Licensing Local Television - Statement

How Ofcom will exercise its new powers and duties to license new local television services

Statement published 10|05|12, updated 15|05|12

Executive Summary


1.1 Three Orders have been passed by Parliament, which give Ofcom the necessary powers and duties to license a new generation of local television services.

1.2 Ofcom has consulted on how it would exercise these new powers and duties to create a licensing framework for local television. We set out our proposals before the Orders were passed so as not to delay the timetable for launching new local TV services. Our consultation Licensing Local Television was published on 19 December 2011 and closed on 19 March 2012.

1.3 This Statement concludes that consultation and sets out how we will advertise and award licences for, and regulate, the local television multiplex and local TV channels ('local digital television programme services' or 'L-DTPS').

1.4 Ofcom received 72 consultation responses, which are addressed in this Statement. As well as responses on our consultation questions, we also sought expressions of interest in the licences we were proposing to advertise. We received 87 distinct expressions of interest in local digital television programme service licences; and 3 expressions of interest in the local multiplex licence.

1.5 The L-DTPS licence is only for a service carried on this local multiplex, i.e. on digital terrestrial television (DTT). L-DTPS licensees may wish to distribute their services on satellite and/or on cable and/or online, subject to commercial negotiations. A separate Television Licensable Content Service (TLCS) licence would be required for any such simulcasts.

1.6 Alongside this Statement, we have published the formal Invitation to Apply for a Local Multiplex Licence and Invitation to Apply for an L-DTPS Licence for the first 21 locations.

Structure of the licensing process

1.7 The local multiplex licence and the L-DTPS licences will be interdependent, with the multiplex required to make capacity available in the relevant location for the local digital television programme service, and an L-DTPS licensee required to make its service available to the local multiplex.

1.8 We are advertising a single local multiplex licence which will carry all local services with a minimum coverage specification at 21 locations. It is for applicants for this licence to propose what additional locations they will cover, above the minimum 21.

1.9 Simultaneously we are advertising separate L-DTPS licences for each of the 21 locations in the minimum coverage specification.

1.10 Both the local multiplex licence and the L-DTPS licences will be advertised for a period of 13 weeks, with the closing date for applications on 13 August 2012. Ofcom will publish applications (minus confidential sections) shortly after the deadlines, and award licences as soon as practicable.

1.11 Any further locations proposed by the successful local multiplex licensee will then form a second phase of local service licensing.

Locations that the local multiplex licence will cover

1.12 We set out analysis suggesting that a minimum roll-out of 20 locations will be viable for the local multiplex provider in most scenarios. We did not receive any consultation responses suggesting this would not be possible.

1.13 We are adding Sheffield to the list of minimum locations. As the largest UK city not on our minimum list, it is very likely that any local multiplex licence applicant would propose it in their additional coverage, and we consider that its addition will not significantly alter the viability of the multiplex. By making it part of the minimum requirement, we can offer certainty to potential L-DTPS bidders.

1.14 So we are requiring that any local multiplex licence applicant must cover the 20 locations we proposed, plus Sheffield. There was at least one expression of interest in the L-DTPS licence for each of these locations.

1.15 We are now advertising L-DTPS licences for: Belfast, Birmingham, Brighton & Hove, Bristol, Cardiff, Edinburgh, Glasgow, Grimsby, Leeds, Liverpool, London, Manchester, Newcastle, Norwich, Nottingham, Oxford, Plymouth, Preston, Sheffield, Southampton and Swansea.

1.16 We are inviting applicants for the multiplex licence to propose additional locations to cover, over and above the first 21: the number of additional locations proposed will form one criterion for the award of the local multiplex licence. In our planning work we identified 44 other possible locations for local television, based on where it is technically feasible to provide a local TV service.

1.17 In response to our consultation we received expressions of interest from potential L-DTPS licence applicants for 28 of those 44 locations plus a further two locations that were not included on the original list.

1.18 For us to advertise an L-DTPS licence, it is necessary that coverage of the location by the local multiplex is technically possible, and that there is a potential L-DTPS licence applicant. Therefore, in proposing their additional coverage, applicants for the multiplex licence may select from:

1.18.1 the following 28 locations where Ofcom received an expression of interest from at least one potential L-DTPS licence applicant and where it is technically feasible to provide a service: Ayr, Basingstoke, Bedford, Derry/Londonderry, Guildford, Kidderminster, Limavady, Luton, Maidstone, Malvern, Stoke on Trent, York, Aberdeen, Bromsgrove, Carlisle, Dundee, Inverness, Middlesbrough, Reading, Scarborough, Stratford upon Avon, Tonbridge, Bangor, Barnstaple, Cambridge, Hereford, Mold and Salisbury;
1.18.2 the following 16 locations where we have determined technical feasibility, if the local multiplex licence applicant can demonstrate that there is a potential L-DTPS licence applicant: Burnley, Carmarthen, Dover, Elgin, Falkirk, Gloucester, Greenock, Haverfordwest, Haywards Heath, Hemel Hempstead, Keighley, Lancaster, Poole, Reigate, Shrewsbury and Telford; and
1.18.3 any other location where the local multiplex licence applicant can demonstrate technical feasibility and also demonstrate that there is a potential L-DTPS licence applicant. We have had expressions of interest in Leicester and Solihull but it would be for applicants to demonstrate interest elsewhere.

1.19 Any additional locations proposed by the successful local multiplex licence applicant, above the required 21, will become a binding coverage commitment in their licence, and we will advertise L-DTPS licences for them shortly after the first phase of licensing is complete.

Additional conditions and requirements for the local multiplex licence

1.20 We are requiring applicants to propose a timely build-out of the minimum 21 locations, with additional sites to be covered as soon as these are complete.

1.21 The local multiplex licence will be for 12 years, although wider spectrum developments that affect the whole DTT platform mean that we will reserve the right to vary or terminate the licence with no less than five years' notice. This is similar to other DTT licences and we would consult fully on any proposed changes.

1.22 The local multiplex must reserve capacity for the licensed local service at each site. It may additionally make any commercial use it likes of the additional capacity, which is sufficient to carry two other standard definition video streams. Any other services broadcast using this capacity would need to be licensed under the normal Broadcasting Act regime.

1.23 The local multiplex licensee will be required to co-operate with the individual service licensees, and with a body consisting of all local service licensees.

1.24 The local multiplex licensee cannot charge the L-DTPS licensee a carriage cost that exceeds the net operating cost to the local multiplex licensee of providing that facility. The legislation gives Ofcom a role in determining the sum to be charged by the local multiplex licensee in the event of a dispute regarding this cost. We have set out a broad approach to determining this sum, based on cost orientation. This is set out in more detail at 3.147.

1.25 Reference Offers for the provision of network access and managed transmission services published by Arqiva give an indication of likely transmission costs to any local multiplex licence applicant, although no applicant is required to use Arqiva for either type of service.

1.26 Any applicant for the local multiplex licence that relies on the available funding from the BBC Trust must demonstrate that they have satisfied any criteria that are necessary to secure this. Following award, the licence will not actually be granted until a grant agreement has been signed.

1.27 We have said that we plan to impose spectrum fees based on our administered incentive pricing (AIP) principles for television multiplex licences from the end of 2014 onwards; we would consider the effect of this on local TV and examine policy or regulatory changes that may be appropriate to address or mitigate any effects.

Local multiplex licensing process

1.28 We will assess applicants' proposals against the statutory criteria and Ofcom's general duties. These include the extent to which award of the licence would promote the development of local digital television; the extent of coverage proposed by the applicant, and the timetable for coverage build-out; the ability of the applicant to establish the proposed service and maintain it for the duration of the licence; and proposals by the applicant for promoting local digital television programme services. The assessment and licensing process is set out in more detail in the Invitation to Apply for a Local Multiplex Licence.

L-DTPS licence conditions and requirements

1.29 Local services will have specific content obligations, alongside general obligations that apply to all television broadcasters.

1.30 In usual circumstances the studio from which the service will be broadcast, and/or the main production base of the service, should be located within the licensed area.

1.31 L-DTPS licence applicants will need to describe their programming output and how it will satisfy the statutory criteria. They will summarise their local output in Programming Commitments, drafted as part of the licence application process. These will be written into the L-DTPS licence of the successful applicant and licensees will be held to these commitments.

1.32 Local services will be required to carry Party Political Broadcasts, and Ofcom will be consulting on its guidance on this obligation with a view to publishing a new set of guidance that includes guidance for local licensees, by the time any local services are broadcasting.

1.33 More broadly, we expect local TV services to engage with the local democratic process. The licence application form invites applicants specifically to consider what programming they propose in order to facilitate civic understanding and fair and well-informed debate through coverage of local news and current affairs.

1.34 L-DTPS licensees will have to comply with Ofcom's Broadcasting Code, Ofcom's Code on the Scheduling of Advertising, and the UK Code of Broadcast Advertising. They will need to comply with Ofcom's Code on Television Access Services setting out the requirements on subtitling, sign language and audio description (although we anticipate that most may be exempt from these requirements due to their audience share).

1.35 L-DTPS licensees will be specifically prohibited from broadcasting pornographic material and longer advertisements for a chat service made available for purchase by means of a premium rate service.

1.36 Any L-DTPSs not receivable outside the UK will be exempt from the advertising minutage restrictions set out in the AVMS directive (but not from advertising scheduling rules).

1.37 The Government has signalled its intention to lay new legislation to remove the requirement for local services to commission 10% of their output from independent production companies. This is an obligation on all broadcasters, and if not removed by a change in the law, will apply.

1.38 The L-DTPS licensee will need to make the service available to the local multiplex licensee at all times, at an interface point and in a specified technical format.

1.39 All Phase 1 services must be broadcasting within two years of award, unless coverage is not built-out at their location. In the period after licence award a launch date within this two year period will be agreed. We hope some services can begin broadcasting earlier.

1.40 Licences will be granted for a period such that they are coterminous with the local multiplex licence, because of their mutual interdependence. So the first 21 L-DTPS licences will be for up to 12 years, depending upon their exact launch date in relation to the local multiplex licence term. Any L-DTPS licence subsequently advertised will be granted for a shorter period.

1.41 L-DTPS licensees will be required to keep full recordings of their output for 60 days, and to complete a short annual return so that Ofcom can meet its statutory obligations to report on this emerging sector.

1.42 L-DTPS licensees must co-operate with each other, and with the local multiplex licensee, to facilitate the provision of local TV, and to participate in the formation of a legal entity which is intended to facilitate that provision. They are required to seek to measure the number of viewers of the service in co-operation with the legal entity, and to encourage that entity to apply or negotiate for a local multiplex licence, should one be advertised or become available.

L-DTPS licensing process

1.43 Ofcom will first establish that any applicant is eligible to hold a licence, then we will distinguish between applicants on the basis of how they compare to each other on the statutory criteria.

1.44 Applicants will need to present their programming proposition and also their business plan so that we can assess their ability to maintain the proposed service. We ask for a clear business plan and strategy for the duration of the licence, including financial information - budgets and funding - for set-up and the first three years of operation.

1.45 We invite applicants to set out aspects of their proposed local programming and scheduling as part of their application, including how much local programming will be in 'peak time', and how much broadcast material may be produced by a different organisation.

1.46 We are not setting quantitative requirements but we consider news to be the most important type of local television content. Applicants should propose a reasonable provision of news and current affairs, bearing in mind the public subsidy and public purposes of local TV.

1.47 As a guide, we will be unlikely to consider less than seven hours in total of broadcast news per week to be too burdensome for even the smallest L-DTPS licensee. This refers to duration of broadcast output, and we are open to proposals on how it may be scheduled, so long as a substantial proportion is during peak time. We will judge proposals in the context of the scale of operation, and resources available. We have taken on board comments on our news guidance, and sought to clarify it: we intend to be flexible but nonetheless to prioritise journalism-led news.

1.48 We ask applicants to propose a specific launch date. The proposed build-out schedule, when the local multiplex licence is awarded, will be compared with proposed L-DTPS launch dates and, as far as possible, these will be aligned following discussion between the parties.

Related processes

1.49 In relation to the positioning of L-DTPSs on the DTT Electronic Programme Guide (EPG), DMOL - the organisation responsible for the management and allocation of channel numbers on DTT - has set out proposals for consultation. The consultation closes on 24 May 2012.

1.50 Following responses we received which asked for greater clarity about the EPG position of any L-DTPS service that wishes to simulcast on satellite or cable, Ofcom has written to Sky, Virgin and Freesat asking for confirmation of the likely positioning on these platforms. We will publish the replies we receive on our website before L-DTPS applications close so that potential licensees can take this into account in their business plans.

1.51 The BBC has set out its proposed requirements and processes for both the local television multiplex funding and the purchase of content from L-DTPS licensees.