Broadcasting White Paper (Hansard, 27 April 1989)

§ Mr. Hurd

I am grateful to all those who responded to the invitation to comment on these radical proposals.

As the White Paper undertook, we have considered carefully all the views which have been expressed. In the light of them we have decided to make some adjustments to our original proposals. I am placing in the Library of the House a note which details the modified proposals which we intend to recommend to Parliament.

We continue to believe that there should be a new, flexible technology-neutral framework for local services, leaving operators free to decide upon the best mix of technologies. As the White Paper noted, this will in practice mean at present cable or MVDS, or a mixture of the two. The fact that we are proposing that local operators should in future have the choice to use technologies other than cable does not imply, as some commentators have suggested, that the Government do not foresee a prominent role for cable under the proposed new framework. The advantages of cable over other delivery technologies are well known; and we have been pleased to see that many recent applicants for cable franchises have plans to exploit these advantages in order to provide telecommunications as well as television services over their networks. The point of the freedom, which we are proposing should be offered to operators, is 638W to enable them to choose which delivery technology or combination of technologies to use, based on their commercial judgment of the nature of the services for which there will be a demand.

The new framework will be designed to allow operators themselves to choose the nature and level of service they wish to offer their customers. It is, however, important for all local delivery systems to meet certain standards relating not only to safety and interference, but also, for example, to compatibility between systems and equipment. The Government, after consulting all interested parties, will decide how this is to be achieved.

In line with the White Paper, we propose that the new framework should be based on 15-year local franchises awarded by the new Independent Television Commission (ITC). Although we have considered carefully the contrary opinions which have been expressed, we hold to the view that some form of competitive tender mechanism will be the best method for allocating franchises. It will provide an objective method for choosing between applicants, and also takes account of the fact that successful applicants will be acquiring the exclusive right to use scarce MVDS frequencies. We will be giving further thought to the precise form of the competitive tender mechanism, taking due account of the arrangements decided upon for the allocation of licences for channels 3 and 5.

We envisage that, initially at least, only one franchise is likely to be awarded for any given area. It will be open to the ITC to award a second franchise if it chooses to do so; but we are no longer proposing that it should be required; as the White Paper envisaged, to consider advertising a further franchise or franchises for an area a short time after awarding the initial franchise there.

The aspect of the White Paper proposals which has attracted most comment is the suggestion that local delivery operators should not, except at the discretion of the ITC, be permitted to retail programme services. The objective of this proposal was to provide additional scope for competition in the retailing of programme services. While we still attach importance to this objective, we accept the argument put by many commentators that the White Paper proposal could inhibit investment in local delivery networks. We now therefore propose that local operators should be able to retail programme services without restriction, and without the need for permission from the ITC.

The Government do, however, see a case for injecting some competition into the local delivery and retailing of services by loosening the present restrictions on the development of satellite master antenna television (SMATV) systems. The Cable Authority's policy towards the licensing of SMATV systems has flowed from its statutory duty to exercise its licensing powers in such a way as to promote broadband cable systems. As the White Paper indicated, the ITC will not have such a duty.

We therefore believe that the restrictions placed on SMATV hitherto could not be sustained under the new framework, and we are proposing a significant, though not total, liberalisation of SMATV systems.

Under these proposals systems covering single buildings or adjacent pairs of homes sharing a party wall will be automatically licensed by means of a class licence under the Telecommunications Act 1984. Systems larger than this and covering not more than 1,000 homes would be individually licensed under that Act provided that, in the case of an application for a system within a franchise 639W area, the local delivery operator (or cable operator) had been given the right of first refusal to provide a service within a reasonable timescale. Unlike local delivery operators SMATV operators would not be granted telecommunications code powers, which would in practice make it difficult for them to build systems covering more than 1,000 homes. This size limit would in any case be applied flexibly. These proposals will be subject to review in the light of experience with any changes in its existing SMATV policy which the Cable Authority decides to make.

Licensed SMATV operators would be able to carry any channels licensed by the ITC or originating from states signatory to either or both of the proposed Council of Europe convention on transfrontier television or the EC directive on broadcasting (assuming they come into affect). A system carrying channels falling outside either of these categories would need to be licensed separately by the ITC.

The White Paper proposed that local operators should be liable to levy while they retained a local monopoly. We have, however, been persuaded on balance that it would be sensible not to introduce a new levy on local services. Whereas the White Paper proposed that broadcasting levies should mainly be based on advertising revenue, revenue from locally sold advertising appears at present unlikely to become a major source of finance for local services. Furthermore, we acknowledge the risk perceived by some commentators that the liability to levy might deter investment in a young industry, and we believe that this outweighs the benefits to the public purse of the modest amount of revenue which a levy might have yielded.

We have given further thought to the choice of frequencies for MVDS. We have concluded that the pressures on the 2.5 GHz band, the uncertainties surrounding possible future international developments and the limited amount of spectrum that could at best be made available combine to make this band unsuitable for MVDS. We have also ruled out the band 27–29 GHz since the 40 GHz band has similar characteristics and the significant advantages of larger amounts of spectrum, no existing incumbents and is, in part, internationally designated for broadcasting.

The White Paper also canvassed the possibility of frequencies being made available in the 12 GHz band. This band and that at 40 GHz have different characteristics and competing advantages and disadvantages. We shall need to consider further from which band, or bands, frequencies should be allocated to MVDS. In order to assess the reactions of potential users, now that we have put forward these firm proposals on local services, the Department of Trade and Industry will issue a short discussion paper early in May. We fully recognise the undesirability of continuing uncertainty over the choice of frequencies for MVDS, but this is an important decision which needs to take account of the interests of all parties, including other potential users of the spectrum, from whom the Government would welcome views.

Many in the cable industry have argued that the present prohibition in the Cable and Broadcasting Act 1984 on non-EC control of cable licences should be lifted, and that no such prohibition should be placed on local delivery 640W franchises under the proposed new framework. We have been giving careful thought to these representations in the context of our consideration of the general question of restrictions on the ownership and control of broadcasting licences. We hope to announce our views on this whole area before too long.

As foreshadowed in the White Paper, we propose that all cable operators awarded franchises before the date of its publication (7 November 1988) should have the right to opt to become technology-neutral delivery operators under the proposed new framework. We have decided to propose that this right should also be extended to these applications for franchises which had to be submitted by 7 November and which were eventually successful. In both cases the right will apply only to franchise holders who have been awarded a licence by the Cable Authority before it ceases to exist.

Under our proposals operators in this category will, if they so choose, be licensed as local delivery operators as of right by the ITC when it is set up. As such they will be entitled to use MVDS to deliver services to the home, subject to the availability of spectrum. It will be for the ITC to decide what frequencies can be made available to any operators who take this option. It may not always be possible for it to make available sufficient frequencies to cover an operator's entire franchise area.

Cable operators who obtain their franchises after this cut-off date and who are awarded a licence by the Cable Authority will, under our proposals, retain their status as operators licensed under the Cable and Broadcasting Act 1984 for the remainder of the terms of their licences. The ITC will discharge in relation to such licences the duties now undertaken by the Cable Authority.