UK Digital Switchover Costs: Ofcom Report Questioned Again

ofcomwatch-logoMatthew Wall of the Sunday Times Doors section hammers Ofcom over the regulator’s recent report on digital switchover cost and power consumption issues. Wall labels Ofcom’s report a ‘dubious attempt to play down the true costs of switching…’

Read for yourself folks, but basically Wall claims that The Times / Doors estimates the digital switchover costs at about one billion GBP, while Ofcom’s report claims a ‘pie in the sky’ figure of 572 million GBP. The tone of Matthew Wall’s piece is aggressive and he suggests Ofcom is deliberately playing down the true costs of digital switchover.

My comments: Wall needs to be careful in his accusations. Ofcom did not author the report at issue. Instead it was authored by Scientific Generics. While I don’t know if this is the case with this particular report, in the past Ofcom has published third-party research without endorsing the conclusions contained therein. In particular, Ofcom’s recent third-party produced report on the Television Without Frontiers Directive proposed revisions was merely put on the internet as an interesting report for public viewing and comment. The regulator informed me that the TVWF report was useful third-party data but did not contain Ofcom’s views, per se.

UK Digital Switchover Costs: Ofcom Report QuestionedThat being said, Ofcom need to do a better job at handling third-party research. Some suggestions:

1. These types of reports should be tendered in a public manner. How do these research projects get sourced? I’d like to know…

2. Ofcom should publish how much it pays for these types of reports. I’ve mentioned this before and the reasons Ofcom gives for not reporting how much this research costs are not convincing.

UK Digital Switchover Costs: Ofcom Report Questioned3. The significance (or lack thereof) of these reports should be plainly stated. Similarly, if Ofcom is not necessarily endorsing a particular report’s conclusions, it should plainly state that fact. An ‘evidence-based’ regulator should be very clear as to how it treats these findings made by third parties. If the Scientific Generics report is not endorsed by the Ofcom Board, but it is merely one of many research inputs on the issue of digital switchover costs, then Walls’ claims are clearly overstated. However, it’s hard to blame the press when reports like these are published on the Ofcom website with no disclaimers, giving them the imprimatur of Ofcom approval.

On the merits, I think people should stop bellyaching about the cost of digital switchover. No expert can seriously claim to accurately predict the true cost: Qui numerare incipit errare incipit (He who begins to count, begins to err). Anyway, the cost is not the real problem – the real problem is that Freeview stinks as a platform and Wall is correct when he observes that the U.K. government tends to assume it is the standard of the future. But that’s just my opinion.
Russ Taylor writes for OfcomWatch

Free Speech In Advertising?

Background – Make Poverty History had its last TV advertising campaign, widely know as the finger-click advert, removed from the UK’s TVs by Ofcom, citing political advertising.ofcomwatch-logo

Tamsin Allen (pictured below) has a thought-provoking piece on page six of today’s MediaGuardian (Sadly we can’t link to it as they are a subscription-only service, but it’s on page six of the printed version).

Tamsin AllenPartially arguing against the UK ban on advertising by organisations that attempt to “influence public opinion on a matter of controversy”, she says her group will challenge the ban. Allen is right in some respects when she says:

Oil companies can spend thousands on vanity advertising to convince us that the environment is safe under their stewardship but Greenpeace is not allowed to contest that view in the same media.

My reaction:
Tamsin Allen also misses the point in certain ways. Allen’s same logic of unfairness also applies to political party messages, but she discards them into some lower class of speech than (oddly) animal rights. That is wrong. If a group of interested persons – whether organised as a political party or not – want to get a certain message across to the UK populace and that message is otherwise legal, it should be permitted. Picking and choosing the nature of the permitted topic (animal rights, environmental issues, etc.) seems as arbitrary as the current system.

I don’t mean to be flippant about Allen’s cause, but do we really want the aborted ‘My Mate’s a Primate’ ad campaign to be the poster-child for this issue?

The whole ‘we don’t want to end up like the US’ tone he starts off with is just silly. So much of misguided thinking on British media policy is a reaction to some perceived deficit in the US system. Straw man thinking.

If you want a reasoned view of the US system, just click on the Becker-Posnerblog – they covered this precise issue yesterday. Becker notes,for example, that the $4 billion spent in the 2004 US campaign is quite small compared to the $200 billion annually spent by commercial advertisers.

There’s a convergence point here somewhere. Oh, it’s with the Conservatives. And the Labour Party. And even the Respect Coalition! So, like so many other debates we are witnessing, the regulatory scheme developed in 2003 is already out-of-date in many respects.

Russ Taylor writes for OfcomWatch.

iTunes 6 Tested: Your Next TV Supplier?

Russ takes us those who haven’t got a US credit card through iTunes 6 with the downloading of video and contemplates its impact.

iTunes 6 Tested: Your TV Supplier?I’m sure by now everyone has heard that the new version of Apple’s iTunes (version 6) permits the U.S. user to download music videos and television shows (the U.K. user gets the music videos, but not the television shows). Apple’s announcement, released yesterday, says:

iTunes 6, the next generation of the world’s most popular music jukebox and online music store, lets fans purchase and download over 2,000 music videos and six short films from Academy Award-winning Pixar Animation Studios for just $1.99 each. Customers can also now purchase and download their favorite television shows from iTunes the day after they air on TV, watch them on their Mac or PC and Auto-Sync them onto the new iPod for viewing anywhere.

So, I tried it today. Here’s a snapshot of my experience and my hastily-drawn conclusions for media and communications policy.

My experience:iTunes 6 Tested: Your TV Supplier?* I downloaded and installed iTunes6. Takes 5-10 minutes. No big deal. iTunes6 has the same basic interface and purchasing/sampling system as previous versions of iTunes.

* I do not own the new video-ipod. Some of the press coverage makes it sound like the video-ipod is required to enjoy the video downloads. It’s not – you can play them on your PC or laptop.

* The product selection is not bad, for the second day of availability. There were episodes from 5 Disney TV shows available (including Lost and Desperate Housewives) and what looks like hundreds if not more music videos. There were also 6 Pixar films available. I think they are short films. By the way, the ‘Apple Music Store’ is now a misnomer.

* I purchased two items for about $4.00 – a music video (All These Things That I’ve Done, by The Killers) and an episode of Disney’s Desperate Housewives (first episode of season 2). I don’t mind paying $1.99 for a music video (something that I will likely play frequently), but it’s a steep price for a television episode that I might never watch again. I suppose it depends on the product selection and whether sports and news ever make their way on to this service.

iPod With Video; New iMac; FrontRow; iTunes 6: Apple Summary* File sizes: Killers video: 20.1 mb; Desperate Housewives episode: 208.6 mb. Both were MPEG-4 video files.

* Both downloads completed in about 2 minutes each. I’m on a high-speed connection, and obviously times will vary depending on what’s under your PC’s hood.

* Both video products were of good—but not great—quality and played in what looks like a Quicktime video window. You can manipulate the screen size, so smaller screen = better quality.

* Unlike the BBC’s interactive media player (IMP), I ‘own’ these videos and may keep them on my PC just like music files for as long as I want. The IMP really seems to serve a different purpose and seems more like a DVR than the Apple product. We’ll see.

Hastily-drawn policy conclusions:* The EC should put off serious consideration of any proposed revision of the Television Without Frontiers Directive for at least one year. The EC should see where the market heads before acting. Really, folks, it’s absurd for an intelligent regulator to be developing ex ante rules that may be seriously missing whatever developments occur in the marketplace. Viviane Reding might want to rethink her linear / non-linear distinction if the marketplace offers nothing much by way of linear services, or offers something that is not easily pigeonholed into a category being created at this time. Ms. Reding’s actions may actually have the Oedipus-effect of encouraging IPTV players to avoid linear products. Madness.

* I attended an IPTV conference earlier this year and the focus was completely on telcos offering IPTV service (in a triple play with internet and telephony) that resembles a cable or satellite offering. Well, Apple’s not a telco and iTunes6 does not resemble a traditional multichannel video offering. Same for Major League Baseball, the other important IPTV offering available at this time. Again, we’ll see what happens.

* Broadband, broadband,broadband. The number one priority for policy-makers should be to get faster, cheaper broadband to more areas of the country. With these types of services and free PC-to-PC VoIP, is there any policy goal more important than broadband if you really have the interests of consumers at heart?

iTunes 6 Tested: Your TV Supplier?* I’m sure there are some underlying copyright / “rip-off Britain” issues at play here. I’m just not smart enough to figure them out. But there is a problem when the popular television shows are not available on iTunes-UK and the same music video is 1.89 GBP or about $3.30 – that’s $1.30 extra for each music video that UK customers must pay.

* Public service broadcasters (PSB) in Europe beware. The ‘quality and universality’ arguments you’ve made over the years to avoid true competition are about to be seriously put to the test.

UPDATE: I forgot to mention that the Desperate Housewives video had no adverts in it. There appeared to be quick gaps where adverts would normally be placed.

Ofcom’s BT statement – Legal Issues Examined

Following hot on the heals of yesterdays Ofcom’s notice to BT, under Section 155(1) of the Enterprise Act 2002, Russ Taylor of OfcomWatch takes us through the legal issues.

Ofcom's BT statement - Legal Issues ExaminedOfcom released the details of the BT settlement.

Folks, here are the key takeaways / open issues as I see them from a legal perspective:

* This is essentially a consultation on whether BT has promised enough (‘undertakings’ – spelled out in Section 2 of the document) to avoid referral of this matter to the Competition Commission. Ofcom concludes that BT has, and asks for public comment until August 12, 2005.

* Section 4.14 of the document is the key allegation, and check-out the indirect wording on Ofcom’s part! Ofcom basically say that BT had the incentive to engage in anti-competitive conduct, and later say that it suspects BT ‘may have acted in accordance with the incentives set out above.’ Is that Plain English? Even the title of Section 4 is non-confrontational… referring to the problems of the market, rather than problems with BT.Ofcom's BT statement - Legal Issues Examined

* Annex E is the basic document (the Annexes are here). It is the proposed agreement between BT and Ofcom. It specifies the undertakings. It looks to me like the Access Service Division (ASD) CEO reports to the BT CEO. So, presumably, the BT CEO can terminate the ASD CEO? That’s not exactly ‘separation’. And more importantly, it does not square with the classic definition of a CEO.

* It’s a lengthy document, and I’ve only skimmed it, but the missing element–in my opinion–seems to be a clear dispute resolution / problem solving element of the undertakings. In other words, what happens if BT shirks its duties, or there is a dispute about one of the undertakings. Are the undertakings self-enforcing? I don’t think so. Sections 12 through 17 of Annex E purport to cover this ground, but I think they are vaguely worded. Section 14, in particular, seems to merely allow BT and Ofcom to agree to disagree, and has no real teeth other than Ofcom’s ability to declare BT in breach of the undertakings. But what then? Does Ofcom then have the power to fine BT? I don’t think so – I think a breach would require Ofcom to go to court to secure a remedy… or threaten another referral? So, would communications policy decisions then rest in the hands of a court? Why didn’t Ofcom require BT, as part of its undertakings, to waive court procedures and agree to a schedule of monetary penalties, etc.Ofcom's BT statement - Legal Issues Examined

* I also recall that Ofcom initially said that third parties would be able to secure relief under this settlement–for their losses caused by BT’s breaches of the undertakings. How does that work? This element of the scheme seems to be completely missing from the documents.

* Finally, what happens if BT merges with another entity to which these undertakings do not apply. I’m confused… Overall, I think the document accomplishes much by way of technically sorting out a way to limit BT’s market power. But from a legal perspective, it needs some more thought.

* * *

This should be an interesting consultation… stay tuned…

Russ taylor is a co-founder of OfcomWatch

OfCom Response To DCMS Green Paper on BBC Royal Charter: Comment

OfCom Response To DCMS Green Paper on BBC Royal Charter: CommentOfcom’s press release accompanying their response to the DCMS green paper on BBC Royal charter was my first point for comment. It initially indicated to me Ofcom were sticking to:

* An institutional model of PSB (BBC fully-funded, cornerstone of PSB, key role in digital switchover, all things to all people, etc.);

* The much-derided PSP concept; and

* ‘The BBC is independent’ myth (Note the irony – this statement is otherwise contained in a document related to how the government will establish the funding, governance and remit of the BBC).

I wondered if I was being a little too hard on Ofcom. If there was original, evidence-based thinking in the document?

Once I’d had the opportunity of read through the whole document, combined with the benefit of reflection, my views changed slightly, leading me to the following conclusions.

1. Ofcom have produced more original thinking than I gave them credit for, initially, perhaps because the introduction and summary to the document are not as robust as its contents. Read on…

2. That being said, Ofcom in its response still embarrassingly clings to the discredited notion that PSB must be fostered by significant and prolonged state intervention in the form of subsidy. I agree with the Financial Times on that point. Will there always be a need for a multi-billion pound state subsidy to this sector?

3. Much of Ofcom’s thinking stems from a very questionable line of logic. Ofcom posit that PSB is in danger of becoming a BBC monopoly because the ‘implicit’ subsidy given to ITV and Channel Five is disappearing as the move to digital is underway. This line of argument is contained in Sections 2.4 through 2.11 of Ofcom’s response. I’ve never been convinced by this argument for two reasons: (i) recent empirical research by the Satellite and Cable Broadcasters Group (SCBG) demonstrated that PSB is being provided in abundance in the digital world without any subsidy and (ii) Channel 4 provides PSB and makes money. Ofcom’s statements–actually they are more like predictions–on this point have simply been unconvincing.

4. Someone should actually listen to what the SCBG has to say. These providers don’t receive scarce spectrum, don’t have must-carry status, and don’t receive public funds. Yet SCBG say their members produce 14,000 hours of PSB programming per month—more than all the terrestrial channels combined. The SCBG say:

[I]n the majority of programme genres that Ofcom defines as “public service broadcasting”, channels other than the BBC’s now provide most of the UK output: more than 60% of news and current affairs, more than 90% of documentaries, more than 80% of arts and music programmes. It follows that publicly funded broadcasting should now be limited to services, or to a quality of service, that the private economy cannot provide or would not provide in the absence of competing public subsidy.

OfCom Response To DCMS Green Paper on BBC Royal Charter: CommentThis reflects the EU rules governing the use of State Aid, which require that publicly funded services such as the BBC’s must complement rather than substitute or duplicate provision by the market. Furthermore, where market developments supersede publicly funded provision, the BBC should withdraw from those services or activities and re-direct its valuable public resources to areas of activity where there is a proven market failure. While market failure should not be the only test applied to BBC services, it should provide the underpinning for all publicly funded BBC services. The absence of a market failure analysis raises significant questions as to the compatibility of the BBC’s publicly funded status with European State Aid rules.

5. Give Ofcom some credit – if the SCBG is wrong and instead Ofcom’s thinking is correct and PSB does require massive public subsidy, at least they have it right that the public subsidy should not all go to the BBC. Ofcom also propose a responsible structure to apportion that subsidy.

6. Give Ofcom more credit – they are keen to point out that the BBC’s role in the digital switchover process should not mean a government preference for Freeview over other digital platforms. Ofcom say the switchover should be platform neutral. Amen. Freeview stinks – I recently heard an influential observer charitably call it a ‘transitional technology’, and that’s really about the best you can say for it. Its capacity is limited; it’s not two-way; it has no worthwhile gaming applications, etc.

7. One more area where Ofcom deserve credit – suggesting to DCMS that it consider moving the review date for PSB funding to 2010 instead of post-digital switchover. Ofcom rightly realise that this is a fast-changing area and an earlier review will serve the public interest.

8. Finally, Ofcom say they want an ‘enhanced’ license fee for British viewers. An ‘enhanced fee’ – that can’t be a good thing, right? How much more will that cost us?

Russ Taylor is a co-founder of ofcomwatch.

Review of the BBC’s Royal Charter – Ofcom response to the Green Paper
Ofcom publishes response to Government Green Paper on BBC Royal Charter Press Release
BBC Charter Review

Ofcom R18 Ban: Comment

Ofcom R18 Ban: OpinionFollowing Ofcom publishing its new broadcasting code earlier this week, Russ Taylor of ofcomwatch outlines his reasons for disliking the R18 ban. He makes good points about the difference between IP delivered content and that which is broadcast. Simon

I’m going to stop banging-on about the Ofcom R18 ban (eventually), but I thought I would share a few thoughts about the decision:

1. The reaction to the R18 ban (or lack of reaction) says alot about the British system of content regulation. The decision–from an economic standpoint–is a significant and highly intrusive market intervention by Ofcom that creates winners (licensed sex shops, internet porn sites, future IPTV players) and losers (cable and Sky). Adult content flows through the UK. Ofcom’s decision has not stopped that flow–it has redirected the flow. So, while I use the term ‘ban’, that doesn’t quite capture the economic reality of what happened as a result of Ofcom’s decision.

2. The decision also has a social impact: There was straight, uncritical reporting of the ban in the trade press. Privately, some people have told me that they thought the Ofcom research was shoddy. In fact, one former content regulator told me he was ‘angry’ with the decision. But, there seems to be a general intellectual consensus that there is a difference between ‘freedom of expression’, championed by British academia and the likes of the Guardian, and ‘porn-campaigning’ which is some lower form of freedom.

3. Ofcom’s reputation was going to be damaged no matter what it did on this issue. If the regulator permitted R18 content, there would have been a firestorm. If the regulator banned it, the flimsy reasoning used for the ban would be attacked. One decision (a lift of the ban) would have been evidence-based, the contrary decision (maintaining the ban) would have been political. Ofcom is a utility-maximiser and went with the route with the least amount of pain. That’s how I see it. I’m willing to be convinced otherwise – by Ofcom or others… so feel free to write us and share an alternative opinion.

4. Speaking of flimsy reasoning, the ‘PIN protection’ argument advanced by Ofcom has been universally castigated–by those willing to speak out–as weak and illogical. Of course it is. Many adult activities, such as driving, voting and the viewing of adult content, are restricted to minors, and those restrictions are sometimes porous. Underage minors have always done things that they are not supposed to. That possibility, however, has never been used to restrict the freedom of adults. Until now.

5. In any case, minors will still access R18 over the internet or by raiding their parents DVD collection. God forbid, they will probably also create their own R18 content! So, the regulation is mostly ineffective. The regulation is also not platform or technology neutral. I suspect Ofcom will be successfully challenged on this extremely weak (and non-converged) justification for its decision. But going back to my point no. 3, above, it is a better political route for Ofcom to have a judge tell them the ban cannot stand. It is also a better political route for Ofcom to maintain a ban that is ineffective.

6. I’m concerned that the LSE research on R18 harms and the YORG research on PIN protection were held and not released until the day that the code was released. Matt Peacock of Ofcom previously posted on OfcomWatch and stridently indicated that Ofcom does not tactically time the release of documents. But I was told by LSE that there research was completed in early March. Why was it not made available to the public until May 25th — too late to attack the flimsy reasoning behind the R18 ban? Perhaps Ofcom can shed light on this.

Russ Taylor is a co-founder of ofcomwatch.