Should the BBC pay for spectrum?
44. In 2001 the Government commissioned an independent
review, led by Professor Martin Cave, to look at the future of
spectrum management and develop principles to promote efficient
use of the radio frequency spectrum. Professor Cave published
his report in 2002. He recommended that "spectrum pricing
should be applied over the coming decade to all spectrum which
is used for broadcasting". He also specifically recommended
that "Ofcom should have greater oversight of the BBC's spectrum
use".[12]
45. Following these recommendations the Communications
Act 2003 gave Ofcom a duty to secure optimal use for wireless
telegraphy of spectrum (Section 3) and the power to charge for
wireless telegraphy licences (Section 1 of the Wireless
Telegraphy Act 1998 as amended by paragraph 145 of schedule
17 to the Communications Act 2003). Accordingly, the BBC needs
a licence from Ofcom to establish or use wireless telegraphy apparatus
to transmit its programmes and Ofcom may charge the BBC for that
licence.
46. In its report "Driving Digital Switchover"
Ofcom stated that "We will consider charging companies who
use the spectrum from 2006. This would give broadcasters an incentive
to use as little as possible. If we decide to go ahead, charges
could apply for the first time to the BBC, Channel 4 and S4C in
2006".[13] Lord
Currie of Marylebone, the Chairman of Ofcom, told the Committee
that Ofcom would be consulting on this proposal this year (Q 1438).
If Ofcom do decide to charge the BBC and Channel 4 for spectrum
the money paid will go directly to the Treasury. Private sector
users of spectrum already pay the Government for the spectrum
they use. We note that the Communications Act 2003 gives the Government
the power to direct Ofcom in its decision about who to charge
for radio spectrum. Section 156 of the Act empowers the Secretary
of State to "by order give general or specific directions
to OFCOM" with regard to radio spectrum.
47. We took evidence from Professor Cave who
explained the logic for charging public services for the use of
spectrum: "Clearly, the commercial spectrum users will be
under commercial pressures to economise on spectrum. There is,
however, a concern… that if the public sector spectrum users
get it free, they will get too much and we will have an imbalance…
For that reason, I have proposed the extension of a system that
was introduced in 1996 which means that public sector spectrum
users actually make some kind of payment". He went on to
argue that such a policy would have two benefits: "Firstly,
it makes transparent or more transparent how much public services
are actually costing… The second reason is that it provides
signals for broadcasters to make sensible decisions about how
to achieve their… objectives" (Q 1746).
48. However, having argued that the BBC should
pay for spectrum to ensure its efficient use Professor Cave also
stated that the BBC currently uses spectrum efficiently (Q 1756).
49. Many of our witnesses were strongly against
making the BBC pay for spectrum. Lord Puttnam stated that "an
already relatively cynical public [know] full well that this is
double dipping. They are having their pockets picked for a licence
fee and that licence fee is being picked again for that money
to go back to the Treasury" (Q 1770). He argued that
the licence fee would be much better spent on BBC services. Michael
Grade agreed. He argued that "The justification for charging
the private sector for-profit organisation for the use of the
spectrum seems to me intellectually perfectly justifiable in the
sense that this is a national resource, the airways belong to
the nation, shareholders are making hopefully a decent return
on their exploitation of that publicly owned utility... It seems
to be inconsistent to apply the same logic to the BBC, because
the BBC is there to provide a public service for which the public
pays and to take money back through spectrum charging seems to
me to be fundamentally illogical" (Q 1999).
50. Andy Duncan, the Chairman of Channel 4, argued
that as a not-for-profit public service broadcaster Channel 4
should also be exempt from spectrum charging. He suggested that
the requirement to pay for spectrum might bite at exactly the
same time that other pressures began to cause real problems for
the channel. He went on to state that "Capacity has historically
been a very good way of helping drive the public service model,
both in our case and the BBC's case and, going forward, we think
it is one of the best ways in which you could underpin Channel
4" (Q 1137).
51. It is our conclusion that it would be
illogical and unfair for licence fee payers to pick up the costs
of ensuring the BBC uses its spectrum efficiently. This is particularly
true when it is acknowledged that the BBC already uses its spectrum
efficiently. Although we recommend that the BBC's use of spectrum
should be kept under review we do not believe that licence fee
payers should pay a charge that goes straight to the Treasury.
52. We also recommend that Channel 4, as a
not for profit public service broadcaster, should be exempt from
spectrum charging.
53. The decision as to whether to charge the
BBC and Channel 4 for spectrum will have a direct impact on the
quality of public service broadcasting and on the level of taxation
to which the public is subject. The Government should therefore
use their powers under Section 156 of the Communications Act 2003
to direct Ofcom to exempt the BBC and Channel 4 from any charge
for radio spectrum.
54. Finally we note
that the Government stand to benefit financially from digital
switchover in two ways. Firstly through receipt of the proceeds
of the sale of analogue spectrum and second through receipt of
spectrum charges placed on broadcasters (commercial and, under
current plans, the BBC and Channel 4).
55. In our first report we noted that "the
Government will be in direct receipt of the proceeds of the sale
of analogue spectrum" and explained that "although the
value of this spectrum will not be known until it is sold it is
undoubtedly a very valuable asset".[14]
In the course of this inquiry Professor Cave told us that, although
it is hard to estimate the value that may accrue to Government
from the sale of spectrum, he estimated a value of between £0.5
billion and £1.5 billion (Q 1753). These are huge amounts
even before the revenues from spectrum charging are added to them.
These projected revenues will arise from the same decision as
that which means the BBC will be required to cover the costs of
switchover for the "vulnerable". They should logically
be used to cover the costs of that decision. We therefore recommend
that the proceeds from sale of analogue spectrum, and any receipts
from the charging of broadcasters for spectrum, should be used
to cover the costs of digital switchover.
12 
