Conclusions and recommendations
Digital Economy Bill
1. 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. (Paragraph 17)
2. 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. (Paragraph 22)
3. 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. (Paragraph 23)
Annual Report for 2008
4. We
are grateful to Channel 4 for the provision of the information
which we sought, but we do not agree that withholding from the
public the figures relating to its individual digital channels,
E4, Film4 and More4, is justified. Channel 4 occupies a unique
position as a broadcaster in the UK and should be transparent
on the costs and benefits of its non-PSB channels. It is not obvious
to us what, if any, commercial disadvantage Channel 4 could suffer
if this information was in the public domain. (Paragraph 39)
5. Moreover,
we find this lack of transparency on its digital channels incompatible
with Channel 4's ambitions for them to be part of a public service
network, as proposed in the Digital Economy Bill. (Paragraph 40)
6. While
in principle we support the inclusion of a public service broadcasting
requirement relating to older children in a revised Channel 4
remit, it is clear that Channel 4 did not achieve its aims of
demonstrating via a pilot fund its capability to commission engaging
content that connects with its intended audience, or successfully
demonstrate what it could do with further resources. (Paragraph
49)
7. We
find it difficult to accept Channel 4's claim that competition
authority reference of Project Kangaroo "was a surprise to
most people" and that "the general view [of Project
Kangaroo] within the industry was that it would be a good thing
and clearly in the public interest", with "only one
or two" complaints from competitors. This is contradicted
by the number and weight of representations to the competition
authorities, and their findings regarding the threat to competition
in the VOD market. (Paragraph 54)
8. There
is clearly a disparity between Channel 4's depiction to us of
the BBC Executive's expectations for BBC Trust approval of Project
Kangaroo (based on the Executive's reported dealings with the
Trust), and the position of the BBC Trust. However, we believe
that, given the level of investment involved, Channel 4 was unwise
to rely on the assurances it received from the BBC Executive,
and to make such heavy investment in advance of a decision of
the competition authority. This is especially the case given the
financial cutbacks by Channel 4 in other areas, such as its pilot
fund for children's programming. (Paragraph 58)
9. There
is a clear disparity between Channel 4's initial claim that the
BBC outbid it for Harper's Island, and the BBC Director
General's claim that Channel 4 withdrew from the bidding for editorial
rather than economic grounds. However, we agree with Channel 4
that there does not seem to be any reason for the BBC as a licence
fee funded public service broadcaster to acquire programmes such
as Harper's Island, let alone outbid others using public
money, thereby reducing the resources available for original UK
production and talent. (Paragraph 64)
10. We
cannot agree with the assessment that such a loss represents a
"modest amount". On the contrary, we believe that this
represents a significant amount of funding that could more usefully
have been used to maintain the public service content on Channel
4's core channel. (Paragraph 66)
11. Whether
or not accounting rules required Channel 4 to detail the costs
and losses of its failed digital plans, we believe that public
accountability requirements mean that it should have been clear
and transparent as part of its annual reporting process. The opposite
was the case. In fact, had this Committee not made its own enquiries,
the total figures might never have been disclosed publicly. (Paragraph
68)
12. It
must be hoped that the appointment of a new Chairman and Chief
Executive at Channel 4 will provide the stability which Channel
4 needs to transform itself successfully into the public service
broadcaster envisaged in the Digital Economy Bill. We trust that
they will work together effectively and look forward to holding
them to account for the future performance of Channel 4. (Paragraph
75)
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