How much money did the BBC save when it ended it’s Sky encryption contract?

Trawling around the internet, I found this Freedom of Information request, regarding how much money the BBC saved by moving from Sky encryption, to being free to air.

Originally BBC channels were only available via satellite using a Sky subscription viewing card. Then the BBC moved away from the Sky subscription model, but their channels were still encrypted, and required a viewing card to view – the so called “Solus” card, the cards costs being met by the BBC.

But moving away from Sky’s encryption also meant the BBC moved it the Astra 2D satellites UK beam, to try and prevent signal over-spill into areas where the BBC does not hold the broadcaster rights to.

A BBC press release suggested that “an estimated £85 million over the next five years because it will no longer be using BSkyB’s Conditional Access system.”

The FOI request asked for information as to how this figure of £85 million was calculated.

The FOI document follows:

British Broadcasting Corporation Room BC2 B6 Broadcast Centre White City Wood Lane London W12 7TP
Telephone 020 8008 2882 Email [BBC request email]

Information Policy & Compliance
bbc.co.uk/foi
bbc.co.uk/privacy

Mr XX
By e-mail: [FOI #197007 email]

18 June 2014

Dear Mr XX,

Freedom of Information Act 2000

Thank you for your request under the Freedom of Information Act (‘the Act’) of 12th February
2014, seeking information on the following:

“In 2003, the BBC cancel ed its contract with BSkyB for carrying encrypted signals of the main
domestic channels.

At the time a BBC press release
(http://www.bbc.co.uk/pressoffice/pressreleases/stories/2003/03_march/12/digital_sat.shtml)
claimed that this would result in “an estimated £85 million over the next five years because it will
no longer be using BSkyB’s Conditional Access system.”

I would like to know the exact amount saved. This would be best illustrated by providing me the
exact figure paid to BSkyB for this service for the year 2002. If this figure, multiplied by five, does
not come close to £85m, then I would also ask for a further explanation of how the figure of
£85m was “estimated”.”

As noted in the contemporaneous press release to which you supplied a link, conditional access
was removed from the BBC’s digital satellite services on 30th May 2003. From this point onwards,
the BBC’s services have been available on compatible satellite receivers without the need for a
viewing card (‘free-to-air’).

You will be aware that, on satellite platforms, conditional access is controlled at the platform level;
that is to say that it is the platform operator – in this case, Sky – who provides these services to
broadcasters who require them.

Your query relates to a press release issued over 10 years ago which refers to an estimated
number of £85m over five years. Given the passage of time, we do not have a contemporaneous
explanation of the how the figure was estimated. However, it appears that there were three main
elements of the estimated £85m savings:

• Removal of conditional access charges for existing channels
• Avoidance of conditional access charges for new channels
• Removal of charges for “solus” viewing cards.

We discuss these further below.

Conditional access charges for existing channels and new charges for new channels

Based on the fees charged by Sky, as platform operator, the BBC estimated that £28m would be
saved over a five year period by removing conditional access from existing and future BBC
services.

As the press release highlights, the BBC went on to introduce BBC One English regional variants
to satellite; additional conditional access fees would have applied for these services. This would
have increased the £28m figure.

Costs of ‘solus’ viewing cards

Prior to the BBC’s services being available free-to-air on digital satellite, the BBC funded ‘solus’
viewing cards. These cards were supplied to homes that;

i) wished to receive BBC and other PSB services via satellite without a Sky subscription, and
ii) to homes that had previously, but no longer, held a Sky subscription but wished to continue to
use their existing viewing equipment to receive BBC and other PSB services.

Each solus card was supplied to the viewer by Sky, as platform operator and controller of the
conditional access system, for an annual fee that was met by the BBC.

At the time of the decision to cease conditional access, the cost of solus card fees to the BBC was
approximately £8m per annum (excluding internal administration and associated costs).

The BBC predicted that the total number of solus cards in circulation would increase in the
fol owing years based on growth in the total number of Sky subscribers and the number of
subscribers ending their subscriptions on an annual basis – the so-called ‘churn rate’.

As the growth rate and the rate of churn over the fol owing five years could not be guaranteed, an
estimate was made. This assumed that the number of solus cards would increase significantly over
the next five years and that this would have a proportionate impact on the £8m per annum cost to
the BBC. The withdrawal of the BBC funding in 2003 led to significant changes in the solus card
system. Given this, it is not possible to accurately quantify the increase that would have been seen

in the number of cards put into circulation (under the old BBC funded system) for the five years
to 2008. However, it is worth noting the fol owing chart supplied by Ofcom in their Q4 2007
Digital TV review:

You should note that Q4 2003 was a low point, since it followed the withdrawal of the BBC free
solus cards. As at 31 Dec 2002, the ITC (the predecessor to Ofcom) estimated there were
558,592 free satellite homes.

The chart demonstrates that our forecasts of an increase in the number of solus cards potentially
coming into circulation (and hence an increase in costs to the BBC) would have been justified and
reasonable.

Conclusion

The £85m total estimated saving was therefore primarily made up of:

• The £28m saving on conditional access for existing channels and national variants;
• Conditional access payments that would have had to be paid for BBC One Regional
variants; and
• Annual savings on solus cards (£8m in 2003 and estimated to increase significantly over the
five year period).

I hope you find this information helpful.

Appeal Rights

If you are not satisfied that we have complied with the Act in responding to your request, you
have the right to an internal review by a BBC senior manager or legal adviser. Please contact us at
the address above, explaining what you would like us to review and including your reference
number. If you are not satisfied with the internal review, you can appeal to the Information

Commissioner. The contact details are: Information Commissioner’s Office, Wycliffe House,
Water Lane, Wilmslow, Cheshire, SK9 5AF, telephone 01625 545 700 or see
http://www.ico.gov.uk/

Yours sincerely,

James Hamilton
BBC Distribution