Joint Committee on The Draft Communications Bill Minutes of Evidence

Examination of Witnesses (Questions 540 - 547)



  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 is listed.
  (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 now—if 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 channel—or 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 period—we had our marching orders then—is premature, particularly given that OFCOM does not exist and we do not know what it is like.

Brian White

  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 signal—which 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 price—what 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.

Nick Harvey

  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?

  545. Yes.
  (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 has—whether 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 world—we had about 26 different countries—and 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.

Paul Farrelly

  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 one—the market sorts these things out". Our bid is only about us putting our existing services that you can receive on Sky on to DTT—that 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 platform—this is the one hope—and 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 £50—I 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.

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