Select Committee on Broadcasting Minutes of Evidence



Examination of witnesses (Questions 1 - 19)

WEDNESDAY 15 JULY 1998

MR MALCOLM TAYLOR, MS CHRISTINE MITCHELL, MR GRAEME STANLEY, MR STEVEN WAGNER and MR PHIL KIRBY

Mr Gale

  1. Good morning, ladies and gentlemen. May I welcome you all to this, the first hearing of the first session of evidence into the Broadcasting Committee's inquiry into the development of Parliamentary broadcasting. I as the senior member of the Committee am acting as Chairman in the absence of our elected Chairman, Eric Clarke, who sadly is indisposed, but I know the Committee and I am sure witnesses would wish him well for a speedy recovery. Before we start could I also place on record my thanks to the Director of Parliamentary Broadcasting, Miss Margaret Douglas, and her staff, together with the Clerk of the Committee, for the speed and efficiency with which they have assembled this gathering this morning at very short notice indeed. Can I thank those of you who have agreed to participate and to interrupt your own already full diaries for responding, again at such short notice. The reasons for that will be clear to you. In the absence of Mr Clarke the Committee had not met but we felt that it was appropriate to commence this inquiry and to take this morning's evidence prior to the annual general meeting of the Parliamentary Broadcasting Unit Ltd tomorrow morning. That is not to say that the evidence taken this morning will in any way influence PARBUL's decision. Their decision is a matter for them. The Clerk has however arranged that a transcript of this meeting will be made available to PARBUL in a specially short order for their information and consideration but no more than that. The full inquiry will take appreciably longer. The situation as we understand it at the moment is that the House of Commons broadcasting is operated through PARBUL and its shareholders with the provision of a clean feed to The Parliamentary Channel. The provider of the backup for that team at the moment is and has been Flextech who now wish to relinquish that task and we shall be taking evidence from their representative later in the morning. The Parliamentary Channel have indicated in a majority that they would like the service to go to the BBC and the BBC have indicated that they would like to take over the provision of the service. One operator, National Transcom Limited, have indicated that they also would like to provide the service and we shall be taking evidence from each of those groups this morning. The first evidence that we wish to take is from the representatives of The Parliamentary Channel: Malcolm Taylor of Telewest, Christine Mitchell of General Cable, and Graeme Stanley of Cable and Wireless. Thank you for joining us. Could I first ask whoever is leading for your group to indicate to the Committee why you wish the Parliamentary Channel to be transferred to the operation of the BBC.
  (Ms Mitchell) Yes, thank you very much, Mr Gale. The advent of digital broadcasting required the Board of the Channel to consider how we needed to deal with its future and how best to take it forward. The cable operators set up the channel as a non profit making organisation in 1992 but it has been heavily subsidised by its shareholders to date, albeit that its revenues now cover its operating costs, but there are still substantial loans outstanding. As part of the strategic review that we began at the end of last year, prompted by digital, we went back to our individual companies to consider what we wished of parliamentary coverage. The unanimous view of the three companies who have submitted joint evidence today was that we had a strong commitment to the continuing provision of parliamentary coverage to our customers. We are proud of having established continuous coverage to date and we wanted to make sure that the service going forward was viable and accessible. We wanted to build on the considerable commitment that the cable industry has made to connect schools to its networks, the educational aspect of the channel has been a very important one to the Board during the life of the channel, and we also needed to make sure that the channel was prepared for digital transmission and/or the enhanced and interactive service capability that provides. However, the cable operators do have financial constraints. We are tackling many tasks simultaneously and the additional funding available for the channel to develop the service in the way we thought best served our customers was going to be limited to the extent that we felt that it was not likely to provide the enhanced level of service we felt it deserved. We considered several options as to how to take the matter forward, perhaps with third party managers of the channel, and then we began discussions with the BBC. We were excited about some of the possibilities that provided us, including the possibility of a broader distribution of the channel, and the companies who have submitted the joint evidence felt unanimously that the preferred option would be to have the BBC service.

Mr Gardiner

  2. You talked, Ms Mitchell, about the loans outstanding. Although you said that the revenue was broadly meeting the expenditure now there were still substantial loans outstanding. How forceful a consideration has that been in arriving at the decision?
  (Ms Mitchell) The primary consideration of the development of the channel was how we can best provide a service to the customers. The three companies have been prepared to consider writing off the considerable investment we have made for the channel if we feel we are going to get a better service as a consequence. This was set up as a non profit making organisation and we knew this was not going to be a commercial venture like other ventures that we have entered into.

  3. Yes indeed, but clearly you did not think it was going to be a loss making operation either.
  (Ms Mitchell) Probably not to the extent that it is but there was a certain amount of recognition that there was no guarantee that those loans would be repaid.

  4. Could you give us some indication of what stage the current negotiations are at?
  (Ms Mitchell) We have a letter of intent with the BBC as to what the relationship between the BBC and the cable operators would be. The complexity there is that there is a relationship to be had with The Parliamentary Channel Board and with its members as individual cable operators. Clearly each individual cable operator will come to its own arrangements with the BBC for carriage of the channel and my understanding is that, certainly as far as our three companies are concerned, we have gone a long way to finalising the carriage provisions for a BBC Parliamentary Channel. It is obviously conditional upon the BBC securing a PARBUL licence to be able to provide the channel.

  5. Could you be quite explicit about whether the transfer to the BBC would actually cover the outstanding loans that you talked of earlier?
  (Ms Mitchell) No. It is a quite separate arrangement. The BBC would be creating a licence fee funded channel. Clearly the BBC will be able to answer this in more detail, but from our perspective we are not transferring any assets of the channel to the BBC at all.

  6. In that sense those outstanding loans are going to have to be written off anyway?
  (Ms Mitchell) Correct.

  7. Can you perhaps tell the Committee, if it is not breaking commercial confidences, what financial arrangements have been made for the transfer?
  (Ms Mitchell) To the BBC?

  8. Well, in general, to the BBC and any that you feel this Committee should know of.
  (Ms Mitchell) Clearly there is no financial transaction to be undertaken between the channel and the BBC as the channel and, because it is a licence fee funded service, that will not happen either in terms of carriage provision with us as individual cable operators. We have an offer tabled for the assets of the company from NTL which the Board is considering. I think we will all take our own individual accounting positions as MSOs, multiple service operators, as cable operators, as far as our outstanding loans are concerned. I am pretty sure in saying that that General Cable has written off its loans already in anticipation of not having any return on that and as far as I know the other operators are in the same position.

  9. Just to clarify, the reason that you are not pursuing the continued provision of the service is that you said I think in your opening remarks that your pot of money is limited, if I can paraphrase you, and it would not enable you to enhance the service in the ways that you think the service needs to be enhanced?
  (Ms Mitchell) I think that is a fair summary, yes.

Mr Sayeed

  10. What is the capital investment that the cable operators will be required to write off and what are the losses to date, the income against costs?
  (Ms Mitchell) I may require support from colleagues with this. It is approximately £3.6 million.

  11. Capital?
  (Ms Mitchell) Capital and accrued interest.

  12. And what are the revenue losses to date?
  (Ms Mitchell) About five million.

  13. So in total you will need to—if you have not already done it—write off about £8.5 million?
  (Ms Mitchell) In one form or another, yes.

  14. What are the BBC offering that Flextech do not do?
  (Ms Mitchell) Flextech operates to the instruction of the Board and therefore Flextech have provided a service which they have been funded to provide. What the BBC are offering from the inception of an autumn launched channel would be that they are looking at additional Select Committee coverage. We have limited Select Committee coverage available on the channel at the moment, and a daily round-up programme which was not a cost effective option for The Parliamentary Channel to consider. They will be providing an FM feed, audio only feed, and we are hoping that we will be working closely with the BBC to establish what services will be available on a digital cable network and indeed other digital platforms as and when they become available. The regional assemblies is another issue. Again, I would hate to give any more detail than that which has already been shared with the BBC. I am sure Jenny Abramsky and her colleagues will be able to give you a much better picture.

  15. Yes, but it is interesting to know what your view is as opposed to theirs.
  (Ms Mitchell) That is our view at the moment. Those are the key points.
  (Mr Stanley) Our view is that at minimum the service will not be any different than it presently is, that the gavel-to-gavel coverage will be continuing, that recorded House of Lords coverage will be provided, and that in the future the BBC will be able, given their resources, to provide a more enhanced and developed service. Flextech are purely the manager of The Parliamentary Channel under the auspices of our Board and so they are only able to offer what The Parliamentary Channel Ltd permits them and funds them to do.

  16. I understand that, Mr Stanley, but if I may say, Ms Mitchell's answer was more helpful because yours was somewhat generalist whereas hers was actually saying some specifics, that your understanding of the BBC offer was that we would hear from the BBC later. Have you got anything in specific terms to add to what Ms Mitchell has said as to what the BBC is offering to do if they take over the service?
  (Mr Stanley) No. I think Ms Mitchell covered all the points that we have discussed with the BBC.
  (Ms Mitchell) I think an additional point is the educational resource that they bring, which is simply that the BBC is probably the pre-eminent education publisher, certainly in the UK and possibly the world, and we are excited about the possibility of working with them to develop that but there are no further proposals in place at the present time.

  17. Do they have any proposals to use the Internet for instance?
  (Ms Mitchell) We have not discussed that in detail. Again, I am sure that you will be asking them to flesh out their points on that. We have talked about establishing on an ongoing basis or to discuss this very issue. They will be creating initiatives for their own programming and we, having run the channel and having been responsible for the channel for six years, will be in a position to plug into what they are doing and, we hope, add value to their considerations in terms of parliamentary coverage.

  Mr Gale: Thank you, Ms Mitchell. If there are no further questions relating to the financial considerations surrounding the proposals, then Mr Lepper has some questions concerning the guarantees that the BBC may be able to offer you.

  Mr Lepper: Ms Mitchell, I think all of us who are Members of Parliament are pleasantly surprised at the numbers of our constituents who tell us they watch The Parliamentary Channel—

  Mr Pound: It horrifies me!

Mr Lepper

  18.—recognising that it is not a profit making channel. I am interested in what guarantees there are that those viewers who currently receive The Parliamentary Channel on cable will be able to continue to do so if your current proposals go ahead.
  (Ms Mitchell) Yes, absolutely. There is a commitment from the three companies here that a BBC Parliamentary Channel will be treated no less favourably than a cable owned Parliamentary Channel. It will continue to be available on our networks and to those customers. The situation will change slightly because of the ITC review of funding. We are all in the process of assessing the impact of how we offer cable TV to our customers but it is unlikely that the BBC Parliamentary Channel will be available to any fewer customers. It will be available to all customers. The number of customers who might choose to take it might be slightly lower because we might be retailing our services in a slightly different way, but it will be available to every single one of our customers.

  19. Could you just explain that last point about retailing your services?
  (Ms Mitchell) The ITC are looking for us to make the way in which we retail our television services more flexible, to give our customers more choice. We have different packages of programming basically. In the case of my company it is likely that the BBC Parliamentary Channel will be available to a hundred per cent of our customers. We have not finalised our decisions on that packaging procedure but I am confident that it will be available to a hundred per cent and I think that other cable operators, because it is a fairly recent decision, have not finalised their marketing proposals either.


 
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