BBC TRUST FREESAT CONCLUSION.

AS REPORTED BY THE BBC TRUST IN APRIL 2007.

licence fee payers and with our view of the public value in approving the “Freesat”
proposition.
Our consultation has confirmed that these views are widely held. Only 38% of respondents
considered the current access to the BBC’s digital services acceptable. 93% thought that the
BBC should be taking action to improve access in the lead up to digital switchover. This
figure was 100% for Wales and Northern Ireland where access through ‘Freeview’ is known
to be more limited.
(ii) Assessment of the best interests of licence fee payers and the public interestCurrently, licence fee payers in geographical areas where access to Freeview is not possible
will, until digital switchover in their area, only be able to access BBC services by taking up
“Freesat from Sky” (or an offering of any other entrant to the market) or subscription
services. This is in the context where no commercial provider would be subject to the same
express Public Interest duties that apply to the BBC with oversight by the Trust (with our
own express public interest duties). This isan important issue and the public consultation
responses support our view that there is a significant level of public concern over this. As
part of the Trust’s and the BBC’spublic duties, it is incumbent on us to address this situation
if there is an appropriate way to do so. Our conclusion is that the “Freesat” proposition is
an appropriate way to take action over this matter of public interest.
In our view failure to address this position, which potentially affects a significant proportion
of licence fee payers, would be inconsistent with the BBC's and the Trust's public interest
duties, particularly to promote the Public Purposes set out in the Charter, which require
facilitating access to BBC services. We also consider it is in the interests of licence fee
payers and part of the public interest that “Freesat” is made available as soon as possible.
As part of considering the public value of the proposition, which is dealt with in section 6.5
below, we have concluded that it is not acceptable for a significant proportion of licence fee
payers to be limited to a single subscription-free access routeto BBC services provided by a
commercial third party (BSkyB), over which the BBC has no influence, until as late as 2012.
BSkyB has expressed concern that, in their view, we have created the impression in our
consultation that “Freesat from Sky” ‘remains available to customers only by the grace and
favour of Sky and that at some point the service might cease to be free’. They make the
point that any DVB-compliant services broadcast via Astra and Eutelsat can be viewed via
Sky’s set top boxes. Whilst we accept that it is technically possible to receive channels
broadcast unencrypted via satellite using Sky set top boxes, we do not believe that this
option is, or would be, widely used, and we do not consider it to be a substitute for a
properly supported proposition complete with an Electronic Programme Guide to make
access to services more user friendly. The Consumer Expert Group on Digital Switchover
confirms this, stating that “close attention will be paid to usability aspects of Freesat-
compliant products with the opportunity to encourage manufacturers to follow best practice
in remote control design, labelling and on-screen navigation. Some of these features are
expected to be mandatory for a product to qualify for the Freesat trademark licence.” 

BBC TRUST FREESAT CONCLUSION.

AS REPORTED BY THE BBC TRUST IN APRIL 2007.

BSkyB is under no regulatory obligation to provide subscription-free access and we think it
reasonable to conclude that it does so as a commercial choice. So there is no guarantee
that there would remain a subscription-free route to access BBC services in the future. As
with any commercial proposition, BSkyB could at any point choose to withdraw or change
the terms of this service subject to normal notice provisions. Whilst the BBC would have
no say in such a decision, the potential impact in terms of access to its services would be
significant.
As part of considering the public value of the proposition, our view is that it would not be in
the public interest for licence fee payers to be reliant only on commercial provider routes
over which the BBC has no influence as a subscription-free means of access to BBC services.
There may also be additional benefits to consumers through the introduction of an
additional provider and hence greater competition in the market. This would lead to
increased choice for consumers and potentially other benefits, such as improved product
offerings to customers in the short and longer term. This effect will be particularly strong in
those areas where there is currently only a single, or limited, supplier of digital retail TV
services and those outside of the current Freeview footprint, where the current level of
competition may be lower.
95% of respondents thought that licence fee payers should have a choice of subscription-free
means of access to digital services, with several expressing specific concerns about
dependency on Sky.
Overall conclusions on the interests of licence fee payersWe consider that the BBC's main stated objectives for the proposition are consistent with
the best interests of licence fee payers and the Public Interest duties of the BBC and the
Trust. In relation to the second stated objective, to provide a subscription-free route to HDoutput in perpetuity, given that there will be a PVT assessment of the BBC’s HD service
proposals, the Trust has only considered whether it is in the public interest (and in the
interests of licence fee payers) to have an in-built capability to carry HD output. Our view is
that this allows for appropriate future development which is in the public interest because it
protects against “Freesat” being superseded by technology as well as providing incentives for
manufacturers to produce the required set top box equipment. The response to our
consultation has reinforced this view. 91% of respondents considered it important that theproposition should be future-proofed. One respondent commented “I think the set top
boxes should be capable of receiving both standards [SD & HD] so that a new box is not
necessary when high definition broadcast becomes standard”.
In reaching the above conclusions we have taken into account generally the wider matters
set out in these conclusions particularly those explored in the section on public value and
those in the section on market impact and we have also had regard to the Trust's duties
under the Charter and the Agreement (particularly the duties in Article 23).

BBC TRUST FREESAT CONCLUSION.

AS REPORTED BY THE BBC TRUST IN APRIL 2007.

suppliers in the market but, taking account of the scale of the new proposal, concluded that
these effects on competitors would be small.
The report also considered the potential impact on wider markets, including TV channels
and the supply of hardware. It concluded that the characteristics of the proposal meant that
there was unlikely to be a major impact on the overall distribution of advertising revenues
between channels (as the majority of channels that would be available on the new platform
also played-out on the other main digital TV retail services) and that the proposal might
benefit some manufacturing and service industries by expanding demand in these markets.
Overall, the review suggested that there may be some marginal positive impact on wider
markets and that the proposition was likely to make a contribution to the growth of digital
television take-up and its associated economic benefits.
(ii) The Fathom Partners' reportThe original Governance Unit report was forwarded to DCMS in support of the BBC’s
application in June 2006 (and a revised Governance Unit report which we published as part
of our consultation was provided on 18 November 200617) seeking the Secretary of State’sapproval to enter into a joint venture arrangement. DCMS commissioned Fathom Partners
to comment on the report. Whilst Fathom agreed with the Governance Unit view that theproposition would increase competition withconsequent benefits for consumers, it
contained a number of conclusions which differed from the Governance Unit's views.
Although the Fathom Partners report was not commissioned by the Governors or the Trust
Unit, we considered it was appropriate that we took the report into account in considering
the proposition. The full Fathom Partners report was published as part of our consultation.
The key conclusions are set out here.
•Fathom considered that the Governance Unit had not taken proper account of the
effect on the proposition that future decisions on the provision of HD services could
have. Fathom reviewed two separate scenarios – one without a strong HD channel
line up and one with a strong HD channel line up.
•Without a strong HD channel line up they concluded that the proposition would
have limited appeal (0.5m customers) and may fail because of insufficient interest
from potential manufacturers of the set top boxes. Fathom Partners also
considered that this same scenario could have a negative impact on BSkyB’s
subscription services as well as its free services because in their view the launch of
PSB “Freesat” would alert BSkyB's paying customers to consider a free-satellite
alternative potentially over time prompting a body of BSkyB customers to move from
BSkyB subscription services to “Freesat from Sky”, or to lapse their payingsubscription.
•With a strong HD channel line up they concluded that the proposition could be fairly
successful (2.5m customers). They asserted that the Governance Unit had not
17 We published both the 18 November 2006 Governance Unit report and also the later Trust Unit report that
amended and updated it.

BBC TRUST FREESAT CONCLUSION.

AS REPORTED BY THE BBC TRUST IN APRIL 2007.

promotion of all BBC services. In formulating its codes the Trust is required to have regard
to competition codes issued by Ofcom. The consultation is open until 22 May 2007.
The consultation has reinforced our view that the launch of "Freesat" will not deter
significant levels of investment and innovation or result in the market exit of existing market
participants. Overall, 90% of respondents (and 90% of organisations responding) supported
our assessment.
Finally, 89% overall (and 88% of responses from organisations) said that the proposals went
far enough to minimise the impact of the proposition on the market. Comments included:
“Generally yes although some consideration will need to be given to influencing manufacture
and installation in the interests of consumers.”
“Yes. Many companies existing and future will benefit from the supply of the equipment
necessary.”
“Yes and distances the BBC somewhat which is more suitable for a public body.”
Our view on the competitive impactHaving taken into account all of the material before us we reached the following views.
(a) Effect of strong HD channel line upAs set out above in the section describing the "Freesat" proposal, it is important to bear in
mind the limits to what is being evaluated in considering this proposal. The proposition does
not include approval for a service licence to make available BBC HD output through
“Freesat.” Any such approval would be subject to a PVT which would include consideration
of a MIA prepared by Ofcom. We therefore consider that it is not necessary for the Trust
to give significant weight to the potential market impact with a strong HD channel line up.
However, the Trust has appropriately taken into account, when assessing the proposition's
public value, the future proofing in the proposition by building in the capability to provide
BBC HD output and the fact that this would entail enabling access to HD content if other
broadcasters decide to make unencrypted HD output available.
In the risks section below we have considered Fathom's conclusion that without a strong
HD channel line up the proposition would have limited appeal (0.5m customers) and may
fail.
(b) Competitive restraint on competing servicesWe considered the Fathom Partners' conclusion that the proposition without a strong HD
channel line up could have a negative impact on Sky’s subscription services as well as its freeservices.

BBC TRUST DECIDE ABOUT FREESAT.

AS DESCRIBED BY THE BBC TRUST IN APRIL 2007.

“With the introduction of the 'Freesat' proposals yes. The BBC should continue with its
High Definition trial and should start a scheduled HD satellite service as soon as it is

practically possible. HD is the next logical step in the technological advancement of TV
broadcasting. Had the BBC not progressed broadcasting we would still have 405 lines B&WTV and the Home Service.”
Sample of comments from those who think the BBCshould not
improve access
“I personally believe that the current access levels are sufficient and would question, at this
stage, what value an additional means of receiving would bring?”
Question 2 – Should licence fee payers have a choice of subscription-free
means of access to digital services?
Of the 628 responses to question 2, 95% consider that licence fee payers should have a
choice of subscription-free means of access to digital services, while 5% do not.

Pie chart shoing the percentages responding to the question "Should licence fee payers have a choice?". 95% said "Yes" and 5% said "No".Again the response is especially strong from Wales, Scotland and Northern Ireland; areas
with lower than average Freeview coverage. The evidence suggests that a choice in these
nations would be welcome, with 100% of respondents in favour of a choice of means of
access, compared to the overall average of 95%. 

BBC FREESAT TRUST DECIDES.

AS REPORTED BY THE BBC TRUST IN APRIL 2007.

3(b) 6 0 0
364 6 0 05 6 0 06 4 0 27 5 0 18 4 0 29 3 1 210 3 0 3
11 1 1 4
The following table gives a breakdown of responses to each question for respondents from
Scotland only.
Question Yes No No response1(a) 17 34 6
1(b) 38 3 16
2 56 0 1
3(a) 41 6 10
3(b) 48 1 8
4 49 2 5
5 53 1 3
6 34 1 227 52 0 0
8 42 3 129 38 2 1710 39 6 12
11 28 16 23
The following table gives a breakdown of responses to each question for respondents from
Wales only.
Question Yes No No response1(a) 8 23 2
1(b) 25 0 8
2 32 0 1
3(a) 20 2 11
3(b) 26 1 6
4 27 1 5
5 31 1 1
6 19 1 137 28 0 5
8 22 2 9
9 20 3 1010 23 5 5
11 8 10 15


Results by Representation
The following table gives a breakdown of responses to each question for respondents
representing themselves only.
Question Yes No No response1(a) 186 298 85
1(b) 369 25 175
2 512 23 34
3(a) 398 62 109
3(b) 434 26 109
4 459 38 72
5 498 29 42
6 376 21 172
7 468 35 66
8 417 40 112
9 355 44 170
10 351 91 127
11 160 180 229
The following table gives a breakdown of responses to each question for respondents
representing someone other than themselves (e.g. a company or industry
organisation) only.
Question Yes No No response1(a) 3 18 3
1(b) 18 2 4
2 19 1 4
3(a) 16 1 7
3(b) 19 1 4
4 16 1 7
5 17 0 7
6 9 4 117 14 1 9
8 9 1 149 7 1 1610 9 4 11
11 8 1 15 

BBC TRUST FREESAT CONCLUSION.

AS REPORTED BY THE BBC TRUST IN APRIL 2007.

Appendix 2
Note of licence fee payer concerns over subscription-free
access to BBC digital services
This note was prepared by the BBC Trust Unit.
Lack of access to digital services is an important issue for many licence fee payers. When
they are given the opportunity to pose questions to the BBC, for instance at public meetings
or through unsolicited correspondence, it is a subject that frequently features in the top
three or four most-asked categories. The main issues raised are:
1.Viewers’ inability to receive BBC digital services
2.Their aversion to paying Sky for access to BBC services
3.The common misconception that access to BBC digital services is only available
through a Sky subscription service19The analysis presented below illustrates the issues raised by licence fee payers through both
quantitative analysis of BBC data and qualitative research. We have also included what we
have selected as a representative sample of comments and questions from licence fee payers.
Data analysis
Digital Terrestrial Television through a TV aerial (Freeview) is currently available to only
74% of the UK population. From the beginning of 2005 to the end of 2006 the BBC was
contacted by nearly 1000 people about the lack of digital coverage in their local area. Thesecontacts were as follows:
Complaints 412
Comments 520
Enquiries 27
Total 959
Unsolicited contacts fromthe public via BBC website, phone, email and letter 05/01/2005 – 29/12/2006
The BBC held five public meetings between July 2005 and July 2006, in Belfast, Cardiff,
Glasgow, Norwich and London. In the run up to each public meeting, licence fee payers who
were unable to, or didn't want to, attend the meetings were invited to send in questions via
the website (Suggest a Question). This facility was only open in the 3 to 4 weeks
immediately before the public meeting and not continuously over the year. The BBC
received 2,001 responses via this internet facility, with 200 of these (10%) concerning thelack of digital services. The breakdown of these figures is as follows:
Public Meeting Location Number of Number relating to Percentage
19 Freesat from Sky, a non-subscription service, is available for a one-off fee of £150, with 98% UKcoverage