Memorandum submitted by ITN
1. INTRODUCTION
1.1 ITN welcomes the Committee's inquiry
on BBC Charter Review and is grateful for the opportunity to respond
to what will be an important examination of what the BBC should
be doing in future. We have a number of core concerns, in particular
relating to the scope and remit of the BBC, the development of
new services and governance and regulation.
1.2 ITN is the BBC's main competitor in
the provision of broadcast news in the UK. We compete predominantly
through our television news services for ITV, Channel 4 and Five.
For ITV, ITN produces national and international bulletins for
ITV1, the 24-hour ITV News Channel and the ITV regional London
news service. We produce Channel 4 News—both the News at
Noon and 7pm bulletins. We will continue to produce Five News
until the end of 2004. ITN also produces national and international
news for Independent Radio News (IRN), providing news for over
260 commercial radio stations.
1.3 ITN has diversified its business over
the last few years in order to remain competitive and broaden
the range of our activities into profit-generating commercial
enterprises alongside our core news contracts. Each of these activities
helps to underpin ITN as a healthy business and a strong competitor
to the BBC.
1.4 ITN Archive is now the world's largest
commercial news and history archive and has recently expanded
into non-news content, with representation deals to manage the
clips archives of Channel 4 and Granada. In addition, ITN manages
the British Pathe and Reuters archives, as well as ITN's own 49
years of news material and a range of other, smaller archives.
This is the fastest area of ITN growth and we hope to further
develop the business to make it's the world's largest commercial
archive. It competes head-on with the BBC archive.
1.5 ITN International has seen ITN lead
the way in video news on mobile phones, with contracts to produce
news bulletins for Vodafone, 3 and O2. These are important commercial
relationships, which help us ensure that ITN content can continue
to be available across a wide range of media platforms in the
digital universe. This in turn helps to ensure that plurality
is maintained across as wide a range of platforms as possible.
ITN International is also the division that syndicates ITN content
around the world, including relationships with CNN, NBC and Channel
9 in Australia.
1.6 ITN Factual specialises in factual documentary
production for a range of channels, including the BBC, ITV, Channel
4, Five and Discovery.
1.7 Competition with the BBC to provide
choice and diversity of "news voice" is at the very
heart of what ITN does. It is central to the regulatory obligations
around ITV News in particular, with the Communications Act requiring
ITV News to provide competition with other broadcast news services
in the UK.
1.8 We believe this policy objective should
be carried forward throughout the life of the next BBC Charter.
In order to be able to continue to do this, we need to be sure
that the BBC will not behave unfairly or unduly limit our ability
to compete and to develop into new and emerging markets. Our principle
concerns therefore fall into the following core recommendations:
— That each BBC service should be subject
to a clear, precise and measurable remit.
— That the BBC Charter should require
the Corporation to be more transparent and accountable in all
its dealings.
— That every proposed new BBC service
should be subject to a rigorous approvals process, including a
market impact test conducted by Ofcom.
— That Ofcom should conduct the public
consultation for new BBC services.
— That the BBC should be subject to
greater external scrutiny, either by Ofcom or a more independent
and restructured Board of Governors.
— That Ofcom should be responsible
for the regulation of all the BBC's commercial activities.
— That Ofcom should be responsible
for the enforcement of the BBC Fair Trading Commitment, alongside
its existing competition powers.
— BBC management and Board of Governors
should publish discussion concerning proposed new services to
ensure clarity about how decisions are reached about new services
and whether or not they require separate approval.
— That the next Royal Charter should
run for a period of five years to take account of analogue switch
over.
1.9 We will discuss these points in more
detail below in response to the specific questions identified
by the Committee.
2. Given expected growth in digital TV and
likely developments in the internet and other new media, what
scope and remit should the BBC have?
2.1 As we have described above, ITN believes
it is important that competition between high quality, domestic
news providers is maintained in the digital age. The public has
come to expect a plurality of news provision in the analogue world,
and this should be transferred into the digital environment across
a range of digital and new media platforms, not just on linear
television and radio.
2.2 ITN does not oppose per se the
BBC launching new services and seeking to deliver services across
a range of media platforms, but it is critically important that
it is not allowed to do so unfettered. Any proposed new service
must be subject a rigorous approvals process to ensure that it
is a legitimate use of licence fee funds, that the activity would
not unduly damage competition and that each service has a clear,
precise and measurable remit.
2.3 The launch of BBC Online is the clearest
example of how an ill-defined remit can have seriously damaging
consequences on the market. The BBC launched BBC Online in 1997
to coincide with the General Election. Since then it has grown
into a vast website carrying information across the full range
of programme genres. It is one of the biggest and most popular
websites in the world, costing somewhere between £75 million
and £100 million in public funds. At the same time the BBC
has on occasion sought to broaden the range of new media services
running alongside its core website, www.bbc.co.uk.
2.4 This has included making BBC content
available on platforms such as mobile phones, personal digital
assistants (PDAs), broadband portals, such as Freeserve and Video
Networks, among many others. While BBC Online sought and was granted
approval for BBC Online, the exact scope and remit was never properly
defined. We hope that the Graf Review will seek to ensure that
BBC Online is finally given a proper remit, but in its absence
the BBC has been able to launch myriad new media services with
little clarity about their approval for launch under a vague original
remit. The terms of the approval failed to take any account of
the outer limits of what the BBC was allowed to do and this has
provided the rest of the market with little certainty about what
the BBC is allowed to do through BBC Online. For example, nowhere
does the remit specify whether the BBC was permitted to launch
ancillary new media activities above and beyond its main website
(bbc.co.uk), such as services on mobile phones and broadband all
of which would have required investment to establish and operate
the services.
2.5 In the case of content on mobile phones,
ITN has had direct experience of how the lack of a proper remit
has damaged our business and our ability to compete.
2.6 In late 1999 ITN became the first provider
of a text news service to mobile phones in a commercial deal with
Orange. A few months later the BBC launched a similar service
with Cellnet—yet provided its content for free. Having taken
the initiative to move into this market, ITN soon found that its
business model was unsustainable with phone companies no longer
willing to pay for content if the BBC would provide it at no cost.
2.7 Recently ITN has again taken the initiative
to lead the way in providing video news to mobile phones. We currently
have contracts in place to provide news to Vodafone, Hutchison's
3 and O2, providing each with tailor-made news bulletins throughout
the day in full audio and video. This is an important growth area
for ITN, which helps to underpin the business. Yet if the BBC
were to launch a similar service for free, we there is every likelihood
that we would be forced out of this market, thereby reducing choice
and destroying a major area of ITN activity. A properly defined
remit would at least help us to understand what we can and cannot
expect to compete with and help us operate with more certainty
of business planning. This is only one such example, which serves
to demonstrate how important a clear and measurable remit is for
all BBC activities.
2.8 If the BBC is to continue to expand
the range of its activities it must do so by paying greater regard
to the way it impacts on the rest of the market. The impact of
the BBC's enormous investment in new channels—and in particular
in online services—has been to leave little oxygen for commercial
operators who might otherwise develop their own services. There
is a serious risk that an unfettered BBC could stifle innovation
and research and development across the media as a whole and in
areas where the UK can—and should—be a world leader.
2.9 In addition ITN also believes there
needs to be more clarity about when and why certain services are
put forward for approval through the DCMS. The approvals process
itself has improved in recent years, with more emphasis on the
market impact of new services, with BBC Three given a market impact
test by the ITC prior to launch. Once a proposed service is put
through the approvals service the system works relatively well.
However, we still have some concerns about new services that are
launched without approval, and the way in which the BBC decides
whether to submit a proposed new service for approval. One such
example is the BBC Creative Archive, which the BBC intends to
create using vast amounts of public money. It has the potential
to damage ITN's own archive business, yet has not been formally
approved. We are unclear why this is the case and how such a decision
is reached. Therefore we believe that the BBC management and Governors
should be more transparent about how they demonstrate that they
are launching services within the rules and explain why they believe
any new service does not require approval. If they are unable
to, then it should also be possible for industry to recommend
that a service should be subject to the approvals process.
2.10 The BBC is also responsible for the
public consultation for new services. The BBC frequently cites
widespread public support for proposed new services. Unsurprising
then that these consultation exercises contain little rigorous
questioning about the proposed service. Public consultations should
be more objective and as such, we believe they should be conducted
by Ofcom.
3. In the context of scope and remit, how
should the BBC be funded?
3.1 ITN believes that the licence fee remains
the most appropriate way of funding core BBC services. However,
this is closely linked to the points we have made about the need
for a clearly defined remit for the BBC and each of its constituent
services. Any BBC service needs to be carefully considered to
ensure that it serves the licence fee payer and does not compete
unfairly in the market.
3.2 We therefore hope that the forthcoming
reviews of all the BBC's digital services will examine in detail
whether the licence fee remains the best way to fund these services
and whether they have added genuine value to licence payers. If
any of these services are deemed to be inappropriate then we believe
that subscription may offer an alternative funding model.
3.3 We also believe that there is a case
to look further at "top slicing" the licence fee, to
redirect sums to certain public services provided by the commercial
sector. At present we do not have a fixed view about this, but
it is an option that we hope the Charter Review process will examine
in detail over the coming months.
4. How should the BBC be governed and/or
regulated and what role should be played by the Office of Communications?
4.1 The way in which the BBC is governed
has been shown to be flawed on several occasions and we believe
the BBC should be subject to more external scrutiny. This Charter
Review provides the ideal opportunity to redefine the Board of
Governors and transfer some of their responsibilities—if
not all their regulatory functions—to Ofcom. We do not believe
that the Board of Governors can continue to act as both judge
and jury over the BBC's affairs.
4.2 On several occasions we have found that
the Board of Governors has not acted as a truly independent body
from BBC management, and their responses to serious issues have
not demonstrated what we would consider to be sufficient objectivity.
4.3 One such example relates to a serious
issue we raised with the Board of Governors about the distribution
of the commercial BBC World in America. We learnt that the BBC's
distribution arrangements did not appear to meet the terms of
the Fair Trading Commitment which sets out the competition arrangements
for the BBC's commercial activities. The Commitment states that
the BBC's commercial activities should not damage competition,
should reflect market practice, should cover all costs and should
deliver a return to the licence fee arm of the Corporation.
4.4 However, we had evidence that the BBC
was not making a charge from a US public service station for the
channel, which therefore appeared to breach the rules. In response
to our query we were informed in a two paragraph letter from Baroness
Young, then the Governor responsible for Fair Trading, that there
was no problem with the arrangements and that she could not provide
more detail as it was commercially sensitive. This did not reflect
the level of detail that we would have expected from an independent
regulator.
4.5 This is only one example, but one which
demonstrates that at the very least responsibility for enforcement
of the BBC Fair Trading Commitment and regulation of all aspects
of the BBC's commercial activities should be transferred to Ofcom,
to sit alongside its concurrent competition regulatory responsibilities.
This would also help ensure that there is more consistency in
the way in which competition issues concerning the BBC's activities
are handled.
4.6 The Board of Governors should be established
as a properly independent body, separate from BBC management and
based in a different location to the BBC executive and staff.
We also believe that the BBC Governors should be drawn in members
with relevant professional, legal or regulatory expertise. The
Board of Governors should also be more answerable to OFCOM through
regular dialogue and publication of minutes and decisions taken
in greater detail than those published at present. This would
help to ensure more consistency across the Governors and OFCOM.
5. In a changing communications environment,
does a 10-year Royal Charter and Agreement with the Secretary
of State, together, provide the most appropriate regime for the
BBC?
5.1 The next Royal Charter will come into
force at an awkward time in the development of the broadcasting
sector. If digital switch-over can be achieved as hoped by 2010-12,
the Charter will only be half way through its normal 10-year period
when the broadcasting landscape will change fundamentally. Switch
over will have profound implications for the way in which the
public accesses broadcast services and, potentially, for competition
between broadcast organisations. We do not believe that it is
possible to devise a Charter that can take into account the state
of the market both before and after switch over. At the same time
there is likely to be significant growth in the take up of broadband
and other new media services. Yet at this stage it is too early
to make an accurate prediction of take up across all platforms.
ITN therefore believes that the next Charter should run for a
period of five years, to be reviewed in 2011.
April 2004
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