House of Commons - Culture, Media and Sport - Appendices to the Minutes of Evidence

Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence

APPENDIX 24

Memorandum Submitted by ITN

GENERAL

1. ITN is grateful for this opportunity to submit evidence to the Culture, Media and Sport Select Committee about the future Funding of the BBC. The inquiry comes at a critical point in the development of British broadcasting and—in particular—the industry's collective response to the challenges of the digital and information technology revolutions.

2. ITN's submission to the Department for Culture, Media and Sport on the Report of the Review Panel into BBC Funding explicitly analyses its recommendations in the broader public policy context identified by the Select Committee. Whilst we are not seeking to submit oral evidence to the Committee, we believe that our deliberately encompassing response to the Davies Report might prove useful to the Commiteee in its wider deliberations about BBC funding. ITN's detailed analysis therefore follows.

3. The public debate provoked by the Review Panel's recommendations and the concurrent Select Committee inquiry is a microcosm of a broader and long-running debate about the future of the BBC. It is characterised by polarised arguments deployed by a "Balkanised" and (necessarily) self-interested industry. Certain commerical operators question whether or not the Corporation should enjoy anything other than a bare minimum of universality in the digital era. These arguments are still less convincing when deployed by those who overtly or discreetly challenge the basic principle of publicly funded public service broadcasting. The BBC itself continues to argue for very generous public funding to support the fullest range of new services across all platforms. But it seeks to decouple this issue from essentially pragmatic commercial and public interest concerns about the transparency, accountability and legitimacy of its new and existing services.

4. ITN believes the Review Panel's Report is a welcome departure from this predictable public policy debate. Indeed, the Panel's most constructive recommendations are those that deliberately offer up pragmatic solutions to long term policy problems. ITN therefore welcomes the Report and acknowledges the sound analytical framework within which the inquiry has been conducted.

5. ITN supports the Review Panel's basic premise that the BBC should remain a "full service public service broadcaster"[89]. Together with commercially funded operators like ITN, the BBC has played a crucial role in setting a benchmark of quality, diversity and choice in analogue services, and we believe this role should be extended across all platforms in the digital environment.

6. We also endorse the basic argument that the BBC's strategic expansion into digital services—and its funding—must be determined now. To delay until the expiry of its formal government agreement guaranteeing the licence fee until 31 March 2002—or until the expiry of its Royal Charter on 31 December 2006—would "effectively freeze the BBC out of the digital world"[90].

7. But if we are to accept these arguments, we must also accept that it is too late to wait until March 2002—or December 2006—before the Corporation, government and Parliament address the regulatory framework within which these new publicly funded services will operate. In particular, it is crucial to address particular concerns about the transparency of the Corporation's publicly funded and commercial operations and the legitimacy and public service function of each proposed or existing service. These concerns should be addressed before the BBC receives any additional funding.

8. ITN believes that the Review Panel's Report and its recommendations present government—and Parliament—with a golden opportunity to broker a settlement between the legitimate concerns of commercial operators and the Corporations' equally legitimate ambitions to expand its services into the digital universe. In doing so, Ministers and parliamentarians will help chart the equitable development of digital services in the wider public interest.

9. This paper seeks to examine the specific recommendations of the Review Panel in exactly this context and in the wider public policy context that delineates the Select Committee inquiry into the Funding of the BBC.

CHAPTER 1—ACHIEVING SUFFICIENCY WITHOUT EXCESS: THE BBC'S FUNDING NEEDS UNTIL THE CHARTER REVIEW

10. ITN does not have at its disposal the kind of economic modelling resource necessary to provide a definitive response to the detailed analysis contained in Chapter One of the Review Panel's Report. We will therefore confine our comments to matters of public policy principle, although we acknowledge the Panel's commendably realistic view that "turning these principles into hard figures is more of an art than a science."[91]

11. The Panel is right to identify a conundrum at the heart of the BBC funding debate. The Corporation might require additional sources of funding to execute a full service public service role in the digital age, but the inherent disadvantages of the licence fee system "imply that we should fund the minimum services necessary"[92]. ITN therefore strongly welcomes the broad approach of the Review Panel to examine the BBC's funding needs in the context of "achieving sufficiency without excess"[93].

12. We have no difficulty with the BBC's "services vision"[94], although having provided high quality commercially funded programmes and services to the commercial broadcasting industry for 44 years, we would point out that the Corporation is "a major" investor in UK production and not "the major" investor. But we acknowledge the BBC's investment in production is crucial to the breadth and quality of the UK production industry. We also acknowledge its role as a "benchmark" of quality in every genre, its role in providing access to creativity and content and its need to maximise audience reach (although not necessarily audience share).

13. But ITN has profound difficulties with some aspects of the BBC's views of its funding needs. In particular, we believe the BBC's strategy "to provide access to this investment in content in a range of ways"[95] is completely inadequate.

14. The BBC has made a series of claims about improving its main national networks, including higher value content and more first-run programmes. But it continues to resist a proper definition of its public service obligations on BBC 1 and 2. The absence of properly defined obligations—and a degree of independent scrutiny—has allowed the Corporation to measurably dilute its public service offering on these channels in recent years (ref: The BBC's Public Service Obligations and Commercial Activities: An ITV Analysis—1998). In the absence of enforceable obligations, neither viewers nor the BBC's commercial competitors have any guarantee that creeping "dumbing down" will not continue once the Government agrees a revised financial settlement for the Corporation.

15. It is claimed that BBC Choice would become a "genuine third network for digital audiences". But this channel already operates without an enforceable definition of its public service function. There are no proposals to introduce such a framework, let alone an independent public consultation on its locus and remit.

16. Similarly, BBC News 24, BBC Knowledge, BBC Parliament, three new BBC digital radio services and four digital repeat format services are cited as concrete examples of the BBC's "access to investment "strategy. But ITN cannot accept that these existng and proposed services can be deployed as a definitive case for additional funding. None have been subject to an independent public consultation, none have clearly defined public service obligations and none would be subject to independent scrutiny.

17. ITN has no objection in principle to the BBC's online presence and we welcome the crucial role that the Corporation has played in educating a wider audience about the Internet. But ITN also endorses the very many public policy concerns outlined in the submission to the Committee of the British Internet Publishers Alliance. The Internet is not simply the fourth platform of broadcasting. It is also the second platform of publishing and—as such—raises additional concerns about competition policy. This has yet to be recognised by government, Parliament, the BBC or in the analysis of the Review Panel's Report. As yet no attempt has been made to define the exact public service function of BBC Online or the limits of its function. Nor have there been any substantive improvements to the transparency of the relationship between bbc.co.uk and beeb.com. ITN urges the Select Committee to closely examine this issue in its inquiry.

18. Furthermore, it is critically important that BBC funding is not so generous that it effectively "crowds out" services that could just as easily be delivered by commercially funded operations. Operators like ITN—playing a pivotal public policy role in competing with the BBC to drive up standards of programme content—could not possibly hope to compete with the kind of revenue growth demanded by the BBC for its expansion into the digital and information technology universe.

19. Chapter One of the Review Panel's Report goes some way to acknowledging the absence of clarity in the BBC's digital strategy. Indeed, it states that "we were not happy to pre-fund services which had not yet been fully identified and specified"[96]. The Panel is therefore absolutely right to reject the BBC's case for enhanced income amounting to £650 million by 2006, implying real growth of about five per cent per annum between 1998 and 2006 to fund an increase in programme provision of 57 per cent in an eight year period[97].

20. Furthermore, Chapters Three and Five of the Review Panel's Report go much further in addressing the additional problems of accountability, commercial transparency and the need to properly define the BBC's public service offerings. But in failing to peg all of the recommendations contained in these later Chapters to the recommendations made in Chapter One, the Review Panel has failed to identify a "settlement" between legitimate commercial and public interest concerns and the BBC's reasonable ambitions for its digital future. Again, this is an issue the Select Committee might wish to examine in more detail.

21. It is set against this context that ITN offers to the Select Committee its assessment of the six specific recommendations springing from Chapter One of the Review Panel's Report.

— ITN agrees that "the BBC should be funded sufficiently to remain a full service public service broadcaster across the UK's rapidly developing broadcasting market", provided that the locus and remit of each of the BBC's existing and proposed publicly funded services is clearly defined, that they comply with measureable public service obligations, that their accounts and their relationship with BBC Worldwide are completely transparent and that the Government—through Parliament—gives a specific commitment to introduce independent scrutiny of the BBC. ITN has identified what we believe to be the necessary safeguards in more detail (below).

— We also agree that the "status quo" option of an index-linked settlement for the licence fee is "likely to freeze the BBC out of the digital world" and that this is undesirable. However, we believe it is unreasonable for the BBC to demand enhanced funding for existing and proposed services without simultaneously addressing the need for a strengthened regulatory framework for both its publicly funded and commercially funded services.

— ITN therefore opposes the Review Panel's recommendation that the BBC's revenue should increase—broadly in line with GDP growth—by 2-2.5 per cent per annum in real terms up to 2006. That is not to say we are opposed to an increase in licence fee revenue. But ITN strongly believes that the Corporation should be required to justify each of its existing and proposed digital services—and the activities of BBC Online—within clearly defined and enforceable public service obligations, before it receives any additional funding. Each proposed service should be properly costed, so that the Corporation effectively "bids" for revenues on a case-by-case basis.

— ITN strongly supports the recommendation that the BBC should retain additional savings and commercial revenues and that these revenues be invested in extra programme provision. But again, we believe that these revenues should not be invested to launch new services without the introduction of appropriate safeguards and obligations.

— As a first step towards bringing external accountability to the BBC, ITN warmly welcomes the Review Panel's recommendation that the Corporation's efficiency savings be periodically assessed by outside consultants appointed by the Secretary of State.

— ITN also welcomes the final recommendation in Chapter One of the Report that the BBC's Director-General should address the issue of central management expenses. We firmly believe that this is the single most important factor in undermining the Corporation's public credibility and has contributed to potentially destabilising attempts to undermine the broad coalition in support of public funding. Given the new opportunities presented by the appointment of Greg Dyke, we believe this recommendation should be strengthened to "require" the Director-General to ensure these costs are commensurate with those of equivalent commercial operators.

22. ITN fully endorses the analytical thinking and economic modelling behind the Review Panel's recommendations in Chapter One. And we fully support the BBC's ambitions to continue as a full service public service broadcaster in the digital universe. But we do not believe the BBC has made anything like a definitive case for additional funding for new services, or for additional funding to upgrade its existing services. Nor do we believe that the Corporation should execute its "digital strategy" until the kind of obligations and safeguards outlined in Chapters Three and Five of the Report are introduced.

23. ITN believes that government and Parliament—working together with the BBC Board of Governors—now has an opportunity to address these concerns and should be prepared to "fast track" the introduction of a revised framework within which the BBC can operate.

CHAPTER 2: ACHIEVING A HEALTHY BROADCASTING ECOLOGY—GOOD AND BAD OPTIONS FOR EXTRA FUNDING

24. ITN accepts that the Review Panel has "established that the BBC's internal sources of funding would not be sufficient to generate the recommended growth in services up to 2006"[98]. However, we do not believe that the BBC has established a public service legitimacy to justify their services. Nor do we believe it is possible to establish this legitimacy without a new framework of accountability and transparency within which the BBC's new and existing services can be measured and assessed against the public interest.

25. However, subject to the introduction of such a framework, ITN accepts that the BBC may need to secure additional sources of funding. We believe the Corporation should "bid" for such funding during an independent consultation process to assess the public interest legitimacy of a proposed new service. If the BBC deploys a conclusive and definitive case for a new service, ITN accepts it may be necessary to raise additional revenues.

26. It is against this context—and on these assumptions—that ITN offers its views to the Select Committee on the recommendations made in Chapter Two of the Review Panel's Report.

— We wholeheartedly endorse the Review Panel's rejection of advertising sponsorship and subscription on the BBC's public services as a supplement to the Corporation's licence fee income. The quality, diversity and choice available to consumers of broadcast services in Britain is almost entirely dependent on the finely balanced plurality of funding between the major broadcasters and producers. Sanctioning access to any of these revenue streams to supplement the BBC's existing public service offering—let alone its proposed new services in the digital universe—would have a dramatic effect on the revenues available to a large range of ITN's partners and customers. It would have a particularly detrimental effect on the ITV Network, Channel 4, Channel 5 and the 200+ commercially funded radio stations supplied with news services by ITN Radio either directly, or indirectly through IRN. ITN's existing ability to compete against the BBC—acknowledged as one of our key public policy functions—is inextricably linked to the ability of our core customers to generate advertising revenue.

— On the same basis, we also support the Review Panel's rejection of raising supplementary revenue through the BBC's new public service offerings, including BBC Choice, BBC News 24 and BBC Online.

— In principle, ITN has no objection to the Review Panel's recommendations to extend BBC Online into new non-UK services and the development of beeb.com. However,we have serious reservations about the transparency between the publicly funded bbc.co.uk and beeb.com and ITN draws the Select Committee's attention to a contemporary illustration of this concern. ITN New Media is developing a business marketing tailored news services for websites and interactive services. It recently secured a contract to supply a Dutch-based platform—Cello—with online news content. However, Cello's main commercial rival is supplied with news content from the BBC. ITN has discovered that this content was supplied not by BBC Worldwide from beeb.com, but by BBC Broadcast from bbc.co.uk. The BBC have claimed this clear breach of their existing fair trading commitments springs from the experimental nature of the service. ITN has no objection to free and fair competition, but it is extremely difficult to develop this business when we have no idea which part of the BBC we are competing against or on what commercial terms. ITN seeks specific assurances from the Government and Parliament about existing concerns of this kind—echoed by the British Internet Publishers Alliance—before we feel able to support this proposal in practice.

— ITN also agrees that the existing five-year settlement for the licence fee should not be re-opened. However, given the qualifications and reservations that we have expressed about the Review Panel's recommendations in Chapter One, we do not believe this settlement should result in a "flat fee", but a variable annual revenue stream based on the BBC's successful "bidding" for funds to support legitimate public services.

— ITN has no view about the digital licence supplement. In part this springs from our belief that the BBC should "bid" for additional revenues on a service-by-service basis and that it is therefore inappropriate to establish a definitive level of additional funding. But if the BBC was able to justify additional funding, it is by no means clear to ITN whether a digital licence supplement is any more damaging to broadcast ecology than an across-the-board increase in the basic licence fee. Even taking into account ITN's ambitious plans for digital expansion, an unhypothecated rise in the basic licence fee might prove damaging to ITN's core clients—and therefore to our core revenue and our ability to compete against the BBC—than the digital supplement.

— The Review Panel also recommends that revenue from a digital licence supplement "should broadly cover the costs of services to digital licence fee payers". ITN strongly believes that any (potential) increase in revenues—regardless of how these are raised—should be hypothecated to those additional services the BBC seeks to launch and specifically accounted for in the Corporation's Annual Report. We believe this is essential both to provide public interest legitimacy to any new publicly funded service and as a necessary step in introducing transparency in the BBC's accounting procedures. We therefore believe the Review Panel's recommendation is insufficiently rigorous.

— Whilst ITN acknowledges the crucial part that the BBC has played in educating the public about digital broadcasting and the Internet, we have very grave reservations about the Corporation using additional funds for this purpose. Working on the basis that "one man's education campaign is another man's marketing strategy", we share the concerns of many commercial operators—and of the British Internet Publishers Alliance—that the BBC's promotion of its new digital channels and BBC Online is already a borderline case of market distortion. ITN therefore opposes this final recommendation and we believe that the BBC's promotional campaigns—together with the broader public debate about digital television and the Internet—will be more than adequate drivers of public education. But if government or Parliament are anxious to further promote public education about these important developments, then they should identify public funds for the purpose.

27. ITN supports a significant proportion of the Review Panel's recommendations in Chapter Two. Our principle concerns relate less to the suggested mechanisms for raising supplementary revenue, and more to how any additional revenue can be raised before setting out clear criteria for defining new services for which the BBC should seek funding.

CHAPTER 3: ACHIEVING A LEVEL PLAYING FIELD

28. ITN believes that the Review Panel's recommendations in Chapter Three of their Report represent a quantum leap forward in the debate about the BBC's transparency and accountability. ITN supports all of the recommendations, and we have some specific comments to the Select Committee about each one.

29. As a privately owned company with a wide range of commercial activities both in Britain and overseas, ITN can have no objection to the BBC selling a 49 per cent stake in BBC Worldwide to secure effective private involvement and better exploit its assets. ITN shares the view of the Review Panel that this is likely to increase the "return to the licence fee payer"[100]. However, our support is based on the assumption that government and Parliament will address existing concerns about the transparency of the BBC's commercial operations and enforce the Review Panel's other recommendations in Chapter Three.

30. ITN is "agnostic" about the proposed sale of BBC Resources. Whilst it represents an innovative approach to raising additional resources for the Corporation, BBC Resources still plays an important part in equipping individuals with important skills and training for careers across broadcasting and production. In effectively privatising BBC Resources, government and Parliament should ensure that safeguards are put in place to secure this important function into the digital environment. To this extent, ITN supports the Review Panel's view that "realising the value of Resources' assets will require detailed work, as the BBC's important craft base and therefore its creative capacity must not be undermined."[101]

31. The suggestion that proposals for new BBC public services should be published and debated in full (prior to launch) is the single most important recommendation in the Review Panel's Report. This proposal should be implemented without delay. However, if this consultation process is to deliver public interest legitimacy to each of the BBC's proposed new services, ITN strongly believes that the following conditions have to be met:

— Any public consultation should be conducted by an independent "arbiter" from government or Parliament, an appropriate regulatory body or a transparently appointed ad hoc Advisory Committee. A "consultation" along the lines of "BBC: 2000 and Beyond"—where the BBC effectively manipulates both the question posed and the answer received—has so many flaws that it is likely to undermine public interest legitimacy rather than enhance it.

— The consultation should be as wide and inclusive as possible, incorporating the views of consumers, consumer groups, commercial operators and—where appropriate—regulators, NGOs, Parliament and government departments.

— The BBC should present specific costings for each new service to allow the Secretary of State, Parliament, the nominated "arbiter" and respondents to the public consultation an opportunity to weigh costs against benefits.

— The BBC should be compelled to incorporate specific, comprehensive and measurable public service obligations into each new proposal.

32. ITN also supports the recommendation that all of the BBC's new services be subject to a comprehensive review to assess whether they continue to fulfil a public service remit. However, we are strongly opposed to a delay until Charter Renewal in 2006. By this time some of the BBC's recently launched digital offerings would have been operating for more than eight years, without any assessment either of their distortions on the development of the commercial market, or their broader public service legitimacy. Long-term delays of this kind are completely inappropriate for digital and new media markets, which are often developing daily and weekly rather than annually. We believe it is intellectually and practically inconsistent to apply a "public interest test" to proposed BBC services, without applying the same test to new services that the BBC has only recently launched.

33. We wholeheartedly endorse the recommendation that the BBC should demonstrate in its Annual Report, for each of its established services, that it is continuing to fulfil its public service obligations. However, ITN believe this recommendation should be strengthened and that each new services' public service obligations should be specifically measurable. It should also include a commitment for the BBC to detail the exact cost of operating each service. The BBC's current attempts to quantify the public service obligations of its main services in its Annual Report are completely inadequate— and essentially subjective.

34. ITN fully endorses the Review Panel's view that it is "essential that the BBC's commercial activities are conducted in ways that are fair to its competitors"[102]. The Report includes a number of recommendations to improve the transparency and accountability of the BBC's commercial operation, all of which we fully support. Specifically:

103

— The Panel has made two parallel recommendations about the role of the National Audit Office in ensuring the BBC complies with its fair trading policy and examining the transparency of the BBC's financial reporting. ITN has urged government to execute these recommendations as a matter of urgency. ITN believes government and Parliament should specifically reject the BBC's hostility to scrutiny from the National Audit Office and should make any potential increase in licence fee revenue conditional on external scrutiny of this kind.

— ITN welcomes the recommendation that the BBC should publish a quarterly complaints bulletin on fair trading and transparency and also welcomes the recommendation that the BBC use separate commercial auditors for fair trading from those which carry out the financial audit.

35. But ITN regrets that the role of the Board of Governors falls outside the Review Panel's remit. We firmly believe that true transparency between the BBC's public service and commercial operations, genuine accountability in seeking public interest legitimacy for its new and existing services, and the introduction of measurable and enforceable public service obligations to each of the BBC's public services can only take its full effect when independent external scrutiny is built into BBC governance (see commentary on Chapter 5, below). It is our hope that the Select Committee inquiry will have an opportunity to examine this specific issue with the rigour it merits.

CHAPTER 4—ACHIEVING FAIRNESS

36. ITN warmly welcomes the Review Panel's recommendations about the concessionary licence scheme and the implicit assumption that the licence fee should not be used as a tool of economic redistribution.

CHAPTER 5—ACHIEVING SUSTAINABILITY

37. ITN welcomes all of the recommendations outlined by the Review Panel in Chapter 5 and the broader analytical approach from which they have been developed.

38. In particular, we support the Panel's observation that the BBC's vision for its own digital future "require more concrete definition"[104]. The Panel is therefore right to conclude—in its first two recommendations—that the BBC "should define clearly the purposes of each [public] service"[105] and that "new public services should be tested through wider consultation"[106]. But we remain concerned about their timing and practical application, particularly if both the definition of purposes and consultation are drafted and managed exclusively by BBC management and the Board of Governors.

39. ITN also welcomes the recommendation that the Board of Governors should insist on clearer criteria "for what the BBC is doing"[107] and that the BBC's aspirations "require more concrete definition"[108].

40. However, ITN questions whether the BBC Board of Governors—as it is currently constituted—has the necessary structural independence and breadth of resource to execute and enforce this difficult task. The Board of Governors is currently funded direct from the BBC's budget, resourced by BBC staff and housed in the same building as BBC corporate management. ITN is sceptical about whether this allows the Governors to make the genuinely informed and independent assessment of all the BBC's public services necessary to fulfil this very broad recommendation. We believe that the Secretary of State should take immediate steps to establish a genuinely autonomous Board of Governors as a matter of some urgency. We do not believe that the necessary changes in staffing, accommodation and resource to create a genuinely arm's length relationship between regulator and regulated would require primary legislation. ITN would value the Select Committee's considered opinion about this specific issue.

41. The Review Panel recommends that—when the Charter is next reviewed—"consideration should be given to providing a clearer definition of the BBC's public service obligations in a way that can easily be translated into performance criteria for assessment under whatever regulatory arrangements apply post-Charter renewal."[109]. This recommendation appears to spring from the Panel's concern about a "lack of clarity"[110] in the BBC's strategy to extend its services into the digital and new media universe. ITN shares this concern and warmly welcomes the recommendation.

42 Similarly, ITN supports the Panel's recommendation that government amend the Royal Charter, so that scrutiny of the BBC's accounts and fair trading commitments by the National Audit Office can take place on a regular basis. This is likely to address many of our concerns about the BBC's transparency and accountability.

43. All of these recommendations appear to rely—at least in part—on the Panel's observation that "the privilege of controlling £3 billion of public money after 2006 requires a more formal criterion than exists today." But ITN cannot accept that the privilege of controlling £3 billion of public money in seven years time is any different from controlling £2.3 billion of public money in 1999. We believe it is this central question that the Government—and the Culture, Media and Sport Select Committee—now need to address.

44. ITN supports the vision of the BBC as a full service public service broadcaster. We also endorse the basic principles outlined by the BBC's in its own "service vision".

45. We have no objection—in principle—to an increase in licence fee income to facilitate the Corporation's expansion into the digital universe.

46. Moreover, the extensive recommendations made by the Review Panel in Chapter's Three and Five of their Report represent a major leap forward in the debate about the public policy framework within which the BBC's new and existing services will operate.

47. However, we believe the Panel has—in effect—"put the cart before the horse". For example, it recommends that all of the BBC's new digital services be properly defined and that they are subject to a much more rigorous consultation process before they are launched. Yet it seeks to pre-judge their outcome by recommending any unhypothecated increase in licence fee revenue to fund services whose public interest legitimacy has yet to be established.

48. ITN firmly believes that any additional funding for the BBC should be conditional on the implementation of all of the recommendations made in Chapter's Three and Five of the Report, together with proper structural, staffing and financial autonomy for the Board of Governors. We believe that this can be achieved without amendments to primary legislation, although a possible Communications Bill in 2002 would provide an additional opportunity for Parliament to address the BBC's framework of regulation and governance.

49. Based on these conditions, ITN believes the Corporation should be free to "bid" for revenues to fund proposed services that are fully costed and have specific and measurable public service obligations. If their public interest legitimacy is proved, the BBC should be able to access funding for each new service based on the costings submitted during the consultation process.

50. ITN therefore believes that the Panel's recommendation about the growth in BBC revenues in line with GDP should be seen as a maximum "cap", and that actual licence fee income should be dependent on the success of the Corporation in "bidding" for revenue on a service-by-service basis.

51. Any new services should—in the first instance—be funded by efficiency savings accounted for by the National Audit Office. But should additional funding prove necessary, ITN has no preference between a digital licence supplement or a rise in the basic licence fee, both of which pose problems for the ecology of broadcasting.

52. We reiterate our belief that—taken together and implemented simultaneously—the Review Panel's Report presents government and Parliament with a golden opportunity to broker a settlement between well-founded commercial concerns about the framework within which the BBC currently operates and the Corporation's equally legitimate ambitions to extend its services into the digital universe. We believe such a settlement is in the public interest and urge the Select Committee to do all that it can to persuade government achieve this end.

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