BBC/BSkyB To Reap Fruits Of DTT Victory, Says Lehman Brothers

The successful bid by the BBC led coalition for the DTT licences formerly held by ITV Digital could mark a watershed in UK broadcasting, according to analysts at Lehman Brothers.

The Independent Television Commission (ITC) last week awarded the available multiplex licences to the BBC, Crown Castle and BSkyB consortium. The three organisations are set to provide a digital service with 28 free-to-view channels, although BSkyB will not be allowed to participate in the running of the operation.

The licences run for 12 years with automatic renewal for a further 12 years and Lehman believes that this will strengthen the position of the BBC and lead to increased competition with ITV. BSkyB will benefit from the absence of another pay-TV operator in the market and having been awarded three channels on the new service, will have access to the free TV terrestrial market once the analogue signal has been turned off.

The BBC does not rule out the introduction of a pay-TV element on DTT in future. However at this stage, it was felt that lack of demand and ongoing technical problems rendered it unworkable in the current economic climate.

During its lifetime, ITV Digital was constantly affected by signal problems and the BBC/BSkyB consortium is leading calls for an improved DTT reception. It predicts that a better signal would increase by half the number of UK households able to receive DTT on a plug and play basis. Similarly, the percentage of homes able to receive DTT affected by interference would fall from 50% to just 10%.

Lehman anticipates that the long term consequences of the ITC’s decision will be cheaper set top boxes, better quality TV content and stronger cross-promotion by terrestrial broadcasters. However, figures show that only 87% of the population will have converted to digital by the end of the decade and analysts remain sceptical as to whether the government will be able to carry out its intention to switch off the analogue signal by 2010.

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