Rt Hon Jeremy Hunt MP
Secretary of State for Culture, Olympics, Media & Sport
Department for Culture, Media and Sport (DCMS)
2-4 Cockspur Street
London SW1Y 5DH
19 October 2011
PLEASE SAY NO TO MUXCO!
This letter is supported by over 40 signatories representing prospective bidders for new local TV licences, specialist engineering providers and other interested stakeholders. We are aware of many others who agree with the sentiments expressed in the letter but have decided not to sign at the current time.
We support the broad thrust of your local TV policy but we believe you have been poorly advised on technical options and urge you to think again on the proposal to compel all operators to use a transmission company over which they have no control (“Muxco”).
An engineering supplier should be the servant of local TV operators. Under the current proposal, local TV operators will be denied the right to contract with a transmission supplier of their own choosing. Instead, operators may be required to enter into an onerous negotiation with a monopoly supplier to obtain the levels of coverage they are seeking. We do not see any rational justification for such a highly-damaging proposal.
Why no Muxco
We do not believe any of the arguments put forward for Muxco stand up to rational scrutiny.
It is argued it may be difficult for some local TV operators to procure their own transmission system designs and quotes.
Arqiva gave binding undertakings to the Competition Commission (when it acquired NGW) to provide reference offers upon demand. We assume Ofcom will insist these references offers are published prior to the licensing of local TV – with or without Muxco. It is therefore clear there is already a Muxco-type company offering regulated transmission services to anyone that wants it. We are surprised this was not explained in the recent consultation document.
It is argued Muxco will have greater negotiating power and secure lower costs than individual local TV operators.
Arqiva’s prices for access to its masts and broadcast transmission services are regulated because the Competition Commission recognises there is a lack of competition on a UK-wide scale i.e. Arqiva is not expected to review its rates in a commercial negotiation.
The notion that a state-imposed monopoly supplier will be more cost-efficient and deliver better service than suppliers competing in a free market is not an argument we believe is based on any genuine understanding of this market.
The imposition of Muxco risks shutting-out many small engineering firms (of the type which already service small-scale radio stations) preventing them from entering the market to compete with Arqiva to provide equipment and support on a site-by-site basis. Local TV operators (directly or indirectly) risk being saddled with much higher costs than would be the case if there were a free and open market in the supply of transmission services.
It is argued Arqiva is the only company which owns transmission sites suitable for local TV and so local operators should not try to identify alternative suppliers.
Access to Arqiva sites is straightforward as this company is regulated. Any party is free to place its own equipment at Arqiva sites with no obligation to use Arqiva-sourced equipment. However, there are dozens of areas left off the list of potential local TV locations for no good reason other than existing Arqiva sites are often not suitable for local multiplexes.
There is nothing to prevent the placement of DTT antennas on new masts (in line with the direction of receiving aerials) subject to compliance with some basic requirements. We know of cases where the antennas which allow the widest local DTT coverage do not fit on Arqiva masts and more suitable alternatives have been identified by local TV stakeholders.
It is argued it may be challenging for local TV operators to sell any ‘spare’ capacity on local multiplexes to shopping channels and the like.
Numerous stand-alone digital channels (and also the analogue local TV RSLs) engage agencies to sell their ‘spare’ hours to shopping channels or other third party networks. This process is simple – and all revenue after costs goes direct to operators. We are perplexed why DCMS would wish to deny the exploitation of incremental multiplex capacity as a modest source of income to boost the sustainability of local TV – allowing greater investment in local production, quality service provision and job creation.
It is argued Muxco will reduce costs for local TV operators by offering rents below market rates (albeit only on one videostream).
This argument appears extraordinary given that the government is proposing to gift Muxco the entire spectrum intended to support local TV and allow its equipment costs to be paid for by the BBC. As DCMS itself notes, the ongoing costs of operating a local multiplex are modest. If a local TV operator wishes to deliver maximum impacts for local advertisers by offering incremental services (e.g. additional channels or ‘red button’ services) then it will be forced to negotiate with a monopoly gatekeeper free to deny local operators access at affordable rates. This seems absurd.
It is assumed Ofcom can be trusted to regulate Muxco effectively.
The ITC promised to regulate national DTT multiplexes and the Radio Authority promised to regulate DAB multiplexes. We anticipate application promises made by Muxco will be of little value once the licence is awarded. We expect Muxco to behave largely as it pleases. Ofcom may feel unable to ever revoke Muxco’s licence since this would risk taking all local TV off air. Muxco can threaten licence surrender at any time. We suspect Muxco (and its suppliers) will have Ofcom and local TV operators over a barrel.
It is argued Muxco’s interests will be aligned with the interests of local TV operators.
At the moment, the Government is proposing to undermine the success of local TV by compelling all local DTT multiplexes to adopt a new transmission mode which is not in the D-Book (the standard all Freeview receivers in the UK are required to conform to). We believe this is diametrically against the interests of local TV operators – compelling local channels to reduce their signal strength purely to allow Muxco to make more money. We regard this proposal as illustrative of how policy is already being skewered by the interests of Muxco.
We urge caution when reviewing Arqiva-procured coverage maps based on all viewers having perfect installations. Some viewers never change their aerial – some may use a coat hanger as an aerial in the kitchen or bedroom. That is why we believe the D-Book authors’ made the only sensible decision to adopt a QPSK coding rate which allows the maximum signal strength (albeit less capacity to sell to shopping channels).
If you decide to proceed with Muxco, a local TV operator will not be free to win a licence one week and go on air a few weeks later. Local TV operators will be at the mercy of a monopoly supplier – they will have no direct control over when they launch or where they cover. We expect more rural areas to be particularly poorly served by Muxco.
We could go into more detail but we hope this letter demonstrates that the case for Muxco is built on sand, lacking evidence or analysis. Far from removing a barrier to entry Muxco is merely creating an obstacle to success. It cannot be right to gift public assets to a company which is taking no risk and offering no benefit. We are deeply concerned local TV policy is being disproportionately influenced by the interests of Big Business rather than Big Society.
The alternative to Muxco
We believe local TV operators should be awarded combined content and transmission licences on a ‘use it or lose it basis in line with existing local and community radio practice in the UK. The benefits are obvious:
- much lower costs – as a result of free market competition for transmission contracts;
- much better coverage – particularly in the many ‘fringe’ areas Muxco is unlikely to be interested in reaching;
- opportunities for local operators to deliver innovative services to meet viewer demand such as 24-hour news and information via the ‘red button’;
- the ability for Ofcom to use the full value of the spectrum to enforce local content commitments rather than allowing this value to be used to enhance the profits of a spectrum gatekeeper;
- the opportunity to licence more than one DTT multiplex where there is credible demand for additional services e.g. ethnic/community services.
We believe the main benefit of GI spectrum is that it is able to:
- offer local TV operators a good deal of flexibility to choose where to cover;
- liberate operators from the high fees associated with using large suppliers and burden of dealing with third party multiplex operators; and
- provide some capacity for additional services to enable operators to maximise viability (the amount of capacity may vary from one area to the next reflecting the transmission configurations adopted).
We are concerned all of these advantages are at risk in the current Framework proposals.
We also believe it to be a waste of licence fee payers’ money to gift £25m to Muxco rather than use it to meet the real start-up needs of local TV operators and community programme-makers.
Please can we suggest a meeting to enable us to explain why we see Muxco as an unwarranted government intervention that risks permanent damage to the local TV sector?
We believe it is you (not Ofcom) who will be criticised if local TV operators fail to deliver high quality services on a sustainable basis. We simply cannot understand why you would want to adopt a policy – offering no benefit – which is unprecedented overseas and poses such a grave threat to the success of local TV.
Former Ofcom Chief Adviser, Radio
And all of the organisations set out below:
Trade groups, charities and campaigners
- Martin Campbell Chair, Broadcast Journalism Training Council (BJTC)
- Jaqui Devereux, Community Media Association (CMA)
- Steve Harris, Colleges and Universities for Local Television (CULT)
- Steve Webber, IMOL – Independent Multiplex Operator Licensees
- Daniel Cass, United for Local Television
Local TV operators and prospective operators / partners
- Rick Waghorn, Addiply
- Lia Nici, Channel Seven Television (North Lincolnshire)
- Alan Cummings, Channel 9 TV (Derry, Coleraine, Limavady)
- Philip Reevell, City Broadcasting (Manchester)
- Steve Buckley/Richard Motley, Community Television Network (Sheffield)
- Geoff Wheatley, Compass Media Group
- Paul Gallagher, Gallagher Productions
- Philip Radley-Smith, i2i Media
- Fred Perkins, Information TV
- Maria Sellors, KCOM Group
- Richard Laurence, Leeds Channel
- Kuldeep Shekhawat, MATV (Midlands Asian Television)
- David Morris-Jones, Newsnet UK (Cardiff)
- Richard Jones, Saddleworth News
- Rob Speranza, South Yorkshire Filmmakers Network
- Marilyn Hyndman, NvTv, Northern Visions (Belfast)
- Peter Williams MBE, Peter Williams Television
- Gavin McLauchlan, Twofour Digital
- Nic Millington, Rural Media Company
- Chris Gosling, Serious Leisure
- Carl Wolf, Science City York
- Professor Mike Holcombe, Sheffield City Region Local Enterprise Partnership
- Daniel Cass, SIX TV (Oxford, Southampton, Fawley, Reading)
- Phil Shepherd, Somerset Film
- Mike Southgate, Mike Southgate Consulting
- Ian Lodwick, SO Productions
- Chris Haydon, Southwark TV / Community TV Trust
- Fiona Ryder, Stream Exchange
- Ben Tagg, TV York and TV Norwich
- Tony Daniels, University of Lincoln
- Rosie Hayes, YNUKtv
Transmission service providers
- John Bibby, Bitstream Broadcast
- Steve Maskrey, RTI Broadcast
- Mike Rea, Taylor Bros Oldham
- Ian Hickling, Transplan UK
Sales agent / teleshopping specialists
- Dominic Matterson, Media15
Red button / interactive service providers
- Keith Bedford, EBS New Media
cc: Rt Hon David Cameron MP
John Whittingdale MP
Ed Richards, Ofcom
Chris Patten, BBC Trust
Alexander Italianer, European Commission