BBC TRUST FREESAT CONCLUSION.

AS REPORTED BY THE BBC TRUST IN APRIL 2007.

considered the market impact of this scenario. Their view was that this scenario
would exert significant negative impact on current and prospective participants
across the TV market, including potential new entrants.
Fathom also reported their findings on impact on competition and Digital Britain (these
findings applied to both the above scenarios).
•They agreed with the Governance Unit that the proposition would increase
competition, with consequent benefits for consumers (e.g. lower prices, increased
promotion of free satellite services). However, their view was that because the
proposition would be publicly supported, the usual presumption that the benefits of
competition for consumers outweigh the market impact on producers would not
apply.
•Finally, Fathom noted the Governance Unit’s comments about the possible
contribution of “Freesat” to switchover, and the benefits associated with “Digital
Britain”. They took the view that the proposition would not contribute significantly
to digital take-up or deliver benefits associated with “Digital Britain”.
(iii) The Trust commissioned independent reportWe commissioned an independent review of both the Governance Unit and Fathom reports
from Zoltan Biro, Director, Frontier Economics. A copy of his review was published as part
of our consultation. The key conclusions are set out here.
•On the basis of the information contained in the Governance Unit report and theFathom reports, Frontier Economics concluded that the market impact of the launch
of "Freesat" should be expected to generate static welfare improvements (i.e. in
terms of allocative and productive efficiency)as a result of an increase in competition
in digital TV services.
•In Dr Biro's view, the issue requiring further consideration by the Trust when
considering the overall welfare implications of the launch of "Freesat" (i.e. in terms of
static and dynamic efficiency combined) is whether the anticipated scale of impact on
the revenues of Sky, NTL and potential newentrants would be expected to have a
detrimental impact on their incentives to invest in product and process innovations.
We therefore asked the Trust Unit to further refine the estimate of the potential impact on
Sky (as the main market participant likely to suffer a loss to revenues) in terms of whether
the anticipated impact on revenues could have adetrimental impact on its incentive to investin product and process innovations. This is discussed further below.
(iv) Consultation responses
We included a series of questions on competitive impact in our consultation with the aim of
eliciting views on whether we had identified the relevant markets likely to be affected, what

BBC FREESAT DECIDED BY THE BBC TRUST.

AS REPORTED BY THE BBC TRUST IN APRIL 2007.

ResultsThis section looks in detail at the 674 consultation responses, question by question. For
questions 1 – 11 there is quantitative analysis giving an overall picture of the responses, as
well as drawing out any interesting variations by region and representation. This analysis is
followed by a representative sample of the detailed comments. For instance, if 70% ofrespondents answered ‘yes’ and 30% answered ‘no’ to a given question then the number of
quotes for each point of view will reflect this. Similarly, as 569 responses were fromindividuals and 24 were from organisations the balance of the quotes reflects this.
Questions 11 and 12 do not lend themselves to quantitative analysis as they encourage
respondents to give suggestions, further thoughts, and information. Instead a representative
sample of comments from both individuals and organisations is included.18Question 1(a) – Is current access to the BBC's digital services acceptable?
Of the 562 responses to question 1(a), 62% consider current access to be unacceptable,
while 38% consider it to be acceptable.

Pie chart showing breakdown of responses to the question "is current access acceptable?". 38% said "Yes" and 62% said "No".When breaking the results down further it becomes clear that this issue is particularlyrelevant in Northern Ireland, Wales and Scotland, where digital coverage is not as strong as
across the UK as a whole. These three regions all polled higher than average, with 80%, 74%
and 67% respectively believing current access to be unacceptable, compared to the average
of 62%.
518 Trustees weregiven access to all the consultation responses in full.