UK Broadcasters Plot Managed Transition to Universal Access Streamed TV

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UK broadcasters, including the BBC, have said that delivering TV over the air is no longer economically viable and envisage an increased reliance on broadband networks for video streaming in the future.

In a comprehensive report submitted to the UK government regarding the future of TV distribution, regulator Ofcom found widespread support across the sector for TV services continuing to be available to all but no shared view about how to achieve this.

Instead, Ofcom outlined three broad strategies:

1. Invest in a more efficient DTT (Digital Terrestrial TV) service, possibly requiring audience-scale and investment sustainability over the 2030s, potentially involving new equipment for improved broadcast signals.
2. Reduce DTT to a core service, maintaining essential channels while encouraging internet-based TV access, potentially transitioning to a fuller switch-off or remaining indefinitely as a last resort provider.
3. Plan for a gradual DTT switch-off, ensuring digital inclusion and support for those reliant on DTT while promoting confidence in internet services.

All of these scenarios will rely on investment in internet infrastructures to manage the load on networks and higher peaks from linear TV viewing.

To deliver equivalent levels of universal coverage to audiences, the broadband network would need to match the level of DTT coverage today, which stands at 98.5% of UK households (for PSB channels).

A number of ISPs including Vodafone, BT, Mainstreaming and SES expressed the view that the UK’s broadband networks are not currently capable of replacing broadcast networks at the scale that would be required for distributing high quality access to live content.

However, it is the take-up, rather than rollout, of broadband that would present the largest barrier in the case of a full or partial switchover to IP delivery.

“Without intervention, there will likely remain a cohort of people who do not take up broadband because they do not have the means, skills, or interest to do so,” Ofcom states. “To ensure any partial or full managed switchover is as inclusive as possible, government, industry, and Ofcom would need to work together to design a scheme which provides significant consumer support.”

According to Barb, 13.2m UK households had DTT connected to the main TV set in 2023. The majority of those already had an internet connection to their smart TV or box. However, 3.3 million UK households (5.1 million individuals) only had DTT to access any TV services. This figure is gradually falling over time, in part as more people take up broadband services, and in part due to generational turnover. “But the group of viewers solely reliant on DTT will remain in the millions for many years to come, absent any change in current trends.”

Shift to streaming

The background to the report is the changing nature of the TV ecosystem where audiences in the UK as elsewhere are shifting from linear to digital services streamed over the internet.

On average, individuals spent 25% fewer minutes per day watching broadcast TV in 2023 compared to 2018. Projections suggest a continued decline in scheduled TV channel viewing through DTT and satellite, dropping from 67% in 2022 to 27% by 2040.

However, households relying solely on DTT, typically older, less affluent, or disabled, remain significant consumers and the repeated mantra for the upcoming transition to all-IP is "to leave no-one behind" by ensuring universal access.

UK broadcasters are already shifting to streaming. The BBC doubled down on its commitment to an all-streaming future in its annual report published in March. Pay TV leader Sky is gradually weaning subscribers off satellite delivery. ITV in favour of streaming-only children’s content in ITVX Kids. Channel 4 also recently announced plans to shift its focus from traditional broadcasting to digital, including plans to close small linear channels (starting with the Box channels in 2024) and aiming to become a digital-first public service streamer by 2030. Most recently, TalkTV announced that it would be closing its DTT channel in the summer of 2024 and become an online-only channel.

“Taking these trends together, multiple broadcasters and channels suggested that it is unlikely to be commercially sustainable or justifiable value for money for them to continue indefinitely to pay to be on as many distribution platforms as they do today.”

The future of DTT

None of this will be good news to Arqiva, the incumbent DTT infrastructure provider in the UK, which is owned by a consortium of investors led by Digital 9 Infrastructure (48%) and Australian bank Macquarie (25%).

When contracts come up for renewal, there will be renegotiations of the price of network access and managed transmission services between Arqiva and multiplex licence holders.

Arqiva stated in its evidence to Ofcom that the DTT network was a “cost-effective and reliable platform enabling universal delivery of free-to-view TV”.

It referenced recent channel launches on DTT including Earth X and GB News as evidence of ongoing demand for capacity on the platform, and expects demand for multiplex capacity from broadcasters “to continue in the long-term”.

However, several key stakeholders in DTT took a different view. For example, the BBC’s evidence suggested that even without inflation, the cost per DTT viewer hour in 2030 will be around four times higher than it is expected to be in the financial year 2023/24.

All UK public service broadcasters anticipate a tipping point will eventually be reached where costs exceed the benefits of being on DTT.

Commercial broadcasters voiced concerns that while DTT and satellite remain important in delivering large audiences to commercial broadcasters, as audiences migrate to IP platforms, those viewers that remain on DTT and satellite are increasingly older and less affluent, which makes them less lucrative for advertisers.

Ofcom said: “Taken together, a significant number of broadcasters voiced concerns in their evidence that maintaining the existing DTT infrastructure is unlikely to be commercially attractive after the mid-2030s. They stated that the DTT platform may increasingly represent poorer value for money or even become financially unsustainable.”

The future of satellite

Nor will it be of comfort to satellite facilities providers who risk losing more share of the once dominant TV distribution business.

The current fleet of satellites used by Sky and Freesat is likely to reach the end of its life by the end of this decade, and Sky is shifting its strategy to deliver TV content over IP rather than satellite.

These developments will create a series of investment decisions for stakeholders in the satellite distribution infrastructure, including whether to invest in a new satellite fleet and whether the investment required to remain on Freesat if Sky were to exit satellite is feasible.

The BBC stated in its evidence that it expects to begin discussions about future capacity with SES in 2025. The BBC’s evidence suggests that, even without inflation, the cost per DSat viewer hour in 2030 will be around five times higher than it is expected to be in the financial year 2023/24. Per Ofcom, these cost outcomes will continue to reduce the incentives for broadcasters to remain on the platform.

Accessible and useable IPTV interfaces

Any switch to the internet raises concern that IP based platforms would confuse certain sections of the public used to the more simple to use EPG including a remote with buttons for channel numbers, audio description and a channel list guide.

“For those who have lower levels of digital literacy, IP-based platforms can be confusing and are largely taking design inspiration from ‘smartphone’ style app interfaces,” the report said.

“As consumption of content moves online, there is a risk that some people are left behind due to the challenge of adjusting to more complex and diverse user interfaces.”

It noted, however, that IP-based interfaces also open up opportunity for “creative and sophisticated approaches” to usability.

Commercial investment to improve broadband coverage

Every household and business in the UK has the right to request a ‘decent’ affordable connection. A decent connection is defined by legislation as achieving a download speed of at least 10 Mbit/s and an upload speed of at least 1 Mbit/s – which can currently be achieved by 99.8% of premises.

Ofcom states that a decent connection speed can be sufficient for both SD and a single stream of HD viewing, “but in practice multiple users in a household can quickly put this under strain. Based on current increasing data consumption patterns, it is unlikely speeds would remain sufficient for a reliable IPTV viewing experience in a multiple-user household” in the time frame of any wholesale abandonment of DTT. Superfast broadband speed (30 Mbit/s) is more likely to provide a reliable viewing experience. Ofcom points out that a 10 Mbps connection is unlikely to be able to continue to keep up with the demand of a modern household.

IP only and hybrid increase viewing

The majority of DTT viewers are and will continue to be ‘hybrid’, mixing traditional linear with connected viewing. The number of households with any internet connected TV has risen from approximately 6 million households in 2018 to 12 million in 2023. Additionally, some broadcasters anticipate most of these ‘hybrid’ UK households will use IP technology more often to access their content in the future.

Forecasts suggest that households which solely rely on IP connections (without a DTT or other TV service) are growing from 5.3m households in 2023 to 17.8m households by 2035.

Next steps

Ofcom said its report remains neutral on options, emphasising collaboration between broadcast, broadband industries, and the Government to establish a unified vision for delivering universal TV services. The transition is expected to take 8-10 years, underscoring the importance of early consideration to prepare for industry changes by the early 2030s.

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