Mr. Tony Hanway:

The second point relates to RTE's call for an amendment to section 77 to be added to the draft heads of the Bill, which would allow RTE to charge platform providers for the privilege of including its content in our pay television packages.

Virgin Media and its parent company, Liberty Global, have always held the view that every society needs a strong, financially independent state broadcaster that offers public services within a clearly defined public service remit. However, a harsh light needs to be shone on why RTE is pushing so hard to be allowed to charge TV operators for content. Unfortunately, the answer lies in the fact that RTE mistakenly believes this will produce a large financial windfall that can solve its budgetary challenges while avoiding the hard decisions that would otherwise be required to manage costs. We believe it is not in the interests of the public to throw money at the problem so as to shield RTE from these financial realities. RTE needs instead to confront cost inflation and reform itself in order to deliver on its public service mandate effectively and efficiently, both now and in the future.

Let us consider RTE's specific request because it is important we have a clear understanding of what is at play here. In its own words, RTE is seeking a simple change to section 77(11) and the insertion of two seemingly innocuous words, "and payment", to the "must offer" provision which is a requirement on RTE to give its content to platform providers. RTE has claimed this is a simple request because retransmission fees exist elsewhere. However, in all other instances, in all other markets, retransmission fees mean something very different from what RTE is proposing for Ireland. Indeed, there is no like-for-like in any other market comparable to the Irish situation. In no other market where our parent company has business operations is there a case whereby the local state broadcaster is allowed to levy a fee on platform providers for content that it "must offer" to platform providers.

Virgin Media strongly disagrees with the introduction of any amendment that will give RTE an unfettered right to demand payment from pay-TV operators for a whole host of reasons underpinned by data and rigorous research, which is presented in the Communications Chambers report which has been provided to the committee. I do not propose to address that report today.

When RTE's consultancy firm, Mediatique, appeared before the committee some months ago, it presented a seemingly convincing case in setting out the amounts of money it believed would flow in the direction of RTE. However, despite what Mediatique's crystal ball is telling its consultants, RTE will not get the financial windfall it is expecting. In particular, Mediatique has overstated the importance to our customers of having RTE within their Virgin Media bundle. Mediatique is operating under a misconception that RTE is uniquely important to our overall service offering. Most of our TV customers take their TV service in a bundle with a range of services, including our market-leading high-speed broadband service. These customers are not going to walk away from all of that value, when all that would be required to watch a show on RTE is for them to tune into the RTE player online from time to time, or switch over to Saorview. Most of the predictions made by RTE's consultants regarding our willingness to pay for carriage of RTE channels do not make sense in reality, nor do they correspond with our first-hand knowledge of our customers.

In response to Mediatique's report, Virgin Media has commissioned its own study by Amárach Research to simulate a negotiation between TV platform providers and RTE. The results were then used to replicate Mediatique's analysis and, in particular, adapted to correct for the flaws in Mediatique's research. One stand-out finding was that Irish households are not in favour of extra funding for RTE. While RTE is important to our customers, TV viewing is spread across many channels. We also found that 30% of our customers would watch RTE less, or would stop watching RTE altogether, if it was lower down on our electronic programme guide, EPG.

In the research, we explored the ways in which consumers would be impacted by the introduction of retransmission fees. If we assume for a moment that pay-TV platforms agreed to pay retransmission fees and then passed this cost of doing business on to customers, consumers will be faced with three options: to pay more to retain RTE channels in their pay-TV package; to drop RTE channels from their pack and find a less convenient alternative way to watch RTE; and-or watch RTE less often. One interesting and notable result of our research is that if it becomes more expensive or less convenient for customers to watch RTE, they will watch it less.

Even Mediatique has acknowledged that RTE would suffer from reductions in viewership, and therefore advertising revenue, if pay-TV platforms were no longer carrying RTE's content. In fact, platform providers represent 52% of RTE's commercial viewership currently. This means that, in effect, our customers account for 52% of RTE's advertising revenue, not to mention the impact on sponsorship revenue.

All of the foregoing leads me to believe that the narrative on this debate must change and reflect the real issues at stake here. It is crucial that RTE has an incentive to make better use of its state funding, otherwise no amount of supplementary funding will ever eliminate the potential or inevitability of a recurring deficit. As long as RTE is allowed to run deficits and not to configure itself into a modern broadcaster, it will keep losing money which is to the overall detriment of the sector. Retransmission fees will not satisfy RTE's appetite for spending, nor will they inhibit RTE's practice of inflating the price of content as per comments from Pat Kiely to the committee earlier today. Virgin Media would contend that there are many ways for RTE to improve its finances. As a key partner to RTE, we invested approximately €2 million in developing a technical solution that allows broadcasters like RTE to insert adverts dynamically into their on-demand TV content on the Virgin Media platform. TV3 embraced this technology many years ago to great effect. In contrast, RTE has yet to use it.

The RTE Player, too, is in our view under-utilised. The player is available across 11 different platforms, but the reality is that not all platforms are equal, and RTE holds back certain programming from platforms including Virgin Media. For example, in January 2017, 30% of the top performing content on the RTE Player was not available to our customers who, by the way, have already paid their TV licence fee and as such are entitled to access this content.

The reach of our fibre broadband network means that we offer the highest broadband speeds to the largest number of homes in the State. If ever there was a platform provider to help RTE better monetise its player content, Virgin Media is that provider.

In summary, there is no cause or justification to amend section 77(11) and doing so would lead to the enforcement of a tax by RTE on pay-TV platform providers. In respect of proposed changes to the CRRA, we respectfully request the separation of the repeal of section 103 from the draft heads of Bill and to undertake no changes to this section in the absence of a full and thorough regulatory impact assessment.

I look forward to listening to members' views and responding to their questions on these matters later in the session.