Examination of Witnesses (Questions 540
THURSDAY 20 JUNE 2002
540. Talking of public interest and rights,
one of the smaller parts of the Bill, but important, is the continuation
of the regulations regarding listed events and the Crown Jewels
of sport and so on, and at the moment we are enjoying the World
Cup in this country: in Spain where they do not have the same
provisions they are having to pay per view. Do you think there
is a special obligation on public service broadcasters, particularly
the BBC, where Parliament does list events, whether for live rights
or highlights, to do their best to try and show these on television?
For example, the Cricket World Cup which I understand Channel
4 and the BBC are not planning to make a bid for even though it
(Mr Dyke) The history of cricket, as you know, is
that it used to be on the BBC and the BBC covered almost everything,
and Channel 4 decided it wanted to get into cricket and it came
along and stole the Crown Jewels of cricket but it does not seem
to want to cover the rest, and I think it is probably a question
you should ask Channel 4 more than us. We have not got a big cricket
team nowif you have not got the test matches and you have
not got much of the cricket, you have not got a big team to cover
it. We will, I suspect, look again at some stage at this if the
recorded highlights of the Ashes next year are not being covered,
but that is an obligation that you should ask Channel 4 about,
because they are the cricket channelor that is what they
claimed when they won the rights, so obligations go with that.
(Mr Davies) Apart from radio.
(Mr Dyke) We will cover it all on radio.
(Mr Davies) We keep forgetting radio!
541. I feel an Early Day Motion coming on! Finally,
how would you respond to somebody like Chris Smith who says that
really it would be in the BBC's long-term interest to have tier
3 regulation under OFCOM because in a way it is a greater guarantee
of independence, he would argue, than Parliamentary oversight.
(Mr Davies) We are definitely in favour of independence,
there is no doubt about that, not from Parliamentary scrutiny
at all but from Parliamentary instruction, because the BBC is
not and has never been a wing of the Government or of the State,
and it is one of the reasons the BBC broadly speaking has succeeded;
it has not fallen in the trap which other state broadcasters have
done of being the voice of the State, so I fully share Chris's
desire to see the BBC independent. We have thought about this
a lot: we have revised and modernised our processes in the way
we explained in the document we published in February: we now
think it is reasonable to see how these revised processes work
for the next three or four years, run them in parallel with OFCOM,
and that the national time to make an ultimate judgment on this
is when Parliament has seen OFCOM and our new processes for a
period of time, and our Charter renewal is absolutely the time
to have this debate again. To make these changes halfway through
a Charter which was set in 1996 for a ten-year periodwe
had our marching orders thenis premature, particularly
given that OFCOM does not exist and we do not know what it is
542. One of my fears about OFCOM as this morning
has demonstrated is that it will be dominated by discussions about
the BBC and about the fluffy end of the market and the important
communication regulation will be forgotten. There is a whole set
of changes happening in the television market at the moment with
digital switchover and a number of others. What role do you see
for OFCOM, if any, in the operation of a fair trading market?
I am thinking of, for instance, digital switchover and ensuring
it happens, interactive TV, internet provisions and so on.
(Mr Dyke) On the first part, they will have a problem
but in the end, whether or not we have analogue and switch-off
is going to be a decision for the market and for the politicians.
You can decide it because you have the power to switch off the
signalwhich might not be the most popular thing at this
moment amongst some of your constituents! From our perspective,
because we have gone in and now have digital channels which are
not received by everybody who pays their licence fee, we fully
support the move to analogue switch-off and will do all we can
within our powers to help it because we want everybody to be able
to receive all the services we are currently broadcasting.
543. Assuming the must-carry provisions happen
before digital switchover?
(Mr Dyke) On must-carry, when the White Paper first
came out we made certain suggestions on that which have not been
carried through, so particularly if there is any sort of obligation
that we must offer you have to have a must-carry provision that
is fair and straightforward, and the present regime of regulating
that and ensuring it is done at a fair price is quite difficult.
When the cable legislation first went through the Houses of Parliament,
if one had known then what was going to happen on satellite, somebody
would have written in "must-carry", just as they did
on cable, and I think this is the opportunity to write "must-carry"
in, but it has to reflect that Sky in particular have invested
pretty heavily in a satellite system and, therefore, there has
to be a price for that. What we would ask is that must-carry be
at a price that reflects the marginal cost of doing it. Clearly
Sky did not set up the Sky platform to broadcast the BBC; they
set it up to broadcast pay television and to profit from that,
which is perfectly valid, and therefore we believe there should
be must-carry on satellite and we believe there should be a price
but that it should be fixed at a marginal pricewhat is
the real extra cost of broadcasting this as opposed to having
to charge into that price, not only for us but also the other
public service broadcasters; also not charging in the cost of
the whole Sky infrastructure, which is what happens at the moment.
(Mr Davies) What Greg has said, Chairman, is that
there are two specific amendments to the Bill which we think should
be in: must-carry for satellite and the pricing at marginal cost.
The third element is due prominence for public service radio channels
on the PGs. That applies to TV but not radio, and is another case
where radio is slightly forgotten in the legislation.
544. You call for specific powers for OFCOM
to restrict the purchase of rights by cross media holdings. Why
would Competition Act powers not be sufficient for this, and perhaps
we would be interested in your take on Government proposals for
extending foreign ownership and the effect that will have on purchasing
power and therefore on the ecology of television broadcast?
(Mr Dyke) You are talking about the change in ownership
provisions within the Bill?
(Mr Dyke) There will be a difficulty if somebody who
runs the major pay platforms in this country and pay channels
can also own our terrestrial channel in the sense of the buying
of rights to sporting events, to movies, to American material,
because the price paid by the pay operator is so much greater
than the price paid by the free-to-air operator that they can
take them all in. It is a fairly small part of it but I do think,
within that, you should write something into this Bill which says
you have to buy separately: that if somebody is allowed to own
a terrestrial broadcaster and to the major pay operator they have
to buy rights separately, not collectively. If you want to go
on to talk about the whole of ownership
546. I think the thrust of the question is what
distortions are possible as a result of the changes in ownership?
(Mr Dyke) From the BBC's perspective there must be
a danger that if you allow Time Warner to own ITV, a number of
American programmes that at the moment come on to the market will
not come on to the market at all. There is no doubt that if Time
Warner owned ITV you would not have seen "Friends" and
"ER" up for sale. They would have gone to a different
channel and so there is a difficulty in that and that is the concern
that the BBC haswhether this is going to distort the market,
and things that come on to the market will not come on for a free-to-air
broadcaster. If you ask me about my perspective rather than the
BBC's perspective, having been in this industry for 20 odd years
and run a number of different companies, I am not sure. Firstly,
I think reciprocity is a really interesting discussion and I fail
to understand why Britain would want to allow American media companies
to own our largest commercial broadcasters, while no European
one is going to own a station in Cincinnatti and it seems to me
reciprocity is a big question. Secondly, there is an argument
about dumping material. While I was at Pearson we built up the
biggest independent production company probably in the worldwe
had about 26 different countriesand the one thing you discover
really going on in that is that there are only two sorts of television
product around the world, American and indigenous, and American
dominates the world, and what you were always trying to do in
America was to find some guaranteed markets because the deposits
on production in America being sold to NBC or ABC are so large
that what you wanted was some guaranteed markets, and therefore
the real danger is you will get a significant amount of dumping
if you allow large American broadcasters who are also production
companies having a studio. So Disney, who owns ABC, owning ITV
means you suddenly find an awful lot more Disney programmes on
a particular channel, which is what has happened on ABC, both
good and bad. So I am not at all convinced by the arguments as
I have seen as yet for changing the ownership rules in the way
that is proposed.
(Mr Davies) Adding to that, the bundling of rights
between pay channels and free-to-air channels is something we
believe OFCOM should be able to regulate and, if these ownership
changes are passed into law, it is important to amend the Bill
so that OFCOM does have the ability to do that.
547. Greg, you said you believe very strongly
in the interests of plurality in broadcasting. Given the demise
of ITV Digital, why should the BBC be allowed to carve up the
digital TV market in this country with B Sky B?
(Mr Dyke) That is one way of describing it! We do
not want to "carve up" the market. We would be quite
happy if there were to be a utility approach, which is effectively
what our bid is, to the platform. If you want to go through the
whole of ITV Digital and the whole of that DTT platform, what
you discover is the failure of the platform for a number of reasons
but, firstly, technology failure. You discover that only 39 per
cent of the population can receive it and, of those, half got
a dodgy picture when you opened the fridge door or a bus went
past! My knowledge of technology is a little limited, as you will
understand, but basically the thing failed technically. Now there
are all sorts of things you can do in this window to sort out
the platform but what they will end up meaning is there are less
channels available, and the question then comes down to a discussion
about whether or not you want a free-to-air platform or a pay
platform. We believe quite strongly that a pay platform will not
work. There is no country in the world that has three successful
pay platforms, and although at times people in Government encourage
me to want a third pay platform because they want it, I say, "Well,
you want a car industry but you have not got onethe market
sorts these things out". Our bid is only about us putting
our existing services that you can receive on Sky on to DTTthat
is all. We do not wish to do anything more than that. There is
a bid whereby three Sky channels would also come on to DTT and
there will be another five or six channels available for others
who want to come on, so we certainly do not want to dominate it
in any way. We believe that, if you want analogue switch-off,
you are only going to achieve that by DTT being a free-to-air
platformthis is the one hopeand you market it in
a totally different way, not as digital at all because the world
out there thinks "digital" means "pay", but
you market it as more existing television. In other words, for
£99 you buy this box, take it home, you plug it in, and instead
of getting four or five channels you get 20 free-to-air channels.
That is what we believe is marketing. If you can achieve that,
the price of the box will come down from £99 pounds to £50I
see the Chairman thinks I am trying to do a sell!
(Mr Davies) The key difference between these two bids
is the amount of space you give to a pay platform. With our bid
you do not give any space to a pay platform but everything to
free-to-air channels. We believe that will be much easier to market
and much more likely to succeed than the alternative, which is
why we have done it
(Mr Dyke) But not to control it.
Chairman: I personally find this riveting and
I will pay for us all to have dinner and discuss it, but it does
not affect the Bill! Thank you very much.