Joint Committee on The Draft Communications Bill Appendices to the Minutes of Evidence


Memorandum submitted by Professor Richard Collins

  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:

    —  Digital switchover.

  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 infrastructures—notably digital satellite transmission (platform, conditional access system, electronic programme guide etc).

    —  Broadband rollout.

  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).


  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 "dumbing down".

  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 broadcasting.


    —  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 advertising) market.

    —  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 and citizens.

  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.

June 2002

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