Licensing Local Television

Summary

Background

1.1 Following the Government's statements of policy in A new framework for local TV in the UK, Local TV: Pioneer locations, and Local TV: Making the vision happen, it has laid three Orders before Parliament that, if they enter into force, would create a statutory framework for local television. These are the Local Digital Television Programme Services Order ('s.244 Order'), the Wireless Telegraphy Act 2006 (Directions to OFCOM) Order ('s.5 Order') and the Code of Practice for Electronic Programme Guides (Addition of a Programme Service) Order ('s.310 Order').

1.2 Respectively, the Orders would create a framework for licensing a new class of television services; direct Ofcom to reserve spectrum for these services; and establish the status of these services in relation to Electronic Programme Guides (EPGs).

1.3 Ofcom is consulting now so that we can advertise licences as soon as possible. The proposals in this document are based on the Orders being passed by Parliament, and all are conditional on that happening. If the Orders were not passed, Ofcom would withdraw this consultation and give notice to this effect.

Structure of the licensing process

1.4 The s.244 Order creates a class of licences called 'local digital television programme service' (L-DTPS) licences. It also modifies the statutory framework relating to the licensing of television multiplex services, to create a new type of multiplex service (a 'local multiplex service') which is licensed specifically for the purpose of carrying local digital television programme services. These two new types of service (and the licences which are required to provide them) are complementary, with the multiplex required to carry the local digital television programme service, and the L-DTPS licensee required to offer it to the local multiplex licensee, respectively.

1.5 Ofcom's previous technical report for Government identified 65 different locations where a local TV multiplex would be technically possible. It is necessary that a location should be economically viable, and that there should be demand there for a local service, if it is to be licensed and built-out.

1.6 We propose a minimum coverage requirement of any multiplex operator, and that potential multiplex operators should propose what additional areas they will cover, above that minimum.

1.7 This will allow us to advertise the local multiplex licence simultaneously with the first tranche of local area licences, as soon as this consultation is concluded, assuming the Orders are passed. This will be the first phase of licensing.

1.8 Any further locations proposed by the successful multiplex licensee will then form the second phase of local service licensing. We anticipate advertising these local service licenses soon after concluding the first round of awards.

1.9 There will be a number of concurrent processes relevant to the licensing processes described in this consultation, including the BBC's administration of its funding for transmission build-out, and an Ofcom review of the rules around Party Political Broadcasts. These are out of scope of this document.

Local multiplex licence conditions and requirements areas to cover

1.10 Our financial modelling suggests that a minimum rollout of 20 locations will be viable in most scenarios, and so we are proposing 20 sites as a minimum coverage requirement. (In some scenarios a far larger number is possible, but these scenarios assume the multiplex operator being run as a non-profit business, which cannot be taken for granted, so we are proposing a minimum that we consider can be commercially viable.)

1.11 We are proposing 20 specific sites for the minimum rollout. These are selected from the sites where local TV is technically possible and we consider there is a potential local service operator, to achieve a range of locations across the UK, and a range of scales of operation. We also take into account evidence of strong local demand.

1.12 The 20 sites are: Belfast, Birmingham, Brighton & Hove, Bristol, Cardiff, Edinburgh, Glasgow, Grimsby, Leeds, Liverpool, London, Manchester, Newcastle, Norwich, Nottingham, Oxford, Plymouth, Preston, Southampton and Swansea. We are consulting on this list.

1.13 We are proposing that applicants for the multiplex licence should specify how many sites they will build out to on top of this minimum, and that the number of additional sites covered should be a criterion used to distinguish between applicants for the multiplex licence.

1.14 The sites to be covered in addition to this minimum should be sites where there is interest from a potential local service licensee. Based on responses to the DCMS consultation we believe there are 24 of these: Aberdeen, Ayr, Bangor, Barnstable, Basingstoke, Bedford, Cambridge, Carlisle, Derry/Londonderry, Dundee, Guildford, Hereford, Inverness, Kidderminster, Limavady, Luton, Maidstone, Malvern, Mold, Salisbury, Sheffield, Stoke on Trent, Stratford upon Avon and York. We are consulting on this list too, so any potential local service operators should respond to this consultation.

1.15 We expect coverage at any site that the multiplex operator is required to cover to be at least as good as that predicted by our modelling. We would consider requests to extend areas coming from the multiplex operator; and if local service operators wish to extend their areas, the multiplex operator must facilitate this, if the local service pays for the increased cost.

1.16 Each of these areas is named for the principal conurbation within the technically-possible coverage area. Some transmission areas cover secondary conurbations too, and where coverage is good enough, we will consider applications for local services targeted at these.

Local multiplex licence conditions and requirements other terms

1.17 We will seek to ensure that coverage is built-out to the 20 sites in the minimum requirement as soon as possible. Additional sites covered should be built-out as soon as these first 20 are complete.

1.18 The local multiplex licence will need to terminate simultaneously with the L-DTPS licences, because of their mutual obligations. It is plausible that both the multiplex operator and some local service operators could be at the margins of profitability, and therefore having the longest possible licence duration might be critical to their viability. We are therefore proposing to advertise the local multiplex licence for the maximum duration of 12 years. However we are open to other models that can deliver certainty for local services and secure a viable build out of the multiplex.

1.19 There may be wider spectrum developments that affect not only local TV but the whole DTT platform. If re-assignment of the frequencies assigned to local TV is proposed during the term of the multiplex licence then Ofcom would consult on that policy. The licence (and other DTT broadcasting licences that are affected) may be varied or terminated with no less than five years notice.

1.20 The local multiplex must reserve capacity for the local services at each site. There is additional capacity sufficient to carry two other standard definition video streams, and this is for the multiplex operator to use as they wish. Any other services broadcast using this capacity would need to be licensed by Ofcom.

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

1.22 The local service licensees should pay no more to the multiplex operator than the cost of their service being carried. Ofcom has a role resolving any disputes that arise as to this cost. We have set out a broad approach to resolving such disputes, based on cost orientation.

1.23 Following previous findings by Ofcom and by the Competition Commission, the transmission company Arqiva is bound by a number of Undertakings, including the production of Reference Offers for the provision of network access and managed transmission services. Ofcom is in the process of requesting such offers from Arqiva for the proposed local TV network. These will be published in the New Year. No potential multiplex operator is bound to use Arqiva for either network access or transmission services, but any who wish to will have an indication of the likely transmission costs.

1.24 Ofcom anticipates that any applicant for the local multiplex licence is likely to have a business plan that relies on the available funding from the BBC, so must demonstrate that they have satisfied any criteria that are necessary to secure this. We anticipate that the licence will not be granted until a funding contract has been signed.

1.25 We plan to propose 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

1.26 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. We would particularly like to hear from those who might wish to apply for the multiplex licence. Any such expressions of interest would be non-binding and may be submitted in confidence.

Local service (L-DTPS) licence conditions and requirements

1.27 Local services will have both content obligations that are specific to local television, and those that are general obligations for all television broadcasters.

1.28 We are proposing a localness requirement: that, 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.

1.29 We are proposing to invite applicants for a local service licence to describe their programming output and how it will satisfy the statutory criteria, particularly how it will serve the tastes and interests of the target community, and broaden the range of local services available in the area. These Programming Commitments, drafted as part of the licence application process, will be written into the licence of the successful applicant, so that their delivery becomes a binding licence condition.

1.30 Local services will be required to carry Party Political Broadcasts. 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. More broadly, we expect local TV services to engage with the local democratic process. The licence application form will invite applicants specifically to consider what programming they propose to facilitate civic understanding and fair and well-informed debate through coverage of local news and current affairs.

1.31 Like any TV broadcast services, local services will have to comply with Ofcom's Broadcasting Code and the UK Code of Broadcast Advertising. Also, local services 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 many will be exempt due to their audience share).

1.32 Local services will specifically be prohibited from broadcasting pornography, and longer advertisements, including telephopping windows, for chat content using premium rate phone calls. (There are no restrictions proposed for the other two video streams, other than any that apply generally.)

1.33 We anticipate that most local TV services will be broadcast only on via the local TV multiplex, and therefore will not be receivable outside the UK. This allows us to exempt them from the advertising minutage restrictions set out in the AVMS directive, and we propose to do this. There are some other rules concerning advertising scheduling that must be observed.

1.34 There is a requirement under the current UK legislation for a 10% independent production quota. The Government has proposed removing this, subject to a consultation and new legislation in the New Year.

1.35 The local service provider will need to make the service available to the multiplex operator at all times, at an interface point and in a specified technical format.

1.36 We propose that services should aim to begin broadcasting within two years of licence award. This is subject to network build-out by the multiplex operator, and we hope some services can begin broadcasting earlier. In any case, services must begin broadcasting within three years (unless coverage is not built-out).

1.37 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 20 licences will be for up to 12 years, depending upon their exact launch date in relation to the multiplex licence term, and any advertised subsequently will be granted for shorter periods.

1.38 Local services are required to keep full recordings for 60 days, and to complete a short annual return so that Ofcom can report on this emerging sector.

1.39 Local service operators 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 engage that entity to apply for a local multiplex licence, should one be advertised or come available.

Local service licensing process

1.40 Ofcom's proposed approach to licensing will be first to establish that any applicant is eligible to hold a licence, then we will distinguish between applicants on a basis of how they compare on the statutory criteria: meeting the needs of an area, broadening the range of programmes available, and increasing local programmes; and also ability to maintain the proposed service.

1.41 The former criteria are to be demonstrated and enforced through programming commitments; the latter through financial analysis of the proposed business model.

1.42 We propose a series of questions encouraging applicants to consider aspects of 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.

1.43 Although we are not setting quantitative requirements, we consider news to be the most important type of local television content, and applicants should propose a reasonable provision of news and current affairs, bearing in mind the public subsidy and public purposes of local TV. As a guide, we will be unlikely to consider less than one hour in total of broadcast news per day to be too burdensome for even the smallest licensee. We will judge commitments in the context of the scale of operation, and resources available.

1.44 To assess the ability to establish and maintain the proposed service, we will ask applicants to submit 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 are asking applicants to propose a specific launch date. The proposed build-out schedule, when the multiplex licence is awarded, will be compared with proposed service launch dates, and as far as possible, these will be aligned.

1.46 We would particularly like to hear from those who might wish to apply for an L-DTPS licence to provide a local television service for any of the areas listed. Any such expressions of interest would be non-binding and may be submitted in confidence.