Sunday, 10 February 2008



broadcasters in “Freesat” are such that it can be demonstrated that those other
broadcasters are not being subsidised by the licence fee, and that there should be an
appropriate separation between the operation of the “Freesat” proposition and the existing
Freeview proposition.
It is important to make clear that although our market review work does not have to
include the same scope or level of detail as a full Market Impact Assessment15 we have
concluded that the level of the review was appropriate when the scale of the BBC’s
proposed participation was taken into account.
(i) The Governance Unit report updated by the Trust UnitWe were provided with a report based on work conducted during 2006 under the direction
of the BBC Governors to assess the competitive impact of the proposition before it was put
forward to the Secretary of State for consideration. The Governors had asked for an
assessment of the impact of the new proposal on the market and the Governance Unit16had, in the light of BBC management’s own assessment, carried out a review of the market
implications of the proposition.
The Trust Unit considered that the report and its market analysis provided a proper basis
for the Trust's consideration of the proposition and should be put before the Trust with
amendments only to correct typographical errors and to update the statistics used. We
decided that it was appropriate to use this updated report, which we refer to as the Trust
Unit report, as part of our consideration of the proposition particularly given that it was
important to the public value of the proposition to consider it without further delay. The
report considered those specific markets which might be directly affected by the proposition
and assessed the impact on competition in those markets, as well as any ancillary markets
that may be affected and wider economic effects. The full report was published alongside
our consultation document. The key conclusions are set out here.
The Trust Unit report advised us that the proposal might encourage some consumers to
switch from their existing digital providers (or in the case of analogue households, choose
PSB “Freesat” over an alternative digital offering). The market most likely to be affected was
that for non-subscription digital providers (there are two significant competitors in this
market – Freeview and “Freesat from Sky”), although there could also be some effects onsubscription services.
However, the report concluded that the introduction of this additional non-subscription
offer would not be likely to have an adverse effect on competition in these markets, and that
in terms of consumer welfare the effects would be beneficial. The review noted that from
the consumer perspective a new entrant would introduce an element of choice in terms of
subscription-free access to digital TV services in those areas outside Freeview coverage, and
enhance choice and competition in other areas with consequential benefits to consumers.
The report noted there would be some impact on the future revenues of the existing
15 Carried out by Ofcom when the Trust is conducting a full Public Value Test
16 The unit, separate from BBC management and accountable directly to the Governors, established to provide
independent advice to the BBC Governors.

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