BBC Trust

At the start of February 2016, the Trust received an application from the BBC Executive to remove restrictions prohibiting Freesat from offering pay sports services delivered via the internet.  Having considered the proposal and consulted with other TV platform operators and Ofcom, the Trust has concluded that the proposals do not constitute a significant change to the BBC's services and that it is not necessary to conduct a full Public Value Test.  In particular, the Trust found that the plans were unlikely to give rise to any material negative impact on the market. 

Background

Freesat is a 50:50 not-for-profit joint venture between the BBC and ITV. It was launched in 2007 to offer a satellite based Free-to-Air (FTA) alternative to subscription services.  Freesat is now available in over 1.93 million households and is watched by more than four million viewers every week. It offers more than 200 TV & radio channels and 10 interactive services. [1]

While the BBC Trust does not regulate Freesat itself, the BBC’s participation in the venture was subject to (and received) Trust approval in 2007.

In July 2011, the Trust extended this approval to include the provision and listing of additional broadband-delivered on-demand content. This includes the option to access paid-for content, alongside Freesat’s core free-to-air TV offer.

This permission enabled Freesat to launch Freetime in 2012, a hybrid platform which provides its customers with a mix of free and pay video on-demand (VOD) services. Such platforms are now well established in the UK. At the time, the Trust approval did not apply to the provision of live streamed sports coverage.

Proposal

In the light of market changes, Freesat wanted to extend the scope of its permission to offer pay services delivered via broadband onto its platform. Specifically, Freesat wished to give its viewers the option to access Pay-Sports services via broadband through its set-top box. It believes that such an option is important to help support Freetime as an attractive and competitive connected TV platform and if it is to maintain its market share.

Under the BBC Framework Agreement, the BBC Executive is required to notify the Trust of potentially significant changes of this kind. The Trust must then consider whether the proposal actually constitutes a significant change to the BBC’s public services, and whether it should conduct a Public Value Test before reaching a decision.

At the start of February this year, the BBC Executive therefore proposed to the Trust that this restriction on the BBC’s participation should be removed.

Trust’s decision-making process

In deciding whether or not a change is significant and whether a PVT is needed or not, the Trust must have regard to the four considerations set out in Clause 25 of the Framework Agreement; that is, the impact, financial implications, novelty and duration of the proposed change.

The BBC Executive provided the Trust with its assessment of whether the proposal to provide access to pay-IP sports services to Freesat/Freetime customers is likely to be significant against these criteria.  Its analysis concluded that is unlikely to be significant for the following main reasons:

• Changes in the market mean that consumers are now able to watch sports through a wider range of pay TV platforms.[2] The Executive noted that Freesat is the only major TV platform that does not currently offer access to some form of premium sports service in its environment.
• The proposal is unlikely to significantly increase sales of Freetime set top boxes or other devices (IDTVs or game consoles). The Executive anticipates that providing access to pay TV sports services such as Now TV and BT Sports will help Freesat to retain rather than grow its market share.
• Freesat currently accounts for around 7% of all TV homes. Only a small proportion of these homes (around 20%) have access to pay VOD services through Freetime receivers, and only 20% of those currently pay to access such content monthly.[3] On this basis the Executive concluded that the potential negative market impact if Freesat adds pay sports services to the existing pay services it offers on Freetime is marginal.

The Trust’s initial view was that it was satisfied with the Executive’s analysis and the conclusions drawn from it.

Although we did not carry out further analysis of our own, we invited views from others in the market that might be affected by the proposal to identify any potentially material new information on impacts before reaching a final decision on the proposal.  We also informally shared the Executive’s analysis with Ofcom for their views.

We received responses from all the major broadcast platforms in the UK. They stated either that they did not wish to provide a formal response as they had no particular evidence to submit or accepted that the specific proposal would only be likely to lead to an incremental change to Freesat/Freetime’s existing VOD services.

Trust decision

Based on the evidence we have received, the Trust has now agreed that the Executive’s proposal to introduce pay-IP sports services on Freesat is unlikely to be a significant change to the public services and therefore the presumption of undertaking a Public Value Test can be rebutted.

The Trust has therefore approved the removal of this restriction on the BBC’s participation in Freesat.

Footnotes

[1] Freesat PN 4th February 2016 

[2] Ofcom’s review of the pay TV wholesale  must-offer obligation, November 2015 

[3] Based on Freetime homes that have opted into audience measurement