Select Committee on Culture, Media and Sport Minutes of Evidence

Memorandum submitted by Channel 4

  Channel 4 welcomes this opportunity to put before the Select Committee its principal views on the Government's White Paper, A New Future for Communications. In this submission, we concentrate on that part of the Committee's inquiry concerned with the future regulation of public service broadcasting.

  Channel 4 has welcomed the White Paper for setting out a clear framework for how the converging communications industries should be regulated in the years ahead. In particular, Channel 4 welcomes the plans to create a single regulator, which should bring greater coherence and clear-sightedness to the ways the communications industries develop.

  We welcome the strong endorsement of public service broadcasting and the assertion that it may have an even more important role in the multi-platform multi-channel future than it has now. We fully support the White Paper's commitment to must carry/must offer provisions and to securing due prominence for public service channels in multi-channel environments.


  The White Paper recognises that the defining elements of Channel 4's public service remit are to provide innovative and distinctive programming and to provide both complementarity and competition to the BBC and ITV—a remit cast in terms of not compensating for failures in the commercial market but of catalysing change and pioneering new services to reach new communities of viewers. The Channel's role in fostering the development of the creative economy should also be recognised as part of its remit. The Channel believes that the new regulatory structure will enable its remit to be interpreted in the more positive light that the White Paper recommends.

  Channel 4 strongly welcomes the White Paper's rejection of privatisation. Channel 4's success depends on its unique status as a statutory corporation funded entirely by commercial revenues. This structure has enabled us to provide a rich and varied schedule, for some programmes to cross-subsidise others, for creative risks to be taken and for innovative talent to be nurtured. All our income is directed towards providing services for viewers, as we do not have to provide dividends for shareholders; the money to pay shareholders would have to be found by diminishing the mix of programming we offer. By putting commercial rather than editorial objectives at the heart of Channel 4, privatisation would deprive the channel of the central reason for its success. Regulators and independent commentators alike have been of the view that policing the remit within a shareholder-driven company would be a practical impossibility. We agree and putting Channel 4 in the private sector would mean the BBC would lose the benefits of direct public service competition.

  The White Paper says "the framework for ensuring Channel 4's new services support its remit and are not unfairly subsidised will be clarified". Like every other major broadcaster, we recognise that the development of a multi-channel, multi-platform set of services is the only viable creative strategy of the future. While some of our new services, mainly in the field of education, are likely to be dependent on cross-subsidy for the foreseeable future, others such as E4 are planned not only to be self-financing, but to generate net revenues for the channel within a specified period.

  In a fluid and fragmenting media world we do not believe we can rely on advertising alone to guarantee an adequate and secure revenue source for the Channel. For the Channel to fulfil its existing public service remit, and in addition provide the enhanced range of services that the White Paper envisages, it must ensure it can raise the revenues it needs. There is a risk that if legitimate medium term investments designed to safeguard the Channel's financial future and extend the range of services it offers are characterised as "unfair subsidy", then Channel 4 could be gradually boxed into a corner where it will wither and die.


  We welcome the commitment to a single regulator and the recognition that such a regulator will need delegated powers to operate effectively in a fast-moving and fluid media environment.

  We believe the proposals for a three-tier regulatory structure hold out the possibility of a genuinely exciting new chapter in UK broadcasting. The structure gives clear expression to the reasons why, how and where regulation will apply. The logic of the White Paper is that the close and sometimes mechanistic management of regulation for broadcasters is no longer desirable or practical. The underlying theme of many of the government's statements has been less regulation, more responsibility—a sentiment that we strongly endorse.

  In this context we believe it makes sense for some fixed requirements on content and output to be regulated at the first and second tiers while some variable requirements are self-imposed and agreed with the regulator at the third tier.

  We believe that the best way for Channel 4 to ensure that it meets its remit requirements of innovation, distinctiveness, competition and complementarity is through the Channel 4 Board being empowered to make appropriate strategic decisions to give effect to the remit. We envisage the Board taking greater responsibility for defining how the Channel's remit should be interpreted, giving clear targets for its implementation and monitoring how well it is being achieved. The Board will report to the regulator on how it is discharging its responsibility. We believe that this will provide a more creative approach to steering the remit than some of the traditional, more mechanistic forms of "box ticking".

  As far as the second tier is concerned, we believe that all public service broadcasters should meet certain key conditions. Channel 4 remains committed to ensuring a large majority of its programmes are original productions, to fulfilling its regional production targets, and to maintaining news and current affairs in peak time. The Channel believes that the health of the independent production sector will be secured by maintaining the system of independent production quotas.

  The proposals for maintaining content standards through bringing together the best aspects of existing programme codes into a single form of content regulation at the first tier are to be welcomed. However, we are concerned to have a clearer understanding of what the White Paper means by generally accepted community standards, especially in light of its recognition that viewers are discriminating and have different expectations of different channels and platforms at different times of the day.

  We are disappointed that all major content providers are not to be set a minimum commitment to training, along the lines of the Channel's own requirement to invest at least half of one percent of qualifying revenue. In a fast changing industry as heavily dependent on creative and technical talent as our own, we regard the failure to set any quantifiable targets for training investment as a sadly wasted opportunity.

  Channel 4 is committed to increasing the proportion of its programmes that are subtitled for the deaf and hard of hearing, and to meeting its commitments to provide signing and audio description on its digital services.


  Channel 4 believes the BBC should not be exempt from many of the provisions of other public service broadcasters, and that an opportunity to look at all of public service broadcasting together within the context of the whole communications industry has been missed. We do not believe it is in the interests of the whole industry, of public service broadcasting in general or of the BBC itself, for the BBC to maintain a privileged position half-way outside OFCOM's remit.

  We strongly endorse the need for careful consideration of new BBC services. While Channel 4's public service role is to be the main force for innovation, creativity and diversity in British media, the primary responsibility of the BBC, funded annually by more than £2 billion of licence fee income, must be to address the issues of market failure.

  We endorse ITV's continuing commitment to regional programming as a distinctive aspect of its public service role. However, we remain concerned, notwithstanding the need to comply with competition law, of the effects on the airtime sales market of greenlighting ITV consolidation in the way the White Paper proposes. We do not see how the benefits claimed for such a consolidation outweigh these concerns. It is vital that a competitive advertising sales market is maintained.


  Public service broadcasting has served the UK well, and its strengths should be preserved. Channel 4 has played a key role in the development of public service broadcasting, and we are pleased that the White Paper is so supportive of our achievements. We believe that if the Government is prepared to be as supportive in the future, Channel 4 will continue to enjoy success as a quite unique public service broadcaster.

February 2001

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