Final Report for Department for Business, Innovation and Skills and Department for Culture, Media and Sport
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- Economic welfare benefits; TV broadcasting
- Producer surplus
- External benefits
TV and radio broadcastingTV and radio programmes can be broadcast in a number of ways: via terrestrial radio transmitters, via satellites in orbit around the earth, via cable TV networks and via the internet. In this section we consider the value to the UK economy of terrestrial and DTH satellite broadcasting. We do not consider cable and internet distribution since these do not use radio spectrum directly (although we note that internet distribution of broadcast programmes may indirectly involve the use of mobile data networks, which we considered in Section 4.2, or Wi-Fi, which we consider in Section 5.2). Historically, terrestrial and satellite broadcasting used analogue transmission technology. The digital switchover of satellite broadcasting to the UK was completed in 2001, and for terrestrial TV broadcasting the switchover will be completed in 2012. Since analogue terrestrial TV broadcasting will shortly be discontinued we do not consider it further in our analysis. For the time being DAB is continuing alongside AM and FM analogue radio broadcasting, so we consider all of these technologies. In the UK, DTT channels are broadcast by the following organisations:
the BBC (which is publicly funded via the licence fee) the three main commercial public service broadcasters (PSBs), ITV, Channel 4 and Five (which also broadcast a number of commercial channels in addition to their public service channels) regional PSB variants (including STV in Scotland, UTV in Northern Ireland, and S4C in Wales) other commercial broadcasters (of which the largest is UKTV, a joint venture between the BBC’s commercial subsidiary, BBC Worldwide, and Scripps Network Interactive). DTT channels are grouped together and broadcast in blocks known as multiplexes. There are currently six multiplexes in the UK, three of which carry PSB broadcasting and three of which carry purely commercial broadcasting. Details of the multiplexes are shown in Figure 4 .14 below. Figure 4.14: Details of UK DTT multiplexes, following the digital switchover [Source: Analysys Mason, 2012]
The DTH satellite TV broadcasting platforms in the UK are operated by BSkyB and Freesat (a joint venture between the BBC and ITV). The satellites themselves are owned by SES (based in Luxembourg) and Eutelsat (based in France). Channels broadcast on some foreign DTH satellite platforms can also be received in the UK, and are watched by a minority of DTH households. Like DTT channels, DAB radio stations are also broadcast in multiplexes. The BBC operates one national DAB multiplex for its national stations, which currently covers around 92.2% of households. Digital One (owned by Arqiva) operates a commercial national DAB multiplex which currently covers 84.6% of households. A number of other commercial DAB multiplexes operators collectively run 48 local and regional DAB multiplexes across the UK, covering 66.2% of households. As of May 2012 there were a total of 548 analogue radio services available in different parts of the UK, including 5 BBC nationwide networks, 46 BBC local and nations services, 3 nationwide commercial stations, 296 local commercial stations and 198 community stations. 99 services are broadcasting on AM and a further 446 on FM (some stations simulcast on both wavebands).25 Economic welfare benefits; TV broadcastingWe have built a new model to calculate the consumer and producer surplus from DTT and DTH satellite broadcasting. The method we have followed is described in Annex B. Consumer surplusThe consumer surplus from TV broadcasting over the forecast period is shown in Figure 4 .15 below. As explained in Annex B, we developed two scenarios concerning consumers’ willingness to pay for HD content, and therefore in the chart we present a range of values for consumer surplus. Our base case suggests there has been an increase in consumer surplus from £3.4–£5.9 billion in 2006, to £6.2 billion in 2011 (a nominal change of 5–84% and a real change of between -11% and +55%). We believe that it is reasonable to expect some increase in the economic welfare benefits due to an increase in TV households, an increase in the number of TV channels and advances in technology such as the launch of HDTV. However, the increase may also be due in part to methodological differences between our study and the 2006 study. Consumer surplus from DTT is high due to the high number of TV households (around 26.5 million in 2011), the difference between the cost of a TV licence and the assumed ‘choke price’ for DTT, and the assumption that willingness to pay increases with inflation. The consumer surplus from TV broadcasting is heavily dependent on the level of the TV licence fee, as this is the main cost of the service to the consumer. The consumer surplus from DTH satellite broadcasting is much lower, because the majority of customers are pay-TV subscribers and the difference between the actual cost of subscription and the assumed willingness to pay is much smaller than in the case of DTT. Figure 4.15: Consumer surplus from TV broadcasting [Source: Analysys Mason, 2012] 
The producer surplus from TV broadcasting over the forecast period is shown in Figure 4 .16. There has been a nominal increase of 533% since 2006, from £0.2 billion to £1.5 billion (a real-terms increase of 431%). Since 2006, there has been a 20% increase in the number of pay digital satellite subscribers, and the average revenue per subscriber from DTH services has grown in nominal terms by around 50%, but this large increase may also be due in part to methodological differences between this study and the 2006 study. The majority of producer surplus is due to DTH, while DTT producer surplus is low, partly because the largest broadcaster is the BBC which is a not-for-profit organisation. We have assumed that £130 million per annum is spent on digital switchover marketing and communication in 2011 and 2012.26 After 2012, we have assumed that £150 million per annum of TV licence revenue is spent on rural broadband or similar non-TV related projects.27 We have also taken account of the fact that the BBC is assuming financial responsibility for BBC Monitoring in 2013 and the World Service in 2014. We have assumed that the annual funding provided to each service remains the same in nominal terms as at the time of handover (£20.2 million for BBC Monitoring and £227 million for the World Service). Figure 4.16: Producer surplus from TV broadcasting [Source: Analysys Mason, 2012] 
External benefitsAs mentioned in Section 4.2.1, estimating the value of external benefits was not the focus of this study, but the external benefits from TV broadcasting that have been suggested include: greater social inclusion (particularly for those living alone or in remote areas) greater social cohesion resulting from the shared experience of watching popular programmes the value of TV as a medium for disseminating public information (particularly in times of crisis) more generally, the value of TV as an educational medium. NPVFinally, we have calculated the NPV of the consumer and producer surplus from TV broadcasting over the period 2012–21 for our base case. The results, shown in Figure 4 .17 below, suggest that TV broadcasting represents the second most valuable usage of spectrum in the UK, and the resulting direct economic welfare is likely to have an NPV of £86 billion over the next ten years. A more detailed breakdown of the results from the broadcast TV model is presented in Annex B.
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