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Ofcom, dividends, and Sky stocks

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Column It's now (almost) too late to submit your comment on what should be done with the "digital dividend" - which is to say, if you think Sky should have a monopoly on High Definition TV, then you'll be smiling.

On the other hand, if you're a fan of FreeView, you might be alarmed.

Ofcom had to have your protest in by March 20. OK, you have the weekend, during which time anything you have to say can be safely ignored, because nobody will be able to comment on it.

"This review is about one of the most important decisions Ofcom has ever had to take – how to release the spectrum freed up by digital switchover for new uses," says the introduction.

Oh, boy oh boy, spectrum. Spectrum is worth money. Remember how many billions Gordon Brown skimmed off the mobile phone operators when auctioning off 3G phone spectrum?

So, the powers that be are now auctioning off new spectrum, and they are making no secret about how they think it ought to be used. It's going to be 4G phones. Or, to put it another way, "wireless broadband" - or to use the trade name most people are using for it, WiMAX.

In theory, of course, this decision hasn't been made. That's what this consultation period is about: working out what is best. Or, at least, that's what Ofcom says it's about - and I suppose we ought to write down what it says. But... should we really believe it?

There's a nice old legal saying which conspiracy theorists are always writing on banners: "Cui bono?" - which means "To whom the good?" - or perhaps, more simply, "Who inherits the dead guy's estate?" - and that's often a useful way of uncovering a crime.

The obvious answer is: "The tax payer!" and that's certainly a popular answer. The less obvious answer, say some, is: "News Corporation, and specifically, BSkyB."

To quote from one comment posted on the Ofcom website, there's really no evidence of a demand for WiMAX. Paul Duffy: "There is a real need for OFCOM to review the release of this bandwidth taking into account the commercial activity currently happening in the market. Sky TV have been allowed to become the de facto monopoly supplier of PAY DVB-S services in this country."

His suggestion is that there's an obvious demand for this spectrum from a technology which people want: HD television.

As things stand, you can get HD three ways. You can get it over cable (Virgin/Telewest/NTL has a couple of test channels) or over the air (the BBC has a trial service) or from satellite - Sky HD.

But there simply isn't enough broadcast spectrum on the ground. And if there is going to be broadcast HD from non-satellite sources, then some of this "digital dividend" is going to have to be held back.

On the face of it, Ofcom's questions are innocuous enough. It is asking, it says, whether it should include mobile broadband as one of the options for this spectrum. To do this, it implies, would not mean that it would necessarily go to mobile broadband; it might be that other, more obvious technologies would be used.

In the real world, however, it might be less complicated.

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It is, certainly, my own reading of Ofcom's intentions, that they are trying to whip up another 3G lottery or feeding frenzy, using 4G WiMAX as a way of getting more enthusiastic bids. And on one hand, you have to say: "Oh, the mobile phone companies would never fall for that a second time."

But it's not at all clear that they wouldn't. Paul Duffy again: "The explosion of 'value added' services on Mobile Phones has frankly failed to materialise (3G takeup is virtually non existent)."

What that means is that the mobile companies still need a high speed wireless network. They are hoping to get it by piggy-backing on home broadband (google for femtocell for full details) - but if they can get cheaper, less problematic spectrum, they will be keen to spend their investors' money on it.

There are good reasons to be sceptical. As Duffy remarks: "While recognising the failure of 3G is partially due to the slow speed of the services currently available, it is also much to do with the fact that hand held devices are not ergonomically designed (and indeed there is little or no demand for them) to be used for high speed data applications." In other words, there are excuses which mobile operators can trot out to explain why investors should, after all, throw good money after bad.

But is this in the best interests of the end users of the spectrum? or does someone else benefit?

Duffy's theory is that there is an obvious beneficiary: Murdoch. Referring to BSkyB, he lists straws in the wind: "Their specific recent activity (acquisition of 18 per cent of ITV to block a bid from Virgin/NTL, aggressive negotiations with Virgin Media and unwillingness to use an independent binding arbitration for resolution, announcement they will remove their channels from Freeview and launch a Pay TV DVB-T service)."

These, he suggests, "together with the public statements of the Chairman of News Corp, that all governmental restrictions of media control should be removed, give a very real sense of unease to many, that come, 2012 the British Public may well end up with a TV service effectively controlled by one monolithic Media Company."

And you can bet that won't be FreeView.

Personally, I don't care about TV much, and less about HD TV which I regard as a way of selling expensive and power-consuming junk to mugs. Come next summer, the first thing that proud new owners of 40-inch HD displays will have to do, is buy an equally expensive aircon unit to mitigate the heat pumped out from that acreage of plasma or TFT silicon. But you can't pretend that HD-ready TVs aren't selling well - even before programming is available to watch.

And personally, I think WiMAX is a fairy story. But that won't stop people talking the cost of spectrum up - and up and up until it reaches the Sky. And if it gets expensive enough, it's hard to see how it will go to keeping FreeView alive. A final point from Duffy:

"The release of spectrum for Mobile operators could well lead to a 'defensive' bidding war were operators will buy the spectrum to just ensure competitors don't own it. While this will maximise the revenue generated it does not in turn mean the bandwidth will be utilised or utilised effectively."

His theory is that we should vote to hold back much of this "dividend" spectrum for MPEG 4 compressed Freeview - some for SD, and some for HD - for terrestrial broadcasters.

The thing is, I reckon an awful lot of people would agree with him - but simply haven't realised that Ofcom is asking for comment. If you do feel that your opinion should count, remember that Ofcom's own view is in the public domain:

"On the basis of the evidence available, we do not believe that there is a compelling case for intervening in this spectrum award in order to reserve capacity for high definition services on Digital terrestrial television."

Here is how to respond. ®

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