Memorandum submitted by Professor Richard
1. The Government's proposals in the draft
Bill are, broadly, very positive. But proposals for safeguarding
established institutions and practices, particularly in broadcasting,
mean that some opportunities to establish a genuinely technologically
neutral and future proof regulatory regime, so far as any legislation
for a fast changing sector can be future proof, have been missed.
The proposed strengthened powers for OFCOM to
use the Competition Act, the forthcoming Enterprise Act, through
transposition of European Union Directives and the arrangements
proposed for spectrum pricing and trading (subject to Government
adoption of the Cave report) promise to:
Provide a more predictable and thus
secure climate for investment.
Promote entry of new firms.
Encourage efficient use of resources
and solutions appropriate for purpose.
2. Specifically, these measures will assist
progress (but perhaps not enough) towards achieving:
Attributing a value to spectrum used by public
service broadcasters will incentivise PSBs to migrate analogue
services to digital platforms. Government may choose to accelerate
this process by subsidising distribution of digital boxes, and
perhaps build out of transmission infrastructures, using the net
present value of PSB spectrum liberated by digital switchover
to fund the boxes.
By strengthening OFCOM's power to overcome bottlenecks
in key infrastructuresnotably digital satellite transmission
(platform, conditional access system, electronic programme guide
By strengthening OFCOM's power to overcome bottlenecks
in key infrastructures.
Competition is likely to serve the public interests
when markets work well but, even in well functioning markets,
economically efficient outcomes may not always serve the public
interest. The Bill identifies several areas where competition
and markets may not work well enough.
However, I comment here only on the important
matter of public service broadcasting, other than to observe that
among OFCOM's general duties (Paragraph 3.1.g) should be the duty
of promoting freedom of expression and of limiting it only in
clearly specified circumstances (eg those acknowledged in Article
10 of the European Convention on Human Rights).
3. PUBLIC SERVICE
Public service broadcasting merits particular
attention for it constitutes the principal exception to the general
principles, notably of promoting competition and ensuring optimal
use of resources, defined in the draft Bill. The public service
broadcasting exception (and other exceptions, such as ownership
regulation) is based on the implicit assumption that broadcasting
markets fail and intervention, eg by public service broadcasting,
serves the public interest. Other, non-economic, considerations,
eg democracy, fairness, security, may also point to intervention.
However, it is one thing to establish a case
for intervention, it is another to establish the scale of intervention
required to redress market failure and to secure social and democratic
goals. By any standards, intervention in the UK broadcasting market
is massive. Indeed, McKinsey (in a study for the ITC) stated that
UK public funding per head is highest of all countries surveyed.
Yet, the objectives of public service broadcasters are poorly
specified and the remits defined in Annex B of the policy statement,
which accompanies the Bill, are notably imprecise. Is intervention
proportionate to the size of market failure? We cannot know because
of the lack of precision in defining goals and thus in defining
public service broadcasting. Once it may not have mattered that
few shared Gavyn Davies' ability to "know it when he saw
it" but now, when entry to broadcasting markets may be chilled
because potential entrants are unable to predict whether they
will be exposed to competition from PSBs, more objective, transparent
and public definition of PSB is required.
Public Service Broadcasting has served the UK
well, but practices and institutions that served us well in the
past may not be best at doing so in the future particularly when
the context in which they worked has changed fundamentally. UK
broadcasting policy has been based on Government's ability to
control entry to the broadcasting market. Firms were licenced
and given privileged access to spectrum in exchange for performance
in the public service. But technological change, technology neutral
regulation and promotion of competition, which shifts regulatory
responsibility towards encouraging market entry rather than restricting
it, means the old public service bargain can no longer be struck.
Moreover, there is a high level of well founded
concern that the programming policies of public service broadcasters
reflect more accurately broadcasters' enthusiastic participation
in a race for market share rather than a commitment to provision
of services unlikely to be provided by commercial suppliers. Mark
Thompson's justly celebrated Banff speech, made before he took
up office as Chief Executive of Channel 4 and when Director of
BBC Television, eloquently testified to this concern about PSB
The Government's proposals for broadcasting
in the draft Bill are very complex. Their complexity is surely
related to an insufficiently consistent recognition of the need
to change regulation in response to a fundamental change in market
structure. Too much of the draft Bill reflects attempts to secure
the survival of established institutions and practices and an
underestimation of how far regulators' power to manage the broadcasting
market has declined.
To ensure that intervention in, and regulation
of, broadcasting markets is proportionate to the need to redress
market failure and achieve social and democratic goals changes
are required to the institutional structure of PSB in the UK,
to OFCOM's remit and powers, and to the remits for public service
Cease to classify Channels 3 and
5 as public service broadcasters, assessing whether these broadcasters'
PSB obligations and privileges are too onerous or too light is
likely to be an insoluble problem for OFCOM and such uncertainties
may chill entry by new suppliers to the television (and television
Bring the BBC under OFCOM's competence.
The BBC's c38 per cent share of the television market and 50 per
cent share of the radio market means it may require regulation
as a dominant incumbent for competition purposes. And, if OFCOM's
assessment of the performance of public service broadcasting is
to be meaningful OFCOM must have the competence to assess the
performance of the UK's principal public service broadcaster.
Require the Governors of the BBC,
the Welsh Authority and the Board of Channel 4 to specify, at
appropriate intervals (eg annually in a three year rolling setting
of targets), their programming and access plans. These plans should
show both how the provision proposed is unlikely to be provided
by commercial services and how it is likely to achieve public
service objectives. OFCOM will assess PSB's performance against
their own self-defined targets. In doing so, OFCOM will give due
consideration to viewer and listener judgements on the PSB offer
by researching and consulting audiences. Has the PSB offer been
valued by audiences, has it served minorities, enhanced pluralism
and diversity, been of consistently high quality, universally
accessible and independent of vested interests?
Such measures will enhance transparency,
will allow PSBs to define their own policies but ensure that their
performance is authoritatively assessed and linked to viewers'
and listeners' values and preferences. It will put the onus on
PSBs to show how "boundary cases", eg services such
as E4 or BBC Radio 1, meet PSB objectives and are unlikely to
be provided by commercially. It will assist cost/benefit analysis
of public service broadcasting and an informed consideration of
the extent to which the resources committed to PSB are proportionate
to PSB's remit and performance.
If assessment of PSB performance
shows that insufficient resources are committed to PSB, (eg to
secure the desired provision at the level of costs that would
be incurred by an efficient private broadcaster); that market
failure is insufficiently redressed; and that high level social
and democratic goals are insufficiently fully achieved, it will
be open to Government to allocate additional resources to PSB.
This might be done by providing support to an independent nominated
news provider(s) and/or by providing further support for programme
production. Such support might be administered by bodies such
as the Gaelic Broadcasting Committee, the Film Council or by a
new body such as an "Arts Council of the Air". If Channel
3 and 5 will no longer pay less than market clearing prices for
spectrum in consideration of their PSB roles Government will dispose
of "broadcasting" revenues which could be devoted to
this purpose if required.
4. Such changes will bring UK regulation
closer to the PSB regime enjoined by the European Commission through:
Clear statement of objectives.
Funding proportionate to the achievement
of PSB objectives.
A specific monitoring body independent
of public service broadcasters.
Most importantly, it will create a market structure
and regulatory regime more likely to facilitate achievement both
of the Government's high level goals of:
A dynamic and competitive industry.
Universal access to a choice of services
of the highest quality.
Advancing the interests of consumers
Moreover, such changes will enable the UK's
public service broadcasters to re-focus on their public service
mandate and mission and ensure that the level of the UK's resources
committed to these goals is proportionate and appropriate.