Select Committee on BBC Charter Review Written Evidence


Letter and memorandum from Trinity Mirror PLC

  I enclose Trinity Mirror Plc's submission to the extended Lords' Select Committee inquiry into the BBC with a specific reference to broadcasting in the Nations and Regions and "ultra-local" services.

  In essence, we believe that the launch of the BBC's pilot projects into ultra-local news provision has not been properly thought through. The proximity of the conclusion of the pilots and the adoption of a new Charter with its accompanying new regulatory regime, leave any Market Impact Assessment of these new services in a regulatory no-man's land.

1.  INTRODUCTION

  1.1  The Lords BBC Charter Review Committee has extended its review into the BBC and will now hold a short inquiry to consider specific aspects of BBC activity including decentralisation and "ultra-local" services. The Committee has invited interested parties to submit evidence to assist it in its inquiry.

  1.2  This submission has been prepared on behalf of Trinity Mirror Plc, the largest regional newspaper publisher in the United Kingdom with a regional presence of 250 titles including the Newcastle Evening Chronicle, The Journal, Liverpool Echo, Liverpool Daily Post, Western Mail, South Wales Echo, Birmingham Post, Birmingham Mail and the Coventry Evening Telegraph. Through its subsidiaries, Trinity Mirror also publishes the Daily Mirror, Sunday Mirror and The People and the Daily Record and Sunday Mail in Scotland. This submission is structured in accordance with the suggestions contained within the Committee's announcement of 2 August 2005.

2.  DISTORTION OF THE MARKET

  2.1  The Government's central communications policy is to ensure a plurality of media voices in any market place. Trinity Mirror has long held the view that plurality ensures strong competition and a diverse market. If the BBC uses public funds to create a new ultra-local news content service using new technologies and delivery mechanisms it will ultimately stifle investment from commercial investors and inevitably lead to a reduction in pluralism.

  2.2  Local newspaper companies invest in providing ultra-local content. Our audiences demand ultra-local content. As those audiences adapt to new technologies they will want their trusted newspaper content, segmented or otherwise, to be available to them on platforms of their choice.

  2.3  If the BBC has already colonised those new platforms what incentive is there for commercial operators to compete? Even if they wanted to compete, would they be able to do so?

  2.4  The BBC is not subject to the financial or revenue constraints of a commercial business. It could support a financially unsuccessful project in the name of the public's interest. Trinity Mirror argues that if a revenue-blind model is allowed to lay claim to new delivery platforms in an infant market, it will distort that market.

  2.5  The commercial development of local news online relies upon investment rewarded by advertising revenue generated from site users. The BBC, entering early with rich content and no need for commercial returns, will take a significant share of the audience for local news. In doing so it will reduce the returns available to the private sector and hence its level of investment in local news services.

  2.6  We agree with Philip Graf, who conducted a market impact assessment of BBC online, when he concluded that the presence of the BBC in the online market might: "Lessen competition by deterring investment by commercial operators that could have led to new forms of competition". (Graf Report Page 58).

  2.7  Competition is served best when investment, risk and innovation lead to many new projects being launched in the market. In a burgeoning low-audience digital market these projects are currently defined by higher than average levels of investment with higher levels of risk exposure and much lower returns, at least in the short term.

  2.8  When innovative decisions are considered in this environment, the presence of a licence-fee supported BBC service will act as a deterrent to investment decisions. Even a commitment by the BBC for a service expansion into a new or extended digital market will bounce commercial innovation away. This isn't a matter of the BBC addressing market failure. It is rather that early ownership of a new platform, backed by public funds, might leave the BBC acting as a monopolistic incumbent.

  2.9  As the market fragments, it will be essential for traditional paper-based media to expand onto alternative platforms to retain readers and advertisers. If those new platforms are effectively closed off because they have already been occupied by subsidised services from the BBC, the long-term future of the core paper product may well be placed in jeopardy, with a consequential threat to plurality.

  2.10. Licence fee-backed experimentation on new delivery platforms constitutes, in our mind, unfair competition against commercial parties who need shareholder approval to proceed with new investments.

3.  MARKET IMPACT ASSESSMENTS AND PUBLIC VALUE TESTS

  3.1  The Government's Green Paper says: "There should be sufficient flexibility in the system for the BBC to add and remove services in response to changing technologies and market conditions. Any significant change should be subject to a public value test that incorporates a market impact assessment (MIA). Only where the public value of a change outweighs any adverse market impact should it be allowed". (Page 14 "Review of the BBC's Royal Charter").

  3.2  Trinity Mirror asks the Committee to consider whether the public's interest is served by the extension of BBC content into ultra-local markets. If the public's interest is served at all by such an extension, does that public value outweigh any adverse market impact? How can such a market impact be measured given that the effects on competition of a new or extended BBC service must include the likely effect of the BBC hindering competition in the medium to long term?

  3.3  "Market impact assessments of BBC services also play an important role. Significant investment by the BBC in new services would—if not properly directed—have a chilling effect on private sector investment. Uncertainty about the BBC's plans could deter commercial operators, especially in niche markets" (Para 3.19 Ofcom Response to Green Paper).

  3.4  Trinity Mirror supports Ofcom in seeking to carry out impact assessments of BBC services. We also support the Ofcom view that: "significant changes or repeated changes to existing services are not different in nature to new services, as to their impact on the market(s), competition, and on predictability/certainty in the market. Ofcom believes they should not be treated differently. In fact, if they are treated differently, there is a risk that the objectives of the market impact assessment regime could be circumvented by simply reclassifying new service as a change to an existing one" (Para 3.21 Ofcom response to Green Paper).

  3.5  We fully support Ofcom when it says: "Our view is that these are new services or are at least significant changes to existing services, and that there could be reasonable grounds for believing that they may have a significant impact on the market. They should therefore be subject to an independent assessment by Ofcom" (Para 3.26 Ofcom response to Green Paper).

  3.6  If current proposals for the new Charter are adopted, after Ofcom carries out an impact assessment, the BBC Trust will have the final decision on the continuation of that service based on the overall public value of that service and whether it outweighs any potentially adverse market impact.

  3.7  Trinity Mirror has concerns about the status of the proposed BBC Trust and the public value test, as outlined by the BBC's Building Public Value document. We support the OFT when it says that all activities of the BBC must be appropriately regulated within a framework of legal accountability.

  3.8  In a letter to the BBC Charter Review consultation Becket McGrath from the OFT said that the BBC: "can also produce outcomes that are uniquely damaging to effective competition and to commercially funded innovation on media markets due to the BBC's unique scale, scope, status and ambition. As a result, the systems by which the BBC is governed and generally held accountable must be able to provide sufficient safeguards for those whose legitimate interests may be harmed by the BBC's activities." (Page 2, OFT letter to DCMS June 2 2005).

  3.9  The new BBC Trust will have power to agree BBC services based on a public value test. The Trust could approve a service that, in Ofcom's assessment, might have a negative market impact. The discretion of the Trust to override Ofcom's advice when deciding on a new service must be matched by a structure to allow those parties who feel damaged by such a decision to have course for redress. "In our view, it is important that this accountability is clear, to enable aggrieved parties to seek redress, and that it includes, in appropriate cases, accountability in law" (Page 4, OFT letter to DCMS 2 June 2005).

  3.10  Unfortunately for Trinity Mirror, the first ultra-local pilot project is in the Midlands, one of our core publishing markets, and it is launching in December 2005. The reassuring regulatory tones from both Government and the BBC for the new Charter seem a bit flat as these new BBC services are to be launched without any of the checks and balances described and debated above in place. This is deeply un-reassuring to those with doubts like ours about the potential adverse market impact of BBC expansion onto new platforms.

4.  CONCLUSION

  4.1  We agree with Ofcom when it says: "In one sense, by its very existence, the BBC impacts on competition in the market-place" (para 3.14 Ofcom response to the Government Green Paper on Review of the BBC's Royal Charter).

  4.2  The BBC is a powerful force that will affect decisions made by media investors. In emerging digital markets, new and extended BBC services must be rigorously scrutinised to prove there is no short or long term threat to current, near or future investment and ultimately plurality. The BBC must be forced to adopt what the Graf Report described as a "deliberately precautionary approach". Their behaviour this year, in extending and launching digital services, seems more expansionary than cautionary.

  4.3  Ultimately, the responsibility falls to Government to ensure the BBC shows restraint. But structures that regulate BBC activities—Ofcom, BBC Trust—must offer transparent, independent and inclusive review procedures for new and extended service and must offer genuine routes to redress.

  4.4  Ofcom must be allowed to review the BBC's new ultra-local news services, including the pilot launched in the Midlands in our core publishing market. This review must allow for withdrawal of the services, and the elimination of the widely publicised rollout plan, if they are not deemed to add value to what the commercial market would provide now, or more importantly, in the future as digital content delivery matures.

  4.5  Commercial operators must know what expansionist services are planned by the BBC to enable them to take educated commercial investment decisions. The extension of existing services onto new digital platforms must be treated, from a regulatory framework, as the provision of a new service. Changes to those services—platform delivery or availability—must be monitored closely by Ofcom through it's own research and via concerns from commercial operators. The changing reach and remit of an existing service cannot be allowed to go ahead without an impact assessment on what the possible effects on the future health of the market into which those services are expanding will be.

  4.6  Procedure and process aside, Trinity Mirror believes that wider issues of competition must be addressed. The BBC has the potential to distort the market. In doing so, it will harm plurality by adversely affecting future investment. Moves into ultra-local content provision could pose a very real threat to the local press.

10 October 2005



 
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