Memorandum submitted by the Office of
Communications (Ofcom)
INTRODUCTION
Ofcom has been asked to provide a submission
to the Culture, Media and Sport Select Committee Inquiry in relation
to BBC's Charter Renewal. Our submission is set out in two parts:
— Part 1 sets out the regulatory functions
that Ofcom carries out in relation to the BBC, and the functions
that Ofcom has in relation to commercial broadcasters that do
not apply to the BBC.
— Part 2 provides a summary of recommendations
that Ofcom has made in recent public documents which relate to
the review of the BBC's Royal Charter.
The BBC plays a central role in our society,
with a reach and influence envied by many private companies and
public institutions. As we enter a fully digital world, the BBC
has the opportunity to reinforce its importance and its value
in an increasingly fragmented market. It is therefore important
for Parliament, the Government and the BBC to ensure the Corporation
can operate within effective governance and regulatory arrangements.
Ofcom, as a statutory corporate body, has no
preference for any one system of governance or regulation of the
BBC, regarding these as a matter for Government and Parliament.
PART 1: OFCOM's REGULATORY ROLE IN RELATION
TO THE BBC
AREAS IN
WHICH OFCOM
HAS A
REGULATORY ROLE
IN RELATION
TO THE
BBC
Regulation of broadcasting content can broadly
is split into three tiers: tier1 regulations apply to all broadcasters
and relate to avoidance of harm and offence, impartiality, subliminal
messages and fairness and privacy; tier 2 regulations apply to
designated public service broadcasters and consist of quotas for
certain programmes; and tier 3 regulations comprise the public
service remit of designated public service broadcasters.
Section 198 of the Communications Act 2003 requires
that Ofcom shall carry out such regulatory functions in relation
to the BBC as are specified in the Act or in the BBC Charter and
Agreement. The Agreement was amended in December 2003 for this
purpose.
In each case below, where a power stems directly
from the Act, or where the Agreement has the effect of applying
that section to the BBC, the relevant section is stated.
Section 198 gives Ofcom the power to impose
a fine of up to £250,000 on the BBC for a breach of any of
the requirements below (except listed events) if, after giving
the BBC reasonable opportunity to make representations, it believes
such a fine would be warranted. (In the case of listed events,
Ofcom can only report the matter to the Secretary of State under
section 103 of the 1996 Broadcasting Act.) Ofcom can also direct
the BBC to take remedial action, including broadcast of a correction
or a statement of findings and/or a direction not to repeat a
programme.
TIER 1 ("NEGATIVE"
MINIMUM CONTENT
STANDARDS AND
COMPLAINTS HANDLING)
The following requirements apply to all BBC
Public Broadcasting (ie licence fee funded) Services, including
radio, in the same way as they apply to commercial broadcasters.
— Observance of the Ofcom code dealing
with fairness and privacy for those involved in programmes (Act
S327)
— Observance of the Ofcom code dealing
with programme standards concerning:
— Protection of those under the age
of 18 (Act S319(2)(a))
— Exclusion of material likely to encourage
or incite crime or lead to disorder (S319(2)(b))
— Exercise of a proper degree of responsibility
with respect to religious content (S319(2)(e))
— Application of generally accepted
standards to provide adequate protection from offensive and harmful
material (S319(2)(f))
— Subliminal messages (319(2)(l))
TIER 2 (QUOTAS
FOR TELEVISION
PROGRAMMES)
The Agreement provides for Ofcom to agree or
be consulted by the BBC's Governors about quotas for the BBC of
a similar kind to those for commercial PSB channels and services.
These cover:
— News at intervals on BBC1
— Current affairs on BBC1&2 taken
together
— Peaktime current affairs on BBC1&2
taken together
— Original productions on BBC1&2
and BBC digital services
— Original productions in peaktime
on BBC 1&2 and BBC digital services (note: in practice peaktime
quotas have only been set for BBC1-4)
— Other regional programmes on BBC1&2
taken together
— Regional programmes made in region
— Regional news and other programmes
in peaktime and immediately preceding or following peaktime
— Production of network programmes
made outside the M25 across BBC1&2 and BBC digital services
taken together, by hours and expenditure
— Subtitling, sign language and audio
description for sight/hearing impaired people—BBC must observe
the Ofcom code on this
— Independent productions (Schedule
12 Part 1 of the Act and Agreement)
OTHER
The BBC is also required to:
— Produce a code on programme commissioning
in accordance with Ofcom guidance;
— Comply with international obligations
notified to the BBC by Ofcom;
— Retain and produce recordings of
television and radio programmes;
— Publicise Ofcom's functions in relation
to handling complaints (Schedule 12 Part 1 of the Act);
— Observe Ofcom's code containing rules
on coverage of major events (Part IV of the Broadcasting Act 1996
as amended by the Television Broadcasting Regulations 2000 and
sections 299-302 of the Communications Act 2003)
— Co-operate with Ofcom and produce
information to Ofcom in connection with
— Annual factual and statistical
report
— Report on fulfilment of
public service remit
OFCOM'S
FUNCTIONS UNDER
COMPETITION LEGISLATION
Part 5 of the Communications Act sets out Ofcom's
functions under competition legislation, and in particular, the
areas where Ofcom can concurrently apply general competition law
alongside the OFT. To date the issue of the application by Ofcom
of competition law to the BBC has not arisen.
AREAS IN
WHICH OFCOM
HAS NO
REGULATORY ROLE
IN RELATION
TO THE
BBC
The sections of the Communications Act listed
below apply to commercial PSB channels, but have no application
to BBC Public Broadcasting Services. These are currently the responsibility
of the BBC Governors.
TIER 1 ("NEGATIVE"
MINIMUM CONTENT
STANDARDS AND
COMPLAINT HANDLING)
— Programme standards concerning:
— Commercial products within programmes.
TIER 2 (QUOTAS)
— Party political, election and referendum
broadcasts
TIER 3 (PUBLIC
SERVICE REMIT)
— The BBC is only obliged to "consider
. . . anything of relevance" in Ofcom guidance on annual
reviews and statements of programme policy and Ofcom's annual
reports and PSB reviews, and it is itself responsible for assessing
the quality and effectiveness of its services, not Ofcom. In the
case of commercial PSB channels, any "significant change"
in programme policy must be approved by Ofcom, which also has
backstop powers to impose detailed regulation in the case of serious
failures. For the BBC, backstop powers rest, in effect, with government
through the Charter, Agreement and government's power to approve
and set conditions for new digital services.
OTHER
— Making arrangements for training
and equal opportunities in employment
— Contributions to a National Television
Archive
COMPETITION FUNCTIONS
Under Section 316 of the Communications Act
Ofcom may include in all broadcast licences any conditions that
it considers appropriate to ensure fair and effective competition
in the provision of licensed services or of connected services.
All broadcast licences currently include a provision stating that
the licence holder must not:
(a) Enter into or maintain any arrangements,
or
(b) Engage in any practice
that Ofcom considers, or would consider to be prejudicial
to fair and effective competition. This allows Ofcom to impose
ex ante conditions on broadcast licensees where Ofcom has
concerns that the licensee is or is likely to harm competition.
Currently Ofcom has four Codes that set out
detailed rules in specific areas on the types of behaviour that
we would consider to be prejudicial to fair and effective competition.
These cover the areas of:
— Advertising sales arrangements;
— Minimum carriage requirements; and
— EPGs (excluding access and pricing
arrangements which are covered under the Access Directives).
If a licensee were to breach the rules set out
in these Codes, Ofcom would consider that the licensee was acting
in a manner prejudicial to fair and effective competition and
would be able to impose sanctions as set out in Schedule 13 of
the Communications Act.
Clearly, since Section 316 is only applicable
to Ofcom's licensees, the BBC is not covered under any of these
ex ante regulations.
PART 2: OFCOM's PUBLISHED RECOMMENDATIONS
CONCERNING THE BBC
In many areas of our statutory responsibilities,
Ofcom must consider the BBC's activities, since the Corporation
is such a large and important part of the UK broadcasting market.
In two recent documents, Driving Digital Switchover: a report
to the Secretary of State and Ofcom's review of public service
television broadcasting "Is Television Special?", for
example, the issues could not be discussed without reference to
the role of the BBC. In both documents, Ofcom made some firm recommendations
and put forward some propositions, which relate to the Government's
review of its Royal Charter. Below is a list of our recommendations
and propositions.
DIGITAL SWITCHOVER
— In the context that it is important
for all broadcasters to have clear and unambiguous incentives
to drive digital switchover for it to happen, Ofcom made the following
recommendations regarding the BBC.
— "Ofcom recommends that as part
of the BBC's Royal Charter review, the Government adds specific
obligations to the BBC's current general obligations to promote
digital TV. They should include obligations on rolling-out digital
transmission nationwide, providing public information, continuing
to provide its channels on the free-to-view satellite platform,
and providing on-air marketing of digital TV on a platform-neutral
basis."
— In a discussion of which institutions
should manage the process towards switchover, Ofcom recommended
the establishment of a body, termed SwitchCo, which would have
sufficient independence of broadcasters and the government. We
recommended:
"Many interested parties—the Government,
the broadcasters, Ofcom, manufacturers and retailers—will
continue to have important roles to play in delivering switchover.
They must agree to SwitchCo's role and remit, and would be part
of its governance arrangements. However, neither the Government,
nor the BBC, nor a consortium of broadcasters, nor Ofcom should
run SwitchCo because their interests are diverse. Instead, SwitchCo
should have sufficient independence so it can represent the national
interest effectively, ensure platform neutrality and avoid conflicts
of interest."
PUBLIC SERVICE
BROADCASTING REVIEW
— Ofcom recognised the "strong
case for the BBC to continue to undertake a wide range of activities
to underpin the delivery of public purposes and characteristics
of public service broadcasting.
— In relation to the BBC's impact on
audiences, we noted that audiences had fallen across the main
terrestrial TV channels. Also, the reach of terrestrial channels
had fallen. We noted:
"In 2003, BBC One reached 80% of audiences
in cable and satellite homes for 15 minutes or more each week,
compared with 84% in 1998; the same channel reached only 75% of
16-34 year-olds in 2003."
— In relation to attitudes of the public
to the BBC, we noted:
"The BBC was assumed by the public to have
the most programming obligations, Channel 5 the least. Audiences
gave ITV1 some leave to pursue mass audiences with popular drama
and entertainment."
— In relation to the programming on
BBC television over the past five years, we noted:
"Broadcasting professionals felt that the
BBC had taken a more aggressive approach to winning audiences
in recent years and was less different from other channels than
it should be."
— The changing environment of the television
market is likely to pose further challenges to the BBC. We noted:
"The TV licence fee is already questioned
by viewers whose use of the BBC's services is declining. Dissatisfaction
with the BBC's method of funding may increase and there is an
additional question about whether the BBC's income will keep pace
with rising viewer expectations for high quality content."
— When evaluating the immediate consequences
of our phase 1 research, we concluded:
"In parallel, the BBC needs to reaffirm
its position as the standard setter for delivering the highest
quality PSB. The BBC Governors should take the lead in ensuring
the BBC addresses concerns about derivative formats, aggressive
scheduling, competition for acquired programming and a balanced
schedule in peak hours."
— Our first proposition which had consequences
for BBC was:
"We need to examine the prospects for PSB
funding and the case for seeking alternative resources. The existing
funding base for PSB is being eroded. The traditional obligations
on commercial broadcasters, set by the regulator, are being undermined
by increased competition, falling audiences and declining advertising
revenue. The BBC faces a similar problem: popular support for
the TV licence fee may be jeopardised by the same development.
So, new forms of explicit or implicit funding or support for PSB
need to be considered for the longer term. These should include
areas such as EPG positioning, digital multiplex access, commercial
TV's payments to the Treasury and other possible incentives."
— Our sixth proposition for public
service broadcasting was:
"Notwithstanding developments in the market,
there is a strong case for the BBC to continue to undertake a
wide range of activities to underpin the delivery of the public
purposes and characteristics of PSB. But its range of activities
needs to be reviewed periodically in relation to core PSB purposes.
— Where a high cost of delivery is
associated with low viewing figures, it will be harder to justify
continued public intervention. Alternative means of funding, such
as subscription, should be considered for these services.
— Other activities, including secondary
market distribution, studio and other production resources, and
indeed production should be reviewed carefully against their distinctive
contribution to PSB purposes.
— Our seventh proposition was:
"In the case of the BBC, with its unique
and privileged funding status, programmes should always strive
to reflect the broad purposes and character of PSB to some degree."
26 May 2004
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