Memorandum submitted by Richard Collins,
Professor of Media Studies, The Open University
Given the expected growth in digital TV and likely
developments in the Internet and other new media, what scope and
remit should the BBC have?
Broadcasting markets fail. Markets are unlikely
to fully realise public policy objectives such as universal access
at affordable prices to a range and quality of programmes and
services which enable viewers and listeners to participate fully
in their society. But how much do markets fail? What's an appropriate
and proportionate redress of market failure? Too little intervention
leaves viewers and listeners sold short, too much swamps private
sector provision reducing pluralism, diversity and innovation.
We need clearer definition of public policy objectives and thus
of public service broadcasting's remit (and the BBC's remit in
particular) to know whether the BBC is too big, too small or just
right.
The BBC should improve the QUID—the Quality,
Universality, Independence and Diversity—of UK broadcasting
and online services. Its provision should be distinctive and recognisably
different to commercial services. The BBC should augment pluralism
and diversity not provide "me too" competition and/or
"crowd out" alternatives.
The complexity of broadcast and online goods
and services and the desirability of innovation and originality
means that the BBC's remit can't be prescribed "ex ante".
The BBC's Governors should publish forward looking QUID objectives
and retrospectively publish performance assessments using objective
criteria. See Collins 2004 and Collins and Purnell 1995 for detail
and discussion.
The BBC is custodian of an enormous portfolio
of publicly funded intellectual property, new technologies promise
to make this accessible to the public that has paid for it. The
BBC should use Video On Demand to make its archive of programming
available to UK licence fee payers.
In the context of scope and remit, how should
the BBC be funded?
The BBC should continue to be funded through
a licence fee and insulated from direct Government influence.
The BBC's Governors should have the primary responsibility for
defining the BBC's public service remit, their proposals should
be published for public consultation and Ofcom comment. The enormous
rise in BBC licence fee revenues (c30% in the current licence
period) shows the difficulty of ensuring the BBC receives the
right amount to discharge its public service mandate. So, every
three years, a new body, like the German KEF, should set the level
of the licence fee in the light of the BBC's public service remit,
the willingness of the public to pay and the costs a reasonably
efficient organisation should require.
How should the BBC be governed and/or regulated
and what role should be played by the Office of Communications?
A single independent body, able to develop regulatory
expertise and ensure effective regulation, should have overall
authority in respect of the BBC. Although the BBC has commercial
and public service roles these cannot always be distinguished.
An egregious example was the BBC's launch of a commercial news
to mobile telephones service: when this proved unprofitable it
was re-designated as a public service. Moreover, the size of the
BBC's notionally public services, more than 50% of radio consumption
and around 40% of television consumption, inevitably affects commercial
broadcasting and thus diversity, pluralism and competition. The
BBC is a commercial force of some magnitude—depending on
how intra-group transfers are considered the BBC's commercial
activities equate to between three and five Channel 5s!
The established regulatory three way split between
DCMS (approval of new services and the level of BBC funding),
Ofcom (oversight of competition, tiers 1, 2 and 3 content issues
and the independent production quota) and the BBC Governors (other
matters) does not address these issues adequately. Moreover, the
BBC's mix of commercial and public service activities makes relevant
competition law of uncertain application. The BBC will only be
caught under the Competition Act 1998 if it is an "undertaking"
(an entity carrying on an economic activity), and it will not
in every case be acting as such. Even where the BBC is regarded
as an "undertaking" the force of the Competition Act
as a whole may not apply if the BBC were performing services of
general economic interest. The BBC's mix of activities might thus
afford something of a "safe harbour" from law which
would apply were it a purely commercial operation.
Moreover, Article 81 EC and Chapter I of the
Competition Act 1998 only apply to agreements between undertakings.
If the BBC and its various subsidiaries are viewed as a single
economic entity these will not apply. The BBC's Fair Trading Commitment
may not be an effective substitute, although it's audited annually
by an independent auditor in practice the auditors audit the effectiveness
of the compliance process rather than substantive issues.
It is vital that actual or potential suppliers
are assured of protection against anti-competitive conduct by
the BBC (and others). There is prima facie evidence that:
— the BBC is at or close to a position
of dominance in a number of markets;
— it is using this position to enter
a number of horizontally or vertically related activities; and
— inevitably opportunities will arise
for the leveraging of market power, to the detriment of competitors
and consumers.
Potential problems include predation, refusal
to supply, cross subsidy, abuse of buyer power and failure to
trade fairly. Many of these potential abuses may be motivated
by the desire to leverage dominance from one market into another
and are exceptionally difficult to detect unless the regulator
can build up information and expertise. Because the BBC is not
an ordinary object of competition law special remedies are required,
such as some form of structural separation or rigorous independent
ex ante regulation by a single independent and expert body. Ofcom
is the obvious body to so act and undertake competition analyses,
monitor developments, develop expertise and engage in a constructive
dialogue with the BBC regulatee.
The BBC has gone some way down the route of
legal separation, through the separate incorporation of BBC Broadcast,
BBC Technology, BBC Worldwide and BBC Resources. However, the
presence of the CEO of BBC commercial services on the BBC Executive
Committee suggests that their separation may be more apparent
than real.
In default of structural separation, rigorous
independent ex ante regulation is required. This should:
— prevent the BBC from cross-subsidising
its commercial subsidiaries;
— prevent the BBC from showing undue
preference towards its commercial subsidiaries;
— require the BBC to furnish the information
which the regulator requires in order to enforce these prohibitions;
and
— require the BBC to notify the regulator
confidentially of its commercial plans ahead of their implementation.
These requirements are akin to licence conditions
imposed upon telecommunications operators, which prohibit the
showing of undue preference and prohibit a cross-subsidy. For
fuller discussion see Cave, Collins and Crowther 2004.
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?
Yes, the long life span of the Charter and Agreement
provides an important measure of independence for the BBC. However,
as indicated above, major changes to the funding, regulatory and
accountability regimes that bear on the BBC are required.
REFERENCES
Cave, M, R Collins and P Crowther (2004) Regulating
the BBC. In Telecommunications Policy 28 p 249-272.
Collins, R (2004) Public Service Broadcasting:
too much of a good thing? In From Public Service Broadcasting
to Public Service Communications. p 130-150 Ed D Tambini and J
Cowling. London. IPPR.
Collins, R and J Purnell (1995) The future of
the BBC: commerce, consumers and governance. London. IPPR.
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