The document summarizes key points from a presentation given by Damian Radcliffe at Birmingham City University on November 26, 2009. The presentation covered Ofcom's role as the UK communications regulator, the state of the communications market, issues around public service broadcasting, local media, and the Digital Economy Bill. It provided an overview of Ofcom's duties and focus areas, trends in digital technologies, challenges facing public service broadcasters, and the goals and main elements of the Digital Economy Bill.

1. Presentation Birmingham City University Damian Radcliffe26th November 2009

2. 1AgendaAbout OfcomCommunications Market in the UK todayHot topic (1) – Public Service BroadcastingHot topic (2) – Delivering news, media and information at a local level BreakHot topic (3) – the Digital Economy Bill6. Broadcasting Code

3. 21: About Ofcom

4. About OfcomOfcom is the regulator for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications servicesIt is independent of Government but accountable to ParliamentOfcom’s sponsoring Departments of State are:the Department for Business, Innovation & Skills (BIS)the Department for Culture, Media & Sport (DCMS)Set up - and its powers and duties defined – by the Communications Act 2003

5. Where we came from

6. 5Ofcom’s statutory dutiesUnder the Communications Act 2003 “It shall be the principal duty of Ofcom, in carrying out their functions;(a) to further the interests of citizens in relation to communications matters; and(b) to further the interests of consumers in relevant markets, where appropriate by promoting competition" Ofcom’s specific duties fall into six areas:

7. Ensuring the optimal use of the electro-magnetic spectrum

8. Ensuring that a wide range of electronic communications services - including high speed data services - is available throughout the UK

9. Ensuring a wide range of TV and radio services of high quality and wide appeal

10. Maintaining plurality in the provision of broadcasting

11. Applying adequate protection for audiences against offensive or harmful material

12. Applying adequate protection for audiences against unfairness or the infringement of privacy What we don’t do

13. 72: Communications Market in the UK today

14. 8The communications market in 2008 – key storiesTrends

15. Communications markets and the recession

16. Consumers take control of their viewing

17. Broadband sees double-digit growth in 2008

18. Communications in the Nations and Regions9Communications industries generated revenue of £51.8bn in 2008, but growth slowed…Industry revenue grew by 0.2% (compared to 3.5% in 2007)Total

19. 10…while take-up of all key services continued to riseBroadband and HDTV among the fastest growing servicesSource: Ofcom research/operators

20. 11Time per day spent using communications services On average, consumers spent a little more time using communications services – home internet on the rise, but radio listening declines5 year CAGR0.1%-1.9%21.5%-3.4%15.2%Source: Ofcom/BARB/RAJAR/Nielsen Netratings (internet is home use only)

21. 12The communications market in 2008 – key stories Trends

22. Communications markets and the recession

23. Consumers take control of their viewing

24. Broadband sees double-digit growth in 2008

25. Communications in the Nations and Regions13Communications services appear resilient Items where consumers are most likely to cut back their spendingSource: Ofcom commissioned research (sample = 862)

26. 14Household spend on communications fell again in 2008…In real terms, UK household average spend was £93.69 a month, down 4.7%, or £4.39, on 2007Total

27. 15…and more consumers are buying services in ‘bundles’ 46% of consumers now buy two or more communications services from a single supplier, up from 39% a year earlierSource: Ofcom research

28. 16Communications Market 2008 - key stories Trends

29. Communications markets and the recession

30. Consumers take control of their viewing

31. Broadband sees double-digit growth in 2008

32. Communications in the Nations and Regions17Consumers are taking control of their TV viewing…DVRs and online and TV catch-up services are helping consumers to time-shift their viewing. Our research shows:27% of homes have a DVR (9 million devices now sold)

33. 15% of viewing in DVR homes is time-shifted using their recording device

34. 23% of households with home internet watch online catch-up TV

35. 15% of internet users watch programmes on the BBC’s iPlayer service

36. 52% of cable TV homes (1.8 million) accessed VoD on their television

37. On average, cable homes viewed VoD programmes 30 times per month, at Q4 2008Source: Ofcom research/operators

38. …and watch more TV they enjoy with on-demand18Agreement with statements on non-linear viewingSource: Ofcom research

39. 19Communications Market 2008 - key stories Trends

40. Communications markets and the recession

41. Consumers take control of their viewing

42. Broadband sees double-digit growth in 2008

43. Communications in the Nations and Regions20More than two-thirds of households have broadband – double-digit growth between Q1 2008 to Q1 2009 Take-up of broadband, combining landline and mobile, increased to 68% at Q1 2009, up by 10 percentage points year on yearSource: Ofcom research

44. 21Mobile broadband enters the mainstreamMobile broadband connections exceeded 260,000 in May 2009. 75% of mobile broadband homes also have landline broadbandSource: GfK

45. 22Communications Market 2008 - key stories Trends

46. Communications markets and the recession

47. Consumers take control of their viewing

48. Broadband sees double-digit growth

49. Communications in the Nations and RegionsTop telecoms towns and citiesAberdeen: VOIP 30%Dundee: Bundles 65%Belfast: Mobiles 94%Leeds: Mobile broadband 29%Norwich: Online TV 49%Cardiff: Mobile-only households 29%Source: Ofcom research, selected towns and cities23

50. 243:Hot Topic (2): PSB “under pressure”

51. PSB purposes 25Informing our understanding of the world - To inform ourselves and others and to increase our understanding of the world through news, information and analysis of current events and ideas 2. Stimulating knowledge and learning -To stimulate our interest in and knowledge of arts, science, history and other topics through content that is accessible and can encourage informal learning 3. Reflecting UK cultural identity - To reflect and strengthen our cultural identity through original programming at UK, national and regional level, on occasion bringing audiences together for shared experiences 4. Representing diversity and alternative viewpoints - To make us aware of different cultures and alternative viewpoints, through programmes that reflect the lives of other people and other communities, both within the UK and elsewhere

52. PSB characteristics 26High quality - well-funded and well-produced Original - new UK content rather than repeats or acquisitions Innovative - breaking new ideas or re-inventing exciting approaches, rather than copying old ones Challenging - making viewers think Engaging - remaining accessible and attractive to viewers Widely available - if content is publicly funded, a large majority of citizens need to be given the chance to watch it

53. 27The central challenge – the move from analogue to digital model of public service broadcasting

54. Channel shares in all homes, 1986 - 2008Source: BARB

55. 29Impact of Digital TVOver 90% of households now have access to Digital TVDigital Switchover means all homes will be multi-channel by 2012Digital homes have access to around 40 channels on Freeview and over 400 channels on multichannel subscription – representing huge choice for viewers.By 2012 the 5 channel home will be moribund. For many it already is.

56. Data from Q1 2007 is basedon consumer research**** Chart using new GfK research from Q1 2007 Digital TV progress 1998-2008Source: Ofcom

57. Market share of platforms – All sets Q4 2008Under a third of sets remain analogue terrestrialSource: GfK research31

58. 32The UK TV market is experiencing a period of rapid changePenetration of digital technologies risingAudience share for the five main channels falling78%69%84%64%51%54%47%11%20032007200320072003200720072003Source: Ofcom Source: BARB

59. Market changes

60. 34The growth in digital platforms is creating new opportunities for audiencesPenetration of digital technologies (%)Source: Ofcom, GfK, Sky, Virgin Media. Mobile broadband includes penetration of 3G phones plus dongles

61. DVR penetration in all homes% of homes27%Source: Ofcom Research (Technology Tracker)35

62. BBC iPlayer online usageBBC iPlayer monthly online streams/download requests, 2008 Autumn TV schedule launchesTV iPlayer launches on Virgin Media Streams/downloads (m)36

63. Despite more choice, TV consumption is declining% growth 2002-2007-3%-5%295%-7%88%

64. Total viewing hours of National News, main PSB channels only, by age group Total hours per year watched by average individual (4+)103285019571143Source: BARB, 2008

65. 39PSBs face declining income as well as audiencesIncreased competition for advertising revenue from other TV channels and internet2007 TV advertising1993 TV advertisingOther channelsOtherchannelsChannel 4ITV1ITV1Channel 4

66. 40Investment in UK content depends on public service channels but is already fallingPSB content – excludes sportSource: Oliver & Ohlbaum Assocs

67. Spend on first-run originated output on the five main networks£2,620Total£2,697£3,064m£2,952£2,848£mSource: Ofcom/Broadcaster returns. Note: figures are expressed in 2008 prices. Figures include GMTV. 41

68. 424: Delivering news, media and information at a local level

69. Our work focuses on our statutory duties set out in the Communications Act43Secure wide range of TV and radio services of high quality and wide appeal

70. Maintain sufficient plurality of providers

71. Licence national and local analogue and community radio stations

72. Ensure optimal use of the radio spectrum – including for Local TV Plus, in addition:Role in conducting Local Media Assessments for newspaper mergers

73. Review operation of Media Ownership Rules for Secretary of StateOur work spans different levels of localness44Local and regional media – the consumer view

74. Local journalism is important because it underpins democratic participation in the UK45InformingRepresentingInterrogatingCampaigning

75. Consumers value local and regional content – particularly news46% saying local and regional content is very important - weekly usersScores based on respondents importance rating 9/10 on a scale of 1-10. Source, Ofcom research

76. People using internet for local media more than they used toUse of local media now compared to two years agoSource: Ofcom research 47

77. The internet has also created new opportunities and business modelsLocal and regional newspapers onlineUltra-local reporting and citizen journalismEmerging hyper-local and community internet servicesLocation based servicesNational classified advertising vehicles48

78. But the growth of the internet as an advertising medium has created challenges for the sector49Source: Advertising Association, IAB, PWC, WARC, Oliver & Ohlbaum Analysis

79. 50The recession has placed further pressure on regional and local mediaRegional Press advertising revenuesCyclicalStructuralCurrent Prices (£m)Source : Advertising Association/ WARC (www.warc.com)

80. 51The recession has put further pressure on regional and local media TV net advertising revenues£m revenue at constant prices (2000)CyclicalStructuralSource : Advertising Association / WARC (www.warc.com)

81. Consumers value plurality in regionally based TV newsPercentage who state it is important to be on than more than one of the main channelsSource: Ofcom Research 52

82. Our analysis shows that the Channel 3 licences could face a deficit of £38-64m by 201253MillionsRanges between higher and lower values based on current best estimatesCost Benefit of PSB status for the Channel 3 networkSource: Ofcom

83. The Government has proposed a new model for delivering regional news54Independently funded news consortia (IFNCs) would bid to provide regional news service backed by public funding

84. Including, but not be limited to, news on Channel 3

85. Consortia awarded contracts based on public criteria, including: - Reach & impact - High production & editorial standards - Financial strengthGovernment has proposed pilots in Scotland, Wales and one English regionLocal news consortia could also offer greater localness and cross media news provision55News consortia could offer enhanced options for localness, by- Extending local coverage beyond current regional transmission footprint - Using news content gathered at local level to underpin extra local servicesExciting opportunity to try new models for local news across multiple platforms, using new methods and technologies

86. Consortia could also make news footage available more widelyPhased funding for news consortia could balance costs and benefits for C3 over 5 years56Cost Benefit of PSB status for the Channel 3 network including IFNC fundingRanges between higher and lower values based on current best estimatesSource: Ofcom

87. 57A number of potential bidders have already emerged

88. A large number of stakeholders have responded to the DCMS consultation Majority expressed agreement that plurality in regional TV news is important and that commercial news providers are facing substantial pressures Many recognised that some form of additional funding may be required to sustain this Support for IFNCs as a mechanism to achieve thisSome concerns raised:Commercial impact of public funding of regional newsProposed use of the licence fee for non-BBC services Impact of public funding on governance and impartiality of newsComplexity of awards process58

89. We believe the future of the sector should be driven by the needs of citizens and consumers59Future opportunities Current challenges Continued provision of regional news on Channel 3 in doubt

90. Local commercial radio sector under pressure

91. Small local TV sector

92. Local and regional newspaper closures

93. Limited visibility of community media sector

94. More localised, cross-media service

95. Reinvigorated and fit for digital age

96. New opportunities on DTT

97. A wide choice of content, available on traditional platforms and online

98. Thriving community media sectorAll underpinned by innovative, grass roots journalism

99. Next Steps60Government’s Digital Economy Bill underway

100. Government leading on-going work on IFNC pilots

101. Ofcom’s Statement with recommendations on Media Ownership Rules – to Secretary of State has been published

102. Ofcom Consultation on DDR in due course615:Hot Topic (3): The Digital Economy Bill

103. Digital Economy Bill62“The communications sector underpins everything Britain does as an economy and society. The rapid drive to digital technology is transforming how both businesses and people operate. And this digital revolution offers great opportunities.Not only does the digital economy contribute around eight per cent of our GDP, it is vital for the success of every other area of productivity. It is growing in significance as we plan for recovery from the economic downturn. The Government is committed to securing the UK’s position as one of the world’s leading digital knowledge economies.This Bill would put in place the necessary legislative measures to deliver the strategic vision set out in the Digital Britain White Paper.”http://www.commonsleader.gov.uk/output/page2920.asp

104. Digital Economy Bill (2)63“The purpose of the Bill is to: Strengthen the nation’s communications infrastructures, equipping the UK to compete and lead in the global digital economy.The main benefits of the Bill would be:Promoting a competitive digital communications infrastructure, through proposals on radio licensing, changes to Ofcom’s duties and spectrum modernisation. Providing essential support for creative industries in a digital world, through proposals on online copyright infringement and changes to copyright licensing. Improving digital security and safety, by putting in place a classification system for boxed video games that meets the needs of parents and children. Securing public service content in a rapidly changing broadcasting landscape, through action on the provision of news in the nations, regionally and locally, updating Channel 4 Corporation’s functions and future-proofing the Channel 3 and 5 licences.”

105. Digital Economy Bill (3) - main elements64“Online infringement of copyright – tackling widespread copyright infringement via a two-stage process. First by making legal action more effective and educating consumers about copyright on-line. Second through reserve powers, if needed, to introduce technical measures, such as disconnection.

106. Support the plurality of independent and high quality news in the Nations, locally and in the regions – giving Ofcom powers to appoint and fund Independently Funded News Consortia.

107. Digital infrastructure and content – giving Ofcom new duties to promote investment in infrastructure and public service media content, and to carry out an assessment of the UK’s communications infrastructure every two years.”Digital Economy Bill (4) - main elements (2)65“Mobile and wireless broadband – enabling investment in next generation technologies through spectrum modernisation.

108. Digital radio - updating the regulatory framework to make moves to digital switchover for radio possible by 2015.

109. Channel 4 Corporation – updating its functions to encompass public service content on all media platforms - online as well as television.

110. Video games – protecting children by making age ratings compulsory for all boxed games designed for those aged 12 or above.”66Questions & Break

111. 676: Broadcasting Code

112. How you may have heard of us

113. 69Case StudiesGordon Ramsay's Great British Nightmare, Channel 4 Casualty, BBC1 Breakfast Show, Kiss FM Katie and Peter, ITV2 Sumo TV

114. Thank you for listeningdamian.radcliffe@ofcom.org.uk70