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Is the UK overpaying for the digital dividend?signal strength
Monday 29 February, 2016, 08:16 - Broadcasting, Licensed
Posted by Administrator
Some time ago, Wireless Waffle discussed the various bidders to provide the television transmitter network for the UK's fledgling local TV stations. As part of this, the company responsible for providing the transmitters and masts for all of the other UK digital terrestrial television stations, tax evading transmitter supremos Arqiva, provided indicative figures for the costs of building the local TV transmitters. Their 'Reference Offer' details, on a site-by-site basis, the costs, as Arqiva saw them, of providing the requisite service together with the cost of providing 'network access' only (e.g. the rental of space on their masts). The figures vary by a factor of about 8 to 1 between different sites. But to what extent are Arqiva beefing up the actual costs to make a profit on their largely monopolistic position?

sheffield tv transmitterMaybe an example would be useful, so let's consider their proposals for the Sheffield transmitter, one of the cheapest in their offer. Their prices are as follows:
  • GBP 147,397 one-off costs, and;
  • an annual fee of GBP 17,783.
The one-off costs include site planning, preparation and installation, antennas, transmitter and multiplexer and the annual fees include rental of the site, a management fee, electricity, rent, light and heating.

According to Ofcom's local TV feasibility study, the technical details for the Sheffield site are:
  • Frequency: Television Channel 55, vertically polarised
  • Transmitter power: 100 Watts e.r.p. requiring a transmitter output power of 28 Watts (taking into account antenna gain and cable loss)
  • Antenna height: 43 metres
  • Antenna type: 2 x log periodic on a bearing of 110 degrees
Let's start with the stuff we have to buy. A 28 Watt DVB-T transmitter costs around GBP 10,000. Antennas can be had for GBP 100 each and we need two. Cable (let's assume 60 metres to allow a few metres at the bottom of the mast to reach the transmitter and a few left spare) of LDF4-50 which gives less than 3dB of loss, is around GBP5 per metre, making a total of GBP 300 for the cable. The mast of the tower is 52 metres high, so let's assume GBP 2500 to make space for the local TV antenna. And to be generous, let's add in another GBP 5000 for sundries such as connections to electricity, rack space and so on. Much of the remaining DTT functions (e.g. multiplexer and encoder) can be done in software, so GBP 2500 for a high-end PC to do some storage, playout, encoding and multiplexing. This makes a total capital spend of GBP 18000. Even accounting for a very healthy profit margin this means that Arqiva are charging well over GBP 100,000 for 'site planning, preparation and installation'. Maybe television engineers are particularly expensive in Sheffield?

working on transmitterAs for the annual costs, let's say it requires a visit every month to check on how it's working and this is one person dedicated for the day (though no doubt they would be checking on all the other transmitters on the site too), at a reasonable estimate of GBP 500 per day, to include the cost of petrol and transport, this equates to GBP 6000 per year. The power required for a 28 Watt transmitter assuming it is 20% efficient, is 140 Watts (equating to 1,227 kWh of electricity per year) which at today's prices would cost around GBP 122 per year. Allowing a further GBP 500 per month towards the maintenance of the buildings, air conditioning, mast and so forth (noting that these will have already been paid for by the existing tennants), the total annual fees would be around GBP 12,122. The annual fee proposed by Arqiva is therefore not as badly over-egged, no doubt the 'management fee' covers a lot of this difference.

So, in conclusion:
  • Arqiva seem to have extensively overpriced the capital work associated with providing and installing the local TV transmitter; but
  • The proposed annual fee seems much more reasonable.
Moving forward to today, the European Commission has just published a report by consultants LS telcom and VVA which, amongst other things, examines the cost of changing the frequency of all the digital television transmitters in Europe to clear the 700 MHz band, whilst at the same time migrating to DVB-T2. The costs detailed in the report, catchily entitled, 'Study on Economic and Social Impact of Repurposing the 700 MHz band for Wireless Broadband Services in the EU', are that to do this mammoth re-engineering task would cost between EUR 456 and EUR 888 million.

The study makes the assumptions that:
  • Existing antennas are broadband and can be re-used;
  • Existing transmitters will be upgraded rather than replaced.
These two assumptions are open to challenge. Whilst most new UHF antennas are broadband and thus in theory would not need changing, there can be instances where antennas have been designed to provide very specific radiation patterns (e.g. to provide nulls in certain directions for co-ordination purposes) and thus a change in frequency would affect their radiation pattern and may require a new antenna. Evidence suggests, however, that the transmitters themselves should be able to be converted from DVB-T to DVB-T2 by only replacing the modulator.

dvb t2 conversion
Source: Assessing the technical requirements and implications of DVB-T transitions

The 'cost per transmitter' given in the report ranges from EUR 20,000 to around EUR 50,000, which seems reasonable given the assumptions made. Arqiva's estimate for re-tuning the UK's transmitter network to clear the 700 MHz band provides values ranging from GBP 310 to GBP 470 million (approximately EUR 400 to EUR 600 million) putting the price for re-farming the 700 MHz band in the UK at approximately the same level as the Commission report identifies for the whole of the EU!

There are approximately 1,200 transmitter sites in the UK, the smaller ones with three multiplexes on them and the larger 90 or so with six, seven or eight, making roughly 4,000 transmitters in the UK. Taking the consultants' report's 'per transmitter' value, the price for re-farming the spectrum in the UK ought to be nearer to EUR 80 to 200 million, a factor of 2 to 8 times removed from the prices quoted by Arqiva, depending on which end of the ranges quoted you take.

So who is right? It seems that the two reports are doing something slightly different:
  • The Commission's report assumes that existing multiplexes and frequencies are converted to DVB-T2 and as such fewer are needed. In only very few cases would there therefore need to be a change in frequency, as the additional capacity of T2 (and MPEG-4) would mean existing frequencies could largely be re-used.
  • The Arqiva report is trying to move all existing multiplexes (whether DVB-T or DVB-T2) to new frequencies, which is (clearly!) a much more expensive undertaking.
arqiva happy moneyPerhaps Ofcom should take a leaf from the Commission's book, and instead of trying to re-engineer the UK's DTT network to be the same, should instead take the opportunity to convert the network to be DVB-T2 only and save a lot of money in the process. Given the timetable for the clearance of the 700 MHz band (e.g. around 2020), and that typical television replacement cycles are 7 years, the average British household would already have a T2 receiver by then... Then again, no doubt Arqiva could find some 'management costs' to soak up any savings!
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