The Future of Digital Terrestrial Television. Sky s response to Ofcom s consultation
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- Lee Robinson
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1 The Future f Digital Terrestrial Televisin Sky s respnse t Ofcm s cnsultatin 1. In paragraph 5.88 and Questin 7 f the cnsultatin, Ofcm has asked rganisatins t indicate whether they are interested in launching MPEG-4 nly services n ne r mre multiplexes, and if s hw such an early adptin wuld avid undermining the prpsed transitin t a mre efficient cmbined MPEG-4/DVB-T2 launch in As Ofcm is already aware, Sky/Picnic and NGW have already presented t Ofcm such a prpsal t bradcast in MPEG-4 nly: a. Sky s riginal prpsal fr Picnic, as annunced in February 2007, was that its services wuld be bradcast in MPEG-4. 1 b. In Nvember 2007, NGW submitted an applicatin t Ofcm requesting permissin fr services n Multiplexes C and D t be bradcast in MPEG-4 nly. It is understd that this applicatin is currently being cnsidered by Ofcm. 3. Were it apprved by Ofcm, bth Picnic and NGW remain cmmitted t launching MPEG-4 (nly) services (n Mux C) at the earliest pprtunity (i.e. during 2008). 4. Ofcm s cnsultatin dcument, hwever, prpses linking the intrductin f MPEG-4 t the separate DVB-T2 technlgy such that MPEG-4 culd nly be intrduced t DTT nce DVB-T2 is ready fr (cmmercial) deplyment. Further, under Ofcm s current prpsals, the intrductin f these technlgies wuld (initially) nly be permitted n the cleared Mux B. 5. Ofcm sets ut the benefits it cnsiders will result frm upgrading multiplex(es) t bth MPEG-4 and DVB-T2, such as a ptential increase in platfrm capacity by up t 160%. Whilst Ofcm des engage in sme discussin f the incremental benefits (i.e. an increase in DTT capacity) that may be realised frm the upgrading, separately, t MPEG-4 and DVB- T2, Ofcm indicates that: The adptin f DVB-T2 and MPEG-4 tgether maximises the increase in the capacity f the platfrm at this pint which will bring frward the realisatin f additinal value fr viewers. This is particularly s if the DVB-T2 upgrade is carried ut in line with DSO Sky des nt disagree with the statement abut the maximisatin f increase in capacity frm an intrductin f bth f these new technlgies. Sky/Picnic supprt the (apprpriate) intrductin f technlgies that wuld imprve the effective amunt f capacity f platfrms, and the efficiency f its use, bth thrugh (in relatin t DTT) active participatin in the DVB and DTG, and active supprt f a hrizntal market bx manufacturing arrangements. 1 Whilst Sky s frmal licence applicatin t Ofcm in April 2007 cncerned bradcasting its DTT services nly in MPEG2, Picnic cntinues t wish t transitin its DTT services t MPEG-4 as sn as pssible. 2 See paragraph 5.23 f the cnsultatin. 1
2 7. Sky cnsiders, hwever, that the requirement t link MPEG-4 and DVB-T2 is nt apprpriate r necessary, and culd in fact be detrimental t the nging develpment t the range f services available via DTT. Such a prpsal wuld nt necessarily result in the mst efficient r beneficial use f DTT capacity, as it is likely, at least in the shrt term, t prevent the launch f additinal services n DTT (i.e. in MPEG-4 nly, a technlgy that is already available fr deplyment in relatin t linear bradcast services n DTT 3 ). 8. Whilst prpsals t enable the intrductin f new technlgies that increase capacity and imprve usage n the DTT platfrm can be cnsistent with Ofcm s duties (fr example t secure the ptimal use fr wireless telegraphy f the electr-magnetic spectrum, and t secure the availability thrughut the United Kingdm f a wide range f televisin and radi services), linking their intrductin where that results in bradcasters deciding t remain using MPEG-2 wuld clearly nt be cnsistent with Ofcm s duties. 4 The prpsal t allw the intrductin (at this stage, at least) f these new technlgies n nly ne multiplex, the (PSB) Mux B, whilst cntinuing t restrict their applicatin n ther (cmmercial) multiplexes, als risks being incnsistent with Ofcm s duties t act prprtinately and target regulatry activity nly at cases where actin is required Ofcm acknwledges in the cnsultatin that the intrductin f each f these technlgies (individually) will prvide benefits. Hwever, Ofcm gives insufficient cnsideratin t these benefits and des nt take sufficient accunt f the difficulties (and cnsequent impact f timing) that, in particular, the intrductin f DVB-T2 (in cnjunctin with MPEG- 4) is likely t cause. 10. Ofcm indicates that launching in MPEG-4 nly wuld be prblematic, due t: (i) the ptentially significantly higher cst f the intrductin f DVB-T2 in the future, thrugh the need t displace existing services frm cnverted mux(es); 6 (ii) a ptential delay f up t 15 year fr the intrductin f DVB-T2; 7 (iii) the lack f incentives n the institutins cntrlling the DTT platfrm, and the regulatry arrangements regarding the platfrm, given their fragmented nature, t intrduce bth technlgies in a timely manner, withut regulatry interventin Ofcm seeks t classify this fragmentatin as leading t a likely case f significant risk f market failure, 9 thus justifying its need fr interventin by way f mandating a link between the intrductin f these tw technlgies. 3 Ofcm will be aware that MPEG-4 (nly) is already deplyed by BT Visin in its hybrid DTT set tp bxes fr use in cnjunctin with BT Visin s VOD services. Further, Ofcm shuld nte that MPEG-4 cmpatible idtvs and set tp bxes are already available in the UK and it can be expected that, by 2010, dual (MPEG-2/MPEG-4) decders t have becme a mre standard feature in many mdels f receptin equipment. 4 This includes thse duties under sectins 3(2)(a) and 3(2)(c) f the Act, tgether with Ofcm s duty t have regard t the desirability f encuraging investment and innvatin in relevant markets (see s.3(4)(d) f the Act). 5 It is nted that Ofcm has nt indicated any timescale fr a review f the existing technical guidelines which currently prevent the adptin n DTT f new technlgies - see paragraph 5.46, 3 rd bullet, and paragraph 5.89 f the cnsultatin. 6 See paragraph 5.20 f the cnsultatin. 7 See paragraphs 5.55 and 5.59 f the cnsultatin. 8 See paragraph 5.31 f the cnsultatin. 9 See paragraphs 5.51 and 5.69 f the cnsultatin. 2
3 12. Ofcm reinfrces its argument abut the need fr interventin n a tempral basis - t enable (and ensure) the linked intrductin f bth technlgies by the time f DSO in the Granada regin in 2009, presumably t benefit frm the prcess (and ensure the pprtunity is nt missed) f cnsumers purchasing r replacing receptin equipment in ne f the largest TV regins in the UK. 10 Cmments n Ofcm s analysis 13. Sky has a number f cmments n the analysis in the cnsultatin which shuld be taken int accunt in reaching a decisin n the linked intrductin f these technlgies: Timetable 14. In paragraph 5.22, Ofcm envisages that the standard fr DVB-T2 will be agreed in Spring 2008 and is likely t be available fr deplyment in cnsumer equipment by the time f Granada DSO. Whilst Sky understands that DVB standardisatin remains n track fr cmpletin this Spring, given that DVB-T2 is unprven and nt yet widely used (in cntract t MPEG-4), Ofcm shuld nt underestimate the practical difficulties with its deplyment. 15. In Sky s view, whilst manufacturers are likely t be planning the incrpratin f DVB-T2, few are likely t guarantee that this will be achieved by 2009, which shuld be viewed as a best case scenari that is nly likely t happen if n prblems are encuntered. It is Sky s understanding that the general cnsensus amng manufacturers, supprted by the DTG, is that early DVB-T2 cmpatible equipment may be available frm late 2009, dependent n silicn availability, but that the prductin f vlumes required fr wide scale cmmercial deplyment is unlikely t happen until later in 2010 r even In additin t questins f reliability and stability f the new technlgy, discussins within the DVB cncerning the inclusin f features such as Dynamic Multiplex Switching and Narrwer Channel Optins (as standard r ptinal t the technlgy) remain nging. The early intrductin f DVB-T2 is likely t see them available nly n an ptinal basis: the standard will nt therefre be unifrm at initial deplyment, and s can be expected t develp subsequently, with the later inclusin f features that can be expected t be f significant utility. 17. This is thus similar t the experience f the intrductin f DVB-T in 1998, which prvides an illustratin f these difficulties ntably the amunt f time required fr testing and stabilisatin f new DVB-T tuners was hugely underestimated, s much s that a number f manufacturers had t withdraw and replace a significant number f set tp bxes (fr example, ne manufacturer had t recall ver 500k set tp bxes between Octber 1998 and June 1999; Sky understands that anther actively withheld frm launching a DTT set tp bx until spring 1999 fr these reasns). Given that DVB-T2 is (significantly) mre 10 See paragraph 5.22 f the cnsultatin. 11 The relevance f Granada DSO shuld be queried in any case, given that by the time DVB-T2 is likely t be ready fr cmmercial deplyment at the earliest, the majrity f Granada hmes can already have been expected t have switched t digital; the remaining cnsumer base (including thse wh wuld benefit frm the switchver assistance scheme) is likely t cntain a high prprtin f refusniks wh are unlikely t be interested in acquiring advanced receptin equipment that prvides access t a wide range f services ver and abve the main PSB channels. 3
4 cmplex a technlgy than DVB-T, it is likely that a significant perid f ff-air testing will be critical t the stability f set tp bxes incrprating DVB-T2. Incentives 18. A direct cnsequence f Ofcm mandating the linked intrductin f MPEG-4 and DVB-T2 culd therefre be that, in light f the timing issues utlined abve, bradcasters and multiplex peratrs are in effect incentivised t cntinue bradcasting in MPEG-2, and cmpletely freg the pprtunity t cmmence bradcasting using the mre efficient MPEG-4 technlgy. 19. Were Ofcm s prpsal t be put int effect, a bradcaster/retailer wuld face the fllwing chices: Launch r cntinue t prvide a service in MPEG-2 and wait t migrate t (bth) MPEG- 4/DVB-T2 in due curse (nce cmpatible receptin equipment is available); r Launch a service in MPEG-2 and d nt migrate t MPEG-4/DVB-T2; r Nt launch in MPEG-2 at all, but wait t cmmence services directly in MPEG-4/DVB- T A cnsequence f Ofcm s prpsal t link MPEG-4/DVB-T2 culd therefre be that bradcasters/retailers, and therefre multiplex peratrs, decide t cntinue prviding services bradcast in MPEG-2 rather than migrate t use f either technlgy, ntably MPEG-4 (where nt linked t DVB-T2). The factrs cntributing t such an utcme include the fllwing: the extent t which a bradcaster/retailer cnsidered its viewers/subscribers wuld be willing t invest in new receptin equipment in rder t receive (r cntinue t receive) its services, r it wuld itself be willing t fund a bx swap-ut; faced with the cst f equipment replacement, and the benefits per bradcaster/retailer wuld gain frm a mve t the new linked technlgies, many bradcasters/retailers may decide nt t switch (fr example, FTA bradcasters wuld nt necessarily experience any increase in revenues (frm advertising r spnsrship) frm such a switch). This is likely t influence the decisin f the multiplex peratrs n cnversin f their multiplexes; the fact that there is likely t remain at least tw (PSB) multiplexes bradcasting in MPEG-2 and DVB-T will als influence ther bradcasters/retailers, and thus multiplex peratrs (as they will need t balance the likelihd f persuading viewers/subscribers t upgraded receptin equipment, when ther attractive services cntinue t be bradcast in MPEG-2). 21. The impact f a mandated link f MPEG-4 and DVB-T2 culd therefre be tw-fld: (i) the remval f interim, demnstrable benefits frm the intrductin f MPEG-4 (with DVB-T), pending its linked deplyment with DVB-T2 (in light f the inherent uncertainties f that intrductin), and (ii) the pssible disincentive against migratin t MPEG-4 as a whle. 4
5 MPEG-4 alne prvides benefits 22. Ofcm des acknwledge that the intrductin f MPEG-4 (alngside DVB-T) n DTT wuld give rise t benefits (t bth cnsumers and prducers), but that the benefits f its intrductin with DVB-T2 are greater. The assessment in the cnsultatin is, hwever, inchate; the benefits f MPEG-4 alne are summarily dismissed (in paragraph 5.76 f the cnsultatin), and perhaps relegated in imprtance in light f the ptential, greater benefits that the linked technlgy intrductin culd bring (even if mre difficult t achieve). 23. As Ofcm recgnises, MPEG-4 can be intrduced within a multiplex, in cntrast t DVB-T2 where each multiplex as a whle has t be cnverted t its use. Thus the intrductin f different cmpressin standards can be much less disruptive, and can therefre be dne gradually n a service-by-service basis, withut impacting the ther services carried n the same mux. This may well influence bradcasters/retailers resulting in cnversin t MPEG-4 (nly) being mre likely. 24. Delaying the intrductin f MPEG-4 thrugh its linkage t DVB-T2 culd result in DTT freging, in the shrt-medium term, the benefits that use f this better cmpressin standard wuld bring. MPEG-4 can be expected t prvide efficiency gains f the rder in 25-30% reductin in bandwidth usage per channel immediately, rising t a 50% gain ver time. In cmparisn, the intrductin f DVB-T2 can be expected t prvide a cumulative increase bandwidth capacity f arund 30% (dependent n the versin used) but nly frm 2010/11 at the earliest As Ofcm is (at this stage) nly prpsing t allw the intrductin f these tw technlgies n a single (cleared, PSB) multiplex, and at this stage limiting the cmmercial multiplexes frm upgrading, it appears that the benefits realised frm the intrductin f these technlgies culd therefre be cmparatively limited and nt fr a while. In cmparisn, the gains frm MPEG-4 alne are mre certain and mre prximate (nt least because Ofcm has already received at least ne applicatin frm a multiplex peratr t allw MPEG-4 bradcasts t cmmence n DTT). 26. T the extent that a justificatin can be discerned frm the cnsultatin fr the linkage f these technlgies, a significant aspect appears t be that it is required t facilitate the intrductin f HD services n DTT; hwever, it is nted that Ofcm is nt requiring any capacity gains realised frm the use f these technlgies be reserved fr the exclusive use f HD services n DTT. Replacement f receptin equipment 27. In paragraph 4.58 f the cnsultatin, Ofcm argues that the managed intrductin f MPEG-4 DVB-T2 will reduce the number f receiving equipment upgrades fr cnsumers. Hwever, Ofcm als ntes that cnsumers will chse t change receptin equipment where they are incentivised t d s in rder t receive new r different services As DVB-T2 is being develped and ptimised t wrk acrss mre than ne multiplex, it fllws that if its use is limited t ne multiplex, its full benefit may nt be realised. 13 See paragraphs 1.19 and 2.11 f the cnsultatin. 5
6 28. The fact that cnsumers can be incentivised t purchase new equipment in rder t receive different r particular services (such as the new Picnic service), rather than in rder t btain the underlying technlgy per se, is therefre a key issue fr Ofcm s analysis. Ofcm s analysis shuld reflect this: cnsequently, Ofcm shuld recgnise that (i) equipment upgrades d nt necessarily represent a cnsumer harm and (ii) by allwing MPEG-4 (nly), which wuld enable the launch f additinal services, the demand fr thse services, may sufficiently incentivise cnsumers t change receptin equipment. 29. Likewise, even thugh DVB-T2 wuld require cnsumers t acquire (further) new receptin equipment, t the extent that DVB-T2 enabled the launch f additinal, new services n DTT (fr example, HD services), cnsumers wishing t access thse new services wuld be able t, and may be sufficiently incentivised t, acquire such receptin equipment. 30. T the extent that there is a range f DTT receptin equipment, which emplys different technlgies in rder t allw the receptin f a range f different services, that shuld nt be cnsidered t represent a prblem. In fact, the DTT platfrm can already be characterised as a diverse platfrm, with different types f receptin equipment required t receive services frm Tp Up TV, BT Visin, PVR functinality, integrated int idtvs, CAMs, and with future develpments including PC receptin. Cnsumer decisins abut acquiring receptin equipment will cntinue t be primarily driven by the chice f services that such a switch wuld prvide. 31. The intrductin f new and different technlgies t DTT will simply represent a further step in the nging develpment f the platfrm, which will nt be t the detriment t the cnsumer n the basis that: (i) (ii) they purchase receptin equipment fr their desired services; and apprpriate and prprtinate prtectins are put in place arund receptin f certain cntent (fr example, prtecting receptin f PSB services thrugh requiring them t cntinue t be bradcast in MPEG-2). 32. In additin, in relatin t Ofcm s arguments abut displacement (see paragraph 10(i) abve), this need nt nly happen by means f regulatry interventin nw. The fragmented nature f cntrl f DTT des nt necessarily hinder technlgical imprvements t DTT: where technlgical develpments will allw the prliferatin f new services, fr which there is cnsumer demand, that demand can sufficiently incentivise the different rganisatins invlved in DTT t c-perate. 33. In fact displacement (i.e. clearing f a multiplex t allw its cnversin t DVB-T2) culd be facilitated by a mve t MPEG-4: the larger the base f MPEG-4 cmpatible receptin equipment, the greater the incentives n MPEG-2 bradcasters t switch t MPEG-4 (t save bandwidth csts) and n multiplex peratrs (t allcate freed up capacity t ther users), withut alienating all platfrm users (as many wuld have already migrated t MPEG-4 already). This prcess culd therefre allw a multiplex peratr t recnfigure its multiplex(es) t launch DVB-T2, in respnse t demand fr services using that transmissin standard. 34. Ofcm s prpsal t link MPEG-4 t DVB-T2 therefre has the ptential t prevent the launch f additinal services n DTT in relatin t which cnsumers may be willing t 6
7 purchase different receptin equipment (particularly in the case f cmmercial services). This wuld nt appear t be cnsistent with Ofcm s general duties, particularly since it is the cmmercial multiplexes which wuld, under Ofcm s prpsal, cntinue t be restricted frm changing transmissin and cmpressin standard (which is arguably a mre prprtinate restrictin, rather than a retaining a restrictin that applies t mst multiplex peratrs). 35. Ofcm indicates (in paragraphs 1.52 and 5.27) that there is need t review, n a case-bycase basis, the technical standards allwed n ther (cmmercial) multiplexes, t ensure that it des nt unacceptably diminish the range, variety and quality f services available t DTT viewers. This wuld appear t reflect the pwers that are therwise available t Ofcm under Cnditin 17(2) f the multiplex licences, raising questins f prprtinality f its prpsed restrictins n the intrductin f MPEG-4. Cnversin t DVB-T2 36. If Ofcm, nnetheless (and inapprpriately) remained minded t prceed with its prpsed linked intrductin f DVB-T2 with MPEG-4, it wuld be cnsistent with the existing apprach fr capacity allcatin set ut in the multiplex licences fr any additinal capacity that is generated as a result t be allcated t bradcasters n a fair, reasnable and nndiscriminatry basis. 37. In additin, Ofcm will need t ensure that the effects f the cnversin f any multiplex t DVB-T2 with MPEG-4 remain cnfined t that multiplex, s as nt t interfere with, r encrach n, the capacity n ther adjining multiplexes, which shuld be guaranteed cntinued unfettered peratin. Sky February
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