1. © Wiggin LLP. All rights reserved CANOLFAN MATERION CYFREITHIOL CYMREIG: YR 8FED DDARLITH FLYNYDDOL Jason Chess, Partner, Wiggin LLP

2. © Wiggin LLP. All rights reserved Tonight A.THE ESSENTIAL BACKGROUND: DIGITISATION and CONVERGENCE – the transformation of the media industry B.BROADCASTING IN WALES – Current provision C.THE FUTURE – Will the cataclysm of change in the media allow Wales to retain a media personality in either language?

3. © Wiggin LLP. All rights reserved Born Porthcawl, educated Porthcawl Comprehensive School and University College, Oxford Read English (MA 1986) and Mediaeval Languages (MPhil, 1990) Specialised in the religious verse of the Gogynfeirdd and the palaeography and transmission of Celtic manuscripts to Saxon Wessex. Partner at No. 1 specialist media law firm Wiggin LLP. Advise a range of media clients including ITV, Channel 4, Five, BT, S4C, Granada, Virgin Media, UKTV, Discovery, Al Jazeera (Arabic and English), HBO, Setanta, Emap Plc, Conde Nast, Hearst Corp. Recent work = BBC/ITV/C4 Public Service VOD JV announced this week. Negotiated and established Astra 2A digital satellite transmission chain for S4C in 1998 Who Am I?

4. © Wiggin LLP. All rights reserved Come on the journey… Lle’r ei di Twn Pen Ceunant Lle’r ei di ar draws y byd A’r Sioned bron a hollti A’i hwyliau’n garpiau gyd? Yn ol i’r Felinheli Rwy’n mynd co bach, ho,ho, Ym morio am fy mywyd Saith mis o Callao… Where go you, Twn Pen Ceunant Where go you across the seas And the Sioned almost broken Sails ragged in the breeze? Back to Felinheli I’m going, my lad, ho, ho Sailing like a maniac Seven months from Callao Ynys yr Hud, (W.J. Gruffydd); Euryn Ogwen Williams: “Byw ynghanol chwyldro”, Darlith Cymru Heddiw, Eisteddfod Genedlaethol Bro Ogwr, 1998

5. © Wiggin LLP. All rights reserved Part One: What is “the Media” and why is it changing at present??

6. © Wiggin LLP. All rights reserved Analogue Terrestrial Television 1982: Analogue Television Broadcasting BBC 1 BBC2 ITV Channel 4/S4C Television

7. © Wiggin LLP. All rights reserved Analogue Terrestrial Television BT Distribution Network 1154 Transmitter Sites Production What is ATT? Broadcast from 1154 sites UK Wide 211 sites in Wales – Moel-y-Parc, Wenvoe 4 or 5 television services with ‘universal coverage’ Wasteful of capacity Only able to broadcast a small number of national channels DSO process to be completed in 2012

8. © Wiggin LLP. All rights reserved Analogue Satellite Television Analogue Terrestrial Television Broadcasting Platforms 1990 Analogue Cable Television

9. © Wiggin LLP. All rights reserved Cable Television Enc1 Enc2 MUX Local Node (HFC) What is Cable Television? 2 UK operators – ntl and Telewest – now merged into Virgin Media Limited geographic availability Virgin – Cardiff and Swansea A closed network requiring subscription Provides digital video and audio Provides NVOD / VOD, internet access & telephony Every television requires an STB Requires installation of a coax feed to the home ATM Distribution Network ATM Distribution Network Cable link to the home Content “on-demand” servers Real Time TV services QAM Modulator

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11. Direct to Home Satellite Television What is Direct to Home Satellite Television? Sky platform dominant in the UK Provides access to 600+ channels: slots on the electronic programme guide (“EPG”) have just run out Provides NVOD services (“near video on demand”) Provides PPV services (“pay-per-view”) Provides interactive services via Open TV and WML Provides PVR functionality via Sky+ Requires a set-top-box ITV and BBC to launch a ‘Freesat’ alternative service Services uplinked to Satellites Services downlinked via receive satellite dish and fed in to STB Enc1 Enc2 MUX Content “on demand” servers QPSK Modulator Real Time TV services

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13. Television 1998: Digitisation and Digital Broadcasting “Terrestrial Television” Analogue and Digital : Cable TV: Analogue and Digital Satellite

14. © Wiggin LLP. All rights reserved Digital Terrestrial Television Enc1 Enc2 Enc3 MUX Enc1 Enc2 MUX Regional (RPOC) and National (NPOC) Multiplexing Systems BT Distribution Network 80 Transmitter Sites Real Time TV services What is DTT? 6 Multiplexes of 24.1Mbit/s Up to 10 services in a multiplex High quality video and audio ‘interactivity’ via MHEG-5 NB no return path Mix of free-to-air services and Pay-tv Currently limited core coverage from 80 transmitter sites UK Wide 9 sites - Wales Reception can be patchy At DSO, core coverage of PSB multiplexes expected to reach 98% Further capacity possible, subject to Ofcom and RRC06 COFDM Modulator

15. © Wiggin LLP. All rights reserved Analogue…Digital

16. © Wiggin LLP. All rights reserved Satellite Terrestrial (Analogue & Digital) Content Distribution Platforms 2002 DSL (IPTV) Cable

17. © Wiggin LLP. All rights reserved DSL (IPTV) What is IPTV? Direct to consumer service, offering: Broadcast television Video on demand Deliver over a closed IP network Offering a high QOS Fixed wire delivery, currently DSL in the UK (Homechoice in London and Kingston in Hull) “Soft Launch” of BT Vision ‘Internet’ (Usually dedicated ATM circuits) ‘Internet’ (Usually dedicated ATM circuits) Local Loop (twisted pair) to the home Local BT exchange (DSLAM) Real Time TV Services Enc1 Enc2 MUX Content “on demand” servers IP Encapsulator

18. © Wiggin LLP. All rights reserved CATV DSL (IPTV) Satellite Terrestrial Television PC Mobile Phones (3G) Content Distribution Platforms 2004 Mobile Phone (3G)

19. © Wiggin LLP. All rights reserved Mobile Telephony (3G) 3G Distribution Network What is Mobile Telephony (3G)? Direct to consumer service carried in-band over 3G mobile telephone networks, offering: Recorded video-clips Could provide ‘mobisodes’ Video messaging between handsets Content can be FTV or pay-tv 3G cellular transceiver network 3G handset Content Server MPEG4 Encoded Content

20. © Wiggin LLP. All rights reserved Mobile Telephony (3G) DSL (IPTV) Satellite Terrestrial Internet TV PC Mobile Phone (3G) Media Players 2007: The Modern Media Mobile TV devices (DVB-H and T-DMB) Mobile Television (DVB-H and T-DMB) Cable

21. © Wiggin LLP. All rights reserved Internet WM Server Windows Media Player Client Live Content Windows Media Encoded Content Real Time Encoder Streaming Server Internet ISP Connection What is Internet Delivery? Delivery of content encoded using e.g. Windows Media or Real Networks. Usually Unicasting TCP/IP based delivery Viewed on a PC with a client application Can be accessed from various terminals and various connectivity (e.g. PC, handheld, 3G mobile phones)

22. © Wiggin LLP. All rights reserved Mobile Television (DVB-H) Distribution Network What is DVB-H? Delivery of live television programming to mobile devices via DVB-H transmissions Cellular transmission network likely Single Frequency Network topography likely Frequency availability and licensing framework not yet decided. Capacity subject to post-DSO frequency plan and RRC06 decisions. Ability to receive high quality digital pictures and sound Whilst on the move (cell roaming) O2, Nokia & Arqiva trialled a DVB-H network in Oxford. DVB-H Transmitter Network DVB-H Equipped receiver Enc1 Enc2 Enc3 MUX Real Time TV services DVB-H Modulator

23. © Wiggin LLP. All rights reserved The Media Platforms: How do they sell content and how can users access content? Modern Media Platforms : How do they work?

24. © Wiggin LLP. All rights reserved Analogue Terrestrial Television TV Analogue Terrestrial Television Business Model : 1982 “Free to Air” or “FTA”

25. © Wiggin LLP. All rights reserved Analogue Cable TV Analogue Satellite TV Analogue Television TV Free to Air Basic Pay-TV Packages Premium Packages (Sports, Films/ Adult) Broadcasting Platforms Business Models: 1990

26. © Wiggin LLP. All rights reserved Digital Satellite Analogue and Digital Cable TV Free to Air Basic Packages and Themed Packages (“music” package; “family” package) Premium Packages (Sport/Films/Adult) “Pay-Per-View” or PPV Digital and Analogue Terrestrial Television Broadcasting Platforms Business Models: 1998

27. © Wiggin LLP. All rights reserved Cable DSL (IPTV) Satellite Digital and Analogue Terrestrial TV PC Mobile Phone (3G) Free to Air Basic and Themed Packages Premium Packages (sport, films) Pay-Per-View Pay-Per- Day/Week/Month Broadcasting Platforms: Business Models 2002

28. © Wiggin LLP. All rights reserved TV PC Mobile Phone (3G) Free to Air Basic and themed Pay-Packages Premium Pay- Packages (Film, Sport) Pay-Per-View Pay-Per Day/Week/Month Video-On-Demand Mobile Receiver Media Business Models 2007 onwards Mobile TV receiving device (DVB-H) Mobile Phone (3G) Cable DSL (IPTV) Satellite Terrestrial Internet Mobile TV (DVB-H & T-DMB) DVB-H & T-DMB

29. © Wiggin LLP. All rights reserved What More? BBC iMP BBC Local ITV Local Sky & Easynet / Sky VOD Sky HD BBC HD PVRs iTunes Google Video BT Vision Virgin & Nokia DVB – H MobiTV Vodafone/Sky/ Orange/3

30. © Wiggin LLP. All rights reserved For example….

31. © Wiggin LLP. All rights reserved Mobile – 3G handsets Nokia 6630 Sony EricssonV600i Apple iphone (2.5G)

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33. Improved picture quality Sky and BBC HD plans BBC, ITV, C4 & Five MOU Al Jazeera English language service acquired global 15 mb p/s satellite feed HD simulcast of S4C? High Definition

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35. Portable Devices Sony’s Play Station Portable (Sony PSP) Microsoft Mobile Media Centers Samsung a Creative PVR2G0 Pace

36. © Wiggin LLP. All rights reserved PVR Allows preferred content to be Identified and recorded

37. © Wiggin LLP. All rights reserved BBCiPlayer

38. © Wiggin LLP. All rights reserved "Our ambition is not to become a major production company. Our ambition is to be a major distribution company, a major platform," Terry Semel Yahoo!

39. © Wiggin LLP. All rights reserved Wales…

40. © Wiggin LLP. All rights reserved “The challenge will be to innovate and compete, with relatively limited resources……” E.B. Hughes The S4C Authority seeks to rise to the challenge of the beginning of this new digital era. This is truly a crossroads…. (Yr Athro Elan Closs Stephens) Welsh Broadcasting: Where are we on the journey?

41. © Wiggin LLP. All rights reserved Why do we need “public” television anyway? There are 400 channels on Sky…something for everyone…why interfere…why tax? There are several pressing reasons why society needs to control the media different viewpoints reflect and encourage democracy and tolerance PLURALITY increase our understanding of our society and the world including arts, science, history INFORMATION to reflect and strengthen our British and regional – Welsh, Irish, Scottish identity CULTURE

42. © Wiggin LLP. All rights reserved ROYAL CHARTER & DCMS Agreement BROADCASTING ACTS S4C2 Content Supply UK Channel 3 Franchises Five BROADCASTING ACTS FIVE BROADCASTING ACTS Wales Commercial company Channel 4 4 Wales programming obligations Don’t care about Wales

43. © Wiggin LLP. All rights reserved Wales: Status Quo BBC WALES “Wholly or primarily in Welsh” C4 FIVE S4C HTV C4 FIVE S4C2 English Language Welsh – orientated content Regional Programming obligations Independen t Producers Content supply Daytime analogue content Content supply

44. © Wiggin LLP. All rights reserved Wales: Finance Models LICENCE FEE DIRECT DCMS GRANT £90m? AD SALES £4m? Advertising/ Sponsorship /interactive revenues

45. © Wiggin LLP. All rights reserved Ed Richards, OFCOM High quality Innovative Challenging Original Widely available Diverse in sufficient quantity? PSB Programmes

46. © Wiggin LLP. All rights reserved

48. Devolution & Broadcasting Commission in Scotland “Broadcasting has a crucial and central role in our democracy, but also in obtaining the full cultural and economic benefits of our creative industries” Alex Salmond 8 th August 2007

49. © Wiggin LLP. All rights reserved Chris Bryant, MP S4C & BBC Not enough spectrum for BBC2 content S4C BUDGET Should remain bilingual for the “whole of Wales” Sporting fixtures should have English AND Welsh commentary Devolved to Assembly in Cardiff…along with rest of Welsh language policy News = 5.5 hours per week –287 hours p.a Current Affairs = 47 minutes per week – 41 hours p.a Other Regional = 13 minutes per week – 167 hours p.a Retain as a MINIMUM

50. © Wiggin LLP. All rights reserved ANALOGUE SWITCH OFF Wales…pressure points and challenges threat to viewer numbers if C4 content declines loss of C4 analogue content to S4C political attacks: Somalis in Cardiff more important BBC CUTS loss of regional focus? Financial pressures: Quality and diversity under pressure salami slicing? ITV loss of regional focus? Need to compete against all Sky and Freeview channels without analogue audience Regional content uneconomic WELSH VIEWERS Welsh/regional content needs to compete harder for audience share Keen consumers of digital TV…not necessarily “loyal” to Welsh or even regional English output Need for more investment in content; better content very popular

51. © Wiggin LLP. All rights reserved S4C OPTION 1 (Status Quo & BBC linkup) Pretty well achieved NO: Corrodes plurality, focus and associated benefits - “publisher” already - nourishes TV production - multi-platform - new BBC relationship: £72m p.a - new brand - new demographics OPTION 2 (amalgamate with BBC) OPTION 3 (PSP)

52. © Wiggin LLP. All rights reserved -English C4 available to everyone in Wales -S4C will lose C4 English–speaking viewers -S4C funding has fallen behind broadcast industry costs -S4C will lose commercial income - IMP - ITV local - BBC local -Ofcom’s Local TV Proposals all year-round pattern of broadcasting, coupled with events and landmark programming - consolidate peak hours upturn - consolidate approval of Welsh speakers - strengthen symbiosis with larger, consolidated indies - act as tendering agency to head off PSP issue inflexibility Disappearance of analogue channel funding Challenge of local TV Programming Communications Act 2003 S4C: Challenges

53. © Wiggin LLP. All rights reserved DSAT DTT CATV IPTV DSL 3G DVB-H main “flagship” multichannel television package Interactive ancillary services Retransmission of DSAT feeds opportunity for content reversion for broadband ADSL as well as linear transmission “S4C Broadband” opportunity for reversioned online content: “S4C Broadband” Internet presence: not expensive “S4C mobile” service: reversioned news, snippets, music, gossip, sport proper “TV to Mobile” opportunity for S4C brand = the longer term Linear content & interactivity Linear content & interactivity Linear content & possible future interactivity Broadband Non-linear Broadband non-linear Limitations questions re churn T-DMB Proper “TV to Mobile” opportunity for S4C = the short term S4C2 S4CD S4C S4C2 multi channel strategy We believe that a mixed approach, combining linear television and digital media, is essential…”

54. © Wiggin LLP. All rights reserved Sianel Blant S4C S4C Multichannel “It was put to us forcibly, that if the young watch mainly English language programmes, the decline of the Welsh language will continue…” (the Crawford Committee Report into Welsh Language Broadcasting, 1974)

55. © Wiggin LLP. All rights reserved S4C DTT challenges 1996 Act gifted S4C half a digital multiplex…approx 4/5 channels’ worth 2002 – after collapse of ITV digital, Mux B was awarded to BBC Free to View Limited: BBC services have universal carriage requirement…trumped Mux A as a PSB mux S4C & Five claim to be third “universal” Mux was undermined & diminished value to S4C as universal PSB S4CD to be transmitted on Mux 2 with TG4 & Gaelic service: fine, universal coverage for the main feed, but… What about universal coverage of S4C2? Only 8-10 transmitter sites perhaps 70/80% coverage as opposed to 211 sites for S4CD Potential childrens’ channel limited to 70/80%…Welsh Assembly limited to 70/80% coverage? OFCOM consultation….S4CD to be universal in Wales but query S4C multichannel strategy with only 70/80% coverage…? Platform neutrality issues Effective reduction in S4C digital settlement

56. © Wiggin LLP. All rights reserved Wales…Conclusions Universal coverage multichannel platform in Wales + regular review of corporate governance/best practice Welsh interests to be protected by robust corporate governance Regional obligations to remain post ASO/DSO

57. © Wiggin LLP. All rights reserved Jason Chess Partner Wiggin LLP jason.chess@wiggin.co.uk 01242-631226 07785-111439