2 Digital Economy Bill
9. The Digital Economy Bill proposes extending the
Channel Four Television Corporation's primary functions, which
currently relate only to its main Channel 4 television channel
(its sole PSB service), to the making, broadcasting and distribution
of "relevant media content" on other types of channels
and services, including on-demand programme services and other
services provided by means of the internet.[10]
10. This would be a significant expansion of the
broadcaster's statutory remit. Rather than operate as a single
channel public service broadcaster, additional channels and services
such as E4, More4, Film4 and other online and on-demand activities
of the organisation would effectively become part of a multichannel,
multiplatform public service network. The drafting of the bill
seems to leave the way open for further diversification of Channel
4's offer, with the inclusion of the provision for Channel 4 to
provide "other services […] by means of the internet
where there is a person who exercised editorial control over the
material included in the service".[11]
11. If these proposals are enacted, Channel 4 would
become more akin to the UK's other publicly-owned, not-for-profit
broadcaster, the BBC, which currently provides PSB content via
multiple television channels and other services.[12]
However, there are fundamental differences in the funding and
governance models for the two organisations, which give rise to
a number of important issues.
12. Unlike the BBC, Channel 4 generates all of its
revenues in the commercial marketplace and a significant proportion
of its programme budget and schedule is used for unashamedly non-public
service content. The non-PSB content on the core Channel 4 service
is intended to generate revenues to fund the PSB output. The extent
to which this generates an adequate return of public service content
is a matter of legitimate debate, and of interest to this Committee.
13. It is far from clear that the level of PSB content
that is broadcast has been properly examined. Indeed at times,
the core channel's output appears composed largely of non-PSB
programming. For instance, the TV listings for the core Channel
4 PSB service on 1 December 2009 included the US comedies Everybody
Loves Raymond, Frasier (two episodes), Will and Grace,
Friends (two episodes), Ugly Betty, The Simpsons, and
The Big Bang Theory, US dramas St Elsewhere and King
of the Hill, US film The Dead Zone and the 1968 UK
film Carry on Doctor. UK and other acquired content scheduled
on the day included Celebrity Life Skills, Countdown, Deal
or No Deal, The Paul O'Grady Show, Pokerstars.com European Poker
Tour, Wife Swap USA, the Bullrun USA car rally, The F Word, Gillette
World Sport, Volvo Ocean Race, Channel 4 News, and drama
series' Hollyoaks, The Queen and Cast Off.
[13]
14. According to its Annual Report, in 2008 Channel
4 spent £153m on first-run UK-originated programming on key
PSB genres on the core channel (including news, current affairs,
education, comedy, single dramas, drama series, religion and arts).[14]
However, this comprised a minority of the £390m expenditure
on UK-originated programming,[15]
and an even smaller proportion of the total expenditure of £516m
on programme and other content on the core channel.[16]
15. These figures and the sample schedule above would
appear to support criticism from the media commentator David Elstein
that Channel 4 is "a small public service dog being wagged
by a very large commercial tail".[17]
We note, however, that the majority of viewing to the core channel
in 2008 was of programmes commissioned by Channel 4 rather than
acquired programmes.[18]
However, viewing of those programmes which are in key PSB genres[19]
is likely to comprise the minority of this viewing given that
these programmes account for a minority of Channel 4's programme
expenditure, and generally have smaller audiences than other genres.[20]
16. A further distinction between the BBC and Channel
4 is that, at present, the BBC is subject to a fundamental requirement
to have regard to the competitive impact of its activities on
the wider market.[21]
There is no apparent equivalent for Channel 4.
17. The impact
on markets in which a public service broadcaster operates can
be both positive and negative. Much concern has been expressed
- including by this Committee - about the negative impact of the
BBC as it has expanded both its public service and commercial
activities. The extension of Channel 4's primary functions beyond
the core PSB television channel, along with the growth of its
non-PSB activities, means the market impact this public organisation
has might increase significantly, raising questions about how
this impact should be monitored and controlled. We recommend that
the Government consider and address these issues now, during the
passage of the Digital Economy Bill.
18. The Digital Economy Bill also contains provisions
for monitoring and enforcing the delivery of Channel 4's new functions.
Among other things, it requires Channel 4 to prepare, every year,
a statement of media policy, setting out how the organisation
proposes to discharge its functions in the coming year. Channel
4 will be obliged to consult Ofcom and have regard to guidance
issued by it. Ofcom will also have a new obligation to review
and report on the performance of Channel 4's new duties. New enforcement
powers for Ofcom in relation to the fulfilment by Channel 4 of
its new functions are also included.[22]
19. The Explanatory Notes to the Bill indicate that
these new duties "may well include the making and broadcasting
of programmes on television"[23]
(as opposed to Channel 4's commissioning and acquiring its programmes).
This would be a massive change. The current regulatory regime
includes a condition "requiring C4C not to be involved, except
to such extent as OFCOM may allow, in the making of programmes
to be broadcast on Channel 4."[24]
20. The proposed changes in Channel 4's remit also
raise issues regarding the extent to which its governance framework
should be revised. For instance, Ofcom - unlike the BBC Trust,
in relation to the UK's other main publicly-owned, not-for-profit
broadcaster - does not set overall budgets and strategic priorities
for the organisation. The Channel 4 Board, which is comprised
of both Channel 4 executives (management) and independent non-executives,
undertakes these functions. Yet in the case of the BBC the need
to have such functions undertaken by an entity separate and at
arms length from the organisation's management (executives) was
a key factor in the creation of the BBC Trust.
21. The current governance structure at the BBC is
in our view flawed, something which we discussed in our Report
on the BBC's commercial activities.[25]
Nevertheless the potential for the Channel 4 Board, which is not
at arms-length from Channel 4 management, to wield significantly
greater power is a material issue, especially as it is likely
that Ofcom will have a less hands-on role than the Trust does
in relation to the BBC.
22. We agree
that any expansion of Channel 4's remit, and any extension of
its statutory public service activities to services beyond its
single traditional PSB service, the main Channel 4 television
channel, requires provisions for monitoring and enforcing the
new functions. It is far from clear, however, that the monitoring
and enforcement provisions proposed will be the most appropriate
and effective means for achieving this.
23. Nor is it clear that the existing
governance framework for Channel 4 is the most appropriate for
its proposed new status. While the BBC and Channel 4 retain different
funding models, the evolution of both as publicly-owned, not-for-profit
multichannel, multiplatform public service broadcasters, benefiting
from direct and/or indirect public funding, calls into question
the rationale for maintaining dramatically different governance
systems.
10 Digital Economy Bill, Clause 21. Back
11
Ibid. Back
12
E.g. digital television channels (such as BBC3 and CBBC) and through
its website www.bbc.co.uk Back
13
This is a sample of programming on Channel 4 on that day and does
not list every single programme broadcast, which would have included
some additional PSB output. Back
14
Annual Report 2008, page 67 Back
15
Ibid. Back
16
Annual Report 2008, page 97 Back
17
Institute of Economic Affairs Beesley lecture, "What is the
role of public service broadcasting in the digital age?",
David Elstein, September 2009 text available at www.guardian.co.uk
Back
18
The core channel accounted for 8.2% of all TV viewing in 2008
(Annual Report, page 60) Back
19
e.g. news, current affairs, education, arts, religion Back
20
Programmes (of all types) commissioned by Channel 4 and broadcast
on the core channel ("network originations") accounted
for 5.8% of total TV viewing, the majority viewing on the channel
(Annual Report, page 61) Back
21
Article 23(c), BBC Charter. The BBC Trust must also adopt and
publish a statement of policy on fair trading, and of holding
the Executive Board to account for compliance with such statement
(Charter, Article 24(2)(k); BBC Agreement, clause 65). It is also
required to adopt and publish codes dealing with those aspects
of the operation of its public services that could raise significant
issues regarding the competitive impact of the BBC's activities
(BBC Agreement, clause 66). Back
22
Digital Economy Bill, cl 22 Back
23
Explanatory Notes to the Digital Economy Bill [Lords] [HL
Bill 1 (2009-10) -EN], para 106 Back
24
via Section 295 of the Communications Act 2003 Back
25
Culture, Media and Sport Committee, Fifth Report of 2008-09, BBC
Commercial Operations, HC 24 Back
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