U.K. Debate Over Broadcast Carriage, Retransmission Fees Takes Next Step

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U.K. culture secretary Maria Miller

A government report says that pay TV giant BSkyB should stop charging public service broadcasters like the BBC and ITV for carrying them, while network bosses look for payments of their own.

LONDON – U.K. public service broadcasters, such as the BBC and ITV, should be protected by law from paying pay TV giant BSkyB fees to get carried on its platform, according to a new report about issues that the British government should consider.

The report, published Tuesday by the U.K.'s Department for Culture, Media & Sport (DCMS), detailed the findings of a two-year review of the legal framework governing the media and telecommunications sectors, so that it "remains appropriate for the digital age."

The report said that pay TV giant BSkyB should stop charging public service broadcasters like the BBC and ITV for carrying them, while network bosses have said they are looking for payments of their own.

"This free ride needs to stop," John Tate, director of policy and strategy at the BBC, recently said. He also signaled the BBC could itself start charging BSkyB, in which Rupert Murdoch's 21st Century Fox owns a 39 percent stake, retransmission consent fees.

"We would in the future expect to get retransmission fees," echoed ITV CEO Adam Crozier on an earnings conference call on Tuesday.
He highlighted that in many countries such fees are now paid by pay TV companies.

U.S. broadcast networks have in recent years started receiving such fees from cable and satellite TV operators, giving them a new revenue stream that mirrors the carriage fees cable networks receive.

But in the U.K., business models have been different. BSkyB charges the BBC and other public service broadcasters (PSBs), such as ITV, Channel 4 and Channel 5, for offering their channels. The BBC, for example, is estimated to pay about $8 million (£5 million) per year to BSkyB. Other PSBs combined are thought to pay about the same amount.

While those fees have declined in recent years, the British TV industry and politicians have recently been discussing possible changes.

"I've been very upfront that in the future we would expect to be paid for our content," Crozier said Tuesday, while predicting that this would likely take a couple of years or so. Highlighting that he did not mean that as a criticism of past systems, which ensured competition, he argued that pay TV firms nowadays build big broadband and other telecom businesses "on the back of the investment in original content we make." He said that it would become "almost impossible" to sustain arguments against retrans fees in the U.K. over time. "It's something we want to change," he concluded.

The Tuesday DCMS report, signed by culture secretary Maria Miller and culture minister Ed Vaizey, said that where the U.K.'s PSBs offer programs to satellite or cable platforms free of charge for pay TV audiences, "We do not expect the platform to charge the PSBs any costs associated with transmission -- in recognition of the value of the content they have been given."

Tuesday's report also suggested that this would help "maximize the revenue available to PSBs to support investment in U.K. programs." PSBs now invest over $4.6 billion (£3 billion) a year in U.K. content.

BSkyB has argued that PSBs get much value from having its channels on BSkyB since the company has more than 10 million TV homes.

"The BBC directly benefits from the billions of pounds we’ve invested in our TV platform and the technical services that support the 49 channels they run over the Sky platform," said a BSkyB spokesman earlier this year about the fees it charges the BBC. "These payments are no different than paying for electricity, studio facilities or any other operational costs" and cover BSkyB's technical transmission costs, he added.

BSkyB has also highlighted that current regulations require it to continue offering the broadcast networks to people even when they cancel their BSkyB pay TV subscription.

The DCMS report also calls for a reduction in media watchdog Ofcom's duties when it comes to public service broadcasters, saying that would reduce "unnecessary burdens" on the regulator.

The DCMS recommendations also include the aim to introduce laws governing electronic programming guide slots to keep the PSBs at the top of the listings.