Split licence is a good idea but it wouldn't work

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The Independent Online
A new front has been opened in the debate over who gets the licences for digital terrestrial television. Digital Television Network, the outsider in the two-horse race for the three multiplexes on offer, is pressing the line that the licence should be split, so that both bidders get a share of the action.

In usual circumstances, such a proposal would be tantamount to running up the white flag, and indeed the idea does look a little on the defeatist side. OK, DTN seems to be saying to the Independent Television Commission: "So we're not going to win outright. Why not compromise and share the spoils? We're prepared to accept second best if it's all that's on offer."

Defeatist or not, the proposal does hold some attractions for ITC and politicians alike, for whichever way the ITC jumps, there's a big potential downside in awarding the licence outright to either player.

For the time being, DTN is just a one-man band, an adjunct of International CableTel - all the other participants in the supposed consortium having fallen by the wayside. But if there are doubts about DTN's financial, commercial and programming credibility, they are more than matched by the monopolistic drawbacks of awarding the licence to the other side.

British Digital Broadcasting (BDB) is an alliance of Britain's most powerful broadcasters, and none of them seems interested in using digital to develop new product. Their main purpose is to monopolise the new platform for existing channels.

Furthermore, BDB's dominant partner is BSkyB, which already has a monopoly of analogue pay-TV and is intent on making its own digital satellite systems the dominant future platform for pay-TV too. Should Sky really be given the rights to the commercial side of digital terrestrial as well?

Most rational people would think not. The trouble is that these competition concerns form only a minor part of the ITC's remit; its primary brief is to award the licence to the bidder most likely to ensure the biggest take up of digital, so that analogue spectrum can be freed up for other things. To state that on this basis there's no contest would be an exaggeration, but certainly it puts BDB in a very powerful position. Hence the idea of splitting the licence, a possibility which has won some support from Labour's spokes man on these matters, Lewis Moonie.

Unfortunately BDB has been clever on this front too, constructing its bid in such a way as to make splitting the licence in an equitable way as difficult as possible. Both DTN and BDB have bid for all three multiplexes on offer, but the rules also required alternative bids for a lesser quantity so as to allow for the possibility of a split award.

DTN has bid for all permutations - one, two, and three - but BDB has bid for just three and one. What BDB is saying here, in effect, is that if you don't give us all three then we are not really interested. If the ITC wants to split the licence, it can only do so by giving two multiplexes to DTN and one to BDB. It cannot give two to BDB and one to DTN, the option it might have favoured, given its brief.

What's more, the logistics of splitting the licence could easily be enough to make both bidders shy away. Already there are doubts about the commercial viability of digital terrestrial. Force the two together under one roof, with all the hassle, duplication of cost and scope for personality clash that would involve, and the whole thing might founder.

So my money continues to be on the award of all three multiplexes to BDB and a consequent extension of the evil empire into the world of digital terrestrial. After the support given by Rupert Murdoch to Tony Blair's election campaign, it furthermore seems unlikely that a Labour government would interfere unduly through the competition authorities with the ITC's decision.

Does it really matter if Mr Murdoch secures this important new platform? Obviously it does but possibly not as much as people think - provided as robust a regulator as Don Cruickshank at Oftel remains in place, that is. The main threat to Sky's monopoly of pay-TV comes not from digital terrestrial but from cable, an increasingly well-marshalled alternative method of distribution for broadcast television. Over time, control of important movie and sports rights will be wrestled away from Sky and its monopoly position as a distributor will begin to disintegrate. There are already signs of it beginning to happen.

So personally I wouldn't be too pessimistic about the outcome even if the ITC does award all three multiplexes to BDB. The split licence approach might seem a reasonable compromise, but can the ITC rely on DTN to provide the systems, drive and finance to push the digital revolution forward?

We've been wrestling, on the Independent business pages, between a mischievous temptation utterly to ignore Andrew Regan's arrogant assault on the Co- operative Wholesale Society, and our possibly rather saner newspaper man's instinct to give it saturation coverage. To have done the former would have been to treat this unsavoury little escapade with the contempt it perhaps deserves. But in the end we've had to recognise it for what it is - a bloody good story.

Incredible though Mr Regan's attempted piracy still seems, it has to be admitted that he is at least creating waves as well as some amusing high drama. Mr Regan is a 31-year- old wheeler dealer of both limited experience and success - so far. The object of his attentions is the CWS's very substantial non- food interests, which he has rightly identified as underexploited assets.

The problem is that the CWS belongs to a grand old mutually owned tradition and though at one stage there were plainly traitors in the ranks prepared to parley with the young upstart, they've since been got at and the movement now speaks with one voice against him. If he's going to do anything, he's certainly taking his time in getting round to it. The suspicion must be that with his allies in the movement now nobbled, Mr Regan has lost his chance.

You never know. He may yet surprise us all. The way advisers are being added to his already burgeoning team, he certainly seems still to be serious. But though there may be battles yet to come, I rather suspect he's already lost the war. The barriers to entry seem just too great. Frightened out of its slumbers, the CWS is showing signs of attempting to recognise value itself. In the meantime we in the press should perhaps be grateful to Mr Regan. He's given us something to write about in this increasingly barren patch for business news. Here is unreconstructed 1980s man meets grand old cloth cap tradition, brass plate tax avoidance against ethical investment, cost cutter and asset stripper par excellence against nineteenth century utopianism. It would have been hard to invent a better plot.