A new company which will take over RTE's transmission of services, paving the way for digital broadcasting, should be in place by the middle of next year, the semi-state's director-general, Mr Bob Collins has said.
RTE will have a 40 per cent stake in the company, tentatively titled DigiCo, and will shortly seek a partner to take the remainder. Mr Collins said whoever takes the 60 per cent will need to commit "substantial equity" to the venture. It has been estimated that £35 million-£40 million will have to be invested to digitalise the network.
Mr Collins acknowledged that RTE may need to invest as well, but he said E's its knowledge and expertise in broadcasting as well as the fact that it owned the current network infrastructure would also have to be factored in.
Financial advisers are currently being sought and are expected to be appointed shortly. The advisers will then finalise the criteria involved to be circulated to interested parties. An inter-departmental group - appointed in August - which includes representatives from RTE, the Department of Public Enterprise and Arts, Heritage, Gaeltacht and the Islands is currently drawing up plans for digitalisation.
It is envisaged that the new company would be a transmission operator. In the immediate term it would take over all existing network commercial arrangements which RTE undertakes. These include transmission arrangements with TV3, Today FM and a range of local radio stations. RTE would also enter a service contract with DigiCo, paying it to transmit its services.
Under the proposals RTE would have a multiplex (a grouping of channels). TV3 and Teilifis na Gaeilge (TnaG) would have half a multiplex each. This would give them spare capacity to offer either another channel or other services (such as telecoms services) or a combination of both.
The network operator will be able to offer a further four multiplexes which can be made available to other service providers such as data or telecoms providers. They will also carry the British channels. Mr Collins said it was too early to say whether the new company would generate significant revenues. However, he said that "as a business proposition it stands up". This was also the view of RTE's external advisers, he said.
For its part, RTE intends to use its multiplex to provide five new channels. The make-up of these is not yet finally decided but it intends to offer a 24-hour news service and an education/ children's channel.
As director general, Mr Collins will have to steer RTE through some very competitive and turbulent times. The company will have to spend around £25 million to digitalise its own production facilities. At present, the semi-state's costs are rising far faster than its income.
Last year RTE recorded a surplus of £6 million, but lost £3 million on its core business of broadcasting. These figures were better than forecast.
This year Mr Collins says RTE, which was on target to post a deficit of £1.5 million, is now likely to turn in a £1.5 million net surplus. This is due partly to better-than-expected revenues.
A £1.5 million surplus is well below what RTE needs to generate and, as Mr Collins points out, broadcasting inflation far outstrips normal inflation - in terms of expenditure demanded for technology and programming rights, for example. He says the bottom line is that RTE must radically reduce its cost base. A six-month study into RTE, furnished in April, suggested it will have to take out around £25 million in costs to secure its future. Part of this would involve at least 270 redundancies in the organisation which employs approximately 2,000 people.
Mr Collins will not specify redundancy figures but says he agreed with the broad thrust of the report. He describes the savings envisaged as "very ambitious and challenging" but believes that cost cuts of such magnitude could be achieved over the next three years. He hopes that management and employees will have an agreement in place by the end of this year to start the process from January.
Mr Collins conceded the Government's decision to force it to sell its share in Cablelink, the cable television company in which it had a 25 per cent stake, was a disappointment. However, he says, the "silver lining" is that RTE will be able to use the monies raised from the sale for other much-needed investment. At present E the State broadcaster spends approximately £10 million per annum on capital investment and Cablelink is expected to generate in excess of £140 million when it is sold.
Mr Collins is adamant that his brief is to cut costs and develop RTE in a way that ensures the quality of programming does not suffer. "I don't want to save money just to accrue surpluses," he says.
The bulk of RTE's expenditure goes into programme-making and Mr Collins admits to being disappointed by the Government's decision not to index link the licence fee. At £70 per annum, he says it is the lowest rate in Europe and accounts for about one-third of RTE's income.
Mr Collins also believes that while An Post, which collects the licence fees on behalf of RTE, has made great improvements in the system, the process could be conducted more cheaply. RTE would like to have control of this function, he says.
Mr Collins says RTE has to work against the backdrop of factors such as committing 20 per cent of its expenditure on independent programme making and supplying one hour of programming per day to TnaG. The latter costs RTE about £6 million per year. The fact that RTE had to supply and pay for programming for TnaG came as a surprise at the time, he says. Although not complaining - he describes himself as a great supporter of TnaG - he says its future funding needs to be secured.
As for TV3, Mr Collins says it is still far too early to judge its performance and suggests people have rushed to comment too quickly on the issue. He says he is confident RTE will remain the first choice of viewers in Ireland.
At present RTE's annual accounts do not break down the performance of its individual operations - such as 2FM or E Network 2 - sometimes leading to allegations of cross-subsidisation. Some competitors wonder to what extent each operation would be profitable without the benefit of the licence fee.
Mr Collins dismisses suggestions that in the interests of transparency these figures should be published. He argues that RTE is supplying a public service and 2FM and other operations are part of the total package. He says RTE fulfils its statutory accounting obligations.
For now though, Mr Collins must ensure RTE can compete in an ever-increasing, cost-conscious environment. He says he is cautious about the future but confident nonetheless.
As technologies converge and digitalisation offers more channels and more opportunities to use the infrastructure for data transmission, he says there will be tough challenges ahead. Nobody really knows what the outcome of digitalisation will be or how quickly people will transfer to it. Mr Collins points out that the extent to which people will use their PCs to view television, or their televisions to surf the Net, is not yet clear either.
Preliminary research in the US has found people are spending more time in front of computer screens and so have less time to watch television screens. The findings estimate people are spending 10-15 per cent less time viewing television.
Mr Collins says these are all factors which will have to be taken into account as RTE maps out its future and all have costs attached. One thing is certain though: Mr Collins believes RTE will be a key player in the digital television age. "It would be highly undesirable that in a digital environment the only additional services would be originated outside the State," he says.
