Examination of Witnesses (Questions 260
- 277)
TUESDAY 29 JUNE 2004
BIPA, IWF, TWO WAY
TV, VIDEO NETWORKS
Q260 Michael Fabricant: Your company
is new to the UK but your accent gives your origins away. I wonder
if you could give us any insights at all into how long this service
has been available in parts of the US and how that has affected,
if at all, viewing habits to existing broadcasters CBS, NBC, ABC
and Fox?
Mr Lynch: There is actually not
a service like this anywhere in the world; London is the only
place in the world that has a service this extensive. In the US
the issue is that the telephone networks there are not as robust
as the telephone networks that BT built here. Part of it is just
the geographical density of the conurbations, and part of it is
the architecture of the telephone networks—the way they
were built. There are other areas in Europe where people are starting
to roll out services like this, in France and Italy, and this
has all been done on the back of Local Loop Unbundling regulation
there, which remains very, very cost-effective. These are primarily
broadcast services; they do not really get into the heart of the
on demand services that we have developed.
Q261 Michael Fabricant: Five or six
years ago our Committee visited the United States and scientists
(I think I would call them scientists more than engineers)—visionaries—were
talking about this sort of service becoming available eventually,
and now it seems that Britain is the first—and I did not
realise Britain was the first—country in the world to have
this service. So whither goes the BBC then? Do you still see a
role for the BBC just as a programme provider, or still as a broadcaster?
Mr Lynch: I think that is the
heart of the issue right there. Is the BBC a programme provider
or a broadcaster, and what is the difference between the two?
I think there is a critical role for the BBC as a programme provider.
In fact, a lot of the content that is watched on our service on
demand is BBC content—whether it is captured through the
broadcast stream, like Eastenders, so that you can watch
it for up to a week after it is broadcast, or it is documentaries
that we have put together in "documentary on demand"
channels. People want to watch BBC content, and the real issue
for them is how can they get access to the archive. I think there
is a very strong role for the BBC as a content creator/producer;
what is less clear is what it means for the BBC as a broadcaster.
Q262 Michael Fabricant: Do you think
Chris Bryant's thesis is an attractive one, which says give the
BBC stability and give it a 10-year charter, but make it a very
thin charter so that the BBC can move and innovate as required
as technology moves on?
Mr Lynch: Ten years is going to
seem like a very long time in what is going to happen over the
next decade. I think there was a discussion earlier about what
has changed over the last five years. A lot has changed but not
much has changed in relation to how people watch television. That,
I believe, will fundamentally change. It changes already with
our subscribers. If you look at how people use television on our
platform it is completely different from how they watch on Sky
or cable.
Q263 Michael Fabricant: Just expand
that. How are viewing habits changing?
Mr Lynch: Subscribers to our platform,
for instance, spend a disproportionate amount of their time watching
on demand content that is not available on a broadcast channel.
The reason for that is because the functionality combined with
the programming means that the choice that you have is far greater.
The problem with providing so much choice—and this goes
back to another discussion—is people want someone to exercise
some editorial control. They want to be told "This is a good
programme to watch". If you put 10,000 hours of content in
front of someone and say "Go choose what you want" they
will be confused and they will turn off. That, I think, is the
essence of the role for someone like the BBC where their editorial
control and judgment is valued by people, and if they can be presented
in an on demand environment where you can say "I am interested
in documentaries" and the BBC has suggested documentaries
you can watch right now, that is of value to people.
Michael Fabricant: Thank you, Chairman.
Q264 Mr Doran: A question for Mr
Drayton. In your evidence you are fairly critical of the lack
of control over the funding and scope of BBC's online services.
I may be a bit naïve but I have always seen the internet
as a fairly unfettered medium. Why do you think the BBC should
be fettered?
Mr Drayton: We are not really
suggesting fettering, we are suggesting that the market failure
test ought to be applied a bit more rigorously. The problem was
at the beginning, back in 1997, when many of us publishers had
already invested heavily in exploring digital and delivering services,
the BBC came in and has had totally unfettered access to the community.
It has almost limitless funding, no shareholders, obviously (we
are, supposedly, the stakeholders), and it has almost zero regulation.
There has been no remit, it did not stick to even the original
ideas that it set out to the DCMS and its voluntary code is "We
are going to focus on education, we are going to cap spending
at £25 million." None of these pledges were maintained.
They have ridden on this very spurious argument that the internet
is another arm of broadcasting, which clearly it is not; it is
a very different medium. I think we are all big supporters of
the BBC in many of the things it does, we are great fans of the
BBC, but where it is clearly preventing the commercial sector
from developing, that is negative for the British public, for
the consumer and the wrong use of the public's money.
Q265 Mr Doran: A lot of people will
say that the BBC's news site is the best around.
Mr Drayton: You would not expect
the managing director of The Telegraph to agree with that
surely.
Q266 Mr Doran: A lot of people would
say that and I am one of them, I use it quite regularly. Are you
complaining that they are too good?
Mr Drayton: No, I think the BBC
does news very well. What it does not do is what newspapers do,
which is put it into more context. It does not have the writing,
that is not its skill. It is good at frontline news. The Guardian,
The Telegraph and others do different things. I think there
is room for all of that. Nobody is suggesting that the BBC news
feed should not be available on-line, what we are suggesting is
that they should not be running holiday sites up against commercial
users with the public's money, nor should they be developing on-line
car magazines because the commercial sector does that very well.
Q267 Mr Doran: If we accept the thesis
that the BBC should be controlled, who should be controlling them?
Mr Drayton: Ideally a better type
of Governor. We think that the current judge and jury are the
Governors—this is not just a BIPA issue but across all the
media—and we think it is a completely untenable situation.
I think it has to be Ofcom who determines whether or not the BBC
is having an adverse effect on the commercial market because that
ought to be a role of Ofcom. That is something which to date the
Governors and the BBC have been left to decide for themselves
and I think that is wholly unsatisfactory.
Q268 Mr Doran: A tougher set of Governors
with a remit, which is possible in the new Charter, might do the
job?
Mr Drayton: I think it might do
the job. It does not have to be Ofcom; it just has to be somebody
who can give an independent view. Our very clear view is that
in the current and recent regime the Governors have not had that
independence of view, nor the spirit to challenge it. In our particular
case, we have been challenging the BBC's activities now for seven
years and it is only with the Graf Report, after a long, long
time in anticipation of Charter renewal, that we have had some
kind of monitoring. Nothing has happened under the current Governors'
regime.
Q269 Mr Doran: Just going back to
something you said earlier. You said that the BBC was treating
the internet as a form of broadcasting but I think everything
that we hear about the technological advances suggests that the
internet, certainly in the future, will be part of the broadcast
territory.
Mr Drayton: It is very different
in the sheer sense that it is acknowledged that the barriers to
entry are much lower. The fact is that for me to set up a television
channel would be extremely costly. To broadcast television, firstly
it would involve me in getting licences but also involve a huge
investment. Similarly, that is the case with traditional, conventional
radio. The internet is not like that, it is not that type of broadcast
medium, and it does not require that type of infrastructure.
The infrastructure is provided by the networks.
Q270 Mr Doran: I am still a little
bit confused because the BBC is our prime broadcaster and it is
moving into a number of new territories, some of them have different
forms of approval and internet clearly is not one of them. You
heard the debate from earlier witnesses about the way in which
the quality which the BBC provides and produces is a spur, an
incentive, for other broadcasters. We were discussing earlier
with Sky witnesses, for example, that their completely hostile
approach to the BBC seems to have changed quite dramatically over
the last year or two. Clearly there are business opportunities
and improvements to business being presented by the quality that
the BBC represents and which it brings to the whole area. Why
is that not likely to be seen as the case on the internet?
Mr Drayton: I think it has improved.
The very existence of the Graf Report and that inquiry has helped.
BBCi has understood that it has overstepped the market in many
commercially viable areas. The remit needs to be clearer. If,
as they have purported to do from the beginning, the BBC is to
be this trusted guide then it should also be co-operating with
the wider market. If the BBC made a better effort to include other
trusted sources of information linked to them, firstly it would
be using the technology much more effectively and using the web
the way that people outside the BBC use it, but also it would
be providing a public service which is presumably at the heart
of what the BBC is there to do for us.
Q271 Derek Wyatt: I am sorry I am
late, I had to go and see a minister. Can I ask Mr Drayton, the
BBC has said that it is happy with its digital channels and its
digital radio channels, it does not want to do any more, it just
wants to hone in on what it has got. What if another broadcaster
or another media player announces five broadband channels in the
next two years, one of which might be a UK film channel, one could
be a sport and health channel, because that is the way you should
do it, and the BBC then says, "Oh, we missed it. We need
to do it"? What would be your reaction as a publisher?
Mr Drayton: I think they would
have to first justify in that or any other area why they would
have to do it. There seems to be this thought amongst some of
the BBC internally that they have to be doing everything, that
they have to cover every inch of the waterfront, and that is a
totally wrong use of public money. Why would they have to provide
something just because somebody else proves successful at it?
Q272 Derek Wyatt: Mr Lynch, I am
sorry I was not here for your earlier piece, but we have met previously.
Mr Lynch: Yes.
Q273 Derek Wyatt: Is it your view
that the entertainment platform—this is something I keep
asking witnesses—is going to move beyond television to broadband?
Do you think there is a stage where broadband will overtake conventional
television in the next five or 10 years?
Mr Lynch: If I make a distinction
between the delivery mechanism and how you view it for a second.
In our case we use broadband but we use broadband to deliver it
to the television. Our viewers watch television, maybe it is a
broadcast channel or on-demand programme but it is through a television
set, but the functionality that they get is somewhat akin to the
internet in that they can choose what they want to watch, search
through menus or programme guides and find exactly what they want.
That will change significantly. I do not think that the convergence
of PCs and TVs is necessarily something that is going to happen
because how you view a television is very different from a PC
and the things that you do on a PC will remain different from
what you do on a television. If you are working on a spreadsheet
or typing out something it is just a very different experience
from watching a film and I do not see that convergence will necessarily
take place. What will take place is a convergence of the distribution
media that delivers the content either to a television or to a
PC.
Q274 Derek Wyatt: If there is a shift
towards broadband delivery as the broadband gets better and better,
does it become harder to detect who is watching the BBC? These
little men go around in their little white uniforms saying "You
have not paid", but how do you detect that on broadband?
Mr Lynch: I think it is an issue
for the BBC that if more and more of the content is delivered
via means like the internet, yet the licence fee is tied to a
television set, is there a match of the funding to how people
are actually enjoying the content? In our case we deliver it via
broadband but we have measurement capabilities that are far in
excess of what a broadcast platform can provide. We know everything
that people watch, how they watch it, when they watch it, from
what channel they came from. In our case, the measurement capabilities
are significantly in excess of what a broadcaster can do on their
platform but that is not true of the internet in general though.
Q275 Derek Wyatt: Anybody can answer
this question. It seems to us that some of the evidence we heard
in Dublin at the MIT lab last Monday was that people are coming
from the MTV generation, it is two minutes, three and a half minutes
or four minutes, it is off and on, but the formal nature of television
makes you come in on the hour or half hour normally and that goes
against the grain of the younger generation, as it were, who do
not want that. It seems to me that you cannot deliver television
any other way conventionally. How do you deliver to the MTV generation,
if that is what they want, three and four minutes, they do not
want programmes of half an hour, an hour or 45 minutes? That is
a huge cultural shift. Will that not affect the whole of the way
in which the economy and the ecology of television is going to
move in the next 10 years?
Mr Schmitz: We have addressed
that, being in the interactive business. I would not argue that
we will replace or totally satisfy that need but clearly our business
is one of providing what I would call a different experience than
the normal broadcast experience by allowing viewers to either
interact in the obvious but perhaps trivial application such as
the voting, we also broadcast games on special channels that are
available so that it is the TV experience but it is providing
what we view as bite-sized amounts of information and entertainment
that clearly is popular with that age group. When you look at
what they are doing in other medium, like the game consuls and
internet, the way in which they get involved with the entertainment
as opposed to what we heard earlier, the sitting back, the conventional
television broadcast, is clearly there and we believe it will
come over more significantly to television as we and others overcome
some of the technical difficulties of providing that interactive
capability through the television set.
Q276 Chairman: Could I just put this
to any or all of you, depending on whether you wish to reply.
I think it was Alan Keen in his questioning who talked about the
way in which when we were looking at communications we were told
by authoritative figures who appeared to know all about it on
the West Coast of the United States that the converged box was
the thing, convergence was the thing. It has not worked out that
way at all but still one sees the elements of convergence, one
sees advertisements in the papers whereby you can get a huge package
of different films if you subscribe through your computer, for
example. Lots of people watch DVD on their computer. Are we getting
convergence under a different name and in a different form than
was anticipated, and how does that affect the future of the BBC?
Mr Drayton, you were saying that if anybody does anything there
is a feeling that the BBC is going to have a go at it. Should
not the BBC, in fact, be pioneering some of these things which
others do not do in view of the fact that it is buttressed by
the licence revenue? Is there not an argument for saying that
it ought to be at the cutting edge of these developments rather
than sitting back, waiting for what is happening and then trying
to get a part of it?
Mr Drayton: I think there is a
role, and certainly your previous witnesses talked about the innovation
of the BBC and that is undeniable, they have got some great brains
and they have, of course, an unrivalled resource. I think the
issue from the BIPA perspective is that we would like to see that
controlled a bit better. I do not think we have any objection
to the BBC experimenting on a modest scale but it should not be
to the exclusion of all the potential commercial players who could
come in and provide equally good services and a diversity of choice
for the consumer, which is the pattern that has happened in several
things that have affected our publishing community.
Mr Lynch: I think that the BBC
absolutely should be on the cutting edge of this, but what they
should be doing is looking at it from a programming perspective.
How do they do what they do best, which is take the television
content that they create, or radio content or internet, and make
it available using cutting edge technologies? That does not mean
that the BBC has to go out and develop it because the private
sector is happy and willing to do so and, in fact, is willing
to invest significant sums to do it. The main thing the BBC should
be doing is embracing that, working with those partners who are
willing to make the investment to make their content available
on cutting edge services.
Q277 Chairman: Is there not a problem
that if it is going to work with partners, the boundary of the
licence becomes fuzzy and then people like Mr Drayton would have
a right to say that the BBC is having commercial partnerships,
as it does now on some of the specialised channels, using licence
payers' money whose accounting is very, very opaque so you do
not know where cross-subsidy is and, therefore, Mr Drayton would
say it is not fair? It seems a possibility that the farther the
BBC gets along the cutting edge, the more the BBC throws itself
into the market, some people would say the less it has the right
to use licence money to do it.
Mr Drayton: With great transparency
and a clear remit that can be happily monitored and I think people
would be satisfied. I think what the BBC has to do is refrain
from exaggerated cross-promotion. It has this unrivalled opportunity
across its own media to cross-promote and compete with the commercial
market and that is where the problem lies. Also, if the BBC gets
into new markets and opens new markets and it becomes clear that
the commercial sector can offer diversity and can operate clearly
then the BBC should be happy enough to doff its hat and retire
from that market and move on to other things, which is a trend
we have yet to experience.
Chairman: That is very helpful indeed,
we are most grateful to you. Thank you very much.
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