BBC Ends £85m Conditional Access Contract With BSkyB

The BBC’s director general, Greg Dyke, said: “This is an important decision for the BBC which will save us a considerable amount of money. It will also bring new benefits to viewers right across the country, will broaden the appeal of digital satellite and enable as many people as possible to get the BBC’s digital channels.”

Encryption-free Ever since the BBC started broadcasting on satellite, it has paid Sky a fee for ‘conditional access’. This has meant that the BBC’s signal is scrambled (encrypted) to ensure that it is only received in the UK and that audiences get the right regional service for where they live.

The decision to drop the conditional access system has been triggered by two events: Firstly, the five year contract with BSkyB ends in May, so alternative options can now be considered. Secondly, by moving all of its services to the Astra 2D satellite – which has a more tightly focused signal – the BBC can limit broadcasting principally to the UK. This removes the need to encrypt for rights purposes.

There are currently nearly 80 TV channels broadcasting in the clear on satellite in Europe, plus 61 radio stations, including CNN, EuroNews and Turner Classic Movies. CNN currently pays Sky just under £30,000 for its electronic programme guide (EPG) listing. The BBC says it expects to pay a comparable price as it moves to an unencrypted transmission and ceases to require conditional access.

Lobbying the Government Both ITV and the BBC have been lobbying the Government to reduce the carriage fees they pay to Sky in order to be shown on satellite television. In response, BSkyB, has warned that it may slow the take-up of digital TV in the UK by ending decoder promotions if the Government orders a reduction in carriage fees (see Sky Threatens Government Over Carriage Fees).

Clive Jones, joint managing director of ITV wished the BBC success with the new initiative, saying: “The public service broadcasters have long argued that the price Sky charges for conditional access is too high. ITV currently needs Sky’s conditional access facilities in order to deliver the best regional service to viewers.

“However, the £17 million per annum ITV pays for this service bears no relation to the actual cost of the service, which we estimate to be no more than a few hundred thousand pounds, and is in stark contrast to the other two digital platforms who provide viewers with the right regional variant of our channels at no extra cost.”

BSkyB is quick to note that ITV also benefits from being carried on the satellite platform. Richard Freudenstein, chief operating officer of BSkyB, has pointed out that Granada – one of the two major ITV companies – increased its digital dividend by around £39 million after moving onto Sky Digital. “In addition, we calculate that ITV generated an additional £40 million in advertising revenue because of its carriage on the satellite platform last year,” said Freudenstein in December 2002.

ITV is hoping that the BBC’s moves will alert the Government to the issue of Sky’s conditional access charges. “We hope the BBC’s announcement will focus the minds of peers on this issue as the Communications Bill enters the House of Lords. We are calling for an amendment to the Bill that will require Ofcom to take account of the particular nature of public service broadcasters and their obligations to viewers when deciding whether Sky’s charges are appropriate,” said Jones.

However, the complaint from ITV has already been before Ofcom, which concluded that Sky’s charges are “fair, reasonable and non-discriminatory.”

The BBC’s decision to take matters into its own hands and bypass BSkyB may well be followed by ITV when its current contract with Sky expires in autumn 2004.