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Digital Local - Options for the future of local video content and interactive services

Research Published 19|01|06

Executive Summary

Background and objectives

  • This report contains the findings of a programme of research and analysis into the future prospects for digital local video content and interactive services, conducted by Ofcom between June-December 2005.
  • Local news, information and entertainment media services have existed in the UK since the first newspapers were established in the 17th century. Radio has contributed strongly in the past 40 years. More recently, the growth of digital content platforms has created a new impetus behind the development of video content and interactive services targeted at specific geographic communities. These services have the potential to create significant citizen and consumer benefits.
  • Ofcom’s remit in this area is twofold. First, in carrying out our duties we are required to have regard to the desirability of promoting the fulfilment of the purposes of public service television broadcasting (PSB). In our first statutory review of PSB carried out in 2004-05, we identified local TV as a potentially important element of the future PSB mix, serving audience needs that were not fully met by the current blend of national and regional broadcasting. However we also recognised that the economic viability of local services was not established and that audience demand for them had not been adequately assessed. We undertook to carry out more work on the prospects for digital local content services as part of our follow-up to the review.
  • Secondly, and more specifically, if a new licensing regime is required for digital local TV services, it would be Ofcom’s responsibility to develop and implement it, following an order from the Secretary of State for Culture Media and Sport. It is therefore incumbent on us to understand the likely future market for digital local services and the viability of alternative models, in order to inform the planning of any such regime.
  • Our approach has been to start with a blank slate. The emergence of mass-market digital technologies opens up new opportunities for the provision of services that would have been technically impossible as little as ten years ago. The need is to understand what local content and interactive services could be in future, rather than what they are now, or have been in the past.
  • Research suggests that local services continue to matter to people, despite technological, social and cultural changes in the last 20 years that might have been expected to reduce our attachment to locality. Digital local content could deliver a range of benefits in future, including more relevant local news, improved access to local services, better consumer information and advice, stronger involvement in community affairs, enhanced democratic participation, greater capacity for individuals and local organisations to make and distribute their own content, support for local production and training, and advertisers’ access to local markets.
  • We are in the early stages of a period of experimentation with digital local content services in the UK. A wide range of organisations including local and national media groups, community organisations, national broadcasters, local authorities and regional development agencies (RDAs) are exploring the potential for digital technologies to deliver enhanced content services to communities ranging from the very small (a few thousand households) to relatively large (metropolitan areas with a population of one million or more).
  • As digital technologies roll out, further new services will become possible. Broadband, with its powerful interactive and on-demand capabilities, will be particularly important. At present most broadband services are available through computers or other web-enabled devices, and many local operators – including ITV and the BBC – are already taking this approach; but the availability across the UK of services delivered via internet protocol to TV sets within the next year or two offers significant new opportunities for the future.
  • We welcome this innovation and diversity and would like to see experimentation continue, with different services designed to meet the needs of different communities and new entrants adopting new approaches.

Options for public policy

  • We do not at this stage suggest that any specific policy or regulatory intervention is required or justified in this emerging market. Our principal objective here is to contribute research and analysis to help inform the wider debate about the future of local content services, rather than to set out new policy proposals or regulatory initiatives, which would require consultation.
  • However, our analysis implies that it is possible that there is a case for public investment to support the delivery of local services that meet public purposes, although it is difficult to quantify the likely benefits of digital local content services at this early stage. We propose five public purposes for local content services, based on a version of the wider purposes of public service broadcasting identified in the PSB Review, adapted for local content.

The public purposes of digital local content and interactive services

  • To inform ourselves and others and to increase our understanding of the world through news, information and analysis of current events and ideas, with particular focus on issues relevant to our locality
  • To stimulate our interest in and knowledge of arts, science, history and other topics, particularly those relevant to our locality, through content that is accessible and can encourage informal learning
  • To reflect and strengthen our cultural identity, particularly that based on shared local identities, through original programming at local level, on occasion bringing audiences together for shared experiences
  • To make us aware of different cultures and alternative viewpoints, through programmes that reflect the lives of other people and other communities, especially those within our local area
  • To support and enhance our access to local services, involvement in community affairs, participation in democratic processes and consumer advice and protection
  • Our economic modelling indicates that commercially-funded local services could be sustainable in a digital environment, using all major distribution platforms to maximise reach and impact. However, commercial services are only likely to be viable in larger metropolitan areas, and are likely to have limited scope for commissioning high-quality local original content that could help meet these public purposes. Other services are likely to rely to a greater or lesser extent on support from public agencies or community organisations.
  • There may, therefore, be a prima facie case for exploring ways of supporting the development of local content services that help meet public purposes. There are two broad options which we believe merit further consideration. Note that further cost-benefit analysis of these options would be required before any policies could be pursued on a nationwide basis, and the impact of these options on existing local press, radio and online markets would also need to be carefully assessed.
  • If the case for supporting local services were established, one option would be to ask the BBC to develop local services that meet public purposes. The BBC has already indicated its willingness to take on this role, and has developed proposals of its own, with a pilot project already in operation. These proposals will need to be reviewed by the public value test and market impact assessment that have been proposed as part of the BBC’s post-Charter Review governance arrangements, but notwithstanding the results of those reviews, the BBC’s role in delivering local content is likely to be critical. It has an unrivalled local newsgathering infrastructure and a strong, trusted brand to help its local services achieve reach and impact.
  • On the other hand, the BBC’s local plans could discourage or crowd out other potential providers of public service content, leaving the BBC as the sole intervention in the local content market. There is a risk that this might stifle the innovation which is beginning to take place, while the BBC’s plans may not be sufficient to deliver all the potential public benefits of digital local content.
  • The second option is to explore ways of supporting the development of a range of other services, provided by both commercial and community providers, either as a complement to BBC services or delivered in partnership with them. The goal would be to create flexibility for local providers to develop services tailored to meet different communities’ specific needs, within an overall strategy designed to meet public purposes in the most appropriate and cost-effective way in each area.
  • Ways of supporting the development of other services could include:
    • Limiting the BBC’s involvement to give maximum opportunity to commercial and community alternatives;
    • Reallocating some of the public funds earmarked by the BBC for its local services to other providers, possibly via a contestable fund;
    • Asking the BBC to develop partnerships, for example making content and training available to independent providers, or commissioning and distributing more content and services from independent providers;
    • Providing central funding for services that meet public purposes, for example through a Community Media Fund or Public Service Publisher;
    • Local funding, by local authorities, RDAs or national development bodies in Scotland, Wales and Northern Ireland;
    • Offering licence benefits to qualifying operators, such as requiring cable operators to carry licensed services, or ensuring due prominence on electronic programme guides;
    • Providing planned access to spectrum for digital terrestrial services.

Ofcom’s role in the management of spectrum

  • Many of these options for the future are for Government to consider, not Ofcom. However, Ofcom has a specific statutory duty to ensure the optimal use of the radio spectrum, which includes considering whether and how spectrum should be made available for digital terrestrial television (DTT) services. Although our analysis suggests that digital local services can make a contribution to public purposes, this does not automatically make them the best possible use for spectrum. Spectrum is and will remain a relatively scarce resource, even after digital switchover, and there are a range of alternative uses for the areas of spectrum that have been identified as appropriate for local television broadcast services.
  • The process of identifying how the spectrum released by digital switchover should be awarded is only just beginning. Ofcom has recently launched its Digital Dividend Review, a major project to examine the full range of options arising from the release of spectrum afforded by the digital switchover programme, which we will carry out over the next year. This work needs to be completed before we can come to a final view on the various options for the delivery of local content on digital terrestrial television.
  • We will therefore assess any potential basis for intervention in the allocation of spectrum as part of the work to be carried out under the auspices of the Digital Dividend Review. If any spectrum were to be reserved for local services, as the result of intervention in the allocation of spectrum, a dedicated licensing regime would probably be required, with Government issuing an order under section 244 of the Communications Act 2003.
  • Regardless of the outcome of this assessment, we will seek to ensure that at least some of the spectrum available after switchover will be auctioned in a way that does not unduly prevent or disadvantage participation in that auction by independent local operators.
  • Although there is no automatic continuation for existing analogue services into a digital environment, we recognise that the timescale for this ongoing work creates continued uncertainty for those going concerns broadcasting in analogue using Restricted Service Licences (RSLs). We will therefore offer to existing local RSL holders the right to extend their licences until the start of switchover in their region. This should give them sufficient time to plan for the future once they have more information about whether any spectrum can be reserved for local services, and on what terms, which should be available by the end of 2006.

Next steps

  • Ofcom will take forward its assessment of the prospects and potential role for local content and interactive services, in our continuing work on the future of public service broadcasting, and in the Digital Dividend Review. We will offer RSLs the opportunity to extend their licences immediately and continue to discuss with them, and other stakeholders, the options for the future.
  • To help inform the wider debate about the future of digital local content services, we also intend to commission further research into the impact of existing local services and viewers’ attitudes towards those services.
  • At the same time, the BBC, ITV and others are piloting new approaches, which will provide a wealth of useful information. The Government may also wish to consider whether and how to create a new licence class of local services broadcasting in digital form via a television multiplex, using the powers granted to the Secretary of State in the 2003 Communications Act.
  • Taking these developments together, we suggest that a possible programme of work on local content services over the next two years, for us and others, would be as follows:
    • Ofcom offers opportunity to extend licences to current holders of local RSLs: early 2006
    • Ofcom carries out further research into audience perceptions and use of existing local content services: Jan-Jun 2006
    • BBC carries out West Midlands pilot: Dec 2005 – Aug 2006
    • Public value test and market impact assessment of BBC proposals: Aug-Oct 2006
    • Ofcom carries out Digital Dividend Review and advises on availability of spectrum for local services: Jan-Dec 2006
    • Government assesses policy options and considers whether and how to support local services on all digital platforms: Jan-Dec 2006
  • There are a number of possible platform solutions to local services. One of those might be for the government to establish a local TV licensing regime for DTT. If this is its preferred solution, then a number of further steps would be required. We suggest one possible timetable could be as follows:
    • If required, Government consults on order for local TV licensing regime for digital terrestrial services: early 2007
    • If required, Ofcom develops licensing regime according to terms of Government order and consults on spectrum allocation process for local digital terrestrial services: first half 2007
    • If required and where appropriate, first DTT local licences advertised and awarded in selected areas: second half 2007
  • Outside of the specific contexts of BBC activity and licences on DTT, we anticipate that development of local content services will continue strongly throughout this period and beyond.

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