HC 743 Support for the creative economy

Written evidence submitted by the BBC [SCE 087]

Key points

· The television, radio and online sectors make an important contribution to economic growth and to the UK’s cultural vitality. The UK television sector has a strong reputation for producing high quality content with global appeal.

· A licence-fee funded BBC is a key driver of growth in the creative sector-generating £2 of economic value for every pound of expenditure. Support for the independent sector and its commercial activity also creates benefits to the UK economy.

· The BBC facilitates knowledge transfer across the creative economy-through adoption of open standards, as a result of BBC training, by fostering the development of creative clusters and by working in partnership with others.

· A targeted and proportionate regulatory regime will be critical in sustaining the BBC’s contribution to growth in the future. In particular there needs to be a supportive policy framework in place which not only ensures that there is continued investment in high quality UK-originated content, but also that audiences are able to access it.

· To achieve this, the BBC believes that priority should be given to reforming platform carriage arrangements, extending the principle of EPG prominence for public service content, sustaining a viable DTT platform and promoting net neutrality.

· The BBC also welcomes Government proposals to reform the Intellectual Property regime and to introduce creative sector tax reliefs.

Introduction

1. The BBC exists to deliver public purposes by providing high-quality programmes and services that educate, inform and entertain. But in meeting this mission, the BBC delivers broader benefits to the digital and creative industries-which in turn spill over into the  wider economy. In 2011/12, the BBC’s Gross Value Added [1] --that is the value the BBC adds to the UK economy through its public service and commercial activities-was around £8 billion, so at least two pounds of economic value was generated by every pound of the licence fee.

2. This figure highlights the importance of the BBC to the UK creative economy although it does not reflect all the ways in which the BBC supports growth. Helping to drive growth in the creative economy set out a framework which shows how the BBC contributes to sustainable growth in the creative sectors and beyond.

3. In summary, the BBC aids private sector growth both by enhancing the productive potential of firms in the creative economy (through investment in skills and training, by enhancing technological progress, and by supporting the independent sector) and by stimulating the demand for the outputs of the creative economy (by commissioning of programmes from the independent sector, by encouraging exports and inward investment via BBC Worldwide, by encouraging take-up of new technologies and by showcasing the UK cultural and creative sectors). These supply-side and demand-side impacts also help to provide sustainable growth by rebalancing the economy sectorally and geographically.

4. Underpinning this framework is the role of the BBC as a driver of knowledge transfer across the creative and wider economy, as this is a key channel through which many of the BBC’s activities lead to further growth in the creative economy and beyond.

5. Aspects of this framework are discussed in more detail below.

BBC support for the independent production sector

6. The television production sector makes an important contribution to the UK economy and is a critical source of jobs and growth. The UK's strong position is partly due to the healthy competition between in-house and independent producers. The BBC's in-house production base delivers a range of benefits to UK licence fee payers and to the UK creative economy including a focus on public service values, setting a quality benchmark across a range of genres and serving UK audiences. It guarantees the cost-effective supply of a wide range of genres and returns cultural and economic value to the UK. It also helps to grow production bases of scale across the whole of the UK.

7. The UK's independent sector provides a vital source of competition, injecting fresh ideas, diversity of thinking and innovative formats. Growth in the independent production sector, from £120 million in 1982 to £2.4 billion in 2011 [2] , is testament to its success.

8. An important way in which the BBC contributes to growth is by stimulating the demand for programmes made by in the independent sector. The commissioning of programmes from the independent production sector and the way the BBC does business with external suppliers helps to underpin a dynamic and vibrant commercial production sector. In a period where other sources of revenue are under pressure, the licence fee provides a valuable source of funding for a range of content. The introduction of the Window of Creative Competition (WoCC) in 2007 increased competition between in-house and external suppliers. The BBC Trust’s biannual reviews of the WoCC [3] show that it is working effectively in allowing commissioners to find the best ideas from both in-house and independent producers.

9. In 2011/12 the BBC spent nearly £1.1 billion in the creative economy, including £489 million on independent productions supplied by companies across TV, radio and online, £75 million on acquired programmes and £277 million on payments to contributors, artists and for copyright. The £277 million includes payments to on-air contributors such as actors, scriptwriters, composers, musicians, presenters as well as licences associated with the use of music, existing literary works and direct programme contributors. In 2010/11 the BBC issued 336,000 contracts to contributors and rights owners for in-house programming alone and each week we report some 250,000 items of music to the Music Collecting Societies.

10. The BBC also plays a crucial role in sustaining breadth and depth in the independent television production sector. The BBC is not only a key source of revenue for the independent production sector but we also continue to work with the largest number of suppliers compared to other broadcasters. In 2011 the BBC was supplied by 295 different suppliers. In comparison, Channel Four worked with an estimated 250 ‘indies’ in 2011, ITV worked with 73 and Sky worked with 110 [4] .

11. Similarly the BBC continues to support the radio sector. BBC radio operates an independent supply quota of 10% and a WoCC of 10% which was introduced as part of the BBC Trust’s Radio Independent Supply review in 2010. In addition to the 10% quota, the BBC has a commitment to commissioning programming from a suitable range and diversity of independent producers. More broadly, BBC radio offers distinctive and original UK public service content in scale: Radio 4 is the world’s largest commissioner of radio drama and features original drama every day of the year; Radio 3 remains the most significant commissioner of new music in the world; BBC music stations support new, specialist and live music across the network; Radio 1 breaks news acts in a far more diverse range of musical genres than any other provider; BBC Introducing-a collaboration between BBC network, nations and local radio-gives unsigned and emerging musicians the opportunity to be heard by mass audiences.

BBC Worldwide’s contribution to the UK creative industries

12. Successive governments have encouraged the BBC to engage in commercial activity, in part to relieve pressure on the licence fee. BBC Worldwide is the main commercial arm and a wholly owned subsidiary of the BBC. In 2011/12 it returned a record £216m to assist the BBC in meeting its financial challenges. As well as supporting the BBC, BBC Worldwide operates as one of the engines for the UK’s wider creative economy, generating a UK GVA of £947 million in 2011/12. It has been an important contributor to the global success of the UK audio visual sector and to the economy more generally contributing over £40m in corporation tax to the Exchequer over the last three years, plus additional tax payments in the form of VAT and National Insurance contributions.

13. As a commercial organisation, BBC Worldwide contributes directly to UK growth through its own performance. Its headline sales in 2011/12 grew 5% to £1,085 million. Headline profit grew 8% to £155 million, despite a challenging commercial climate.

14. BBC Worldwide is the largest TV programme distributor in the world outside the US major studios. BBC Worldwide sells programmes and formats produced by the BBC and by over 200 UK independent producers to the rest of the world. Each year, BBC Worldwide puts on BBC Worldwide Showcase, the world’s biggest programme trade fair organised by a single distributor. It provides a launch pad for top quality UK programmes to reach much wider audiences across the globe. This year, more than 640 international buyers attended BBC Worldwide Showcase- a 19% increase on 2011-generating around £50 million of sales.

15. As a channel owner, it operates a global suite of television channels, reaching 356 million subscribers. BBC AMERICA, for instance, is a well-established cable channel available in 80 million homes in the US-offering the best of British programming from the BBC and independent producers to the US market. Meanwhile the Global BBC iPlayer app pilot enables overseas audiences in 16 countries access to high quality British TV content through a subscription service. Through BBC Worldwide’s part‐owned business, UKTV, it extends the window of availability of high‐quality programmes to UK audiences, and has delivered growth every year since the network launched in 1997.

16. BBC Worldwide delivers further opportunities to expand consumers’ enjoyment of media brands, such as via its DVD business, its rapidly growing digital businesses (including download‐to‐own, apps and games) and through its Live Events.

Supporting growth in the wider creative sector

17. As well as content from the BBC, programmes and formats from more than 200 UK independent producers were distributed by BBC Worldwide in 2011/12. Of the 100,000 hours of high‐quality UK programming sold to over 700 customers from the USA to Indonesia in 2011/12, roughly a third of TV sales revenue earned came from indie produced content (both BBC and non BBC commissioned).

18. High growth firms face obstacles in accessing finance and business skills. This is particularly true in the creative sector, which is characterised by a small number of large companies- e.g. the broadcasters and major ‘indies’-and a large number of small firms. BBC Worldwide works in partnership with UK independent production companies.

19. As part of its support for individuals looking to make a career in TV, Future Formats is a BBC Worldwide funded initiative with BBC Entertainment, which has helped 12 people from non-television backgrounds create and pitch television formats, and is now running its third scheme this year. The initiative offers lectures and workshops, followed by placements with entertainment development teams within the BBC.

20. BBC Worldwide is also supporting other parts of the UK’s creative economy. Earlier this year, BBC Worldwide announced the six UK-based digital media start-up finalists for its BBC Worldwide Labs initiative.  BBC Worldwide Labs is a new and comprehensive six month programme to support the most dynamic emerging digital media and technology companies in the UK. The start-ups have been offered workspace within BBC Worldwide’s West London offices, and have the opportunity to work alongside specialists from across BBC Worldwide, who can offer sound business advice in areas such as technology, content, marketing, sales and distribution, advertising, PR, HR and legal among others. BBC Worldwide is not seeking to inject money into the selected companies, but hopes that commercial deals and partnerships will transpire, thus helping to establish the start-ups at their next level of success.

Growing exports and inward investment

21. Exports and inward investment are a key component of a nation’s national income and an important driver of economic growth. The UK’s digital and creative sector performs exceptionally well on a global basis; the UK is second only to the US in its export success.

22. BBC Worldwide has made a significant contribution to this success. It is Britain’s largest international television company and exports the best of British creative content to the world. It has been successful at supporting exports from, and inward investment into, the UK creative sector. Together the BBC and BBC Worldwide helped to attract £32 million of co‐production funding into the UK in 2011/12 from overseas broadcasters, supporting investment in the UK production sector. The company’s strategy is to increase the amount of revenue it generates from overseas business, with the last financial year seeing the proportion of international sales increase by 16% to 64% (55% in 2010/11).

The BBC’s contribution to innovation and knowledge sharing

23. The Government’s 2011 Innovation and Research Strategy [5] put innovation at the heart of the growth agenda. The BBC is an important innovator in the creative industries, not only through its contribution to technical Research and Development, but also as a result of its investments in other ‘intangible’ assets [6] including people, brands, programmes and program formats.

24. A licence-fee funded BBC of scale and international reach is well-suited to spreading the benefits of this innovation to other firms and sectors in the creative economy, generating wider improvements in productivity by encouraging knowledge spillovers and transfers. This is partly because the BBC interacts with many elements of the creative economy; not only its own staff, but also programme contributors, freelancers, independent production companies and other firms within its supply chains. The BBC’s funding model also gives it the stability and incentives to engage in a wide range of activities at a time when other parts of the creative sector are under financial pressure.

25. The BBC promotes the diffusion of knowledge in the wider economy through several channels.

The BBC’s commitment to open standards

26. A key channel for diffusing knowledge is through open standards. The BBC’s commitment to open standards is enshrined in the BBC’s Agreement, and this commitment is integral to the way in which the BBC operates. Open standards are fundamental to driving market innovation and will always be important to the BBC's mission to introduce the benefits of new technology to society. Common technical standards bring significant advantages allowing manufacturers to maximise their investment by allowing them to replicate technologies across multiple markets. Common standards also enable content providers to share their content more widely across different devices, creating horizontal markets.

27. Common standards have been instrumental in driving the take up of digital TV. Freeview is found in 18.7 million homes. It has brought the benefits of interactivity and paved the way for next generation IPTV services. For example, YouView, the interconnected TV platform resulting from a partnership with ITV, Channel 4, BT, Talk Talk and Arquiva, has been deliberately engineered around open standards.

28. BBC R&D’s commitment to open standards is demonstrated by its role in standard setting groups both within the UK and internationally. For example, BBC R&D played a pivotal role in developing DVB-T2, the standard for High Definition digital terrestrial digital TV. Drawing on its experience with the original DVB-T standard as well as with BBC R&D also makes a point of publishing its working papers and speaking at conferences in order to ensure that the benefits of its activity are disseminated widely. In 2010/11 BBC R&D presented 27 conference papers and published 20 other papers.

The BBC’s contribution to training

29. The BBC is required under the Agreement to train its own staff and support the preparation and maintenance of a highly skilled media workforce across the audio visual industry. The work of the BBC Academy-the BBC’s centre for training-is instrumental in meeting this obligation.

30. The BBC Academy plays a critical role in generating knowledge spillovers and transfers through training of BBC staff who may work elsewhere in the audio-visual industry later on in their careers.

31. The BBC Academy offers trainee schemes covering a wide range of areas including production, production management, journalism and design. The schemes offer year-long paid training and provide a thorough grounding in many aspects of broadcasting through training and work placements across the BBC’s regional and national centres. BBC traineeships have produced some of the most respected names in broadcasting who have gone on to work outside of the BBC including Kevin Lygo (Managing Director, ITV Studios), Stephen Merchant (Writer, Director, Radio Presenter, Comedian and Actor), Peter Kosminsky (Film Writer, Presenter and Director, Member Governor of the BFI) and Julie Etchingham (Presenter, ITV).

32. During 2011/12 the BBC has employed over 50 apprentices across the UK-based in London, Salford, Cardiff, Bristol and Glasgow. The 2012 London and Scotland Scheme are industry-wide, involving partners such as ITV, Talkback Thames, Tiger Aspect, Endemol. The Government has also recently announced that the BBC and Channel Four will provide placements and apprenticeships as part of the Employer Ownership Pilot. [7]

33. The BBC also works with universities to develop BBC branded Masters programmes. The Masters Programme in Production Management is a BBC Academy partnership with Bournemouth and Salford University. Most recently the BBC Academy has added a Software Engineering and Internet Architecture MSc. delivered by Bournemouth and Bradford Universities.

34. Subject to Fair Trading restrictions the BBC Academy aims to share as much training as possible with the mobile freelance community. In 2011/12, c 8,500 non-BBC delegates attended BBC training courses and events. In addition, almost 700,000 have accessed the BBC’s online learning which is made freely available via the BBC Academy’s external websites.

The BBC and creative clusters

35. In 2008 the BBC renewed its commitment to move more network television production out of London to draw on the talent and skills of the whole UK, to ensure that 50% of network production will be made outside of the UK by 2016. One of the key benefits of this strategy is that the BBC has kick-started the development of creative clusters around the UK. Companies within these clusters benefit from sharing first class resources and knowledge with other local and creative organisations. Creative clusters can also promote sustainable growth by rebalancing the economy geographically.

36. The BBC’s move to MediaCityUK in Salford, which started in Spring 2011, is a tangible example of the beneficial impacts of creative clusters. This migration of activity will also lead to direct and indirect employment effects [8] . In addition BBC North has engaged with local communities via outreach activities and put in place a BBC North partnership strategy involving institutions such as The Salford Foundation, The Oasis Academy and The University of Salford.

37. The BBC has also sought to encourage network production in the Nations with the development of production hubs in Glasgow, Cardiff and Northern Ireland. Studios at Roath Lock, which opened last year in Wales, are now home to Casualty, Pobol y Cwm and Doctor Who. Waterloo Road has also recently moved to Greenock. A recent study by Deloitte’s shows that more than 80% of network TV spend in the nations is attributable to the BBC.

The BBC in partnership with others

38. One of the benefits of partnership arrangements is that they can promote knowledge sharing which in turn can improve the productive potential of the creative sector. The BBC’s 2010 Strategy Putting Quality First set out how partnerships across the industry could create increased value both for the BBC and others. It concluded that the BBC is well-placed to help other institutions and groups and that ‘partnerships’ should be the default setting for most new activities.

39. Examples of recent successful BBC partnerships include The Space, a digital arts service from the Arts Council England and the BBC, and Radioplayer, which allows the audience to access BBC and commercial radio stations from a single online platform. Both of these partnership activities have provided a catalyst for growth in commercial revenues. The Space has raised the profile of suppliers who have benefitted from having greater exposure than they might have otherwise expected. An online survey of visitors to The Space indicated that 20% of those surveyed had gone on to visit an artist or organisation’s website after seeing their work and 4% had purchased tickets for an event/exhibition. The introduction of Radioplayer has corresponded with a 32% increase in online listening between Q2 2011 and Q2 2012, and commercial online revenues have increased by £10.2 million over the same period.

40. The BBC has also been heavily involved in the Digital Production Partnership (DPP)-an initiative formed by the UK’s public service broadcasters to help producers and broadcasters maximise the potential of digital production. The partnership also leads the standardisation of technical and metadata requirements within the UK broadcast industry to ensure that digital video content can be easily and cost effectively distributed to audiences via multiple platforms. The partnership is funded and led by the BBC, ITV and Channel 4 and it provides information and shares best-practice.

Future plans

41. Looking ahead, the BBC’s support for the creative economy is likely to increase. The BBC is working in partnership with the independent sector to develop a new permanent download-to-own window for content. By combining BBC-owned content with that from the independent sector and other rights holders, this partnership will deliver additional public and economic value.

42. Our commitment to support the development of a wider ‘public space’ with a growing number of partnerships with other public bodies and commercial bodies will provide on-going benefits to the creative economy. We are continually evolving different forms of partnership models. For instance the BBC and Arts Council England are currently exploring the potential for a permanent digital arts service following on from the success of The Space.

43. The BBC has plans in place to advance The Connected Studio via a series of collaborative events taking place across the UK over the coming months. The Connected Studio provides an opportunity for external digital agencies, technology start-ups, designers and developers to submit and develop ideas for innovative new features and formats for BBC Online. The Connected Studio has a fund of up to £1 million available to invest in both early stage concepts and public-facing pilots across the whole of BBC Online, as we all support individual developers, project managers and UX expertise.

44. However, the BBC’s ability to deliver these ambitions whilst continuing to support the creative economy crucially depends on the regulatory and policy landscape. The responses to the Committee’s questions address this issue in more detail.

Responses to committee questions

45. The remainder of this submission focuses on four specific issues highlighted in the Call for Evidence:

· Developing the legacy from the Olympic and Paralympic Games;

· Barriers to growth in the creative industries;

· The impact on the creative industries of the current Intellectual Property regime; and

· The extent to which taxation supports the growth of the creative economy.

Legacy from the Olympic and Paralympic games

46. London 2012 has been called the first truly digital Olympics. This was borne out by the record-breaking audience figures for the event. The Olympics attracted over 51.9 million viewers in the UK across linear TV channels and Red Button. London 2012 was also the first truly mobile Games with 9.2 million UK mobile browsers to the BBC’s Olympics coverage, making up 34% of all daily browsers to BBC’s Olympics coverage, and 12 million requests from mobiles for video throughout the Games. Millions of people watched the Games via BBC Red Button with 23.7 million views to the 24 SD and HD streams (covering every Olympic sport) made available on the satellite and cable TV platforms.

47. Building on this success to leave a lasting digital legacy in years to come will be critical. The BBC is proposing to take forward many of the lessons learned from broadcasting the Olympics to ensure the benefits are long lasting. The BBC has secured the rights to a succession of major sporting events including the Glasgow Commonwealth Games 2014, the World Athletics Championships in 2015, the Rio Olympics in 2016, and the World Athletics in London in 2017. A BBC partnership with NHK which brought the world’s first live broadcast in super high vision of swimming events from the Olympic Aquatic Centre will provide useful experience when broadcasting events such as these in the future.

Barriers to growth in the creative economy

48. On most metrics, the UK has one of the most successful broadcast and content creation sectors in the world. Previous BBC responses to Government consultations [9] have highlighted the conditions required to promote investment in high quality UK originated content – a key driver of growth in the broadcasting sector. One is the diversity of funding streams and competition for quality between a range of public and private operators. Another is the carefully designed regulatory framework that has supported a Public Service Broadcasting model with the scale and reach to deliver significant consumer and citizen benefits. A competitive tax regime, a robust and modern IP framework, a skilled workforce and support for SMEs are also important factors. Targeted and proportionate public policy and regulatory interventions can stimulate-rather than stifle-growth as well as secure wider social and cultural objectives.

49. The BBC welcomes the Government’s alignment of the policy objectives of sustaining high levels of investment in a range of UK originated content and ensuring widespread and easy access to that content. These objectives are mutually reinforcing. In policy terms, priority should be given to reforming the platform carriage arrangements, extending the principle of EPG prominence for public service content, sustaining a viable DTT platform and promoting net neutrality.

Carriage consent and payments

50. The widespread availability of public service channels on the main television platforms is an important objective.

51. The UK’s current carriage consent and payments regime is unfair and runs counter to the core policy objective of driving investment in the TV content sector. It is also internationally anomalous. It is possible to reform the regime to reverse the flow of payments and consequently lead to a net increase in UK originated content investment.

52. At present, the TV platforms pay nothing for carrying the main free-to-air broadcasters, despite the fact that taken together, they are by far the most watched channels and so bring considerable value to those platforms. On the contrary, the PSBs-who are for all practical purposes obliged to seek re-transmission on the major TV platforms to meet their universality and ‘must offer’ obligations-pay significant carriage fees to the satellite platform. Under the current Technical Platform Services (TPS) regime, BSkyB is permitted to recover platform development and maintenance costs (including marketing and set-top box subsidies) from PSBs but is not required to take account of the benefits that the platform derives from carrying the channels. The result is that the PSBs effectively subsidise a platform that likely derives more benefit than it confers, with a resultant diversion of funds away from UK content investment.

53. Under the TPS regime, BSkyB levies Platform Contribution Charges (PCC) of c£15 million per annum on the PSBs and further fees for EPG listings. We welcome BSkyB’s recent decision to reduce the TPS fees it charges broadcasters but this does not obviate the need for reform of the underlying arrangements.

54. There are a range of options available to reform the current UK regulatory framework. As far as BBC is concerned, there should be zero payment. This could be achieved through application of the ‘must carry’ / ‘must offer’ rules (similar to what is used in some other European countries), or alternatively by reforming the TPS regime to ensure it takes account of the significant value delivered by BBC services.

55. The outcome should be a net positive impact on original UK content investment, for the following reasons:

· The PSB system guarantees a high level of investment in UK content and these broadcasters spend a significantly higher proportion of their revenues on UK content investment than pay-TV channels; and

· The BBC would commit to spending any returned carriage fees on UK content. It is likely that the not-for-profit Channel 4 would also dedicate the bulk of any incremental income to programming budgets. The Government may want to consider making it a condition of reform that consent payments are re-invested by the commercial PSBs into UK content.

Prominence

56. Under current legislation, the main TV platforms are required to give ‘appropriate prominence’ to the main public service channels. The prominence rules are designed to aid easy and universal access to these PSB services. With developments in EPGs and the growth of new ‘gateways’ to content, there is a risk of the prominence framework losing its ability to deliver current policy objectives. To date, the BBC has managed to secure an appropriately prominent position on many new content gateways thanks to its commitment to emerging technologies. However, this may become increasingly challenged as the market develops.

57. The Government should therefore consider updating the ‘appropriate prominence’ framework, with the principles extended to on-demand content gateways. The BBC recommends the following policy approaches are considered:

· Introducing enabling or backstop provisions which would be triggered only when a defined threshold was met, for example, when the gateway or access point became used by a significant number of consumers as a means of receiving on-demand programmes. Ofcom could be given a duty to review market and technology developments to assess if the trigger had been reached. Such an approach should be proportionate and minimise the risk of interference with platform innovation and the development of new services.

· Scope of on-demand gateways. This could be where the provider has ‘editorial responsibility’ over selection and organisation of content in an on-demand catalogue, as under the current EU AVMS Directive. At present, this would be likely to cover non-linear listings and on-demand catalogues on ‘traditional’ UK TV platforms, connected TV-related devices and OTT providers; and

· Definition of prominence. The key principle would be that public service content should be displayed in a prominent position on such gateways. It would not be sensible to try to prescribe in legislation what prominence should mean on the variety of present and future gateways and selection technologies. Rather, Ofcom should be given the power to draw up a code setting out the requirements that should be met, based on an assessment of audience expectations and technology.

Access to spectrum

58. As well as ensuring spectrum is used efficiently, spectrum policy should also support universality and choice for consumers of UK television; maximise investment in UK original content; and minimise the disruptive impact on consumers of changes in spectrum use.

59. DTT is the most popular UK TV platform-used in over three quarters of UK homes-that delivers significant consumer and public value. It performs an important role in providing universal, low cost access to PSB services and also supports platform competition. These roles will remain for the foreseeable future. For example, forecasts show that DTT is likely to be the primary source of TV reception in c45% of UK homes in 2020. Internet protocol television (IPTV) services, such as Youview, are a complement to linear broadcasting and will not represent an effective substitute for DTT for the foreseeable future.

60. Developments in domestic and international policy on the use of UHF spectrum could adversely affect the future of the DTT platform. The BBC, alongside the other DTT multiplex operators, has responded to Ofcom’s consultation paper on the long-term use of UHF spectrum [10] . In summary, our view is that the cost-benefit case has not been made to transfer a significant amount of the spectrum used by DTT (in the so-called "700 MHz band") to mobile broadband. Clearance could involve significant costs and disruption for the DTT platform and for the millions of UK households who have selected it to access digital television services, often as a direct result of the Government’s switchover programme.

61. In the event that it is decided to transfer the 700 MHz band to mobile, it is vital to ensure that the consumer and public benefits delivered by Freeview are maintained for the long term-in a way which means that all Freeview viewers continue to receive the range of services they can access today, and also are able to receive more HD services over time. This will require compensating spectrum-namely the "600 MHz band" freed up by digital switchover-to be allocated the DTT platform without auction. We welcome Ofcom’s recognition of the need to sustain the DTT platform.

62. The Government and Ofcom should carefully consider the impact on broadcasting any introduction of Administered Incentive Pricing (AIP) for DTT spectrum. Given that the amount of spectrum allocated to PSBs is commensurate with their public service obligations, spectrum charging is unlikely to create additional incentives for efficient use of spectrum. The introduction of DTT spectrum charges would significantly reduce the funding available for public service content, to the detriment of UK audiences. This would run counter to the Government’s core policy objective of incentivising greater investment in UK originated content. Ofcom should, therefore, waive the application of AIP to spectrum used by the PSBs. If not, the Secretary of State should consider using her powers under the Wireless Telegraphy Act 2006 to direct Ofcom accordingly. [11]

Net neutrality

63. As convergence progresses, so the importance of maintaining the open internet increases. It has contributed to digital innovation and growth, sustained access to digital public services and been a safeguard of media plurality. The BBC has therefore welcomed the good progress made by Government, the Broadband Stakeholders Group and the majority of UK Internet Service Providers in agreeing a voluntary code with tangible commitments to support the open internet. [12] Despite this progress, the BBC would warn against complacency. There is a risk that service and content innovation will be hindered if providers of internet access block services, or apply traffic management in a manner that discriminates against content providers. [13]

64. In general, the BBC believes Ofcom’s new ex ante powers-under the revised EU Framework Directive and corresponding UK law-are currently sufficient to ensure transparent consumer information about traffic management practices and address harmful discrimination on the internet. However, the pace of change in the market requires Ofcom not only to actively monitor market developments but to demonstrate a willingness to use its powers should this become necessary.

The Intellectual Property regime

65. The Committee seeks views on several aspects of the current IP regime: the impact on the creative industries of the independent Hargreaves Review of Intellectual Property and Growth and the Government’s response to it; the impact of the failure, as yet, to implement the Digital Economy Act; and the impact of proposals to change copyright law without recourse to primary legislation (under the Enterprise and Regulatory Reform Bill currently before Parliament).

66. It is essential to ensure a strong, flexible IP regime that preserves the incentives for investment in original content. The BBC welcomes the proposals on extended collective licensing and orphan works schemes to modernise copyright as part of the Enterprise and Regulatory Reform Bill. However, we would caution the Government against a broadly drawn private copying exception, which could undermine secondary exploitation and rights holders’ incentives to invest.

67. On copyright infringement, we are disappointed that the Hargreaves review did not recommend changes to legislation to help rights holders enforce rights – in particular the clarification of section 73 of the Copyright, Patents and Designs Act 1988 to address the problem of websites offering unauthorised online streaming of channels with their own advertising on top, which undermines investment in content.

68. In addition, implementation of the notifications regime under the Digital Economy Act (DEA) could have been speedier and provided for a less complex and costly system than the one under consultation. In addition, while the DEA primarily focuses on infringement by UK users via Peer to Peer, copyright owners frequently face infringement via other services such as embedded streaming, or in jurisdictions outside of the UK. A toolkit of enforcement measures is essential to target different points in the value chain, including effective collaboration by intermediaries to address the funding of infringing services (payment processors, advertising networks, search), prompt responses to notice and take action requests, and timely court blocking injunctions. It is important that Government continues to facilitate and give momentum to UK stakeholder dialogue on these areas and, with Ofcom, engages effectively with EU and international policy development.

Tax reliefs for the creative sectors

69. The BBC believes that the Government’s tax relief proposals form an important component of the Government’s Plan for growth in the communications sector. The BBC sees the tax reliefs as providing a valuable opportunity for the Government to create a critical mass of infrastructure and skills to enable and support production in the UK both today and over the longer term. The BBC is keen for the Government:

· To make contribution to training a condition of receipt of the tax reliefs-for example by introducing a compulsory levy payable to Skillset or by placing a direct responsibility on production companies in receipt of the relief to train staff working on their productions.

· To ensure that the right conditions are in place to encourage strategic investment in infrastructure in relevant and appropriate locations (e.g. in areas of shortage or in regional clusters) and to bring together public and private sector investment to maximise its effectiveness.

· To use the tax credits to support the regional agenda so that the benefits of any additional investment are spread around the country rather than being concentrated in the South East. For example, the Government may wish to consider introducing higher rates of tax relief for out of London investments as defined by Ofcom.

70. More generally, Government should consider the tax reliefs in the wide context of other measured aimed at supporting UK production to ensure that it has a coherent and consistent approach to all content producers.

November 2012


[1] Gross Value Added (GVA) provides an estimate of the value generated by an organisation for the UK economy reflecting both immediate expenditure on people, infrastructure and services and any indirect consequential effects on the wider economy.

[2] Source : Mediatique analysis and PACT Financial Survey and Census , 2012

[3] See http://www.bbc.co.uk/bbctrust/news/press_releases/2012/wocc_2012.html

[4] Broadcast Indie Survey 2012

[5] See http://www.bis.gov.uk/assets/biscore/innovation/docs/i/11-1387-innovation-and-research-strategy-for-growth.pdf

[6] Intangible assets (often known as knowledge assets or intellectual capital) are assets that do not have a physical or financial embodiment. For a fuller discussion see Growth, Innovation and Intangible Investment , by Jonathan Haskel to the LSE Growth Commission, June 2012 and BIS research paper number 74 (May 2012), the Impact of Investment in Intangible Assets on Productivity Spillovers

[6]

[7] http://news.bis.gov.uk/Press-Releases/-150-million-for-businesses-to-build-skilled-workforce-68396.aspx?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+bis-news+(BIS+News)

[8] The employment effect of BBC North is not yet known. However, the North West Development Agency estimated that the BBC’s relocation had the potential to create 10,000 jobs and add £170 million to the regional economy and research by Amion Consulting (March 2006) estimated that MediaCityUK will employ 15,000 people and deliver £1billion net value to the North West economy.

[9] See the BBC’s response to Jeremy Hunt’s open letter seeking views on the Communications Review and s ubsequent submissions to the DCMS seminars to inform the White Paper.

[10] http://stakeholders.ofcom.org.uk/consultations/uhf-strategy/

[11] Under section 5 of the Wireless Telegraphy Act 2006, the Secretary of State may by order give general or specific directions to Ofcom about their radio spectrum functions.

[12] http://www.broadbanduk.org/content/view/485/7/

[13] http://erg.eu.int/doc/consult/bor_12_30_tm-i_snapshot.pdf

Prepared 14th December 2012