Title: Impact Assessment (IA) Local TV: Implementing a new framework IA No: DCMS005 Lead department or agency: DCMS Date: 28/06/2011 Other departments or agencies: Stage: Final Ofcom, HMT, BBC Source of intervention: Domestic Type of measure: Secondary legislation Contact for enquiries: Ruth John - 020 7211 6977 [email protected] Summary: Intervention and Options What is the problem under consideration? Why is government intervention necessary? Research (see para 34) shows high demand from audiences for local news and content, some of which is available through newspapers, radio and online. However, the UK market has been unable to support sustainable commercially viable local TV, as it is hampered by market barriers with limited regulatory incentives. Despite television being the media platform with the greatest household use, these barriers limit commercial opportunities for local TV to develop. Government can incentivise the market and encourage growth by tackling the barriers to entry and creating a framework for local TV services to emerge that will bring wider economic, social, cultural and democratic benefits. Local TV will have a vital role to play in the localism agenda, in holding local institutions to account and increasing civic engagement at a local level. What are the policy objectives and the intended effects? In line with the Coalition Agreement, Government is committed to enabling local TV to emerge in the UK. The Government will create a regulatory framework to enable and support commercially sustainable local TV as part of the wider growth agenda. This will not be an imposition on existing broadcasters or create new regulatory burdens. Instead it will create an opportunity for the market, through reservation of sufficient geographic interleaved spectrum to carry local TV; implementing a new fit-for-purpose local TV licensing regime; and ensuring that licensed local TV providers can benefit from appropriate prominence in television electronic programme guides (EPGs). The BBC has committed to contribute to capital infrastructure costs and to ongoing costs for the first 3 years through purchase of local content. What policy options have been considered, including any alternatives to regulation? Please justify preferred option (further details in Evidence Base) 1. Do nothing. This has no cost or impact on the market. Makes it extremely unlikely that sustainable local TV will emerge and succeed. 2. Create a new local TV framework with three key elements: a) Acquring spectrum b) Ensuring EPG prominence c) Developing a fit-for-purpose local licensing regime The costs and benefits of the options Government could use to deliver this framework are considered in detail in the Evidence Base section, taking into account alternative options for spectrum and EPG prominence. Will the policy be reviewed? It will be reviewed. If applicable, set review date: 6/2014 What is the basis for this review? PIR. If applicable, set sunset clause date: N/A Are there arrangements in place that will allow a systematic collection of Yes monitoring information for future policy review? Ministerial Sign-off For final proposal stage Impact Assessments: I have read the Impact Assessment and I am satisfied that (a) it represents a fair and reasonable view of the expected costs, benefits and impact of the policy, and (b) the benefits justify the costs. Signed by the responsible Minister: Date: 16 June 2011 1 URN 10/1268 Ver. 2.0 12/10 Summary: Analysis and Evidence Policy Option 1 Description: Do Nothing Price PV Base Time Net Benefit (Present Value (PV))(£m) Base Year Year Period Low: 0 High: 0 Best Estimate: 0 Y COSTS (£m) Total Transition Average Annual Total Cost (Constant Price) Years (excl. Transition) (Constant (Present Value) Low 0 0 0 High 0 0 0 Best Estimate 0 Description and scale of key monetised costs by ‘main affected groups’ N/A (Local and national media industries would continue within their current parameters , with no new costs imposed on businesses). Other key non-monetised costs by ‘main affected groups’ N/A (Local content in press and on radio will continue to see a decline through structural and cyclical change. This may have a consequent impact on businesses which struggle to survive. This has a consequent impact on society of benefits of local TV not being realised. These are the 'Benefits' in Option 2). BENEFITS (£m) Total Transition Average Annual Total Benefit (Constant Price) Years (excl. Transition) (Constant (Present Value) Low 0 0 0 High 0 0 0 Best Estimate 0 Description and scale of key monetised benefits by ‘main affected groups’ N/A (these have been captured as opportunity costs in Option 2). Other key non-monetised benefits by ‘main affected groups’ N/A (these have been captured as opportunity costs in Option 2). Key assumptions/sensitivities/risks Discount rate Without any intervention from Government, local television will continue to face technical and market barriers, accompanied by limited regulatory incentives. In trying to get viable services carried on digital terrestrial television, local TV services have to compete with national broadcasters but without an appropriate legislative framework to support them. Given the small size of these companies and with an unfavourable cost framework, the risk is too great for investors and businesses to develop a business model and invest in. Local TV may eventually emerge on IPTV over the coming years, but the timeframe for this is difficult to establish, and it is likely to be more disparate, fragmented, and difficult to find (a television platform rather than internet would provide significantly greater visibility and television is the most used media platform). Direct impact on business (Equivalent Annual) £m): In scope of Measure qualifies Costs: N/A Benefits: N/A Net: N/A No NA 2 Enforcement, Implementation and Wider Impacts What is the geographic coverage of the policy/option? United Kingdom From what date will the policy be implemented? N/A Which organisation(s) will enforce the policy? N/A What is the annual change in enforcement cost (£m)? N/A Does enforcement comply with Hampton principles? N/A Does implementation go beyond minimum EU requirements? N/A What is the CO2 equivalent change in greenhouse gas emissions? Traded: Non-traded: (Million tonnes CO2 equivalent) N/A N/A Does the proposal have an impact on competition? No What proportion (%) of Total PV costs/benefits is directly attributable to Costs: Benefits: primary legislation, if applicable? N/A N/A Distribution of annual cost (%) by organisation size Micro < 20 Small Mediu Large (excl. Transition) (Constant Price) N/A N/A N/A m N/A N/A Are any of these organisations exempt? N/A N/A N/A N/A N/A Specific Impact Tests: Checklist Set out in the table below where information on any SITs undertaken as part of the analysis of the policy options can be found in the evidence base. For guidance on how to complete each test, double-click on the link for the guidance provided by the relevant department. Please note this checklist is not intended to list each and every statutory consideration that departments should take into account when deciding which policy option to follow. It is the responsibility of departments to make sure that their duties are complied with. Does your policy option/proposal have an impact on…? Impact Page ref within IA Statutory equality duties1 No Statutory Equality Duties Impact Test guidance Economic impacts Competition Competition Assessment Impact Test guidance No Small firms Small Firms Impact Test guidance No Environmental impacts Greenhouse gas assessment No Wider environmental issues Wider Environmental Issues Impact Test guidance No Social impacts Health and well-being Health and Well-being Impact Test guidance No Human rights Human Rights Impact Test guidance No Justice system Justice Impact Test guidance No Rural proofing Rural Proofing Impact Test guidance No Sustainable development No Sustainable Development Impact Test guidance 1 Public bodies including Whitehall departments are required to consider the impact of their policies and measures on race, disability and gender. It is intended to extend this consideration requirement under the Equality Act 2010 to cover age, sexual orientation, religion or belief and gender reassignment from April 2011 (to Great Britain only). The Toolkit provides advice on statutory equality duties for public authorities with a remit in Northern Ireland. 3 Summary: Analysis and Evidence Policy Option 2 Description: Create new local TV framework (preferred option using secondary legislation to: reserve GI spectrum; ensure appropriate EPG prominence; and implement a robust local licensing framework) PRICE PV BASE TIME NET BENEFIT (PRESENT VALUE (PV)) (£M) BASE YEAR PERIOD 20 LOW: - HIGH: - BEST ESTIMATE: SEE YEAR YEARS BELOW COSTS (£m) Total Transition Average Annual Total Cost (Constant Price) Years (excl. Transition) (Constant (Present Value) Low - - £0 High - - £80m (opportunity cost) Best Estimate £40m * Description and scale of key monetised costs by ‘main affected groups’ This policy is about creating an opportunity in the market for businesses to take advantage of. It does not impose new direct costs or burdens. * Reservation of some Geographic Interleaved spectrum for local TV could represent an opportunity cost to those who might otherwise have used the spectrum for other DTT purposes if they chose to acquire it. This opportunity cost ranges from £0 to £80m and the assumptions are set out at paragraph 75. The BBC is providing a contribution of up to £40m over 4 years to local TV, set out at paragraph 116. Other key non-monetised costs by ‘main affected groups’ Reservation means HMT would not receive open auction receipts. However, (1) it may receive funds through Administered Incentive Pricing; (2) previous auctions for GI spectrum have released it at the reserve price of £10,000; (3) this is only a small part of the GI spectrum available in the UK (approx 5-8%).