a way do the broadcasters need to say how much they are prepared to invest. This frequency allocation exercise will reveal that. I go on about it because I think by the end of March it will be clear after consultation process what the industry thinks, but the government is giving itself another 6 months --or more than that probably-- before it decides what it is going to do. But I think the government can make some interim decisions well before that and that is what I am trying to get them to do.
Q. How about the financial difficulties at ITV Digital? This certainly will impact what role the two biggest ITV players, Granada and Carlton, are going to have in DTT going forward?
A. Well one can hardly ignore these problems! To be honest I'm not and I canít be and shouldn't be directly involved in this but you're right, whatever happens (with ITV Digital) will have a significant impact on the roll out of DTT. I will have to wait and see like everyone else.
Q. But will the closure of the pay TV part of DTT, which is ITV Digital, delay or even mortally wound the DTT roll out plan?
A. It will most certainly delay the roll out of DTT. What is does more than that is a bit difficult to say. I think all the signs are that the government and all the broadcasters including ITV as opposed to ITV Digital still see a real value in DTT and want to roll it out. But the real difficulty is to what extent does DTT remain a pay platform? And there is a division among the broadcasters about that. I think the BBC isnít really bothered if it remains a pay platform, but Channel 4 and the ITV companies would very much wish it to remain a pay platform. Channel 4 has two pay services on it, giving it significant revenues. So the broadcasters themselves are divided and I think that this is one of the complicating issues. Leaving aside the legalities of what the ITC will have to do it if ITV Digital hands back its licenses, and the process of re-licensing that would then unfold, it is very obvious that the closure of ITV Digital would delay DTT. Whether it does anything more significant I am not willing to speculate on.
Q. Some people say maybe we should just let Sky run the pay TV part of the DTT platform or maybe even let them market the whole thing. The idea being to give one group with a lot of expertise in pay TV and a lot of marketing saavy control of this, rather than depending on the open-access model that we seem to have now. I know there are some concerns here about giving Sky too much control, but certainly the fact that the government blocked Sky from being a partner in the original ITV Digital partnership is now seen as having contributed to the weakness of that service and to the overall slow take-up of DTT. So in your view, what role is there for Sky?
A. It really doesnít matter what I think. What is very clear is that the government and the other broadcasters are very concerned about the dominance that Sky already has in pay TV being further enhanced. There are very real competition issues here. It may happen by default because no one can come up with a better proposal, but certainly at the moment most of people outside of Sky are anxious to avoid it. Whether they can or not, we'll see.
Q. What role do Sky and the cable operators have in all this? Is it basically their role is to pick up the digital slack, or the connections that canít be done via DTT?
A. No, they already have a role and a very active role. Sky has far more digital TV viewers than anyone else. They have led the digital charge. So it is not a question of giving them a role, they have got a role. They've grabbed a role and are going with it. Clearly they will continue to do that. The cable operators haven't progressed as fast as they wanted to or as fast as others expected and now less so with the (financial) difficulties they've got. But over the next few years Sky and digital cable will take over a significant chunk of the digital market and are an absolutely vital element in the switchover. But in a way that is the easy bit because their whole commercial focus is on doing that. There are some issues like planning restrictions which are a problem but essentially they can get on with their business and that in itself will help switchover. The real urgent problems at the moment are in the DTT are.
Q. Many are saying that a very important part of all this is the cheap, free-to-air DTT box, perhaps it's THE way forward?
A. I donít know if it is THE way forward, it is certainly a very important in the ultimate solution to this, in the switchover. It is obviously necessary and highly desirable to have low-cost --I donít like the word cheap-- free-to-air boxes. They are a vital element because they will encourage people who either donít want to buy integrated digital TVs or don't want to become pay TV subscribers to go digital, which is a significant step. But they are important longer term as well because given that most households in this country have more than one TV, if we are going to achieve switchover effectively then all these bits of kit need to become digital, so people don't have redundant equipment. Therefore low cost adapters are important for those second, third and fourth TV sets and for the VCRs. I see these free-to-air boxes that will emerge this summer as the forerunner for that.
Q. BBC CEO Greg Dyke says that maybe 2 million homes will have an appetite for the free-to-air boxes. Counting the digital inroads made by Sky and Cable and ITV Digital, even with 2 million more from the sale of low cost boxes, we are still falling short of all of the UK. So will there need to be some other kind of subsidy to get the rest of the population to switch?
A. I think that the other element in all this is when you go to buy a TV set and you automatically pump for a digital one. I think there were 6 million TV sets sold last year but the vast majority were analogue. This is rather odd but of course we know why, it's because there arenít enough of them and they ones that are there are at a premium price. Do I think that irrespective of what happens with free to air boxes, the other important element is the dTV that is at the same price or equivalent to the analogue one. Now that isn't going to happen this year or next year, but I hope it will happen within a few years. When that happens we will be well on the way to switchover.
Q. I agree that if everyone buys a dTV it will help a lot but it boils down to what people think they are getting that is all that new or better on digital. So besides better sound and a digital picture, it comes down to content which brings us back to some of the discussion about new channels.
A. Yes, of course one of the reasons for buying the free to air box or any multi-channel service is for the new channels. Notably ITV2 and I personally think BBC 4 is a rather splendid service, me and the southern white educated middle classes that (BBC Chairman) Gavyn Davies was criticising the other dayÖ There are good new services which I think are attractive across a range of tastes, like the children's stuff, which I haven't watched, and the 24 hour news channels and all the rest of it. So there is clearly already a significant element of content that is not all new but that people are becoming aware of like the digital BBC channels that have been re-positioned and are now far more vigorous in the way ITV2 is. I think that these are positive developments and what lies behind Greg's figure of 2 million boxes. Yes new content is very important at this stage. But in the long term there will be other reasons for buying a digital set: the whole wide screen thing, the interactivity element. So I donít know if we need a vast number of new free to air services to be sitting there as an attraction. It's important that we have some of them and we've got some of them, and it would be nice to have a few more and perhaps we'll get a few more but there will be limits to how far that can go and to how much that can be a factor leading towards switchover. Content yes is important, but it is not the crucial, vital, all-embracing thing that I think some people think it is.
Q. The government is having second thoughts about authorising BBC3 as a channel. This seems to be sending a mixed signal given that the government wants to see DTT succeed.
A. BBC3 is a separate discussion because BBC3 is not specifically a switchover issue. Of course it was designed by the BBC as part of its package to try and help switchover. It has run into strong opposition from commercial broadcasters including Channel 4 and I am the Chair of Channel 4, let me declare that interest. So there are some serious questions about the proposal that remain. (Culture Secretary) Tessa Jowell was not sending a mixed signal. She wants digital to happen as fast as it can but she has other responsibilities and one of those is the terms on which she approves new BBC services. She is simply doing her proper job in approving a new service she is checking out the impact and making sure it is a valuable, necessary new element and whose impact on the commercial environment is legitimate instead of being disproportionate. These things get wrapped up in digital switchover but in the end the decision does not have to do with digital switchover so much. It is one of the elements she has to take into account but there are others that are probably more important at this stage.
Q. What about the potential of free co. or box co. between the BBC and ITV. Does it make sense?
A. The proposal is about re-organising the channels that are on DTT and also about possibly a co-ordinated marketing exercise in support of free-to-air boxes. It makes good sense but it is sad that they haven't yet agreed it. I donít know the details but in principle is makes very good sense.
Q. The factions that you have to deal with in your job as Digital Tsar or as you prefer liaison do not always see eye to eye. Is it difficult to get them to work towards the common goal of switching the UK to digital?
A. I canít quite answer that in the terms you put it. Of course there are very deep rivalries particularly between the commercial operators, and the BBC although its revenues are "safe" so to speak gets sucked into this competition in other ways in that they are competing for the audiences. But these are facts of life and it is worse now because the market is more fragmented so achieving a co-ordinated broadcasting policy which is effectively what we are talking about is much more difficult than when we switched from black and white to colour for example or when we saw the introduction of VCRs. But that is the world and we get on with it. So I can't really offer anything other than banalities. We just have to get on with it!
Q. Do we really need a switch-off date for analogue to make DTT switchover work?
A. Unless the government is going to abandon its plan to get a more efficient use of the analogue spectrum, which is the starting point for all this, then we need switch-off because without it we canít achieve the first goal. I see no sign of the government changing its mind on that. I suspect we are too far down the path for the government to abandon switch-off.
Q. But do we need a more precise date for switch-off so that the industry can better plan? Right now it is a moving target somewhere between 2006 and 2010.
A. The reason it's hard to plan is we haven't got a spectrum plan and once we've got that we can plan! That wonít solve switch-off but it is a crucial building block. Worrying about 2006 or 2010 is not relevant until we have a spectrum plan. The longer the government takes to deliver a plan the less likely it is that we will achieve switchover in 2006. I think it is still just about feasible from my reading of the situation if we can start a serious planning process this summer. Whether it is desirable to do it in 2006 or even practical, these decisions can be made in a couple of years time, but until the frequency plan is there there is no point in worrying about 2006 or 2010. It wonít be 2020 if we donít get a bloody plan in place!
Q. If you are broadcasting now and you plan to continue to be in the business when everything is digital you have to double illuminate or dual broadcast in both analogue and digital and that is costly and that is why some broadcasters want to know the exact date. They want to run a business model and map out the huge financial commitments they have to make.
A. There are substantial commitments. In the order of things, where we are currently is a bearable cost for braodcasters. But indeed you are right we are all paying twice and they would like to pay only once, but in the analogue universe there are far fewer players so that is a kind of compensating factor I suppose. But as to your point that maybe we should set a switch off date, well the real point is let's recognise that it is going to take longer than is being said. In due course and certainly by the end of this year it will be that much clearer as to when a realistic potential start date for switch-over is. But I think that at this moment I see no reason for the government to change its current target dates and indeed it hasnít and frankly it isn't material at the moment.
Q. What about interactivity on DTT? Is it part of the plan to leave some space for these kind of services?
A. Well this is up in the air at the moment. It is precisely one of the issues that the free-to-air boxes will complicate. In reality there will be boxes with little to zero interactive functionality and others that are quite sophisticated. So one part is what the receiving equipment is capable of. The other is what the broadcasters themselves wish to do. It's a bit chicken and egg here. And one of the elements in their responses to the current spectrum consultation plan they will be pointing out that to make these services truly interactive they will need more spectrum than they have currently got. But that is again an issue for the government, the extent to which it believes DTT should be optimally an interactive platform.
Q. So what other stumbling blocks are there to DTT?
A. There are some concerns in the power of the signal. There are some attempts being made now to improve the situation but how much they will improve it is still unclear. They certainly wonít do it definitively, that will only be done when we are moving over to switch-over properly. It is one of the those things again that the government has to agree because it has to honour its international agreements about the power levels and frequencies it is using. And the other factor is we have to know if a power increase is going to interfere with the current analogue signals because the government does not wish to upset its international neighbours, nor its analogue viewers. Then the other factor is the broadcasters have to be willing to pay the costs of a power increase and it is not cheap. The broadcasters will only be willing to do that if they know what they are getting in return in terms of digital frequencies and that again comes back yet again to where we started which is the spectrum plan.
Q. Do you think the governments desire for digital means it will have to offer some kind of subsidy for those who cannot or will not pay for DTT and when do you think this becomes part of the conversation?
A. Well everybody seems to assume that they will have to do this and I think at a basic human level there are going to be a number of people in the lowest income households for whom buying even very low cost viewing equipment is arguably a problem or if not there is a moral case for arguing that some just donít want to do it. Now if those two come together (the poor and the morally opposed) and logically they ought to, I think the government would find it very hard to resist that idea (of subsidy). Were I in the government and thank God I'm not, I would wait until I saw how many such households there were like that and how expensive the equipment was because I think in some cases there will be big retailers giving away boxes to entice people to buy other things. So why should the government need to get involved? There may be people who get second boxes when they buy a widescreen set and as maybe they already have a set top they can give it to their parents. I mean the point is that there is no reason why the government should decide or announce now that it is going to subsidise anything. Were they to ask me and they haven't --yet-- I would say hold fire until you need to.
Q. So they havenít asked you yet?
A. They may never do so. And if they read this article they wonít need to will they?
Kate: Well, let's hope they do just that. Thank you Barry.