Memorandum submitted by Ofcom
INTRODUCTION
1. This supplementary memorandum[1]
is intended to provide the Committee with updated information
on developments in Ofcom's work directly relating to the BBC and
the Charter renewal process, to supplement the memorandum submitted
to the Select Committee's BBC Charter Renewal Inquiry in May 2004.
BBC AND OFCOM
2. As the Committee is aware, Ofcom has
a clear statutory remit for the BBC in terms of content regulation
(Tier 1 for standards, excluding due impartiality and accuracy
in news, and Tier 2 for production quotas) and has concurrent
competition powers with the OFT.
3. In our wider duties to report on developments
in the broadcasting sector, Ofcom has made a number of public
statements on the BBC. For example, we called for the BBC to play
a more pro-active role in promoting digital television, as part
of our report to the Secretary of State on progress towards digital
switchover. In the first phase of our review of public service
television broadcasting (PSB) we made a strong case for the BBC
undertaking a wide range of activities, but with its unique and
privileged funding status, programmes should always strive to
reflect the broad purposes and character of PSB to some degree.
The BBC welcomed Ofcom's proposed approach to defining PSB through
purposes and characteristics. In its document, Building public
value, the BBC put forward equivalent arguments as Ofcom about
the importance of plurality in PSB provision.
4. In our recently published Phase 2 report
on PSB, Meeting the digital challenge, we set out a number
of proposals on the BBC, including:
— the next Royal Charter should run
for 10 years to take the BBC through the period of digital switchover,
but it should include a substantive mid-Charter review of the
BBC's funding and its progress in meeting PSB purposes and characteristics;
— welcoming the BBC's reviews of its
production and of its commercial operations, we proposed that
these should form an important part of the BBC's Charter review
process and that the review of commercial strategy should be subject
to thorough independent external validation before any decisions
are taken about the future of BBC Worldwide or the use of the
proceeds from asset sales;
— there should be a new commitment
to regional programming from the BBC, in line with the Corporation's
own proposals; and
— the BBC should be expected to demonstrate
that it has clear plans to introduce a commissioning system, outside
news programming, which has fair access for independent suppliers.
A summary of the report's proposals regarding
the BBC is attached as an annex to this memorandum.
OFCOM REVIEW
OF PUBLIC
SERVICE TELEVISION
BROADCASTING
5. Ofcom was asked by Parliament to undertake
a review into public service television broadcasting, with the
underlying aim to suggest how PSB could be maintained and strengthened.
One of our key conclusions in our Phase 2 Report, was that the
BBC should remain the cornerstone of public service TV broadcasting
and that an "effective, strong and independent BBC is essential
to the health of PSB in the UK".
6. This position was based on our analysis
of the wider broadcasting market, which demonstrates that the
historical compact in which PSB was provided by commercial broadcasters
in return for access to analogue spectrum will come under increasing
pressure. The move from an analogue to a digital broadcasting
market erodes the surplus value in ITV's and Five's analogue licences
which funds their contribution to public service broadcasting,
and which we calculate to be currently worth around £400
million. Digital television also gives these channels a potential
route to near-universal access in digital without any public service
obligations.
7. An inescapable context for our PSB review
is that in a very few years' time, as the graph above illustrates,
the value of existing channel 3 analogue licences may well be
less than the cost of the accompanying PSB obligations. Ofcom
does not believe that waiting for this situation to arrive is
a viable option. By then, unless other measures are taken, that
£400 million of implicit funding for PSB will have bled out
of the system. Given our statutory duty to maintain and strengthen
PSB our core recommendation is that the money should be kept in
the system. However, funding that is implicit today will need
to be explicit tomorrow. For the existing broadcasters, it means
giving ITV and Five greater freedom to play to their core strengths
in original British programming and news, combined with greater
scheduling freedom so that they will want to remain universal,
free-to-air broadcasters. It also places an even greater importance
on the BBC being focused on true public service, being fully funded
to do so, and being managed, governed and regulated effectively.
For Channel 4 it will be necessary to address issues of scale
from their commercial revenue base, to enable them to sustain
their public service elements in the face of audience fragmentation
and consequent pressures on advertising yield.
8. To maintain plurality in the provision
of PSB, and to strengthen the quality and range of programmes
produced, Ofcom has suggested the possibility of a new institution—a
public service publisher (PSP)—alongside the BBC and Channel
4 to provide some anchor for public service content for the digital
and broadband age. We further suggest that part of the implicit
funding that would otherwise be lost from the existing system
is channelled into this new PSP as a way to meet the Parliamentary
injunction to maintain and strengthen PSB. We suggest an indicative
figure of £300 million as the amount of funding the PSP might
need in order to be a significant player in the future provision
of PSB.
OFCOM'S
REMIT AND
PARLIAMENTARY ACCOUNTABILITY
9. Ofcom is an independent regulator, created
by statute and accountable to Parliament. We value our independence,
as it allows us to make decisions based on evidence we gather
from citizens and consumers and the industries we regulate. Equally,
we value and understand that we operate within a legislative framework
set out by Parliament, and that we are accountable to it for our
actions. As part of our PSB Review, we have set out innovative
solutions to the question of how to maintain and strengthen PSB.
However, we acknowledge that the ultimate decision on how this
is achieved is a matter for Parliament and our aim is to provide
informed options and evidence to assist Parliamentarians with
this task.
1 See HC 598-i, pEv 72 Back
|
