ITC announces decision to award multiplex service licences for digital terrestrial television

24th June 1997

The ITC announced today it has decided to award each of Multiplex Service Licences B, C and D to British Digital Broadcasting PLC, which, following the withdrawal of BSkyB, will be jointly owned by Carlton Communications and Granada Group.

It has also been decided the licence to provide the service on the Channel 3/4 Multiplex should be awarded to Digital 3 and 4 Limited.

The ITC would intend to grant these licences within 12 weeks from today.

The ITC is still considering the application by S4C Digital Networks Limited for Multiplex Service Licence A and hopes to be able to announce its decision on this by the end of July.

Applications were invited last October for Multiplex Licences A, B, C and D and in November for the Channel 3/4 Multiplex. By the closing date on January 31, 1997, four applications had been received, as follows:

  • For Multiplexes B, C and D - British Digital Broadcasting PLC (BDB), Digital Television Network Limited (DTN)
  • For the Channel 3/4 Multiplex - Digital 3 and 4 Limited
  • For Multiplex A - S4C Digital Networks Limited (SDN)

The Broadcasting Act 1996 requires the ITC to have regard to the extent to which the award of a Multiplex licence would be calculated to promote the development of digital terrestrial television and sets out a list of those matters which the ITC must take into account.

In brief these are:

  • Coverage and programme service timetables
  • Ability to establish and maintain the services
  • Capacity of the programme services to appeal to a variety of tastes and interests
  • Promoting the acquisition of receiving equipment by viewers
  • Contracting with service providers on the basis of fair and effective competition.

Certain of these provisions do not apply to the Channel 3/4 Multiplex.

The ITC must also take into account representations received on those matters as a result of its public consultation. The ITC made available the non-confidential sections of each application for public inspection at its offices and at selected main libraries.

A statement supplied by each applicant summarising the application was also placed at the ITC's offices and main libraries and made available to the public on request. More than 700 responses were received and taken into account by the ITC in assessing each application.

Award of Multiplex Licences B, C and D

The proposals in the applications by BDB and DTN, including further information provided by applicants in response to requests from the ITC, have been carefully considered by the ITC in accordance with broadcasting legislation and against the requirements and guidance set out in the Invitation to Apply issued on October 31, 1996.

The applications submitted by BDB and DTN were fully and carefully prepared. The participants in both applicant groups have considerable experience within the television industry.

The ITC is pleased the opportunity to apply for Multiplex licences has attracted such serious interest from the industry and is grateful to both applicants for the thoroughness of their respective applications and for their assistance in the course of the ITC's deliberations.

The ITC has decided to award each of the licences for Multiplexes B, C and D to BDB, subject to the condition that, before the date of grant of the licences, the shareholding changes described below and already agreed by the shareholders should take place.

In reaching this decision, the ITC has had regard to the extent to which the award of each licence would be calculated to promote the development of digital television broadcasting in the United Kingdom otherwise than by satellite.

The ITC has taken into account the matters specified in the Broadcasting Act including the representations made to the ITC in response to its public consultation in relation to the applications received.

The ITC has also taken into account its general duties under the Broadcasting Acts 1990 and 1996 concerning the exercise of its licensing functions, including its competition duties, and has had regard to relevant EC law.

In relation to the matters relevant to its decision specified in the Broadcasting Act 1996, the ITC's conclusions were briefly as follows:

Coverage and Programme Service Timetables (Section 8(2)(a) and (b))

The ITC concluded both applicants had exceeded the minimum requirements set out in the Invitation to Apply concerning the extent of the coverage area, timetable and the timetable for the introduction of programme services, The ITC did not consider the differences between the applicants' proposals were significant.

Ability to Establish and Maintain the Service (Section 8(2)(c))

The ITC considered BDB's application offered a greater degree of assurance than that of DTN that the proposed services could be established and maintained throughout the period of the licences.

The ITC considered the revenue assumptions in BDB's business plan were more cautious than those of DTN, having regard to the nature of the programme services and additional services which each applicant proposed.

Funding for BDB is to be provided from the internal resources of the shareholders, both of whom are substantial FTSE 100 companies. In the case of DTN the business plan was dependant upon its parent company raising further debt.

After the receipt of applications DTN submitted to the ITC a proposal that United News & Media should become a 30 per cent shareholder in DTN. In the view of the ITC this did not constitute an unfair enhancement of DTN's application.

The ITC's conclusion was that, on the basis of each applicant's business plan and funding proposals and further information supplied by each applicant, there would be a higher degree of confidence in the ability of BDB to establish and maintain its services throughout the licence period.

Capacity of Programme Services to Appeal to a Variety of Tastes and Interests (Section 8(2)(d))

Each applicant put forward acceptable proposals for appealing to a variety of tastes and interests but of a different character.

BDB put forward proposals for programme services generally intended to appeal to broad audiences. On balance the ITC was more attracted by the innovative programme proposals, supported by additional services, designed to appeal principally to a wide range of different audiences which were put forward by DTN.

Promoting the acquisition of receiving eguipment by viewers (Section 8(2)(e))

Each applicant proposed substantial expenditure on the promotion of DTT, both in respect of the subsidy of domestic receiving equipment and in advertising and marketing costs.

Although DTN proposed a higher level of expenditure on receiving equipment than BDB this expenditure was dependant on a more optimistic estimate of subscriber numbers.

Contracting with Service Providers (Section 8(2)(f))

The ITC did not consider that either application gave rise to concerns within the limited scope of this statutory provision.

Other matters taken into account by the ITC included the following:

Competition Concerns

As a result of its consideration of the applications, including consideration of representations made in the course of public consultation, the ITC had concerns with respect to its competition duties about BDB's applications but no such concerns about DTN's applications.

The ITC had fundamental concerns stemming from the role of BSkyB as both a shareholder in BDB, thereby having an influence over BDB's choice of programmes, and a supplier of programmes to BDB, having regard to BSkyB's strength in the UK pay-television market, particularly in relation to premium film and sports channels.

These concerns were supported by a number of responses to the ITC's public consultation. The ITC has no objection on competition grounds to the inclusion of programme services, such as those of BSkyB, whose ability to attract viewers and revenue is already well established.

The ITC consulted the Office of Fair Trading and the European Commission on these matters and took the preliminary views of those bodies into account.

The ITC then put to BDB its concerns about competition. The ITC indicated to BDB these concerns could be addressed by BSkyB ceasing to be a shareholder in BDB.

The ITC made clear however it would not be acceptable for BSkyB's programme services to be removed in connection with BSkyB's withdrawal as a shareholder since those services were part of the core proposals in BDB's application.

BDB informed the ITC its shareholders had reached a legally binding agreement that BSkyB will withdraw as a shareholder in BDB and will continue to supply its programming as envisaged in BDB's application.

Carlton and Granada have each agreed to acquire half of BSkyB's shareholding in BDB and to assume BSkyB's funding commitments.

The ITC considered it would be consistent with its competition duties and would not be in breach of European Community law to award these licences to BDB, subject to those changes in BDB's shareholding structure and the award of the licences is therefore conditional upon the changes taking place before the licences are granted.

BDB's licences will contain a condition restricting Granada from acquiring control of BDB in the light of Granada's significant shareholding in BSkyB.

Receiver Technology

Set-top box receivers are expected to be subsidised and to contain proprietary conditional access technology.

However, for the new generation of TV sets which will have built in digital reception, the ITC supports open technical standards. The ITC will include in BDB's licence a requirement to do all they reasonably can to facilitate the introduction of such open standard TV sets, in cooperation with their chosen conditional access technology provider and with receiver manufacturers.

The possibility of split awards

Each applicant presented strong arguments in favour of the award of all three licences to a single party.

However, in accordance with the Invitation to Apply, each applicant had submitted a separate application for each of Multiplex licences B, C and D together with supplementary proposals in the event the applicants were awarded more than one licence.

The ITC considered these separate applications and supplementary proposals carefully, with a view to determining whether it would be desirable to award one or two licences to one applicant and the remaining licence or licences to the other applicant.

The ITC considered a split award would be likely to lead to a less focused and coherent promotional strategy to consumers and increase the risk of confusion in the development of receiving equipment, impacting adversely on the development and success of the whole digital platform.

The ITC was clearly of the view the development of digital terrestrial television in the United Kingdom would be better served by the award of all three licences to the same applicant.


The ITC has to consider the extent to which the award of each licence to each applicant would be calculated to promote the development of digital terrestrial television in the UK.

Digital terrestrial television is a new and high risk development and one which is of key strategic importance to the future development of broadcasting in the United Kingdom.

The ITC has therefore been mindful of the need for there to be a high degree of confidence that the successful applicant would have the resources necessary to ensure, despite the uncertainties and possible setbacks that attend a development of this kind, the new digital terrestrial platform can be successfully established.

The ITC has had to reach a view on whether the award of the licences for Multiplexes B,C and D to BDB or to DTN would be best calculated to promote the development of digital television broadcasting in the United Kingdom otherwise than by satellite.

The ITC's conclusion is that the award of these licences to BDB would be best calculated to promote this objective.

Award of Guaranteed Place Multiplex

The ITC has decided to award the licence to provide the service on the Guaranteed Place Multiplex to Digital 3 and 4 Limited, representing ITV and Channel 4. This will include the provision of services from the Channel 3 licensees, Channel 4 and Teletext Limited.

The ITC expects further and more detailed proposals on using the additional capacity on the Multiplex and for promoting the acquisition of equipment will be forthcoming.

Notes to Editors

  1. The ITC advertised the licences to operate four commercial digital terrestrial multiplexes on October 31, 1996.
  2. Six frequencies are available for multiplex services. Use of all these frequencies requires a licence from the ITC, except for that of the first multiplex which has been allocated by the Government to the BBC. Capacity has been reserved for analogue broadcasters, Channel 3, Channel 4, and the provider of public teletext on Channels 3 and 4, on the second multiplex. Channel 5 and S4C have guaranteed capacity on a third multiplex, which is the Multiplex A. For S4C this is in Wales only and this multiplex is also required to carry Gaelic programming in Scotland. These broadcasters notified the ITC on October 15, 1996 of their intention to provide a 'qualifying service.'
  3. In relation to Channels 3, 4 and 5, a 'qualifying service' is the provision in digital form of the service provided by the licensee under its analogue licence and which is, in relation to the programmes - other than advertisements - included in the service, and the times at which they are broadcast, identical with the corresponding service. The qualifying service to be provided by the public teletext provider would be a teletext service broadcast in digital form which complies with certain criteria set out in the Act, and that by S4C would be the S4C Digital service as defined in the Act.
  4. On the remaining three multiplexes (B, C and D), no capacity has been set aside for any of the analogue broadcasters and applicants for these multiplexes put forward, as part of their applications, their own proposals for the digital programme service and digital additional services to be provided. The applicant for Multiplex A put forward such proposals for any part of the capacity not taken up by Channel 5 and S4C which is not to be used for the provision of 'qualifying services.'
  5. At the time of application, the applicant groups were constituted as follows:
    • British Digital Broadcasting PLC - a consortium of Carlton Communications Plc, Granada Group PLC and British Sky Broadcasting Group Plc.
    • Digital Television Network Limited - wholly owned by International CableTel, now called NTL Inc.
    • S4C Digital Networks Limited - a wholly owned subsidiary of S4C.
    • Digital 3 and 4 Ltd - owned by Channel 4 and the ITV Association.