Last month I attended the Westminster Forum conference on “The future for television distribution in an online world” which was timely following the publication by Ofcom of its early market review report on the subject the day before. We were joined by representatives from the Department of Culture, Media and Sport (DCMS), Ofcom and other key stakeholders in the TV and Broadcasting industry including representatives from leading public service broadcasters, internet service providers and industry bodies. All stakeholders welcomed the Ofcom report.
The discussion centred around the fragmentation of TV distribution today and what the future of TV distribution should look like. Stakeholders recognised that there has been a significant shift in audience viewing habits in the last decade with audiences watching less digital terrestrial television (“DDT”, also known as “Freeview”) and accessing more content online via the internet via on demand streaming services (“IPTV”), and agreed that this trend is likely to continue with DDT audiences expected to drop from 62% in 2023 to 28% in 2035 and 22% in 2028. This is largely down to the increased take up of in-home broadband as well as the growth of internet-based TV platforms.
Stakeholders agreed that IPTV offers a richer viewing experience to its audiences (with the ability to pause live TV as well as access to interactive and personalised features) but they emphasised that DDT is a key component of public service broadcasting and has a broader reach than IPTV. However, there is a concern around the sustainability of a continued DDT infrastructure. As fewer audiences are watching DDT and paying TV licences, it is becoming less cost effective per viewer to support those audiences who continue to rely on DDT. Without more investment in DDT, there is a risk that broadcasters will look to cut costs by removing high-definition services from DDT, reducing the number of broadcast channels and investing less in high quality content creation which in turn may lead to a poorer viewing experience for those who rely on DDT. So what does the future of TV distribution look like for the UK?
What are the options for future TV distribution?
Ofcom has recommended that the Government considers three potential transition methods:
(1) Invest in a more efficient DDT infrastructure;
(2) Reduce DDT to a core service (also known as the “night light approach”); and
(3) Move towards DDT switch off in the 2030s.
There are pros and cons to each model and a range of ways in which each model could be adopted so it will ultimately require a cost benefit analysis to understand the best way forward. Regardless of which approach is taken, Ofcom is clear that there needs to be a focus on improving IPTV as a primary method of distribution to deal with the increased reliance on internet-based services before we can properly consider what this transition would look like.
Wholesale move to IPTV?
If it is clear that this upward trend of online TV consumption will continue, what is stopping us from making a wholesale move to IPTV like other countries such as Switzerland? A key concern regarding the move to IPTV is the potential for “digital exclusion” with DDT-reliant viewers generally being from an older, lower socioeconomic and vulnerable demographic with some unlikely to ever transition to IPTV. Ofcom estimates that around 3.9 million households do not have access to IPTV for reasons such as a lack of affordability, connectivity (due to where they live) or digital literacy (as accessibility to IP TV becomes more complex). Ofcom recognises that take up of broadband is more of a challenge than broadband availability (with 1.9 million households in the UK not having any internet access today) and states that if IPTV is to become the primary method of distribution, more investment will be required to understand why people are reluctant to get connected and to support and upskill those people to ensure that everyone gets the benefit of being online. There were discussions at the Forum around where this investment should come from and whether large online streaming platforms should be doing more in this respect.
Significant investment would also need to be made to ensure that IP networks are as resilient as DDT platforms to cope with increased data traffic and to ensure a reliable service. Improvements would need to be made to combat piracy and security threats and to cope with events on a national scale (i.e. the Olympics). Another challenge will be the continued distribution of radio and emergency broadcast systems as it is not currently clear if radio and emergency broadcast systems would be commercially viable if we were to switch off DDT completely.
Invest in DDT?
Some stakeholders have called for more investment in DDT to continue the provision of freely available and universal delivery of public service content and to serve those who rely on DDT. However, those who advocate maintaining DDT for longer will need to consider how to fund the DDT infrastructure with audiences being increasingly split across different viewing platforms and how to sustain investment in traditional technologies (that cost more to run) in an environmentally efficient way. Keeping DDT for longer may also delay any action in engaging digitally excluded households.
Best of both worlds?
It was clear at the Forum that there was an attraction to the “night light approach” but stakeholders explained that this approach may lead to us having a “two tier system” dividing those who have access to better services online and those who don’t. Energy efficiency is another consideration to running both DDT and IPTV. An approach which increases IP usage (and the associated energy consumption that comes with that) without any change to the energy usage of DTT is inherently inefficient.
Lessons from the past?
As we know, the UK successfully transitioned from analogue to DDT, taking the number of channels on terrestrial TV from five to dozens. But this required a massive industry, Government, and regulatory effort to design and deliver the digital switchover over a seven-year period. Now, the supply chains are even more complex in IPTV with a move to multiple forms of distribution such as streaming, on-demand and subscription models. There may be lessons we can learn from the past but first we need to work out the differences and similarities between the challenges we face in the present day to understand what we can take from the previous transition.
The Media Act 2024
As the way in which audiences consume content changes, audience expectations are also changing and the law will need to be clear on how those audiences are protected when consuming content in an online world. The implementation of the Media Act 2024 and the development of Ofcom guidance around the new rules will be an important first step in gaining clarity on this and ensuring that audiences are more comfortable with the shift towards IPTV (if that is where we are heading). The Media Act 2024 will bring video-on-demand (VoD) services such as Netflix and Amazon Prime under new Ofcom rules to protect UK audiences from harmful content and impartiality. The Act also offers more flexibility to PSBs in relation to how they deliver their services in the new digital age demonstrating the Government’s commitment to recognising the value of PSBs and the need to protect their prominence by levelling the playing field between PSBs and VoDs.
So what is the current status quo?
The Government are committed to DDT until 2034. However, key licences for PSBs on the DDT platform are due to end by 2034 so Ofcom is urging the Government to provide certainty in the next 18 months to plan for the future of TV distribution.
There are competing visions for how TV distribution should look in the future but the consensus between broadcasters and internet service providers was clear – maintaining universality is key and any transition needs to be inclusive, leaving nobody behind, with the interests of the audience being at the heart of whatever decision is made.
The Forum agreed that all key stakeholders need to collaborate to facilitate the debate and that the next 18 months will be crucial to reaching a consensus on how best to ensure a sustainable and effective TV distribution ecosystem and secure the investment to develop the necessary infrastructure for TV delivery ahead of 2034.