Select Committee on BBC Charter Review Minutes of Evidence


Memorandum by Ofcom

INTRODUCTION

  The Office of Communications (Ofcom) submitted an initial memorandum of evidence to the Select Committee and gave oral evidence in April 2005. Following the extension of the Committee's inquiry, Ofcom would now like to submit supplementary evidence on two particular issues that fall within our remit; broadcasting in the nations and regions and the BBC as commissioner versus broadcaster.

  Ofcom embarked on its first statutory review of public service broadcasting (PSB) in late 2003. We are charged by the Communications Act with assessing the effectiveness of the designated public service broadcasters (BBC, Channel 3, Channel 4, Five, S4C and Teletext), taken together, in delivering the public service purposes set out in the Act. We are also charged with reporting on how the quality of public service broadcasting can be maintained and strengthened in future.

  One of our main conclusions from the review of public service broadcasting was that, as a society, we demand a wider range of high quality UK content than would be provided by the market—even in a more effectively competitive environment. We value trustworthy and independent news, programmes which increase our knowledge of the world, and content which reflects the different parts of the UK, and informs our cultural identity.

  Ofcom believes the BBC, funded by the licence fee model, should remain as the cornerstone of PSB, with a special responsibility to invest in distinctive content which strives always to meet public service purposes and characteristics. However, we also believe that the BBC should strive to ensure that all its programmes, not just its services, reflect the purposes and characteristics of PSB to some degree.

  One of the most challenging issues for the future is securing the effective provision of PSB in the Nations, regions and localities of the UK. For the commercial PSBs, this programming has a high cost of provision and is most at risk as competition increases. Viewers tell us that their priorities are regional news and current affairs, delivered by more than one provider, although many viewers would like the news to be more locally relevant than that currently provided. Viewers also like to see their own nation or region reflected on network television. The distinctive circumstances of the devolved Nations mean that meeting the needs of audiences in those Nations requires both more, and a greater range of programming specifically for each nation than is the case in the English Regions. We therefore believe an increasingly important role for the BBC in the provision of news and a range of other programming for both the Nations, and the English Regions.

BROADCASTING IN THE NATIONS AND REGIONS

The BBC's role in the Nations and Regions

  Ofcom set out its recommendations for the BBC's role in broadcasting in the Nations and Regions in Phases 2 and 3 of its Review of Public Service Television Broadcasting, published in September 2004 and February 2005 respectively.

  In the context of the inevitable decline of ITV1's regional service as switchover approaches, we proposed that the BBC should adopt an enhanced role in meeting the needs of the UK's nations and regions (in line with its own proposals), particularly in the English regions, where its non-news output has historically been more limited than in the devolved Nations. This should not involve the BBC providing a direct replacement of programming no longer available on ITV1. Nonetheless Ofcom considered that the BBC should be asked to develop new proposals of its own, which go beyond the use of local new media, to help provide more well-funded television programming for the English Regions in addition to its ongoing activity in the Nations. In adopting any new regional commitments, we suggested the BBC should undertake to support a plurality of regional producers.

  We noted in our final Statement on Programming for the Nations and Regions, published in June 2005, that the BBC agrees that it will need to take the lead in providing programming for the Nations and English regions, as ITV1's presence and obligations are reduced. We welcomed its commitment to developing plans for further regional output in England including current affairs, targeted regional programmes and regional inserts in network output. So far, the BBC's development of its English regional services has been mainly in the form of programming associated with major network projects, such as British Isles: A Natural History. A more extensive response could be looked for.

Production outside the M25

  Most UK network production still comes from companies based in London, although all five main channels have some level of out-of-London production quota. In 2003, 33 per cent of network originations across the five main channels combined came from outside the M25, accounting for 37 per cent of total spending.

  Viewers tell us that they value representation of their Nation or Region on network TV, although audiences in the Nations are sometimes concerned about misrepresentation, and some feel that their local accent or culture is often portrayed in an atypical or awkward way on network TV.

  The BBC has an important role to play in reflecting the Nations and Regions of the UK on its networks. In the early 1990s, the BBC set itself a target to increase the proportion of network programming made outside London from a fifth to broadly a third. In 2003, 31 per cent of its produced hours were made outside London, accounting for 33 per cent of its network production spend. The Governors' Review of Services for 2003-04 stated their particular concern that not enough material from the BBC Nations is shown on network television.

  We intend to consult with the BBC about increasing its out-of-London production quota, as part of the follow-up to Charter Review. We believe it is reasonable to expect the BBC over time to achieve a similar position to ITV1—50 per cent of network production made outside London, measured by both volume and spend, across BBC One, BBC Two and its digital services.

  We expect that the changes announced by the BBC in December 2004, which proposed a significant move of production and commissioning responsibility to Manchester, would represent a significant contribution towards this increase, and welcome this proposal. However, further steps may be worth considering, in particular increasing the BBC's representation of the Nations and Regions in its network drama, entertainment and factual output. The BBC might also be able to complete the Manchester relocation programme faster than currently envisaged to help meet our proposed target.

Local services

  Ofcom is the licensing authority for existing local TV services, broadcasting on analogue to particular areas around the UK. There are currently 11 services on air.

  Looking to the future, we believe digital local services have the potential to create significant new value for citizens and consumers and be a source of innovation in the UK broadcasting sector. In the PSB Review we identified digital local TV as a potentially important element of the future PSB mix, serving audience needs that are not fully met by the current blend of national and regional broadcasting.

  However we recognise that the economic viability of local services has not yet been established and that audience demand for them has not been adequately assessed. We are currently carrying out further work on the prospects for digital local content services as part of our follow-up to the PSB Review.

  We welcome the BBC's interest in "ultra-local" television news services for 50-60 cities and counties across the UK, initially on broadband (and satellite in its West Midlands pilot), and its offer to share its evaluation data with Ofcom to contribute to our own ongoing work in this area.

  We note that "ultra-local" is something of a misnomer for the BBC's plans, given that the initial intention is to base coverage areas on existing local radio service areas. In many cases these are not particularly local, and are not the kind of community-level services that some local TV stakeholders envisage.

  Nonetheless we recognise there are concerns from the local press and from some commercial and not-for-profit local TV operators about the potential impact of the BBC's plans on their markets and potential audiences.

  It is difficult to reach a firm view about the relationship between the BBC's plans and the prospects for alternative providers without more information about the likely future development of the BBC's services. However the growth of digital platforms offers substantial growth opportunities to commercial and not-for-profit local TV operators and there is a risk that the BBC's early entry to this field could discourage potential investment in this market, closing it off before commercial and community providers have had a chance to explore fully the emerging opportunities.

  We therefore suggest that the BBC's detailed plans, and any future extensions to them, should be carefully assessed with respect to their public value and their impact on both existing and potential future markets before they proceed beyond the current pilot in the West Midlands.

  One option that may be worth further assessment is for the BBC to develop partnerships with other local operators, including both commercial and community providers. However, a significant disadvantage of this is that if other stakeholders join with the BBC in sole operations in particular areas, this may have the effect of stifling not only commercial but also creative and editorial competition.

  Our detailed work on the future of digital local content services, including an assessment of the possible role of the BBC, is now underway, and is being carried out collaboratively with DCMS. We will set out the full range of options that we believe deserve consideration in our initial report, which we currently plan to publish by the end of the year. We would suggest that no further decisions on the BBC's plans should be taken until this research is complete.

Other issues

  In addition to the issues covered above, the aspect of broadcasting in the Nations and Regions in which the role of the BBC is critical is the delivery of indigenous language services. Although not specifically covered by the Committee's questions, we include a summary of our proposals in this area in case the Committee should wish to address these important issues.

  In the short term, the key issues to be resolved include:

    —  S4C's relationship with the BBC in Wales;

    —  in Scotland, the creation of a Gaelic digital channel with the support of the BBC and provision of Gaelic programmes on ITV1; and

    —  the extended transmission of TG4 in Northern Ireland and the role of the BBC in serving the needs of Irish language speakers.

  The BBC and S4C should develop a new relationship driven by three core principles: transparency, financial commitment and editorial control. We welcome the constructive steps already taken by both broadcasters to develop such a relationship, and support the BBC's proposals to establish a new Strategic Partnership between itself and the S4C Authority.

  However in certain respects we feel that more could be done to ensure that S4C has effective control over the nature of its service, its programme strategy and the direction of investment.

  The overarching goal should be to ensure that accountability for the S4C service, and the powers needed to carry out its strategy, clearly rest with the S4C Authority. Our Statement on Programming in the Nations and Regions contains more detailed proposals that we would be happy to make available to the Committee if that would be useful.

  Longer term, consideration should be given to alternative funding models for Welsh broadcasting based on contestability, including a review of the possibility of a Welsh Public Service Publisher funded partly by a transfer of the portion of licence fee revenues spent by the BBC on Welsh broadcasting.

  In Scotland, sufficient funding and in-kind support for a Gaelic digital channel could now be secured from a number of sources. We recognise the BBC's vital role in supporting the Gaelic language over many years and believe that it would be the preferred broadcast partner for any new channel.

  Looking further ahead, we recognise that other delivery mechanisms (broadband, DTT, interactive Web services, mobile, digital radio) might represent a rich and powerful way of engaging the Gaelic audience, particularly younger people.

  In order to most effectively exploit these new opportunities, one option would be to introduce creative competition into the provision of Gaelic through a contestable funding mechanism. This could either be achieved by channelling funding to a single body after a competitive tender process, or by awarding contracts to a range of providers providing different aspects of a broader Gaelic service.

  We believe that this could help generate a new wave of creative thinking about ways of reaching the largest possible audience, and exploit the best ideas from all those with an interest in supporting the development of the Gaelic language. Ultimately, of course, this is a matter for Government.

  The ultimate goal for Irish language speakers should be a dedicated digital service broadcasting to all viewers in Northern Ireland. The main Irish language public service channel in the Republic of Ireland, TG4, would currently appear to be the obvious vehicle for such a service. Consideration needs to be given as to whether and how it might be possible for TG4 to continue to be broadcast in Northern Ireland after switchover.

  However it is not appropriate for the provision of services from the Republic of Ireland to be the whole of the solution to Irish language broadcasting in Northern Ireland. The matter most often raised with us by respondents from Northern Ireland in the final phase of the PSB Review was the absence of statutory provision and of sufficient funding via the licence fee for dedicated programming in Irish, with content produced in and about Northern Ireland. They pointed to a perceived lack of equity in the treatment of Irish compared to that accorded Welsh and Scots Gaelic.

  It is true that Irish language speakers continue to be under-served by UK broadcasters compared to speakers of other indigenous languages. We believe that Charter Review should provide sufficient funding for BBC Northern Ireland to continue and expand its commitment to Irish language television broadcasting.

  However, enhanced funding raises further questions about where and how new programming should be broadcast. We have argued that provision through dedicated services and the exploitation of new media are more attractive than opt-outs on the main channels, and the BBC has said in its response to our consultation that in scheduling Irish language programmes it "must take into account the potential `deprivation' factor for the monolingual English-speaking audience."

  Therefore other options should be examined, including an enhanced relationship between the BBC in Northern Ireland and TG4, for example involving greater use of co-productions. There may also be scope for enhanced new media services, especially those relating to news and current affairs, pre-school children, school pupils and drama.

THE BBC AS COMMISSIONER VERSUS BROADCASTER

  The UK television industry generates annual revenues exceeding £9 billion, and spends almost £5 billion on programming—of this, around £2.4 billion 4 billion represents spending on original programming by the five main terrestrial broadcasters. This means that UK television viewers enjoy one of the highest levels of domestically originated programming in the world.

  UK programming is delivered by a production sector comprising programme-making activity both within the main broadcasters (in-house production) and without (independent and external production). This part of the industry has been and remains an integral part of UK television.

  Ofcom is conducting a review of the television production sector. This review commenced in May 2005, and is expected to be completed by April 2006. This submission to the Lords Charter Review Committee summarises the key issues being addressed by the review.

Background

  Ofcom is conducting this review since we are looking to secure the delivery of high quality television content.

  More specifically, this review is being carried out in the light of our statutory duties set out in the Communications Act:

    —  To secure the availability throughout the UK of a wide range of television and radio services which, taken as a whole, are both of high quality and calculated to appeal to a variety of tastes and interests

    —  The maintenance of a sufficient plurality of providers of different television and radio services.[1]

  This means that the interests of viewers are at the heart of Ofcom's work on the television production sector.

  In order to meet this overall objective, Ofcom has a number of responsibilities which relate directly, or at least indirectly, to the television production sector. These include:

    —  The setting of quotas regarding original production on the main terrestrial channels, designated as public service broadcasters (PSBs) under the terms of the Communications Act.

    —  Setting out-of-London production quotas for the PSBs.

    —  Recommending quotas for the commissioning by the PSBs and other channels of programming sourced from independent producers.

    —  Monitoring the operation of codes of practice for dealing with independent producers.

    —  In addition to its formal powers, Ofcom needs to take account of the impact on the overall production sector of proposals made in the context of the Review of the BBC's Royal Charter.

  The last major review of the sector was conducted by the Independent Television Commission (ITC) in 2002. As well as reviewing existing quotas, the ITC's review recommended that new codes of practice should be put in place between independent producers and existing public service broadcasters. These have since been implemented by the broadcasters, based on guidance issued by Ofcom.

  The sector was also considered as part of Ofcom's recent review of public service television broadcasting (PSB) in 2004. In the PSB Phase 2 report,[2] Ofcom suggested that the new codes of practice should be given time to work before any detailed assessment of them could take place. Ofcom therefore concluded that it would be sensible to wait for 12 months before conducting a further review of the production sector.

The current review

  Overall, Ofcom's review concerns essential aspects of the relationship between television broadcasters (including, but not limited to the BBC) and the production sector—focusing in particular on the key production quotas, and the operation of the commissioning system between producers and broadcasters. Our overall objective is to define the appropriate nature and scope of intervention that is necessary in order to secure the highest quality content for viewers.

  Intervention in the production sector has been an important contributor to the sector's development. Ofcom is using this review to re-examine the case for this intervention. We are considering whether changes to existing regulations are necessary, and assessing the continuing need for intervention in the sector.

  More specifically, the review is covering:

    —  The economic and public policy arguments for intervention in the production sector.

    —  The effectiveness of existing quotas on origination, independent production, and production outside the M25.

    —  The extent to which the new codes of practice have helped the market to function more effectively.

    —  Issues surrounding the exploitation of programming rights on new distribution platforms.

    —  The transparency of the commissioning process.

    —  The case for further action or for alternative solutions, which if required may mean investigation of:

—  The appropriate definition of an independent producer, and of qualifying programmes.

—  The appropriate level of the independent production quota, and whether it should be defined by volume or value of programming.

    —  The circumstances that might result in the relaxation or withdrawal of intervention.

  This review comes at a critical time for the UK television broadcasting sector in general, and for the production sector in particular. For instance, the Government's review of the BBC's Royal Charter is now well underway. The recent Green Paper[3] indicated that the future of independent production is a key issue, and the Paper also highlighted the need to give detailed consideration to the BBC's plans for the reform of its commissioning system (including the proposed Window of Creative Competition).

  The BBC's proposals are intended to enhance creative competition for access to the BBC's commissioning structure—and so aim to ensure that the best possible ideas reach viewers' television screens. This is therefore an important issue for Ofcom's review.

November 2005






1   Section 3(2) of the Communications Act 2003. Back

2   Ofcom review of public service television broadcasting, Phase 2-Meeting the digital challenge ("PSB2"). Published on 30 September 2004. Back

3   Review of the BBC's Royal Charter: A strong BBC, independent of Government. Published on 2 March 2005. Back


 
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