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The smart choice: opportunity from uncertainty

Comment Even at the second time of asking, digital TV has been a commercial flop. That's not surprising when taxpayer-subsidised broadcasters are given valuable spectrum. It's time Ofcom admitted this and gave Sky the chance to revitalise the market.

Here's why.

The UK, probably more than any other country in Europe, has a very healthy mix of consumer options for TV. However, 90 per cent of viewing is for the five main public service broadcaster (PSB) channels: BBC, ITV, Channel 4 and Five. The public still associates the digital TV platform (DTT) with these old analog channels - even though 85 per cent of the population views them via digital.

In October 2002 when Freeview was launched there were 22 channels of which only seven (Sky Travel, Sky Sports News, Sky News, TMF, The Hits, TV Travel Shop and QVC) were from non-PSB sources; whereas today there are 41 channels with only 12 being from non-PSB sources.

(Please note, I am including the state funded Community Channel and Teachers TV in the PSB sources. I am also including the jointly owned BBC and Virgin Media channels, UKTV History and Bright Ideas in the PSB source.)

Of the non-PSB channels, six fall into the "t-commerce" category (QVC, Thomas Cook TV, Ideal World, Smile TV, PriceDrop TV and Bid TV), two are music channels, TMF and The Hits, one is from Virgin Media, and three are from the Sky family.

Furthermore, for non-PSB owners it appears that life is really tough. The Disney-owned general entertainment based abc1 channel has been withdrawn; Emap has sold 50 per cent of all its TV business to the allegedly skint and needing a further public subsidy Channel 4.

It appears that it is very difficult to make a channel pay on the basis of advertising funding alone, especially when you are competing against the PSB for advertising spend. ITV plays on this point in presentations to the City: advertisers pay a premium for mass market audiences. Of course, it helps even more when the PSBers are gifted their spectrum and non-PSBers have to pay for their capacity.

Basically, over time more and more of the DTT capacity is being used by the PSBers and diversity is shrinking rather than growing on the platform.

Ofcom's answer to this is to put its head in the sand and instead ask questions about whether Channel 4 needs yet more state subsidy, when it is using allegedly scarce and incredibly valuable capacity to run channels like C4+1, E4+1 and F4+1. Also, whoever regulates the BBC allows them to bleat about budget cuts (while the actual licence fee increased) - while they are busy buying travel content company Lonely Planet and blowing millions on an fatally flawed internet distribution platform.

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