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The final Ofcom statement on the future of PSB advocates fixing the commercial PSB crisis by designating Channel 4 as the core alternative provider of public service programming to the BBC, and freeing up ITV and Five commercially by means of considerably lightened PSB obligations

The fundamental issue of the Channel 4 (or any other) solution is funding the new commercial PSB model. Eyes are now being set on a Channel 4 partnership with BBC Worldwide, centred on its UK assets as the marriage made in heaven

Another major recommendation of the Ofcom PSB proposal is the abolition of the national Channel 3 breakfast time licence, currently held by GMTV, which is running a viable business with its own sales force. This recommendation appears at odds with Ofcom’s commitment to plurality in news provision and its statutory duties to encourage competition in the communications industries

Our current forecast of UK advertising revenues in 2009 is a decline of 12.2% across all the display media, led by a steep fall of 19% in newspapers, a result of the double whammy of the migration of classified advertising to the internet and the economic crisis

Visibility is poor for TV advertising spend beyond January and February, which we expect to be down 10-15%. Although the influence of the internet on TV has been less severe than on the press, our initial forecast for the full year is of a 10% decline, due to the recession and deflationary pressures

We expect internet advertising to continue growing through the recession, but at vastly lower levels – we project only 2.1% growth in 2009, a sharp deceleration from 20% in 2008, and growth will be driven entirely by search, as both online classified and display spend are falling as advertisers in key categories cut back

Carphone Warehouse’s distribution business felt the recessionary chill for the first time in the December quarter, but its like-for-like organic growth of -1% was still far better than other consumer electronics retailers have fared

The market outlook is unfortunately still worsening. While we still expect Carphone Warehouse to outperform its competitors, its results are likely to get worse before they get better

In fixed line, net broadband additions were reasonable at TalkTalk but negative again at AOL. We are sceptical of the prospects for subscriber growth at AOL, and earlier guidance of 200-250k broadband net adds for the year to March now looks unlikely to be met

Major record labels will allow iTunes to sell all its music stripped of digital rights management (DRM), removing a barrier to digital music buying, while iTunes will introduce in April the tiered pricing the industry wants

We expect no real bounce in demand, however, as Apple’s DRM was not a restriction for iTunes customers as most owned iPods, the dominant music player in a market which is almost fully matured – we expect few iPod customers to pay to upgrade their libraries to DRM-free

News of peace breaking out between iTunes and the recorded music industry was overshadowed by reports of the continued steep decline in CD volumes sold in the US market, down almost by one fifth in 2008 from 2007, with digital increases again failing to offset the decline

Ending a simmering commercial dispute, Vivendi’s Canal+ has agreed to distribute its packages to France Télécom’s Orange TV satellite customers, allowing Orange to relaunch its DTH platform (targeting 4 million customers off the DSL TV footprint) after its dismal ‘do-it-alone’ first six months

Canal+ recruitments will benefit from the resumption of active marketing for its packages over Orange TV platforms, after a poor year for subscriber growth

Canal+ catch-up TV will now be available to all Orange Canal+ DSL TV subscribers, as it is to those on Free, where it is very popular, plus Orange satellite subscribers, thus giving Orange back the leadership position on IPTV in France

ITV has agreed to provide 7 day catch-up and archive content to Virgin Media’s TV customers. By closing the last major gap in its VOD offering, Virgin Media can better exploit VOD as a differentiator with Sky, thereby assisting customer retention

ITV also stands to gain from the circa £5-10 million per annum that it could receive for distribution of its catch-up content and the addition of 500 hours of top archive content to TV Choice, Virgin Media’s subscription VOD service. There appears no corresponding downside risk to ITV advertising revenues

The announcement highlights the future role of Kangaroo, the proposed BBC/ITV/Channel 4 joint venture, in supplying archive material to complete Virgin Media’s VOD line up, and the remedies the Competition Commission is considering to protect wholesale VOD customers

BT’s latest trading update involved a massive £340 million one-off charge to reflect a more cautious view of contract profitability and realign reported performance with cash flow; in addition reported GS EBITDA for the quarter to December is expected to be negligible

There will be little visibility of improved performance at GS until the various ongoing reviews of the business are completed, with a further charge related to one or more NHS contracts the most likely outcome

Performance at the rest of BT group is continuing to be relatively resilient, and price changes at BT Retail and Openreach should help to an extent. But GS looks likely to prove a major drag on group performance well into 2010

DMGT has sold a 75% stake in its London title, the Evening Standard, to Russian investor Alexander Lebedev for £15 million

The deal helps DMGT reduce its losses at the title, thought to be up to £20 million a year

While the sale also underlines the publisher’s commitment to reducing its reliance on volatile newspaper assets, we think it highly unlikely that the crown jewels – the Daily Mail and the Mail on Sunday – will come to market, although the story could be different for regional division Northcliffe

The CC determination on mobile termination rates (MTRs), if implemented, would result in a cumulative 4% reduction in UK mobile industry revenue and EBITDA by the 2010/11 financial year, but a small boost to fixed line industry EBITDA

However, even this cut does not make up for the termination rate cut ‘holiday’ that the UK mobile industry has been enjoying for the last 2-3 years, with MTRs still high in relation to retail tariffs by historic standards

On the positive side (for the MNOs), this means that increased competitive pricing pressure is unlikely in the short term; on the negative side we still expect substantial further cuts from April 2011. These cuts are broadly lagging those in the rest of Europe, so there is no negative read-across for most European MNOs