Media: What can I do to make you go digital?

Digital TV will never work if it is minority entertainment. So how does the BBC get the unconverted viewer to switch on?

Analogue switch-over is the rather arcane term-of-art for a defining moment in the history of broadcasting in this country. When it happens, every family in Britain will be profoundly affected, yet at the moment it appears that only a tiny minority is aware of its importance. If broadcasting policy gets this one right in the next 10 years, the benefits to the economy and to the viewer will be incalculable. But if policy-makers get it wrong then a sizeable minority of households, especially those of under-privileged families and elderly people, could suffer serious losses.

This issue dominated the considerations of my panel on the future funding of the BBC, even though we did not have full knowledge of the Government's intentions in this area before last Friday, when Chris Smith made a path- breaking speech on the subject at the Royal Television Society meeting in Cambridge.

I should like to explain how my panel's recommendations on BBC funding dovetail with the Culture Secretary's intentions on analogue switch-over. Far from being at odds with the strategy for early switch-over, our proposals for a small and temporary digital supplement to the BBC licence fee were designed with precisely this objective in mind.

On the date of switch-over, British households will no longer be able to receive the television signals on which the entire population relies today. Instead, we shall be expected - in effect, required - to acquire equipment that can receive digital television signals.

Why would any sane policy-maker contemplate forcing families to make this choice?

There are two reasons. First, today's television services are occupying a part of the spectrum that might be better adopted for alternative uses, with higher economic returns. I have seen estimates suggesting that the sale of this spectrum may be worth up to pounds 8bn to the Government. This seems much too high a figure, but if we are to establish this country as the European base for information technology - in tough competition with the Germans, who are moving rapidly towards analogue switch-over themselves - then we need all the spectrum we can get.

Second, digital television is simply a superior technology to analogue television, and the sooner we make the switch, the sooner the vast majority of viewers can enjoy its potential benefits.

This is why Chris Smith announced last week that he hopes to make the change somewhere between 2006 and 2010. The problem, however, is that the Government cannot authorise switch-over until two crucial tests have been met. These are that digital television should be available to virtually everyone (defined to be 99.4 per cent of the population), and that it should be affordable to the vast majority. The Culture Secretary said that "when 70 per cent of consumers have access to digital equipment, we will know that a significant milestone has been passed and can clarify the timetable further".

In other words, and quite appropriately, more than two-thirds of the population must voluntarily choose the digital option before a firmer timetable can be set for a compulsory switch-over date.

Here is the rub. So far, only about 6 per cent of households have made the switch, and all the evidence from opinion surveys suggests that the eventual take-up of digital services will plateau at somewhere between 50 and 60 per cent of the population. This seems plausible when we examine the history of pay-TV, whether in the form of satellite or cable. After a decade of heavy marketing, the take-up of this form of television has still reached only 30 per cent of households, with the rest of us preferring to stick with the five terrestrial channels.

Why has this happened? Essentially, it is because the economics of pay- TV are such that it makes sense for the providers to focus on only a few television genres, notably premium sport and movies, for which there is a high willingness to pay among some elements of the population. For reasons connected with advertising it also makes sense, from a profit-maximising standpoint, to price these services so that they exclude a large number of households, perhaps the majority.

If we rely on the private sector alone to develop and market digital television, precisely the same thing will happen. An important new study by dotECON, published last week by the BBC, shows that only about 55 per cent of people will ever be interested in the mix of programmes that is likely to be provided by the private sector. The other 45 per cent of viewers express little interest in the typical pay-TV diet of sport, movies and rerun soaps, and instead want to watch a wider selection of programmes, including drama, news, documentaries, nature, education and factual programmes. Unless those tastes can be catered for in the digital arena, these households are most unlikely to migrate voluntarily to digital, and Chris Smith's 70 per cent take-up threshold will never be reached. This means that analogue switch-over will never occur.

There is only one feasible way of removing this catch-22: a rich variety of new programming will be needed in the digital space to attract the forgotten half of the population for whom pay-TV has no appeal. And in the UK there is only one broadcaster that feasibly can produce and market these new programmes: the BBC. We are therefore left with the conclusion that unless the BBC receives funding to enhance and enrich its digital offering, Chris Smith's essential tests for switch-over will never be met. This leaves one more question. Who should pay for this extra BBC programming? One option, which my panel considered, was that the money should be raised from the regular licence fee, but we were concerned that this would simply be unfair. Early adopters of digital television are markedly better off than the average licence-fee payer. Why should a poor pensioner household subsidise my own family, just because we can afford to watch Arsenal play Manchester United in interactive wide-screen technology? To institutionalise this unfairness for another decade or so was a difficult pill for the panel to swallow. This left only one option - that those who choose to go digital should pay a small top-up, averaging pounds 1.57 per month, on the licence fee so that the BBC can afford to provide us with the services needed to attract the majority to make the switch. This supplement would gradually decline through time, and would disappear entirely before the date of switch-over, so that nobody would ever be forced to pay it against their will.

Predictably, the private television industry has opposed this supplement on the grounds that it would harm digital take-up. Yet since the publication of my panel's report there has been no noticeable effect on the share prices of the companies concerned, no downgrades to profit projections, and no impact (as far as I am aware) on digital sales in the high street. The test of the market-place suggests that the over-the-top adverse reaction of private television companies was entirely misplaced.

Last week, Chris Smith said the role of public service broadcasting and the BBC "needs a redefinition, not a requiem". I agree. I would go further. Unless we get this redefinition right, we shall not achieve switch-over by 2010. The BBC is needed to make this happen, and the digital licence supplement remains the fairest way of financing the change.

The writer chaired the independent review panel on the future funding of the BBC