Local TV: Freeview First, IPTV Later, No Certainty Of Success

Freeview should be used as an initial “transitional platform” to carry local TV services in a handful of areas, until they can flourish all over the UK on IPTV devices, says the review of the market carried out for the UK government.

“Immediate distribution by DTT would give time to establish a brand confidence in local content, in advance of its eventual transfer to IPTV, once it becomes the primary distribution platform,” Nicholas Shott’s review says.

IPTV may take a number of years to fully develop within the UK. DTT is therefore even more necessary and relevant. But, this does not mean that local TV can be developed in isolation without consideration of an online presence or of its future on IPTV. Local TV distributed by DTT could help to pave the way to IPTV, by establishing what works and building a viable and sustainable model.”

Just as Ofcom did last week, Shott presents Hunt with several options for a local TV network – including use of existing spectrum, new spectrum or simply the red button – but does not advocate any particular one. Indeed, much is left uncertain in the review, leaving Hunt to pick a favoured configuration and announce a plan in the New Year.

What is clear is that Freeview is not actually suited to carrying local TV of any scale – for one, signals, at that level, would spill over spectrum boundaries if neighbouring towns each enjoyed such services.

“Terrestrial transmitters built over 50 years ago pose inherent constraints and were not designed to broadcast to specific communities or localities,” Shott’s review says. “DTT does not, therefore, naturally lend itself to local TV purposes. Technically, DTT will require further engineering solutions (with potentially expensive capital and investment costs) to produce even a reasonable patchwork of local TV coverage.”

As a workaround, Shott is proposing that only 10 to 12 areas should get local TV services. “This will offer a means to establish demand, understand supply, identify problems and elicit interest in other parts of the country,” he says. “It will also help to develop local TV so that when IPTV reaches significant coverage of the UK, it can naturally transfer across and lessons will have been learnt and brands established in the meantime.”

Aside from the limited number of local TV services, Shott also acknowledges that influencers in the devolved nations are more concerned with creating national TV services. They want “a degree of autonomy politically and geographically” – that means that much is left open and that Hunt’s TV localism strategy could become an England-only strategy.

Additionally, the problem with expecting IPTV to become the “primary” distribution platform means it’s bound up with rural broadband policy. What if outlying areas never get broadband fast enough to support local TV?

Even after all this, Shott concludes only that “commercially viable local TV may be possible in the UK” (emphasis ours) and will need state support: “Local TV is unlikely to be viable if it is dependent on local advertising revenues alone,” Shott says, recommending that a public service broadcast be charged with selling £15 million in ads from its national advertising inventory on such a service’s behalf.

“The trend away from local display markets makes it appear unlikely that there is some as yet undiscovered, latent local advertising market of sufficient size to support local TV. Therefore local TV will require other revenue sources for financial viability.”

And how local will such services really be? “Local content (is) unlikely to make up the whole of the channel schedule as there would simply not be enough available material,” Shott writes. “The schedule could therefore be split into local and non-local parts. It was suggested that the non-local airtime could be sold to the highest bidder, or filled with network content provided in another way, for example through partnership with an existing network provider.”

At the end of the day, Shott estimates the services should broadcast for two hours a day with a £1,500-per-hour production budget, meaning an annual production budget of £1.1 million per service. Other costs of £500,000 per service mean an annual budget of £1.6 million per service.

Referring to last week’s Ofcom research, Shott said: “41% of (viewers) asked chose local TV in their top two options of possible new uses for spectrum, ahead of HD services, improved mobile phone coverage and mobile broadband”.