Review of bbc’s participation in YouView
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- Contractual arrangements are no substitute for appropriate supervision
- A review of the Trust’s approval of Project Canvas is timely
- Failure to enforce the Trust Conditions undermines the Trust
Response of British Sky Broadcasting Limited (‘Sky’) to the BBC Trust
review of BBC’s participation in YouView
Sky welcomes the opportunity to input into the BBC Trust (‘the Trust’) review of the BBC’s
participation in YouView (formerly Project Canvas). This review comes at a key time in the
venture’s existence: three years after the Trust approved the creation of YouView; 12
months after launch; and shortly before re-negotiation of the joint venture shareholder
agreement (which we understand needs to be in place by March 2014).
In contrast to the position when the Trust approved Project Canvas, we now know what
YouView is and what it does, and have a better, if not complete view on how it interacts
with those outside the venture, like Sky. Furthermore, the Trust is in a privileged position
vis-à-vis the joint venture as it will have access to all the necessary information to enable it
to scrutinise YouView’s compliance with the various conditions imposed by the Trust as
part of its approval process in a rigorous and robust manner. Due to an overall lack of
transparency, non-shareholders are unable to verify compliance with the Trust’s
Sky’s interest in YouView is twofold. On the one hand, YouView competes with Sky’s own
television platform and services. Secondly, as a content provider, Sky wishes to make its
channels and programmes widely available, and has engaged with YouView to launch Sky’s
internet TV service, NOW TV, on the platform, in addition to supplying its channels to
distributors on the platform using IP-delivery. Sky Store will also launch on the platform
Sky’s interest as a competing platform operator is focussed on ensuring that the BBC’s
creation of and participation in YouView does not distort competition between television
platforms and services any further than is necessary to deliver the BBC’s public interest
As a content provider, Sky has invested significantly in adapting its internet TV service,
NOW TV, for the YouView platform and intends expanding its offering to include linear
channels and additional content so that the service on YouView matches that available on
other platforms and devices. Sky has also entered into arrangements, or is in negotiations,
for the distribution of its content by BT and TalkTalk as part of their television services on
Both interests rely heavily on the conditions set out in the Trust’s “Final Conclusions” of 25
June 2010 (‘the Trust Conditions’) intended to create “a standards based open environment
including a new ‘open platform’ for
YouView partners agree on expansion
”, ft.com dated 28 July 2013, and “
weigh cash injection
”, ft.com dated 10 October 2013.
content providers, to ensure that Sky is not unduly prejudiced by this unprecedented
intervention in the sector.
Sky’s comments to the Trust are framed by these two complementary interests.
the joint venture and its shareholders, we ask that the Trust treat the response as
confidential. Should the Trust need to disclose specific information contained in this
submission to those parties, we would be happy to consider such disclosure on a case by
The nature and scope of the Trust’s review
The Trust’s review should be comprehensive
Absent the Trust’s approval of Project Canvas, YouView would not exist. The BBC’s
participation in YouView, and therefore the Trust approval, are inextricably linked to the
operation of the joint venture, and the Trust owes a continuing duty to licence fee payers
and the wider market to ensure that the Trust Conditions, imposed to protect the licence
fee and public interest, are fulfilled by the BBC, and the joint venture.
only of the Trust Conditions relating to:
access and usability features;
the use of 'editorial signposting';
whether the BBC's involvement in YouView has had an impact on other public service
broadcasters’ content syndication strategies; and
and would ignore the many other conditions
of equal, if not greater, significance to the
fulfilment of BBC’s objectives, and the criteria against which the Trust assessed the
proposals, namely: public value, value for money, licence fee payer interests, market impact,
risk and compliance with the law and BBC policies.
Indeed, the Trust’s duties under the BBC Charter require that it conduct a rigorous and
comprehensive review of its approval decision and compliance with the conditions that it
set for the BBC Executive when approving the launch of YouView:
“ultimate responsibility … for … the BBC’s stewardship of the licence fee revenue and its
other resources; upholding the public interest within the BBC, particularly the interests of
licence fee payers”;
the Trust’s general duties require that it “represent the interests of licence fee payers; …
exercise rigorous stewardship of public money; have regard to the competitive impact of
the BBC’s activities on the wider market; and ensure that the BBC observes high standards
of openness and transparency.”;
more specifically in the context of the current review, the Trust has specific
responsibility for “assessing the performance of the Executive Board in delivering the
BBC’s services and activities and holding the Executive Board to account for its
performance” and for “discharging the regulatory functions accorded to the Trust and
Article 22 of the BBC Charter.
regulatory requirements and the general law”.
The Trust therefore has a clear duty to ensure that the Trust Conditions have been
implemented correctly and complied with over the course of the joint venture, and will
continue to be met on an on-going basis.
Contractual arrangements are no substitute for appropriate supervision
Sky notes that many of the conditions listed in Annex 1 were required as a condition of
approval to be included in the joint venture’s ‘Objects’ and shareholders agreement. This
mechanism does not remove the need for the Trust to review the efficacy of those
provisions in achieving the Trust’s objectives. As neither licence fee payers nor commercial
stakeholders, such as Sky, have visibility over the terms of those documents and no
standing to challenge their operation, the Trust is uniquely placed, and therefore uniquely
obligated, to consider such matters as part of their duty to hold the BBC Executive to
Reliance on contractual provisions alone cannot therefore be appropriate in such
circumstances: for example, the Trust Conditions may not be adequately reflected in the
agreements; they may be incorrectly interpreted by the parties; or may be ineffective in
achieving their objectives. These are all questions the Trust should be asking of the BBC
and YouView, and on which they must take action should the arrangements be found to be
inadequate. The Trust cannot derogate its role as the “guardian of the licence fee and of
submits that it was therefore incorrect to state in the Final Conclusions that the Trust had
“no remit to police the conduct of the joint venture”.
If the Trust finds itself able to police
the narrow set of conditions set out in its review statement, it can do so in relation to the
remaining conditions. Indeed, the Trust must do so in order to fulfil its duties.
A review of the Trust’s approval of Project Canvas is timely
Furthermore, a more thorough review of this kind is timely as:
the YouView platform is materially different to that described in the Executive’s
original proposals in 2008 and throughout the approval process, with further
developments away from the core proposition of “a standards based open environment
for internet connected television platforms in the UK” under consideration.
It must be a
serious concern of the Trust’s as to how the BBC’s vision has been distorted to the
point where only one manufacturer is making YouView set top boxes for the open
market (as well as for BT), and only one other manufacturer is supplying devices to
TalkTalk. Meanwhile the BBC’s Freeview and Freesat platforms, as well as the majority
of new television sets, offer internet connectivity and access to content and
functionality in excess of that available on YouView; and
conditions are reflected in any renewal of YouView’s ‘Objects’ and shareholder
agreement when the current shareholder agreement expires in March 2013.
Failure to enforce the Trust Conditions undermines the Trust
See Paragraph 2.50 of the BBC Trust’s Final Conclusions.
See footnote 1 above.
Finally, failure to monitor and enforce the Trust Conditions calls into question the
regulatory framework by which the Trust approves Executive proposals. Any process of
conditional approval (such as that carried out in relation to Project Canvas/YouView)
becomes otiose if compliance with those conditions is not kept under review.
Accordingly, the Trust must consider, as part of its review, all the Trust Conditions, and
should not rule out further public consultation and additional conditions on the BBC’s
continued participation in the venture if appropriate.
response to those matters of which it has knowledge and particular concerns. This should
not be taken as meaning that Sky does not, or would not have other concerns regarding
compliance with the Trust Conditions. Sky would expect the Trust to publish the outcome
of its review and Sky reserves the right to provide further comments in response in due
Accordingly, Sky has set out below its concerns that:
YouView for content providers with technical content delivery services and wholesale
fair, reasonable and non-discriminatory grounds by granting S4C undue prominence
outside of Wales and Channel 4 undue prominence in Wales;
the BBC is at risk of exceeding the limits placed by the Trust on its financial
contribution to YouView, and that the lack of transparency with regard to YouView’s
financial operations makes it impossible for non-shareholders to verify compliance
with the Trust’s conditions relating to the BBC’s contribution on costs and competition
At launch the YouView platform was unable to support IP-delivered linear channels as
originally proposed to the Trust. Sky was therefore forced to launch its internet TV service,
NOW TV, on YouView without the linear channels that accompanied the on-demand movie
content on all other platforms.
On other platforms NOW TV also includes live and on-
demand sports content from Sky Sports, available on a daily subscription. Sky will add
entertainment channels and on-demand programming shortly.
YouView’s launch and obtained contractual dispensations from licensors to make the
content available on an on-demand basis only, without the accompanying linear channels.
the success of the service, and is therefore key to Sky’s ability to recoup its significant
investment in the platform. The limited service available on YouView has had a detrimental
impact on the success of NOW TV on the platform and makes marketing the service
difficult due to the need to highlight differences to the service via YouView.
Had Sky waited until linear IP-delivered channels were available then NOW TV would have been
listed at a less prominent position in the YouView UI, or it would not have launched at all pending
resolution of the issues around the delivery of IP channels discussed in this submission.
YouView subsequently informed Sky that although multicast delivery
of linear services
would be available within 12 months of launch,
Sky’s preferred method
of delivery, would not be available for a further 12 months, necessitating further
dispensations from content licensors and postponing rollout of Sky Sports content to
NOW TV on YouView.
Details of the arrangements currently necessary for IP-distribution of linear channels to
YouView set top boxes have only come to light as negotiations with the parties have
developed. YouView requires that broadcasters enter into a Listing Agreement and
Channel Distribution Agreement in order for the channel to be available to YouView set
top boxes, however, these agreements are not sufficient to enable YouView users to
access the channels. As YouView set top boxes can currently only support multicast-
delivered IP channels, broadcasters must also enter into a multicast distribution
agreement with the relevant multicast network operator for access to their network and
therefore to those YouView users whose use that operator’s ISP access service.
The vast majority of YouView set top boxes, however, are connected to BT’s and TalkTalk’s
multicast networks. Sky therefore requires access to those networks in order to be able
to offer its channels to those YouView users, and in order to do that Sky must enter into
distribution arrangements with both TalkTalk and BT for technical delivery of the channels
over each of their multicast networks. To date BT has only been prepared to discuss such
arrangements in respect of Sky channels which it has the right to retail as part of their own
pay-TV services under a wholesale distribution agreement. BT’s terms of access have
been wholly unreasonable, thereby preventing Sky from making its channels available to
YouView users on its network.
the YouView platform, scheduled to be available in Q2 2014, will also require the consent of
BT and TalkTalk to access connected YouView set top boxes on each of their networks.
Sky is extremely concerned that BT will not consent to delivery of Sky’s channels via
unicast. BT claims that unicast delivery of linear channels will not meet the required TV
Quality Standard. Sky maintains that, based on experience with the successful Sky Go
multicast delivery is not necessary to deliver services that meet the required
standard. Sky has asked YouView whether it or BT will determine whether a service meets
the TV Quality Standard, and has not received a satisfactory response to date.
Multicast delivery is a particular method of delivering content, including video, on a one to many
basis over an internet protocol infrastructure in a network. It effectively requires the creation of a
separate network within the open internet with greater control over the capacity allocated to the
particular content being transmitted. This is similar to tuning into a station on a radio. Each client
that listens to the multicast adds no additional overhead on the server. In fact, the server sends out
only one stream per multicast station. The same load is experienced on the server whether only one
client or 1,000 clients are listening
IP-delivered linear channels launched on BT Vision’s YouView-based pay TV service on 2 August
Unicast delivery is more widely used method of delivering content, including video, over the internet,
with a one to one connection between source and user. Each unicast user that connects to a
server takes up additional bandwidth. For example, if you have 10 clients all playing 100-kilobits per
second (Kbps) streams, those clients as a group are taking up 1,000 Kbps. If you have only one client
playing the 100 Kbps stream, only 100 Kbps is being used.
The requirement to obtain the ISP shareholders’ consent to delivery of linear content to YouView is
reflected in the contractual documentation received from YouView, although it has been clarified by
Sky Go is Sky’s ‘over the top’ internet delivered service which provides access to live channels and
on-demand content across a wide range of devices, including mobiles, tablets and PCs.
These additional conditions of access to the YouView platform imposed by the ISP
shareholders directly contravene the Trust Condition prohibiting bundling of access with
other products or services.
determine whether a service meets the relevant quality standard, rather than YouView,
putting the those ISP shareholders in the position of gatekeepers over the platform.
position that YouView operates as a closed platform for the benefit of its ISP
shareholders, and not as “a standards based open environment for internet connected
television platforms in the UK”. This is the case because each ISP is able to control the
content delivered to YouView set top boxes on their network.
full public value of the BBC’s intervention by restricting their access to a wide range of
content. Further, the Trust’s public value assessment which justified the venture is
substantially undermined by such an outcome.
The bundling of access to the platform with wholesale services also distorts competition
amongst television services. For example, NOW TV’s ability to compete with BT and
TalkTalk’s television services is restricted by the limited nature of NOW TV on YouView,
including the lack of Sky’s sports content and linear movie channels in a way that the Trust
Conditions sought to avoid in order to comply with the ‘Competitive Impact Principle’,
which requires that the BBC “must endeavour to minimise its negative competitive impacts
there is a significant risk that the continued operation of YouView as a closed platform
constitutes an illegal state aid.
Accordingly the Trust must act immediately to prevent YouView continuing to operate as a
closed platform for the ISP shareholders and to require compliance with the Trust
Conditions by whatever means necessary, including changes to the joint venture’s Objects
and shareholders agreement.
Sky has agreed to make its Sky Store pay per view service available on YouView. The
service ought to occupy the last available slot on the front page of the On Demand menu,
however, YouView has now informed Sky that due to the launch of S4C’s on demand
service in a more prominent position due to its public service status, the Sky service will
now appear on the second page of the menu.
Wales. Accordingly, outside of Wales, the service should not be given undue prominence.
All the major platforms deal with this by swapping the position of Channel 4 and S4C in
service territory. This approach is contrary to both Ofcom's Code of practice for Electronic
Programme Guides (‘the EPG Code’) and YouView’s published UI and EPG policy which
seeks to comply with Ofcom’s code.
Such an approach cannot be fair, reasonable and non-discriminatory, and should be
addressed by the Trust as an infringement of the Trust Conditions.
In Wales, S4C is available on Freeview 4, Sky 104, Virgin TV 166 and Freesat 104. In England, Scotland
and Northern Ireland, S4C is available on Sky 134, Freesat 120 and Virgin TV 166.
The cost of access to YouView are disproportionate and discriminatory
The costs associated with a listing on YouView are very significant to the point of being
exclusionary, and are disproportionate to the benefit gained. Sky, more than most,
however, understands the costs involved in creating a new platform, and welcomed the
Trust’s condition that charges for access should be set on a cost recovery basis only. Such
an approach would clearly be discriminatory if shareholders, including the BBC were not
charged on the same basis as non-shareholders, as this would result in non-shareholders
bearing a disproportionate level of cost.
notes, however, that as a minimum, the Trust ought to require YouView publish details of
its charges, and should confirm that non-shareholders are not being discriminated against.
All other platforms providing access to content providers on fair, reasonable and non-
discriminatory basis publish rate cards. YouView should do the same.
IP-delivered channels which sit alongside DTT delivered channels in the YouView EPG.
Broadcasters of IP-delivered channels are required to pay listing fees to gain access to the
platform. DTT delivered channels pay nothing but are given preferential access to the
platform in the form of higher EPG positions. This places IP-delivered channels at a
significant disadvantage vis-à-vis DTT delivered channels. The principal beneficiaries of
free access to the EPG are those broadcasters who also shareholders in YouView, however,
other broadcasters also benefit, creating further distortions.
The Trust Condition requiring fair, reasonable and non-discriminatory access to the
YouView EPG must be applied to all services provided access to the platform.
In its role as guardian of the licence fee and public interest, the Trust has a duty to
exercise rigorous oversight of how the licence fee is spent, including the BBC’s financial
contribution to YouView. This is necessary not only to ensure that the costs of developing
Project Canvas have been repaid in accordance with the Trust’s instructions to avoid any
breach of state aid rules, but also to ensure compliance with the condition relating to the
overall limit on the BBC’s financial contribution to the venture.
The Trust approved the BBC’s involvement on the condition that “the annual cost of the
BBC's involvement in Canvas shall not exceed the estimated cost of £24.7 million over a 5 year
period by more than 20 per cent in any one year.” The Trust allowed a 20% allowance, rather
than its usual 10% threshold, to take account of the uncertainties inherent in such a
technologically complex project.
If the BBC’s contribution exceeds the set levels, the Executive must seek further Trust
approval. Sky would expect the Trust to publish the outcome of any such requests for
additional funding, in particular given the direct link between such costs and the Trust’s
assessment of public value assessment and market impact. Similarly, the Trust ought to
publish a statement of compliance with the costs plan.
concerns as to the costs of the project which significantly exceeded the projected costs
before launch as compared to those published in 2009.
There have also been recent
See for example,
reports of further investment by the shareholders being required.
The BBC may
therefore be at risk of exceeding the thresholds set by the Trust in approving the BBC’s
participation in the enterprise.
Sky’s experience in dealing with YouView demonstrates that what may have begun as a
public service spirited idea to develop a unified open standard platform has singularly
failed to deliver on that promise. Instead, as one commentator has put it, “the main
beneficiaries have been the broadband service provider partners, BT and TalkTalk, who have
gained an enhanced platform and personal video recorder design at comparatively low cost,
with the positive support of the BBC and other public service broadcasters
There is a clear duty on the Trust to hold the joint venture to the Trust Conditions. Failure
to do so would be an abrogation of the Trust’s duties to act as guardian of the licence fee
and public interest such as to render the conditions, and the process by which they came
It is also evident that the Trust Conditions are not being complied with in relation to
access to the platform for content providers and that there is a risk that certain
shareholders are acting on incentives to discriminate in favour of their own retail services
to the detriment of others. The Trust must use all means necessary to bring about the
necessary changes to the operation of the YouView venture to prevent further harm to
the interests of licence fee payers and the wider market.
Any further changes to the YouView proposition, including extending the venture online,
should first be considered by the Trust and subject to the same approval process as
Project Canvas in order to ensure that the proposals are of public value and to do not have
a significant negative impact on the market. Any further assessment of public value and
market impact can only take place once the Trust has reviewed the original approval
process to understand how it could have better avoided the current position. The Trust
should review its previous forward-looking decision in the light of actual events in order to
assess whether YouView is likely to deliver the hoped for public value and its impact on the
wider market, or whether alternative strategies, such as adopting the HbbTV standard,
impacts. Only through such retrospective analysis will the Trust improve the quality of its
decision-making processes and therefore better hold the BBC to account in the interests
of licence fee payers.
YouView shareholders weigh cash injection
”, ft.com dated 10 October 2013.
See, for example,
Sky notes the recent article by Nigel Walley of Decipher “
Tony Hall’s Vision For The BBC Re-
” which also considers the BBC’s investment in YouView in the context of the latest
proposals for the BBC iPlayer.
Additional Trust Conditions of the approval of YouView
The technical specification be developed with industry engagement;
The BBC’s share of the joint venture’s costs should not exceed the £24.7m estimated cost over
Operational costs be charged on a “cost recovery” basis only;
Entry controls imposed by YouView in terms of technical and content standards be minimal;
Access to the platform for content providers not be bundled with other products or services;
Listing on the electronic programme guide (‘EPG’) and user interface (‘UI’) be awarded in a fair,
reasonable and non-discriminatory manner;
The core technical specification be made available to third parties on a fair, reasonable and
Safeguards are put in place as soon as reasonably possible after approval to prevent any
sharing of strategy on syndication and other commercially sensitive information between the
competing members of the joint venture.
reasonable and non-discriminatory manner; and
Compliance with all applicable laws, including competition and state aid law (including,
subsequently, repayment by YouView to the BBC the costs of developing the technical
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