Mr. David Wheeldon:

I thank Mr. Buckley. I am now going to address the issue at the heart of this session, namely retransmission fees. RTE has argued that it should be permitted to drop its obligation - known as 'must offer' - to distribute its channels as widely as possible at no cost to consumers. I would like to consider the obverse of that obligation. What RTE is requesting is the right to restrict the availability of its publicly funded channels and to, in effect, charge consumers. We are of the view that allowing RTE to do this would negatively affect all parties, including, most importantly, Irish citizens accessing programmes they have already paid for via a licence fee. To be clear, we do not believe that 'must offer' can be tweaked, as RTE put it, without fundamentally altering its intent. Either RTE has to make its channels available without payment or it has the ability to restrict availability, which can in no way be described as 'must offer'. The reason 'must offer' exists is twofold. Licence fee payers have a reasonable expectation to watch publicly funded channels on whatever platform they mainly chose to watch television and they also, quite reasonably, do not expect to be charged twice for it through both the licence fee and additional charges.

By way of background, Sky’s business model is quite straightforward. In all six of the European markets in which we operate we only charge customers for channels that we actually sell to them. We only sell channels that cannot be obtained for free elsewhere and, it goes without saying, we do not pay for channels we do not sell. Since we do not and cannot sell RTE channels to our customers we are not in a position to pay for them. To be clear, Sky would not pay RTE for its public service channels should RTE no longer be obliged to provide them for free. Of course, in such a scenario RTE might decide voluntarily to withdraw from the main television platform in over 40% of Irish homes, in which case there can only be losers. If RTE removes its channels those Irish licence fee payers who use Sky to watch television would obviously be inconvenienced, as would Sky. We make no pretence about that but we have means of mitigating the impact which I shall come to later. The main loser will be RTE itself which stands to lose €83 million in advertising revenue over five years, according to its own research. RTE could, after a period, choose to return to our platform but I must make the committee aware that in its absence, there may well have been changes made to our programme guide and we may not be in a position to guarantee that RTE would return to its current position. I do not say that as any kind of threat but commitments may have been made to other channels that we may not be able to undo.

I mentioned that we would seek to mitigate the impact on Sky’s customers of RTE leaving the platform. Fortunately we have some experience of this. In Italy, which is one of our other major markets in Europe, we developed a free-to-air USB dongle which plugged into the Sky box and allowed customers to toggle between Sky and the Italian equivalent of Saorview when the public broadcaster Rai left our platform under what I would term political pressure, Italy being a market that is subject to quite a bit of that. It is worth noting that Rai is now back on Sky’s platform in Italy, without payment. Sky’s market share remained steady during the entire time Rai was off our platform. Clearly, this is not our desired outcome as it will divert money away from productive and useful investment in our Irish business, which as Mr. Buckley said, we have an ambition to continue. Nevertheless, it does demonstrate the mitigation measures available to us.

In the context of our multinational operations, it is worth saying that this matter has been looked at it in other jurisdictions. In the UK, for example, the Department of Culture, Media and Sport carried out an extensive consultation on the issue, lasting two years, and concluded that the prevailing zero fees and 'must offer/must carry' regime resulted in the best outcome for citizens. That is still its policy. It is also worth noting in this context that the BBC did not seek any change in the UK legislation as it did not wish to endanger the principle of universal availability of public service broadcasting services or call into question the legitimacy of a universal licence fee.

I would also like to briefly touch upon the situation in the US, which has been frequently cited by RTE and its advisors, Mediatique, as an example of a successful retransmission fees regime. The truth is that the European and US markets are so different that comparisons are of little value. Most importantly, the US does not have a universal licence fee. Beyond that, the availability of any free-to-air terrestrial television is extremely limited.

Where it is available, it is often underpowered, meaning that signal and picture quality is poor, and far poorer than it is in the majority of Europe. As a result, pay television has, at more than 80%, a higher market share than it does in most of Europe. Pay television packages are the only way that most viewers can access local broadcasters. Retransmission fees in this market are a different proposition.

It is worth taking note of the knock-on effect of the negotiations on retransmission fees in America. There have been substantial increases in consumer prices, which are often broken out as a "broadcast fee" in customers' bills, and a large number of channel blackouts. In 2015, almost 200 channels were made temporarily unavailable, with the longest dispute lasting more than six months.

The US example has led RTE down a blind alley. It is evident from the Mediatique analysis that it has selectively failed to recognise the differences between the US and European markets, in particular the widespread availability of public broadcasters in every home free to air in Europe. This has led RTE to assume incorrectly that pay television platforms would suffer disproportionately if PSB channels came off them and ceased to be available. In fact, these broadcasters would still be available through other means. RTE has got its sums wrong.

Universal availability, free of additional charges beyond the licence fee, is widely recognised as a key tenet of any public service broadcasting regime. Such obligations go hand in hand with the benefits that PSBs receive. If RTE is asking to remove the obligations that it faces, it stands to reason that the significant benefits it receives should no longer be made available to it. Should the committee and Government wish to consider such a deregulated approach and remove not just the restrictions that RTE feels are imposed on it, but also withdraw all of the benefits, including the universal licence fee and other forms of State funding, we would be happy to enter into commercial negotiations with it in the same way that we do with any other commercial channel that seeks access to our platform and wishes to be retailed. However, it is unlikely that RTE would favour such an approach in the absence of such two-sided deregulation. Therefore, and sitting where we are, it appears that RTE wishes to have its cake and eat it as well.

We do not pay for PSBs to be available on our satellite platform in any of our European markets. This is a crucial and consistent premise of Sky's operating model. Regardless of any legislative change or the value that RTE does or does not deliver to our platform, there are no circumstances in which we would change our approach and begin to make payments for a free-to-air channel in any of our markets simply because of the precedent that it would set for us elsewhere. Put frankly, this issue has far wider ramifications for us than our Irish business and we would be incentivised to stick to the line here to avoid risks elsewhere.