Memorandum submitted by Carole Tongue
and David Ward
INTRODUCTION
Over the past decade there has been huge changes
in the broadcasting sector with the growth in the number of channels
available to the viewer and the development of new platforms for
delivery. In the face of these changes, public service broadcasting
has remained a constant feature of the UK broadcasting ecology,
despite forecasts for its imminent demise. The BBC is strong,
well funded and it provides a range of services that are unmatched
in terms of creativity, innovation and volume by any other broadcaster
in the world. We believe that the BBC largely works well as the
main public service broadcaster in the UK, though there is always
room for improvement and we believe this can be achieved through
developing a more effective system for assessing its performance.
The key issue that we have focused upon therefore is accountability
and how to sustain the BBC as not only a pioneer public broadcaster,
but as a modern public institution that accounts for both its
activities and funding in an independent and transparent manner.
Accountability is crucial to both the maintenance
of legitimacy for the BBC and in a regulatory capacity to ensure
that the BBC fulfils its obligations in all of its public service
activities. The BBC has, and continues to be a positive and central
institution in British cultural and political life and the public
should continue to have access to its full range of services.
The more platforms that the BBC can provide services on, based
on public service principles, the more that the public will benefit
from having access to a diverse range of quality media based services
across platforms. To this end the Government should strive to
secure and guarantee the future of the BBC during the Charter
review process. It should at the same time put in place a transparent
and adequate framework for assessing the activities and performance
of the BBC in order that value for money, quality and an assessment
of how the BBC has met the requirements of its Charter are satisfactory.
In the context of scope and remit, how should
the BBC be funded?
The above activities are made possible by the
unique funding and remit the BBC enjoys. The funding from the
public purse is crucial to ensure that the commitments set out
in its Charter are satisfactorily met. The BBC reaches every citizen.
It belongs to the people of Britain and it is part of an exclusive
group of institutions that are governed by certain principles
in their range of activities and are wholly concerned with providing
a public service. It has done this with success and value for
money. The BBC has a duty to serve a range of needs and tastes
and it is essential to the maintenance of a diverse and plural
television ecology that the BBC invests in and reacts to these
needs.
The main funding alternatives to the licence
fee have been argued for some time and have been raised in both
the report by the Peacock committee in 1986 and more recently
by the Davies report into the future funding of the BBC. It is
widely agreed that until better options are available the licence
fee should remain the main source of income for the BBC. It is
only when options become realistically available we should seriously
consider the alternatives. For the foreseeable future we do not
believe there is an alternative to the licence fee, as any alternative
would lead to a seismic shift in the television landscape and
a loss in the public service values that the Government has stated
are principal public policy objectives.
Previous assessments of other funding options
have rejected the main alternative to the licence fee (a mixed
model of licence and advertising revenues), as unsuitable both
in terms of the detrimental impact on the commercially funded
broadcasters in the UK and programming. Evidence from experiences
in the European Union would support some of the conclusions made
by these reports, especially in cases where advertising revenues
have become a large proportion of revenues for public broadcasters.
In these countries the public service broadcasters have become
engaged in aggressive competition with the commercial sector to
the detriment of themselves and the sector overall.
In this sense the only alternatives for funding
the BBC are seen to be from the public purse or subscription.
The strongest solution of which, we believe is the licence fee.
FUNDING THE
BBC FROM GENERAL
TAXATION
Although this funding model would allow for
more progressive mechanisms to be employed there are certain disadvantages
of linking the funding of the BBC to general taxation policy.
Firstly, it raises issues of political independence, a core principle
that underpins the activities of the BBC. Secondly, by bringing
the funding of the BBC more closely into government taxation policy
it would be open to the vagaries of changing political policies
on taxation and government spending.
The Government now recognises that public services
in the UK have been fundamentally damaged in the past by cut backs
and the lack of funding under previous governments for these organisations,
and has undertaken a programme to inject adequate resources back
into the public sector. We cannot afford a similar situation for
the BBC and it must retain its independent funding in order for
it to fulfil its public service obligations. We must draw on the
lessons of other public services where short-term spending cuts
have brought about a decline in the quality and range of services
that the public has access to. In one sense the BBC has been extremely
privileged that it has retained the licence fee, which has meant
that it has not had to suffer the cuts in budget that was witnessed
in the NHS and other important British institutions under previous
governments. Such would be a major disadvantage of abolishing
the licence fee and replacing it with a system funded through
taxation. As we have seen in the past it is very difficult to
rebuild these organisations once governments have embarked on
radical spending cuts affecting public services.
FUNDING THE
BBC FROM SUBSCRIPTION
Subscription, amongst other funding solutions
has been recommended as a replacement for the licence fee by a
recent report by the Broadcasting Policy Group. Although there
may well be arguments to support a greater degree of consumer
freedom in the choice of television services we believe there
are fundamental problems with this model and the licence fee remains
a more productive funding solution.
The introduction of a voluntary subscription
fee would inevitably lead to a loss of revenue in a transitional
phase. Little or no research has recently been conducted on who
would offer to take out a voluntary subscription to the BBC and
thus what income the BBC would enjoy to plan for the future, at
this crucial point in the development of the British television
industry. Even considering mechanisms that would subsidise the
BBC in an interim period the instability caused to the Corporation
would have incalculable effects. Public television services would
also, given the loss of critical mass the BBC currently benefits
from become more expensive for the end user and this would act
as a deterrent for some sections of the community to engage with
programming that not only entertains, but also informs and educates.
It would dilute key principles of public service such as universalism
and inclusion that have underpinned our television and radio services
for generations.
FUNDING PUBLIC
SERVICE BROADCASTING
FROM CONTESTABLE
FUNDING
The second important issue is how public money
is allocated. The idea of an Arts Council of the airwaves first
explored by the Peacock Committee and more recently taken up by
the Broadcasting Policy Group suggests that the break up of the
BBC and the redistribution of public money across the sector specifically
for public service programmes would positively benefit British
viewers and listeners. At this point in time we cannot see what
benefits there would be for the viewer and listener of such a
system of radical reform.
Contestable funding is seen as a mechanism to
encourage the sector as a whole to make public service programmes
that under perfect conditions will be scattered across numerous
television channels. It assumes that commercial companies will
be offered sufficient incentives to make these programmes. There
is little evidence to support such a claim in the current British
television landscape that funding by this method would be adequate
in moving the commercial sector towards a more public service
orientation. Controversy would undoubtedly arise if public money
was allocated to subsidise commercial channels, some of which
now invest in public service programming and others which do not.
The importance of the culture of an institution
and the role played by the BBC both as a benchmark for other broadcasters
in the UK and as a focal point for listeners and viewers is key
to the British system and this would also be swept aside. According
to the BBC audience research department some 52% of the British
public tuned into BBC television news on September 11, demonstrating
a remarkable sense of loyalty and trust the public have for the
BBC. In short, without sufficient evidence to the contrary, the
licence fee supporting a strong central institution remains the
most effective mechanism to produce and distribute public service
radio and television. It would simply be counter productive to
dismantle the current system just for the sake of innovation.
The present system is not the major problem facing public service
broadcasting in the UK.
Neither would it solve the issues of the disadvantages
of having a funding solution tied to general taxation. Funding
would be prone to increases and more likely decreases following
the overall economic climate and government spending policy, without
an adequate mechanism for assessing the real financial needs of
a dynamic and healthy public service in broadcasting. With a television
system of over 200 channels the system would be administratively
complex both in the selection of projects, as well as regulating
the successful applicants to ensure that the programmes that have
been awarded financial support have actually achieved the quality
threshold that would presumably underpin such a system. It would
do little to alleviate the inherent problems of defining issues
such as quality and diversity and could have an unanticipated
consequence of diluting the principle of public service in British
broadcasting. We are still left with the problem as to what constitutes
a public service programme, and perhaps more crucially who defines
what is or what is not a public service and we would be in danger
of ghettoising public service programming and scattering it over
the whole schedule to the confusion of the viewers.
THE ADVANTAGES
OF THE
LICENCE FEE
SYSTEM
The value of the licence fee system is that
all households that have a television set contribute. This means
that the licence fee is set at a rate that the large majority
of households can afford. As the DCMS has pointed out the current
fee will be raised to £121 in April 2004, a fee of a little
under £11 per month in line with the current agreement with
the BBC. The licence fee ensures a consistent level of funding
necessary for the BBC to provide a wide range of programming and
services. In 2003 the total revenues from the licence fee enjoyed
by the BBC were £2,658 million. Together with its commercial
revenues this makes the BBC the sixth largest media enterprise
in Europe according to company turnover and the second largest
public broadcaster after ARD in Germany.
This income does not go to shareholders. It
is invested in producing and distributing a growing range of audiovisual
services on a non-profit basis. Because of this the BBC invests
over £1 billion in original programming and is a major contributor
to our society's culture, creativity, jobs and skills in the British
audiovisual industry. According to the European Audiovisual Observatory
ZDF/ARD and the BBC invest the highest levels of resources in
original fiction of any broadcaster in Europe.
The licence fee enables a consistent, stable
and high level of investment in British programmes and it creates
the conditions that provide the BBC adequate revenue to provide
its core British services independently of commercial imperatives.
It allows the BBC independence in programming and scheduling decisions
that is crucial to the fulfilment of its Charter requirements.
Even if we reached such a time when realistic
alternatives were available the value of the licence fee should
not be underestimated, nor should the advantage of a system whereby
every household in the UK that has a television set contributes
to the funding of the BBC. In many respects it is the key to both
the range of activities undertaken by the BBC, as well as how
the BBC fulfils its obligations in this range of activities. It
is not only what programmes are produced, but the whole approach
to the production and distribution of radio and television programmes
as well as other media based services that makes the BBC stand
out in British broadcasting today.
Although we believe that at the present time
it is only through public money that these services can be provided
in the quantity and quality that they are currently supplied.
However, the potential value of measures such as subscription
should not be underplayed. If the system can be used to devise
a method for compulsory subscription, that cuts down on administrative
resources in collection and processing then this should be welcomed.
But the key is that subscription should be compulsory to all television
households as an enabling mechanism that allows forward planning
and stability.
We see the main weakness of the licence fee
is that it is regressive and it is simply unfair to apply a flat
fee on households that enjoy highly differentiated incomes throughout
the UK and this is a legitimate complaint that must be taken seriously.
In this respect the licence fee must be seen by the public to
be able to account for households that may not be in a position
to pay the annual fee and consideration should be given to making
the licence fee less regressive. A more progressive licence fee
would benefit all of the community and provide for a more inclusive
mechanism. To this end the Charter review process should investigate
making the licence fee more sensitive to different income levels
whilst at the same time ensuring the levels of funding are proportionate
to the costs that the BBC incurs in fulfilling its remit.
SETTING THE
LEVEL OF
FUNDING—A COUNCIL
FOR PUBLIC
SERVICE BROADCASTING
Any assessment of funding must take into account
the needs of the BBC as well as value for money to ensure that
public money is well spent. It is crucial that the licence fee
is set at a level that is proportionate to the costs incurred
by the BBC in fulfilling its remit as a public service broadcaster
covering the whole range of interests in the UK. The licence fee
determines what the BBC is able to do and in this sense it is
important to underline the BBC's central role in our society's
creative and cultural spheres. It is also true that the funding
of the BBC has become a far more complex issue with the growth
of competition in broadcasting.
Setting the licence fee is always a political
question in the UK and it is quite right that the parliamentary
process reviews the allocation of such large sums of public money.
All too often the arguments over the level of the licence fee
have been prone to political pressures. We believe that it is
necessary in the first instance for the issue of funding to be
removed from the primary political domain and from lobbying by
the BBC and other interested parties. Given the complexity of
the modern broadcast sector a permanent council should be established
that is accountable to Parliament with the task of assessing the
financial needs of the BBC.
Any such council would be responsible for assessing
the level of the licence fee as to whether it is adequate and
proportionate as well as whether it needs adjusting. In this manner
Parliament and the public would have access to a broad range of
information and evidence based recommendations, which would provide
solid foundations to underpin public policy.
The council should be comprised of individuals
with knowledge of the industry that is able to act independently
of both the Government and the BBC. Appointments to such a council
should be independently adjudicated. Past reviews of funding have
largely been dealt with by ad hoc committees and a permanent
council would be better placed to fully report on the needs and
spending of the BBC and take into account market conditions. We
therefore would recommend a permanent body charged with setting
the level of the licence fee, which it concludes as appropriate
to the needs of the BBC.
In regulating the BBC we should strive to achieve
proportionality against a clearly defined remit that will clear
up any unjustified criticism of the BBC in its output and spending.
The BBC has already made great strides in accounting for its performance,
but a clearly articulated remit setting down the aims and objectives
of the Corporation together with a system of independent regulation
will not only ensure that the BBC continues to fulfil its public
service remit, but will also make the system transparent and open
to public debate and scrutiny.
The BBC should, however, not be allowed to go
beyond the range of services that are either legitimate public
services, or where it does operate commercial services, what is
necessary for the Corporation to fund its public services activities.
Proportionality and the separation of accounts for public and
commercial services provided by the BBC is the key issue here
and, in line with the European Commission's approach to the funding
of public broadcasters in Europe. The BBC already provides a separation
of these activities.
How should the BBC be governed and/or regulated
and what role should be played by the Office of Communications?
It is important that the governance of the BBC
is both independent from government and BBC management. The self-regulatory
culture of the Board of Governors has been largely successful
throughout the history of the institution, but it is prone to
be influenced by the management of the BBC and its composition
is largely unreflective of the diversity of modern society.
Though we would endorse self-regulatory practices
at the BBC, there is a strong case for reform of the nature and
constituency of the current board of governors. There is now a
broad consensus that the unrepresentative nature of the board
of governors as well as their dual role in governance and regulation
is an anomaly and it is crucial to modernise the present arrangements.
We would suggest that more suitable structures
be considered in the Charter renewal review in order to ensure
more independence for the regulation of the BBC. A solution may
well be to separate the regulatory and strategic functions of
the Board in order to achieve full independence for the regulatory
aspects of the BBC and this would entail changing the role of
the present Board of Governors and reducing both its capacity
and size, whilst introducing an independent council to act as
the regulator of the BBC.
A Council for Public Service Broadcasting composed
of qualified experts would have a remit to rigorously assess the
performance of the Corporation in all its activities. A system
of this kind has already been established in Norway where there
is a specific council established to monitor and assess the performance
of the broadcasters that have public service obligations. The
Allmennkringkastingsradet (the Public Service Council)
is responsible for reviewing the performance of the broadcasters,
which come under its remit, pursuant to the obligations detailed
in the Broadcasting Act, NRK's statutes, and the commercial broadcaster's
concession. We would suggest such a model offers a strong alternative
to the current arrangements.
To ensure minimum replication of functions any
proposed council should function in a dual role to both assess
the performance and the funding needs of the BBC and therefore
combine similar functions as to the ones undertaken by the KEF
in Germany, together with undertaking an independent review of
the BBC's performance and activities. A two pillared structure
covering funding and regulation would provide a systematic and
efficient framework for an independent review of the BBC in these
crucial areas. With an independent secretariat, legal standing
and a separate facility for a council of this kind, independence
would be maintained from the Government and the BBC ensuring no
conflicting roles for the council.
The advantages of this system are clear. An
expert council that acts independently of the BBC and government
has the potential to depoliticise the question of funding and
assessment of the BBC's activities. The duties of this body would
include a continual assessment of the performance and the financial
requirements of the BBC and it would be well suited to regulating
a modern and increasingly complex Corporation. This independent
body in turn would be required to report annually to Parliament.
We would also suggest that this body was legally independent of
Ofcom and able to operate across sectors to best undertake its
role as regulator. Although we understand that given Ofcom will
be responsible for tiers 1 and 2 of the new regulatory framework
some degree of cooperation would be productive, but we would like
to see the 3rd tier of the framework wholly independent from Ofcom
as is envisaged in the Communications Act.
A more developed system for monitoring compliance
is also essential with minimum and in some cases maximum thresholds
employed on certain genres of programming. In the Netherlands
they have employed this system with success and the public broadcasters
have a ceiling placed on them for entertainment and at the same
time minimum thresholds for important programme genres such as
art and culture. This allows a balanced assessment of the output
of NOS and ensures the public channels remain loyal to their remits.
Programme reach should also be encouraged across programming and
a system developed to ensure that the BBC is reaching all parts
of the viewing and listening public, with minimum reach thresholds
in areas such as news and documentary put in place.
The council should be efficient, combine the
necessary expertise to undertake a thorough assessment of the
BBC's finances and activities and have the resources to be totally
independent in its activities. Furthermore, it should be composed
of a small but effective team that has an evidence based approach
to regulating the BBC rather than a political one and operate
as a permanent office.
We would suggest a separation between the powers
of the current Board of Governors especially in their dual role
as both "guardians of the public interest" and, as "strategic
directors" of the Corporation. By dividing these functions
a greater degree of separation of these roles will be achieved,
and as a consequence the regulation of the BBC will be independent
from the management of the Corporation. The BBC would retain some
form of scaled down Board of Governors to undertake the strategic
role that it presently performs as strategic directors, if practicable.
The council responsible for the assessment of
the BBC would account to Parliament on an annual basis and give
recommendations as to the funding and performance of the BBC.
Where necessary the parts of the current review process that the
BBC undergoes would remain to ensure a consultative and rigorous
review process. The BBC has already embarked on a broad information
campaign to inform the public of its activities and its statement
of programme policy sets out the objectives for the Corporation
annually and this should be continued.
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?
The Royal Charter has acted as the legal basis
of the BBC since it became a public corporation and is ill suited
to set out the duties and responsibilities of the contemporary
BBC and we would suggest it is not renewed and is replaced with
a more suitable instrument. We would like to see something far
more permanent both in terms of reviews of the BBC's services
and its legal standing and obligations.
Given expected growth in digital TV and likely
developments in the Internet and other new media, what scope and
remit should the BBC have?
Over the past decade there has been rapid innovation
in communications technology that has brought about huge changes
not only in the delivery of audiovisual services, but also their
production. The BBC has embraced these changes and with government
consent (and scrutiny) embarked on a programme of expansion in
Internet and digital (niche) television services. New technology
has been a central part of government communications policy for
the past decade. The BBC has been at the forefront of these developments
firstly by supplying one of the most developed and comprehensive
web-based services in the world and secondly by taking over, together
with BSkyB and Castle Communications the digital terrestrial platform
from ITV Digital in a strategic partnership to support and drive
roll out of digital television services and broadband.
Throughout the history of public service broadcasting
an important part of the BBC's strategy has been to develop and
embrace innovation in radio and television and in this tradition
it has moved into Internet and digital television services. In
this respect the modern day concept has shown itself to be dynamic
and responsive to developments in technology, as it has expanded
services to include the Internet and niche television channels.
In our opinion this is in line with the concept of public service,
as the concept cannot remain tied specifically to traditional
media. As new platforms develop it is important that a space is
reserved for public services that reflects the diversity of the
population and their requirements, not just as consumers, but
also as citizens across platforms and medium.
Given the multiplicity of channels and platforms
for the delivery of information, education and entertainment,
citizens and consumers still require indigenous programming made
specifically for them that enables them to make sense of a complex
world and a huge number of sources of information. If digital
television is going to enhance pluralism and viewer choice it
is important that the BBC continues to invest in new digital services,
and offer a range of public services, particularly thematic channels
composed of local and national programming produced specifically
for British viewers and listeners.
It is also important that the Government lays
out the responsibilities of the BBC clearly across different platforms
and that performance can be measured against these set objectives
without stifling the institution. These requirements should include
both quantitative and qualitative measures in order to assess
the annual performance of the BBC in contributing to the following
objectives:
— A democratic and/or pluralistic society;
— National, regional and local culture;
— High quality programming;
— Meeting high journalistic standards;
— Investment in the indigenous audiovisual
industry;
— Providing a universal service.
It is, as crucial today as it has ever been
to steer the broadcasting market in order to derive maximum benefits,
to as many viewers as possible. It is therefore necessary to have
the right regulatory structures in place to enable the BBC to
take advantage of the new opportunities that multi-channel television
and broadband offer, whilst also guaranteeing that its central
activities remain governed by core public service principles.
References
Machet, E, Pertzinidou, E and Ward, D (2002)
A Comparative Analysis of Television Programming Regulation
in Seven European Countries: A Benchmark Study. NOS.
Tongue, C (1996) Tongue report on the Future
of Public Service Broadcasting in the Digital Age. Adopted
by the European Parliament. September 1996.
Betzel, M and Ward, D (2004) The Regulation
of Public Service Broadcasters in Western Europe. In Ward (2004)
(Ed) Special issue of Trends in Communication Public Service
Broadcasting: Change and Continuity. Issue 12, No 1. LEA.
April 2004
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