Government’s digital economy bill proposes scrapping law that protects pay-TV platforms from paying retransmission fees

ITV is set to seek to charge Virgin Media to broadcast its flagship channel, after the government said it will scrap a law that could boost its coffers by tens of millions of pounds a year.

The UK’s public sector broadcasters, which include the BBC and Channel 5, have argued for years that that they should receive significant fees from pay-TV operators because subscribers spend most of their time viewing their channels.

On Tuesday, the government published the digital economy bill in which it said it intends to repeal an arcane law that protects cable platforms from having to pay copyright or retransmission fees to PSBs.

While section 73 of the Copyright, Designs and Patents Act, introduced in the 1980s to help the fledgling cable industry, only relates to Virgin Media its removal re-ignites the argument by PSBs that they should receive retransmission fees from all pay-TV operators, including Sky.

“We have consistently called for major pay-TV platforms to pay UK public service broadcasters fairly for the transmission of their channels ending what is effectively a multi-million pound subsidy - and this is clearly a welcome first step in that direction,” said a spokesman for ITV. “This is simply about ITV, and other PSBs, being paid fairly for their investment in original UK content so that we can continue to invest in the programmes viewers love.”

It is understood that if the digital economy bill is passed into law ITV intends to enter commercial negotiations with Virgin to carry its flagship channel.

Any negotiation would be tricky given that Liberty Global, the parent company of Virgin Media, owns a 10% stake in ITV.

Channel 4 chief executive David Abraham has been outspoken about the need for pay-TV companies to pay up.

However, a statement from the broadcaster it is not as bullish as ITV in interpreting the bill as grounds to pursue Virgin Media for fees.

“We welcome the government’s conclusion that the UK’s mixed-ecology broadcast and production sector is a global success story,” said a spokesman for Channel 4. “However, we believe that this has been a missed opportunity to update and modernise the regulatory framework for broadcasting and ensure that it fully takes account of the considerable value created by the public service broadcasters.”

ITV and Channel 4 submitted research to the government that retransmission fees from Sky and Virgin Media could make them £121m and £75m annually respectively.

To pursue retransmission fees from Sky is unlikely given it is likely to require a change to the 2003 communications act.

While ITV heralds the scrapping of section 73 as a major victory for PSBs, the government said that it does not want retransmission fees levied on pay-TV operators.

The government said that “no convincing case” has been made that would guarantee that PSBs would invest any retransmission fee income into more UK originated TV programmes.

It reiterated its belief that PSBs are already “adequately compensated” under existing licensing arrangements.

This includes guaranteed access to spectrum to broadcast and the best slots on electronic programme guides, in return for making their PSB services available throughout the UK free of charge.

“Government remains of the view… that it wants to see zero net fees between the main platforms and the PSBs for the licensed PSB channels,” it said. “This recognises the benefits to platforms, the PSBs and audiences from being able to access award winning, PSB content.”

Virgin Media says that the digital economy bill has completely ruled out retransmission fees being introduced following the scrapping of section 73.

“Virgin Media welcomes the government’s decision to reject a two year lobbying campaign by ITV and Channel 4 to charge viewers extra fees for watching programmes on cable and satellite that they’ve already paid for,” said Brigitte Traffrord, Virgin Media’s chief corporate affairs officer.

The government said that it may look to introduce legislation if PSBs and pay-TV companies cannot agree to keep the status quo.

“Government expects that there will continue to be no net payments between all platform operators and the PSBs for carriage of their licensed PSB channels going forward. If this situation appears to be at risk, Government will consider again whether legislative change is required.”

The digital economy bill will have its first debate at the second reading stage, and it is expected to complete its passage through the Commons and move to the Lords in the autumn subject to parliamentary timetabling. Royal assent is expected in the spring of next year.