Examination of Witnesses (Questions 540
- 559)
TUESDAY 26 OCTOBER 2004
OFCOM
Q540 Michael Fabricant: Am I right
in thinking that not one of those options is top-slicing the licence
fee?
Lord Currie of Marylebone: One
of the ones I did not mention was the possibility of an augmented
licence fee. That is a possibility, the BBC fully funded appropriately
for what it is—its mission going forward—that an element
might then go to funding the PSB. That was one option amongst
several.
Q541 Michael Fabricant: Are you saying
that of all the options you are proposing not one of them would
have any impact on the funding of the Corporation of the BBC?
Lord Currie of Marylebone: Yes.
It requires Parliament and Government to mandate that funding;
but we are very clear that the absolute cornerstone of public
service broadcasting is the BBC—fully funded, independent
and strong.
Michael Fabricant: With the option of
possibly coming back, I would like to leave it at that point,
Chairman.
Q542 Derek Wyatt: I am attracted
by the public service publisher concept, but if I was putting
it out as a tender it would be a broadband channel—24 hours
a day, seven days a week—not a conventional channel. What
we have seen over the last three or four months travelling around
the world is that broadband is here and is going to come. If somebody
could have pitched to you that they would want to be a 24 hours
a day, seven days a week broadband public sector publisher, would
you be opposed to that?
Mr Carter: Just as an aside, it
is delightful to be in a conversation where we are talking about
broadband being here and being successful—we would agree
with you entirely. As I was saying in the answer to the earlier
question, one of the reasons why we framed the idea as we did
was because we very much viewed it as a provider of public service
content at a point in the development cycle where television is
being provided on a fully digital platform, and we could
hypothesise about what broadband penetration will be in 2008-09
but at five million homes today and at a trajectory of 200,000
new customers a month you are talking about a real scale and reach.
We are of the view that the distribution mechanism for the public
service content is going to be completely different from a traditional
analogue broadcast transmission model, I absolutely agree.
Q543 Derek Wyatt: That is reassuring.
Let me come on to your recommendations that you still think it
is worth giving 10 years for the licence for the BBC, given that
now it seems as though you are suggesting they will have completed
switchover by 2012, if I have read that correctly. We have seen
a whole host of new technologies, and it seems to me there will
come a point that television (or whatever we call television)
broadcasting will not be broadcasting; and therefore to give a
categoric 10-year licence when we cannot define really too much
beyond 2008 or 2009 as to the landscape of broadcasting, do you
think it would have been better to have given five years with
a five-year renewal, rather than a 10-year? What was the reason
that you wanted to give a carte blanche 10-year?
Lord Currie of Marylebone: I think
we feel it is important the BBC has security. The 10-year horizon
allows it to make a substantial investment in digital switchover
and have some security coming forward from that. We did propose
a five-year review which would look at the way in which the landscape
has changed in exactly the way you are describing. To answer the
question, "Does that imply adjustments for the BBC, a transition
through to the end of that 10 years?" we felt a 10-year with
a five-year review was the appropriate mechanism. Clearly it is
a matter of judgment here.
Q544 Chairman: Surely another way
of giving the BBC security, as you are advocating, would be to
put it on the same basis as Channel 4; namely, not have a Charter
but to be a permanent institution under a Communications Act?
That would give it security without arguing about what the length
of the Charter would be; because despite what the Secretary of
State wants, it is not standard to have 10-year Charters; the
previous Charter was 15 years and on our recommendation this one
was 10 years. If the BBC were put under a Communications Act,
in the way Channel 4 is and indeed the other broadcasting organisations,
then that will give it the security without the hassle of Charter
Renewal.
Lord Currie of Marylebone: That
is certainly a possibility. We are also sensitive to the points
that are made about state broadcasters, as it were. We have a
rather different tradition in the UK and it would be a significant
step to make that change.
Q545 Derek Wyatt: There will be a
Health Service of some description in 10 years; there will be
an education service; there will be a BBC in 10 years; so what
is the fuss about saying 10 years; what is the stability? It is
not as though there will not be operations in the Health Service
or teachers turning up to school; we do not give them a 10-year
licence, we just know it will always be there and the BBC will
always be there.
Mr Carter: Ours, to be candid,
was a relatively passing view on the length of the Charter; but
the underpinning of the support for 10 years was in the context
of the review of the provision of public service broadcasting
by the commercial broadcasters. Part of the reason why we thought
a 10-year Charter and security of that period, combined with a
five-year mid point review, was because our analysis told us that
over that corresponding period you were going to see the commercial
provision of public service broadcasting probably only going in
one direction. Therefore, against the brief of maintaining and
strengthening public service broadcasting, which was what our
report was asked to answer, it seemed to us that if you see the
BBC as having an increasingly important role in the provision
of public service broadcasting, for now, looking over a 10-year
horizon seemed to make sense. The second point just to add to
David's point, which I think is an important one, is the requirement
to make the necessary capital expenditures in transmitter roll-out
for digital switchover; and that probably requires a financial
planning horizon of more than three or four years.
Q546 Chairman: Could I just come
back on that. You talk about the BBC having an increasingly important
role on the provision of public service broadcasting. What is
your basis for saying that? After all, even Mr Greg Dyke in his
recent book admitted that the only reason BBC1 was ahead of Channel
3 was because the BBC was losing audience at a slower rate than
Channel 3. With all the diversification that has come—and
we have been trying to look not at the position next year or the
year after but where we might be in 2016 were the BBC to get a
further 10-year Charter—the scenario, the environment is
going to be so different that while it might be perfectly valid
to say that a BBC is indispensable for maintaining the
ethos of public service broadcasting, I would guess it is almost
inevitable that that slide down of the people actually watching
the BBC channels (particularly with analogue switch-off coming)
is going to continue?
Mr Carter: I am sure you are right,
Chairman. We would broadly agree with your analysis that as we
move to 100% digital provision (which on the current planning
timetable will be 2012 rather than 2016, so four years earlier
than that planning horizon) it is an interesting and challenging
question to hypothesise what is the lowest level that BBC's share
viewing and audience engagement will reach. Some of the answers
to that question will of course be determined by how digital take-up
is achieved. If you had 100% digital provision direct to the home
satellite the BBC's share of viewing I suspect would be different
than if a substantial proportion of that is through digital terrestrial
free-to-air. There are substantially important different
outcomes, depending upon how the path of digital is achieved.
To answer your central question, our hypothesis for now was that
if you want to have a central provider of public service content,
as we do go down that path that you rightly predict, securing
the position of the BBC and giving it a very clear remit to be
a provider of public service broadcasting, rather than commercial
competitive broadcasting, seems to us to be a sensible recommendation.
Q547 Derek Wyatt: Can you just tell
us what your role would be if BBC Worldwide was sold or parcelled
off? Do you have a role at all in analysing that deal if that
was to happen?
Mr Carter: No, we would not.
Q548 Derek Wyatt: Do you not think
that is a mistake in the Act?
Mr Carter: In our report we only
made one real reference to that, not specifically to BBC Worldwide
but to the notion of disposal of the BBC, currently BBC managed
assets, that if an asset was to be disposed the proceeds of that
asset were not to be automatically absorbed into the BBC's P&L;
that that was disposal of a public asset rather than a BBC asset
and, therefore, there should be independent scrutiny of where
those receipts go. Indeed, going back to the earlier question,
they could indeed be a source of funding for alternative, competitive
provision of public service broadcasting or public service content.
As to whether it should or should not have been in the Act, I
am not sure it is for us to comment. We have no role.
Q549 Mr Hawkins: I have two issues
I want to raise with you, gentlemen. You have put forward some
specific proposals on the BBC's scope and remit, and in particular
you have suggested that the BBC should have regard to the extent
to which Hollywood films and other expensive acquired programming
meet the BBC's public value test and could not be provided equally
well at no direct cost to the public by free-to-air commercial
broadcasters. I have a particular interest in the opportunity
of everyone in the UK to see major national sporting events. As
you know, there has been a huge controversy running over many
years now that the BBC is not sufficiently providing that. It
seems to me, and it has always seemed to me, that if the BBC adopted
your recommendations and left some of the more expensive other
things to the commercial broadcasters it might have more ability
to bid for sports rights and provide more of these things. Would
you care to comment on that?
Mr Stoller: Essentially this is
a matter for the BBC to make a judgment on—for the BBC's
managers and Governors to work out their own arrangement. I think
our view is that the BBC needs to refine its attention across
the whole range of its output to that which is public service
broadcasting. If, in the judgment of the Governors and management
of the BBC, focusing on sports rather than focusing on blockbuster
films is a way to do that then it will be their call.
Q550 Mr Hawkins: You do accept as
Ofcom, as a regulator with a very big interest in this, that major
national sporting events come within the remit, without talking
about specific events; but the general concept of major national
sporting events come within the remit of what a public service
broadcaster might be expected to provide in the UK?
Mr Stoller: Yes, indeed.
Q551 Mr Hawkins: Because there is
a lot of concern—you will have read many, many articles
about this written by distinguished broadcasting personalities
like Paul Fox over many years—saying one of the things the
British pubic perceives that they have lost is the opportunity
to see major sporting events on free-to-air channels. It is a
matter of major controversy amongst a very large number of people
in the UK and that is why I am asking you about it.
Mr Stoller: Yes.
Q552 Mr Hawkins: The other thing
I wanted to raise was what you said, Lord Currie, in your speech
to the Royal Television Society, which is that the central tenet
of your report is that the existing analogue model of public service
broadcasting, which has been sustained by a mixture of institutions,
funding and regulation, will not survive the transition to digital
and may well erode rapidly before then. I have a particular concern
about the date of the proposed analogue switch-off—and you
talked about the creation of a switch code for managing that transition.
I am worried about the very large number of elderly and not very
well off people in this country who may have no interest at all
in going digital. My concern is that perhaps we ought to be talking
about a much later preservation of the analogue services. Would
you care to comment, given that you are a public regulator with
the interests of the public as a whole at your heart?
Lord Currie of Marylebone: Let
me just start on that and ask Stephen to conclude the point. It
seems to us that, firstly, digital switch-over is happening household
by household really quite rapidly. There is clearly an option
of delaying switchoff, but it will become increasingly a small
rump, and increasingly a group where the economics of analogue
broadcasting will look increasingly unattractive. It is perfectly
possible that if one did switch-over later that an analogue broadcaster
might decide to walk away anyway. It is a complicated scene. The
other point is that the Secretary of State has asked the Ofcom
Consumer Panel to look at exactly the question of disadvantaged
groups, to recommend how that issue can be managed. I think we
still await that report, and it is coming in November. We are
aware very much of the issue, but I think the answer is not to
delay switchover, but rather to manage the issue directly.
Q553 Mr Hawkins: I understand entirely
the point you are making that in practice switchover to digital,
as you say, is happening household-by-household, but my concern
is even if the numbers are what you call a small "rump"
they are still important people?
Lord Currie of Marylebone: I was
not being dismissive by using that word at all. The other point
to bear in mind is that the technology will be on our side. The
costs of switching are going to be falling quite rapidly as we
move towards that date.
Q554 Mr Doran: I do not think anybody
disputes the landscape will change as broadband accelerates, but
I am interested in the general approach you are taking in your
own review of the public service television broadcasting requirement.
If I can put it crudely: it seems to me that your general approach
is narrowing the scope of the BBC (and my colleague Nick Hawkins
has already mentioned the Hollywood films issue) but at the same
time reducing obligations on the Channel 3 sector. That concerns
me a little bit because it seems to me what we may be producing
may be a worthy BBC but not the BBC we have got at the moment,
and not one that is vibrant and still our leading broadcaster.
Is that how you see things developing?
Mr Carter: We might put them in
slightly different words.
Q555 Mr Doran: I said it was a crude
analysis!
Mr Carter: It is a powerful analysis
but we might put them in slightly different words, not just to
be semantic about it but because we would not see our recommendations
in relation to the BBC's provision as narrowing what they do but
as sharpening the focus of what they are there to provide. To
the point you make about ending up with a worthy BBC and a lesser
provision, if you like, from the commercial sector—the underpinning
of our analysis is that there is an inexorable march of consumer
behaviour which is going in one direction. The previous exchange
about digital take-up through people exercising consumer choice
illustrates that. The point we were making about the obligations
on the commercial public service broadcasters is that today the
value of an analogue licence to a commercial broadcaster is pretty
substantial. We could argue about the number; indeed we are currently
consulting on what that number is, but it is in the tens of hundreds
of millions over the period of a licence. Come 2012 it will be
in the low tens. As a consequence, what you extract in return
from that is a lot less. What we were trying to show in our analysis
was that is an inescapable fact come that date and it does not
stay as it is today and then happen that way in 10 years' time,
it is a trend that goes that way. Given that—against our
brief which was how to maintain and strengthen public service
broadcasting; what does that tell you about what the role of the
BBC should be over that same period—hence our recommendations
on the purposes and characteristics of the BBC's public service
provision.
Q556 Mr Doran: Let us look at two
areas. Nick Hawkins has already mentioned the Hollywood film and
we are interested in film as part of the public sector broadcasting
requirement. So far it seems that, in the UK anyway, UK films
are fairly low down the agenda for all terrestrial broadcasters
at the moment. Can you say a little about what Ofcom's position
is in relation to the contribution of film to the cultural aspect
of public service broadcasting?
Mr Carter: We do not have a specific
remit by programme genre beyond obviously the area of sport, where
there are specific listed events which are governed by statute.
We have not done a particular analysis or detailed study on the
provision of film, so I could not give you an informed answer
to that question.
Q557 Mr Doran: You have no position
on this level of importance? Is it something television generally
should be encouraging?
Mr Carter: I am sure we do not
have a specific remit in that area. All I would be doing would
be expressing a personal view.
Q558 Mr Doran: Back to the point
about the Hollywood films, what you seem to be saying, if I read
your report correctly, is that there should be some limit on the
BBC being able even to bid for Hollywood films. Do I understand
it properly?
Mr Carter: The actual nature and
structure of the BBC's schedule is in the language of the Communications
Act Tier 3 Regulation and therefore, as Tony said earlier, a matter
for the BBC Governors. The point we were trying to make in our
report was against our analysis that said the importance of the
BBC providing public, high quality, challenging, original production
and schedules that engage for a UK audience would sharpen one's
focus around the delivery of that schedule and would lead one
to ask some questions about substantial investments being made
to acquire foreign, in this instance Hollywood, films.
Lord Currie of Marylebone: It
is for the Governors to make those judgments.
Q559 Mr Doran: That seems quite a
strong steer from Ofcom, a statement along the lines that in future
the BBC should have regard to the extent to which (Hollywood films,
however expensive) it acquires programmes which meet its own public
value test. That is a very strong statement. You are also encouraging
of the BBC's recent statements where they are increasing investment
in the regions. On the other hand, that is balanced if you like
by strong statements about the impact of the regional requirement
at the moment on the independent companies. In the Phase 2 document
you say that the cost of programming will greatly exceed the value
of any privilege available to Channel 3 licences. I can understand
that in the context of the analogue broadcasting, but I have difficulty
in seeing that in relation to a digital licence. I will not go
through the rest of it. The current position is therefore neither
sustainable nor desirable in either the English regions or the
nations, which suggests that Ofcom is in favour of removing the
regional broadcasting commitment. There is a statutory requirement,
I know that, until the statute has changed and you can support
that; but that is a very, very strong statement. It is arguable
that the whole responsibility for regional broadcasting should
be pushed on to the BBC. Is that Ofcom's position?
Mr Carter: No, I would not again
put it in those words. If I can perhaps come at the question in
a slightly different way, it seems to us more than a fortunate
coincidence of timing that your own report into the BBC's Charter
Renewal, the fact of the BBC's Charter Renewal, the fact of planning
for digital switchover, and the fact of our report all happen
at the same time. What we were trying to do in that particular
section was to draw those various strands together to paint a
picture of what was likely to happen over the period. We were
not suggesting it was going to happen immediately and, as you
rightly point out, there are statutory obligations we are required
to license and impose, but we were drawing a picture so that the
time the BBC's Charter is being renewed over five or 10 years
it could be renewed with a reasonable knowledge and understanding
of what was going to happen in the other side of the public service
provision, which is the commercial side.
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