THE ROLE OF THE BBC
54. UK consumers have guaranteed provision of public
service content, free from commercial pressures, from at least
one public service broadcaster: the BBC. In 2007, the BBC received
a new Royal Charter, which guaranteed its existence for the next
ten years.[103] The
Government also stated that the television licence feecurrently
reserved exclusively for the BBCwill remain in place for
the same period,[104]
and set the level of the licence fee for the next six years giving
the BBC certainty over its income. [105]
55. The BBC's remit is set out in its Royal Charter
and Agreement. The BBC has to fulfil certain public purposes and
each of the BBC's UK public services is expected to comply with
a published service licence, issued by the BBC's new governing
body, the BBC Trust. Each licence sets out the service's remit,
scope and distribution, aims and objectives, and budget. These
service licences will cover the BBC's media portfolio on all platforms,
including eight television channels, ten national radio services,
a large number of local radio stations and an online service.
56. The BBC also plays an important role in setting
high standards for the rest of the broadcasting market to follow.
DCMS, for example, said that the BBC is "unique, adds value
in its own right and has undoubtedly helped to set the high standards
of quality for which UK broadcasting is rightly renowned."[106]
Ed Richards, Chief Executive of Ofcom, told us that "the
BBC in a sense sets the standard, and that is a good thing"
and recognised that it does so "because it has a unique position
with the greatest privileges". He added that the BBC, together
with the commercial public service broadcasters, set a standard
which other providers without public service broadcaster status
have to match and occasionally exceed.[107]
Michael Grade, Executive Chairman of ITV, said that "a successful
BBC is good news for viewers and good news for advertisers in
the end because it keeps our standards up and stops us becoming
commodity programme suppliers."[108]
57. The BBC
currently provides a wide range of public service content across
many genres and plays an important role in setting quality standards
for the rest of the broadcasting market. We expect the BBC to
continue to provide quality programming and to set standards for
other broadcasters in future given its guaranteed income of over
£3.2 billion per annum.
58. Many stakeholders, however, expressed the view
that the BBC had a negative impact on the provision of public
service content by the rest of the market. We also heard that
the BBC should therefore be focusing its attention on areas the
market genuinely would not provide. For example, Channel 4 argued
that "clearly everything the BBC does as a publicly funded
organisation distorts the market" and that the BBC's licence
fee bid represented a "significant incremental public intervention
in the broadcasting market, with the potential to adversely affect
the competitiveness of other players".[109]
SMG said that the BBC's market dominance over commercial competitors
is a problem and that there is a "need for regulatory intervention
[
] to redress the balance".[110]
59. We also heard concerns about the BBC's involvement
in radio and new media. The RadioCentre argued that the BBC is
"using its might to threaten a pluralistic public service
broadcasting ecology" in radio and that the best option for
securing plurality in the provision of public service content
on radio is to maintain "reasonable restraints" on the
BBC.[111] The RadioCentre
also told us that it was not unreasonable to suggest that, if
the market is getting bigger and more diverse, providing consumers
with more of what they want, then the level of provision by the
BBC "need not grow and indeed could diminish".[112]
ITN said that the "expansion of BBC News online, and the
resources required to invest in these areas, will make it difficult
for ITV News and Channel 4 News to develop their online propositions
to compete as successfully as they do on television".[113]
SMG argued that the BBC's online offering, including publicly
funded content free from any commercial activity, is a "real
barrier to entry for the development of alternative services".[114]
60. Greg Dyke, former DirectorGeneral of the
BBC, told us that the BBC should focus on the services that matter
the most to the public interest, "which is not necessarily
the same thing as [the services that] matter most to the public".[115]
When asked in oral evidence from which areas the BBC planned to
withdraw, Mark Thompson, DirectorGeneral of the BBC, indicated
that the BBC would reduce spending on acquisitions and imported
programming and stated that "you do not need the BBC generally
to show you American programming".[116]
In July 2007, in a speech on the future of the BBC, Mark Thompson
said that "the BBC needs to become smaller [
] in terms
of its scale as an organisation and in its operations". He
also believed that the BBC "should make less" and "concentrate
its finite resources on fewer, better hours of television and
radio and fewer, better web pages".[117]
More recently, Mark Thompson set out his strategy for the BBC
for the next six years. He confirmed that the BBC would be "smaller
than it is today" and that the BBC will "make less but
make it to a higher standard". He announced, for example,
that the BBC plans to commission 10% fewer hours of television
than it does today by 2012, which he hoped would allow the BBC
to make more landmark programmes such as Planet Earth.[118]
61. Some stakeholders considered that the BBC needed
to be involved in a wide range of areas, including more commercial
programming, in order to maintain its relevance to the widest
possible section of licence fee payers. In the Charter review
process, the Government said that "the BBC should provide
a wide range of content, across every genre, trying to reach the
greatest possible range of audiences"[119]
and that in most cases "the BBC's output will achieve its
maximum impact only by entertaining its viewers and listeners."[120]
The Government further argued that "it is wholly legitimateand
in view of the way it is funded, necessaryfor the BBC to
provide programmes aimed at a wide audience".[121]
The Satellite and Cable Broadcasters' Group told us that "the
careful balance of popular entertainment and public service broadcasting
is the defining condition of the BBC" [122]
and that "the BBC's ability to retain an adequate level of
support for public funding will [
] remain down to its ability
to present a value mix that generates enough public support".[123]
Lord Burns, former adviser on BBC Charter review to the Secretary
of State for Culture, Media and Sport, noted that people wanted
to see variety of programmes on the BBC, but that "it is
patently obvious that the programmes which are most watched are
the ones that are most similar to the programmes that you do see
on the other channels". He believed that it was important
that the BBC provided a "good offering which has a big reach
that attracts quite a substantial range of people to watch it
on a systematic basis".[124]
62. Mark Thompson, DirectorGeneral of the BBC,
claimed that the BBC has increasingly focused on areas that that
the market does not provide, and said that the "BBC has reacted
to the arrival of new channels and new competitors by drawing
back from those kinds of programmes that can be broadcast by others."[125]
He also indicated that, at the same time the BBC sets out its
future plans, it would also be clear about the services it is
not going to provide, in order to "help the rest of the industry
[and] make sure that we do concentrate the licence fee in a way
which delivers really outstanding content to the public."[126]
In October 2007, while setting out his strategy for the BBC for
the next six years, Mark Thompson went some way towards doing
this by announcing that the BBC would "make sure what [it
does] is really distinctivedifferent from what commercial
broadcasters can provideand really original".[127]
63. We note
that some argue that the BBC should provide more commerciallyorientated
programming in order to reach a wide range of audiences. However,
we do not share this view and instead believe that the BBC should
place a high priority on areas that other broadcasters will not
provide, while continuing to offer high quality programming which
attracts diverse audiences. Given the substantial provision of
public service content by other broadcasters, we believe that
the BBC could deliver its public service remit without providing
all of its current range of services and we note and welcome the
BBC's commitment to become smaller in terms of its scale as an
organisation and in its operations. We do not believe, however,
it is in the public interest for the BBC to be allowed to wither,
as some would like, for example, to become akin to the Public
Broadcasting Service (PBS) in the US.
64. The BBC's public service content provision is
funded by the television licence fee. In 2005, the BBC set out
its bid for a new licence fee settlement for 2007-08 onwards.
It set out plans to build digital infrastructure, deliver digital
services, provide quality content, and increase local relevance,
and argued that this would require an increase in the licence
fee of RPI plus 1.8% per annum. In January 2007, the then Secretary
of State for Culture, Media and Sport announced the licence fee
settlement for the next six years: the settlement broke the link
between the licence fee and inflation but, based on projections,
equates to an increase of approximately RPI minus 0.45% per annum.
Michael Grade, Executive Chairman of ITV, stated that the
licence fee "fell some way short of what the BBC needed in
order to meet the programme that the Government had set for it
in the Green and White Papers".[128]
Mark Thompson, DirectorGeneral of the BBC, told us that
the level of the licence fee is a "matter of judgement for
government" and that it was now up to the BBC to "deliver
the best possible range of services and programmes we can within
the funding that we have got."[129]
65. Other parties also considered that the licence
fee settlement, while lower than the BBC's bid, would still enable
the BBC to provide a substantial amount of public service content.
The Government said that the licence fee settlement "will
enable the BBC to deliver its new public purposes" as set
out in its Royal Charter. BSkyB argued that the licence fee settlement
"is more than sufficiently generous" for the BBC to
"prioritise its activities so that it delivers more public
service broadcasting in areas which might not be served in the
future"[130] and
Andy Duncan, Chief Executive of Channel 4, considered that although
the BBC received "less of a licence fee than they wanted
[
] they have done very well" especially considering
forecast future falls in the advertising market.[131]
66. There were concerns, however, that the BBC would
not be able to provide quality programming if it received less
resources. Mark Thompson, DirectorGeneral of the BBC, recognised
that this was a risk and said that "a change which leads
to a reduction in quality isn't an 'efficiency', it's a straightforward
cut and a diminution in service". However, Mr Thompson
argued that although there was "widespread anxiety inside
and outside the BBC" about the impact on quality of the BBC's
recent threeyear efficiency drive, most of the quality indicators
at the BBC have gone up, not down, over the past three years.[132]
67. The Government gave the BBC Trust an overriding
duty of effective stewardship of the licence fee. In the event
that the BBC Trust decides that the BBC can fulfil its public
purposes using less resources than afforded by the licence fee,
it has the option of "not drawing down the full amount of
the licence fee where the Trust considers this is in the public
interest".[133]
68. While we
recognise the concerns that the BBC received a lower licence fee
settlement than desired, we believe that the BBC can continue
its role in providing high quality programming within the resources
available to it and we welcome the BBC's plans to become a smaller
but more distinctive organisation. However, the increase in market
provision of public service content suggests to us that further
analysis needs to be undertaken to assess the level of public
funding that needs to be made available for public service content.
On current trends, we would expect that the case for current levels
of public funding will diminish. The BBC has rightly reacted to
the arrival of new channels by drawing back from programming that
can be broadcast by others. We welcome the BBC's approach, and
encourage the BBC Trust to limit the BBC's activities in areas
where there is already alternative provision. The BBC Trust should
not treat licence fee income as a sum that must necessarily be
spent in its entirety, irrespective of others' provision of public
service content, and we encourage it to bear in mind its option
of not drawing down the full amount of the licence fee in future.
THE ROLE OF S4C
69. S4C was optimistic about the prospects for public
service content in Wales. S4C told us it could succeed in the
digital age and that its 2004 Creative Excellence Strategy would
answer the "challenges of the new multiplatform, multimedia
environment".[134]
S4C was also optimistic about programming genres that other public
service broadcasters believe will come under threat as the UK
approaches digital switchover. It said that over the past two
years it had doubled its financial commitment to its provision
for preschool children. S4C told us that it also planned
to launch crossplatform Welshlanguage services for
children and young people and added that it will not be seeking
additional funds for this launch.[135]
70. S4C's comparative optimism may be due to its
unique funding arrangements. S4C is relatively insulated from
fluctuations in the advertising market as around 95% of its income
is received in direct funding from DCMS (under statute, this funding
increases by RPI each calendar year).[136]
S4C receives only around £8 million from other sources including
advertising. DCMS, however, argued that S4C will face challenges
in the multichannel world. It considered that S4C will "not
be immune to the competition for audiences facing other public
service broadcasters" and noted that digital switchover will
mean that S4C loses the advertising revenue it currently receives
from broadcasting Channel 4 programmes in Wales.[137]
71. Although S4C benefits from direct public funding,
this form of support for public service content has been discounted
by the Government as a wider policy option. The main concern about
direct funding is the risk that it would compromise the independence
of the recipient broadcaster. Despite the fact that the BBC technically
receives its licence fee income in direct funding from DCMS, the
BBC opposes direct funding in principle, stating that the licence
fee "ensures that the BBC remains independent from political
[
] influences".[138]
In relation to news, for example, Channel 4 stated that direct
funding needed to be handled carefully "given the absolutely
critical requirement for any news provider to maintain independence
from the Government and the wider political ecology".[139]
On the other hand, S4C told us that it is happy with its direct
funding position: it did not believe it was subject to inappropriate
scrutiny as its funding formula is set out in legislation.[140]
The Canadian Broadcasting Corporation, Canada's national public
broadcaster, told us that the direct funding which it receives
from the Canadian Government did not compromise its independence.
72. We are encouraged
by S4C's optimism about its ability to provide public service
content in the future. S4C demonstrates that a broadcaster with
direct public funding and a tightly defined remit can deliver
public service content without having its editorial independence
compromised.
Digital multichannels
73. The Committee heard that the provision of public
service content by the digital multichannel sector would
increase in the future. The Satellite and Cable Broadcasters'
Group predicted that it is "inevitable" that public
service broadcasting in the digital age will consist of a wide
plurality of providers as technological development and the end
of spectrum scarcity will allow new channels and platforms to
develop.[141] Five
echoed this view, stating that "the growth of digital will
create further opportunities for channel and programme offerings
that would traditionally be defined as public service broadcasting".[142]
BSkyB argued that the level of public service content from the
multichannel sector would increase in the future as the
rising uptake of digital television will allow multichannel
broadcasters to reach larger audiences and therefore generate
greater revenues to invest in content.[143]
However, the Satellite and Cable Broadcasters' Group expressed
a concern that commercial multichannel broadcasters would
find it difficult to invest in programming and platforms without
appropriate oversight of the incumbent terrestrial operators as
they believed that subsidised public service broadcasters crowd
out the multichannel sector's investment in content.
[144]
74. We outlined earlier the arguments concerning
the digital multichannel sector's investment in UK programming.
Some stakeholders argued that investment in UKoriginated
content by digital multichannels would grow in the future.
David Elstein, Chairman of the Broadcasting Policy Group, pointed
out that in the United States, even faster fragmentation of audiences
than that experienced in the UK has led to a significant increase
in the volume of investment and production of highquality
content.[145] BSkyB
stated that the economics for multichannel investment in
UK content were very challenging at the moment but were improving,
and that this would mean that more UK content would be commissioned
by the multichannel sector. In addition, UKoriginated
public service content can be profitable for commercial broadcasters,
via sales of rights and formats for example. The Voice of the
Listener and Viewer pointed out that the UK is second only to
the United States in the economic value of its media exports.[146]
In relation to children's programming, Pact noted that some programming
is lucrative as it is able to generate substantial revenues from
secondary and ancillary sales such as merchandising.[147]
On the whole, however, Pact was more sceptical about the digital
multichannel sector's future investment in public service
content stating that they "cannot be regarded as a replacement
for terrestrial public service programming in the foreseeable
future" unless they significantly raise their investment
in new UK programming.[148]
75. The provision
of public service content by the digital multichannel sector
has increased plurality in UK broadcasting. The sector provides
a range and diversity of content that exhibits public service
purposes and characteristics as defined by Ofcom and this provision
may very well increase after digital switchover as its channels
gain access to larger audiences and revenues.
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An onscreen guide to scheduled television programmes. Back
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Ofcom, Review of public service television broadcasting: Phase
2-Meeting the digital challenge, September 2004, p 21 Back
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Ofcom, Review of public service television broadcasting: Phase
2-Meeting the digital challenge, September 2004, pp 24,
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An educational charity which seeks to promote high quality television
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DCMS, Copy of Royal Charter for the continuance of the British
Broadcasting Corporation, Cm 6924, October 2006 Back
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DCMS, A public service for all: the BBC in the digital age,
Cm 6763, March 2006, p 8 Back
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HC Deb, 18 January 2007, col 933 Back
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DCMS, A public service for all: the BBC in the digital age,
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Q 527 Back
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Channel 4, Submission for the licence fee seminar, May
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Written evidence from SMG [not printed] Back
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Mark Thompson, Delivering creative future: The BBC in 2012,
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Mark Thompson, Speech to BBC staff on delivering Creative Future,
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DCMS, A public service for all: the BBC in the digital age,
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Mark Thompson, Delivering creative future: The BBC in 2012,
10 July 2007 Back
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Uncorrected transcript of oral evidence taken before the Culture,
Media and Sport Committee on 3 July 2007, HC (2006-07) 820,
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Mark Thompson, Speech to BBC staff on delivering Creative Future,
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Uncorrected transcript of oral evidence taken before the Culture,
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Mark Thompson, Delivering creative future: The BBC in 2012,
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DCMS, A public service for all: the BBC in the digital age,
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BBC, Response to A strong BBC, independent of government,
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