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


Memorandum submitted by Artsworld Channels Ltd

  Artsworld Channels Ltd is an independent UK company owned by British corporate and private shareholders. Its current services comprise Artsworld, a digital subscription television channel, and, an Internet portal, both devoted to the arts. Artsworld's programmes comprise performances of classical music, opera, dance, jazz and world music, drama and films; features or documentaries on these subjects as well as the visual arts, literature, design architecture, and theatre; and topical reviews, previews and advance information about the arts throughout Britain. Further details of its programmes are attached[12]


  The White Paper's proposals rest on the premise that there are only two sectors in British television. The first of these is "public service broadcasting", represented principally by the BBC but also by the regulated programme output of ITV, C4, C5 and S4C. The second sector comprises all other broadcasters, ranging from Artsworld and Discovery to ITN and Sky News, lumped together under the pejorative description "purely commercial broadcasters". Since commercial television has now been with us for nearly 50 years, and has regularly proved the equal of the BBC in creativity, integrity and popularity, this distinction no longer serves any valid purpose.

  The Role of Independent Commercial Broadcasters

  Unacknowledged by the White Paper, there are in fact now three distinct sectors in British television, all of them providing public services:

  There is publicly-funded television, providing public services financed by direct taxation via the licence fee, and represented at present only by the BBC. The proper description for this entirely distinct sector is not "public service broadcasting" but "publicly-funded broadcasting".

  There is commercial television, providing public services without any public subsidy, but using scarce public resources of spectrum for their transmission, and being required by regulation to show certain categories of programme. This sector is represented by ITV, Channel 4, Channel 5 and S4C. Rather than "public service broadcasting", it could more correctly be called "commercial public broadcasting". It may be noted that much of the output of these broadcasters in prime viewing time consists of programmes that are outside the mandated "public service" categories defined by the White Paper.

  Finally there is commercial television which provides public services using private capital and other sources of revenue, pays commercial providers for transmission, and is entirely independent of any form of public money or resource. This is "independent commercial broadcasting". It is this sector that contains the great majority of channels available on digital television, and the principal systems on which they are transmitted. Its channels are entirely analogous to commercial publishing, providing public services at a reasonable cost to their users and at no cost to the taxpayer. Artsworld Channels Ltd is just one such independent commercial broadcaster among many. Like many others, its output consists wholly of programmes that fall within the White Paper's "public service" categories.

Driving digital television growth

  These independent commercial channels, and not the publicly-funded nor the commercial public broadcasters, are providing the increased programme choice so valued by the users of digital television. Their existence, together with the high subsidies to digital receiving equipment invested and risked by BSkyB and ONdigital, has driven the rapid growth of domestic digital television in the last two years and will continue to do so.

  The virtually unlimited capacity of digital satellite and cable transmission, and improvements in technology which have lowered costs of both transmission and production, have ushered in a new wave of these independent commercial broadcasters. They are already offering an immense variety of programmes for British viewers, and in the next five years could be providing a further explosion of new and valuable channels and services. (A few may provide unmitigated dross, but the essence of such channels is that people are not forced to pay for them nor watch them.) These channels and their transmission systems are the creators, and will be the sustainers, of the digital broadcasting revolution. They are the epitome of the "dynamic and competitive communications market" that the White Paper claims as one of its principal goals.

The pariahs of the White Paper

  Yet the reaction of DCMS and, even more surprisingly, of DTI to the emergence of these new broadcasters is to treat them as pariahs. Instead of recognising that they can add to British broadcasting the very diversity and plurality that the White Paper seeks, and at no cost to the taxpayer, the Government aims to ensure that they face unequal competition and hostile regulation.

    The White Paper's fundamental position is that "public service broadcasting will continue to have a key role to play in the digital future, potentially an even more important role than it has now". This may be true, though the evidence provided to support the latter assertion is flimsy and subjective. [White Paper 5.3.] But since this fundamental statement is employed to justify everything from inequalities in regulation to expansion of BBC services, it is worth testing.

  Using the White Paper's definitions, the statement means two different things simultaneously. It means that broadcasting by the BBC, funded by the licence fee, will have "potentially an even more important role than it has now", which suggests substantial expansion. It means also that the regulated content of commercial broadcasting will have the same "potentially even more important role". Between these heavy potential importances, something must inevitably be crushed into a position of no consequence. That "something" is independent commercial broadcasting.

  Whether independent commercial channels show the arts, news, education, entertainment or sport, the White Paper's proposals will place them deliberately at several major competitive disadvantages:

    Existing and new BBC channels, ITV, Channel 4, Channel 5 and S4C and other channels selected by Government, will be designated as "must carry" channels on all present and future digital platforms. Independent commercial channels are excluded from this provision. [White Paper 3.4.]

  This is a distortion of the market which will create unfair competition for existing independent channels and form a barrier to entry for new ones, raising the cost of platform access to deterrent levels for many of them and preventing it entirely for others.

    All these existing channels, and future channels selected by Government, will be given special prominence on electronic programme guides. Independent channels are excluded from this provision. [White Paper 3.5.]

  This is a distortion of the market, through which Government will try to determine which channels people should watch by promoting some and reducing the visibility of others. Existing independent channels and the development of new ones will suffer.

  It should be noted particularly that the mandated "public service" elements of ITV and C5 (summarised by the White Paper as news, educational material, children's programmes, religious programmes and coverage of arts, science, current affairs and international issues) are already largely absent from prime viewing time and are likely to reduce further. [White Paper 5.6 and 5.7.]

  Independent channels which consist wholly of such desirable categories of programme—for example arts or science or news channels—show far more of these "public service" programmes in prime viewing time across the week and across the year. Despite this, they are excluded from the must-carry and EPG-prominence provisions afforded to their competitors. This holds out the absurd prospect of Channel 5's prime time fare of soap operas, game shows, crime and cookery being given "public service" privileges, while independent channels consisting wholly of education or arts or science or children's programmes are denied them.

    Public money in the form of the licence fee can continue to be used to introduce new services which may duplicate the output of those that exist, and prevent the creation of others that could be provided without taxation, Public money in the form of the Channel 4 surplus can continue to be used to subsidise services which fall outside its remit. Both can compete unfairly with independent channels by using their main channels to promote new services with excessive expenditure. [White Paper 5.8.]

    No safeguards against this anti-competitive behaviour are provided in the White Paper.

Reckless competition by the BBC

  In addition to giving these competitive advantages to a minority of selected broadcasters, regulation of competing services will be unequal and lacking in transparency. Although subject to a degree of regulation by OFCOM, the BBC will continue in most important respects to enjoy self-regulation by its Board of Governors—whom the public and many in Parliament now find it hard to distinguish from its Board of Management. All other broadcasters will be subject fully to OFCOM regulation, without any commensurate self-regulatory advantage. [White Paper 8.]

  Few would object to the BBC Governors maintaining their historic role of upholding editorial integrity and independence. But none of the changes in BBC accountability and transparency that have previously been recommended by the Culture, Media and Sport Committee, by the Davies Panel and by the Committee of Public Accounts is to be introduced.

  The impact of this lack of transparency and accountability on the other channels is potentially severe. Without proper scrutiny the BBC can act recklessly with public money in its pursuit of competitive advantage. In particular, if given permission to extend its present range of channels, it can as a matter of policy determine to do the following:

    —  Outbid competitors for programme rights and costs, without regard to market prices or reasonable spending limits.

    —  Outspend competitors with profligate promotion and advertising.

    —  Target existing niche commercial channels by focussing content and promotion in identical genres—then, once damage is done, changing aim to the next target.

    —  Refuse to sell programmes at market prices to commercial channels, even when BBC channels do not require them.

    —  Prevent commercial channels having access to BBC-owned information providers (eg magazines, teletext, Internet programme guides) which should have a duty to be neutral suppliers of public information.

  Some of these practices already take place and since the BBC's Director General has now outlined its strategy as one of direct commercial competition rather than complementary provision of services, this kind of excessive spending and unfair competition must become a likelihood rather than a possibility. Even the possibility should be ruled out by the introduction of equal regulation and full accountability.

Ambition v financial control

  It is notable that recent BBC proposals for new channels require massively greater expenditure than would or could be employed by any commercial channel. This is on the grounds (according to the BBC's proposals submitted to DCMS) that the BBC's channels are "more ambitious" than cited examples including Artsworld and the Performance Channel. As the Culture, Media and Sport Committee concluded in its Third Report, "The BBC has shown a disinclination to view its budget as a guide to the scope of its digital provision, preferring instead to advance an enormously ambitious vision".

  Ambition is not confined to the BBC, but in other broadcasters it is allied to realistic financial controls that appear absent where the BBC's use of licence fee income is concerned. The result is that a publicly-funded BBC, with a policy of beating the opposition at all costs and no regulation to control its expenditure, can enter markets created by commercial broadcasters and use its financial muscle to dominate them. The White Paper legitimises this behaviour, which the Government would regard as anti-competitive in any other sector.

The reality of "digital citizenship"

  To justify maintaining the BBC's unregulated, unaccountable, dominant market position and limitless ambition, the White Paper calls in aid the concept of "digital citizenship". In the words of the Secretary of State for Culture, Media and Sport, digital citizenship incorporates the provision via digital television of impartial news and current affairs, education for children and adults, creative and cultural activity, religious or humanist experience, and access to common knowledge, including a national understanding of Britain "in all its cultural, ethnic, local, regional and national variety" and in a British framework. It is a high ideal and worthy of pursuit.

  The White Paper's mistake is to believe that in a multi-channel world this ideal can be achieved by creating dominance for a single publicly-funded broadcaster. There are already digital citizens, in more than a quarter of Britain's homes. They exercise their right to choose freely among the channels and programmes offered by privately-funded and publicly-funded services. They choose to watch the arts on Artsworld or BBC or Channel 4. They choose to watch documentaries on The History Channel or Discovery or BBC Knowledge. Despite the fact that they are forced to pay for publicly-funded television, they choose to pay for a wide variety of alternatives.

  This is the reality of digital citizenship. The digital city is not yet built in its entirety, but its citizens do not wish to go back to a place where a very few programme controllers dictate their viewing, and the voices of a narrow range of opinion (including the Government's of whatever hue) command the screen.

Pay v "free"

  The Government disparages independent commercial channels because people choose to pay for them (not "have to" pay for them as the White Paper suggests—that applies only to the licence fee). It makes much of the "free" services of the BBC, created with £3 billion of compulsory taxation. It invokes that invisible minority of people who "cannot afford to pay" for digital services they want to watch, as a reason for supporting the wide ambitions of the BBC. No evidence is supplied about the numbers of people who cannot afford to pay for their desired digital services, though there will undoubtedly be a small number in that category.

  What the White Paper fails to do is make any assessment of their numbers or their wishes, or to assess the alternative ways of providing them with services they require, and the relative costs thereof to taxpayers and consumers. Nor does it acknowledge the declining cost to the consumer in real terms of digital channel provision by commercial services, or the consistent results of research which shows that current digital customers in all income groups regard their subscriptions as good value.

  Instead of its thesis that "purely commercial channels" are to be disregarded in the digital consumer world and the digital economy, the Government should be promoting them in parallel with other providers of public broadcasting services. A home which can choose from a thriving, high-quality, good-value range of commercial channels, complemented but not duplicated by programmes from publicly-funded and commercial public broadcasters, will fulfil the social, cultural and economic criteria that DCMS and DTI have set out.

Diversity, plurality and fairness

  The White Paper declares correctly that "Fostering competition is the first step to promoting plurality in the media" [White Paper 4.2.6]; that "we must ensure that the new technologies deliver not just more channels, but more choice and diverse services" [White Paper 1.2.8]; and that "developing and sustaining a dynamic market is one of the Government's key objectives" [White Paper 2.2.1].

  None of these goals is achievable unless competition is fair between the three sectors of UK broadcasting.

  The publicly-funded sector, ie the BBC, should provide services that are complementary to those of other broadcasters and which cannot be provided without the direct taxation of the licence fee. It should be regulated in precisely the same way as other broadcasters. Its costs should be independently monitored to prevent excessive expenditure and waste. It should not be financed to enter markets already catered for by either of the commercial sectors, nor to create aggressive and dominant market positions. It is not free, but paid for compulsorily by all regardless of their use of it or need of it. It should therefore be openly accountable to those who pay for it.

  The commercial public sector, comprising ITV, C4, C5 and S4C, should receive no privileges that other commercial companies do not. Such regulated element of their output as will remain after OFCOM review should be regarded as the appropriate price of using public spectrum, and should not entitle the sector in addition to favourable treatment over other commercial broadcasters. Channels created by the sector that are not commercial public channels should be separated entirely and transparently from their "parent" organisations, and become part of the independent commercial sector in all respects.

  The independent commercial sector should be regulated in a way that encourages its growth and development. It should not be treated by Government as a weak, tertiary tier of digital broadcasting, but as de facto the principal driver and energiser of digital take-up by consumers. As such it should be protected from unfair competition and from excessive dominance by publicly-funded and commercial public broadcasting. Where the independent commercial sector is providing channels that consist wholly of "public service" categories of programme, they should be able to grow, develop and increase their range and their reach without publicly-financed intervention to prevent them.

  The White Paper suggests that "The end of spectrum scarcity does not mean that broadcasting will automatically become a perfectly functioning market" [White Paper 5.3.5]. This is true. For many years there will be a need for publicly-financed broadcasting which, in the recent words of the Chairman of the BBC Governors before the Culture, Media and Sport Committee, "remedies the deficiencies of the market". But the BBC should not create those market deficiencies by using its dominant power to crush new initiatives, and the Government should not permit them to do so.

February 2001

12   Not printed. Back

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