Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 640 - 658)



  640. Can I put a third potential problem to you? You mentioned 20 per cent of households. That is not 20 per cent of television sets. In a funny sort of way, as digital sets are sold more widely, it exacerbates the problems of switch-off because analogue sets are being put into the children's room or the kitchen. Ironically, people are probably going to have more analogue sets lying around somewhere else in the house and suddenly the day is going to come when they are going to be told that those sets are useless to them. It is a common misconception.
  (Mr Smith) The average number of television sets per household is now, I think I am right in saying, approaching three.

  641. And rising fast, I would think.
  (Mr Smith) What tends to happen is that as people buy a new television set, instead of throwing out an old one, they move the old one to somewhere else in the home. That is one of the issues that we need to bear in mind as we move towards contemplating digital switchover. One other very interesting thing that appears to be happening is that the figures show that, for households with children, the take-up of digital television is much greater and much faster than among households more generally, which says something about some of the reasons this drive is happening.

  642. It is still a problem though that very often the children are going to be watching an analogue set and they are going to want a new one too.
  (Ms Hewitt) I want to add, in a sense, a third barrier here which is the problem of many consumers not actually understanding the different sets that are available. That is not surprising because it is changing very fast. There is a lot of confusion and the labelling is often very unclear. We have been working with the industry to look at how we can get much clearer labelling and much better guidance to consumers about the difference between an integrated digital television set which they can simply plug and play and an analogue set which may be a very high value, wide screen analogue set, which nonetheless needs a converter box to make it work digitally.

  643. That was the point I was seeking to make. In the article which the Chairman referred to in the Financial Times, you say that you are making steady progress towards switch-off between 2006 and 2010. Whilst business I am sure would welcome that, as a politician, I admire your optimism because somewhere down the line there are going to be very difficult choices for politicians to name a date for switch-off. Would you like to take us a little further through your thoughts as to how it has progressed? For instance, do you foresee a situation where some form of subsidy may be needed to entice people to change over?
  (Mr Smith) For reasons that I spoke of in answer to Mr Wyatt earlier on, I would not want to speculate at this stage on that issue. However, progress will ultimately depend on two things. The first is how rapidly and how far the price of either a set-top box or the added price for an integrated digital set falls. At the moment, those prices are high and it is of little surprise, given those prices, that many consumers have decided not to make a switch unless they are prepared to go for the subscription option at present. Those prices will come down. This is an inevitable feature of all markets of this kind, but what we do not know at this stage is how rapid that fall is going to be or what the bottom point of it is likely to be. That is the first imponderable and it is a very important one. The second task we have is making sure that the digital signal is available everywhere. At the moment, digital terrestrial signals are available to somewhere between 60 and 70 per cent of the population. That will over the course of the next year or so increase, but there will be a portion of the population, probably round about ten per cent—we do not know the exact figure as yet—that will not be able to be covered sensibly or affordably by digital terrestrial television. We have to find the right means of getting digital signals to that final ten per cent before we can take the steps towards setting a date.

  644. Could I deal with one other completely different topic in the White Paper briefly, which is the section that deals with the must carry regulations, the carriage of public service television on all platforms. We had quite a lot of evidence from the terrestrial broadcasters in particular in the last couple of weeks about the conditional access charges which Sky levy on access to their platform. ITV told us that the reason they are not on the Sky platform is that they estimate it will cost them £20 million on the current rate card. The BBC would not give us a number, but told us it was substantially less than £20 million but they would let us know in confidence what it was. It was an issue which I had not really grasped before and it did surprise me that, for instance, I am a cable customer paying a licence fee, effectively helping to subsidise Sky's operation through my licence fee; whereas my cable supplier or indeed any other digital terrestrial supplier is not able to levy that same amount. Is this something you are concerned about?
  (Mr Smith) It is certainly an issue that I am concerned about and indeed I would very much hope that ITV would make itself available on fair and reasonable terms to Sky digital subscribers at an early date. However, the crucial question of what those terms should be is something that is partly a commercial matter up to the two organisations; it is partly also a matter for the regulators and for Oftel in particular. When the BBC arrangement was reached with Sky, as far as I understand it—and obviously this was a matter for the regulator, not for me—Oftel were quite strongly involved in assisting the two companies to come to a resolution. I would hope that they might be willing to make their good offices available again.

  645. I was not in any way decrying Sky's right to run a business and to make a profit but it seemed to me there were two anomalies. The first is the one you have highlighted that ITV are not on the Sky digital platform, but the second is that Sky's competitors effectively, in providing a platform, do not have access to that same availability for charging. If there is going to be a commercial arrangement, surely it should be the same for everybody?
  (Mr Smith) As far as I understand it, in relation to the BBC provision, the basis on which a resolution was eventually reached was that the charge would reflect the actual costs to Sky of carrying the service. It was an arrangement based on an assessment of cost rather than an assessment of profit. That is an issue that you would need to explore further with the parties involved because of course I was not party to that arrangement.


  646. Your exchanges with Mr Faber and questions that Mr Faber has asked at previous sittings of this Committee do illustrate the confusion that is liable to arise in the mind of the householder, the individual who either wants to subscribe or simply to have access to digital television or to get a new set and the capabilities of the new sets. For example, Mr Faber a short while ago asked ONdigital about the availability of how many sets of ONdigital with one ONdigital box. Mr Prebble explained one box, one set. In the case of Sky Television, that simply is not so. You get one box and you can watch on any set in the house, on the same channel, but in the case of ONdigital you cannot even do that. Your explanation has demonstrated that people may be confused about that as well, though you can watch on one set without having all the sets on. There is confusion about that. There is confusion too about how to gain access to digital television. You said some people may not be aware that they do not have to subscribe, either to Sky Digital or ONdigital or cable, in order to get the free-to-air channels. How are people to know how to set about that? If you are a subscriber to Sky TV, you only have to pick up the phone and you can get your digital subscription. If you want to subscribe to ONdigital, again you only have to pick up the phone. What is more, both of them have loss leading offers to entice people, which is a justifiable business prerogative. If a consumer in the market comes to me and says, "What do I do to get the BBC channels and, say, ITV2?" I would not know what to say, except, "Go to your dealer". Presumably they would have to get a box. Maybe the box would cost them a lot of money and maybe that might make it more attractive to subscribe to one of these services which come over a wide variety of channels. Furthermore—I am sorry this question is so long, but the situation is so complicated—in obtaining a set what do they do? If one goes into Dixons, an organisation with which I have dealings and which I respect, with the greatest possible respect to Dixons, they are going to want to sell you what is of greatest commercial advantage to them. That is what they are in business for. They have very good salespeople who are very knowledgeable and I am sure totally scrupulous. Nevertheless, they are going to guide you to what is most advantageous for their commercial organisation. If they were not, it would not be worth Dixons or some other organisation employing them. There is enormous confusion because there are so many choices. The man or woman in the street simply does not have the expertise. Why should they? They have lots of other things to do in their lives. We put this to some of our witnesses earlier and to my surprise what they suggested is that the Government ought to provide the plain man's or woman's guide to how to set about getting the equipment and making the choices. I do not believe in the nanny state at all; I am really New Labour. What can the Government do to assist people in making these choices which are important and sometimes very expensive?
  (Mr Smith) I shall try to answer that first, Chairman, and then Patricia may want to say a word or two about labelling and customer information. You are absolutely right to identify a problem. One of the problems is not so much that sales assistants in shops might conceivably want to steer the customer in a particular direction. The problem quite often is that the level of confusion in the mind of the sales assistant is as great as it is in the mind of the customer. So there is a very real problem. We would like to proceed in all of this by a consensus approach across the whole industry, including the broadcasters, the manufacturers and the retailers, along with Government. I do not think this is something on which the Government alone should take action and issue guidance. The Government, I think, does have a role to play, in partnership with the rest of the industry. We have been discussing this with the rest of the industry. There is broad agreement—which in itself is remarkable, because we are talking about some fierce competitors here—about the types of messages that need to be put across. What we have yet to determine is the best way in which to do so, and I think there are two ways that we need to press the industry very hard on this. The first is making a very simple leaflet giving guidance about the real choices that people have available at the point of sale, so that when a customer is going into a store and does not know what the rich variety of options actually is, there is something there that is easy to read and understand, that will provide him with the facts. The second is to persuade the broadcasters to use their unrivalled access to the audience to begin to demystify this whole area as well. Those are two areas on which we are, as I say, in discussion with the rest of the industry, and I would certainly hope to reach conclusions with them as rapidly as possible. Patricia, are we doing other things as well?
  (Ms Hewitt) Can I add to that that the third element in the mix is proper labelling of sets. I recently had the experience as a consumer of having my main television set at home fall to pieces, so I went out, with the children of course, to find a new one. Fortunately, I knew what I was looking for, which was an integrated digital television set, but I was only able to get it and get a wide-screen integrated digital television set at the excellent price of £399, by reading very, very small print in, as it happens, the Argos brochure. So it was by the combination of just about being able to decipher the print and knowing what to ask for, and then finding one helpful assistant who knew and actually understood the technology, that I was able to get, reasonably affordably, the set that I wanted and which would meet the needs of many—not all, but many—of our constituents. The labelling is not adequate. Some of the integrated digital television sets carry a DVB label, but not all of them do, and in any case at the moment neither the consumer nor sometimes the marketing/retail assistant knows what the DVB label actually means, so getting that kitemark and then getting it marketed to consumers, particularly by the broadcasters and backed up by a set of clear messages from Government, is absolutely crucial.

  Chairman: As we Jews would say, mazel tov on your bargain!

  Mrs Organ: Also new Labour shops in Argos not in Currys.

  Chairman: If you do not know what to ask, who is going to know what to ask? I am thinking of all your constituents and the rest of our constituents round this table. I shall call Mr Keen.

Mr Keen

  647. I would like to say for everybody's benefit that we are not sponsored by Argos, Currys and Dixons. Perhaps I should say as a Labour Member, we ought to mention the Co-Op. You have made a great point this afternoon about joined-up working between departments. That was highlighted a short while ago when Patricia Hewitt got to the end of a long list of public authority buildings that were going to have the broadband in several years like, say, police stations, and you lent across, Secretary of State, and whispered what I thought at first was "public lavatories". It gave me this wonderful nostalgic memory of dad with his Daily Herald and packet of Woodbines, and I could picture that, but I realise that you actually said "public libraries". Does it not really show the real need for sub-titling which you have already made a commitment to pursue? Could I come on seriously, though, to the BBC. You did tell the House of Commons a year ago, Secretary of State, that the public service role of the Governors of the BBC would be reviewed in the White Paper, but the public service role has not really had too much of a mention in the White Paper, has it, in detail?
  (Mr Smith) The White Paper is very strong on its upholding of the need for public service broadcasting into the future, and seeing it as an essential part of the broadcasting landscape, especially as we move towards a multi-channel environment. We are very clear in the White Paper about the role that the BBC in particular has to play as a benchmark of quality against which the rest of broadcasting has to be able to measure itself. There is also, on the web site version of the White Paper, an immediate link through to the Smith Institute speech on public service broadcasting, which I gave about five or six months ago, and which set out, as near as I have been able to do in the course of the past year or so, a considered definition of public service broadcasting. What, however, we decided not to do was simply to say that the BBC should be answerable to OFCOM in its entirety for everything it does. The reason is the very particular role of the BBC as not just a public service broadcaster, but a broadcaster established by Parliament, subject to parliamentary Charter, with very special rules and a remit that Parliament has established, and also, of course, the BBC as the recipient of the licence fee income. That does put it into a different category from the rest of the broadcasting world. What we looked at were those aspects that we felt could entirely legitimately become subject to monitoring and regulation by OFCOM, and those aspects which we considered ought to remain in a special form. That is what we have set out in the White Paper. I should use this opportunity perhaps just to pick up a very small point which I swept up in an earlier answer. I may have inadvertently given the impression that impartiality was subject, in the case of the BBC, to regulation by OFCOM. That is not actually the case, because it is actually specified in the basic remit and the Charter of the BBC, therefore we have proposed that that should be left for the Governors to regulate.

  648. It is obviously in the Charter, but for the future do you not think that if OFCOM is going to take radio and everything else into one, is there not a case for OFCOM taking over the regulation of the BBC?
  (Mr Smith) There is a case for OFCOM to have some roles in relation to the BBC, and we set out proposals for that, such as being the final arbiter of complaints, for example. However, we do not think that it is sensible to throw out the public service structure of the BBC lock, stock and barrel. That is why, in relation to the upholding of the remit, we believe that the role of the Board of Governors should remain in place. The other point that is worth making is that OFCOM will have a very important role in commenting publicly, from time to time, on the overall state of public service broadcasting. It is expected, under the third tier of regulation that we set out here, that OFCOM will publish reports that look at aspects of public service broadcasting, how they are being achieved, not just by those on whose activities OFCOM have a direct remit, but the BBC as well. Those reports will be published, they will be available for public discussion, they will be available for parliamentary scrutiny, and I am absolutely certain that the Board of Governors of the BBC will wish to take account of what is in those reports, when reaching their decisions about the fulfilment of the remit of the BBC.

  649. How will you make sure that the new legislation following the White Paper will not be incompatible with the review of the BBC's Charter in 2006?
  (Mr Smith) The review of the Charter is, of course, a matter fully for Parliament to decide, and nothing that we say in the White Paper diminishes the role of Parliament in making those decisions at all.

  650. On a point which really is certainly not within the White Paper, unfortunately maybe, I had the opportunity yesterday of putting a point to the Chief Executive of the Daily Mail. His job is not just print media but broadcasting as well. I said to him was it not difficult to manage where broadcasting is strictly controlled, in that there is no possible dressing up of opinion as fact in the news, and yet the print media—and the Daily Mail is one of the culprits—certainly does that on a daily basis. I complimented him on his paper being a good read, but I said that his editors do dress up opinion as fact. Why cannot we control that, which is, after all, misleading the public? Why cannot we look at that, not in this White Paper, but in the future?
  (Mr Smith) We have taken, I think absolutely rightly, a very firm decision that we do not want to go even half a step down the road towards State control of print media. That is down the road towards censorship. It is not something that we wish to do, uncomfortable though that may be from time to time for us politicians.

  Mr Keen: Yes, it is nice to have the chance to make that point.

Ms Ward

  651. Can I come back, Secretary of State, to the issue of OFCOM and the BBC? You said that the BBC would set the benchmark as public service broadcaster, but do you not accept that actually it is very difficult for other broadcasters to be given a fair consideration against the BBC, when clearly they are not in the same ballpark?
  (Mr Smith) I think, particularly in terms of ITV and Channel 4, in much of the original programming that they make they can very strongly stand head to head in terms of quality with the BBC. However—and this is the point that I was trying, I think, to make—if we were to lose the BBC from that landscape, with its licence fee funding, then the pressure on the other broadcasters to equal them in terms of the degree of challenge and quality of the drama, or the comedy, or the sports coverage or whatever that they do, the pressure on them to perform well would be diminished, and I think that would be regrettable.

  652. If you accept that LWT or ITV and Channel 4 equal the BBC in terms of some of their output as a public service broadcaster, then surely it would be right that they should all be regulated by the same body?
  (Mr Smith) I would come back, I have to say, to the point that the BBC is in a different category because of its receipt of the licence fee income, because of the Parliamentary Charter under which it operates, because of its role as a public sector broadcaster rather than a public service broadcaster. It judges itself to be fiercely and robustly independent of political influence, and rightly so. All of those things, I think, lead to a conclusion that the model of economic regulation for the BBC done by OFCOM and by the competition policy rules and by fair trading rules, the fulfilment of the remit role of the BBC to be governed by the Board of Governors, and the balance to be sought in a number of other areas like complaints, like regional programming, like fulfilment of obligations of independent programming—those things can be regulated satisfactorily by OFCOM.

  653. Perhaps I can give you an example. Radio 2, certainly about ten years ago, was the sort of channel that my parents' generation and older people listened to. You turn on Radio 2 now and it is playing music which is very much designed to attract 25-plus, 25 to 40-year-olds. If you ask the BBC, they will define Radio 1 as being for 25 and under. Given that Radio 2 have decided to go for a market which is clearly not that which they used to provide for, and calls into question whether or not the 40-plus people are being provided for in the BBC sector now, do you not think that that shows that they are competing against other commercial channels and they are not being regulated to stop them doing that in the same way that those commercial channels are?
  (Mr Smith) I have to confess, not being a comprehensive listener to Radio 2, I am not in a personal position to judge the comments that you have made.

  654. Neither am I.
  (Mr Smith) I do know, however, that the audience for Radio 2 is growing quite substantially at the moment. You would need to ask the BBC about what research they have done, as I am sure they will have done, on the age breakdown, the geographical breakdown and so on of that audience. What I would say, however, is that where there are significant changes to the nature of a channel, either on radio or on television, in what the BBC are providing, then that is a matter which ultimately would have to be considered by the Secretary of State under the terms of the agreement that is necessary for any radical change of the nature of the particular channel which the BBC were proposing or implementing. So if it could be demonstrated that this was a completely different product, or even a very substantially different product, from the one that was in place under the Charter, say, ten years ago, then there would be a role for the Secretary of State to consider that, obviously carefully and taking evidence from the BBC and others.


  655. Secretary of State, I would like to ask you three questions. This sounds like "Any Questions". This is a question from Sylvia Harvey, Professor of Broadcasting Policy at Sheffield Hallam University, who faxed me a letter this afternoon, and our colleague Helen Jackson mentioned it to me as well. She has written to Sir Robin Biggam saying that she is concerned that the ITC is proposing to close all its regional offices plus its libraries. She is worried that it is planning to close its office in Sheffield on 31 March, and she is worried that the offices in Newcastle-upon-Tyne and Manchester are also going to be closed, though there is a plan to re-open an office in Manchester to cover the whole of the north of England. She is also very worried about the closure of the library which she says is the best "living archive" of broadcasting policy and regulation in the world. I do not know, Secretary of State, if you are aware of this, but clearly Professor Harvey is an authoritative person and would not have contacted me were she not seriously concerned about this matter.
  (Mr Smith) On the question of the ITC regional offices, this is something on which I have had some discussion with the ITC. As far as I understand it from them, their proposal is simply to close physical offices, but to maintain regional official representatives readily contactable within the region, and indeed they have said that their intention is that the regional focus of their work should increase rather than decrease. I will, however, ask them to write in detail to yourself and the Committee about the proposals that they have in place. I would be very worried if they were retreating from having a presence in and a concern for the regions, but that is, as far as what they have certainly said to me so far is concerned, not their intention. On the issue of the library, I think there are discussions under way about the possibility of the British Library being involved in the maintenance of the ITC's live archive.

  656. Yes, she does not like that. She says it will get lost, I think. This is the point. Knowing what the British Library has done to its Round Reading Room, I would not trust the British Library an inch.
  (Mr Smith) I would be interested to hear her detailed reasoning as to why the British Library, which already has a very remarkable sound archive, would not be the right repository, because obviously it is something that is at the moment under discussion. Her views would, I am sure, be extremely valuable in that discussion.

  657. What she says—I will not labour this—is that "To despatch" the ITC library's "collections to the British Library or elsewhere would be to destroy the vital link with the practice of contemporary regulation." In a sense, Secretary of State, it is rather like the rumours that went around Manchester about them making major changes to the Henry Watson Music Library, which fortunately turned out not to be the case. Anyhow, I have registered that. Secondly, Secretary of State, when you come to us recently to discuss the National Lottery, I put to you a lesson that we learned from our experience in meeting lottery commissions in the United States, namely the fact that they were public bodies which conducted their activities in public. Now we are dealing with another regulatory body. My guess is that if the ITC met in public, these were matters which it would be required to discuss—the matters I have just been putting to you—with great openness. Are you planning, when the legislation goes through to create OFCOM, for OFCOM to meet in public, except when it is dealing with matters of commercial confidentiality?
  (Mr Smith) The problem with both the ITC at the moment and OFCOM once it is established is, of course, that it will be dealing with a very large number of commercial issues, and I suspect that there will be quite a large number of occasions when it would have to maintain the commercial confidentiality of both the work that it was carrying out and its discussions with parts of the commercial landscape and any conclusions that it reached. However, with that proviso, it would certainly be my wish that OFCOM should be as open as it can be in the way in which it conducts its affairs, but always mindful of those practical difficulties and the fact that it will be dealing with a commercial world where there is a very active commercial competition and where there is a lot of information to which it would undoubtedly be privy that it would not be able to put into the public domain.

  658. You will understand that this Committee has got a particular interest in OFCOM, because it regards itself in a way as its progenitor. Finally, in your interview which was published in the Financial Times on Monday you spoke about three inquiries into the BBC: an external inquiry into its commercial activities and two inquiries within your department, one on BBC News 24 and two on BBC Online. Without stretching your patience, since I would like to close this meeting in six minutes, so that Mr Maxton can get his plane without missing anything, can you just tell us a little bit more about those inquiries, and also tell us what you would do or what you plan to do when the inquiries are concluded and report to you?
  (Mr Smith) These were in fact three initiatives which we announced at the time of our response to the Davies report. The first relates to the appointment of an eminent outside person to look very specifically at the fair trading provisions within the BBC and the very clear divide that needs to exist between the BBC's commercial operations and its licence-fee funded operations. In fact, I announced a couple of weeks ago that Professor Whish has agreed to take on that role and over the next few weeks will be undertaking that work for us. The other two initiatives that the article referred to were the provision that we announced at that time that once the new digital services of the BBC had been in place for a period, we would wish to conduct a review of how successfully or otherwise those digital services were fulfilling the promises which were originally made when they were started up and given permission to do so. We identified at the time—I think in part at the urging of yourselves, Chairman—that News 24 should probably be the first of those exercises to be undertaken. We also felt that it was appropriate to give News 24 at least a period to find its feet before conducting that inquiry, and also that in the immediate run-up to a general election—if that is what we are perhaps looking at in the next few months—it would not be a right and appropriate time to review a new service. If there is an election within the next few months, I would certainly have hoped that it would be high on the list of priorities for my Department to initiate after an election.

  Chairman: Secretary of State, thank you very much. You have wound up the inquiry with your customary frankness. We thank Patricia Hewitt too for coming before us and demonstrating her great knowledge of the issues. Thank you.

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