What a waste! – Elstein answers back

Answering Peter Marshall…

Of the two responses to my arguments about digital terrestrial television (DTT) Damian Tambini is the most sustained and unpersuasive. Before responding I’d like to make just a couple of remarks (more are possible) about Peter Marshall‘s enthusiasm for DTT.

The notion that BSkyB is these days ‘bankrolled by News Corporation’ is a little quaint; some analysts have even suggested that BSkyB is rich enough to take over its 37 per cent shareholder!

DTT is not uniquely open. Satellite is a completely open platform, not owned by any channel operator. Any free–to–air operators with no copyright limitations on their content – e.g. news channels or Turner – can simply ignore the existing subscriber management systems and broadcast direct to the consumer. Of course, the installed base of set–top boxes is closely linked to Sky’s smart card system, but Sky cannot exclude those wanting to use its SMS, and conditional access fees are regulated by OFTEL.

The point is that the special advantages of DTT have yet to display themselves. Satellite can deliver regional television, including to those outside a region who want to watch its output (Scots in London, for example). When I was in Sydney for the Olympics, my coach to and from the stadium offered live TV, delivered to a mini–dish.

It is not so much that I write off DTT – more that I think its establishment has involved a huge, undeclared and continuing public cost which is almost entirely unjustifiable.

That issue Peter does not begin to address.

DTT: bad politics

Nor does Damian Tambini.

The launch of DTT has been driven by political considerations. Damian denies the political nature of the DTT project, claiming that initial enthusiasm came from the commercial sector, not politicians. But the LWT/Carlton support for DTT was entirely cynical and short term. They feared the commercial threat of a possible launch of Channel 5 in 1992. They noted that one of the frequencies it proposed to use was UHF channel 35. They were told that if DTT were ever launched as a single–frequency network, it could only use channel 35. So they espoused DTT for a few months as a spoiler, until the application to launch the service was turned down by regulators. Then they promptly forgot DTT, along with their other anti–5 propaganda.

It later transpired that engineers preferred a multi–frequency patchwork for DTT to a single–frequency network, and I re–captured UHF channel 35 for Channel 5 in 1996 when I became the station’s chief executive. But such commercial machinations are simply politics with a small p, not to be confused with real businesses.

Barry Cox, now the lead co–ordinator of digital policy for the government, has conceded (in an article published in Broadcast the week after it ran excerpts of a speech on the same lines as my openDemocracy contribution) that DTT was a political invention whose purpose was to protect public service broadcasting.

Now as Damian says, anything requiring spectrum allocation will have a political dimension. There is nothing intrinsically wrong with this. But DTT was launched to thwart Murdoch, to enrich the Treasury and to entrench the BBC. The fact that the first two objectives have failed, and that the third has many disadvantages, means it is bad politics.

What digital dividend?

The prime reason for this is that digital does not deliver sufficient added value technologically.

As for ‘digitopian twaddle’ – to borrow Damian’s own phrase – John Howkins has already explained how digital production has its own logic, quite separate from that of transmission (as is the case in cinema). The ‘inefficiency’ of analogue terrestrial is marginal: and what it does offer is acceptable quality pictures on all TV sets in 99.4 per cent of homes and 100 per cent video functionality – something DTT is far from achieving and will probably never achieve, yet which is far more important to the vast majority of consumers than any specific benefits DTT (as opposed to cable and satellite, which do not require analogue terrestrial switch–off) will ever bring.

Damian admits that ‘the BBC’s interactive sports coverage’ is to be found on digital satellite – the limited capacity of DTT cannot sustain anything other than just enhanced content, which means more text and some alternative pictures, but nothing that can be truly termed ‘interactive’. As sophistication on cable and satellite increases, the limitations of DTT will become even more marked. And, again, there are no actual ‘savings’ in digital broadcasting – simply room for more minority channels in the same spectrum.

Damian seems to have fallen for ITV Digital’s own hype. ‘Piling on new consumers like no technology had done before’? Actually, it was about 1.1 million in two and a half years. ‘Customers by and large satisfied’? With a 25 per cent churn rate, even amongst those who managed to get a signal in the first place?

As for the prospect of DTT solving the multiple set problem, my argument is not that people only install digital for subscription services, rather that subscription platforms will only subsidise one set per home. A free–to–air service makes more sense for bedroom and kitchen TVs, but only if the signal can reach them – which is overwhelmingly not the case at the moment. People will not install DTT boxes in advance of the signal being able to reach them.

And touching as Damian’s faith is in the digital BBC4, I can tell him from real–time evidence (from Channel 5 and BSkyB) that consumers unwilling to pay for more channels are also unwilling, for the most part, to pay more than a small amount (certainly less than £100) in upfront costs to receive more free–to–air channels, even popular ones. I am also surprised that he believes DTT’s delivery of specially regulated content will make a big difference in terms of child protection. Cable and satellite (and ADSL) already offer the security of pin numbers.

Regulation not tampering

The gatekeeping issues Damian raises are dealt with by regulation, not by launching at enormous public cost a non–competitive platform, which bankrupts itself and its rivals. Nor is there any evidence which shows that a significant number of consumers (and it would have to be at least 10 million for DTT to make sense) want the limited quality, limited choice option offered by DTT at a £100 one–off cost (for the 50 per cent of the country that can receive the signal with their existing aerial).

This is not surprising. For a one–off cost of less than £250, viewers can get a dish and digibox, with far more free–to–air channels, far more digital radio channels, an excellent electronic programme guide, enhanced and interactive services, easy access to pay–TV and transactions, and a year’s worth of all the basic tier channels on offer. A Renault Clio at the same price as a Rolls Royce is not a great deal.

The combination of bad politics and misjudged technical assessment leads to massive economic incompetence by the policy makers. My point then is not that we should live in a ‘free market’ utopia without political or technical policies and regulation. On the contrary, it is because such decisions are a necessary part of modern government that they need to be held to account with vigour. A good first measure is costs.

The huge subsidies payable to ITV and the BBC as part of the price of DTT will not come to an end. Damian does not even refer to them.

Another measure of competence is whether those making decisions have any hope of seeing their targets reached. To get around this simple but deadly measure, Damian conjures up ‘aspirational targets’.

What can I say?

If the experts were indicating that the earliest possible date for analogue switch–off was 2018 or later, what was the point of committing to 2006–2010? To create aspirations? Of course not. The early dates were a response to pressure from the DTT investors, keen to impose a forced migration to digital. Gerry Robinson, of Granada, publicly espoused 2005! The targets set in 1999 were not ‘optimistic’. They were deliberately unrealistic. The complete failure to provide any kind of rationale for them demonstrates their political nature.

And, let us repeat, these were not targets for ‘digital transition’ (the weasel words used by policy makers which so often mislead) but for analogue switch–off itself – the only aspect of digital policy entirely in government control. It was the politics of vested interest seeking to retain their advantage.

It is true that the government wrapped up the political concession of the 2006–2010 dates in some woolly language, so as to avoid giving too many hostages to fortune. But even these elusive targets still embody the completely incredible proposition that the UK’s switch–off can be implemented on the basis of a single digital installation per home.

Given that the target dates are themselves completely unachievable and will have to be abandoned (as the minister responsible, Tessa Jowell, is beginning to admit), it is hard to see any point in the entire exercise other than to give the DTT protagonists some fuel to get their project kick–started (itself a futile and self–defeating exercise – but then, politicians live in the short term).

Damian largely elides the argument over analogue switch–off (which he barely mentions) by referring to ‘digital policy’. Here he offers the truism that there is a public interest in the efficiencies of digital broadcasting. Even this is debatable, as the public benefit that might be derived from squeezing more channels into available spectrum (irrelevant in cable and satellite, with their virtually unlimited spectrum, and only marginally relevant in terrestrial) is outweighed by the huge public subsidy that DTT roll–out has required.

It is also worth noting that the government played virtually no role in the decisions made by cable and satellite to convert to digital – the platforms responsible for 85 per cent of digital take–up – except in a perversely negative fashion. Neither was really ready to contemplate the huge costs involved until the pre–emptive and premature launch of DTT forced their hands. That all platforms were consequently driven into deep losses (in the case of BSkyB) or bankruptcy (ITV Digital, ntl and Telewest) is the most eloquent comment on the dilettante nature of government policy and the superficial justifications offered by Damian for it.

The fact that no attempt has ever been made by government to assess even the cost of analogue switch–off (let alone the economic implications of DTT’s launch) is particularly unforgivable. The early calculations from the most experienced commercial company working in this field indicate a switch–off cost of £15 billion – which is entirely separate from the £10 billion I have estimated as the cost of DTT in the run–up to switch–off. The silence from Whitehall is simply deafening.

Still, in his last line, Damian has an interesting suggestion: that if DTT take–up within a definable period is indeed low, the spectrum be withdrawn. Does he suspect something? How long a period and how low a level are unspecified, but that, at least, is on the right lines, even if the vast cost of DTT (completely unadmitted by Damian, but also not denied) can never be recovered.