Nine nationwide DTT channels have been ordered by the Spanish Supreme Court to shut down by 6 May at the latest. The order comes as a result of the Supreme Court this week rejecting an appeal made by the organisation representing the interests of national commercial broadcasters, UTECA. The initial decision was taken by the Supreme Court on 27 November 2012. The Court found the award of the nine DTT licences to be illegal as it did not follow a public tender process.
Four nationwide commercial broadcasters are being required by the Ministry of Industry and Commerce to cease DTT transmissions of their channels. Atresmedia (the company created after the merger of Antena 3 with La Sexta) has to close the channels Nitro, Xplora and La Sexta 3. Mediaset Espana (the company created after the merger of TeleCinco with Cuatro) has to close the channels Nueve and La Siete. The other four channels are Net TV, Veo TV, Marca TV and AXN.
The spectrum being used by the broadcasters was included in the spectrum auction in July 2011. The government’s priority, following the closure of the channels, will be to implement the plan to allocate digital dividend spectrum to the mobile operators that won the frequency auction by 1 January 2015.
The commercial broadcasters’ association, UTECA, has filed an appeal in the Constitutional Court which will be heard later this year. UTECA is claiming that the TV industry has been seriously affected by the collapse of the advertising market due to the economic crisis. IHS Advertising Intelligence estimates that TV advertising revenues in Spain have fallen 34% between 2010 and 2013, from €2.47 billion in 2010 to just €1.63 billion in 2013.
The closure of the nine DTT channels can be seen as the last straw in a string of mismanagements of the digital terrestrial television migration process by consecutive Spanish governments. The previous Spanish government had decided on July 2010 to award an entire multiplex to each one of the then existing national commercial broadcasters (Antenna 3, Gestevision Telecinco, Sogecable, Veo TV, NET TV and La Sexta). However, the DTT licence allocation procedure was implemented without any public tender, a decision inconsistent with the applicable audiovisual law. What rendered this decision even more troublesome is the fact that a segment of the UHF frequencies allocated to these multiplexes were about to be auctioned a year after the allocation as they formed part of the so-called digital dividend spectrum band (790-862 MHz). In Spain four nationwide DTT networks were using the digital dividend frequencies. The government needed to auction this spectrum and therefore it had to clear it from terrestrial broadcasting. The previous Spanish government undertook to finance the clearance of the digital dividend spectrum - in essence moving the DTT networks to lower UHF frequencies - from the money it would collect from selling this spectrum to mobile operators. Governments and industry sources had estimated the total cost to be covered by the government to be in the region of €800 million. Neither the broadcasters nor the TV viewers were asked, initially, to fund the cost of removing the four DTT networks from the digital dividend frequencies.
The spectrum auction was held in July 2011 and generated revenues of €1.3 billion. However, the new Spanish government, elected in November 2011, withdrew the commitment of fully funding the process of clearing the digital dividend frequencies. Citing budget restrictions due to the looming economic crisis, the politicians claimed that the administration could not afford to pay the full cost of the change, including marketing and information campaigns and the cost of retuning set-top boxes and redirecting antennas. Instead, it said the broadcasters would have to foot the bill. The situation for nationwide commercial broadcasters took a turn for the worst when, in November 2012, the country’s Supreme Court declared that the July 2010 decision is null and void and that nine DTT channels would have to close by the end of 2013. The Supreme Court decision came after an appeal made in November 2010 by Infraestructuras y Gestion 2002 SL, a TV broadcasting company that had tried but failed to obtain a DTT licence both on a national as well as on a regional level.
The Supreme Court decision will force the government to create a new DTT map, without the nine channels, after negotiations with the broadcasters while at the same time fulfilling its obligation to vacate these frequencies and to release the digital dividend spectrum by 2015 to the three mobile operators - Telefonica, Vodafone and Orange - that won the 2011 auction. Any delay to stand by its commitments will result in having to compensate the mobile operators for the losses in exploiting these frequencies by launching LTE (4G) services. Estimates put forward by government sources indicate that the administration would have to pay each mobile operator €100,000 a day (after 1 January 2015) if the spectrum was not available to them by that date. On the other hand, the commercial broadcasters reacted vociferously, accusing the government of creating instability and uncertainty in the country’s television market.
In May 2013, the European Commission (EC) ruled that the Spanish commercial DTT network operators (in effect the broadcasters themselves) should pay back €236 million in state subsidies. The EC ruled that the subsidies that in 2005, the Spanish government had given to a terrestrial operator (Abertis) in order to cover the cost of DTT transition in remote areas of the country were illegal because the principle of technology neutrality was not respected. The EC said the government should have held a tender open to other distribution platforms (such as satellite).
The most serious issue following the court’s decision is what kind of implications this will have on the DTT offer in the country and how it will affect the future of the DTT platform in general. At the end of 2013, according to IHS Television Intelligence, DTT is the dominant TV platform with a 75% primary TV set penetration at the end of 2013. The first implication is that the DTT content offer will be weakened. Since analogue switch-off in April 2010, ten DTT channels have either closed or moved to another platform. The channels CNN Plus, 40 Latino, La Sexta 2, La 10, Veo, Marca TV and Intereconomia have closed while channels Xplora and La Siete have moved to another platform. Furthermore, another eight channels face the prospect of closure as the Supreme Court is considering revoking their licences following an appeal made by Infraestructuras y Gestion 2002 SL.
These decisions will create confusion among the TV viewers, cause disruption to further investment in the TV business and force a reorganization of the whole DTT market. Another serious implication is that TV viewer will be called on to foot the bill of this second digital migration without receiving any improvement in the service offering to the contrary the content offer is reduced. Finally, further losses of multiplexes are expected for the DTT platform in the quite probable scenario that next year’s ITU World Radiocommunications Conference agrees to award the 700 MHz UHF Band (the 694-806 MHz currently used for DTT broadcasting) to mobile operators (the so called Digital Dividend 2.0). In such a case, the Spanish government will have to further reduce the number of nationwide DTT multiplexes in order to accommodate the loss of the frequencies.