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Freeview telly channels face £240m-A-YEAR shakedown by Ofcom

Watchdog keeps death of broadcast TV by 2026 on track

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Freeview broadcasters in the UK face annual fees that could add £240m a year to Blighty's coffers by 2020.

Ofcom wants to, effectively, charge telly stations every 12 months to transmit over the airwaves, just like mobile phone networks must regularly cough up cash to continue using their licensed radio frequencies for chatter and data.

If the communications regulator gets its way, it will extract at least £10m for each Freeview multiplex. A multiplex, in simple terms, is a bunch of channels: the BBC spans two multiplexes, while Channel 4, Channel 5 and ITV share one, for example. There are six multiplexes in total in the Freeview spectrum, and the fees are expected to be split between the broadcasters.

But that proposed annual charge could jump to £40m per multiplex, adding up to £240m a year, if the channels can't be shifted out of the way to make more space for 4G mobile broadband.

The so-called Administered Incentive Pricing (AIP) system put forward by Ofcom will be applied to any radio spectrum that was allocated (such as the Freeview frequencies) as opposed to spectrum that was auctioned (namely, the 3G and 4G mobile internet licences).

AIP is built on the assumption that companies that didn't pay for a slice of the airwaves have no incentive to use it efficiently. The scheme has already been applied to the Ministry of Defence, forcing the military to take a careful look at its portfolio of radio spectrum and release quite a bit of it, pushing light aircraft towards using narrower bands.

More controversial has been the application of AIP to the coastguard and mountain rescue teams, who argued that the payments will cost lives, although the government covered most of the expense. But applying AIP to Freeview could prove even more difficult as it's hard to see how it can survive.

So, whose round is it is?

AIP is calculated by working out how much it would cost to clear the spectrum, and who else would like to make use of it. Ofcom hired Analysys Mason to do the maths, and its staff looked at Freeview bands (470-550MHz and 614-790MHz) and the White Space spectrum being allocated to small-area telly stations ("Local TV") and DAB radio (which runs 211-239MHz and 174-176MHz).

The analysis (PDF, woefully long) concludes that White Space and DAB are all but worthless - no one else wants them - but TV broadcast bands are quite valuable so the AIP is entirely appropriate for that region.

So we come to the cost of clearing it: the top band can be emptied by shuffling Freeview transmissions down the dial (as already proposed by Ofcom) and that's the most valuable as it's already being used for 4G/LTE mobile broadband in the Americas and will likely be harmonised across Europe too.

Clearing the rest means moving everyone onto Freesat, or squeezing the transmissions into MPEG4 and DVB-2, or rebuilding the entire broadcast network as a single-frequency system, all of which would be hugely expensive and disruptive, much to the delight of Sky, Virgin, NetFlix and other internet-based outlets.

Assuming Freeview TV can be shuffled down the dial by 2018, as proposed, Analysys Mason put the value at £11.9m per multiplex per annum, and about four times that if the upper band can't be cleared. Ofcom rounded that to £10m a year and wants to start charging at the end of 2014.

It won't start the full rate: initially Ofcom will only seek to recover the costs of regulation, but AIP will kick in come 2020 and then ramp up to that £60m-a-year figure over the following five years (adjusted for inflation, naturally).

There will be another consultation later this year on the cost-recovery rate that Freeview will have to start paying in 20 months, and further consultations on the exact ramp-up rate following 2020; the writing is clearly on the wall for terrestrial broadcasting, which is having a hard enough time without being hit with another annual expense.

Freeview - the organisation that runs the free-to-air telly spectrum and provides the electronic programme guide - doesn't have cash sloshing around to spare, so any charges from Ofcom are expected to be passed onto the broadcasters using the frequencies.

The programme-making and special events (PMSE) crowd had similar problems when its use of microphones was threatened: PMSE techies don't make much money, relatively speaking, certainly not enough to pay for the spectrum they use, but PMSE contributes to UK theatre and TV businesses, and helps bring in tourists who stay in hotels and eat in restaurants.

With hard lobbying and celebrity support, the PMSE people won a stay of execution, a new wireless home and some money to cover the costs of the transition, but the reprieve isn't permanent; the spectre of AIP still hangs over the PMSE industry just as it hangs over broadcast TV.

Back in 2009 a team working for Ofcom did some crystal-ball gazing and predicted that the UK's terrestrial TV network would be switched off in 2026, which now seems surprising prescient until one remembers that it's Ofcom's proposals (PDF, not as interesting as they sound) that'll price it out of the market. ®

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