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HC 82-II [Incorporating HC 598 i-x, Session 2003-04]

Published on 16 December 2004 by authority of the House of Commons London: The Stationery Office Limited

House of Commons

Culture, Media and Sport Committee

A public BBC

First Report of Session 2004–05

Volume II

Oral and written evidence

Ordered by The House of Commons to be printed 8 December 2004

£22.50

The Culture, Media and Sport Committee

The Culture, Media and Sport Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Culture, Media and Sport and its associated public bodies.

Current membership

Sir Gerald Kaufman MP (Labour, Manchester Gorton) (Chairman) Mr Chris Bryant MP (Labour, Rhondda) Mr Frank Doran MP (Labour, Aberdeen Central) Michael Fabricant MP (Conservative, Lichfield) Mr Adrian Flook MP (Conservative, Taunton) Mr Nick Hawkins MP (Conservative, Surrey Heath) Alan Keen MP (Labour, Feltham and Heston) Rosemary McKenna MP (Labour, Cumbernauld and Kilsyth) Ms Debra Shipley MP (Labour, Stourbridge) John Thurso MP (Liberal Democrat, Caithness, Sutherland and Easter Ross) Derek Wyatt MP (Labour, Sittingbourne and Sheppey)

Powers

The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk

Publications

The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at http://www.parliament.uk/parliamentary_committees/culture__media_and_sport.cfm

Committee staff

The current staff of the Committee are Fergus Reid (Clerk), Ian Cameron (Second Clerk), Grahame Danby (Inquiry Manager), Anita Fuki (Committee Assistant), Louise Thomas (Secretary) and Jonathan Coe (Office Support).

Contacts

All correspondence should be addressed to the Clerk of the Culture, Media and Sport Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6188; fax 020 7219 2031; the Committee’s email address is [email protected]

Witnesses

Tuesday 25 May 2004

Mr Stuart Cooke, Mr David Elstein, Professor John Naughton, Professor Richard Tait and Dr Damian Tambini. Ev 3

Tuesday 8 June 2004

Sir Christopher Bland, Chairman, BT (former Chairman, BBC) Ev 90

Mr Charles Allen CBE, Chief Executive, ITV plc, Mr Clive Jones, Chief Executive, ITV News Group, and Mr Donald Emslie, Chairman, ITV Council and Chief Executive, SMG Television Ev 96

Ms Jane Lighting, Chief Executive, and Ms Sue Robertson, Corporate Affairs Director, Five Ev 102

Tuesday 22 June 2004

Lord Burns, A member of the House of Lords, Independent advisor to the DCMS; Chairman, Abbey National plc Ev 107

Mr David Scott, Chief Executive and Managing Director, and Mr John Newbigin, Head of Corporate Relations, Channel 4, Professor Elan Closs Stephens, Chair, and Mr Huw Jones, Chief Executive, S4C Ev 116


Mr Richard Freudenstein, Chief Operating Officer, Mr Mike Darcey, Director of Strategy, Mr Michael Rhodes, Head of Regulatory Affairs, and Mr Ray Gallagher, Director of Public Affairs, BSkyB Ev 120

Ms Lisa Opie, Managing Director, Flextech, Mr Howard Watson, Managing Director, Network Division, Telewest, Dr Keith Monserrat, Director of Communi-cations and policy, and Dr Steve Upton, Managing Director, Networks NTL Ev 130

Mr Hugo Drayton, Chairman, British Internet Publishers Alliance, Mr Roger Darlington, Chairman, Internet Watch Foundation, Mr Bob Schmitz, Chairman, Two Way TV, and Mr Roger Lynch, Chairman and CEO, Video Networks Ev 139

Tuesday 6 July 2004

Sir Robert Smith, National Governor, Mr Ken MacQuarrie, Controller of BBC Scotland, and Mr Pat Loughrey, Director, Nations and Regions, BBC Scotland Ev 146

Mr John Pearson, Chief Executive, Virgin Radio, Mr Derrick Thomson, Managing Director, Grampian TV, Ms Helen Arnot, Head of Legal, SMG Television, Ms Elizabeth Partyka, Managing Director, SMG TV Production, SMG plc Ev 153

Mr Paul Brown, Chief Executive, Commercial Radio Companies Association, Mr David Goode, Managing Director, Scottish Radio Holdings, Ms Nathalie Schwarz, Strategy and Development Director, Capital Radio, and Mr Steve Buckley, Director, Community Media Association Ev 158

Tuesday 7 September 2004

Mr Roger Bolton, General Secretary, BECTU, Mr Ian McGarry, General Secretary, Equity, Mr Jeremy Dear, General Secretary, NUJ Ev 169

Mr David Ferguson, Chairman, and Mr Jim Whiteford, Chief Executive Officer, Directors’ Guild of Great Britain, Creators’ Rights Alliance, Mr Chris Green, Chief Executive of British Academy of Composers and Songwriters, and Mr John F Smith, General Secretary, the Musicians’ Union Ev 181

Tuesday 14 September

Mr John McVay, Chief Executive, PACT, Mr Andrew Zein, Chair of PACT and Managing Director of Tiger Aspect, Mr Alan Clements, Chairman, IWC Media, and Mr John Woodward, Chief Executive Officer, UK Film Council Ev 185

Mr John Hambley, Chairman of Artsworld and Chairman of the Satellite and Cable Broadcasters’ Group, Mr Geoff Metzger, Managing Director, and Mr Richard Melman, Channel Director, the History Channel and the Biography Channel, The History Channel UK Ev 196

Tuesday 19 October

Mr Michael Grade CBE, Chairman, Mr Anthony Salz, Vice Chairman, Mr Richard Tait, Governor, Mr Mark Thompson, Director General, Mr Ashley Highfield, Director New Media and Technology, and Ms Caroline Thomson, Director Policy and Legal, BBC Ev 201

Tuesday 26 October 2004

Professor Lord Currie of Marylebone, a member of the House of Lords, Chairman, Mr Stephen Carter, Chief Executive, and Mr Tony Stoller, External Relations Director, Ofcom Ev 223

Tuesday 2 November 2004

Rt Hon Tessa Jowell MP, Secretary of State, Rt Hon Lord McIntosh of Haringey, a member of the House of Lords, Minister for Media and Heritage, and Mr Andrew Ramsay, Director General, Economic Input, Department for Culture, Media and Sport Ev 232

List of written evidence

1 Professor John Naughton Ev 1

2 Department for Culture, Media and Sport Ev 14

3 ITV Ev 15

4 Paul Phillips Ev 21

5 Equity Ev 21

6 Institute of Practitioners in Advertising Ev 24

7 Erika Sigvallius Ev 28

8 Royal National Institute of the Blind (RNIB) Ev 29

9 British Internet Publishers Alliance (BIPA) Ev 33

10 BECTU Ev 34

11 Commercial Radio Companies Association (CRCA) Ev 37

12 SMG plc Ev 44

13 Pete Browning Ev 46

14 ITN Ev 48

15 Howard Robinson Ev 51

16 Carole Tongue and David Ward Ev 52

17 UK Film Council Ev 57

18 Skillset Ev 60

19 Music Business Forum Ev 64, 178

20 Ofcom Ev 72

21 Capital Radio plc Ev 76

22 Parliamentary Office for Science and Technology Ev 82

23 S4C Ev 114

24 Telewest Broadband/Flextech Television Ev 127

25 NTL Ev 128

26 Internet Watch Foundation Ev 135

27 Video Networks limited Ev 138

28 BBC Scotland Ev 144

29 National Union of Journalists Ev 164

30 Creators’ Rights Alliance Ev 176

31 The History Channel UK Ev 192

32 Artsworld Channels Ltd Ev 193

33 Ofcom Ev 220

34 Alliance of Black Media Professionals Ev 244

35 Graham Allen MP Ev 245

36 BBC Ev 246, 262

37 Chairman of the BBC Ev 248

38 Mrs Judith Bramley Ev 248

39 Mr Richard Collins, The Open University Ev 249

40 Cultural Diversity Advisory Group Ev 250

41 Electronic Frontier Foundation Ev 252

42 Friends of the Creative Domain Ev 256

43 Gaelic Media Service Ev 257

44 Highlands and Islands Community Broadcasting Federation Ev 259

45 Mr Jean-Jacques Marmont Ev 259

46 Mr Kenneth Wood Ev 260

47 Mrs J Ferns Ev 260

48 Mr James Tough Ev 260

49 Director-General of the BBC Ev 261

List of unprinted written evidence

Papers have also been received from the following and have been reported to the House. To save printing costs they have not been printed and copies have been placed in the House of Commons library where they may be inspected by Members. Other copies are available to the public for inspection and requests should be addressed to the Parliamentary Archives, Record Office, House of Lords, London SW1A 0PW. (Tel 020 7219 3074). Hours of inspection are from 9.30am to 5.00pm. An asterisk indicates that these papers have already been deposited in the Library in relation to HC 598-i, Session 2003-04

Kenneth Wood*

Ray Gallagher*

Mr and Mrs G McDonough*

Alexis Alexander*

Mr S R Harvey*

Mrs M Bell*

Robert Wilson*

Edward Gaskell*

Rene Laryea*

European Publishers Council (EPC)*

Creators’ Rights Alliance*

Roland Hitchcott*

British Academy of Composers and Songwriters*

British Internet Publishers Alliance*

British Music Rights*

Mr N Woodland*

Simon Powell*

BECTU*

John Burton*

Equity

Jeremy Wraith

Barry Shearman MP

Mrs G Laurens

Mr David Hollyoake

Mr and Mrs Garratt

Mr C P Copley

Alliance of Black Media Professionals

Social and Legal Action Project (SLAP)

Mr Peter Batty

Professor Sylvia Harvey

Mr S Pennells

Mr Michael Leslie

Mr Frank Taylor

The Wireless Group plc

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Culture, Media and Sport Committee: Evidence Ev 1

Oral evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 25 May 2004

Members present

Mr Gerald Kaufman, in the Chair

Mr Frank Doran Alan KeenMichael Fabricant Ms Debra ShipleyMr Adrian Flook Derek Wyatt

Memorandum submitted by Professor John Naughton

The Future of the BBC

1. The BBC is a remarkable organisation. It is central to our cultural life and remains one of the fewBritish institutions that are still universally known and admired throughout the world. In this context itsonly parallels are the UK armed forces and the universities of Oxford and Cambridge. A paradoxicaltestimony to the BBC’s standing is the extent and concern of the media coverage across the globe of theCorporation’s diYculties in relation to the Hutton Inquiry. To draw attention to the BBC’s reputation is,in one sense, a statement of the obvious. But I am sure that the Committee is aware that, in considering thefuture of the Corporation, we are dealing with something very precious. And we should remember the oldengineer’s maxim: “if it ain’t broke, don’t fix it”. The story of what has happened to Britain’s publicuniversity system—once also the envy of the world, now in possibly terminal decline as a result of politicalindiVerence followed by political interference—should stand as a salutary warning of what can happen ifpublic policy gets it wrong.

2. The three objectives of public policy in relation to the BBC ought to be:

— To ensure the continuation of Britain’s rich tradition of Public Service Broadcasting (PSB)1. Thisimplies a more rigorous definition of what constitutes PSB than we have had to date. The de-factoposition seems to have been that PSB is whatever the BBC decided to do. This is untenable andneeds to be changed. PSB should be defined by a public authority separate from the BBC, in waysthat are accountable and transparent.

— To strengthen the BBC so that it plays a positive and creative role in the new media ecologyemerging under the pressure of digital technology.

— To strengthen the creative community in Britain which produces media products that entertain,inform or instruct their audiences.

3. In considering our communications environment, we need to think not of “markets” but of ecologies.An ecosystem is defined as “the system of interactions between living organisms and their environment”.Although the term arises primarily in the biological sciences, it provides a useful way of thinking aboutmedia, which are dynamic entities in a constant state of flux and perpetual interaction with one another. Formost of our lives, themedia ecosystemhas been dominated by broadcast television, which explainswhymostdiscussion about the future of BBC or ITV is couched in terms of the future of BBC (or ITV) television.

4. But our media ecosystem is changing under the pressure of technology and the new economics ofinformation goods. The biggest change is the gradual erosion of the dominance of broadcast (ie one-to-many) television. There are two main reasons for this. The first is the dilution of the broadcast model by thenarrowcasting possibilities oVered by digital transmission technology (satellites and cable). The second isthe inexorable rise of the Internet, and especially the World Wide Web.

5. This does not mean that broadcast television is finished—far from it. There will always be occasions,spectacles, events for which the one-to-many model is the most appropriate. But the overwhelmingdominance of the broadcast medium will erode, to be replaced by narrowcasting technologies of which theInternet is the most important.

6. This change in the ecology is significant because it means a shift from “push” media to “pull” media.Television is the quintessential push medium: a small group of content providers decides what kinds ofcontent is to be oVered, creates it, and then pushes it at passive consumers down whatever transmissionchannels are available. The consumer’s freedom of choice is eVectively limited to the menu of pushed items.

1 I have some reservations about the term “broadcasting”—see later.

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Ev 2 Culture, Media and Sport Committee: Evidence

Although that freedom is apparently increased by digital television, with its multiplicity of channels (up to500), the range of oVerings is still narrow compared to the enormous diversity of human appetites andinterests. And narrowcast television is still a push medium.

7. The Web, in contrast, is a quintessential “pull” medium. Nothing comes to a Web user unless he orshe selects it and pulls it down from a server across the Net. This is profoundly diVerent from what happensin the broadcast model. The distinction was once captured by Elizabeth Murdoch when she describedtelevision as a “sit back” medium, and the Web as a “sit up” medium.

8. One implication of this is that we need to consider whether Public ServiceBroadcasting is the right flagunder which to sail as we move into the next decade. I would suggest that something like “Public ServiceContent Creation”may be amore appropriate description for the activities of an organisation like the BBC.

9. Another implication of the changing ecology and the diminishing role of broadcasting in it is whetherthe LicenceFee is an appropriate solemethod of funding theBBC in a fragmentedworld of digitally-enabledpull media. This is a subject on which I do not have any special expertise, and I leave it to others to debateexcept in relation to one specific issue—the funding of technological innovation, which is discussed later (seepara 12 below).

10. In the light of these earlier observations, one of the most important aspects of the BBC’s operationsis its online presence. The Corporation was an early adopter of the Web and now runs some of the world’slargest andmost admired online news and other services. Several factors have combined to give it its currentdominant position:

— The amount of resources it was able to commit to the task.

— The way it was able to leverage its brand, news-gathering and other assets to feed high-qualitymaterial into its online oVerings.

— The technical ingenuity shownby its staV. A good example is theway the BBCharnessed streamingaudio technology to provide its “Listen Again” service—which enables listeners to hear radioprogrammes that they missed on transmission.

11. Partly because of the public and political (not to mention the industry’s) obsession with broadcasttelevision, the importance of BBC Online has up to now been underestimated. It is perceived by mostcommentators (and even by parts of BBC senior management) as a sideshow. Yet if our media ecologyevolves in the manner suggested earlier, the BBC’s online activities will become considerably moreprominent (and dominant) than they are at present. My conjecture is that in the next decade BBC Onlinewill come to be as important—in terms of public profile and audience usage—as BBC2, 3 or 4. And this,in turn, raises an interesting question—whether the funding mechanisms which would be appropriate forsupporting public service broadcasting in the future would also be appropriate for what one might call“public service webcasting”.

12. My tentative answer to this question is “no”. DiVerent funding mechanisms are needed for theprovision of high quality public service online oVerings. The weakness of most of the proposed alternativesto the Licence Fee is that they are geared only towards funding the creation of material for broad- or narrow-cast television. But creating, maintaining and developing the world-class online assets now owned by theBBC requires investment in technological innovation as well as in content. And everything we know aboutthe funding of radical technological innovation in universities and industry tells us that it requires stablefunding over long periods with few demands in terms of “deliverables”.2 This is how the most innovativeresearch labs have been run in industry. And it explains why the BBC has consistently led the rest of theindustry in the online field. Even in the relatively innocuous area of digital radio, the commercial sectorrecognises that BBC innovation and investment is essential in order to push consumer adoption of DABover the tipping point which will make it an economic proposition for advertisers and independent radiostations. Commercial radio needs the BBC, in otherwords. Andwithout BBC intervention, digital terrestrialtelevision would likewise be a stalled technology—at least as far as consumer take-up is concerned.

13. Finally, I would like to turn to the question of “content”. We live in a world increasingly dominatedby a maniacal obsession with “intellectual property”. The copyright industries—music, publishing andmovies—see digital technology as an unprecedented opportunity to extend control over how copyrightedmaterial can be used to a degree that was inconceivable in an analogue world.3 They have persuadedlegislators in the US and in Europe that their view of intellectual property is the one that should prevail.The result is what the American legal scholar James Boyle calls “The Second Enclosure Movement”.4 In

2 See Naughton, John and Taylor, Robert W, “Zen and the Art of Research Management”, in Andrew Herbert and KarenSparck-Jones (Eds): Computer Systems: Theory, Technology and Applications, Springer-Verlag, 2004.

3 See Lessig, Lawrence, Free Culture: how big media uses technology and the law to lock down culture and control creativity,Penguin, 2004.

4 Boyle, James, “The Second Enclosure Movement”, available online at www.law.duke.edu/pd/papers/boyle.pdf

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this (disturbing) context, the most significant development in recent years came in a speech made by GregDyke, then Director-General of the BBC, on 24 August 2003. I hope you will not mind me quoting therelevant passage. It reads:

“The BBC probably has the best television library in the world. For many years we have had anobligation to make our archive available to the public, it was even in the terms of the last charter.But what have we done about it? Well, you all know the problem.Up until now, this huge resourcehas remained locked up, inaccessible to the public because there hasn’t been an eVectivemechanism for distribution.But the digital revolution and broadband are changing all that. For the first time, there is an easyand aVordable way of making this treasure trove of BBC content available to all. Let me explainwith an easy example. Just imagine your child comes home from school with homework to makea presentation to the class on lions, or dinosaurs, or Argentina or on the industrial revolution. Heor she goes to the nearest broadband connection—in the library, the school or even at home—andlogs onto the BBC library. They search for real moving pictures which would turn their projectinto an exciting multi-media presentation. They download them and, hey presto, they are able touse the BBC material in their presentation for free.Now that is a dream which we will soon be able to turn into reality. We intend to allow parts ofour programmes, where we own the rights, to be available to anyone in the UK to download solong as they don’t use them for commercial purposes. Under a simple licensing system, we willallow users to adapt BBC content for their own use.We are calling this the BBC Creative Archive.When complete, the BBC will have taken a massive step forward in opening our content to all—be they young or old, rich or poor. But then it’s not really our content—the people of Britain havepaid for it and our role should be to help them use it.”

The BBC “Creative Archive” initiative is an excellent example of what public service means in an onlinecontext. I would hope that, whatever is decided about the future of the BBC, this commitment of Mr Dykewill be honoured in full.

25 May 2004

Witnesses: Mr Stuart Cooke, Nokia, Mr David Elstein, Broadcasting Policy Group,Professor John Naughton, Open University, Professor Richard Tait, CardiV University and Dr DamianTambini, IPPR and Oxford University, examined.

Chairman: Good morning, gentlemen and welcome, look at 1996 to 2006 there has been a hugetransformation in the broadcasting scene. Hadin many cases not for the first time. We areanyone heard of Sky-Plus in 1994 when we weredelighted to see you here. As I am sure you know,doing Charter Review last time? Had anyone heardthis is the opening of what is going to be aof Andrew Gilligan when we were doing Chartermarathon which will take us many months. LastReview last time? I think, though, the one reasontime we did this the then government accepted ourwhy five years—or five to seven years—might berecommendations so we had better get ouradvantageous this time is that the biggest singlerecommendations right on the oV chance that thisfactor in the organisation of broadcasting—whichGovernment will pay some attention to us. Please,is the proposal to switch oV the analogueany of you or all of you, feel free to answer any ortransmission system—is going to reach its climaxall of the questions.somewhere around 2008–09 and the way in whichthe BBC interacts with that process is prettyQ1 Derek Wyatt: Good morning, gentlemen. Ifundamental. If there are too few levers thatwonder whether you have given any thought to thegovernment has in order to influence BBCfact that the renewal of tenures is too long a periodbehaviour at that stage, that may, in retrospect, beand whether it should be five years or seven years,seen to have been a mistake. However, I am prettynot 10. As this is a blue-skies session can you tell sure that those can be accommodated in theus where you think the entertainment platform will language of Charter Renewal—assuming Charter is

be in 2012 and whether it will be diVerent in terms renewed—anyway and therefore I think that if youof children to, say, couples to, say, older people? even take into account that one big issue and stillWould that influence, therefore, whether the BBC think you can encompass its needs within a 10 yearsurvives in the long term? It does not seem to have Charter, you have to have some other big reasoncome out in the public domain, but everyone seems for saying no, this time only five. It is possible toto assume it is 10 years. Is that reasonable given build in not a full Charter Review within thethe phenomenal changes going on in Charter after five years, but a set of key tests andentertainment? key performance reviews which can be much moreMr Elstein: Ten years is assumed to be norm swiftly implemented but which are designed inbecause nobody can bear the thought of doing advance.three years of Charter Review every five years sothat is probably why we have settled into the 10 Q2 Chairman: Mr Elstein, you said that nobodyyear pattern. Also, it is fair to say, it gives the BBC can bear the idea of a Charter Review on a shorter

period. However, if the BBC were on a statutoryroom for planning which is quite important. If you



25 May 2004 Mr Stuart Cooke, Mr David Elstein, Professor John Naughton, Professor Richard Taitand Dr Damian Tambini

basis like Channel Four and the other public sector partly because this existing Charter period iscoming to an end and has run out of road and isbroadcasting organisations—you do not have a

Channel Four Charter Review—it is just there on no longer appropriate in some ways to theenvironment in which we currently operate and inthe statute. Would it meet both public concerns,

plus end this continuing uncertainty if the BBC which we are going to operate further as we goforward. I would say that I think that the balancewere not to have a Charter at all and it were put

on a statutory basis like Channel Four? of advantage of giving people a reasonably stableenvironment in which to operate creatively in termsMr Elstein: Chairman, I could not disagree.of delivering public service broadcasting outweighsany advantage of having a five year term.

Q3 Derek Wyatt: Do any of the other panel have Mr Cooke: From a manufacturer’s perspective wea view about the 2012 entertainment platform? need clarity and certainty and we have not yetProfessor Naughton: May I make a comment on rolled out digital terrestrial television and thatthat in relation to on-line media? At the height of needs to continue. Looking at other platforms—thethe dot-com boom some years ago—as you know, internet and mobiles, for example,—the BBC willMr Wyatt—there was a belief that one internet year have a strong role to play in that. That process, inequals seven chronological years. Who knows if terms of wireless planning, takes a long time. Eventhat is correct or not, but if it has any credence at if the switch over did start in 2008 it would take aall then we are talking about 70 years in internet long time to convert and switch everybody oV.time. It is sometimes instructive to think, for Clarity and certainty is needed in order to get theexample, back 10 years ago almost nobody in this investment right, get the conditions right, to guidecountry outside some specialist professions had an the BBC through that process; not just that processe-mail address. No advertisement on television had but also the convergence process, of getting thata URL at the foot of it; no radio station (including content to other devices (PC’s or mobile phones).the BBC) said, “And you can check our website” For a long term view clarity is required.at the end of the broadcast. Ten years on the worldis unimaginably diVerent and I think in that case

Q4 Chairman: Mr Cooke, you represent ananyone who wants to make predictions about 2012organisation which is extraordinarily successful.needs to take a large dose of humility first becauseOne of the reasons it is extraordinarily successfulnone of us know.is that it is able and ready to respond not instantlyDr Tambini: I think that this broad question ofbut very, very fast indeed to changes in the market,governance structure over the 10 year period needsto public demand and public preferences whereto be taken in the round because there arewhat we have in the BBC more than in any othercompeting objectives here. We need to givebroadcasting organisation is an adamantineproviders the space to innovate but, particularly instructure which proceeds at its own pace. Is therethe case of the BBC, we also need to guarantee theirnot then an argument for saying that if you exposeindependence and accountability at the same time.the BBC to the kind of commercial competitionThat is quite a diYcult thing to do. The problemthat you are exposed to, the BBC is likely to be ablewith the Charter period at the moment is thatto respond not precisely in the same way as you do,because it is infrequent it leaves many new servicebut at least to be part of what is going on day bypermissions to the minister so therefore we haveday in the country as distinct from seeking to setnow a near-permanent approvals and reviewits own agenda to which we all have to conform?procedure for new services and that is somethingMr Cooke: In terms of the planning, in our processwe have never had in the history of the BBC. Onewe look five to 10 years ahead in terms of themight even say that as a structure it compromisestechnology that underpins both products andthe independence of the BBC. I think we need toservices so we have a very long time frame whichsee the Charter and the new service reviews andin the investment side, to continue that process isdecisions as part of the same package. I also thinkkey. The regulatory framework takes a long timethat there are some aspects of the over allto adapt and change. In terms of future productsregulatory structure relating to the value for moneyand services, for example, if you have a mobileor financial audit which, in a sense, fall outside thatphone and have a TV in it, it takes a long time togovernance structure which need to be looked at.get those market conditions right and the contentProfessor Tait: As somebody who, until quitedeveloped for those phones needs to be in place atrecently, was a programme maker, I think I wouldthe same time as the products. I think the BBC hashave to speak up for the desirability of programmeplayed a major role in getting Freeview oV themakers not working for an organisation that isground; that has been extremely successful and iscontinuously under review; it is a great distraction.one of the leading platforms in Europe in terms ofThere is a diYcult balance here which you have

clearly identified between being able to react to digital television. The internet site is extremelysuccessful. The next phase—the mobile world, ifreal, significant change both in technology and in

the commercial environment in which the BBC also you like—I think the BBC will play a large role inthat. The technology, the planning and theoperates and the need for people to be able to plan

and to innovate and to produce very good investment needs to start now on all of those areas.I think it is a long term process and only at the lastprogrammes. I suspect that a lot of the unhappiness

about the BBC over the last two or three years is minute do you see the products and the services.




Q5 Derek Wyatt: Mr Cooke, I have visited Helsinki Q7 Derek Wyatt: Yes, but at the end of the daythere is a technology company which delivers that.and I have been to Nokia in Helsinki; I have seen

the wireless world that you have there which is Professor Naughton: I see. My own feeling about asubstantially ahead of anything anywhere else in lot of this debate is that it is in a sense rooted inthe world. Do you not think, in a sense, that the the past. That is to say, we have all grown up andnext big discussion on entertainment platforms is been conditioned in a media ecology in whichwho controls the hub in the home and the oYce— broadcast television was the dominant medium.and it could be a wireless hub—and therefore your My feeling is that that dominance is eroding. Weown company will have to re-invent itself because have no idea what the ecology will be like in 20you will not just be a technology player, you will years’ time, but I am pretty certain thathave to be a software entertainment player. In some broadcasting one to many is going to be a muchways you have produced a phone that has got smaller part of it than it ever has been in ourgames on it, that is an experiment—I am not sure lifetimes. In those circumstances I think what onehow well it has sold—you are dabbling at the edge has to realise is that discussions about Freeview orof moving from just being a technology company anything else are all conditioned by this idea thatto being a slightly diVerent company in the same broadcasting is the only reality. My feeling is thatway that Sony with Playstation Three and Four that is ending. It aVects an organisation, forwill move exactly the same way to you. That is why example, which is actually called the BritishMicrosoft is nervous of iPod. You are all scared Broadcasting Corporation.because someone is perhaps going to win the hubbattle. Does that not change the rules of (a) howwe receive entertainment, (b) give us more choice Q8 Derek Wyatt: A hypothesis that I have had

explained to me is that the next stage is that theand (c) does that mean that the BBC would onlyneed to be a software company as opposed to a Hollywood film companies will ask you to

subscribe to a monthly DVD and on the monthlybroadcaster?DVD will be 24 episodes of Cheers or 70 episodesMr Cooke: I think you have now the traditionalof Friends or whatever are the current hits, plus acontent from broadcaster, the broadcast networkcouple of films. The only thing that television doesand you have the internet and the computer; youthat no-one else can do currently is live news andalso have the mobile phone operators and thelive sport—live, anyway—and therefore people willmobile device. That is changing so that in the futurepay diVerently because they can have widescreen atyou will have a PC that can also be a television andhome, they can have their own plasma screensvice versa; you will have a mobile device that can(plasma technology is changing phenomenally) andalso be a television. Various players will allthis is a very diVerent way for Hollywood to sellcompete for segments within that. In terms of theitself, but also sell itself on subscription in a far, farcontent, the content can now be delivered to thediVerent way. Do you think that is a mad idea, orTV and the PC and the mobile device so I thinkdo you think that is the interim stage that we arethat needs to be examined: whether we shouldgoing to before 2012?separate the content creation from the actual

delivery. For example, as you mentioned Finland, Dr Tambini: We are not at an either/or crossroadshere. I think it is a question of both. Live, linearthe content creation is now separated from the

actual delivery of that content. The delivery is in one-to-many audiovisual services are somethingthat broadcasting does very well and does veryprivate hands and the public services for the

content creation. In terms of the manufacturers, eYciently. Attempts to webcast on a very largemass market model—I think the most strikingyes, there are the Sonys looking to move into this

converged world; there are the Nokias, and example is the Eurovision Song Contest—have beenvery problematic simply because it is not a veryunderpinning that is the software that supports

that. I would not say that the wireless hub in the eYcient way of distributing audio visual content ona live, mass, basis. I agree that broadcastinghome is the only way; the broadcast network will

still be there, the internet will still be there and the technology is appropriate for that task. However,there are a number of things happening on the on-mobile networks will still be there.demand and interactive space which I think goalongside that continuing broadcast role. What I

Q6 Derek Wyatt: Given the success of Freeview, do would be worried about is any kind of implicationyou feel that that is actually the big change coming, that somehow that on-demand interactive space isthat Freeview will actually overtake subscription a space which is somehow more appropriate fortelevision and therefore create a brand new model? commercial provision. I think the creative archiveOr do you think it is just another part of the proposals, for example, of the BBC are an excellentsame game? example of developing new ideas of what public

service broadcasting should be doing in this on-Professor Naughton: Could I have a shot at that?First of all, Mr Wyatt, I am sure you did not mean line, interactive, on-demand space. They also

outline what might be in some ways some of thewhat you said: “who controls the hub in the home”because surely the answer is the consumer controls new thinking about the role of public service

broadcasters in this next Charter period.the hub?




Q9 Michael Fabricant: There are three areas that the structure we have at the moment is not theoptimal one and it may not be the best one for theI am particularly interested in and I do not knowcreative economy. Likewise, in terms ofwhether we are going to have time to get throughdistribution, owning your own distributionthem all. One is, what is the BBC? What is it therebusiness which is the dominant one in the UK doesfor? (I might come to that first of all.) Secondly,create the opportunity for substantial distortion ofthere is the question of the future governancethe value chain and the creative economy. I thinkstructure of the BBC. Finally, of course, there is theif you do look at the Ofcom review of public service$64,000 question—actually it is rather more thantelevision and particularly focus on the back end of$64,000—which is how the BBC could be fundedthe review which is kind of looking to the digitalor ought to be funded. Let us talk about what isage, they do not see any particular reason why athe BBC and what it is there for first of all, as abroadcaster should have a production arm at all.public service broadcaster. We have heard fromThat vertical integration is probably an outdatedDerek Wyatt about diVerent platforms that may ormodel and it builds in a large number ofmay not be used in the future for the BBC andineYciencies and blockages in the creative economysome of you will be aware of video networks (athat ought to be disposed of. When you ask, “Whatuseful use of broadband) to deliver televisionkind of BBC do we want?” I would suggest to youprogramming and I suspect that might well be thethat we want a BBC that is focused, that isfuture for how television is created. However, I putaccountable, that is transparent in its operationsit to you that the platform is actually irrelevant. Alland that is funded in a rational way.we know is that there is going to be a lot more

competition in the future however television isdelivered. The first question is this: the BBC started Q10 Chairman: That is not this BBC, is it? Not oneoV as a radio broadcaster, then as a television of those criteria that you have just set out appliesbroadcaster; now it has gone into the internet— to the BBC as it is today.very successfully—but should it be in the internet Mr Elstein: Correct.even though the BBC website—BBCi—is the most Michael Fabricant: After the Chairman gave hishit upon (if there is such an expression) website in particular point of view.Europe? The BBC also produces magazines, Chairman: Mr Elstein, who is a far greater expertoperating in a commercial environment; the BBC than I will ever be, has just endorsed the view.also sells programmes and I suspect that is a good Mr Elstein: Which is voice and which is echo, Ithing. It has many other ventures—some leave to you to decide.commercial, some not—it now has BBC News 24,BBC3, BBC4, digital audio broadcasting. Where Q11 Michael Fabricant: Moving aside for ashould it stop? Should it have gone into those moment from the internal structures of theventures? Ought there to be a limit into what the Corporation—which we will perhaps come on toBBC does in the future? later—what about the delivery of services? AreMr Elstein: I do not want to do a quick trot though there services that the BBC ought not to be in? Or,the report which was published in February and in fact, do you feel that the BBC has now reachedwhich addressed some of these issues. I do not its optimal level and it should not expand anythink it matters much where we came from, the further and should not get into other services? Orissue is which way we go forward. A key issue that are you reasonably content with the various BBCthe Broadcasting Policy Group identified was that channels that are being oVered on radio andthe core function of the BBC is broadcasting—it is television, in publication, satellite and website?the British Broadcasting Corporation, not the Dr Tambini: I do think that our customary way ofBritish Production Corporation or the British looking at these questions which is the idea ofDistribution Corporation—and we get hung up on market failure—a very ill-defined idea as far as Ia lot of these issues because of the way the BBC is can see—does miss a lot, and particularly withfunded. If there were a more rational way of regard to the challenges and changes we werefunding BBC entertainment and BBC commercial speaking about a few moments ago. We do need toactivities we would have fewer hang-ups and we have a close look at, if you like, the public interestwould see much more clearly that which requires and public value of providing new forms ofdirect public funding through licence fees or services. I also think that we should do that in awhatever, and that which the public is well able to pro-active way; rather than waiting to see what thefund for itself. We have a public broadcaster—a market provides and waiting to see how the marketvery successful public broadcaster—called Channel develops and then try to fill in the gaps, this is theFour which does not produce a single programme time to say, “What is the role of a publicitself. There is no essential requirement for a communications provider on-line?” I think you canbroadcaster, a public broadcaster, a public service have some very broad arguments aboutbroadcaster or a high quality broadcaster to make communications rights, what is the basic amounta single programme. The fact that BBC Production of information citizens should have; those kinds ofunder some other ownership structure would arguments are relevant. I also think that looking atundoubtedly carry on producing very high quality values like creativity and how the market has failedprogrammes in response hopefully to many more to provide for new forms of culture like peer to peer

or re-use of content (and I refer to the creativebroadcast outlets than just the BBC, suggests that




archive I mentioned previously). Another area public service broadcasting and making sure that itis provided for the British public. That clearly haswhich I think is fundamental to that re-thinking of

the justifications of public service and bearings on the way the BBC is governed. Inrelation to Ofcom there is a diVerence betweencommunications is the traditional democratic and

civic role of communications. Over the past 10 regulation and governance. Ofcom is there toregulate, to ensure compliance with standards andyears we have had very healthy experimentation in

on-line provision of government information, requirements and so on that are laid down in otherways. Governance is, I think, diVerent and theCitizens’ Space, UK On-Line, et cetera. Alongside

that we have had very fragmented provision by diYculty with the BBC governance in its presentform is that the Board of Governors iscommunication providers such as the BBC. I think

the time is right for a broader debate about what constitutionally incapable of doing the conflictingthings that it is required to do. That has to change.Professor Stephen Coleman calls The Civic

Commons. I do think that there are naturalmonopoly arguments you can make for the role of Q14 Michael Fabricant: What would you changea single communications provider to bring together it to?into one kind of portal, if you like, those kinds of Professor Naughton: I think I would move theservices. That is something that I would say is Board of Governors towards a body which wasfundamental to the re-thinking of what the BBC more independent of the management, which hadshould provide and what we would be a diVerent kind of external representation anduncomfortable with leaving to commercial which was comprised of people who had more timeproviders. and energy to devote to it and were not necessarily

chosen on the basis of geographical or otherrepresentation. I think it used once to be aQ12 Michael Fabricant: Would that mean yourequirement for being a member of the Board ofwould be comfortable if, say, in a few years’ time,Governors of the BBC that you had never workedthe Corporation decided with the ability ofin broadcasting and knew nothing about it. That isbroadband providing two megabyte, fournot necessarily a good way to proceed.megabyte—whatever it needs to get a decent

picture down broadband—a service where I, as aconsumer or a licence payer still, could call up Q15 Michael Fabricant: Who would you have

appoint the Board of Governors?episodes of Dr Who or Panorama of 20 years agowhich are held on archive and have it fed down to Professor Naughton: I would have a Public Service

Broadcasting Authority.my television set via a broadband link, you thinkthat new service would be acceptable as anadditional service being provided by the Q16 Michael Fabricant: Another organisation? InCorporation. parallel with Ofcom?Dr Tambini: Yes. Professor Naughton: Yes.

Q17 Michael Fabricant: How do others feelQ13 Michael Fabricant: On the question ofgovernance of the BBC, it has been argued that about that?

Professor Tait: I would be cautious about givingthere could be an increased role for Ofcom so thatit governs the Corporation in the same way that it Ofcom anything more to do at present until we

have a better idea of how they are coping with thegoverns—and I use the word “governs”advisedly—other public service broadcasters such very many tasks they have already been given. I

would also be a bit cautious about handing overas Channel Four and others? The NUJ areconcerned; they are running a campaign at the regulation of a public body to a commercial

regulator which has a rather diVerent remit. I havemoment: “Save our BBC”. What is your viewabout that? Not so much the NUJ campaign but been to this Committee before when we talked

about the stewardship of the previous commercialwhether Ofcom is a likely candidate to provideexternal governance of the Corporation? regulators—the ITC—and the mess they made in

many ways of news provision over the last 10 yearsProfessor Naughton: First of all, I think governanceis a big issue not just because of recent on the commercial network, ITV. I do not think

that commercial regulators have a particularlydevelopments, but there is a fundamental diYcultythat I see which is that there is this question of how good track record at running public bodies. I think

Ofcom does have a role. I think it already doesdo we define public service broadcasting? TheeVective answer seems to have been for the last 50 have in regulating some pan-commercial public

issues like harm and oVence, taste and decency (asyears that public sector broadcasting is what theBBC does, broadly speaking. I do not think we can we used to call it). I think Ofcom already has a role

in regulating BBC and I do not think there is anycontinue with a system that allows a singleorganisation to define what it does as being public problem with that. I agree with Professor

Naughton; I think if you are looking for betterservice broadcasting. In the first instance, there isa need for some sort of external accountable, regulation of the BBC you want to go for a

diVerent structure and a structure that has muchtransparent mechanism, some agency, someinstitution, something which will, in a sense, be clearer diVerentiation between the governors and

the executive.publicly responsible for defining what we mean by




Q18 Michael Fabricant: Do you agree with We are not going to go to the Lake District andwatch drama on a mobile phone. Are you sayingProfessor Naughton’s Public Service Broadcasting

Authority being set up? that this generation is changing? I do not think Iwill change.Professor Tait: No, I am opposed to setting up

many more bodies, really. I think what we need is Mr Elstein: Technology does change you. There isquite a lot of evidence that in homes that have Sky-clarity and then you need the right people to carry

out whatever clear remits they have been given. I Plus less than 30% of viewing is of live TV ascompared with homes that do not have Sky-Plusthink part of the problem we have with the BBC—

as I said before—is that at the end of a Charter where it is 98%. In homes with Sky-Plus I think theviewership of advertisements is round about 2% ofinevitably problems come up which people had not

entirely anticipated and I think that has put the adverts are actually viewed because the rest are fastforwarded. You do not have to be a 14 year oldexisting regulatory structure under a pressure

which it has not been able to sustain and that is geek with full knowledge of every bit and byte inthe universe to be able to operate a PVR; it iswhy we are now looking for a new approach. I

would agree that greater separation is a way actually rather simpler than an old-fashionedvideo. People do change their behaviour if theyforward rather than to put everybody into Ofcom.have superior technology put in front of them.Mr Elstein: Unfortunately the problem with thesePeople who have multi-channel choice spend lessinteresting tinkerings with the relationship of thetime watching the core five terrestrial channels. Ingovernors to the executive which actually datemulti-channel homes their share of viewershipback—for those who are interested—as far back asdrops to a little above 50%; obviously in five-1949 when the Beveridge Committee thenchannel homes it is 100%. Choice and technologyrecommended that there should be formaldo aVect behaviour. As several of my colleaguesseparation of the governors from the executive; ithave already said, it is fruitless to anticipate exactlyshould have its own secretariat, own building, ethow new technology will change behaviour. Icetera. The BBC Executive fought bitterly tonoticed that a supermarket chain is oVering youdestroy those proposals and succeeded. You havevideos by post, as many as you want to view, andto look at specifics. For the last three years the BBCthey turn up by snail mail, but it looks like it is ahas dramatically failed to meet its obligations inviable business model, and why not? You do notterms of independent commissioning. It has a 25%have to be connected to the informationquota that it acceded to and agreed to, and eachsuperhighway to take advantage of ingenuity inyear for the last three years it has actually failedcreating new forms of distribution. All you can sayby a larger and larger margin. You have to thinkfor certain is whether or not the volume and qualitythrough, how does that happen? To whom are theof content remains constant, the way in whichmanagers accountable? The governors. How comepeople access that content will change and the waythe governors, after the first year of failure, did notin which they use that content will change. One ofimplement a system to ensure there was not athe most remarkable statistics is that through thesecond year of failure? After two years of failure,entire period that we are talking about—the lasthow come there was not a system to make sure iteight to 10 years—the total viewing of television ondid not happen in the third year? You have toaverage in each household for each person has notaccept that the governors actually have nochanged at all. They are viewing diVerent things inauthority. What could they do? Fine their owndiVerent ways on diVerent platforms, but they aremanagement? Fire their own management? Theystill viewing.only appoint the Director General. Professor Tait

correctly points out that the ITC was not a shiningexample of exceptional regulatory capacity, but

Q20 Chairman: I find what you say about thisOfcom—as the Chairman has noted—regulates aparticularly interesting because it does demonstratepublicly owned broadcaster called Channel Four.that people do adapt themselves to technology inIt has the right to impose fines on Channel Foura way they would not think they could. You havefor non-compliance, breaches of codes, all kinds ofpeople, friends of mine, for example, who shy awaythings. I do not believe that Ofcom would havefrom anything to do with a computer, but they sittolerated a second year of failure to meet thein front of their television set operating a computerindependent quota in the way the BBC governorsonce they go into any kind of interactivity. It seemsdid.to me that we should not operate on the basis thatChairman: We need to move on now; I will comewe have a static technological readiness to accessback to Mr Fabricant if there is time.because people will conform to what they need todo if they are determined to get their entertainmentand information.Q19 Alan Keen: Taking a blue-skies look at this

was a great idea; we have just proved that because Mr Elstein: You have techno-freaks and techno-fear. Techno-freaks love every last aspect of everyit is so wide-ranging. Derek Wyatt is always right

at the cutting edge of new technology, but when we last new gismo. Mr Wyatt is famous for being atthe cutting edge of everything and giving poor oldare looking at the BBC are we really saying that

people are changing? Most of us who watch Nokia a hard time if they have not invented thenext thing straight after the last one. Techno-feartelevision, do we not want to just sit in a chair, nod

oV to sleep, wake up again and watch a bit more? sounds like a psychological ailment; it is just lack




of familiarity. I suspect the vast majority of people what people most value from public servicewho have mobile phones only understand about television is impartial television news. All the10% of their functionality. Likewise with research that has been done on trust shows thatcomputers. Most people who buy thousand pound although the BBC has had its ups and downs withcomputers probably have mastery of about 2 or 3% the political parties and governments it is stillof their functionality; their children may have 30 to trusted as a source of impartial news in a period50. We just slowly familiarise ourselves and the key where an awful lot of journalism—quite properlyissue here—and one of the great successes of Sky- in a free society—is partisan. That is an absolutePlus—is that it has a limited number of functions value which Ofcom recognised as one of the mostand they are relatively straightforward to use. It important things that public service broadcastingdoes crash and it is expensive to call out an brings into the digital age. If you look at theengineer if it does crash and you cannot re-start it, audience figures for the last two or three years, youbut it is not even cutting edge technology, it is just will find that what you are talking about—peoplevery well modulated to how the consumer behaves sitting down and watching television together,in the home. That is the key to how to bring perhaps watching a news bulletin—has held up verytogether the technological opportunities and well. When the news channels started there was theconsumer behaviour: close attention to the way thought that as you get into multi-channelconsumers behave. television the bulletin would die because peopleMr Cooke: I think technology will change the way would see the convenience of being able to watchwe view that content. It has to be easy, simple and news whenever they wanted it; with interactivityintuitive. However, that content will also be they could drill down deeper. Those benefits aretailored towards diVerent screens: the TV, the there and a growing number of people are usingcomputer, the mobile phone. Nobody will watch a them, but not the 17 or 18 million people whofull length feature film on a mobile phone, but that watched BBC1 and ITV last night for a fixed fix ofcontent will be tailored to a five or 10 minute video news, if you like. As well as looking at theclip, for example, designed for a smaller screen. I technology and the market changes that are takingthink there will be a gradual change. It may be that place and will continue to take place, we should notthe family will still sit in the living room watching forget there is still currently a core value in whatthe TV, but there will also be that time delay when the BBC and ITV does, which is providing thatyou can watch that content when you choose to fixed point each day where people can get a prettybecause it is on your PVR or your VC or your good take on what is going on in the world withoutmobile device. Slowly it will change. overtly being told what to believe. I think that is aDr Tambini: I would hope that we would not get very important value going forward, even thoughtoo technology driven in this argument. In the it will be put under pressure by the things we haveOfcom review of public service television we can all talked about.begin to see evidence for the genres of good old Professor Naughton: Returning to Mr Keen’sfashioned TV that do hold up well in terms of what original question, one of the things that I think isthe audience continues to watch, for example now very noticeable is that audiences—whethercurrent aVairs. The desire on the part of the public they are radio audiences or TV audiences—want tofor what you might call “water cooler TV” is still have more control over the way they, quote,very much there. “consume” media. The observations that Mr

Elstein made about time shifting of televisionwatching using Sky-Plus or other technology, is justQ21 Alan Keen: Can you explain what you meanpart of a wider story. The truth is that we grew upby “water cooler TV”?in an era where, for example, scheduling was aDr Tambini: Water cooler TV is, I guess, anreally important and black art in all televisionindustry term for the kind of TV that you talk tobroadcasters. They created the schedule and thenfriends or colleagues about the next day in front ofunder the broadcast model the population, so tothe water cooler or the teapot or whatever. Thespeak, consumed the television according to thatfear, however, is that it may be the case that a moreschedule. I believe that that model is breakingfragmented market would have more diYculty indown and it is breaking down largely because ofactually delivering those kinds of social benefitschanges in society and people’s expectations andand those kinds of collective experiences. I wouldhaving more control. If you want illustrations of itrefer the Committee to the recent report, funded Iyou do not just have the statistics for Sky-Plus,think by the BBC, on social capital and televisionthere are other things. For example, when the BBCand also the work of the French economist Pierreon BBC radio introduced its Listen Again feature—Larouche on the economics of broadcastingthat is to say a technology where if you missed Mrmarkets and the positive externalities of providingKaufman being interviewed on the Todaythese kinds of collective experiences and the extentprogramme by John Humphries on the divisionsto which the market might not provide them.within the BBC and you wished you had heard itProfessor Tait: Although clearly change is going tobut you were making toast at the time, you can gohappen and has been a constant in the past 10 yearsto the BBC website and listen to it again. They doin the broadcasting industry, I was struck by howthat for The Archers and for other things. Whatwell some things have held up. Television news

bulletins, for example; the Ofcom report shows that they have discovered is that the audience for The




Archers has increased quite a lot, not because Q25 Alan Keen: I would not spend £10 a monthbecause I do not think it is worth it. There mustpeople are listening to it live but because they arebe a high proportion of people who watch recordedlistening to it later. That is an important long termprogrammes because they think it is worth buyingchange, I think, which eVects how the mediait, but there are people like me who do not thinkenvironment will work in the future.it is worth buying because they like to see theimmediacy of it. I think the percentage you are

Q22 Alan Keen: It is true that when you record giving is a false one at the moment; it may be rightsomething you no longer want to watch it. A lot in the long term.of people might record a film, but once they have Professor Tait: I think one of the crucial issues ofrecorded it, it is not the same as when they could this session is emerging, which is: how far is the facthave watched it live on television. There is that something can be done mean that it is goingsomething, is there not, about this immediacy of to happen for the whole population? None of uswatching on TV and once you have the thing in the know the answer to that because it is in the future,

but there clearly is currently quite a lot of evidencelibrary it is not the same as when you sit down withof people who do not want to go that far down thisyour toast and your cup of tea and watch it.road; they are a diminishing group but they areMr Elstein: The evidence is to the contrary,quite a big group and they are not all poor people,unfortunately. Certainly with the old videoalthough a lot of them are poor people who do notrecorder, the vast majority of what was recordedwant to buy the technology and are quite happywas never viewed. That was mostly a function ofwith free to air terrestrial television as it isinaccessibility. In other words, you were recordingcurrently. They do watch news programmes andon tape sequentially and finding the programmesports programmes; television is still a sharedyou wanted to watch was a relatively laborious jobexperience; they are a group who will be quiteand on the whole people did not bother to watchdiYcult to transfer to a wholly interactive world.unless somebody told them to watch it. What SkyThey may just be quite happy to sit down andhave established with Sky-Plus is that there is awatch the BBC news at 10 o’clock. Another focusvery high rate of viewing of recorded programming,of the BBC is to ensure that that news is ofnot least because it is instantly accessible becauseextremely high quality and meets theirit is on a hard disc and you can find exactly therequirements as well as providing for the interactiveprogramme you want within a couple of seconds,future for a growing number of people. One hopesand therefore you do not have any of thewith aZuence more and more people will be ableineYciencies. You can also pause, rewind, cometo aVord it. We know there are a number of peopleback to it, do whatever you like. That is why therewho would take your view. By the time they haveis such a huge diVerence between the proportion ofpaid their licence fee they have paid enough forrecorded material watched in Sky-Plus homes.entertainment and they have other things they wantThere is no reduction in total viewership, but just to spend their money on. I think it is quite a

a major shift as between watching live and diYcult balance how one mixes the old world whichrecording. If you think about it, how long do we does provide a lot of public goods free to air in aall live? If you can compress last night’s three fairly straightforward way, and the new technologyepisodes of Coronation Street down to 24 minutes which is going to provide a wonderful richness ofeach and watch them all in 72 minutes rather than content and richness of formats but at a price.an hour and a half, you have recaptured 18 minutesof your life and you have lost nothing other than

Q26 Ms Shipley: I am interested in going back tosome commercial messages that you are likely toexploring the public service broadcasting because Ipick up in some other programme. There is quitereally want to know what the BBC’s unique sellinga powerful incentive to optimise your viewingpoint is going to be. Professor Tait, you said thathours and do a bit of digital compression of yournews is holding up well, the BBC is doing reallyviewing experience so that even if you allocate thewell with the news bulletins, then you said: “andsame proportion of your life to viewing you areITV”. Then we had current aVairs: BBC is doinggetting more out of it. very well on current aVairs, “and ITV”. Whatexactly is special about the BBC as a public servicebroadcaster?Q23 Alan Keen: I would rather save all the time andProfessor Tait:We can guarantee that the BBC willnot watch any television. Is it not people like Derekcontinue to do it. In the current environment it isWyatt who are the ones who buy Sky? I would notquite clear from the Ofcom report that they arepay more money for Sky because I do not watchpointing to a world in which ITV and the othertelevision like that.terrestrial commercial channels will say, whetherMr Elstein: It does not cost you anything.they are right or not: “We cannot aVord to do thisany more”.

Q24 Alan Keen: It does cost me.Mr Elstein: If you are a subscriber to Sky anyway Q27 Ms Shipley: I think it is well worth having thatyou get a Sky-Plus box thrown in. They used to on record, that we can guarantee that the BBC will

produce high quality, unbiased news and currentcharge £10 a month but that has gone now.




aVairs and so on. However, how can we guarantee Ofcom as the person who gives permission tonetwork operators to develop premium ratethat? How can we guarantee the high quality? We

are all agreed that the governorship is problematic. services, Ofcom could in a sense be involved interms of receiving reports from the BBC governorsProfessor Tait: There are two issues here. One isas the self-regulatory body and making decisionsresources. Take Patricia Hodgson who used to runabout whether the BBC purposes have beenthe ITC, she said last year that during the previousexceeded or whether the BBC is doing something10 years ITV had halved their spending on news init should not be.real terms. At the same time the audience of their

main evening news programme had halved. That isbefore you get the sort of commercial pressures Q29 Ms Shipley: Presumably none of you wouldwhich are going forward which we can see with think that the BBC should only be a news andmulti-channel television becoming even more current aVairs channel so could I take thepopular. The first issue is resources and as a former opportunity to ask you what else should be broughtnews editor who worked for both organisations, I into the public service broadcasting round? Whathave great admiration for the professionalism of constitutes public service apart from news andboth groups of people, but the reality is that you current aVairs?need resources to do high quality news. Professor Naughton: Essentially anything that

market driven organisations cannot or will notprovide which society, viewed broadly, regards asQ28 Ms Shipley: Or you need a much tougherimportant.watchdog—tougher than Patricia Hodgson was—

that can require it otherwise you do not give themlicences and so on. Q30 Ms Shipley: Such as?Professor Tait: Yes, but you do need the resources. Professor Naughton: For example, the experimentalThere may come a point where ITV can say, hand programmes, high quality serious drama,on heart, that they cannot aVord to do it. Already challenging intellectual material. The kind of stuV

they are spending far less than the BBC and that that, in a commercial world, would be seengap is widening. I think the first issue going immediately as depressing ratings. The central issueforward is that the BBC has to be properly we have in a lot of these areas is that free and openresourced to do proper news and current aVairs societies need high quality availability of ideas in thewell, and it has to spend the money it has been public domain. In some cases I do not think thegiven by the public on that and not on other things. market is disposed to provide that. Societies have toIn terms of its priorities it has to make that its key make some arrangements for ensuring that there ispriority. The second issue is that you have to have a that kind of rich culture and it includes diYcultvery clear regulatory management regime to ensure broadcasting, it includes challenging material and itthat it does news to the highest possible standard includes, not least, unbiased, impartial andand lives up to what it currently has, which is a very thorough news coverage. The diYculty we have withpublic esteem. If you look at polls, the BBC News news right through the broadcasting system—andis regarded as being a benchmark of impartiality, this applies increasingly in the United States, foraccuracy and truthfulness, and the organisation has example—is although broadcasters regard theto ensure that it lives up to that reputation and provision of high quality news as a majorcontinues to do that, and if there any problems they responsibility, nevertheless in market drivenneed to be sorted out very quickly. organisations there is always a pressure to provideDr Tambini: On this issue of guaranteeing quality, news that the market is interested in.we are back to the regulatory question and I agreewith David Elstein in fact that it was a mistake for

Q31 Ms Shipley: What you have just done,the Government not to take up the BeveridgeProfessor, is to construct a really powerful argumentCommittee’s recommendations from 1949 andas to why the BBC should be protected for itsremove the governors physically from the BBC,uniqueness.give them more powers and more control over theirProfessor Naughton: With respect, I would suggestown budget. I think there are a number ofwe should make a distinction between what andimprovements to the transparency of thehow. I feel we are talking this morning aboutappointments process which would beef up and“what”. The BBC is one particular “how” for doingmake much more legitimate the regulation of thethese things; it may not be the only one.governors. In terms of regulating news, there is

particular sensitivity about independence and Ithink a separate argument for regulatory pluralism Q32 Ms Shipley: Your whole premise was based onin a sense that there may be an advantage in having the commercial ventures could not provide thesemore than one authority responsible for this very things; this is what the BBC could do because thesensitive issue. In terms of giving a regulator teeth, other ones could not do it.I think that is certainly possible by—to use the Professor Naughton: I would say that the record upjargon of the times—developing a co-regulatory to now has not been promising, especially since thestructure analogous to ICSTIS, the premium-rate Thatcher reforms of the broadcasting systemtelephony regulator, which is able to levy fines but changed the ITV network out of all recognition. The

record is—not 100% but on balance—that marketit has a relationship with Ofcom which enables




driven organisations do not have an incentive to do moving away from genres and towards what I callapplehood—in other words, all nice things,some things that are diYcult and do not attract large

audiences. That is perfectly understandable. motherhood and apple pie and would it not be niceif we could end poverty in the Congo as well throughMr Elstein: It would be a mistake to think that therepublic service television—all these kind ofwas some exclusive quality about the BBC in termsunquantifiable, immeasurable undeliverableof delivery of high quality content. Channel Four ischaracteristics of public service broadcasting, thosea non-profit distributing publicly owned publicare in the end not going to get us very far. Publicservice broadcaster which has a remit to provideservice broadcasting is simply how we, as a society,challenging, innovative programming and, indeed,choose to correct a gap; howmuchwewant to spend,high quality news. Despite what Professor Tait haswhat are the categories and year by year it maysaid, I should point out that there is a long body ofchange. Year by year we may say that what weITC research into public opinion about impartialityactually need is more arts programming of ain programme services and the BBC has beenparticular type or more regional programming.consistently behind ITV, Channel Four and even

Sky News in terms of public view of who is leastbiased in terms of delivery and impartiality. There is Q34 Ms Shipley: Who is the “we”?not an exclusive, genetic component inside the BBC Mr Elstein: “We” is the people of Britain asthat ensures that you get every aspect of high quality represented by you.content. I think it is also important to recognise thatwe have this kind of funding confusion. The biggest Q35 Ms Shipley: Yes, but year by year you consumesingle utilisation of the BBC licence fee is on BBC whatever is given to you, do you not?One; roughly half of all BBC content spend is on Mr Elstein: If you look at the Public ServiceBBC One. I would not like to put an exact figure on Television Review that Ofcom has just publishedit, but something like 90% of everything that BBC there are some very interesting gaps between whatOne transmits is perfectly ordinary entertainment, the public sees as important and what the public seeshard to diVerentiate from what you would find in as being delivered. If you ask them what they thinkcommercial services. That is why the Broadcasting is important and then ask them what they think thePolicy Group, when it looked at these issues, public service system has delivered, you will findconcluded that the broadcasters collectively had gaps like 57% between what they think isbeen failing public service broadcasting because, important—85% say X—and what they think hasunder the pressure of audience fragmentation, they been achieved. Year by year a good regulator is ablehad all marginalised certain types of public service to say, “We have tested the system and this what iscontent or stopped investing in it, or, as Professor missing, therefore if we are going to correct what isTait just said in terms of ITV, simply walked away missing, this is what we think ought to be spent andfrom news and regional programming and allow this is what we think it ought to be spent on”. It istheir audiences to decline and use that as an excuse not rocket science but equally it is not a very precisefor no longer investing in them. The view that the outcome.Broadcasting Policy Group came to was that wewould probably be better oV with a distinctive fund

Q36 Chairman: I would just like to follow up whatfor non-market content (as Professor Naughton hasMr Elstein said about this business of threateningdescribed it), that which the market cannot or willpeople with jail. Can you imagine not simply Lordnot provide, provided by a variety of broadcasters.Reith but Hugh Carleton-Greene countenancing aAgain, the Ofcom review emphasised thelicence campaign which said, “Get one or get done”?importance of having competition in supply ofMrElstein: I think they would improve the grammarpublic service content.and maybe the sentiment, but there was a farstronger public justification in terms of spectrumscarcity and allocation of national resources inQ33 Ms Shipley: So you do not think the BBC has aReith’s day and in Carleton-Greene’s day than thereunique selling point, then?is now. Our problem is that if the licence fee is notMr Elstein: No. The BBC is a very eVective butlarge it is actually even more ineYcient because itextremely expensive organisation and it has a verycosts £150 million a year to collect, with evasionineYcient method of funding, it gives you very littlerates of around 7%. If you cut the licence fee downtransparency and accountability and the kind ofand the evasion rate stays the same and the cost ofnews, current aVairs—9% of BBC expenditure—iscollection stayed the same, it would become evenused to justify the other 91% which you think tomore ineYcient. We are stuck in a bit of a trap inyourself, hang on aminute, in a properly functioningterms of how to fund (a) the BBC and, what weconsumer market place anyone can supplythought was rather more important (b) publicEastenders or Ground Force. You do not have toservice content which is not identical to the BBC.threaten people with jail in order to make sure it gets

funded, which is what we do at themoment. Becausewe have inherited a funding system which has long Q37 Ms Shipley: I would also like to touch on theterm historic justification—and may continue to notion of the BBC as a promoter of UK plc. I takehave some justification—we tend to miss the point it you all know what I mean by that. Is that a validabout what is distinctive about public service thing for a public service broadcaster to do? Is that

something that Britain wants its broadcasting to do?content. I think the Ofcom review tentatively




Professor Naughton:Yes and no. Yes, indirectly; no, Mr Elstein: UK plc is, I am sorry to say, a bit of adistraction. UK quality content will find audiencesdirectly. If I can illustrate that, a fewweeks ago I hadoverseas whether the BBC exists or does not exist.an American guest and we were listening to a radio

programme on Radio Four after nine o’clock inQ39 Ms Shipley: Apparently not, though.which Clive Anderson was discussing with a veryMr Elstein: How you fund that content is an issue,senior law lord and some distinguished andbut audiences will find that content without theexperienced lawyers the concept of sovereignintermediary of BBC Worldwide distributing it.immunity which is actually quite an important issueIndependent producers are meant to supply—butfor the public to understand in relation to Iraq andthey do not—25% of BBC broadcasting. Thoseother issues. It was an extremely demanding, high IQproducers are real people who do not belong to theconversation which made no concessions at all toBBC. The programmes they make will find anpopularity, but it was deeply interesting and deeplyaudience. BBC America incorporates a lot ofenlightening and deeply helpful. At the end of it myprogrammes not made by the BBC. We should notfriend said, “That would be inconceivable in theconfuse the existence of the BBC with the existenceUnited States”. I think he was right. That is the kindof a thriving, creative community, if properlyof thing, in my opinion, that public servicefunded, capable of generating high quality content.broadcasting exists to do.Mr Cooke: One of the other wider issues is DigitalBritain and getting everybody connected and

Q38 Ms Shipley: What I am asking you about is UK keeping us competitive in terms of our use of digitalplc, actually selling Britain in the wider arena if you technology whether it is wired or wireless. I think thelike as a certain image, a certain way of thinking BBC will have a strong role in persuading the massabout Britain. market to adopt internet, mobile, digital TV etProfessor Naughton: That was the point of my cetera. I think the BBC will have a role in Digitalanecdote, which was that what happens is in a sense Britain. I think that is a wider issue also.a reflection that a society that can produce and Chairman: Gentlemen, I cannot imagine a bettersustain something as good as this has something start to our Inquiry thanwhat you have provided for

us today. We are very grateful to you. Thank you.going for it.

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Written evidence

Memorandum submitted by the Department for Culture, Media and Sport

The BBC Charter Review is a wide-ranging and open process, encompassing full industry and publicconsultation and research. We published our principal consultation document—The Review of the BBC’sRoyal Charter—on 11 December 2003, supported by a summary leaflet and a translation for children andyoung people, kindly provided by the Children’s Rights Alliance. We have supported the consultation withmeetings with industry and the public around the country, including two events specifically for children.

Interest has been high from the industry and public alike, with around 5,500 responses to the consultationreceived to date. Consultation closed on 31 March and we are currently analysing the substantial publicresponse. To support and complement the public consultation, we are carrying out a major programme ofqualitative, deliberative and quantitative survey research. In addition, because Ofcom’s review of publicservice television forms an important part of the evidence base for Charter review, the research carried outto support that study will also contribute.

We intend to feed back the results of public consultation and research by publishing them in full,supported by a summary paper to be published in the summer.

Over the course of the summerLord Burns—my independent adviser onCharter review—will be fosteringfurther debate of the key issues and helping usmarshal the evidence towards options to be set out in a Greenpaper, scheduled for publication around the turn of the year.

Charter review is still at a relatively early stage and, save in one respect—that the review will reaYrm thestrength and independence of the BBC—Ministers have drawn no conclusions about any aspect of theBBC’s role, structure and function. The Government is therefore not yet able to give definitive answers tothe Committee’s questions, and this is reflected in the responses set out below (however there will be manyopportunities—including in Parliament—to put the Government’s conclusions to the test):

— Given expected growth in digital TV and likely developments in the internet and other newmedia,what scope and remit should the BBC have?

This is a key area for Charter review and is reflected in the first and second sections of our mainconsultation document, “The Review of the BBC’s Royal Charter”. New technologies are being introducedat an ever-increasing rate, and the Review is taking place amidst a large increase in the uptake of digitaltelevision, radio, and DVD technology, and at a time when increasing numbers of people are finding theirway on to the internet, aided by increasingly aVordable broadband availability.

The BBC itself is playing an important role in helping to drive the take up of digital TV, through theprovision of specific digital services and its participation in Freeview. All of the PSBs have a crucial role toplay in bringing switchover about: nonemore so than the BBC, and Charter Reviewwill need to reflect that.We have also asked a Consumer Experts Group, chaired by Alan Williams of the Consumers Association,to review the availability and aVordability criteria set down in 1999 in the light of the rapid take up of digitaland the limitations constraints of DTT reception. We expect to receive their report shortly and will publishthis in due course.

We are currently working with all stakeholders on the detailed plans for switchover, though progress willdepend on how markets respond and on sustained consumer demand for digital services. The prospects arefavourable, with over 50% of households having converted at least one set to digital, and research carriedout by DTI indicating that only 5% of the population would never switch. The DTI published furtherresearch (by Scientific Generics) on 30 March setting out the reasons for this attitude, and we will need tolook at the impacts of switchover on all consumers before actual detailed plans or timetables can beannounced. At the moment, however, we estimate that that switchover could begin as early as 2006, andcould be completed by 2010.

— In the context of scope and remit, how should the BBC be funded?

Again, this is a key area for Charter review, and one covered by “The Review of the BBC’s RoyalCharter”. Options for the future funding of the BBC include continuation of the licence fee, direct fundingthrough taxation or grant, and by way of the introduction of some form of advertising or sponsorship. Theconsultation document explores these in more detail. I have made it clear that the licence fee will continuein the absence of a better alternative, but the review will involve a reassessment of established models—forexample those considered by the Davies review—as well as new proposals that might arise fromconsultation.

The Review is about deciding the right shape of the BBC for the digital age. In that the outcome of theReview will be a strong BBC, independent of Government, attuned to the digital age, and more able toprovide services appropriate to the changing environment, I am confident that it will emerge from theReview stronger and better able to relate to the other organisations with which it has to work.

— How should the BBC be governed and/or regulated and what role should be played by the OYceof Communications?



The BBC Governors have retained their core responsibilities, including upholding and protecting theCorporation’s political and editorial independence. But, the BBC is now subject to new externalrequirements monitored and enforced by Ofcom. The BBC is, for the most part, subject to Ofcomstandards, targets and quotas on the same basis as all other public service broadcasters. And Ofcom willbe able to fine the BBC if it breaches them.

There remain some diVerences in regulation between the BBC and others, reflecting the diVerences in theway they are established and the extent of their public service obligations, but the central aim is to create amore level playing field for all public service broadcasters. Under the Communications Act settlement, theregulation of requirements relating to issues of accuracy and impartiality remain exclusively with the Boardof Governors, because this is so closely bound up with their overriding role of ensuring the BBC’s editorialindependence.

Ofcom already plays a role in the regulation of the BBC. The future arrangements for the Corporation’sgovernance and regulation—including the maintenance of accuracy and impartiality—are central issues inCharter review, and it would be premature to draw conclusions at this very early stage. Charter review willalso look at the fundamental question of whether the Royal Charter, and supporting Agreement, remainthe best foundation for the BBC for the next 10 years.

In considering all these issues, the Government will obviously take account of Lord Hutton’s conclusionsinsofar as they are relevant, although the Charter Review is of course a quite separate and considerablywider process.

— In a changing communications environment, does a 10-year Royal Charter and Agreement withthe Secretary of State, together, provide the most appropriate regime for the BBC?

Again, we ask this question specifically in “The Review of the BBC’s Royal Charter”.

The BBC’s Agreement with the Secretary of State was amended at the same time as the CommunicationsAct came in to force at the end of 2003. One of the provisions aimed to improve BBC accountability toParliament for the value for money of the BBC’s licence fee expenditure. The provision involves arequirement on the BBC’s Audit Committee to commission value for money reviews from the NAO andother suitable organisations that will then be laid before Parliament. In addition to this, of course, the SelectCommittee has the opportunity to scrutinise the BBC’s AnnualReport, all of which has contributed towardsimproving BBC financial accountability without any risk to its editorial independence.

The BBC still needs to seek my approval for new public services. However, Ofcom will now have animportant role in the approval process. I have made clear that I will formally consult ofcom on any newBBC service proposals and on the reviews of existing BBC services.

April 2004

Memorandum submitted by ITV

Introduction

This submission is made on behalf of the ITV companies operating the 15 Channel 3 licences, namely ITVplc, Scottish Media Group, Ulster Television and Channel.

DCMS Committee Questions

1. Given expected growth in digital TV and likely developments in the Internet and other new media, whatscope and remit should the BBC have?

1.1 With the development of new technologies and the eradication of spectrum scarcity consumers ofmedia are becoming much more used to paying for what they want when they want it. The historic relianceon a handful of channels to deliver key media content free at the point of consumption is gradually beingeroded.

1.2 These changes, and the rapid moves towards digital switchover, are transforming the UK’s medialandscape and placing particular pressure on the foundation stone of UK broadcast media, the BBC. In aworld of enormous and increasing consumer choice the notion of a compulsory levy (the Licence Fee) thatmust be paid by all those wishing to watch television is looking increasingly outdated.

1.3 However, there remains strong support for the BBC and a counter view that in a world where themarket will happily deliver content that viewers are prepared to pay for as individual consumers (ie moviesand premium sports events) there will continue to be a role for a publicly funded broadcaster dedicated tobringing a comprehensive range of content including much that the market would not make to the widestpossible audience.



1.4 This is a view that ITV broadly shares. We believe the UK has benefited from public investment inthe BBC as a standard-bearer and public service innovator. However, we also believe that in recent years theBBChas been going in thewrong direction, seeking to respond to the dramatic change taking place around itby rolling its tanks on to every battlefield and seeking to expand its scope and remit far beyond its initial role.

1.5 The BBC has been assisted in this by the exceptionally generous licence fee settlement awarded to itby the Government when it reopened the 1996–97 settlement in 1999. TheDCMSCommittee argued at thattime that the BBC had known the profile of its external income from 1997 to 2002 for several years andshould have “cut its coat according to the cloth”.1

1.6 Unfortunately the Secretary of State took a diVerent view, in spite of the fact that at the time of the1996–97 settlement the BBC had described it as an “historic breakthrough” that would “fund the transitionto the age of digital services”. Consequently the BBC has found itself the beneficiary of a significant financialwindfall since 1999. Had the original 1996–97 settlement been maintained the BBC would be enjoying asubstantial annual income from the Licence Fee of £2.25 billion by the end of the current Charter period.As a result of the 1999 revision it will be enjoying an income of circa £3.1 billion.

1.7 At the time of its application for extra funds the BBC made much of the need for it to compete witha buoyant ad-funded sector. Unfortunately for the commercial sector the BBC’s much enhanced financialposition has also coincided with the worst advertising recession in the TV advertising industry for 20 years.

1.8 As a result of the Licence Fee settlement of 1999 and the downturn in the advertising market the BBChas, in recent years, found itself in an exceptionally strong financial position. Combined with theappointment of a Director General who had spent his entire career in the commercial sector this resulted inan expansionist and commercially aggressive mindset at the BBC that has undermined its public purposes.

1.9 At the time of the Committee’s 1999 inquiry ITV argued that no additional funds should be grantedto the BBC until there was clear public agreement about a new role for the BBC in the digital age. TheCommittee asserted that “The BBC has, in our view, singularly failed to make the case for a much expandedrole in the digital era and consequently for additional funding.” This Charter Review provides the first realopportunity to assess whether the BBC has deployed those extra resources in the wider public interest or inthe pursuit of its own corporate interest.

1.10 In ITV’s view there is much evidence that in recent years the BBC has too often pursued the lattercourse. The BBC’s digital distractions have raised major complaints from competitors in new media areasthat have felt the BBC has crowded out. However, even within its traditional core competencies, inparticular the provision of television services, the BBC has strayed from its traditional approach to publicservice values in favour of an approach characterised by determination to win the ratings war at all costs.

1.11 ITV has never argued the BBC should be a “market failure” PSB. We recognise that as everyonepays the licence fee the BBC should provide something for all—Eastenders should be as much a part of theBBC as Panorama. Unfortunately in recent years the BBC has increasingly changed the mix—taking theopportunity to move important public service content from BBC1 and BBC2 to BBC3 and BBC4.

1.12 Whilst the BBC denies it has used its new digital channels in this way comments by its seniorexecutives suggest otherwise. Quoted in a recent Financial Times interview BBC2 controller Jane Rootsuggested that the channel had previously suVered from “attempting to be a Jack of all trades for the BBC,taking everything that didn’t fit on BBC1—current aVairs, science and a series on garage music. BBC2additionally had to do all those jobs that are now done by diVerent channels [ie BBC3 and BBC4].”2

1.13 The BBC has also adopted an approach to scheduling its main channel that has beenmarkedlymoreaggressive and commercial in style. Scheduling Fame Academy head to head against Pop Idol; shuntingPanorama to the margins of the BBC1 schedule; abandoning arts programming on BBC1 for several years;scheduling a one-oV extra episode of hospital soapHolby City against new ITV dramaOthello as a spoiler;moving the 9 o’clock news to free up the schedule for post watershed drama.

1.14 With Charter Review now under-way we have, unsurprisingly, seen something of a reversal in thisbehaviour—the recently announced major investment in arts programming on BBC1 and BBC2 is just oneexample. In ITV’s view we cannot rely on the periodic process of Charter Review to bring the BBC backinto line. As we argued back in 1999 and during the passage of the Communications Act 2003 what is neededis a level regulatory playing field in which the scope and remit of the BBC’s service as a whole and each ofits channels individually are clearly set out and agreed with an independent external regulator.

1.15 This would also appear to be a requirement of EU State Aid law. A 2001 Communication from theEuropean Commission on the application of State Aid rules to public service broadcasting stresses that,“Without a clear and precise definition of the obligations imposed upon the public service broadcaster, theCommission would not be able to carry out its tasks under Article 86(2) and, therefore, could not grant any

1 Paragraph (xi), 3rd Report of DCMS Committee, 1999.2 Interview with Jane Root in Creative Business section of the FT, 16 September 2003.



exemption under that provision;” ie the Commission would not be able to conclude that any public moneygranted to a public service broadcaster was compatible with EU State Aid law. On the issue of independentregulation, the Communication goes on to say that, “It is within the competence of the Member State tochoose the mechanism to ensure eVective supervision of the public service obligations. The role of such abody would seem to be eVective only if the authority is independent from the entrusted undertaking.”3

1.16 In 1999 the Committee argued “for a single regulator of the market as a whole.”4 We now have asingle regulator, Ofcom, which has responsibility for regulating certain areas of the BBC. Unfortunately thegaps in regulation that remain will permit the BBC to continue playing fast and loose with interpretationsof its remit.

1.17 The opportunity aVorded at this Charter Review should be taken to set out clearly the scope andremit of each of the BBC’s services. The peculiar “risk free” nature of the BBC’s funding means that itsservices should be demonstrably more risk-taking, diVerent and innovative than those provided bybroadcasters reliant on the commercial marketplace.

1.18 The remits of the BBC’s services should be agreed with Ofcom. “Significant changes” to any of theseservices, ie a decision to abandon the arts on BBC1, should require prior approval of Ofcom, which has astatutory obligation to “maintain and strengthen” PSB. This is the approach that applies to the commercialpublic service broadcasters (ITV1, Channel 4 and Five) and the same rules should apply to the BBC.

1.19 In terms of the scope and remit of the BBC in the wider marketplace and in particular in new mediaareas clear parameters need to be drawn outside which the BBC should not be expected to stray. Cruciallyany attempt by the BBC to further expand its services should require the approval of Ofcom and should bepermitted only after there has been extensive and independent analysis of the likely market impact.

2. In the context of scope and remit how should the BBC be funded?

2.1 If the BBC is to be expected to do something diVerent to those players that are reliant on commercialrevenues to fund their activities then it will continue to need a secure funding base that is not subject to thevagaries of the market. ITV believes that for the period of the forthcoming Charter the Licence Fee, whilstimperfect, remains the best way of funding the BBC’s activities.

2.2 For obvious reasons we do not support the idea of the BBC carrying advertising. Advertising on theBBC would have a very negative impact on the rest of the free-to-air advertising funded sector. All previousinquiries, from Peacock in the 1980s to theDavies Review in 1999, have concluded that allowing advertisingon the BBC at a level necessary to make a major contribution to its funding would result in a significantincrease in the amount of advertising impacts available to advertisers but not in a significant increase inoverall advertising spend. As such the BBC would simply cannibalise revenues currently available to thecommercial sector and UK plc would lose the benefits aVorded from a system that currently oVers threegood, strong sources of programme investment—the Licence Fee (approx £3 billon), advertising (approx£3 billion) and subscription (approx £4 billion).

2.3 At the extreme we estimate that were BBC1 and BBC2 allowed to show as much advertising as theircommercial rivals this would result in a 50% increase in Total TV Impacts but only a 5% rise in Total TVNet Advertising Revenue (NAR).5 Based on an implementation date of 2007 forecasts suggest this wouldresult in ITV1’s revenues collapsing by circa £600 million and Channel 4’s by circa £300 million. This ismoney that would simply be taken out of the broadcasting system, decimating investment in original UKproduction.

2.4 Subscription might provide a more acceptable alternative funding model for the BBC in the futurebut will not become practically possible at the very earliest until digital switchover. Even then majortechnical and legacy issues will remain to be resolved.

2.5 However, whilst it is ITV’s view that the Licence Fee should remain the primary source of funding forthe BBC’s public services for the next Charter period theRPI plus 1.5%annual formula should be brought toan end when the current Charter period expires. The continued substantial growth in the number of licencefee-paying households over the period of the current Charter,6 the RPI plus year on year rises the BBC hasreceived every year since 1998, the BBC’s consistent over performance in the delivery of internal savings7

and the collapse in the revenues of the advertising funded sector since 20008 have all combined to create a“super funded” BBC.

3 See EC 320/11, Communication from the Commission on the application of State Aid rules to public service broadcasting,paragraphs 37 and 42.

4 Paragraph (xx), 3rd Report of DCMS Committee, 1999.5 See Annex.6 In 2003 there were 23.8 million full licence fee-payers, compared to just 20.5 million in 1996–97.7 In 2000 the BBC promised to cut its overheads from 24% to 15% by 2004. In fact it had already managed to cut them to 13%by 2002–03.

8 ITV revenues have fallen from a high of £2 billion in 2000 to £1.6 billion in 2003.



2.6 As stated in answer to Question (1) by 2007 the BBC will enjoy annual Licence Fee revenues of £3.1billion.9Had the 1996–97Licence Fee settlement beenmaintained theBBCwould be enjoying annual licencefee revenues of £2.25 billion in 2007.

2.7 This super-funding of the BBC has created an expansionist mindset within the organisation. Thenumber of full-time employees rose between 1995–96 and 2002–03 from 24,103 to 27,148. The cost ofemployment almost doubled over that period from £700.1 million to £1,265.7 million.

2.8 ITV believes that an RPI minus X formula should be reintroduced for the BBC when the presentsettlement expires. Given that the BBC’s level of funding from the Licence Fee by 2007 will be almost£1 billion higher than was originally anticipated in 1996–97 the imposition of an RPI minus X formula willnot devastate the BBC’s finances. It will, however, restore some equilibrium to the funding of the UKbroadcasting sector and encourage the BBC to (a) concentrate its resources on the delivery of its core publicpurposes (as agreed during this Charter process) and (b) concentrate on generating greater eYciencysavings.

2.9 In the wider context of the general review of public service broadcasting being conducted by Ofcomit is also ITV’s view that theGovernment should take the opportunity of this Charter Review to stop viewingthe Licence Fee as the sole birthright of the BBC. It is clear that major changes in the broadcasting marketlie ahead as we approach digital switchover and it may be necessary for the Licence Fee to be used to supportpublic service content on channels other than the BBC if we continue to believe that a plurality of supplyin PSB is important. The Charter and Agreement should, therefore, be amended to permit the use of theLicence Fee by other broadcasters, where appropriate, to support PSB subject to a recommendation byOfcom and approval by the Secretary of State and Parliament.

3. How should the BBC be governed and/or regulated and what role should be played by Ofcom?

3.1 In 1999 the Committee concluded “The BBC’s self-regulatory position separate from the rest ofbroadcasting is no longer sustainable. The case for a single regulator of the market as a whole, which wemade last year, has been reinforced by the rapid development of the market. We reiterate ourrecommendation that regulation of the broadcast content and commercial activities of the BBC should bethe duty of a Communications Regulation Commission.”10

3.2 It is ITV’s view that this conclusion was right then and has since been proven to be so. The currentarrangements for governance and regulation of the BBC are inadequate. They are not serving the publicinterest, nor are they serving the BBC’s best interests.

3.3 The Hutton Inquiry has comprehensively exposed the central flaw in the BBC Governors’ role andremit. The Governors have a crippling conflict of interest when it comes to adjudicating on allegations ofserious editorial failings because they are charged both with defending the BBC’s values and independence,and with regulating its editorial output. When the two are in conflict, the defensive role will always takeprecedence. This conflict extends beyond editorial matters to every area of the Corporation’s manyactivities. The Governors are not equipped to take an objective arm’s length approach to evaluatingperformance or strategy outcomes, since they played such an integral part.

3.4 The Governors should be maintained as a strong body of people appointed to represent the publicinterest and champion the BBC. The regulation of the BBC should be the responsibility of the independentregulator Ofcom, which is already responsible for regulating the BBC at Tiers 1 and 2 of the new regimecreated by the Communications Act.

3.5 Ofcom is not, as some have sought to suggest simply a “commercial regulator”. One of its mainobjectives is the maintenance and strengthening of PSB and it is the most appropriate body to have fullregulatory responsibility for the BBC. Passing this role to Ofcom would make more sense than yet anotherhalf hearted attempt at creating an artificial distance between the Governors and the BBC management.

4. In a changing communications environment does a 10-year Royal Charter and Agreement with theSecretary of State provide the most appropriate regime for the BBC?

4.1 The anachronism of the BBCoperating under aRoyal Charter, whilst the rest of the industry operatesunder clear statute is not ideal. However, all of the major changes that need to occur at the BBC in thisCharter Review, such as the granting of full regulatory authority to Ofcom, can be done without changingthe Royal Charter status of the BBC. Getting these changes right, rather than seeking to find limitedparliamentary time to alter the BBC’s status, is the priority as far as ITV is concerned. We also believe thatthis Charter ought to be renewed for a 10-year period in order to provide the BBC with suYcient time andcertainty to implement the changes to its funding, regulation, governance and remit that we hope will resultfrom this Charter Review process.

9 This excludes revenues generated via BBC Worldwide and the BBC’s other commercial ventures, which by 2006–07 areexpected to give the BBC a total income of near £4 billion.

10 Paragraph (xx), 3rd Report of DCMS Committee, 1999.



Annex

THE EFFECT OF ADVERTISING ON THE BBC

Key Assumptions

We have used Market NAR and viewing & impact shares in line with projections for audience andadvertising revenues based on third party forecasts. It is assumed that advertising is allowed (in whicheverform) on the BBC from Jan 2007 onwards.

Total Impacts

If advertising was allowed on the BBC (Case A) then Total TV Impacts rise by 50%. This is based on thefact that in 2007 our estimate of Total BBC Viewing (BBC1, BBC2 and BBC Digital Channels) is 37.2% ofindividuals viewing. This would suggest that as the non-commercial sector is 60% of the commercial sector,when the BBC becomes commercial it would provide an extra 60% of impacts to the TV marketplace. Wehave downweighted this number to 50% to reflect the fact that part of the BBC’s strength is made up ofardent ad-avoiders who would probably watch less television as a result of advertising on the BBC.

Total Revenue

However, despite this 50% rise in Impacts only 5% more TV revenue is generated as a result. Thejustification for this is as follows:

— History shows that incremental increases in impacts generated by new channels (eg C5, TV3 inIreland) or extra minutage, do not engender a commensurate increase in NAR

— This is supported by a recentMindshare report which estimated that any increase in impacts fromadvertising on the BBC would be absorbed within 18 months.

At first glance it seems counterintuitive that such a large increase in supply would stimulate a relativelysmall increase in demand (Revenue) but in reality, while costs would come down—which would allowadvertisers previously priced out of TV to advertise—existing advertisers would achieve the same targets forless and would, in fact, scale back investment. Indeed the existence of EastEnders as a rival to the coveragepowerhouse that is Coronation Street and the fact that they have many mutually exclusive viewers meansthat advertisers might reach coverage targets more eYciently (the BBC’s attractive demographic profilewould further aid this) which would also allow them to reduce expenditure.

In short we believe that the 50% increase in Total Impacts would only generate a 5% incremental increasein Total TV NAR. It is worth noting that in the base case for 2007 this is an extra £183 million on top ofthe currently forecast £3,653 million for Total TV NAR. This money would come from other media and isroughly equivalent to the current size of Cinema advertising or a third of all Radio advertising.

Schedule Investment

It is assumed that all channels continue to invest in schedules at their current rate. This is true of the 2007year as well.

Scenarios

For the purposes of this document, we will concentrate on 2007—the first year that any changes to BBC’snon-commercial basis would take eVect. Seeing the eVects of this one-year is suYcient to demonstrate theeVects on the TV marketplace that would result from such a change.

BASE CASE—2007

Individuals Adult Premium NAR % NAR £msViewing % Impacts %

BBC1 24.6BBC2 10.0ITV1 21.2 40.8 118.1 48.2 1,760.2GMTV 1.5 2.5 60.0 1.5 54.8C4/S4C 8.8 15.0 118.7 17.8 650.3Five 6.1 10.3 79.8 8.2 300.3Other BBC 2.6Sat/Cab 25.2 31.4 77.4 24.3 887.8Total 100.0 100.0 100.0 3,653.4



Case A

ADVERTISING ON THE BBC

BBC1 and BBC2 allowed to advertise in the same manner as other commercial channels.

Individuals Adult Premium NAR % NAR £ms & Base £msViewing % Impacts %

BBC1 24.6 28.2 116.9 32.9 1,263.0 !1,263.0BBC2 10.0 9.8 111.9 11.0 420.9 !420.9ITV1 21.2 24.5 103.8 25.3 971.4 "788.8GMTV 1.5 1.5 54.7 0.8 31.4 "23.4C4/S4C 8.8 9.0 100.1 9.0 344.4 "305.9Five 6.1 6.2 85.0 5.2 200.8 "99.5Other BBC 2.6 2.0 76.8 1.5 58.1 !58.1Sat/Cab 25.2 18.8 75.8 14.2 545.9 "341.8Total 100.0 100.0 100.0 3,836.1

Assumptions: BBC 1 would supersede ITV1 as the preferred route for advertisers by dint of its greatersize, better profile and breadth of programming. BBC 2 would “out niche” C4 for the same reasons. ITV1and C4 would lose their USPs (fast coverage and eYcient targeting of sub demographics) and the BBCwould command a substantial premium due to profile.

Case B

Limited Minutage Per Clock Hour

If limited to half commercial minutage of clock hour then BBC revenues % 50% of Case A

Case C

Peak Only

Peak accounts for 70-80% of revenues, assume BBC revenues 70-80% of Case A

Case D

Off-Peak only

OV-Peak accounts for 20-30% of revenues, assume BBC revenues 20-30% of Case A.

Implications for UK Broadcasting Ecology

Currently UK television programming is paid for via Subscription (BBC & Sky etc.) and Advertising(Sky, ITV, C4, C5 etc.). Below is set out the approximate revenues of the major players (excluding Sky) andthe cost of their programme budgets giving their Gross Margin for 2003. Please note that the ProgrammeBudget does not represent the full costs with PQR levies, sales costs and transmission costs among manyassorted costs that also apply.

2003 Programme Budget Revenue Gross Margin

BBC 1,900.0 Licence FeeITV 1,000.0 1,592.4 592.4C4 345.0 635.1 290.1Five 157.0 252.3 95.3

Below is set out the same table for 2007 with an advertising funded BBC

2007 Programme Budget Revenue Gross Margin

BBC 2,056.6 1,742.1 "314.5ITV 1,082.4 971.4 "111.0C4 373.4 344.4 "29.0Five 169.9 200.8 !30.9

Sky are absent from these tables as they would be relatively unaVected by these changes—only 9% of theirincome is from Advertising the remainder from Subscriptions and channel sales. Arguably, with eachhousehold £10 a month better oV after the removal of the licence fee, Sky could well increase theirsubscriptions and ARPU to oVset any losses to advertising revenues



Conclusion

Clearly thismeans that current budgets for BBC, ITV,C4 andFive would become untenable. ITV’sGrossMargin for example would go from!600million to"£300million. Expensive original commissions wouldbe less and less viable and the only player left with any sort of cash for commissions & acquisition wouldbe BSkyB.

In eVect, unless the ex-licence fee money from each household found its way to Sky and Sky spent it allon programming, there would be a massive loss in revenues to UK programme producers. For this reasonthis analysis ends at 2007. Without agreement on how we model future programme budgets it is impossibleto look at revenues in the longer term.

15 April 2004

Memorandum submitted by Paul Phillips

I wish to be submit my views to the Committee regarding the BBC charter renewal. In the past I havebeen very disappointed by Gerald Kaufman’s attacks on the BBC, much of which as a licence payer, I findunjustified.

I would prefer the licence fee to continue, as is, because:

— It spreads the cost over the entire population.

— Overall, compared to say Sky it oVers better value for money (I also subscribe to Sky which isalmost a monopoly and charges far too much for the quality of service it oVers in my view).

— It raises the bar for all the competitors—I have watched TV around the world, and there is nodoubt in my view that British TV is the best. I believe the BBC raises the bar for the competition.

— The ability to have TV and radio without adverts is great.

— The service is public but independent from the Government. If the BBC public services werefunded from tax this would compromise its independence in my view.

April 2004

Memorandum submitted by Equity

Introduction

1. Equity welcomes this opportunity to contribute to the discussions surrounding the review of the BBC’sCharter. As the trade union representing 37,000 performers and creative personnel, we recognise theimportance of the BBC in our society. The BBC is our most significant employer and it plays an integralrole in both the audio-visual environment and as a community focus for the United Kingdom.

2. The BBC is one of four public service broadcasters in the United Kingdom, but it is arguably the mostimportant. Each channel has a role to play in the public service television broadcasting ecology by providinga focus for communities, educating the public, and providing a shared sense of heritage. However, the BBChas a freedom to lead the other broadcasters on matters of standards, innovation and diversity only becauseof its unique source of funding. The BBC has a key cultural role within the UK—by setting programmestandards and bridging the gap between the information-rich and the information-poor, as more qualityprogrammes are drawn to subscription channels—it continues to be our main public service broadcaster.

What Scope and Remit Should the BBC Have?

3. The BBC is much more than a broadcaster. It is part of our society, it showcases the United Kingdomto the rest of the world, it plays a crucial role in our economy, both as an employer and an exporter of goods,and it acts as a standard bearer for the audio-visual sector in terms of quality, diversity, and innovation.Equity values each of these roles and recognises that it is able to fulfil each of them only because of its uniquefunding structure.

4. Equity believes that the BBC should retain both its television and radio responsibilities. While a recentreport by the Broadcasting Policy Group recommended their separation into two distinct arms, we believethat there are significantly advantages in these functions to remain together. This dual broadcastresponsibility is important for its role in setting standards for other public service broadcasters. Thisstandard setting role should not be undervalued because without the BBC, we believe that viewers andbroadcasters alike would suVer.



5. While we will concentrate on genre diversity below, the role of the BBC in television and radio isincredibly important. As cited above, it has a wider role in setting standards, and bringing togethercommunities. Additionally, it has a responsibility to experiment in programme production.

6. The BBC also has an important role in sustaining the independent production sector. Without theBBC’s investment and commissioning, the UK’s production base, which also serves the UK film industry,would not be as strong as it is today. Even with the scaling down of BBC film production, its televisionproduction has supported the industry and benefited their in-house production. There does not appear tobe any comparable investment by other broadcasters and in the case of channels only available through Sky,there is no indication that they ever intend to match this level of investment.

7. Crucially for Equity members, the BBC is themost important employer and trainer in the audio-visualsector. It has provided a consistent source of employment in a variety of programming, both audio andvisual, and heavily invested in the training and development of the industry. Despite increased eVorts of theother public service television broadcasters through Skillset to invest in training, the BBC continues to faroutstrip them in financial commitments and training opportunities.

8. Equity would like to see the BBC retain its commitment to programme making in and for the Nationsand regions. The BBC and ITV are the only public service broadcasters to make programming specificallyfor diVerent national and regional boundaries. While Channel Four and Five share a commitment toproduce a proportion of programmes outside the M25, the BBC and ITV are the only channels that oVerprogrammes for the viewer made in the region for the region they live in. Regional programme productionshould not be confined to news and current aVairs. It should include drama and comedy for example, evenif the broadcast is restricted to the region it is produced in. In this latter regard, the BBC falls short ofmeetingthese commitments in a number of regions, but particularly in Northern Ireland.

9. During the debate surroundingCharter Review, some commentators will inevitably argue that the BBCshould not be obliged to provide “something for everyone”. This has long been a core feature of publicservice broadcasting and one consistently identified throughout Government and regulator inquiries andresearch. While the initial reasons for this requirement on public service television broadcasters have longgone, with the event of more channels and now new platforms, it is still very important. This is most evidentfor those who cannot aVord to pay for subscription channels.

10. Equity believes that it is inevitable that there will be some overlap of output with other broadcasters,and we would argue that this does not matter. As long as the programming is of the highest quality andoVers alternatives that challenge other broadcasters within genres, viewers will be able to access a range ofprogrammes and that is the most important measure for the BBC.

11. Prior to digital switchover, there will be individuals who actively choose to receive only those channelsavailable on analogue. Recent research by theDepartment of Trade and Industry suggested that 13% intendnever to switch to digital, while a further 29% would do so when there was no other choice. Additionally,there will be those people who cannot aVord to subscribe to channels or those that prefer linear viewing. Ifthe BBC and other public service television broadcasters cherry-picked genres rather than providingprogramming for all, it would eVectively exclude minorities, economic and geographically-diYcult viewers.Additionally, while many niche channels continue to provide only poor quality cheap programmes that arebroadcast on a repeated loop available by subscription only, there would be no justification for the BBC tostreamline its programme provision.

12. Equally, it should not be the BBC’s responsibility to only provide for genres in the public serviceenvironment not produced by commercial public service broadcasters. This would risk ghettoising the BBCand prevent it from setting standards for all broadcasters. Equity believes that the BBC is at the core ofPSTB, and as such it is important that it should be allowed and encouraged to continue its range ofprogrammes and be supported by the Licence Fee. We believe that the BBC should set standards for allbroadcasters, whether or not they have public service obligations and that they have a greater responsibilityto the broadcasting environment because of the privileges of the Licence Fee.

13. BBC Radio has demonstrated that their unique system of funding alongside their public serviceobligations can result in the production of high quality programming not available anywhere else. BBCRadio produces a variety of programming across its channels, and continues to provide the UnitedKingdomwith the finest radio broadcasting system in the world. ThroughBBCRadio, theUnitedKingdomis able to access a consistent choice of high quality programming across genres such as drama, comedy,music, schools, sport, education, arts, sciences, news and current aVairs, not found on any other radiostation.

14. This dedication to diverse genre provision is most evident in drama programmes. Dramaprogrammes, including the single play, continues to excel and to push the barriers of imagination on radio.The initiatives with children’s programming on BBC 7 have brought a new and growing audience ofchildren. Radio is an important educational tool, and Equity welcomes the BBC’s commitment in this area.Additionally, the BBC’s support across a range of music is significant. Listeners are able to access classical,pop, middle range, jazz, folk music and world music; the choice is outstanding. It should also be noted thatBBC support of orchestras, singers, new and established composers, the proms and live concerts around theUK makes a major contribution to this important aspect of the culture of the nation.



How Should the BBC be Funded?

15. Equity believes that, despite it imperfections, the continuation of the Licence Fee is essential for thesurvival of high quality, diverse and original public service programming on the BBC. We believe thatwithout the Licence Fee, the BBC would be unable to continue to meet its public service obligations. Itwould not be able to act free of market concerns and trends and it would be forced to react to developmentsin the way the commercial PSBs have had to do repeatedly over the last five years. Operating in a market-orientated environment would put a huge strain on the BBC (and the commercial broadcasters) and we donot believe that any of the alternatives suggested by commentators would allow the BBC to be as significantand respected as it is now.

16. If further convincing were necessary, the Government only needs to look at the experiences of othercountries to see the possible implications of changing the BBC’s funding. ABC in Australia, TVNZ in NewZealand, CBC in Canada and PBS in the United States are all poor examples of public service televisionbroadcasting when compared to the BBC. These channels are forced to weather advertising slumps, seeksponsorship, raise money through telethons or beg Governments for public subsidy. As a result, they failto live up to their potential and are often criticised for poor, unimaginative programming or worse, that theireditorial independence is questioned.

17. Additionally, a recent report by Oliver & Ohlbaum Associates called UK Television Content in theDigital Age identified that redirecting BBC funding may increase commercial audiences but the consequentpressure on airtime prices would limit actual revenue increases for commercial broadcasters. As commercialbroadcasters recycle a lower proportion of revenue into original production, the net eVect would be to lowerthe overall level of domestic content investment in the UKmarket. Additionally redirecting existing or newpublic funds to commercial broadcasters to subsidise high cost genres could result in these funds beingdistributed to shareholders or new ventures which do not rely on quality, home-grown programmes,eVectively crowding out new commercial investment.

18. Public service broadcasting often relies on broadcasters to act in a way in which the private sector,left unregulated, would not. While the Communications Act defines that those obligations should be, it isonly the BBCwithout the concerns of shareholders or failing advertising prices that can truly embrace them.In doing so, it provides a standard of programming that the commercial PSTBs can measure themselvesagainst and other commercial broadcasters can aspire to meet. It has only been able to do that because itoperates in a mixed broadcasting economy, using significant public investment in the form of the LicenceFee.

19. We have detailed below our consideration of each of the proposed alternative funding possibilities forthe BBC. It is important to consider the experiences of other countries when considering these alternatives.

(a) Advertising

Advertising is being spread among more and more broadcasters, and it is still suVering from the eVectsof an economic downturn. ITV reports an 18% downturn in advertising since 2000. It makes no sense forthe BBC to share a diminishing source of revenue, especially as it is likely to result in irreparable damage toall broadcasters. As well as reducing Channel 4’s ability to produce high-quality programming, introducingadvertising to the BBC threatens the quality and diversity of BBC programming. Producers would seekprogrammes generating high audiences to ensure high advertising.

(b) Sponsorship

Programmes would become reliant on their sponsors and editorial values could be threatened. The riskof sponsorship withdrawalwouldmake planning for the future less certain and is likely to result in a decreasein worldwide recognised quality of programming.

(c) Subscription

Making the BBC a subscription only service will create a number of problems. Firstly, while theBroadcasting Policy Group may consider that the BBC will be able to oVer a selection of packages of theirservices, we believe that for the current television services to be financially viable, they would need to beeither sold as a group or part of a bundled packagewith other broadcasters. The latter would cause problemsfor European audiovisual regulations. Additionally, it is likely to cost viewers more than the current LicenceFee to access these services, if the current quality and range levels are maintained. At present, figures showit costs £4 to collect the BBC Licence Fee per head, compared with £24 per head to collect one year’ssubscription to BSkyB. This would be reflected in any subscription costs. If the Licence Fee were to besupplemented by subscription this would also increase the burden on viewers, including those poorer people,who would be deprived of the full range and quality of the BBC, which would otherwise be universallyavailable. Finally, we are unsure as to how this approach could be applied to radio services. It would meanseparating the BBC into radio and television organisations and we believe that in order for them to continueto produce a range of high quality programming, they need to operate together.



(d) Combination of Commercial and Public Funding

If the BBC was funded by a licence fee and commercial funding, future European rules could turn theBBC into a ghettoised public service, providing a limited range of “worthy” programming equivalent to PBSin the USA.

(e) PSB fund—“Arts Council for the Air”

Some commentators argue that the Licence Fee money could be made available to other broadcasters toproduce “worthy” programming. We are concerned both about how that “worthy” programming will bejudged, and also how the BBC could continue to act as a public service broadcaster if any of the LicenceFee was diverted away from it. If the intention were to ensure that money is made available to the industryas a whole, Equity would argue that this is already the case through the BBC’s independent productionobligations. This in eVect means that independent production companies are able to pitch for Licence Feemoney. One other issue to consider would be the fate of advertising revenue earned for advertisementsplaced around a programme that has been produced using money from the fund. It would be diYcult toagree that this money should not be returned to the fund, but should instead be absorbed by the commercialbroadcaster. We would also be concerned that any body created to administer a PSB fund would result inanother level of bureaucracy that all broadcasters would have to accommodate.

20. Furthermore, we believe to enable innovation and allow the BBC to fulfil its Public Service remit, theLicence Fee should rise by above RPI annually with concessions to certain sections of society such as theold and the disabled. Any concessions need to be revenue neutral to the BBC, be perceived to be fair by thepublic, but also aVordable in terms of administration and finite.

How should the BBC be governed or regulated and what role is there for Ofcom? Is a 10 year RoyalCharter and Agreement with the Secretary of State the most appropriate regime for the BBC?

21. Equity considers the Royal Charter to be the most eVective way to sustain unique nature of the BBC.We believe the Charter provides the BBC with independence that could otherwise be compromised.

22. With regard to the regulation of the BBC, we would advise against incorporating the Corporationunder the remit of Ofcom. This regulator is new and untested, and it already has significant responsibilitiesin the telecommunications and broadcasting sectors to get to grips with. We believe the additional pressurein regulating the BBC at this stage would be too much and therefore unwise. Unless therefore, theGovernment can propose an alternative, Equity considers the BBC should remain under the regulatorycontrol of the Board of Governors.

23. However, this does not mean that the Governors should remain untouched. Instead, we believe a lotcan be learned from the debates surrounding the creation of Ofcom especially regarding transparency. Weconsider there is a need for a greater clarity of the role and function of the Governors, and that they shouldbe separated from the day-to-day functions of the BBC. However, we do believe that there is some value inthe Governors having a professional background, including some experience of managing a large business.Additionally, the amount of information available about the decisions and working policy of theGovernorsshould be increased as an overall strategy to be more transparent in their operation.

March 2004

Memorandum submitted by the Institute of Practitioners in Advertising (IPA)

The IPA welcomes the opportunity to submit views to the Culture, Media and Sport Committee on theabove inquiry.

1. About the IPA

1.1 The Institute of Practitioners in Advertising is the trade body and professional institute for UKadvertising, media and marketing communications agencies. Our 220 corporate members, who are basedthroughout the country, handle over 80% of the UK’s advertising agency business with an estimated valueof £9 billion in 2003, on behalf of many tens of thousands of their client companies and organisationsworldwide.

1.2 Since its inception, the IPA’s consistent objective has been to secure for British business cost-eVectivemedia for promoting their products at all levels, with the end-benefit of extending consumer choice andgenerating economic growth.

1.3 We believe the BBC, the nature of its programming and how it schedules and promotes its output,have a fundamental impact on this objective and it is against this background that our present submissionis made.



2. Scope of The IPA’s Response

2.1 As the trade body for marketing communications agencies, our response has been constructed fromourmembers’ commercial viewpoint versus that of the ordinary citizen—although, as will be apparent, thesewill frequently coincide.

2.2 Inevitably our submission will also repeat much of the argument we put forward in our earlier papersto Ofcom on public service broadcasting and the DCMS in its review of the Royal Charter—however sinceour views on this area remain unchanged, it will reflect our on-going concerns.

3. Specific Areas for Consideration

3.1 Given expected growth in digital TV and likely developments in the Internet and other new media, whatscope and remit should the BBC have?

Scope

— As has been pointed out in earlier papers, the IPA is a considerable admirer of the BBC.

— As an informer, and educator, we believe it has fundamentally helped shape the attitudes of thenation and, via theWorld Service, has played a vital social and political role through the provisionof accurate and balanced news programming across the globe.

— It is—both in addition and in consequence—one of the few global brands the nation possesses andone with which governments tamper at their peril.

— This is not, however, to blind us to the necessity of both re-evaluation and change vis-a-vis theCorporation.

— The BBC was able to achieve almost all the above from the ultimate position in broadcastingpower—a monopoly. Indeed while this situation may have altered with the arrival of commercialcompetition in the TV (during the 50s) and radio (during the 70s), the sheer size and multi-medianature of the Corporation has still meant the BBC has tended to “call the shots” with regard toinnovation and technical development.

— Having once held this position, it is easy to see why the Corporation should wish to perpetuate itand indeed to future-proof its importance by having it written into its Charter.

— This is, however, to miss the point that the BBC led technological advance and participated in allsectors of communications in the past—not primarily because it was the repository ofbroadcasting wisdom nor because it had the most money (both of which were true) but because itwas by Governmental decree “the only player in town”.

— Clearly the advance of technology and a freer broadcasting environment have altered thissituation. Equally, we believe it should signal a reassessment of the scope of the BBC.

— No organisation used to setting the pace in all areas of communications will give up its powersvoluntarily—which inevitably leads to debate on how should licence-fee payers’ money be spentto maximum benefit—and via this, to the ultimate role of the Corporation.

— While mindful of the scale of this discussion—from the IPA’s point of view, the answer to thesequestions is simple. The BBC should cease seeking to maintain its historical dominance in all themultifarious areas in which it operates and instead complement the market activities of thecommercial players in these areas—enriching the totality of the oVering before the public vscompeting in a highly aggressive (but ultimately pointless) way for maximum audiences.

— This is not to seek to belittle the Corporation or, for political reasons, to reduce its importancewithin the media as a whole. Instead it is to recognise the impracticality of the BBC wishing tobe in the vanguard of every new development—if nothing else because of the finite nature of thelicence fee.

Remit

— Just as the IPA believes in a reduced scope for the BBC, it favours this reflected in a tighter, morestrictly defined operating remit for the Corporation.

— To recap, we believe the role of the BBC should be to extend viewers’/listeners’ choice byguaranteeing access to everyone in the country, to programme/online services that are of unusuallyhigh quality—and that would be unlikely to be provided by the commercial sector. This was thebroad purpose that the BBC identified for itself in 1992 in its document Extending Choice—andwhich we would see breaking down into three key duties:

— the duty to fund and make important programming which—either by reason of itsniche appeal or because the capital investment required would be too large—thecommercial sector would be unable to underwrite;



— the duty to innovate, challenge and provoke, aVorded by the absence of a commercialimperative;

— the duty to act as a benchmark of quality to the rest of the market.

— It is our view that since 1992, the BBC has not followed its own remit. Instead it has behavedincreasingly like a commercial broadcaster—adopting a policy of seeking to maximise audiencesas its end goal.

— As the trade body for UK advertising agencies, wishing to protect the commercial sector as avehicle for our clients’ messages, we could be accused of biased pleading in this respect. Yet it isclear, this concern is also held in many quarters of the Corporation itself—with no lesser figurethat Jane Root, the controller of BBC2, speaking out against what she termed “the tyrannicalobsession with viewing figures” as a result of which new BBC programming has either to achieveinstantly high viewing figures—as measured by BARB “overnights” or be terminated (RoyalTelevision Society—10 February 2004).

— Such a philosophy, we would argue, runs contrary to the BBC’s PSB requirement to providechallenging, innovative output, which through its very nature will either take more time to gain apublic following or alternatively appeal to more discreet, and consequently, more limitedaudiences.

— As we are all aware, the Corporation is often portrayed as being on the horns of a dilemma. If itis too specialist in its output, it is accused of being elitist with the public’s money. If it is toopopularist, it is charged with stealing the bread from the mouth of the commercial sector.

— Clearly neither position is acceptable, instead we would suggest it is a matter of balance.Historically the freedom granted the Corporation to make its own interpretation of its remit inaccordance with the views of the prevailing Director General has resulted in the BBC adopting anincreasingly entrepreneurial approach to programming and scheduling which has amounted to agross abuse of power. That this has been unchallenged by its regulator (ie the BBCGovernors) willbe a matter for discussion later in this paper. That it has occurred at all, however, is yet anotherindication of the need to set the Corporation firm operating guidelines to be eVectively policed.

3.2 How should the BBC be funded?

— Given the IPA’s earlier statements with regard to restricting the scope of the Corporation andproviding it with a tight remit against which to operate, it might be supposed that we shouldequally favour an alternative method of funding the BBC. We do not.

— Although the Davies Committee completed its review of BBC funding five years ago, the IPAcontinues to believe that the licence fee remains the most appropriate means of paying for theCorporation.

— While what amounts to an hypothecated tax is clearly not a perfect means of supporting the BBCwithin a multi-channel environment, it nevertheless remains, we believe, the fairest method andthat least open to adverse political or commercial pressures.

The basis for the viewpoint largely reflects the views expressed by the Davies Committee in 1999.Specifically:

— Direct funding: As with Davies, we believe any funding method which relies either on generaltaxation or grant, would render the Corporation vulnerable to political mood and the potentialloss of editorial or political independence. (Irrespective of the validity of the views expressed byeither side in the recent Hutton Inquiry, the strength of Governmental opposition to the BBCserved to underline the potential risk to Corporation finances should it have been reliant on directfunding. The independence of the licence fee guards against such a threat.)

— Advertising: Likewise, we have been consistent in our opposition to the BBC taking commercialson the grounds that:

— Advertising on the BBC would inevitably alter the nature of the Corporation’s programmingtoward output capable of attracting large audiences (thereby sacrificing the raison d’etre for theCorporation and bringing it into direct competition with the commercial sector.)

— Suggestions that such activity might be limited to certain advertisers and/ or time slotsare unrealistic (governments faced with the unpopular alternative of raising licencefees would inevitably favour an extension of advertising activity.)

— Irrespective of this, it is unlikely that there is suYcient money in the market to supportboth the BBC and the current commercial operators. Given that the BBC’s funding isapproximately £2.7 billion, it would seem highly improbable that TV advertisingmonies would grow suYciently above their current £3.5 billion to finance both theBBC and the independent broadcasters—leading immediately to a greater emphasison less expensive bought-in programming and longer-term either to the possibility of



ITV moving to a subscription basis and/or the potential failure of a number of themarket’s current key players. (Eitherwaywe believe this would result in less choice andlower quality viewing for the current “free-to-air” consumer.)

— Sponsorship: Similarly, we have little faith that sponsorship would provide an alternative means offunding the Corporation—and we would concur with Davies’s conclusion that it could potentiallyresult in the least satisfactory of all solutions ie that it would be incapable of generating suYcientincome to support the Corporation while at the same time potentially unbalancing schedules byencouraging producers towards the creation of programmes which might be attractive tosponsors.

— Subscription: Finally, we should reject subscription outright in that it would immediately negatethe fundamental public purpose of the BBC as a free-to-air broadcaster—eVectively destroying thesocial role of the Corporation and potentially dividing society into those who can aVord to beentertained and informed—and those who cannot. No responsible individual, company orgovernment could countenance such a situation.

— By a process of elimination, therefore, we are left with the licence fee as the most universallyacceptable method of financing the Corporationwhich is least open to political and/or commercialpressures.

— As far as arguments raised that such a charge is somehow immoral when its revenues are directedtoward a single broadcaster (vs being shared or competed for by other operators) we wouldsuggest:

— these objections have historically been the result of the BBC abusing its income base to competefor audience with its commercial rivals (vs complementing their output);

— this grievance has been compounded by the remaining commercial terrestrial broadcasters havingto fund their PSB output from their own pockets.

Both the above, we would suggest would be relatively simply addressed by:

— ensuring the BBC operates strictly to its PSB remit;

— reducing the PSB requirements placed on the commercial sector to those key areas likely to emergefrom Ofcom’s current analysis of the area.

— In sum, given the absence of an appropriate alternative funding mechanism which would preservethe independence and eVectiveness of the BBC, we view the licence fee as a necessary evil for theforeseeable future.

3.3 How Should the BBC be Governed and/or Regulated and what Role Should be Played by the OYce ofCommunications?

— The IPAhas been consistent in its call for the governance of the BBC to be removed from its Boardof Governors and placed into the hands of an independent and professional regulator.

— While concern has been expressed in some quarters that the transference of such power to Ofcomwould result in the latter acquiring a dangerous level of power over UK broadcast media, webelieve that the benefits of creating a uniform approach to regulation will far outweigh any remoteanxieties that the regulator might abuse its powers.

— What is clear, in the light of the Hutton inquiry, is that the BBC’s current Board of Governors isinsuYciently distanced from the Corporation to exercise an eVective policing role, while—for ourpart—we should question its professional qualifications for judging matters of commercialactivity.

— The whole Gilligan episode, we believe, has highlighted the extent to which the Governors haveceased to operate as the independent regulator of the Corporation and, under fire, become itschampion. At the same time, it has led to profound concerns that a patrician body comprisingrepresentatives from the regions, social groups and the “great and the good” can ever hope tounderstand the potentially enormous economic implications of sanctioning activities by the UK’slargest single broadcaster, standing as it does at the centre point of the nation’s entire political—media—communications structure. As has been pointed out—even at the relatively mundane levelof operations—none of the current incumbents “has any close knowledge of the world of massmedia—the payment for sports rights, the scheduling of entertainment or the development ofreality shows” (Independent, 12 February 2004).

— This may be contrasted eVectively with the behaviour of a professional regulator, like the oldIndependent Broadcasting Authority (IBA), which when caught in the cross-fire between ThamesTelevision and the Conservative government under Margaret Thatcher over the Death on theRock programme, was able to act convincingly as a regulator because it was visibly—andemotionally—at a distance from those in the editorial front-line. If the BBC Board of Governorsis unqualified for its economic and business responsibilities—and unable by its very structure todivorce itself from the body it is meant to regulate—there is an unquestionable need for change.



— In these circumstances, the IPA would concur with recommendations that the structure ofgovernance at the BBC should become more like that of Channel 4, with its board of directorsresponsible for operational decisions and strategy, answerable to Ofcom as an independentregulator.

— Moreover, in addition to Ofcom regulating the BBC’s commitment and adherence to a tightlydefined public service broadcasting brief, we should see this control also extending to the contentof the Corporation’s trailers/programme advertisements, as it does all other commercialbroadcasters. Although on a lesser scale to issues of governance, it is nevertheless whollyunsatisfactory that such “advertisements”, remain outside Ofcom’s remit (even more so, in thelight of recent research that such trailers contain a disproportionate level of inappropriate sexualand violent behaviour—frequently broadcast before the watershed).

— Although we recognise that the Corporation has resolutely resisted any move toward outsideregulation in the past, post Hutton we believe it represents the surest and most secure method ofpreserving its independence—and indeed protecting it from the repercussions of its ownmismanagement.

— Simultaneously, it would ensure—in as far as their diVerent funding mechanisms allow—thatcommercial and licence funded media companies would be subject to the same rules, equallyapplied.

3.4 Does a 10 year Royal Charter and Agreement with the Secretary of State, together, provide the mostappropriate regime for the BBC?

— Allowing for our earlier comments recommending that regulation of the BBC should be broughtmore fully under Ofcom, we would not recommend any significant change to the current RoyalCharter and Agreement arrangements through which Government is able to exercise control overthe remit and funding of the BBC.

— As a systemwe believe it hasworkedwell in preserving the independence of theCorporation; while,as reluctant believers in the licence fee as its least hazardous method of funding the BBC, we seeno reason for more fundamental change.

— Our only possible comment might be to question the ten year duration between reviews. While itis noted that the build up to Charter Renewal is a prolonged one—and we should not wish to seethe Corporation perpetually engaged in preparing its case for the next review—nevertheless themedia sector is extremely fast moving and ten years’ grace between Charters does seem extremelygenerous.

— If the UK Government is able to develop and introduce its policies within a maximumParliamentary life of five years—to grant the BBC double this period before it can be called toaccount does appear excessively prolonged.

April 2004

Memorandum submitted by Erika Sigvallius

I have been reading your web pages and see that you have asked for comments from interested individualsin the run up to the Charter Review. I am entirely unqualified to comment on the relative roles of BBCmanagement, the Governors, Ofcom and the Secretary of State, but I am writing to urge you to reconsiderhow the BBC is funded.

The method of funding the BBC impacts very unfairly on those of us who do not own a television. Sincemost people do ownTVs (and pay the licence), they are often startled to hear how I am treated like a criminalby the licensing authority.

Unpleasant letters are routine. Over the years I have received them saying variously, “You do not havea licence. You must get one immediately”, “Final demand” and “We are taking you to court”. I have hadletters demanding to know why I haven’t responded to a previous letter, when in fact I have, and made afollow-up phone call too.

The letters invite you to respond to say why you don’t have a licence, and when you reply to the eVectthat you don’t own aTV, the licensing authority writes back to say that it doesn’t believe you, and is sendinga sinister-sounding “Enforcement oYcer” to your home. And whether you repeatedly write or phone theauthority, or make no response at all, the result is always the same: it sends someone to inspect your home.

This inspection involves a search of your house, with every room being entered (sometimes you are toldthat “the main living area” only is inspected. What this means is open to interpretation, but I had it directlyfrom the Enforcement Department itself that this can mean every room bar the attic.) All of this isthreatened in the face of no evidence whatsoever that I have committed any oVence.



I have refused entry for the search, which means that harassment is constant: a letter every other monthand two separate visits from Enforcement oYcers within the last six months. I strongly object to thisinvasion of my privacy: I believe that to enter someone’s private property uninvited requires a compellingreason to do so. The “Well if we didn’t inspect, everyone would say they didn’t have a TV, and then wherewould we be?” response from the licensing authority simply isn’t good enough. There are many activities inthis country that require a licence. Yet I have never received letters from the local authority asking why Idon’t have a licence to run a pet shop, I have never opened my door to find a police oYcer asking to searchmy house for an unlicensed gun, and I have never been threatened by Customs and Excise for not possessinga licence to import and sell tobacco. But these authorities would be quick to inspect if they hadREASONABLE suspicion that I was doing any of those things without a licence. Why should TV licensingbe any diVerent?

I have told the licensing authority that they are welcome to use their detection equipment close to myhouse; I always reply courteously to its letters, and co-operate fully EXCEPT for the requests to search myhouse, an idea I find abhorrent. The authority has tried to tell me that allowing them entry will stop allfurther visits for up to three years, yet a TV-free friend of mine living locally was searched three times in twomonths, so frankly, I don’t believe what I have been told. Also, I don’t consider it reasonable to be inspectedonce every three years simply because the authority feels like it.

I amNOT anti-BBC. Far from it. I consider myself to be very well served by Radio 4, and would willinglypay for it. I also get good use of BBC Online, and use some of its content in my professional life. It is quiteridiculous that this is free to anyone, including people overseas who also do not pay for it. BBC Online isfunded by the licence fee, yet in the area where I live, Crook North ward, very few people own a PC or haveinternet access (the ward falls within the lowest 6th of all wards as measured by the indices of deprivation[Census 2001].) It simply isn’t reasonable that this excellent service is paid for by people who have no accessto it. I understand there are also now some digital TV channels that many people have no access to; yet thisis also funded by the licence fee.

I have little sympathy for people who feel they should be able to watch BBC TV without paying for it. Ifthey feel so strongly about not paying, they don’t have to have a TV at all. But it doesn’t seem reasonablethat they have no option to watch exclusively the advertising-funded channels, without also paying theBBC’s licence. The current annual fee of £116 must be very onerous for low-income earners.

Would it not be possible to make each BBC TV and radio channel a subscription service, especially as wemove towards digital signals? Then people could pay for what they actually use, and if they don’t use it, theydon’t pay. I am not personally in favour of paying for the BBC out of general taxation, since there seemsto be hardly enough tax to go around for necessary services, let alone something that is largelyentertainment. Unlike the NHS or state education it can hardly be called an essential public service.

April 2004

Memorandum submitted by the Royal National Institute of the Blind

1. Introduction

1.1 Royal National Institute of the Blind (RNIB) is the leading organisation representing the needs andinterests of the two million people in the UK with a sight problem. The organisation provides over 60services. It works directly and indirectly with blind and partially sighted people, representativeorganisations, visual impairment professionals, national and local government, the broadcasting andentertainment sector, and a range of public and private organisations.

1.2 Since its Needs Survey* in 1991 showed that 94% of blind and partially sighted people watchtelevision RNIB has taken an active role in highlighting access issues. It has worked to try to ensure accessto programmes, services and equipment, both by direct work with broadcasters and manufacturers and byinfluencing legislation. RNIB’s role has become particularly important since the introduction of digitaltelevision, which provides considerable opportunities with the availability of more channels and services,and better picture and sound quality. However, for the majority of blind and partially sighted people theseadvantages are oVset by the problems in accessing services and equipment.

1.3 RNIB has recognised the access issues related to digital television and through previous consultationsand direct working with service providers (including the BBC) and manufacturers has ensured that some ofthese issues have been, and continue to be, addressed. However, it is essential to have relevant legislativeand regulatory frameworks to ensure that all issues are addressed, particularly to ensure that access issuesare automatically included in any future technology developments. The BBC Charter is, therefore, a keypart of this future framework.



1.4 RNIB was pleased that its campaigning on the 2003 Communications Act resulted in Ofcom havingthe responsibility for ensuring that many access measures would be covered by codes of practice or anappropriate regulatory framework. It is essential for the broadcasting industry to recognise and address theproblems caused by digital technology.Many of the issues covered by the Communications Act are relevantto the BBC through its Royal Charter.

1.5 RNIB has worked with many BBC departments to raise awareness of the needs and interests of blindand partially sighted people, and to try to develop good practice guidelines. RNIB, therefore, welcomes theopportunity to have input into the Committee’s inquiry in order to contribute to the debate about the futureof the BBC, and has responded where issues specifically impact on the lives of people with a sight problem.

2. What Scope and Remit Should the BBC Have in the Digital Future?

2.1 Public Service Broadcasting: As the UK’s major public service broadcasting organisation, and onethat is publicly funded, the BBC has a responsibility to adopt and implement good practice. Public ServiceBroadcasting plays an important role in the provision of television programmes in theUK by ensuring thereis a variety of high quality programming across a range of channels. Public service broadcasters have asignificant role to play in developing access services for sensory impaired viewers on all television platforms.They should take the lead, and have an on-going role, in providing the high quality audio describedprogrammes that blind and partially sighted people expect. RNIB recognises that the BBC is now operatingin an increasingly fragmented market and that it needs to ensure that it can remain competitive withoutlosing its ability to provide a unique contribution to the life of the UK and the wider world. However,development within the new broadcasting environment must not mean a lowering of standards.

2.2 Audio Description

2.2.1 RNIB recognises that the BBC has been in the forefront of developing access services for blind andpartially sighted people, particularly since the launch of digital television. The work it has done on technicalsolutions for the delivery of terrestrial audio description has been invaluable. In addition the BBC startedproviding audio description at the same time as other digital terrestrial broadcasters, although it was notcovered by the relevant legislation. Although the BBC has given the commitment to match such services itis essential for access provision, including targets, to be included in the new Charter.

2.2.2 However, RNIB does want to ensure that in the future the BBC does meet the spirit of its Charter,and the aims of public service broadcasting. This is not currently the case with the audio description digitalsatellite. Unfortunately it took from 2001 until December 2003 for one channel (Five) to transmit its audiodescription via satellite as well as terrestrial. As at April 2004 the other broadcasters have not made thisprovision. It is bad enough that these are all public service broadcasters (BBC, ITV and Channel 4), butworse that they include the only publicly funded broadcaster. The BBC has deliberately chosen to withholda service that would considerably enhance the viewing experience for satellite viewers with a sight problem.The lack of this audio description has been made worse for blind and partially sighted satellite viewers bythe fact that from mid-2001 until late-2003 this was the only way of receiving audio description. The firstterrestrial receiver with audio description capability only became available in December 2003, despite theterrestrial broadcasters transmitting a description service since mid-2000. (As at April 2004 there is no audiodescription on digital cable television.)

2.2.3 It is important to understand how audio description makes a programme more informative and/orentertaining. It enables blind and partially sighted people to enjoy amuch wider range of material, includingsome that is diYcult to follow without it (eg complex series such as Waking the Dead and Silent Witness).It enables independent viewing and, thereby, takes away the dependence of relying on someone else to fillin the key gaps (or missing the end of a story because there is no-one to ask). Blind and partially sightedpeople will not get the most enjoyment from and access to television programmes until Government andindustry recognise that adequate provision is essential. More audio description of a wider range ofprogrammes would be an incentive for people to move from analogue to digital television.

2.2.4 Although RNIB concentrates on the needs of blind and partially sighted people in this response itis important to understand how audio description can benefit much larger numbers of people.

— The cognitive benefits to older people were covered in the European AUDETEL Research fromthe early 1990s. Comparison tests were done that showed that people remembered more aboutstorylines and characters after watching programmes that were described.**

— It is felt that description helps people with learning diYculties and people for whom English is nottheir first language.

— In addition audio description is beneficial to sighted people whilst their attention is not fully onthe television (eg when ironing, cooking, or when watching television in a car—a new developmentcurrently being promoted). Audio description can, therefore, enhance the viewing experience formost people, at diVerent times under diVerent circumstances.

2.2.5 As the only public funded, and the major UK public service broadcaster, the BBC should:



— provide more audio description than other broadcasters—aim for 50%, at least, irrespective of thetargets outlined in the Communications Act 2003, which are totally inadequate;

— provide audio description on all digital platforms;

— ensure the widest range of programming, on all its channels, is described;

— increase audio description output on analogue television in order to raise awareness amongst thegeneral public as well as blind and partially sighted people. (The current transmission of adescribed programme on analogue is a good step but most blind and partially sighted people willnot be aware of a broadcast as part of the Sign Zone, in the early hours of the morning);

— ensure that when described programmes are released on DVD the audio description is included.

2.3 Older people: The BBCmust be in a position to recognise and reflect social and demographic change,particularly as current forecasting indicates that older people will be the majority by the year 2025. It isworth noting that the majority of blind and partially sighted people are over the age of 65. Sight loss (alongwith hearing loss and certain other disabilities) is related to ageing so inevitably the number of older blindand partially sighted people will increase. It is, therefore, essential to ensure that current planning for audiodescription, and other access measures, provides a solid basis for the future development of services.

2.4 Educational programmes: The BBC has provided an invaluable range of educational programmesthroughout its history, for schools, through the Open University, and for general viewing. The BBC of thefuture should continue to provide this essential access to and opportunity for greater social inclusionthrough its education and learning services, as well as its mainstream programming. It has to ensure thatsome of its services are reaching everyone at some time, and that it plays a role in the wider Governmentaspiration of lifelong learning for all.

2.5 Films:As a result of its history of encouraging and developing drama and films the future investmentin British films is another key role for the BBC. It should be able to provide the infrastructure to:

— ensure training and encouragement for young, or new, writers and directors;

— encourage the creative talents of people with disabilities;

— contribute to the mixed cultural life of the UK; and

— provide opportunities for greater social inclusion.

2.6 Radio

2.6.1 As well as access to digital television it is important that Digital Audio Broadcasting is notoverlooked as radio is an essential medium for blind and partially sighted people. DAB oVers the benefit ofa wider range of channels but listeners still have to cope with displays of text. This will increase when digitaltext services are oVered and these will be inaccessible to people with a sight problem unless leadingbroadcasters and manufacturers ensure that they can be accessed in alternative ways. The BBC has beenin the forefront of DAB development and should use its influence to ensure that these services are actuallyaccessible.

2.6.2 The BBC is in a unique position of providing a wide range of radio channels, enabling it to planstrategically to ensure that all tastes and interests are covered. Both through network and local radio theBBC must be able to provide the type of specialist programming that is not available from otherbroadcasters (eg Radio 4’s In Touch).

2.6.3 In the past local radio stations have been in the forefront of developing programming for peoplewith a visual impairment. However, in recent years this situation has changed with fewer opportunities forspecialist programming. In addition the areas covered by local radio stations are getting larger, therebydestroying much of the benefit they brought in their early days. Real local news is essential for those peoplewho cannot access their local newspaper. With the possibility of more community radio in the future theBBC has role to play in ensuring that its local provision really does reach out to and involve the community,in order to meet the needs of the whole audience.

2.7 Digital Technology

2.7.1 The BBC has always been in the forefront of broadcasting technology developments, and has beenable to use its research and development resources to ensure that good quality standards are developed andadopted by broadcasters, both in the UK and overseas. The BBC should be able to continue this role,ensuring priority for the access needs of people with disabilities.

2.7.2 Digital broadcasting oVers many opportunities for viewers and listeners but is more complex, andtherefore more daunting, for many people. It is even more daunting for people who cannot see on-screenmenu information and remote controls/keyboards and read instruction manuals. The BBC should be ableto use its unique position in the UK broadcasting world to ensure universal design principles are adoptedso that both broadcasters and the public can benefit from the changes that are happening now and that willcontinue for many years.



2.7.3 Many blind and partially sighted people are apprehensive of the move to digital television, for anumber of reasons but most importantly complexity of equipment, lack of understanding of the need tochange, and cost. It is, therefore, essential that digital television and radio services and equipment are fullyaccessible to people with a sight problem prior to the switch from analogue to digital. All sectors of thebroadcasting industry, Ofcom, and the Government have a role to play in ensuring that outstanding accessissues are addressed and resolved urgently.

2.8 Information

The broadcasting industry (under the auspices of the Government’s Digital Action Plan) has identifiedthe need for clear information about digital (multi-channel) television. As a lead digital player, particularlyfor Freeview, the BBC has a vital role to play in providing information about digital television and radio.As part of its information provision it is essential for the BBC to ensure that access services are included.

2.9 Interactive

2.9.1 As one of the benefits of digital television is the provision of interactive (enhanced) services it isessential to ensure that these services are accessible to blind and partially sighted people. Any additionalprogramming that is accessed via an enhanced option should be assessed for audio description in the sameway as the main programme. In addition description must be considered for the additional services that canbe accessed via an interactive operator, such as NHS Direct.

2.9.2 It must be noted that at present the access technology that enables blind and partially sighted peopleto work with computers is not transferable to digital television platforms. It is important to recognise thattelevision interactive services are not generally accessible to blind and partially sighted people. To addressall interactive access issues guidelines can be drawn up along the lines of the world wide web accessibilityinitiative. TheGovernment should be encouraging service providers andmanufacturers to work together onthe development of such accessible services and equipment, particularly as its agenda includes the delivery ofpublic services via digital terrestrial television. This will not be achievable until all services and equipmentare accessible and aVordable.

2.10 Websites have become another tool of broadcasters to deliver information. RNIB welcomedworking with the BBC to ensure that its website is accessible to people who use access technology. However,it is essential that the BBC ensures continued commitment to this access, in its desire to extend audiencereach and services in an increasingly competitive marketplace. RNIB recommends that people withdisabilities are consulted prior to the conception of any new online service to ensure best use of the medium,and to avoid fundamental design errors that might be expensive to correct retrospectively.

3. In the Context of Scope and Remit, how Should the BBC be Funded?

Whilst RNIB does not feel that it can contribute to the debate about the funding of the BBC it feels it isimportant to make the following points:

— the licence fee ensures that the BBC is accountable to the public, not to commercial interests. Thisensures that the needs and interests of viewers and listeners are paramount. This should ensurealso that issues such as access services for people with sensory impairments are fundamental to theorganisation.

— it is important to note that if alternative funding methods are introduced in the future that blindand partially sighted people are not disadvantaged. Currently registered blind people have a 50%reduction in their licence fee. This type of measure must be available also in any future fundingscheme, particularly if full access measures are not in place.

4. How Should the BBC be Governed and/or Regulated; Role for Ofcom?

4.1 The BBC can sometimes seem a cumbersome organisation because of its size and complexity.However, the BBC’s ability to provide technical research and development, along with other servicefunctions has enabled it to become established as a leading broadcaster worldwide. Its present structureenables the organisation to oVer integrated planning and service delivery. Whatever structure is put in placeto regulate the BBC in the future the organisation must be able to maintain and build on its successes andreputation, and ensure that the needs of all consumers are paramount.

4.2 In order to ensure that the needs of people with disabilities and older people are fully covered thefollowing measures should be put in place:

— all BBC Advisory Councils to contain representatives with disabilities, or with knowledge andexperience of people with disabilities;



— a BBC Advisory Committee on Elderly and Disabled People in order to reflect changing needs, inthe light of technological developments and demographic forecasts. This committee would havea responsibility to cover the BBC as both programme/service provider and employer and shouldwork closely with Ofcom’s own Committee;

— all Statements of Policy to contain specific targets for people with disabilities and the provision ofaccess services, with clear indications of whether or not they have been met and what resourceshave been allocated.

5. Conclusion

5.1 RNIB recognises that the BBC has introduced a number of initiatives over the years to reflect theneeds of people with disabilities, such as the transmission of specialist television and radio programmes, theappointment of a Disability Correspondent and membership of the Broadcasters and Creative IndustriesDisability Network.

5.2 RNIB recognises also that the broadcasting world that will be covered by the new BBC Charter willbe very diVerent from that of the past and that the BBC needs to adapt to ensure its future. However, RNIBfeels that it is essential for the BBC to remain in the forefront of broadcasting in the UK and as such it hasa real role to play in ensuring that older people and those with disabilities are not disadvantaged in thefuture. A strong, independent BBC is essential for the future of digital broadcasting in the UK.

5.3 RNIBwould welcome the opportunity to discuss the issues further with the Committee to ensure thatthe new BBC Charter provides the right framework to ensure that people with a sight problem are notdisadvantaged in the broadcasting world of the future.

* Blind and Partially Sighted Adults in Britain: the RNIB Survey, Volume One (1991).

** The European AUDETEL Project: Final Report (TIDE 1994).

14th April 2004

Memorandum submitted by The British Internet Publishers Alliance (BIPA)

The British Internet Publishers Alliance (BIPA) is pleased to submit its views to the DCMS SelectCommittee. Our main issue with the BBC is the lack of control over the funding and scope of its onlineservices, and the consequent negative eVect on those who wish to provide alternative, competitive servicesfrom the commercial sector.

The nature, extent and complexity of this problem is perhaps best understood from the evidence BIPAsubmitted to the Graf Inquiry into BBC Online. Graf is due to submit his report to the Secretary of Stateby the end of thismonth. Copies of our two submissions are attached herewith for consideration bymembersof the Select Committee.

In terms of the highly relevant questions posed by the Select committee, BIPA would summarise itsposition as follows:

Given expected growth in digital TV and likely developments in the internet and other new media, what scopeand remit should the BBC have?

In terms of online services, there is urgent need to put in place an agreed remit, and a proper system ofregulation andmonitoring. The activities of the BBC, both in scope and funding, have expanded far beyondthe letter and spirit of the DCMS approvals given in 1997–98, and have seriously damaged the provision ofchoice and plurality in this market. BIPA believes that BBC online services cannot be an open-endedcolonization of all aspects of electronic publishing, but must have agreed boundaries, and be largelyprogramme-related.

In the context of scope and remit, how should the BBC be funded?

BIPA has no a priori view on the method of funding the BBC, except to note that over-generous fundingby the LicenceFee, with no eVective spending disciplines, leads to unproven value formoney and a disregardfor the healthy constraints and eYciencies that operate in the private sector. Worst of all, it gives the BBCan unfair and unassailable advantage in exploiting its brand and assets in any market in which it choosesto operate.



How should the BBC be governed and/or regulated and what role should be played by the OYce ofCommunications?

The Governors operate largely as apologists for the BBC Management rather than as its regulator. It issignificant that the DCMS was obliged to set up the Lambert and Graf inquiries: had the Governors beenproper regulators, these were functions it should itself have undertaken. If the Governors cannot betransformed into eVective regulators, then the BBC should come fully under OFCOM. In any eventOFCOM, as the industry-wide regulator, should have a key role in determining the eVect of BBC activitieson the wider market—both before and after new service provisions have been approved.

In a changing communications environment, does a 10-year Royal Charter and Agreement with the Secretaryof State, together, provide the most appropriate regime for the BBC?

In view of the pace of change, there is a strong argument for allowing a shorter time scale in which to testwhat radical changes (eg a greater direct role for OFCOM) need to be eVected. Too much can happen inten years if the present system remains unreformed.

14 April, 2004

Memorandum submitted by BECTU

1. BECTUnotes the timely nature of the Inquiry and sets out below our views on the particular questionshighlighted by the Committee. Given the focus of our own interests, our response to some of the questionsis longer than for others.

The Scope and Remit of the BBC

2. We believe that the BBC is and should remain as the cornerstone of our public service broadcasting(PSB) system; that it plays a vital and irreplaceable role as the primary source of original programmeproduction in the UK; that because of this the BBC is centrally relevant to the growth in digital TV; andthat there is no justification for a diminution of its current broad scope and remit, including itscommercial services.

The BBC and PSB

3. We, and we believe very many others, value the BBC as the cornerstone of the UK’s public servicebroadcasting (PSB) system. The Corporation has been and remains a centre of excellence and a benchmarkfor other broadcasters on many criteria but especially as a provider of high quality and wide rangingprogrammes both to a mass audience and to a diversity of more particular audiences and interest groupsthroughout the UK.

4. We value the BBC’s role in many specific areas, including its contribution to the democratic processthrough its comprehensive news and current aVairs coverage; its educational impact; its promotion of sport,including coverage of major events; its patronage of the arts and the creative industries; its uniqueinternational role through theWorld Service; its presence throughout all the nations and regions of the UK;and its role at the cutting edge of new digital technology.

5. The strengths we would particularly like to emphasise are:

— The BBC’s universal role throughout every level (local/regional/national/global) and everyprogramme genre.

— The BBC as the primary source of original programme production in the UK audiovisual sector.

— The BBC as the most significant employer and trainer in the UK audiovisual sector.

6. We are particularly aware of the mounting tendency to attack the BBC by commercial broadcasterssuch as BSkyB and those who wish to dismantle the UK’s PSB system as an impediment to a market-basedbroadcasting system. We believe this should be strongly resisted. The completely specious argument thatcommercial broadcasters oVer “choice” while the BBC and PSB regulations restrict it should be turned onits head. It is the BBC, with its unrivalled range of coverage not dictated by the primary need to extractcommercial revenue, that provides a range of choice which commercial broadcasters do notmatch and couldnever match. The BBC, in this context, is absolutely irreplaceable.

The BBC and Original Programme Production

7. The BBC is, through its publicly-funded services, the primary source of original programmeproduction in the UK audiovisual sector—accounting for 40% of all UK TV content spend. Commercialpay TV services spend a disgracefully low proportion of their revenue—only 3%—on original domesticcontent (compared to the BBC’s record of recycling 70% of its TV income into original production). At the



same time, the commercial PSB networks (ITV, C4, C5) are coming under increasing pressure from pay TVcompetition, leading to audience fragmentation and pressure on programme budgets. We therefore believethat the BBC’s role as a programmeproducer will become evenmore significant in the future. In this context,we agree with the analysis byOliver &OhlbaumAssociates—among others—that “public funding enhancesrather than crowds out commercial sector investment in UK content”.

8. We believe the BBC’s services—by acting as our primary source of investment in original production—provide the key element in what TV audiences want, which is access to a wide range of home-grown TVprogrammes. Only by public funding free frommarket pressures can we provide the critical mass of originalproduction necessary to counterbalance the commercial attraction of (relatively) low-price but high qualityimported US programmes. Without the BBC’s role as a major publicly-funded source of domesticprogrammes, we would be in serious danger of following in the wake of a number of other countries whosetelevision schedules are dominated by imported US programming.

9. We see the BBC’s role as a publicly-funded counterweight to the commercial forces described aboveas increasing in significance. The continued growth of BSkyB, the consolidation of ownership (and possiblefuture foreign ownership) of ITV, and the potential entry of powerful new players (such as BT andMicrosoft) in the digital broadcasting sector of the future mean that the BBC’s distinctive role will becomeincreasingly important if we are to preserve a UK broadcasting culture with a commitment to public serviceprogramming and significant original production.

The BBC and Digital Technology

10. The BBC remains at the forefront of the development and spread of digital technology inbroadcasting. The Corporation has pioneered both new digital television channels (BBC3, BBC4, CBBC,CBeebies, BBC News 24) and new digital radio channels (such as BBC 5 Live Sports Extra, 6 Music, BBC7and BBC Asian Network). Furthermore, it has invested significant resources in high quality originalprogramming (eg The Alan Clark Diaries) to be broadcast initially on the digital channels and build thedigital audience.

11. The government’s aim of achieving a 95% digital penetration rate triggering analogue switch oV

between 2006 and 2010 may still be uncertain of achievement. What is unquestionable is the BBC’s role,through Freeview, in powerfully boosting the spread of digital to the point where reportedly more than halfof UK households now have digital television in some form.

12. The BBC/Freeview initiative has succeeded where ITV Digital did not and it is now clear that if theGovernment is to achieve its aim of analogue switch oV, the process will be driven to a significant extent bythe BBC. This is both a justification for the BBC’s past digital spending and an argument for significantfuture resources for BBC digital development.

13. A further aspect of the argument is the BBC’s potentially unifying role in providing, throughFreeview, a universal basic digital service.Digital broadcasting can be provided through a range of receptiondevices at a variety of levels.Without a universal basic service there is a real danger of a serious digital dividewithin the broadcasting audience—with a fragmentation never before experienced. The BBC’s initiative inthis area is therefore crucial in retaining audience-universality both in the lead up to switchover and beyond.

The BBC’s Commercial Services

14. One of the most controversial aspects of the BBC’s current scope is its involvement in commercialactivities. Our view on whether the BBC should continue to run commercial services alongside its licence-fee funded services is an emphatic “yes”. We believe that “One BBC”, including the full range of theCorporation’s publicly-funded and commercial activities, provides the economies of scale, the centres ofexcellence and the necessary critical mass to support the BBC’s basic and vital role as the UK’s premierpublic service broadcaster, whose services to the UK audience simply cannot be replicated by any otherbroadcaster. The BBC’s commercial services provide significant funding (eg £123 million from BBCWorldwide and nearly £30 million from BBC Ventures in 2002–03) and necessary expertise (eg in digitaltechnology and IT) which underpin the Corporation’s ability to provide its full range of PSB services.

15. We believe that blatantly self-interested lobbying by commercial interests against the BBC’s right toengage in any commercial activity should be strongly resisted. The Corporation’s commercial activity issupplementary to and directly supportive of PSB services from which everyone benefits. Hiving oV thisactivity to the private sector would result, in our view, in reduced original production and reduced PSBservices for the TV audience as a whole, with PSB investment being diverted to private profit.

16. We therefore oppose any moves to hive oV all or part of BBC commercial activities as, for example,at BBC Ventures (including BBC Broadcast, with its technical and playout centres/Resources/Technology/Vecta), at Worldwide, at BBCi (responsible for Europe’s most widely visited website), or in Research andDevelopment.

17. We view all of these activities not as optional extras but as essential components underlying the BBC’sability to fulfil its PSB role. Privatisation of BBC commercial activities was considered and rightly rejectedin the wake of the Davies Report on BBC Funding. We believe the same arguments continue to hold good.



BBC Funding

18. We remain strongly committed to the licence fee as the primary source of BBC funding—with thefurther belief that future licence fee settlements should be set at a suYciently high level and that the BBCshould have full and exclusive use of licence fee income rather than diverting any licence funding to otherbroadcasters.

19. As the Secretary of State rightly pointed out in her speech to the Oxford Media Convention inJanuary 2003, “Two reviews of the BBC (Peacock in 1986 and Davies in 1999) set out to find alternativeways of funding but didn’t find one”. On the contrary, we believe the licence fee is a brilliantly eVectivemechanism which provides the full range and quality of BBC services to the public at a current (2002–03)cost of £116 ie only 31 pence per day—an absolute bargain which commercial broadcasters are not remotelycapable of matching under any conceivable alternative funding system. Quite simply the licence fee worksbetter than anything else on oVer.

20. A range of alternative funding mechanisms have been suggested from time to time:

— Direct Funding from Taxation would remove any vestige of BBC independence from theGovernment of the day, with negative implications for editorial independence that would go tothe heart of the BBC’s current role and image.

— Advertising on the BBC would have disastrous consequences for the broadcasting sector as awhole, since all the evidence indicates that total revenue would not grow in any way proportionallyto broadcasting hours covered—with consequently reduced resources across the board. Nor,incidentally, does advertising ever provide “free” television to viewers, since the cost of TVcommercials adds an estimated 11% to 13% to average household bills.

— Subscription is wholly inappropriate for what should be a universal service. Nor does digitaltechnology somehow remove any justification for a licence fee by allowing viewers to subscribe tothe whatever programmes they wish to see—even with the growth of Freeview, the overwhelmingmajority of viewers simply have no access to pay-per-view and nor should they be forced tocontemplate this solution.

— Sponsorship simply would not provide more than a fraction of the necessary revenue—let alonethe separate problem of sponsors’ restrictions on editorial independence.

21. We note the recent upsurge in interest in “top slicing” the licence fee ie reallocating perhaps 20% toa possible “Arts Council of the Air” to which commercial broadcasters could bid for revenue for PSBprogramming. Rather like rail privatisation, we believe this proposal would have the eVect of seriouslyweakening a viable public service, redirecting scarce public resources to private profit, introducing a layerof chaotic competition into PSB and, as a final consequence, producing a significantly inferior broadcastingservice for viewers.

22. Stable and separate funding mechanisms for the BBC and for commercial PSB companies has beena key feature of our successful broadcasting system since its inception. Top-slicing seems at best a form ofcounterproductive tinkering and at worst a blatantly self-interested bid by the BBC’s competitors to graba share of BBC resources. Companies such as ITV plc (whose track record includes the spectacular failureof ITVDigital), andBSkyB (whose track record onPSBprogrammes and original production is truly pitiful)would be better advised to use their existing resources more eVectively rather than to seek a cross-subsidyat the expense of the BBC. Furthermore, the notion of introducing a new bureaucracy (“The Arts Councilof the Air”), having just supposedly created a rationalised approach to regulation through Ofcom, seemsequally perverse and unattractive.

23. Top-slicing would have a particularly negative impact, in our view, on original programmeproduction. As indicated above, we agree with the analysis of Oliver & OhlbaumAssociates, among others,that “Proposals to reduce public funding to help commercial broadcasting would only reduce the incentiveto invest in original content. Every pound taken away from theBBC is likely to reduce newTV content spendby around 60 pence”. In sum, “the reallocation of money from the BBC to commercial services removes themain reason the commercial services choose to spend themoney in the first place” ie byweakening a rigorousBBC presence, the commercial sector’s content spending is likely to reduce overall.

24. In respect of the licence fee itself, we believe the BBC’s benchmark PSB role, together with its positionas the key driver for achieving digital switchover, justifies future licence fee settlements at RPI and above.While recognising the social case for assistance to low-income groups, we believe this is more appropriatelyprovided through the benefit system than through extending concessionary licence fees, which can only havethe counterproductive eVect of significantly reducing BBC resources and services.



Governance

25. We have always favoured a system under which the BBC and its Governors are independent of butaccountable to Government and Parliament. In the wake of the HuttonReport we believe that greater focusis now necessary on measures to guarantee such independence.

26. We also recognise for some time now the Governors have taken a more direct interest in BBCoperational issues than was historically the case. There is a perception in some quarters that in doing so, theGovernors have become too close to the senior management of the BBC.

27. In our view, the time is now right for a public debate on whether, and if so how, there should be aredefinition of the role of the BBC Governors—both in relation to Government and to BBCManagement.Our own guiding principles in any such debate will be the need to guarantee independence fromGovernment; to ensure accountability (but with clarity as to exactly what this means); to allow theGovernors a suitable regulatory rather than managerial role; and to build a suitable degree of separationfrom BBC management.

28. We recognise that the Communications Act has also given Ofcom a more significant role in relationto the Corporation than was the case with previous regulators. We believe these new arrangements shouldnow be given time towork and that further significant change of this kind (eg bringing the BBCwholly underOfcom) should be resisted.

29. We believe that the balance and composition of the Governors continues to be a matter of legitimateconcern and would favour a system inwhich theGovernors weremore broadly representative of the countryas a whole.

The Length of Settlements

30. We recognise that a 10-year settlement appears lengthy in the context of a fast changing broadcastingenvironment. We note, however, that analogue switch oV may not occur, on the Government’s owntimetable, until 2010. We believe that it would be wholly unhelpful for such a major transition to beaccompanied by further root and branch uncertainty about the role of the UK’s major broadcaster.

31. On the contrary, we believe that a further 10-year Charter period will suitably span the transition toa wholly digital era. For the reasons set out above, we believe the BBC will continue to have a major roleto play in that era. We do not, therefore, favour an amendment at this time to the current 10 year Charterrenewal model.

March 2004

Memorandum submitted by the Commercial Radio Companies Association

CRCA

The Commercial Radio Companies Association (CRCA) is the trade body for UK commercial radio. Itrepresents Commercial Radio to Government, Ofcom, copyright societies and other organisationsconcerned with radio. It manages the Radio Advertising Clearance Centre which clears national and specialcategory advertisements prior to broadcast. CRCA also jointly owns Radio Joint Audience Research Ltd(RAJAR) with the BBC and was instrumental in the formation of the Digital Radio Development Bureau,a company owned by UK digital radio multiplex owners.

CRCA members include national commercial radio stations, as well as most commercial local andregional stations. They account for 45% of all the radio listening in the UK and around three quarters oflocal listening. CRCApromotes the importance of Commercial Radio and plays an active role in promotingconditions that will enable it to thrive into the future.

Executive Summary

CRCA believes that BBC Radio’s purpose, funding and regulation are the principal factors that shouldbe taken into account when considering whether and how the BBC’s Charter should be renewed.

Purpose

— We believe that BBC Radio’s diVerent funding ought to mean that it has a diVerent purpose fromthat of commercially funded radio broadcasters.We accept that competition between the BBC andthe commercial sector has value for both sides and thus listeners in the middle. But we think thereis a significant diVerence between competition and mere imitation or duplication. Licences for



BBC Radio services should include format descriptions that require BBC popular music stationsto complement rather than imitate commercial popularmusic radio services both during peak-time(0600-1900) and outside it.

Regulation

— Whatever arrangements are arrived at for the future regulation and funding of the BBC, theyshould be undertaken by an independent regulator able to respond to changing communicationsmarket conditions. If this is not done, the new arrangements should be for only five years or witha break for re-examination at five years.

— A BBC Board should be responsible to the regulatory body for the running of the BBC and themeeting of the relevant body’s licence conditions and codes.

Funding

— BBC Radio should continue to be publicly funded but the decision and its justifications on howmuchmoney should be assigned to BBCRadio should be entirely transparent and should take intoaccount factors outside the BBC including the success of, and provisions being made by,commercial radio.

— We do not think BBC Radio should have access to commercial funds of any kind, including thoseused to pay for BBCmarketing activities or events whether or not broadcasts are made from them(eg the sponsorship by Renault of the Radio 2 Proms in the Park). In addition, the BBC shouldnot broadcast the names of those sponsoring oV-air events or things independent of the BBC (forexample, the “RBS Six Nations Championship” should be merely “The Six NationsChampionship” when mentioned or covered on BBC Radio).

CRCA’s Answers to the Committee’s Questions

In answering the Committee’s questions we have confined our remarks to radio.

Question 1

What scope and remit should BBC Radio have?

1.1 The shape, size, nature, funding and regulation of BBC Radio are important to UK CommercialRadio. Commercial Radio people admire and respect much of BBC Radio’s output. Commercial and BBCRadio frequently co-operate in the interests of the entire radio industry via the Digital Radio DevelopmentBureau (DRDB), the Radio Joint Audience Research Company (RAJAR) and the Radio Academy.

1.2 Commercial Radio seeks greater predictability and precision of scope in BBC Radio activities; aproper balance between ratings and the kind of radio programming that is worthy of public funding; andgreater accountability and eVectiveness from BBC Radio’s regulatory framework, whatever that mayeventually be.

1.3 We think it is reasonable to expect BBC Radio to be regulated no more lightly than CommercialRadio in both content and competition terms. In addition we expect BBC Radio’s funding to respect theprinciples of the EU state aid rules.

BBC Radio’s size and resources

1.4 BBC Radio is huge. It dominates national radio in a way that its television services do not dominateterrestrial television. BBC 1 and BBC 2 face national commercial equivalents in the form of ITV, Channel5 and Channel 4. Successful though the three analogue, commercial national radio stations are, only one ison FM. Not only are they fewer they are also much newer than the BBC’s core national radio services.National services inevitably achieve the lion’s share of national press attention and hence Westminster andWhitehall interest.

1.5 Here are the key facts about BBC Radio’s scale.

— It achieves 52% of all UK radio listening;

— owns 70% of available FM broadcast spectrum;

— regulates itself;

— has 5 of the available 8 national analogue radio services;

— has 4 out of the 5 available national FM radio services;

— owns 6 analogue services and five digital-only services audible in almost every part of the UK;



— receives around £348,000,000 from the television licence fee for its 54 national, regional and localanalogue and digital radio services;

— employs an average of 200 people for each one of its services;

— enjoys the cross promotional support of the two BBC national television channels;

— owns all the services on its own national digital radio multiplex;

— and provides all its radio services via all digital platforms including Freeview, the nationalterrestrial television multiplex which is controlled by the BBC.

1.6 None of these advantages is available or applies either to a commercial radio company or toCommercial Radio taken as a whole. In addition, BBC Radio is increasingly a vehicle for nationalcommercial sponsors to publicise their brands and involvement in sporting and other activities.

1.7 Commercial Radio does not seek a weak BBC Radio but submits that some radical reorganisation isnow required. The notion expressed over recent years in some quarters of “fair” or “necessary” marketdistortion in order to ensure a strong BBC has, we believe, gone too far. It is beginning to act against themedia interests of citizens and consumers by undermining the competitiveness and creativity of commercialbroadcasters. Weakening that part of UK radio responsible for wealth creation is not helpful to the UK atlarge and does not enhance listener choice.

The Balance Between BBC Radio and Commercial Radio

1.8 Commercially funded UK broadcast media are tightly regulated. The aims of the regulation areadmirable: plurality of ownership and diversity of output. The end result has generally been regarded asbetter for citizens than the less regulated commercial broadcasting industries found elsewhere in the world.

1.9 No other country has a publicly funded radio broadcaster to match BBC Radio in terms of itsfreedom of manoeuvre, size, cultural influence, resource, creativity or funding. These benefits are oftendescribed as key to a national asset but their protection, maintenance and development have a price.

1.10 Much is made of the value of competition between the publicly and commercially fundedUKmediasectors. There is no doubt that much of BBC Radio’s current provision has been derived from CommercialRadio ideas and Commercial Radio has benefited from the need to maintain creativity and investment inorder to compete with the BBC (although it is worth noting that, following 13 years of brisk growth innumbers, Commercial Radio stations also compete fiercely with each other). However, the value of settingpublicly funded radio services against commercially funded ones becomes eroded if peak-time output acrossthe services becomes too similar or if one side begins to dominate too much through inequality of fundingor regulation or if its remit becomes blurred. Balance is lost if there is too much financial support andregulatory freedom on one side and too little opportunity and/or too much regulation on the other.

Commercial Radio’s Value

1.11 Commercial Radio is a valuable national asset and a sounding board for opinion. It oVersalternative voices to the BBC’s and reflects life in the UK both at national and local level. It is especiallyvalued by UK citizens between 18 and 45. The main points to bear in mind about Commercial Radio areas follows.

— Given the concentration bymany of its services on younger listeners, it achieves a remarkable 45%share of overall UK radio listening and, less surprisingly, 62% of all listening by under 35s.Commercial Radio’s share of children’s listening is 76%. Local commercial radio has 77% shareof all local radio listening (which itself comprises almost 50% of all UK radio listening).

— There are over 260 local analogue radio services which generate local employment for around8,000 people.

— Over the last completed financial year alone, it has yielded approximately £30,000,000 incorporation tax to the exchequer.

— It has been the fastest growing medium over the last decade and despite falling revenues over thelast diYcult three years, has still managed to increase its share of display advertising expenditure.

— This is because its advertising works as the Radio Advertising Bureau’s website demonstrates(www.rab.co.uk).

— It is a £600 million per annum business whose income has enabled it to invest in new digital andanalogue services.

— It has invested over £40,000,000 in digital radio infrastructure and content.

— It pioneered charity broadcasts and auctions and continues to support local charities across theUK with fund raising and coverage every year.



— Commercial Radio continues to be innovative. It pioneered sports and general phone-ins,broadcasting to ethnic minorities, genre specific radio stations, and the mix of light music withcurrent aVairs and information which is now almost universal. All these initiatives have beenimitated one way or another (and well) by BBC radio: the sincerest form of flattery.

1.12 Commercial radio stations are vibrant, creative, closely attuned to the geographical or interestcommunities they serve. They are fiercely competitive, innovative and, most important of all, sociallyvaluable, encouraging participation or interest in local life. The competitive power of a generously publiclyresourced state broadcaster should not be allowed to undermine this because of regulatory or competitiveadvantage or access to excessive resource.

The Purpose of BBC Radio

1.13 There is no doubting the popularity of BBCRadio services. However, if the need for publicly fundedradio is accepted, it follows that the need for the necessary public expenditure must be justified and itsallocation must be transparently handled to meet the clearly defined need.

1.14 A definition of the purpose of publicly funded radio that should then be met by BBCRadio servicesis sorely needed. We shall argue later that this needs to be arrived at and regulated independently from theBBC. At the moment, BBC Radio remits are often blurred and the behaviour of BBC Radio services issometimes driven, it seems to us, by a desire tomaximise audience share or exclude or price-out competition.This paper does not recommend a reduction in the number of BBC services but the scope and remit of thecurrent ones require closer control than that currently applied and CRCA sees no reason why their numbershould be increased.

Blurred Remits

Commercial behaviour

1.15 CRCA is concerned by the increasingly commercial approach being taken by the BBC. We submitthat the appointment within the BBC of so many from the commercial media, marketing and advertisingsectors and the creation of BBC Worldwide as a company with numerous commercial relationships and agrowing repertoire of businesses, have substantially changed the way in which some elements of BBCRadio behave.

1.16 BBC Radio’s commercial behaviour narrows the commercial opportunities on which CommercialRadio relies. Part of BBC Radio’s dominance in national event involvement and coverage flows from itsability to credit the sponsors of oV-air independent events—the “Barclays Premier League” for example.Thus BBCRadio is oVering not only large licence fee enabled payments for coverage rights that CommercialRadio is unable to match, but also free commercial exposure on powerful national services in acomparatively uncluttered programme environment. BBC coverage has become an important bargainingchip between third parties and sponsors, thereby disadvantaging commercial broadcasters who are unableto oVer similar “solus” promotion to sponsors. This came to a head in radio recently with the proposal thatBBC Radio 1 should broadcast the “Coca Cola Chart” because the list of record sales (which Coca Colasponsors) is independent of the BBC’s chart broadcast. Pressure fromCommercial Radio has persuaded theBBC to row back from this but, we submit, the BBC should never have been in this position in the first place.Exposure of these sponsorships has no economic or other value to licence fee payers and serves only toprovide rights advantages to BBC Radio and publicly subsidised benefit to advertisers.

1.17 The subvention from the television licence fee is (and should be) suYcient for BBC Radio servicesto meet its obligations. There is no need for BBC marketeers, frequently recruited from the commercialsector, to arrange major oV-air sponsorships of broadcast events such as Vodafone’s involvement withRadio 1’s “One Big Sunday” or Renault’s involvement with “Proms in the Park”. Such activities restrict therevenues available to Commercial Radio and colour the nature of the events themselves.

1.18 The growing tendency for BBCRadio to come to exclusive deals with rights owners merits scrutiny.A recent example would be the four year exclusive radio coverage rights for the Scottish Premier Leaguesecured by BBC Radio Scotland. Apart from raising the price that other radio broadcasters must considerpaying in the future, exclusive deals lock out competitors. CRCA does not believe this is a proper purposefor publicly funded broadcasters to pursue.

Pursuit of audience share

1.19 In addition to developing commercial relationships with companies which wish to benefit fromprofile on BBC Radio services, we think BBC Radio is behaving increasingly like its Commercial Radiocompetitors in its broadcast content. In particular, we think there is a need to regulate independently theoutput of the publicly-funded popular music radio stations, BBC Radios 1 and 2.



1.20 BBC Radio has engaged in a relentless drive to maximise its audience share, at the expense ofcommercial broadcasters. In the BBC’s last annual report, the section devoted to radio opens with astatement about its market share. It has measured its success, and therefore its value, in terms of audienceshare achieved. We believe this is misguided as it misrepresents BBC Radio’s true value (the provision ofchoice and excellence irrespective of audience share). The value of BBC Radio must be determined in morequalitative terms. These are about its core objectives as a publicly funded broadcaster—its contribution tothe country’s social and cultural development, its educational role, and its influence on national debate anddiscussion. Its success should be determined by how well it achieves these objectives rather than by howmuch audience share it has won from commercial broadcasters, particularly if that share has been won byreplicating commercial services.Much of this cannot be quantified ormeasured, and it should be for externalregulators to determine whether or not the BBC is achieving these goals. However, some public serviceobjectives are both quantifiable and measurable. It is possible, for example, to determine howmuch of BBCRadio’s specialised music output is played during peak daytime listening hours, or how much of Radio 1’sdaytimemusic output is of British origin. Only by determining what the BBC’s true public service objectivesare, and implementing a method of recording their success against those objectives, can wemove away fromthe inappropriate situation of measuring the BBC’s achievement by ratings alone.

1.21 BBCRadios 1 and 2 provide both marketing and talent development devices for the music industry.We recognise that the UK record industry prizes its relationship with the only available nationwide FMpopular music services and is pleased that those services are publicly funded. But just like CommercialRadio, BBC Radios 1 and 2 are principal broadcasters of current, recent and emerging hit records and therecorded music catalogue of all major popular music artists. During the 1996 Charter review, BBC Radio1 developed and claimed a “public service” status in the interest of survival. It promised more documentary,more new, cutting edge music and more live music. Despite this, however, it continues to behave in the wayCommercial Radio does by seeking ratings by day and reputation by night and at less popular parts of theweekend. Commercial Radio has to do this in order to gain the advertising revenue it needs to survive. TheBBC does not and should make available more of the diVerent fare made possible by diVerent fundingduring peak hours (0600 to 1900) when more listeners are available to listen.

1.22 The UK’s most popular radio station is now BBCRadio 2. It is well managed and programmed andis home to the cream of the UK’s radio personality presenters. In the late 90s, in a BBC document obtainedby CRCA and sent by CRCA to DCMS, Radio 2 examined how it might move itself younger to regain theaudience lost to Commercial Radio by BBC Radio 1 following the 1996 Charter review process. In theensuing five years, Radio 2 has pursued this strategy, engaged the services of front-line entertainers popularwith adults aged 25 plus and ensured a core of current and emerging pop hits and the recordings of majorpop music artists throughout peak-time hours. This nationally available, warm, brightly presented,commercial mix of music without interruption by advertisements has proved hugely successful. Its audienceshare has risen to 16%, double that of Radio 1’s. Almost single-handedly it has trimmed a vital 3% awayfrom commercial radio’s share of all UK listening. In doing so, it has most adversely aVected the fortunesof medium and small scale local commercial radio stations which have traditionally adopted a similar classicand current hit/major artist music formula as the glue which cements their local news, information andaudience interaction together.

1.23 At present, the BBC’s flexibility and control over its output is unfettered. It produces “Statementsof Programme Policy” which, after initial approval by the Secretary of State, are then self-regulated andmay be unilaterally amended at will. Thus, at present, Commercial Radio’s principal competitor has theability to change its formats to enhance its position in the market yet Commercial Radio has no equivalentright with its own stations.Not only canCommercial Radio not predict howBBCRadio services will changein the future, but it is also greatly restricted in its ability to respond when they do so. CRCA believes thatBBC Radio should be subject to the same constraints as Commercial Radio, with externally regulatedFormats ensuring that the BBC honours its commitments, thus enabling non-BBC radio services to operatein an environment of greater commercial certainty.

Question 2

How should BBC Radio be funded?

2.1 BBC Radio should continue to be publicly funded. Public funding should remove commercialconsiderations from programmemaking and provision. This lies at the heart of the diVerences between BBCand Commercial Radio and extends audience choice. It is the source of BBC Radio’s freedom (and, wewould argue, duty) to provide output that advertisers would be unlikely to fund. The licence fee seems toCRCA to be the least bad way of publicly funding BBC Radio as the process is at arms length fromGovernment.

2.2 In favouring the retention of the licence fee, however, CRCA suggests that an independent regulatorshould have broad oversight over how the licence fee should be determined and how eYciently it is managedand spent.



2.3 Between 1998 and 2003, total BBC income increased by 42.4% but total programme expenditureincreased at a lower rate: by 28.9%. It is sometimes diYcult to compare figures in BBC Annual Reportsbecause accounting categories appear to diVer from one year to the next, but less seems to have been spenton BBC Radio in 2003 than was spent in 1998, despite the introduction of digital radio. £436 million wasspent on BBC Radio in 1998 while £348 million was spent in 2003. We understand there are significantexclusions (eg newsgathering and copyright fees) from the 2003 figure and we note that, even so, it is higherthan the total of the per-station figures in the DCMS Charter Review. In the same period, the number ofpeople employed by the BBC’s publicly funded services appears to have increased by 3,000. This increasehas been accompanied by a 22.6% increase (£148 million) in salary costs for those working in all BBCpublicly funding broadcasting. Taken together, reductions in programme spend and increases in staV andpayroll suggest to us that the BBC has been investing more on non-programming staV and activity relatedto publicly funded services than on the quality and range of its output.

2.4 We consequently believe that an independent body should be given the power to determine the levelof the BBC licence fee on an annual basis. This body should have the interests of the licence fee payersthemselves as its first priority. Since it cannot eVectively perform this function without a broaderinvolvement in the oversight and accountability of the BBC, it should be the same body that regulates theBBC’s activities and output.

Question 3

How should BBC Radio be governed and/or regulated and what role should be played by the OYce ofCommunications?

3.1 Our answers to questions 1 and 2 indicate that better regulation of BBC Radio is needed. We believethat better regulation should mean independent, external regulation. It is also needed to deal with otheraspects of BBC competitive behaviour.

3.2 Broadcasters are bound to behave in an aggressively competitive manner if left to their own devicesirrespective of whether or not they are fulfilling a genuine public need in so doing. The BBC is so big andself-absorbed that it sometimes cannot see the damage it inflicts on those involved in commercially funded,wealth creating broadcasting.

3.3 Here is an example of what we mean. Oneword Radio is a digital commercial national speech service.It provides plays, stories and comedy in a diVerent style to that in which BBC Radio had previously doneso. The idea was and is that Oneword will do for the accessibility of spoken word what Classic FM has donefor the accessibility and popularity of classical music on radio.

3.4 When it launched in early 2000 its most energetic shareholders were UBC and Chivers Press. At thatpoint they each held approximately one third of the company’s equity, the remaining stock being held bythe Guardian Media Group and Heavy Entertainment, both of whom subsequently sold their interests tothe remaining shareholders, leaving Chivers’ successor and UBC as 50% shareholders.

3.5 In July 2001 BBCWorldwide acquired Chivers Press except for their interest in Oneword which thenpassed to Chivers original owners, the Hong Kong based conglomerate USI Holdings. This initiative notonly removed one of Oneword’s most active directors, Chivers’ MD Simon Gibbs, it also replaced anenthusiastic shareholder with one that was decidedly uncertain about radio investments in general anddigital investments in particular.

3.6 That same year the BBC announced its intention to launch ‘Network Z’ (which became the nationalBBC digital service “BBC Radio 7”) with a proposed schedule that sounded very similar to that beingoperated by Oneword. In the event, the only significant diVerence between BBC 7 and Oneword appears tobe that whilst the bulk of BBC 7’s output is BBC produced, most of Oneword’s is licensed in.

3.7 For two years after the departure of Chivers, UBC sought to encourage USI’s faltering belief in thefuture potential of Oneword. Sadly this ultimately proved impossible and in 2003 USI stated theirunwillingness to continue the same level of support for a loss making operation. At the end of last year theboard reluctantly took the decision to drastically reduce the investment in Oneword whilst a restructuringof the business was investigated. UBC’s intention was to seek to acquire control of Oneword and then torestructure the financing of the service and to investigate possible adjustments to the nature of the service.

3.8 It is clear that the current weakness of Oneword’s financial position as compared with its businessplan is principally due to a slower take up of DAB radio sets than had initially been anticipated. It is equallyclear, however, that the two moves by the BBC have significantly aggravated an already challengingsituation.

3.9 Whilst CRCA totally supports the opportunity for listeners to have increased access to the BBC’soutstanding audio archive, we do not believe that the creation of a publicly funded competitive service toOneword was the only way to achieve this. It may for instance, have been possible to license such material



for broadcast by Oneword and or other commercially funded services. At the time of its creation, Onewordsought to serve a previously unserved market. At its inception there was no reason to believe that the BBCintended to launch its own service of all day spoken word entertainment. What has happened is that thismarket now splits its listening across two similar programme services thus diluting the number of hours thatOneword could reasonably have been expected to attract.

3.10 In simple terms, CRCA is concerned that because of the way it is funded and constituted, the BBCis able to move without financial risk, into areas of direct competition with commercial broadcastingventures. In this case, it was able to combine its commercial muscle through BBC Worldwide with itsunjustifiably protective attitude towards its own archive and launch a publicly funded radio service to thedisadvantage of a commercial radio endeavour.

3.11 In June 2001 UBCmade representations to the DCMS. These were unsuccessful. CRCA feels UBCshould have been able to make its case to an expert, independent, external regulator.

3.12 The reader might be inclined to wonder whether the Oneword case might not have been dealt withby competition authorities. Indeed, the BBC challengedCRCA to take this routewhenwe sought to raise thematter with them at the time. We believe that this response was wrong. The generous 1996 Charter Reviewsettlement allows the BBC’s commercial arm to use its profits to purchase an audio books company. Thuspublic money was not being spent so competition powers were only relevant to whether or not the purchaserepresented abuse of a dominant position in the audio book market not to whether it disadvantaged acommercially funded broadcaster or advantaged a BBC publicly-funded service.

3.13 Having noted why external regulation of the BBC is needed to create a more equitable regulatorybalance between the publicly funded broadcaster and commercial broadcasters, we also believe that boththe Government and the BBC would benefit from external, independent regulation of the BBC.

3.14 Because neither BBC management nor the BBC Governors can provide an external view, theGovernment (specifically the DCMS) has been left holding the ring between the BBC and its commercialcompetitors. The relationship creates close links between Government and the BBC which are distrusted bycommercially funded broadcasters and the media in general.

3.15 Perhaps more significantly the current regulatory arrangements can undermine the BBC. It isdiYcult for the BBC to get on with its job while complaint handling is underway, because it has to deal withthe complaint itself and take the consequences if its handling of the complaint is judged to be inadequate.

Question 4

Do a 10-year Royal Charter and Agreement with the Secretary of State, together, provide the most appropriateregime for BBC Radio?

4.1 Thanks to digitisation, UK broadcasting is undergoing swift structural and content change. Radiois no exception. For example, there are now more than 50 terrestrial digital radio services available inLondon alone, half of them digital-only. Whatever arrangements Government imposes on the BBC willbecome swiftly out of date. Given the speed of change, it would be sensible to provide for further reviewsat set intervals.

4.2 The BBC’sRoyal Charter and the self regulation that goes with it are no longer appropriate. The BBCis often unaware of the damage it sometimes causes to non-BBC broadcasters. Independent, transparentregulation would make it more accountable, lead to fair equality in the way both the commercially andpublicly funded radio sectors are regulated, and enable independent examination of important issues orcomplaints. External controls are now required to ensure that BBC popular music services complementrather than imitate the commercial radio provision.

4.3 Radio and television services and other sources of audiovisual entertainment have increased innumber and fragmented hugely over the past decade. This process seems unlikely to decelerate andwhateverarrangement is arrived at to fund and regulate the BBC from 2006 onwards is unlikely to be relevant to thecommunications environment of 2011 much less 2016. Single television (and to an extent single radio)channels will lose audience share. Viewers and listeners will gather and purchase their entertainment in avariety of ways from a variety of sources and providers that will make a universal licence fee diYcult tojustify. It follows that the new arrangements should either be for a short, say five year period only or shouldbe in the hands of an external regulator with flexibility to change in line with communication developments.

15 April 2004



Memorandum submitted by SMG plc

Executive Summary

The key elements of SMG’s submission on the BBC Charter renewal are as follows:

1. The over-riding objective should be to increase the BBC’s focus on its core public service objectives.In particular, where established, mature commercial markets now provide services, the BBC should beoperating diVerently, takingmore risks and championing innovation. Behaviour which amounts to an abuseof market-dominance, overtly commercial non-core activity and the distortion of commercial marketsthrough the use of public funds should be curbed.

2. A clear public service remit is required for every individual BBC service across television, radio andonline. This levels the playing field between the BBC and commercial operators, whose services are alreadycharacterised within their licences, and allows transparent measurement of actual delivery against statedobjectives.

3. The licence fee should remain the primary source of funding, but with a review at the earlier of the nextCharter review or analogue television switch-oV, with the possible advent of subscription funding added intothe mix thereafter. Consistent with other broadcasters, power and telecomms companies, the increased useof new technology and eYciencies should facilitate the application of a deflation index to future licence feepayments.

4. BBCWorldwide to be sold oV with proceeds used directly to reduce the licence fee, or returned to theTreasury. The BBC should continue to benefit from secondary exploitation of rights and licensing ofprogramming for magazines etc, but in future, external partners should be responsible for commercialisingcontent, not the Corporation directly.

5. The BBC should refrain from inflating the market in rights for sports events and films by paying forexclusive transmission when other universally available broadcasters are prepared to bid; ie it shouldbecome a buyer of last resort. The current position benefits rights holders much more than viewers orlisteners and artificially distorts the market by pushing such events and films beyond commercially viablepricing.

6. Governance and regulation of the BBC should be split. The role of the Governors, primarily asprotectors and ambassadors, should become more akin to non-executive directors within a plc, similar toChannel 4’s Board. In terms of regulation, the BBC should fall in line with all other broadcasters andOfcomshould assume full tier 1, 2 and 3 obligations.

7. Increased levels of accountability should be required, with financial and programming performanceagainst stated objectives, remits and targets published annually. Failures, such as notmeeting the 25%quotaof independent production over the last three years, are unacceptable.

8. The BBC’s guaranteed funding has given it the security to invest in original high quality programmeswith excellent production values. However, SMG believes that the Corporation must do more to nurturethe UK’s creative communities, particularly outside of London. Currently, no decisions about nationalcommissioning are made anywhere other than the capital and this London-centric bias is as unfair as it isirrelevant. Given the range and number of individual television channels, we believe that at least one shouldbe based outside London. For example, BBC Scotland has become a centre for production of children’sprogrammes and there is no reason why CBeebies or CBBC could not be based there.

9. In order to safeguard the future existence of high quality jobs in the creative industries in Scotland,SMG’s network production business, SMG TV Productions, should be reclassified as an independentproducer outside of Scotland. This would help to increase production levels in the important productioncentre of Glasgow and act as a hub for other businesses within television production and the creativeindustries in general. There is no doubt that, with the combination of BBC Scotland, SMGTVProductionsand the Channel 3 licence of Scottish TV, Glasgow is recognised as a major production centre within theUK. The recent merger of Wark Clements and Ideal World has created the biggest independent outside ofLondon. Our classification as an independent producer in a rapidly changing market can only help to buildthe critical mass of production required to sustain these high quality jobs in the long term.

10. Beyond digital switchover, ITV may require to adopt a diVerent business model where transferringtheir content to the digital spectrum, as opposed tomaintaining the current protected position as a PSB, willbe the key driver of future revenues and viability. Consequently, without the continuation of the networkprogrammes supplied by ITV as part of a network, it is unclear as to whether an independent broadcasterin Scotland would be a viable concern. In order to safeguard our position post-switchover, it is vital thatour status as an independent producer be recognised. This change in status would allow us to build a vibrantproduction business based in Scotland and would secure the long-term viability of jobs in Scotland and ourcontinuing contribution to the creative industries. It would also provide the bedrock upon which anindependent Channel 3 broadcaster would exist in a digital market.



Q1. Given expected growth in digital TV and likely developments in the Internet and other new media, whatscope and remit should the BBC have?

— It is essential that public service broadcasting also lies at the heart of services provided by the BBCon new methods of delivery such as interactive and broadband. The BBC has already built anextensive portfolio of services which complement its traditional broadcast services

— As technology changes and new methods of delivery are available to viewers and listeners,universality must remain a pivotal and over-riding aspect of the BBC’s publicly funded services.

— Aswith all the current television and radio services provided by the BBC, SMG recommends that aclear remit is established for each new proposed online strand and that, where appropriate, Ofcomundertake a market impact analysis to predict the commercial and competition eVect of new BBCilaunches.

— Original annual investment in BBCi of £25 million has grown four fold to over £100 million andwhilst this unforeseen, unpredictable resource has resulted in high quality digital services, it hasalso depressed the growth of other commercial online activity.

— There should be a clear and demonstrable link between all BBCi channels and core PSB services.The primary focus should remain on the provision of services on publicly managed broadcastspectrum, with online content a secondary and supporting outlet.

Q2. In the context of scope and remit how should the BBC be funded?

— SMG believes that the licence fee remains the most appropriate method of funding the BBC forthis Charter renewal period. We do believe there is merit in considering part-subscription fundingat the time of the next Charter renewal or analogue switch-oV (whichever is earlier), since a degreeof choice in what to watch (and therefore pay for) will become a more prominent and expectedfeature of multi-channel television.

— In contrast to the free-to-air, advertiser-funded sector’s recent passage through one of the mostdiYcult downturns in advertising revenue, the BBC has enjoyed above-inflationary increases infunding, boosting its annual income from £2 billion to £2.8 billion in just three years and aprojected £3.1 billion by the end of this Charter period.

— This rise in funding has occurred against a backdrop of hardware production costs decreasing anda deflationary cost ratecard being applied bymajor suppliers such as telecom and power operators.

— This disparity needs to be addressed and the most appropriate way of doing so is by a deflationaryindex being applied to future licence fee payments. The £3.1 billion of projected income is almost£1 billion more than was anticipated at the beginning of the 10-year Charter in 1996.

— We believe savings can be made in a way that will not result in either the quality or quantity ofproduction being reduced.

— One example where savings can be made is the acquisition of sports rights. The BBC has justcommitted to paying £2 million per season for four years for exclusive Scottish Premier Leaguefootball coverage on radio. Previously, commercial stations had paid c£800,000 per season fornon-exclusive rights and shared the rights with the BBC.We fail to see how exclusivity for the BBCat such an inflated price is of any benefit whatsoever to listeners, since they will now have no choicein coverage, no plurality of voice, and no diversity of provider. The BBC, in wishing not only tobroadcast but to dominate Scottish football reporting in a manner which has no public interestobjective, has not eYciently disbursed its privileged funds.

— The same is true of the BBC’s purchasing of films such as Harry Potter, which do not requirelicence payers’ funds to bring them to a universal platform.

— As a general rule, we recommend that the BBC be discouraged and even prevented from acquiringexclusive sports or film rights, since this amounts to unnecessary publicly funded expenditure thatbenefits rights holders farmore than viewers/listeners and distortsmarket pricing beyond the reachof commercially-funded operators.

Q3. How should the BBC be governed and/or regulated and what role should be played by Ofcom?

— The current arrangement whereby the BBC regulates itself poses a basic conflict of interest: theBoard of Governors act both as protectors and ambassadors for the Corporation, whilst alsoregulating its output.

— The UK has just completed one of the most comprehensive reviews of broadcasting regulation,leading to the vesting in Ofcom of powers under the 2003 Communications Act. In this context,we believe it is both desirable and necessary to also position Ofcom as the backstop regulator forthe BBC.



— Recent events have highlighted the shortcomings of a self-regulatory regime, where theBBCBoardofGovernors, as a single body corporate, are simply not equipped to discharge the duties they haveto the Corporation, its management, the market and citizen-consumers.

— Under the BBCAgreement, there is a form of regulation through a requirement to publicly consultprior tomaking anymaterial change to the nature of theHome Services, provided always that suchconsultation shall not require the BBC to disclose commercially sensitive matters relating toprogramme services. This is wholly deficient as a means of regulation. The BBC remains free tomake decisions unilaterally and without prior approval of the regulator. There is no transparencyas to the approval process (if any) exercised by the Secretary of State—granting a party a rightsimply to be consulted oVers little control or regulation of outcome.

— It is clear that citizen-consumers who fund the BBC need to be reassured that it is an institutionindependent of the Government. However, it is SMG’s recommendation that the economicdirection of the BBC be subject to regulation to prevent unfair practices and distortion of themarket. SMG proposes a solution where the Governors sit in a position akin to a plc Board ofDirectors, within an environment ultimately regulated by Ofcom, similar to the structure ofChannel 4.

— Historically, the BBC’s independence from Government has underpinned its editorial integrityand we believe it is vital that this aspect of the Corporation’s character be preserved. Our proposalallows the Governors to guide and support the BBC’s senior management, whilst matters ofregulation are reserved to Ofcom, itself established by Act of Parliament as the independentregulator.

— Transparent and accountable governance of the BBC is aided by many of the recommendationssubmitted in this document. In particular:

a clear remit for each service provided;

setting of clear quantitative objectives;

greater accountability in reaching quotas such as 25% independent production;

separation of Governors and Regulator role;

detailed annual reports showing financial and programming achievements againsttargets.

Q4. In a changing communications environment does a 10-year Royal Charter and Agreement with theSecretary of State provide the most appropriate regime for the BBC?

— We do not believe it is necessary to seek to change the BBC’s status as incorporated by RoyalCharter, although this places the BBC at odds with other broadcasters who operate under statute.Whilst Royal Charter is one form of conferring legal status, others are available. Change asadvocated in this document can be introduced throughRoyal Charter as well as through any othermeans. SMG believes that the priority in the short- to medium- term must be to curb the BBC’scommercial and expansionist behaviour first, secure its funding via the licence fee, and bring itunder the regulation of Ofcom. If this was achieved, then the status of the Royal Charter can belooked at in the future as part of the next Charter review.

April 2004

Memorandum submitted by Pete Browning

Given expected growth in digital TV and likely developments in the internet and other media, what scope andremit should the BBC have?

The BBC should continue to have a very broad remit, if not quite as broad as it has at present. The growthin digital TV and in broadband poses the greatest technical challenges that the BBChas faced. In the contextof a competitive broadcasting business sector, these challenges threaten the very foundations of the BBC asit has existed for eighty years. However, it is vitally important that the best features of the BBC survive. TheBBC is too important a part of British life for it to be dismantled.

Public Service Broadcasting (PSB) should be broadly defined. In terms of non-news programming, thereis a danger that PSB is seen as that which cannot profitably be provided by commercial television companies.This would mean that the BBC would provide for minority interests, would lose its unique national status.Public service broadcasting is broadcasting which serves the public, both as a single national collective andin its many discrete groups. PSB can include entertainment programmes. Over the years, the BBC has beenable to innovate because it has not been dependent on the market share needed to attract advertising. Itsrange of channels has allowed it to experiment with programmes on, say, BBC2 before showing successfulnew programmes on BBC1. This freedom must be retained.



Ideally, PSB is not just about who is catered for or what is provided but also how the service is delivered.It should involve quality of delivery. In the past, the BBC has come closer to that ideal than its commercialrivals. This has been one reason why the BBC is highly regarded across the world. PSB means the provisionof high quality and relevant programmes to a wide range of groups within theUK. To fulfil these PSB goals,the BBC needs to retain a wide range of broadcast radio and television channels. It also needs broadbandnetworks to cater for people who prefer to receive their radio and television programmes in moreinnovative ways.

At present, the provision of BBC digital services runs counter to the BBC’s commitment to provide itslicence-funded services to all licence payers. This is intended to be a temporary phase, prior to the switch-oV of analogue transmission around 2010. It is important that the switch over to wholly digital transmissionis accomplished as quickly and as smoothly as possible, in order to restore the traditional universality ofprovision. Surveys suggest that there is a small group who are determined not to switch, come what may.If they resist all inducements to change, then that will be their choice.More important is the need to providea proper digital transmission service for all parts of the UK.

The BBC has probably expanded into too many activities which are only loosely related to the businessof public broadcasting and thus should lose some aspects of its current work. One example of several suchactivities must suYce: BBC Worldwide should not be involved in broadcasting within the UK. Thus itscurrent joint funding of UKTV should cease. BBC Worldwide should be as its title suggests, the activitiesof the BBC outside the UK.


This is the most diYcult question to answer as well as the most important. The days of the licence fee areprobably numbered and for two reasons. Firstly, the conversion to digital broadcasting will provide ameansof charging viewers of BBC channels which is more sophisticated, much more eYcient and fairer than thecurrent licence fee. Secondly, the growth of multi-channel television and the subsequent fall in the size ofthe BBC audience makes it increasingly diYcult to ask viewers to pay a flat-rate licence fee. There is a dangerthat the BBC, in order to maintain market share in order to justify the licence fee provides programmeswhich are populist rather than popular.

So if the licence fee is to go, what is to replace it? Not commercial advertising, even on the most popularchannels. A key feature of BBC programmes is that they are free of advertisements—except for their ownprogrammes, which is another matter. This financial freedom allows the creative freedommentioned earlier.And viewers need a contrast of channels and approaches. For many young people, unaware of the historyof the BBC and its contribution to British life, it is the feature of BBC which distinguishes it from ITV andBSkyB. Something significant would be lost if Britain were to have a BBC funded by advertising.

Thus the only alternatives are either subscription or taxation. Though the BBC’s External Services arefunded by the taxpayer, the BBC’s national services should not be. To do so would make it harder than everto distinguish the BBC from the British state, wouldmake the BBC evenmore dependent upon the decisionsof politicians for the amount of funding it receives. I do not support the proposal of the recommendationof the Broadcasting Policy Group’s recent report Beyond the Charter, which argues that radio broadcastingshould be “sourced from tax revenues”.11 Does this mean all BBC Radio, including Radios 1 and 2, whichprobably could be run commercially? I would argue against “privatising” these channels.

Which leaves subscription. The danger with subscription funding is that not enough people will subscribeto the BBC’s services in order to provide funding equivalent to that lost by scrapping the licence fee. TheBroadcasting Policy Group assumes that “20% or more will not subscribe to the BBC”.12

“Or more” could make a big diVerence to estimates and arguments. Let’s assume that the withdrawal rateis 25%.Which means that the BBC’s current licence fee of £121 would have to increase by some £30 to £150per annum. By £3 per week, 42p per day. Which is the price of a tabloid newspaper. And as the licence feeis charged per household, the actual daily charge per person is less than 42p. I would have thought thatacross the BBC’s breadth of programmes, three-quarters of the British people listen to orwatch programmesfor which they would pay 42p a day or £3 per week.

In other words, subscription could work. However—an important point this—people should subscribeto the BBC as an organisation and not to particular services. (To get around the fairness argument againsta flat-rate levy, the BBC would have to be innovative in its charging policy—which, presumably, digitalbroadcasting would allow it to be.) There is a great amount of public goodwill towards the BBC, a goodwillwhich must be used much more eVectively. One benefit of a BBC subscription would be that it would havea new, more direct relationship with its viewers and listeners. A subscription-funded BBC could provide itwith a new lease of life.

11 See Broadcasting Policy Group, Beyond the Charter, 2004, p49.12 See Broadcasting Policy Group, Beyond the Charter, 2004, p49.




Concern has been expressed about the dual role of the Board of Governors of the BBC. How can theBoard be responsible for both running the BBC and regulating its activities? Its role during the eventssurrounding the death of Dr David Kelly, where it was seen to have failed, is quoted as the example whichshows the need for reform. Even before the Kelly AVair, some had called for the Governors’ regulatoryfunction to be transferred to theOYce ofCommunications (Ofcom), then in the process of being established.Their arguments seem to have been strengthened by the DrKelly AVair and the subsequent Hutton Report.The pressure for the separation of powers appears irresistible.

This pressure should be resisted, at least for the foreseeable future, and for three reasons.

Firstly, Ofcom already has several powers to monitor and regulate aspects of the work of the BBC. Theseinclude most programme code standards, eg taste and decency, as well as quotas for independentproductions. Ofcom, a very new organisation, has enough to do without being given additional and verydemanding duties. Admittedly, it is odd to divide the regulation of “accuracy and impartiality” betweenOfcom and the BBC Board of Governors but the decision was made recently, just a year or so ago, bygovernment and parliament. It would make no sense to change it now, especially as it would seen as aresponse to a failure of controls over one particular broadcast at a time of great national controversy.

Secondly, the BBC is likely to revise its method of governance following the publication of the HuttonReport and the appointment of a new Chairman and Director-General. Before the responsibility forregulation is transferred to Ofcom, the BBC should be given the opportunity to make its own eVorts toimprove its governance and management. These eVorts can be reviewed by external agencies, such asparliament and other media, as is already the case.

Thirdly, to bring the BBC wholly under the regulatory control of Ofcom would be to threaten further theuniqueness of the BBC. The BBC and its form of governance have served the country well. One danger ofimposing several major reforms on the BBC all at once is that the BBC might lose its special and essentialqualities. The governance of the BBC should be changed only after full and careful evaluation of all thealternatives. A new regime, involving Ofcom, is being developed. Let it be evaluated after it has been givena proper chance to work, say in five years’ time.

In a changing communications environment, does a 10-year Royal Charter and Agreement with the Secretaryof State together provide the most appropriate regime for the BBC?

The life of Royal Charters establishing the BBC has varied from a just few years to 15. However at thepresent time 10 years is probably the optimum. Anything less and the attention of the BBC managementwould be deflected by yet another charter review from its prime role of providing high quality programmes.Anything longer would be too long, especially given the current speed of technological change.

The duration of the next Royal Charter is also aVected by the ending of analogue broadcasting. If it doesend in 2010,maybe 2012, it would be undesirable to end theBBCCharter at around the same time.However,by 2016, the end of a 10 year Royal Charter, the analogue era would have concluded some years previously.The experience of the end of analogue and the first few years of wholly digital broadcasting could thenusefully inform the next Charter review.

As to the Royal Charter itself, it could be argued that using a largely symbolic device to establish the BBCis redundant. It was significant when first used in the 1920s because it showed that the BBC was not thecreature of the government of the day. By the 21st century that tradition is well established and could bejust as well preserved by use of parliamentary statute. However, the Royal Charter symbolises the BBC’sspecial status and its deep roots in the history of the British people in the 20th century. It should be retained.

14 April 2004

Memorandum submitted by ITN

1. Introduction

1.1 ITN welcomes the Committee’s inquiry on BBC Charter Review and is grateful for the opportunityto respond to what will be an important examination of what the BBC should be doing in future. We havea number of core concerns, in particular relating to the scope and remit of the BBC, the development of newservices and governance and regulation.

1.2 ITN is the BBC’s main competitor in the provision of broadcast news in the UK. We competepredominantly through our television news services for ITV, Channel 4 and Five. For ITV, ITN producesnational and international bulletins for ITV1, the 24-hour ITVNews Channel and the ITV regional London



news service. We produce Channel 4 News—both the News at Noon and 7pm bulletins. We will continueto produce Five News until the end of 2004. ITN also produces national and international news forIndependent Radio News (IRN), providing news for over 260 commercial radio stations.

1.3 ITN has diversified its business over the last few years in order to remain competitive and broadenthe range of our activities into profit-generating commercial enterprises alongside our core news contracts.Each of these activities helps to underpin ITN as a healthy business and a strong competitor to the BBC.

1.4 ITN Archive is now the world’s largest commercial news and history archive and has recentlyexpanded into non-news content, with representation deals to manage the clips archives of Channel 4 andGranada. In addition, ITN manages the British Pathe and Reuters archives, as well as ITN’s own 49 yearsof news material and a range of other, smaller archives. This is the fastest area of ITN growth and we hopeto further develop the business tomake it’s the world’s largest commercial archive. It competes head-onwiththe BBC archive.

1.5 ITN International has seen ITN lead the way in video news on mobile phones, with contracts toproduce news bulletins for Vodafone, 3 and O2. These are important commercial relationships, which helpus ensure that ITN content can continue to be available across a wide range of media platforms in the digitaluniverse. This in turn helps to ensure that plurality is maintained across as wide a range of platforms aspossible. ITN International is also the division that syndicates ITN content around the world, includingrelationships with CNN, NBC and Channel 9 in Australia.

1.6 ITN Factual specialises in factual documentary production for a range of channels, including theBBC, ITV, Channel 4, Five and Discovery.

1.7 Competition with the BBC to provide choice and diversity of “news voice” is at the very heart of whatITN does. It is central to the regulatory obligations around ITV News in particular, with theCommunications Act requiring ITV News to provide competition with other broadcast news services inthe UK.

1.8 We believe this policy objective should be carried forward throughout the life of the next BBCCharter. In order to be able to continue to do this, we need to be sure that the BBCwill not behave unfairly orunduly limit our ability to compete and to develop into new and emerging markets. Our principle concernstherefore fall into the following core recommendations:

— That each BBC service should be subject to a clear, precise and measurable remit.

— That the BBC Charter should require the Corporation to be more transparent and accountable inall its dealings.

— That every proposed new BBC service should be subject to a rigorous approvals process, includinga market impact test conducted by Ofcom.

— That Ofcom should conduct the public consultation for new BBC services.

— That the BBC should be subject to greater external scrutiny, either by Ofcom or a moreindependent and restructured Board of Governors.

— That Ofcom should be responsible for the regulation of all the BBC’s commercial activities.

— That Ofcom should be responsible for the enforcement of the BBC Fair Trading Commitment,alongside its existing competition powers.

— BBC management and Board of Governors should publish discussion concerning proposed newservices to ensure clarity about how decisions are reached about new services and whether or notthey require separate approval.

— That the next Royal Charter should run for a period of five years to take account of analogueswitch over.

1.9 We will discuss these points in more detail below in response to the specific questions identified bythe Committee.

2. Given expected growth in digital TV and likely developments in the internet and other newmedia, what scopeand remit should the BBC have?

2.1 As we have described above, ITN believes it is important that competition between high quality,domestic news providers is maintained in the digital age. The public has come to expect a plurality of newsprovision in the analogue world, and this should be transferred into the digital environment across a rangeof digital and new media platforms, not just on linear television and radio.

2.2 ITN does not oppose per se the BBC launching new services and seeking to deliver services across arange of media platforms, but it is critically important that it is not allowed to do so unfettered. Anyproposed new service must be subject a rigorous approvals process to ensure that it is a legitimate use oflicence fee funds, that the activity would not unduly damage competition and that each service has a clear,precise and measurable remit.



2.3 The launch of BBC Online is the clearest example of how an ill-defined remit can have seriouslydamaging consequences on themarket. The BBC launched BBCOnline in 1997 to coincide with theGeneralElection. Since then it has grown into a vast website carrying information across the full range of programmegenres. It is one of the biggest and most popular websites in the world, costing somewhere between £75million and £100 million in public funds. At the same time the BBC has on occasion sought to broaden therange of new media services running alongside its core website, www.bbc.co.uk.

2.4 This has includedmakingBBC content available on platforms such asmobile phones, personal digitalassistants (PDAs), broadband portals, such as Freeserve and Video Networks, among many others. WhileBBCOnline sought and was granted approval for BBCOnline, the exact scope and remit was never properlydefined. We hope that the Graf Review will seek to ensure that BBC Online is finally given a proper remit,but in its absence the BBC has been able to launch myriad new media services with little clarity about theirapproval for launch under a vague original remit. The terms of the approval failed to take any account ofthe outer limits of what the BBC was allowed to do and this has provided the rest of the market with littlecertainty about what the BBC is allowed to do through BBC Online. For example, nowhere does the remitspecify whether the BBC was permitted to launch ancillary new media activities above and beyond its mainwebsite (bbc.co.uk), such as services on mobile phones and broadband all of which would have requiredinvestment to establish and operate the services.

2.5 In the case of content on mobile phones, ITN has had direct experience of how the lack of a properremit has damaged our business and our ability to compete.

2.6 In late 1999 ITN became the first provider of a text news service to mobile phones in a commercialdeal with Orange. A few months later the BBC launched a similar service with Cellnet—yet provided itscontent for free. Having taken the initiative to move into this market, ITN soon found that its businessmodel was unsustainable with phone companies no longer willing to pay for content if the BBC wouldprovide it at no cost.

2.7 Recently ITN has again taken the initiative to lead the way in providing video news tomobile phones.We currently have contracts in place to provide news to Vodafone, Hutchison’s 3 and O2, providing eachwith tailor-made news bulletins throughout the day in full audio and video. This is an important growtharea for ITN, which helps to underpin the business. Yet if the BBC were to launch a similar service for free,we there is every likelihood that we would be forced out of this market, thereby reducing choice anddestroying a major area of ITN activity. A properly defined remit would at least help us to understand whatwe can and cannot expect to compete with and help us operate with more certainty of business planning.This is only one such example, which serves to demonstrate how important a clear and measurable remit isfor all BBC activities.

2.8 If the BBC is to continue to expand the range of its activities it must do so by paying greater regardto the way it impacts on the rest of the market. The impact of the BBC’s enormous investment in newchannels—and in particular in online services—has been to leave little oxygen for commercial operatorswhomight otherwise develop their own services. There is a serious risk that an unfettered BBC could stifleinnovation and research and development across the media as a whole and in areas where the UK can—and should—be a world leader.

2.9 In addition ITN also believes there needs to be more clarity about when and why certain services areput forward for approval through the DCMS. The approvals process itself has improved in recent years,with more emphasis on the market impact of new services, with BBC Three given a market impact test bythe ITC prior to launch. Once a proposed service is put through the approvals service the system worksrelativelywell. However, we still have some concerns about new services that are launchedwithout approval,and the way in which the BBC decides whether to submit a proposed new service for approval. One suchexample is the BBC Creative Archive, which the BBC intends to create using vast amounts of public money.It has the potential to damage ITN’s own archive business, yet has not been formally approved. We areunclear why this is the case and how such a decision is reached. Therefore we believe that the BBCmanagement and Governors should be more transparent about how they demonstrate that they arelaunching services within the rules and explain why they believe any new service does not require approval.If they are unable to, then it should also be possible for industry to recommend that a service should besubject to the approvals process.

2.10 The BBC is also responsible for the public consultation for new services. The BBC frequently citeswidespread public support for proposed new services. Unsurprising then that these consultation exercisescontain little rigorous questioning about the proposed service. Public consultations should be moreobjective and as such, we believe they should be conducted by Ofcom.

3. In the context of scope and remit, how should the BBC be funded?

3.1 ITN believes that the licence fee remains the most appropriate way of funding core BBC services.However, this is closely linked to the points we have made about the need for a clearly defined remit for theBBC and each of its constituent services. Any BBC service needs to be carefully considered to ensure thatit serves the licence fee payer and does not compete unfairly in the market.



3.2 We therefore hope that the forthcoming reviews of all the BBC’s digital services will examine in detailwhether the licence fee remains the best way to fund these services and whether they have added genuinevalue to licence payers. If any of these services are deemed to be inappropriate then we believe thatsubscription may oVer an alternative funding model.

3.3 We also believe that there is a case to look further at “top slicing” the licence fee, to redirect sums tocertain public services provided by the commercial sector. At present we do not have a fixed view about this,but it is an option that we hope the Charter Review process will examine in detail over the coming months.

4. How should the BBC be governed and/or regulated and what role should be played by the OYce ofCommunications?

4.1 The way in which the BBC is governed has been shown to be flawed on several occasions and webelieve the BBC should be subject to more external scrutiny. This Charter Review provides the idealopportunity to redefine the Board of Governors and transfer some of their responsibilities—if not all theirregulatory functions—toOfcom.We do not believe that the Board of Governors can continue to act as bothjudge and jury over the BBC’s aVairs.

4.2 On several occasions we have found that the Board ofGovernors has not acted as a truly independentbody from BBC management, and their responses to serious issues have not demonstrated what we wouldconsider to be suYcient objectivity.

4.3 One such example relates to a serious issue we raised with the Board of Governors about thedistribution of the commercial BBCWorld in America.We learnt that the BBC’s distribution arrangementsdid not appear to meet the terms of the Fair Trading Commitment which sets out the competitionarrangements for the BBC’s commercial activities. The Commitment states that the BBC’s commercialactivities should not damage competition, should reflect market practice, should cover all costs and shoulddeliver a return to the licence fee arm of the Corporation.

4.4 However, we had evidence that the BBC was not making a charge from a US public service stationfor the channel, which therefore appeared to breach the rules. In response to our query we were informedin a two paragraph letter from Baroness Young, then the Governor responsible for Fair Trading, that therewas no problem with the arrangements and that she could not provide more detail as it was commerciallysensitive. This did not reflect the level of detail that we would have expected from an independent regulator.

4.5 This is only one example, but one which demonstrates that at the very least responsibility forenforcement of the BBC Fair Trading Commitment and regulation of all aspects of the BBC’s commercialactivities should be transferred to Ofcom, to sit alongside its concurrent competition regulatoryresponsibilities. This would also help ensure that there is more consistency in the way in which competitionissues concerning the BBC’s activities are handled.

4.6 The Board of Governors should be established as a properly independent body, separate from BBCmanagement and based in a diVerent location to the BBC executive and staV. We also believe that the BBCGovernors should be drawn in members with relevant professional, legal or regulatory expertise. The Boardof Governors should also be more answerable to OFCOM through regular dialogue and publication ofminutes and decisions taken in greater detail than those published at present. This would help to ensuremoreconsistency across the Governors and OFCOM.

5. In a changing communications environment, does a 10-year Royal Charter and Agreement with theSecretary of State, together, provide the most appropriate regime for the BBC?

5.1 The next Royal Charter will come into force at an awkward time in the development of thebroadcasting sector. If digital switch-over can be achieved as hoped by 2010–12, the Charter will only behalf way through its normal 10-year period when the broadcasting landscape will change fundamentally.Switch over will have profound implications for the way in which the public accesses broadcast services and,potentially, for competition between broadcast organisations. We do not believe that it is possible to devisea Charter that can take into account the state of the market both before and after switch over. At the sametime there is likely to be significant growth in the take up of broadband and other new media services. Yetat this stage it is too early to make an accurate prediction of take up across all platforms. ITN thereforebelieves that the next Charter should run for a period of five years, to be reviewed in 2011.

April 2004

Memorandum submitted by Howard Robinson

I have never written to you before, but have noticed your sense of decency in so many things.

In my opinion television is having such a bad influence, in so many ways, especially now that so manychildren have access in their rooms. Of course they should not, but that is what is going on in the real world.



I have just received a reply from Julia Palfreeman of Ofcom, they have more or less admitted that theyare not on the side of decency and taste. So they are just another toothless bulldog, who will do nothing tocurb the worst excesses, the irresponsibility, of the TV companies, especially the BBC, who I have tosubsidise, with the licence fee. I object to the swearing and the vulgarity only to find that there is little betteron the other side.

I know the government does not wish to interfere, but given the influence on our young, things will onlyget worse and antisocial behaviour will be the norm.

30 March 2004

Memorandum submitted by Carole Tongue and David Ward

Introduction

Over the past decade there has been huge changes in the broadcasting sector with the growth in thenumber of channels available to the viewer and the development of new platforms for delivery. In the face ofthese changes, public service broadcasting has remained a constant feature of the UK broadcasting ecology,despite forecasts for its imminent demise. The BBC is strong, well funded and it provides a range of servicesthat are unmatched in terms of creativity, innovation and volume by any other broadcaster in the world.We believe that the BBC largely works well as the main public service broadcaster in the UK, though thereis always room for improvement and we believe this can be achieved through developing a more eVectivesystem for assessing its performance. The key issue that we have focused upon therefore is accountabilityand how to sustain the BBC as not only a pioneer public broadcaster, but as a modern public institutionthat accounts for both its activities and funding in an independent and transparent manner.

Accountability is crucial to both the maintenance of legitimacy for the BBC and in a regulatory capacityto ensure that the BBC fulfils its obligations in all of its public service activities. The BBC has, and continuesto be a positive and central institution in British cultural and political life and the public should continueto have access to its full range of services. The more platforms that the BBC can provide services on, basedon public service principles, the more that the public will benefit from having access to a diverse range ofquality media based services across platforms. To this end the Government should strive to secure andguarantee the future of the BBC during the Charter review process. It should at the same time put in placea transparent and adequate framework for assessing the activities and performance of the BBC in order thatvalue for money, quality and an assessment of how the BBC has met the requirements of its Charter aresatisfactory.


The above activities aremade possible by the unique funding and remit the BBC enjoys. The funding fromthe public purse is crucial to ensure that the commitments set out in its Charter are satisfactorily met. TheBBC reaches every citizen. It belongs to the people of Britain and it is part of an exclusive group ofinstitutions that are governed by certain principles in their range of activities and are wholly concerned withproviding a public service. It has done this with success and value for money. The BBC has a duty to servea range of needs and tastes and it is essential to the maintenance of a diverse and plural television ecologythat the BBC invests in and reacts to these needs.

The main funding alternatives to the licence fee have been argued for some time and have been raised inboth the report by the Peacock committee in 1986 and more recently by the Davies report into the futurefunding of the BBC. It is widely agreed that until better options are available the licence fee should remainthe main source of income for the BBC. It is only when options become realistically available we shouldseriously consider the alternatives. For the foreseeable future we do not believe there is an alternative to thelicence fee, as any alternative would lead to a seismic shift in the television landscape and a loss in the publicservice values that the Government has stated are principal public policy objectives.

Previous assessments of other funding options have rejected the main alternative to the licence fee (amixed model of licence and advertising revenues), as unsuitable both in terms of the detrimental impact onthe commercially funded broadcasters in the UK and programming. Evidence from experiences in theEuropean Union would support some of the conclusions made by these reports, especially in cases whereadvertising revenues have become a large proportion of revenues for public broadcasters. In these countriesthe public service broadcasters have become engaged in aggressive competition with the commercial sectorto the detriment of themselves and the sector overall.

In this sense the only alternatives for funding the BBC are seen to be from the public purse or subscription.The strongest solution of which, we believe is the licence fee.



Funding the BBC from General Taxation

Although this funding model would allow for more progressive mechanisms to be employed there arecertain disadvantages of linking the funding of the BBC to general taxation policy. Firstly, it raises issuesof political independence, a core principle that underpins the activities of the BBC. Secondly, by bringingthe funding of the BBC more closely into government taxation policy it would be open to the vagaries ofchanging political policies on taxation and government spending.

The Government now recognises that public services in the UK have been fundamentally damaged in thepast by cut backs and the lack of funding under previous governments for these organisations, and hasundertaken a programme to inject adequate resources back into the public sector.We cannot aVord a similarsituation for the BBC and it must retain its independent funding in order for it to fulfil its public serviceobligations. We must draw on the lessons of other public services where short-term spending cuts havebrought about a decline in the quality and range of services that the public has access to. In one sense theBBC has been extremely privileged that it has retained the licence fee, which has meant that it has not hadto suVer the cuts in budget that was witnessed in the NHS and other important British institutions underprevious governments. Such would be a major disadvantage of abolishing the licence fee and replacing itwith a system funded through taxation. As we have seen in the past it is very diYcult to rebuild theseorganisations once governments have embarked on radical spending cuts aVecting public services.

Funding the BBC from Subscription

Subscription, amongst other funding solutions has been recommended as a replacement for the licencefee by a recent report by the Broadcasting Policy Group. Although there may well be arguments to supporta greater degree of consumer freedom in the choice of television services we believe there are fundamentalproblems with this model and the licence fee remains a more productive funding solution.

The introduction of a voluntary subscription fee would inevitably lead to a loss of revenue in a transitionalphase. Little or no research has recently been conducted on who would oVer to take out a voluntarysubscription to the BBC and thus what income the BBC would enjoy to plan for the future, at this crucialpoint in the development of the British television industry. Even considering mechanisms that wouldsubsidise the BBC in an interim period the instability caused to the Corporation would have incalculableeVects. Public television services would also, given the loss of critical mass the BBC currently benefits frombecomemore expensive for the end user and this would act as a deterrent for some sections of the communityto engage with programming that not only entertains, but also informs and educates. It would dilute keyprinciples of public service such as universalism and inclusion that have underpinned our television andradio services for generations.

Funding Public Service Broadcasting from Contestable Funding

The second important issue is how public money is allocated. The idea of an Arts Council of the airwavesfirst explored by the Peacock Committee and more recently taken up by the Broadcasting Policy Groupsuggests that the break up of the BBC and the redistribution of public money across the sector specificallyfor public service programmes would positively benefit British viewers and listeners. At this point in timewe cannot see what benefits there would be for the viewer and listener of such a system of radical reform.

Contestable funding is seen as a mechanism to encourage the sector as a whole to make public serviceprogrammes that under perfect conditions will be scattered across numerous television channels. It assumesthat commercial companies will be oVered suYcient incentives to make these programmes. There is littleevidence to support such a claim in the current British television landscape that funding by this methodwould be adequate inmoving the commercial sector towards amore public service orientation. Controversywould undoubtedly arise if public money was allocated to subsidise commercial channels, some of whichnow invest in public service programming and others which do not.

The importance of the culture of an institution and the role played by the BBC both as a benchmark forother broadcasters in the UK and as a focal point for listeners and viewers is key to the British system andthis would also be swept aside. According to the BBC audience research department some 52% of the Britishpublic tuned into BBC television news on September 11, demonstrating a remarkable sense of loyalty andtrust the public have for the BBC. In short, without suYcient evidence to the contrary, the licence feesupporting a strong central institution remains the most eVective mechanism to produce and distributepublic service radio and television. It would simply be counter productive to dismantle the current systemjust for the sake of innovation. The present system is not the major problem facing public servicebroadcasting in the UK.

Neither would it solve the issues of the disadvantages of having a funding solution tied to general taxation.Funding would be prone to increases and more likely decreases following the overall economic climate andgovernment spending policy, without an adequate mechanism for assessing the real financial needs of adynamic and healthy public service in broadcasting.With a television system of over 200 channels the systemwould be administratively complex both in the selection of projects, as well as regulating the successfulapplicants to ensure that the programmes that have been awarded financial support have actually achieved



the quality threshold that would presumably underpin such a system. It would do little to alleviate theinherent problems of defining issues such as quality and diversity and could have an unanticipatedconsequence of diluting the principle of public service in British broadcasting. We are still left with theproblem as to what constitutes a public service programme, and perhaps more crucially who defines whatis or what is not a public service and we would be in danger of ghettoising public service programming andscattering it over the whole schedule to the confusion of the viewers.

The Advantages of the Licence Fee System

The value of the licence fee system is that all households that have a television set contribute. This meansthat the licence fee is set at a rate that the large majority of households can aVord. As theDCMS has pointedout the current fee will be raised to £121 in April 2004, a fee of a little under £11 per month in line with thecurrent agreement with the BBC. The licence fee ensures a consistent level of funding necessary for the BBCto provide awide range of programming and services. In 2003 the total revenues from the licence fee enjoyedby the BBCwere £2,658 million. Together with its commercial revenues this makes the BBC the sixth largestmedia enterprise in Europe according to company turnover and the second largest public broadcaster afterARD in Germany.

This income does not go to shareholders. It is invested in producing and distributing a growing range ofaudiovisual services on a non-profit basis. Because of this the BBC invests over £1 billion in originalprogramming and is a major contributor to our society’s culture, creativity, jobs and skills in the Britishaudiovisual industry. According to the European Audiovisual Observatory ZDF/ARD and the BBC investthe highest levels of resources in original fiction of any broadcaster in Europe.

The licence fee enables a consistent, stable and high level of investment in British programmes and itcreates the conditions that provide the BBC adequate revenue to provide its core British servicesindependently of commercial imperatives. It allows the BBC independence in programming and schedulingdecisions that is crucial to the fulfilment of its Charter requirements.

Even if we reached such a time when realistic alternatives were available the value of the licence fee shouldnot be underestimated, nor should the advantage of a system whereby every household in the UK that hasa television set contributes to the funding of the BBC. In many respects it is the key to both the range ofactivities undertaken by the BBC, as well as how the BBC fulfils its obligations in this range of activities. Itis not only what programmes are produced, but the whole approach to the production and distribution ofradio and television programmes as well as other media based services that makes the BBC stand out inBritish broadcasting today.

Although we believe that at the present time it is only through public money that these services can beprovided in the quantity and quality that they are currently supplied. However, the potential value ofmeasures such as subscription should not be underplayed. If the system can be used to devise a method forcompulsory subscription, that cuts down on administrative resources in collection and processing then thisshould be welcomed. But the key is that subscription should be compulsory to all television households asan enabling mechanism that allows forward planning and stability.

We see the main weakness of the licence fee is that it is regressive and it is simply unfair to apply a flat feeon households that enjoy highly diVerentiated incomes throughout theUKand this is a legitimate complaintthat must be taken seriously. In this respect the licence fee must be seen by the public to be able to accountfor households that may not be in a position to pay the annual fee and consideration should be given tomaking the licence fee less regressive. Amore progressive licence fee would benefit all of the community andprovide for a more inclusive mechanism. To this end the Charter review process should investigate makingthe licence fee more sensitive to diVerent income levels whilst at the same time ensuring the levels of fundingare proportionate to the costs that the BBC incurs in fulfilling its remit.

Setting the Level of Funding—A Council for Public Service Broadcasting

Any assessment of funding must take into account the needs of the BBC as well as value for money toensure that public money is well spent. It is crucial that the licence fee is set at a level that is proportionateto the costs incurred by the BBC in fulfilling its remit as a public service broadcaster covering the wholerange of interests in the UK. The licence fee determines what the BBC is able to do and in this sense it isimportant to underline the BBC’s central role in our society’s creative and cultural spheres. It is also truethat the funding of the BBC has become a far more complex issue with the growth of competition inbroadcasting.

Setting the licence fee is always a political question in the UK and it is quite right that the parliamentaryprocess reviews the allocation of such large sums of public money. All too often the arguments over the levelof the licence fee have been prone to political pressures. We believe that it is necessary in the first instancefor the issue of funding to be removed from the primary political domain and from lobbying by the BBC andother interested parties.Given the complexity of themodern broadcast sector a permanent council should beestablished that is accountable to Parliament with the task of assessing the financial needs of the BBC.



Any such council would be responsible for assessing the level of the licence fee as to whether it is adequateand proportionate as well as whether it needs adjusting. In this manner Parliament and the public wouldhave access to a broad range of information and evidence based recommendations, which would providesolid foundations to underpin public policy.

The council should be comprised of individuals with knowledge of the industry that is able to actindependently of both the Government and the BBC. Appointments to such a council should beindependently adjudicated. Past reviews of funding have largely been dealt with by ad hoc committees anda permanent council would be better placed to fully report on the needs and spending of the BBC and takeinto account market conditions. We therefore would recommend a permanent body charged with settingthe level of the licence fee, which it concludes as appropriate to the needs of the BBC.

In regulating the BBC we should strive to achieve proportionality against a clearly defined remit that willclear up any unjustified criticism of the BBC in its output and spending. The BBC has already made greatstrides in accounting for its performance, but a clearly articulated remit setting down the aims and objectivesof the Corporation together with a system of independent regulation will not only ensure that the BBCcontinues to fulfil its public service remit, but will also make the system transparent and open to publicdebate and scrutiny.

The BBC should, however, not be allowed to go beyond the range of services that are either legitimatepublic services, or where it does operate commercial services, what is necessary for the Corporation to fundits public services activities. Proportionality and the separation of accounts for public and commercialservices provided by the BBC is the key issue here and, in line with the European Commission’s approachto the funding of public broadcasters in Europe. The BBC already provides a separation of these activities.


It is important that the governance of the BBC is both independent from government and BBCmanagement. The self-regulatory culture of the Board of Governors has been largely successful throughoutthe history of the institution, but it is prone to be influenced by the management of the BBC and itscomposition is largely unreflective of the diversity of modern society.

Though we would endorse self-regulatory practices at the BBC, there is a strong case for reform of thenature and constituency of the current board of governors. There is now a broad consensus that theunrepresentative nature of the board of governors as well as their dual role in governance and regulation isan anomaly and it is crucial to modernise the present arrangements.

We would suggest that more suitable structures be considered in the Charter renewal review in order toensure more independence for the regulation of the BBC. A solution may well be to separate the regulatoryand strategic functions of the Board in order to achieve full independence for the regulatory aspects of theBBC and this would entail changing the role of the present Board of Governors and reducing both itscapacity and size, whilst introducing an independent council to act as the regulator of the BBC.

ACouncil for Public Service Broadcasting composed of qualified experts would have a remit to rigorouslyassess the performance of the Corporation in all its activities. A system of this kind has already beenestablished in Norway where there is a specific council established to monitor and assess the performanceof the broadcasters that have public service obligations. The Allmennkringkastingsradet (the Public ServiceCouncil) is responsible for reviewing the performance of the broadcasters, which come under its remit,pursuant to the obligations detailed in the Broadcasting Act, NRK’s statutes, and the commercialbroadcaster’s concession. We would suggest such a model oVers a strong alternative to the currentarrangements.

To ensure minimum replication of functions any proposed council should function in a dual role to bothassess the performance and the funding needs of the BBC and therefore combine similar functions as to theones undertaken by the KEF in Germany, together with undertaking an independent review of the BBC’sperformance and activities. A two pillared structure covering funding and regulation would provide asystematic and eYcient framework for an independent review of the BBC in these crucial areas. With anindependent secretariat, legal standing and a separate facility for a council of this kind, independence wouldbe maintained from the Government and the BBC ensuring no conflicting roles for the council.

The advantages of this system are clear. An expert council that acts independently of the BBC andgovernment has the potential to depoliticise the question of funding and assessment of the BBC’s activities.The duties of this body would include a continual assessment of the performance and the financialrequirements of the BBC and it would be well suited to regulating a modern and increasingly complexCorporation. This independent body in turn would be required to report annually to Parliament. We wouldalso suggest that this body was legally independent of Ofcom and able to operate across sectors to bestundertake its role as regulator. Although we understand that given Ofcom will be responsible for tiers 1 and2 of the new regulatory framework some degree of cooperationwould be productive, but wewould like to seethe 3rd tier of the framework wholly independent from Ofcom as is envisaged in the Communications Act.



A more developed system for monitoring compliance is also essential with minimum and in some casesmaximum thresholds employed on certain genres of programming. In the Netherlands they have employedthis system with success and the public broadcasters have a ceiling placed on them for entertainment and atthe same time minimum thresholds for important programme genres such as art and culture. This allowsa balanced assessment of the output of NOS and ensures the public channels remain loyal to their remits.Programme reach should also be encouraged across programming and a system developed to ensure thatthe BBC is reaching all parts of the viewing and listening public, with minimum reach thresholds in areassuch as news and documentary put in place.

The council should be eYcient, combine the necessary expertise to undertake a thorough assessment ofthe BBC’s finances and activities and have the resources to be totally independent in its activities.Furthermore, it should be composed of a small but eVective team that has an evidence based approach toregulating the BBC rather than a political one and operate as a permanent oYce.

We would suggest a separation between the powers of the current Board of Governors especially in theirdual role as both “guardians of the public interest” and, as “strategic directors” of the Corporation. Bydividing these functions a greater degree of separation of these roles will be achieved, and as a consequencethe regulation of the BBC will be independent from the management of the Corporation. The BBC wouldretain some form of scaled down Board of Governors to undertake the strategic role that it presentlyperforms as strategic directors, if practicable.

The council responsible for the assessment of the BBC would account to Parliament on an annual basisand give recommendations as to the funding and performance of the BBC.Where necessary the parts of thecurrent review process that the BBC undergoes would remain to ensure a consultative and rigorous reviewprocess. The BBC has already embarked on a broad information campaign to inform the public of itsactivities and its statement of programme policy sets out the objectives for the Corporation annually andthis should be continued.


The Royal Charter has acted as the legal basis of the BBC since it became a public corporation and is illsuited to set out the duties and responsibilities of the contemporary BBC and we would suggest it is notrenewed and is replaced with a more suitable instrument. We would like to see something far morepermanent both in terms of reviews of the BBC’s services and its legal standing and obligations.

Given expected growth in digital TV and likely developments in the Internet and other new media, what scopeand remit should the BBC have?

Over the past decade there has been rapid innovation in communications technology that has broughtabout huge changes not only in the delivery of audiovisual services, but also their production. The BBC hasembraced these changes and with government consent (and scrutiny) embarked on a programme ofexpansion in Internet and digital (niche) television services. New technology has been a central part ofgovernment communications policy for the past decade. The BBC has been at the forefront of thesedevelopments firstly by supplying one of the most developed and comprehensive web-based services in theworld and secondly by taking over, together with BSkyB and Castle Communications the digital terrestrialplatform from ITV Digital in a strategic partnership to support and drive roll out of digital televisionservices and broadband.

Throughout the history of public service broadcasting an important part of the BBC’s strategy has beento develop and embrace innovation in radio and television and in this tradition it has moved into Internetand digital television services. In this respect the modern day concept has shown itself to be dynamic andresponsive to developments in technology, as it has expanded services to include the Internet and nichetelevision channels. In our opinion this is in line with the concept of public service, as the concept cannotremain tied specifically to traditionalmedia.As newplatforms develop it is important that a space is reservedfor public services that reflects the diversity of the population and their requirements, not just as consumers,but also as citizens across platforms and medium.

Given the multiplicity of channels and platforms for the delivery of information, education andentertainment, citizens and consumers still require indigenous programming made specifically for them thatenables them to make sense of a complex world and a huge number of sources of information. If digitaltelevision is going to enhance pluralism and viewer choice it is important that the BBC continues to investin new digital services, and oVer a range of public services, particularly thematic channels composed of localand national programming produced specifically for British viewers and listeners.

It is also important that the Government lays out the responsibilities of the BBC clearly across diVerentplatforms and that performance can be measured against these set objectives without stifling the institution.These requirements should include both quantitative and qualitative measures in order to assess the annualperformance of the BBC in contributing to the following objectives:

— A democratic and/or pluralistic society;



— National, regional and local culture;

— High quality programming;

— Meeting high journalistic standards;

— Investment in the indigenous audiovisual industry;

— Providing a universal service.

(Betzel and Ward 2004)

It is, as crucial today as it has ever been to steer the broadcasting market in order to derive maximumbenefits, to as many viewers as possible. It is therefore necessary to have the right regulatory structures inplace to enable the BBC to take advantage of the new opportunities that multi-channel television andbroadband oVer, whilst also guaranteeing that its central activities remain governed by core public serviceprinciples.

References

Machet, E, Pertzinidou, E and Ward, D (2002) A Comparative Analysis of Television ProgrammingRegulation in Seven European Countries: A Benchmark Study. NOS.

Tongue, C (1996) Tongue report on the Future of Public Service Broadcasting in the Digital Age.Adoptedby the European Parliament. September 1996.

Betzel, M and Ward, D (2004) The Regulation of Public Service Broadcasters in Western Europe. InWard (2004) (Ed) Special issue of Trends in Communication Public Service Broadcasting: Change andContinuity. Issue 12, No 1. LEA.

April 2004

Memorandum submitted by UK Film Council

Overview

1. The Select Committee for Culture, Media and Sport has announced an enquiry into BBC Charter. Asthe strategic agency for film in the UK, the UK Film Council is making a submission the keynote of whichis the integration of the Government’s policy for film and its policy for public service broadcasting. Thisdocument draws heavily on the submission on BBC Charter Review made by the UK Film Council to theDepartment for Culture, Media and Sport earlier this year.13

2. The DCMS’s December 2003 document, Review of the BBC’s Royal Charter, does mention film, butonly in a relatively limited context that does not correspond to the full range of either the BBC’s establishedand potential role in carrying forward UK film policy, or UK film policy itself.

3. In this submission, the UK Film Council wishes to set out the strong relationship between the goalsset for the BBC and those of UK film policy. The UK Film Council notes that in its report Is There a Britishfilm Industry published in September 2003, the Committee urged “the BBC to review its approach and levelof commitment to feature film production, in consultation with the UK Film Council, given the significantcomity of interests in this area.”14 The UK Film Council has been holding a series of meetings with the BBCas the first steps toward creating a strategic partnership whose goals would include reviewing the approachand level of commitment to film production.

4. This submission is informed by the strategic objectives established by theGovernment for theUKFilmCouncil to:

(a) Encourage the making of distinctive UK films.

(b) Ensure audiences throughout the UK have access to the full range of British and internationalcinema.

(c) Support skills training.

(d) Support the development of opportunities for all UK citizens to understand and appreciate film.

(e) Support the development of opportunities for access to cinema history and heritage.

(f) Promote social inclusion and celebrate diversity.

(g) Encourage excellence and innovation particularly through the use of new digital technologies.

13 See UK Film Council submission to the Select Committee enquiry Is There a British Film Industry available at: http://www.parliament.the-stationery-oYce.co.uk/pa/cm200203/cmselect/cmcumeds/667/3062410.htm.

14 See Paragraph 116 at: http://www.parliament.the-stationery-oYce.co.uk/pa/cm200203/cmselect/cmcumeds/667/66709.htm£a22.



The UKFC Response

The BBC needs a film strategy

5. The UK Film Council wants to take up the oVer made to it by the BBC to build an enduringpartnership for film with the BBC based on shared objectives. These objectives extend beyond filmproduction. That said, the UK Film Council remains convinced that the current level of BBC investmentin new British films is inadequate for a public service broadcaster of the scale of the BBC. The UK FilmCouncil recently commissioned a nationally representative survey from TNS which showed that 81% ofpeople believed that the UK terrestrial television companies should support the British film industry byshowing more new UK films. Seventy seven percent agreed that British films are an important part ofBritish heritage.

6. The challenges facing the BBC for film can be usefully summarised in the following terms:

How the BBC can help the UK film industry to compete successfully

The BBC could and should intervene in three ways: by investing in talent and ideas; by showcasing thefull range of UK and international cinema and by using its unrivalled media presence to promote andencourage film-going in the UK. The UK Film Council has already drawn the Select Committee’s and theGovernment’s attention to the insuYcient level of investment by the BBC in feature film and in the marginalpresence it gives to UK films (and all but a narrow range of US movies) in its schedules; indeed, the rangeof films shown on the BBC is far narrower than that seen in UK cinemas. These points were forcefully takenup by the Select Committee and endorsed by theUKGovernment in its response to thatCommittee’s report.The Government said that it “recognises and welcomes the BBC’s valuable contribution to the British filmindustry, both in terms of support and training, and the very fine films it has backed, includingMrs Brown,Dirty Pretty Things, The Mother and Sylvia”.

Nevertheless, theUKFilmCouncil agrees with the Committee’s recommendation there should be a frankand open debate about the extent of the BBC’s involvement with the film industry.One forum for this debatewill be through the review of the BBC’s Royal Charter. This review will provide an opportunity forGovernment to consult with interested parties, including the film industry, on all aspects of the BBC.”15

How the BBC can encourage the making of distinctive UK films

7. First andmost importantly, the BBC should increase both the number of films it supports and the levelof its investment in those films. The BBC should also review the acquisition prices it pays for UK films. TheBBC deserves real credit for investing consistently in distinctive UK films. But it could and should be doingmuch more given its power and centrality as the leading British Public Service institution. In particular, theUK Film Council believes that there is an opportunity for the BBC to develop popular yet distinctive UKfilms which could play on BBC1 at peak times to replace US Studio blockbusters.

How the BBC can ensure audiences throughout the UK have access to the full range of British andinternational cinema

8. The creation of BBC4 has created a model which schedules a wider ranger of films and supports thedistribution of those films in cinemas. But the level of this activity could be dramatically increased. It alsohas little echo in the BBC’s other radio and television services. In addition, the very eVective on-line contentin support of film releases is almost completely confined to major Hollywood films. The BBC also needs toparticipate more fully and directly in the promotion of cinema-going and of specialised films.16 The BBCcould and should, in particular, engage with the development of the UK Film Council’s Digital ScreenNetwork.

How the BBC can support appropriate skills training

9. The BBC prides itself on being the largest provider of training in the UK audiovisual sector. It playsa leading role in Skillset and supports the National Film and Television School. The UK Film Council, inlaunching its training strategy, A Bigger Future, threw down a challenge to the UK audiovisual sector to

15 Available at: http://www.culture.gov.uk/NR/rdonlyres/eztsqbilydxjkx2jvvxj4rw3bf7szqjupszjyglehvgq2p7rf44ib6riczapxxixwhrjkbpm6r7as4udnrdecnlv7rf/907134Cm6022Film.pdf.

16 The UK Film Council uses the following the term “specialised film” within a particular context as set out below:The UK market, in common with most others around the world, is generally driven by mainstream, US studio-originated

material. In such a context, specialised films oVer audiences a diVerent experience of cinema. Such films are often characterisedby an innovative cinematic style and by an engagement with challenging subject matter. As such, specialised films willchallenge and educate audiences of all ages and backgrounds.Specialised films, therefore, are likely to be less obviously commercial andmore diYcult tomarket since they are economicallymore risky. Their theatrical release is usually characterised by the limited use of prints and a relatively low level of investmentin advertising and publicity. Consequently, the opportunity to reach a wider audience is restricted.Examples may include, but are not necessarily limited to:— Foreign language films.— Indigenous British films which are not aimed at the mainstream.— Films which directly address cultural, social and political issues.— Re-issues of classic and/or restored archive films.



boost its commitment to training, for example, by contributing to the £10 million-a-year skills training fundestablished by the UK Film Council and Skillset. The BBC is expected to play a central role in theachievement of the objectives of this training strategy.17 The BBC could also play a crucial role through suchtraining in contributing to the promotion of diversity across the UK film industry workforce.

How the BBC can support the development of opportunities for all UK citizens to understand and appreciatefilm

10. TheUKFilmCouncil itself is keen to work in partnership with the BBC and to assist the Corporationdevelop ways of working with other key film stakeholders such as; the British Film Institute, FilmEducation, the Regional Screen Agencies, the National screen agencies, educational institutions and otherorganisations. Crucially, the UK Film Council together with the BBC, the British Film Institute andChannel 4 has recently created a Media Literacy Task Force to build on the outcomes of a major seminaron Media Literacy organised by the above partners in January 2004. The UK Film Council welcomes theBBC’s positive engagement with Media Literacy and looks forward to working with the Corporation andother partners in taking this work forward.

How the BBC can support the development of opportunities for access to cinema history and heritage

11. Access specifically to educational opportunities around history and heritage should be a function ofthe Digital Archive. The BBC should also lead on a progressive approach to rights management forlegitimate educational use. There is real scope here for a major collaboration with the British Film Institutewhich is responsible for the National Film and Television Archive.

The encouragement of excellence and innovation particularly through the use of new digital technologies

12. The BBC has demonstrated in recent years how extraordinarily eVective it can be in driving the take-up of new technologies, notably in relation to digital radio, internet and digital terrestrial television. TheBBC is also contributing to the education of a generation of people confident in their use of the digitaltechnologies. But this function could also be further improved by connecting with separate but similarinitiatives taking place across the UK. Such initiatives should include, for example, the work of both theBritish Film Institute and First Light, the scheme funded by the UK Film Council to support the makingof digital short films by young people each year.

The BBC’s openness, transparency and accessibility

13. Finally and most obviously, the UK Film Council believes that the BBC should publish a clear filmstrategy to be accountable for its delivery. In addition the BBC must become transparent about the totalamount of money which it commits to all its film-related activities.

Conclusions

14. In responding to the Select Committee report the UK Film Council wishes to emphasise thedistinctions between:

(a) The BBC’s industrial roles as the UK’s major audiovisual producer, broadcaster and employer.

(b) Its role as the most powerful “cultural representative” delivering information and entertainmentin the UK.

(c) Its educational role.

15. The UK Film Council therefore sees the Charter Review process as an opportunity to encourage theBBC to articulate and implement a clear and transparent strategy for film which meshes with theGovernment’s own film policy.

16. As noted above, the UK Film Council has recently met with the BBC and agreed a range of potentialareas of collaboration which will form the basis for developing a new partnership over the coming months.

17. The UK Film Council looks forward to the development of this partnership but it remains the UKFilm Council’s view that the BBC should also re-consider its overall level of investment in new British films,(in line with the Select Committee’s conclusions in its report on the British film industry) in a way whichdelivers on the three points set out at 21 above.

April 2004

17 The UKFilm Council endorses the points made on this subject by Skillset in its submission on Charter Review to the DCMS.



Memorandum submitted by Skillset

Introduction

Skillset exists:“to encourage the delivery of informed training and vocational education provision so that the UK’saudio visual industries,18 maintain and enhance their creativity, productivity and competitiveness”.

Skillset is one of a growing network of Sector Skills Councils, led by industry and licensed by and workingin partnership with Government and its public agencies across the UK, charged with addressing thefollowing four goals:

— Reducing skills gaps and shortages;

— Improving productivity and business performance;

— Increasing the opportunities to boost the skills and productivity of everyone in the sector’sworkforce, including action on equal opportunities;

— Improving learning supply including apprenticeships, higher education and national occupationalstandards.

It was one of five “trailblazer” SSCs, has recently been awarded a five year licence and has been selectedas one of four “pathfinders” SSCs charged with developing Sector Skills Agreements in England, Scotlandand Wales.

Skillset’s Chair is Clive Jones, CEO of ITV News and our Deputy Chair is Stewart Till CBE, Chair andCEO of UIP and Deputy Chair of the UK Film Council. Our industry led and managed Board includessenior representatives from:

BBCBskyBCarlyle Media LtdChannel 4CRCAFederation of Entertainment UnionsFiveITVIVCAMotion Pictures AssociationPACTSMGS4CUIPUK Film CouncilUlster Television plcand the Photo-imaging industry with whom we have recently merged.

The BBC was one of Skillset’s founding members and has always maintained an active support andcommitment to Skillset.

In addition to the Board, Skillset has established a network of cross industry panels in each nation andregion of the UK and sector specific committees which guide our more detailed work in each area.

This submission seeks to comment only on those issues which relate to the skills agenda, represents theconsensus view of the industry as expressed through its Sector Skills Council and makes an assumption thatthe BBC will continue with its current status and funding arrangements. The various constituent parties toSkillset will be addressing the many other serious and important questions that Charter Review poses intheir individual submissions.

Context

Our submission ismade against and informed by the dynamic context within whichwework. In particularfour current key strategic developments require some description, before moving onto our specificcomments on the BBC in this process of Charter Review:

National Skills Strategy (England) White Paper July 2003 DfES / DTI / DWP / Treasury / SponsoringDepartment eg DCMS

18 Audio visual % broadcast, film, video, interactive media and photo imaging.



Training and education are devolved powers and the specific policies and public agencies that support theactivities diVer. However, there is common thinking and close liaison. The latest articulation is thepublication of the National Skills Strategy for England which has been developed in close consultation withthe devolved administrations and is consistent with the direction of their policies.

Overall economic analysis identifies that UK productivity lags significantly behind our internationalcompetitors. Government across the UK is clear in its view that one of the key reasons for this is the lackof focus and emphasis that both the public and private sectors have placed on skills, the lack of industrycollaboration that has taken place to address these issues and the short termism of the responses that aremade.

As the White Paper States:

“no business operates in isolation. In a highly interconnected and interdependent world theGovernment also has a role to promote long term, as well as short term gains from skills.”

Sector Skills Councils have been given a central role in driving change and the key mechanism foridentifying and articulating how industries are going to raise their performance will be through thedevelopment of Sector Skills Agreements. Skillset is currently charged with developing one of the first ofthese agreements for our sector in England, Scotland and Wales. The Agreement is expected to describe alonger term agenda (5-10 years) for raising productivity in each sector, the skills needed for internationalcompetitiveness and how industry is going to work collaboratively to invest in these skills. The Secretariesof State for both DfES and the DTI and the Lifelong Learning Ministers in Wales and Scotland are takinga close interest in the development of the Pathfinder Agreements and will be meeting with us over the periodof its development. Formal sign oV is timetabled for December 2004.

In return for employer collaborative action, Government has promised influence over publicly fundedsupport for training and education in order to promote successful partnership and implementation of theAgreements.

Skillset/Ofcom Task Force and Developments

“The Government would like to make it clear that the obligations placed in the Bill represent a serious andongoing obligation to invest in training. We see these requirements as vital to the future success of the sector.Unless we invest in people and their skills our vibrant audio visual media will eventually go the way ofshipbuilding and many other traditional manufacturing industries. On the recommendation of the ITC’sprogramme supply review, the Secretary of State asked Skillset to set up a task force to report back to Ofcomon training. We keenly await the recommendations of the task force and expect a robust and vigorous strategyfor the industry to emerge as a result.”

(LordMcIntosh of Haringey, Minister for Media and Heritage, 8th July 2003, House of Lords debate onthe Communications Bill)

The Skillset/OfcomTask Force, made up of representatives from across the industry, submitted its reportand recommendations to Ofcom in November 2003. At the beginning of the process, in March 2003, KimHowells, the thenMinister for Culture, Media and Sport wrote to Skillset asking that the Task Force makeclear in its recommendations its views on the position of the BBC in relation to training, as articulated inthe draft BBC agreement.

The Task Force, including the BBC, who played a full and active role in its deliberations was:

“unanimous in its recommendations that the BBC should be expected to report to Ofcom on thesematters as a Tier One responsibility. As the biggest single employer it is essential that they informand adhere to the practices and processes which the Task Force is recommending . . . .”

The Task Force Report analysed the current organisation of training and investment in the broadcastindustry and concluded that although many companies take their obligations seriously, current regulationand investment is piecemeal with no common systems of audit and assessment. It drew attention to aparticular weakness in television where the growth of both the independent and freelance sectors require acommitment to industry wide initiatives and organisations which address the development of skills for thosewe do not benefit from in-house training schemes.

Its view was that the nature of the current iniatives set up to address this issue:

“has produced patchy response with little correlation between contributions made and dependence onfreelance talent. While the freelance sector has increased over recent years, the funds have actuallydecreased and are woefully inadequate to meet the needs of an increasingly casualised workforce.”

In addition it noted that in television and radio there are a wide variety of other areas where industry wideiniatives need to be focussed, such as careers advice and guidance, creating links with FE and HE provisionand targeting training courses to further new talent from under represented groups in the industry. Whilethere are examples of some companies contributing to such schemes there is no systematic way ofidentifying, assessing, investing in and coordinating them such that the eVort and commitment madebecomes greater than the sum of the parts.



The Ofcom Board welcomed the Task Force’s report and the objectives underlying its recommendations.Ofcom and the industry, including the BBC, have now agreed that they wish to move forward to discuss theestablishment of a co-regulatory relationship with the industry through Skillset. An independently chaireddesign group has been established to recommend a system for eVective co-regulation which is fit for purposeand able to facilitate achievement of the following objectives:

— Strengthening training provision as appropriate;

— Ensuring training provision is more forward looking and more closely allied to the business needsof the industry than at present;

— Developing common reporting and measurement systems across industry.

All of the above will be informed by the work of Skillset’s TV Skills Strategy Committee, who will workwith and through Skillset to provide an ongoing accurate industry wide assessment of skills, gaps, shortagesand priorities and a costed action plan to meet them. The intention is that a similar committee is establishedfor radio.

The Co-Regulatory Design Group will receive recommendations from a Finance Group which has beenestablished to look at mechanisms for coordinating and improving investment in skills/talent developmentacross broadcast.

The group will produce a written report for Ofcom by the end of June 2004 with a timetable on consultingon and implementing its proposals with a view to the new co-regulatory system being in place by the endof 2004.

A Bigger Future—The UK Film Skills Strategy, Skillset/UK Film Council 2003

Launched by Charles Clarke, the Secretary of State for Education and Skills, A Bigger Future is acomplete training and education strategy for British film born out of over 12 months of research,consultation and deliberations involving the full UK industry. The key objective is to ensure that the UKindustry is able to compete in the European and global marketplace on the basis of world-beating skills. Adetailed five-year strategy supported by £50 million of investment has been developed and is beingimplemented and managed by Skillset with the guidance of a new Film Skills Strategy Committee, made upof representatives from the UK Film Council, Skillset and the industry. The strategy is being financedthrough the establishment of a new Film Skills Fund which comprises:

— contributions from producers in recognition of meeting the training needs of the freelanceworkforce—the current voluntary Skills Investment Fund which, following consultation with theindustry, may become mandatory;

— contributions from industry for specific projects;

— Lottery funding from the UK Film Council;

— EU Training Funds;

— partnership investment from training and education providers;

— employers contributing to their own company-specific initiatives.

In areas of mutual concern and benefit (of particular relevance for terrestrial and non-terrestrialtelevision) Skillset provides a mechanism where policy, strategy and investment from both film andtelevision can be discussed and in some cases, mutual investments made.

Skillset and DTI Skills Committee

This group has only just been established. Its objective is to guide the development of a comprehensiveinteractive media skills strategy for the UK industry. It will be producing a first stage report in June 2004and its analysis will form a central plank of Skillset’s Pathfinder Sector Skills Agreement. The BBC has asenior representative on this group.

The BBC

People are the principle asset of our creative, high skills, high knowledge industry. Investing in anddeveloping their skills and talent is an investment which reaps both commercial and creative reward forindividuals, individual companies and the overall competitiveness and productivity of the sector.

The BBC is the single biggest employer of staV and freelancers in the industry. The critical creative masswhich it represents combinedwith its Pubic Service remit and its unique funding formulameans that it is wellplaced to and should have a responsibility to invest in the development of its own and the industry’s people.

The BBC has a well deserved reputation for investing in the development of its people with high qualityskills and talent training and support. It currently reports to Governors on its training spend and activityand in addition produces an annual review of training activity within the organisation and its contributionto the wider industry.



As the Skillset Ofcom Task Force Report identified, there is no industry wide agreed methodology formeasuring investment and activity which makes any analysis of the BBC’s commitment more diYcult. TheBBC reported to the Skillset Ofcom Task Force that in 2002 the total BBC spend was £53.5 million—1.58%of its revenue and 5.98% of its payroll. This does not include the significant investment it makes in on thejob development. However, these figures conflate investment in staV, directly employed freelancers andcontributions to industry wide initiatives.

Appendix A of the Charter Review Consultation Document provided by the BBC highlights trainingand states:

“the BBC will continue its substantial investment, around £40 million a year, in ensuring that all staVhave the opportunity to develop their skills and to learn new ones. We will also continue to make asignificant contribution to industry wide initiatives, as well as running schemes designed to attract newpeople to the broadcasting industry such as BBC Talent, which now oVers four schemes across theUK”

Whilst there is no question that the BBC invests in its staV in a systematic and thorough goingway, Skillsetquestions the level and basis on which decisions around both investment in freelancers and other industrywide initiatives are made. We welcome the BBC’s active support and commitment to the development ofSkillset’s Pathfinder Sector Skills Agreement and its constituent strategies, both sectorally, and nationallyand regionally. Its commitment to becoming part of new regulatory relationship with Ofcom and theindustry is very welcome. These activities will allow for a proper assessment of industry wide priorities andthe BBC’s active involvement in the development of appropriate partnership action and investment with therest of the industry across the UK.

Skillset would strongly recommend that the BBC significantly increases its investment in freelancers andsupport for industry-wide collaboration within the new frameworks described above. The fast pace oftechnological change within the industry as a whole is a significant challenge and one which the BBC hasbeen at the forefront. In order to stay ahead of the international competition and maximise the benefits thatthese new technologies bring will require substantial BBC and industry-wide investment, not just in thetechnology but on the skills needed to exploit it. As the industry fragments and becomes ever morecompetitive its unique position (assuming that it is maintained) becomes ever more privileged. A balancehas to be struck between its investment in its own skills and talent as one of its USPs and its Public ServiceBroadcasting remit. However, a legitimate question can be asked as to whether the investment made, forexample, in the purchase of Harry Potter and in some of its other more commercially competitiveprogramming would be better deployed in working with the rest of the industry to eVectively invest in thediverse skills and talent that are needed to support the growth and competitiveness of the sector. The SkillsetOfcom Task Force specifically reflected on this. It noted that one of the stated goals of the licence fee isto fund:

“training and support for British production skills and talent in music, drama, film, radio and TV”

and recommended that any industry response to meeting the challenge of improved industry widecollaboration and investment in freelancers would require in future:

“investment . . . at a higher level for the BBC to reflect the organisation’s Public Service remit andfunding. The BBC’s circumstances are unique in that all its domestic broadcast services are fundedby the licence fee. It is therefore accountable to its audience, the industry and wider public need ratherthan to its shareholders and is exempt from the commercial imperative of attracting advertisingrevenue to exist”.

Both in relation to the industry and in relation to playing its part in raising the skills game the BBC shouldbe the flagship employer. It should act as a beacon demonstrating through its practice its commitment toPublic Service both within the industry and in providing an example of excellence in supporting the deliveryof the Government’s skill strategies across the UK.

In respect of its patronage of the arts, within which film is included, Skillset wishes to see the BBC fullysupporting the implementation of the UK Film Skills Strategy. Whilst it is positive that BBC Films is nowplaying its part in supporting the voluntary levy in the feature film industry (the Skills Investment Fund),it was nevertheless disappointing that it has taken three years before it felt able to do so. However, thedevelopment of the UK Film Skills Strategy has provided a vision, clarity and unifying purpose and theBBC’s new commitment to the SIF and its support for the levy to become mandatory is welcome. We lookforward to developing ever closer partnership involvement from the BBC as the strategy is delivered overthe coming months and years.

In respect of Interactive Media, as was noted above, until the DTI—Skillset Interactive Committeedelivers its strategy it is too early to identify practical ways in which the BBC can support its delivery butits involvement on the Committee at senior level is welcomed.

In respect of its commitment to supporting the development of skills and talent in Scotland, Wales,Northern Ireland and the English Regions the BBC is involved in all of Skillset’s Industry Skills Panels someof which are shared with the National and Regional Screen Agencies. In some areas the BBC representationand involvement is extremely active and committed and in others less so. Skillset wouldwelcome a consistent



approach to support throughout the UK. In addition Skillset is unaware of how the BBC’s investment inskills and talent development breaks down on a national / regional basis. However, the development of thisanalysis should flow from the outcome of the Ofcom discussions and co-regulatory systems.

There is an absolute and proven link to be made between investing in the development of skills and talentwhich properly reflects the make up of our diverse society and improving the diversity of the sectorsworkforce. The BBC has pioneered innovative work and well regarded schemes that address this issue andagain, should be encouraged to further invest both for its own benefit and for the industry as a whole. Itshould also continue to strengthen and deepen its support for working with the Women in Film andTelevision Network, the Cultural Diversity Network and the Broadcasters Disability Network as well asSkillset in order to ensure that its contribution “joins up” eVectively with other activity across the industry.

Finally, the potential for the BBC to support the learning and development of both people interested inand already working in our industry, through the production of educational and specialist content on all itsplatforms, is a resource which Skillset believes could be deployed in a more strategic way. BBC Trainingand Development are trailblazing the way by working with Skillset to establish a joint portal wherefreelancers, colleges etc can be accessed to the fantastic on-line learning facility that has been developed bythe BBC. To develop a “cradle to grave” approach to supporting the development of media literacy in thewider population and to providing supporting programming for more vocationally orientated courses inschools, colleges, universities and industry is an exciting and significant proposition. The development ofsuch a comprehensive strategy could provide real added value to the BBC and the community it serves aswell as to the wider industry and is one which Skillset recommends is more fully explored.

Conclusion

Skillset enjoys and is appreciative of the considerable support and commitment from the BBC.We wouldlook for this to strengthen and grow as the need for greater industry wide collaboration on the skills agendabecomes even clearer.

13 May 2004

Memorandum submitted by Music Business Forum

Executive Summary:

— The role that music of all genres plays in both informing, educating and entertaining listeners andviewers of public broadcasting services should continue to be specifically recognised within theBBC Charter.

— Music should be expressly referred to as a key part of the cultural activity for both public serviceradio and television services provided by the BBC within the UK.

— Radio should be given the support and prominence it deserves within the BBC, especially as digitalradio stations become more prevalent. Around 60% of BBC radio network content is made up ofmusic. The BBC has an important role to play in providing distinctive services at the local level.The role of music in radio must not be allowed to slip down the agenda of priorities for regulationboth for Governance of the BBC and through OFCOM generally.

— The BBC has an important role to play in not only helping to present and use the diversity of workthat is available, but also in educating the creators and the creative entrepreneurs of the futureabout the importance of creative people being able to earn a living from the use of their work.

— The educational role of the BBC should also embrace the ways in which young people can learnto appreciate how creators of, and investors in, music and other copyright works are able to buildand maintain careers and businesses in the creative industries. As more people in the UK movefrom work within traditional manufacturing industries to new knowledge based and serviceindustries, the opportunities aVorded by the cultural diversity of the UK for careers and work willbecomemore andmore important to the wealth of theUK, both as a cultural leader and in helpingto create jobs and business opportunities in the future.

— BBC radio services and BBC television services operating as public services within the UnitedKingdom should provide eVective platforms for the broadcast of Britishmusic in an accessiblewayto the widest possible audience, whilst celebrating the range and diversity of music genres.

— To the extent that the BBC undertakes commercial services, these should be complimentary to thepublic services operated by the BBC, and not detract from them. As part of this process, creatorsmust be rewarded properly. Rights owners and contributors to the BBCprogrammes and ancillaryworks commissioned by the BBC must be able to negotiate fair terms for the use of their work ona free market commercial basis.

— BBC editorial independence and integrity can best be preserved for the term of any new Charterby funding secured through a licence fee.



— ARoyal Charter continues to be the most appropriate basis for the establishment of the BBC anda new Charter should be granted to apply from 2006.

— The role of the BBC Governors needs careful review taking into account the diVerent skills thatare needed to carry out the aspects of “corporate governance” relevant to the governors currentrole and the regulatory aspects of their role. There should be aGovernor on the Board to representthe role of music in the BBC’s broadcasting.

The Music Business Forum:

The Music Business Forum (MBF) welcomes the opportunity to respond to the CMS inquiry on thereview of the BBC’s Royal Charter. We also welcome the opportunity to provide oral evidence to theCommittee later in the year.

The MBF is an informal group of music business organisations that, since its inception in the spring of2002, has gained a reputation as an eVective representation of music business interests in its widest sense toGovernment and beyond. Details of the current membership of the MBF are included in Appendix 1.

The members of the MBF represent interests from all aspects of the UK music-making community,ranging from composition, adaptation, performance, use, licensing, publishing, recording, investment,distribution, marketing, training, education and business development in all the ways that reflect the vibrantdiversity of the industry.

The work and the services provided by the BBC touch almost every aspect of the music business. Manyof our member organisations have made their own submissions to the DCMSCharter Review consultation.

We look forward to further consultation with the Government against the background of a Green Paperto be published at the turn of the year, and again when these options are firmed up in a later White Paper.

Introductory Remarks:

Music is undeniably a central part of the BBC’s core activity and an integral part of the BBC’s schedulingacross all its broadcasting platforms. This is emphasised by the fact that the BBC itself is the biggestcommissioner of music in the world. BBCRadio 3 alone is the world’s largest commissioner of new classicalmusic, responsible for up to 65 new pieces each year.19 Music broadcasting over 7,500 hours of music andadding 310 concerts to the BBC archive in its first year of operation is another testament to the importantrole played by music in programme output.

The importance of music supports the transmission of a significant number of hours of music and artsprogrammes broadcast on all the BBC television channels. In the BBC’s Annual Report and Accounts for2002–03 the hours of music and arts programmes broadcast were reported as:

BBC One 55 hoursBBC Two 270 hoursBBCThree/BBC Choice 175 hoursBBC Four/BBC Knowledge 916 hours20

However the importance of music output continuing as a featured part of programming on both BBCOne and BBC Two will remain key if the diversity of music included in the public television services oVeredby the BBC is to be appreciated by an eVective audience reach.

Network radio output really shows the significance of the role that music plays within the BBC radioservices. The BBC Annual Report for 2002–2003 reports transmission of the following hours of musicprogramming:

BBC Radio One 8,460 hoursBBC Radio Two 7,448 hoursBBC Radio Three 8,109 hours1Xtra 4,472 hours6 Music 7,876 hoursBBC Asian Network 1,395 hours21

Across the BBC television channels, radios 1, 2, 3 as well as 1 Xtra, 6 Music and on-line presence such asCollective and OneMusic, music is a consistent thread running through the whole of the BBC’sprogramming. When one adds in the music content of regional and local radio stations the true importanceof music to the BBC as a whole becomes even clearer. For instance it is estimated that of a total of 63,740network radio broadcast hours in 2002–03, there were 37,760 hours of music output on network radio.

This means that almost 60%22 of BBC radio network content is made up of music.

19 Figure quoted from “The BBC: Some facts and figures”.20 Statistics quoted from “BBC Annual Report and Accounts for 2002–03”.21 Statistics quoted from “BBC Annual Report and Accounts for 2002–03”.22 59.24%.



The BBC is also clearly amajor employer ofmusicians. The BBC runs 5 symphony orchestras in England,Scotland and Wales, and the BBC Singers, and their associated administrative teams—producers, concertsmanagers, marketing, education managers, librarians etc. This involvement alone provides 428 musiciansdirectly employed by the BBC, plus associated administrative teams. The importance of the BBC insupporting these 6 performing groups across the country at a total cost of £28 million,23 is something whichbenefits the cultural health of the UK as a whole and should continue to be recognised as valuable for theBBC, whilst sending out important and positive signals about the value of music-making and the currentstate of cultural health. This is a great commitment to the live performance and broadcasting of music andassociated community activity, which is supported by the Music Business Forum.

In addition to this, the cultural role of the BBC as a public service broadcaster and distribution channelis considered to be of great importance within the music community and to audiences who listen or watchmusic-related output. Its status is demonstrated and developed through the broadcasting of a range ofprogramming featuring all genres of music from such high-profile programming as the annual Proms to theweekly Top of the Pops, in addition to the myriad of music-based programmes that are broadcastthroughout the day, year-round.

The importance of a continued BBC commitment to live music across all genres is a key part of BBCpublic service obligations. BBC roadshows (some run in close association with music industry bodies) area good example of how the BBC attracts people to music, develops audiences and generates enthusiasm andinterest in music in a wide sense. In addition initiatives to help support the profile of broadcast musicprogramming—such as the relay of The Proms to live events across theUKplay an important part in helpingcreate awareness about the rich variety of UKmusic culture to audiences who might not otherwise pick upon the broadcast programmes themselves.

The role that music plays in schools, both in the classroom and as an extra curricular activity, is anotherarea with which the work of the BBC should be linked to help underline how music is an integral part ofthe cultural life of the United Kingdom.

This educational role for the BBC should also embrace the ways in which young people can learn toappreciate how creators of, and investors in, music and other copyright works are able to build andmaintaincareers and businesses in the creative industries. As more people in the UK move from work withintraditional manufacturing industries to new knowledge based and service industries, the opportunitiesaVorded by the cultural diversity of the UK for careers and work will become more and more important tothe wealth of the UK, both as a cultural leader and in helping to create jobs and business opportunities inthe future.

The BBC has an important role to play in not only helping to present and use the diversity of work thatis available, but also in educating the creators and the creative entrepreneurs of the future and theiraudiences about the importance of creative people being able to earn a living from the use of their work. Anawareness of copyright and other intellectual property rights is an important part of business awareness forthe future. The BBC also has a duty, in its dual roles of educating and informing, to promote this type ofmedia literacy.

Britain’smusic industry (in it’s widest sense) is worth almost £5 billion a year andmusic activities generatethe equivalent of over 120,000 full time jobs in the UK. The British music industry is also significant forbeing one of the country’s highest net exporters, generating almost £0.5 billion in net revenues. The BBC’spart in exporting British music within the context of BBC programmes properly relayed or shown overseasmust not be underestimated.

A significant number of those involved in the music industry at some stage either work for or contributeto the way in which British music is performed, licensed by, commissioned, developed, recorded for orbroadcast and otherwise distributed by the BBC.

Finally, it is also clear that the BBC’s commitment tomusic is illustrated by the amount ofmoney it spendson it each year. In 2002–03 the figure spent on contributors and rights, including BBCorchestras and singers,music collecting societies, live music and musician engagements and composers totalled £107 million. Overthe same period, the total network music spend across all broadcast platforms totalled £172 million.

23 Figure quoted from BBC internal brief on the BBC and music, includes BBC Symphony, Philharmonic and ConcertOrchestras, BBCScottish SymphonyOrchestra, BBCNational Orchestra ofWales and the BBCSingers, the only professionalchoir in the UK.



Response to the CMS Committee Questions:

Given expected growth in digital TV and likely developments in the internet and other newmedia, what scopeand remit should the BBC have?

The BBC Remit

TheMusic Business Forumbelieves that one of the key areaswhere the BBC adds value is that of diversity.Without a publicly-funded service, it is doubtful whether the huge range of music that is made and listenedto across the UK would have a broadcasting platform. Such a commitment to diversity but also equality ofaccess would almost certainly not be guaranteed if all broadcasting were to be provided on a whollycommercial basis.

We believe that the opportunities aVorded for the commissioning of new works, and the airtime madeavailable for the performance of new recorded works within scheduling that will draw attention to the newworks, is of vital importance within the acknowledged remit of both television and radio services oVered bythe BBC.

The reputation of the BBC as a respected broadcaster also allows it to act as a showcase demonstratingthe diversity and the creativity of musicians, of music, and of investors in and licensees and distributors ofmusic within the United Kingdom and to the wider audience around the world.

We also recognise that the BBC has a wider role, outside the public service remit, in setting standards ofbroadcasting more generally and even providing a degree of social cohesion. Given that this is the case, wehope that the BBC will agree that this Charter Review aVords it the opportunity to once again try and raisestandards in terms of music provision that others will aspire to.

In this context it is important that music should be expressly referred to as a key part of the culturalactivity both for public service radio services and public service television services provided by the BBCwithin the United Kingdom

The Regional Dimension

In terms of music provision, the MBF supports the production of the regionally-based programming bythe BBC and applauds further eVorts in this area. Regional production of music-based programming playsa vital role in enabling new talent to be heard, local creative economies to be sustained and regional cultureto be supported.

However, with the development of digital technology, the emphasis has to change from simply providingregionally-representative output, to enabling regional output to be accessed by audiences outside thegeographical area. Advances in digital technology should enable this without disproportionate costs.

This accessibility will itself help to inspire individuality of regional programming output which in turnwill maximise the benefits of consumer choice within the public service ethic—without detracting from thebenefits oVered by the BBC services which are broadcast nationally.

Diversity and access are key. We want to see community level programming having an opportunity to bepicked up and introduced to the mainstream, so that the mainstream itself can evolve to embrace morediverse influences. As technology develops, so broadcasting should become more sophisticated andsensitive, rather than facing unavoidable pressure to reduce to the lowest common denominator. The wealthof talent and diversity that exists at all levels of the UK music community deserves to be heard and it isclearly the role of a publicly funded broadcast service to make sure it does.

Such an approach should complement (but not substitute for) the audio and audio-visual on demandservices featuring music which are being developed and launched for the benefit of consumers in a varietyof commercial oVerings.

BBC Services

As distribution channels for music, the various components of the BBC are all of vital importance to theUK music-making community whether in terms of commissioning, audiences, live music and almost everyother aspect of the industry or simply providing quality and diversity of music for the listener or viewer.

(i) Radio:

We are particularly keen that radio is given the support and prominence it deserves within the BBC,especially as digital radio stations becomemore prevalent. During the music industry’s activities around theCommunications Bill, it became clear that Government had not initially given the necessary considerationto the impact of their radio consolidation proposals on high quality and diverse music services within theUnited Kingdom. Broadcasting experiences in market led systems, such as theUSA andAustralia, amongst



others, have demonstrated that diversity can be squeezed out into themargins of schedules in a consolidatedradio sector. The Music Business Forum recognises that the BBC has an important role to play as the “plusone” at the local level.

(ii) Television:

It is felt that BBC television channels, “taken as a whole” are very much “light” with respect to musicprogramming. This is arguably due to the suggestion that only low audiences can be retained; some also feelthat music programmes also risk being “ghettoised” in some manner. In fulfilment of its role as a publicsector broadcaster this perception needs to be changed and an increase of creativity in music programmingput on BBC’s mainstream channels and made accessible through more sensible scheduling. Availability ofchallenging programming alone is not enough. Real accessibility and reach is an important part of publicservice broadcasting. It is also felt that the BBC television channels currently focus too much on pop andclassical music but leave other genres largely without profile.

(iii) Online:

TheMBF also recognises the strength of the BBC’s online service, as a starting point for research but alsothe online music coverage, which supplements the music programming of the BBC. We would only wish toremind the BBC at this point that its primary role is that of distributor, not retailer substitute. The breadthof content and services oVered by the BBC online, whilst commendable in its range in many ways, shouldnot be allowed to extend beyond its core competency and risk negative commercial impact on others. Wealso have concerns about the problems posed by the overseas reach of online services, eVectively “exporting”content in a less-regulatedmanner. Although this profiling of British broadcasting and content is important,rights should be considered at every stage of development in this area, particularly when extending to anyservices which allow the downloading of content by users of a particular service.

Publicly-Funded Services

In relation to publicly-funded services, we would like to see a renewed commitment to playing UK-originated material. We would also like to suggest that a new channel be created to promote new music,across all genres. At the very least, there should be redoubled eVorts to source and broadcast new music onall existing channels.

The editorial remit of the BBC should allow for the testing of boundaries and the expansion of coverage,with newly-composed and newly-recorded music getting the airplay it deserves. We would also like toemphasise the point that when considering the role of music in the BBC, the BBC should not just think ofdelivering wholly music-based programming but also be aware of the valuable role that music has to playacross all mainstream output, for instance, theme tunes, incidental music and soundtracks.

New Technology

TheBBC’s free-to-air services should adapt to the adoption of new technologies by setting clear standardswith a public service ethos. Unlike other commercial broadcasters, the BBC has a stable of digital servicesthat are each of independent value rather than reduced to stations to bolster the value of bundled packages,and we would urge that this continue to be the case.

Digital broadcasting is welcomed, in particular the advent of Freeview which has allowed people in theUK to access digital broadcasting in a way that only the influence of a well supported publicly-fundedbroadcast service could. We reserve particular praise for the work of the BBC’s research department indeveloping this.

However, there are issues that we have concerns about:

(i) Archive:

If new archiving technologies will allow past programming to be accessed by viewers in new ways thenthe BBC must ensure that the implementation of such initiatives does not ride rough shod over thecopyrights and performers’ rights of those who contribute to BBC programmes and includes provision forrights holders to be paid for the additional use of their work through access to archives. This should be thecase whether in the form of repeat broadcasting fees, extensions of the collective bargaining agreements inplace for the payments of revenue for secondary uses, or through the negotiation of clearance for the rightto exercise new rights on individually negotiated commercial terms.

(ii) Storage:

Likewise, if new technologies allow consumers in their homes to “deal” in reproductions or recordingsmade from BBC broadcasts, then consideration must be also given to the rights involved in such activitieswith a view to the interests of rights holders being properly recognised. As the DCMS Charter Reviewdocument points out, new technologies in the homes of consumersmean that as technologies develop, digitalrights management continues to be of immense importance.



(iii) Encryption and DRM.

Just as the BBC has been a leader in the development of digital broadcasting, they should also take a leadin implementing encryption and Digital Rights Management (DRM) applications. Digital broadcastingclearly has huge benefits for viewers and listeners. By broadcasting “perfect” digital copies, often with allthe metadata (track title, artist name etc), it is also potentially an invitation to piracy. Devices such as thePVR enable a user to search automatically for individual tracks and record them remotely. While this isavailable free and unpoliced, commercial download services will be unable to compete and artists, writersand the other creators will have no means of getting paid. There are a number of encryption and DRMsystems being developed for the market and the BBC should be an early adopter, working in conjunctionwith the music and creative industries.

(iv) Electronic Programme Guides:

We also believe that EPGs need a degree of regulation to the extent that they should be wholly accuratein their signposting of programmes. However the commercial value of positions within EPG’s and thecommercial advantages that can arise through permitted links is a matter for regulation and should notallow the BBC any unjustified commercial benefit through linking viewers or listeners into other areasoutside of the BBC’s core activities.

Intellectual Property Rights

The BBC, as a publicly-funded organisation, has a responsibility to be seen at every opportunity to beupholding the systems of rights that operate in the UK, not least to act as an example to others. The licencefee does not of itself authorise licence fee holders to the free use of BBC output in whatever way they wish.

The BBC has an important role to play in helping to improve public awareness of the role that intellectualproperty plays in stimulating and promoting the cultural life of the United Kingdom by providing the legalframework against which creators are able to get paid for the use of their work and recoup the creative andfinancial investments made in the creation of a work in the first place. The BBC should have a clear dutyto support wider awareness of the value of rights to help ensure that viewers and listeners appreciate thatprofessional contributors to programmes at all levels need reward to recognise the use of there work. Suchprofessionals are unable to continue to work and create new work if they are not rewarded for its use.

As with other areas of the BBC’s work, we also believe that operation through digital and newtechnologies should really only be developed along the lines of the BBC’s core activities, as outlined in theCharter, and that these should not impact detrimentally on others’ commercial activities.

The BBC’s Relationship Commercial Public Service Broadcasters

The fact that the BBC public services do not carry advertising is a key attraction for many viewers andlisteners. If the BBC was permitted to carry advertising not only would this point of diVerence disappear,but the marketplace for radio and television advertising be further squeezed in an environment where theproliferation of available channels continues to put pressure on the revenues of the commercialbroadcasting sector.

We would again emphasise that diversity and access are what distinguish the BBC from commercialbroadcasters. Commercial broadcasters respond to a diVerent dynamic than the BBC, often catering for theadvertisers’ profile audience rather than the population as a whole. The BBC, in fact, not only needs tomerely address this audience but actually has to positively engage them as citizens who are empowered tohold the BBC to account. The latter is a diYcult audience to satisfy but through the wide range ofdistribution channels and the breadth of programming, the BBC should be prepared to do so.

In regard to radio in particular, it is worth mentioning that at a time when the music business and othersfear greater radio consolidation and a resulting loss of diversity, the BBC has an opportunity to buck thistrend and reinvigorate radio for the 21st century. In this context is it important that the BBC radio servicesprovide a clear point of diVerence for those who otherwise access to and listen to music. The importance ofimaginative and attractive presentation of BBC radio services to attract and maintain the size of audiencethat will serve to promote diversity of interest in music must not be underestimated.

Parliament recognised the importance of diversity of music within broadcast radio services in theCommunications Act 2003. Under section 312 of the Act when OFCOM are required to considerapplications for amending local radio formats, and be satisfied that the changes would not substantially alterthe character of the service, to take into account the selection of spoken material and music in programmesincluded in the relevant service.

This recognition of the role of music should be applied to all BBC public services, and when applicationsaremade for the provision of additional services under the terms of the Charter, the genres and style ofmusicto be included in the service should be anticipated and, once the service is in operation—preserved.

In terms of its eclectic approach to music, BBCRadio 1 is a very good example of how a non-commercialapproach can exploit the cultural impact of a mass medium still valued by large numbers of young people.It is almost impossible to evaluate Radio 1’s contribution to Britain’s popular music culture and talent base,



and a market led approach would find it diYcult to acknowledge the creative benefits which are not easilymeasurable, but so important. We highlight such factors against OFCOM’s market based approach todecision making and suggest that the qualitative approach of OFCOM’s PSB may oVer a possible modelfor this more comprehensive analysis.

The BBC Operating Commercial Services

In relation to the BBC operating commercial services, we believe that this is a diYcult area that requiresfurther in depth analysis during the next phase of the Charter Review process. The MBF believes, however,that to the extent that the BBCundertakes commercial services, these should be complimentary to the publicservices operated by the BBC, and not detract from them.

As part of this process, creators must be rewarded properly. Rights owners and contributors to the BBCprogrammes and ancillary works commissioned by the BBCmust be able to negotiate fair terms for the useof their work on a free market commercial basis.

There is some disquiet amongst members about the aggressive rights acquisition of BBCWorldwide andit was felt that this arm was better placed to concentrate on secondary exploitation, for the benefit of bothitself and its creative suppliers. More generally, overseas exploitation of programming is seen as morestraightforward, as long as rights are applied as usual. Overseas broadcast of BBCmaterial featuring musicis often an excellent way of showcasing UK talent, under the recognised name of the BBC. However, thechoice of granting rights should remain on commercial terms under fair trading commitments. The BBC inits role as public service broadcaster should be a standard bearer for best business practice in this area.

We welcome the fact that an estimated £109 million raised by commercial activity goes back intoprogramming and we also welcome the systems for eVective distribution.

In the Context of Scope and Remit, How Should the BBC be Funded?

The indirect and politically independent funding of the BBC public service through the licence fee allowsfor the BBC to be creatively experimental, and therefore more innovative, editorially independent andtherefore maintain its integrity. This should be preserved.

This creative experimentation would be threatened in considering any sort of part-subscription scheme.The concept of subscription payments applying to BBC public service programmes would attack one of themain advantages for the BBC as it is currently funded. That is the way in which the BBC is viewed asproviding viewers and listeners with what they want now and what they may want in the future.

It is the range and the diversity of BBC services that are provided within an eVective public service remitthat helps to provide a secure a strong focal point for a breadth of cultural opportunity.

If people do not have the easy opportunity to experiment with new viewing and listening experienceswithin free to air broadcast public services, subscription conditions may act as a barrier to experimentationand therefore accessibility to the more unusual or challenging aspects of the BBC output.

How Should the BBC be Governed and/or Regulated and What Role Should be Played by the OYce ofCommunications?

Given that the BBC is run along lines first drawn up over 70 years old, it is no surprise that some changesin the system of governance are now overdue.

The Secretary of State for Culture, Media and Sport, Tessa Jowell is quoted as saying, in her Forewordto the DCMS Review of the BBC’s Royal Charter, that the Government is committed to “the continuationof a strong BBC, independent of Government, both now and in the future.” The Music Business Forumwould like to strongly support this statement and urge that such a BBC be kept relevant, accessible andexcellent.

To this end, we would support a strong and independent Board of Governors, whose role it is to regulatethe BBC, as envisaged in the 2003 Communications Act. Such a Board of Governors would be in place tocontinue to honour the broad range of services outlined in the Royal Charter.We see OFCOM’s role as thatof economic regulator and, as such, separate from the Board of Governors.

Whilst we recognise that the self-regulatory culture of the Board ofGovernors hasworkedwell to a certainextent, it has also often been influenced by the management of the BBC. We believe a Board of Governorsshould be equally free of influence from government and management in order for it to be successful. Wealso believe that their simultaneous role as both governors and regulators should be re-examined.

The role played by the Director-General of the BBC in trying to reconcile reporting both to the BBCGovernors and to the Seniormanagement of the BBC raises issues of possible conflicts of interest that shouldbe addressed in the review.



The way in which the Chairman of the BBC might participate in the selection of other Governors shouldalso be reviewed. It is important that individuals within the Board ofGovernors are able to act as an eVectiveBoard in terms of personalities as well covering complimentary areas of interest and business skills.

We believe that there is a strong case for reforming the nature and constituency of the Board ofGovernors. They need to reflect more accurately the diversity of modern society and also need to be morein touch with the output that the BBC produces.

In the context of securing a more balanced and representative Board of Governors it is proposed thatthere should be a representative on the Board of Governors specifically to reflect the role of music in theBBC’s broadcasting.

In aChangingCommunications Environment, Does a 10-yearRoyal Charter andAgreement with the Secretaryof State, Together, Provide the Most Appropriate Regime for the BBC?

A Royal Charter, in principle, is a good way of enabling the BBC to be evaluated. However, in order forit to be truly eVective, the Charter has to adequately provide for the full breadth of the BBC’s work.

Given that music is such a vital part of the BBC’s work, we think that it is necessary to preserve and buildupon the express references to music within the current Charter in the new Charter.

The objects of the Corporation under the existing Charter provide for the BBC:“to organise, present, produce, perform or subsidise concerts . . . musical and other productionsand performances (whether live or recorded) in connection with the broadcasting and programmesupply services of the Corporation”

We believe that this role should continue to be expressly recognised in any new Charter.

The Future of the Charter?

OFCOMs Public Service Broadcasting review (for which there is a statutory duty to review no less thanevery five years) should concentrate on performance and accountability and ensure that the public serviceremit is being met.

With the current speed of developments in technology and the means by which programmes andinformation can be relayed, transmitted, accessed and stored by service providers and their customers, theidea of setting in stone rules by which the BBC should operate for the next 10 years must be a more diYculttask that has ever before faced those dealing with a BBC Charter renewal.

We would argue that any new 10 year Charter should continue to provide for development and changesto BBC services during the term provided that appropriate safeguards are in place to ensure that the remitof agreed services is not—and cannot be changed unilaterally by the BBC in ways that “shift the publicservice goal posts” and vary the relationship of the BBC with those working in the public sector without theopportunity for consultation and public comment.

This is not to say that the remit of any one BBC service should be so closely proscribed as to:

i. enable those in the commercial sector to argue that—because someone in the commercial sectorCOULD oVer such a service—that a “public service” broadcaster should be prohibited from undertakingthe task; or

ii. limit the editorial integrity of those operating the channel or service in ways that counteracts theimportance of channels be able to fulfil the full list of duties that are recognised as being relevant to theconcept of public service sound and television broadcasting services (whether under the CommunicationsAct 2003, the BBC Charter itself or through relevant regulation under the auspices of OFCOM).

Annex

Music Business Forum Members Details

— AIM (Association of Independent Music)

— APRS (Association of Professional Recording Services)

— AURA (Association of United Recording Artists)

— British Academy of Composers & Songwriters

— BARD (British Association of Record Dealers)

— British Music Rights

— BPI (British Phonographic Industry)

— Sound Connections

— Equity

— The MCPS-PRS Alliance

— Music Education Council



— (MIA) Music Industries Association

— Music Managers Forum (MMF)

— MPA—(Music Publishers Association)

— Musicians’ Union

— Music Producers’ Guild

— National Music Council

— PwMRA

— PPL (Phonographic Performance Ltd)

— VPL (Video Performance Ltd)

Memorandum submitted by the OYce of Communications (Ofcom)

Introduction

Ofcom has been asked to provide a submission to the Culture,Media and Sport Select Committee Inquiryin relation to BBC’s Charter Renewal. Our submission is set out in two parts:

— Part 1 sets out the regulatory functions that Ofcom carries out in relation to the BBC, and thefunctions that Ofcom has in relation to commercial broadcasters that do not apply to the BBC.

— Part 2 provides a summary of recommendations that Ofcom has made in recent public documentswhich relate to the review of the BBC’s Royal Charter.

The BBC plays a central role in our society, with a reach and influence envied bymany private companiesand public institutions. As we enter a fully digital world, the BBC has the opportunity to reinforce itsimportance and its value in an increasingly fragmented market. It is therefore important for Parliament, theGovernment and the BBC to ensure the Corporation can operate within eVective governance and regulatoryarrangements.

Ofcom, as a statutory corporate body, has no preference for any one system of governance or regulationof the BBC, regarding these as a matter for Government and Parliament.

PART 1: OFCOM’s REGULATORY ROLE IN RELATION TO THE BBC

Areas in which Ofcom has a Regulatory Role in Relation to the BBC

Regulation of broadcasting content can broadly is split into three tiers: tier1 regulations apply to allbroadcasters and relate to avoidance of harm and oVence, impartiality, subliminal messages and fairnessand privacy; tier 2 regulations apply to designated public service broadcasters and consist of quotas forcertain programmes; and tier 3 regulations comprise the public service remit of designated public servicebroadcasters.

Section 198 of the Communications Act 2003 requires that Ofcom shall carry out such regulatoryfunctions in relation to the BBC as are specified in the Act or in the BBC Charter and Agreement. TheAgreement was amended in December 2003 for this purpose.

In each case below, where a power stems directly from the Act, or where the Agreement has the eVect ofapplying that section to the BBC, the relevant section is stated.

Section 198 gives Ofcom the power to impose a fine of up to £250,000 on the BBC for a breach of anyof the requirements below (except listed events) if, after giving the BBC reasonable opportunity to makerepresentations, it believes such a fine would be warranted. (In the case of listed events, Ofcom can onlyreport the matter to the Secretary of State under section 103 of the 1996 Broadcasting Act.) Ofcom can alsodirect the BBC to take remedial action, including broadcast of a correction or a statement of findings and/or a direction not to repeat a programme.

Tier 1 (“Negative” Minimum Content Standards and Complaints Handling)

The following requirements apply to all BBC Public Broadcasting (ie licence fee funded) Services,including radio, in the same way as they apply to commercial broadcasters.

— Observance of theOfcom code dealing with fairness and privacy for those involved in programmes(Act S327)



— Observance of the Ofcom code dealing with programme standards concerning:

— Protection of those under the age of 18 (Act S319(2)(a))

— Exclusion of material likely to encourage or incite crime or lead to disorder (S319(2)(b))

— Exercise of a proper degree of responsibility with respect to religious content (S319(2)(e))

— Application of generally accepted standards to provide adequate protection from oVensiveand harmful material (S319(2)(f))

— Subliminal messages (319(2)(l))

Tier 2 (Quotas for Television Programmes)

The Agreement provides for Ofcom to agree or be consulted by the BBC’s Governors about quotas forthe BBC of a similar kind to those for commercial PSB channels and services. These cover:

— News at intervals on BBC1

— Peaktime news on BBC1

— Current aVairs on BBC1&2 taken together

— Peaktime current aVairs on BBC1&2 taken together

— Original productions on BBC1&2 and BBC digital services

— Original productions in peaktime on BBC 1&2 and BBC digital services (note: in practicepeaktime quotas have only been set for BBC1-4)

— Regional news on BBC1

— Other regional programmes on BBC1&2 taken together

— Regional programmes made in region

— Regional news and other programmes in peaktime and immediately preceding or followingpeaktime

— Production of network programmes made outside the M25 across BBC1&2 and BBC digitalservices taken together, by hours and expenditure

— Subtitling, sign language and audio description for sight/hearing impaired people—BBCmust observe the Ofcom code on this

— Independent productions (Schedule 12 Part 1 of the Act and Agreement)

Other

The BBC is also required to:

— Produce a code on programme commissioning in accordance with Ofcom guidance;

— Comply with international obligations notified to the BBC by Ofcom;

— Retain and produce recordings of television and radio programmes;

— Publicise Ofcom’s functions in relation to handling complaints (Schedule 12 Part 1 of theAct);

— Observe Ofcom’s code containing rules on coverage of major events (Part IV of theBroadcasting Act 1996 as amended by the Television Broadcasting Regulations 2000 andsections 299-302 of the Communications Act 2003)

— Co-operate with Ofcom and produce information to Ofcom in connection with

— Annual factual and statistical report

— Report on fulfilment of public service remit

Ofcom’s Functions Under Competition Legislation

Part 5 of the Communications Act sets out Ofcom’s functions under competition legislation, and inparticular, the areas where Ofcom can concurrently apply general competition law alongside the OFT. Todate the issue of the application by Ofcom of competition law to the BBC has not arisen.

Areas in which Ofcom has no Regulatory Role in Relation to the BBC

The sections of the Communications Act listed below apply to commercial PSB channels, but have noapplication to BBC Public Broadcasting Services. These are currently the responsibility of the BBCGovernors.



Tier 1 (“Negative” Minimum Content Standards and Complaint Handling)

— Programme standards concerning:

— Due impartiality

— Due accuracy in news

— Commercial products within programmes.

Tier 2 (Quotas)

— Party political, election and referendum broadcasts

Tier 3 (Public Service Remit)

— The BBC is only obliged to “consider . . . anything of relevance” in Ofcom guidance on annualreviews and statements of programme policy and Ofcom’s annual reports and PSB reviews, andit is itself responsible for assessing the quality and eVectiveness of its services, not Ofcom. In thecase of commercial PSB channels, any “significant change” in programmepolicymust be approvedby Ofcom, which also has backstop powers to impose detailed regulation in the case of seriousfailures. For the BBC, backstop powers rest, in eVect, with government through the Charter,Agreement and government’s power to approve and set conditions for new digital services.

Other

— Making arrangements for training and equal opportunities in employment

— Contributions to a National Television Archive

Competition Functions

Under Section 316 of the Communications Act Ofcom may include in all broadcast licences anyconditions that it considers appropriate to ensure fair and eVective competition in the provision of licensedservices or of connected services. All broadcast licences currently include a provision stating that the licenceholder must not:

(a) Enter into or maintain any arrangements, or

(b) Engage in any practice

that Ofcom considers, or would consider to be prejudicial to fair and eVective competition. This allowsOfcom to impose ex ante conditions on broadcast licensees where Ofcom has concerns that the licensee isor is likely to harm competition.

Currently Ofcom has four Codes that set out detailed rules in specific areas on the types of behaviour thatwe would consider to be prejudicial to fair and eVective competition. These cover the areas of:

— Advertising sales arrangements;

— Cross promotion;

— Minimum carriage requirements; and

— EPGs (excluding access and pricing arrangements which are covered under the Access Directives).

If a licensee were to breach the rules set out in these Codes, Ofcom would consider that the licensee wasacting in a manner prejudicial to fair and eVective competition and would be able to impose sanctions asset out in Schedule 13 of the Communications Act.

Clearly, since Section 316 is only applicable to Ofcom’s licensees, the BBC is not covered under any ofthese ex ante regulations.

PART 2: OFCOM’s PUBLISHED RECOMMENDATIONS CONCERNING THE BBC

In many areas of our statutory responsibilities, Ofcom must consider the BBC’s activities, since theCorporation is such a large and important part of the UK broadcasting market. In two recent documents,DrivingDigital Switchover: a report to the Secretary of State andOfcom’s review of public service televisionbroadcasting “Is Television Special?”, for example, the issues could not be discussed without reference tothe role of the BBC. In both documents, Ofcom made some firm recommendations and put forward somepropositions, which relate to the Government’s review of its Royal Charter. Below is a list of ourrecommendations and propositions.



Digital Switchover

— In the context that it is important for all broadcasters to have clear and unambiguous incentivesto drive digital switchover for it to happen,Ofcommade the following recommendations regardingthe BBC.

— “Ofcom recommends that as part of the BBC’s Royal Charter review, the Government addsspecific obligations to the BBC’s current general obligations to promote digital TV. They shouldinclude obligations on rolling-out digital transmission nationwide, providing public information,continuing to provide its channels on the free-to-view satellite platform, and providing on-airmarketing of digital TV on a platform-neutral basis.”

— In a discussion of which institutions should manage the process towards switchover, Ofcomrecommended the establishment of a body, termed SwitchCo, which would have suYcientindependence of broadcasters and the government. We recommended:

“Many interested parties—the Government, the broadcasters, Ofcom, manufacturers andretailers—will continue to have important roles to play in delivering switchover. They must agreeto SwitchCo’s role and remit, andwould be part of its governance arrangements. However, neithertheGovernment, nor the BBC, nor a consortium of broadcasters, norOfcom should run SwitchCobecause their interests are diverse. Instead, SwitchCo should have suYcient independence so it canrepresent the national interest eVectively, ensure platform neutrality and avoid conflicts ofinterest.”

Public Service Broadcasting Review

— Ofcom recognised the “strong case for the BBC to continue to undertake a wide range of activitiesto underpin the delivery of public purposes and characteristics of public service broadcasting.

— In relation to the BBC’s impact on audiences, we noted that audiences had fallen across the mainterrestrial TV channels. Also, the reach of terrestrial channels had fallen. We noted:

“In 2003, BBC One reached 80% of audiences in cable and satellite homes for 15 minutes or moreeach week, compared with 84% in 1998; the same channel reached only 75% of 16–34 year-oldsin 2003.”

— In relation to attitudes of the public to the BBC, we noted:

“The BBC was assumed by the public to have the most programming obligations, Channel 5 theleast. Audiences gave ITV1 some leave to pursue mass audiences with popular drama andentertainment.”

— In relation to the programming on BBC television over the past five years, we noted:

“Broadcasting professionals felt that the BBC had taken a more aggressive approach to winningaudiences in recent years and was less diVerent from other channels than it should be.”

— The changing environment of the television market is likely to pose further challenges to the BBC.We noted:

“The TV licence fee is already questioned by viewers whose use of the BBC’s services is declining.Dissatisfactionwith the BBC’s method of fundingmay increase and there is an additional questionabout whether the BBC’s income will keep pace with rising viewer expectations for high qualitycontent.”

— When evaluating the immediate consequences of our phase 1 research, we concluded:

“In parallel, the BBC needs to reaYrm its position as the standard setter for delivering the highestquality PSB. The BBC Governors should take the lead in ensuring the BBC addresses concernsabout derivative formats, aggressive scheduling, competition for acquired programming and abalanced schedule in peak hours.”

— Our first proposition which had consequences for BBC was:

“We need to examine the prospects for PSB funding and the case for seeking alternative resources.The existing funding base for PSB is being eroded. The traditional obligations on commercialbroadcasters, set by the regulator, are being undermined by increased competition, fallingaudiences and declining advertising revenue. The BBC faces a similar problem: popular supportfor the TV licence fee may be jeopardised by the same development. So, new forms of explicit orimplicit funding or support for PSB need to be considered for the longer term. These shouldinclude areas such as EPG positioning, digital multiplex access, commercial TV’s payments to theTreasury and other possible incentives.”



— Our sixth proposition for public service broadcasting was:

“Notwithstanding developments in the market, there is a strong case for the BBC to continue toundertake a wide range of activities to underpin the delivery of the public purposes andcharacteristics of PSB. But its range of activities needs to be reviewed periodically in relation tocore PSB purposes.

— Where a high cost of delivery is associated with low viewing figures, it will be harder to justifycontinued public intervention. Alternative means of funding, such as subscription, should beconsidered for these services.

— Other activities, including secondary market distribution, studio and other productionresources, and indeed production should be reviewed carefully against their distinctivecontribution to PSB purposes.

— Our seventh proposition was:

“In the case of the BBC, with its unique and privileged funding status, programmes should alwaysstrive to reflect the broad purposes and character of PSB to some degree.”

26 May 2004

Memorandum submitted by Capital Radio Plc

BBC CHARTER RENEWAL

Opening Statement about Capital Radio

Capital Radio plc operates 22 UK analogue licences across London, the South Coast, the Midlands,SouthWales, theNorth East, the NorthWest and central Scotland.We also have 56 digital licences on localand national digital multiplexes. Capital’s stations broadcast to over eight million adult listeners each weekand we employ approximately 700 people across our radio broadcasting interests.

Executive Summary

— The three areas where there is a need for more eVective regulation are programme formats,spectrum allocation and use, and the proper audit of the application of public funds (includingvalue-for-money).

— There should be no change to BBC Radio’s source of funding in the short to medium term. TheBBC should remain publicly funded through a compulsory licence fee. However, there should bemore transparency about the quantum of funds, application of funds, public accountability, andproper value-for-money evaluation.

— The BBC should be set up similarly to commercial companies, with the Management andGovernors between themmirroring the roles that an executive and Board of Directors would havein other corporate entities. Governors should be responsible for proper governance but not takeon the role of regulator. Their existing regulatory functions should be done externally by theSecretary of State, Ofcom and the National Audit OYce. The ex ante competition powers Ofcomhas in relation to BroadcastingAct licensed services should be extended to the BBC, and the BBC’saccounts should be subject to full audit (including value for money audits) by the NAO.

— Given the rapid changes which are occurring in the media environment through technologicaldevelopments, growth of on-line services, demographic changes, and—coupled by the prospect oftelevision digital switchover before 2016—there should be a review of the Charter every five years.

— There is a need for more eVective regulation of programme formats, spectrum allocation and useand application of funds.

Question 1: What Scope and Remit Should the BBC Have?

1.1 Although the Select Committee’s question was primarily directed at BBC television services, theCommittee may also be interested in examining this question with respect to radio.

1.2 BBC Radio is currently the dominant player in UK radio, with over 50% of radio audiences. Whilethe commercial sector would certainly wish to see a reduction in the BBC’s share, this should come aboutthrough improving our own services to make them more attractive to listeners, rather than by forcing theBBC to become less popular. However, what commercial radio does seek is more equitable treatmentthrough regulation to enable us to compete fairly and eVectively and for the scope and remit of the BBC tobe clearly defined and monitored.



1.3 The three areas where we believe there is a need for more eVective regulation are programmeformats, spectrum allocation and use, and the proper audit of the application of public funds (includingvalue-for-money).

Programme Formats

1.4.1 Commercial radio stations are subject to strict format regulation by Ofcom, under the terms of theBroadcasting Act 1990. This is the “quid pro quo” for the use of a valuable public resource, namelyspectrum, by the commercial sector. Ofcom can monitor compliance with formats, or follow up oncomplaints. If a commercial operator is found not to be broadcasting within the terms of its format, it willbe in breach of its licence and face statutory penalties (a fine, shortening of a licence, or revocation).

1.4.2 By contrast, BBC Radio’s analogue services (that is, Radios 1 to 5 and local BBC radio) are notsubject to any external format regulation whatsoever. This contrasts to the BBC’s new digital radio serviceswhere formats were agreed by the Secretary of State for Culture, Media and Sport. This also contrasts withthe new arrangements for BBC television. Under the terms of the revised Agreement, the BBC will have itsdelivery against its statements of programme policy reviewed by Ofcom as part of Ofcom’s regular reviewof public service television. There is no provision for any external review of BBC Radio services.

1.4.3 The revised Agreement provides that each year the BBC must prepare and publish statements ofprogramme policy for each service. For radio, the BBC is responsible for monitoring its own performanceand reporting on this in the Annual Report. There is no external validation of the BBC’s evaluation, andno sanctions if the BBC does not meet its promises. So, in contrast to the commercial sector, the “quid proquo” for the BBC’s use of two valuable public resources—spectrum and the licence fee—is a completeself-regulatory regime for programming.

1.4.4 It might be helpful for the Committee to see how the detail of self-regulated formats compares tostatutory regulation.

1.4.5 Radio 1’s remit, as set out in the statement of programme policy for 2003–04 is:

BBC Radio 1 aims to oVer a high-quality service that is relevant to its young target audience andtheir lives. Music is at its core but this is augmented by other distinctive public service elementsincluding original news, features and informative advice campaigns on the issues that matter tothe audience. The network aims to deliver the best new music, with a music policy covering all therelevant genres.

Commitments: BBC Radio 1 will play a key role in British music, with a range of support forhome-grown talent. At least 35% of the playlist will be made up of UK artists.

We will broadcast 2,700 hours a year of specialist music—about 40% of the output—covering allthe appropriate youth genres.

We will broadcast 270 hours a year of news and current aVairs.

We will continue to commission features and documentaries on a wide range of subjects, includingmusic and other issues of importance to a young audience.

1.4.6 The Committee may wish to compare that with the format, regulated by Ofcom, for Capital FM,the current chart hits service in London:

Capital FM is a predominantly contemporary/chart music LED service for under 40s in London

Music programming will be predominantly (up to 100%) current chart hits, new releases, and hitsless than 10 years old.

No more than 20% will be hits over 10 years old.

Specialist programmes for the target audience, which complement the main music mix, may bebroadcast in non-daytime for up to 15 hours a week.

Speech must account for at least 15% daytime weekdays (10% at weekends) or 5% non-daytime.

News bulletins containing local/regional news must be broadcast at least during peaktimeweekdays and breakfast at weekends. National news will feature at other times.

Other information, including entertainment news, travel news, whats-ons, leisure activities and soon should be balanced across each day.



1.4.7 Or indeed, the format for Xfm, Capital Radio Group’s service playing “alternative rock” musicin London:

Xfm will be targeted at 15-34 year-old London listeners, providing a specialist music format of“Alternative Rock”, best defined as modern rock with attitude, featuring artists generally outside themainstream.

Tracks and artists featured will generally be groundbreaking “alternative” artists, innovative,youthful, generally guitar-led. Output will not be expected to have much overlap with other, moremainstream stations, or become chart-hit oriented (whether past or present charts).

Up to 50% of the output will be current popular alternatives (from the last two months), with therest of programming made up of breakthrough tracks from the previous fortnight, classicalternatives and “roots” tracks which played a part in alternative evolution. None of thosecategories should exceed 30% of the output.

Daily programming will contain whats-on information, news about bands, a full weeklyalternative rock review programme, and at least three weekly “live” sessions (each at least 15minutes) commissioned forXfm.At least four bulletins a dayweekdays and three weekends shouldcontain relevant local/regional news tailored to the tastes of the target audience. National newswill feature at other times. Sport is seen as a key interest to the target audience and a music/sportmix on Saturdays may be aired.

1.4.8 The Committee may note that, unlike for the commercial sector, neither the music remit nor thetarget age demographics of BBC Radio 1 is defined, thereby enabling the BBC to shift its music policy toaim at whatever audiences it wishes. Nor is there any clarity or distinctiveness about BBC Radio 1’s publicservice remit. This results in unfair competition against the commercial radio sector, as we are strictly boundby our remits and target demographics.

1.4.9 Radio 2’s remit is similarly unspecific about music:

“BBC Radio 2 aims to bring a wide range of popular and specialist music, news, current aVairs,comedy, readings and social action campaigns to a mainstream audience. In addition, we arecommitted to oVering a variety of religious output catering for the diverse beliefs of our audience.”

1.4.10 This would account for BBC Radio 2’s ability to shift to a younger target audience over the pastfew years, competing directly with the commercial sector. BBC Radio 2 is now the most listened to radiostation in the UK and can shift and adapt its output at whim.

Spectrum Allocation and Use

1.5.1 Commercial radio is currently assigned 8MHz of the FM waveband, whereas the BBC is assigned11.5MHz. Commercial radio has a 46% share of FM radio listening with the BBC having a 54% share. Acrude assessment of the ratio of audience delivery to spectrum occupation, indicates that commercial radiois 23% more eYcient at delivering audience per spectrum allocation despite having only one national FMservice (Classic FM) in contrast to the BBC’s four national FM licences.

1.5.2 The BBC broadcasts many radio services in triplicate on the AM, FM and digital wavebands andis guaranteed space on digital radio multiplexes. Commercial radio services are not guaranteed digitalmultiplex spaces. Of the BBC’s 46 analogue radio stations in the nations and regions, half are simulcast onboth AM and FM with Asian Network programming on seven of the AM frequencies in selected eveningand weekend slots.

1.5.3 The allocation of valuable spectrum space between the BBC and commercial sector should bereviewed.

Audit

1.6.1 Unlike other publicly funded bodies, the BBC is not subject to the financial controls of theComptroller and Auditor General, nor audited by the National Audit OYce (“NAO”). The BBC, as far asCapital Radio is aware uniquely among public bodies, is independently audited (currently by KPMG).Although the BBC publishes financial information as part of its Annual Report, much detail remains hiddenand unavailable for public scrutiny. For example, according to the 2002–03 Annual Report, the cost perhour of originated programming on Radio 1 is £2,700, and on Radio 2 it is £4,200. Nowhere are these costsbroken down or explained. The BBC has claimed that its programming budget for digital radio alone is £200million. This is double the turnover of the entire Capital Radio Group. What has been lacking to date isany evaluation of whether the additional costs of BBC Radio services represents value for money for thelicence fee.

1.6.2 Paragraph 4 of the Schedule to the amendment to the BBC Agreement dated 4 December 2003requires the BBC Audit Committee to examine the value for money achieved by the Corporation in usingthe licence fee. In doing this, they must consult with the Comptroller and Auditor General over the possiblescope of an audit programme and consider which individual reviews under that programme might best beconducted by the NAO.



1.6.3 Capital Radio does not believe this arrangement properly addresses the requirements of a full valuefor money audit.

1.6.4 Significantly:

— although reports will be done by independent bodies, including the NAO, the factual content ofany report is to be agreed by the BBC;

— there is no requirement for any public consultation, either on the audit programme itself, or onindividual reports;

— while the reports (and any BBC response to them) are to be laid before Parliament, there is no otherarrangement for them to be made public; and

— the Audit Committee may make recommendations to the Governors following on from the report(and indeed, the report itself may include recommendations), but there is no requirement for theserecommendations to be made public, or indeed be reported to Parliament.

1.6.5 We believe these arrangements remain unsatisfactory and that, as part of Charter Renewal, theBBC’s accounts and practices should be subject fully to scrutiny by the NAO.

Question 2: How Should the BBC be Funded?

2.1 We believe there should be no change to BBCRadio’s source of funding and it should remain publiclyfunded through a compulsory licence fee in the short to medium term. However, there should be moretransparency about the application of funds, public accountability, and proper value-for-money evaluation.

Public Funding

2.2.1 Although television has seen the successful growth of funding through subscription, no equivalentmodel of success exists for radio. The only subscription-funded radio service in the UK, Music Choice, is amusic-only (i.e. no speech) service aimed primarily at providing background music in commercial venues.We do not believe it would be valid to extrapolate anything from this one example.

2.2.3 In the UK, therefore, there are two models for radio funding: advertising and public funding.Although successful in building advertising revenue and growth over the past 28 years, commercial radioattracts only 6% of all display advertising revenue. If BBC Radio were to compete for this narrow market,we believe it would be to the detriment of all radio services and to the benefit of none. Should radio’s shareof advertising revenue grow substantially over the coming years, there may be scope for considering theprivatisation of Radios 1 and 2. But to do so now would introduce an unacceptable level of new competitioninto the commercial radio market.

2.2.4 The BBC has recently undertaken a number of commercial “partnerships” including associationwith the Radio 1 chart show and local and national events which directly aVect revenue opportunities forcommercial radio. We believe that these commercial activities should be reviewed and curtailed.

Transparency and Accountability

2.3 As stated in paragraph 1.6.1 above, the BBC’s published accounts are noteworthy for their lack oftransparency. We believe, as the receiver of over £2 billion a year, the BBC should be far more accountablefor its spending policies and practice. There is no justification for a public body hiding behind the excuse of“commercial confidentiality”.

Question 3: How Should the BBC be Governed and/or Regulated and what Role Should be Played

by Ofcom?

3.1 We believe that the BBC should be set up similarly to commercial companies, with the managementand Governors between them mirroring the roles that an executive and Board of Directors would have inother corporate entities. Governors should be responsible for proper governance but not take on the role ofregulator. Regulation should be external, and divided between the Secretary of State, Ofcom and theNational Audit OYce.

Role of BBC Management

3.2 The number and structure of BBC management is a decision for the Director General, with theapproval of the Governors. The role of management, vis a vis the Governors, is ultimately a matter fordecision by the Governors. However, we believe the arrangements should be modelled on that of othercorporations, with staV management having responsibility for the day-to-day operational running of BBCservices, under the strategic guidance of the Governors.



Role of BBC Governors

3.3.1 The functions of the Governors as set out in the BBC Charter read as a blueprint for the duties ofa responsible corporate board. Under the Charter, the Governors are to:

— Approve and monitor performance of the BBC’s programme objectives;

— Ensure the terms of the Agreement are satisfied;

— Satisfy themselves that the BBC is complying with its fair trading commitments;

— Satisfy themselves that the BBC is providing value for money in the use of public funds;

— Determine overall strategy;

— Ensure proper liaison with the BBC’s National Councils;

— Ensure complaints are properly handled;

— Monitor and supervise the fulfilment of legal and contractual obligations, including compliancewith codes and guidelines of programme content;

— Determine strategy for and oversee the provision of the commercial services;

— Determine strategy for the World Service; and

— Appoint an audit committee, the Director General, and Senior StaV.

3.3.2 Many of these functions are to do with oversight and governance and are properly the remit of theGovernors. However, some functions also have a regulatory perspective (compliance with programmeobjectives and content codes, compliance with fair trading obligations, value for money, complaintshandling). Until the commencement of the Communications Act 2003 and the most recent changes to theAgreement, theGovernors were the back-stop body for all of these functions; they were responsible for bothproper governance, and—ultimately—for regulation. This has led to an unacceptable confusion of roles.The Governors are not only expected to act as judge and jury, but as Counsel for the defence as well.

3.3.3 Under the terms of the revised Agreement, Ofcom is now the competent regulator for certainprogramme-related functions (as described below). We recommend that the Governors’ remainingregulatory functions be redistributed, leaving the Governors responsible for ensuring proper governance ofthe BBC, without any potential confusion of their role. We further recommend that the Secretary of Statereconsider the range of competencies required by the Board of Governors and seek to appoint Governorswith relevant expertise. The remuneration for the Governors should also be reviewed to reflect their level ofresponsibility, including ensuring the proper application of over £2 billion of public money.

Role of Ofcom

3.4.1 Under the terms of the revised Agreement, Ofcom is now the responsible regulator for the BBC’sobligations to comply with television quotas (Tier 2), and programme standards (except for accuracy andimpartiality) and fairness and privacy (Tier 1). Ofcom is also now able to review and consider complaintsabout BBC services. In addition Ofcomwill review the BBC’s television output as part of its regular analysisof public service television.

3.4.2 In order to clarify the role of the Governors, and to ensure consistent regulation with otherbroadcast services, Ofcom should also have responsibility for ensuring the BBC’s output is impartial andthat news is presented with due accuracy.

3.4.3 In section 1 above we set out our concerns about the lack of formal regulation of BBC’s radioformats, and the unfairness of the flexibility aVorded by their self-regulation. Charter Renewal oVers theopportunity to address this inequity and to make the BBC accountable to proper and full external scrutiny.

3.4.4 The arrangement would also work to ensure that the BBC concentrates on providing a truly publicservice, and not onewhich competed directlywith the commercial sector for themost popular programming.Ofcom’s recent Public Service Television Review demonstrates that audiences do not want the BBC tobroadcast copycat popular programming which is already well provided by licensed services. Although theresearch only looked at television, the same principles apply to radio: listeners will value The Archers, andthe distinctiveness of Radios 3 and 4. But it does not benefit listeners to Radios 1 and 2 to hear—at leastduring daytime peak—identical material to that available on commercial stations. Listeners want—anddeserve—something diVerent.

3.4.5 Ideally, we would like BBC radio to be subject to similar format obligations as the commercialsector. However, if the BBC is to be permitted to write its own promises of programme performance, Ofcomought to be responsible for ensuring the BBC’s compliance, with the same back-stop powers to enforceformat obligations as exists for PSB television licensees.



3.4.6 The commercial radio sector has regularly complained about anti-competitive behaviour by theBBC, ranging from its ability to cross-promote its services across platforms, to raising the price of radiosports rights and talent without regard formarket prices; from introducing new digital radio services backedby generous public funds in direct competition with existing (but struggling) commercial digital services, toarranging commercial sponsorships of spurious “events” and thereby detracting advertising revenue fromlicensed services. The OFT has been unable to pursue complaints under the Competition Act for the simplereason that the BBC is not advertiser-funded and therefore, under the terms of the Act, not operating in thesame “market”. The same problems would face Ofcom under the Competition Act.

3.4.7 However, Ofcom is empowered under the Communications Act to apply ex ante competitionobligations on its Broadcasting Act licensees. This power is potentially far more flexible and wide-rangingthan its Competition Act ex post powers. The power (set out in section 316 of the Communications Act)enables Ofcom to include licence conditions appropriate for ensuring fair and eVective competition in theprovision of licensed services. The conditions can include provisions to ensure that service providers do notenter into or maintain any arrangements or engage in any practice which Ofcom considers would beprejudicial to fair and eVective competition. Licensees are required to comply with any Code that Ofcomissues in this regard.

3.4.8 We recommend that, as part of Charter Renewal, Ofcom is empowered to apply these competitionconsiderations to the BBC, and that the BBC should also be subject to any Ofcom Code. While we do notwish to prejudge the outcome of any investigation Ofcom might undertake under these competitionobligations, this would provide additional oversight of the BBC’s compliance with its fair tradingrequirements and enable proper examination of the eVect of the BBC’s behaviour on the rest of thebroadcast sector.

Role of Secretary of State

3.5.1 As the recipient of substantial public funds for the provision of public services, there ought toremain some mechanism to ensure accountability to Parliament (over and above the laying of the AnnualReport).We therefore consider that the Secretary of State ought to retain her role in this regard with specificreference to the appointment of Governors, changes to the licence fee, Charter and Agreement, and theapproval of new services. However, as indicated in section 3.4 above, Ofcom ought to take formalresponsibility for ensuring the BBC’s compliance with the programming conditions for new (and existing)services.

3.5.2 We see no reason to change the current arrangements for the World Service.

Role of National Audit OYce

3.6 We have set out in section 1.6 above why the BBC should be subject to the same degree of scrutinyof its accounts as other public bodies and should therefore be fully accountable to the NAO. The NAOshould also take over the regulatory functions of the Governors in relation to evaluating value for money.It is impossible to see how the Governors can adequately consider value for money without access tocomparable industry data. Unlike the Governors, the NAO is in a position to compare and analyse costsand spending across the broadcasting sector.

Question 4: Does a 10-year Royal Charter and Agreement with the Secretary of State, Together,Provide the Most Appropriate Regime?

4.1 On the assumption that the BBC will continue to receive a substantial amount from public fundslevied by way of a compulsory licence fee, then the decision as to the BBC’s continuing arrangements shouldbemade by someonewith direct accountability to Parliament, namely the Secretary of State. Given the rapidchanges which are occurring in the media environment through technological developments, growth ofon-line services, demographic changes, and—coupled by the prospect of television digital switchover before2016, there should be a review of the Charter every 5 years. There may be scope for retaining a major reviewonly every 10 years, not least given the amount of resource both internally at the BBC and outside is devotedto each Charter Review, but there should be some opportunity at lesser intervals to review whether theassumptions and criteria applied at the last major review continue to be appropriate.

May 2004



Memorandum submitted by Parliamentary OYce for Science and Technology (POST)

DIGITAL CONVERGENCE AND THE BBC CHARTER

Introduction

The BBC’s Royal Charter is due for renewal in December 2006. The Culture Media and Sport (CMS)Select Committee announced an inquiry into the Charter renewal in March 2004. This report is to providethe CMS Committee with an idea of how the relevant technology has developed since POST examined thedevelopment and convergence of digital communications in the UK in 2001 (POST report and POSTnote17024), where the technology may take us over the time-frame of the next Charter, and what the implicationsare for public service broadcasting.

Background

Rapid changes in communication technology are aVecting the world of broadcasting. Whereas, until sixyears ago, all television (TV) channels in the UK were received in analogue form, many televisionprogrammes are now encoded and delivered using digital technology. By encoding the signal digitally moreservices can be delivered over a given amount of spectrum so enabling more choice of channels as well as arange of interactive services.

Digital television

Digital TV (see below) in the UK can currently be accessed by three main methods:

— digital satellite, mainly provided in the UK by BSkyB;

— digital terrestrial television (DTT) delivered through TV aerials, provided by the Public ServiceBroadcasters and others, including Freeview (a consortium of the BBC, Crown CastleInternational and BSkyB) and a (recently-launched) “pay-light” subscription service provided byTop Up TV; and

— digital cable, via companies such as NTL or Telewest.

Traditional analogue televisions cannot decode digital signals, so viewers need either a set-top-box toconvert the signal or an integrated digital TV set (iDTV). Currently, set-top-boxes for converting digitalterrestrial TV (DTT) signals, including Freeview, can cost under £50. Top Up TV requires a slightly morecomplicated set-top-box or iDTV set, with the PayTV facility either built-in or plugged in to a special “CI”socket. For satellite TV, installation of a receiver dish and satellite decoder is necessary. Most channels arereceived by subscription or pay-per-view, but some can be received freely (notably the BBC channels). Cablereception is also by subscription and pay-per-view.

Digital television is more eYcient in its use of radio spectrum than analogue TV. Switching oV analogueTV will release some of the spectrum for further digital TV services or other communication uses. InSeptember 1999, the Government set two pre-conditions for switch-oV:

— availability—everyone who can currently receive themain public service broadcasting channels onanalogue television (99.4% of the population25) must be able to receive them digitally by one ormore methods; and

— aVordability—as an indicator of this, 95% of consumers must have a digital TV receiver in thehome.

What is digital TV?

Until 1998, all TV channels in theUKwere received in analogue form—a continuously variable signal—whether by aerial, satellite dish or cable. Digital TV encodes the original television picture as a series ofnumbers (1s and 0s) then uses computer processing to compress it so it can be transmitted in a fraction ofthe “space” in the radio spectrum taken by the equivalent analogue TV signal. Advantages of this methodof encoding and transmission include:

— more services can be delivered over the same radio-frequency channel—so a wider selection ofservices is possible;

— many diVerent types of digitised information can be transmitted—such as sound, still or movingpictures, text and data. For example, as well as traditional programming, faster, more interactiveand graphical teletext services are possible;

— the digitised signals can be readily manipulated using computer technology, stored electronicallyand adapted for presentation on diVerent devices;

24 E is for Everything? Public policy and converging digital communications. POST report 170, December 2001.25 Although the figure for Channel 5 is lower.



— it is easy to provide interactive services, such as using the remote control to obtain moreinformation about programmes, or with a modem and phone line to provide full two-wayinteractivity (see Interactive section); and

— because a digital TV service takes up less spectrum than its analogue equivalent, switching overcompletely to DTT will make it possible to release some of the UHF spectrum (see SpectrumManagement section) for other purposes (such as navigation or other communications). TheGovernment argues that this re-use will have economic benefit. However, much of the releasedspectrum could still be used for digital TV or increase the number and/or technical quality ofservices available. Further, only limited spectrum could be re-allocated without requiring largegroups of viewers to change their receiving aerials.

Spectrum management

Both analogue and digital TV and radio signals are transmitted over air in the radio frequency bands ofthe electromagnetic spectrum. Both analogue TV and DTT share the same (UHF) band.

DTT services are currently broadcast over six multiplexes, or data pipes. Each multiplex carries severalchannels and can be easily reconfigured to vary the number of channels carried. However, this number isreduced when programmes are transmitted at higher quality or resolution as this takes up more bandwidth.New technologies have been developedwhich are better at compressing the digital TV signal. These could, intheory, increase the eYcient use of theDTT bandwidth, but would require all the existingDTT transmissionsystems to bemodified as well as a complete replacement of the existing receiver population. However, thesenew technologies may be used in the future to squeeze a broadcast quality TV signal down an xDSLtelephone line (see Broadband section).

Analogue-digital switchover

In 1999 the Government stated that digital switchover could start in 2006 and be completed by 2010. Toachieve this completion date a Government decision to proceed on this basis would need to be made aroundthe end of 2004. The Government will need to work closely with the communications regulator (Ofcom),manufacturers, broadcasters and retailers to achieve this date.

The speed of digital technology development soon makes the current generation of devices out of date.Consumers are used to renewing computers andmobile telephones fairly regularly to keep up with the latestapplications, but they are not so used to regularly changing their television sets and video recorders. Anupgrade policy is therefore needed to help encourage people to keep up with the digital TV world. Thetechnology is also very complex, but needs to be extremely simple to install and use to encouragewidespread uptake.

Fifty-three per cent26 of households now have digital TV, up from 50% at the end of 2003 and 41% at theend of 2002. All the distribution platforms (methods) are important to ensure widespread access to digitalTV, taking into account aVordability and geographical coverage:

UK viewers by television distribution platform (primary TV set) at end 2003

0.8% Free-to-view satellite

Analogue terrestrial

46.3%

Freeview 12.0% Analogue cable 3.9%

Digital cable 9.3%

Sky Digital 27.6%

Sources: Ofcom, BBC estimates of Freeview take-up (primary TV set only) and free-to-view satellite. Doesnot separately show the very small numbers of subscribers who receive linear digital TV channels via anxDSL service.

26 Ofcom, May 2004.



— DTT—the introduction of Freeview in 2002 rapidly increased the uptake of DTT, with aVordabledecoders and a wider choice of free-to-view channels than analogue TV. During 2003 1.5 millionDTT set-top-boxes or iDTVs were bought and sales of iDTVs doubled.

— Digital satellite—subscribers to SkyDigital have also continued to increase with 600,000 homesadded, during 2003, to the 6.9 million that already pay monthly subscriptions for their pay TVservices. Although there is almost full geographical coverage (x98%) by satellite there are someareas that are in a satellite shadow or some buildings which cannot have a satellite dish, eg forenvironmental reasons.

— Digital cable—the number of homes with cable TV stayed constant throughout 2003, maybebecause they have not had any further major roll outs for financial reasons.

— Broadband—Digital Subscriber Line (xDSL) technology (broadband) is forecast to start taking-oV as a platform for digital TV distribution this year with broadband subscribers increasingrapidly (see Broadband section).

The terrestrial analogue signal will be turned oV region by region. Individual analogue channels mayalso be turned oV in sequence to free up some of the spectrum for replacement high power digitaltransmissions before the final total analogue switch-oV date. It has not yet been decided in which order thechannels will be turned oV.

It has been forecast that, left entirely to the market, digital TV will be in 95% of households by 2013 27,with only 72% of first TV sets converted by 2010 28. Therefore, there are several barriers that still need to beovercome before analogue switch-oV if a 2010 date is to be achieved. These include:

— Communication and marketing—a report by the Generics Group for the Digital TelevisionProject shows that many people are not fully aware of what digital switchover will mean. It isthought that when a definite date is announced for analogue switch-oV this will make a diVerenceto the rate in which people convert to digital TV. 5% of respondents to the survey said they wouldnever convert, with cost being reported as a significant barrier. The report recommends that thisbarrier be addressed, as well as encouraging people to start converting to digital now so there isnot a surge in demand for digital equipment just before switchover in each region. However, thereare still millions of consumers who see no reason to adopt digital TV at all, because they see theanalogue switch-oV policy as coercive; think the new technology is too expensive, confusing anddiYcult to use; or are simply happy with what they have already.

— Converting secondary TV sets—many households that have digital TV have only their primarysets converted. 41% of viewing in all homes is on secondary sets, and only 14% of these have beenconverted so far.

— Aerial problems—some households need new roof-top aerials, either to increase the signal strengthor to have a wideband reception to receive all DTT channels. This problem will probably still existafter switchover. Some roof-top aerials will have to be adjusted or replaced to receive signals froma diVerent transmitter.Many secondary sets use set-top aerials throughwhich it will be challengingto ensure good reception.

— Recording method—recording digital broadcasts on video cassette recorders (VCRs) is not easyat the moment. Using a (single tuner) set-top box for both the TV and VCR will not allow viewersto watch one digital channel whilst recording another digital channel. Twin-tuner set-top-boxescould provide a solution. There are Personal Video Recorders (PVRs—see Time-shifting TVsection) with twin DTT tuners on the market already but many viewers will want to retain theirVCRs.

— DTT coverage—currently only 73%ofUKhouseholds can receive the fullDTT service. Even afteranalogue services have been withdrawn, and DTT transmission powers increased, only 95% ofhouseholds would be reliably covered from the 80 current transmitter sites.

— Free-Sat—as DTT is not currently receivable by the whole country, a viewer-friendly solution isneeded to provide a reliable subscription-free way of receiving the main public servicebroadcasting channels via digital satellite.

Ofcom’s role in switchover

Ofcom is the new communications regulator. It replaced the five previous regulators at the end of 2003.Ofcom is carrying forward the previous regulators’ work in the sphere of spectrum planning. This willinclude:

27 Progress Towards Achieving Digital Switchover—a BBC Report to the Government, BBC, 26 April 2004.28 Attitudes to Digital Switchover: The Impact of Digital Switchover on Consumer Adoption of Digital Television. Preparedfor the Digital Television Project by the Generics Group, March 2004.



— considering spectrum charging, including to the BBC who are not charged at the moment, toensure eYcient use of the spectrum29. Increased charges for access to the existing analogue TVbroadcast spectrum might also act as a significant spur to the broadcasters to promote earlyswitchover;

— negotiating, planning and evaluating the use of any released spectrum and co-ordinating the planfor the regional roll-out of digital DTT transmission;

— reviewing the role and delivery of public service broadcasting in an all-digital world;

— assessing the ease of use of digital TV equipment on sale and enhancing the public’s medialiteracy; and

— monitoring and analysing the broadcasting market and digital TV adoption and monitoringcompetition in the broadcasting market.

The Changing Face of Broadcasting

Broadcasting is no longer simply scheduled television on TV sets and radio programmes on radios. TheBBC already has an extensive, continuously developing website that is widely used throughout the world.It is also possible to listen to a number of BBC and commercial radio services on digital televisions, to seewritten information and images on digital radios (see below), to watch television on PCs and to watch videosand listen to the radio on the Internet. There are several key trends in digital technology:

— increased local storage (up to 4,000 hours of video by 2016);

— increased bandwidth to the home (enabling films to be downloaded in minutes by 2016);

— increased personalisation (to help make sense of huge increase in choice); and

— increased interactivity (enabling new forms of virtual community).

Production

Most TV programmes are now produced using digital technology because it is eYcient and economic todo so. It is also easier to store and re-use material. Programmes can be made at a very high quality, if theyare deemed to have a long commercial shelf life. Once a programme is made at high quality it can bedistributed at a lower quality if necessary.

In preparation for a wider use of digital technology, the BBC and others are already making highdefinition television (HDTV) programmes even though there is only one HDTV satellite service in Europeat the moment, serving Belgium (see below). Some of these programmes can be sold to the USA that canbroadcast them on HDTV sets now. They can be broadcast in the UK when this technology is ready to beused and enough people have the appropriate sets for there to be a suYcient market.

High Definition TV

HighDefinition TV (HDTV) has a very high picture quality, which is especially needed on larger screensand for viewers used to DVD-video quality. Technological developments and market circumstances meanthat HDTV could be broadcast in the UK within the next five years. However, it would be extremelybandwidth-hungry, requiring most of a DTT multiplex which could otherwise carry four to six StandardDefinition [SD] channels. Limited DTT bandwidth suggests that, in the absence of improvements in thecompression technology currently implemented for European digital TV, HDTV could only be eYcientlyintroduced for the satellite and cable platforms. Although production costs for HD programmes are similarto SD, there is a limited amount of suitable content, eg high-end drama and sporting events such as theOlympics. In additionHDTV is not compatible with any of the current digital receivers and so a new specificHD receiver or TV would need to be purchased by consumers.

The BBC, which is considering distribution of HD, suggests that broadcasters could go a long waytowards improving picture quality, without making the leap to HD, by paying closer attention to the waySD services are made and transmitted. Distribution of HD would not, in itself, be a driver for digital take-up for the owners of millions of small-screen SD analogue televisions currently in the market, but it wouldbe a service potentially of interest to the growing number of owners of large screen devices.

Broadband

Broadband could become a fourth main method for delivering digital TV once it is more widelyavailable. Broadband is a term used to refer to a group of technologies that can deliver content to users overhigh speed telecommunications networks eg cable or xDSL (a technology that allows copper telephone linesto transmit broader bandwidth). This access is always available, without the need to dial up.

29 The BBC do however contribute to the cost of spectrum enforcement eg Ofcom’s role in shutting down pirate broadcasters.



Growth in UK broadband connections by residential users and SMEs30 at the end of April 2004

Total broadband: 3,992,500DSL: 2,446,000Cable modem: 1,538,000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Oct

-00

Jan-

01

Apr-

01

Jul-0

1

Oct

-01

Jan-

02

Apr-

02

Jul-0

2

Oct

-02

Jan-

03

Apr-

03

Jul-0

3

Oct

-03

Jan-

04

Apr-

04

Thou

sand

s

Total DSL inc. LLU Cable modem

Source: The Ofcom Internet and Broadband Update. Ofcom, April 2004

Broadband roll-out is acceleratingwith a 200% increase in take-up betweenOctober 2002 andNovember2003. There are now more than 3.99 million subscribers to broadband and it is in 14% of UK homes.Broadband is currently available to 90% of households, mostly concentrated in urban areas. BT expectavailability to reach 99.6% 31 of households by the summer of 2005, though the transmission speed may notalways be adequate for full broadcast quality TV across all of these households.

International broadband Internet take-up, June 2003

0

5

10

15

20

25

Korea

*Cana

da

Netherla

nds

Swden

*Japa

n*U

SA

*Germ

any

*Franc

e*U

K*It

aly

Irelan

d

Czech

Repu

blic

Poland

Subs

crib

ers

per 1

00 p

eopl

e

Source: Broadband Audio-Visual Services: Market Developments In OECD Countries, OECD, January2004. G7 nations marked with*

With the rise in the use of broadband, the potential advantages become clearer. It can deliver digital TVto households where traditional digital TV platforms may be unattractive, unavailable or impractical.Linear (ie real-time—as broadcast) digital TV channels are already oVered to TV sets by KingstonInteractive Television and Video Networks (Home Choice). Also, some PCs can be equipped to receivelinear digital TV channels, such as Sony Vaio, with the added advantage that the PC hard disc drive can actas a video recorder and time-shift programmes (see below).

30 SMEs—small and medium enterprises.31 The Ofcom Internet and Broadband Update, April 2004.



Time-shifting TV

Time-shifting TV allows the viewer to set their own schedule. Oneway of achieving this is through video-on demand, which is now a practical proposition because of faster broadband access. Video Networks’Home Choice package includes high speed internet access of 1Mbps 32 to a PC and digital television and on-demand channels to a television set, through the same telephone line. The BBC has a video and audiobroadband service and also intends to make their archives available via broadband Internet; however,programmes with commercial value will be encrypted to limit access to seven days.

Personal Video Recorders (PVRs), such as Sky! and similar DTT devices, are another way of timeshifting digital TV. Rather than recording programmes onto a tape, they use a large hard disk drive (up toabout 40 hours). Such systems diVer from conventional video recorders (VCRs) in that:

— as well as recording and playing back programmes, the device can “pause” live programmes (byrecording the parts transmitted after the pause);

— there is no need to fast forward or rewind tapes to search for programmes—a digital index ofrecorded programmes is maintained and can be shown on the TV screen;

— viewers can watch one recorded programme while recording another; and

— some can also learn viewers’ tastes and record suitable programmes without being requested.

Such innovations have a number of possible commercial and social implications. In some cases therecorder is plugged into a phone line and calls back to the service provider every day to maintain up-to-dateschedule information. Data about people’s viewing habits could also be transmitted, and because the harddisc drive is able to record details of all programmes watched, this raises privacy concerns. Should PVRsbecome widely used, the ability to skip advertisements may have ramifications for advertisers andcommercial television channels, although broadcasters hope to increase the success of advertising spots byadding interactive content. PVRs are much easier to use than conventional recorders, which are infamousfor the diYculty involved in programming them. Therefore, it is conceivable that these tools will be usedmore widely, allowing people essentially to schedule their own programming. This could have implicationsfor regulatory structures such as the 9 o’clock watershed. A wide uptake of these PVRs could lead tobroadcasters transmitting more programmes at oV-peak times specifically to be recorded, so making fulleruse of the spectrum.

Interactive

All UK digital TV operators oVer some TV-specific interactive services, such as an up-to-the-minutechoice of news stories. Web TV, Internet access on the television, has not taken oV, although a few yearsago it was thought it would be very popular; however, its popularity may increase when accessed over abroadband connection.

There are two levels of interactivity which can be associated with digital TV. Full interactivity requiresa return telecommunications channel eg a telephone line connected to the TV or set-top-box to enableactivities such as voting. However many broadcasters make use of “local” interactivity—also known asenhanced broadcasting—which does not require a return path. For programmes such as Wimbledon,viewers can choose which tennis match they want to view and have extra information such as results,statistics and players’ profiles at the touch of a button without the need for a return path. The level ofinteractivity provided by each distribution platform may not always be the same, even for the sameprogramme, due to the diVerent characteristics of the platforms; for instance the limited bandwidth on theDTT platformmay restrict what can be provided eg the number of alternativeWimbledon matches to view.

Electronic Programme Guides

Most set-top boxes and PVRs have electronic programme guides (EPGs) which enable viewers to:

— see what programmes are available by date and time—and sometimes by subject;

— view background information, for example on the actors, directors, the film locations, etc;

— build personal lists of their favourite channels;

— build personal lists of programmes to watch in the days ahead—the EPG will then remind themwhen the programme is about to start or will start the video/DVD recorder;

— buy movies on demand; and

— block out specific channels or programmes above a certain rating.

More advanced set-top boxes and EPGs will allow personalised profiles to be stored and then used toidentify likely programmes of interest. They will also provide more advanced search options.

32 Mbps—Mega (1 million) bits per second.



The order that channels are listed on these EPGs has been shown to influence the watching pattern ofmany people. Ofcom is required by the Communications Act 2003 to publish a Code which would apply toall EPG providers. The Code must explain how public service channels (the BBC’s public services, ITV1,Channel 4, Five and S4C) should be given “appropriate prominence” on each television service accessedthrough an EPG. The draft Code also sets out what EPG providers should do to enable people with visualor hearing impairment to benefit from the services on oVer.

Benefits to local communities

Digital technology is allowing services to target specific communities. The BBC are developingtechnology somore television programmes will be signed and/or sub-titled for the deaf and hard-of-hearing,with these facilities being an option to turn on. There will also be more audio description for programmesavailable for the blind and partially sighted. Television and radio channels can be more localised. On theirInternet site, the BBC have recently launched a virtual community interactive website called “iCan”. Thisenables people to find local information, get involved in local issues and interact with others in a similarposition.

Digital radio

Both analogue and digital radio share the same (VHF) radio frequency band. As with digital television,digital radio oVers the opportunity for more channels, and high reception quality. It can also be used tobroadcast text and pictures (eg giving more details on the music being played), and for interactive services.To receive digital radio, a digital receiver is needed. The range and aVordability of portable digital radiosis increasing but they are still more expensive than analogue radios. It is also possible to receive several radioservices on digital TV, and many broadcasters also make their output available on the Internet. There arenow many digital stations, with a wide range of local digital commercial and public service stations. Thereare no current plans to turn oV the VHF analogue radio signal, as analogue radio does not use as muchbandwidth as analogue TV.

Future Developments

The spectrum freed by digital switchover could be used to provide additional broadcasting services suchas extra DTT channels, more radio services and interactive services. More localised services could beprovided. Existing broadcasting transmitters could be used to send TV and other forms of data to mobiledevices. Provided the necessary international agreements were secured, the freed spectrum could ultimatelysupply the capacity for entirely new wireless communications services, such as mobile wireless broadband.

Mobility will be an important factor in future communications. Television could be broadcast to 3Gmobile phones and personal digital assistants (PDAs), which can already be used to access the Internet,download and play music and videos, and receive radio. Television could also be available on publictransport, with specially produced, up-to-the-minute short programmes such as current aVairs and news.Freed bandwidth could additionally be used formanagement services such as traYc congestion information.It could also be possible to connect wirelessly all home entertainment devices, and also control themremotely from a greater distance using, for instance, a mobile telephone, eg to set the video to record.

Currently the UK average bandwidth for broadband is 512 kbps 33, which costs about £25 per month;higher bandwidths cost more. However, in Tokyo it is now possible to have 45 Mbps (around 100 times asmuch) for an equivalent price. 64% of UK households now have a computer, so with the performance tocost ratio of broadband doubling every 18 to 24months then broadbandwill very quickly becomemore andmore accessible and commonly used. Current constrictions on broadband are:

— the cost of laying the fibres to carry the broadband information and connect with local coppertelephone lines—60% of this is digging up the road;

— the bandwidth bottleneck when the signal gets closer to the home—the signal needs to go throughthe copper telephone lines which slow it up, and there is only a certain amount of bandwidth whichis shared by groups of customers so high usage in that group slows the data rate;

— copyright and intellectual property rights challenges, which will become more complicated andmore relevant with the converging technologies; and

— image quality is still not at the level of traditional television.

It is currently cheaper to broadcast, but with the advance of broadband, switching may become cheapenough for consumers to want to set their own schedules more. The eVect that these emerging technologieswill have on regulation is currently uncertain and internet issues are specifically being investigated within aglobal context. Internet based audio-visual services are still not universal enough to replace existing media,but there is currently a general consensus that broadcast scheduled television will still have its role in society,even when broadband is universal.

33 10 kbps—kilo (1 thousand) bits per second.



Summary

Whilst the future of communication technologies cannot be precisely mapped out, certain general trendscan be projected. The BBC Charter could potentially be renewed for another 10 years, up to 2016. Withinthis period there will be changes in the technology used by the BBC and its consumers, and this will alsolead to changes in the way the BBC and its consumers interact. It could be predicted that in this period inthe UK:

— the analogue DTT signal will be switched oV, so all DTT will be digital;

— broadband take-up will become near universal;

— broadband service will become faster and better quality with bandwidth being aVordable atpotentially 100 times greater speed;

— use of broadbandmobile devices will increase, giving consumers access to information on demand;

— video-on-demand and PVRs will allow greater numbers of consumers to set their own schedules;

— interactive enhanced broadcasting will be more common, giving more information than thestandard scheduled programmes;

— consumers will use their television sets for more two-way interaction, eg voting duringprogrammes;

— some information and programmes will be more localised and community specific;

— consumer choice will increase, so the interfaces of devices, such as EPGs, will need to be simplifiedto increase widespread access;

— it will become much easier for individuals to create and broadcast their own audio-visualprogrammes; and

— scheduled broadcast programmes will still be watched, though will not be as popular as now.

Over the last few years new technology has already changed the role the BBC plays in public viewing.In reviewing the BBCCharter and its time frame from 2006, the Government will have to consider a numberof technological issues. These include:

— for how long will there continue to be a market for scheduled broadcast programmes?

— with the fragmentation of the broadcast market, is there still a role for a publicly funded publicservice broadcaster?

— how much the BBC should keep up with changing technologies and how it can do this withoutaVecting nascent markets?

May 2004

986942PAG1 Page Type [SE] 13-12-04 16:43:05 Pag Table: COENEW PPSysB Unit: PAG1


Tuesday 8 June 2004

Members present:

Mr Gerald Kaufman, in the Chair

Chris Bryant Alan KeenMr Frank Doran Rosemary McKennaMichael Fabricant John ThursoMr Adrian Flook Derek Wyatt

Witness: Sir Christopher Bland, Chairman, BT; former chairman BBC (1996–2001), examined.

Q40 Chairman: Sir Christopher, I would very much there is this relationship. Surely the point is that weneed a buVer, as it were, to the commercial worldlike to welcome you back to the Committee. I

remember our delightful exchange when you retired and it does not really matter what the reach is? Youseem to think it does.as Chairman of the BBC and I was asked to

contribute to your farewell commemoration, and Sir Christopher Bland: I certainly think it matters. Ido not think it is an absolute. Your example fromyou wrote back thanking me and saying you hoped

to do the same for me at some point. Japan demonstrates, at least there, that there is nota rule which clearly applies. There is a need for theSir Christopher Bland: I look forward to it. Any

moment now? BBC as a buVer, as something that on its good daysis capable of raising the bar of the broadcasting. OfChairman: You have got a vast experience on this

issue of BBC Charter Renewal that we are involved acting as both a national and international standardI think is as near an absolute proposition as you arein. We particularly appreciate your coming because,

after all, you are under no obligation. likely to find in broadcasting. We do need the BBCfor reasons and to provide a purpose that no otherbroadcasting institution in the UK is likely toQ41 Derek Wyatt: Good morning, Sir Christopher.provide in full.In trying to understand where the entertainment

platform might be in 2012 and then again in 2017,given that at the moment it is a ten-year licence Q44 Chairman: That obviously is a very sustainablerenewal, what issues do you think there are for the case, Sir Christopher. Following on from what MrBBC if, say, by 2012 its coverage, its audience Wyatt has put to you, can I put to you twoquestions:participation, is less than 20%? In other words, do first of all, this question of audience—audienceyou think we have a commitment to public sector reach as calculated means a very, very smallbroadcasting whatever the figure; or do you think attention span being given for those who havethere is something about the audience figure that tuned-in to be counted as part of the audience reach.dictates, as it were, a relationship with the licence On the whole it is not realistic, is it? If people arefee? going to watch television they are going to watch itSir Christopher Bland: Chairman, I think it is clear more than for that very minute period, if they arethat there is a relationship but it is not one that is serious about watching, rather than just zappingeasy to define. I think we could all imagine a point at through with their remote control. That is the firstwhich the BBC’s coverage, reach and share were question. The second question is a very diVerentsuch that a universal licence fee was not sustainable. question. Assuming that the Committee decidesIt is a long way from that point today; and I suspect (and we are a long way from any decisionsin five years’ time (indeed in 10 years’ time) if the whatsoever) that it is desirable in the nationalBBC continues to do well it will still be a long way interest, as you put it, that we should continue tofrom that point. There is plainly some relationship. have a BBC, is it therefore in your view requisite thatYou cannot expect the whole of the television- the BBC should continue to exist on a Charter; afterwatching population of the United Kingdom, which all, Channel 4, which is a public sector broadcastingis virtually all of it, to pay a substantial licence fee if channel lives permanently without any need fora large number of those who pay it do not actually renewal under the Communications Act? In a senseuse some of the BBC services some of the time. To would it not be safer for the BBC not to havefix a figure I think is pretty tricky. It is a good deal these periodic renewals, but just to be somethinglower than their present level of reach, which I think that is there and remains there under theis still in the 1990s. Communications Act?

Sir Christopher Bland:You have to remember this isQ42 Derek Wyatt: Reach as opposed to audience? the first time I have appeared before this CommitteeSir Christopher Bland: Share. without at least all of these chairs full, and several

people behind me passing the answer and remindingme what the first question was if I had forgotten it!Q43 Derek Wyatt: Given that the BBC set up NHK

in Japan after the war, and given that NHK’s licence The first question was about reach and itsimperfections. You are quite right, reach is afee is more than our current one in the UK but given

the audience figures in Japan are less than 10%, it measure of quite a short use of the BBC’s services;and share is of course quite diVerent. I think youdoes not seem to have bothered the Japanese that



8 June 2004 Sir Christopher Bland

need to look at the two together. If share for Derek Wyatt: Chairman, could I ask about BT?Chairman: Provided it is relating to the BBC’sexample, on BBC1 in particular, declined far more

than reach, you would have to pay attention to that. Charter. Sir Christopher is good enough to comehere but he has not come here to talk about his roleWould the BBC be better oV without a Charter? I

think arguably itmight. I amnot sure as a citizen and as Chairman of BT.I am not sure that you as parliamentarians would bebetter oV without a Charter. Charter Renewal does Q46 Derek Wyatt: Do you perceive at any time thatgive you a chance to review, as you and the country BT will be a content provider, so that it will come tois entitled to and should, the purpose and funding of rival the BBC Online, or anything like that?the BBC at regular intervals. If there is a kind of Sir Christopher Bland: No, I do not. I do not thinkrolling continuum then you do not get that ten-year that BT’s strengths lie in the area of contentopportunity to question what the BBC is for. The provision. One can see, although we are someBBC, I think, is immensely privileged as an distance from it at the moment, a broadband worldorganisation, in a way that Channel 4 (although it in which increasingly video is a part of the serviceshas got a privilege of its own) does not have the that people use.We are not there yet, but BT is doingunique privilege of a licensee; it does not have the some investigation and experimentation and that isaccess, the radio, television and Online frequencies, going on in a lot of countries. It is all about the kindwhich the BBC has. I think the BBC is sui generis in of bandwidth you need to deliver high quality digitalthat respect, and I think a Charter does, as it were, images, and that is a good dealmore than 512K.Youidentify that very clearly. There is another value to can arguewhether it is 4Mbor twowith compressionthe Charter too: it is via the Charter and its techniques and these are improving all the time. Tomechanism and the Queen and Privy Council that deliver sport, for example, you need a lot more bandappoints the Chairman and the Governors at the width than is available at the moment. To deliverBBC, and that puts them in a hugely strong and actionmovies again you need a lotmore bandwidth.independent position both in relation to the Chat shows, that is fine. The deliberations of thisGovernment once it is done, and also in relation to Committee, that is fine—we can do that at 512 youeach other. The Chairman of the BBC, as you find will be glad to hear.We are some distance away fromvery soon after joining it, cannot fire (although from that. I believe that broadband will become, at sometime to time you may long to) any of his fellow stage in the next five to 10 years, a very significantgovernors, as they are there independent and for as means of distributing television, film and movinglong as the Queen is prepared to have them until the pictures, and that is already starting.end of their three or five-year period. The Chairmanand the Board of Governors are in a very strong

Q47 Alan Keen: I was as enthusiastic for aposition, and that derives from the Charter.combination of Chair, Chief Executive andDirectorGeneral when you were there as I was for the two

Q45 Derek Wyatt: Is there a dilemma as the BBC who followed you. The problem the BBC had, andmoves forward—in that BBC3 and BBC4 cannot be led to the resignations, I thought was extremely sad.seen by most of the population and much of the The problem seemed to be that the Chair wasdigital radio stations cannot be either—that if we perhaps too involved in the day-to-day running ofwere to say to you, hypothetically, by 2012 the the BBC and therefore was not the backstop that theentertainment platform was perhaps some sort of Chairman could have been. That is not a criticism ofmobile communicator, and that is how our children the previous chairmen. I thought the relationshipand grandchildren will receive their information, worked extremely well and I saw it on many, manyshould the BBC have a public sector remit for that occasions. Youmay not be able to comment on howentertainment platform; or should it just be basically it worked after you left, but did you think about thatradio and television currently? In other words, dilemma of whether you should be involved as anshould it be a software producer, should it move ExecutiveChairman, or should you have takenmorewith what is going to happen to the marketplace, or of a backseat to have an overview of what was goingshould it just stay in the radio and television on at the BBC? If somebody had been further backbusiness? or had there been a separate Chairman of the BoardSir Christopher Bland: Of course it is not only in the of Governors from what looked like an Executiveradio and television business. In a sense it has Chairman, would that have stopped the probleminvented its own Online role. I think actually of the that arose at the BBC?great benefit of the expansion and quality of digital Sir Christopher Bland: I do not think there is anyand Online services in this country at very form of organisation that stops mistakes, thingsconsiderable cost. It is diYcult to see where else that that, with the benefit of hindsight, you would havekind of money would have come from and, as a done diVerently or you would conclude were anresult, Online in the United Kingdom has grown, I error of judgment. I do not think there is a structurethink, far more rapidly and its quality is far more that avoids that. It is clear that the BBC wouldinteresting than would otherwise have been the case. recognise, and have recognised, they mademistakes.I think it would be unwise prescriptively to say the It is true of BT as well. I am a part-time ChairmanBBC should not do X or Y. It involves a view of the (and I never allow myself to be called “non-future which is inevitably likely to be proved wrong. executive” because that implies you are not veryI do not think that kind of prescription would be active or interested in what is going on) and have a

very distinctive and diVerent role from that of thewise—at least at this stage.




Chief Executive of BT. The same is true at the BBC. governance. You cannot sub-divide or second guessthe responsibility for making sure that the BBCThe Chairman’s job is not to run the organisation; it

is to know what is going on and, from time to time, achieves its remit and its Charter responsibilities.Once you divide that, that is the equivalent of sayingdistance himself where he needs to from theDirector

General, from the Chief Executive. I think that is in- to the Board of BT, “You’re responsible but actuallyso is Ofcom”. NowOfcom is not responsible for BT.built, as it were. Knowing when that moment has

arrived is pretty important, and sometimes you may The Board is clearly responsible to its shareholdersfor what is in the end a fairly simple, in contra-not do it. It is a matter of balance. Again, I do not

think you could be prescriptive about it. The most distinction to the BBC, remit. Our job is to delivershareholder value and you can measure that; theimportant moment, of course, in the Chairman’s life

is when he and his Board appoint the Director BBC’s is much more diYcult but it still cannot besub-divided or shared. You have to decide who is inGeneral and the Chief Executive; and the next most

important, if and when that comes—and it is charge of that; making sure that the BBC delivers itsresponsibility. You cannot share that with Ofcom.interesting to point out over the last four Director

Generals of the BBC, three have been fired and one You can on the other hand, and that has alreadyhappened, give Ofcom specific regulatoryonly missed it by a whisker—is when the Chairman

and the Board of Directors decides that the time has responsibilities in relation to the BBC, and thatalready exists.come for a change.

Q50 Alan Keen: What would be the mainQ48 Alan Keen: There is a strong argument indisadvantage if the BBC was not given a furtherany organisation—and wish my private sectorCharter? It would go to the market, presumably?experience had been as successful as yours because IWhat would happen?worked in the private sector—and it is very handy,Sir Christopher Bland: That would be to change theis it not, for a Chief Executive (the one driving thestructure and nature of British broadcasting and, Ithing) to have aChairmanwho is involved, not everywould argue, for the worse. Broadcasting wouldday of the week but involved in a very constructivesurvive. You have got a perfectly lively commercialway and keeping his eye on things and helping thingsmodel in the United States with PBS as a beggingalong? For the BBC, with an extra problem thebowl stub that does, given its lack of funds, aprivate sector does not have, would it not be a goodremarkable but very, very small and minority job. Itthing to have a Director General, a Chairman of thehas very little influence and very little power andBBC, but then a separate Chairman of the Board ofvery little money. You could move to that model;Governors as the backstop?you could make the BBC a commercial organisationSir Christopher Bland: I do not think so. Iovernight; it would fight its commercial weight; butunderstand the argument and the apparent appeal,you would destroy ITV in the process, orbut that raises the diYculties of: who is themarginalise it, and you would have a far worseChairman of what; and what do the two chairmenbroadcasting ecology in the United Kingdom thando which is diVerent? I think that would actuallywe are lucky enough to enjoy at the moment.create more problems than it solves. With all its

imperfections, with the relationship between aChairman who is clearly not theDirector General, is Q51 Chairman: Sir Christopher, if you have not seen

it, I recommend you and my colleagues on thenot responsible for running the organisation, andcan and should stand back from time to time, along Committee to read the article on PBS by Ken

Auletta in the June 7 issue of the New Yorker. It is awith the rest of the Board of Governors (again theBBC’s structure is not like a FTSE100 company, terrifying prospect, is it not?

Sir Christopher Bland: I have read it and it is very,none of the Executives, including the DirectorGeneral, are members of the Board of Governors) very good.there is the structural opportunity to stand back andsay, “We are the Board ofGovernors.We are not the Q52 Michael Fabricant: But not half as terrifying asExecutives of the BBC”, and the BBC does need to actually watching PBS at times! Thank God thedo that from time to time. BBC provides much of its output.

Sir Christopher Bland: Principally British shows.Q49 Alan Keen: Maybe it is because I am in favourof keeping Ofcom further away from the BBC than Q53 Michael Fabricant: Sir Christopher, I take the

point you made to Alan Keen regarding the eVectsome would have that I am saying possibly thereshould be a separate Chairman of the regulators of that a privatised BBC would have on other

commercial broadcasters. Clearly, the pot is onlythe BBC. That is what I am thinking about, but youwould not be for that? one particular size for advertising subscription and

it is not going to expand that much, if at all, if theSir Christopher Bland: I would not. I agree withLord Currie when he says there is a diVerence BBCwere privatised.With the benefit of three years’

distance now from the chairmanship of thebetween regulation and governance. At least I define“governance” as being responsible for what happens Corporation, do you see any room for any change at

all in the governance of the BBC, the way it isat the BBC; and “regulation” as being ensuring thatthe BBC obeys the general and particular rules that funded, or any of its commercial operations? Or are

you saying that it should remain forever static, or atapply to that organisation. I think you can takeregulation outside the BBC, but you cannot take least in the next 10 years?




Sir Christopher Bland: I see one significant change in starts widening its remit—and that is the temptationand the thing which the BBC fears—then that willthe relationship between governance and regulation.

I think that there should be an appeal against the not turn out to be successful.BBC’s decisions on matters of fairness, in the sameway as there is on taste and decency. I took that view Q57 Michael Fabricant: Alan Keen mentioned thewhen I was Chairman. It was not a view shared by recent turbulence within the Corporation, and Ithe majority of my fellow Governors at the time, personally very much regret the departure of Gregwho felt that was so important that the BBC needed Dyke whom I think was a very able Directorto do it itself. I took a contrary view: that it was so General. You mentioned that part of the strength ofimportant that there needed to be an entirely the Board of Governors was the Director Generalexternal body, and it could be Ofcom—they, after not sitting on that Board of Governors. I put it toall, have those responsibilities in relation to taste and you: was that a strength? Might not the situationdecency so you are not actually inventing a new have been resolved more quickly, and perhaps forprinciple—or it could be somebody else. That there the better, had the DG been an integral part of theshould be an appeal against the decision of the BBC Board of Governors, just as you have a Managingon matters of fairness I think would be a major Director on the main Board of BT?safeguard—actually for the BBC, as well as for the Sir Christopher Bland: It might, but I doubt itpublic interest. That would be a change for the because the Director General is an integral part ofbetter. the top structure of the BBC. He, as do the senior

members of the Executive team, comes to everysingle meeting of the Board of Governors. The daysQ54 Michael Fabricant: I think what you have justare long gone when the Director General and otherssaid is hugely significant because a number of uswaited outside to be sent for. It is integral in thathave always argued that, even when the BBC Boardsense. Again, I do not think structure would haveof Governors came up with a correct decision,overcome the mistakes that were made.perhaps to the outsider it would seem not to beChairman: Without being in any way critical of thecompletely impartial because the BBC was being itsline of questioning, I prefer us not to pursue the lineown judge and jury. Could you just expand on that?about Hutton. I do not think that is really relevantWhat sort of areas of fairness are you talking about?to Charter Review.Are you talking about balance in politics?

Sir Christopher Bland: Yes.Q58 Chris Bryant: Good morning, Sir Christopher.Can I just press you on the issue of Charter Renewal,Q55 Michael Fabricant: Solely that?whether or not to have a Charter, or to haveSir Christopher Bland: In eVect I think there is nostatutory powers for the BBC? If one were cynicaldecision of the BBC’s that should not be appealable.one could point to the ten-yearly process wherebyThat is the case for taste and decency. I forget whatthe BBC and policy people put together a grid ofthe exact definition is in the Charter and the Act ofgreat television programmes that are going to appealParliament, but I think fairness is the overarchingto politicians, that are going to be on in the sixdescription: of fairness in coverage of politics; of themonths or nine months before the Charter Renewal;aVairs of the Corporation; the aVairs of anlots of people taken out to lunch inGovernment andindividual. An appeal against that—at the momenton select committees and things like that, and a greatthe opportunity for that does not exist. For thewooing of government over a certain period of time,reason you have just given, I think it would be betterand once the Charter has been renewed go back tofor the BBC. Even when the BBC is right you maynormal. Would it not be better for the BBC, and fornot be happy until you have gone to a third party.the steady progress of broadcasting, if the BBCinstead of having a ten-yearly cycle was in statute?Sir Christopher Bland: I think you are right, that is aQ56 Michael Fabricant: On the subject of third

parties, the BBC for a long time resisted any cynical view. As you went into politics plainly thatwould not be an attitude of mind you would hold.opportunity for the National Audit OYce to look at

its activities in respect of its operations—whether You and I are more optimistic about the humancondition than that. As you quite rightly say, that isthey were in the public interest financially. Do you

welcome the fact now that the BBC is beginning to a cynical view of what happens and a bit of acaricature. Some of it of course happens but even ifaccept intervention by the NAO.

Sir Christopher Bland: I think “welcome” would be the worst comes to the worst and you said that wasthe only time the BBC behaved well, the rollingoverstating it. I accept it as a political need of our

times. It would be very significant to see the way in continuum, I would suggest they never did any ofthat. I think the truth is actually that the Charterwhich the NAO discharges that responsibility. If it

does it properly and well that will be fine. If it tries, Renewal does give you—Parliament and thepublic—a very, very significant opportunity tofor example, to take over some of your job that will

not be fine; because you will have two groups rather review the BBC in a way that on a rolling basis youwould not do. The BBC is going to respond to thatthan one in Parliament doing that. If it tries to take

over the job of either Ofcom or the Governors that and plainly it should. The important thing if theCharter is renewed is for the Board of Governors towill not be fine either. I think it needs to confine itself

to what it properly does, which is an audit and that make sure—and for this Committee to play its partin making sure—that the Charter objectivesis a financial audit and a value for money audit. If it




continue to be fulfilled even when it is seven years Q61 Chris Bryant: Speaking from my ownperspective, as somebody who represents a seataway from the licence fee and from the next Charter.where access issues to a lot of BBC channels are veryI think the processes by which that is done can bediYcult, if you are going to go digital you have toimproved. I think, for example, this Committee canpay a subscription to Sky, which eVectively doublesimprove the ways in which it deals with the BBC. Inthe licence fee. You are paying another £16.50 amy experience you do not grasp fully themonth because there is no free view. The kind ofopportunity that the Annual Report gives you forthing my constituents would like to say is that thea really thorough-going review of the BBC’sBBC Board of Governors should be there to standperformance each year. I think Parliament as aup for ordinary licence payers and say to the Boardwhole—and the BBC did try and present its Reportof Management, “Excuse me, you’re rolling out allto the House of Lords and the House of Commonsof these new services, but are you really fulfilling thein Westminster Hall—also does not grasp thatpublic service remit of getting it to everybody?”opportunity. That is something methodically andSir Christopher Bland: I think the Board ofannually this Committee and Parliament as a wholeGovernors have got to be able to answer thatshould grasp. It should really hold the Board ofquestion. You have put it to them enough times toGovernors to account. That process should be anhave given them every opportunity to—annual one rather than a Charter Renewal one.

Q62 Chris Bryant: They have never answered itQ59 Chris Bryant: One of the innovations in the last satisfactorily!few years is the review of individual services which Sir Christopher Bland: Satisfactory to you inthe Secretary of State now does. We have had a London, no, but Ireland never was contented. Youreview of BBCNews 24; and there are reviews of the know the poem: “Ireland was contented when allother news services, because there have been so could use the sword and pen”.many news services coming out at the same time.How important do you think that process is? Or do Q63 John Thurso: Before I ask my question, could Iyou think there is a danger of politicians getting their just say thank you to Sir Christopher for the intereststicky fingers on broadcasting in away that would be he has taken in delivering broadband to Caithnessinappropriate? and Sutherland which is very, very welcome. ThereSir Christopher Bland: There is always that danger, are a lot of people grateful for that.but I do not think in the case of the review of news Sir Christopher Bland: July 2005 in Kinlochbervie!services that is an inappropriate thing for theSecretary of State to do. Most organisations do not Q64 John Thurso: It is wonderful! Recently therewelcome annual reviews or having their processes have been accusations that the BBC has beenscrutinised, but I think the BBC in particular has becoming more commercial, chasing ratings, if yousuch a privileged position it really needs it. Actually will, rather than concentrating on some of its morethe Board of Governors need it too. public service role as it should have. Two questions

based on that: firstly, do you think that is the case?Do you think the balance is broadly right or wrong?Q60 Chris Bryant: Gavyn Davies, when he wasFollowing on from that: what is the core thing whichChairman of the BBC, and Michael Grade alreadythe BBC should do that justifies the BBC having ahave made quite a lot of changes to the relationshipCharter and getting a licence fee?between the Board ofManagement and the Board ofSir Christopher Bland: If I can start with the secondGovernors; a separate secretariat, and a suggestionquestion because, in a sense, it is the easier one tothat BBC Governors should be more independentanswer. In general terms at least, I think it is tofrom the Board ofManagement, a recommendationprovide a quality and range of programmes that willwhich was around from the 1940s in the Dearingnot always, or frequently, have been provided byReport. Do you think that is the right direction to go commercial television and commercial radio. It is toin, or is this overstated? provide a coverage of the aVairs of the United

Sir Christopher Bland: I think you have to analyse Kingdom in the depth and of a quality that wouldwhat “more independent”means and how that more not otherwise be provided. It is to have completeindependence is created. I see no reason why the political independence and impartiality in providingBoard of Governors should feel enthralled to the that coverage. None of these things are things thatBoard of Management; they are not appointed by ITV cannot and does not do. The BBC really onlythem; they are not dependent on them for their rum exists to do those things. In terms of its performance,and rations. They are dependent upon them for as we were discussing earlier, it cannot ignore reachinformation, which is of course absolutely critical. and ratings because that is as sure a recipe forBeing more separate from them may actually disaster as if it were to allow those to dominate. Theparadoxically reduce rather than improve the balancing act is a diYcult one. I think the BBC, frominformation flow. We are all in favour of greater time to time, may appear to lose the plot. It is not forindependence for the Board of Governors, but me to say whether they have in the last three years.independence from what? From politicians? Plainly, I have not watched enough television or radio, andbut I think that is pretty strong. From the Executive? I have not been responsible formaking sure that thatWhat does that really mean, and how is it to be happened. While I spent five years at the BBC that

was the job of the Board of Governors, to try anddelivered?




make sure that the BBC did do those things I set out a great deal of money. They have reduced their ownoverhead and operating costs. They generated morein the second answer. From time to time it will not

always succeed. It will do certain individual from commercial revenue, and that has gone intoprogramming too. It has enabled the BBC to sustainprogrammes that will not look as though they

belong within a public service remit. We could all one of the Government’s and the country’slegitimate ambitions for it, which is to help the roll-identify those; but it cannot live by those and those

are not what the BBC is for. out of digital services both online and in broadcast.First of all, you can trace the money and I think ithas been pretty well spent; but not with the aim ofQ65 John Thurso: Do you think it would be helpfuldishing the commercial competition.if the BBC were to produce less in-house and

commission more externally? There is a theoryQ67 Mr Flook:As I understand it, theGovernors arebecause the BBC is responsible for so much productthere to protect the interests of the viewers andit almost has a controlling hand, and whether that islicence payers. What role did you have in going toin fact a dampener on a wider commercial sector?the Board of Management of the BBC and saying,Sir Christopher Bland: Yes, I do. I think that the“Hang on a moment, you’ve just been given a hugeamount of programming that goes to thebung from the taxpayer, the licence payer; you’veindependent sector ought to be increased. I think thegot to spend this money even more wisely”? Whenprimary reason for that is the independentwewent to aBBC facility a couple ofweeks ago thereprogramme-making sector is too small for reallywere more flunkies following us round thanwe were.strong viable programme-making companies toEverywhere we go there are huge numbers of BBCexist in any quantity. If you increase the quota overstaV and middle managers. Could you not do atime, and you should not do it overnight, that wouldBarclays and put more money into the end productstrength both the range of programmes that areand less into the middle management?made in the private sector and the financial strengthSir Christopher Bland: Luckily I am flunky-lessof those companies that make them. At the momenttoday; were I the Chairman of the BBC attendinga lot of it is Soho pick-up television, with five peoplethis I would not be, and you would be able to pointin the studio with an idea and they last for threeto the serried ranks of supporters. Actually the BBCyears and have a great time and then they have gone.has reduced its overhead and its costs. You areThe other thing is that you do want to maintain aalways going to get, as you will when a Secretary ofcritical mass of programme-making within theState or even aMinister of State appears before you,BBC—because that is a real asset to the UK. I thinksurrounding people hanging on their every word andit would be a mistake to go wholly to the Channel 4helping them to frame them in the proper way.model for that reason. The second thing is that the

ridiculous rule by which independents suddenlycease to become independents, because they are Q68 Mr Flook: They are the only ones who are!taken over by somebody who has a broadcasting Sir Christopher Bland: If you look at what haslicence in, let us say, Luxembourg or Germany, is happened to the overall BBC staYng, that hasplainly nonsense. That is why the BBC did not meet reduced. If you look at the costs of the BBC that goits quota. It was not because the amount going into programming, that has increased. I think theoutside the BBC was reduced; it was because the percentage has gone up year on year on year. As yourules changed because therewas an acquisition. That rightly say, I think that was something the Board ofis a plain nonsense and should be eliminated. Governors existed to ensure. Also, more diYcult to

assess, the right balance between expenditure on newdigital services—which, by definition, are not goingQ66 Mr Flook: Sir Christopher, in recent years theto be available to the whole country, and some ofBBC in its Annual Report has crowed about how itwhich the BBC got into well before its time. Digitalhas increased its market share. Yet, at the same timeradio, for example, they got into that far too early,that commercial rivals have had a negative impactbelieving that set manufacturers would haveon advertising revenue, the BBC has had an increaseavailable sets at reasonable prices five years beforein its RPI plus X formula. How did it look to youthey did. They should have been wiser.when you were given that RPI plus X formula? Did

you think, “We know we have to put some of it intodigital, but this will help us while our commercial Q69 Mr Flook: How did that happen? How did the

BBC start producing superb radio programmes oncompetitors are on the back foot” as advertisingrevenues collapsed towards the very end of the digital with no-one there to listen to them?When did

the Governors get involved in sanctioning that, if1990s?Sir Christopher Bland: It looked at the time like a they did?

Sir Christopher Bland: You could not reallyreally good and generous settlement, and it was. Thereason the BBC were pleased about it was for good sanction. We just made an error of judgement. We

committed in the belief that digital radio wouldreasons. Nobody forecast both the extent and thelength of the decline in ITV revenue, including ITV. expand much more rapidly, and the manufacturers

would deliver sets much more quickly than they did.I do not think that was the reason the BBC werepleased with the settlement. They were pleased It was actually a serious error of judgement. I

remember helping to make it. I remember going tobecause they could put more money intoprogramming. You can trace where that money has the big radio fair in Germany and seeing what were

extremely elegant-looking prototypes (and that wasgone. It is not the sole source. The BBC have saved




fine) and believing (and this was not fine, but foolish) It is very important that viewers should not besurprised bywhat they see in particular in fiction andthat these would be in production within a matter ofin a soap. They should be well warned in advance. Imonths. Actually five years later they still were notremember we showed a Tarantino movie late atmade. We believed where we should have been morenight and had considerable reservations. It was farsceptical and we should have waited.tougher than I liked but it was a brilliant movie andit was suYciently well flagged, “Here was what it

Q70 Rosemary McKenna: Sir Christopher, can I was. Here was when it was coming”, that nobodymove on to something quite diVerent with your saw that who did not either want to see it or knowexperience. Would you like to comment on the what they were seeing when they switched it on. Iconcerns that a lot of people have about taste and think that is all right. The earlier you get in thedecency in television at the moment. It may have evening, the more important it is to be clear whatbeen a bit of kite flying by one of the Directors of happens before nine o’clock.Ofcom who suggested that perhaps televisionprogrammes ought to develop a rating system— Q71 Rosemary McKenna: I agree with you. I dorather than the current system of the watershed, think ultimately it is the parents’ responsibility towhere everybody accepts the nine o’clock thing—in make sure; but there are, of course, manyview of the fact that recently there have been some households where the parents are not there, thedubious or concerning story lines in some soap children have free access to television etc etc. All ofoperas, for example? the programmers at some time or another announceSir Christopher Bland: It remains a matter of in advance there are concerns within the programmeconcern. It is very much a generational thing. The and parents should be aware. They all do that.younger you get—and I am talking generalisations I think it is something which is worthwhilenow—the more standards and attitudes of what are considering. For example, parents often say to me,acceptable in terms of language, taste and decency “Do I stop my child watching a particularchange. Whether that is a good thing or another programme when they’re going to go to school thething is a matter of opinion. You can also argue that following day and it’s going to be discussed? Howsome of that might be the responsibility of the media can we control it?” Maybe some parents are lookingfor, in eVect, changing the attitude of, as it were, my for that kind of guidance?20 year-old son or five year-old son to my own or his Sir Christopher Bland: I think it is a reasonablegrandfather’s. It is not an absolute; it is relative. You assumption that the major soap operas on eithersee things now on television, read them in books and BBC or ITV should be watchable by children beforesee them on the cinemawhich 40 years ago we would the watershed. If there is pressure that they shouldhave thought astonishing, in whatever sense of that sensationalise and move those story lines in moreword you like to use. Standards do change. You energetic directions then that really needs to becannot say today what is going to last forever. resisted if the result is something that actually shouldWhether a rating system would be better—I do not not be shown before nine o’clock.think it is a ridiculous idea—you would have to Chairman: Thank you, Sir Christopher. From whatdecide whether it would be really useful to the you have said about the role of this Committee weviewer, andwhether the ratings would help people to ought to place on record that it was you whomake informed choices about when to let their instituted the Annual Report being brought beforechildren, in particular, watch a programme, or this Select Committee. Thank you very much

indeed.themselves to decide whether they wanted to see it.

Witnesses: Mr Charles Allen, CBE, Chief Executive, ITV plc,1 Mr Clive Jones, Chief Executive, ITV NewsGroup and Mr Donald Emslie, Chairman, ITV Council & Chief Executive, SMG Television,2 examined.

Chairman: MrAllen, gentlemen, may I welcome you impossible to ask the Board of Governors to behere today. It is always a great pleasure to see you. judge and jury. We think it is an impossible task. No

matter how you structure the interface betweenmanagement and the Board of Governors we do notQ72 Michael Fabricant: In your written submissionthink you can get that level of independence. Weyou said you would like to see the BBC’s Board ofthink that the Board of Governors should remain,Governors retained in their present role; but I thinkbut the task is much more that of a role of a non-you were here just now when you heard Sirexecutive director, and more towards the Channel 4Christopher Bland speakwhen he said that he wouldmodel. I also think they should be independentlywelcome perhaps a little bit more influence fromreviewed by Ofcom.Ofcom particularly, say, with regard to fairness.

What is your reaction to that?Mr Allen:We think the Board of Governors should

Q73 Michael Fabricant: You would welcome that?take on the role more like non-executive directors ofa plc board, more similar to Channel 4. I think it is Mr Allen: Absolutely.

1 See Ev 15–212 See Ev 44–46



8 June 2004 ITV, SMG

Q74 Michael Fabricant: The BBC is changing in MrAllen: The diYculty we have is that it really lackstransparency. To be able to answer that question wesome diVerent ways, and you will know it has gone

very successfully, as far as the number of hits is would need to have far greater transparency betweenthe costs that are transferred from the PSB side ofconcerned, into its Online facility, very well

championed byAshleyHighfield who is theDirector the business to the non-PSB side. I think that is whya clean divide between the public servicefor New Business. While I know you would not be

happy at all with the idea of the BBC having broadcasting BBC and their commercial activitiesowned separately would give that divide, but notcommercials on its main television and radio

services, just as the Radio Times carries advertising deprive the BBC of those revenues and income.do you think BBC Online should carry advertising?MrAllen: I think the problem is that it is the thin end

Q77 Michael Fabricant: Of course, the BBC wouldof the wedge, of whether we want a commercial BBCargue that they have a fairness structure in theiror a public service broadcasting BBC. I think wetrading activities. Would you then welcomeneed to be very clear on the role of the BBC. INational Audit OYce intervention to examine andpersonally believe that the BBC should be focusedtry and cut through that lack of clarity and exposeon public service broadcasting. I believe that itwhether or not the BBC is competing unfairly withshould continue to be funded by the licence fee,the commercial sector?because any involvement of that team in commercialMrAllen:Wehave supported that in submissions weactivities will actually distract them from their corehave made to the Committee. We think that wouldrole of providing core public service broadcasting. Ibe a good idea. I do not think that takes it farthink that should happen. I equally believe thatenough. Inter-company trading, inter-corporationeVectively their commercial activity should betrading, is always a nightmare and it is very diYcultprivatised, with an even clearer divide betweento get to the true value unless you are in a realpublic service broadcasting, as a broadcaster, andmarket. That would be a help but I do not think ittheir other commercial activities.solves the problem.

Q75 Michael Fabricant: That is an interestingQ78 Michael Fabricant: Earlier on you said that thesuggestion, because if the BBC’s commercialBBC should really restrict itself to its core activities.activities were privatised—and that would includeYou said that they should not be commercial. Thatall BBC publications, all their productions, DVDs,followed on from a question about the BBC’s OnlineVHSs and all the rest of it—then the profits fromservices. By definition, it would seem that you wouldthat activity would not be able to go back intocount that as being its core service. Do you thinkprogramming, which actually helps subsidise andthere are any activities at present which arekeep down the licence fee.undertaken by the Corporation funded by theMr Allen: I think we should look at how it can belicence fee—I do not know,maybe itmight beBBC3,structured. I think they should retain the revenuesBBC4 or its Online service—that really is not itswhich come in from those commercial activities; andcore service?those revenues should be put back into funding aMr Allen: I think BBC3 and BBC4 are very much itsstrong BBC. We as ITV want to see a stronglycore service. I think it provides a range of services.funded BBC; not an over-funded BBC, but aWe welcome the fact that there is a very clear remitstrongly funded BBC. That is both in ourfor BBC3 and a very clear remit for BBC4; we wouldcommercial interests as well as in broadcasters’like to see that clarity applied to BBC1 and BBC2. Iinterests at large, and the public’s interest. We wantthink there is a fantastic opportunity (a) for thisa strong BBC, and we would like to see the revenuesCommittee and (b) in this debate to clarify exactlyand profits from those commercial activities fedwhat the remit and role of the BBC is. So I think theback into the BBC, because we want a strong BBC.areas you touched on are core services for the BBC.People sometimes find that a little bit strange and say

why would we as a major competitor want to see astrong BBC; and the reason for that is basically we

Q79 Michael Fabricant: Would you have anyand the BBC obviously compete for ratings but weobjection if the BBC were to expand its services anddo not compete with the BBC for pound notes in theintroduce new television and radio channels oradvertising market. We believe the public is wellindeed got into other areas of online provision?served by a strong BBC that is providingMr Allen: Providing there is a debate, as there wascomplementary public service broadcasting andon BBC3 and BBC4, we would have no objection tocommercial broadcasting service to the public. Thethat, providing it really is providing new andideal situation for ITV is ITV getting a 35% peak-additional services that the market is not alreadytime share, the BBC getting a 30% peak-time share,providing. There is a lot of debate in terms of theand all of the others chasing a 35% share, so we wantBBC’s new service and a lot of debate on BBC’sa strong BBC.children’s services. I think we need to have a verythorough process where, I think, this Committee canplay a very key role in ensuring that we are actuallyQ76 Michael Fabricant: Do you think the BBC,

through its commercial activities, competes unfairly providing true additional public services rather thanjust an expansion of BBC strategy.in the commercial sector?




Q80 Derek Wyatt: Good morning, gentlemen. Can review at the point of switchover, because things willchange quite dramatically and none of us can predictI ask a technical question? Is it possible, in the near

future, for the Freeview box to be incorporated into how that is going to pan-out 10 years out. None ofus could have predicted the growth of Freeview evena television set? Will that be on the market in three

or four years? two years ago. So I think the way forward would beto give suYcient comfort to the shape of the BBC forMr Allen: It is technically possible now.a ten-year period but to introduce a review, either bythis Committee or a more general review, at theQ81 Derek Wyatt: Thank you for that. Two weekspoint of switchover.ago we had a session we called Blue Skies, where we

were trying to sort of anticipate what the futureQ84 Derek Wyatt: However, if you are giving 10might look like. Have you had a Blue Skies sessionyears you are committing the licence fee concept forwith your own people and have you a view about10 years.where the entertainment platform might be in 2017?Mr Allen: I accept that. For the BBC to enable itselfMr Allen: That is a very good question. I think weto plan for that period of time I think that is ahave looked at a number of scenarios. There is a lotsensible time-frame within which to allow the BBCof scaremongering around that it will changeto plan its funding going forward.dramatically. I think what we still believe is that

there is a market for what we might call watercoolertelevision. If you look at 20 years then 14 million Q85 Derek Wyatt: If we were sitting here in 2012—people will still want to watch the rugby—Jonny which is probably unlikely in both our cases—and,Wilkinson’s drop-kick—14million peoplemaywant say, the actual viewing figures for the BBC wereto watch a programme likeGetMe Out of Here! and under 20%, there would come a dislocation between12 million people have continued to watch people wanting to pay the licence fee. Can we be soCoronation Street for many years. Our vision still confident now, in the next year, to give 10 years? Ihas a lot of the things that we see now as part of think that is what scares me slightly.people’s lives going forward. I think what we bring Mr Allen: I think it is a bit of a chicken and eggis a cohesion to society with issues that people want situation. I think if you do not have that level ofto talk about because they share that experience. I confidence then the BBC would not be able to planthink that shared experience will absolutely be part for its future. I think the BBC should be given a ten-of the future. I think there will be a lot of year Royal Charter but we should implement afragmentation, there will be a lot of specialist review. Whether that review also includes funding isservices, but we inherently believe that mass-market the point you are making.television has a long-term future.

Q86 Derek Wyatt: Would you feel happier if youhad no public sector remit, as a group? Do you feelQ82 Derek Wyatt: One of your purposes is the needit should just be the BBC?to satisfy your shareholders. If I could prove to youMrAllen:No, I think it would be wrong for the BBCthat the revenue stream and the share valuewould beonly to be the provider of public servicemuch better if you just actually had a DVD sent tobroadcasting. I believe pretty passionately that ITVevery household and that on that monthly DVDwashas a role to play, Channel 4 has a role to play andthe complete Coronation Street or the complete ERChannel 5 has a role to play and I think it would beand the only things missing were live news and livewrong to see the BBC as the sole provider of publicsport, and that it doubled your share value, youservice broadcasting. Frankly, a multiplicity ofwould have to look at that as an issue, would yousupply of public service broadcasting has to be thenot?model going forward.Mr Allen: Absolutely.

Q87 Mr Doran: You made a powerful case for aQ83 Derek Wyatt: That is some of the thinking instrong BBC. How much does ITV depend on aHollywood; as DVDs go from 10 hours to 100 hoursstrong BBC?to 1000 hours that is a scenario that could change,Mr Allen: It is very important to us commerciallyor you could just dial it down and just subscribe tothat there is a strong BBC. I think a weak BBCa service. That changes almost all the rules, it seemsmeans that they lose ratings and if they lose them toto me, that currently we are talking about. I supposeour competitors our competitors then make moremy question really is: can you really bet ten years formoney. So commercially it is very important to us. Ianother licence fee? Or would it be better to say fivepersonally believe that from the public serviceyears or seven years?broadcasting perspective then a strong BBC, ITV,MrAllen:Our view is that the BBC is appropriate toChannel 4 and Channel 5 gives viewers a range ofhave another Royal Charter for 10 years. However,public service broadcasting services that is unique inwhat we would say is that we think it is appropriatethe world, and I think we should be mindful of thatfor an independent review to take place uponas we look to change and modernise the BBC andswitchover. So when we actually move to switchoverITV going forward.and the date of switchover there should be a full

review. So a ten-year charter that allows the BBC toplan, to think ahead about how it is going tomanage Q88 Mr Doran: Do you think there is a case to say

that the existence of a strong BBC actuallythat set of changes you have talked about, but we dothink it would be appropriate to have a specific improves ITV?




Mr Allen: It is very important to ITV. I think aspects of the recent merger was that one of the firstthings that seemed to happen was the axe came outwithout a strong BBC then ITVwould be weakened.

If you just look at the financial models, that is why to some local studios. Is that something we are likelyto see more of in the future?I think in this country we have three fundingmodels:

pay generates between 3 and 3.5 billion; there is Mr Allen: I think maybe Donald could respond onthat because all that has happened in some of theabout 3 to 3.5 billion of advertising money and

another 3 to 3.5 billion of licence fee. That tripod of English regions is some of the work that has alreadystarted in Scotland, where there was afunding enables us to have, I believe, the highest

quality programming in the world. With any one of modernisation process. If you look at the work thatGrampian did in modernising its studios, I think thethose not being there, or any one of those being

disadvantaged, then I think that is a problem.One of focus for us is moving away from, if you like, anengineering structure to a talent and technologythe things I do think is important, though, andwhere

there has been a change in the last few years is what structure. I think Grampian did a good job.Mr Emslie: Frank has heard me talk about this onI would call public service scheduling. One of the

things that the Committee should look at is this many occasions but in terms of modernisation,particularly as Grampian, we’re about to do exactlywhole issue of counter-scheduling. I do not think it

can be in the public’s interest when the main the same for Scottish television in the CentralScotland region, we felt that our money is bestchannels are targeting exactly the same

demographic; whether you are a 16–34-year-old invested, as Charles said, in programming, bothnetwork programming and regional programming,watching a pop programme or whether you are a

35! or ABC1 watching a key drama, that cannot be which is a significant investment for us, and thetalent of the individuals to make it. So in Aberdeenin the public interest. So one of the things I think we

do need to look at is what I would call public service we have moved into new studios which are verymodern and highly technical, and that model I thinkscheduling, because you are depriving the public of

a type of programming they want. will be replicated round the ITV network. We havenow got more people making more programmes atGrampian than ever before, so I think the newmodelQ89 Mr Doran: Just moving on a little, in yourdoes work. I do not think anyone is suggesting thatevidence you have talked about the BBC’s tanks onGrampian Television does not serve its region veryyour lawn, and that has obviously become a featurewell; it is an area the size of Switzerland and it makesparticularly because of ITV’s recent financialseven hours a week, but it really focuses in on theweakness. Your innovation has been, maybe, at alocal population, and it does a very good job.lower level than you would have liked it. Without

that innovation from the BBC (what you call thetanks on the lawn), the excellence you have Q91 Mr Doran: I think we are all very grateful for

the new studio, it is an excellent studio; the onlydescribed and the strong BBC that you describe isnot likely to be around. So why do you pick that as thing you gotwrong, I think, is that youmoved it out

of my constituency!a target?MrAllen: I think it is not about tanks on the lawn in Mr Allen:We tried to keep it in but we could not get

a building.that sense. The good news from an ITV perspectiveis that despite a significant fall in revenues we havebeen able to increase our investment in Q92 Mr Doran: There is a serious point behind that,programming and we have been able to create more because although I understand the situation inhit dramas, for example, than our competitors and Grampian (we have discussed it many times and wethe BBC. I think healthy competition is good news. have fought about it on a few occasions) it is theBut between ITV and the BBC spending $20 million message that it sends. This new company is formedon Daniel Deronda and Dr Zhivago and then and, obviously, Grampian and SMG are not part ofthinking they should be scheduled head-to-head that new company. OYces closed down, and some ofcannot be in anyone’s interests. What I am talking my colleagues round the table had real concernsabout is healthy competition between the BBC and about what was happening, and I know that fellowITV. Equally, I do not want to see PSB colleagues have. There is just a sense that the PSBprogramming ghetto-ised on the BBC. I think it is part of the remit is not being abandoned but there isequally appropriate for the BBC to be providing a move away from it, in the sense that it will all beEastEnders as it is Panorama. Actually the question left to the BBC and that is coupled with concernsis: how many EastEnders? The bulk of the money about what we see as a very light touch fromOfcom.being put into longer runs of Holby City and more I think it is important to understand exactly how youEastEnders—is that the right mix? I am talking see that and where you are in the process.about proportionality and healthy competition Mr Allen: I think Clive can probably deal with thatrather than scheduling which just undermines and because he is managing the detailed changesdeprives the public. throughout the whole of the English and Welsh

regions.Mr Jones: I think the key thing is to actually judgeQ90 Mr Doran: As a Scottish MP I could not resist

this audience or this group of witnesses in front of what we are still putting on the screen and what wecontinue to intend to put on the screen. We provideme without raising the issue of regional

broadcasting. I want to say something about 27 regional and sub-regional news services acrossITV, and we are not proposing to diminish any ofScotland in a second, but one of the disappointing




those. That is far more than the BBC does; the BBC Rosemary McKenna: I think that makes a lot ofsense. There are many occasions when parents arein the English regions does around half-an-hour of

non-news regional programming every fortnight concerned, but one of the problems I think is thatfamilies have somuch access; it is not uncommon forand we do three hours a week—more in Scotland,

more in Wales and more in Northern Ireland—to four or five television sets in a family home, witheach child having their own television set in theirrecognise the nations alongside the regions. This is a

process of change to the process of investment— room, and how do parents control what they areactually viewing when they are viewing it? I think itinvestment in new technology which is happening in

Derek’s area, inMeridian, which is happening in the is a huge issue but probably you are right thereshould be a proper public debate about it and aboutMidlands which we are planning to do in Wales and

which we are planning to do in the creation of a new how we get the right answer without having a knee-news-gathering centre in the East Midlands in jerk reaction. Thank you, Chairman.Nottingham. This is not a retreat in any way fromregionalism or frompublic service broadcasting; this

Q94 Chris Bryant: Part of the sort of concept behindis a real investment in regionalism going forwardpublic service broadcasting, as embodied not only inand continuing to provide a range of regional newsthe BBCbut in yourselves, is relatively authoritarianservices and national news services and regionalor paternalistic; it is trying to make people watchnon-news programming which is unrivalled. No oneprogrammes that theymight not otherwise choose toelse gets anywhere near us; Channel 4 cannot do it,watch if they had freedom to do so. Of course, thatChannel 5 does not do it (they are not required to dois much easier in an old environment because youit) and the BBC does not do it. Regionalism is stillcould “hammock” programmes, you could putalive and beating well in the heart of ITV.something they have got to watch between twothings that they want to watch and all that kind of

Q93 Rosemary McKenna: Can I go back to the point stuV, but with Sky Plus now coming along and lotsI raised with Sir Christopher? It was based on of people choosing not to watch the adverts, andsomething I read recently, a suggestion by one of the choosing their own programmes rather thandirectors of Ofcom that there ought to be a ratings channels, there are some enormous challenges outsystem applied to television programmes, similar to there for public service broadcasting. Can it reallythe ratings system that is applied to cinema films, survive? Can you survive that?particularly, I think, in view of the concerns recently Mr Allen: I think we can. I think there needs to beover certain storylines that have been appearing. I a clearer definition of public service broadcasting. Aagree that times have changed and people are much good example of that would be when we are tryingmore aware, and children are much more aware, but to get political programmes. Sadly, for yourselveswould it be helpful to the parents and how would and for us, it is part of our PSB remit but we needyou feel about being asked to produce a ratings to come up with more creative solutions that engagesystem? people in politics. Sadly, when we brand politicsMrAllen: I think youmake a very good point. As we then we get quite a high turn-oV rate. If we brand asmove from analogue terrestrial television to digital issues, whether it is education, whether it is health,then a lot of the rules and regulations we have whether it is obesity, you can actually engage peopleaccepted as the norm do not apply in the digital in a debate. I think we need to change, and areworld. So I think you make a very good point about changing, to try and get the debate, because peoplehow we are going to deal with that. I think there is a are interested in issues, they are not as interested inbig issue there.My only concern, or the issue I would a red one, a blue one and a yellow one debating theirraise, is that when Channel 4 attempted something point of view; they are interested in getting people tosimilar, going back to the 1980s and 1990s, it debate the issues more generally. I think there is aactually had the opposite eVect; when there was the type of programming that will engage a number ofidentification of violence then it actually drew the people. It will not engage all the people but it willpeople that you did not want to the programming. engage a number of people who want to be in theSo I think it is something we should think through, debate, and I think it is down to our creativity inbut I think the more strategic issue is how we deal getting the right people on the screen.with something where we have got acceptable rolesand structures in analogue television and the

Q95 Chris Bryant: So the kind of Shakespeare,watershed, which is not something which wouldSchiller and Shostakovich understanding of publicnaturally apply in a digital world. I think it is an issueservice broadcasting is dead, really, because peoplefor the industry to debate and I think it is an issuewill have somuch choice that there is no way you arewhere the Committee can play quite a key role ingoing to be able to force them to watch what is goodacting as a catalyst. I do not think there is one easyfor them?answer because there is always the law of unintended

consequences. If you think you are doing something Mr Allen: I do not know if I accept that completely.Last year we did amodern adaptation ofOthello andthat will improve the situation, the findings of

Channel 4 when it attempted to do something along got not very good ratings because, sadly, the BBCwent head-to-head and undermined the ratings.similar lines, I believe, was it actually had the

opposite consequence. I thinkwe should look at that There is a creative opportunity and challenge inactually having a range of programming that canand bear some of those lessons in mind as we try to

create a new structure in the digital world. attract people who would not naturally come to




Othello. I think that is our challenge. I do not think Government in terms of bearing alongside 4 and 5and the BBC, the complete load for converting allprescriptive box-ticking and hours of PSB is the

way forward. the digital transmitters—that is 1,100 transmitters—at a time when we have already invested in partialinfrastructure for the existing DTT transmissionQ96 Chris Bryant: This issue about going head-to-area, which as you said do not reach the Rhondda.head, counter-scheduling, that you have mentioned:Even if we did the complete conversion of 1,100 I stillone of my beliefs for a long time has been that youdo not think it is going to hit the Rhondda becauseshould not have politicians in any sense trying to tellof problems in relation to the topographic nature ofpeople when things should be on television, gettingWales. So I think these are the issues we are going totheir sticky fingers on scheduling. How do you gethave to grapple with. I think we also need to beround this complication, especially at a time when,aware that as Broadband rolls out this is anotherlast week, I had a row with the BBC about apotential delivery mechanism for televisionprogramme where they refused to tell me how manychannels, so it is not necessarily solely around apeople watched the programme because they said itFreesat option.was commercially sensitive? How do we get round

these problems?Mr Allen: I find that diYcult to believe. The Q99 Alan Keen: David Elstein said the other weekinformation is publicly available— that 90%-odd of the BBC was just out-and-out

entertainment anyway, so the public servicebroadcasting aspect of it was very, very small. In theQ97 Chairman:Chris, if you let me know about that,case of ITV what diVerence would it make to you ifI will write to the Acting Director General. We haveyou did not have to provide—what none of us reallyhad that kind of nonsense from them before, and Iunderstand exactly—public service broadcasting?will not put up with it.The regional aspect of it Frank has already beenMr Allen: The information is publicly availableasking about.almost on a daily basis, if you read any of the tradeMr Allen: If you look at the total ITV schedule, 33%magazines. I think the issue is there is not an easyof the ITV schedule is public service broadcasting.answer. I think it is about setting it in the principles;ITC did a review for Ofcom and they estimatedof basically saying to the BBC and to other publicthat there was approximately £250 million ofservice broadcasters “It is not in the public’s interestopportunity costs in providing what is currently afor you to schedule head-to-head” and that beingrange of public services ranging from news, regionalembodied in the Charter. It is not there. I do notnews, international news, regional programmes, art,suggest that politicians then become prescriptive ifand religion—a whole range of programming. So athat was there but if you then had an independentthird of our schedule is currently constructed aroundbody, such as Ofcom, reviewing how we arewhat is currently defined as public serviceperforming to our public service remit then thatbroadcasting. So that gives you a sense of scale.could be something that could be reviewed, because

you could actually look at the number of instanceswhen that is happening and say “Is that really falling Q100 Alan Keen: I search around all the channels Iwithin either the spirit or the letter of the law?” have got available when I am sitting with nothing

else to do and I am searching for stuV that is verydiYcult to find; I am looking maybe for artsQ98 Chris Bryant: Freeview. A few years ago people

said that the idea of a box that you buy, you plug in programmes, and such like, and sometimes they arenot easy to find. So I am a market. Why should weand which involved no subscription at all would not

be an attractive proposition, but Ofcom’s latest have to impose public service broadcasting on youwhen a lot of people are looking for interestingfigures show, I think, an 18% increase in the last year

in Freeview. It is clearly going extremely well. programmes which are not just entertainment? Itis partly education, is it not, but it is stillHowever, it may not be a solution for every part of

the country because geographically it just may not entertainment?Mr Allen: I think it is about us providing a range ofbe possible. I am loath to return to the issue of my

own constituency but there is no Freeview in the services to diVerent people. That is why it is not onlyacross ITV1, it is across ITV2 and the new channelRhondda. An important point: do you think that it

is vital to have a free-to-air option, maybe on digital ITV3—it is a range of services. I think the bigchallenge, looking forward, which addresses some ofsatellite, in the digital environment so that

everybody has an opportunity to have not just the this point, is that in the past public servicebroadcasting, or the relationship with ITV, has beenBBC channels free but, also, you and Channel 4 and

Channel 5? If so how are we going to make that an “in kind” payment and a licence fee, but as wemove to the digital world that you have talked abouthappen?

Mr Jones: It is one of the issues that we have to deal then the idea that we, as ITV, are paying £475million in licence costs and in-kind public servicewith over the next year in terms of our deal coming

to an end with Sky and we have had certain broadcasting is not a sustainable structure. So Ithink what we have got to do is sit down and say,discussions with the BBC about the concept of

freesat. We have to be concerned both about “How do we fund and structure ITV, if you acceptyou do not only want the BBC to be a PSBmaintaining control of our transmission, both in

terms of analogue and digital, and in terms of cost. broadcaster?” Our view on that is that there shouldbe a series of contracts: the BBC should beWe are facing an enormous potential bill from the




contracted to provide a series of services—PSB and What you would do is have much more flexibility onwhen you played your public service broadcastingothers; ITV should be contracted to provide PSB;

Channel 4 and Channel 5, so there is absolutely and how you structured it. At the moment there is avery rigid structure, and I think what I am saying isclarity on what we are being asked to provide and

how that is going to be funded. If you look at a that in a broader sense we need to look at how publicservice broadcasting is funded beyond the BBC,digital world that is how we would preserve PSB

broadcasting moving forward. because at the moment we see basically the licencefee as a BBC funding model and I think we have gotto look at a diVerent funding model and a diVerentQ101 Alan Keen: If you had complete freedom what

would you drop? If all your funding just came from set of structures in a digital world.advertising and that gave you a completely freemarket, what would you drop? Q102 Chairman: Thank you. You must admit the

Committee has been very co-operative withoutMr Allen:What happens is that basically we put ontraditional PSB and our competitors schedule knowing the extent to which it is needed to be co-

operative,MrAllen. It has been delightful to see youagainst that. So they will go against when we havegot our news on and they will go hard with very and your associates. Thank you very much.

Mr Allen: Thank you very much.commercial oVerings—The Simpsons, or whatever.

Witnesses: Ms Jane Lighting, Chief Executive, and Ms Sue Robertson, Corporate AVairs Director, Five,examined.

Chairman:Goodmorning andwelcome.We are very maturing and I think we have seen ourselves that itgrateful to you for coming here today, and we will makes a great deal of sense, both commercially andstart with Mr Fabricant. in terms of the reputation of the channel, to putmore

emphasis on the diversity and the quality of theschedule. We, frankly, have better resources to beQ103 Michael Fabricant: The bad news was when Iable to do that. Last year was the first year that Fivefirst saw Channel 5 I stopped watching but now Imade a profit, albeit a modest one but nonetheless ahave become quite a fan; it seems to be changing itsprofit, after the start-up phase, which obviously tookformat. Do you see yourself now as a public servicea lot of investment on the part of our shareholders,broadcaster?in terms of the re-tuning and the normal start-upMs Lighting: I have only been with Channel 5 for 12costs of a channel.months—

Q104 Michael Fabricant: That explains it! Q106 Michael Fabricant: One of the problems whichMsLighting:No, no, no, I would not like to say that. you did not mention that Channel 5 (in those days)I think Five has always seen itself as a public service faced when it first started broadcasting—and stillbroadcaster. What we clearly have been doing exists—is that you do not have universal analoguerecently is, I think, improving the quality across the coverage, particularly in parts of the South coastschedule and the diversity of the programmes we are which can interfere with French transmissions.oVering. So I amdelighted to see that you can see the Incidentally, the French interfere enough withdiVerence. British transmissions so I do not knowwhywe are so

reticent, but that is beside the point. There are wholeQ105 Michael Fabricant: The diVerence is areas of the country where you cannot pick upnoticeable. What is driving it? Is it to try and go—I Channel 5 on analogue and we learn frequently thatwas going to say “more upmarket” for certain types in the Rhondda you cannot pick up Channel 5 orof programmes but I think that probably would be anything else on Freeview. Is that not holding youthe wrong assessment to make (and maybe rather a back, or is now availability on satellite turningsnobby assessment).What is driving it? Is it trying to Channel 5’s fortunes for the better?get diVerent audience profiles or is it because Ofcom MsLighting: There is no question that digital is veryare encouraging you to do it? Is it because of a sense good news for Five. We probably welcome digitalof responsibility that you are doing it? technology and digital roll-out in a way that noMs Lighting: There would be a number of reasons other terrestrial broadcaster would. We have, inwhy we are changing, and I think one of the first fact, made some improvements in our—as we wouldthings to remember is we are simply growing up as a like to call it these days—“old, analogue system” butcompany. We are the youngest, by a long way, of all the focus, clearly, is the future and it is what digitalof the terrestrial broadcasters. Five launched as the technology will bring to us in terms of our coverage.only terrestrial to launch into what was already amulti-channel environment and a very competitive

Q107 Michael Fabricant: One of the suggestions youone at that. In its early days I think Five was (and ithave made in relation to the BBC is that the licencewas called the cross-channel five at that time) reallyfee should be top-sliced, and that a part of thehaving to push and work very hard to be noticed infunding should be available to Five for publicwhat was already a very crowded market. We are

now becoming more established; I think we are service—no?



8 June 2004 Five

Ms Lighting: Absolutely not. negative eVect, which is why I am rather loath tojump to too many conclusions about this withoutsuggesting that actually we do a really in-depthQ108 Michael Fabricant: I have been told the wrongresearch and review of it.thing altogether.

Ms Lighting: We would actually take quite theopposite view. We do not believe that top-slicing is Q113 Chris Bryant: Can I return to the issue ofsomething to be recommended. We think that the Freesat? Part of the accepted world view for the lastBBC’s current form of funding is the right one for few years has been that there is a free-to-air oVerthe BBC and that, actually, top-slicing could be very which everybody is entitled to, and Channel 5 hasdiYcult in any event to manage and to create a sort been part of that although it has not been physicallyof Arts Council of theAir, if you like. So, no, it is not possible for people in many parts of the country tosomething that wewouldwelcome or something that get Channel 5. Of course that is now possible in somewe are trying to bring about for Five. parts of the country, but only if you pay money to

Sky; you have to take out a package and the basicpackage is £17.50 and the next package up £19.50Q109 Michael Fabricant: I am very pleased to hearand so on. Do you believe that Channel 5 wouldthat because those are the sorts of arguments I wasalways want to be part of any guaranteed freeabout to make.package?Ms Lighting: I think we are in violent agreement.Ms Lighting:We do see ourselves as a PSB who weMichael Fabricant: That is very good. In fact, it ishope and believe, in the digital environment, shouldsuch a love-in, Chairman, I think I will give up onbe available universally, which is why we havethat high note.welcomed the introduction of Freeview. I think it isan extraordinary platform to have seen just what hasQ110 Rosemary McKenna: Can I continue with thehappened in the short time it has been around; it hastheme I asked the other witnesses, on the issue ofgrown to about 3.5 million homes—about the samewhether there ought to be a ratings system forsize as cable which has taken considerably longer totelevision programmes, or whether it is somethingestablish itself. I think the introduction of a freethat ought to be discussed in view of the concernssatellite oVering would be a very positive step, boththat are expressed by many parents with very youngfor viewers and for the speed at which people wouldchildren, and older children, about the fact thatbe able to take up digital rather than waiting for aeveryone understands the watershed is nine o’clockfull roll-out, but also I think there is enormousbut we have all the access to television and toeconomic benefit in covering part of the countrycomputers, etc. Would you think that is worththrough satellite.discussing?

Ms Lighting: I think this is a big issue and a diYcultQ114 Chris Bryant: Were you a bit depressed by theone, actually. I think the suggestion that this shouldway the BBC went it alone, by going on to Astra 2Dbe open to a wider debate is a very good one. Whatand therefore circumventing the need.we actually do at Five is we have introduced someMs Lighting: In terms of going it alone, in terms—form of ratings system already in addition to the

watershed.We have for ourmovies a rating that tellsthe viewers what they can expect to watch, and it is Q115 Chris Bryant: They have created a Freesatsomething that we have, particularly at Five, found BBC, have they not, because you can go and buy aour own audience actually welcomes. But we have Sky box and use it and you can get the BBC, but youdone that specifically around our movie output and cannot get ITV, Channel 4 and Five.not around our general programming. I think more Ms Lighting: That is true, with the exception ofgenerally it may be more diYcult to ensure that it is Solus cards, which are available through Sky.absolutely consistent, and I would slightly worryabout the level of bureaucracy and administration Q116 Chris Bryant: You cannot get a new one.across an entire schedule. Ms Robertson: We were rather depressed by the

unilateral action which immediately meant that theQ111 Rosemary McKenna: To achieve that kind of Solus card system, which the BBC had funded toconsistency. I do not think anyone wants to go down start with, was stopped and so there was a problemthe road of censorship but I do think people are for people, particularly in constituencies like yourgenuinely looking for more information and more own, who had been receiving us through that means.advice about content. Obviously, Ofcom are the That is why, together with Channel 4 and ITV, wepeople to look at that. Would you agree with that? for a period of time funded a schemewhereby peopleMs Lighting: I think Ofcom would be a very good could, for a very cheap price, buy a Solus card to lastplace to start that debate. the next three years, so that they could continue to

receive our services on the satellite. Actually it isinteresting it had quite a small take-up—muchQ112 Rosemary McKenna: I think the concern is

that Ofcom are involved after the event, when smaller than we had thought it would—but peopledid have that opportunity. We e-mailedparents and people make complaints about certain

things, and that they should be more proactive. everybody—Chris Bryant: There was enormous confusion aboutMs Lighting: I did think it was rather interesting to

hear about Channel 4’s experience of when they it, I think, and that was one of the issues I had moreletters about—certainly more letters about it than Iintroduced ratings and actually it had a rather



8 June 2004 Five

did about the Iraq war—frommy constituents. I am into our peak-time schedule. We would rather moveto an environment where we actually have morejust intrigued because, of course, that Solus oVer is

for three years; one of those years has now gone and flexibility to work within our schedule and to lookfor opportunities to provide programmes that otherthere is only two more years of that, and you cannot

go out and do it from scratch now. broadcasters are not necessarily, and actually to bescheduling in a complementary way. Simply puttingChairman: I do not want to interfere with your line

of questioning but this is an inquiry into BBC additional money into Five, with restrictions thatmay come with that, is not seen as particularlyCharter Review. We are always delighted to see our

friends from Five and we are very interested in Five beneficial to us.but this is not an inquiry into communications ingeneral. Q119 Derek Wyatt: You heard Sir ChristopherChris Bryant: Chairman, I think that is unfair Bland say that on digital radio (I am going to findbecause the question is specifically about the BBC out howmuch they spent) they now admit that it wasand the BBC’s relationship with the other a mistake. We never asked them to do that. By thebroadcasters, so that they produce the Freesat way, we could not even hear it. So what is publicoption, which then enables people to see the BBC. sector about that? For instance, my communityChairman: I said I was not being critical of you, radio stations—I have three with one-month trialChris. If I am critical of you, you will know it. Please dates—will never survive and never work in anygo on. other way unless there is a trust fund for them toChris Bryant: I do not think there is any need, work. I would say that that is a BBC duty; that theyChairman. I have finished. ought to have done community radio. They think it

is rather down there, and they do not want it to aVecttheir own radio programmes, but if we cannot get aQ117 Derek Wyatt:Goodmorning. Can you just tellcommunity radio fund and we cannot top-slice theme what your budgets are for production currently?licence fund, how will community radio andMs Lighting: Our programme budget is currentlycommunity television develop in the UK?£170 million a year.Ms Lighting: I am less familiar with radio, I mustadmit, than I amwith television, but Iwould point to

Q118 Derek Wyatt: As I understand it, BBC3’s is the BBC’s investment in BBC3 and 4. We were just£100 million and they get less than 2,000 viewers per talking a moment ago about the success of Freeviewhourmost of the time and 10,000–15,000 sometimes, as a platform, and I am under no illusion thatand if we are lucky they get 100,000 which gets to .1, actually those new channels have been part of thewhich is very good. So I am interested that you are driving force of that digital roll-out. So I think thenot for top-slicing because we did not ask for BBC3 BBC are actually playing a very important roleor 4; there was no negotiation with the people who across the whole of PSB and driving digital take-up.pay their licence fee. I would like to see a UK filmchannel and I would like to see the BBCpay for that.

Q120 Chairman: Following on what Derek has beenIf they do not want to do a PSB channel that wesaying, if you make a bloop you pay for it—youmight like I would like to see a sports channel for thesuVer, one way or another.BBC. If the BBC does not want to do it why shouldMs Lighting: Yes, we do.there not be a fund made available for people to bid

to say, “If they don’t want to do it we would like todo it and we would like it to be paid for by the Q121 Chairman: If the BBC makes a bloop we pay

for it. Basically, hardly anybody watches the BBC’slicence fee”?MsLighting: I think that whenwe have looked at the digital channels. I personally find BBC 4 an

attractive channel, but I must be practically the onlyconcept of top-slicing the view that we have taken sofar is that most people have been talking about it in person inManchester whowatches it. They spend all

of this money on this, as Mr Bryant has pointed outterms almost of an annual amount of money thatperhaps would come from the BBC and would be and as others have pointed out. When I turn on

Radio 3, all of the frequent interruptions on Radioinvested directly into programmes that would thengo into the various terrestrial broadcaster schedules. 3 tell us “This is BBCRadio 3 on so-and-so FMplus

digital radio”, to which nobody is listening. You,Our view, at the moment, is that the BBC is fundedin the right way. By takingmoney from the BBC I do like ITV, although not so much Channel 4 (that is in

a diVerent area) are susceptible to the market; thenot think that will enhance in any way the oVeringwe already have. I think the PSB requirements upon market decides how you do. Is it really acceptable

that you have to compete against a broadcastingthe other broadcasters are acceptable to all of us.What we would ask for, from Five’s point of view, is organisation who, provided in the case of new

channels the Secretary of State allows them to goactually just a little more flexibility in the way thatwe are asked to provide our PSB. By that, what I ahead, can do whatever they want, spend whatever

money they want and obscure their accounting asmean is more flexibility to choose the areas that wefeel it is right for us to do. I will give you an example. they do (that is very well-known) and yet the only

people who pay for it in the end are the licence-Our arts programming, which is something that wehave become fairly well-known for recently, and our payers?

Ms Lighting: I have a few points I would like toscience programme that we have just launched inJanuary, were not actually a requirement per se by us make around that. One is that I think the new

channels BBC3 and 4, as I say, are importantbut something that we were able to do, and we put



8 June 2004 Five

additions to the BBC. I think that it was the right five maybe or seven but we want to come back andreview this” and not let it just drift? Would you be indecision for them to enter that market. What I think

is important is that we find away of ensuring that the favour of shortening that period?BBC does keep to the remit as set out around those Ms Robertson: We think there is a considerablechannels. The area that I have, from Five’s amount of sense in what you say in that, howwe canperspective, more diYculty with is actually when we know now what the market is going to be lookingsee the BBC investing licence money in acquiring like in 10 years’ time? We have not seen through theforeign programmes. That, for me, is an area that whole digital switchover process. So, a shortergives me more cause for concern as we see the BBC licence than, say, the ten years that is currently beingeither going out and acquiring blockbuster movies mooted might be a wise track to take. On the otheror buying commercial series from, usually, the States hand, I do understand the pleas of people who say,and doing so against what is already a healthy “We are constantly being reviewed; five years is notenvironment, a commercial market which would be long enough.” We think as a channel that one needsjust as prepared to acquire those programmes and to to look at that length and the implications. Maybepay the price for those programmes. EVectively, something along the lines of what Charles Allen waswhat happens is often the BBCwill drive up the price talking about, a sort of root and branch review at theof those programmes beyond the commercial point where what is going to happen with digitalmarket rate. I had an example just last week of a switchover becomesmuch clearer. That might be theseries that the BBC acquired. We were in way forward.competition with them, we got to a certain level Ms Lighting: I think one of the biggest questionswhere, commercially, it was not viable to bid any around it is actually what will happen with platformfurther and yet the BBC continued with their delivery and I think that once we know how thebidding. So there are those more practical areas that various digital platforms are rolling out in the UK,I would like to call upon that we should look at in then we will see the role of the BBC within that andterms of how the licence fee is used. Where it is used I think it will be much easier.for original programming and where it is used toprovide programmes via diVerent platforms I have

Q125 Derek Wyatt: Is it your view that the decidingfar less of an issue, particularly where thosebit of technology is actually free-to-air satellite andprogrammes are British products.that will have to be out on the market and then wecould see how that went before you could make a

Q122 Chairman: I do not want to be rude to you but defining decision about the future of the BBC?you, Channel 4 and Channel 3 have all got a vested Ms Lighting: Free-to-air satellite is important ininterest in the continuation of a licence because if the terms of the timing of digital rollout as a whole. Ilicence did not continue then somehow or other you find it hard to see that we will get to the dates wecould be undermined. would all like to reach unless digital satellite is

something that is addressed in the short term.Ms Lighting: Absolutely, yes.

Q126 Mr Doran: Youmade a point earlier about theQ123 Chairman: But that is not the deal, is it? Thecompetition you were in with the BBC over adeal is not that you are insulated from possiblyparticular programme which you lost. Is that notformidable competition from the BBC because ofalways a problem for you? They are a big beast withthe fact there is a licence and, therefore, they do not30% of the market; you are much smaller with abouthave commercials or, in the case of Sky, they do not6% or thereabouts of the market.have subscriptions or whatever. I can accept that

that is the deal for you but what about the deal for MsLighting:The BBC is certainly larger thanwe areby a long way! Actually, there should howeverthe licence-fee payers? That is not their deal, is it? In

the end, the licence fee payer does not care whether always be what you could loosely call a commercialmarket rate for programmes and there is anthere is a 3, 4 or Five because the licence fee payer is

paying for 1 and 2. acceptance that, over and above certain levels, one iscertainly justifying the acquisition of a programmeMsLighting: I think the licence payer and the viewerfor other reasons than commercial market rate. It isat large does care if there is 3, 4 and Five, very muchnot so much that the BBC clearly has bigger pocketsso. I think that when you look at the televisionthan us and therefore could buy more programmeseconomy as a whole, it is important to bear that bigif they wanted to, but we do not have this problempicture in mind. So, it is not as simple as saying thatin the same way with Channel 4 or ITV.if we reduce the licence fee or we find a diVerent way

of that licence fee being covered, it would have noother impact on the viewer at home.

Q127 Mr Doran:You do not have that problemwithITV? Surely the commercial considerations whichITV take into account—Q124 Derek Wyatt: I have asked this question of a

number of people. Do you think that 10 years is a Ms Lighting:We can still beat and win programmesfrom Channel 4 and ITV because we are bidding onreasonable period of time? None of us can be

confident where the technology market is going to the same basis that we are bidding on a commercialbasis. So, what is commercially viable for us will befinish up in 2017. Would it not be better to have a

shot across the BBCbows and say, “Wewill give you commercially viable for ITV and vice-versa.



8 June 2004 Five

Q128 Mr Doran: I find that a little hard to Q130 Mr Doran: So, the whole of Britishbroadcasting benefits from a strong and vibrantunderstand because they have a much larger income

from advertising. BBC?Ms Lighting:We do and our view at Five would beMsLighting: They do, so their overall budget will be

larger than ours but, in terms of their justification for that we are generally very supportive of the BBC. Iwill have a few niggles that I will quote of thingsan individual product, our justification will be very

close to theirs individually. where we feel that they are using their position toinfluence the market negatively, particularly whereit is unnecessary, where it is acquired foreignQ129 Mr Doran: I do not think I understand that but

we will move on to something else. The ecology of programming that really, as long as that programmeis going to be brought to the UK and aired in thethe broadcasting market is always changing and, for

a long time, we have had one big beast in the market UK, then my view would be that the BBC, as thepublic service broadcaster it is, should, frankly,and that was the BBC. We now have the ITV

company which is another big beast and the range withdraw from such head-to-head battles andshould commit its investment to British originalwhich you are more familiar with than I am. What I

am getting across quite strongly in the evidence we programming.have heard today and in the written evidence is that,despite the changes and despite the movements in Q131 Mr Doran: The big issues in this whole debate

about the Charter are about the length of thethe marketplace, the BBC is still extremelyimportant to every one of the other players in the Charter, about the role of the governors, the

separation and regulation. Are these issues thatmarket. It may be going a little too far to say that itprovides a sort of umbrella but it certainly provides matter to you in the day-to-day marketplace?

Ms Lighting: Yes, they do. We, as I say, are lessa touchstone set of standards etc for everyone toweigh themselves against. Can you comment a little aVected by the BBC than, for example, ITV would

be, but the BBC nonetheless has an important eVecton that.Ms Lighting: I think our view from Five’s on us. Even the BBC, for example, showing high

levels of football on BBC 3 will have an impact onperspective—and Charles is not here at themoment—is that the BBC is a particularly good our own viewing share. So, yes, they do have an

absolute eVect on us. In terms of governance and sotouchstone for ITV. We would not claim to be largeenough to be trying to compete with the BBC on, obviously that has less of a direct eVect on us. It

is their commercial activity and their schedulingourselves. However, it is a standard setter across thewhole industry. I think that, in terms of the quality activity that has more of a direct eVect on us.

Ms Robertson: We do believe that there should beof programming that the British public not onlyenjoys but expects, a lot of that has historically been more of a role for Ofcom in terms of regulating some

of the areas of the BBC’s activities, such as crossdriven by the BBC and it continues to do that. So,for all of us in terms of us keeping on our toes and promotion, new channels and probably into tier

three as well.delivering quality that will be really appreciated asquality, the BBC will continue to have a role for Chairman: Thank you very much indeed. We are

most grateful to you.quite some period.




Members present:

Sir Gerald Kaufman, in the Chair

Chris Bryant Alan KeenMr Frank Doran Rosemary McKennaMichael Fabricant Derek WyattMr Adrian Flook

Witness: Lord Burns, a member of the House of Lords, Independent Adviser to the DCMS; Chairman,Abbey National plc, examined.

Chairman: Lord Burns, we would like to welcome discuss whether there are other things that we shouldbe doing, such as some of the things that youyou today and say what a pleasure it is to have you

back before the Committee. mention, and perhaps attending some other sessionsand talking to other groups of people who may havea part to play in this.Q132 Derek Wyatt: I wonder if you might explain

how long your inquiry is going to take, who is nowon the panel, what sort of inquiry it is going to be Q134 Chairman: You are already on record asand whether you are going to issue a formal report? saying that what you are looking at is not simplyLord Burns: My role is to act as an independent what should happen after 2006 but the position as itadviser to the Secretary of State. It is not to conduct would be if there were another 10 year charter. That,an inquiry. I have had some experience of if I may say so, is exactly the right position fromconducting inquiries in the past and this role is quite which to begin. Derek Wyatt talks about the MITdiVerent. I see myself as part of the process of giving media lab inDublin.Wewent there yesterday.Whatconfidence that the charter review will be carried out was demonstrated there was a series of technologies,in a transparent and objective way. I work with both communicative and interactive, which areoYcials in DCMS. I go to meetings with the ready or almost ready and which transform theSecretary of State and oYcials. I have been engaged nature of communication, including the kind ofin the drafting of the consultation document. Now communication that might be expected from thethat the panel has been appointed, I will be engaged BBC. One of the things that certainly concerns me—in a series of seminars and processes to try to tease and it was put in very cogent terms byAdrian Flook,out some of the issues that come out of that a colleague of ours on the Committee—is that unlessconsultation. The end result of the work is theGreen the BBC embraces and uses this technology to justifyPaper that the Government is proposing to produce its existence well into this century it will relapse intoat around about the turn of the year. The work that being no more than a social service for those whoI am now engaged in is to try to assist that process cannot aVord any wider use of the technology. Iof producing the Green Paper. It is the Green Paper would be very interested to know your reaction tothat is the primary output of what we will be doing. that together with a recommendation to you toOur present plans are to conduct a series of seminars spend a few hours there because it really does openand processes that will try to tease out those one’s eyes.arguments, to try and ensure that all of the points Lord Burns: I need no encouragement to visit thesethat are made are heard; where there are diVerences, types of establishments. Indeed, most of the time, Ito try to subject them to some scrutiny and to test the am trying to resist my own pressure to go and seeevidence for some of the views as part of the process them as I have a fascination with them myself. Weof feeding into the Green Paper. We have not yet have had a lot of discussions with people who aredecided whether there will be some kind of very close to the technology and I have attendedaccompanying document that will be the output of more than one discussion trying to tease out some ofthat seminar series, which may go alongside the these longer term issues, as to where the technologyGreen Paper to set out some of the background may be going, the nature of the platforms, whetherarguments and debates that have taken place. they will be a single platform or whether there will be

a whole variety of ways in which this type of contentwill be delivered. I certainly will look at theQ133 Derek Wyatt: That is very helpful. Thank you

very much. Can I ask whether the panel will also be suggestion that you make. As far as the BBC’s roleis concerned, I have a lot of sympathy with the pointvisiting such places asMIT laboratories inDublin or

BT in Ipswich just to look at what the technology you made. Historically, it has played a veryimportant role in the development of thesecan deliver?

Lord Burns: The panel have not yet met. We have technologies, right the way through from radio totelevision.We have seen the role that it has played injust appointed them. I have spoken to each of them

separately. Our focus at this stage is on designing the the development of the internet. My impression isthat they are well aware of the importance of theprocess and the seminar series that we are proposing

to have, beginning at the end of July, and going on technology and the part that they have to play in it.Reading some of your evidence from earlier sessions,through to the end of the year. We will of course



22 June 2004 Lord Burns

I notice the point was also made that sometimes this down before we can begin to see what the impact ofit has been upon people’s viewing patterns and thehas taken them more rapidly into some areas than

might in the end be justified. This is a very uncertain way that they are working with the technology. I amslightly reluctant to go down the line that says weworld where people have to make judgments. They

have to try out certain technologies. Some work; will have digital switch over and that at that verymoment we should then have another bigsome are delayed; some get overtaken by other

methods of doing things before they become investigation. I think we will probably want to seesome more evidence emerge as to how that isestablished. I think everyone agrees that we are

going through a period of enormous change in this beginning to impact before you can make some ofthose judgments. I am also enormously aware nowarea with this enormous array of ways of delivering

media content, in its broadest terms. of the extent to which the BBC is in a constant stateof review. This process of charter review is takingplace quite some time before the new charter comes

Q135 Derek Wyatt:Three or four years ago, most of into place. There is simultaneously going on a seriesus would have found defining broadband diYcult of reviews which go back to commitments that haveand certainly would never have heard of wifi been made about having the right kind of reviews ofwireless. These seem to be the competing some of the new services. I have some hesitationtechnologies now andmaywell be in the next four or about plunging into a short charter period this timefive years. It seems to me that the television people and finding ourselves back in review almost as soondisregard the technology completely so far in the as the new charter begins. Taking all of those thingsevidence we have seen, because they want the BBC into account, my personal view at this point is that Ito have 10 years so they can have 10 years of their would be hesitant about making it any shorter thanown life and not have to worry about the competing 10 years, but that decision is not for me. That is antechnologies. From the technologists, we hear that issue for the Secretary of State. I am quite reluctantat least four gigabyte delivery on broadband will be to come to the view that the switch over will takeuniversal within four years in the United Kingdom place cleanly and on a particular date and we willand if that is so there is a diVerent mechanism then know what the implications of that are for theentirely for the entertainment platform to every BBC. I think we will probably need a period ofpiece, wherever you are, the business, the home, the experience from which we can draw evidence to seeschool or wherever. Therefore, do you think it is what the implications are for the BBC’s role in thateven possible to commit to a 10 year licence this time multichannel world.round or do you think it would be more appropriateto wait for the switch oV of analogue and have asecond review, because it seems to me you have two Q136 Derek Wyatt: If you look at viewing habits, it

seems to us loosely that at under 25 people arecompeting things there. You have new technologythat can deliver an entirely diVerent way of receiving watching less; under 15, very much less and

therefore, as you get a generation going through thetelevision and you also have the government’sdemands to want to move from analogue to digital system, by the time you get to 2017 it could well be

that the BBC is watched by less than 15% becauseand the BBC is in the middle of that debate.that viewing population moves up and gets biggerLord Burns: There is an enormous amount going onand bigger. The next generation does not watch asin terms of change. You do not have to go back verymuch. Therefore, it is the most important review wefar to a period when some of the things that are inhave probably ever had because if we cannot predictcommon use today were not available. I have a lotthe next three or four years in technology weof these devices myself. I have a wireless network atcertainly cannot anticipate the viewing audiences,home. One of the things that strikes me about all ofbut they are in decline not just at the BBC but atthis though is that there is a huge range of thingsITV, and they are in terminal decline. Do you thinktaking place simultaneously. It is not as if there isthere is a point at which the politics of the licence feeany convergence on a particular way of doing things.become important when people say, “Though I loveAt the moment, what we are seeing is more ways ofthe BBC, I only want to watch this bit. I do not reallydoing things rather than things centring on onewant the whole spectrum any more.” Therefore, itparticular direction. I suspect that that is going tobecomes diYcult to maintain the whole purpose.continue for awhile, but certainly it means that these

are things which the BBC have to take into account. Lord Burns: I agree that the politics of the licence feemean that if numbers of people using the BBCI think we should wait to see their evidence with

respect to charter review. As you know, we have decline very sharply, that does raise issues that arenot there today. At the moment, my interpretationreceived everyone else’s evidence but because of the

various changes that have been taking place within of what people say to us is that there really is verywidespread support for the licence fee as a methodthe BBC we have not yet had their evidence. Before

making any comment upon what their thinking is at of funding the BBC. As you move forward, clearlythe options in relation to subscription become thatthis stage, I would like to see the evidence that they

put forward. As far as the 10 year licence is much greater technically. If the number of peopleusing theBBCwas to fall very sharply that argumentconcerned, I see the argument about the rapid

change in technology. Digital switch over is going to may be strengthened. On the other hand, what we donot know yet is to what extent the reach wouldbe a very important event. We do not at this stage

know quite when it will happen. All experience remain the same; to what extent people do use it butmaybe in smaller amounts, compared to the extentsuggests also that it will take a little while to settle




to which they do not use it at all. Secondly, my and how the BBC itself responds to this, we maythen have moved into a position where perceptionssuspicion is—and it is no more than a suspicion at

this stage—that the early adopters of the are significantly diVerent. I am also conscious withan awful lot of this technology and these predictionsmultichannel world, apart from those of us who are

obsessed with sport and have it entirely for the that some things move a lot faster than one expects.Some things move a great deal less rapidly than onebenefit of the sport, were probably those people who

have been using the BBC least of all to begin with. expects. Even in 10 years’ time, there will be anenormous number of people who will still be aroundThey are the people who have bought the alternative

technology because they want a greater variety than and who will be consuming these services, who willhave spent a lifetime with the BBC and who are verythey are being oVered through the BBC. You say it

will be 2017 but the debate on the next licence period conscious of it. Given the enormous spectrum ofages that we have, it is not clear to me that that iswill begin in 2012–13. By then, we will have had

some experience of the digital switch over and what going to shift dramatically unless somethinghappens which I cannot quite foresee at this point.is happening to what is still quite a lot of people

where we have not yet seen the extent to which theirhabits are being changed by that technology. I think

Q138 Chairman: I read the news coverage today init is a good question. It is something that we have toThe Daily Telegraph in which they interviewed lotsaddress, but I do not think I am yet in the positionof people who had gone to Portugal for the matchthat Mr Wyatt is at, where it points very sharplylast night. As it happened, one of them was atowards a major disjunction in people’s use of theconstituent of mine who was there but who will beBBC or to the licence fee as being a mechanism thatback in England on Sunday for the match againstwill see us through this next 10 years.Portugal.What he said was very interesting.He said,“I am going to go down the pub to watch it.” He wasa mature student. He has a television set at home, asQ137 Chairman: Derek said that people love the

BBC. There is no doubt that what you might almost everybody has. This idea that John Birt usedto have of a family sitting on a sofa in the livinggenerically call the liberal middle classes in this

country do love the BBC. On the tube train that I room, sharing an experience has gone, has it not?The BBC, if it is to survive, has to adjust itself to thiscame in on today, there was a young man standing

there, listening to his music on his headphones. He new social environment.does not love the BBC. My guess is the BBC means Lord Burns: I observe what you observe particularlynothing to him except as a possible source of some in the case of big sporting events, which is thatof the things he wants to see. He might well have people see them as shared experiences and by andwatched the match on the BBC last night, simply large they wish to watch them with someone else.because that was the channel on which he could see Last night, some members of my family came roundthe match. What increasingly concerns me is that, to watch the game. In the match against France, Iwhile, despitemy own personal feelings about it, I do went to someone else’s house who had some familynot believe that the licence is a huge issue, most round. Some of my children have been oV to the pubpeople including young people as they become because they see this as a regular place to go on ahouseholders will simply pay it as one of the things Sunday afternoon to see a game. I think the bigyou have to pay as part of life, like the council tax or sporting events are very particular in the way theywhatever it might be. I have a feeling that unless the are seen as major shared experiences, which peopleBBC transforms itself to meet this era, the BBC is like to watch with other people. It is part of thenot going to remain something that means a lot to a tradition of going to watch sporting events withvery large number of people. That being so, it will be others. I would not necessarily say that that appliesunable any more to justify its very special place as a to all other forms of entertainment. You were justrecipient of a Royal Charter and a recipient of a making the point that more and more people nowregressive, hypothecated tax. listen tomusic on their own. Far from sharing it with

others in their home, they prefer to go oV, put theirLord Burns: The evidence that we have receivedfrom the consultation that we have done so far, and headphones on and listen to precisely the music that

they want to listen to. This, it seems to me, is all partindeed from some of the research which DCMS hasbeen doing, still does point to the fact that most of the great, diverse world that we are seeing and the

enormous range of diVerent ways in which peoplepeople like the BBC and quite a lot of people like it alot. There are concerns and worries about derivative now access the media. Many of us have lots of these

diVerent gadgets which we use at diVerent points informats and too much copycat type programmingand some concerns that the relative quality may not our day or in our week or in our year to get video,

music, to experience sporting events.My suspicion isbe what it was.My interpretation of this so far—andit may be that some of the responses we have in have that it is diversity rather than uniformity that is

emerging in this world and I am slightly resistant tobeen self-selecting, which you would expect at thisstage—is that I do not sense that the worries and suggestions that there is going to be one great

method through which all of this is channelled toconcerns that people have about theBBCare leadingthem to turn away from the important role that people. My wife gets desperately frustrated at the

number of cables, gadgets and everything else that Ipeople seem to feel it plays in their lives. Ten yearsdown the line when we have been through many of carry with me whenever we move from one place to

another. Hopefully some day somebody willthe changes that Mr Wyatt has been talking about,depending very much on what the competition does produce some uniformity of chargers and cables that




will reduce this particular load, but it reflects the fact mixed and which they think will be interesting tothem on the day and at the time they will bethat much of this technology is being delivered in

diVerent forms. In business we have exactly the same interested in the experience. You get D-Dayprogrammes etc, which happen to coincide with theproblems. With almost all of our computer systems

having been built at diVerent times to deliver anniversary of D-Day. If you do that yourself andthe whole thing is an active process, you woulddiVerent product types, you have a lot of problems

in bringing them together. Huge expense is involved probably find it quite diYcult. My experience andsimple observation of people is that in all of theseand a lot of people simply let them live alongside

each other, try and build bridges between them and areas we are seeing a combination of active andpassive. There is still a role for people who putwait until they cease to be useful any more.together schedules, who put together newspapers,and are trusted providers. They select things and act

Q139 Michael Fabricant: I want to get on to the as the intermediaries, who bring you this content inwhole area of how broad is the scope of your non- an ordered, trusted way.inquiry but I want to get our feet on the ground a bitand talk a little more about technology. I am not

Q140 Michael Fabricant: Intuitively, I suspect youtechnology averse. When I left the London Businessare 100% right.School, I went into broadcast engineering and I loveLord Burns: I do not have any evidence other thangadgets but at the end of the day I still think we aremy own observation.human beings. Yesterday, the Chairman came up

with a marvellous expression when he talked aboutQ141 Michael Fabricant: I remember some 30 yearsthe conveyor belt of life. The hypothesis, if I put itago you telling me oV once, because I made certaincorrectly, is to say that people of a certain age likeassumptions and you said, quite rightly, “You maybeing passive and not interactive with theirwell be right but has any research been done onentertainment form. Younger people like using theirthis?” Can I urge you or the Department of Culture,ipods. Younger people want to help create or changeMedia and Sport, if research has not been done, tothe programming by being interactive with it. Otherdo research, not just into people’s viewing patternspeople such as myself think there is a time and abut behaviour patterns? Surely, does that not createplace for everything. If you are tired, you may justa whole direction in which the BBC might go inwant to flop out and watch television and get it sentthe future?at you. Maybe you get to a stage of life anywayLord Burns: I am very happy to be ticked oV on that.where you do notwant to be quite as interactive.Has

any research been done? You talked earlier on aboutDCMS research. Has any research been done about Q142 Michael Fabricant: How broad is the remit?existing viewing patterns, entertainment patterns, of Derek Wyatt asked about the length of charterdiVerent age segments and, I guess, socio-economic renewal, but would there necessarily be a charter?segments of our population? Are you looking at the possibility of there being aLord Burns: I have not seen it, if there has been. statute instead? Are you looking at whether the BBCThere has been an enormous amount of research should be going into new areas of technology, notdone into viewing patterns of television and listening just broadband, but other forms of interactivity?Arepatterns for radio. There is rather less across the you looking at possibly other forms of funding formedia and I do not really have much to add at this the BBC?What assumptions are beingmade as fixedstage on that. Just as people deliver things through or are there no assumptions about the future of thediVerent media, there are some activities that you BBC at this stage?want to do in an active way and there are other Lord Burns: What we are looking at is charterthings that you want to do in a passive way. We see review, charter renewal. Within that charter and thethis with newspapers. It is only a few years ago that letter of agreement at themoment, there are a certainpeople were talking gaily about the fact that number of things that have to be decided. One of thenewspapers would have no role in the newworld and things that has to be decided is a system ofpeople would be able to get all their information on governance and regulation. Some things will comethe internet fromwherever they wanted. They would to be determined at the point of the charter renewalmake their own newspapers. Theywould draw down and in the letter of agreement. Some of the otherall their own stories. The fact is there is an enormous things that tend to be discussed would be things thatamount out there. Much of the time you want you would hope would emerge through the processsomebody to act as an intermediary for you, who is of governance and regulation. Not everything has toa trusted source, who is going to put together things be decided at the outset. I am very conscious thatin the order and with the priority that will suit you quite a lot of things you could not hope to decide atand draw your attention to the things that you think the outset. In terms of things which you haveare important in life. Newspapers have the great mentioned, they are very much on the table, as youvirtue that they order the news for you. They make will see from the consultative document that DCMSsure that you are not reading the same thing twice in issued. So issues of funding, issues of governance,one day. If you trust the people who are supplying the particular structure of the BBC, as well as thethat to you, you feel very comfortable. With a lot of remits of particular channels and particularmedia and television, films etc, there is a similar programmes are very much there to be debated. Atprocess going on. People like other people to put this stage, we are pre-Green Paper. As far as I am

concerned, that leaves almost anything to betogether for them schedules of events which are




debated that people wish to be debated. At the fee, which is obviously deliberately circumventingthe market, is that we are buying a public good,Green Paper, some of those options will probably be

narrowed down and there will be argumentation for whether in terms of the local production because weare making British programmes which might not beand against the options. Then there will be another

period of consultation which will lead to the White made if it were not for the licence fee, or you havelocal news, extensive news gathering which wouldPaper later in 2005. At this point, we are willing to

look at a very wide range of issues and I hope that not be commercially viable and you are doing genreslike comedy that would not be commercially viable,was demonstrated by the nature of the consultative

document that was issued at the end of last year. and on top of that there is a universal accessprovision.Do you think that argument still holds forthe licence fee?Q143 Michael Fabricant: How much freedom doLord Burns: After the digital switch over, some ofyou think the BBC should have to explore newthe arguments that were made for the licence fee areareas? The Chairman and I were discussing thisgoing to be less powerful than theywere. Some of theyesterday. We do not think the BBC had to seekpoints that you make should not exist in quite thepermission to go into new media. I personally thinksame form that they do now, or that they did beforethat it was a wise decision and the BBC news websitewe were in the multichannel world. One of theis probably the best website of its type in the world.objectives of public service broadcasting was toCertainly if its hits are anything to go by and itsprovide a variety of programming, not necessarilypopularity is anything to go by it must be because itjust catering for the mass audiences at all times:is the most looked at news website in the world. Doparticular types of genre, particular types ofyou think the BBC should have that freedom to doprogramming, that might not be commerciallythat or do you think the BBC should be moreviable in advertising funded media. As you moveconstrained to just provide broadcast televisioninto many, many channels, it should be possible toand radio?see more of that programming. On the other hand,Lord Burns: It is very diYcult over a 10 year periodit is quite striking tome, from discussions that I haveto define at the outset what it is that a broadcastingparticipated in so far and the evidence that I havecompany can do. That is why I made the point thatread that people still see an important role for ayou need a remit, a broad charter and a broad set ofbroadcaster who is not being driven by either theobligations that fall upon the corporation; and yourequirements of subscription or the requirements ofneed a system of governance in place, in which youadvertising, both in terms of the diversity ofhave confidence, that can make some of thoseprogramming and in terms of being able to reachdecisions during the course of the charter period.audiences for specific types of programming, andSome of the issues in terms of scope, reach and thewhich gives confidence in terms of quality. A lot ofapproach to dealing with new technology are thingspeople simply enjoy watching television without anythat should be possible to be taken care of within aadvertising. Although the argument has weakenedgood system of corporate governance andin some areas, I think there is still going to be aregulation. You do need some constraints. As youdemand for a certain type of what is called publicwill have seen from some of the evidence that youservice broadcasting. I thought the Ofcom reviewhave had presented to this Committee as well as thetook us through quite a lot of that argumentationevidence that we have had, one of the things thatvery well. I also agree that the time will come, if theworries some of the commercial competitors to thenumber of people who are watching the BBCBBC is that the BBC can decide what to do withoutdeclines very sharply and there is the ability to switchany process of consultation and without anypeople oV who do not wish to pay, that the balanceconstraints being placed upon them. Some othersof the argument between the licence fee andworry that it may be over-constrained in not beingsubscription is going to change through time.able to go into some new areas. What you want out

of the system of governance and regulation issomething that can take care of both of those events; Q145 Chris Bryant: Would you accept that maybewhich draws the line in the right place; but which whilst that is an argument and that perhaps leadsnevertheless gives the freedom to move into areas you to a situation where you would say you have tothat it is sensible they should move into. That is a much more narrowly circumscribe what publiccombination of the remit that they are given and of goods you are buying and the BBC has to thereforethe governance process which is trusted to be able to have a much more detailed list of things that it hasmake those decisions as you go through a charter to do and things that it cannot do, perhaps there isperiod. another argument which suggests that because

broadcasting will always tend towards monopolybecause it is very expensive to make the first copy,Q144 Chris Bryant: With all the cables, boxes and sorelatively cheap to distribute to everybody else, buton that you now have to have in your sitting roomit is very diYcult for new people to enter the marketto be able to watch television, let alone to make sureand you need a hefty player which does rig thethat other sets in the house can work, and watch themarket so that there is competition for quality aschannel that you want to watch, it is prettywell as just a competition for viewers?perplexing. When you go to Dixons or wherever toLord Burns: The way I have approached this is verybuy a television, it is almost impossible for thesimilar to the way it has been approached in theordinary consumer now to see their way through the

complexity. The traditional argument for a licence Ofcom review. I start with the question: what type of




programming do people wish to see available? The they would not do anything about it. They had greatleadership, a great brand, the ability to produce ansecond question is how much of this is likely to be

delivered by the market place. And the third alternative but they did not do anything about it.What role do you see in giving your advice to thequestion is, if there is a diVerence between those two

things, what kind of intervention do you need in BBC going forward andwhat role do you see charterrenewal has in helping the BBC to avoid that Swordorder to bring them together? Because our market

has been so rigged throughout the entire history of of Damocles?Lord Burns: First of all, it is an important part andradio and television, we have no real way of judging

with any confidence what an entirely market driven has been an important part of the BBC’s role that ithas engaged itself extensively in the technology ofsystem would produce for us and whether it would

produce those things that we want or whether it broadcasting. It has been a very important player indeveloping new technology. Far be it from me towould fall short of those things. I am certainly not

going to jump in and make any strong predictions defend the BBC but so far I would have said theirrecord was pretty good in embracing digitalabout that at this stage, but evidence will begin to

emerge as we move into the new world and as we television and digital radio and the internet.Already, we see the enormous use that is being madegain experience of it. It is going to be important to

be rather more specific about what the remits are for of broadband with respect to being able to listen toradio programmes that youmay havemissed.At thisthe BBC with regard to both radio and television. It

has to take into account what is being delivered in stage it would not be one ofmy criticisms of the BBCthat they had been rather sluggish in the way inthe market place more generally. To me, you cannot

just set about it as if that market place did not exist. which they have embraced new technology. Indeed,I am often surprised when I go to some othercountries and discover that they do not have a lot ofQ146 Chris Bryant: One of the traditional parts ofthese things. That is not enough of course. We arethe BBC’s remit has been producing Britishlooking at this in a forward looking sense. I think anprogrammes and British content.important part of the remit of the charter—I think itLord Burns: I suspect that will remain important foris in the present charter—is about the BBC’s role insome time.developing broadcasting technology as well as tryingto make it universally available of course.

Q147 Chris Bryant: If you translate that into a newera, the content that many young people—the 15

Q149 Mr Flook: Which is precisely what the Kodakyear olds and so on that we have been talkingexecutives said as well. They could see it but theyabout—enjoy is some form of game. To old folkswould not do anything about it. I am nolike us, a game is something ephemeral andtechnologist, but there could be a tremendous seairrelevant, but the content inside that can be everychange in the way we all receive and watchbit as imaginative and creative and story driven as atelevision. That may not be broadcast and that is aBBC costume drama. Is there any reason why thedangerous word. We may not receive broadcastBBC should not be doing games?media. We may receive programmes which the BBCLord Burns: I would ask the same questions that Imakes and we could hold out the BBC justificationasked earlier: what kind of games would you like tofrom within quite simply. I rather hope you will besee available to people? Maybe some of them wouldable to take that on board and talk to the MITbe educational; maybe some of themwould be aimedpeople you mentioned earlier, because I think thereat particular age groups; maybe some of themwouldare lots of things in the future that the BBC arebe aimed at particular niches and you might askaware of but could not necessarily do anythingyourself the question are they going to be deliveredabout.by the market place. If yes, end of story. If not, youLord Burns: I take on board what you say and I ammay then ask yourself the question whether the BBCvery happy to follow that up. I would again want toare the appropriate people to be doing it.My instinctask the questions as to whether some of this willis that I would doubt it; but it would possibly be oneemerge anyway and whether it is the BBC’s role toof the ways in which you might wish to intervene inget themselves involved in it, and how it fits with thethis market. There are other ways of bringing thatother players in the market place.about if you want a particular kind of educational

game and software. I approach this from the pointof view of asking what is it we want to see; what is it Q150 Alan Keen: Because of the nature of your role,

we are having a discussion rather than anthe market is going to deliver; what is the best wayof intervening in order to get the outcome that you interrogation.

Lord Burns: I am very grateful for that.want. So far, the licence fee has been shown to be aneVective way of doing that.

Q151 Alan Keen: We have quite diVerent views onthe Committee. A lot of the time we want to beQ148 Mr Flook: You spoke earlier about how well

loved the BBC is and indeed it probably is one of the entertained. I am lucky enough. My interactivity ison cricket or football themes still. When I watchgreat brands of the 20th century.Yesterday, we heard

from Simon Jones, the head of MIT Europe, when television, I am in a wonderful illustration of thebinary code which is really the basis of all thiswe visited them, that that is potentially very similar

to Kodak which made silver paper. They were well important technology. I am either awake or asleepon the settee. Nothing beats that. I have never takenaware of the digital threat and they could see it but




drugs but I am sure you cannot beat drifting in and country is going to give a better service than thehealth service. The health service has certain thingsout of sleep. I want to be entertained. At MIT it is

obvious what wonderful technology they have. The it has to do. I would pay £121 for Radio 4 alone. Itis a cheap way of providing wonderful broadcasting,BBC can still put on what I would call shows but

maybe we will get not just 3DTV but characters that the same as the health service. Please look at that.can appear to move around the room. This is where Lord Burns: There is force in what you say but thewe can use the technology but we still want to be health service is rather diVerent from broadcastingentertained. The important thing is this: people have in respect of the alternative means of deliveringtalked a lot of tripe about public service those things, the alternative ways in which peoplebroadcasting and trying to define it. Why cannot we receive their treatment and the extent to which it islook at the BBC as just a diVerent way of ownership? necessary or not. We have obligations that we placeWhy do we not democratise it a bit more so that the upon people in return for public funding and, havingpublic own it and can influence the decisions that are spent a large part of my life engaged in the job ofmade by the BBC more than now? Some people say trying to decide who should receive public fundingthey are impressed by commercials or it should only andwhat they should do in return for that, I do thinkgive weather forecasts and the rates of national it is important that there should be some very strictinsurance contributions. Can we not just say to criteria and remits. And there should be very tightthem, “Do what you like, BBC. Provide what the control in terms of ensuring that you have goodpublic want but democratise it so that the public systems of corporate governance for people who arehave an input”? What do you think about that? in receipt of large sums of public money. The BBC is

in receipt of a very large amount of public money.Lord Burns: Let me repeat one of the observationsthat I think is made in the Ofcom review. There is agroup of people who talk endlessly about public

Q153 Mr Doran: I want to pick up a fewmicro issuesservice broadcasting but when you go and ask theto get away from the big picture and I will wrapcustomers, the consumers, the people who watcheverything up in one question. One of the areas thatand listen, about public service broadcasting, theythe BBC have not been very good at over the pastdo not have a clue what it is you are talking about.few years is, first of all, in the use of independentThe issue to them is do they like and trust what theyproducers. I know that is an area that you are goingget and what are some of their concerns. As I saidto look at. In terms of regional production, oftenearlier, one of the conclusions I reach is that mostthere has been a feeling that a regional production ispeople do seem to like the BBC but that does notjust a crew moving from London, doing the filmingstop a substantial number of them having a grouseand everything else in the region, but we want to seeof one kind or another. One of the grouses is that toothe use of regional facilities. In the area of publicmany of the programmes are derivative of otherservice broadcasting, the BBC along with theprogrammes that they can see elsewhere. They seemindependent television companies have an appallingto be copied and there are endless programmes of therecord, not just in supporting British film but insame type. Also, one of the issues that does get raisedshowing British film on television. As far as the firstis whether or not they themselves are havingtwo are concerned, I would be interested to hear howsuYcient influence in terms of the governance andyou are going to approach these two issues and, onaccountability process. I have some sympathy withthe third, I would like your confirmation that inwhat you say, but if you are going to raise thelooking at the public service broadcasting remit youamount of money that the BBC gets from the wholewill be looking at the attitude to British film.population in the form of this compulsory levy, ifLord Burns:Each of those issues does come up in theyou wish to watch television, it seems to me thatconsultation and survey the visits that the Secretarythere are quite a lot of obligations that fall uponof State has had around the country, talking tothem rather than just doing what they want to do.various groups in preparation for the debate onThe debate about public service broadcasting ischarter review. Those points have often been made.trying to define what those obligations are.Each of them however—independent production,Historically, those obligations have been aboutregional production, issues about films—fall into theputting on certain types of programming; about thetwo categories I mentioned earlier. It is partly aquality of them; about fairness and impartiality inquestion of how you deal with them in terms of thenews and current aVairs; about meeting a range ofoverall remit that you give to the BBC at the time oftypes of programming for a range of people and notcharter renewal. The second thing is how you engagejust concentrating upon the things which largethe system of governance and regulation to deliveraudiences wish to watch. My instinct is that that iswhat you have asked them to do. In the case ofgoing to remain the case. If you are going to fund anindependent production, from what I can gather,organisation in the way that the BBC is funded,there are ambitions that have been laid down whichsome very special obligations fall upon it as to whathave not been met and it seems to me that that is anit should do with that money as well as how it shouldissue for governance as to how it is that that is thebe accountable and how it should be influenced bycase and how it is that the governance process insistswhat the viewers want.that it should happen. In terms of regionalproduction, most people outside of theM25who arein the broadcasting world complain quite bitterlyQ152 Alan Keen: The health service is quite a good

parallel. We do not think that having 147 private about the amount of work that goes on inside theM25. Again, as long as government defines what itcompanies providing health care throughout the




is it expects in those areas, it should then be a matter they get Monday through Sunday? There is alreadytalk of giving greater weight to things like audiencefor the governance to take care of. Films I have

heard rather less about but it is an issue that comes reach rather than simply audience share. And theremay be other means of trying to get people’sup and I am certain it will be aired as we go through

this period of consultation. appreciation of the quality of what it is that theyhave seen as well as whether or not they havewatched it. That has become quite an active area forQ154 Rosemary McKenna: I am one of those people

who absolutely love the BBC and I do think it is debate. When I read the autobiographies of peoplewho have worked for the BBC in the past, you canreally important, with a worldwide reputation, and

the BBC World Service is so important. But ought see that this struggle has gone on for quite a longtime; of trying to keep a balance between audiencenot the BBC to concentrate on providing really good

quality news and entertainment? Should it continue share and the quality of programming. There isclearly a fear that if you let the audience share dropto make some decisions, that it has done, I think,

over the last few years, purely on commercial below a certain level, you will begin to put in doubtthe future of the licence fee upon which all of theirgrounds, to keep or increase its audience share, and

should that be part of the Charter Review? lives depend. So you are trying to ride the balance ofthe two issues; between being innovative, doing newLord Burns: I think a lot of people share just the

views that you havementioned, which is that they do things, and keeping up levels of quality, but alsohanging on to a certain audience share.We will eachlike the BBC a great deal and they do want it to

concentrate on providing very good quality news have our own views at diVerent points in time as towhether that balance has swung one way or it hasand entertainment. The issue of quality comes up

time and time again in terms of the feedback that we swung the other way. Quite clearly quite a lot ofpeople share your view, that it has swung slightly inhave. From what I interpret from this evidence,

people do not want to see on the BBC simply what the direction of worry about audience share. I thinkone of the things that we hope to debate during thisit is that they can see elsewhere; they are expecting

something that is a bit better. Undoubtedly, in the period is to see if there are some other measures ofsuccess and appreciation that may be able to figureconsultation that we have been through, there is also

some concern about the emphasis that is being put a littlemore prominently than simply the question ofaudience share.upon gaining audience share. I think one of the

issues that will come up for quite a lot of discussion Chairman: Thank you. Lord Burns, it is always apleasure to have you here. So many jobs to do andduring this period is whether there is a better set of

measures of success at the BBC, rather than simply only one person to do them! Thank you very muchindeed.looking atwhat is the share time of peak viewing that

Memorandum submitted by S4C

Introduction

1. This document sets out the main observations that S4C would like to oVer to the Culture, Media andSport Select Committee enquiry on BBC Charter renewal. It summarises S4C’s submission to theDepartment of Culture, Media and Sport in response to the Government’s consultation process on BBCCharter Renewal. S4C’s contribution is oVered from our perspective as theUK’s only other publicly fundedbroadcaster. This evidence also reflects our unique relationship with the BBC, under which S4C broadcasts10 hours of Welsh language programmes every week which are provided free of charge by the BBC. TheBBC’s contribution to S4C includes the daily soap Pobol y Cwm, national and international news bulletins,as well as current aVairs and factual programming. The BBC and S4C worked in partnership to acquire therights to broadcast Welsh club rugby and to broadcast the proceeding of the National Assembly for Waleson S4C2.

The BBC in Wales

2. The BBC’s Welsh and English language services have made and continue to make an invaluablecontribution to the development ofWales’s distinctive cultural and political identity. Because it is relativelyunder-served by the print media, the contribution the BBCmakes inWales is possibly even more significantthan that which the Corporation makes at a UK level. As global media organisations grow ever morepowerful, we believe that the BBC will have a still more important role in ensuring that UK broadcastingreflects the lives of people in the UK’s nations and regions. S4C believes that it is important that this shouldextend beyond the provision of regional news and current aVairs. The BBC also has a crucial part to playin ensuring that broadcasting centres outside the south-east are able to maintain a critical mass of talent soas to enable them to produce programmes for national as well as local audiences.



The Relationship Between S4C and the BBC

3. S4C values its creative partnership with the BBC.We believe that it can only be to the benefit of Welshspeaking viewers that the BBC—one of the world’s major cultural organisations—has made such a wideranging and long term commitment to broadcasting through the medium of Welsh. However, if the BBC isto continue to make the essential contribution to S4C’s service on digital platforms that it has to date onS4C’s analogue service, we believe its contribution needs to be extended and modernised, so as to enrich theservice available to Welsh speakers following digital switch-over when S4C will no longer be required tobroadcast Channel 4’s English language programmes in Wales.

4. S4C believes that there should be a move away from a relationship predicated solely on the provisionof a specified number of hours to be broadcast each week. With additional opportunities to view the mostpopular programmes now being a natural element of the services every broadcaster provides, specifying acertain number of hours fails to reflect the changes in broadcasting patterns in the multi-channel age. S4Cbelieves that anymeasurement based on hours should be supplemented by a clear financial benchmark. Anysuch benchmark should take account of the extent to which the BBC’sWelsh language television output hasfallen behind the growth over recent years in English programming intended for aWelsh audience. In 1995,the BBC spent marginally more on its Welsh language programmes than on its English language output inWales. By 2002, the BBC’s expenditure on English programmes was more than 1.5 times greater than theexpenditure on Welsh language programmes.1

5. Any growth in the BBC’sWelsh language output should be funded by the BBC centrally. It should notbe at the expense of the BBC’s existing services in Wales. S4C has proposed that the Charter should reflectthe BBC’s duties with regard to S4C and that the BBC in Wales should be funded so as to reflect these.

Paying for the BBC

6. S4C believes strongly that the licence fee continues to be the best way to pay for the BBC. We believethat the onus should fall on those who argue for alternative systems to demonstrate how they wouldrepresent an improvement. When set against the level of subscription fees charged by satellite and cableoperators, we believe that the licence fee represents value for money. It also delivers a public broadcastingservice which legitimately seeks to reflect the views and interests of viewers and citizens in each of theconstituent parts of the United Kingdom. It is hard to see how any narrower funding base, or a move tosubscription, would deliver the same degree of breadth and diversity with all that that entails for a trulynational service.

Governance

7. Although on a much smaller scale, S4C’s system of governance mirrors that of the BBC. Ourexperience leads us to believe that the regulation of public service broadcasting—with a view to achievingthe maximum cultural impact and the widest possible range of public benefits—is a very diVerent task tothat of regulating commercial television. The S4C Authority believes it has a far more hands-on rle withregard to agreeing the strategic direction for S4C’s programme service and for determining priorities moregenerally than would be possible through external regulation. As is the case for S4C, we also believe thatthe cultural regulation of the BBC should be the responsibility of the body that is also charged with ensuringeVective financial oversight of the organisation. This seems to us to be the best means of ensuring that thepublic benefits associated with public service broadcasting can be assessed against the cost of deliveringthose benefits. Similarly, it enables any assessment of financial eYciency to be informed by an understandingof the cultural impact achieved. Whilst there may be areas where current systems might be improved, webelieve that this points very strongly to the BBC’s public service remit remaining the responsibility of theBoard of Governors.

June 2004

1 Source: BBC Annual Reports 1995–96; 2002–03.



Witnesses: Mr David Scott, Chief Executive and Managing Director, and Mr John Newbigin, Head ofCorporate Relations, Channel 4, Professor Elan Closs Stephens, Chair S4C and Mr Huw Jones, ChiefExecutive, S4C, examined.

Chairman: Good morning, welcome. First of all, acknowledging that Public Service Broadcasting isnot the BBC plus a few also-rans, it is a wholeMichael Fabricant.system.

Q155 Michael Fabricant: Obviously not in anQ158 Michael Fabricant: By the way, being half-attempt to ingratiate yourselves with thisWelsh, I do invite S4C to contribute if they wish to.Committee, Channel 4 suggested that thisMay I ask a further point, and then I will conclude,Committee does not have oversight for the BBC.if I may, Chairman? Do you believe that the BBCPerhaps you would like to expand your reasons forshould not only have its ownCommittee, but do yousuggesting that?believe that the BBC should fall much more underMr Newbigin: There are two reasons. One is thethe aegis of Ofcom than it presently does?Communications Act sets out a very clear definitionMr Newbigin: In our submission to DCMS, I thinkof Public Service Broadcasting, and it seems to usyou probably know that all through the passage oflogical that there should be a parliamentary bodythe Communications Bill we argued long and hardwhich is the final port of call for discussions aboutthat the BBC should be answerable to Ofcom, againhow broadcasting fits into the larger public realm.on the point that that there should be one systemSecondly, that the process during the passage of thewhich looks at the whole of Public ServiceCommunications Bill, of the Committee of bothBroadcasting. Acknowledging that Ofcom has quiteHouses that scrutinised the Bill, was a verya lot to do and that the world is moving fast, whatsuccessful and very happy process. It seemed to uswe suggested in our submission is that at the time ofthat it is worth building on that and acknowledgingthe next five-year Ofcom review, if there was athe particular importance of broadcasting in themidpoint review on the Charter there should be amedia by giving it a Committee all of its own.very serious and explicit consideration of whetherthe BBC at that time should come fully underOfcom

Q156 Michael Fabricant: So you would expand that, or not.would you, to the Public Service Broadcastingprovided by Channel 4? So are you saying, in

Q159 Michael Fabricant: Does S4C want toeVect—and I do not want to get knotted up herecomment?about this Select Committee—that the SelectProfessor Stephens: Obviously we come underCommittee should not be looking at any publicOfcom to largely the same extent, that there is anservice broadcaster, including the BBC?overarching responsibility in terms of protection ofMrNewbigin:No,we are saying that there should beminors, decency, morality and in terms ofa specially established Committee, which looks atindependent quotas and so on. I think the questionPublic Service Broadcasting right across the piece,one has to ask is not where does the overallie the BBC, ITV, Channel 4, Channel 5, and clearlyregulation lie, but where does the place for actuallythat does not cover all the DCMS responsibility so delivering those issues lie? You cannot get away inthere would, de facto, need to be another Select the end from the presence of the Board, however

Committee which looks at the other activities of constituted, which actually has the responsibilityDCMS. and the care for that organisation and the passion

for it. I am somewhat perplexed myself as to theimmense passion at the moment to say that it is notQ157 Michael Fabricant: Channel 4 is, as you say,always possible to do the two things, that is toand I thinkwe would all agree, a good Public Serviceregulate and to govern. In some ways one can argueBroadcaster, though rather diVerent in size to that ofthat in bringing up children one has to do exactlythe BBC. It is also diVerent from the BBC in the waythat—it is not rocket science. We are complex andit is set up; it is set up by statute. Do you think theresophisticated people, and inmany ways the presenceis an argument to suggest that either Channel 4of somewhere like the ITC has not stopped the ITVshould have a Royal Charter or the BBC should benews from moving from nine to ten. I came downset up and operate by statute?yesterday on a train from mid-Wales; the train wasMr Newbigin: Channel 4 certainly does not want ahorrendously late, but we do have a strategic railRoyal Charter, thank you very much for the oVer!authority. So the presence of a regulatory body thatWe are very happy with statute. In our view afines post hoc and sets parameters is a very diVerentCharter for the BBC is appropriate and a ten-yearanimal from a public service body that actually hasCharter is appropriate, but, as we said in oura care and a commitment and an obligation to whatsubmission to DCMS, we think there should be ait is doing.very substantial midpoint review after five years, to

tie in the ongoing processes of the BBC into thewider scheme of management for Public Service Q160 Alan Keen: May I ask a very simple question,Broadcasting that the CommunicationsAct sets out, John? Can you paint us a picture of what wouldwith the five-year review by Ofcom. That is the happen if the BBC ceased to exist in so many years’logical time to look at the part that the BBC is time? If it were given away, sold oV, what would theplaying as one of a number of players in the whole broadcasting arena be like? What would be the

advantages and disadvantages?area of Public Service Broadcasting; in other words,



22 June 2004 Channel 4, S4C

Mr Newbigin: If the BBC was, as you said, sold oV, address that which is missing in the public sector, bytop slicing 5% or 10% of the licence fee, and, if youthen what would happen is that over a period of time

there would be a degrading of the quality and the could, would that have influenced the way in whichyou have approached film in the last two or threelevel of innovation and the range of skills that are

available in British broadcasting, and the long-term years yourselves, Channel 4?Mr Scott: There are two issues there, one ofconsequence would be dire.

Mr Scott: If I may add, one would need to ask how production of the films and then the running and theorganisation of a channel. Our Film 4 channels, I amwould the new body be funded? Because if it was

funded by advertising it would have significant glad to say, are doing well and will be profitable thisyear, and that is a great achievement. On theimpact on ITV, Channel 4 and Channel 5 as well.

Professor Stephens: Could I add to that, that production side, as you know, we have had to scaleback our ambitions. A couple of years ago we foundcertainly from the point of view of Wales and the

culture of Wales and the politics of Wales, the that the structure which we were pursuing was notreally eVective, and in particular we had scaled up ancontribution of the BBC to Welsh life has been

immense since the 20s, not just in terms of news operation in the hope of getting a decent Americanstudio deal, which we did not get in place. So ourgathering and regional—now devolved—and

national news, but also in such things as the production model has gone back to where it hadbeen in the time when we were being successful. WeNational Orchestra of Wales, and the support it has

given to young singers, and so on; it has been an are commissioning films out of the main channel’sprogramme budget and those films are beginning toimmense cultural asset. As we look to the long-term

future of the commercial broadcaster, ITV, and the come through now. As for the running of a UK filmchannel, are you suggesting that that would onlykind of economic models that are coming out with

digital switchover, and how far PSB can be sustained have British films on it, or be broader than that?in that atmosphere, then I think that the presence ofthe BBC in the national regions is of acute Q163 Derek Wyatt: No, I was thinking of a Britishimportance. film channel. You have huge film libraries that are

just laid bare, which would need digitising, but thereis a cultural need to show film. If you cannot show itQ161 Alan Keen: Is there any way you can tell uson the BBC then why should we not have a publichow it could maybe be democratised further than itservice UK Film Channel? The logic escapes me atactually is at the moment?the moment.Mr Newbigin: In our submission to DCMS weMr Scott: I have not seen a business model for that.suggested a structure which is actually closer to the

Channel 4 structure, which is that there should be aManagement Board, which is a properManagement Q164 Derek Wyatt: There is not a commercial

business, as you know, and I have talked to theBoard of the BBC, which might include some non-execs, and that they should report to the Board of commercial entities, but why could there not be a

Public Service Channel?Governors and theBoard ofGovernors should be anarm’s length regulatory body with clearly a majority Mr Scott: It sounds a very interesting idea.

Professor Stephens: Could I add, that wearing myof lay persons, but it also ought to include someheavyweight broadcasting expertise and it should be other hat as a governor of the BFI that obviously I

would be delighted to see more film on, by whateverbroadly representative of the population of Britain.That, in our view, is the best way to make the BBC means possible.more accountable. If, in the long-term, it were tocome fully under Ofcom then that would be the Q165 Derek Wyatt: But we will not attract children,second stage in that process. we will not attract the next generation unless there isMr Scott: I think that if each of our services had a a public service need, and that is a failure; that ismore explicit remit laid down, which was what everyone says the public service means. It is ameasurable, accountable and transparent, that failure of the commercial, or you cannot run a UKwould be a proper role for the governors to supervise film channel?and report on, and actually agree those remits at Mr Scott: I really do not know the complexity of thethe outset. rights position and where those catalogues sit andProfessor Stephens: I suppose there could be an who owns them, but I am certain that those are allargument for strengthening the regional bodies, the issues that can be dealt with.Broadcasting Council for Wales, the BroadcastingCouncil for Scotland, and so on.At themoment they Q166 Derek Wyatt: So let me ask you all, are you inhave an advisory role but not a budgetary or favour, therefore, of being able to apply for a fundregulatory role in the proper sense. So that is an area so we could top slice the licence fee? Film is not thethat could be explored. only channel that the BBC does not do; it does not

do sport, it does not do sport health, sportpsychology or sport education. It could easily run aQ162 Derek Wyatt: Good morning. I have been on

record as wanting to try and persuade the BBC to sport channel but chooses not to.Mr Scott:Whether it is the role of the BBC licencecreate a UK film channel only, and Channel 4 has

some experience of that. If I fail to persuade BBC fee to do this or whether it is something which theFilm Council should look at, I do not know, but it isgovernors and new management to do this, do you

not think that there should be some way that we can an interesting idea.




Mr Jones: It seems to me that the question is what be encouraged. Therefore, the position is somewhatthen gets cut in order to fund the additional channel? diVerent in political terms over the whole of theWe sometimes portray our own dilemma in deciding country, and I think we are the beneficiaries of thathow we decide on our priorities by saying we could political will. However, one could argue that thespend the whole of our programme money on small drop in the number of Gaelic speakers at themaking a single blockbuster film each year, but then moment is an argument for enhanced coverageyouwould not have a television channel. Somewhere because we are all the losers when a certain culturein the range between that absurd extreme and the disappears.other pragmatic policy there is the truth of what wedo, which is to fund up to two films a year becausewe think that is appropriate. But your proposition is Q170 Chris Bryant: S4C, it is interesting that youthat something would have to go in terms of the said it is good for viewers that you have Channel 4general presence of broadcasting at the moment. and S4C alongside each other in Wales, but I guess

it is diYcult for you because you have lost a third ofyour audience in the last three years. But today is notQ167 Derek Wyatt: Forgive me, but BBC3 isabout you, it is about the BBC. You argue in favourwatched by less than 2,000 people an hour and costsof the licence fee, but you are funded by grant-in-aid£100 million; it would cost less than £100 million forand I guess you want a bit more grant-in-aid as well,a UK film channel.and the World Service is funded by grant-in-aid andMr Newbigin: I would have thought with the BFInot by the licence fee. Why are you in favour of theand the FilmCouncil exploring the possibilities of E-licence fee?Why should it not just be grant-in-aid, ascinema that, if one was going to look at a filmit is in Holland?channel, to do something on broadband is

something that would be worth exploring and would Professor Stephens: I suppose it is an argument webe infinitely cheaper than starting a television would have to have with the Treasury as to the waychannel. in which they would wish the licence fee to becomeDerek Wyatt: I agree it would be cheaper in a grant-in-aid. Would that then have repercussionsbroadband if we can get the bandwidth. Thank you, for their own rate of inflation, RPI, whatever? I amChairman. sure that there are issues around this subject, which

they have already debated. I suppose the old way oflooking at it was to say that this is the buVer zoneQ168 Rosemary McKenna: You may not be able tobetween an arm’s length government interventionanswer this question, but I think it is interesting thatand the broadcaster. I am not quite certain that thatthe creation of S4C, did you at any time considerargument prevails totally.making a similar arrangement in Scotland, because

there is an upsurge in Gaelic broadcasting in thelanguage in Scotland?Has that ever been considered

Q171 Chris Bryant: Are you compromised by beingor would you consider it in the future?funded by grant-in-aid?Mr Scott: I think that it was briefly considered someProfessor Stephens:No, we are not, and I would saytime during the 80s and the outcome of thatthat the fact that Parliament in a sense sets theconsideration was the setting up of the Gaeliclicence fee is in itself a little bit of a compromise onTelevision Fund, which was then providingthe absolute independence of that fee. It has been aprogramming, which was transmitted on ITV’suseful device, which currently most people subscribeScottish Services, and I think on the BBC as well butto, and, as we heard from Lord Burns, the researchI am not entirely certain.and the Ofcom research shows that at the momentit is not under immense threat. Therefore, all we are

Q169 Rosemary McKenna: There certainly is not saying is, so long as that remains a viable way foranything like the volume. people to pay for their Public Service BroadcastingMr Scott: The commercial impact on Channel 4, if then we are supportive of it.we had Scotland separated away from Channel 4,

Mr Jones: And the size of the population of the UKwould be quite severe; it is obviously a largegives you a product of the licence fee, which enablesaudience for us. I hope people in Scotland enjoy oura very wide, rich range of services to be provided,programmes as well, so it is probably good to havewhich would not be the case in a smaller countryChannel 4 there and a Gaelic Fund.where other mechanisms have to be put in place inProfessor Stephens:Of course, as the new digital ageorder to sustain what is considered to be aevolves Channel 4 will be UK-wide side by side withdesirable service.other broadcasters such as ourselves, which is a very

good thing for viewers—they are provided with adiversity of programming. We are very aware of the

Q172 Chris Bryant: A diVerent question. At theneeds of Gaelic speakers for greater coverage andmoment you get 10 hours a week from the BBC,more programming. I think that the diVerence inproduced by the BBC for you, and that comes out ofWales over the years has been the political will tothe licence fee, and you are going to lose 10 hours amake the language survive. At the moment theweek of English broadcasting from Channel 4 whenlanguage is, as you know, compulsory in schools;Channel 4 is available to everybody in Wales?it is the avowed intention of the Assembly

Government that it should survive and that it should Mr Jones:More like 70 or 80 hours.




Q173 Chris Bryant: A week? more than once voice inWales, and that is one of theprincipal arguments for the existence of a separateMr Jones: Yes.channel.

Q176 Chris Bryant: Thank you very much for that.Q174 Chris Bryant: So an enormous hole in bothOne question to Channel 4—and it looks as if youmoney, because you are not able to sell theare going to get away without any questions aboutadvertising, and in terms of programmes. Would itBig Brother today, which is going to be quite annot make more sense in this new Charter just to putachievement—on the governance of the BBC, doyou into the BBC? you think it will make any significant diVerence if the

Mr Jones: The reason why S4C was set up as a governors were to become more independent fromseparate channel and as a separate authority was in the Board of Management, as Michael Grade seemsorder that there should be this space, which gave to be suggesting, as well as obviously independentprimacy to the Welsh language, and when you have from government?200 to 300 English language channels that argument Mr Scott: We certainly believe that is the directionstill prevails in respect of giving that space, where the they should move in. As John was saying earlier, weWelsh language has primacy in Wales. The reason a envisage a Board ofManagement with perhaps non-separate authority was set up was to ensure that executive directors, who would manage the businessthere was a body which had the interests of that and the governors as regulator at some distance,

arm’s length, in their own building, with a degree ofchannel as its primary function. A separate fundingseparation. We think that would strengthen thestream was set up, again so that that primacy waswhole structure of governance at the Beeb.sustained throughout.We think those arguments are

still as strong as ever.Q177 Chairman: Just to proceed on the question thatChris Bryant was putting about funding the BBCthrough grant-in-aid. I made some headway inQ175 Chris Bryant: But there must be costs topersuading Harold Wilson, when he was Primehaving two structures, to having a separate Board, aMinister, to do exactly that, but Denis Healey, whoseparate organisation, a commissioning through towas Chancellor of the Exchequer, would not have itthe BBC, and, at the same time, you have no power because grant-in-aid can only come out of general

really to say to the BBC, “Excuse me, you are taxation. The licence is hypothecated tax for whichspending lots more money on English language the Chancellor does not have to find the money; youprogramming in Wales, but you are not spending are a public sector organisation but you find yourproportionately the same amount of money on own money. It is in a sense a rhetorical question, isWelsh language programmes that you make for us.” not the only future for funding of the BBC in thoseSo actually you lose out. circumstances either to go on being funded by theProfessor Stephens: We are a very hybrid licence or to find its own way of funding in the wayorganisation; we take advertising, we take that Channel 4 finds its own way of funding?sponsorship and so on, in an upfront way which is Mr Scott: We believe that the licence is the correct

way of funding the BBC. If they were to be fundednot currently the BBC model. So I think there arethrough subscription I think what we would find issome problems as to the way in which we are athat perhaps half the country would want to pay itsuitable fit for the BBC. Having said that, I do notand it would have to be £200 a year, and the otherthink that there are suYcient savings in just thehalf of the country could not aVord it or did notmovement from a single Board, which is probablywant to pay it, and I thinkmuch of the benefits of thecosting in the order of £200,000 per annum, touniversality of the BBC Services would be lost. Iactually make up for 70 hours’ loss of programming.think that if the licence fee is the right way, even afterThe most important point—and I think this is aswitchover we will find that many of the DTT Free-serious one, because I take your point veryview boxes will have no conditional access slots andseriously—when I am trying to be very good and cards. Even at that point I do not think that thevery moral I try my best not to suVer from equipment which will be in people’s homes would

institutional-itis, and to say, “I am defending the enable a simple charging mechanism. I think thepresent structure at all costs.” In the interests of the issue on the licence fee—andwe believe in the licenceviewer we have to look beyond that. When you look fee—is the question of how much should it be? Iat the print media in Wales, at the lack of diverse think there is scope there to look at the quantum ofvoices in that print media, when you look at the it and the cost to the various BBC Services and whatpower of the English Press in Wales, as opposed to things we want them to do. I support a licence fee.Scotland, when you see what could be happening to Chairman: Thank you very much indeed; we are

most grateful to you for attending.ITV Wales, I do think it is important that there is




Members present:


Chris Bryant Rosemary McKennaMr Frank Doran John ThursoMichael Fabricant Derek WyattAlan Keen

Witnesses: Mr Richard Freudenstein, Chief Operating OYcer, Mr Mike Darcey, Director of Strategy,Mr Michael Rhodes, Head of Regulatory AVairs and Mr Ray Gallagher, Director of Public AVairs, BSkyB,examined

Chairman:GoodMorning, gentleman. It is very nice distinctive from what commercial channels provide,and then you need someone tomake sure they live byindeed to see you, as always. We are going to launch

straight into the questioning. John Thurso. the rules.

Q180 John Thurso: Do you believe that BSkyBQ178 John Thurso: Can I begin with a prettydelivers any public service in its broadcasting?straightforward question. From your perspective, isMr Freudenstein: It depends how you define “publicthere really any need for a BBC? Should the BBCservice broadcasting”. Clearly Sky provides a lot ofactually exist?high quality entertainment and information which isMrFreudenstein:Abig question to start with! I thinkof a public service. We do it for commercial reasons.you really need to look at why you want a BBC andSo it does not fit within the narrow definition ofwhat it is there to achieve; and I think in that we“public service broadcasting”, but clearly a lot ofprobably agree with some of the things thatwhat we do is public service.witnesses to this Committee have said before, such

as Sir Christopher Bland earlier in the month said, Ithink in general terms, “the BBC is there to provide Q181 John Thurso: If I have got your definitiona quality and range of programmes that will not right, what you are suggesting is that the BBCalways or frequently have been provided by should primarily take care of those areas which thecommercial television and commercial radio”. So I commercial sector will not be able to do on its own,think there is a role for the BBC in terms of and that is eVectively to be there to—if you like, it isproviding high quality programming that would not where there is market failure, where the market doesbe provided by the commercial stations. I think there not support the activity. Is that a fair summation ofis also a role for them to lead the way in innovation your view?and risk, if that is what society thinks is important. Mr Freudenstein: The words “market failure” tend

to be a bit emotive and tend to send people oV andget excited, but I think that is generally right. It is theQ179 John Thurso: If one looks at the BBC and theview of a number of witnesses before thisway it has developed, it has moved into a lot of areasCommittee—I quoted Sir Christopher Bland, Iwhich might be considered the province of thethink Lord Burns said something similar. What typecommercial operators and clearly the boundaryof programming do people want? Is it likely to bebetweenwhat it is appropriate for the BBC to do andprovided by the market place? If not, what kind ofhow far they go is one that needs to be debated. Inintervention do you need to bring it about? So Iyour view where should that boundary be drawn?think, yes, that is basically right.What is the preserve of the BBC and adds the value

that you have just described, and where is it that theytrespass into the areas you would really like them to Q182 John Thurso: Ideally, from a commercial pointkeep out of? of view, the less the BBC does to compete the better?Mr Freudenstein: I think you keep bringing it back Mr Freudenstein: Sky is certainly not afraid ofto what does society want to see? What competition, but what you are talking about here isprogramming and content does society want to see using public money and what you want to use thatprovided? Is that being provided by the market? If it public money for.is not being provided by the market, then the BBCshould provide it, then you have to have a debateabout how much money they need to do that and Q183 John Thurso: Do you not then end up with the

danger that if you have a very narrow remit and athen you can have a debate about how you fund it.The one thing that is clear is that, however that is public service broadcasting that is confined to very

narrow limits and therefore does not have the viewerdecided, you need to set a pretty clear remit for whatyou want the BBC to do. An example is what has figures to actually fulfil its role, the argument being

that the BBC, by being in other areas, has suYcienthappened with BBC 3. For the first time there hasbeen a remit and some rules laid down about what viewers to be able to deliver the public service

content across a wider spectrum?the channel should be, and the emphasis is on being



29 June 2004 BSkyB

Mr Freudenstein: No, I think there is a lot that can Q187 Derek Wyatt: But if the statistics show thatpeople under 18watchmuch less television now, thatbe—there is a lot the BBC can do within that sortthe next generation will watch a lot less again andof general “not being done by commercialagain, is it not a development that there will be lessbroadcasting” that gives them a fairly wide scope tointerest in television per se as the next generationsdo things; it gives them a scope to innovate and toinherit diVerent forms of platforms? I suppose mytake risks that commercial broadcasters may notquestion is: do you think we should just pay thewant to and it gives them the remit to push thelicence fee for ever and ever, or, if we are going to saycommercial broadcasters as well. An example mightit is 10 years, should we say, “It is 10 years, but webe comedy. The BBC has a role in investing inare going pay you less over the 10 years because lessinnovative and risky comedieswhich the commercialpeople will come into your systems”?sector may not do. I also think if that is the role ofMr Freudenstein: I think there are a couple of issuesthe BBC, then you should not get too hung up onthere. The first is I think there is still uncertaintyaudience figures: because if it is providing a role thatabout what children will do as they grow up, and,society thinks is important, I do not think audiencewhen they reach a certain age, will they continue tofigures are the be all and end all.consume media in the same way as they do whenthey are 15 or will they becomemore like we are: flop

Q184 John Thurso: Let me ask a last question, at home in front of the television after a hard day atChairman. If, therefore, the BBC were removed and work? I think that is still a bit uncertain. Clearlyyou were free to act without the BBC there, you there will be fragmentation. I am not quite sure towould see that as a negative rather than a positive in what extent it will happen. As to the second part ofcommercial terms? your question, I think it does come back to what youMr Freudenstein: I do not think we have ever see as the BBC’s role, and, once you have workedthought about a world without the BBC being there. that out, howmuchmoney do you need to fund that,

and not necessarily get hung up then on how manypeople will be consuming it.Q185 John Thurso: I have invited you to think

about it?Mr Freudenstein: I think there would be . . . The Q188 Chairman: Could I come in at this point,market would be very diVerent. There would be Derek, following what you have been saying? Youopportunities for commercial broadcasters, because are in a very enviable position, taking into accountclearly the BBC—anything the BBC does has an that you have the issue of winning and retaining theimpact on the market; even if it is for a good reason. subscribers, which you have been very good at. YouIt has an impact on the way the commercial sector can do what you like within the variables, withinwill invest, it has an impact on strategies for the Sky. You can launch new channels whenever youcommercial broadcasters. So, clearly, if it was not want to, you can, as you are doing, proceed withthere, there would be more opportunities, yes, but I interactivity. Taking into account your commercialdo not think that is something that Sky is business, whose main objective—and I do not

criticise you in any way for this—is to make money,advocating.which all commercial operations have as their mainobjective, you are very, very flexible. Could I put a

Q186 Derek Wyatt: Good morning. I apologise, I devil’s advocate question to you simply in order tohave to go after I have finished questioning you just get your reaction, namely this. You are flexible.for an hour to see a Minister, so do not take that as Heaven only knows what your flexibility will havea slight. In trying to work out whether the BBC led you to be by the year 2016. Twelve years fromshould be as it is in 2017 it is quite a gamble, from now would a monolithic, relatively inflexiblemy perspective, that the entertainment platform organisation whose new plans have got to bewould be the same as it is currently. You are a fast- approved of by a government be the mostmoving company. What is your view of where the appropriate form of public sector, public serviceentertainment platformwill be, say, in 2012, halfway television in this country?through a 10-year licence fee? Mr Freudenstein: I suppose it depends how quicklyMr Freudenstein: I think one thing that is certain is you think things will change. It also depends. . . Youthat there is uncertainty. I think in 2012, for are presuming that the BBC is incredibly inflexibleexample, even in 2017, broadcast television will still and slow-moving, which can be true in some areas,be far and away themost popular way people receive but I think in other areas they move very quickly. Ientertainment. I think channels and multi-channel mean, when we, together with the BBC, launchedplatforms will still be very, very popular. Clearly Freeview quite recently that was very quick on ourthere will be fragmentation, there will be more part (Crown Castle and the BBC). We all movedbroadband, there will be more ways into the home: very quickly to re-launch that platform. So, I think,mobile, internet, broadband, and so on and so forth. somehow, you have to come up with a governingI think another factor which will be very interesting regime for them that allows them to move quickly ifin how the whole landscape develops is that there that is, again, what society thinks needs to be done.will be PVRs, our Sky! and other similar versions Chairman: When the previous government decidedwill be very, very popular by 2012 and even more so on a 10-year charter to the year 2006, the kind ofby 2017. So there will be a lot of change; it is hard to ways in which people behave now in terms of access

to visual and audio entertainment andpredict exactly how it will pan out.



29 June 2004 BSkyB

communication were practically unimaginable. The Q191 Alan Keen: I am a great fan of Sky as Chair ofthe All-Party Football Group! It is a magnificentexplosion of the use of mobile phones and thepresentation, and when I spent years travellingincreasing amplification for what you can use aaround the country watching opponents’ tacticsmobile phone for. Things like Ipod, which havebefore we played, TV produced nothing thattaken over now, etcetera, etcetera, were not evenanalysed games. I also found the BBC . . . Iimagined when the previous government decided onremember asking a series of questions to them athe 10-year charter. Is there an argument for sayingcouple of years ago, and we ended up almostthat, in view of the almost utter incalculability ofagreeing, I think, that Sky News, Sky Sports News,where we are going to be in 12 years’ time, that a 10-and football was all public service broadcastingyear charter might be too long, or, on the otherreally. So much of Sky’s output really is publichand, because of the incalculability, a 10-yearservice broadcasting. I think, as a fan of both thecharter might be too short?BBC and Sky, do you not agree, you do tend to takeChris Bryant: Hear! Hear!too hard a line as if you want to get rid of the BBC’sentertainment? You said that audience figures are

Q189 Chairman: I do notwant you to approve ofme, not important to the BBC. You are about the onlyChris; it puts me oV! person that I have heard say that, because others sayMr Freudenstein: Plainly it is very diYcult, and the the BBC should justify their existence by producingother thing you have got coming up obviously is the decent audience figures?

Mr Freudenstein: It is not the be all and end all: itpotential for digital switch-over as well in that time,should not be the determining factor. If the BBC iswhich adds another level of complexity. I do notspending the money in the way society wants that isthink we know the answer.Maybe you need a reviewpurely to a group of people that it is important topoint around about the time of digital switch-overprovide programming to, I do not think itmight be a way to look at it.necessarily matters whether it is a 30% share, a 20%share, a 15% share. I do not think that is the

Q190 Derek Wyatt: Just a last question. It seems to determining factor.me that in the public sector system there are twochannels the BBC will not do: one is a UK film

Q192 Alan Keen: I do not watch it, but are youchannel dedicated to UK film from, say, 1918 to thesaying that the BBC should not produce somethingpresent day, and, secondly, a sport and healthlike Eastenders? You think they should beeducation channel to look at sport psychology, sportrestricted?medicine, sport development, school curricula, andMr Freudenstein: No, I did not say that either. Iso on. Yet these are two things that (a) the schools think just because the BBC makes a populartell us they would like, and (b) aficionados of film programme it does not mean it is not public service

would like. In fact, they will not get very high broadcasting. You have got to start from theratings, but they are a public service, yet we cannot premise about why are they investing?What they arepersuade the BBC of the eYcacy of that; they have doing? If it turns out to be a popular programme,already decided that their current digital platform is that is great, but they should not just do copycatit for the next 12-years; they do not wish to extend programming or programming that the commercialthat. Would you, in principle, be for the top-slicing sector would do.of the licence fee so that those groups of people inour communities that would like public sector

Q193 Alan Keen:One thingwe have been finding outbroadcasting and cannot get it from the BBC at leastin the last couple ofweeks of this inquiry is that somecould have funding, much like the community radio.people say that Sky!, for instance, means thatThe BBC does not want to do community radio. Itpeople can select the programmes and watch themis a big growth area in Britain. Where are we goingwhen they want to. On the other hand, I have notto get the funding for it unless we top-slice the been convinced myself. I wonder if you can convincelicence fee? me from statistics maybe, as you are learning from

Mr Freudenstein: I think there is always a bit of Sky!. I like to sit in front of the television and beconfusion about what top-slicing actually means. entertained and see a show. It might be a series ofOne concern of ours is that top-slicing means taking three programmes, three diVerent programmes. It ispublic money and giving it to commercial not that I do not look to see what is going to be on,broadcasters to do what they would have done but I like in a way to be surprised, and it seems ananyway. In your example, there are lot of British immediate thing to me, like going to the theatre.films on the Sky platform already, both on Sky and What is Sky! showing? Is it showing that people areon channels like FilmFour, so I am not sure whether going over to that sort of thing?that is a gap that needs to be filled by public money; Mr Freudenstein: I can give you some statistics. Iand similarly with sport, I am not sure whether that think 62% of viewing in Sky! homes is to liveis a gap that needs to be filled by publicmoney either. television, 38% is to recorded. 85% of people checkSky does a range of minority sports. We do a range what is on live before they go to the recordedof youth sports. So I am not convinced there is an programming. So there is still a majority of liveargument for either of those channels particularly, programming. That is partly because of the way weand I am uncertain about what top-slicing actually have set up our Sky! system. If you turn on our

electronic programme guide, the live programmeswould mean.



29 June 2004 BSkyB

are on first and the recordings are at the bottom, what youwant it to do, decide howmuchmoney youthink it needs to do that and then have a debatewhich is, for example, diVerent from the way TiVo

does it in the United States, where the first thing you about how you are going to fund that.get is the recorded programming, which could tendto throw youmore to recorded, whereas we are quite Q198 Chris Bryant: Do you think it should behappy to throw people to live first. So there is a lot funded by subscription?of viewing to live television, but, as I said, 38% of Mr Freudenstein: I think once you have goneviewing is recorded programming. Within those through that analysis, I think at the moment youstatistics people are watching more movies, more might find that the licence fee is probably the leastsport, more basic channels, as a general rule less worst way to fund the BBC at the moment.terrestrial television in Sky! homes as well. Overallthey are watching more television, and it goes up Q199 Chris Bryant: So “Sky supports the Licencefrom 23 hours to 27 hours on average per week. Fee”—that is the headline today?Mr Darcey:One other comment about the recorded Mr Freudenstein: No, as I said, I think we have notprogramming. Some people tend to think of this as come to a definite conclusion. I think you need to gobeing about watching something from aweek ago or through that analysis first: what you want it to do,a month ago. Some of the recorded programming how much money you think it needs, and then haveviewing could just be time-shifting it by 20 minutes. a debate about—It would still come up as recorded viewing,obviously, and people find that functionality very Q200 Chris Bryant: Let’s say it needs roughly £2.5attractive. It helps them cope with the complications billion a year. Should it be funded by subscription,of their life and they are able to watch a television should it be funded by advertising or should it beprogramme when they are ready rather than when it funded by the licence fee?happens to be on; so even time-shifting by 20 Mr Rhodes: I think, as Richard said, it depends onminutes can be pretty valuable. what it is doing. If for that £2.5 billion it is providing

a service for, by and large, the whole population,Q194 Alan Keen: Following on from that, one last then probably the population should bequestion. Do you foresee, for instance, in 10 years contributing to the funding; and it may well be thatthat somebody like me will not sit in front of the the most eYcient way to do that is through a licencetelevision set thinking, “Now I will watch this and fee. That is something you would have to look atthen watch this”? Do you think all of this virtually once you have identified the role it is going towill be choosing and drawing down the programmes perform. If the role it is going to be performing is, foryou want to see, or do you still think there will be example, to provide very much a niche service, likewhat I call the theatre eVect of sitting in an armchair the one that Derek Wyatt mentioned earlier, thisand being entertained? Sports Psychology Channel, then it may be thatMr Freudenstein: I think a lot of people will have the there is a very small part of the population whichSky! or PVR devices in their homes. I think there would wish to consume that service, and it may bewill always be event television which people will more appropriate that that part of the populationwant to watch live, but I think there will be more use looks to funding it. I do not think you can say in theof recorded time-shifted programmes. AsMike said, abstract: is the licence fee right? Should it beit might only be by 20 minutes, it might be by one subscription? It really does very much depend uponnight if you happen to be out on the night and you the activity being undertaken.want to watch a programme, but there will stillabsolutely be a place for event television, live sport Q201 Chris Bryant: But we know what the BBCbeing an obvious example and things like the big looks like. It has got BBC1, BBC2, all the radio, allsoaps, and things like that, clearly people will want of that kind of stuV. We know what it does. I am ato watch them live or very close to live. bit worried if you are so shy of saying anything

about the licence fee, because in the past Sky hasQ195 Chris Bryant: Many congratulations on your always been rather publicly opposed to it; and we“Freesat” package, which I know a lot of people will have had people on behalf Sky sit in that chair andbe looking forward to. When is it going to start? say the licence fee is nonsense.Mr Freudenstein:We have not announced a definite Mr Rhodes: I am not sure we have said that, but ourdate, but we did announce that it would be this year, position today is that it very much depends upon thethis calendar year. function that it is performing.

Q196 Chris Bryant: You do not want to announce Q202 Chris Bryant: But you challenged the licencea date? fee as being State Aid, for instance, in Europe?Mr Freudenstein: Not today. MrRhodes:That was a question to dowithNews 24,

whether it was appropriate that public moneyshould be given to the BBC to perform that taskQ197 Chris Bryant: Let me check. On funding of the

BBC, you are not in favour of the BBC being funded given the eVect it was having on commercialoperators such as Sky News. So that was a veryby subscription?

Mr Freudenstein: I do not think we have—.We have specific issue: should thatmoney be given to the BBCfor that task? It is not a general, “We challenge thenot said, we have not made a comment on that. I

think again it comes back to the principle: decide licence fee.” That is not our position.



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Q203 Chris Bryant: Do you still believe that News Mr Freudenstein: No. I think what we are saying isyou need to go through the process of analysing24, BBCNews 24 should be stopped, that in the new

Charter it should not be allowed to do News 24? what you want the BBC to be.We are not saying oneway or the other emotively what it should or shouldMr Rhodes: I do not believe we have given that anynot be. I think the people who decide this need to goconsideration recently. Certainly there has been anthrough the process of what youwant the BBC to be,adverse eVect on Sky News, and it is diYcult tothen decide how much money you need and thenenvisage yet another entrant who is providing news,decide how you are going to spend it. It does notgiven the BBC’s position. ITVwas able to grow a 24-need to be emotive; it needs to be: “what does societyhour news channel oV the back of its existing newswant from public service broadcasting?”provision, but it is diYcult to see anyone else doing

that. So there is clearly amarket eVect whichwe havesome concerns over. Q208 Chris Bryant: What do you think it wants?

That is what I am trying to tease out of you.Mr Freudenstein: I will go back to what I said at theQ204 Chris Bryant: Hang on. We are talking aboutbeginning, which is echoing what other people havea new Charter for another 10 years in whichsaid to this Committee, which is that you want apresumably there will be laid out what channels thequality and range of programming that is notBBC can and cannot do; and you are saying todayprovided by commercial broadcasters, and then youthat you have no view as to whether News 24 shouldwork out the best way to achieve that.be part of that package into the future. Is that right?

Mr Freudenstein: If it is, I think it needs to performsome public service function which needs to be Q209 Chairman: Before I call on Rosemary, could Idistinctive from what commercial broadcasters are follow up on something that Mr Rhodes said? Mrdoing. Rhodes talked about “niche broadcasting”. Sky is a

large conglomeration of niches. So is Channel 4. Sois Channel 5. They are the niches. Chris Bryant wasQ205 Chris Bryant: It is, because it is not as good asking you about how you felt about the BBC as itas yours! is now. The BBC as it is now, whether that will be so

Mr Freudenstein: I think my comment echoes what in another 10 years who can tell, is based uponthe Lambert Report said as well. It is no good just having audiences, certainly for BBC1 and BBC2,copying what we do or what ITV News does. It which are far bigger than anything you aspire to forneeds to be distinctive. It needs to do something that any of your channels. They are looking to have forjustifies the public money. BBC1 something like 20% of the people in the

country sitting down together and watching someprogramme, whether it is EastEnders, Panorama, orQ206 Chris Bryant: I am still a bit perplexed, becausewhatever it might be. Is that the scenario that youit seems to me that basically you are accepting theenvisage is still viable for the year 2016?BBC as it is and into the future, which has not beingMr Darcey: Can I have a go at that one? I think thistraditionally your position; and I just wondergoes back to the point that Richard was makingwhether that is because the BBC, with BBC3, BBC4,earlier about the issues with share of viewing. Wethese new channels, has driven up take-up of digital,have some sort of sympathy with the BBC on thiswhich has put you into an awful lot of homes inpoint—maybe that is going to be your headline—the country?that share of viewing is sort of used in both ways. IfMr Freudenstein: I would not over-emphasise theshare of viewing for the BBC is too high they areeVect that BBC3 andBBC4 have had on driving takecriticised for being too populist, and if it is too lowup. What has driven take-up, to some extent, hasthey are criticised for wasting public money. Sharebeen the BBC’s cross-promotion, which is a big issueof viewing is a very imperfect device, and I doinmaking sure that they are platform neutral in theirwonder if we should try and pay more attention tocross promotions. Every new channel or service thesome sort of concept of audience appreciation,BBC launches has an eVect on commercialbecause I think there is quite an important diVerencebroadcasters, and people have to be aware of whatbetween somebody sitting down in front of a BBCthat eVect is.Wemaymake decisions to approve andprogramme because it is the best of a bad lot that islaunch new channels, but we are not coming hereon and they sit there and they find it a thoroughlytoday with a definite view on what channels shouldunmemorable experience, and contrast thator should not exist. It depends a lot on what comessituation with one in which they sit down in front ofup.a BBC programme and it is absolutely the highlightof their week, they find it very entertaining, they are

Q207 Chris Bryant: It is interesting, because last time very exited about it and they come away thinking, “Iwe debated issues around broadcasting in advance am really pleased I devoted an hour of my life toof the Communications Act, there was a much more that.” Unfortunately, those sorts of distinctions doferocious debate about the BBC and about ITV, not really get picked up in straight viewing shareeverybody was rowing, and it feels as if all the heat numbers, and I think the important thing for thehas gone out of that debate. It feels as if basically the BBC going forward is to make sure that it is doingstatus quo is what you are quite happy with. You more of the latter, to the extent, whatever its overallsupport the licence fee now. You support the BBC’s viewing share is, it is comprised of people perceiving

that they are getting a few real gems from the BBCbroad package of channels?



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that they find memorable and, when they look back, Mr Darcey: Yes, I do not think we would go as faras to say you should abandon all audience share,they think, “Yes, I am really pleased with what thebecause I think there is a certain inevitability thatBBC has given me.” Because that is more importantthose pieces of information are produced on a dailythan lots of people just watching a lot of stuV thatbasis and people will look at them and theywill drawthey find fairly unmemorable.conclusions from them. I think all I would say isthere are other aspects that are just as important and

Q210 Chairman: Last Thursday evening many they should be—or the industry as a whole shouldmillions of people parked themselves in front of their try and look at those as well. Audience appreciationtelevision sets to watch the England/Portugalmatch. is, I think, an important concept, it just happens toIt was on BBC1, but they would have watched it on be quite hard to get a handle on.whatever channel it was, provided they had access toit. They were not saying, “I must us watch BBC1”,

Q213 Rosemary McKenna: One other question,they were saying, “I must watch the match”?Chairman. There is a common thread runningMr Darcey: Yes.through evidence that has come from eitherMr Freudenstein: That is correct, yes.programme producers or the carriers that providethe path for people. Everyone has said that the BBC

Q211 Rosemary McKenna: I do not quite know is important, that it should continue to be funded. Iswhere the Chairman is going with that question, but that simply because they set a standard but they alsocan I probe a bit further. I wanted to ask about do most of the training in the UK? Is it simplyaudience share, the question that you have given, because of that that the other companies recognisebecause I believe, and I wonder if you would agree, that would not be done, or the standards would notthat the BBC should not be concerned about be as high if the BBCwas not there and not doing theaudience share as its primary concern. What it job that it is funded to do?should be doing is producing high quality Mr Darcey: I think clearly part of the BBC’s role isprogrammes, a bit of experimentation. Would to help set standards. I do not think they are the onlyanyone else have produced “The OYce”, for people who set standards either in programming orexample? Should they get their audience share by in training, and you cannot look at training toothat eVort of producing really high quality narrowly because Sky does a lot of training in areasprogrammes and not be concerned about audience that the BBC does not operate, such as call centresshare in terms of what time they put something on to and a whole range of installation, a role range ofchannel whatever. What would your view on that areas, but, yes, the BBC plays an important role inbe? that area.MrDarcey:We have seen a number of comments bysome of the other terrestrial broadcasters where they

Q214 Rosemary McKenna: On a diVerent tack,had some concerns about counter-scheduling andDerek Wyatt, I think, earlier on said that youngthings like that, and I think we understand wherepeople are not watching television as much as theythey are coming from. I think we tend to agree that used to, but that was said about film 10 to 15 yearsthe BBC should focus its eVorts on high quality go and now many, many more young people are

programming. People sometimes then take that and watching film because the film people havesay, “So what you are saying is they should go down recognised they have to provide it in a diVerent way.a sort of Shakespearean ghetto”, and I do not think Is that very much on your horizon, the BBC’sthat is what is being implied, that high quality can horizon, do you think, that they have to find aalso be highly popular, and I think this issue of risk diVerent way of attracting younger audiences?is very important. It is very easy after the fact to say, Mr Freudenstein: We do a pretty good job in“Oh, well, ‘The OYce’ was a very popular attracting younger audiences. I think 60% ofprogramme, so perhaps the BBC should not have children in the UK live in homes that have Sky.done that.” I think the real issue is that most of the There is a great deal of programming on the Skyterrestrial broadcasters find comedy a very platform that appeals to children of all ages, and itchallenging genre to invest a lot of money in because is very important for us. I think you are right:it is very risky; but when we ask the BBC to take on children do consume media in many, many diVerentrisk because they are well placed to do so, we should ways and it is worthwhile seeing how that is going toaccept that sometimes risk will pay oV and they will develop and will they continue for ever or will theyproduce something very popular and very revert to more, dare I say, normal habits as theysuccessful; and we cannot then criticise them for get older.that; but we also have to accept that sometimes theywill bear a risk and it will not come oV and they will

Q215 Mr Doran: In themarket inwhich you operate,produce something which is not very popular, andhow do you see the BBC? Are they simplythat is part of the game.competitors, or are they something else?Mr Freudenstein: They certainly are competitors,

Q212 Rosemary McKenna: Your idea about just and we compete with them in a number of ways forlooking simply at audience share—it would be rights, programme rights, clearly audience share.WediYcult to analyse that deeper, would it not, rather have an interesting relationship with the BBC. We

are partners in Freeview, so we work with them onthan just—



29 June 2004 BSkyB

the promotion of the Freeview platform. We are in you would only receive the BBC channels and otherdiscussions with them about working together on free to air channels, but not ITV, Channel 4,the free to air satellite platform, and we will see Channel 5. So I am not quite sure what they thinkwhere that one leads, but clearly whatever they do they are going to achieve out of their service, andhas a big impact on us and the other commercial that is whywe are talking about working together onbroadcasters. our service.

Q216 Mr Doran: You are competitors and partnersQ222 Mr Doran: Picking up the point that Chrisat the same time?Bryant made, it is quite obvious to us over theMr Freudenstein: Yes.periods that we have been looking at the variousaspects of the industry that the attacks on the BBCQ217 Mr Doran: You gritted your teeth when youhave tempered quite a bit. Is that because thesaid that?industry, like yourself, is seeing that there is anMr Freudenstein: No, not at all, as are lots ofadvantage in the size and the capacity of the BBC asdiVerent players in the television industry.potential partners and pushing broadcasting furtherand creating new opportunities in what seems aQ218 Mr Doran: In relation to Freeview, on the onemuch more flexible market?hand you have said you are partners and that isMr Freudenstein: I would not necessarily say that.clear. At the same time, it seems to have had anWe at Sky think it is better to take an unemotionalimpact on your business?approach to this. This is a long process, this review.Mr Freudenstein: Freeview—. It is questionableIt is going to go on for a long time. I think you justwhether Freeview has had an impact on ourneed to be analytical, look at what you want out ofbusiness. Freeview is doing very well, and on thethis, and being emotional about it does not help theback of BBC promotion Freeview is growingdebate at all. I think there is an acceptance at Skyquickly. Sky is continuing to grow.that the BBC will continue to exist, will continuepresumably to be a large player and it is just how thatQ219 Mr Doran: But not as quickly as it was beforeall fits into the landscape that needs to be workedFreeview?out.Mr Freudenstein: Perhaps not, but we will see what

happens in the future. Early indications are thatpeople who have taken Freeview have been very

Q223 Chairman: Could I ask you one final question.much people that are often BBC watchers who, soAt the National Theatre there is a play aboutfar, have been disinclined to take pay TV. So we seefootball called “Sing your Heart out for the Lads”,Freeview as very much an introduction to digitaland the central part of the set, there is a huge screentelevision, an introduction to multi-channelon which they are showing Sky TV coverage of atelevision. I think you will find over time that, asfootball match. Viewing patterns have changed apeople get a taste for more television, work out theregreat deal, have they not? I talked before, afterare channels other than the big five, many of thesesomething Mr Rhodes said, about the old conceptwill then be attracted by the superior content on paywhich we all grew up with of a family sitting in atelevision and move to either Sky or Cable. So Iroom watching television programmes together. Wethink over time you will see Freeview continue tohave now reached a very diVerent stage in manygrow and then perhaps over time the number ofways, perhaps pioneered by the way that you havehomes that have only Freeview will start to decline

as those people then move and take pay television promoted yourselves, in which peoplewatching, say,services over time. sporting events on television do not really want to sit

at home and watch it with a six-pack of beer in theway that they might have done a few years ago, theyQ220 Mr Doran: So you see Freeview as a sort ofwant to make it a community event, they want tohook?share it, and viewing patterns are changing in thatMr Freudenstein: Yes; it is a nursery slope.way as well, are they not? So, again, to what extentwill that aVect the way in which public sector, publicQ221 Mr Doran:OnFreesat, we know the BBCwereservice broadcast . . . Towhat extent are our viewinglooking at their own idea of a free satellite service.patterns changing in relation to evolving socialAre you saying that now you are working togetherpatterns?on that?MrFreudenstein:On your example, I think live sportMrFreudenstein:No,what I am saying is that I thinkis always something that people have wanted tothe BBC are still looking at their own service, but wewatch, often wanted to watch in the community; soare in discussions with them as well as to how muchthe pubs have always done verywell out of live sport;support they will give to our service and whetherpeople watching it together at home has always donethey need to do their own. One thing to note is ourquite well, and I am sure that will continue. I thinkservice for £150 you will receive a box, anit is an issue that there is probably less of the wholeinstallation and a card, and the card allows you tofamily sitting down and watching televisionreceive all the terrestrial broadcasters: ITV, Channeltogether. The average household has a number of4, Channel 5, as well as the correct regional versions

of BBC and ITV and Channel 4. The BBC’s service, televisions now and people sometimes tend to watch



29 June 2004 BSkyB

their own programme in their own room, and that is Q224 Chairman: If you do not know, nobodyknows! Gentleman, thank you very much indeed.probably happening more. I do not know what the

answer is. I do not know what you do about that. Mr Freudenstein: Thank you.

Memorandum submitted by Telewest Broadband/Flextech Television

Telewest Broadband providesmulti-channel television, telephone and internet services to 1.74millionUKhouseholds. Flextech Television is the content division of Telewest Broadband; it provides eight whollyowned channels and is a 50% partner inUKTV, a joint venture with BBCWorldwide. Flextech is the largestsupplier of basic channels to the UK pay-TV market.

This paper outlines the views of Telewest Broadband/Flextech Television in relation to the potentialimpact of technological developments, notably broadband, on broadcasting and on some of the core issuesfaced by a basic pay channel operator in a changing world.

Telewest Broadband provides “converged” services over a fibre-based network; ie it provides telecomsservices, digital television channels, analogue television channels, FM radio services and high speed(broadband) internet (up to 3Mps) on the same “pipe”. Therefore, it has first hand experience of changingcustomer trends in the use of television and other communications services and sees broadband leading atrend towards a more on demand world.

For example, TV is moving from “push only” to “push and pull”, from scheduled linear broadcasting totime-shifted linear broadcasting and interactive broadcasting towards video on demand (VOD). Significantextensions of VOD are on the horizon. In addition, PVRs are changing viewing patterns, as will extensionsof PC functionality for recording and content storage. In this respect, we note a comment from the BBC ina recent submission to DCMS in relation to the digital switchover:

“It has to be borne inmind that PVR technology, and consumer expectations carried over from online,are re-shaping digital TV into much more of an on-demand medium such that (rights permitting)broadband could have a considerable role in helping to take analogue viewers into a future of digitalconsumption of audiovisual media”.

In other words, although the market has evolved radically since the last Charter Review was undertaken,the changes are likely to be even more marked over the next 10 years. Therefore, we share the concerns thata 10-year cycle may be too long unless it can be made to be responsive to technology and market changes,based on input from Government, the industry or the regulator.

Consequently, we would support a mid term review. Without a review point, there is no real protectionoVered to the commercial market, the citizen and consumer, Government or the BBC to review funding,remit and governance issues.

Flextech Television’s portfolio includes LivingTV, Bravo, Trouble, Challenge and ftn. These channelshave been established, individually, to cater for niche audiences, whilst collectively they have wide appeal.

In the multi-channel market, we have established “community creation” television, introducing stripscheduling and clear signposting of programmes to enable viewers to understand the environment and thenature of the programmes that they can expect.

For example, Trouble has concentrated upon brand development and its core targeted niche audience,13 to 19 year olds, has created a community which trusts, relies upon and engages fully with the channel.By building and concentrating the service towards this age group, we have created an audience aYnity withthe channel.We have extended the brand into on-line communities and have been congratulated by industrybodies for the educational remit that we satisfy through this service. The audience is a diYcult one to reach,and the messages that need to be conveyed are critically important—safety, self respect, safe sex, alcohol,smoking, drugs etc. Furthermore, whilst targeting 13 to 19 year olds, we cannot ignore the fact that 10 to12 year olds aspire to this age group and emulate what they regard to be their peer group. Therefore, it isimportant that the channel does not alienate these age groups, as they too need to be prepared for thechallenges ahead.

In essence, this channel could be seen as providing a public service. Our main concern, having developedsuch niche channels, is that, if the format is seen as successful by the terrestrial broadcasters, they will copythe concept and undermine the integrity and value of the original work that we have undertaken. Therefore,although we recognise the value of competition in the market, we would question the validity of directcompetition by PSBs with other providers that could be deemed to be meeting public service objectives.

Competition in the broadcast market over recent years has aVected all players, not just the terrestrialbroadcasters.With the increasing number of channels available, it is inevitable that the guaranteed audiencefor PSB services will have been eroded. However, we do not believe that the “burden” of PSB obligationshas had a significant impact on the market shares of terrestrial broadcasters. We have seen services grow



from 155 channels in 2001 to 243 by the beginning if 2004, much of which has come from tele-shoppingservices, a growing number of pay-per-view movie channels, religious and ethnic channels, factual,children’s and multiplexed or time shifted services.

Digital TV expansion will continue to increase diversity and quality within the market but the terrestrialbroadcasters will still enjoy privileges in relation to the “must carry” obligation and EPG positioning.Furthermore, their background in British TV has enabled them to build strong brands that are interwoveninto the very fabric of television culture and they have a fairly secure planning base from which they canlaunch new digital services, cross promote and cross brand.

As a result, they have a head start on newer channels that have to “punch above their weight” to attractaudiences and advertisers as they do not enjoy programming budgets available to PSB services. Therefore,new channels need to establish points of diVerence, and brands, to attract investment and to growprogramme budgets.

We recognise also that the BBC has played an active role in driving digital switchover, and in innovatinginteractivity. The investment into BBCi has enabledmore innovative enhanced programming towork acrossmulti-platforms. This has aVorded consumers, who were perhaps web cautious, to undergo a sharedexperience that they perhaps would not have been brave enough to undertake without the kudos of the BBCbrand guiding them. However, this does raise the issue of how best to apportion the licence fee income inthe interests of public service.

In summary, we support the model of a BBC that provides services for the “converged” world but wesee the need for a tighter remit and governance structure that would provide a clear define of public servicebroadcasting and ways to measure the extent to which the market is either meeting, or likely to meet, theneed at any point in time.

24 June 2004

Memorandum submitted by NTL

1. Introduction to NTL

1.1 NTL is a major communications company. It has three operating divisions which provide services tohomes and businesses in the UK and Ireland.

NTL Home provides telephony, internet and television services to 3 million residential customers. NTLBusiness provides a range of telephony, data and internet services to business customers and public sectororganisations and NTL Broadcast is the leading provider of broadcast transmission services for televisionand radio (both analogue and digital) in the UK.

NTL is playing a major role in the growth of broadband in the UK and in the spread of digital television.NTL is the largest broadband internet service provider in the UK with over 1 million customers.

Following a successful recapitalisation programme, which was completed in January 2003, and under theleadership of a new senior management team, NTL has now delivered five consecutive quarters of growthand announced break-even operating income for the first time in May 2004.

2. Digital Television Technologies

2.1 As a provider of television services, NTL’s primary objectives are:

— to provide its customers with choice and value formoney ı choice in this context refers to the widestpossible choice in the number and range of channels available; and

— to exploit available opportunities to extend its own coverage (and hence provide services tocustomers), outside the confines of its existing franchise areas.

2.2 Today, digital television is delivered to customers via three platforms, namely:

— digital terrestrial;

— digital satellite; and

— digital cable.

However, broadband technologies using the local loop can provide an additional mechanism fordelivering digital television into residential and business premises.

In many homes and businesses broadband digital subscriber line (“DSL”) technologies are already beingused to deliver high speed internet access services over the telephone line and the technology exists to deliverdigital television services in a similar manner. However, there are some fundamental diVerences.



2.3 The majority of broadband internet services provided over the telephone line are delivered via awholesale agreement with BT. In practice, the telephone line from the customer’s premises is connected toBT’s ownDSL equipment located in the local exchanges. This equipment is capable of delivering broadbandinternet services but not digital television (it should be noted that although “streaming video” is possibleover the internet, the services are of variable quality).

2.4 To enable the delivery of broadcast quality television services, the “broadcaster” would need to installits own equipment in the local exchanges and the customer’s telephone line would need to connect to thisequipment. This process is known as Local Loop Unbundling (“LLU”). This equipment would also enablethe delivery of other services over the same, single, access circuit.

2.5 The services delivered could include digital television, video on demand, interactive electronicprogramme guides and rich interactive environments coupled to micro-payment systems suitable for onlinepurchases, gambling and premium content delivery. Services not directly associated with broadcasttelevision delivery would also be possible. These could include high speed internet, voice and videoconferencing services. The combination of digital television and high speed internet enables an especiallyrich interactive environment ideal for both education and entertainment.

The provision of fixed link, high speed, two-way connectivity between the “broadcaster” and the viewerwill always provide the most flexible service delivery environment. Satellite and terrestrial systems have abroadcast capability but in order to provide interactivity and a rich, multi-service environment wheretraditional broadcasting is mixed with internet and telephony services, they require an additionalcommunications link. It is possible, therefore, that satellite and terrestrial systems will remain confined tothe delivery of digital television with only limited scope for the provision of interactivity and other serviceswhereas a combination of digital television and a rich, multi-service environment will be provided via cableand local loop broadband. This provides excellent service choice and variety for the consumer, coupled withcompetition at the service provision level.

2.6 A number of telecommunications companies elsewhere in Europe have successful deployments of“broadband television”—eg France Telecom, Deutsche Telekom and Telefonica. The countries wheredeployment has been successful are those which are also leading Europe in the unbundling of local loopaccess. In the UK, which is lagging behind many European countries in LLU, “broadband television” has,so far, been less successful. Only one operator, “HomeChoice” has created a business around the deliveryof “broadband television” although reports suggest that it has struggled with its business model. The mainbarriers to successful and economic service delivery have been the costs associated with LLU and thelocation of equipment in BT exchanges. If the UK is to have a viable “broadband television” capability, thecurrent model for LLU will require considerable improvement.

3. NTL’s Perspective on the Renewal of the BBC Charter

3.1 NTL is a carrier of television channels and does not create or provide television content itself. It hascommercial carriage agreements with numerous channel providers and its relationships with the publicservice broadcasters, including the BBC, are set against the backdrop of the “must carry” provisionscontained in the Communications Act 2003 (“the Act”). It is probably true to say, therefore, that some ofthe issues on which the Select Committee will be hearing evidence concerning the future of the BBC, aVectNTL less than other parties.

3.2 That said, NTL recognises the unique role which the BBC has played and continues to play in thelives of UK citizens and the respect in which it is held throughout the rest of the world. NTL believes thata healthy and adequately-resourced BBC will continue to have a key role in delivering public servicebroadcasting (“PSB”) benefits for the foreseeable future, including after analogue switch oV.

3.3 Moreover, NTL believes that the BBC also has the potential to play a key role in promoting the takeup of digital services and, to use a phrase coined by the OYce of the e-Envoy, in promoting a “DigitallyUnited Kingdom”. The BBC’s recent initiative, as part of the D-Day commemoration, to encourage peopleto post details of their wartime experiences on the People’s War section of the BBC website, is a goodexample of incentivising people to participate in a digital environment. NTL understands, from a discussionwith Age Concern, that this initiative produced significant interest among elderly people and gave manyelderly people their first experience of using the internet.

3.4 But this is an example, albeit a very commendable one, of the BBC driving usage of its own website.In NTL’s view, a question which needs to be addressed is whether the BBC should have a broader remit tosupport and encourage other digital services through the provision of access to its key content.

3.5 There has been debate concerning the length of any future Charter for the BBC. While NTLacknowledges the force of the argument that a 10 year Charter provides certainty and stability, not only forthe BBC but also in the context of the wider broadcasting market, NTL notes that this is out of step withthe duty ofOfcom to carry out a review of PSB at least once every five years. This raises the questionwhetherit would be possible to take corrective action under an existing Charter if Ofcom identifies a problem withthe BBC during the course of one of its own reviews?



3.6 As mentioned above, NTL’s relationships with the public service broadcasters (including the BBC),as a carrier of their services, are set against the backdrop of the “must carry” provisions of the Act. So faras the BBC is concerned, NTL has an obligation to carry all licence fee-funded services.

NTL expressed some concerns during Parliamentary debate on the Act at the prospect of an ever-growinglist of “must carry” channels because, even in a digital environment, capacity constraints on networks donot disappear entirely. The current “must carry” channels and associated interactive services are heavy usersof bandwidth and NTL incurs significant cost in providing the necessary capacity on its networks. Thepublic service broadcasters claim that they are neither able nor liable to pay or to contribute towardsthese costs.

A particular concern highlighted by NTL was in relation to the opportunity cost incurred in carrying anyfurther “must carry” channels at the expense of other services. Although the Minister gave assurances that,before adding any new services to the list of “must carry” channels, the Secretary of State would take theissue of opportunity cost into account, the Government preferred not to include this within the Act itself.

None of this detracts from NTL’s support for PSB and, indeed, NTL sees itself as an important partnerof the public service broadcasters, including the BBC, in achieving high audience reach for their services.However, while the carriage of channels in a “must carry” environment continues to take place in a non-commercial, non-negotiated context, NTL must retain the flexibility it needs to deal with as many otherchannels as possible on a commercial basis.

NTL is conscious of the debates which are taking place concerning the future funding of PSB and,specifically in the context of the Select Committee hearing, the future funding of the BBC.NTL believes thatif certain BBC services were no longer funded from a licence fee and, for example, BBC Three and Fourbecame subscription channels, the consequence would be that these would be removed from the “mustcarry” requirement.

18 June 2004

Witnesses: Ms Lisa Opie, Managing Director, Flextech, Mr Howard Watson, Managing Director, NetworkDivision, Telewest; Dr Keith Monserrat, Director of Communications and Policy, and Dr Steve Upton,Managing Director, Networks, NTL, examined.

Chairman: Lady and gentlemen, thank you very more time, energy and money on gettingprogrammes to people? Should they be sharing inmuch indeed for coming to see us. Could I just make

a point that what is going on on the floor of the some of this investment that you are talking about,or should they be spending as much of their moneyHouse later on this morning, within the next few

minutes, is going to aVect attendance. It is not in any as possible on production?MrWatson: I think that is an interesting question inway a reflection on you it is just the way in which our

beloved House of Commons organises itself these the sense that where does the licence fee money go,in terms of the various elements of the BBC? I thinkdays.

Chris Bryant: Thank you, Chairman, and I the point that you are picking up on, which isensuring that all of the population has access to theapologise that that is partly referring to me; I am

going to have to go and do something in a couple of digitalmedia bywhatevermeans, is an area that doeswarrant further looking at. I think what is clear isminutes. Can I just ask one very narrow question,

first, which is to NTL, about NTL Westminster. that there is a variety of digital platforms availableand so there is a choice for consumers, and I thinkWhen is it going to be digital?

Chairman: I am sorry, Chris, relate it to BBC it would be wrong to look at large sweeping ways ofsubsidising one platform versus another. I think thatcharter renewal.looking at where investment could be directed andways of increasing for the UK the availability ofQ225 Chris Bryant: Bearing in mind that BBC3 anddigital is something that is certainly worthy ofBBC4 are channels which are only available ingovernment as a whole.digital, when do you think it will be possible forNTL

Westminster viewers to be able to see these channels?Dr Upton: It is a fairly short answer, I am afraid, inthat we do not have a planned date for the upgradeof the Westminster network. We do have a Q227 Chris Bryant: Let me just tease that out. Doessubstantial amount of work going on in other areas that mean that you think that the Governmentof London, however, to bring both digital television should insist, by the charter, that part of what has toand broadband services where they are not currently be guaranteed is a choice of digital platforms foravailable, but just at the momentWestminster is not every household? Or is that just not achievablepart of that programme. because some people live in areas where they are

never going to have cable?Mr Watson: I think that will come, ultimately, as aQ226 Chris Bryant: I raise the question because,

obviously, access to BBC channels is a significant consequence of the market. I think attempting toregulate to insist upon that is not necessarily the bestissue as we look forward into the future. Do you

think the BBC, as part of its charter, should spend method to do that.



29 June 2004 Flextech, Telewest and NTL

Q228 Chris Bryant: Will it come? You are not going Ms Opie: I think without a doubt they do provide agreat deal of training into the industry, and that isto roll out new cables over anywhere else in the

country, are you? beyond dispute and we should appreciate them fordoing that. I think there are a growing number ofMrWatson:We have talked about free satellite with

Sky, and the reach of digital terrestrial continues to other broadcasters that provide a very diVerent kindand a very valuable source of training as well, and Iincrease. There are certain technological limitations

which may never be overcome there, and I think would say that within Flextech and Multichanelthere is a very specific and distinct kind ofthere are also the other media by which digital

content will be consumed, for example broadband, broadcaster being developed and taught, and anability to multi-skill and take a very broad view ofand certainly if you look at the availability of

broadband to the UK population that has increased the market that on-going will be very valuable. Ithink the value of the BBC and the need for it todramatically over the last three years.continue to provide quality content is because iteVectively lifts the bar for all other broadcasters inQ229 Chris Bryant: How do you think the BBCthemarket, and I think that can only be a good thingshould be funded?as far as the consumer, the viewer and the citizen isMrWatson: I think we feel that the existing methodconcerned, and also provides a very importantof funding has worked and is right going forward. Icontribution to our standards. I think we would allthink the key point—and I think if Derek was hereagree with that.he would ask the question—is how long should the

charter be renewed for? I think we, certainly, are ofthe opinion, from what we have seen, that Q232 Rosemary McKenna: Why have you concerns,

then, about the amount of “must carry” that youtechnology is absolutely moving so quickly that theadage from Bill Gates—which is that it is really hard have to provide?

Dr Monserrat: I think the issue comes down to theto see a change in a year but you are alwaysabsolutely amazed at what happens in ten years—is fact that the tradition has been that the BBC has got

to its customers through the ether and theabsolutely true for this industry, and I do think, as aresult of that, some review after five years, technology is blurring all that and a lot of the BBC

content can go through cable. What you are tryingparticularly as that will be shortly, hopefully, beforethe analogue switch oV time— to do then, in that circumstance, is have a definition

for what is public sector broadcasting. In thatcircumstance we would be delighted to carry thatQ230 Chris Bryant: I wonder about that argument.because it is part of the nation’s heritage, it is part ofI used to write speeches forGregDyke and JohnBirtthe nation’s life and we would carry that. Where theand they used to predict all sorts of thingswere goingBBC—and I refer to the comments made by Derekto change—the whole world was going to change—Wyatt—begins to move into areas which are moreand actually things are remarkably similar to whatniche or are more specialised, then in thatthey were five years ago. The pace of change has notcircumstance the model that we would like to seebeen as dramatic. You could use your argument, ifthen is to carry that which we must carry because itthere is going to be change, to say that the charteris part of the nation’s life, and when it is a moreshould be a very thin document, that really justcommercial activity there should be a conversationstates the basic principles of what the BBC should beon how do you fund the carriage of that content.about rather than anything that is too prescriptive. I

suspect most people are urging the Chancellor to berather more prescriptive. Q233 Rosemary McKenna: What you are saying is it

takes up too much of the band width.MrWatson:My experience is the world has changeddramatically in five years. Five years ago I would not Dr Monserrat: It does take up band width. There is

an economic case to be discussed.have had a house with five mobile phones in it, onefor each individual; I would not have been using apersonal video recorder and, potentially, watching Q234 Rosemary McKenna: Yet in certainEastenders three times in an evening for diVerent circumstances, and I know this because of where Imembers of the family. So I think that pace of live and the access I have, I can have every singlechange has been dramatic over the past five years. BBC television and radio channel at the flick of aWhether that means you should have a less switch, including BBC Radio Gale in Scotland. It isprescriptive or more prescriptive charter, I am not nice to be able to watch BBC television in thesure. I think the important point is to have, as I said morning and find out what is going on, but do youearlier, a review earlier than ten years, so that at least do that easily and provide that generally?you can take stock of what may have changed over Dr Monserrat: Can I introduce something slightlythat period. diVerent, which is there is a phrase that has been

used which is that there is the “lean forward” type ofinformation and there is the “lean back” type ofQ231 Rosemary McKenna: Can I ask the question I

asked the previous group: there is a common thread information, so when you want to be entertained inthe way you have just talked about you are leaningrunning through all the submissions by both the

carriers and the producers, which is that the BBC is back, it is a community experience, you are receivinginformation. If, however, in that circumstance,crucial, must be funded properly andmust continue.

Is that, to be cynical, because they set high standards where you are now receiving specific information,niche information, you are learning forward toor is it because they do a lot of the training?




receive it, it is a diVerent method of receiving it and Mr Watson: I think with that clarification, in thesense that I think the way in which we view televisionin that circumstance what you are receiving is

information on public service, on government has not changed in the sense that we lean back infront of a piece of glass that we call the television andservices, and if the BBC is delivering that under its

charter as a “must-carry” obligation, then the we have not yet seen viewing of TV by leaningforward in front of a personal computer or, indeed,volume of that information is going to change

dramatically and that will have an economic impact on a mobile phone or an iPod—on how much we carry. So in this blurred world ofinformation going to the customer or the consumer,

Q238 Michael Fabricant: Can I just ask? That isbe it entertainment or information for life, then theretechnically possible, but do you think it will everneeds to be a consideration of that which is in thehappen? For years Casio have had a little two-inchesinterests of the nation and that which is theby one-inch television screen, and the reason why itinformation that the individual requires.has never been that popular (no doubt I will getletters from Casio if I say something that is wrong)

Q235 Rosemary McKenna: You are only interested is because we are human beings and human beingsin doing it where you have a huge number of find it quite a strain looking at something quite closeconsumers? There are areas throughout the country for any length of time. Can I put it to you—andwhere you do not provide any access at all. please correct me if I am getting it wrong—that theDr Monserrat: Currently, and I will speak now for ergonomics of a human beingmean that yes, you useNTL specifically, we will deliver that kind of a computer close up just as you write close up, butservice—“on net” is the jargon we use—but the for relaxed entertainment you need somethingwhereaspiration is to try and provide that on a national your eyes are more focused on infinity, so somethingbasis, but that is where Local Loop Unbundling, has to be about eight or 10 feet away. Will that notwhich comes under the BT and the Ofcom remit, always be the case, whatever the technology?becomes so crucial for us, and the nature of the MrWatson: I think we are actually in agreement onplaying field becomes so important. this point. Newspapers are still here, we still read

books and we still listen to the radio despitepredictions centuries ago. I think what we will see isQ236 Rosemary McKenna: You cannot carry thejust a continued divergence in the range of possibleBBC to those areas until that is—ways of receiving digital content, and I think it isDr Upton: Yes, that is right. The extent of thevery diYcult to sit here and predict that in 2017 wecurrent cable network is about two-thirds of theshall be the most dominant means by which we gethomes that we were licensed to build a network to,that. I think it goes back to the point the Chairmanand clearly as you move out of the more denselywas making earlier, which is as viewing in a familypopulated areas the costs of providing dedicatedfragments to beingmore of an individual experience,infrastructure for that can escalate significantly. Therather than a collective experience for the family,current opportunities to run those services acrossand if we really believe that that trend is happeningBT’s network are really restricted to broadbandthen I do think the “lean-forward-look-at-your-internet access, and running television servicesmobile-phone” type of viewing may indeed increase.across a BT-managed infrastructure is not reallyI personally would not see it taking over from thetechnically possible today. The vehicle to do thattelevision as the main viewing or broadcast media inwould be unbundled BT local loops. The previousthe home.kind of regulatory regime really did notmake that an

economically possible opportunity. What we arelooking at now are some of the recent BT Q239 Michael Fabricant: I was reading that NRK, aannouncements about unbundled open loops to try former client of mine, in Norway are now providingand explore whether that does provide us with a stream television to Norwegian mobile handsets.vehicle to provide some further geographic coverage The interesting thing will be whether people actuallyand, therefore, provide the sort of services that we watch it. Given that you have got satellite, which canare talking about. produce some degree of interactivity, cable—which

certainly brings interactivity—and it was mentionedthat Local Loop Unbundling is now becomingQ237 Michael Fabricant: I just want to pursue, if Icheaper and cheaper, do you think solutions likemay, the line of questioning that Chris Bryant wasVideoNetworks, whowe are going to be speaking toasking. Chris Bryant was saying that in his viewlater on, is going to be the answer by which peoplethere had not been huge amounts of change in fivewatch television? It will all be television on demand?years, and in some respects I agree with him.Mr Watson: I think that will radically change overAlthoughMrHowardWatson said he had seen a lotthe coming five to 10 years. We have just heard thatof changes—and of course from a technology pointin homes of a PVR 38% of viewing is done from theof view there have been huge changes—the actualcontent that is stored on the PVR. The key pointmanner by which people watch television has notabout that is that you have had to plan in most caseschangedmuch over five years. So, in connectionwithto record that content, so it has required you to lookthe licence renewal, I just wonder whether you see athrough the schedule, decide “I want to watch that”convergence, if you like, over the coming years of theand, potentially, series link it, so it records each time.platform by which BBC television and indeed other

broadcasters will be received. One of the advantages that on demand TV gives you




is if you have missed something. There is this water- Ms Opie: No, not for the time being, although atsome stage we would assume that Freeview wouldcooler phrase, whereby you are chatting in the oYce

by the water-cooler, “Did you see the episode of X have a capacity to carry more than the 30 channelsthat it does currently carry.last night?”, and you have then got the opportunity

of on demand television to go home and catch upwith that. I think that type of change to the way we

Q243 Michael Fabricant: One final question, if Iview, recent life television, we will see as on demandmay,Mr Chairman. Given, as I said right at the veryand Video On Demand type technologies go wider.beginning, that I believe there is convergence andeventually one platform will become pre-eminent, is

Q240 Michael Fabricant: Let us just fast forward for it going to be cable, is it going to be satellite or is ita moment; let us assume that on demand television going to be a sort of hybrid between cable operatorsis available here and now. If that were the case, it such as yourselves and telephone operators such ascould be argued that the individual becomes his or BT,who are introducing internet protocol telephonyher own programmer. I have got two questions and so on and so forth and upgrading? If that is thefollowing on from that. If that were the case, is there case, what is the future for companies like yours?a role for a broadcaster like the BBC? Or will there Mr Watson: I do not think we will see totalalways be a significant proportion of the population convergence on to a single monopoly platform. I amwho, after a hard day’s work slaving over the not quite sure that would be good for us, either. Icomputer or whatever, just want to get home and get think that the real advantage of cable is that we canwhat the BBC or ITV or any other broadcaster oVer a multiple of products and solutions to athrows at them? household, be that telephony, broadband or, indeed,MrWatson: I think they will absolutely co-exist. The TV, and we can essentially do that over the sameconcept which I know was mentioned some years physical infrastructure. The great advantage of ourago of an enormous internet search engine technology is as demand for consumption continuesequivalent with access to a library of a billion titles to increase there are not really any physical limits tois probably quite hard to actually manage for the the amount of bandwidth we can deliver to meetability to go back and view any content that was ever that. One of the things I think we will see quite soonproduced. I think we will see, as I said, the viewer is high definition television coming along whichhaving far more choice about when they want to requires something like four times the amount ofwatch a particular piece of content, but I also think bandwidth that existing television signals do. So Iwe will see still the strength of broadcasters, such as think cable is in a great place in terms of having thethe BBC or, in our case, such as Flextech being able capacity to fulfil that need. I think there willto lay out a schedule of viewing for a majority of continue to be the other platforms as well.customers.

Q244 Alan Keen: Can I ask NTL to expand onQ241 Michael Fabricant: Does Flextech everwhere, in your submission, you say, “In NTL’s view,envisage providingmore programming on Freeview,a question which needs to be addressed is whetherwhich was mentioned earlier? You have got UKthe BBC should have a broader remit to support andHistory, but do you see others?You do a lot of cross-encourage other digital services through thepromotion, just like the BBC successfully cross-provision of access to its key content.”?promotes BBC3 and BBC4. Are you cross-Dr Monserrat: As I said in the answer to Rosemarypromoting your otherUK services because youwantMcKenna, the BBC is the custodian of the nation’speople to eventually see them on Freeview or is it aheritage, to a large extent, and there is content theremeans to wean them oV Freeview to watch it onwhich could be used either in streaming technologiesanother viewing platform?or VOD on demand access to its libraries, or itsMs Opie: Between our relationship with UK TV,archives. What we were alluding to there is that thatwith whomwe obviously have a 50% share, Flextechhas been paid for by the consumer in the licence fee;wholly owns four pay channels and also has onethe suggestion being that that should be madefree-to-air channel called FTN, which is currently aavailable on whatever platform it is to the consumercollection of the content that we produce. We spendgoing forward.about 50% of our budget on originally

commissioned programming from the independentsector. Yes, Freeview, for us, is an opportunity to Q245 Alan Keen: I referred the earlier panel to thisattract as many eyeballs as we possibly can because and Howard Watson has been talking about it now,we are funded 50% from our subscription revenue which is what I refer to, in the best way I can, as thebut also 50% from advertising revenue, so theatre aspect of television, where we just sit theredistribution and reach remains important to us, and and be entertained and are not interested inyes it is an opportunity to cross-promote our searching through and looking at certainchannels that exist in the home market at the same programmes. In my case there is a very smalltime. percentage of programmes I would want to watch in

that way. Newsnight I could watch after the pubshut, for instance. If you had to have a stab, andQ242 Michael Fabricant: But you do not imagine

any more channels being made available on were really forced to have a stab at it, in 10 year’stime what percentage of that theatre aspect wouldFreeview or, indeed, the free Sky Satellite channel

that is becoming available? remain, as we always used to watch television, 10 or




15 years ago? What would the percentage be in 10 Q248 Alan Keen: The reason I am asking theyears’ time? It is almost impossible but somebody question is that a few weeks ago we seemed to beinghas to try. led by the techies whowere saying “Nobody is goingMs Opie: Interestingly, broadcasters have begun to to sit and watch, they are all going to draw theadapt the market that they are in and there is no programmes down whenever they feel like it”, and Idoubt that the dominance of event-driven television am really happy to establish the fact that it is notand its growth over the last couple of years—from only me that likes to—Big Brother and I’m a Celebrity, Get Me Out of DrMonserrat:One thing I have learnt over the yearsHere!, Pop Idol—all build the sense of occasion and is that to say “No change will happen” is atheatre around that style of content. I think you will dangerous statement and to try and predict the levelsee broadcasters doing more of that in order to hold and rate of change is an equally dangerouson to the identity of their channels and the statement. I think, yes, we know that technologywillsignposting that their channels provide to deliver diVerent things but how, where and how itconsumers, but also to that real-time enthusiasm will be used by people is diYcult to predict. A case inand engagement with the broadcast stream—with point would be how the 16–24 year-olds have startedthe understanding that there will be a degree of using textmessaging, downloads ofmusic tunes, andprogramming that will be viewed out of real-time. the method and the manner of communication—As a percentage stab, that is a really diYcult they have even invented their own language to talkquestion. to each other.

Q246 Alan Keen:Weare really talking about eveningQ249 Alan Keen: We were misled a few years ago ontelevision, when people get home from work.the convergence, and I could never understand whyMs Opie: A view of a world where there was simplypeople were saying that soon television woulda library of content that you could either dip into orbecome something we could keep asking questionsnot, I think that would not be a particularly excitingof and finding out which other films the actor hasworld for a viewer. I think broadcasters do providebeen in. If somebody is about to get shot when theysignposting; their brands depict the kind of contentcome round the corner I do not want to know howthat they will show; they introduce new content. Themany other films the same actor has been in, I justpower of talked-about television is that it opens ourwant to sit there. Personally, I do not even want tobrains to new content. If we were simply to find andthink about “who dunnit”, I just want to sit therenavigate our own way around libraries of content

then I think we would be much less able to trial and find out in the end who did it. I was proved rightanything new and there would be very little on that convergence thing, I said people do not wantexcitement involved in what our diet and content to mix the two; they will go in a separate room andwould be. I think there is a very important role for look at the internet and statistics. It is a very simpleall broadcasters going forward in signposting what question I am asking but it is important, particularlyis new, what is fresh, what stretches and what is when we look at the BBC, where we always regardchallenging the viewers. that as the station that provides the entertainment.

Ms Opie: One of the interesting things that hashappened in the vast amount of change that, I wouldQ247 Alan Keen: Have you got views on this theatreagree with Howard, has happened over the last fiveaspect of it?years is that as the number of channels available hasDr Monserrat: We tend to agree very much withexploded into the market the portfolio of channelswhat Lisa Opie said, which is that it is, first of all,that individuals view has also grown. We wouldvery diYcult to predict the entertainment side versusestimate most viewers will watch about 11 channelsthe “lean forward” group of customers. I wouldwithin their repertoire at any given time, and theytackle the question in a slightly diVerent way, whichwill go to diVerent channels for diVerent kinds ofis that I believe that a programme like, for example,entertainment. One of the ways that we havethat which the BBC did for D-Day was a landmark:successfully engaged young people—13 to 19s—init educated, it entertained and it informed a diVerentthe market is by creating communities around thatgeneration of what had happened X-years ago. Thatchannel brand (a channel called Trouble, in thisis a very valuable thing to do. In thosecase), which enables young people to have multiplecircumstances, I think all of us want to betouch-points with their television brand. So it is notentertained, want to pick. If, on the other hand, yousomething that they just view in a passive way, it iswant to address the kind of conversation that yousomething they can log onto online, that they canwere alluding to, which is coming home from worktext their answers to, that they can interact with andand collapsing and it does not matter what there isthat they can have conversations and dialogues with.on youwill watch it because it is a formof relaxation,So that it is television, if you like, breaking out of thethen you go for the event-driven thing. There is aboundary of what is just a passive event andhuge role to be played where someone’s mind—yes,becoming an awful lot more in consumers’ lives. Iit is tired but it also needs to be stimulated, be it acertainly see that, for young people, as being a wayplay from the theatre or be it opera, or be itthat we will see continue as they grow up throughsomething. How do you divide between the diVerenttheir adult lives—the community that can be built upsets of customers? I think it is a challenge to try and

answer that question. behind channels.




Q250 Chairman: One of the things (I think Mr mean that you are making an assumption which is,perhaps, unacceptable to the consumer, namely thatWatson made this point) is this: when in 1995 theit is an imposition on them to force them to pay forthen Government decided to give the BBC a 10-yearanother 10 years of BBCon the licence? Everybody’scharter with funding by the licence, the broadcastingopinion, who is in the world you are in, is valid andenvironment, on the whole, even taking into accountinteresting, and I would be very interested to knowthe fact that cable had come in, that Sky started andwhat your opinions are.so on, was very little diVerent from what it was inMrWatson:One thing I would say on that is that the1922 when the British Broadcasting CompanyBBC, through its funding, are actually prettystarted broadcasting on the wireless and 1948 wheninnovative and quite a lot of the interaction that Iwe got the post-war resumption of televisionhave with them around—they pushed widescreentransmissions. The assumption by everybody wastelevision through digital TV and in terms ofthat people sat at home and listened to the wirelessinteractive television—is probably the richestor, when it came, watched television, takingcontent that is provided by the BBC, and, I think,whatever was doled out to them—end of story. Tenalso, in terms of the investment that they are makingyears ago we were still very, very much in thatin bbc.co.uk. So we are seeing the BBC in themselvesposition. What has happened, partly through yourpushing forward the technologies. I think that is aown work, partly through that of Sky, but partlypositive point. I think, also, that they are pretty goodalso through loads and loads of technologicalat doing that at the rate of pace that the consumerdevelopments, many of which were not anticipatedwants to consume it rather than, as was mentionedten years ago, is that we are not in a position anyearlier, the technology fails and we try and force itmorewheremost people sit down at home andwatchupon an unsuspecting customer. I do think, though,whatever is being doled out to them; the marketthat there needs to be some mechanism of reviewingprevails. You were talking about newspapers. Wemid-term (coming back to the five-year point) whatmay well be reaching a point where there will be nois this amount ofmoney going in this direction, givenmore national broadsheet newspapers. Thethe changes that may have happened over thatIndependent has gone tabloid, The Times is goingperiod, and is that still the right way of the UKtabloid,TheGuardian is thinking about going sort ofpublic funding public sector broadcasting.tabloid. That is because themarket has decidedwhat

is wanted in newspapers. The title of Michael Q251 Chairman: A few weeks ago this CommitteeMoore’s new film is stolen from a film about where went and looked at what the BBC, presumably,there will be no more books any more. People still thought would impress us, in terms of theirwant books; they have decided that that is what they technological development. Frankly, it was likewant. They do want books, they do want text watching a coal-fired steam engine. Last week wemessages. They want iPod. I saw a guy on the tube went to Dublin to the media lab and there we werethe other day actually having earphones attached to really shown what is now the cutting edge. So thata cassette player; it was like watching something out being so, is it perhaps being over-generous, Mrof prehistory. The point I am trying tomake in order Watson, to say what you have just said? Namely,to ask your views about it is this: that we no longer implicitly, the BBC knows what it is doing? If medialive in a worldwhere nobody does get everything any lab tells us where we are going the BBC does notmore. People choose according to preference, and seem to be in that game at all.according to their pocket, what their audio-visual MrWatson: I think, Chairman, there is a diVerence.entertainment is going to be. In 10 years from now, The fantastic things that are in that media lab insince 10 years ago we had no idea that we would be Dublin, which is, in essence, giving a directional viewin this amazing environment, this amazing and a vision of what might be possible, I think, putenvironment will probably seem extremely a challenge on all of us who have the responsibilityprimitive. Where does that, in your view, with your of delivering entertainment and information into aexperience and insight, leave us with regard to BBC consumer’s home, and in really making sure that wecharter review? Does it mean that you give the BBC can constrain that into what is probable in marketa chance to adapt itself, which is what this Select terms over the next 12, 18, 24 or 36 months. I thinkCommittee recommended 10 years ago, to the that is where there is a diVerence.environment and, therefore, you give it a long Chairman: Thank you very much indeed. Your

insights have been very valuable to us.charter and you buttress it by the licence, or does it

Memorandum submitted by Internet Watch Foundation

The Internet Watch Foundation (IWF) was created in 1996 by UK Internet service providers ISPs),primarily to combat illegal content on the Internet. As well as some funding from the European Union, itnow has a total of 53 funding members, embracing ISPs, mobile operators, software providers and others.

The IWF aims to:

— foster trust and confidence in the Internet among current and future Internet users;



— assist service providers to combat the abuse of their systems for the dissemination of criminalcontent; and

— assist law enforcement in the fight against criminal content on the Internet.

The types of content covered by IWF activities are child abuse images hosted anywhere in the world andUK hosted criminally racist and obscene adult material.

The IWF was invited to the Select Committee’s oral evidence session on 29 June 2004 in order to answerquestions on Internet regulation in the context of the Committee’s inquiry into BBC Charter renewal. Inthe event, there was not time for the relevant questions to be addressed and therefore it was agreed that wewould provide a written response to the questions the Committee has on Internet regulation and its impacton public service broadcasting (PSB) generally and the BBC more particularly.

— How much regulation of their internet should there be, taking into account both its practicalityand desirability? And who should regulate it? Should we leave the internet alone, adapting to itrather than attempting to regulate it? Are technologies to filter out unwanted material, andimproved media literacy, a better direction to go in for all but illegal material? How can the latterbe stopped when it originates overseas?

Formally speaking, the Internet is not, and cannot, be regulated in the sense that radio and television areregulated. There is no allocation of scarce spectrum and no licensing process and both origination andhosting of material is worldwide. Consequently, while Ofcom regulates the UK telecommunicationsinfrastructure that comprises the domestic component of the Internet network, it has no responsibility forInternet content.

Having said that, it is essentially the case in this country—as elsewhere in the world—that what is illegaloV-line is illegal on-line, although it has to be accepted that—for a variety of reasons—enforcement of thisprinciple is often not an easy process.

As regards criminal content (primarily child abuse images), the IWF operates a ‘notice and take down’procedure whereby it advises any UK ISP of material which that ISP is hosting which, in the judgement ofthe IWF’s professional and trained analysts, is potentially illegal. This has been an exceptionally successfulmodel: whereas in 1997 18% of the material IWF judged to be illegal was found to be hosted in the UK, thatproportion is now down to less than 1%.

Fortunately most Internet users do not come upon illegal content by accident; however, they frequentlydo access material which they find oVensive and even harmful, especially as regards children and othervulnerable groups. For suchmaterial, the IWF’s ‘notice and take down ‘procedure has no relevance. Insteadthere are two broad lines of action: first, labelling, rating and filtering. Second, awareness andmedia literacy.

A label is a word or phrase to describe the nature of content, whereas a rating is an appraisal of the natureof content—usually an age-based category, eg “12” or “15”. A further distinction needs to be made betweena visual label (often an age-based rating) that appears on an actual product, such as a movie rating beforea film and a machine-readable label that travels with the digital content, eg a label such as that promotedby the Internet Content Rating Association (ICRA) that describes the content of an Internet site or page“read” by a localised filter or blocking software. A filter is software, usually installed by the owner of thePC, to block certain material so that it cannot be accessed by children using that computer. IWF supportslabelling and rating of Internet content and promotes the availability and use of filtering software where thiswould assist parents, teachers and carers.

Knowing about the dangers and oVensiveness of some Internet content and the concepts of labelling,rating and filtering in responding to such content are part of awareness. Knowing how to navigate theInternet, use a search engine, and access the authoritativeness of content are all part of wider media literacy.IWF supports the work of organisations like many Internet service providers, the children’s charities, andOfcom to promote both awareness and media literacy.

Turning now to the specific subject of the Committee’s inquiry, there are two major respects in whichcontrol of Internet content is relevant to PSB generally and the BBC more particularly. First, all publicservice broadcasters have web sites which carry on-line material related to their broadcast programming.This is especially true of the BBC which has a vast on-line presence, so much so that the Governmentinstituted the Graf inquiry into it. Second, technological convergence means that increasingly consumerswill access broadcast material (which is regulated) and on-line material (which is not regulated) on the samedevice, whether that be a digital television, a personal computer, a games station, or a mobile phone.

From a consumer point of view, therefore, two things are necessary. First, a clear indication that one iseither in a regulated space or an unregulated one. Second, knowledge of how, if one is in a unregulated space,one can ensure that the control of the content can be made to approximate that found in the regulated spaceif that is what is desired (which will usually be where children are involved).

The BBC is in a very special position here—partly because it has such a massive on-line presence, partlybecause of the expectations generated by its broadcast material, and partly because uniquely it is funded bylicence fee. However, the BBC clearly understands this and has a high reputation for the responsibility ithas shown in respect of its various web sites and on-line fora.



The BBC operates a self-regulatory model for its on-line services and published the first edition of its“Online Guidelines” in 1997. In 2002, the second edition of those guidelines (2001) won a special award fordevelopments in on-line safety provided by the Internet Services Providers’ Association (ISPA) and awardedby the IWF. Like the IWF, the BBC is a member of the Home OYce Task Force on child protection onthe Internet.

The BBC’s control of its on-line material is based very much on its own values and its own brand. It doesnot label or rate any of its sites. It has conducted an extensive test of the ICRAPlus system—promoted bythe Internet Content Rating Association (ICRA)—but it apparently takes the view that the ICRA systemis hard for users to operate. It believes that it is diYcult to label its sites by following ICRA instructions andthat the filter itself is unreliable.

This is obviously a judgement for the BBC to make in relation to its on-line material. However, Ofcom—as part of its media literacy programme—is endeavouring to encourage a labelling system that would becommon across a range of platforms providing access to audio-visual material and this is an initiative thatthe IWF would support as empowering end users to make easier and more informed choices about whattheir children watch and access.

Meanwhile the BBC search engine oVers family friendly systems to help screen out the least acceptablematerial. Also the CBBC site for children oVers a limited number of links to third party sites which havebeen specially selected and checked by CBBC staV.

Also the BBC has instituted a number of media literacy initiatives such as Webwise and Chatguideintended to help parents and children obtain the best from the Internet and avoid the worst. Clearly the BBCcould play a major role in future media literacy programmes such as those being encouraged by Ofcom.

— What are the content regulation implications of broadband television? Who regulates video ondemand services?Who regulates television delivered fromother countries over the internet?Wheredoes all this leave the 9 o’clock watershed?

In May 2002, the Government published “The Draft Communications Bill- The Policy” in which itchallenged the video-on-demand (VOD) industry to produce an eVective self-regulatorymodel which wouldenable VOD services to be exempt from control by Ofcom. The industry met this challenge and thereforeVOD services are governed by a detailed Code of Practice promoted and enforced by the Association forTelevision On Demand (ATVOD).

Television originating from other countries and viewed on the Internet by those in the UK is regulated(if at all) by the relevant authorities in the originating country. This means, of course, that such televisionmay well not conform to the standards (including those of taste and decency) applied to UK televisionprogramming. This is already an issue with Fox News, an American channel which is available on Britishtelevision but which does not conform to the ‘balance and impartiality’ rules applicable to UK-originatednews.

This leaves the 9 pm watershed as applicable to less and less of the range of television which is becomingavailable to viewers. This requires that parents appreciate which channels are subject to the watershed andwhich are not and that parents have the tools to control access by young children to channels which do nothave a watershed.

Of course, even programming which is subject to the watershed can be viewed before 9 pm if it is recordedon a video cassette recorder and the advent of the personal video recorder means that more and moreprogramming will be the subject of such ‘time-shifting’.

The BBC is well aware of this dilemma and, in anticipation of these changes, it has established a LabellingProject which is intended to identify what further information or signposts viewers will need in this non-linear environment if they are to continue to make informed choices about the content they—and especiallytheir children—access. We understand that the BBC’s initial research has shown that viewers will findadditional text information about programme content the most useful signpost. However, further researchis necessary to identify where this information might best be placed.

Clearly it is highly desirable that any labelling system is accepted across the industry and operated acrossdelivery platforms. Ofcom may well play a key enabling role here.

— If IP television or other video content develop on a widespread scale, will this undermine anddevalue the concept of public service broadcasting, and the raison d’etre of the BBC?

It is important to distinguish between carriage and content. Television delivered over the Internet is justanother delivery mechanism to add to terrestrial broadcasting, satellite and cable. Of course, television overthe Internet—like cable and satellite—expands the range of content available to the viewer, in this casedramatically because potentially television channels from around the world will be accessible.

New forms of access appear to encourage new forms of consumption of PSB.

For instance, take up of the Internetmedia playerReal Player—which currently enables BBC fans of “TheArchers” to listen to a streamed version of the programme up to a week after transmission—has shown thatthe BBC’s audiences want access to material over the Internet because it gives themmore control over whenand how they consume such material.



We understand that the BBC is currently trailing a television version of Real Player and no doubt, whenavailable, this will be popular with viewers. As so often has proved to be the case, therefore, the Internet islikely to be a complementary medium rather than a substitute for existing media. In that case, thesedevelopments may well increase the desire for and consumption of public service content.

20 September 2004

Memorandum submitted by Video Networks Limited

This letter sets out the principal points that Video Networks Limited would like to cover in its evidenceon the subject of BBC Charter renewal to the Select Committee on Culture Media and Sport.

For the Committee’s information, Video Networks owns and operates the HomeChoice broadbandtelevision service that is now beginning to roll out in the London area. Its large range of content (includinglive television channels, more than a thousand films and a wide range of individual television programmes)combinedwith its unique functionality that allows viewers access to content whenever theywant, means thatHomeChoice is essentially a broadband cable network. It is using BT’s local loop infrastructure to developits own DSL platform so that a virtually limitless amount of content can ultimately be made available atlow cost to people’s television sets at home.

As part if its evidence, and through this memorandum, Video Networks Limited would like to invite anymember of the Select Committee who so wishes to visit the company’s oYces in Holland Park, London fora demonstration of the HomeChoice service.

In addressing the issues surrounding the renewal of the BBC’s Charter, Video Networks would like tomake the following points:

(i) The BBC has a vast archive of television and radio content that it is planning to make more widelyavailable through distribution on new media platforms. Video Networks welcomes this. Theunique advantage of broadband television platforms such as HomeChoice is that they can providecontent at exactly the time consumers’ want or need it. This means that for a public servicebroadcaster such as the BBC, highly expensive programmes, made from money received throughthe Licence Fee, can be kept and then made available to Licence Fee payers at more convenienttimes. This increases the value of the programmes.Not only canmore people see them, but becausethey’re watching them at a time that suits them perfectly, they can derive more satisfaction fromthem.

(ii) Video Networks believes that the policy of universal availability of “already paid for”programming through its distribution on new media platforms should form a central part of thecase for Charter Renewal. Within the next five years the media world in the UK will become avery diVerent place. The Proliferation of broadband will be very nearly universal; on websites, andthrough innovative television services, people will begin to have access to content in a way that ishard to envisage today. But it will happen. And the educational and social opportunities oVeredby this process are huge. The BBC’s position as the mainstay of the British content creationindustry requires it to take a lead in this area. But it must do so in a way that benefits the industryas a whole, not just its own services. It has a number of online and new media services, such asbbc.co.uk and its Interactive Media Player (IMP), currently undergoing testing, and these willbenefit from the BBC’s ability to clear all its content for secondary use on these platforms.However, the BBC’s new media service must not be allowed to become the only beneficiaries; anynew media service provider capable of presenting fully cleared, licence-fee funded content tolicence-fee payers must be able to use it in the same way as the BBC itself.

(iii) In taking advantage of the availability of publicly funded programmes Video Networks will be nodiVerent from pay television services such as Sky or cable which already benefit from the growthof the BBC’s digital channels. These can only be seen on commercial platforms, or throughFreeview, which requires customers to buy a box. Like Sky and cable, Video Networks has spentmillions of pounds developing a network, and a platform, that it believes oVers consumers realadvantages. It will not charge its customers more for the ability to watch BBC programmeswhenever they want. This will be an additional service, made available at no extra charge, butbringing benefits to the BBC, the HomeChoice platform, and most importantly, British televisionhouseholds.

(iv) VideoNetworks believes its platform can be used for educational and social initiatives—andwouldlike the BBC to be part of this too. HomeChoice already runs an information service for theLondon Borough of Newham, and is exploring with the London Grid For Learning the use of itsnetwork to service schools and colleges with educational material. It is also in discussion withvarious private/public partnerships in London that might like to use the network for localinformation and education as well as entertainment. The BBC has a role to play here—in a similarway to what it has tried to do in Hull using the Kingston Communications network. But theprocess needs to become more robust and more whole-hearted, if it is to yield the benefits that areundoubtedly possible. The BBC needs content partnerships with New Media platforms if it is to



develop, facilitate and encourage the further distribution, not only of its programmes, but of itswhole public service approach and purpose. Platforms such as HomeChoice stand waiting forexploitation of this kind. Video Networks hopes that as part of Charter Renewal the BBC isrequired to join hands with the innovative programming services that will become more and moreavailable during this period. The advantages for these new platforms are, of course, considerable.But there are great advantages for the BBC too. Through partnerships of this kind, the BBC willensure that its presence and influence in the new world is no less than it has been in the old.

More widely, Video Networks would add this. In looking at ways in which the BBC can work with NewMedia operations, issues will arise relating to the BBC’s commercial operations, and how these sit with itspublic service remit. What are the boundaries? What is commercial and what isn’t? How far is the BBCallowed to go? These are questions that have been asked before—but in truth not very clearly answered. Infuture clear answers will be absolutely vital. TheUKmedia industry must find the right balance for the BBCand then communicate it strongly to the market at home and abroad.Without that clarity it will be diYcult,perhaps impossible, to encourage the innovation and investment the new media sector so badly needs.

25 June 2004

Witnesses: Mr Hugo Drayton, Chairman, British Internet Publishers Alliance;3 Mr Roger Darlington,Chairman, Internet Watch Foundation; Mr Bob Schmitz, Chairman, Two Way TV and Mr Roger Lynch,Chairman and CEO, Video Networks, examined.

Chairman: Welcome. Thank you very much indeed it is made available on demand much like a PVRfor coming to see us.Michael Fabricant will start the would do, except in this case you do not have to planquestions. it, it is available on the server.

Q252 Michael Fabricant: We heard earlier thatQ254 Michael Fabricant: Of course the BBC areLocal Loop Unbundling may or may not be oftalking about providing their own video archive inbenefit to people providing video down telephonedue course. Have you spoken to them at all, becauselines. I would like to ask Roger Lynch whether thepresumably the technology that Video Networks isrecent announcement by BT is actually, in practice,employing is similar sort of technology to that whichgoing to help the provision of such services.the BBC uses?Mr Lynch: I think it will help it immensely. It hasMrLynch:We have spent a lot of time with the BBCalready been done now. Mr Bryant asked earlieron this issue. I think the technology would beabout when theWestminster cable system was goingdiVerent in the sense that what we deliver isto be upgraded. In fact, that whole area now istelevision, whether it is on demand or broadcast.upgraded to the telephone to be able to receive 60That implies a completely diVerent quality level thanchannels of digital television and on demandwhat is delivered on the internet. The infrastructuretelevision. What Local Loop Unbundling and thethat we build to do on demand television, I think,announcement from BT does is make itwill be very diVerent from what the BBC would doeconomically viable to roll that out in a large area.to enable the creative archive through the internet orthrough their interactive media player. What weQ253 Michael Fabricant: Given that Video Onwant to do, as the BBC frees up its archive, is toDemand is potentially here and now and, certainlymake it available over our platform and, indeed, itin certain parts of London, provided by Videoshould be available over any other platform thatNetworks, and given that you were listening to thecould carry it to the licence fee payers.debate earlier on when we were talking to NTL and

Telewest, do you think that VideoOnDemand is thefuture, and broadcasting, in its traditional sense, is

Q255 Michael Fabricant: Let us get this absolutelydead, and therefore it follows the BBC is dead? Orclear: I am not paid to advertise Video Networks,do you see the two co-existing?but I think you are one of the first in the UK to doMr Lynch: I see the two melding together, frankly.this, if not the first. Video Networks is providingThat is what we attempt to do on our service now.broadcast television down an ordinary telephoneWe oVer broadcast television, a large array ofline (correct me if I am wrong) and what I can dobroadcast channels, including all the BBC channels,through some form of remote control or whateveras well as currently about 5,000 diVerentis get your server, your computer, based whereverprogrammes on demand. Where it melds together isit is—presumably in London—to feed thethings like on BBC1 currently, or BBC2 or Channelprogrammes that I want in real time down the4, where you can look at what is on but you can alsotelephone line and I look at a picture which is everyscroll back in the programme guide and watchbit as good as broadcast television, by cable or byprogrammes that have been broadcast already thatsatellite. Is that right?are available on our server. So it is broadcast in theMr Lynch: That is correct. You would not noticesense that these are programmes that the BBC

decided to commission or produce and schedule but any diVerence, looking at the picture.

3 See Ev 33–34



29 June 2004 BIPA, IWF, Two Way TV, Video Networks

Q256 Michael Fabricant: Let us just pursue this a amount of bandwidth that can be delivered over acopper wire. So the compounding eVect of theselittle further. What future is there for cable or

satellite in the conventional sense, given that technologies means that as we roll out our service tolarger and larger areas around the UK we will bepresumably it is more diYcult for a satellite

footprint to actually target an individual home? Is able to deliver very high quality pictures to a veryhigh percentage of the population.there a future?

Mr Lynch: I think, in particular in this country,where you have such a strong and dominant satellite Q260 Michael Fabricant: Your company is new toprovider there will be a future because they are very the UK but your accent gives your origins away. Iinnovative. They are just scratching the surface wonder if you could give us any insights at all intoabout what they will be able to do with the SkyPlus how long this service has been available in parts ofbox. I think what they will attempt to do is continue the US and how that has aVected, if at all, viewingto expand the capacity of that to capture more and habits to existing broadcasters CBS, NBC, ABCmore of the broadcast signal and be able to store it and Fox?so that you can create your own on demand library. Mr Lynch: There is actually not a service like thisWhere it will get diYcult is in relation to what you anywhere in the world; London is the only place inhave been talking about, the creative archive. Today the world that has a service this extensive. In the USwe already have hundreds of archive BBC the issue is that the telephone networks there are notprogrammes that are available on demand on our as robust as the telephone networks that BT builtservers. We are already doing that commercially here. Part of it is just the geographical density of thewith the BBC. We would like to expand that very, conurbations, and part of it is the architecture of thevery significantly. That is going to be very diYcult telephone networks—the way they were built. Therefor satellite to be able to do. are other areas in Europe where people are starting

to roll out services like this, in France and Italy, andthis has all been done on the back of Local LoopQ257 Michael Fabricant: I think SkyPlus can store

about 18 hours at any one time. Of course, with a Unbundling regulation there, which remains very,very cost-eVective. These are primarily broadcastmain server, how long is a piece of string? You can

have as many drives as you want. Could I ask of services; they do not really get into the heart of theon demand services that we have developed.Video Networks: how many hours right now, with

the equipment you have, are you capable of storing?Mr Lynch: Our servers today store 10,000 hours of Q261 Michael Fabricant: Five or six years ago ourcontent. Committee visited the United States and scientists (I

think I would call them scientists more thanengineers)—visionaries—were talking about thisQ258 Michael Fabricant: Which I could access at

any time? sort of service becoming available eventually, andnow it seems that Britain is the first—and I did notMr Lynch: Yes. Currently, I believe, there are 7,000

items of content available on our servers, of which realise Britain was the first—country in the world tohave this service. So whither goes the BBC then? Do5,000 are entertainment, movies, television

programmes and music videos, and the others are you still see a role for the BBC just as a programmeprovider, or still as a broadcaster?more informational, such as we have an information

service with the Borough of Newham that has Mr Lynch: I think that is the heart of the issue rightthere. Is the BBC a programme provider or aprobably 20 hours of content about local housing,

benefits, health and schooling. broadcaster, and what is the diVerence between thetwo? I think there is a critical role for the BBC as aprogramme provider. In fact, a lot of the contentQ259 Michael Fabricant: Presumably you needthat is watched on our service on demand is BBCsuYcient bandwidth to deliver this to the consumer.content—whether it is captured through theWhat bandwidth is it that you require and what arebroadcast stream, like Eastenders, so that you canthe constraints to panning out your servicewatch it for up to a week after it is broadcast, or it isthroughout the United Kingdom, or similar servicesdocumentaries that we have put together inby competitors throughout the United Kingdom?“documentary on demand” channels. People wantMr Lynch: Today we use about four megabytes into watch BBC content, and the real issue for them istotal but we deliver not only the television servicehow can they get access to the archive. I think therewith that, we deliver a one megabyte broadbandis a very strong role for the BBC as a content creator/internet service for the PC. As we expand outside ofproducer; what is less clear is what it means for theLondon, the distance from the telephone exchangesBBC as a broadcaster.to the home gets greater and the amount

of bandwidth that is available reducescorrespondingly. There are newer technologies Q262 Michael Fabricant: Do you think Chris

Bryant’s thesis is an attractive one, which says givecoming along, the first of which is encoding thestandard, such as Mpeg 4, of which we may well be the BBC stability and give it a 10-year charter, but

make it a very thin charter so that the BBC canmovethe first operator anywhere in the world to roll outthis year, which will reduce in half the amount of and innovate as required as technology moves on?

MrLynch:Ten years is going to seem like a very longbandwidth that we require to transmit a given videoquality. There are also new standards coming out in time in what is going to happen over the next decade.

I think there was a discussion earlier about what hasADSL which will have the impact of doubling the




changed over the last five years. A lot has changed Mr Drayton: You would not expect the managingdirector of The Telegraph to agree with that surely.but not much has changed in relation to how people

watch television. That, I believe, will fundamentallychange. It changes already with our subscribers. If

Q266 Mr Doran: A lot of people would say that andyou look at how people use television on ourI am one of them, I use it quite regularly. Are youplatform it is completely diVerent from how theycomplaining that they are too good?watch on Sky or cable.Mr Drayton: No, I think the BBC does news verywell. What it does not do is what newspapers do,

Q263 Michael Fabricant: Just expand that. How are which is put it intomore context. It does not have theviewing habits changing? writing, that is not its skill. It is good at frontlineMrLynch: Subscribers to our platform, for instance, news. The Guardian, The Telegraph and others dospend a disproportionate amount of their time diVerent things. I think there is room for all of that.watching on demand content that is not available on Nobody is suggesting that the BBCnews feed shoulda broadcast channel. The reason for that is because not be available on-line, what we are suggesting isthe functionality combined with the programming that they should not be running holiday sites upmeans that the choice that you have is far greater. against commercial users with the public’s money,The problem with providing so much choice—and nor should they be developing on-line car magazinesthis goes back to another discussion—is people want because the commercial sector does that very well.someone to exercise some editorial control. Theywant to be told “This is a good programme to

Q267 Mr Doran: If we accept the thesis that the BBCwatch”. If you put 10,000 hours of content in frontshould be controlled, who should be controllingof someone and say “Go choose what you want”them?they will be confused and they will turn oV. That, IMr Drayton: Ideally a better type of Governor. Wethink, is the essence of the role for someone like thethink that the current judge and jury are theBBC where their editorial control and judgment isGovernors—this is not just a BIPA issue but acrossvalued by people, and if they can be presented in anall the media—and we think it is a completelyon demand environment where you can say “I amuntenable situation. I think it has to be Ofcom whointerested in documentaries” and the BBC hasdetermines whether or not the BBC is having ansuggested documentaries you can watch right now,adverse eVect on the commercial market becausethat is of value to people.that ought to be a role of Ofcom. That is somethingMichael Fabricant: Thank you, Chairman.which to date the Governors and the BBC have beenleft to decide for themselves and I think that is

Q264 Mr Doran: A question for Mr Drayton. In wholly unsatisfactory.your evidence you are fairly critical of the lack ofcontrol over the funding and scope of BBC’s online

Q268 Mr Doran: A tougher set of Governors with aservices. I may be a bit naive but I have always seenremit, which is possible in the newCharter, might dothe internet as a fairly unfettered medium. Why dothe job?you think the BBC should be fettered?Mr Drayton: I think it might do the job. It does notMr Drayton:We are not really suggesting fettering,have to be Ofcom; it just has to be somebody whowe are suggesting that the market failure test oughtcan give an independent view. Our very clear view isto be applied a bitmore rigorously. The problemwasthat in the current and recent regime the Governorsat the beginning, back in 1997, when many of ushave not had that independence of view, nor thepublishers had already invested heavily in exploringspirit to challenge it. In our particular case, we havedigital and delivering services, the BBC came in andbeen challenging the BBC’s activities now for sevenhas had totally unfettered access to the community.years and it is only with the Graf Report, after aIt has almost limitless funding, no shareholders,long, long time in anticipation of Charter renewal,obviously (we are, supposedly, the stakeholders),that we have had some kind of monitoring. Nothingand it has almost zero regulation. There has been nohas happened under the current Governors’ regime.remit, it did not stick to even the original ideas that

it set out to theDCMS and its voluntary code is “Weare going to focus on education, we are going to cap Q269 Mr Doran: Just going back to something youspending at £25million.”None of these pledges were said earlier. You said that the BBC was treating themaintained. They have ridden on this very spurious internet as a form of broadcasting but I thinkargument that the internet is another arm of everything that we hear about the technologicalbroadcasting, which clearly it is not; it is a very advances suggests that the internet, certainly in thediVerent medium. I think we are all big supporters of future, will be part of the broadcast territory.the BBC in many of the things it does, we are great

Mr Drayton: It is very diVerent in the sheer sensefans of the BBC, butwhere it is clearly preventing thethat it is acknowledged that the barriers to entry arecommercial sector from developing, that is negativemuch lower. The fact is that for me to set up afor the British public, for the consumer and thetelevision channel would be extremely costly. Towrong use of the public’s money.broadcast television, firstly it would involve me ingetting licences but also involve a huge investment.Similarly, that is the case with traditional,Q265 Mr Doran: A lot of people will say that the

BBC’s news site is the best around. conventional radio. The internet is not like that, it is




not that type of broadcast medium, and it does television to broadband? Do you think there is astage where broadband will overtake conventionalnot require that type of infrastructure. The

infrastructure is provided by the networks. television in the next five or 10 years?Mr Lynch: If I make a distinction between thedelivery mechanism and how you view it for aQ270 Mr Doran: I am still a little bit confusedsecond. In our case we use broadband but we usebecause the BBC is our prime broadcaster and it isbroadband to deliver it to the television. Our viewersmoving into a number of new territories, some ofwatch television, maybe it is a broadcast channel orthem have diVerent forms of approval and interneton-demand programme but it is through a televisionclearly is not one of them. You heard the debateset, but the functionality that they get is somewhatfrom earlier witnesses about the way in which theakin to the internet in that they can choose what theyquality which the BBC provides and produces is awant to watch, search throughmenus or programmespur, an incentive, for other broadcasters. We wereguides and find exactly what they want. That willdiscussing earlier with Sky witnesses, for example,change significantly. I do not think that thethat their completely hostile approach to the BBCconvergence of PCs and TVs is necessarilyseems to have changed quite dramatically over thesomething that is going to happen because how youlast year or two. Clearly there are businessview a television is very diVerent from a PC and theopportunities and improvements to business beingthings that you do on a PCwill remain diVerent frompresented by the quality that the BBC represents andwhat you do on a television. If you are working onwhich it brings to the whole area. Why is that nota spreadsheet or typing out something it is just a verylikely to be seen as the case on the internet?diVerent experience from watching a film and I doMr Drayton: I think it has improved. The verynot see that convergence will necessarily take place.existence of the Graf Report and that inquiry hasWhat will take place is a convergence of thehelped. BBCi has understood that it has oversteppeddistribution media that delivers the content either tothe market in many commercially viable areas. Thea television or to a PC.remit needs to be clearer. If, as they have purported

to do from the beginning, the BBC is to be thistrusted guide then it should also be co-operating Q274 Derek Wyatt: If there is a shift towardswith the wider market. If the BBC made a better broadband delivery as the broadband gets better andeVort to include other trusted sources of information better, does it become harder to detect who islinked to them, firstly it would be using the watching the BBC? These little men go around intechnology much more eVectively and using the web their little white uniforms saying “You have notthe way that people outside the BBC use it, but also paid”, but how do you detect that on broadband?it would be providing a public service which is Mr Lynch: I think it is an issue for the BBC that ifpresumably at the heart of what the BBC is there to more and more of the content is delivered via meansdo for us. like the internet, yet the licence fee is tied to a

television set, is there a match of the funding to howpeople are actually enjoying the content? In our caseQ271 Derek Wyatt: I am sorry I am late, I had to go

and see a minister. Can I ask Mr Drayton, the BBC we deliver it via broadband but we havemeasurement capabilities that are far in excess ofhas said that it is happy with its digital channels and

its digital radio channels, it does not want to do any what a broadcast platform can provide. We knoweverything that people watch, how they watch it,more, it just wants to hone in on what it has got.

What if another broadcaster or another media when they watch it, from what channel they camefrom. In our case, the measurement capabilities areplayer announces five broadband channels in the

next two years, one of which might be a UK film significantly in excess of what a broadcaster can doon their platform but that is not true of the internetchannel, one could be a sport and health channel,

because that is the way you should do it, and the in general though.BBC then says, “Oh, wemissed it.We need to do it”?What would be your reaction as a publisher? Q275 Derek Wyatt: Anybody can answer thisMr Drayton: I think they would have to first justify question. It seems to us that some of the evidence wein that or any other area why they would have to do heard in Dublin at the MIT lab last Monday wasit. There seems to be this thought amongst some of that people are coming from theMTV generation, itthe BBC internally that they have to be doing is two minutes, three and a half minutes or foureverything, that they have to cover every inch of the minutes, it is oV and on, but the formal nature ofwaterfront, and that is a totally wrong use of public television makes you come in on the hour or halfmoney. Why would they have to provide something hour normally and that goes against the grain of thejust because somebody else proves successful at it? younger generation, as it were, who do not want

that. It seems to me that you cannot deliverQ272 Derek Wyatt: Mr Lynch, I am sorry I was not television any other way conventionally. How dohere for your earlier piece, but we have met you deliver to the MTV generation, if that is whatpreviously. they want, three and four minutes, they do not wantMr Lynch: Yes. programmes of half an hour, an hour or 45 minutes?

That is a huge cultural shift. Will that not aVect thewhole of the way in which the economy and theQ273 Derek Wyatt: Is it your view that the

entertainment platform—this is something I keep ecology of television is going to move in the next10 years?asking witnesses—is going to move beyond




Mr Schmitz: We have addressed that, being in the perspective is that we would like to see thatcontrolled a bit better. I do not think we have anyinteractive business. I would not argue that we will

replace or totally satisfy that need but clearly our objection to the BBC experimenting on a modestscale but it should not be to the exclusion of all thebusiness is one of providing what I would call a

diVerent experience than the normal broadcast potential commercial players who could come in andprovide equally good services and a diversity ofexperience by allowing viewers to either interact in

the obvious but perhaps trivial application such as choice for the consumer, which is the pattern thathas happened in several things that have aVected ourthe voting, we also broadcast games on special

channels that are available so that it is the TV publishing community.MrLynch: I think that the BBC absolutely should beexperience but it is providing what we view as bite-

sized amounts of information and entertainment on the cutting edge of this, but what they should bedoing is looking at it from a programmingthat clearly is popular with that age group. When

you look at what they are doing in other medium, perspective. How do they do what they do best,which is take the television content that they create,like the game consuls and internet, the way in which

they get involved with the entertainment as opposed or radio content or internet, and make it availableusing cutting edge technologies? That does not meanto what we heard earlier, the sitting back, the

conventional television broadcast, is clearly there that the BBC has to go out and develop it becausethe private sector is happy and willing to do so and,and we believe it will come over more significantly to

television as we and others overcome some of the in fact, is willing to invest significant sums to do it.The main thing the BBC should be doing istechnical diYculties of providing that interactive

capability through the television set. embracing that, working with those partners whoare willing to make the investment to make theircontent available on cutting edge services.Q276 Chairman: Could I just put this to any or all of

you, depending onwhether youwish to reply. I thinkit was Alan Keen in his questioning who talked Q277 Chairman: Is there not a problem that if it is

going to work with partners, the boundary of theabout the way in which when we were looking atcommunications we were told by authoritative licence becomes fuzzy and then people like Mr

Drayton would have a right to say that the BBC isfigures who appeared to know all about it on theWest Coast of the United States that the converged having commercial partnerships, as it does now on

some of the specialised channels, using licencebox was the thing, convergence was the thing. It hasnot worked out that way at all but still one sees the payers’ money whose accounting is very, very

opaque so you do not know where cross-subsidy iselements of convergence, one sees advertisements inthe papers whereby you can get a huge package of and, therefore, Mr Drayton would say it is not fair?

It seems a possibility that the farther the BBC getsdiVerent films if you subscribe through yourcomputer, for example. Lots of people watch DVD along the cutting edge, the more the BBC throws

itself into themarket, some people would say the lesson their computer. Are we getting convergenceunder a diVerent name and in a diVerent form than it has the right to use licence money to do it.

Mr Drayton: With great transparency and a clearwas anticipated, and how does that aVect the futureof the BBC? Mr Drayton, you were saying that if remit that can be happily monitored and I think

people would be satisfied. I think what the BBC hasanybody does anything there is a feeling that theBBC is going to have a go at it. Should not the BBC, to do is refrain from exaggerated cross-promotion.

It has this unrivalled opportunity across its ownin fact, be pioneering some of these things whichothers do not do in view of the fact that it is media to cross-promote and compete with the

commercial market and that is where the problembuttressed by the licence revenue? Is there not anargument for saying that it ought to be at the cutting lies. Also, if the BBC gets into new markets and

opens new markets and it becomes clear that theedge of these developments rather than sitting back,waiting for what is happening and then trying to get commercial sector can oVer diversity and can

operate clearly then the BBC should be happya part of it?Mr Drayton: I think there is a role, and certainly enough to doV its hat and retire from that market

and move on to other things, which is a trend weyour previous witnesses talked about the innovationof the BBC and that is undeniable, they have got have yet to experience.

Chairman: That is very helpful indeed, we are mostsome great brains and they have, of course, anunrivalled resource. I think the issue from the BIPA grateful to you. Thank you very much.



Tuesday 6 July 2004

Members present:


Chris Bryant Alan KeenMr Frank Doran Rosemary McKenna

Memorandum submitted by BBC Scotland

The BBC has a duty to serve all parts of the UK, and to reflect the cultures, needs and interests of all itslicence payers. It seeks to do so in three key ways:

— By providing programmes and services intended to meet the needs and interests of audiences indiVerent parts of the UK—through programmes provided on national and regional versions of itstelevision channels, through its range of national and local radio stations, and increasinglythrough a series of local websites.

— By ensuring that programme-making talent from all parts of the UK make a proper contributionto the BBC’s UK-wide services.

— By developing a positive and active presence in communities.

This range of activity ensures that the BBC can fulfil its aims of:

— Serving the whole nation, in all its diversity.

— Providing value for money for all its audiences.

— Supporting local creative economies.

— Reflecting the cultures of the whole UK.

— Bringing the nation together.

— Making a positive diVerence to people’s lives, wherever they live.

The BBC’s Activities in the Nations, Regions and Communities of the UK

Scotland

— Production for BBC television and radio networks.

— Local television programming across the full range of genres for transmission on BBC OneScotland and BBC Two Scotland.

— Radio Scotland—an English-language radio service for Scotland, and Radio nan Gaidheal—aGaelic-language radio service for Scotland.

— bbc.co.uk in Scotland, providing online news and information, sevenWhere I Live sites and BBCAlba, a Gaelic-language website.

— A range of community services including a National Storytelling project.

English Regions


— Regional television news, current aVairs and political programming.

— 40 local radio services.

— 42 Where I Live websites.

— A range of community services including five BBC Open Centres and 10 BBC buses.

Wales


— Production of at least 10 hours per week of Welsh-language television programming for S4C.

— Local television programming across the full range of genres, for transmission onBBCOneWales,BBC Two Wales and the digital service BBC 2W.

— Radio Wales—an English-language radio service for Wales, and Radio Cymru—a Welsh-language radio service for Wales.

— bbc.co.uk in Wales, providing online news and information and five Where I Live sites.



— BBC Cymru’r Byd—the Welsh-language online news and information service.

— A range of community services including Community Studios, a bus and the Digital Storytellingproject.

Northern Ireland


— Local television programming across the full range of genres for transmission on BBC One NI,BBC Two NI and the digital service BBC 2NI.

— Radio Ulster and Radio Foyle, radio services for Northern Ireland.

— bbc.co.uk in Northern Ireland which provides online news and information.

— A range of community services including a community bus.

Despite the BBC’s long history of activity in the nations and regions, at the beginning of the currentCharter period it was still viewed largely as London-centric. It has been a key aim since then to address this,and to ensure that the BBC truly serves and reflects the nations, regions and communities that make upthe UK.

Programmes for the Nations and Regions

The licence fee settlement in 2000 allowed the BBC to make a step-change in its approach in the nationsand regions. The lasting results of this expenditure are still coming through, but some key changes have been:

— Planning for and responding to political devolution, with an additional £20 million invested innews and current aVairs programming, including coverage of the devolved institutions. Today forexample, in addition to substantial coverage on news and current aVairs programmes, coverage ofthe proceedings of the Scottish Parliament features on Holyrood Live, broadcast twice weekly onBBC Two Scotland. This service for the nations is supported by and reflected on BBC Parliamentand through the BBC’s network television, radio and online news coverage, ensuring that thebusiness of the parliament and assemblies is brought to a UK-wide audience.

— Investing an additional £50million a year from the current licence fee settlement into programmes,services and activities in the nations, regions and communities. This includes enriching services inthe indigenous languages of the UK: the BBC has been at the forefront of the development of thenew Gaelic Media Service, in collaboration with the Scotland OYce and with other broadcastersand programme makers in Scotland.

— Devolving more decision-making to the nations, as well as resources, to ensure that programmesand services more fully reflect the needs and interests of the audiences for which they are intended.In Scotland, twice-weekly drama River City was launched and is attracting average audiences ofaround 500,000.

— Engaging in innovative ways of connecting with communities, including BBC Open Centres,community buses and local partnerships delivering education and training in media literacy.

Technology meanwhile is allowing the BBC to serve licence payers better. The investment of £17 millionto place all national and regional TV services unencrypted on digital satellite ensured that people can watchtheir BBC wherever they are. For example, a Scot in London can now watch Reporting Scotland onsatellite TV.

The BBC’s increasing commitment to the nations, regions and communities has come at a time when thecommitment of the commercial sector can be seen to be waning. There is a risk that these commercial trendswill continue in the years ahead, with increasing media centralisation around London. The BBC’s role insupporting audiences and themedia industry outside London over the next Charter period is therefore likelyto become even more important.

Programme Production in the Nations and Regions

The BBC’s substantial investment in programme production around the UK delivers a number of publicbenefits: ensuring that its TV and radio networks better represent the diversity of the UK; ensuring that itsservices benefit from a diverse pool of creative talent; and supporting, nurturing and developing that talentand so supporting local creative economies.

The picture has changed substantially over the period of the current Charter:

— The value of programmes produced outside London for network television has never been higher,rising from £151 million in 1996–97 to £277 million in 2003–04.

— The value of the contribution of Scotland, Wales and Northern Ireland to network televisionproduction has more than doubled, from £39 million in 1996–97 to £84 million in 2003–04.



— Increasing numbers of high-profile and high-impact programmes on the BBC’s main TV networkshave come from outside London. Key examples from Scotland includeMonarch of the Glen, 2000Acres of Sky, HamishMacbeth, Tinsel Town,Mrs Brown, Rab CNesbitt andRestoration. Scotlandhas become a recognised centre of expertise in Children’s programming, providing 20% of theBBC’s overall output, and in Drama.

A study conducted by EKOS Ltd on BBC Scotland underlined the fact that the doubling of its incomeover the past five years resulted in an output of £177million to the wider Scottish economy. Since 1998 directBBC employment has increased by 44% to 1,442 and the impact of the organisation on the Scottish creativeand programme-making sector has resulted in the generation of the full-time equivalent of 3,500 jobs.

Future Plans

There are clear signs already of increasing audience approval resulting from the enhancement of itsactivities in the nations and regions, and the BBC intends to build on this in the future. In its document,Building public value, published on 29 June 2004, the BBC outlined a vision of its future that had at its hearta clear commitment to programming for and from the Nations and Regions of the UK.

— The BBC has pledged to increase its total expenditure in the Nations and Regions to more than£1 billion during the next 10 year Charter period (ie 2007 to 2016)—an increase of around 35% onthe present total.

— It will also increase the number of its public service staV based outside London from the presentfigure of 42% to at least 50% over the same 10 year period.

— Thirdly, it has undertaken to devolve around a fifth of all BBC network programmecommissioning out of London—in a radical shift from the present situation, where virtually nonetwork commissioning happens outside London.

Central to these pledges is a strategy to increase the localness of BBC services across the whole UK andthe proportion of network programmes made in diVerent parts of the UK. In Scotland, as in the othernations, core services will be strengthened and new regional and local services developed on television, radioand online. The commitment to Gaelic programming will be reinforced, helping future generations to learnthe language by providing learning resources across all media platforms. The BBC will also continue toinvest in the creativity of audiences by creating more opportunities for them to tell their own stories on theBBC’s diVerent platforms, while building on the increased profile and volume of production from Scotlandto enrich all the BBC’s UK networks.

2 July 2004

Witnesses: Sir Robert Smith, National Governor, Mr Ken MacQuarrie, Controller of BBC Scotland, andMr Pat Loughrey, Director, Nations & Regions, BBC Scotland, examined.

Chairman: Gentlemen, I would like to welcome you O’Clock News and the Ten O’Clock News, into this hearing of the Culture, Media and Sport considering the needs of the audience and the needCommittee. I would first of all very much like to for the BBC to oVer a shared experience across thethank Glasgow City Council for making this very UK so that when we schedule sport, for example, orhandsome room in the beautiful City Chambers when we are scheduling factual output, we are ableavailable to us for this sitting. As it happens this is to take into consideration the needs of the audiencethe second time I have chaired a select committee in Scotland at a particular time and schedulehearing in this building because the National accordingly. In that sphere of activity we haveHeritage Committee which I chaired also held a absolute autonomy as far as the scheduling ishearing here, so this is becoming something of an concerned but it is a discretion that we use withintermittent tradition for our select committee to consideration and also in co-ordination withhold hearings here inGlasgow. This, as you know, is colleagues in the network in terms of making sureone of a number of hearings, most of the rest of that we all know what we are scheduling at awhich are being held at Westminster, in our inquiry particular point in time and that we have theinto the BBC Charter Review. I will ask Rosemary marketing and all the listings and relevantMcKenna to open the questioning. information for the audience.

Sir Robert Smith: Perhaps I could amplify that bytalking about the governance. We have theQ278 Rosemary McKenna: It is quite clear underBroadcasting Council for Scotland which isthe current Charter exactly what the BBC’sessentially advisory. The governors are the ultimateresponsibilities are to the nations and regions of thedecision-makers in London. I am a governor as wellUK. However, what we would like to know is justas Chair of the Advisory Committee that is thehow autonomous BBC Scotland is.Broadcasting Council for Scotland. This year, withMrMacQuarrie: If we take, for example, schedulingthe issue of the Scottish Six, as it was called, the Sixof BBC1 and BBC2, we are in the scheduling ofO’Clock News hour between six and seven, whichprogramming very much autonomous but we would

obviously look to fixed points, for example, the Six changes from international and national to purely



6 July 2004 BBC Scotland

Scottish news, we looked at whether that should be elsewhere and you have the kind of investment thatallows Scottish sport, Scottish entertainment andedited from Glasgow. We had about 20 public

meetings up and down Scotland which members Scottish drama to compete with any other form ofbroadcasting from any other source. Then there isof the Broadcasting Council attended. The

Broadcasting Council laid down a remit for radio. All the nation’s radio services are devolvedfrom dependence on bits of Radio 4 and the oldindependent investigation. When we got all the

evidence back the management in Glasgow came to Home Service with local programmes slotted in.Now you have got a free-standing schedule for allus with the proposition that we should not change.

It was a very well argued thing. We agreed with that the peak time hours. That is a massive change with,likewise, financial growth. I believe those are theand we had no recourse back to the governors in

London. We felt that the governors, if you like, of measures of a significant shift in that part of the BBCaway from its London roots.the advisory people in Scotland were content with

what themanagement in Scotlandwere saying aboutthe Scottish Six and we decided to go ahead on that Q281 Mr Doran: We have obviously seen anbasis and we did not have to go for approval to improvement over the last few years in devolution toLondon. the regions. In plans recently announced by the BBC

it seems as though there is going to be even more ofthat, and indeed you have mentioned that yourself,Q279 Rosemary McKenna: This is your opportunity

to see if you would like further autonomy or if under Mr Loughrey. We hope to tease that out a little andask you to say a little more about how you see thecharter renewal there is anything that you would like

written into the charter which would strengthen future in Scotland. For example, there was talk ofover a billion pounds being spent outside Londonyour autonomy?

Sir Robert Smith: I would not want any more direct over the next 10 years. What is Scotland going to getout of that?power like that because I think there is enough

opportunity there. Under the changes that the Mr Loughrey: I have been charged by MarkThompson, along with my colleague Peter Salmon,governors are bringing into governance generally,

where they are creating more blue water between with drawing up those plans. In the past six or sevenyears, as I said, there has been unprecedentedmanagement and themselves, we are setting up a

system in London where we will be able to growth in the three nations. It is obvious that someof that growth has happened while there has been acommission independent research and we will be

able to use internal people to do that. We would like degree of neglect of the large centres of populationin England. As commercial television seemsto see Broadcasting Councils have more of an

opportunity to use independent research locally as determined to move towards London and awayfrom their regional roots there is an obvious needwe did with the news and current aVairs review this

year. and opportunity for the BBC to take advantage ofthe great deal of talent which would otherwise beMr MacQuarrie: We are looking at diversity this

year in its fullest sense in terms of what we are doing dormant and in a sense of fairness about collectinglicences from across the entire UK. I guess our firstacross our services from social inclusion through to

geographic diversity in that the Broadcasting priority is to re-assert opportunities for Bristol, forBirmingham, for Manchester, the big populationCouncil will lead a major project with independently

commissioned research on diversity in much the centres in England. Even if we fulfilled all of ourplans that are envisaged for those three centres insame fashion that we did the news review last year as

a sample of 1,160 plus the public meetings. England, there is real opportunity for the threenations to continue to grow. The figure you quoted,Sir Robert Smith: Broadcasting House are going to

be talking about this and if theBroadcastingCouncil aVecting half of the BBC staV who will be basedoutside of London within the next charter, is afeel frustrated we will go to the governors and say,

“Look: we need more authority here”. If we feel remarkable commitment from the top of the BBC,from the new Chairman and the new Director-really strongly about something I believe that the

governors have to listen. General. The growth of Scotland has beenremarkable in the past four or five years. Themomentum is there: for example, 20% of all of theQ280 Rosemary McKenna: Pat, you are Nations andBBC’s rapidly growing children’s output is nowRegions now?produced in Scotland. I cannot see any future inMr Loughrey: I am in the unaccustomed role ofwhich that growth will not continue.being the voice of London and, as you will know

frommy accent, that does not come naturally to me.I think the best form of autonomy is meaningful Q282 Mr Doran: You talk as though you see a

commercial opportunity rather than fulfilling aeconomic investment. What has happened in thepast six or seven years is unprecedented investment public remit. You make the point about the

commercial companies withdrawing a little. I thinkoutside of London from the BBC and the old daysof “London calling, London calling”, have changed there are gentlemen behind you who might question

that. How does this fit in with the public remit? It isbeyond recognition. Because it has been a gradualprocess what you have in Scotland now on not that the BBC has not had a commitment to the

regions for most of its existence; there is no questiontelevision, is a Scottish voice, Scottish brandingthroughout the day every day. You have Scottish about that, although clearly it is a lot stronger now.

Also in the papers I noticed that there was someprogrammes in peak time without challenge from




suggestion ofmore local opt-outs.How local are you people who will be employed by us directly. Theywill not fit into the BBCmanagement line. They willgoing to get? My interest, for example, is in north

central Scotland. We have got very good studios in report directly to us. We are also going to beannouncing in a few weeks’ time a change to ourAberdeen which serve a very wide area of the north

of Scotland but we still have to get the same complaints procedure which we have been trying toimprove over the last couple of years. This is a majorprogrammes as Glasgow and Edinburgh have.

Mr Loughrey: I do not see it as a commercial announcement for how complaints will be dealt within the future. Using this quite separate secretariat ofopportunity. I see it as an opportunity to meet

audience need. There is a clearly demonstrated sense people who will be monitoring complaints andmonitoring how the organisation is carrying out itsof audience requirement for local information, local

news and local contact. We have a raft of evidence remit, as you see in the document that we producedlast week, we are going to grant licences to each offrom very extensive piloting and research to

demonstrate that need. I am afraid there is evidence the networks and we are going to be measuring themagainst a whole list of criteria so that they createof ITV being less committed to their regional roots

than they were historically. I think that is an public value. I think it is going to be moreinterventionist than it has been in the past and Ieconomic inevitability for them but the BBC has

diVerent realities. There is an obvious public service think it will be clear that the governors are muchmore separate from management rather than beingremit for us across an increasingly devolved,

granular UK. In terms of local broadcasting I have supporters, if you like, as they might have been seenin the past. I do not think it was like that but thespent most of my career criticising the metro-

centricity of the BBC with regard to London. The perception was that it was.truth is that that metro-centricity is every bit as trueof Belfast (where I have spent a lot of my time) Q285 Mr Doran: Next week we are going to have thedominating the whole of broadcasting in Northern new Chairman and the new Director-General inIreland, of CardiV the whole of Wales and of the front of us to present the annual report and over thecentral belt the whole of Scotland. Our vision is to past two or three years one of the criticisms that theprovide a far richer service for the regions of committee has made of the annual report has beenScotland. We have seven Where I Live sites at the that the governance seems to have been fairlymoment. That will be the launch pad, we hope, for a anaemic, to quote one of the words that came up,local news service across the whole of Scotland. because there is virtually no criticism. I think last

year the only criticism of the BBC’s performancewas about the number of ethnic minority candidatesQ283 Mr Doran: That will be based on digital opt-

outs? who were recruited. Are we going to see anythinglike a separate governors’ report in the future?Mr Loughrey: On-line, broadband, and as

technology unfolds we will seek other means of Sir Robert Smith: I think you will see a big diVerencethis year. The report this year will be in two parts.distributing that most eVectively.Because it is not published yet I cannot tell you toomuch about how it will look but it will be in twoQ284 Mr Doran: One of the key areas in our inquiryparts. Onewill be from the governors whichwill veryis the position of governors, Sir Robert. You are theclearly say what the governors feel aboutNational Governor for Scotland and in theperformance during the year. The other half will notannouncements made last week by Michael Gradebe a company annual report brochure selling thethere was clearly a new local governance. I thinkorganisation. The first half will deal with themost of us want to see tougher governance andmoregovernance and how it is carried out and I think youintervention and a more proactive Board ofwill see some criticisms. There is incidentally fullyGovernors. Can you say a little about how you seetwo pages on thewholeHutton issue.We feel that wethat from your perspective and how it will aVect theare drawing a line under that and we want everyoneposition here in Scotland?to understand exactly what happened, whatSir Robert Smith: What we have in mind, andmistakes were made, what lessons have been learnedincidentally this is not in particular a reaction to veryand what we have done about it.recent events, is continuous improvement in theMr Doran: We will look forward to that. Thank youBBC. For example, when I was appointed Scottishvery much.Governor back in 1999 I was the first Scottish

Governor to have to apply and go through aninterview. Previous governors were just tapped on Q286 Chairman:Before I call AlanKeen I would like

to follow up the last question which Frank Doranthe shoulder and told they were a likely lad.Governance changes the whole time and improves in put to you because, Sir Robert, we have here an

advance opportunity of speaking to you and in aevery walk of life. We have got to be seen to berelatively distant frommanagement now.We are not sense we are leapfrogging next week because later in

our inquiry we will be dealing with both theregulators, or, rather, we are regulators in certainsmaller areas and we carry out the regulation brief documents that have recently been issued and the

whole governance issue and therefore it isfrom Ofcom, but we do govern and in governing weare ensuring that the regulations are carried out. In appropriate that I should ask you about that. The

feeling last year was not simply that the BBC annualorder to be seen to be not captured by managementwhat we are doing is creating some sort of blue water governors’ report was abysmal but that it was based

upon a predisposition to be in favour of everythingby having our own secretariat and our own research




that the BBC had done regardless of its quality or danger. It is not just a danger—it would be a shameif the new chairman could not be part of thejustification and, although I do not want to and

indeed will rule out of order anybody else who tries management but it is impossible to do both jobs.How do you react to that?to refer to the whole Hutton issue, nevertheless what

emerged from that famous Sunday night meeting Sir Robert Smith: You are almost getting on to mywas apparently a predisposition by the governors to specialist subject, which is not broadcasting,take for granted what they were told. One of the big incidentally. I do not think you can have twoconcerns with regard to the future governance of the chairmen but in a way we have got that because youBBC and why this select committee, when it was have got the chairman of what is really a supervisoryreporting on the Communications Bill (and indeed board and the chairman of the management group.when it recommended the setting up of what is now That is how it works. You have to have a goodOfcom), recommended that the BBC come entirely relationship between a chairman and a chiefunder Ofcom—and I make clear that that is not executive. It would be totally dysfunctional if younecessarily what the committee will recommend this had a very bad relationship there. People might say,time because we do not know what will come out— “It is very clear that there is blue water betweenwas that the BBC governors were there on the one them” but it just would not function properly. Thehand to be part of the BBC but on the other hand to Board of Governors has to have a reasonablehold the BBC to account and that this was working relationship and the chairman/chiefanomalous and very diYcult to separate. Mr Grade, executive relationship is very important. I think wewhen he made his statement on the 29, was moving have actually got that because the board is the Boardtowards trying to sort that out but we would be very of Governors. The Director-General, the Deputyinterested in your comments. Director-General and the Chief Operating OYcer

under the new constitution are not members of thatSir Robert Smith: I think the line that he came outwith was that there is nothing wrong with the board. That board is chaired by Michael and that

board supervises the management board, which isgovernors being champions of the BBC but whatthey cannot be is champions of the management of chaired by Mark Thompson. It does actually work

almost with two chairmen, if you like. It is a trickythe BBC. I think you will see in our statement onHutton that some lessons have been learned over thing. The more distance you get the more remote

they are and the less co-operation there is betweenthat, although if youwanted really to go intoHuttonthere are a lot of things that we could say about the the two and the more the organisation suVers. What

you cannot always have is total capture if they getSunday nightmeeting and the inquirywe undertook,but mistakes were made. We do understand the too close. I am not commenting on the relationship

between Gavyn and Greg. We will make ourdiVerence and with regard to the line that MichaelGrade took about being champions there is one area statement and that is it. There always is a danger of

being too close and of being too far apart.that we are particularly left with under regulation,which is bias. I cannot remember the exact words butit was about impartiality, that sort of area. I think it

Q288 Alan Keen: It is a tricky problem. Can I go onis right that there is a danger in concentrating all theto Pat? You can tell by my accent, Pat, that I waspower in a regulator. Particularly where you take thebrought up on Teesside and in those days we used toBBC and potential government intervention and sohave jokes about people from Newcastle, whichon, this line of balance and balanced reporting is oneseemed very large to me. I thought London wasareawhere it is right that it is keptwith the governorsEngland and that we were diVerent, so I understandand away from Ofcom. I think Ofcom on taste andthe Scottish situation as well. How do you balancedecency and all these sorts of things is fine, andthat? I look through diVerent eyes. I have been inunderneath that the governors set guidelines whichWest London for a long time now; I actually live inmay go further than those which Ofcom have set. IWest London now. I look back at the north east andthink lessons have been learned and absolutely weI know that it needs to speak as a region and not asare not here to champion management; we are hereTyne versus Tees. How do you balance those things?to question management on behalf of the licenceIt is not just making programmes; it is a voice for thepayer.region as well, is it not?Mr Loughrey: Yes. This is another complex issue. I

Q287 Alan Keen: I saw at close quarters the working look across at the diversity of the United Kingdomas a hugely healthy, energising thing, and we canrelationship between Gavyn Davies and Greg Dyke

and I thought it was excellent. With your provide an internal dialogue within local radioareas, within Where I Live and within localbackground in business you will have seen that

model repeated over and over again in the television and radio. That is increasingly possible.We play a huge part, I hope, in the political life of thecommercial world. Of course, when the problem

arose Gavyn maybe was too close to the operations United Kingdom with our politics output and ouractive political coverage in news. The bit that hasof it and would tend to defend management. Gavyn

advocated straightaway that there should be an perhaps been neglected is in ensuring that that voiceis consistently heard across the UK, inter-regionalexecutive chairman, as Gavyn seemed to act as, and

a separate chairman of governance. Now we are and across the whole United Kingdom. That is whatwe are pledging to change. At the moment we havegoing to get another person who will make an

excellent chairman but he has been even closer to the vigorous production centres in the three nations.Wehave less vigorous production happening across theoperations of TV and radio, so there is a greater




regions of England and we are determined to Wales is diVerent from BBC1. We get programmesat diVerent times and some of the biggest televisionenhance that for the benefit of the regions but also to

ensure that the network schedules are as rich as they news and current aVairs programmes that would beon earlier in the evening in England are on later incan be. When we produce programmes like Auf

Wiedersehen Pet they do not just meet audience Wales because there are specifically Welshprogrammes put on. The governors put a lot oftastes in that specific region; they meet audience

tastes in the entire UK, which is a far more tolerant money into reporting devolution. I just wonderwhether there is a danger that you adopt a kind ofand far more broad-minded audience than the old

suppositions might lead us to believe. It is about nationalism.nurturing the talent and ensuring that the string of Mr Loughrey: You and I have discussed this before.remarkable writers from all parts of the north of I do not think that proper coverage of the devolvedEngland have opportunities through to public institutions of Parliament and the Assemblies isservice broadcasters from the craft skills, costume doing any more than fulfilling our public service. Indesign and stage construction. These are important the John Birt era of running the BBC there was veryprerequisites of a vibrant industry. We are significant and very proper investment in that work.determined to invest in those areas and build on If the accusation is that we are somehow nurturinginitiatives like the Regional Theatre Initiative an insular and self-obsessed identity I do not(Northern Exposure) in Newcastle and ensure that recognise that. If you look at the remit of BBChappens. There is also a renaissance happening in Wales, as we speak there is the production of a seriesthe cities of England. You do not need to spend long of excellent factual programmes on Kew Gardens,in those to see that. I am privileged now in my job to we are about to produce Dr Who for the network. Isee a sense of pride and opportunity for the future do not think that speaks of an insular, monolithicand an unwillingness to accept less generous services obsession with Welshness but it is absolutely right,than are available elsewhere. That is as true within of course, that BBC Wales provides programmesbroadcasting as it is in the rest of the public service. that are based on and celebrate the unique identity

of the Welsh language and heritage.

Q289 Chris Bryant: Can I ask you a question fromone of your own documents? It isDefining a Nation: Q291 Chris Bryant: The Welsh language andWales and the BBC. Aled Eirug says, “ . . . how can heritage?the BBC adequately serve both one nation and a Mr Loughrey: But not exclusively.series of nations? How can it contribute to a sense ofcohesion in theUnited Kingdomwhile exploring the

Q292 Chris Bryant: The BBC in the past—BBCdiversity of its component parts?”Wales, BBC Scotland—used to do better at gettingMr Loughrey: That is an interesting quote. I thinkprogrammes on to the national network than it doesthe diversity of theUK is its greatest strength. It is allnow. It did better in the 1950s and the 1960s,of us from all of our diVerent backgrounds comingaccording to your own document.together to provide broadcasting in which weMr Loughrey:What you say is our own document ispassionately believe. We believe that broadcasting isa series of essays that we commissioned from peoplea force for understanding and for creative fulfilmentwho did not accept a specific brief from us. It is toand enrichment in society. It is the variety ofensure that the charter debate happens across thelanguages which we speak, the places and cultureswhole UK. These are critical friends, if you like.from which we come that enrich and enliven that

debate. If we were monolithic, if all of our identitieswere the same, there would not be the need for the

Q293 Chris Bryant: Half of them work for the BBC.bit of the BBC that I lead and a central singularMr Loughrey: Some of them work for the BBC butmonolithic voice would be adequate. Happily, thethat does not mean in this instance that they carry aUK is a much richer and more diverse entity thanBBC remit. Statistically I would challenge thethat, not just because of our historic heritage andassertion that our network representation has fallen.indigenous cultures and languages, but also becauseThe opposite is the case. The level of production inof waves of settlement over many generations andthe nations for the networks has grown in Wales bycenturies. Our airwaves oVer the ideal opportunitya factor of three in the last five years.to ventilate and nurture those identities. There are

not easy solutions to it. It has been an organicallychanging and shifting pattern. In the last decade we Q294 Chris Bryant: I have not seen many made-in-have probably moved more in a pluralist direction Wales programmes coming on the national network.than we did since the 1920s. I knowDrWho is coming on next year and I suppose

you would say that one of the recent dramas, HeKnew He Was Right, was a BBC Welsh productionQ290 Chris Bryant: I wonder whether that is truebut I do not see how BBC Welsh it was.because it feels from a Welsh context as if you haveMr Loughrey: If you look at Belonging, if you lookdecided that one of the things that you are there toat the splendid Ellen MacArthur documentary, youdo is define Wales as Welsh and as being diVerenthave on BBC Wales one of the finest factualfrom the rest of the UK and that creates a monolithproduction departments that exists in the BBC.Theyof its own. It is a small monolith, I suppose; it is ahad 11 series running on four television networks atWelsh monolith. You have spent a lot of money on

BBC2 W, which is diVerent from BBC2, and BBC1 one time this year, an unprecedented success.




Q295 Chris Bryant: You said something which I talent and the industry know that those are theplaces to be. When the decision-makers live in awholeheartedly agree with about there being

sometimes a tendency within both Scotland and diVerent environment, when they breathe a diVerentair, when they meet diVerent people, I foresee andWales as well as England to get obsessed and it is

very depressing when you see a BBC news story Mark Thompson foresees a change in that dynamicand the talent will spot where the decision-makersabout education and they have got just about as far

asGospelOak in north London. I wonderwhat your are and follow them, but not overnight.response is to community radio, which has been verydismissive—or has felt very dismissive. Quite a lot of Q298 Chris Bryant: So should there be a quotaother MPs have raised with me that they are feeling which establishes that 50%, or not?that the BBC is never very interested in anything Mr Loughrey: The 50% is a very stretching target.genuinely local. Do you think that is fair? History tells us that quotas are not the most creativeMr Loughrey: I am sorry if that is the impression. device in our industry but you have a ChairmanThis is access radio for the community generally. and a Director-General who are passionately

committed, as indeed is the Board of Governors inits entirety, to achieving this because it is culturallyQ296 Chris Bryant: That is what used to be called inand creatively essential in the modern UK. I foreseethe Communications Act community radio.it happening.Mr Loughrey: Yes. My colleague Jenny AbramskySir Robert Smith: We are talking about movingand I made three specific oVers of support to access1,700 people. It is not just a case of, say, A Questioncommunity radio. We are going through a relentlessof Sport going there. We are talking about completeprocess of digitising kit and upgrading ourchannels having to move, complete genres having toequipment. We are oVering to those radio stationsmove. It has to be thought out very carefully. If itfree equipment for anyone engaged in that kind ofends up being very expensive we will have to thinkwork, non-profit driven, community based radio.about that very carefully.We are oVering free training in any one of our

centres across the country and I know that ishappening in three or four as we speak. Lastly, if Q299 Chris Bryant: One quota that you do have tothey wish to accept it, given proper controls we will abide by is the independent production quota. Howgive them our news output for use on their airways, does that work for the regions and Scotland andprovided it is clearly branded as BBC news and not Wales? Is it not really the case that you are not goingscattered in the service. I think those are pretty to stand much chance of increasing this level ofsignificant oVers of help. Rather than just give you production outside the M25 unless you improvethe rhetoric, we are determined to be better partners your relations with independent producers?than we have been historically across the world of Sir Robert Smith: Strangely enough, on thebroadcasting and indeed in communities. You know contrary: we are exceeding that. The BBC overallour open centres and buses only happen in just failed to reach its quota of 25%. In Scotland,partnership with education authorities in which I can speak for, and Pat perhaps can speak forcommunities. Historically the BBC was not good in the Nations and Regions, we are something like 30partnerships. We have realised that that is how you or 33%, depending on the twomeasures that we takeachieve things in the community and we are of the thing, so we are way ahead of the game ondetermined to be supportive of groups like that.community radio. Mr Loughrey: It is a good partnership. Of all the

network productionwemake in the three nations forthe networks, 60% is made by independentQ297 Chris Bryant: I think everybody wouldcompanies. In representing the United Kingdom onapplaud the announcement last week about takingthe networks, frankly I am not obsessed withlots of production outside the M25 area. I justwhether it is made in-house or out of house. It iswonder how easy it is going to be because I know Aimportant that it is made by people who live in andQuestion of Sport has been made in Manchester forcare about their patch.some time and you have tried a version ofAQuestion

of Pop, which you were going to do in Manchesterand artists refused to come toManchester to do it so Q300 Chris Bryant: But the BBC employs 7,000

more people than the European Commission and soyou ended up doing it in London again. Are theregoing to be diYculties? it is quite a big organisation. Is there a danger about

being a monolith unless you are able to increase thatMr Loughrey: Yes, because the industry is tiltedmore and more towards London. It is right that the relationship with independent producers?

Sir Robert Smith: I do not think we have been veryBBC takes those risks and pushes in a diVerentdirection because of the nature of our funding. It will clever about creating relationships with independent

producers. One defence we have used in the past isnot be achieved overnight. We have set this charterperiod to achieve the targets that I have quoted in the that it is because they occasionally merge or move

out of being independent by definition it has beendocument. It will be a slow process. As we speakalmost all of the network commissioning decisions diYcult for us to reach the quota. I do not think the

governors accept that as a reason and I think someare made within that sealed unit that is the M25.Everyone eats in the same restaurants, walks in the relationships mean that the quality varies. Some of

the independents feel a little bit bound by thesame streets, attends the same theatre. When the keycommissioning decisions are made in that milieu the relationship with the BBC. We are going to improve




that. It is great that I can speak from a position of feeding up and we are feeding into it a lot ofinformation about what the licence fee payers arestrength in Scotland because we do go round and

buy in technically the 25% that the government have saying, wanting and criticising.given us. Incidentally, I cannot arguewith you aboutthe 1950s because I have not delved into that history, Q304 Chris Bryant: Who chooses them?although I did go back to the golden age of BBC in Sir Robert Smith: Ultimately the governors controlthe 1960s where there seemed to be an awful lot of the people who are running the diVerent councils.buying in of programmes likeKojak to fill in evening The DG in turn controls the people who are runningschedules and I can tell you that the home produced the diVerent channels. The commissioning comesstuV was an awful lot less percentage-wise in those from the people who are running the channels.days than it is now.

Q305 Chris Bryant: No; I mean who appoints theQ301 Chris Bryant: I was not around in the 1950s at people on the councils?all so I am only taking it from your own document. Sir Robert Smith: I am sorry; I misunderstood theSir Robert Smith: I was kind of around. Seriously, in question. There is an independent group of peoplerecent years the percentage from Nations and again who are drawn from Scottish society, if youRegions has been increasing.We have had particular like, who are nothing to do with the Broadcastingsuccesses. This is how it should be. Rather than Council and they choose.We openly advertise. Theytaking quotas in each genre there should be centres go through interviews and they are chosen and theyof excellence developing. In Scotland we have got serve usually for three years initially and they can bechildren’s television and I can give you a world re-appointed for another two. We try to get aexclusive today which will be of interest to the balance of area geographically or interest group andScottish constituency Members who are here, that so on.Still Game, which is our comedy show, is going to goon the network this year. There has been a bit of

Q306 Rosemary McKenna: I am delighted, by theconcern about a tartan ceiling or something becauseway, about Still Game because I think it will docomedy is themost diYcult genre of all.We have gotextremely well. I am going to oVer to translate fordrama and we have got children’s television andtheChairman.Yesterday, as part of another inquiry,various things which we are highly successful inwe visited the Science Museum and, of course, yourselling to the network, but Scottish comedy beingbuilding site is right next door.Would you like to tellunderstood, or Irish comedy or Welsh comedy, orus something about the move to Pacific Quayeven Cockney comedy being understood outside thebecause I do think that people do not quiteM25, is a very diYcult genre to do. That is oneunderstand? First of all, is it all BBC—production,success story now. We have had Rab C Nesbitt, wemanagement, everything is going to be there, andhave had Still Game, and that is tremendous for thepeople who regularly contribute to BBC Radiopeople who are working here because it is done onScotland will be delighted if they do not have thatmerit and not against quotas.trek to get to the studio? Could you give us an ideaof the scale of the project and when you expect it to

Q302 Chris Bryant: Obviously, the more you can get be completed?from the Nations and the Regions on to the national Sir Robert Smith: Apart from the orchestras it isnetwork the more chance you have of showing a everybody and it should happen in about 2007. Youdiverse Britain and an exciting Britain, and indeed are the expert, Ken.Welsh or Scottish people would quite like to see their Mr MacQuarrie: We will open in July 2007. Theprogrammes doing well round the whole of the building itself will be a 100-week build and then 12country, but it just seems that Scotland has done months to do the technical bit after that but we arerather better at this over the last 10 years thanWales starting this month on site. The building already hashas. Northern Ireland has done rather better too. had the exploration works and we are delighted toMr Loughrey: I think in the year ahead you will see have had planning permission for it. We believe ita significant uplift in theWelsh representation on the will be a world-wide broadcasting centre fornetwork. Scotland. It is probable that we will take this

building with fully digital technology and it will alsohave high definition within that centre as well. TheQ303 Chris Bryant: One final question, which is

about broadcasting councils. Are they not a idea is that there will be a caucus of a media villagein that area and other broadcasters are alreadycomplete waste of time?

Sir Robert Smith: Absolutely not. If you had been committed to moving onto the site. It will be atremendously creative place to be. As you know, athere at the time of the news and current aVairs

exercise in 1999 where there were resignations, had our own site where we are at the moment we arelocked in and bounded by both the river and alsoyou been here last year when we looked at news and

current aVairs and did a very extensive survey, you with very diYcult access and no room for expansion.The range of creative possibilities onwhat will be thewould have placed great value on it. It does not just

stop with broadcasting councils. We have four (five corporate headquarters, it is important to stress,with the ongoing scheduling in Aberdeen, will meanwith Children in Need) advisory groups on religion,

rural aVairs, Gaelic and education. These four are that Edinburgh will be able to come in and use thematerial and the content as available within thecomposed of 10 or 12 people in each case who are

looking at religious aVairs in Scotland, and that is Quay and that will be available across the piece. We




are changing completely the way that we work with local community. Already we have been workingwith the schools in the area to make sure that theythe emphasis on value for money and eYciency.have a sense of the scale of the project and can reflectThere will be work streams on changing that. Thethe history of the project as it develops over theway we make programmes will be unrecognisablethree years.from the way we currently operate. That work isChairman: We have run out of time, so I am going toongoing and that transition into the Quay is part ofreserve questions I might have put to you on the usethe major work that is going on at the moment. It isof digital television for local and neighbourhoodessential that it is a transformation in the way wecoverage, which is something that we were told, notoperate as opposed to, in the Scottish word, a “flit”.necessarily by the BBC, would happen and has notThe partnerships are working very closely, foryet happened. What I would like to do is to place onexample, with the City Halls and the orchestra gorecord my appreciation of the indispensable andthere and we are working with the Glasgow City immeasurable contribution in the cultural life of thisCouncil to make sure that they have good country of the BBC Scottish Symphony Orchestra

educational outreach as far as the partnership is and the BBC Philharmonic Orchestra which are in aconcerned. We will be working with the local sense completely gratuitous these days. If there iscommunities and a good example of the sorts of any reason whatsoever for the continuation of thepartnerships that we have at the moment is with the BBC charter and no doubt lots of other reasons will“VIP on Air” radio station where Radio Scotland is be advanced as this inquiry continues, those twoworking on training the staV there. These are the magnificent orchestras are an endorsement of it.sorts of partnerships that it is absolutely essential we Thank you verymuch indeed, gentlemen. It has been

much appreciated.build on in addition to having strong links with the

Witnesses: Mr John Pearson, Chief Executive, Virgin Radio, Mr Derrick Thomson, Managing Director,Grampian TV, Ms Helen Arnot, Head of Legal, SMG Television and Ms Elizabeth Partyka, ManagingDirector, SMG TV Production, SMG plc,4 examined.

Chairman: Ladies and gentlemen, we welcome you what that community currently wants. What we doto this inquiry and Frank Doran will start the under our licence terms is create range and diversity,questioning. and indeed quality, because we have to. If we do not

we will quite simply disappear oV the Richter scalealtogether. In Grampian we still have the mostQ307 Mr Doran: We heard it from the horse’spopular news programme on mainland Britain andmouth: the commercial companies are withdrawinga regional series which broadcasts once a week in afrom the localmarket and youwill be replaced by theFriday or Thursday 7.30 slot, again achievingBBC. What is your reaction to that?enormous ratings in this multi-channel world.Mr Thomson: Absolutely not, Frank, is the answer

to that. We have done more than anybody in recentyears to keep ourselves at the forefront of

Q309 Mr Doran:One of themajor criticisms that hasbroadcasting. Grampian itself, as you well know,been made this morning about the whole of Britishhas just moved to a brand new station where ourbroadcasting is about its failure to pay any attentionstudio in Aberdeen invested five million pounds inat all to British film production, not just in terms ofputting us at the forefront of cutting edge technologyinvesting in films but also showing British films. Itand the BBC are behind us at the moment becausehad not struck me until I was listening to the BBCwe have done it first. Colleagues at Scottishpeople, and it is not an issue to raise with the regionalTelevision will be doing the same thing at Pacificteams, that we have been fairly heavy with the BBCQuay in the not too distant future.in terms of its failure to show British films. Usuallyit is because American third-rate films are cheaper.Q308 Mr Doran: You must be a little bit worriedIf you look at Scottish broadcasting we have got twobecause the whole reputation of commercialmajor companies who invest heavily in Scottishtelevision, particularly in Scotland, was built on itstelevision and in drama, but we never see any opt-local content. Ever since 1955 when STV wasout from the film production which is carried out byfounded and 1961 when Grampian came on thethe major English company. You may show them atscene it has been a key part of local culture. Over thediVerent times but it is the same films. We never seeyears we have seen much more homogenisation andany attempt to show Scottish movie production.with themerger of the companies in England to formOver the last few years we have developed our ownone mega company are we not going to see moreindustry with a number of very significant peopleof that?like Lynne Ramsay and Peter Mullen but getting noMr Thomson: I can only talk for Scotland and theshowing at all on Scottish television.way that I see it we have, as I said, done a power ofMr Thomson: I would disagree that we are not fullywork to ensure that in a multi-channel world we areinvolved in some sort of film making, first andproducing programmes that are watched by our

community. Nobody understands better than we do foremost in New Found Films, and our eVort to

4 See Ev 44–46



6 July 2004 Virgin Radio, Grampian TV, SMG

introduce new talent into the film industry has been programmes like Bob the Builder. They then reducedthe licence fees in a way to shop-windowenormously successful and that is something that we

intend to continue to do. merchandising and licensing that is the backbone ofthose kinds of projects. To say that the BBC is notMs Partyka: New Found Films is an extension of a

scheme called New Found Land which is a joint commercial in any way is a misnomer.project between Scottish TV and Scottish Screen,exactly as you have identified, to allow young and Q313 Mr Doran: I do not think anyone would denynew in Scotland to spread their wings and get their that the BBC is commercial. It has got to be. It hasfirst attempt at a movie. That has been very to pay its way but you seem to be criticising them forsuccessful in talent terms. innovation and being entrepreneurial.

Ms Partyka: I just think that we have to accept anduphold that the BBC are doing that and not pretendQ310 Mr Doran: But they do not get shown on

television in Scotland. that they are providing purely a public servicebroadcasting remit within children’s television. TheyMs Partyka: Yes, they do, and some of them get

theatrical releases. are actuallymaking quite a lot ofmoney for the BBCworldwide.

Q311 Mr Doran: Okay. I will move on because thisis an inquiry about the BBC. Reading through the Q314 Mr Doran: We have criticised them in the past

for not doing enough of that. We are talking aboutSMG submission, you are fairly critical of lots ofaspects of the BBC but I must be honest: when I read the charter which will be in place for the next 10

years. I would be interested in your views on how inthem it seemed that you were ploughing your ownfurrow rather than taking a proper objective look at this region of Scotland the BBC and the commercial

companies can live together, particularly bearing inthe BBC. For example, on funding you are quitehappy to see subscription but not anything which mind some of the things you have said in your

submission, which is a little bit diVerent from whatattacks your own income base of advertising. It doesnot seem to me that you take a very realistic or we have had from the ITV companies in England

because theirs was much more accommodating ofresponsible approach.Mr Thomson: On the contrary, we take a totally the BBC, recognising some of the benefits of the

BBC to the commercial companies, the way in whichresponsible approach to it. First and foremost we area commercial public service broadcaster and we take it drives up quality and standards and, if you like,

provides a cover for everyone else to operate under.our money from advertising revenue and possiblythe sale of programmes. The BBC get three billion There is a sense that the BBC is essential for the

success of the ITV companies rather than a threat.pounds per annum come rain, hail or shine. I thinkwe are being absolutely responsible in our approach Mr Thomson: Nobody would disagree with your

comments about the BBC being innovative andin asking them to be less abusive of their marketdominance. It is a diYcult position. It has been a delivering quality, but what is key to the BBC’s

future in Scotland is delivering in an arena wherediYcult position for broadcasters in the commercialworld over the last four or five years and the BBC talent can grow in Scotland because that is what we

all want at the end of the day. We want a talentedhas become an extremely commercial animal,scheduling programmes head to head with ITV that positive Scotland in terms of television production.

We in ITV currently are heavily regulated and weare exactly the same, and that is a disservice to theBritish public. have quotas that we need tomeet in this process. The

BBC should be doing exactly the same thing. I heardfrom the gentlemen previous to us—they did notQ312 Mr Doran: We heard last week from the newdiscuss a lot about Scotland, although it is great toChairman of the BBC that there is going to be a newsee that Still Game and all the rest are going to get aapproach which is going to be very diVerent fromshowing on the network. In Scotland, as I say, wewhat you might call the blatantly commercialfully support a strong BBC for commercial reasonsapproach which might have been adopted before.at times because it takes audience away from ourMrThomson:Wehave read the document which hascompetitors. We can live together and we canbeen produced with interest. Time will tell, frankly,certainly develop together but it has to be a levelif they will be able to deliver that. I am not so sure atplaying field. As you will see from our statement,the moment. There is a lot in there to chew through.essential to that is that they are governed under theWe have not got crystal balls. We welcome thosesame regulator as ourselves, which is Ofcom.changes if indeed those changes are going to take

place. It is a very well written document but timewill tell. Q315 Alan Keen: I have noticed, not today but since

we have started the inquiry into the BBC charter,Ms Partyka: I would like to make the point in termsof the commerciality of the BBC that sometimes it is that there has been more acceptance from the

commercial sector that the BBC should be allowedviewed very favourably insofar as within thedocument I noticed that Michael Grade hailed to exist in the way that it does, apart from maybe

restricting some of its commercialism. Previously weCBBC as a wonderful channel because it is lackingin any form of advertising. I would like to point out have had people arguing that it should be restricted

almost to weather forecasts and social securitythat 10 minutes of Bob the Builder six times a day isactually a 10-minute ad for Bob the Builder in terms things. Why do you think there seems to be a move

this time towards accepting and welcoming theof merchandising and licensing. The BBC took




continuation of the BBC’s charter? Is it because the we restrict the BBC too much? It is restricting itsincome because government cannot go out nextcommercial sector thinks that if it gets the balance

right it will be listened to more than if they were just week and say, “Let’s charge people not £121 but£175”. It is restricted in that way by how muchunreasonable and said the BBC should be shut

down? money it can get in the market. Why do we not say,“Let it go out and compete”? I am annoyedMr Thomson: Nobody would suggest that the BBC

should be shut down. There has to be that balance in sometimes if two clubs I want to watch do clash butthat is competition, is it not? Why should weBritish broadcasting. Nobody would deny that the

BBC is a superb organisation and long may that restrict that?continue but there has to be that balance, Mr Thomson: I think it comes back to the fact thatparticularly at regional level. I would put on the they are a public service broadcaster and they shouldtable that, particularly in the north of Scotland, I am champion the niche issues put forward for thenot sure the BBC is completely at the races. As far as public. The commercial sector is there, it exists, therewhat we do in the north of Scotland I keep on using is a good co-existence at the moment. I disagree. Ithis phrase that we are theHeineken of broadcasting think theBBC should be a public service broadcasterbecause we reach the parts that others do not, and and be contained in that way.that is not true of the BBC. The BBC should beapplying a lot more resources to developing talent

Q318 Alan Keen: So much of the stuV you produceand skill in the north of Scotland from their base inis, you would say, a public service. You havethe central belt, but improving on the quality and theintroduced yourselves as a public servicelevel of service they give to the viewers in the farbroadcaster. What is the diVerence between you andnorth.the BBC?Mr Thomson: At the end of the day we do other

Q316 Chairman: The argument which has been put kinds of programming which are totallyforward, that people are moving to accept the BBC commercially orientated. The BBC exists to produceand the BBC are in a charter in a way that they were quality programmes that are for a wide range of thenot ten years ago, seems to me to be accurate. If I public which the commercial sector television wouldcould put this to our guests, could it not be argued not produce. If I give you an example, Blue Planet,that that is because whatwe have got now is a known Walking with Dinosaurs, versus programmes that wequantity and it is safe, that although there are certain produce like I’m a Celebrity, Get Me Out of Here—areas in which the BBC has been moving over the they are at diVerent ends of the scale but that isground between public service and commercial and eVectively what is in place and we think it works.has been perhaps using the licence fee in order to do Given the fact that every member of the public hasso, nevertheless it is a known quantity, it is safe, it is paid a licence fee that is what the BBC are there tobetter from your point of view, even if you argue for do and I think that to let them become a commercialsubscription, that it be funded by a licence, that if it animal in any other way is daft.were to take commercials, because it still has the Ms Arnot: The markets cannot deliver where therelargest analogue audience and because it is, is abuse of dominance and regulation has to exist towhatever you think, much more innovative in its redress imbalance and produce a positive result.digital services than ITV is, that if the BBC were Building up a criticalmass of production in Scotlandreally to be let loose then it could be a huge danger is a form of regulation which we would welcome toto commercial television in particular, whereas in a redress the market where they are not able tosense, despite concerns expressed by you and others flourish.about it exceeding, or allegedly exceeding, the remit, Ms Partyka: Colleagues earlier talked a lot aboutit is penned in now, as was shown by the Secretary investment in regional programming withinof State’s instructions to them yesterday on on-line Scotland and I think that is all to the good butservices, and if it stopped being penned in it might go regional programming is only one aspect of themarauding around greatly to your disadvantage. production sector within Scotland. What we needMr Pearson:We are talking about television. From from the BBC and from other broadcasters is morethe radio point of view there is an issue to be made network programming in Scotland. You have toin that the BBC already has too dominant a position understand people whowork in television. You startin radio. It has 70% of the spectrum which it uses to with working in regional programming and youdeliver to 50% of the audience. It has five out of six hone your skills and increase your talent butnational FM channels. It acts in a very commercial eventually you want to work in networkway. I do not think there is any acceptance from the programming because you have bigger audiencescommercial radio standpoint that the BBC is and bigger budgets. Historically when that hascontained or that we would be comfortable with its happened you have had to move to London and ifactions at all. From the radio point of view I would that continues then all that that does is that Scotlandseek to disagree with those statements. trains talented people and eventually they disappear.

What we need is more network commissioning andmore network programming coming out ofQ317 Alan Keen: As one who before politics workedScotland. At themoment 3% of the network budgetsin the private sector all my life, I was less pessimisticacross the four broadcasters comes out of Scotland.when I heard that it was to accept themarket, but weProportionally that should be 9% and I think thehave seen tremendous expansion and I accept that

the private sector is the way to drive it. Why should BBC and the other broadcasters have a role in trying




to get us from 3% to 9%. That is encouraging more control. The commercial stations are very muchformatted. We have promises on performance andnetwork commissions to come to Scotland and that

eventually will be network commissioning power formats that have to be agreed with Ofcom. Thoserun into audience delivery, types of music,coming to Scotland. A colleague said that if 100% of

the network commissioning power is based in percentage of music and speech, diVerent eras ofmusic. We are very much formatted. What thatLondon inevitably that is where most of the

commissions will originate. We need to move that means is that as commercial players we know ourbusinesses are working within a certain landscape,network commissioning power to the nations in

order to encourage that change in the programme and in analogue radio the spectrum is still quitescarce and therefore there has to be some sort ofscenario.boundary. The BBC and Radio 1 and 2 do not haveany of those format boundaries. What they are

Q319 Rosemary McKenna: Can I go back to doing is taking and using resources in the wrongsomething Mr Pearson said? You said that BBC way. We would call for those boundaries to be putRadio had 70% of the spectrum and produced 50% on Radio 1 and 2.of the content. If commercial radio had morespectrum what kind of programmes would they

Q320 Rosemary McKenna: You cannot possiblyproduce?compare the programmes that BBC Radios 1 and 2Mr Pearson: It is 50% of the audience. We have seenproduce with the kind of pop programmes that thea huge increase in commercial radio’s success overaverage commercial radio station produces.the last ten years and it has come about by extraMr Pearson: Yes, I would. If you look at thestations and extra licensing. The Radio Authorityaudiences that they are chasing and the amount ofwere before Ofcom and Ofcom are now carrying onvolume to music that they play, yes, I think we can.licensing stations throughout the country. What

those stations are doing is, while the chance is there,Q321 Rosemary McKenna: You are suggesting thatproviding diversity. What we see now is that it isBBC Radios 1 and 2 are simply chasing audiences,getting away from the old first wave heritage stationsnot producing quality programmes that people wantmodel of having two stations in every area owned byto listen to?the same contractor. Now we are seeing up to 10 orMr Pearson:We need to go one step back. We were20 stations being licensed in some metropolitantalking about public service and I am not sure againareas, including digital stations. What those havewhere the public service lies in competing, whether itadded incrementally is new audiences, newis television or radio, for the same audiences with theadvertising opportunities, and over the last decadesame product.radio has grown from2%of expenditure up to nearly

7% of expenditure; commercial radio has grownQ322 Rosemary McKenna: Let us talk aboutitself very successfully by new licences, newScotland and the west of Scotland in particular.audiences and providing diversity. Our issue withThere is not a commercial radio station thatthe BBC is that the BBC has vast resources in radioproduces anything like the work that BBC Radiowhich are far more dominant than in any otherScotland produces.medium, especially television, where there is a moreMr Pearson: Probably it is a question for my radiobalanced market against the BBC. It is the way thatcolleagues coming on later, especially the Scottishit is using those public services. For instance, radioradio colleagues.in this country is dominated by Radios 1 and 2, two

of the largest radio stations we have. During peaktime, which is breakfast, andmost of the day they are Q323 Chairman: Is there not an argument for saying,duplicating and competing for ratings with people in as Max Hastings has said, that the BBC does notthe commercial sector. In last year’s annual report need to do everything? Just because it is there it doesits first statement on radio was a statement about not need to do everything. In the case of Radio 1 andmarket share. If the BBC is going tomeasure success Radio 2 that Rosemary McKenna has been talkingin market share, therefore it is measuring its value in about, they were there first. It is one thing to say thatmarket share, I am not sure that is a very sensible use the BBC should not add to services that it does notof public funding, and if all they are doing is chasing already provide and that the commercial sector isthe same ratings it is the same issue as television has. already providing them and providing them well. InI agree with Michael Grade’s comment that once that sense it might argue that it is gratuitous for theevery ten years the BBC gets religion. Very famously BBC to produce a BBC 3 digital channel. On theRadio 1, when it came up to the 1996 renewal, had other hand, when they were there first is it not a bitfired a lot of its old resident DJs and re-formatted much to ask them to close down services that theyitself quite young, and going into the new charter it have been producing for audiences—and I do notpromised all sorts of things. It promised far more listen to Radio 1 but Radio 2 is something thatdocumentaries, more interviews, more cutting-edge arouses great aVection in audiences—just becausemusic, more live music, but all they seem to have other radio stations provide some form ofbeen delivering is in oV-peak segments where counterpart?audience numbers are quite small. There is another Mr Pearson:We are not asking to close them down.radio saying, “Ratings during the day, reputation by What we are trying to do is contain the activities thatnight”. What we would welcome on the national are competitive with the free market forces that the

rest of us are in. I will give you an example of Radiostations especially is to have far more format




2. There was a leaked document from Radio 2 some Q325 Chris Bryant: Can I go back to the Radio 1/Radio 2 argument briefly because it seems tome thatfour or five years ago which said that Radio 2’sthe BBC is sometimes in something of a double bind.intention was to reposition itself to a youngerIf Chris Moyles on the breakfast show on Radio 1audience and get rid of all the old people listening. Itloses half a million listeners every newspaper in thehas done so very successfully over the last four or fivecountry screams that BBC is not serving its youngyears by pricing out talent, by changing its musicaudience properly. If he puts on audience you lot allpolicy, by getting lots of younger DJs in. That is notscream that it is shocking because the BBC isserving a public service remit. That is just competingcompeting where it should not compete. How canwith services that are there. If Radio 1 decides it isthe BBC win in this argument?going to move its market position tomorrow it canMr Pearson: The way it is set up it cannot. I thinkdo so because it is unregulated, whereas the rest ofyou are quite right to point that out. What we needus cannot do that. By doing that it is chasingto do is find what is in the public’s interest in Radiocommercial audiences. The fact that it was there first1 andRadio 2. If you are going to judge it by ratings,might be one issue. When it has the freedom to gowhich is exactly what the public are doing, if theand reposition itself I think that is not quite fair; it isBBC itself in its own statement starts oV talkingnot quite the same thing. Also, it is not just theabout audience share and ratings, then they will befreedom to act; it is the commercial activities as well.judged that way. We need to go back and see what itIf you talk about Radio 2 and Radio 1, where weis that the considerable sums ofmoney going to thesehave things like sponsorship—the Barclays Premiertwo networks are trying to achieve with the public’sLeague Football, the Renault Proms in the Park, themoney, especially when you look at the dominance.RBS Six Nations Championship—those are theRadio 1 is a good example where, if you look at thecommercial activities and the promotion they enjoy,dominance of commercial radio for 15–34s, it meritswhereas on current Ofcom rules the rest of us witha 65% regional reach. I can verify those figures later.ownership rules cannot get to that size to enjoy that

sort of performance.Q326 Chairman: There is no doubt in my mind thatwhat you are saying took place under Greg Dyke,

Q324 Rosemary McKenna: During the discussions but Mr Grade says he is going to change all of thaton the Communications Act, when Ofcom was set and that chasing ratings is not going to be the BBCup, as a member of the All Party Music Group we that he is going to be Chairman of. If that were tocampaigned quite heavily to have a requirement for turn out to be so, and I think all of us hope it will,everyone to provide local music, not just local news, then a bit of the rug will have been pulled out fromwhich was on the Bill, but there was a reluctance on the argument that you were putting to Chris Bryant.the part of the commercial companies to do that. Mr Pearson: I would very much welcome that andCan you explain why because there does not seem to we did welcome the introduction of service licencesbe a will to encourage young local bands, whether it that they were talking about inMichael’s speech lastbe folk, pop or whatever type of music they play? week. What we would call for within the serviceMrPearson:As a national radio contractor I am not licence, apart from the things that are going into it,party to that argument. is some form of very specific format control so thatMr Thomson: If you want an answer from television we know what they are trying to achieve with therights, in Gaelic it has always been our policy to money.encourage young talent coming through, whatevermusical background they come from. Certainly Q327 Chris Bryant: I am still perplexed about thisNochd Gun Chadeal, which is in our Gaelic- because of course the BBC should not be chasingcommissioned programmes, has done extremely ratings; that should not be its primary aim in life, butwell, producing several new bands who are now it also should not be so careless about whetherdoing extremely well not just at home but abroad as anybody is bothering to listen to or watch it that itwell. In terms of contemporary Scottish music we ends up not producing anything that anybodytried a programme two years ago which we put on at wants, and that seems to me the complex double-peak and it quite clearly failed in ratings terms bind they are in. On Radio 2 it is probably not incompared to more factual documentary type of their interest to have somuch talk in the JeremyVinematerial which the public currently seem to have an Show if they really want to go as commercial as theyappetite for, and that is regional factual can; it is probably not in their interest to have DJsdocumentary material. There are issues with the who choose their own music rather than go to playaudience but certainly if it is Scottish or Grampian lists.we try our best to involve those groups where Ms Arnot: Ofcom introduced the definition ofpossible. “public service broadcasting”, or it was theRosemary McKenna: I think you have just illustrated Communications Act which introduced it, butexactly what is the diVerence between the demands Ofcom has developed a “high-fallutin” definition ofon commercial and the demands on BBC, in that what is to be public service broadcasting, be it onthey do not have to worry about audience share. radio or television. It is to be innovative, it is to haveThey have the pleasure of being able to produce great reach, it is to capture all these diversegood quality programmes and you are market audiences and so it is the BBCwhich is to be chargeddriven. I agree with Alan that that balance is right to still capture those audiences with a type of

programming which serves their public.and should be maintained.




Q328 Chris Bryant: I just have this picture of the Q334 Chairman: A marginal addition, Chris! Thegovernment saying that the BBC must have format first digital radio I heard was when I went to ancontrol pressed upon it and I cannot see that that is experiment in a commercial station. Is this notwheregoing to be an open government process. Let me just a public sector organisation and the commercialgo on to one of your other proposals which is about stations can supplement each other very usefully,subscription. You say that a future BBC model assuming that people actually want digital radio?might be partly licence fee and partly subscription. They are going to have to have digital televisionHow do you see that working? Do you mean that because at some time there will be an analoguesome channels would be sold oV or would become switch-oV.subscription channels? MrPearson: I think the public will want digital radioMr Thomson: Yes, is the answer to that. if digital radio gives them more choice and more

diversity of output. The one thing that digital radioQ329 Chris Bryant: Which ones? has brought is the unlocking of new spectrum andMr Thomson: The lesser viewed ones. new services. For any new technology to survive it

needs a clear consumer benefit. There is a clearQ330 Chris Bryant: Which ones? consumer benefit in these services. The trouble isMr Thomson: Three, four. that digital radio amplifies the resources gapwe have

seen over the last few years, where the BBC haveQ331 Chris Bryant: Nowhere else? had a secure inflation-busting income and theMr Thomson: In terms of the BBC? commercial sector, both television and particularly

radio, have suVered one of the worst downturns thatQ332 Chris Bryant: Yes, I understand, but why we have seen in 25–30 years. We have been pilingthose? What is your rationale for those? Because money into digital radio now for the last six years.nobody is watching them they should become My station, Virgin Radio, was one of the first tosubscription? broadcast on the digital one multiplex and we ownMs Arnot: The rationale would be for the next two other stations in London. The commercial radiotenure.We are not advocating subscription now.We

sector has now put nearly £40 million into DAB.are advocating that that should be a potential formWhen we talk to the City we still cannot give themof funding in the future.a business plan that makes any viable sense for ourshareholders, so this is becoming a very expensiveQ333 Chris Bryant: So at themoment you think thatthing. There are about half amillion sets around.Wethe funding of the BBC should be the licence fee, enddo welcome the BBC’s promotion of digital radio. Itof story?has gone some way to kick-starting the medium butMr Thomson: Absolutely.I think it needs to go further. What we have got nowChris Bryant: All the broadcasters have said that soagain is this resources gap where Radio 6, I gather,far. Thanks.has six million pounds going into it every year andChairman: When it comes to the question of thethat is £12 per radio, not even per household. In theBBC’s digital services and what they are providing,digital world the radio stations have some formatit is clear—and you are experts in radio—that the bigcontrol, so we are very happy with that, as I supposebreakthrough on digital radio has not happened, hasyou know. Digital radio is still very worryingit?We are now seeing advertisements in the press forbecause of the commercial sector’s inability to funddigital radio sets which are really quite inexpensiveit and, of course, to keep pilingmoney into resourcesand yet people are not taking that up. You cannotfor us in the commercial sector in currentget them in cars. I bought a new car and wanted acircumstances is very diYcult.digital radio in the car and I could not get one. It wasChairman: Thank you very much indeed. It has beena very expensive car.extremely helpful. Your perspectives have been veryChris Bryant: It would have been even more

expensive with a digital radio! valuable to us.

Witnesses: Mr Paul Brown,Chief Executive, Commercial Radio Companies Association,5 Mr David Goode,Managing Director, Scottish Radio Holdings, Ms Nathalie Schwarz, Strategy and Development Director,Capital Radio,6 and Mr Steve Buckley, Director, Community Media Association, examined.

Chairman: Can I welcome you very much indeed. doing community radio and how should it beThank you for coming and I will call on Chris funded? Before that can I say that I think RedBryant to start the questioning. Dragon is fabulous.

Ms Schwarz: Good; thank you.Mr Brown: The Community Media AssociationQ335 Chris Bryant: Can I start by asking somehas led the running on the third tier of radioquestions about community radio? You have heard

the comments earlier from the BBC. Who should be broadcasting.

5 See Ev 37–436 See Ev 76–81




Mr Buckley: Thank you for inviting us as the experts who can give that money where it is mostneeded. Such a thing should already be in the processCommunity Media Association to speak to this

select committee hearing. You will obviously of being set up by Ofcom because there is alreadyprovision in the Communications Act under sectionunderstand that we believe that community

broadcasters, both radio and television, should be 359 for a community broadcasting fund. What weare saying is that some of the money that comes intolocally under control, not run for profit and separate

organisations outside the BBC. Not only do we that fund should come from the licence fee but thestructure will be there.believe that; there is a substantial number of

organisations across the country who already havedemonstrated community broadcasting practice and Q338 Chris Bryant:Ageneral question for all of you.are seeking the opportunity to put that on a At the moment I do not know what your estimate ispermanent footing.We hope that will happen first of of the BBC’s share of the radio market—50-all particularly with radio but we would also like to something%?see it happening with community television. Mr Brown: 52%.Community radio should take oV with the Orderthat is currently in Parliament and that is going to be

Q339 Chris Bryant: Do you think that that is toodebated next week. Community television requires ahigh and, if so, how should it be rolled back?further Order to be taken within, we hope, the nextMr Brown: From commercial radio’s point of viewsix to 12 months but we need assistance to press foryou have already heard some arguments about howthat to happen. We do not believe it is the role of thewe would like to see independent regulation of theBBC to run community broadcasting services.BBC to make some of their services diVerent fromCommunity broadcasting works most eVectivelyour own during the day and for this to benefitwhen it empowers communities by giving themlistener choice. As for the rest of it, it is all down toownership and control as well as access to means ofthe competition. I was very interested to hear whatbroadcasting.the Chairman had to say about digital radio. Clearlythere is a variety of views about digital radio, both

Q336 Chris Bryant: But you do think, as I in the BBC and in commercial radio, but actually weunderstand it, that a chunk of the BBC licence fee regard the progress of digital radio as being quiteshould be top-sliced for it, so the BBC should lose outstanding. We believe that we will probably reachsome of itsmoney but it should not be allowed to run a million sets this year; we believe that we will be init? Is that not unfair? two million sets by the end of the following year andMr Buckley: It is our view that community building exponentially thereafter. The amount ofbroadcasting needs a significant amount of public listening to these new services on digital satellitefunding and even more so given the current television and digital terrestrial television has beenregulations within the Community Radio Order quite remarkable in its growth. The fact of thewhich restrict private funding and therefore leave matter is that people do need and want new services.community broadcasting significantly dependent on Commercial radio thinks that digital radio is able toa certain amount of public funding. We would like provide the new services and that is the way in whichto see a structural mechanism by which that is at the end of the day we will start to bring the BBCdelivered. The current arrangements within the back to below 50% and maybe lower than that.Communications Act are not suYcient ofthemselves and we are proposing that part of the Q340 Rosemary McKenna: Can I explore further thelicence fee should be utilised to support community concerns that were discussed earlier on, thatbroadcasting services. commercial radio does not really have a public

service broadcast remit and does not reflect the kindof anything other than pop music industry, andQ337 Chris Bryant: But the whole process of top-

slicing would be quite bureaucratic, would it not? without the BBC how would we do that?Mr Brown: Actually we do have something in theYou would have to have some kind of commissar

deciding how that element of money was funded out region of 270 public service remits; they are just notdescribed that way. We have 270 formats whichto tiny organisations like GX in Pontypridd or

wherever. Is that really a rational use of money? include all sorts of things, including popular music,news, current aVairs and various other bits andWhy can they not have advertising?

Mr Buckley: There are two questions there. First of pieces. I run a trade association. With me are twopeople who actually broadcast who may like to pickall, they can have advertising but only in certain

areas. The current Community Radio Order ensures up that question.Ms Schwarz: By way of illustration Capital Radiothat nearly 15% of the country will not be able to

have community radio stations that carry has Xfm and Xfm is a champion of newmusic in theUK and has won numerous critical awards. I guessadvertising. In other areas they are limited to 50% of

their revenue from advertising and sponsorship. you could say that Xfm would be more akin toRadio 1 in terms of its aspirations. It is wellFirst of all, there is a need for public funding to this

sector and more so given the terms of the current recognised in themusic industry as being the place tobring great new acts and if I want to listen to Xfm’sCommunityRadioOrder in Parliament. Secondly, if

there is going to be public funding for the sector then output for material it has a large number of driversessions, it has a very deep role in the music industrythat public funding should be deployed through an

appropriate independent mechanism with a panel of and it really champions all sorts of new forms of




music. Similarly, we now own Choice and Choice is time as music tastes evolve over time and as ourtarget audiences diVer. Xfm’s manifestation of thatvery much a champion of urban contemporary

formats. Again, we do operate quite a diverse is that it goes round to a number of gigs in Londonand it will itself put on live music events, as willportfolio, not just around the pop music format.

Coming back to the point our colleague John Choice for the urban ethnic community it targets.Capital Radio right from its inception 30 years agoPearsonmade, we are heavily regulated and we have

formats which prescribe the sort of music we can to where it stands today raises millions of pounds ayear for charity and we believe that we do provide aplay. When you hear commercial radio playing

certain types of music, such as pop music, by and public service.MrGoode:Could I just add, because I think it wouldlarge it is because we are regulatorily obliged to play

that sort of music. There are other formats, such as be wrong for me to let go the comment you madeabout just playing popular music, that in Scotland,Xfm, such as Choice, such as Gold forecasts, and

David will outline some formats that his group own. where we are the major commercial broadcasterwith commercial stations in all of themajormarkets,In digital radio that goes even further, so, for

example, Capital Radio owns Capital Disney, which I echo exactly what Nathalie was saying, that we aresomewhat constricted by the fact that our licenceis a format specifically dedicated to children, but to a

certain extent we are victims of the licensing process says we have to play a certain kind of music, but wedo take very seriously our public service remit. Inbecause our regulatory format prescribes the sort of

music we can play. addition I would like to say, again as Nathalie did,that in Scotland in a single year we put well over amillion pounds into our Cash for Kids charity,

Q341 Chairman: Could I just interrupt a moment? I which is not as high profile, I accept, as an orchestrado not know whether you were present at the end of but in a way it contributes equally to thethe session with the BBCwhen I was commenting on communities to which we broadcast. We here inthe existence of the BBC Scottish Symphony Scotland also take it seriously in that we work veryOrchestra and the BBC Philharmonic Orchestra, closely with the Scottish Executive.We currently areand I could have said the BBC Symphony Orchestra running a series of lifestyle matters, which we do callas well but we were dealing with regional matters. I Life Matters, which are all about healthy eating,was on the Standing Committee of the Broadcasting about exercise and so on, to the extent that we haveBill which set up commercial radio and I remember recently won a number of awards against the BBC atasking Capital Radio—it was not an interrogatory Sony Awards, and indeed the NTL Awards, fromsession and we did not know that Classic FM was the BritishHeart Foundation for healthy eating, andgoing to exist then—whether it could justify its we take on other activities, such as lobbying the A77creation and the profits it was going to earn by campaign, by which one of our radio stations here iscreating an orchestra akin to some of the orchestras reflecting the concerns of the local population aboutthat the BBC has. Classic FM does not do that. the dangers of that particular road, with which youClassic FM sponsors a concert here or there and that are probably familiar.is the limit of its commitment to classical music. Doyou not think that the commercial sector, which

Q342 Rosemary McKenna: I ammuchmore familiarmakes a lot of money—and I do not begrudge itwith the A80.that—would be taken more seriously if it put moreMr Goode:Maybe we will start a campaign for that.into the communities that the BBC does? People likeThese are very important.We take this public servicemyself, who do not exactly issue continualremit, if you like, very seriously and there are somepanegyrics for the BBC do nevertheless contrast thevery clear and good examples of what we as a grouplack of such contribution by the commercial sectorare doing.with what the BBC does.Ms Schwarz: On page four of Capital Radio’sMs Schwarz: Capital over the course of its historysubmission1 we set out an excerpt from Xfm’shas been and still is very proud of its communityformat. This is what the radio station must deliver ininvolvement. Going back 20 years Capital wasterms of our regulatory licence and it illustrates asinvolved with an orchestra. In today’sone example why it has to play music outside themanifestation—and next week is a very goodmainstream.example—we are doing a live concert in front of

100,000 people in Hyde Park purely for charity inconjunction with the Prince’s Trust. Red Dragon in Q343 Alan Keen: As you have got such a wealth ofWales has its own concert, as does Fox FM in experience and knowledge of radio, and often it isOxford, and we do that in every local community in TV that gets the most air time on these inquiries,which we operate. We are very proud, within the could I ask each of you to say what changes youformat of what that radio station stands for and the would like to see made if there were to be anothersort of music that we know will attract our BBC charter in 2006?audiences, to put on live concerts. These are Mr Brown:Can I just say that we are very pleased tocharitable community activities and with them we have read what the BBC is proposing. We have saidhave our own charities. In London it is called Help a number of things to this committee in writing, buta London Child; in Birmingham it is Cash for Kids; nonetheless the BBC seems to us to be going alonginWales it is calledHelp a SouthWales Child and so the right lines. You yourself, Chairman, have raisedon, which really get into the roots of the communityand give something back. What we do is evolve over 1 See Ev 78




that on a couple of occasions already this morning. addition to receiving the licence fee, is makingapplications to organisations like the Learning andThose licence conditions that they are saying theySkills Councils to purchase pieces of equipment forwish to issue to their own radio services we wouldcommunity purposes. If the BBC is going to engagelike to see; we think it is a great idea, and we wouldin community work it should do so with the licencealso like to see auditing of the BBC. We would alsofee and not place itself in a situation where it islike to see the licence fee being judged, notpotentially competing for other sorts of publicnecessarily by Parliament, which is another proposalfinance with the community sector. Finally, in termsthat is being made by the BBC. All of those thingsof the role the BBC may have to play, as we heardpopulate what we are thinking, that what you needfrom Pat Loughrey this morning, certainly itis some form of independent regulation of the BBC.potentially does have a role in terms of providingThe Board of Governors are stewards of the BBC,access to equipment, providing training, possiblychampions of the BBC.When it comes to calling theproviding news, but this needs to be not aBBC to account it seems to us quite clearly that thatpaternalistic relationship; it needs to be understoodshould be done outside the BBC. From what wethat the community sector also can potentiallyhave read so far we think the BBC is moving in theprovide training to people in the BBC, indeed isright direction.doing so in some instances for free. It has skills inMr Goode: There are a couple of areas where wecommunity development which are not present inwould like some sort of clarification. It is interestingmany parts of the BBC. It could potentially provideto talk about it here. Our colleagues from the BBCa news-gathering function which could be of use toearlier were saying that broadcasting used to bethe BBC. We want to see much more of adominated from London but equally someone waspartnership-based approach. We believe that withinsaying that in Northern Ireland it is dominated bythe framework of a partnership based approach it isBelfast and so on. BBC Radio Scotland, of course,not unreasonable for some of the BBC licence fee tohas come from the central belt and we have abe used for activities which are not appropriatelynetwork of radio stations that are run byunder the control editorially or under the ownershipindependentmanaging directors and sales teams andof the BBC.so on in each of the major markets. We cannot now,Ms Schwarz: We believe that there is a role for thefor example, bring football to each of our individualBBC and the commercial radio industry tomarket places because the BBC have decided to tiecontribute to a very flourishing radio industry.Whatup an exclusive deal with the SPL. We have nowe would like from the BBC is essentially three-fold.worries in that historically we have competed withWe would like the role and the purpose of the BBCthe BBC in audience because the deal has been non-in each of its services to be clearly defined, soexclusive. We just wonder whether it is right for theessentially welcoming proposals in Michael Grade’sBBC, using taxpayers’ money, to tie up adocument that was published last week about thecommercial deal that specifically excludes the abilitylicence and with that a formula for how we willof independent broadcasters to come in at somemeasure the eVectiveness of that service, so buildingstage and provide locally in Aberdeen, for example,public value, and then what does it contribute toa service to bring football to that particular market.society, to cultural and social development. WeI only use that as an example but it seems to us quitewould like it to bemore independently regulated.Wea valid case where the BBC is using commercialbelieve that it is very diYcult for a governing board,muscle to do exclusive deals to the detriment of thewhich is not a reflection of the quality of thecommercial sector and thus to the detriment of theindividuals on that board, to act as judge and jurylistener.and, in certain cases, counsel for the defence at theMr Buckley: Can I comment from the communitysame time. We believe as well that Ofcom’s ex antemedia perspective? We would very much like to seecompetition powers should be extended to the BBC,the BBC come to grips with community media andso the Competition Act will allow, for example, theunderstand how to relate to it. That means movingOFT to investigate the BBC but for that it relies onbeyond the paternalistic attitude towards this sectorlooking at the market and abuse of an over-or thinking that somehow it can do it itself. There aredominant position within a market. It has alwayscertain things that the BBC cannot do as well asbeen very diYcult to define the market that the BBCpeople in communities themselves can do, takingis in. We therefore would like Ofcom to have thetheir own control over access to the airwaves and same powers as it does for the whole of thebroadcasting, but the BBC has potentially a role to commercial industry which is essentially to look atplay. First of all, it should allow access to the BBC and ensure that it acts fairly and eVectively

frequencies within its sub-bands. It has said in a when carrying out its public service remit in the samerecent response to the Ofcom consultation on way that we are all duty bound to act fairly andcommunity broadcasting that it will do so.However, eVectively.we have also heard from a reliable source that theBBC is proposing to use up some of thosefrequencies now for additional transmitters, re- Q344 Alan Keen: You may have heard me ask thebroadcasting existing services within local coverage BBC a point about having an executive chairmanareas. Secondly, we do not think the BBC should be who works closely with the Director-General and acompeting for public funds other than the licence fee separate Chairman of the Governors to act aswith community broadcasters. There has been a backstop, and I gave an example of the problem we

all know about which fairly recently brought aboutnumber of occasions now where the BBC, in




the changes. The answer the BBC gave was what we Ms Schwarz: Certainly when we recruit new talent anumber of our current presenters started oV life inwould have expected to get from them. In your

experience do you think there is some relevance to hospital radio, so it is a very good training groundas well.what I was trying to get them to say or not?

Mr Brown:We think that there is clearly a case for aboard in the BBC and a chairman of the BBC and a Q346 Mr Doran: I would just like to ask onechief executive of the BBC and they should have the question but before I do that I would like to make asame kind of relationship that any other chairman of facetious response to David Goode in his commenta board in a commercial company and its chief on the Scottish football contract. Aberdeen haveexecutive should have. We do not think it is possible been playing so badly recently that we are veryto have that relationship and at the same time expect grateful for that. You heard earlier the BBCthat person and those persons—who are admirable statement about the way in which commercialpeople; it is not a criticism of the governors, as broadcasting is withdrawing from the local contentNathalie has said—to regulate the BBC. We think it and the regions. Certainly it seems to me that inis an impossible remit for them to undertake. If you television and in radio commercial broadcastinggenuinely want to have the BBC regulated in the your greatest strength is your local content. I suspectpublic interest, if you want it to be accountable, then that you do not accept the BBC’s analysis, but theindependent regulation of many aspects of what the comment was made in the context that the BBC isBBC does is the way to proceed. Can I quickly say talking about spending a billion pounds movingadjacent to that point that we are in an interesting facilities out of London, which suggests that theretime. The BBC has not come out for the last eight will be a much stronger contest in the future, muchyears with the kinds of positive proposals and greater competition, on local content. I amunderstanding of its place in the market that it has interested to hear your response to that. Just one sideover the past two to three weeks. What that means, point to that: would I be right in suggesting that youof course, is that charter renewal (and I have been may be being squeezed from both ends because atthrough a few of them) is a wonderful process but it the other end of the market you have got thedoes take place every 10 years. If you have an potential rise of community radio? I know that theyindependent regulator who is able to take an are not allowed to compete directly with commercialoverview, over whatever period of time, that means broadcasters but it is inevitable that there will be athat the BBC can be stimulated into being more shift in listeners away there, is it not?competitive, more understanding, understanding of Mr Brown:Clearly clarity of remit is very importanttheir place in the broadcasting universe and we can for the BBC, for community radio and for ourselves,have greater certainty without having to wait every and obviously there will be overlapping. Formost of10 years to establish it. the radio stations that I represent, which are our

local radio stations (there are only three nationalcommercial analogue radio stations), their localnessQ345 Alan Keen: I was invited recently to my localand their relevance, either to the community ofhospital radio. They rebuilt the hospital studiointerest or to the geographical community, are theircompletely and they have got wonderful facilitiesstock-in-trade. The more players you have in thethere. I was so impressed by the skill andmarket the more you have to compete in order to becommitment of some of their graduates who are nowable to keep your local listeners and convert them toworking in commercial radio and the BBC, and werevenues for your shareholders. To do that you havewent there to celebrate the new equipment. Ato be part of a community; you have to interact. Ihospital is such a small place. Is there not a way ofwas intrigued by a comment made earlier on whichthat equipment being used over a slightly wider areareminded me of something I heard Anne Begg say,than purely the hospital itself? It seems a waste oftalking about that part of Scotland, at a meeting Iresources and experience to restrict it to thewas at recently. I was very encouraged because shehospital patients.did say that commercial radio provides a far moreMr Buckley: There are a number of hospitalrelevant and deeply rooted local product than thebroadcasting groups that do aspire to widerBBC, as far as she is concerned in her Aberdeencoverage but there are others that we have spoken toconstituency. I obviously would expect you to agreethat very strongly see their remit as serving thewith that. I think that is right.hospital and not aspiring to do something else and

they need their equipment to broadcast to that veryparticular audience, which in itself is a particular Q347 Mr Doran: For the record I would probablysort of community. The cost of equipment is not very agree with that because all we have got at thehigh in the radio sector and that is the least of our moment is a small BBC opt-out.obstacles in this environment. I would certainly MrBrown: I also think it is vital. The answer to yourexpect to see many people who gained their question is, that is how we perform, that is how weexperience in hospital broadcasting contributing to get our listeners, that is how we make our revenue.other forms of community broadcasting covering Mr Goode: It is the suggestion that the BBC aregeographical communities and communities of going to put more substantial opt-out in Aberdeen.interest. Also, we are very much aware that as The question is, should they? The fact is that incommunity broadcasters get established they are Aberdeen you have two commercial services—capable of mobilising large numbers of new entrants North Sound 1 and North Sound 2—with the

potential of the community radio stations to be putinto the radio sector to pick up radio skills.




in there. North Sound 1 and North Sound 2, as you local community licences with the exception of onenational digital licence. Our whole history of successknow, reach 50% of the population. Combined they

are the biggest broadcaster in the area. As I have is based very much on its localness. We understandand our listeners understand that the more rootedalready indicated, they are workingwith the Scottish

Executive on public service, they are lobbying on you are in your community the more eVective yourradio station will be.areas of road safety and so on. The question is,

should the BBC now be moving in there? It is not as Chairman: Thank you very much indeed. What wehavemanaged to do todaywhile looking at the issuesif they got there first, as, Chairman, I think you were

saying about BBC Radio 1 and Radio 2 earlier. in Scotland is add to our inquiry by looking at thewhole spectrum. You have been very valuableNorth Sound 1 and North Sound 2 are there. The

history is that they are providing a good service for contributors to that and much appreciated. Could Itake this opportunity once again of thankingthe local community and onewonders what the BBC

could add in that situation. Glasgow City Council for the use of this wonderfulbuilding, with better acoustics, as the Clerk pointsMs Schwarz: I am again echoing most of my

colleagues. The Capital Radio Group is a local out, than in theHouse of Commons, and also for thefacilities here.commercial radio group. We own and operate on




Members present:


Chris Bryant Alan KeenMr Frank Doran Rosemary McKennaMichael Fabricant Ms Debra ShipleyMr Adrian Flook John ThursoMr Nick Hawkins Derek Wyatt

Memorandum submitted by the National Union of Journalists (NUJ)

SUMMARY OF RECOMMENDATIONS

[Figures such as 2.4 indicate the paragraph in the main body from which the recommendation has beenextracted.]

2.4 The NUJ urges the Committee to see beyond short term political pressure and take a long view aboutthe role of public service broadcasting in the UK, and the BBC’s place therein.

3.7 The NUJ therefore sees public service broadcasting as the context within which the BBC needs tooperate, and believes that the BBC and public service practices on commercial channels should be developedand sustained in the immediate future.

4.8 The NUJ considers that the licence fee is the best tool available for funding the BBC. It believes thatfurther steps might be necessary to help the worst oV sections of society pay the fee. It rejects the idea thatthe licence fee should be supplemented or replaced by either advertising or subscription. The licence fee isessential to maintain the continuity, range and independence of service provided by the BBC.

5.8 The NUJ wants to see a stronger set of obligations for all broadcasters to provide high quality newsand current aVairs across all major channels. It does not want to see the BBC isolated as the only providerof these services. This is bad for the viewer and for the sustenance of a range of competing perspectives onnews in the UK.

6.6 The NUJ, whilst supporting the right of independents to continue to provide programming in thetelevision sector, considers that the priority has to be to ensure that working conditions in that sector areimproved. It views the expansion of the quota on the BBC as a threat to the development and sustenanceof creativity in the BBC.

7.3 The NUJ considers that the BBC should maintain and develop its commitment to the nations andregions and that the 2003 Communications Act should be amended to enforce more production of publicservice programmes, including those from the nations and regions, across all the main providers of UKcommercial TV services, using a system of regulatory and financial incentives to achieve this goal.

8.4 The NUJ considers that the governance of the BBC and Ofcom needs to be reformed to increaseaccountability to the public and to maximise editorial and creative freedom.

1. Introduction

1.1 The NUJ is the UK’s largest journalist trade union, and represents members in the printing andbroadcasting industries. NUJ members produce news and current aVairs for the BBC and they are alsocitizens who use broadcasting services on a daily basis. The NUJ is committed to supporting media freedomin the UK and also to promoting high quality public services broadcasting across the industry. It supportsthe continuance of the BBCas a licence fee funded organisation providing public service broadcasting acrossa range of programming and platforms.

1.2 This evidence focuses on a number of key areas of concern to the Union and supplements evidencewe have submitted to Ofcom in its recent review of public service broadcasting.1 This evidence focuses onsome key areas of concern to the NUJ, but does not cover all of our interests, such as theWorld Service andradio. We hope that the Committee will consider our views carefully and use them to develop a report thatwill encourage the government to review its approach to broadcasting and the future of the BBC in amannerwhich puts people, culture, information, media freedom and accountability at the centre of its policy.

1 NUJ, Response to Ofcom Review of Public Service Broadcasting, Phase 1—Is Television Special? (London, NUJ, 2004).



2. The Political Context

2.1 In February 2004 the Broadcasting Policy Group published its report, Broadcasting Beyond theCharter. The views expressed thereinwere the summation of almost two decades of criticismof public servicebroadcasting from those committed to the idea that onlymarkets, in general, are the best providers of publicservices. The report recommended that the licence fee be reduced, that ITV be released from its public servicecommitments from 2007 and that a new body, the Public Broadcasting Authority, should “takeresponsibility for the delivery of all public service content”. It advocated divesting the BBC of its productionarm so as to “open up the full extent of the BBC schedules to competitive supply”. Echoing therecommendations in the 1986 Report of the Committee on the Financing of the BBC, it recommendedestablishing a Public Broadcasting Authority, accountable to Ofcom, which would be Treasury funded andresponsible for the delivery of all public service content’.2

2.2 This report, in broad terms, represented the orthodoxy that has emerged at the top of thebroadcasting industry and amongst policy makers and politicians in the last two decades. It can be seen asthe next stage in the argument tomarketise broadcasting, an argument that has been running since the 1980s.It wants to take forward the re-regulation of broadcasting embedded in the 2003 Communications Actstill further.

2.3 In this climate, BBC management has had to be seen to be responding to the lobby which it knowshas the ear of politicians and government. In a flurry of activity it has decided to sell of BBC Technologyto Siemens, in spite of the fact that since its launch it has delivered “significant benefits to the BBC, £19million in profit and price reductions in 2002–03 alone”.3 In July the BBC ordered a review of its commercialarm, and the Governors ordered a review of BBC 1’s output. In August Michael Grade called in a firm ofaccountants to review the corporation’s finances. At the same time there was increasing speculation thatsome, or all of BBC Worldwide might be sold oV. The climate at the BBC is clearly one of wanting to beseen to be responding to the complaints being made by the commercial sector about its success, in order tosalvage as much as it can from the Charter review round.4

2.4 The NUJ urges the committee to see beyond short term political pressure and take a long view about therole of public service broadcasting in the UK, and the BBC’s place therein.TheNUJ recognises the desirabilityof change and development, but not of the kind that is currently dominating the political agenda. It is driven,in essence, by a desire to marketise as much of the broadcasting environment as possible, and as much ofthe BBC’s activities as can be. TheCommittee should, we argue, be looking forways to strengthen the BBC’srole, and that of other service providers, in the provision of public service broadcasting. It should be lookingto how best to ensure the political independence of broadcasters from undue commercial and politicalinterference, and for ways of involving the workforce and the public in managing their broadcast services.

3. The BBC and Public Service Broadcasting

3.1 Public service broadcasting is broadcasting that places information, education and entertainment atthe heart of provision. Whilst in the UK it has also been harnessed, via the ITV system and Channel 4, tocommercial ends, these ends have, until recently, been seen to be secondary to the need to provide auniversally accessible system of public service broadcasting.

3.2 There are those who argue that public service broadcasting should be something that is provided onlywhen there is market failure.5 The NUJ rejects this. Broadcasting, like health, education and transport, isa socially beneficial practice that needs to be provided as a service, not purely as a commodity. Broadcasting,if made accessible to the widest numbers of individuals can expose them to a range of cultural experiencesand information that cannot be made as accessible in systems dominated by subscription or pay-per-viewTV.

3.4 Public service broadcasting has, traditionally, included ratings grabbing programming ( CoronationStreet, Eastenders, Fame Academy) and quality news and current aVairs (Panorama, World in Action), andchallenging radio and TV programmes. It has historically, never been just about producing highbrowprogramming or a diet of simply education, news and children’s programmes. For public servicebroadcasting to fulfil its goal of serving the whole of the UK in all its diversity, its output has always hadto be diverse and always will have to be. If it becomes something that is added on after the subscriptionservices have failed to provide quality programming then it will inevitably retreat to the sidelines and fail inits general responsibility to the public.

3.5 Those who advocate a slimmed down BBC, or further reductions in the public service commitmentsof the ITV channels, and who see no role for enforcing public service requirements across major digitalproviders of services, are in danger of promoting a double standard. Those who have the money and the

2 Broadcasting Policy Group, Broadcasting Beyond the Charter (London, Premium Publishing, 2004), I 65-66. See also, HomeOYce, Report of the Committee on the Financing the BBC (Cmnd 9824, HMSO, July 1986).

3 BBC, Review of the BBC’s Royal Charter. The BBC’s response to the DCMS consultation ( BBC, London, 2004):111.4 Quinn, I, “BBC Retreats from rivals” Media Week, 20-27 July 2004; Snoddy, R, “Grade orders investigation into BBC’sfinances” The Independent 13 August 2004; Martinson, J, “BBC faces Worldwide poser”, The Guardian, 19 August 2004.

5 ie Broadcasting Policy Group, opcit, where public service broadcasting is defined as “socially valuable programming whichthe market is unlikely to generate”.



education and the awareness, can choose to pay for high quality services. Those who have none or only someof these, will be relegated to second class citizens doomed to a diet of the least challenging, least enlightening ,least informative TV channels.

3.6 The NUJ considers that public service broadcasting and the BBC’s role within it need to be expandedin the new digital age. In essence this can be done by ensuring that the BBC emerges from theCharter Reviewwithout further sell oVs of its resources and with its infrastructure intact. It alsomeans reviewing the currentlegislative framework to place strong public service broadcasting requirements on all broadcasters. This canbe done by using regulatory incentives, such a reduction in taxation or licence fee payments for companiesthat improve the range and quality of their services.

3.7 The NUJ sees public service broadcasting as the context within which the BBC needs to operate, andbelieves that the BBC and public service practices on commercial channels should be developed and sustainedin the immediate future.

4. Funding the BBC

4.1 In 2002–03 the licence fee generated revenue of nearly £2.7 billion, or nearly 95% of the revenueavailable to the BBC. Of the rest, £371 million was provided by the government to fund the licences of thoseover 75, £201 million came from the government to fund the World Service and BBC commercial activitiescontributed £147 million.6 This has to be set against the huge disparity between the BBC’s licence feerevenues and the size of the advertising and subscriptionmarket. In 2003 TV subscription revenues overtookadvertising as the main source of revenues for the industry. Subscription stood at £3.295 billion, advertisingat £3.240 billion and “other” revenues (sponsorship, shopping channels, premium rate telephony andinteractive services) at £1 billion.7

4.2 By any account subscription and advertising revenues outpace the revenue that the BBC earns fromthe licence fee. In addition the amount of money the BBC earned from commercial services was small(£147 million) relative to the BBC’s income and to the other sources of revenue for the industry.

4.3 Given this situation, it does not seem sensible to argue that the BBC is in some way engaged in unfaircompetition in the broadcasting market and that the licence fee in some way funds this. The growth incommercial revenues for television has been so fast (in subscription from a virtual standing start at the endof the 1980s) that soon the BBC will be a minnow in financial terms relative to the commercial sector. Werethe BBC to have been an obstacle to growth in this area, there would have been some real evidence of relativeweakness in the commercial sector. This has clearly not been the case.

4.4 Those who advocate the BBC selling oV sections of its production base, or those who consider itshould dispose of its commercial arm, are arguing for a weakening of the financial and production resourcesof an institutionwhich is in a less favourable financial position compared to the combined power of its rivals.

4.5 Given these figures there may even be a case for raising a levy on the commercial sector to fund morepublic service output on ITV, Channel 4 and S4C and for the BBC to claim some of this revenue to fundmore programming. In other words the financial case for reducing the licence fee or for cutting back on BBCresources seems weaker now than at any time in the recent past.

4.6 The licence fee is a way in which public money can fund an organisation committed to sustaining anddeveloping a public resource over time. It frees the BBC from direct commercial pressure and allows thecorporation to plan ahead and devise new forms of institutional and programming responses to the evershifting broadcast arena and to public taste. In fact, spinning broadcasting revenues like the licence fee oV

to more independents or to a Public Service Broadcasting Authority might increase the amount ofbureaucracy and costs of administration. At the very least, breaking up the BBC and dispersing the licencefee holds out as much prospect of increasing bureaucratic costs as it does of reducing them.8

4.7 The licence fee allows for some degree of insulation from government pressures. Any government can,if it wishes, place massive pressure on a broadcaster, as was exemplified during the build up to the invasionof Iraq in 2002–03, or as happened over the Thames Television programme Death on the Rock in 1988.9

Nonetheless the licence fee is one reason why the BBC is able to stand on principles of impartiality andindependence where matters of controversy are concerned. Where as in the United States, the commercialimperative dominates, this can, and does, run hand in hand with a severe lack of political balance—as therecent judgement by Ofcom against Fox TV has illustrated.10

6 BBC, Review of the BBC’s Royal Charter. The BBC’s response to the DCMS consultation (BBC, London, 2004):116.7 Ofcom, The Communications Market 2004—Overview (London, Ofcom, 2004): 16.8 In the NHS in the 1990s the introduction of an internal market increased the share of NHS spending on administration from5% to 11% and in the USA where a more market driven system operates the share of administrative costs has reached 24%.See, Pollock, A, “Markets will value cash over caring”, Times Higher Education Supplement, 27 August 2004.

9 See, Dyke, G. “How Blair Betrayed me and the BBC”, The Observer , 29 August 2004; Windelsham, Lord and Rampton,Richard, The Windlesham/Rampton Report on Death on the Rock (London,Faber,1989).

10 See Ofcom judgement : “Standards Cases- upheld cases: The Big Story, My Word” at: http://www.ofcom.org.uk/bulletins/prog—cb/pcb—11/upheld—cases?a%87101; see also, Younge, G, “Fox News reported to TV watchdog”, The Guardian,21 July 2004.



4.8 The NUJ considers that the licence fee is the best tool available for funding the BBC. It believes thatfurther steps might be necessary to help the worst oV sections of society pay the fee.11 It rejects the idea thatthe licence fee should be supplemented or replaced by either advertising or subscription. The licence fee isessential to maintain the continuity, range and independence of service provided by the BBC.

5. News and Current Affairs

5.1 The BBC is rightly seen as a vital element in the provision of news and current aVairs to the UK andto the world.

5.6 Whilst ITV’s services in the area of news and current aVairs have suVered a decline under the impactof regulatory change and the prioritising of commercial over public service goals in that sector, the BBC’sprovision has been sustained. Across television in 2003 the number of hours of factual programming hadnot reached the levels of 2000. Ofcom has recently predicted that although news provision has increased“2004 will see a decrease following ITV’s reallocation of its late evening news bulletin to a permanent homeat 22.30 on weekdays. This move has not brought in the 4 million audience ITV was hoping for”.12 As theBBC has pointed out, BBC 1 is regarded as “the best for news and current aVairs” by 40% of adults, whilstITV follows with 18%.13

5.7 There is no doubt that the changes in the structure of television since the 1990 Broadcasting Act haveput severe pressure on ITV’s willingness to match the BBC’s production of news and current aVairs at peaktime. In the NUJ’s view, the regulatory framework needs to be strengthened to promote news and currentaVairs at peak time across all major terrestrial, satellite and digital channels in the UK. ITV has been putunder pressure because its main commercial rivals have not had the same kind of obligations in this area.The task is to roll out these obligations, thereby reducing pressure on the BBC, increasing the supply ofquality news and current aVairs to all viewers and relieving the BBC of the pressure of being the majorsupplier of a whole range of news and current aVairs services.

5.8 The NUJ wants to see a stronger set of obligations for all broadcasters to provide high quality news andcurrent aVairs across all major channels. It does not want to see the BBC isolated as the only provider of theseservices. This is bad for the viewer and for the sustenance of a range of competing perspectives on news inthe UK.

6. The BBC and Independent Production

6.1 The current debate focuses on the allegation that the BBC has not been meeting its 25% independentproduction quota, and that the BBC should move to becoming an institution which only produces 50% ofits output in-house.14 In fact, Ofcom has found that in 2003 the BBC commissioned 28.8% of its output fromindependents, in a context in which ITV 1, the BBC, C4 and C5, together commissioned 42.3% of theiroutput from independents.

6.2 The NUJ recognises that the independent sector has brought with it many innovative aspects to UKTV. It regrets, however, that it has also led to problems with wages and conditions of service for thoseworking in the sector and high degree of casualisation. This cannot be remedied by increasing the amountof the BBC’s output placed in the commercial sector, but only by firmer action by government to promoteproper working conditions for freelances in this sector.

6.3 The case against increasing the percentage of independently produced output in the BBC is two fold.Firstly the total size of the TV market in the UK as outlined above (See section 4.1) allows for ampleopportunity for independents to grow from working with the new commercial channel providers. If thesecompanies cannot provide enough outlets for independents then, arguably, the government shouldscrutinise the ways in which commissioning and origination of material operates outside of the BBC.

6.4 Secondly, the case for public service broadcasting rests on its capacity to nurture in-house trainingand a culture of independence and innovation. The economic conditions in the independent sector, wherethe next commission is generally the most important driving force, militates against this. Whilst every eVorthas to bemade tomake sure the BBC is outward looking, if the government chooses tomake the BBC acceptmore from the independent sector then it will risk fatally undermining the corporation’s capacity to be amajor creative force in UK culture.

6.6 The NUJ, whilst supporting the right of independents to continue to provide programming in thetelevision sector, considers that the priority has to be to ensure that working conditions in that sector areimproved. It views the expansion of the quota on the BBC as a threat to the development and sustenance ofcreativity in the BBC.

11 In 2002–03 the government paid £371 million to cover the licences of people over the age of 75, see BBC, Review of the BBC’sRoyal Charter. The BBC’s response to the DCMS consultation ( BBC, London, 2004) :116. A similar case might be made forpeople on very low levels of income.

12 Ofcom, The Communications Market 2004—Overview (London, Ofcom, 2004):12.13 BBC, Review of the BBC’s Royal Charter. The BBC’s response to the DCMS consultation ( BBC, London, 2004):39.14 ibid, 135-6; Wells, M, “More in-house BBC shows face the axe”, The Guardian, 19 August 2004.



7. The BBC and the Nations and Regions

7.1 Ofcom has noted that over the period 1998–2003 “spend on regional programming increased, beforefalling back in 2002. This largely due to significant increased investment by the BBC, particularly inprogramming for the nations. ITV’s spend has declined . . .”15 The BBC remains a key provider ofprogramming for the regions and the nations and is committed to continuing this. With the contraction ofITV into one company and the possibility that even the ScottishMediaGroup andUlster TVmay joinHTVas part of the Carlton/Granada empire16 there has to be deep concern over the overall impact this will haveon production for the nations and regions. Add to this the fact that S4C’s RPI-linked grant fromgovernment introduced in 1998, has not kept pace with broadcasting inflation, and that the BBC’scontribution to its programming “represents a significantly smaller slice of the licence fee than it did in1996”17 and the problem looks increasingly serious. ITV reduced its local output by 12% in 2002 and hasbeen cutting its out “of” London production base.

7.2 Once again the issue is that the BBC has retained a commitment to nations and regions, whilst ITVhas been forced into a retreat. As Alan Pugh, AM, theMinister for Culture, Welsh Language and Sport haspointed out, this retreat has consequences for the public. The Minister has recently argued that he wants tosee “ITV Wales” programmes broadcast during prime time, not at midnight’ and has expressed concernabout how “Digital switchover could have a negative impact on S4C at a time when I would like more andmore people watching in Welsh”.18 Digital switchover has cost S4C a major slice of its revenue at a timewhen its grant has been below the level of broadcast inflation.

7.3 The context of this has been the reduction in the range of programming on television at peak timesas a result of the introduction of under regulated competition in the 1990s. Ofcom has found that between1998 and 2003 the proportion of UK- originated programming increased slightly, but that spending on arts,children’s, religion and educational programmes fell; that there was a narrowing of range within genres suchas drama and factual programming; and specialist programmes on topics such as arts and current aVairswere pushed to the edges of peak viewing hours.19

7.3 The NUJ considers that the BBC should maintain and develop its commitment to the nations and regionsand that the 2003 Communications Act should be amended to enforce more production of public serviceprogrammes, including those from the nations and regions, across all the main providers of UK commercialTV services, using a system of regulatory and financial incentives to achieve this goal.

8. The BBC and its Governance

8.1 The BBC should remain outside of Ofcom. Ofcom is a body with both the culture and the brief topromote commercial communications services. It is committed to reducing what it calls “regulation”. Forinstance in 2004 Ofcom devolved its advertising supervision to the advertising industry.20 Ofcom is too bigand covers toomany sectors of communications to be able to regulate properly the BBC. In addition, placingthe BBC under Ofcom, whose regulatory structure is not based on any remotely democratic method ofappointments at Board level would leave immense political power in a very few hands. At least the BBC stillretains governors for Wales, Scotland and Northern Ireland on its Board, something Ofcom does not.

8.2 A BBC free fromOfcom needs a reformed system of governance. But even Ofcom needs this. In bothcases the governing Boards should be appointed by a much more democratic process. The forthcomingGreen Paper allows the government to signal its desire to do just this, and theNUJdoes not wish to proscribea particular method. Nonetheless it would be possible to have a system of appointment after nominationfrom key bodies, such as trade unions, educational bodies, industry bodies and relevant social and culturalinstitutions, a system that could be periodically reviewed. In both the case of Ofcom and the BBC, muchmore power over programming and services could be devolved to national and regionally nominated bodies.This kind of proposal is essential if broadcasting is to be insulated from commercial and political pressure.

8.3 Within the BBC there should be a clear physical and institutional separation of the Governors fromthe management. The BBC has recently proposed this approach. Within this the BBC should ensure thatits systems ensure the maximum degree of editorial freedom for staV.

8.4 The NUJ considers that the governance of the BBC and Ofcom needs to be reformed to increaseaccountability to the public and to maximise editorial and creative freedom.

September 2004

15 Ofcom, The Communications Market 2004—Television (London, Ofcom, 2004):58.16 ibid, 15.17 DCMS, S4C: An Independent Review (London, DCMS, 2004) : 2.18 Pugh, A, “Remote Control’, The Western Mail, 12 August 2004.19 Ofcom, Ofcom publishes Phase 1 Report of the Public Service Broadcasting Review ( Press Release, London, Ofcom,21 April, 2004).

20 Fitzsimmons, C, “Ad industry self-regulation win is “victory for common sense”, Media Week, 20-27 July 2004.



Witnesses:Mr Roger Bolton,General Secretary, BECTU,1 Mr Ian McGarry,General Secretary, Equity2 andMr Jeremy Dear, General Secretary, NUJ, examined.

Chairman: Gentlemen, welcome. We are very a diVerent scale and type of broadcasting which isless broadcast-driven butmore software-driven; andpleased indeed to see you, as always. Derek Wyatt

will start the questioning on behalf of the select by giving ten years you might actually create thedeath of the BBC rather than the life of the BBC?committee.Mr McGarry: I do not believe that is the case. Iunderstand that the impacts of new technologies areQ348 Derek Wyatt:Goodmorning, gentlemen.Maygoing to aVect us all. It will aVect the way people weI just put a couple of questions to you quickly. Dorepresent work; it will aVect the way people watchyou think in the year 2017 there will still be anand how they access programme material; but I ameducational system for the primary and secondarypretty confident in that period you are talking aboutschools in this country?there still will be a very considerable demandMr McGarry: Yes.for high quality programme production andbroadcasting in this country—and without the BBCQ349 Derek Wyatt: Do you think in 2017 there willI cannot see that happening. Therefore, if anything,be a health service called theNationalHealth Serviceit is not the case that the BBC and its funding isin this country?lessened by those developments—conversely, I thinkMr McGarry: Hopefully. It may not be in the formit is strengthened. It is the major production base init is now, but hopefully yes.this country. Very few of the new channels and newoutlets of recorded performances in fact generate

Q350 Derek Wyatt: Given that two very public much new work from the point of view of the actorsservices are a given in 2017, surely the BBC will be and other performers I represent. It is the BBCwith us in 2017, and since neither education nor which is at the core of that process. I do think it can,health has a Charter or some statute, what is the does, should and will produce the kind ofpurpose of giving a ten-year Charter when we know programmes which will still attract very, verythe BBC are going to be with us? significant audiences.Mr McGarry: Firstly, I certainly hope there will bea BBC in broadly its current form in 2017—that is

Q352 Chairman: Could I just follow up Derek’svery important to us. I think you all know ourquestion. We have two public service broadcastingconstituencies, as it were. For our members the BBCorganisations in this country—one is the BBC andis the biggest single employer sowe have a very directthe other is Channel 4. Channel 4 was created byinterest in seeing it there and continuing to flourishstatute; it operates under statute; and it operates,and to succeed. The nature of the period of itsindeed, under a statutory remit. Although there is,renewal under Charter I think is important, becausefrom time to time, talk of privatising Channel 4I think there is a need for stability in an area of ever(which I personally would be very strongly against)more rapid change. The BBC is at the heart ofnobody talks about ending Channel 4. The BBC, ontelevision ecology, as it were, and is an importantthe other hand, is subject to periodic review becauseplayer—key to the role of public sectorof the approaching expiry of the Charter. As Derekbroadcasting. Whether or not it is a Charter, or hashas pointed out, last time, on the recommendationto be a Charter, I think we would be fairly neutralof the National Heritage Committee, the Charterabout that, but it has worked pretty well to date andperiod was cut down from 15 years to 10 years.seems to give the proper degree of accountability,Would there not be an argument to say that the BBCand accountability to government. I think a periodshould not have a Charter—the concept of which is,of ten years would be the very least we would wantafter all, 77 years old—but it should be reconstitutedto see that extended for.under statute and just be there as a given understatute?Q351 Derek Wyatt: You probably do know in aMr Bolton: I think that is an argument, as Ian hasprevious National Heritage Committee, which somesaid, that we would be open to persuasion on. OurMembers were members of, they recommended itstarting point in looking at your terms of referenceshould be reduced from 15 to 10. It was one of theand the questions youmight askwas to ask ourselvesrecommendations taken up by the then government.what damage the Charter has done in terms of theSo ten is not a given. The government has now saidBBC and in terms of its history. Has it been aover the recess that that a digital switchover will bestabilising influence? We think that it has, in thecompleted by 2012. Given the substantial changesmain, been a stabilising influence. We have not yetcoming—both in terms of hard drives where BMWheard any convincing arguments for moving awaywill announce in their next range there will be a hardfrom the Charter and what the implications of thatdrive inside a BMW so you can get on-demandwould be.television and films as you want them, per passenger

seat if necessary, and where an i-Pod, which wasunheard of three years ago, is now a billion dollar Q353 Derek Wyatt: Let me give you a suggestion.

Five of us were at the Edinburgh Television Festivalbusiness, which is another hard drive implication—do you not think the pace of change is so where we heardMark Thompson’s speech about the

future of the BBC. It seems to me that we are in thisphenomenal that youngsters (and we) are moving to

1 See Ev 34–372 See Ev 21–24



7 September 2004 BECTU, Equity and NUJ

loving period where they are being jolly good. The Mr Bolton: On an international basis, they look atGovernors are going to behave and be independent. the BBC’s output with envy, and look at it as beingThey are all going to be jolly and do decent a driver in terms of excellence for the rest of theprogrammes. Panorama is going to have more broadcasting market.money. There are going to be more documentaries. MrMcGarry:Chairman, you should not assume weGosh! Wow! Why? Because they are coming up for are sitting here as uncritical supporters of the BBC.Charter renewal; but as soon as Charter renewal is We have fairly long-established relationships withdone it is done and that is it, and they will not do the BBC, which have sometimes become quiteanything for tenmore years. If they were undermore diYcult, but we do believe that the BBC is essentialpressure, like a department, and every three years to the future of broadcasting in this country, and wethey had to come back and say, “Listen, we said to do think it needs a degree of stability. I was not sureyou we wanted more documentaries. Where are whether you were asking if the Charter was the bestthey?” then there is more leverage for us, on behalf way, or otherwise, of securing that; or whether it isof our citizens, to say, “You haven’t delivered”. A the length of the Charter, or whatever replaces it,Charter is just for them but it is not for us. which is the issue before you. It does, I think, take aMr Bolton: Is there anything in the Charter itself long time to build up and develop the kind ofthat compels the BBC to make those types of programmes the BBC does produce. I think a degreeprogrammes? The Charter is an enabling piece of of stability at least is a strong argument for notlegislation that would allow the BBC Board of changing a system that does work. I think the pointGovernors to exist and to hive oV most of its that the BBC does now seem very ready to approachactivities to outside bodies. I do not think the

its own internal reviews—and maybe that is becauseCharter itself requires the BBC to make anyof this review there—I do not personally think it isparticular type of programme at all, does it?likely that the BBC will depart from the conclusionsof those internal reviews the moment it has got its

Q354 Chairman: That is the point, is it not? The Charter renewed.Communications Act has got a very clear and MrDear: I think it would also be unusual if the BBCspecific remit for Channel 4. It is the only were not to be particularly friendly at this pointbroadcasting organisation in this country which has coming up to Charter review; after all, mosta statutory remit to which it has to conform. The governments, coming up to an election, also like todistinctive identity ofChannel 4 under diVerent chief show their benevolence towards the electorate. Inexecutives stems from its statutory remit. All we terms of the question you are asking, partly it ishave got for the BBC (which of course has a much about the flexibility around technological changewider catchment area) is the assumption that it will and if there is going to be a ten-year or 15-yearprovide public service broadcasting. Mr Grade Charter does that mean the BBC is not going to behimself took up a theme first voiced in this able to adapt to what are going to be massiveCommittee, namely that the only definition of changes in the industry? I do not think that is the“public service broadcasting” (except for that case. They have always been able to adapt within themumbo-jumbo that suddenly appeared in the last current Charter. They also need, to some extent, toCommunications Act) is that public service be able to plan for these things. You cannot run anbroadcasting is whatever the BBC broadcasts. organisation (all the ones you mentioned, really) onMr McGarry: The Chairman of the Content Board

the basis that you cannot make long-term decisionsof Ofcom said to us not long ago, when asked howabout technological change and being able to deliverto define “public service broadcasting”, that heon technological change. I think the importancecould not think of any better example in the worldfromour point of view is that there is proper scrutinythan BBC radio as providing a public broadcastingboth by Parliament and by citizens, throughservice to this country in terms of the range andwhatever mechanisms those are and through thequality of programmes which it does. He said to usgovernors: whether that is through a Charter,very openly and publicly he would cite that as thestatute or whatever is less an issue than that there isbest example of public service broadcasting thatproper scrutiny of what the BBC does and that it isthere is.held to account for what it says it is going to do, andfor what Parliament and the people want it to do.

Q355 Chairman: By “BBC” you mean Radio 3? Chairman: In your two minutes, Mr Dear, you haveMr McGarry: I mean radio altogether—the BBC’s raised about 15 questions!radio services.

Q357 Derek Wyatt: Over the last ten years viewingQ356 Chairman: I was in Canada last month and Iaudiences have gone down for the BBC and they arelistened to CBC2 and I thought it was at least asgoing to go down further—it is inevitable given thegood as Radio 3.way in which we receive entertainment that it willMr McGarry: I know for a fact there is no othernot be above 20% by the end of the decade butbroadcasting authority in the world that producesprobably be 15% by 2012 or 2014—yet you in yourthe range, quality and depth of drama production,evidence want us to continue to give the licence feefor example, that BBC radio does. Nowhere in theand RPI!1. Why? Why should viewers have to payworld is that the case. I personally think that is worth

the licence fee in itself. more for less?




MrMcGarry: Because it is in the public interest that actually very small and leads the BBC into wholeareas of controversy about whether it is competingthey should because by so doing they provide a firm

dependable source of finance which enables the BBC fairly or not with commercial companies who arenot funded by the licence fee. Why do you opposeto invest in programme production and programme

making in a way which is in everybody’s interests. any change to that at all?Mr Dear: I support what the BBC have done interms of talking about a public value test about anyQ358 Derek Wyatt:Even if people are not convincedof its activities, whether they are public service onesit is worth doing?or whether they are commercial activities. TheMr McGarry: I am not sure I accept your view thatcommercial activity is around £160 million which isthere is an inevitable straight line decline inadditional to the licence fee money, a very smallaudiences of the BBC, because there has not beenamount. I think 95% comes directly from the licenceso far.fee; something like 3% from the subsidy to the over75s; and the rest from its commercial activity. So aQ359 Derek Wyatt: Look at the facts.small amount, but important money that can beMrMcGarry: I think we would accept there is likelyreinvested in public service broadcasting in theto be some decline as audiences fragment; but I stillindustry and in programming. I would hate to seethink it is important for the cultural life of thisthat that would be thrown out on a point ofcountry, as well as the ecology of broadcasting, toprinciple, without applying this public value test tohave those millions of pounds that come in throughany of its commercial activities, or indeed any of itslicence fee payments to fund what is, after all, theother activities at all.biggest and most successful production based

television in this country.Q362 Michael Fabricant: Finally, the BBC, as youknow, are toying with the idea of providing ultraQ360 Michael Fabricant: I have to confess, listeninglocal news programming, community newsto what I heard just now, you seem to be moreprogramming, in up to 60 diVerent cities.While I canconcerned with the welfare of your members, whichsee that might well lead to more employment ofI suppose you are paid for, rather than the welfarejournalists it reminds me rather of the early days ofof the licence payer who actually watches and viewsBBC local radio with which I was involved, whichradio and television. I wonder if I may juststarted oV as BBC Radio Brighton but no longerconcentrate on the NUJ, and if anybody else wantsexists any more because it became BBC Radioto come in then please do so. I am asking you theseSussex, and that became South Coast Radio basedquestions on the basis that I very much support thein Guildford, which is nowhere near Brighton. TheBBC and want to see it continue and go fromBBC has moved away from that and now they seemstrength to strength. Yet theNUJ seem to be arguingto be moving back again. I would like youragainst any change at all. One of the areas that camecomments on that and how that would relate toup in the Communications Act, when it was a billindependent community broadcasters, who aregoing through Parliament, was the question of howtrying to do much the same thing. Will that not takemuch time should be made available to independentresources away from national news andproducers. I argued on the bill, for example, thatinternational news coverage, for which the BBC is soradio producers should be guaranteed a particularrecognised as being a first-rate performer?percentage; yet the NUJ are saying there should notMr Dear: We certainly hope that it will not takebe any independent production at all. Why?resources away from national and internationalMr Dear: Looking at the submission it saysnews. That, of course, depends on the level of“independents should continue to provideresources the BBC is given as to whether or not theyprogramming”. We do not think independentsare able to carry out properly resourced the 60, orshould not provide programming either forhowever many, ultra local news services. We aretelevision or radio, but certainly we think the valuecertainly very supportive of the idea, but I do thinkof the BBC’s in-house production and the economiesthey have to be properly resourced, and they have toof scale it can bring and the immense wealth ofmaintain the standards for which the BBC is known.experience and expertise that it has is a tremendousIt should not just be one person with a microphone.benefit to the country and to the broadcastingThey have to be proper news services if they areecology as a whole. That is why we support the BBCgoing to be done. That, of course, is a question ofmaintaining that. I am not rigid on 25%, 26% orresources; and that would depend on whatever the24%, whatever it might be, in terms of production. Ifinal settlement is in terms of BBC funding for thedo think that the BBC has to have its own strong in-future. In principle highly supportive of them,house production base in order to allow it to makeespecially at a time when the ITV network is busythe kind of programmes we think are necessary topulling out with a 12% reduction in regional outputdeliver on public service broadcasting.in 2002–03. I think it is very important there is goodquality local news for people to make informedQ361 Michael Fabricant: The NUJ also argue thatdecisions about what is happening in their local area.the commercial activities of the BBC should not be

sold oV. Although there is a large turnover, with thesale of BBC programmes overseas and various other Q363 Mr Hawkins: I have one general question and

then one specific one about one of the submissionscommercial ventures they get into, the actual netprofit and contribution towards programming is BECTU have made to us. The general question:




there has, I think, been a fairly widely held Q366 Mr Hawkins: Can I turn now to my specificperception that the BBC has made a number of very question on BECTU. If we have interpretedexpensive mistakes in relation to its digital services. correctly your submission to us on this, as part ofWhile recognising you all have responsibilities the opposition to any idea that the BBC could betowards your members, would you accept there is a funded from advertising, you are saying, “Nor,public perception that some of the financial incidentally, does advertising ever provide freedecision-making in relation to digital services, ontelevision to viewers, since the cost of TVline services, has been pretty disastrous in the BBC’s commercials adds an estimated 11% to 13% [yourecent history? say] to average household bills”. I was fascinatedMrMcGarry: They have done a bit better than ITV, to find out a little more about how you come toas a starting point. that conclusion.

Mr Bolton: By using the tools available toeverybody: looking at companies’ expenditure onQ364 Mr Hawkins: Our inquiry is into the BBC,advertising; how much of that is on televisionbecause we are talking about licence fee payers’advertising and what percentage of a product pricemoney. Suggesting that somebody else has donethat makes up. You get to a figure by doing that.worse is not a defence of the BBC?I do not think there is huge disagreement about theMrMcGarry:No, and I am sure you will be puttingfigure we have used. I think the people involved inthese questions to the BBC directly. We would notresearch would tend to agree with that kind ofbe in a position to defend every decision they havefigure. In the more general sense, in terms of themade. I think many of the decisions they have madeBBC gaining funding from advertising, not onlyhave been under pressure from government andwould that have an adverse eVect on the BBC butwhat they perceive the government’s ambitions to beit would probably have a disastrous eVect on thein this area and have sometimes been over-rest of the broadcasting economy which is in someinfluenced by that and invested slightly mistakenlydegree of trouble in this country already.in some of those areas.

Q367 Mr Hawkins: Is not the contrary argumentQ365 Mr Hawkins: You do not think there wasto your interpretation of fees to say that companiesperhaps a danger, rather than being subject toare going to advertise anyway, and they will usegovernment influence, that it was a desire to wish towhatever media are available to advertise. If yoube up with the latest technology, to be perceived tosuddenly did not have any television advertising atbe the leaders, which caused people to plunge soall, companies would still want to advertise.disastrously an awful lot of licence fee payers’Because companies are going to advertise anyway,money?I do not think most members of the public wouldMrMcGarry: I would not accept your description ofthink, “I am paying 11-13% more on my householdit, but I think there is an element of that. Yes, I thinkbills because companies want to advertise onthe BBC has wanted to be at the forefront of thosetelevision”. It may be an argument you feel helpsdevelopments, because I think it sees that as beingyour cause against advertising, but I do not thinkcompatible to its other main function of providingit is one which would really be accepted by thethe main terrestrial network channels. I think it isgeneral public?probably right to be there. As for individual

decisions, I could not argue about those. I think it is Mr Bolton: Let me put it in a slightly diVerent waya very diYcult area in which to make judgments— and that is: it is clear from our submission wenot knowing how people are going to want to adapt support the BBC as being the cornerstone of publictheir watching and viewing and having to service broadcasting. If there has been a debateexperiment to a degree. I think it is very diYcult to about what public service broadcasting is, if thatpredict how audiences will respond to diVerent levels has been a pan-European debate, one of the areasof services. Therefore investment is a bit risky but at with the greatest question mark over it is the statusleast the BBChas been in a position to invest and has of those broadcasters in Europe that had mixin fact taken on a leadership position in most of funding, some from licence fees and some fromthose new technological developments. advertising. That is where the competition becomesMr Dear: I think it has also had tremendous really diYcult. Are they competing fairly with thesuccesses. BBC News On-Line is the recognised rest of the market? Generally speaking the answerworld leader as an on-line news service. We are to that has been, “No”. I think the BBC, takingalways more than happy to admit that the BBC advertising, would place the BBC in a position ofmakes mistakes in deciding to fund some things over very great danger.others; and we will frequently have arguments tosay, “More resources should be put in here and less

Q368 Mr Hawkins: One final, very short question.in there”. There will be mistakes but, on the whole,One point which is often made to me byit has been a valuable addition to its public serviceconstituents is that eVectively the BBC is now thebroadcasting role especially in terms of promotingsame as every other broadcaster because there arethings like media literacy, on-line learning, languageadvertising breaks, it is just their advertising breakslearning and all those kinds of things. BBCNewsOn-are advertising their own programmes. What doLine has been one of the real success stories of the

last 10 years of the Charter for the BBC. you say to that?




Mr Bolton: It is reinforcing a brand which all of principle or anything else that we take. A lot of ourmembers work in the creation of televisionthe broadcasters do. I do not think there is

anything wrong with that. There is a very strong commercials and, therefore, they have an interestin that. There may be a decline in that form ofbrand in terms of what it does. People recognise

it is promoting its own programmes. I see nothing advertising and, consequently, the source of incomethat comes from it. As I said earlier on, it seems towrong with that.

MrMcGarry: The specific point that BECTU made me that in all these changes it is all the moreimportant that the BBC should be there firmlyabout advertising—it does not seem to appear in

our other submissions—we are all one in relation funded by the licence fee so that it is in a positionto provide the ranges and qualities of programmesto the general view of not thinking it would be

possible for the BBC to be in whole or part funded others could aspire to. It puts an even greaterpressure on a secure future for the BBC.by advertising. There seems to be a general

consensus that that is the situation. What we do Mr Bolton: If we have a concern it is not just abouthave in this country is a very successful mixed the BBC within that context. If you look at the dateeconomy of broadcasting. We have a private sector, when they have analogue switch-oV and the wholecommercially funded sector and we have a publicly thing is delivered in a digital manner, there is afunded sector. It is rather strange that almost really serious concern that the business modeluniquely that public funded sector is in fact being which underpins ITV at that moment in timecriticised because it is successful. From our point collapses. I do not know—and I do not know ifof view, we ought to be congratulating, welcoming anybody in ITV knows—what the answer to thatand celebrating the fact that the public funded is yet, and that places a great number of oursector of the broadcasting industry in this country members who work for those companies and theiris, in fact, as successful as it has been. employment in great peril. I think that matter has

been given urgent thought and urgentconsideration. It would be facetious of me to sayQ369 Chairman: Without taking any sides on that,we have an answer to that particular problem atI repeat that Channel 4 is a public sector publiclythis moment in time.owned television organisation which is funded byMr Dear: If the BBC were to have advertising itadvertising.would change its mix of programming veryMr McGarry: And would suVer dramatically if thedefinitely—would have to. If advertising across theBBC were to compete for its advertising revenue.board were to decline and you had to look atChairman: So that is self-interest and nothing to doanother source of funding, the only other potentialwith principle.is something like subscription or pay TV, which ofcourse then takes out the universality and

Q370 Rosemary McKenna: During our inquiry we accessibility for all people to be able to access thoselooked at how television, not will be delivered in services. It could mean the commercial sector couldthe future, will be received in the future. One of the lose 35% of its advertising revenue, and that wouldthings which is very clear is that there will be much be a 35% loss to programme-making and content,more recording of programmes by various so I do not see either advertising or subscription asmechanisms modern technology allows people to attractive alternatives to the licence fee.have—TiVo and various diVerent ways they canrecord, select and decide how they are going to

Q371 Rosemary McKenna: Given that scenarioview. It has been suggested to us that advertisingwhere people will watch in diVerent ways and it willwill be of much less significance in the futurebe much more diYcult to measure, do you believebecause people will be able to cut out the advertsthat the audience share should be significant in thefrom the programmes they record. They will wantfuture? I believe that the BBC should be funded toto watch a film all the way through, will not wantproduce programmes that are a benchmark forto watch the adverts and will be able to do that.broadcasting throughout the world. Do you agreeThey will be able to record concerts fromthat basing it all on audience share is false premise,commercial radio and all sorts of things without thebecause it will be diYcult in the future to measureadvertising. Advertising will have to be delivered inaudience share? Is that the most important thinga diVerent way which means, I suppose, in one waythe BBC’s future should be based on?the BBC are ahead of the game because they do notMr Dear: I do not believe it was set up on the basishave that problem. Taking on board this is goingthat it had to have a certain level of audience share.to be happening over the next ten years, and thereIt was set up to educate, entertain and inform andis no doubt about that because people will beit still needs to do those things. The rest of theviewing television in a diVerent way, what wouldmedia are very critical of it. If it produces ayour view be on that basis for continuation of theprogramme that is brilliant but nobody watches weCharter and the licence over five, 10 years orslam it. If it produces a programme people thinkwhatever? It is a diVerent angle from the questionshas been dumbed down but millions of peopleyou have been asked before.watch it then we slam it for dumbing down. It hasMr McGarry: It may well be there will be a declineto be able to mix those two things to be able toin the traditional source of television advertising ascater right across the board. I do not think thatwe have known it over the last few decades. Weaudience share, therefore, can be the only factorshould not be presented as being against

advertising on television. That is not a position of you look at. It has to sometimes be taken into




account. If nobody is watching a programme there about TiVo and various other technologicaldevelopments. One recent fact-finding was that wecould be no point in making it. I think reach and

accessibility are much more important than were presented with a scenario by one veryinfluential individual who suggested that what weaudience share for the BBC if it is to truly stick to

its public service values. may be seeing is a slow deterioration and decline innormal terrestrial broadcasting, to the point whereterrestrial broadcasting—digital or analogue- couldQ372 Mr Doran: Looking at your evidencebecome a fairly low end niche market, wherecollectively, if your views were accepted thereadvertising would not provide the income it doeswould not be any great change in the structures ofat the moment, for example, for commercialthe BBC, just a little tinkering here and a little bitbroadcasters. In a scenario like that it wasthere. I am interested in particular because I thinkspeculated that the people who would win were theyou are the experts in this and the people incontent producers—which puts the BBC in a verybroadcasting. One of the things we are seeing, andstrong position—as compared with, for example,my colleagues have mentioned this in theirmy local television company which produces a veryquestioning, are very substantial changes in thesmall amount of its own broadcast. That mustlandscape of broadcasting, certainly since the lastmean substantial changes for the staV. I think mostCharter review, and extremely substantial changesof them would be positive, but I am interested toin the technology. We have been looking at thehear how you are preparing for that if you accepttechnology, and one of the things which appears tothat sort of scenario, and what it will mean for thebe coming clear to me is that things are going topeople inside broadcasting?change very substantially over the next few years,Mr McGarry: I am not sure we would accept thatcertainly within the life of this particular review. Iscenario or the timescale in which it has beenwonder whether the status quo really is an option?advanced, but it is a question which needs to beMr Bolton: I am slightly uncomfortable beingaddressed. I do believe all three of us sitting hereportrayed as being in a position where the threecan say very honestly and genuinely that we haveunions sitting at this table here are defending theled the people we represent in a process of reformstatus quo. I have been dealing with the BBC oneand change and the acceptance of change. If youway or another for the best part of 30 years—20 ofjust think, for example, in relation to the rightsthem as a trade union oYcial and ten as anwhich actors and others in Equity enjoy in theemployee—and it has been my experience thatprogramme material, we have adapted andunless you are willing to accept that the BBC is atextended those to cover all the new areas and thethe cutting edge of technological change, and unlessnew technologies. I think essentially the point youthat is accommodated and negotiated through, theare making is the best argument I have yet heard,BBC will fade away and die. It is part of what wewith respect, for the future continuation of thedo. It is part of what we are. In trying to help theBBC funded as it is. It is the only guaranteed wayBBC negotiate through the staYng diYculties thatof securing the production base; which I think isarise from the technological change, when I firstabsolutely essential, not only from the point of viewhad anything to do with the BBC 20 or 30 yearsof training but, indeed, having all of the abilities toago 95% of its staV were permanently employed,make programmes over a whole range and qualityand today approximately 50% are. The BBC wasone wants to expect in an otherwise uncertain areathe first Broadcaster in Europe to actually negotiateof commercial activity and investment in televisionand have electronic news gathering, we are notproduction. We do need that investment from theLuddite in our approach to the BBC, but I see thelicence fee into the production base becauseCharter as being a facility to allow the BBC tootherwise it will disappear.change to actually deal with the technologicalMr Bolton: It is probably no accident that thechange that is coming along.National Training Organisation, the Sector SkillsMr Dear: And should be driving it. Driving theCouncil for the audiovisual industry, where thedigital take-up is something the BBC can do. OneBBC has a huge influence, is seen as a trailblazerstatistic: the majority of training in technological

change and adapting to technological change is in terms of training in this country and is leadingcarried out by the BBC. 38,000 training days a year the way in trying to define the needs of theare given over by the BBC, more than the whole employees over the next five to ten years.of the rest of the industry put together, and that ispeople taking up, understanding and learning the

Q374 Mr Doran: If the scenario I present isnew technologies they are going to have to workaccurate or even close to accurate, what you couldon. It has a good record in that—something wesee is a very distorted market where you have apushed it very hard to do, and we are pleased thatpreserved megalithic BBC and a very muchit does. We wished the others would do more tofractured market everywhere else, surrounded bykeep up with it, to be honest.very, very small companies.Mr McGarry: The answer to that scenario does not

Q373 Mr Doran: Let me take it forward a little. seem to me to in any way damage the BBC.Some of the evidence we are hearing is pointing inthe direction of quite substantial changes, for

Q375 Mr Doran: Except it is a very distortedexample, in the way in which consumers wantto control the product they receive. We know market.




Mr McGarry: Rather that than no production base content that people want to watch. When theywatch it and how they watch it will be up to them,at all, surely? Who else is going to make

programmes? Most of the new channels exploiting but you still have to have the content that peoplewant to be able to watch.the technologies, as far as my members are

concerned, are not really investing much inprogramming production at all. Largely the BBC, Q377 Ms Shipley: Part of the BBC’s unique sellingto a lesser extent ITV, and to an even lesser extent point is listening to discussions through publicChannel 4 are investing in that programme service broadcasting and it comes back to that timeproduction. The BBC is absolutely key to it. and time again. I think it would be very helpful toWhereas if you look at what Sky is producing in have on record what each of you defines as “publicterms of originated drama that would be service broadcasting” because it does seem to bechallenging to audiences in this country, you would something of a moveable feast from time to time.have to look long and hard to find any. Mr McGarry: The easiest answer is to say that you

know it when you see it.Q376 Alan Keen: I am not discounting what youare going to tell us, if anything, but we are going Q378 Ms Shipley: That is not a definition.to interview and talk to young people, because Mr McGarry: I know. I think it is a system ofwhen we are talking to you and most of the people broadcasting which provides for the totality of thewe have as witnesses here it is the people who have available audience a range and series ofbeen brought up on the BBC over the years and programmes of quality which do fulfil what Jeremyare used to being presented with a schedule. When was quoting earlier, to educate, inform andwe went to the States we were told by two people, entertain. I do not think you can say there is anyand one particular person was not putting an one programme—and I was asked last time I cameargument but was he was absolutely dogmatic that to your committee, “Did any particular programmepeople will not be presented with schedules of qualify as public service broadcasting?”—I thinkprogrammes, or if they are they will not take any you have to look at the service as a whole and seenotice of them. We have already seen a decline in the balance of it and the range of choice ofindividual channels viewing numbers, obviously programmes that are delivered because there is anbecause there is more choice. If this comes along, audience for them, and not necessarily driven bywhere the future viewers and listeners have no the size of audience. I think the broadcaster, tointerest in being presented with a schedule of qualify as a public service broadcaster, must fulfilprogrammes—and this is one of the strengths of the that remit.BBC, and I am a strong supporter, and it has beenmentioned a number of times by your panel this

Q379 Ms Shipley: How is it a public service tomorning—presenting a whole variety, some ofentertain?which would be definitely defined as publicMr McGarry: I believe it is. If you askedbroadcasting and others as wonderfulanybody—entertainment and mixed up with education, if in

fact all the public want to do is draw down fromwhatever programme they want to watch, what Q380 Ms Shipley: I know that you believe itfuture is there for the BBC if nobody wants to be because you have stated you believe it, but howpresented with a schedule? It is not easy for you to is it?respond to but it is something we have to face. Mr McGarry: I believe the majority of people inMr Dear: I think that is a tremendously exciting this country look upon the provision offuture for the BBC, rather than a negative one. If entertainment in its broadest sense—if one canyou take the Olympics, even with digital TV you define it. We are not talking here just about comedypress the red button and you can decide not to and light entertainment, we are talking aboutwatch the 4 x 100 metres but you can watch the entertainment which can be serious drama or theworld record attempt at pole vault or the long range of programme provision. I think the majorityjump. The ability for people to demand what it is of people in this country do believe that that is athey want to see and when they want to see it of service they are getting in return for paying theircourse is going to increase through technology, but licence fee. I do think that is what the majority ofthink of the tremendous archive that the BBC has people believe.in terms of people being able to demand that kind Mr Bolton: Firstly, I would not disagree withof stuV. There also has to be a certain point where anything that Ian has said, so what I say will beyou have watched everything there is to watch or relatively brief in adding to it. The BBC is not justyou want to watch and people have to make new a broadcaster, it is a cultural institution in thisand original programmes and original content, and country that reflects in terms of what people seethat is where the BBC really comes into it strength. and hear and the life of this country, and helps thePay TV only reinvests 3% into original production; country feel at ease with itself. I think that isthe BBC reinvests the vast majority back into its a public service responsibility. It makes aown production and into other productions. I see contribution to the democratic process in thisit as an exciting future for the BBC where it has to country. When, in times of crisis, people want tocompete on the basis of the best content. From all know what is happening and want to go somewhere

that is reliable and feel they are going to beour points of view that is what we want—strong




properly informed they go to the BBC. That is and one might argue they would not but theycould; whereas the unique selling point of the BBCpublic service. They are the only two things I wouldis extremely important.add to what my colleague has said.Mr McGarry: I do not disagree with that statementMr Dear: In one of our early submissions we putrather than question.a five point definition about accessibility: access toMr Dear: The fact is that there is a whole range ofall to a range of high quality programmes;programmes that fit in with how I have defined it,impartial news; broadcasting free from politicalthat the BBC would do what no other commercialand commercial pressure; broadcasting that catersbroadcaster would do, because they would not befor all sections of the community; and broadcastingcommercially viable programmes for them to bethat is owned by the public and accountable to the able to produce.public. Within that diVerent programmes will fulfil Mr McGarry: I do not see anybody competing with

diVerent remits. I think you can have entertainment the BBC to broadcast the Proms.programmes that also educate and inform. Whatwould you say East Enders is? Some people will say Q382 Ms Shipley: I have a statement—that thethat is public service broadcasting. Some people BBC has to have its unique quality. What worrieswill say it is not. It serves sometimes to educate and me is that parts of what you just said in answer tosometimes to frustrate, but it can have a public “What is its unique selling point?” have not beenservice role; it will depend on how that is defined. unique. Where it has been unique it has been very,

very strong. Where it has not been unique it getsweaker.Mr McGarry: Yes, I tend to agree. I think the BBC

Q381 Ms Shipley: I think what Mr Bolton says, the has to do what it says on the can, which is producebit where you say you are unique, I thought that the kinds of programmes of quality and depth andwas an extremely powerful and important piece of challenging nature that others will not do. I thinkpublic service broadcasting and unique for the it can do that in the context of broadcasting aBBC. What I was asking for was a unique selling whole range of programme material, but central topoint and not what could anybody do. What its role must be that—to do things that others areworries me about what you said, Mr McGarry and not doing.Mr Dear, is that actually any and all of the other Chairman: Thank you very much, gentlemen, much

appreciated.broadcasters could do that, should they choose to

Memorandum submitted by Creators’ Rights Alliance

Introduction

We believe that it is of vital importance that the role of creators’ and the huge contribution they make tothe BBC’s content across all media is recognised and taken into account throughout the BBC CharterRenewal process. We are, therefore, pleased that this Committee acknowledges our contribution to thedebate and to have the opportunity to provide evidence in support of ourAYliatedMembers to this Inquiry.

The Creators’ Rights Alliance is made up of 16 major organisations that together represent over 85,000copyright creators and content providers throughout the media. The current aYliated members are listedbelow.

The CRA submission to the CMS BBC Charter Renewal Inquiry in April represented the broadconsensus reached by the Creators’ Rights Alliance and was based on the CRA submission to the DCMSPublic Consultation and Review of the BBC Royal Charter.

Since then the debate has moved forward with the publication of the BBC’s own document, BuildingPublic Value. We are encouraged to see that the BBC has taken on board many of the concerns expressedby our members and has requested our contribution to its own reviews. There is a real sense of opennessandwillingness to develop ameaningful relationshipwith creators’ which is ultimately to the benefit of us all.

Affiliated Members of the Creators’ Rights Alliance

Association of British Science Writers, Association of Illustrators, Association of Photographers,Association of United Recording Artists, British Academy of Composers & Songwriters, BritishAssociation of Picture Libraries and Agencies, Chartered Institute of Journalists, Directors Guild of GreatBritain, Garden Writers’ Guild, The Incorporated Society of Musicians, The Musicians Union, NationalUnion of Journalists, Outdoor Writers’ Guild, The Society of Producers & Composers of Applied Music,The Society of Authors, The Writers’ Guild of Great Britain.



Summary

The BBC is essential to UK creative talent both now and in the digital world.

The licence fee is the most viable and appropriate way to fund the BBC.

The public and the BBC governors are the best way to regulate the BBC and we do not see the need toadd another layer of regulation with Ofcom.

How Should the BBC be Funded?

We strongly believe that the licence fee is the only viable way to fund the BBC.

We have examined and discussed in detail the alternatives but firmly believe that to maintain a dynamic,quality broadcasting industry (in the widest possible meaning of the word), free from the influence ofgovernment and commercial concerns and to ensure that the UK has a voice in the wider world the licencefee is by far the best option.

From the creators’ point of view it means that we can continue to expect:

— Fair treatment and contracts

— Training and development opportunities to encourage new creative talent and maximise thepotential of existing talent

— A commitment to diversity and representation of all sectors of the UK

Through governance and accountability, the BBC should continue to be trusted to spend the money itreceives in a way that meets its obligations as the main PSB in the UK.

What Scope and Remit Should the BBC Have?

“Broadcasting” should be looked at in the widest possible meaning—spreading the word—encompassingnew technologies as well as radio and television.

TheBBCbelongs to the people of theUK in away that no other broadcaster does or could. It is an integralpart of our lives and is a trusted, reliable source of information, unpolluted by political or financialshareholder interests. It is unique in its ability to educate, inform and entertain without the influence ofadvertisers, sponsors, politicians or financial shareholders. It is at the heart of our democracy.

The growth in digital TV (and digital film projection) and likely developments in the Internet and othernew media provide an increasing number of platforms for people to receive “broadcasts”. In the same waythat the BBC has been influential in ensuring a high quality threshold for radio and TV content in the UK,we believe that it is essential for the BBC to play a significant role in a digital world and thus provide qualitybenchmarks for the future.

A digital future also brings with it an abundance of opportunities. The BBC is ideally placed to capitaliseon these opportunities to the advantage of everyone in the UK. It opens the door for small, communitybased projects supported by local BBC facilities and personnel through tomajor joint international projectsthat ensure that British culture is broadcast internationally.

If the UK is to sustain its unique creative and cultural voice in a world increasingly dominated by largeinternational corporations it needs a BBC that has the benefit of significant economies of scale together witha commitment to public service content and broadcasting.

How Should the BBC be Governed and/or Regulated and What Role Should be Played by Ofcom?

At the most senior level the BBC needs to achieve separation from political and commercial interests.However, we believe that there may also be advantages to a clearer separation of governance and day-to-day management of the BBC.

The role of the governors is regulatory so we do not see the point in introducing another layer ofregulation by adding Ofcom to the equation. The BBC should not be measured by the same criteria ascommercial broadcasters. Additionally we would like to see the interests of creators’ represented on theBoard of Governors to ensure that the BBC continues to treat us fairly and acts as an example of goodpractice to other broadcasters.

In a Changing Communications Environment, Does a 10-year Royal Charter and Agreement with

the Secretary of State, Together, Provide the Most Appropriate Regime for the BBC?

It is precisely because we live in such dynamic times that the BBC should receive a 10-year agreement. Tobe eVective not only in the UK but also in the global broadcasting arena, the BBC needs to be able to planin the long term. The BBC is constantly subject to public scrutiny and with the proposals it has made forits future is keen to ensure that this is the case.



Recommendations

The BBC should continue to be funded by the licence fee.

The BBC should be a beacon of good practice.

There should be clear separation between the governor’s and the day-to-day management of the BBC.

September 2004

Memorandum submitted by Music Business Forum21

About the Music Business Forum

TheMusic Business Forum (MBF) is an informal group of music business and related organisations that,since its inception in the spring of 2002, has gained a reputation as an eVective representation of musicbusiness interests in its widest sense to Government and beyond.

The members of the MBF represent interests from all aspects of the UK music-making community,ranging from composition, adaptation, performance, use, licensing, publishing, recording, investment,distribution, marketing, training, education and business development in all the ways that reflect the vibrantdiversity of the industry.

Membership details for the Music Business Forum:

— AIM (Association of Independent Music)

— APRS (Association of Professional Recording Services)

— AURA (Association of United Recording Artists)

— British Academy of Composers & Songwriters

— BARD (British Association of Record Dealers)

— British Music Rights

— BPI (British Phonographic Industry)

— CM (Community Music)

— Sound Connections

— Equity

— The MCPS-PRS Alliance

— Music Education Council

— Music Industries Association (MIA)

— Music Managers Forum (MMF)

— MPA—(Music Publishers Association)

— Musicians’ Union

— Music Producers’ Guild

— National Music Council

— PwMRA

— PPL (Phonographic Performance Ltd)

— VPL (Video Performance Ltd)

BBC and Music

TheMusic Business Forum (MBF) welcomes the Committee’s inquiry into the BBC Charter Review.Webelieve that music is at the heart of the BBC as a public service broadcaster and the services it provides. Theimportance of the relationship between music and the BBC can be demonstrated by pointing to the factsthat:

— Almost 60% of BBC radio network content is made up of music;

21 See also Ev 64–72



— The BBC is the biggest commissioner of music in the world;

— The BBC is a major employer of musicians, running 5 symphony orchestras in England, Scotlandand Wales, and the BBC Singers;

Without the BBC it’s doubtful whether the huge range of music that is made and listened to across theUKwould have a broadcasting platform. In addition, the BBC acts as an important showcase for musiciansand music within the United Kingdom and to wider audiences around the world.

We concur with the Secretary of State for Culture, Rt. Hon Tessa Jowell MP, that the BBC should beventure capitalist for creativity.

We very much welcome the BBC’s own response to the DCMS Review of BBC Royal Charter and its“Building Public Value” document.

Responses to Specific Inquiry Questions

Given expected growth in digital TV and likely developments in the internet and other newmedia, what scopeand remit should the BBC have?

The various components of the BBC are all of vital importance to UK music-making as distributionchannels in terms of commissioning, audiences, live music and almost every other aspect of the industry bysimply providing quality and diversity of music for the listener or viewer.

BBC Radio Services:

We are keen that radio is given the support and prominence it deserves within the BBC, especially asdigital radio stations becomemore prevalent.We particularlywelcome theBBC’s commitment to newmusicand live music. We recognise that the BBC has an important role to play as the “plus one” at the local leveland appreciate the extension of local radio to underserved areas to facilitate the expression of local culturaland community identity.

BBC Television Channels:

It is felt that BBC television channels, taken as a whole are very much “light” with respect to musicprogramming. There needs to be an increase of creativity in music programming put on BBC’s mainstreamchannels and made accessible through more sensible scheduling.

BBC Online:

The breadth of content and services oVered by the BBC online, whilst commendable in its range in manyways, should not be allowed to extend beyond its core competency and risk negative commercial impact onothers. Core public (service) values are important here, and we look forward to the BBC’s own response tothe Graf review. Whilst we acknowledge the profiling of British broadcasting and content is important,rights should be considered at every stage of development, particularly when extending to any services whichallow the downloading of content by users of a particular service.

Archive:

If new archiving technologies allow past programming to be accessed by viewers in new ways then theBBC must ensure that within the implementation of such initiatives there is respect for the copyrights andperformers’ rights of those who contribute to BBC programmes. This includes the provision for rightsholders to be appropriately paid for the additional use of their work through access to archives. This shouldbe the case whether in the form of repeat broadcasting fees, extensions of the collective bargainingagreements in place for the payments of revenue for secondary uses, or through the negotiation of clearancefor the right to exercise new rights on individually negotiated commercial terms.

Education / Media Literacy:

The BBC has an important duty to promote media literacy and we are pleased that the BBC recognisesthat this is a priority area. This should not be just about helping to present and use the diversity of workthat is available, but also in educating audiences and potential creators and creative entrepreneurs of thefuture about the importance of creative people being able to earn a living from the use of their work. TheBBC’s role in the promotion and delivery of creativity is paramount and we would therefore like to see theBBC play a central role as a copyright education facilitator because of its unparalleled access to audienceson a variety of levels and in amultiplicity of ways. This is particularly vital given the BBC’s archive initiativeand resulting public perception of this material as “free”.

Commercial Services:

The MBF believes that, to the extent that the BBC undertakes commercial services, these should becomplimentary to the public services operated by the BBC, and not detract from them.Where the BBC doesundertake commercial activities, it should get a good and fair return for licence fee payers and contentowners, especially overseas. It is important to recognise that creators must be rewarded properly. Rights



owners and contributors to the BBC programmes and ancillary works commissioned by the BBC must beable to negotiate fair terms for the use of their work on a free market commercial basis. The BBC in its roleas public service broadcaster should be a standard bearer for best business practice in this area.Wewelcomethe BBC’s current internal inquiry in this area.

Regional Dimension:

The BBC has an important and unique role to play in providing distinctive services at the local level. Interms of music provision, the MBF supports the production of the regionally-based programming by theBBC and applauds further eVorts in this area. Regional production of music-based programming plays avital role in enabling new talent to be heard, local creative economies to be sustained and regional cultureto be supported. With the steady withdrawal of broadcasters from the regions, the need for a strong BBCregional base becomes imperative. Moreover, we note that this is a potential growth area for the BBC andvital to music as it underpins diversity and access, which are key. We want to see community levelprogramming having an opportunity to be picked up and introduced to the mainstream, so that themainstream itself can evolve to embrace more diverse influences.

In the Context of Scope and Remit, How Should the BBC be Funded?

BBC editorial independence and integrity can best be preserved for the term of any new Charter byfunding secured through a licence fee. This enables financial accountability to the public at large and a directconnection between the BBC and British public.

A secure funding base allows the BBC to invest in creativity, innovation and risk taking. Fundingfragmentation of the BBC would result in a reduction in programming quality and range.

We acknowledge the results of the DCMS consultation “what you said about the BBC” whichdocumented that the licence fee is widely considered to be the best or least worst” way to pay for the BBCfor the next Charter, with nearly two thirds (63%) supporting the licence fee in its current form.

We recognise that the BBC is willing to modernise aspects of the licence fee, making it easier to pay andcheaper to collect and these proposals are welcomed.

How Should the BBC be Governed and/or Regulated and What Role Should be Played by the

Office of Communications?

Whilst we recognise that the self-regulatory culture of the Board ofGovernors hasworkedwell to a certainextent, it has also often been influenced by the management of the BBC. We believe a Board of Governorsshould be equally free of influence from government and management in order for it to be successful. Wewelcome the steps proposed by the BBC in this area, such as the Governance Unit, and application of thepublic value test.

The role of the BBCGovernors needs careful review taking into account the diVerent skills that are neededto carry out the aspects of “corporate governance” relevant to the governors current role and the regulatoryaspects of their role.

We believe that there should be a Governor on the Board to represent the role of music in the BBC’sbroadcasting.

We see Ofcom’s role as that of economic regulator and, as such, separate from the Board of Governors.

We believe that the role of music in radio and television must not be allowed to slip down the agenda ofpriorities for regulation both for Governance of the BBC and through Ofcom generally.

In a Changing Communications Environment, Does a 10-year Royal Charter and Agreement With

the Secretary of State, Together, Provide the Most Appropriate Regime for the BBC?

A Royal Charter continues to be the most appropriate basis for the establishment of the BBC and a newCharter should be granted to apply from 2006.We agree with the BBC in that any othermodel chosenwouldhave to be at least as eVective as the current model in underpinning the BBC’s independence and public role.

It is important that music should be expressly referred to as a key part of the cultural activity both forpublic service radio services and public service television services provided by the BBC. Furthermore, giventhat music is such a vital part of the BBC’s work, we think that it is necessary to preserve and build uponthe express references to music within the current Charter in the new Charter.

September 2004



Witnesses: Mr David Ferguson, Chairman and Mr Jim Whiteford, Chief Executive OYcer, Directors Guildof Great Britain, Creators’ Rights Alliance, Mr Chris Green, Chief Executive of British Academy ofComposers & Songwriters and Mr John F Smith, General Secretary of The Musicians’ Union, examined.

Chairman: Gentlemen, welcome here today. I will education to out and out entertainment will spendin the creative industries, so would you agree withask Alan Keen to start the questioning.me we are feeling our way through this, and it wasa bit of a shock to have somebody tell us thatQ383 Alan Keen: I asked the last panel about thenobody in the future will want to sit and becertainty that one or two individuals in the Statespresented with a variety of programmes—what Ihad that there would be no place for schedules and,call the fear eVect of TV? Would you agree within that case, where would the BBC be. You areme that maybe it makes the BBC more important;representing creative people, if those changes comethat at least that amount of money is going to beabout do you disagree with that altogether? We willspent in a broad sense with education part of it?know better when we talk to young people and howMr Ferguson: It also has a huge importance inthey want to watch TV. How it was put to us wasterms of how the BBC is able to do more than justthat young people will no longer have any interestproduce the programme. I happened to see anin sitting in front of the television being presentedexample of this on Friday night where my sonwith a variety of programmes, and they will wantdecided to watch a documentary on BBC about theto go in and pull down a piece of music for fiveBattle of Naseby, and immediately afterwards heminutes and then disappear somewhere else. Havewas on the internet looking at the history page,you had a chance to think about this and how itchecking through the whole thing to do with itwould aVect you as creative people?afterwards. This is a classic example of somethingMr Smith: As far as music goes we are experiencingwhere the BBC is the only real player capable ofthat with music on the Internet already. They candelivering this sort of service and it is because heactually pull down the song they want, the trackhappened to be absolutely fascinated in thatthey want, and the record companies are stillparticular battle. Whether he would have done itproducing albums with songs they do not want. Iwith another programme does not matter but thethink we have got to come to terms with that. AsBBC oVers this and nobody else oVers anythingfar as music on the BBC is concerned, we are notparallel to this.there yet, are we? It is available on-line and lots ofAlan Keen: I will not push this but it is somethingmusic is available. There is an immense amount ofwe need to think about all together.music on the BBC. I do not see why music as a

product cannot adapt to that. It is up to theinventiveness of broadcasters and technical people Q385 Rosemary McKenna: We were all quiteto make that available. There should not be any fascinated by the evidence we got about how thingsreason for schedules, but maybe there should be are going to change in the future. It was very cleargenres which are available. that things are going to change, and I think youMr Ferguson: What you will also notice is that if made reference, Mr Smith, to the fact that theyou look across the digital span the vast amount of broadcasters and the providers have to find waysthe content that is actually up on the other digital of using new technology. It reminded me about thechannels was originated by the BBC. If you look discussions that were had during the passage of theat the satellite broadcasters it is either made by the Communications Bill and the pressure that theBBC or it is imported from America, and what music industry were putting on to make sure thatbecomes important in this context is the BBC’s local music was on the face of the Bill, not just localproduction base, and the fact that it is able to news. Has that had an impact, or is the BBC stilldistribute its work through a variety of diVerent the main provider of local music?medias in the future, and the schedules, I agree, will Mr Smith: It will have an impact, we hope. We arenot become terribly important. But that does not talking to Ofcom about it at the moment. It hasdiminish the importance of the BBC as the prime not really had an impact yet. We were very pleasedproducer of programming in the first place. when it was on the face of the Bill and it is a testMr Green: There is just one thing I would like to of local music. We are supportive of the BBC butadd which is, again, thinking particularly of music there are areas where we want the BBC to improvebut this could apply more generally, greater and that is one area you have just hit upon—andopportunity for people to access what they want I am talking from the music sector now. Musicalso provides greater opportunity for minority coverage on local radio we think is a bit lacking onareas of creativity to have an opportunity to be the BBC services, and we believe there has beenexposed, to be seen, to be understood, to be some market research which shows that people inappreciated and to be shared, and at the moment various localities want to listen to local music, andthere is a tendency obviously for the more popular we think there are ways of doing that. We areareas of creativity to squeeze out the minority ones. talking to the BBC as well, and hopefully we canSo it does provide a very important base for a wider help. But yes, it is an exciting opportunity whichand more diverse availability of all our art forms. has not been delivered yet by the commercial sector

or by the BBC.Mr Green: I think another issue here, and I entirelyQ384 Alan Keen: It may or may not make the BBCagree with John and we do not think the BBC ismore important because there is at least £2 billiondoing all it could be doing on that front, is thator £3 billion which someone who has the duty of

providing a whole range of everything from there is also sometimes within the BBC a strange



7 September 2004 Mr David Ferguson, Mr Jim Whiteford, Mr Chris Green and Mr John F Smith

lack of communication between what happens in Mr Smith: Lots of things! On the creative archivelocal radio and on national stations, and there is a that you have mentioned, speaking for my ownfantastic opportunity where interesting new music personal organisation, the Musicians’ Union, weis found locally for it to be shared with a wider have talked to the BBC and we are told that theaudience, and that is something that the BBC onus is on them to protect the rights. We will co-certainly should be leading on, and I hope it will. operate; in natural history programmes there is lotsMr Ferguson:We have been in the process of trying of music involved; we understand why the BBCto set up a branch of the Academy of Composers wants to do this and we will not stand in their wayand Songwriters in Scotland and one of the things but, if anything goes wrong, it is the BBC’swe were really struck with on several visits to responsibility to make sure our members’ rights areScotland is how important everybody there we protected. Now that is easily said and we will seetalked to regarded BBC Scotland. Particularly in what happens, but the BBC seem confident thatthis context given that the STV television franchise they can protect their own rights, although I dois becoming such a marginalised player in the face believe The OYce is available on KAZAA at theof the amalgamation of Carlton and Granada, and moment to be downloaded illicitly.it is finding it increasingly diYcult to makeprogramming that goes out nationally across theUnited Kingdom, the importance of BBC Scotland Q389 Derek Wyatt: But is one of the issues,as a player in this became even more important. though, and this has been hinted at by others round

the table, if digital rights management is a keyfactor in future rights, that the BBC, having maybeQ386 Rosemary McKenna: That is something wedecided to sell BBC Worldwide, will then tell theare very concerned about, although it is not specific

to this inquiry but it is an issue. Can I ask about independents that are pre creating programmes, “Ianother issue? The music industry seemed to get am awfully sorry but instead of buying the rightsitself tied up in knots on the issue of pirating. There oV you for two hits or for two hits and a repeat,is a very good line here suggesting that rather than in order to make BBC Worldwide stand upresorting to traditional copyright protection commercially for a sale we will want rights for themodels, should it not be i-Pods rather than next 15 years”, and the independent sector will haveinjunctions? no leverage whatsoever on product they haveMr Smith: Maybe that is right! Everything moves created?so fast and the record industry was still looking at Mr Ferguson: The code of conduct which has beenits old business models and the way that consumer negotiated between the BBC and PACT on behalftaste was, and consumer taste changed very of independent production companies obviatesquickly. I mentioned earlier on that people did not that, and that is not going to be the case. I thinkwant to buy albums with things, they only wanted the case is going to be whether or not theone song, or two or three songs perhaps, of that independents do decide to do their marketing ofparticular artist. The record industry has changed; their secondary usages through an organisation likeit is looking at digital rights management methods BBC Worldwide or not and, indeed, as far as I amof protecting its copyrighted material. It is a risk aware, there is some discussion between BBCbecause with new technology there is always a high Worldwide and ITV on joint marketing venturesschool person in California that can hack into it

into foreign territories. I think the most importantstraight away.thing with digital rights management in the context,and the implication behind this is much more to do

Q387 Rosemary McKenna: What I mean is that with television it seems to me than with radio, thepeople will want to download and are quite happy way we are coming at this, is that we stronglyto pay for proper downloading of good quality welcome the archive being made available to themusic, and it seems to me that there is a real British public. The British public have paid for it;opportunity there because a lot of the pirated stuV they certainly should have access to it. What I dois not high quality, and people will be willing to pay think the BBC have to be very careful about infor it. doing is not making this archive freely availableMr Smith: It is being developed now and Apple are around the world because it is the property of theleading the way with that, and we are very pleased BBC and the BBC should be making a return onabout that development. that intellectual property in order to fund its own

activities as well as to remunerate the people whocontributed to making that archive in the firstQ388 Derek Wyatt: It seems to me that the nextplace. So what the BBC have to be careful to do,big area is digital rights management, and in a senseand which Apple certainly seem to be able to domusic has kicked it oV but the BBC has thiswith i-Tunes, is to make sure that the archive isphenomenal archive and it is going to shortly putavailable free to the British public and if peoplethe natural history three minute clips on. Whatfrom overseas wish to access it they pay for it, andproblems do you see in digital rights managementif Apple can do this, if the newly launched Sonyfor your own bits of business that you are in chargeConnect can do this and various other downloadof? What makes you apprehensive or nervoussites can do this, I see no reason why the BBCabout the developments for digital rights

management? cannot do this.




Q390 Derek Wyatt: Let me just push that digital which I see certainly as currently constitutedoperating in a diVerent way. I completely agreerights idea. We have the greatest library in the

world in the British Library; it failed to raise £150 with what you say about the BBC and orchestras.Derek Wyatt: World Service radio is sensationalmillion in a joint venture PFI bid to digitise its

archive, which is a huge shame because the and no one disputes that. If we could have that forthe whole of the nation, a cultural centre for digitalSmithsonian has now taken a quantum leap against

it. The whole thing about digital rights is that we, rights—not just for the BBC but for the whole ofthe nation, that is what I really think—then I thinkas the creator of the language, as the owner of the

longest legacy of language and English, have a if the BBC was a 70% shareholder or whatever, oryou make it a co-operative, a trust or charity,phenomenal chance in the next eighteen months to

win this system, but it is not just the BBC stuV we whatever, the fact of the matter is we do not wantto get behind in this area as we have been.want; we would like the Lowry—we would like

whatever we have in our own museums and art Chairman: Derek, I know you care about this butthis is becoming very tangential to BBC Chartergalleries, we would like a collective digital rights

scheme, but the BBC is not interested in that. Do review.Derek Wyatt: I will stop there, Chairman!you think there is a bigger issue? That it may be

that the BBC ought to handle it on behalf of thenation because it is a cultural centre? But there is Q395 Mr Hawkins: I have a couple of questionsthis bigger drive of which the libraries and art about your views, and I appreciate you all maygalleries and so on are a part which do not seem have diVerent views on this, about digital. Firstly,yet to be in this debate. I know that is not do you think that the digital switchover will benecessarily your own interest but you are citizens achieved by 2010?as much as we are, and it is a very big discussion Mr Smith: That is a good question. I am dubiousbecause we do not want the Smithsonian to beat us. if they can achieve it. It is to do with take-up. WeMr Ferguson:No, but the Smithsonian funding and have spoken to the DCMS about this through thethe way it operates is very diVerent from any feedback we get as an industry and they are dealingUnited Kingdom institution. I have to say I think with things like blocks of flats and hotels and theyit is unfair to bring this sort of question into what are scratching the surface. The multiple televisionthe BBC should or should not do because the BBC household really has not been addressed. Evenat no point has ever been charged with that sort of though the set top boxes are now down to aboutactivity— £50 that is quite a lot if you have four televisions

in the house, and I think there is going to have to besome impetus to reach that target. It is quite soon.Q391 Derek Wyatt: After all, you could say, if youMr Green: It is the last 20 or 10% that is going towere creating the BBC today, why would you allowbe diYcult.them to have orchestras?Mr Ferguson: The BBC is to do with grantingMr Ferguson: Personally I feel that what you areaccess free at the point of delivery to everybody intalking about there is something that would bethis country and the BBC has been successful, verymuch better run by something set up by DCMS tosuccessful indeed and could only have done it frompromote culture as a whole rather than the BBCthe position of the BBC of getting freeview underwhich has been set up as a disseminator ofway and has demonstrated the need for free-to-airbroadcasting product which it makes, primarily.digital programming, but the BBC itself probablywould not want to see analogue switch oV if it knewQ392 Chairman: But it ain’t broke, so why fix it? that 10% was still foundering, and it is crucial IMr Ferguson: I am not saying it ain’t broke. would have thought that the BBC has to be thereto include everybody. That is one of its roles. That

Q393 Chairman: Nor for myself do I think it is a is what makes it a public service broadcaster rathervery good idea to have state orchestras. than a commercial broadcaster.Mr Ferguson:We do not have state orchestras. TheBBC has. Q396 Mr Hawkins: Expressing a personal view I

am delighted to hear what all three of you have saidabout that because I share the scepticism, but theQ394 Chairman: But if you are saying the DCMS

should take over this kind of responsibility from second question is should there be at some point inthe future digital switchover for radio, and is therethe BBC, whatever else one says about the BBC—

and there are lots of things that can be said about any pressing reason why there should be aswitchover?the BBC—one of its huge contributions to the

culture of this nation is the range of first rate Mr Smith: There does not seem to be such apressing reason. There is plenty of radio availableorchestras which would not exist if the BBC did

not exist? on the analogue spectrum at the moment, plenty ofvariety, and the digital services—I am not sureMr Ferguson: I completely support that. What I

said about the DCMS is they have responsibility what the take-up is or what the figures are but thereis certainly not as much publicity about the digitalfor libraries and archive at the moment and it is

them that should be coming forward with policy radio services, although in our music industry weare quite keen because of the potential quality thatideas like that, or people should be proposing it to

them, rather than trying to pull the BBC into this can come out the other end—




Mr Green: It is still quite expensive too, that is the Q397 Chairman: It is an interesting question youraise, Mr Ferguson, about whether analogue switchtrouble. You can buy an ordinary radio for five

quid oV the shelf, and you are spending a lot more oV is related to radio rather than television, becausewhereas the manufacturing industry is going prettymoney on a digital radio. They do not always work

in cars I understand too. fast in terms of digital television, they are verylaggardly indeed on digital radio. I heard BOSEMr Ferguson: I think the take-up of digital radio

will depend much more on whether there is value radio and I thought the sound was so brilliant thatI would like to buy a digital BOSE radio and I rangin freeing the bandwidth that is currently used by

ordinary analogue radio which therefore would up the stores that stock them and they said BOSEhave absolutely no intention of manufacturing aencourage both broadcasters and manufacturers to

make digital radio more available, but I had some digital radio because there is no commercial interestin it.statistics given to me the other day. There are over

100 million analogue radio sets owned by people in Mr Ferguson: But if you get a specific part of themarket that becomes very interested in it, Ithis country, and if you compare the proportion of

that to the amount of digital sets that are available understand, for instance, in the Asian communitydigital penetration is up to 90% because thoseyou cannot see analogue switch oV being a reality

without a massive carrot being held up to people have particularly realised that they haveaccess to media that they particularly want throughencourage everybody to do it, but you may come

up with a piece of technology which may be on the digital, and I think that is what I mean by thecarrot working; that if you are oVering somethingi-Pod scale that has the same eVect that the DVD

machine seems to have had over the VHS. You can digitally that is not available in an analogue wayand it is something you really want and you canscarcely find VHS machines on sale unless it has

happened within a two year period, so somebody get the pricing of the sets down and encourage themanufacturers to be able to mass produce, that ismay come up with the digital audio receiver that

suddenly everybody does go and buy. The other how you get there, but I agree with John Smith’sstarting point—I do not see much movement in thisthing is that even though the prices of DAB radios

have gone down to £50, you get given radios in area at the moment.Chairman: Gentlemen, thank you very much. Yougarages that operate on analogue, so it has to get

into that zone before it becomes workable, I think. have provided us with a very interesting perspectiveon this subject which we shall continue inquiringinto for several weeks still. Thank you very muchindeed, and I declare the session concluded.




Members present:



Witnesses: Mr John McVay, Chief Executive, PACT; Mr Andrew Zein, Chair of PACT and ManagingDirector of Tiger Aspect; Mr Alan Clements, Chairman, IWC Media; and Mr John Woodward, ChiefExecutive OYcer, UK Film Council,1 examined.

Chairman: As they say at the beginning of the best quality US films displace the slot opportunities forBritish films, which of course vary in quality as well,production on at the National Theatre at the

moment—and I do not refer to StuV Happens— but I think if there is no opportunity to see a rangeof British films, some of which will hopefully beplaygoers, I bid you welcome. Frank Doran will

start the questioning. blockbusters—like Billy Elliott, which at its lastouting I think got an audience of 12 million—compared with examples where late on a SundayQ398 Mr Doran: Thanks very much, Chairman, andnight, 11.30, you might get very much a B-list USwelcome, gentlemen. One of the issues that thisfilm which will be of variable quality. OurCommittee has discussed on a number of occasionscontention is that at 11.30 on a Sunday night maybein the past is BBC Television’s commitment to film,it would be useful to see a B-list British film thatand I know that is an issue that has exercised you.might be of variable quality; but I think the qualityThere is a Communications Act commitment tois always in the eye of the beholder.have regard to film, and I would be interested in your

views on how the BBC carries out its responsibilities.Q400 Mr Doran: Address the cost issue as well. IsMr McVay: I will start that, and I am sure some ofthere any diVerence in cost between buying either anmy colleagues will join in that. I think our viewA-list or a B-list British film as against theabout the BBC is that as a publicly-fundedAmerican product?broadcaster we feel that the BBC plays a unique roleMr McVay: It is hard to extrapolate the costs outin its support for British film; however, that theirfrom the bundled deals, because they are bundledsupport for British film over the past few years hasdeals. We have done some work, which we will givebeen more supporting US films rather than Britishto the Committee, on our estimations, which arefilm. We feel that there is an opportunity from thefrom our original research we have commissioned,work of this Committee, the review of the charter,but it is quite diYcult for us to actually drill down tothat this could be addressed to strike a better balancethe actual cost per film. We can take a deal and thenfor the British licence fee payer so they can see moretry and look at the total cost and then workBritish films, that the BBC can be one of the keybackwards. I think the issue is more aboutinvestors in British talent, and that we can deliverinvestment rather than cost, in that the bundled dealgreat British films to the British licence fee payer.is money being invested in the US film-makingFor example, in the year 2003–04 only five UK filmscommunity, so—were shown in peak time on BBC1 compared to a

hundred US films. Furthermore, only two UK filmswere premiered in peak time on BBC1 during that Q401 Mr Doran: Can you explain bundling to me.time compared to 28 US films. So clearly there is a Mr McVay: Bundling is whereby you may acquire,lot of interest in US films, but we think the balance say, Harry Potter as lead film in a bundle of filmshas gone too far towards acquisition of US bundled which might be for eight or ten million, but withinfilms, and we think that should be addressed by the that you have to take a whole lot of other studioBBC to strike a balance so that we can see more films which they sell as a condition of buying theBritish talent on the BBC. Harry Potter deal. So then, once you have bought

that bundle, you are eVectively duty-bound to screenthat bundle at slots throughout the schedule.Q399 Mr Doran: Is it an issue of quality, or is it

something else—cost, for example?MrMcVay: I think it is an issue of quality, and if you Q402 Mr Doran: So that does bring us on to cost,

because the opportunities for British films to bundlelook at what may be comprised of the US bundleddeal you will get one blockbuster film, which would must be much more limited, because—

Mr McVay: Yes, because we do not have studioprobably be the bank holiday film, but then a wholerange of other films which will have varying quality systems of that scale, and also we do not compel

broadcasters to buy bundles of films.anyway. I think our problem is that those varying

1 See Ev 57–59



14 September 2004 PACT, IWC Media, UK Film Council

Q403 Mr Doran: So the B- and sometimes C-list financiers of that film will get no additional returnsfor however many times it is shown. If you choose toAmerican films will be bought probably as part of

that bundling process? go the other way and for the BBC to have a role inthemarketplace after the event, so that a financier ofMr McVay: Definitely.the film knows that if they invest in the film there isthe chance of a terrestrial sale, that the BBChas a bigQ404 Mr Doran: As acquiring one of the bigenough appetite for British films, that would helpattractions?invigorate the market as well. But you do get intoMr McVay: Yes.this odd situation that you are desperate to raise thefunds for a film you can either sell it to the BBC and

Q405 Mr Doran: So that puts the British film give away your birthright, or you hold on to it afterindustry at something of a disadvantage? the event, which we did on another film, and sold itMr McVay: That is our contention, that it does, for approximately five times as much for a lotbecause not only are you using licence fee money to shorter licence fee period, which benefited us and thereward American talent, what you are doing is you financiers but was not necessarily in the licence feeare using up slots, and clearly wewould contend that payers’ interest. There should be some sort ofmiddleif there is a balance struck between acquiring US ground there, actually.films or British films, half of those slots should be forBritish films, along with half of the investment.

Q407 Derek Wyatt: I think I should put on recordthat I should like to see a British-only film channel;Q406 Mr Doran: I think we would all agree that it isI have been working with one of the members of theimportant that the BBC should retain a commitmentpanel on that for some time. Can I just ask you: if weto British film, not just in the production but in thewere sitting together to try to create, as it were, aexhibition, as you have shown; but they also have acultural organisation—which currently is called thecommitment to the licence payer, so how do weBBC, so let us keep it the BBC—it does orchestras,address this problem from the British film industry’swhich is a rather strange thing, and it does a host ofpoint of view, in terms of the cost?other things, training and various others. WhyMr Woodward: If I may, I think you are absolutelytherefore does it not do British film?My argument isright, of course, that in the end this is an issue less forthat why should not an entity that cares aboutthe film industry and more about what the viewerculture, and the British culture, do film? So if theywants. We, looking at some of the statistics that Mrare not prepared to do it, and if there are rights—andMcVay has just gone through, commissioned somerights are always the issue, all the time, for theresearch earlier this year—it was quite a largeBBC—why is it not possible to top-slice the licencestatistically-valid poll—and we came up with anfee, and to, say, put 10% of a licence fee into a newinteresting number. More than 80% of the peoplebody so that if you are an independent, if you dopolled said they thought that public servicewant funding, you should be able to go and use thatbroadcasters had a responsibility to support thefunding for British talent?British film industry by showing more films on TV—Mr Woodward: To begin with I would say thatrecent British films—and the public seemed verycertainly at the Film Council we have nothingclear in its ownmind that that is what they want.Weagainst orchestras; in fact, we rather like them. Youknow that the BBCwhen it chooses to work with theare absolutely right, though, in the sense that, as IBritish film industry can do so very successfully.understand it, the BBC spends twice as much onBilly Elliott, whichwe have already heard about, wasorchestras as it does on investing in new Britishthe top-rated film; it is a small British film, co-films.You are talking aboutwhat Iwould argue, andfinanced with American money, interestingly, but itcontend, is the most popular art form and culture ofwas the top-rated film that went out on the BBC lastthe century—the new century, let alone the old one.year, with over 12 million viewers. The problem is,It is not for the Film Council, I think, to suggest toquite simply, that the level of engagement with thethis Committee the way in which the BBC’s financesfilm industry by the BBC I think we all believe isshould be prescribed in the future. What we aretotally inadequate. The ability is there, out of ainterested in is secure and adequate funding for theturnover of £2 billion-plus, to invest significantly inBBC, to enable it to deliver its public servicefilms that the British public want to see; but to haveobjectives; but the way in which that is done, I think,a spend, as far as we can best ascertain, of £7 millionto be honest, is outside the scope of the Filmout of £2 billion plus seems to us to be a joke, really.Council. Top-slicing is one answer; the retention ofMr Zein: I think, as the producer of Billy Elliott—the licence fee is another answer. Both of them seemand also he has gone on to production of anotherto me to have their merits.movie based on a BBCproperty—there are two rolesMrMcVay: In the charter review our position is thatthe BBC can play: it can either invest in films upfrontwe are not in favour of top-slicing per se; what we areto help make them happen; the raising of finance isin favour of is making sure that the BBC better fitsso diYcult, there is the chance for the BBC to haveits objectives and better delivers great programminga role there. The terms it oVers are so inflexible andto the licence fee payer. I think, as has been widelyso onerous that they virtually make the financing ofrecognised for the past few years, a lot of thefilms impossible, because they seek to buy all of theprogramming choices and approach the BBC haverights in perpetuity for a very low licence figure. Itaken to its scheduling, the type of programmes,think for Billy Elliott they paid something like

£450,000, and in perpetuity they can show it. The indeed films, it has brought to its schedule, maybe




have seemed to be going more towards the that scenario and therefore to run it as a channel ofcommercial sector. We think the BBC has an sorts. It could be done by broadband, it could beopportunity through this charter review to focus done by satellite, it could be done anywhere. Themore on how it invests in creativity. I think the problem is, who is going to fund it? In the end it isproblem we have with the top-slicing is that most the licence fee that has this phenomenal amount oflicence fee payers see the licence fee as the BBC. I money, and of course we see it as a possibility ofthink if you remove that into some other area of top- saying “Well, heavens, we would love to have all theslicing, contestable funding, it is hard to see how that British film black-and-white available to people”. Soconnects directly to the licence fee payer. Eventually if it is not top-slicing, it is not going to be thethat may erode the licence fee payers’ connection government, is it? So what is the funding mechanismwith the programme they actually get, because it to try and take new channels forward and new typesdoes not actually identify them per se.We feel that in of digital forward?the longer term that might erode the whole case for MrWoodward: I think in the context of the BBC thathaving a universal licence fee, which we think is a research through to a point where there is actually amajor investment in our creative economy. We have prototype product is there. The BBC has beenlooked—as I know the Committee have—at other sharing with us over the last month or two thecountries, particularly Canada, and we know from development of their online systems for opening upour colleagues, independent producers in Canada, their archives, particularly the creative archive,that the top-slicing or grant-aided programme they which the Committee is probably aware of. We havehave has actually driven down the popularity of been talking to the BBC about the possibility ofCanadian programming. We would much rather using their online and in the longer term broadbandmake great popular programming for the licence delivery mechanisms to do exactly that, to create afee payer. library, if you like, of online British films. It seems toMr Clements: I think the thing that would exercise me that is in the very early stages, and the ability ofus more is how the BBC spends the money rather the BBC to deliver that is going to depend on thethan how it is funded. I think the problem with the outcome of the charter review and the policies andBBC is not the people within it or its intent—all of proposals that flow from that.us have some of our best friends working for theBBC—but rather the structure, and because itoperates as a vertically-integrated company I think Q409 Derek Wyatt: I am going to run out of time,it is very diYcult to break into that. If the reason I but, Mr Zein, you just said something about rights,was asked to give evidence is because I am an and you are both interested in rights, you two in theindependent producer who works quite often with middle, I know, but if you are going to sell BBCthe BBC, the problem is I think a lack of Worldwide, in order to make that viable you need totransparency and a lack of division between the take rights for 10 years, so that the value of BBCpeople who commission the programmes for the Worldwide is worth two or three or four billion, soBBC and those who produce in-house for the BBC. it is going to get much tougher on the rights area ifI think the most telling example of that was Michael the BBC does decide to divest itself of Worldwide.Jackson, when he was Controller of BBC2, which is Mr Zein: When you say it will get tougher in thefour jobs ago for him, he gave a speech once in rights area, if Worldwide is divested and operates inGlasgow and he talked warmly of the corridor a commercial environment, there is the opportunityculture of the BBC, which meant that he could nip there for those rights to be better exploited bothdown the corridor and talk over some great ideas within the UK, in the opening up of new markets,with the people who were going to produce them. If whether that be an on-demand British archiveyou are not in that corridor or, even worse, not even channel, and that Worldwide will be able to go andin that city, it is very, very diYcult for you to break seek commercial funding for that to make it happen,into that. or overseas. In many ways the divestment of

Worldwide could increase the revenues to the BBC,because I think both within the BBC and externallyQ408 Derek Wyatt: When we were in Americathere is a recognition that themarket can provide therecently—I forget, the clerk will remind me—eitherfunction of selling programmes and exploitingone of the film companies or one of the technologyprogrammes and increasing the revenues. Whethercompanies said that in the near future it will bethat is done by a complete sell-oV of Worldwide orpossible to put 8,000 films onto a hard disk and forsub-licensing and various activities, whether that beyou either to decide on your hard disk whether youmagazine publishing or video publishing, which iswant to have 24 hours of it, you want to burn a CDhappening at the moment, I think there is anof it, you want to have it for a month, or whatever,opportunity there, and the ability to bringand that was 18 months away, and that that wouldcommercial funding to it, in more of a niche area. Ibe the next part—that the new type of channelsthink the market could provide a solution to yourwould be these sorts of things, that you would beproblems, or the solution lies within the BBC andable to almost have all of your American sport, orwhere it sees it priorities—or where it sees film on itswhatever it was, and it is an extension of the SkyBoxpriorities. I think Ofcom has a clear steer that filmdisk at the moment. Therefore it would be possibleneeds to be higher up the BBC’s priorities, and Ito put the British film archive, which is going

through an interesting phase at the moment, into think obviously this Committee feels similarly.




Q410 Derek Wyatt: What about the independent not actuallymaking any of its programmes itself, butquota? Would you like to see that raised commissioning programmes? You could still haveconsiderably? that corridor ethos about the programmes that needMrMcVay:No. What we would like to do is have a to be broadcast, but whymake it yourself?Why havelevel playing field, to strike a balance between in- a BBC resources department?house production, which currently has a 70% in- Mr Zein:Because I think the BBC is one of the mosthouse quota, and the independents, which has a 25% wonderful broadcasting institutions in the world,minimum.What we would like to do is we recognise and to totally overhaul it in that way would fail tothat quotas by definition are ungainly, are market recognise its role in society, the importance it playsinterventions; however, a market intervention in training in the sector, providing those morewithout which Andrew and Alan would not be in tangible programmes at the heart of public servicea job. But as market interventions we feel what it broadcasting—news, current aVairs, sportinghas done is it drove forward—and I think this events—the ability of it to focus on certain areas ofwas recognised by the Committee in the programming where the market might not operateCommunications Act—that having a healthy, as fully. There is a strength from critical mass. Icreative, programme supply market delivers value think everybody is agreed that the BBC shouldformoney, creates creative competition.We are very broadcast the best programmes that it can. Wherewelcome with the changes that the government those programmes come from should be anintroduced in the Communications Act to address irrelevance; it should be what programmes can workthe rights issue for independent producers. best for the schedule. But the ability of the BBC toHowever, we feel that to take full advantage of that get great programmes comes from having a strongopportunity, in-house production should be opened in-house production arm. The current state of playup to a bit more competition, but that the quota for

is that it is not a meritocracy in commissioning. It isindependents should stay the same; but we wouldimpossible to have a meritocracy in commissioninglike to see an out-of-house productionwhere you have an in-house production arm; there iscommissioning of 50% by value on the BBC, so thatno model in the world that works where, if you havebasically we still have the same minimum floor forcolleagues in your organisation who makeindependent producers, but a further 25% to beprogrammes and you are the person buyingcontestable by anyone who wanted to supply to theprogrammes, that you can distance that relationshipBBC. So if Granada production wanted to maketo be properly arms’-length. So, recognising thatHolby City they could tender to make thatshortcoming, there needs to be a way that when anproduction as well, so it would be far moreidea lands on a commissioner, a decision-maker’scontestable. We think that has the advantage of,desk, they give it equal consideration, and that isone, driving more competition; two, making surewhere the 50% proposition comes from. Markthat in-house you still retain 50% of the whole thingThompson articulated that he wanted a morefor yourselves; that they are also open to morevertically-integrated BBC at the launch of thecompetition, and that there is more creativity in thecharter review, which set alarm bells ringing,sector. What will happen, there is a greatbecause vertical integration normally meansopportunity here—whenChannel 4 was set up it was

a really creative blossomingwithin theUK television compromise; it means you are not commissioningindustry. We think this could have the same eVect, the best programmes, necessarily, you arewhere creatives who may currently be in the BBC commissioning them to do something else, whetherwould say “Well, actually, I have spent 10, 15 years that be to sell them for additional revenues or a fee-in the BBC; I would like to go and work for Alan assisted channel or suchlike. What we would urge,Clements, maybe come up with some new ideas, having had some discussions with the BBC, is thathave a more interesting life, supply to other they should seek to vertically integrate the entireUKbroadcasters, and critically, supply to Channel 4”. production sector, because the other aspect ofThere are various creative genres within the BBC vertical integration is a downward communicationwhich are kept eVectively as BBC genres. If they of what you need and what you want and peoplewere opened up to more competition then clearly wanting toworkwith you and engagewith you. Thatpeople would leave the BBC, go and work for is what the BBChas, an entireUKproduction centreAndrew or Alan, or set up their own companies, but who aspires to make programmes for them. I do notthey would be able to supply the BBC and Channel think there is anybody who does not want to work4 and ITV andChannel 5 and cable and satellite. We with the BBC. So that is the opportunity: find a waythink that would be a good thing for the UK for them to treat independents equally as they treatprogramme supply market. in-house, and then everybody wins; they will get theMr Zein: I think everybody is agreed—

best ideas from the sector. We are research andChairman: Sorry, we need to move on, Mr Zein. Idevelopment; that is all we do.We sit around, we tryhave three other colleagues who want to askto come up with creative programme propositionsquestions. Michael Fabricant. Before Michaeland then get those away, so the vertical integrationstarts, could I just say that at eleven I will be askingshould be sought across the whole sector.everybody to rise to observe a minute’s silence forMr Clements: Obviously I do not here speak onthe victims of Beslan.behalf of PACT, and I am very supportive of theirline, but I follow the logic of your argument.Q411 Michael Fabricant: So could I take yourSpeaking personally, I would exclude news andargument a little further, then. Why do you not

argue to say that the BBC should be like Channel 4, current aVairs, because you need a worldwide




operation to do that.Why the BBCmakesTop of the spent on acquiring British films plus around £1.5million on European films. In addition a further £7Pops or Songs of Praise is a complete mystery to me,

because it makes them more expensively than any million is spent on investing in new British films. Wethink that that total acquisitions budget should beindependent producer would. I think any time you

talk to anybody from the BBC—and I am sure they 50:50—50 for US, 50 for British films, leaving it upto the BBC how you strike a balance betweenhave sat in front of this Committee—they would say

“We always commission the best ideas”, but by a acquiring British films and investing in British films.We think that is a more level playing field for theremarkable coincidence 75% of the best ideas come

from our in-house producers year in, year out. licence fee payer and also the British film industry,and they get a fair deal from the BBC, and weImagine if you say 75% of the best films come from

one studio, or 75%of the best ads come from a single reward—and I think this is really critical—one of thethings we get back from broadcasters is “Well, we’dagency, it is clearly a nonsensical proposition, and I

think your solution is ultimately the only way to go love to get a film on BBC1 that would go out at9 o’clock on a Saturday night. We can’t get thosein order to keep them honest.

The Committee observed one minute’s silence for the films because we’ll buy a US film instead because wecan’t find the British films”. Clearly Billy Elliottvictims of Beslanbelies that, but also we think the problem is that ifyou are not investing in British talent, then how areQ412 Michael Fabricant: Mr Zein, I wonder if weyou ever going to get the talent through to makecould move now to the question of funding of films,those films that you want in order to reward thebecause I was very interested in the statistic which Ilicence fee payer? So it is a lovely self-fulfillingthink you came up with, that you thought it wasprophecy they have created, which puts us in declineabout the value of £7 million. It seems that far fromin terms of our creativity. We think with a licence feebeing a multiplier eVect, you were saying that itof this magnitude the British audiences and Britishactually inhibits greater production of film—ortalent can be better invested in.maybe it was John McVay who said that; I do not

know. Can we just explore a little bit further abouthow better the £7 million, the seed corn, if you like, Q415 Michael Fabricant: Although it has to be said,could be used to actually promote the film industry in fairness, that Billy Elliott is not the only Britishin the UK. I wonder if I might turn to John film made; there are some pretty lousy British filmsWoodward, if I may pick on him, as the Film as well as pretty good films too. I wonder if I couldCouncil, who acts very much as well to provide seed turn now to Andrew Zein. You were saying that thecorn.What sort of model do you think, if the budget methodology by which the BBC says it must retainwere not increased from £7 million, the BBC should unlimited rights is a disincentive for other people toadopt while at the same time maintaining the invest in BBC-funded films. Just clarify that, if youbalance between the duty of care to the taxpayer and would—and I know that Derek was asking you thisthe licence payer to see that theirmoney is well spent, too. Do these rights apply only in the Unitedwhile at the same time being used to generate extra Kingdom, whereby the BBC then is free to show thefunding for British film production? film at any time, or are you saying the rights alsoMr Woodward: The first point I would make—and apply to worldwide distribution?this is not meant to be a smart comment—but if the Mr Zein: No, the rights just apply to the UnitedBBCdoes not increase its level of investment from£7 Kingdom, and there is a diVerence between whether,million then it does not really matter what they do, at the time of funding, when a producer is desperatebecause they will never be in any way a significant for funding cash, they sell the UK rights inplayer and supporter of the British film industry; perpetuity. You then bring in further funding to athey will be oVering a token amount of money to film—you might go to Working Title or Universalplay with, essentially. and they say ”Well, we’ll put up another chunk of

money for it”, but you have to say ”The UK hasbeen sold and there will be no future revenues fromQ413 Michael Fabricant: So what order ofthe UK TV market”. That is the disincentive. Whenmagnitude do you think needs to be significant?the BBC licence fee—£450,000 is typical—out of,Mr Woodward: So far at the Film Council we havesay, a £6 million budget it is a relatively smallnot put a figure up. I think our colleagues fromamount, and financiers do feel they should bePACT have perhaps started to put a campaigningplugged into the upside.target into the arena. We are due to meet with MarkChairman: I am sorry,Michael, we are going to haveThompson within the next month or so to discussto move on. John Thurso.what the BBC’s involvement might be in the future,

and hopefully wewill have a clearer idea of where theBBC wants to go, but at the moment we have Q416 John Thurso:MrMcVay, in your evidence youresisted defining a target. had a rather interesting chapter at the end, chapter

8, “Regulating the BBC”, and basically you statethat “. . . it is not possible for the BBCGovernors toQ414 Michael Fabricant: Let us move to John

McVay, then. What sort of figure are you talking realistically act both as a BBC board whose . . . aimis to defend the Corporation, and an independentabout?

Mr McVay: Apparently the BBC currently has an regulator”. Have the changes that the BBC havemade to the way in which they are regulatingacquisitions budget of £73.2 million; of that, £61.5

million is spent on US bundled films, £10 million is themselves changed your view in any way?




Mr McVay: I think, to reflect on Michael Grade’s writing, and we got eVectively the same reply. So wefelt that generally the role of the governors, theycomments when they launched Building Public

Value, they are talking the talk. We want to see what were missing the point, they were there to ensure theBBC complied with the will of Parliament. Theproposals they bring forward.We certainly welcome

the comments that were made in Building Public independent production quota is an Act ofParliament, and the governors should ensure thatValue about the role of governance, but we will wait

to see how that actually ends up being expressed as the BBC comply.we move forward over the next year.

Q423 John Thurso: Is that a view generally sharedQ417 John Thurso: Would you prefer to see a by—regulator rather than the regulation of the BBC by Mr Zein: Yes. I think it was widely felt that thethe board of governors? governors did not understand the day-to-dayMr McVay: You mean the BBC coming under separation between broadcasting and production. IOfcom? think the BBC’s activities in the commercial sector

were becoming blurred as to whether they fulfilledthe aims of returning money to the BBC to help theQ418 John Thurso: That was my next question.

Mr McVay: Our position has been that we think licence fee payer, or being out and out purelycommercial, and there is never a feeling that thethere are extensive areas that the BBC can come

under Ofcom, but we feel that there is still a role of governors could be asked to address those matters,and they seem to take it on themselves to addressthe governors, if they act as governors, as an

independent regulator of the BBC; there is a those matters. I think things have changed sinceMichael Grade has been there. PACT was in andstructure in place. I think the problem over the last

few years has been that the board of governors were had a meeting with him, which we did not haveunder the previous Chair of the board of governors,eVectively the board of management as well. There

was a confusion between the executive and the and certainly there was a separation there in terms ofthe support he had at that meeting.governors as to what the jobs were. Hopefully that

is something that Michael is going to address, andwe see a far clearer distinction between the BBC Q424 John Thurso: It will still be a fruitful line ofeVectively as executives, and the governors being the enquiry for us when we meet the BBC?regulators. Mr Zein: Absolutely. I think in 12 months’ time—it

is a question to be asked annually.Q419 John Thurso: So you would be content if thegovernors behaved properly? Q425 Rosemary McKenna: Alan, I think you said atMr McVay: Yes. the beginning it was not how the BBC spent their

money that actually matters to independents. MarkQ420 John Thurso: You are not actually asking for Thompson has said that he is committed to movingOfBEEB, or something like that? at least 50% of the BBC operation outside the M25Mr McVay: No. area, which I think is good news for everyone. How

could you see that as developing, and would that beQ421 John Thurso: In one paragraph you actually a good opportunity for them and for thesaid “. . . the failure of the governors to eVectively independents to become more involved?regulate the BBC in a way that ensures it sticks to its Mr Clements: I think it probably is. I remembercore objectives . . .—in short to keep the BBC Greg Dyke famously describing the BBC as‘honest’”. “hideously white”; you could also describe it asMr McVay: Yes. “hideously metropolitan”. There is absolutely no

reason—there is absolutely no reason at all—whybroadcasting should be in London. Steel mills had toQ422 John Thurso: In what ways do you feel the

BBC has been dishonest? be beside coal mines, and cotton mills needed water,but broadcasting happens to be in London justMr McVay: I think our point was referring

particularly to the failure of the governors to enforce because the government has let it be in London. Ifthey had said, for example, that Channel 4 as part ofthe independent production quota on BBC

management, which they failed for three years in a its licence had to be headquartered in Liverpool, orthat Channel 5 when it got its licence had to be inrow—woefully, last year. Just to illustrate our

concerns, we were at a Westminster Media Forum Leeds, then I do not thinkwewould need to have thisdebate. So it is a broadcasting issue, not just a BBCdebate with Gavin Davies, where we asked the

question: “What have you done” because the BBC issue. I think the BBC are now trying very, very hardto address that, but again it is back to this questionhad failed the quota—and we asked them what

action the governors were taking to ensure they we come back of keeping them honest and makingsure they genuinely have jobs outside of London.complied, and he askedAlanYentob, whoworks for

the BBC, not the governors, to give us an answer. So For example, I think their commitment is to do 20%of the commissioning jobs outside London, and asbasically one of our competitors from the BBC

eVectively was answering a question on behalf of the part of the screen industry strategy group inScotland we are saying “Why don’t you have all ofgovernors, and we felt that was, maybe not

dishonest, but certainly not exactly the clarity that the children’s BBC headquartered in Glasgow,where it already makes about 20% of thewe were seeking, which we then followed up in




programmes?”—or in Manchester, or in Leeds. and bars will be delighted, but actually it will havelittle impact on the infrastructure unless the marketReally you need to put the top quality jobs in the

BBC outside of London, because otherwise it is the is made bigger so that more companies have moreopportunities to secure some of that work. It is workcorner bazaar, is it not, andwe are all travelling there

to make our pitch. that people want to train their talent, and live inthose areas, and that is the most critical aspect.Mr Zein: So what this brings together is threeQ426 Rosemary McKenna: Would you include thatthreads: training, diversity and original production.in the charter review? Would you actually want theIf the in-house quota is dropped to 50% and there isgovernment to say in the charter renewal that therea greater opportunity for programmes to beis an absolute requirement—I do not think anybodycommissioned andmore of those programmes out oflikes the word ‘quotas’—but that there would be anthe region, you will get more voices and better accessabsolute requirement for the BBC to devolve?to the slots in the schedule.Mr Clements: If you do not do that you get warmChris Bryant: I sort of sympathise with the argumentwords, and then they go “Well, the charter’s renewedabout getting everything out of London, because Iand we’ll come back in a decade’s time and thinkwould love to see more production made in Walesabout it again”.and in my constituency and all of that kind of stuV,but experience teaches us that it is very diYcult to

Q427 Rosemary McKenna: So you would actually do, because the BBC—it is made by an independentwant it to be in— company, I think, or maybe it is in-house—but AMr Clements: Absolutely. Question of Sport is traditionally made inMrZein: I think the key thing is its decision makers, Manchester. When they tried to make A Question ofbecause broadcasting commissioning is a people Pop they could not get any of the artistes to come upbusiness; it is about the dialogue between to Manchester to make the programme. Soprogrammemakers and decision makers, and that is sometimes there is an issue about where talent iswhy the key thing is whole departments, people with concentrated as well as decision makers.the power to decide what goes on screen, and people Rosemary McKenna: Chicken and egg.will naturally gravitate to the decision makers, andactually a significant amount of people in the TV

Q429 Chris Bryant: Maybe it is chicken and egg, butindustry I think would like to be based outside ofI think it is going to be much more diYcult than allLondon; it does draw people to it from the nationsthe blithe comments that people are making. Iand the regions.wanted to go back to the BBC as a commissioninghouse argument, because in the end that seems to be

Q428 Rosemary McKenna: It would also help the where you are leading, that you want to see the BBCtraining of young people in the regions, would it not? rather more like Channel 4, basically 50% of theMr Clements: As a company we are constantly licence fee being devoted to creating a private sectorfighting the drift to London, and the reason they go industry; is that right?to London is there is a continuity of work, because Mr Zein: The BBC commissioning outside of thethe bulk of the industry is in London, but not BBC, yes.because they figure—it is really what they do fortheir families or their careers.

Q430 Chris Bryant: Is there any other public sectorMr Zein: It is not so much the training—it is theindustry or public sector area that you think thattraining that is significant, but it is also the access toshould apply to? The health service or education, orthose jobs, because the cost of living in London in ananything like that?entry-level position is prohibitive. If it is Bristol,Mr Zein: It is an interesting question, and a veryGlasgow,Manchester it is far more straightforward,valid one. I think the funding models are diVerentso it would open up diversity in that respect. I thinkfor those and the government has more of a directpeople do need to be careful about movingcontrol on how they work and the commitmentproduction to the regions and not confusing thatmade by the public to funding them is a diVerent onewith bringing the regions to the screen, which isthan the licence fee.something that sometimes happens. It is what it

would do for the employment and the productionbases in the region, that is the advantage of it. Q431 Chris Bryant: It seems to me this is quite an

ideological position you are advancing, becauseMr Clements: It is an industrial, not a cultural,argument. basically it originally came from Thatcherism, did it

not—the idea that the market should be made to beMr McVay: There is always the sort of Blue Planetsyndrome at the BBC when it is charter-reviewed, much more influential in broadcasting, and that

should be written down in statute. It is the only areawhich is “We’ll come up with a big idea”. The bigidea may be to take a whole department and put where it is written down in statute that that should

be the case, and that a public sector tax should bethem in Manchester. However, I represent everycompany across the whole of the UK, and the big directly siphoned oV to make people profits in the

private sector.thing they want is work, and unless the BBC areopened up to more suppliers from John O’Groats to Mr Zein: I hate using the phrase “The third way”,

but it is somewhere between Thatcher and the freeExeter, from Glasgow to Norfolk, then there reallywill not—I mean, if it is just a department market but recognising the social and cultural role of

broadcasting in society.commissioning itself it is lovely. Basically the cafes




Mr McVay: Obviously broadcasting is dear to all stand. If half the programmes are no longer beingmade by the BBC, then are they not going to haveour hearts, and the value of it—I watch lots of

television, I have grown up with the BBC and diYculty surviving?Mr Clements: That is a fundamentalChannel 4—however, I think the services of the

health service or the education service—although misunderstanding, if I may say so, because if youhave a Songs of Praise viewer, six of the eighteenbroadcasting is important I do not think it is quite

the same thing for me. I think those are universal Songs of Praise are made by independentproductions, but the BBC brand is still on them.services for citizens, and very critical, fundamental

areas of our life. While broadcasting is very Could you look at those and say “Do you know, thatwas made by Term Productions in Aberdeen, andimportant, I think because it is actually a more

ephemeral product and a more cultural product, it that one was made by the in-house BBC”? I wouldchallenge you to do so.does not quite equate ideologically to those—

Q432 Chris Bryant: I wonder about that, becauseMr Q435 Chris Bryant: But your argument is that youwant to keepmore of the rights into the future, somyClements—sorry, I was just going to bring in Mr

Clements, because Mr Clements was making the suspicion is that you will want to brand more—sorry, from the PACT angle—that you will want toargument that you can say that in news and current

aVairs those are so essential to British society and brandmore, because you will want people to acquireloyalty to your strand of programming.there is another dynamic, but does that really hold

water? Mr Zein: I do not think there will ever be the daywhere somebody thinks “I want to watch a TigerMr Clements: Part of it.Aspect programme”. I think in the age of the digitalvideo recorder the broadcasters will become evenQ433 Chris Bryant: Why should it only be that area

of the BBC that is protected from the private sector? more powerful, because they will be the brand thatpeople buy into, and feel there is the trust, or theyMr Clements: There were two points I was going to

make. The first thing is I was advancing that from a will deliver the entertainment or deliver the comedy;and the importance of how that programme gets topersonal point of view; this is not PACT’s position.

I think the BBC should move to what Mr Fabricant the viewer will grow, because if it is not beingwatched as part of a linear schedule and they choosewas suggesting, as a publisher/broadcaster, because

I do not think in order to make public service to set up their disk to record something from theBBC, they will have made that decision as to whatprogrammes you have to have in-house production

departments. I think there is no logic to that channel it is on. This is not about trying to dilute theBBC brand or dilute the broadcasters’ role inargument whatsoever. But I think if you want a

competitor in news terms with worldwide bureaux it deciding. The broadcasters will be the decisionmakers, the buyers, the strategists, those whowould be very diYcult to build that from scratch to

compete against the BBC. interpret the PSB remit.Mr Zein: I think Alan has a crucial point there,which is the diVerence between broadcasting and Q436 Chris Bryant: Do you think the BBC could be

better at maintaining its ongoing relationship withproduction. No-one is advocating that 50% ofBritish broadcasting is handed to the free market indies, because this is the bit that I meet all the time,

people saying “The BBC picks us up, it drops usand left to independents to decide; what we areadvocating is the strongest possible publicly-funded down, it has so much power in the market”—and it

is the ongoing relationship that actually delivers, asbroadcaster with the strongest possible schedule,and we feel that drawing these programmes from the you said earlier, the regions on the television, rather

than just making things in the region.widest range of suppliers helps deliver that.Mr Zein: This is the vertical integration argument.This is the opportunity to bring the programme-Q434 Chris Bryant: I wonder about your dichotomy

between broadcasting and production, because in a making community in the United Kingdom farcloser, far more in line with what the BBCwant, andworld where the personal video recorder is going to

be far more significant, and how people end up also to better inform them. It could be better; it is abuyer/seller relationship in the traditional sense ofchoosing to watch something, or finding it, or falling

across it, as it were, may still be determined by support of long-term view on the proposition.Chris Bryant: Should the governors meet in public?brand, and the BBC brand is the only international

broadcasting or production brand that we have in Chairman: Sorry, Chris, we are encroaching on thetime allotted to our next witness, fascinating thoughthe UK. Most people watching television do not

make those distinctions, and it is a sort of quality the present witnesses are. Thank you very much.

Memorandum submitted by The History Channel UK

The History Channel UK is a company founded in 1995 by A&E Television Networks and BSkyB. Itprogrammes historical documentaries and dramas. It is well regarded for the high quality of its programmes,its work in the community with organisations such as English Heritage and the National Archive and forits website which is recommended by the National Grid for Learning. An ITC poll found that The HistoryChannel UK was considered as one of the UK’s “most respected and high quality” broadcasters.



With regard to BBCCharter Review TheHistory ChannelUKhas two specific concerns: new commercialBBC channel launches and the BBC’s behaviour in acquiring and commissioning programmes. Theseconcerns specifically regard the nine commercial channels which the BBC owns through its UKTV jointventure. Although these channels are not directly financed by the licence fee, they nevertheless enjoysignificant competitive advantage through their close association with the BBC.

In 2002 the BBC launched UKTVHistory, according to the BBC “in direct competition with the HistoryChannel”. Since then the BBC has launched several new commercial channels. As the BBC’s commercialchannel presence has increased, so too has its aggressive approach to programme acquisition andcommissioning with a view to denying its competitors important programme supply by leveraging itspurchasing strength as a licence fee-funded broadcaster. These factors have created the very real risk for theBBC’s competitors of eventual foreclosure as a result of the BBC’s aggressive behaviour.

The History Channel UK has been invited to give oral evidence before the Committee on 14 September2004. In anticipation of our appearance we submit this brief summary of our views regarding BBCCharter Review.

1. In its various guises as (i) a licence fee funded broadcaster, (ii) a commercial broadcaster (through itsUKTV venture with Flextech) and (iii) the dominant supplier and purchaser of programming in the UK,the BBC constitutes a massive structural intervention in the UK’s broadcasting market.

2. The History Channel UK (alongside other commercial competitors of the BBC) was understandablyalarmed at the DCMS’ covert decision in April 2000 to lift its 1997 restriction on the launch of new BBCcommercial channels with UKTV, such that the BBC is now apparently free to launch as many commercialchannels as it pleases. Our concerns were exacerbated when the DCMS granted this very significantpermission without either a public consultation or the apparent knowledge of (and review by) thisCommittee. Since that decision, the BBC’s UKTV venture has launched several new channels with severeconsequences for its competitors.

3. The DCMS has not, therefore, provided any guarantee of proper regulation of the BBC. The BBC’scompetitors are entitled to greater certainty about the scope of the BBC’s activities than is currently the case.Ofcom should have a formal role in relation to any future approvals of new channels, including commercialchannels operated in joint venture with the BBC.

4. Our other key concern relates to programme acquisition. In its 2002 Review of the UK ProgrammeSupply Market, the ITC commented that BBCWorldwide’s involvement in commissioning of programmesby the BBC did not seem to occur on arm’s length terms. In relation to commissioning programmes fromindependent suppliers, Ofcom’s guidelines for public service broadcasters now make it clear that thereshould be no terms in the BBC’s contracts making them (actually or in eVect) conditional on the acceptanceof a bundled deal (bundling primary and secondary rights) or on the use of BBCWorldwide for distribution.The History Channel UK acquires rather than commissions many of its programmes. The History ChannelUK is concerned that behaviour by the BBCwhichwould not be permitted byOfcom’s guidelines in relationto commissioned programming, and which would appear to contravene the BBC’s Fair Trading Condition,is occurring in relation to acquisitions by the BBC. The History Channel UK considers that Ofcom, ratherthan the Governors, is better placed to obtain the necessary evidence and consider these issues objectively.

5. The History Channel UK believes that Charter Review should address these deficiencies in theregulation of the BBC. This is necessary because the BBC has repeatedly manipulated its programme rightsand launched new channels in a way which threatens both the BBC’s competitors and the health of theUK’sbroadcasting market.

September 2004

Memorandum submitted by Artsworld Channels Ltd

Artsworld Channels Ltd is a small UK company founded in 1999 by British private investors to createand operate specialist digital television channels. Its first venture, Artsworld, is a £6-a-month subscriptionchannel specialising in the arts including performances of music, opera and dance, films and drama, paintingand sculpture, books, poetry and the visual arts including design and architecture. The channel waslaunched in December 2000 by the then Secretary of State for Culture, Media and Sport, who described itas “a momentous event for the arts in this country”. In its first year of operation the channel showed morehours of new arts programmes than BBC1 and BBC2 combined, all commissioned from UK independentproducers.

Artsworld was badly aVected by the BBC’s sudden and unexpected change of digital strategy, whichincluded abandoning its recently-launched lifelong learning channel and replacing it with the DCMS-permitted BBC4. Faced with this publicly funded and aggressive competitor, the company’s growth slowedand costs had to be cut. Some shareholders withdrew support and wrote oV millions of pounds ininvestment. People lost their jobs, and viewers received a less satisfactory service. The company is now in astate of fragile recovery.



Fundamental Changes in Broadcasting

Charter Review presents an opportunity to determine the purposes of the BBC in the early decades of the21st Century, and to ensure that it is funded appropriately and regulated adequately to fulfil those purposes.But its purposes, funding and regulation must be placed in the context of 2006, not 1936 or even 1996. Thebroadcasting environment has changed more quickly during the term of the present Charter than at anytime in the BBC’s history, so Parliament should acknowledge and respond to those fundamental changes.The Culture, Media and Sport Committee has shown that it understands how radically these shifts haveaVected broadcasting, and is ideally placed to recommend the appropriate response.

From Scarcity to Plenty

The digital revolution that began only in 1998 has moved UK television with astonishing rapidity fromscarcity to plenty. It is no longer necessary to tax citizens to ensure that they can receive televisionprogrammes of entertainment, history, art, news, films, opera, religion, sport or DIY. It is no longerreasonable to prosecute, fine or gaol them when they fail to pay an ever-increasing licence fee for BBCprogrammes they choose not to watch, or for BBC channels they cannot receive. To quote the FinancialTimes (30.6.04): “The BBC’s manifesto makes much of a survey that shows British audiences most value thesort of programming oVered by a public service broadcaster—news, wildlife programmes, current aVairs, home-made comedy and drama, soaps and sport. The trouble is that viewers no longer turn to the BBC for suchprogrammes in suYcient numbers to justify indefinitely a poll tax of £121 on 94% of households.”

Multi-channel digital television, most of it privately financed, is providing consumers with literallyhundreds of diVerent programme choices every day. But the growth and development of privately financedservices like Artsworld and others is hampered by the continuing expansion of the BBC. Public funding ofa national broadcaster inevitably involves a substantial degree of market distortion, but the scale of thatdistortion must be commensurate with economic and social policy and with market conditions. It isobstinate of the BBC to be continually enlarging itself at ever-increasing public expense, when the logic ofsupply and demand and consumer behaviour points in the opposite direction. It is equally perverse for theDCMS to be increasing household taxation annually to pay for the BBC’s ambitions, when in every othersphere of public provision the Government is enforcing economies and welcoming private sector initiatives.

The Government’s Objectives

The Government’s three stated objectives in broadcasting and communications are fair competition,plurality of supply and diversity of output. All are undermined by a BBC financed lavishly enough todestroy, damage or acquire privately-funded UK media, managed with that goal in mind, and socomplaisantly regulated by its Governors and the DCMS that its anti-competitive behaviour receivespermanent oYcial sanction.

Fair competition is impossible when the BBC can use public funds launching new channels to fightexisting services that have risked investors’ money to demonstrate and fulfil public demand. Plurality ofsupply is weakened whenever the BBC’s wealth and expansion deter private investment in new channels orradio stations or internet businesses. Diversity of output is created by the existence of new channels likeArtsworld, The History Channel, The Community Channel, The Chinese Channel.

It arises from having the widest possible spectrum of talent commissioning, buying and schedulingprogrammes, and from the broadest possible range of voices, opinions and ideas on the screen. Multi-channel broadcasters provide this refreshing diversity, whereas the BBC’s monolithic structure andcentralised agenda tend towards repetition and homogeneity.

Financing Public Service Broadcasting

The concept of public service broadcasting, though elusive of definition, retains its validity in the digitalage. But it is not the same thing as the BBC. If Parliament determines that certain types of programmes orchannels or internet services require compulsory public funding, a case still has to be made that the BBC,rather than any other organisation, should supply them.

The BBC no longer attracts the brightest and the best in broadcasting. It long ago lost its monopoly oftalented programme makers, able executives or experts in advanced technology. The independentproduction sector and the independent channel sector now provide most of the energy, dynamism andinnovation in UK television. Support for the BBC’s expansion and high level of public funding may arisefrom faith in the legend rather than an analysis of present-day reality. It is possible to admire and take pridein the BBC of the past without ascribing its former virtues to the BBC of today. To quote the FinancialTimes again: “The BBCmakes many estimable programmes that can be justified on public service grounds,but much of its output is indistinguishable from that of its commercial competitors who have no recourseto public funding. Those competitors might also be prepared to provide public service broadcasting ifoVered funds from the licence fee, and might do it better”.



They would certainly do it diVerently, less expensively and, as consumer behaviour consistently shows,to the satisfaction of audiences. A system of tender for new and existing services, and of competitive biddingfor public service programme finance, would be in the public interest—not least because competing forfinance would tend to eliminate the BBC’s present profligacy.

BBC Extravagance

The BBC wastes public money. Its expenditure is insuYciently regulated to ensure that it accords withthe best commercial practice, and its cavalier attitude to spending drives up market prices for programmes,copyrights, talent and ancillary services. It is entirely unnecessary for the BBC to spend such a highproportion of its income on advertising in non-BBC media and on its vast PR, marketing and publicityoperation. It is equally unnecessary for a national broadcaster to concentrate the vast majority of itsactivities in London, with a resultant excessive cost in buildings, staV and services as well as a metropolitanbias in its programmes. All these costs and others arise from the lax attitude to public finance that nowpervades the BBC.

The BBC fails to grasp the need for a searching re-examination of its activities and expenditure. The2003–04 accounts show that its 18-member Executive Committee shared £6.2 million pounds (more than50,000 licence fees) in salary, bonuses and taxable benefits, and have individual pensions as high as £2.5million. This is not, as the BBC Governors would have it, “remuneration that enables it to attract, retainand motivate high calibre individuals”, since they acknowledge that the highest-paid senior civil servantsand leading public sector executives are all paid considerably less. Instead, it is the most obvious symptomof a comfortable, well-fed and self-satisfied regime that has lost touch with the responsibility of living onpublic money.

Ofcom Licensing and the Charter

The BBC and consumers would benefit from a fair and transparent system of regulation that wouldcommand public and Parliamentary confidence. Only Ofcom is suYciently disinterested to carry out thistask, as it does for other public and private broadcasters. The DCMS is too ideologically committed to theBBC, too reliant on it for fulfilling its digital policy, and too closely involved with its governance andmanagement to be objective. The BBC Governors, even under the modest reforms recently proposed,cannot be eVective regulators of the BBC while also being responsible for its executive decisions and fordefending it from criticism.

The BBC should be included wholly within the remit of Ofcom, removing from the Governors their rolein regulating the BBC but maintaining their responsibilities for supervising the executive and for ensuringthe BBC’s independence from political and commercial pressure. In addition, just as monetary policy wasplaced in the hands of the independent Bank of England, the DCMS should now give up all its remainingdirect responsibilities for BBC matters (for example, its authority to permit new BBC services) and transferthem to Ofcom.

The logical way for a reforming Government to achieve this would be to abolish the anachronistic RoyalCharter and Agreement entirely, and to replace them with an Ofcom licence similar to those held by otherpublic service and commercial broadcasters. The BBC Chairman and Governors, like the Boards of otherbroadcasters including Channel Four, would be responsible to the public for upholding the terms of thelicence and for overseeing strategy and executive management.

Properly drafted and with the support of Parliament, an Ofcom licence for the BBC could define itspurposes in the new broadcasting environment and ensure its long-term future and continuing independencefrom Government. It could also provide a secure formula for its future finance, by giving Ofcom the powerto recommend to Parliament an appropriate annual level of compulsory public funding for public servicebroadcasting, and what proportion of it should go to the BBC.

The Purposes of the BBC

Future financing of the BBC must be related to its purposes in a multi-channel environment. There aretwo underlying questions. First, for what elements of broadcasting is it legitimate to force citizens to pay,regardless of whether they make use of them? Second, for which of those elements is the BBC the mostappropriate provider? Commercial multi-channel broadcasters have already demonstrated, to Ofcom’ssatisfaction among others, that they can provide high-quality programmes across genres that were once thepreserve of only the BBC. Meanwhile the BBC continues to operate a commercial competitive policy inpursuit of high ratings on its universally available channels, rather than transmitting programmes for avariety of diVerent audiences in a comprehensive range of subjects and styles.

Ultimately this strategy is likely to fail, as consumers increasingly select alternatives to the BBC via theirremote control or their mouse or their keypad. The BBC should re-align the balance of its output to takeaccount of these alternatives and of its public responsibilities for education and information. It should bemoving away from the imperative to achieve high ratings rather than wide appreciation. Government andParliament therefore need to assure the BBC that its future does not depend on scale but on substance. Its



purpose should be to provide what a civilised society demands and deserves from its broadcasting thatcannot be provided by any other means. If other means are available, as increasingly they are, thencompulsory public funding is not justified.

Failure to take a radical approach now to the BBC’s future purposes, activities, finance and regulationmay eventually precipitate a revolt against inexorably rising licence fees that always hit the poorest hardest.It will certainly inhibit the further growth of a dynamic independent sector in UK production, broadcastingand communications technology.

September 2004

Witnesses: Mr John Hambley, Chairman of Artsworld and Chairman of the Satellite and CableBroadcasters’ Group; Mr GeoV Metzger, Managing Director and Mr Richard Melman, Channel Director,The History Channel and The Biography Channel, The History Channel UK, examined.

Q437 Alan Keen: Could I ask John Hambley first of Mr Hambley: Certainly my company has not saidthat at all, that people should not have to pay aall: you seem to be not too keen on the BBC

continuing in the way it is going. Is that right? licence fee. We certainly think the licence fee is liableto go on for quite a long time, but it is not sustainableMr Hambley: Certain aspects of it, yes, that would

be right. in the longer term.

Q438 Alan Keen: Which aspects? Q442 Alan Keen: How can you possibly argue that,Mr Hambley: I think the BBC’s appetite for when I can get a multitude of channels and news andcontinuing expansion and its current regulatory current aVairs and sport and the arts and everythingmechanism are two areas where we would say we else for £10 a month, and you say your system costswould not like to see the BBC going on as it goes £6 a month for one channel only. I am open fornow. competition, I am delighted that there are channels

like yours that I can subscribe to if I wish to, but toQ439 Alan Keen:You say that it distorts the market; do as you suggest and to say ”We’ll get rid of thethat is one of your accusations, is it not? universal system and not make people pay for it”, itMr Hambley: I have said it must distort the market, is going to cost us all an awful lotmore, and it is suchand that distortion should be commensurate with a pity for those people who really cannot aVord toconsumer demand and with social and economic pay £6 a month for one channel. How do youpolicy. We think the distortion is too great at the justify that?moment. MrHambley: If I may say again, certainly we are not

suggesting getting rid of the universal system. Indeedit would be good if the BBC channels wereQ440 Alan Keen: My calculations are—and I am auniversally available. The new digital channels, forfan of the arts, of course, and I would love towhich everyone has to pay, are not universallysubscribe to your channel. The reason I do not,available. But in any case, if I may say so, what Mrreally, and I have many constituents who are farMetzger and I and channels like ours represent areworse oV than I am, but my calculation is that if Iincremental additions to the broadcasting system,subscribe £6 amonth for your channel and deductedand you were kind enough to say you welcomedthat oV the £10 per month I subscribe to the BBC, itthem; but there is no great welcome for them fromwould only leave £4 per month for everything else,the BBC or indeed from the DCMS. What we feel isand the BBC would cost an awful lot if each of theirwe are the independent channel sector. You havechannels cost as much as yours. Is it not true that thejust been talking to the independent productionbenefit of the BBC is that because it is paid forsector, and it has taken 20 years and more for themuniversally by everyone we get a real bargain? Youto rise to the power that they have now.We are at theare trying to say that it distorts or disturbs thebeginning of what we think is an importantmarket, but it is extremely cheap the way it is donecontribution to British broadcasting, and thatnow.contribution is being set back by the continuedMr Hambley: When people choose to pay for myexpansion and continued increased funding at thechannel or other channels they are making a freeBBC.choice; they are certainly not forced to pay for it.Alan Keen: I would like to say something further butOur view is that the BBC, if you regard it as aI had better let others come in.bargain, could be an even better bargain if it were

diVerently managed and regulated.Q443 Chairman: I subscribe to Artsworld and I havesubscribed to Artsworld right from the beginning.Q441 Alan Keen: Again, though, I get the

impression—or not just the impression, but this is Max Hastings in his less overwrought momentsquestions whether the BBC needs to do everythingreally what you are saying—that you want the

present system dismantled. You say that people as the BBC takes the view that it does. It is a fact, isit not, that when you almost had to close down thatshould not have to pay a licence fee, it is no longer

necessary for people to have to pay licence fees to the was because of the competition from BBC4, whichas I see we pay £35.2 million a year for, for,BBC, they should be able to choose whatever they

want to choose. according to the BBC’s own viewing figures, an



14 September 2004 Artsworld, The History Channel UK

audience so small that it cannot actually be counted. for that debate when they said “Sure, BBCWorldwide, you go ahead and do whatever youThe question does arise, and I think this Committeelike to”.will need to consider it, whether some members of

the Committee may take the view that whatever ishappening, the BBC ought to have a part of it, but

Q445 Mr Hawkins: It is very interesting, is it not,to what extent was BBC4 a factor in the almost that following on from the way in which the BBCterminal collapse of Artsworld? had that restriction on it lifted, we now see peopleMrHambley: It was. That is two years ago now, but being much more optimistic about the financialit was the prime factor in our then principal future of some of those new channels and the eVectshareholder withdrawing their finance. But the other they have. You are the only losers, if you like; theaspects of competition from BBC4 obviously drives viewers have gained, the BBC has probably gainedup the price of programmes in our sector, and it in terms of the welcome that has been given to itsremoves what you might call the oxygen of publicity new channels, but the independents such asin our sector, because the BBC, for example, own or yourselves are the losers.controlRadio Times, so themoment BBC4 appeared MrMetzger: I think that is right. Our view is that wethe space that Artsworld once occupied in Radio started, we took the risk, we invested in the idea. ItTimes disappeared, and the BBC has a very, very has had success, the BBC saw the success then itpowerful marketing machine and its whole network. mimicked our success, that it has the criticalSo it is really simply a matter of the small business lifeblood of programming financed by the licence feebeing almost put out of business by the big—the to beat us at this game, and that is what it is doing.small shop and the big supermarket on the corner,but in this case the big supermarket is a publicly-

Q446 Michael Fabricant: In a way I want to pursuefunded government-backed supermarket which isthe arguments or the questioning of Nick Hawkins,driving the private business out. Of course we stillbecause I too am interested in the relationshipsurvive, but there were a number of potentialbetween the BBC and UK History. The BBC willinvestors in other channels, including the channelargue that their fair trading conditions are appliedthat we ourselves had in mind, who wererigorously—and they have argued that. They argueimmediately deterred from that investment by the that UK History has to bargain in an open marketknowledge that the BBC could come in and set up just as your channel does, The History Channel

the same kind of channel of their ownwhenever they does, to buy programming, and that the BBC doesliked, with the unfettered permission of the DCMS. not sell any cheaper toUKHistory than it would sell

to you. If that is true, what is your beef?MrMetzger: It will not sell to us, that is the first beef.

Q444 Mr Hawkins: I declare myself as a regular and I think the BBC has been wise; it saw digitalenthusiastic viewer of both The History Channel television creating a democracy and greater equalityand The Biography Channel. I must confess that, among broadcasters; it understood that it had tolikemy colleague AlanKeen, I do not at themoment find a way to strategically control its rights in asubscribe to Artsworld, but I wonder whether the commercial market because fragmentation wouldconcerns that you have expressed about the inevitably result in a loss of share on its licence fee-apparent unfair competition, the BBC having, as funded channels, and therefore more diYcult toyou put it, in a covert way—theDCMS having lifted justify a licence fee. So John Birt embarked on anthe restriction which previously existed from 1997 extremely ambitious and aggressive commercialon the BBC launching new commercial channels. strategy, which is working very, very well, aided byFrom the viewers’ point of view, the viewers may the DCMS when it actually gave it carte blanche towell welcome the fact that there is an extra outlet for do what it wanted to do. There is very littlethose interested in history. If you remove, as it were, transparency, as well, in that relationship; it givesmethe unfair subsidy side of things, then it is to the little comfort that the board of governors have saidviewers’ benefit. Am I right in thinking that your real that it is assured that the fair trading commitmentconcern is only about the covert nature of that has not been breached. It is not evidence-based inremoval of the restriction and therefore the unfair anyway, and there is no evidence that that is the casecompetition to you? You do not oppose the idea of in the BBC’s annual reports.having somebody to compete with you to add anextra channel to interest the viewers?

Q447 Michael Fabricant: You said specifically thatMrMetzger:Absolutely not. We compete every daythe BBC will not sell to you. Let us just pursue thatand we are not opposed to competition in any waya little bit further. First of all, did the BBC sell to youwhatsoever. I think the 1997 restriction in fact must before UK History started broadcasting? Whathave recognised the potential for the BBC to programmes did you buy if they did?

compete in the commercial markets and to have an Mr Metzger: I think we bought five programmeseVect on them. I think the diVerence here is that from the BBC. The one that sticks out is thebecause the BBC has a special funding status and a lectures by—privileged position as a result, that we need torecognise that, that the regulation needs to recognisethat, and there needs to be a debate about that. I Q448 Michael Fabricant: Do not worry if you

cannot think of the specific programme.think the DCMS eVectively removed any possibility




MrMetzger: Anyway, there are five that we bought Q452 Derek Wyatt: I was going to ask,MrHambley,whether you have been to the competitionfrom the BBC. We have relations with the BBC, wecommissioner on your channel, because it seems totalk about buying programmes from the BBC, butme that you have a really good case.we never manage to buy them for one reason orMr Hambley:No, we have not been, because we areanother.told we have no case at all since it is entirely in theDCMS’s gift to allow the BBC to have as many

Q449 Michael Fabricant: Let us just explore that. It channels as it likes, and that competition law doesis very important, this. To begin with you said the not come into it. We would have to prove some ofBBC will not sell to you. Is it because you are not the things that Mr Metzger has been talking about.oVering enough money? And if you are not oVering What we have done is to set out these things veryenoughmoney, is it thatUKHistory is oVeringmore clearly to Professor Barweiss, who is conducting themoney?—in which case that is perfectly fair. BBC digital services review, and I think it is fair to

say that he gave us a very sympathetic ear. It wouldMrMetzger: I do not know if UKHistory is oVeringnot surprise me if his report suggested that the waymore money; there is no way that I can know that,the BBC’s new channels were permitted by theactually. The BBC will say that is proprietaryDCMS left a great deal to be desired.information because it is a commercial relationship.

I think that answer is actually mitigated by the factthat it has a special status in the market, and there Q453 Derek Wyatt: Basically that is your centralshould be some way of knowing if that is true; and gripe, that in the last four years the BBC and thethere is no way of knowing if that is true. You are Secretary of State are almost one and the sameright; it is not that the BBC will not sell to us, they thing—that permission is given behind closed doors,have not sold to us, and I think the BBC is clever in you are not aware of what has been given, it isthis way. You could not hire a better businessman announced: there is no transparency and there is nothanRupertGavin to run your business for you, and public debate.he has done a very, very good job. He has had the Mr Hambley: I think in the case of UK History thatadvantage of the largest programming budget, is certainly true. In the case of the other new BBCtherefore the largest leverage in the supply market, channels yes, there was a consultation. We took aand the advantage of a regulatory regime which I small part in that consultation. But this was verythink is largely absent, really. So I think there are so much post-hoc, because the BBC had already beenmany diYculties in dealing with the BBC and there given extra money and was asked what it would likeare so many programmes that the BBC could sell to to dowith it, and it invented a series of channels, andus, that they do not, which in fact never get to air theDCMS nodded them through. It would be unfair

to say that that was done behind closed doors, but Ianyway in a secondarymarket, and that is a strategicthink the process was not a rigorous one.business decision.

Q454 Chris Bryant: I have a diYculty with this,Q450 Michael Fabricant: You have raised this issuebecause quite often the charge against the BBC iswith us today, and indeed you have raised it with thisthat its programming is too popular, and that it isCommittee in the past. Have you raised it with competing for big audiences on Friday and Saturday

OFCOM? night and it is not doing enough art in theMr Metzger: I have. programming. Indeed we have condemned it on this

Committee for not putting any arts last year onBBC1 or BBC2. So there is an argument in favour ofQ451 Michael Fabricant: What was their response?the BBC as Shakespeare, Schiller and Shostakovich,Mr Metzger: I think Ofcom feels that the burden ofand then when the BBC does Shakespeare, Schillerproof—if we are talking about that—they make the and Shostakovich on BBC4 it gets condemned frompoint quite rightly, as do others, that the BBC does your angle. Can the BBC win?

actually come under competition law, this is true, Mr Hambley: The BBC does what it does on BBC4although that I know of, and I may be wrong here, at the expense of doing it on BBC1 and BBC2, whereI am not sure that anyone has ever either brought a those programmes would be universally available.competition suit against the BBC or action against To that extent it would have been much better, forthe BBC, certainly not successfully. They make the example for driving digital take-up, if BBC4 had notpoint that the burden of proof has to be quite been a narrow-casting cultural channel. What wesubstantial, that we actually have to show abuse of would like to see—and I am a BBC4 watcher, alongdominance under the Competition Act, whether it with a number of other people who can get it—is theis—there is a variety of abuses in various areas, BBC returning to a much wider diversity ofthings in which I am not an expert. It is an expensive provision on its universally-available channels, onthing for them to pursue and they have challenged us the—whatever it is—17,500 hours of broadcastingto make a good case and to take it to them. In the on BBC1 and BBC2.We think it is unreasonable formeantime they suggest that we go to the BBC head the BBC to move so much of its arts and culturalof fair trading. We have two examples which we programming onto the digital-only channel which abelieve are clear violations of the fair trading very large number of the population are still notcommitment and we will be writing to the BBC head going to be able to receive for a very long time; that

is the BBC’s own contention. But the great problemof fair trading in the near future.




is that BBC4, for example, is a very, very fierce and we do not know yet, there will still be a substantialproportion of the populationwhodo not have accessaggressive competitor in a sector that we went into

because the BBChad abandoned it. TheBBChad no to digital services.plans for BBC4, no plans for doing a digital andcultural channel in 1999 when we started Artsworld. Q458 Chris Bryant:But if three-quarters of people inThat is true, and the reason I can say that is true is Wales already have access to all those digitalbecause we were negotiating with the BBC at that channels, I do not see that your argument stands.time for the BBC to take a stake in our channel. Mr Hambley: As I say, I am only looking at the

statistics produced by Ofcom. I am not sure whetherOfcom has separated Wales from the rest of theQ455 Chris Bryant: I was working at the BBC at theUnited Kingdom, but certainly their figures are nottime and writing BBC Beyond 2000 and I have very75%.strong memories of there being an ambition to

produce a highbrow channel, for want of a betterQ459 Chris Bryant: Can I ask you a completelyterm.diVerent question, which applies to all of you, IMrHambley: I stand corrected, but those ambitionsguess, which is: do you think the BBC governorswere certainly never in any way in the publicshould meet in public or do you think there aredomain. What the BBC did have, of course, wasreasons why they might legitimately argue that theyBBC Knowledge—it had the life-long learningshould not?channel, and the BBC abandoned that life-longMrMetzger: I cannot think of any reasons why theylearning channel, which seemed to people like me atshould not meet in public. My view on the BBCany rate to be an absolutely fundamentally publicboard of governors is that they should be a board ofservice channel, in order to create BBC4. It is thatmanagement and act as non-executives, rather thankind of unpredictabilitywhichmakes it very hard forregulators of the BBC.the private sector, and all we are saying is we would

like to say a broadcasting ecology in which theprivate sector is allowed to grow and survive and is Q460 Chris Bryant: So what would the board ofnot stifled by an over-mighty BBC. It is extremely management do, then?diYcult when the BBC can simply move into MrHambley:Theywould ensure the good operationterritories which are already occupied by the private of the BBC, that it satisfies its remit, that itssector, and itself abandon territories which the operations are eYcient, that it is making theprivate sector was not even attempting to go in— programmes that it should be making.BBC Knowledge being a case in point.

Q461 Chris Bryant: My argument would be thatactually you want the BBC board of governors to beQ456 Chris Bryant: I just want to challenge you a bitmore independent from the board of management,more about the issue of whether people can get theso that they precisely do not just do the “We havechannels or not. I have made the point many timesbeen assured that . . . ” kind of argument.in the Committee about my own constituents andMrMetzger: I think that is a proper role for Ofcom.whether they can have access to all the BBC’s digitalChairman: A meeting on the night when theychannels, and indeed I think there is an argument toendorsed the Gilligan story would have made goodsay that BBC4 and BBC3 should be allowed to beTV.analogue as well as digital at least so that you can get

them on analogue cable which is still available,which will still be the reality for many people in the Q462 Chris Bryant: Let alone the writing of thecountry for some years to come. But the truth is now press release.56% of households inWales have gone digital, which MrHambley:May I say something? From our pointmeans 75% of people inWales now have access to all of view we do not think it would be practical for thethe BBC’s channels. So this is not going to be the big governors to meet in public, but we think that theirproblem that you perceive it to be now in three years’ doings and sayings could be much more transparenttime, is it? So in the course of the charter this is not on the BBC website and in other ways; but we toogoing to be the problem it is. believe that the role of the governors is to maintainMr Hambley: We are not going to go fully digital the BBC’s independence under a licence fromuntil at least 2012, and according to the BBC’s own Ofcom, and to do what they do now but with anfigures and to Ofcom figures there will still be a very Ofcom licence and not a charter and agreement. Wesubstantial proportion of the population who will think that would be suitable for the 21st century.not have digital television but will still be paying forthe BBC’s digital services.

Q463 Chris Bryant: Can I just pursue that. What doyou mean by an Ofcom licence?Mr Hambley: We mean an Ofcom licence as allQ457 Chris Bryant: When? In 2012, you think?

Mr Hambley: I really bow to other experts in these broadcasters have Ofcom licences, and Channel 4,for example, has an Ofcom licence. It would makematters. I have merely read what the BBC says and

what Ofcom says, and of course everyone hopes that the BBC governors analogous to the board ofChannel 4; they would still be in supreme control ofdigital take-up will increase; we hope it will increase

further. We are still looking at the scenario where the institution but they would not be trying both toregulate it and to manage it.eight years,maybe nine years,maybe 10 years ahead,




Q464 Chris Bryant: The one thing that that would that could be addressed while still removing thepresent problems of having DCMS as a quasi-take away would be the accountability of the board

of governors, because the board of Channel 4 do not regulator and theBBC governors as quasi-regulator,and the BBC governors actually being responsiblehave that accountability at all. Does that matter to

you or not? for managing and, as this Committee has said,championing the BBC at the same time. It is veryMr Hambley: I think that would matter to me

personally. I certainly have not discussed it with my diYcult.Chairman:Gentlemen, thank you verymuch indeed.colleagues in the company, but Iwould have thought




Members present:



Witnesses: Mr Michael Grade CBE, Chairman, Mr Anthony Salz, Vice-Chairman, Mr Richard Tait,Governor, Mr Mark Thompson, Director-General, Mr Ashley Highfield, Director New Media andTechnology, and Ms Caroline Thomson, Director Policy and Legal, the British Broadcasting Corporation,examined.

Chairman: Welcome to yourself and your of the BBC and responsible for promoting it, and,on the other hand, they have to perform the rolecolleagues, Mr Grade. We are very pleased to see

you. My colleagues are perfectly clear that this is of really a regulator in a way and there seems tobe an inherent conflict. There have been a numbera session about the BBC Charter Review. We had

the pleasure of discussing BBC current operations of suggestions as to how that could be dealt with,ranging from Ofbeeb at one end, whollywith you when you came to see us in July. John

Thurso. independent, through, for example, the governorsbecoming a body of trustees, quite apart from anylink with the management. The reforms that youQ465 John Thurso: Good morning.have referred to do not envisage going that far.Mr Grade: Good morning.Why do you think it is better to evolve the currentstructure than move to a much more independentQ466 John Thurso: Can I ask you aboutframework?governance in the future of the BBC. I think it isMr Grade: First of all, I do not think there is afair to say that there is general acceptance thatproblem with the governors being the championsthere was some failure of governance in the pastof the BBC. I think the licence fee payers wouldand most observers would be of the opinion thatexpect us to be champions of their service. Wheresome changes are required. Can I ask you, first ofthere has been a problem in the past has been aall, if you accept that and, perhaps making theperception of the governors as the champions ofassumption that you do accept that, ask you whatmanagement, which is an entirely diVerent thing,you would like to see, how you from the BBCand that distinction has to run through every publicwould like to see the governance amended in theutterance, every document, and every decision-future under a new charter?making process. That, I think, is a very importantMr Grade: Thank you. Failure is a fairly emotivedistinction to make. I think we should be theword. I would characterise it slightly diVerently,champions of the BBC. We are there to representperhaps with the same result, but I would say thatthe public interest and only the public interest. Ithe governance of the BBC has not kept pace withhave looked at this in some considerable detail, asthe changes and demands of governance in otheryou would imagine, over the last few months sinceparts of business and society generally in the publicI have arrived. There are other models ofsector and the private sector. The fundamentalgovernance; there have been lot of proposals. Whatchange that is driving the reforms that thewe must not lose sight of is the fact that the currentgovernors are presently implementing is—I think,constitution of the BBC has been very eVective inthe most serious charge against the BBCmaintaining the independence of the BBC.governance over the last 10 years or so is that itGovernments of many persuasions over many,has not been seen to be as objective as it might be.many decades have attempted border raids orIt is easy to see why people would accuse theexcursions across the borders of thresholds of thegovernors of being captured by the management byBBC, but the constitution and the independence ofmaking decisions that were less than transparentthe governors has stood the test of time and it is abased on evidence provided solely by the

management, who clearly have a vested interest in guarantee. It is not an accident that the BBCthe outcome, and all the reforms that we are remains today, despite diVerences with all kinds ofimplementing are designed to bring in independent governments over many, many years from Suez, theevidential support to enable the governors to make National Strike, you name it, there have beenjudgments about what management is proposing. diYculties with governments of the day, but the

constitution has stood up to that very well, and theindependence of the BBC has never beenQ467 John Thurso: That, it seems to me, is the coreundermined—it has been challenged but it hasof the problem: that the governors in the past havenever been undermined—and that stems from thebeen required to undertake two slightly conflicting

roles. On the one hand, they are called champions current constitution. That does not mean to say



19 October 2004 BBC

that the interpretation of the constitution is not in a model; and I suppose the point you make aboutconflict is a point that interests me, because I thinkneed of some repair in order to catch up with what

everyone’s expectations are for means of it is sometimes rather over-done in relation to aparticular position of the BBC and the governorsgovernance, and it seems to me not impossible, if

there is a consensus at the end of this important in the BBC, and that largely arises, I think, becausethe BBC governors have duties to the public todebate, that the reforms we are implementing could

well be suYcient for the purpose; but those reforms produce excellent programming, services withpublic value, value for money, all those sorts ofmight well be codified in some way so that they do

not rely on the present Board of Governors—they things, very much focused on the licence fee payers;and then the governors have regulatory obligations;could be codified—and that degree of separation

and the introduction of objectivity and so on could, indeed, most, or a lot of them, are in conjunctionwith Ofcom in one form or another, either inI think will, serve us well. Other models that you

have described there are really hybrids taken from consultation with Ofcom or Ofcom being a sort ofback-stop checker of compliance with regulation.other circumstances; and the BBC as a corporation

is really of its own kind and other models are not The principle ones perhaps the BBC governorshave of themselves somewhat relate to the essencenecessarily appropriate. We are in charge, we are

entrusted with the public’s money and with that of the BBC in terms of news and current aVairs,around accuracy and impartiality in particular; andtrust goes the need to ensure value for money. It

also means that the governors are in a position to those obligations do not seem to me to be at all inconflict with the basic duties to the public; in fact,be proactive, unlike a retrospective financial

regulator outside. We are in the entrails of the they sit quite well with the duties to the public. Incontrast, most other forms of regulation where aBBC. We can ensure outcomes. We can hire and

fire my colleagues here on the left, which I am sure regulator is involved are situations where theregulator has to look after the conflict betweenis not news to him, but outside regulators cannot

do that. We can ensure positive outcomes. We can money value for shareholders and rules to protectthe public, and that creates quite a diVerentreally influence from the inside the strategy and the

direction of the BBC to meet what the licence relationship than we have with the BBCmanagement, I think, and tends to be, partly aspayers are telling us.Michael says, rather reactive, rather rule-checking,and creates, I think, in many regulated industries aQ468 John Thurso: Finally, Chairman, if I may,sense that they are in completely diVerent camps:you have mentioned the point that these reformsthat the management are about creating value forare internal and therefore could obviously be variedshareholders and do the best they can to limit thein any way and that it might be important to seeimpact of regulation upon that responsibility. Sothese codified. Do I take it that you would thereforethat conflict really does not exist in this particularbe comfortable with a new agreement being moresituation, and, although I am new to it, I think thespecific in terms of corporate governance?potential opportunity for the governors to retainMr Grade: I think that the governance of the BBCtheir independence and the new proposals aroundis the major issue around the Charter Renewalthe governance unit and access to expertdebate. We have to manage the BBC in the futureindependent advice and those sorts of proposalsin a way that gives Parliament confidence and givesthat exist are very important to that but maintainour licence fee payers confidence; and they knowtheir independence as well as the proactive in termswhere the buck stops, and the buck does stop withof achieving for the public the objectives of publicthe governors of the BBC, it does not stop withvalue, the objectives of value for money inanybody in between. If you have a twin Boardan interactive and collaborative way withstructure, where does the responsibility lie, and somanagement. So the important balance, as Michaelon? The governors can be relied on to manage thefocused on, is retaining their independence and sopublic interest in the BBC without having tothe proposals currently being put forward in thebalance that public interest with any other interestcontext of the Charter Review are very muchwhatsoever, other customers or clients of thereinforcing for that. So my point is that the conflict,regulator, with shareholders’ interests, withI think, is somewhat overstated.advertisers’ interests and so on. We only exist as a

body to represent the public interest. May I ask mycolleague, Mr Salz, Vice Chair, to come in at this Q470 John Thurso: The core of the conflict is, aspoint? you have rightly identified, slightly diVerent, but it

is where the governors feel that they must supportmanagement, because they are supportingQ469 Chairman: Yes, of course.independence, when it actually transpires that theMr Salz: I do so as someone who is relatively newsupport was misplaced; and that is the core that hasto the BBC and whose background is in theto be dealt with in a new organisation and structurecommercial sector and as a lawyer with someor the new way of dealing with it. That is what wentexperience of corporate governance from publicwrong in the past and needs to be dealt with?companies who look to shareholder value, someMr Salz: I hope some of the proposals actuallyexperience of regulators more in the financialrespond to that. There are some proposals, whichservices sector than in the broadcasting sector, and,we have not fully formulated, which are onas a trustee, some experience of other models in the

sense of trustee organisations, mainly charitable, as accountability and more access to the people we are



19 October 2004 BBC

looking after, if you like, and through modern one to the independence of the BBC, if that weretechnology and governor’s website ideas getting to happen again, I think the instinctive response ofmore clarity around those people who we are the governors would be that the independence ofrepresenting. So I do not think the structure is—it the BBC is best defended by stepping back andis an odd structure, it is a hybrid structure, but I having a proper inquiry leading me into what thethink it can be made to work very positively. management have said and not relying and jumping

too quickly and instinctively and believing that thebest way to defend the independence of the BBC

Q471 Chairman: Before I call on Michael was immediately to defend whatever managementFabricant, John Thurso seems to me to raise one has said. I have no doubt that an inquiry at thatof the most fundamental issues that we need to moment would have been the right thing to haveconsider here and which the Government is going done; and if the inquiry at the end of the day saidto have to consider in the decision it makes. If one that the management had obeyed all the guidelineslooks at the governance and accountability of the and processes, and so on, and that the story wasother television channels or companies, nobody has well-founded and there was no evidence, that is theever questioned the objectivity and impartiality of best way of defending the BBC. Equally, if you takethe news services on any of the other television

a step back and take a couple of weeks, two orchannels. When Sky Television had a problemthree weeks, as fast as you can, to get anrelating to a report it sacked the reporter and endedindependent assessment of what had happened andthe problem. If one is looking at Ofcom’s or thea forensic examination of what had happened, ifITC’s supervision of the other televisionyou flush out problems at that point, again, that iscompanies, they never have to go into issues of thisthe best defence for the BBC’s independence; andkind. It is typical that the kind of thing Ofcom doeswhat we are trying to do, and the governors hadis fining Channel 4 for a fight on Big Brother, but,started this work before I arrived; I have just kindwithout going into the content of the Hutton aVair,of accelerated the process and some of the thinkingand I tell my colleagues I will not permit discussionand some of the ideas—I think instinctively, wereof that because that is not what we are about, butsuch a situation to occur again, the governors willthe Hutton aVair does seem to me to havesay, ”Stop, we have to take time out here. We hearhighlighted the duality of the role of the governorswhat the management says, but we believe that thewhich you are attempting, Mr Grade, to sort out,independence of the BBC is best defended bybut it is a very, very diYcult question of how youknowing exactly what happened and taking time tosort it out. This Committee, when it recommendedfind out exactly what happened and doublethe appointment of the body which is now Ofcom,checking.” The one certain thing you know in abelieved that the BBC ought to come entirely undercrisis is that you do not know everything on dayOfcom. At this stage of this inquiry, I have to sayone. Somebody always comes in with an e-mail sixthat I no longer take that view, because having seendays later saying, ”I don’t know if this is relevant,Ofcom in operation I do not believe that the waysquire, but I just found this”, and oV you go andit is addressing itself to the kinds of issues that areit changes the whole complexion of things. So Iimportant to you is at all satisfactory. That beingthink that we are changing the rules of engagementso, if you are going to have a position in which youof the governors, the interpretation, and we arehave lay governors of the kind we have now, evenchanging the culture of the way we look at things;lay governors some of whom, though far from alland I do not think that is a conflict. We have againof whom, will have considerable experience of thebeen positive in supporting management to ensuremedia, there is the problem, is there not, Mr Grade,that our mutual objective of providing public valueabout how the duality of the role, the championingfor the licence payers at the right cost. We areof the BBC, can be combined with the real, ”real”,united on that. We will help them for those positiveholding of the BBC to accountability, as evidencedoutcomes. So I do not think it is as big a problem.by that utterly disastrous Sunday evening meetingI do not think we need to unstitch the constitutionwhen the governors were not given the informationof the BBC in order to solve an operation problem.on which to make a decision and where theI am sorry, Chairman, may I ask Richard Tait?Chairman railroaded a decision through theMr Tait: From my experience in journalism ingovernors which led, among other things, to hiscommercial television I think there are diYculties,own departure and that of the Director General. Iquite significant diYculties with the externaldo not believe anybody round this table at thisregulation route, because I think that you find . . .point in our inquiry has a solution, though maybeWhen I was editor of ITN I was rather surprisedwe will try to come up with one before we haveto find that the defender of ITN’s independencefinished; but what you have tried to do, Mr Grade,was, in fact, the regulator, because ultimately theI have put to you, though it is commendable thatexternal regulator was the person who decidedyou started almost as soon as you took oYce, is notwhether the journalism was straight or not, andreally at this point oVering a solution that would bethat is a body which has got a whole range of otheruniversally acceptable.interests and priorities: because in the commercialMr Grade: Without going into . . . Obeying thesector you have boards which consist of people whoChairman’s instruction not to go into the detail,are driven by a whole range of motives, perfectlywith hindsight, clearly with the benefit of hindsight,proper motives, shareholder value, to try andand not being in the middle of what was a very

febrile and volatile situation and a very threatening improve their market share, to try and get a good



19 October 2004 BBC

return for their shareholders. You have a tension, Q473 Michael Fabricant: The Secretary of Statesays that she wants to see a strong and independentas Anthony says, between the objectives of theBBC, and I think we would all, well I guess weBoard and the objectives of the regulator, which iswould all support that. The Chairman just nowperhaps, in public policy terms, to have the highestsays that the independence of the BBC has beenquality programmes. The diVerence with thechallenged on a number of occasions but has notgovernors of the BBC is that they are there tobeen undermined, but it seems to be very much arepresent the public interest and to ensure thefunction of the BBC always to defend itself fromBBC’s independence, and that inevitably meansany outside influence at all; and one of the greatthey must stand behind the BBC’s accuracy andbastions which the BBC resisted was anyimpartiality, because, if the BBC is not accurateinterference in its financial control. It was felt thatand impartial, it is no use to anyone, it is notif the National Audit OYce were to look at theindependent and, frankly, it is not worth having theBBC accounts it would aVect the independence oflicence fee. Therefore you must have, it seems tothe corporation, and yet now the BBC has agreedme, a body which is independent of all pressuresto allow the NAO to investigate, in its normal way,which can create a system which can satisfy youfrom time to time, the activities of the BBC, as itthat it will be robust, it will be rigorous, it will lookdoes other public bodies. So has the independencefor outside external advice and external input inof the BBC been compromised as a result?making its judgments but that that responsibilityMr Grade: I do not think so. I think that the longrests with the governors; and that is why in the end, debate that led to that compromise is a sensible andI think, Parliament was right, after a long debate workable one. I think what the BBC was concerned

on the Communications Bill, to decide that about was that the Director General would becomeimpartiality and accuracy should remain with the the accounting oYcer and would therefore begovernors as part of their core responsibilities, subject to some kind of political decision-makingwhich are independence and accountability. over the operations of the BBC which would have

undermined the role of the governors. I actuallythink that, of course, the BBC, the two key things

Q472 Chairman: Of course, part of it is the problem for the governors are to maintain the independenceof very, very cumbersome bureaucracy, is it not? of the BBC and make sure that the money isInternal processes do not seem to work as fast or properly spent, and it is perfectly right that thatas thoroughly as they ought to. You may recall, Mr comes under external scrutiny, as it does, in anyTait, that I had a complaint over the coverage of event, for auditors. The governors themselves havethe Royal Commission on the House of Lords just commissioned an outside audit of our financialreport. I telephoned you the same evening; you got control procedures, and so on, to make sure thatback to me the same evening; the thing was we are comfortable with the way things areabsolutely settled in one evening because the kind operating. It seems perfectly proper from time toof defensiveness that has built up within the BBC time for the NAO to inquire into various things,was not something that was happening either but to go through the full formal constitutional

proprieties of an NAO relationship where thewithin ITN or Channel 4. Both came back to meDirector General becomes the reporting oYcer, Ithe very same evening, if I may say so, saying thatthink, was avoided in that compromise and I thinkmy complaint was absolutely justified, apologising,it is a very good compromise and should be allowedetcetera, etcetera; and if the BBC were as flexibleto roll out over the next year or so to see whetheras that and were not so defensive in allit satisfies everything.circumstances as that, a lot of the problems would

be solved without getting anywhere near thegovernance? Q474 Michael Fabricant: I am pleased to hear that,Mr Thompson: I think perhaps, Chairman, if I can but can you not see that a number of us mightbriefly say, I think we should recognise that the recognise echoes in your arguments for saying thatBBC—and I speak as someone who has been an external regulator, whether it be Ofcom,involved with Channel 4 and Channel 4 News— whether it be Ofbeeb, or whoever, that echoes ofdoes seem to come under a much greater volume that argument were heard in the defence of theand intensity of complaints than other news BBC against any association with the Nationalprogrammes and other news broadcasters, not Audit OYce, and yet you now say, quite rightly Ibecause the journalism is less strong but because of am sure, that the BBC were able to compromise,the very high profile of the organisation and the that the NAO were able to compromise, that thesheer scale of its news operations. However, what Government was able to compromise. Can you notI would accept is that going forward we should be envisage in the future that there might not be aless defensive and more willing to, if you like, suitable compromise whereby an externalconfront complaints quickly and to start oV with organisation can be there to monitor the activitiesthe premise that a serious complainant may have a of the corporation—maybe “monitor” is not thepoint which needs to be looked into thoroughly and right word—but not only provide protection for thepromptly. In the aftermath of the Hutton aVair we BBC and its independence but also for the viewerhave developed and are introducing a new and the listener who might just take the view thatcomplaints system which we hope will be faster and it is not right, it is not believable for the Board of

Governors to be the BBC’s own judge and jury?more eVective.



19 October 2004 BBC

Mr Grade: I agree with the principle of what you Q476 Michael Fabricant: But is it only financial?You would not rule anything out philosophically.have said, but in the implementation of it I think

it is for the governors to call in outside consultants, You would say the BBC might go into any area.whoever—specialists—to look at what we are Mr Grade: Of course, but I think we have set outdoing, and that is precisely what the Governors’ our stall in the Building Public Value document.reforms are going to achieve and what we are One of the things that we are absolutely certain isactually achieving now. This is a radical departure a cornerstone of the BBC through the next charterfor the BBC for the governors themselves to be is what we call, in head-line terms, our “out oftaking anything other than the management’s word London” policy. We believe that there has been afor everything and signing on the dotted line at five huge shift, for good reason. Historically the BBCto one, just before lunch, on some radical plan that was the national broadcaster, and I think it was inis going to have quite a remarkable impact on the 1955 when independent television, or commercialprivate sector with the net result that some new television, as the BBC used to call it in those days,initiative gets launched, cries of “foul” from the commercial television was constructed as a federalprivate sector and the DCMS police have to come national and regional system to complement thein and call for inquiries and do exactly what the BBC’s national service. I think there has been, andgovernors should have done in the first place, which I think my colleagues on the Board and theis to get external independent advice so that when Executive agree with this, a massive shift now andthe governors make their judgment and balance, let the roles are kind of reversing in a way and thereus say in a particular case, the impact on the private is a huge public service job for the BBC to deliversector and the balance of the public value created through the next charter of meeting thefor what the management is proposing, the expectations of our licence fee payers and the talentgovernors can make their judgment, which is what of the UK that does not live inside the M25; so thatthey are there to do, and be able to say publicly, is a major plank the BBC are going for. I do not”We have found in favour of this service. We know whether the Director General would like to—understand there is . . . We have talked to theprivate sector. This is agreed. On the other hand,

Q477 Michael Fabricant: May I just say, in the lightwe are satisfied and these are the people who haveof answering, and I hope you will answer mylooked at it for us and they concur with ourquestion regarding the future of BBC very localjudgment”, and you can make a very transparenttelevision, given the criticism, which I am notcase that is evidenced-based and not evidencetotally sure is justified actually, against BBC3 andsimply provided by management, and I think thatBBC4, which I personally enjoy, is this not goingis exactly what we are going to achieve withto dilute still further BBC news services and BBCthese reports.resources?Mr Thompson: I will answer your question. Firstly,

Q475 Michael Fabricant: I suspect other colleagues we have made it clear in answer to the first part ofmay wish to pursue this argument. I would like to your question that we do not see a need ormove on, if I may, Chairman, to whither goes the justification for launching new linear television andBBC in the future. I wonder if maybe you could radio services, that the television and radiooutline what services you might envisage the BBC portfolios of linear services are complete. We dooVering in the medium term additional to the think that there may well be a need over the nextservices you oVer now? In particular, I am thinking ten years to develop the BBC’s existing editorialof talk for—there is some discussion, I believe, of mission in a number of ways. Michael has talkedthe BBC providing local news channels, local news about the rebalancing of the organisation out oftelevision, and I would be interested to know London. In terms of local services, localwhether you are going to go down that route. There information, we do think in going forward thatis also speculation about the future of the BBC licence payers will wish to receive local informationworldwide. You mentioned the conflict that is in new and broader ways. We are alreadyoccasionally perceived between the BBC and the complementing our local radio stations around thecommercial sector; so what will be the future of the country with local on-line sites, and we are takingBBC worldwide; and where do you see the limits steps right now to make sure that those websitesof the BBC? The BBC have gone very successfully, are distinct from and oVer value beyond what isI believe, into new media, including a website, or already available in the market. The local televisionwhatever, but that was never envisaged back in idea is an idea of whether, over time, initially1926. Mind you, television was not envisaged in through those websites, we can deliver news, local1926 either. Where do you see the limits of the news, in sound and vision. Increasingly we thinkBBC’s activities? the web is going to be a delivery mechanism for

producing what we call television—moving soundMr Grade: The limits, in the end, are financialconstraints, and we have in the Building Public and vision, interviews with local politicians and

other leaders following local news events, deliveringValue document laid out a number of ideas—someare more firm than others. At the end of this these services in the first instance via broadband

but subsequently perhaps using other deliveryimportant debate hopefully there will be aconsensus about what is expected of the BBC, what mechanisms. I think that whereas in the past the

BBC have seen charters as a period where you haveservices, what provision we are expected to make,and there will be a price put on and presumably— seen lateral expansion of new services and new



19 October 2004 BBC

ideas, I think looking at the next ten years I would assumption and recommendation makes onewonder what this man’s qualifications truly are;say that the trends we see are to do with moving

forward on demand, towards new devices, new and surely it is a question not simply of variety, butwe went to Homechoice last week, for example, andconsumer devices, new ways of using media, and

that the challenge we have is more one of evolving, Homechoice showed that people are alreadyconstructing their own television channels fromadapting and developing our services to meet these

new challenges rather than the idea of, as it were, everything that is available, and not only the BBC.occupying new territory. It is more about saying . . . Mr Thompson: We believe that . . . As you say,As the Committee knows from your own travels some consumers are doing this already. We thinkand researches, our world is moving very quickly; there will be millions of early adoptors doing thisthe world of audio visual products is moving; the over the next very few years, but we also thinkcurve of change is increasing; and it is very many millions of our licence payers will beimportant, if the BBC is to continue to oVer value continuing to use television in traditional ways, andto licence payers, that we stay at or ahead of that our duty is, if you like, about managing acurve of change in how we think about media and motorway where there are some people almost onhow we develop media. the hard-shoulder and other people shooting along

in the fast lane, but the core to me of our missionis about producing a mass of outstanding usefulQ478 Michael Fabricant: So do you think linearcontent and then finding multiple means oftelevision’s days are numbered?reaching diVerent consumers with that content; andMr Thompson: No, I think that some people mightalthough this makes for a much more complex lifehave said when the BBC launched television inand a life where distribution costs, for example, will1936 that BBC radio was finished, that televisionbe a much higher proportion of our spend than inwould be the way of the future. BBC radio remainsthe past, because we will be servicing multiplean extremely creatively robust and popular part ofchannel distribution points, I think it is also a veryour services and I believe that linear television willexciting period, and I do not believe there is anybe a part and critical part of the oVer the BBCreason to believe that the underlying proposition ofmakes to the licence-payers ten, twenty, thirty yearsthe BBC, which is a mass of outstanding useful andfrom now; but to go behind the question, I thinkvery wide ranging content in exchange for thethat in the end linear television is one very eVectivelicence fee, why that should not be just as relevantway of packaging content and oVering it to theat the end of this digital transition as it is now.public. What I would say is right now, but certainly

in five or ten years time, many of our licence payerswill be enjoying that content and accessing it in Q480 Mr Doran: Can I carry on the debate aboutdiVerent ways; so I think other means of enjoying the future landscape: because you will be awareBBC content will co-exist with traditional means of that one of the things that we decided to do as atelevision and radio, and the challenge for us, of committee was to look at the future and see whatcourse, is that this adds cost. If you are continuing the landscape was likely to be at the next charterto provide traditional services and also trying to review; and I do not think that there is any doubtmove forward with technology, that does produce at all that it is going to be substantially diVerentcost challenges. from the present. A number of points that have

been raised by Michael Fabricant and theChairman were about the outline of how the futureQ479 Chairman: To what extent though, Mrlandscape will develop. On our American trip whatThompson, does what you have just said reflectwas coming across to us quite strongly from peoplesomething that was pretty explicit in part of yourwho were looking at this in that context was thatreply to Michael Fabricant, namely 10 years time?terrestrial broadcasting was likely to remain in theWhen we had our discussions in the United Statesfuture but more likely to be at the low end of thethe assumption was that there was going to be amarket, whereas, as you put it, those in the fast-break up, not in the way in which television waslane were rushing ahead with all sorts of newpurveyed, but the way in which television wastechnology and new opportunities which arereceived and chosen by those who accepted it; andcoming onto the market, it seems, almost on a dailylooking to the fact that if one makes anbasis now. How do you deal with that? Becauseassumption, whether that is borne out bycost is clearly going to be an issue, and, if thesedevelopments or not, that at the end of 2006 theforecasts are correct, then terrestrial broadcastingBBC will get another ten-year charter, inevitablyis going to become much more expensive thanduring that period there will be an analogue switch-doing a deal, for example, with Homechoice?oV and there will be more and more convergence.Mr Thompson: I think the underlying driver of thatSo to what extent is it safe for you to base thoseexpected trend in America is long-term questionsassumptions on the continuing linear reception asabout the economic model for free-to-air televisiondistinct from linear provision? One of the idiociesbased around spot advertising. As audiencesof the Barwise report that was published last week,fragment, as people use several PVRs, hard discs,in my view, was an assumption that we were goingto record and perhaps fast-forward throughto go on in an analogue era in which BBC digitaladverts, that model which has driven the diversityprogrammes would somehow or other have toof free-to-air television in America will becomeduplicate the analogue programmes, i.e. two

BBC1s and two BBC2s. The sheer stupidity of that harder to sustain and you do, indeed, hear



19 October 2004 BBC

American networks talk about their free-to-air which I was interested in acquiring as a consumer,and that gave me everything that you have said thatnetworks almost as “Barker” channels to drive

audiences towards other cable and subscription I want which is on my terrestrial channels, butthe opportunity, because of, I understand,services. We have a diVerent tradition in this

country, particularly we have a public who have arrangements with the BBC, to look at the backcatalogue over the last seven days, if I have comecome to expect high quality and properly resourced

free-to-air television and radio. Moreover, and it is home and I have missed a football match or I havemissed the news, then I can switch on to ita cornerstone of that, the acceptance of a licence

fee, a universal licence fee, which if you like immediately. That is going to become more andmore attractive, and it seems to me that people inguarantees a block of investment in free-to-air

services, including free-to-air linear television and my position at the moment who are simplyreceivers of terrestrial broadcasting are going to beradio services. I get no sense at all of diminution

in public appetite for those services; indeed people marginalised substantially in the future.in multi-channel homes, I think, have, I think, been Mr Thompson: I agree with you by the way. Onestruck—once you have had a multi-channel for a recent example for us is the Olympic Games, thisfew years—of how little investment in original summer, broadcast by the BBC on television, and,content you find in the bulk of the channels as you know, 53% of households now have digitalavailable in multi-channel. Now there are some television. We provided an interactive servicegreat exceptions to that. Sky News, I think, has whereby people could, by pressing the red button,been a remarkable and valuable addition to the choose between any one of five diVerent sports, sorange of choices available to people in multi- you could chose whichever sport you want, andchannel homes, but, beyond new services and that was used by more than nine million licencecertain premium sports services, there is very little payers. These are . . . The beginnings of choice andevidence, either in Britain or even arguably in on-demand are happening now, but to me that goesAmerica in some of the digital channels in America, to the issue of how quickly and how eVectivelythat the multiplicity of channels is leading to fresh Britain can move towards a fully digital televisioninvestment in high quality content. So my view environment and what part the BBC can andabout certainly what we will achieve in the United should play in that process. We cannot beKingdom is that we can continue, particularly if the responsible for the whole process; we can play aBBC continues with a licence fee, to guarantee part; and I would argue in recent years the BBCsuYcient investment in free-to-air services so you has played a useful part in broadening the range ofdo not end up with a picture where there are some digital platforms and in particular in ensuring thatpeople, as it were, in the slow lane, to use my digital terrestrial television, where we can provideanalogy, who cannot get high quality content at all; extensive interactive, more channels but also morebut I wonder whether Ashley Highfield has interactive functionality, much more than isanything to add a new meaning to that? available in analogue homes, that we are playing

quite an active role in trying to make sure that no-Mr Highfield: Only that we have already seen withhalf the nation on line, that the cost per viewer one gets left completely out of this process—hour, particularly in some of the services likechildren’s services, is already equal to that provided

Q482 Mr Doran: Moving on to another area: everyin linear television; so there is very little danger intime we have had the BBC in front of us in the lastus providing cheap for the masses and then a highcouple of years I have banged the drum aboutend services in Broadband and internet. The costsBritish films, and I want to do that again. Whatare already comparable.part do you see British film playing in the BBCcommitment to public service?

Q481 Mr Doran: I can understand the point that Mr Thompson: I think British film and theyou are making. Certainly one of the other development and support of the British Filmmessages we got very strongly from the American Industry by broadcasters is very important. I havevisit was that the content producers will be the been involved over the years both with the BBCkings; and that is important in the context of the and Channel 4 in trying to support eVorts to createBBC, and certainly I can understand that; but a sustainable and successful British Film Industry.within the very early days, I would suggest, of the I think there are two or three diVerent strands to

this: firstly, proper prominence for British films onconsumer appreciation, if you like, there are nowvehicles available where you are not force-fed by our airwaves. I think in the past there has been too

little access to the airwaves for outstanding Britishthe broadcasters; you do not have to take theprogramme when they choose to broadcast it; and films. I have to say, there is another issue here—

not every film that is made in Britain, although aI think that we were all struck on a visit toHomechoice last week how professional that was. British film, can earn its place on our airwaves, but

I think for high quality British films there shouldWe were given a demonstration in a closed room,and so it is diYcult to know how that is for the be a place. We are in a position in the BBC where,

I think, as recently as four years ago there werereal consumers out there in the market, but I amsomebody who does not yet have satellite, does not really only a handful, five, six, seven, British films

being shown in peak time on BBC1. We are hopingyet have digital—it is not because I do not want it;it is because I hardly watch any television—but it that this year (2004) we are going to show as many

as 70. So we are trying to up the number ofis the first time I have actually seen an operation



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opportunities for British films to actually be seen Q485 Mr Doran: One final point with films: at themoment there is a very, very small proportion ofby the public. That is the first thing. Secondly, Ithe money that the BBC spends on broadcastingthink the BBC, and Channel 4, but let’s talk aboutfilms which it spends on British films. As thisthe BBC, does have an interesting role in helpingprocess proceeds do you envisage an increase into develop and support British film. That is partlythat respect?money—we spend about £10 million a yearMr Thompson: I think we should look at that.currently—but it is also about how you spend theAgain a key part of this is trying to work with themoney, and I think focus on early development offilm industry, with the Film Council and others toscripts and early support of talent so that at themake sure that the supply of films that are beingbeginning of film projects they have some certaintymade are ones that are going to work for ourabout subsequent television rights and also moneyaudiences, our first duty has to be to our audiencesfor development up front is very important. I thinkand to giving them programming, including featureone of the questions that we need to look at insidefilms, that work for them, work creatively, andthe BBC is whether £10 million a year is enough orwork as entertainment and so forth, but over time Iwhether we should look at whether we can play awould welcome a chance to show more high qualitybigger role. So those are two ways in which we canpopular British feature films and, as a result, showpotentially support the industry.fewer American ones.

Q483 Mr Doran: On the broadcasting, particularly Q486 Mr Doran: Is that “Yes” or a “No” toof recent British films, when you appeared before more money?to us discuss the annual report, you mentioned you Mr Thompson: I think it is, “Yes”, if the supply ofwere in discussion with the independent producers. quality is there.Has there been any conclusion to these discussions?Mr Thompson: No, but we are talking both to the

Q487 Alan Keen: Can I come back to boring oldFilm Council and to film-makers about whetherdemocracy, but before I go on to the point I reallythere are ways in which we can find alternatives,want to raise could I put this to Anthony Salz,though a lot of it, I have to say, does depend onbecause when I put it to the Chairman of the Boardthe kind of films that are made, and by and largelast time he rejected it! That unfortunate episodeour experience is that films which fail completely atthat happened, the Chairman said we must not talkthe box oYce also do not attract televisionabout, I firmly believe that had there been aaudiences. In other words, what you cannot do isseparated Chairman, an Executive Chairman,assume that you can use a television window for a working with the Director Chairman, and afeature film as an alternative, as it were, to a box separate Chair of the Board of Governors, that the

oYce success. By and large cinema goers and problem would not have got to be as serious as ittelevision viewers are looking for the same kinds of was. You said you had come from the commercialthing in feature films. sector fairly recently. What argument is there that

the BBC should not have two Chairmen, becauseI believe that would have stopped that previousQ484 Mr Doran: We still see masses of Americanproblem. It is a pattern; it is a model that is usedfilms which have not even had a box oYce release.in the commercial sector over and over again, thatI understand about bundling and the packages thatthere is an Executive Chairman who involved withyou are supposed to require, but that is somethingthe Chief Executive and there is another Chairmanthat causes a problem for British film makers?as a backstop. What argument is there for notMr Thompson: I agree with that, and I think, andhaving that in place at the BBC?I have tried to indicate what we are trying to doMr Salz: I suppose, in the commercial sector, onein terms of our showing of feature films—I think a of the great diYculties is to define precisely whatrebalancing towards British films, particularly oV- the role of a chairman is as against the chief

peak British films as opposed to lower quality executive; and so that tension always exists in theAmerican films, I think makes sense. Broadly, and commercial sector; and people do it in diVerentI have said this publicly already this summer, ways, but it is a very important relationship inwe have to look at the balance of acquired corporate governance and eVective corporateprogrammes as opposed to original programmes on governance. I do not for myself see why theBBC television. I think that the public still have a Chairman of the governors cannot, subject to anlegitimate desire to see some acquired programme independent overlay, perform substantially the roleas part of the mix, but I readily accept that there it has performed in a more conventionalare many areas of acquired programming where the commercial sector as to working with the chiefrest of the market, in terms of other free-to-air executive. Even in the commercial sector it is a rolechannels and also multi-channel, is providing much that is intentionally independent looking to themore choice and we need to look quite hard at are interests of shareholders, and in this case it iswe buying the right kind of feature films and the intentionally independent looking to the interestsright kind of US and other foreign television series of the licence fee payers. If you had two chairmen,that genuinely add value and add choice rather I think you are in danger of just creating an overlapthan just replicating what you can see elsewhere in which is unclear and causing some diYculty. I

think the focus should be on the appropriatethe market.



19 October 2004 BBC

independence and the independent support. The had any say. They were in great praise of the BBCbut they did not feel that they had, or would have,governance unit behind the governors is rather

crucial as part of reinforcing that independence. any eVect.Mr Grade: That is not acceptable.

Q488 Alan Keen: I will not push it but I think thatQ490 Alan Keen: We have to do something. Therehad there been a separate chairman last time, thehas been general support from the whole of theboard would not have fallen apart like I think itbroadcasting industry for the continuation of thedid. The good news about this inquiry is there haslicence fee and Charter, the only criticism they seembeen universal support for the continuation of theto have is that the BBC does things that they doBBC Charter, even from those who tended tonot think it should do and they impinge on theiroppose it before. As a strong supporter of the BBC,own commercial ability to make a profit. If thereit worries me a little bit that there is a lack ofwas a democracy they would not be able to sustaindemocracy. There have been some wonderful verythat argument because the BBC would beeVective dictatorships in the world in the pastsupported by the public, by the licence fee payers.where they have said, “Everybody votes for me. IWe do have to look at it. Tesco’s is a marketmust be right, I give the people what they want anddemocracy; people get what they want. Eventhey all vote for me”. Surely it is a bit like that withnewspapers provide views that the people they wantthe BBC, we know who does not vote for us so weto buy the newspapers have. The BBC is not thesend a van round with a gang in it and make themsame as that. Can you give any examples of whatvote for us, that is by paying the licence fee. Thereyou have in mind? Governors being electedis a big gap between the people who pay the licenceregionally, is that something that you havefee and the board that runs the BBC. Have youthought of?given any thought to having some real eVectiveMr Grade: Election of governors is an interestingdemocracy, not via the Government and DCMS?idea. I would have to say that the process ofMr Grade: I think that the messages coming fromappointing governors, and I can speak from recentthe Secretary of State are clearly that theexperience and from previous experience as aGovernment would wish to see tangible ways,member of the management of the BBC, hasmeasurable ways, practical ways, in which thebecome much more transparent and the Nolanlicence fee payers can feel more sense of ownershipprocess is now applied to the appointment ofof the BBC than they presently do. The evidencegovernors of the BBC. I think that is a tremendousfor talking about support for the BBC, there are allimprovement in the process. If you start electingkinds of surveys and research that has been donegovernors you always run the risk that the BBCabout the public’s willingness to pay and so on could be captured by a special interest group or bywhich suggests that there is not unanimous support an unscrupulous political party. There are ways tobut overwhelming majority support for the capture organisations. When you have got a votingcontinuance of an independent BBC funded by the population of 24 million, they are not all going to

licence fee. As the governors, I think we do have a vote, are they, on any evidence. I do not know whatresponsibility to improve and clarify the proportion would vote but I suspect that it wouldrelationship between the BBC and the licence fee be small enough to be really open to the risk ofpayers who are, in a sense, the shareholders of the capture, and I think that is a concern.BBC. They own the BBC, they pay for it and wehave to find ways to do that. We do an awful lot

Q491 Alan Keen: It does not have to be voting topresently, much of it the public is unaware of, soelect people; it could be people giving preferencesthere is a start to be made through broadcastingthrough the website. Again, you sometimes get acouncils, advisory committees, and the researchbiased view that way but what I want to do is makethat we do ourselves and so on. There is much thatsure that there is a lot of thought being put intowe do and we need to promote that. We have thethat, because it is the one weakness of the BBC.means to promote that on our own airwaves, onlineMr Grade: I do not think that it is weaknessand so on. We have to have a massive campaignprovided that what the licence fee payers want toto involve the public and stimulate them to comebe absolutely certain of is that whoever is sitting inback and tell us what they think about what we arethe boardroom, whatever anonymous charactersdoing. We need to do more. I hope that by the timeare sitting in the boardroom of the BBC, they havethe debate comes to a climax we will be ready withbeen properly appointed to represent their interestsa package of firm proposals that will do much toand that the BBC remains independent and untilalleviate that disconnect that you have described,that is undone then I think by and large the licencewhich is of concern to us as governors. We need tofee payers are content. I do not sense any greatknow how we are doing from the licence fee payersconcern. I think the concern the public would haveeven more than we do from the politicians.is if they felt that the board of governors had beencaptured. In our public value document we have

Q489 Alan Keen: I do not defend our parliamentary made a commitment and we are going to go out atdemocracy but we have got the technology to do a a minimum of three years, maybe every three tolot better. The Director General just talked about four years, it depends on what the independentthe website and we talked to young people in my pollsters tell us, and we are going to do the biggest

survey that the BBC has ever done with a sample ofconstituency last week who did not feel that they



19 October 2004 BBC

at least 10,000 licence fee payers as a representative in the field, and we have taken on their expert viewssample, and that will be done on a regular triennial and formed a view. We would have been able tobasis. We will take professional advice as to what say to the public, “Yes, we have authorised this, wethe strike rate of that survey should be. That will have shifted this amount of resources to do it andbe the biggest survey that the BBC has ever this is why”.attempted and it will be independently run. We will Mr Tait: That is a process that would happen onbe able to start to track attitudes to the licence fee, any commercial channel launch. If you wereattitudes to services, how the governors are launching a news channel in the commercial sectorperforming and so on and so on. That is one of the you would do that process. You would have apositive steps that we have already said that we are rigorous analysis of its potential reach, its targetgoing to achieve. I am in absolute sympathy, and I audience, the curve at which you build thethink all my colleagues on the board are in absolute audience. All of those things would have been donesympathy, when the Secretary of State says that she before you gave the approval for the launch butwould like to see a greater connection between the also that gives you a framework within which thelicence fee payers and the operation of the BBC and governors can then monitor the performance of thethe governance of the BBC. That is why some of channel, because it is much clearer what you havethese other ideas that are floating around for given approval for and it is much clearer whethergovernance start to confuse that just at a time when the channel is performing against the variouswe are trying to get a direct connection and part of indicators which were established when the channelthat direct connection is that the public absolutely was launched.knows where the buck stops; it stops with us andthe people we represent.

Q494 Derek Wyatt: I think from memory we madeabout a sixteen and a half million pound deficit on

Q492 Alan Keen: Can I finish by conceding that it BBC World, if I have got that right, sowas proven not too long ago that the BBC without presumably—democracy gives greater satisfaction to the public Mr Grade: This is the last financial year.than a government that has been elected bydemocracy. There is not a lot wrong with the finalresult but we need to have some more connection Q495 Derek Wyatt:—the governors are looking atthan there is. that. Would the governors be able to report notMr Grade: Absolutely, and the compulsory licence only on what the future of that is but also look tofee depends entirely on public support to sustain it. say, “Actually, the Government pays for BBCAlan Keen: Thank you. World Service radio, is there not a role here to lookDerek Wyatt: Good morning. Can I just go back at how we are represented overseas diVerently”,to the governors and— and would the governors be bold enough to say,Chairman: Before you go on, Derek, could I just “Why can that not be a stakeholder partnershipsay that I have been keeping a loose rein on the with Granada or ITV News or Sky”?Committee, including on myself, but we do have a Mr Grade: I think the future of BBC World, in alot more colleagues who want to put questions. phrase that I swore when I arrived at the BBC I

would never utter, is under constant review. I saythat in terms that I mean what I say, not as a meansQ493 Derek Wyatt: Last week there was a reportof ducking it. This is on the agenda. BBC Worldabout your digital channels and I think today it isis on the governors’ agenda. This is kept underdigital radio that reports. If you are going to be

more independent, is it that the governors will be very, very close scrutiny and the management aredoing those reports themselves in the future? working on a number of potential solutions andMr Grade: That would be our hope, yes, that we options to alleviate any losses.will be in a position to have gained suYcientconfidence that we are able to bring in outside

Q496 Derek Wyatt: Can I take up Frank’s pointexperts. Under the reforms I think the governorsabout film and the larger role you have as a culturalwould have commissioned, let us say, the Lambertentity. You have a number of orchestras but youReport on News 24; the diVerence being we woulddo not have a youth jazz orchestra, or you do nothave done it before the service was launched, nothave anything to do with youth music, that youafter it was up and running. When it was proposedown in the sense of the way that you do orchestra.by the management to create a 24 hour newsJust put that to one side because that is a problem,service, under the new regime the governors wouldthat in order to get to that target audience you aresay “That is a very interesting idea, we have to teststruggling with that audience from what we canit. We have to test it on market impact, the creationunderstand from the report last week. Against that,of public value” and at the end of that process thewe do not have an HBO for the UK and I thinkgovernors would make a judgment and say to theyou spent something like £87 million on non-management, “We are willing to vote youBritish films to show on BBC, so that was Frank’smanagement resources to do it” and we would bepoint about is there a way we can up that to British,able to explain to the world that this was thebut what I might be saying to you is from a culturalmanagement’s proposal, we took evidence frompoint of view I think we would like the BBC to haveRichard Lambert, Richard Tait (if he was not a

governor), Stuart Purvis, whoever, the real experts a UK-only film channel. If you are not prepared to



19 October 2004 BBC

do that, does it make sense, therefore, to ask Ofcom a licence fee for five more years which would giveto suggest top-slicing the licence fee so that a group you a total of seven years, that would challenge thecould come and have a UK-only film channel? whole innovation and the whole sense of the BBC.

If you get a ten year you will go to sleep again. IsMr Thompson: Firstly, do we take our role as acultural patron of music seriously? Yes, I think we there not a way that innovation is one of thedo. I am not ashamed at all of the fact that we have problems? You are such a large organisationthat spread amongst us around the UK, I think perhaps the more innovative talent now no longerthat is a significant and useful contribution. It is resides necessarily at the BBC?true we do not own a youth jazz orchestra. We have Mr Grade: There are quite a few strands to pick upan increasing and outstanding commitment to jazz there and the first one is about digital channels. Ion Radio 3 and to some extent on Radio 2. Move am not sure that I would characterise the Barwiseto your point on Radio 1, our commitment to report in quite as dismissive a way as you havesupport for original new British bands and new described it. Nevertheless, the fact is that the BBC’sBritish music, which dwarfs anything done by entry into the digital choice market—if you wantanyone else in this market, is very striking. To be to call it that—picking up where there had been ahonest, I am not sure that owning and operating in disaster behind it has driven one of the mostthe popular music space makes sense, but we have successful new take-ups in Freeview that thisan enormous commitment to try to find ways of country has ever seen, and the BBC has played asupporting new musical talent involving young part in it. I do not think we fully understand, butpeople. I will look at the issue about whether there we need to understand what is driving that, whichare enough opportunities for young people in jazz of the BBC’s channels is playing digital channelsas opposed to other forms of contemporary music. and extension of choice, plus the other basket ofThere are some areas—and I think the symphony channels which are on Freeview. Freeview is anorchestra is maybe a good example—where I think enormous success and it has accelerated in my viewour contribution probably is best expressed in the day when we will be able to switch over andsupport of those orchestras around the UK and switch the whole nation across to digital which isalso for new commissions from British composers. a desirable end in itself. I would also caution thatIn other ways, simply finding the opportunity on all new media ventures are a disaster to begin with.Radio 1 and not just on Radio 1 UK but also on ITV was a disaster to begin with; BBC2 was aour opt-outs on Radio 1 where new bands around disaster; Channel 4 was a disaster; Channel five wasthe UK can get their chance to be heard on the a disaster; BSB was a disaster and Sky was aradio, I would say our record on that is good. I will disaster. They all start shakily because they areturn to the issue of a film channel. I have spent the entering a very established market and it takes alast few years with Filmfour, which has been a long while to build the broadcasting brand and toparticular pleasure to look after at Channel 4. I establish yourself and find your own voice andwould say a couple of things: the economics of film fight. I have to say, there is a point where thechannels are tough. One of my challenges at Governors must obviously look at the amount ofChannel 4 was getting Filmfour to a point of break money that is pouring into BBC Three and Four,even. Again, we have to be careful about the BBC other digital channels, radio and television. I do notsailing into an area where you could distort other think that point is today, it is too early. In myexisting players and the feature film channels are experience and the experience of all new mediaalready a significant part of the landscape and both ventures is they do take time to find. It takes youFilmfour and the Sky channels have a good record a while before you realise you have got a successin terms of showing British films. Should we or you may have a flop, but you have to fix a pointexplore with other broadcasters whether there is in time and we are going to look at it and then weroom for an additional British film channel are going to see. Professor Barwise was asked to itshowing perhaps less commercial British films? I at this point. It is early days yet, but on the pointcan take that away and think about it. of innovation, there is an awful lot of innovation

and shows that have started on BBC Three are nowappearing on the major networks.Q497 Derek Wyatt: Before BBC Three and Four,Mr Thompson: Despite press reports which—thisthere was Choice and Knowledge and I do notbeing Britain—seem in many ways to tell theknow what you have spent but I suspect you haveopposite story of what the Barwise report said;spent between £600 and £800 million on thesewhat Barwise said about BBC Three was “it was achannels over the last five years. I guess if they aredistinctive channel with many innovative UKnot working, which is what last week’s report saidproduced public service programmes”; BBC fourto us, it was not working, you are not hitting somehas “met or exceeded most of its commitments”;of your core targets and not so many people areCBeebies is a “triumph”; CBBC is “a highlycoming to you, there will come a point I think,distinctive in both content and quality onwhen in terms of innovation you are struggling incommercial channels” and he said “the viewers ofsome ways to reach the digital channels. If you lookall of those channels were either fairly, very orat the last 20 years you have had Channel 4, Sky,extremely good value for audiences”. One mightChannel five and now perhaps a new PBS channelcriticise Professor Barwise’s picture of the future,against you, if the Ofcom suggestion takes route.his MOT on the progress of these services suggestsGiven that it is only 2004 now, you have got two

more years in the current licence, you could have that they are doing rather better than Grade’s law



19 October 2004 BBC

would suggest. I would also point to other areas people do not think of themselves as children andrightly so—the two children’s channels which arewhere in online and interactive television, not

always after a fast start, I think you are right, the very quickly gaining acceptance, with both childrenand parents, shows that we can work in this area.BBC has not always got onto the bus of change of

innovation, we are making real progress. In It is a tough audience, 11–18 year olds are probablythe toughest, most discriminating audience that areinteractive television, I think we are doing some of

the most exciting work. These ideas are on demand out there. I think we can do more.Mr Highfield: The mid-teen audience does consumeof the BBC available for a complete week: on

demand the ideas of having a creative archive, quite a lot of our services, like Radio 1, and GCSEBitesize, as with those services are not terriblyopening up the entire archive to the public to access

when and where they want it, in what we are doing heavily branded BBC and quite intentionallysometimes. For example, online that core audiencearound mobile technology and getting BBC

services on the move. As Michael said, in cracking is using the internet all the time. We syndicate a lotof our news and information to places where theythe problems of digital television distribution we

are leading in some areas. If the core of your point are, like AOL. We have very close relationshipswith them. When we dig deep we do find they areis the BBC is not good at innovation, I think that

is refuted by the evidence. using our services, but sometimes they do notrecognise or associate us with it.

Q498 Rosemary McKenna: When we have beentaking evidence over the last few months it has Q502 Rosemary McKenna: One of the areas that Igenerally been men in suits. We decided it was a wondered was worth exploring and they mentionedgood idea to go and target an audience who would it themselves, BBC Three does not start until 7be your future audience in terms of how they access o’clock. You have that time before that you couldbroadcast and programmes and also what their use, is that something you would consider?view of the BBC was. We spent last Thursday in Mr Thompson: There is an issue on digital/West Thames College and Heston Community terrestrial television about our children’s channelsSchool. It was a fantastic visit, they were wonderful which use the same band width. I think the idea,young people who were very open and very free again if it can be aVorded, of producing a blockwith us. of programming which we can oVer on all digitalMr Grade: What age group? platforms and which perhaps is a multi-media

oVering, so we are oVering something which hasgot a linear television expression on an existingQ499 Rosemary McKenna: They were what wedigital channel and it is also available onconsider your future audience, 11–18 years of age.broadband and it has got extensions onto theThey are all accessing media by diVerent means andinternet, I think it is a very interesting idea. I havethey use interactive services. After some persuasiontalked about not wanting to launch any moreand discussion to get them going they came aroundtelevision channels, I think it is not a fresh serviceto the view that yes, the BBC was a good thing.but whether there is a block we can find on anThey really strongly gave us a message that you areexisting service. As you can see, there are debatesnot hitting them at all. CBeebies is wonderful,for both sides. Professor Barwise’s view of BBCchildren’s BBC is wonderful and the older ageThree is it should be more mainstream, more broadgroup fine, but 11–18 year olds feel there isspectrum and less targeted. One of the interestingabsolutely nothing there they can access, or is indebates of the BBC going forward is to what extentany way inviting them. They come home fromdo you want a collection of, as it were, targetedschool at four o’clock, they want to chill out for aservices and to what extent is the BBC’s duty to bebit so they watch MTV or Trouble, if they havemore mainstream and we have to work thosethem available to them.debates through.Mr Thompson: There are some BBC services we

hope they would use, GCSE Bitesize, for example.Q503 Rosemary McKenna: I should pass on amessage which I had said previously and I thoughtQ500 Rosemary McKenna: Yes they do.I was just an old fogey, but they did not like theMr Thompson: That will help them pass theirEastenders storylines over the last year.exams we hope. Radio 1 might well be a radioMr Thompson: Thank you for that.station they listen to. A surprising number of

them—they may deny thiswould find themselveswatching some of our mainstream drama on BBC1. Q504 Rosemary McKenna: Can I move on to

another issue which you brought up, the BBCchildren’s programming and take us on to yourQ501 Rosemary McKenna: They all watch

Eastenders. regionalisation, your moving out. There are twoissues there: moving staV out of central London,Mr Thompson: Yes. When we say nothing, what we

mean is not that they are not using BBC services out of the M25 corridor, what are your plans there?For example, it has been suggested that BBCbut there is not enough that they feel is particularly

targeted to them, their world or their concerns. I children’s programmes should move to Scotland?StaYng is one aspect. The other aspect is regionalthink it is a gap we should look at. This is an area

which I think the BBC could do more in. I think the broadcasting and you said yourself there was aclear shift in how the independent televisionsuccess of our younger children’s channels—these



19 October 2004 BBC

producers were delivering regional news and Mr Grade: I think it is unacceptable in this day andage for talented people in the nations and regionsprogrammes, do you think both of those areto have to come to London to work, it is nonsense.something you would do in the future?It flies in the face of the whole experience of ITVMr Grade: The Governors are awaiting the resultwhere there were centres of excellence withof the Director General’s deliberations on practicalGranada in its heyday of production inmoves out of London. We are united, both boardsManchester, Yorkshire Television in Leeds,the Executive Board and the Board of Governors—Scottish Television and so on and so on. They builtas we expressed in the Building Public Valueup fantastic centres of excellence and they weredocument that for the BBC to be quite such amagnets for local talent, new talent. A lot of itheavily London central organisation is not a long-eventually came to London. The late Jackterm future for the BBC. There are independentRosenthal was a local lad up in the North-Westproducers, producers, writers and performers, therewho got a job writing on Coronation Street andis a job to do outside London, that is absolutelybecame one of our finest television dramatists.clearly visible now and that is a public service,Where are those opportunities today? It is the BBCpublic value territory that the BBC must populate.that must create those opportunities because theyThe provision of news on an international, nationaldo not exist anywhere else.and regional and local basis is an absoluteMr Thompson: If I can just add one last thing. Icornerstone of public service broadcasting for thethink whereas in the past people have seen this asBBC and we have to meet that and we have to putan imperial gesture, in Glasgow and Pacific Quay,resources behind that. What is diVerent this time,in our new centre in Manchester, in the Mailboxand Mark’s plan when he eventually comes forwardwe have just opened in Birmingham and elsewhereto the governors I hope will be driven by this, isin the UK, we are very keen to do this inthat previous BBC tokens about moving out ofcollaboration with other broadcasters and otherLondon have meant moving Janet Street-Porterpartners. It is partly about where STV is going toand a religious programme to Manchester, so theybe and Channel 4 in Glasgow. It is about can theall got on the train at Euston on Friday and wentBBC and Channel 4 together help build anup to Manchester, did the programme and all cameindependent sector in Scotland with medium sizedback to London and the whole thing cost 30% toand large players as well as small independents. We40% more than it needed to, but it meant the BBCsee ourselves as more of a catalyst working withcould say, “Yes, we are moving out of London”. others to create sustainable creative industries inThe only way eVectively to build roots, real roots these other parts of the UK rather than, as it were,

and foundations outside of London is to move the BBC doing it all on its own.resources and airtime. Those are the only twocurrencies that mean anything inside the BBC.Money and airtime has to move out of London. Q506 Mr Hawkins: Good morning. I want to sayHow it moves and what the cost of it is, that is all first of all that I have been somewhat reassured onbeing worked on by the executive and the some of the points I was going to raise by what Mr

Thompson has said to us this morning. There aregovernors. That commitment is an absolutea couple of things I will come back to briefly. Mycornerstone—I cannot stress this enough. We dofirst point is really to ask you all, given that thesee that one of the justifications for the existence ofPublic Accounts Committee is often referred to asthe BBC going forward is to fill that vacuum whichone of the most important, if not the mostis so clearly evident today.important, committees of the House, how worriedMr Thompson: Specifically, in network productionwere you by what certainly appeared to be somewe talk in Building Public Value about our visionpretty savage criticism recently, about a month orof a major new network production centre inso ago, by the Public Accounts Committee? InManchester, but it is worth emphasising that whenparticular, a very senior Member of this House, notwe talk about network production outside London,normally somebody who says extreme things, aI think that has also got to mean new opportunitiesformer Minister, he will be Father of the Housefor network production in Scotland, Wales,after the next election, was describing the BBC asNorthern Ireland and also other parts of England“arrogant” and “self-satisfied”. Do you find thatas well, notably our centres in Birmingham andof concern?Bristol. This is not about, as it were, ManchesterMr Grade: Of course. We must be concerned. Igaining at the expense of other parts of the UKthink that is part of what we are trying to addressother than London, it is about Manchester as a bigwith the reforms that we are putting in place.part of the vision but actually looking at what weHistorically, arrogance is the word that the criticscan do in terms of network production in Scotlandof the BBC would reach for first in an appraisal ofand other parts of the UK as well.the BBC’s performance. Having worked inside theBBC previously it did not feel as if we were being

Q505 Rosemary McKenna: I think it is also arrogant but now, coming back, I can see how theimportant to say that with the investment in the lack of transparency, the lack of objectivity andinfrastructure, certainly in Glasgow, it has involved judgment making by the governors, easily could bea real regeneration of an area so there are other described as arrogance and as a former competitorspin-oVs that are just as important as actually of the BBC either at Channel 4 or in ITV, at

London Weekend, which is another example of adoing the broadcasting.



19 October 2004 BBC

disaster when it started, another one to add to audiences who are really living in other thantelevision in an analogue world. We can mitigateGrade’s laws’ list—it had recovered by the time I

got there—the fact is that from the outside the BBC this problem, to some extent, by trying to take thebest of our digital programmes, for example onhas looked arrogant. It is not arrogant, it takes it

accountability responsibilities very seriously. The BBC 3 and BBC 4, and showing them as well onBBC 1 and BBC 2, so analogue households can seeproblem is that the decisions that it has made have

been behind closed doors, a cosy discussion them as well. I absolutely agree that we have to bevery careful that we do not end up where you dobetween the two boards, the executive board and

the board of governors, no transparency, no not feel you are getting, as it were, a proper serviceon analogue because you are constantly beingobjectivity, no independent thought, until after the

decision had been made and, of course, that must pointed for the full information to digitalplatforms. However, all I would say is, taking allseem arrogant but we are addressing that.

Decisions will not be made to do anything, adjust those things on board, nonetheless, I think our roleand our success so far in accepting, if you like, theanything, change anything, launch anything, until

we have been through that process of objectiveness innovation that Mr Wyatt talked about and oftaking the advantage to strengthen and broadenso that we can tell the world how we reached the

decision we reached and what evidence we took in our services and, also, to encourage Britain toadopt digital technology early—we have now gotorder to form that judgment. That is a radical

departure and I hope that will address the PAC’s the deepest penetration of digital televisionanywhere in the world—is basically a success story,very robustly expressed concerns.and although we have to keep that balance in mindI do not think you can deduce from what has

Q507 Mr Hawkins: Obviously the PAC were happened so far that we have got the balance waylooking at some things that some of my colleagues out of kilter; I think we are broadly findinghave already touched on in relation to the digital solutions to that balance, though I accept thatservices particularly. I said earlier on that I was individuals will still get frustrated when they hearsomewhat reassured by what Mr Thompson had about services they cannot receive.said because I was a bit worried in preparing forthis session seeing that Mr Highfield was describedas somebody who was looking forward to a 100% Q508 Mr Hawkins: You clearly, from the answers

you have given, take the view that it is part of thedigital Britain. Like my colleague, Frank, certainlyI do not regard myself as a Luddite, I am quite keen BBC’s mission to say to everybody, “You have got

to go digital.” That is something that you have sorton information technology, but I do have a lot ofconcerns expressed to me by constituents who say of adopted in your minds, even though I was

putting to you analogue switch-oV is clearly notthat there is far too much concentration in almostevery BBC programme on both television and radio going to happen in 2012, it is going to be a lot later

than that.promoting things to look on the internet, to lookat BBC websites and, particularly having come Mr Thompson: Can I say I would not put it quiterecently from being a sports spokesman for my the way you put it? I think it is probably part ofparty, sports fans saying “It is all very well Radio our mission to say “Here are the advantages ofFive Live constantly talking about you can get digital”—whether it is GCSE bite-size for yourthese extra services on digital radio” but we know exams or whether it is People’s War andhow low the number of digital radio sets there are, remembering your and our collective history—butvery, very low take-up. In a world where still an I would never say to an analogue licence payer,awful lot, particularly of the older generation, not “It’s your fault” or “You’re old-fashioned”. I thinkonly are not on the internet but have no intention we need to oVer a full service to them as well. Asof going on the internet, do you accept that there far as digital switchover goes, it is interesting tocan be some criticism that the BBC has become too reflect on the fact that not only are more thanobsessed by that? 200,000 Freeview digital adaptors being sold every

month now (200,000 households every month, so aMr Thompson: Perhaps if I can begin. We have adiYcult and ever changing balance to strike. More million in five months) but I believe there is now a

Freeview box on sale at £25. This is ceasing to bethan half of all households have now got digitalan expensive or, in any sense, heroic piece oftelevision and more than half of all householdstechnology; it is a routine thing.have now got web access. We are particularly

interested in how we can potentially encourage and Mr Highfield: I think we probably have reached thetipping point on the net in Britain anyway, withattract older audiences to think about digital

technology, both the digital buses we have and 55% of homes having the Internet. In fact, thefastest growing are the over-55s, through things likeprojects like People’s War, which is an attempt to

find subject matter which is particularly likely to genealogy, which the BBC can promote an interestin. It kind of goes with my job title that I have aattract older audiences and to engage them with

digital. We talk about our eVorts to broaden the technical brief. It has to be borne in mind that Iam responsible for only 3% of the licence fee, butdigital oVering to all audiences, that is part of what

we are trying to do. I absolutely recognise that for I think that is still £100 million that we spend onthe net and on interactive TV, and we have aquite a few years to come we will have people who

are still in analogue television households and for responsibility to make people aware of thoseservices—often far too deep and analytical news,a generation we will probably have a minority of



19 October 2004 BBC

for instance, that we can possibly broadcast from outside experts, we will get the information and weour linear schedules, but you are actually tackling will get the views of the private sector before wethe balance right. move. Therefore, let us say, we launch some new

commercial activity; of course we must not abuseour privileged position with the distribution that weQ509 Mr Hawkins: It has been suggested to us, as presently enjoy to promote commercial activitiesa Committee, not only by other witnesses but inwith an amount of air time that is not available torecent reports we have had from academics, thatour competitors. It has to be a level playing field,there is a real issue about the BBC unfairly usingand that is policed and there are very seriousits position, as it were, to cross-subsidise andstrictures. It may not seem like that to ourcompete with channels in fields like Arts World andcommercial competitors who would love to winHistory Channel, and that kind of thing. You arepolitically, sometimes, what they cannotall aware that that is an issue. At the same time, Icommercially. It happens, in some cases, that theirsuspect that to an awful lot of the British publiccomplaints are founded, but not in every case.your suggestion in your recent document that you

are eliminating derivative programmes and ideasfrom the schedules would simply cause hollow

Q510 Ms Shipley: I am not sure it has to be a fairlaughter. How do you respond to that, becauseplaying field, actually. I do not see why the BBCcertainly from my own experience as a regularcannot have its own unique area that it leads, andviewer and a great supporter of what the BBC hasif it tramples on a few commercial stations so bedone both in history and the arts I would have toit, if it is in unique areas. I do not really think itsay that some of the things you have done withought to be on the grounds of the non-uniqueyour recent channels are clearly an attempt toareas. When I start thinking about “I want tomuscle in on successful markets which have been

created by the History Channel or Arts World. I believe in the BBC”, what worries me is the areasthink there is a real issue here that you have to look where it is not unique. So I starting looking atat. I see the commercials, as it were, you are doing where is it unique, and I think the news reputationfor your own products, and a lot of constituents is very, very strong and the children’s television issay to me “In the old days we liked the BBC very, very strong, but in terms of its unique sellingbecause there weren’t commercials on it; now there points there are a lot of dodgy areas which,are commercials on the BBC, but it is just the BBC hopefully, you are addressing through yourpromoting their own stuV all the time.” Building Public Value. I would like to ask you, MrMr Grade: On the interaction with the private Grade, what is the diVerence between public servicesector, I think that we are currently undergoing a and public value?review of all our commercial activities. The first Mr Grade: Public value is the result of the publicthing to say is that the BBC embarks on service, we hope, and we are striving always, incommercial activities—what it amounts to is— whatever we do, to be able in some way to measureexploiting beyond broadcast the intellectual the eVectiveness of what we do. Public serviceproperty that the BBC has created and in which the broadcasting, in the end, is the result of the unique,licence-fee-payers have invested. We embark on securely and adequately non-competitive fundingcommercial activities for two reasons: first of all, of the BBC. That creates the climate in whichParliament requires what is colloquially known as public service broadcasting can thrive. It isself-help—that we maximise our commercial interesting to note that ITV had a monopoly ofadvantages. Secondly, we owe it to the licence-fee-

revenue, up to the point when Channel 4’spayers to give them a return on the IP that theyarrangements were changed—if you remember,have invested in and created. So there are two goodITV sold Channel 4’s airtime up until 1980-reasons for doing it. You then have to say, “Aresomething—but once Channel 4 and ITV were inwe doing it fairly? Are we doing it in a way that iscompetition for revenue it aVected the nature of thefair to the private sector?” All the evidence that Iservice, undoubtedly. So the conditions for publichave seen so far suggests that the controls andservice have to be created by the unique, secure andmechanisms and the procedures and guidelinesadequate funding mechanism.that exist within the BBC, which have been

independently audited, at least once—Caroline can,perhaps, tell us how many times we have had

Q511 Ms Shipley: Do you agree, then, that there isoutside people come in and look at oura whole area that is not unique about the BBC atprocedures—have not been found to be wanting inthe moment; that really it has moved itself intoany way, shape or form. There is a fair tradingcompetitive areas where, actually, it should not becommittee of the Governors, which entertainscompeting and that it really, really should becomplaints after the fact, and there are complaints.focusing on its seriously unique possibilities?What I would say is that in future the way weMr Grade: We should be striving at all times to beintend to run it is that in launching any newthe benchmark of quality, innovation and thecommercial activity or any activity which is likelyhighest rate of delivery of those qualities. The moreto have any impact on the private sector we willyou strive you are going to have failures. You areexamine that not on the evidence of whatgoing to make decisions about programmes whichmanagement tells us but we will go to the

governance unit of the BBC and we will call on seemed like a good idea at the time—



19 October 2004 BBC

Q512 Ms Shipley: For the life of me I cannot Ms Thomson: I think it is about increasing reachas a news service, which you yourself just said is anunderstand why the BBC has to do game shows,

for example. Okay, it comes under entertainment, important part to do, to new, young audienceswhich we are trying to get to. That is the point of it.but I cannot understand why it has to do game

shows.Mr Grade: It is dangerous straying over this line Q520 Ms Shipley: I suppose what I am trying tohere, but there is a BBC quiz show and there is an get at is that when I turn on the radio I know whenITV game show. I am listening to the BBC—actually, on any

channel I know. With television I do not alwaysfind that; I am really not always sure what I amQ513 Ms Shipley: Is that not a little pedantic?watching, which brand I am watching. With CBBCMr Grade:No, no.Who Wants To Be A MillionaireI can because there is no advertising (that is itsis an ITV show, in my view.major selling point, as far as I am concerned) andMr Thompson: If you think of Have I got news forcertainly no advertising of products I would notyou? or The News Quiz on Radio 4, I think itlike during children’s television. However, why youdepends on the game show. I think there are gamecannot be running your branding very, veryshows which the BBC should not do. Comedy isstrongly in other products I do not agree with you.quite an interesting area because people say,Mr Thompson: I think the notion here is that aperhaps, “That is not unique, it sounds veryyoung Internet user who might not naturally go tocommercial, it is about entertainment.” Actually,a BBC news site might, nonetheless, connect withthe BBC has got 60 years of heritage in comedyand bump into BBC news and enjoy it in anand, probably, as a matter of fact, is investing moreenvironment—the AOL homepage would be onein comedy than the whole of the rest of—example—where they are more comfortable.

Q514 Ms Shipley: I was not talking about comedy.Q521 Ms Shipley: Fine, but would they not beMr Thompson: In other words, the idea that someturned oV by it being the BBC?parts of entertainment could be distinct and theMr Highfield: Maybe another way of putting it isBBC could be making a unique contribution can bethat 93% of AOL’s traYc does not leave AOL, sojust as true as in news or in children’s programmes.we either become imperialist and say “If you do notcome to us we are not going to bother”, or weQ515 Ms Shipley: Mr Highfield, you said in answer actually find ways of engaging with them on theirto my colleague’s question that you do not brand terms, particularly for the teen audience.all your services and that you do that on purpose.

So why do you not brand all your services? I cannotQ522 Ms Shipley: But then you educate them thatunderstand that—the proud brand of the BBC.there is the BBC, as well. If the product is good andWhy do you choose not to brand them?you want to sell it to young people and the youngMr Highfield: We do brand all our services.people have found it, once they are there surely youunderline—

Q516 Ms Shipley: It is on record earlier on in these Ms Thomson: That is exactly the point.proceedings. Mr Thompson: They can click through and they canMr Highfield: We syndicate into others, we keep then actually come into the BBC world, but theybranding quite light for that particular audience. might come upon it first in this other environment.

Q517 Ms Shipley: Why? I do not understand. Q523 Ms Shipley: When I last looked at branding,Mr Highfield: Because with some of the new which I did in some detail, branding is a lot moreservices that we may put into AOL, the branding than that; branding is about creating a wholeat that particular age for some audiences may just identity. Is it not? So where is your bit about “Wenot appeal and yet we still think there is public don’t, on purpose, brand part of our function”?value built by providing news or educational Mr Thompson: In a way, to get people in in theservices, you just need a more subtle approach first place.sometimes to it rather than slapping in big, boldletters “This is good for you” all over it. Q524 Ms Shipley: It is distressing, is it not, that

they would be oV-put by the BBC?Q518 Ms Shipley: Is that what the BBC is? Good Mr Highfield: That is teenagers!for you? No, come on. There must be a way ofbranding. Q525 Ms Shipley: Then you have not got yourMr Thompson: Just to explain, I think what that market.means is if you imagine a young subscriber going Mr Grade: I think the trend is for the BBC toon to their AOL homepage you would see “BBC partner other, outside, organisations. In doing thatNews” embedded on the homepage. It is still you must respect their brand and their right tobranded BBC but it is in that AOL environment, display their brand, and when we move into anas an example. environment where we are in partnership—and the

example of AOL is a good one—that is AOL’s site;it is branded “AOL”. The BBC gets the credit forQ519 Ms Shipley: There is room for manoeuvre

here, I think. the content, the authorship of the content, but it is



19 October 2004 BBC

important for AOL to explain to their users where Q530 Chris Bryant: I am sorry to unpack this, butit comes from. So the BBC is there but you are in I think from what you are saying you still think itsomebody else’s house. You do not bring your own might be necessary, even once Sky’s Freesat exists,furniture when you go to someone else’s house. for there to be another Freesat/BBC?That is a rather clumsy expression. Grade’s Law Mr Thompson: We think that one of the reasonsis best. Freeview has worked so well, and we were saying

before you came in that over 200,000 units arebeing sold a month now, is because there has beenQ526 Chris Bryant: Now we are getting carriedquite lively competition in that market which isaway with metaphors. “That’s teenagers for you”—driving the price of the Freeview receivers down tojust ungrateful, are they not? Incidentally,£25. If it can be achieved, the idea of a ratherChairman, can I apologise for lateness, I have beensimilar free satellite standard and healthyon a Standing Committee, so if I ask somethingcompetition between diVerent box manufacturers-which has been asked by others, I apologise—just

say “I refer to my answer previously”. We have produced devices so that consumers have a choicealready had four cornerstones of the BBC today of device, a choice of functionality in device, if theyand I note it is a word that is used an awful lot want to have the option of upgrading to pay it isabout the BBC and broadcasting, and then Ofcom there through Sky or through others, if they wantsays that the BBC “is the cornerstone of public a very low cost box without encryption they canservice broadcasting.” However, one that is have that, if they want a box with a PVR, a hardgenerally recognised is that it is about universality, disk on it, they can have that. We would like to seeand you put that in your own charter commitment. a market opening up in free satellite, particularlyOf course, as we have already explored, it is not for the people who currently cannot get Freeview.just 3% of the budget which is not available to The broader point is with over 50% of householdseverybody, it is a significantly higher percentage of already seeing digital television, the best path tothe licence fee now which goes to programming and universality now is to deliver, subject to Mrservices which either themselves are physically not Hawkins’ scepticism, switch-over as quickly asavailable to everybody or which everybody does possible because at switch-over we can then delivernot yet have because they do not live in a multi- DTT across the whole country. I have to say, I amchannel household. What percentage of the BBC’s at the point now of thinking that the best way welicence fee, do you think, is a suitable amount to can get back to a point of universality, which webe not universally available? Secondly, do you absolutely have to get to, is by moving swiftly tothink that you will have to develop your own free- switch-over and freesat is part of that.to-view satellite option?Mr Grade: I will take the second point first.Undoubtedly Freesat, whoever provides it— Q531 Chris Bryant: That ties up the first question.whether it is a consortium led by the BBC or Can I ask something about accountability and thepartnered with the BBC or whether it is Sky and governors. I wholly applaud the direction that youthe BBC, however that emerges—is the easy have moved in in terms of trying to segregate thesolution for those people in parts of the country, two and create greater independence for themany licence-fee-payers, who are unable, even if governors, but at the end of the day there is still thethey bought the Freeview box, to receive the problem of how accountable a governors’ report is?Freeview basket of services. So that is a matter of For instance, you have announced one onurgent development. European coverage and you have set your own

terms of reference. I think they are very biasedterms of reference and I think they are pointing inQ527 Chris Bryant: There seem to be delays about

the Sky version coming into existence still. entirely the wrong direction, but nobody inMr Grade: Sky will launch very shortly. Parliament or as a licence fee payer has an

opportunity to question you on your own terms ofreference. Several months ago you announced thatQ528 Chris Bryant: We were told that back inyou were going to do a report on expenses in theMarch. “Shortly” has become not very shortly.BBC and I think it was going to report within aMr Grade: No, talks are going on all the time toweek but it has not reported yet and it is more thantry and figure out the best route. It is quite athree months later.significant step and we want to get it right, and weMr Grade: On the second point, the Ernst & Youngwant to know we are talking to all the potential

partners. report, there was no commitment at all to anythingthan a thorough report into the financialprocedures inside the BBC which the governorsQ529 Chris Bryant: Is it going to be by Christmas?commissioned. There was no commitment made. IMr Grade: Sky’s box, from what they havewould not have thought that any report of thatannounced to the markets, is going to be availablenature done inside a week would have much value,before Christmas, so that will oVer an immediateto be honest. Ernst & Young are doing their workoption to licence-fee-payers. Whether we go in withand I am hoping that they will have completed itSky or oVer an alternative is a big decision but thatpretty soon, I have not got a date yet, but it is wellopportunity is available from Sky very, verytowards completion now. Sorry, the other pointshortly. It will be an encryption-enabled box, I

am sure. was?



19 October 2004 BBC

Q532 Chris Bryant: Just about you set your own are moving on to video games, they are notslumping in front of the TV. Because we areterms of reference and that was the problem

because who then says “I am sorry, we disagree looking at possibly a ten year Charter renewal, willthose people in their thirties be doing the samewith you”?

Mr Grade: I can assure you that the terms of things they are currently doing in their twenties?reference for the impartiality review of European Mr Grade: The first thing to say is that sort of latecoverage were not set by the news division or teen, early twenties audience has never watchedanybody who was parti pris to the argument and television in large numbers, they have always beenthe review will be conducted with independent the light viewers.outside consultants, experts and so on, who are notparti pris. I sincerely hope when that report is

Q535 Mr Flook: I am told that is happening alsopublished and the governors’ views on it arein their mid-twenties. Is that true, Mr Highfield? Ispublished that people will accept it for what it is,it moving through or not?which is going to be a very independent andMr Highfield: There is some evidence that theimpartial view of the BBC’s coverage of theaudiences are declining and then the question is willEuropean issue.they come back. That is where the jury is still out.I think that from my perspective we place bets on

Q533 Chris Bryant: Just one final area. Barwise where they may stay, which is in new media, digitalsuggests some targets for BBC 3 and BBC 4 but radio, digital interactive television and so on. Whatthe danger of setting targets for audience reach and is clear is that they do not just drop one mediumshare is obviously that you are saying you should forever, as every new medium comes along itchase audiences, and yet one of the basic principles squeezes into the overall space of people’s mediaof the licence fee, and you have advocated this not consumption.only here today but when you have seen us before, Mr Thompson: Careful about assuming that theyis that you are rather eschewing that, that you do are not watching television, but what they watch onnot need to chase audiences all the time. How do television may now be the DVD of Little Britainyou resolve that tension, especially in a world they have bought. The DVD explosion in thiswhere digital television will mean that you will not country is actually driven by this demographic. Forbe able to hammock programmes in the same way, me, it goes back to the point we were talking aboutyou will not be able to guarantee that people earlier on, which is if the mass content you areserendipitously land upon a programme that they making is the right content and works formight not have chosen to watch in the first place? audiences, and BBC comedy would be a goodHow do you reconcile that? example of something this audience loves, weMr Grade: Governors in their stewardship of the should accept they are going to access the comedypublic’s money are not in the business of endlessly in new and diVerent ways as well as watching it ongranting money to the management to spend on BBC 2, as it were.services that clearly nobody wants to watch or tolisten to or to use online. In the case of embryonicservices, which is what the digital services are, we Q536 Mr Flook: Mr Thompson helps me make mywill have to take a view at a certain point as to next point more easily. The Chairman mentionedwhether they are making progress and growing, the phrase “public service broadcasting” and I dowhether they are flat or whether they are in decline, not deny that the big thing the BBC has over theand you do that through a regular process of review next 50 years, 100 years, is your content. Thebut also when it comes to the management’s question mark I have is over that wordpresentation of the budget and the allocation of “broadcasting” because of things like TiVo andfinancial resources the governors will scrutinise personal video recorders, and maybe they arewhere the management are proposing to shift watching DVDs but they are not watching themoney and will take a view in the interests of the broadcasts. I have a particular point because inlicence payers as a whole as to whether we think Somerset, and also on the Devon border, it is quitethat money is going to be well spent or not. In hilly and we do not get a lot of the broadcast andfuture, that will be backed up by the service licences people have been driven to Sky because the qualitywhich will be issued by the governors. of the transmitter is not very good. That is part ofMr Thompson: Building Public Value suggests a it. The other part is if people are changing theirmetric which is not just looking at audience size; it viewing habits, or what they are viewing, is there ais looking at reach, quality, impact and value for need for the BBC to be broadcasting in 12 years’money with a large number of parameters for a time without being a social service?more balanced assessment about whether or not we Mr Thompson: One of the interesting trends inare driving public value. audience figures over the last year or two is that

the big live events are getting bigger. The Olympics’audiences, audiences for events like D-DayQ534 Mr Flook: May I also apologise for beingremembrances, are getting larger, the audience issomewhat late. Since we started this inquiry,getting larger for the Cenotaph. The premium onseveral times we have come across the perceptionevents which you have to watch, whether it is somethat those in their twenties are not watchingenormous news event or Kelly Holmes winning atelevision like those in their thirties, their forties,

their fifties, their sixties or their seventies, that they gold medal—



19 October 2004 BBC

Mr Grade: Two gold medals. and you will have a change in roughly two years’time. My real concern with the BBC is if you doMr Thompson: Two gold medals. The premium on

the live broadcast event is growing. I readily accept get a ten year Charter renewal, in 2016 you willwish that you had not been given ten years, youthat the live broadcast moment, and more generally

the broadcasting of the day, today’s Eastenders or may wish that it had been for seven years. Is therea flexibility? The reason I ask that is because everytoday’sHolby City, as well as the Ten o’clock News,

is going to be part of a richer mixture where people single company that came and sat where you aresitting today over the last three or four months,sometimes say, “Actually, I do not want to watch

what is on BBC 1 tonight, I want to watch what is every single one of them, said they want the existingsituation to continue. That tells me you are eitheron BBC 1 tomorrow night or next week or a year

ago, or the DVD I have got of this classic BBC doing something wrong or it is a very cosyexistence. That is a real concern, that there is no-comedy, or to go on the web, or I want to make

my own programme and I will take some of the one pushing up against and challenging the statusquo, apart from within some walls.BBC archive and start creating a programme of my

own”. To me, what makes it an exciting moment Mr Grade: Digital switch-over is a huge event inthe life of UK media as a whole. I come at it fromin broadcasting is the ways in which people use

material and manipulate it are going to grow and a slightly diVerent point of view. I think that wehave to have some continuity through that periodmultiply, frankly in ways which I think are going to

leave them more discerning, more empowered and of change. Leave aside the BBC’s role in eVectingdigital switch-over, I think there would beoverall, I have to say, having a richer experience.

Mr Grade: For the foreseeable future, the main widespread support for one cornerstone of Britishbroadcasting where there is a guaranteed supply ofbroadcast channels will remain the showcase for

the content. There are ancillary benefits that we can international, national, regional, local news,current aVairs, a guaranteed supply because of ourcreate to leverage that content into other delivery

platforms. It is not unlike the cinema in the sense funding set-up of high value, high content Britishindigenous production produced throughout thethat the gap between the availability of a movie first

run in a theatrical exhibition and the arrival of the UK, throughout these islands. I think there is anenormous case for being able to rely on that as aDVD in your store or on Amazon.com has shrunk,

so if you miss a movie it does not matter, you know source whilst the market sorts itself out and we seewhat the market is going to produce. I think thatyou can get the DVD, but still it is that shared

experience, that immediacy, the showcase of the ten years in, going through that digital change, thatcontinuity and that consistency, that bedrock, thatcinema release—cinema attendances are holding up

pretty well—that drives the rest of the engine and cornerstone, is vital. It is our content that is goingto help to drive digital take-up, as we have provedI think the broadcast channels of all networks will

remain the showcase for the content that we will with Freeview.Chairman: Lady and gentlemen, could I say this: Icontinue to be able to produce.have no idea, and I do not think anybody aroundthis table has any idea, what conclusions we areQ537 Mr Flook: If I can explain, my concern is that

we have this possible ten year Charter renewal and going to come up with and what we are going torecommend, but I will say that it is very fortunatethat ten year timetable is coming up with no regard,

necessarily, to what is happening in terms of for the future of the BBC that the change ofleadership came about and that the BBC has itstechnology and digital and social changes, it is fixed

where it is because of where it was eight years ago present leadership.




Members present:


Mr Frank Doran Alan KeenMichael Fabricant Rosemary McKennaMr Adrian Flook Derek WyattMr Nick Hawkins

Memorandum submitted by Ofcom

Introduction

1. This supplementary memorandum* is intended to provide the Committee with updated informationon developments in Ofcom’s work directly relating to the BBC and the Charter renewal process, tosupplement the memorandum submitted to the Select Committee’s BBC Charter Renewal Inquiry inMay 2004.

BBC and Ofcom

2. As the Committee is aware, Ofcom has a clear statutory remit for the BBC in terms of contentregulation (Tier 1 for standards, excluding due impartiality and accuracy in news, and Tier 2 for productionquotas) and has concurrent competition powers with the OFT.

3. In our wider duties to report on developments in the broadcasting sector, Ofcom has made a numberof public statements on the BBC. For example, we called for the BBC to play a more pro-active role inpromoting digital television, as part of our report to the Secretary of State on progress towards digitalswitchover. In the first phase of our review of public service television broadcasting (PSB) we made a strongcase for the BBC undertaking a wide range of activities, but with its unique and privileged funding status,programmes should always strive to reflect the broad purposes and character of PSB to some degree. TheBBC welcomed Ofcom’s proposed approach to defining PSB through purposes and characteristics. In itsdocument,Building public value, the BBCput forward equivalent arguments as Ofcom about the importanceof plurality in PSB provision.

4. In our recently published Phase 2 report on PSB, Meeting the digital challenge, we set out a numberof proposals on the BBC, including:

— the next Royal Charter should run for 10 years to take the BBC through the period of digitalswitchover, but it should include a substantive mid-Charter review of the BBC’s funding and itsprogress in meeting PSB purposes and characteristics;

— welcoming the BBC’s reviews of its production and of its commercial operations, we proposed thatthese should form an important part of the BBC’s Charter review process and that the review ofcommercial strategy should be subject to thorough independent external validation before anydecisions are taken about the future of BBCWorldwide or the use of the proceeds from asset sales;

— there should be a new commitment to regional programming from the BBC, in line with theCorporation’s own proposals; and

— the BBC should be expected to demonstrate that it has clear plans to introduce a commissioningsystem, outside news programming, which has fair access for independent suppliers.

A summary of the report’s proposals regarding the BBC is attached as an annex to this memorandum.

Ofcom Review of Public Service Television Broadcasting

5. Ofcomwas asked by Parliament to undertake a review into public service television broadcasting, withthe underlying aim to suggest how PSB could be maintained and strengthened. One of our key conclusionsin our Phase 2 Report, was that the BBC should remain the cornerstone of public service TV broadcastingand that an “eVective, strong and independent BBC is essential to the health of PSB in the UK”.

6. This positionwas based on our analysis of the wider broadcastingmarket, which demonstrates that thehistorical compact in which PSB was provided by commercial broadcasters in return for access to analoguespectrumwill come under increasing pressure. The move from an analogue to a digital broadcasting marketerodes the surplus value in ITV’s and Five’s analogue licences which funds their contribution to public

* See HC 598-i, pEv 72



service broadcasting, and which we calculate to be currently worth around £400 million. Digital televisionalso gives these channels a potential route to near-universal access in digital without any public serviceobligations.

£

Analogueadvertising

revenue

Licence hand-back?

Licence payments &PSB obligations

Time

7. An inescapable context for our PSB review is that in a very few years’ time, as the graph aboveillustrates, the value of existing channel 3 analogue licences may well be less than the cost of theaccompanying PSB obligations. Ofcom does not believe that waiting for this situation to arrive is a viableoption. By then, unless other measures are taken, that £400 million of implicit funding for PSB will havebled out of the system. Given our statutory duty to maintain and strengthen PSB our core recommendationis that themoney should be kept in the system.However, funding that is implicit todaywill need to be explicittomorrow. For the existing broadcasters, it means giving ITV and Five greater freedom to play to their corestrengths in original British programming and news, combined with greater scheduling freedom so that theywill want to remain universal, free-to-air broadcasters. It also places an even greater importance on the BBCbeing focused on true public service, being fully funded to do so, and being managed, governed andregulated eVectively. For Channel 4 it will be necessary to address issues of scale from their commercialrevenue base, to enable them to sustain their public service elements in the face of audience fragmentationand consequent pressures on advertising yield.

8. To maintain plurality in the provision of PSB, and to strengthen the quality and range of programmesproduced, Ofcom has suggested the possibility of a new institution—a public service publisher (PSP)—alongside the BBC and Channel 4 to provide some anchor for public service content for the digital andbroadband age. We further suggest that part of the implicit funding that would otherwise be lost from theexisting system is channelled into this new PSP as a way to meet the Parliamentary injunction to maintainand strengthen PSB.We suggest an indicative figure of £300million as the amount of funding the PSPmightneed in order to be a significant player in the future provision of PSB.

Ofcom’s Remit and Parliamentary Accountability

9. Ofcom is an independent regulator, created by statute and accountable to Parliament. We value ourindependence, as it allows us to make decisions based on evidence we gather from citizens and consumersand the industries we regulate. Equally, we value and understand that we operate within a legislativeframework set out by Parliament, and that we are accountable to it for our actions. As part of our PSBReview, we have set out innovative solutions to the question of how to maintain and strengthen PSB.However, we acknowledge that the ultimate decision on how this is achieved is a matter for Parliament andour aim is to provide informed options and evidence to assist Parliamentarians with this task.

Annex

OFCOM REVIEW OF PUBLIC SERVICE TELEVISION BROADCASTING—PHASE 2 PROPOSALS ON THE BBC

(Numbers are paragraph references to the Executive Summary of the Meeting the digital challengereport.)

2.20 The BBC should remain the cornerstone of public service TV broadcasting. An eVective, strong andindependent BBC is essential to the health of PSB in the UK. It should continue to be properly funded bya TV licence fee model.



2.21 The length of the next Royal Charter should run for 10 years until December 2016 to take the BBCthrough the period of digital switchover, but it should include a substantive mid-Charter 2011 review of theBBC’s funding and its progress in meeting PSB purposes and characteristics.

2.22 The mid-point review would coincide with Ofcom’s next quinquennial PSB review. The two reviewsshould examine in detail the role and the funding of the BBC in a fully digital world.

The advantage of a mid-Charter review is:

— that it would provide the BBC with a strong incentive to contribute to the purposes andcharacteristics of PSB for the whole period of its next Charter; and

— that it would ensure that preparation for the postswitchover world occurs well in advance of 2016.

2.23 The BBC should strive to ensure that all its programmes, not just its services, reflect the purposesand characteristics of PSB to some degree. This should also apply to the way the BBC schedules itsprogrammes. Our Phase 1 report identified copycat and derivative programming, and competitive head-to-head scheduling as particular concerns. We welcome the fact that some of the weaknesses in BBC schedulesare being addressed by recent moves made by the BBC Governors. In future, the BBC should have regardto the extent to which Hollywood films and other expensive acquired programming meet its own publicvalue test and could not be provided equally well, at no direct cost to the public, by free-to-air commercialbroadcasters.

2.24 As the commercial sector faces increasing competition, there will be more responsibility on the BBCto provide those aspects of PSB which are most at risk. In particular, we believe that the BBC may need toplay a greater role in the provision of a wider range of regional programming in the English regions, wherethe cost of provision relative to commercial value is high for other broadcasters.

2.25 Our Phase 1 report proposed that the BBC’s other activities, including commercial activities, studioand other production resources, and indeed production should be reviewed carefully against their distinctivecontribution to PSB purposes. We therefore welcome the BBC’s reviews of its production and of itscommercial operations. This should form an important part of the BBC’s Charter review process. Thereview of commercial strategy should be subject to thorough independent external validation before anydecisions are taken about the future of BBC Worldwide or the use of the proceeds from asset sales.

2.26 In relation to production, we believe the BBC should be expected to demonstrate that it has clearplans to introduce a commissioning system, outside news programming, which has fair access forindependent suppliers and which commands widespread confidence across the sector. If this does nothappen, and if the new codes of practice prove ineVective, further action will be needed to secure a fair rolefor independent producers as suppliers to the BBC.

2.27 In future, any BBC plans for new services should be subjected to a rigorous independent evaluationto ensure that they add public value andwould not unduly displace commercial activities.Where it is unclearfrom independent analysis that the benefits of any new service outweigh the costs, the BBC Governorsshould decline to take the project forward.

2.28 To maintain its role at the heart of broadcasting in the digital age, the BBC should be properlyfunded. For the period of the next Charter, a TV licence fee model should continue to fund the BBC; theBBC should not carry advertising, nor should existing services become subscription funded. We have notcarried out a detailed assessment of the BBC’s future funding requirements, but we think that there are twoimportant considerations for the funding settlement over the next Charter period:

— the BBC does not envisage any growth in the breadth of its services and is rightly committed tofurther eYciency savings; and

— the BBC’s income will increase by more than the annual rise in the TV licence fee because thenumber of UK households is projected to grow. After 10 years, the BBC can expect to receive anextra £230 million every year, from the projected growth in households alone.

2.29 In order to ensure a robust financial model in the more distant future, the Government shouldconsider the case for the BBC to supplement its income with limited subscription services to fund any futureexpansion. The BBC should be asked to report on the case for limited subscription services at the time of amid-point review of its next Charter.

2.30 The BBC should take a leading role in the UK plans for digital switchover. As part of the movestowards switchover, the BBC should consider the scope for using new technology in the collection of thelicence fee to reduce collection costs, evasion and the consequent burden on the judicial system. TV licencefee collection costs and licence fee evasion exceeded £300m in 2003–04.

2.31 Over the past few years the BBC has been subject to a proliferation of reviews: various services havebeen scrutinised internally, by Government, by Parliament, by Ofcom, by advisers on its Royal Charter andby independent experts. Our observation is that there are two underlying causes of this undesirable trend:first, that the BBC already receives a very high and rising share of public funding for PSB; and second, thatthere is a lack of a clear separation between the governance and the regulation of the Corporation. Webelieve:

— that maintaining a plurality of recipients of public funding is vital to the health of the PSBenvironment; and



— that clarifying the separate roles of governance and regulation of the BBC should be a centralobjective of the Charter review process.

2.47 Our ambition is to build a sustainable and well-resourced model for PSB in the nations and regionsafter switchover. A new framework would include:

— a new commitment to regional programming from the BBC, in line with the Corporation’s ownproposals. This would include a rebalancing of obligations for non-news English regionalprogramming between ITV1 and the BBC, which does not currently provide such programmingon any scale, as well as a new local BBC news service. In adopting any new regional commitments,we suggest the BBC should undertake to support a plurality of regional producers.

21 October 2004

Witnesses: Professor Lord Currie of Marylebone, a member of the House of Lords, Chairman,Mr Stephen Carter, Chief Executive and Mr Tony Stoller, External Relations Director, Ofcom, examined.

Chairman: Good morning, gentlemen. I am very thing we said was that, in our view, if it was an ideaof merit the only institution you would exclude fromsorry to have kept you waiting—the responsibility is

mine personally and not that of the Committee as a participating in it would be the BBC.whole.We will have an opportunity on your AnnualReport of discussing the work of Ofcom with you. Q539 Michael Fabricant: Channel 4 of course, IWhat the Committee is clear about is that your think many people would agree, is a public servicepresence here today relates to the BBC Charter broadcaster, certainly many of its programmes areRenewal and it will be that aspect we will be providing a public service. It is a publisher too, ofquestioning you about. course, and does not make its own programmes and

it is funded by advertising. How would you thinkyour PSB would be funded?Q538 Michael Fabricant: Good morning. As part ofLord Currie of Marylebone: We set out threeyour review into public service broadcasting, whichoptions: one is that it would be funded from generalis of course directly related to the future of the BBC,taxation, in the way that the BBC World Service isyou suggest the idea of there being a public servicefunded; the second would be a hypothecation ofpublisher, and this is part of your Phase 2 inquiry. Ispectrum revenues; and there is the possibility of awonder if you would like to expand a little on that?turnover tax on communications. There are a varietyLord Currie of Marylebone: Good morning. May Iof mechanisms. We pointed out the options. If thisintroduce my colleagues Stephen Carter and Tonyextra money were to be put in (and it is not extraStoller who will, of course, help to answer themoney in the sense of being an increase in thequestions. The instructions we were given by theamount going to public service broadcasting) it is aCommunications Act from Parliament were that weshift from an implicit subsidy to public serviceshould review public service broadcasting andbroadcasting which we have under the presentadvise on how it can be maintained andarrangement—the gifting of the fixed analoguestrengthened. Our analysis suggests that thespectrum—making that subsidy which is currentlyanalogue compact for commercial public serviceimplicit, explicit in the digital world; a variety ofbroadcasting will come under pressure over themechanisms.We did not express a viewwhich wouldcoming years; and, therefore, we thought itbe better.important to reflect on how we might innovatively

think about new ways of strengthening publicQ540 Michael Fabricant: Am I right in thinking thatservice broadcasting, hence the concept of a publicnot one of those options is top-slicing the licence fee?service publisher; not a fully-formed idea but weLordCurrie ofMarylebone:One of the ones I did notthink a constructive proposal to be thought about,mention was the possibility of an augmented licenceto be worked on byOfcom and by others. That is thefee. That is a possibility, the BBC fully fundedorigins of it.appropriately for what it is—its mission goingMr Carter: I have just two things to add to that:forward—that an element might then go to fundingfirstly, that we deliberately put it out as a not fully-the PSB. That was one option amongst several.formed idea because part of what we were looking to

see was how public service content could begenerated in a fully digital world; and, therefore, Q541 Michael Fabricant: Are you saying that of all

the options you are proposing not one of themconstructing it in a way that was defined solely bytraditional broadcast standards or methods seemed would have any impact on the funding of the

Corporation of the BBC?to us not necessarily to be as innovative an approachas one could have achieved. Secondly, we emphasise Lord Currie of Marylebone: Yes. It requires

Parliament and Government to mandate thatthat the underpinning of the idea was to find avehicle that could provide competition for the BBC; funding; but we are very clear that the absolute

cornerstone of public service broadcasting is thebecause inherent in our analysis was if the ability orwillingness of the shareholder-funded broadcasters, BBC—fully funded, independent and strong.

Michael Fabricant: With the option of possiblycommercial broadcasters, to produce public servicebroadcasting declines you are left without a coming back, I would like to leave it at that point,

Chairman.competition-forcing function for the BBC. The one



26 October 2004 Ofcom

Q542 Derek Wyatt: I am attracted by the public Secretary of State wants, it is not standard to haveservice publisher concept, but if I was putting it out 10-year Charters; the previous Charter was 15 yearsas a tender it would be a broadband channel—24 and on our recommendation this one was 10 years.hours a day, seven days a week—not a conventional If the BBC were put under a Communications Act,channel. What we have seen over the last three or in the way Channel 4 is and indeed the otherfour months travelling around the world is that broadcasting organisations, then that will give it thebroadband is here and is going to come. If somebody security without the hassle of Charter Renewal.could have pitched to you that they would want to Lord Currie of Marylebone: That is certainly abe a 24 hours a day, seven days a week broadband possibility. We are also sensitive to the points thatpublic sector publisher, would you be opposed to are made about state broadcasters, as it were. Wethat? have a rather diVerent tradition in the UK and itMr Carter: Just as an aside, it is delightful to be in a would be a significant step to make that change.conversation where we are talking about broadbandbeing here and being successful—we would agree

Q545 Derek Wyatt:There will be aHealth Service ofwith you entirely. As I was saying in the answer tosome description in 10 years; there will be anthe earlier question, one of the reasons why weeducation service; there will be a BBC in 10 years; soframed the idea as we did was because we very muchwhat is the fuss about saying 10 years; what is theviewed it as a provider of public service content at astability? It is not as though there will not bepoint in the development cycle where television isoperations in the Health Service or teachers turningbeing provided on a fully digital platform, and

we could hypothesise about what broadband up to school; we do not give them a 10-year licence,penetration will be in 2008–09 but at five million we just know it will always be there and the BBCwillhomes today and at a trajectory of 200,000 new always be there.customers a month you are talking about a real scale Mr Carter: Ours, to be candid, was a relativelyand reach. We are of the view that the distribution passing view on the length of the Charter; but themechanism for the public service content is going to underpinning of the support for 10 years was inbe completely diVerent from a traditional analogue the context of the review of the provision ofbroadcast transmission model, I absolutely agree. public service broadcasting by the commercial

broadcasters. Part of the reason why we thought a10-year Charter and security of that period,Q543 Derek Wyatt: That is reassuring. Let me comecombined with a five-year mid point review, wason to your recommendations that you still think it isbecause our analysis told us that over thatworth giving 10 years for the licence for the BBC,corresponding period you were going to see thegiven that now it seems as though you are suggestingcommercial provision of public service broadcastingthey will have completed switchover by 2012, if Iprobably only going in one direction. Therefore,have read that correctly. We have seen a whole host

of new technologies, and it seems to me there will against the brief of maintaining and strengtheningcome a point that television (or whatever we call public service broadcasting, which was what ourtelevision) broadcasting will not be broadcasting; report was asked to answer, it seemed to us that ifand therefore to give a categoric 10-year licence you see the BBC as having an increasingly importantwhen we cannot define really too much beyond 2008 role in the provision of public service broadcasting,or 2009 as to the landscape of broadcasting, do you for now, looking over a 10-year horizon seemed tothink it would have been better to have given five make sense. The second point just to add to David’syears with a five-year renewal, rather than a 10-year? point, which I think is an important one, is theWhat was the reason that you wanted to give a carte requirement to make the necessary capitalblanche 10-year? expenditures in transmitter roll-out for digitalLord Currie of Marylebone: I think we feel it is switchover; and that probably requires a financialimportant the BBC has security. The 10-year planning horizon of more than three or four years.horizon allows it to make a substantial investment indigital switchover and have some security coming

Q546 Chairman: Could I just come back on that.forward from that. We did propose a five-yearreview which would look at the way in which the You talk about the BBC having an increasinglylandscape has changed in exactly the way you are important role on the provision of public servicedescribing. To answer the question, “Does that broadcasting. What is your basis for saying that?imply adjustments for the BBC, a transition through After all, even Mr Greg Dyke in his recent bookto the end of that 10 years?” we felt a 10-year with a admitted that the only reason BBC1 was ahead offive-year review was the appropriate mechanism. Channel 3 was because the BBCwas losing audienceClearly it is a matter of judgment here. at a slower rate than Channel 3. With all the

diversification that has come—and we have beentrying to look not at the position next year or theQ544 Chairman: Surely another way of giving theyear after but where we might be in 2016 were theBBC security, as you are advocating, would be toBBC to get a further 10-year Charter—the scenario,put it on the same basis as Channel 4; namely, notthe environment is going to be so diVerent that whilehave a Charter but to be a permanent institutionit might be perfectly valid to say that a BBC isunder a Communications Act? That would give itindispensable for maintaining the ethos of publicsecurity without arguing about what the length of

the Charter would be; because despite what the service broadcasting, I would guess it is almost




inevitable that that slide down of the people actually BBC is not suYciently providing that. It seems tome, and it has always seemed to me, that if the BBCwatching the BBC channels (particularly with

analogue switch-oV coming) is going to continue? adopted your recommendations and left some of themore expensive other things to the commercialMr Carter: I am sure you are right, Chairman. We

would broadly agree with your analysis that as we broadcasters it might have more ability to bid forsports rights and provide more of these things.move to 100% digital provision (which on the

current planning timetable will be 2012 rather than Would you care to comment on that?MrStoller:Essentially this is amatter for the BBC to2016, so four years earlier than that planning

horizon) it is an interesting and challenging question make a judgment on—for the BBC’s managers andGovernors to work out their own arrangement. Ito hypothesise what is the lowest level that BBC’s

share viewing and audience engagement will reach. think our view is that the BBC needs to refine itsattention across the whole range of its output to thatSome of the answers to that question will of course

be determined by how digital take-up is achieved. If which is public service broadcasting. If, in thejudgment of the Governors and management of theyou had 100% digital provision direct to the home

satellite the BBC’s share of viewing I suspect would BBC, focusing on sports rather than focusing onblockbuster films is a way to do that then it will bebe diVerent than if a substantial proportion of that

is through digital terrestrial free-to-air. There their call.are substantially important diVerent outcomes,depending upon how the path of digital is achieved. Q550 Mr Hawkins: You do accept as Ofcom, as aTo answer your central question, our hypothesis for regulator with a very big interest in this, that majornow was that if you want to have a central provider national sporting events come within the remit,of public service content, as we do go down that path without talking about specific events; but the generalthat you rightly predict, securing the position of the concept of major national sporting events comeBBC and giving it a very clear remit to be a provider within the remit of what a public service broadcasterof public service broadcasting, rather than might be expected to provide in the UK?commercial competitive broadcasting, seems to us to Mr Stoller: Yes, indeed.be a sensible recommendation.

Q551 Mr Hawkins: Because there is a lot ofQ547 Derek Wyatt: Can you just tell us what your concern—you will have read many, many articlesrole would be if BBC Worldwide was sold or about this written by distinguished broadcastingparcelled oV? Do you have a role at all in analysing personalities like Paul Fox over many years—sayingthat deal if that was to happen? one of the things theBritish pubic perceives that theyMr Carter: No, we would not. have lost is the opportunity to see major sporting

events on free-to-air channels. It is a matter of majorcontroversy amongst a very large number of peopleQ548 Derek Wyatt: Do you not think that is a

mistake in the Act? in the UK and that is why I am asking you about it.Mr Stoller: Yes.Mr Carter: In our report we only made one real

reference to that, not specifically to BBCWorldwidebut to the notion of disposal of the BBC, currently Q552 Mr Hawkins: The other thing I wanted to raiseBBC managed assets, that if an asset was to be was what you said, Lord Currie, in your speech todisposed the proceeds of that asset were not to be the Royal Television Society, which is that theautomatically absorbed into the BBC’s P&L; that central tenet of your report is that the existingthat was disposal of a public asset rather than a BBC analogue model of public service broadcasting,asset and, therefore, there should be independent which has been sustained by a mixture ofscrutiny of where those receipts go. Indeed, going institutions, funding and regulation, will not surviveback to the earlier question, they could indeed be a the transition to digital and may well erode rapidlysource of funding for alternative, competitive before then. I have a particular concern about theprovision of public service broadcasting or public date of the proposed analogue switch-oV—and youservice content. As to whether it should or should talked about the creation of a switch code fornot have been in the Act, I am not sure it is for us to managing that transition. I am worried about thecomment. We have no role. very large number of elderly and not very well oV

people in this country who may have no interest atall in going digital. My concern is that perhaps weQ549 Mr Hawkins: I have two issues I want to raise

with you, gentlemen. You have put forward some ought to be talking about a much later preservationof the analogue services. Would you care tospecific proposals on the BBC’s scope and remit, and

in particular you have suggested that the BBC comment, given that you are a public regulator withthe interests of the public as a whole at your heart?should have regard to the extent to which

Hollywood films and other expensive acquired Lord Currie of Marylebone: Let me just start on thatand ask Stephen to conclude the point. It seems to usprogramming meet the BBC’s public value test and

could not be provided equally well at no direct cost that, firstly, digital switch-over is happeninghousehold by household really quite rapidly. Thereto the public by free-to-air commercial broadcasters.

I have a particular interest in the opportunity of is clearly an option of delaying switchoV, but it willbecome increasingly a small rump, and increasinglyeveryone in the UK to see major national sporting

events. As you know, there has been a huge a group where the economics of analoguebroadcasting will look increasingly unattractive. It iscontroversy running over many years now that the




perfectly possible that if one did switch-over later analysis was that is an inescapable fact come thatdate and it does not stay as it is today and thenthat an analogue broadcaster might decide to walk

away anyway. It is a complicated scene. The other happen that way in 10 years’ time, it is a trend thatgoes that way. Given that—against our brief whichpoint is that the Secretary of State has asked the

Ofcom Consumer Panel to look at exactly the was how to maintain and strengthen public servicebroadcasting; what does that tell you about what thequestion of disadvantaged groups, to recommend

how that issue can be managed. I think we still await role of the BBC should be over that same period—hence our recommendations on the purposes andthat report, and it is coming in November. We are

aware very much of the issue, but I think the answer characteristics of the BBC’s public service provision.is not to delay switchover, but rather to manage theissue directly. Q556 Mr Doran: Let us look at two areas. Nick

Hawkins has already mentioned the Hollywood filmand we are interested in film as part of the publicQ553 Mr Hawkins: I understand entirely the pointsector broadcasting requirement. So far it seemsyou aremaking that in practice switchover to digital,that, in the UK anyway, UK films are fairly lowas you say, is happening household-by-household,down the agenda for all terrestrial broadcasters atbut my concern is even if the numbers are what youthe moment. Can you say a little about whatcall a small “rump” they are still important people?Ofcom’s position is in relation to the contribution ofLord Currie of Marylebone: I was not beingfilm to the cultural aspect of public servicedismissive by using that word at all. The other pointbroadcasting?to bear in mind is that the technology will be on ourMr Carter: We do not have a specific remit byside. The costs of switching are going to be fallingprogramme genre beyond obviously the area ofquite rapidly as we move towards that date.sport, where there are specific listed events which aregoverned by statute. We have not done a particularQ554 Mr Doran: I do not think anybody disputes theanalysis or detailed study on the provision of film, solandscape will change as broadband accelerates, butI could not give you an informed answer to thatI am interested in the general approach you arequestion.taking in your own review of the public service

television broadcasting requirement. If I can put itQ557 Mr Doran: You have no position on this levelcrudely: it seems tome that your general approach isof importance? Is it something television generallynarrowing the scope of the BBC (and my colleagueshould be encouraging?Nick Hawkins has already mentioned theMr Carter: I am sure we do not have a specific remitHollywood films issue) but at the same time reducingin that area. All I would be doing would beobligations on the Channel 3 sector. That concernsexpressing a personal view.me a little bit because it seems to me what we may be

producingmay be aworthyBBCbut not the BBCwehave got at the moment, and not one that is vibrant Q558 Mr Doran: Back to the point about theand still our leading broadcaster. Is that how you see Hollywood films, what you seem to be saying, if Ithings developing? read your report correctly, is that there should beMr Carter:We might put them in slightly diVerent some limit on the BBC being able even to bid forwords. Hollywood films. Do I understand it properly?

Mr Carter: The actual nature and structure ofthe BBC’s schedule is in the language of theQ555 Mr Doran: I said it was a crude analysis!Communications Act Tier 3 Regulation andMrCarter: It is a powerful analysis but wemight puttherefore, as Tony said earlier, a matter for the BBCthem in slightly diVerent words, not just to beGovernors. The point we were trying to make in oursemantic about it but because we would not see ourreport was against our analysis that said therecommendations in relation to the BBC’s provisionimportance of the BBC providing public, highas narrowing what they do but as sharpening thequality, challenging, original production andfocus of what they are there to provide. To the pointschedules that engage for a UK audience wouldyou make about ending up with a worthy BBC andsharpen one’s focus around the delivery of thata lesser provision, if you like, from the commercialschedule and would lead one to ask some questionssector—the underpinning of our analysis is thatabout substantial investments beingmade to acquirethere is an inexorable march of consumer behaviourforeign, in this instance Hollywood, films.which is going in one direction. The previousLord Currie of Marylebone: It is for the Governorsexchange about digital take-up through peopleto make those judgments.exercising consumer choice illustrates that. The

point we were making about the obligations on thecommercial public service broadcasters is that today Q559 Mr Doran: That seems quite a strong steer

from Ofcom, a statement along the lines that inthe value of an analogue licence to a commercialbroadcaster is pretty substantial. We could argue future the BBC should have regard to the extent to

which (Hollywood films, however expensive) itabout the number; indeed we are currentlyconsulting on what that number is, but it is in the acquires programmes which meet its own public

value test. That is a very strong statement. You aretens of hundreds of millions over the period of alicence. Come 2012 it will be in the low tens. As a also encouraging of the BBC’s recent statements

where they are increasing investment in the regions.consequence, what you extract in return from that isa lot less. What we were trying to show in our On the other hand, that is balanced if you like by




strong statements about the impact of the regional Mr Stoller: There is an argument that thedistinctiveness of the channel will actually takerequirement at the moment on the independentbroadcasters towards doing more regional or lesscompanies. In the Phase 2 document you say that theregional. Our concern is not with that—it cannot becost of programming will greatly exceed the value ofbecause that is what would happen post-digital—itany privilege available to Channel 3 licences. I canis what happens in the meantime to the existingunderstand that in the context of the analoguestatutory obligations, and howwe move from wherebroadcasting, but I have diYculty in seeing that inwe are now to where we will be post-digital when werelation to a digital licence. I will not go through thewill not have the ability to impose this sort ofrest of it. The current position is therefore neitherobligation. There are certain things we think aresustainable nor desirable in either the Englishessential and central and should be reinforced in thisregions or the nations, which suggests that Ofcom isinterim period. One of those is regional news.We arein favour of removing the regional broadcastingrecommending the strengthening of the quotas forcommitment. There is a statutory requirement, Ithe production of programmes for the networkknow that, until the statute has changed and you canoutside London in the regions and in the nations; butsupport that; but that is a very, very strongthere is one area of programming which is non-newsstatement. It is arguable that the wholeregional programming in England outside peak timeresponsibility for regional broadcasting should bewhich we know is expensive. Our research and ourpushed on to the BBC. Is that Ofcom’s position?analysis show us it is not hugely valued by viewersMr Carter: No, I would not again put it in thosewhen they are asked, and their behaviour reinforceswords. If I can perhaps come at the question in athat because they do not watch it. Therefore, in thisslightly diVerent way, it seems to us more than anew compelling commercial circumstance which wefortunate coincidence of timing that your ownknow we and the operators are going to findreport into the BBC’s Charter Renewal, the fact ofourselves in, it seems to us that to reinforcethe BBC’s Charter Renewal, the fact of planning forthe importance of regional news, to reinforce anddigital switchover, and the fact of our report allindeed lift the obligations to produce networkhappen at the same time. What we were trying to doprogramming outside London, balanced by ain that particular section was to draw those variousreduction in non-peak time, non-news regionalstrands together to paint a picture of what was likelyprogramming, is a way of managing the transition.to happen over the period.We were not suggesting it

was going to happen immediately and, as you rightlypoint out, there are statutory obligations we are Q562 Mr Doran: It is diYcult to escape therequired to license and impose, but we were drawing interpretation that all of the major responsibility,a picture so that the time the BBC’s Charter is being the statutory responsibility, perhaps eventually willrenewed over five or 10 years it could be renewed be shoved onto a much more worthy BBC?with a reasonable knowledge and understanding of Mr Carter: Not now, not in the next two years, notwhat was going to happen in the other side of the in the next three years but it is inescapable than in 10public service provision, which is the commercial years’ time, which is broadly the potential period ofside. the BBC Charter Review, the direct-able public

service broadcasters, if one looks at today’sprovision, are the BBC and Channel 4.

Q560 Mr Doran: I still find it diYcult to understandthe comments in there, for a number of reasons. Oneis, the whole history of ITV is about regional Q563 Alan Keen: During Frank’s questioning

Stephen Carter said “we do not have a specificbroadcasting. I have been involved in very heavyremit” so it will have to be a personal view. One ofbattles with my local television company to try tothe nice things about this inquiry is because we areretain that. I certainly got a lot of popular supportasking all the witnesses who come before us aboutfor it. It also seems to me that is where there is thethe BBC—and ITV have no remit or responsibilitypotential to make a lot of money and distinguishfor the BBC—we have been able to ask people forthemselves from the other rather bland commercialtheir personal views. Can I free you now from thecompetitors—and I exclude Channel 4 and FiveOfcom remit? One of the tasks we have got is to lookfrom that. When we get into the digital world theat the changing pattern of broadcasting, and onecompetition will not just be the BBC—it is a muchthing which has been particularly interesting is thewider competition. The idea we could be movingabsolute certainty that we are changing from what Itowards a situation where Channel 3 loses even inwould describe as the “theatre” aspect of TV, sittingthe digital age that quite distinguishing featurein front of the fire with the TV on a Saturday nightstrikesme as being something I wouldwant to avoid.watching whatever programmes come in front of us;Mr Stoller: I think there will be a shift when we arethis is definitely going to change, we are told,actually in the digital era between what is imposedso people will select programmes, probablyupon any television company, Channel 3/ITV, andprogrammes that were originally shown on thewhat they choose to do themselves. There is anprevious Thursday night and watched on a Saturdayarticle in the Financial Times today—night. Can you paint a picture of what you think TVwill be like? We have to look ahead because of this

Q561 Mr Doran: But we are told they are lobbying 10-year period we keep talking about to 2016. Howdo you see it changing?you quite heavily to reduce—




Lord Currie of Marylebone: In the Fleming Lecture to have a strong role for the BBC, but to liberate theopportunities for other providers of content and towhich I gave a few weeks ago, which has been

referred to, I did a bit of crystal ball gazing. Firstly, allow people to make more free choices about whatthey wish to watch and when they wish to watch it.it is a very dynamic scene. Secondly, I think a lot of

patterns will remain the same for quite a lot of That does not seem to us to be threatening to theBBC, which is why we said we thought there was anpeople; but I think we will observe very diVerent

behaviour amongst young people, who will very important role for the BBC to be appropriatelyfunded over that time period so that it couldrapidly start to exploit the new technologies that are

available—what I describe as the “collision between continue to make a strong contribution. I suspect itwill be less channel-driven. I suspect it will have tobroadband and broadcast”. I think in that area there

will be verymajor changes in behaviour; perhaps the get into more and new forms of content distribution.I suspect its schedule construct will bewhole concept of a channel will soon be eroded—

already with PBR and Sky! that concept is unrecognisable in 10 years’ time. Its investment inapplications and services, rather than programmeseroding—I think it could be a very diVerent scene;

which is why we painted the idea of a public service and channels, I suspect will be quantum bycomparison to where it is today.publisher spanning these two diVerent spaces that

are coming together; because I think it is veryimportant, looking forward, that if the purposes of Q567 Alan Keen: The print media spends an awfulpublic service broadcasting are to be delivered in this lot of money setting out TV schedules and thenew age, we rethink the forms of delivery in order programmes that are available from the minoritythat those purposes are achieved. channels. Radio is the poor sector. With the wealth

of stuV which is on the radio how in the future willwe know what we are missing if we do not find outQ564 Alan Keen: We have always known that the

BBC has an eVect on keeping the quality high what is on? How will radio fit in?MrStoller: I am very happy to step back to radio forcomparing this country with the United States, for

instance, where you can sit in a hotel room and go a moment, although it is not directly my remit anymore.through the channels and not find anything worth

watching at all. With people being able to selectprogrammes, can you paint a picture of how the Q568 Alan Keen: You are already freed from theBBC will be in 10 years’ time? Will there just be a remit.publisher, a producer of programmes, with channels Mr Stoller: One of the interesting factors is thatthat people will select themselves, and obviously radio has tended to lead convergence; and thatother channels with the BBC and ITV as well if actually the movement of radio, the initiative ofpeople get a satellite delivery of their television? radio which the industry and the BBC have taken inWhat will the BBC look like in 10 years’ time? What the area of digital radio, the extent to which digitalwill the change be from now in 10 years’ time? radio has spread beyond DAB onto a range of otherMr Carter:We really are into crystal ball gazing. digital platforms means that radio is in some ways

pioneering a number of these issues. One of thethings that radio discovered a long time ago and isQ565 Alan Keen: You are the experts.

Mr Carter: Not at crystal ball gazing! reinforced by its digital experience is that thecommunication of listings, and therefore the abilityto identify individual programmes, is very diYcult inQ566 Alan Keen:You have focused all your workingstreamed channels. One of the advantages whichlife on broadcasting. It is fascinating to get people indigital technology brings to radio, and also tofront of us like you and be able to draw on theirtelevision, is the ability to identify on-screen or on anexperience.accompanying screen what is being broadcast andMr Carter: Part of the answer to the question, wewhat is being broadcast next. One of the interestingstrongly believe, depends upon your report andthings, looking at digital television, for new adoptersParliament’s decision on the length of the Charter(and I am a fairly new adopter) is when you press theand the level of funding. If you look at it from a basicdigital button to move from analogue to digital youlevel there is £3 billion worth of public money thatget printed information or lettered information ongoes into this form of market intervention. I happenthe screen; and that I think is one of the things thatto shareDavid’s view that the future in 10 years’ timeradio has learned and is exploiting with digital and,is a fantastically exciting future. I share your viewas television moves into a more fluid stance, maythat the BBC has been a significant contributor towell apply there as well. In addition, the role of thequality, but I also happen to think that we as aelectronic programme guide—for television, radionation are very good at this stuV. We produceand for the converged thing that emerges betweenoutstanding content. We are very good at thethem and the other communications technologies—creative industries. Part of the reason why webecomes increasingly important.recommended the public service publisher is because

it seemed to us we have a track record (partlycontributed to by the BBC but partly contributed to Q569 Alan Keen: I was thinking about being in the

motor car, and presumably what we will do when weby skills, training, education, culture and language)to be good at creative content and the distribution of are at home is to ask to be told when astronomy is

on the radio, and for the car radio to switch on or forit. The opportunity it seems to us is to be a leadingnation in digital provision and broadband take-up; the mobile phone to remind us to switch on at 5.05




when we are driving along. Going back to the BBC, conclusion that they were broadly doing so but therewere aspects that could well be enhanced andI asked them last week about democracy, because wesharpened. Have we done that calculation?are all shareholders of the BBC and they have doneMr Carter: It is a powerful question, and I think thea magnificent job by making us feel that it is ouranswer is: no-one could tell you the answer; and thatBBC; but there is little eVort put into the democracy.is part of the problem. What we are saying is, goingThe BBC said they are going to do something aboutforward that does not seem to be a good place forlistening to the people who pay for them. Whatanyone to be, including the BBC. I am sure that isthoughts have you had on introducing somepart of the thinking behind the public value test. Onedemocracy into the BBC to those people who pay forwould hope that the public value test, if it ends upit; rather than some nice good people beingbeing a reality and is a useable mechanism, wouldappointed by DCMS to sit on the Board of the BBCallow that question to be answered. What we havewith no real connection with the people who paysaid is that we believe all of the BBC’s programmestheir money every week?and services should to some degree contribute to theLord Currie of Marylebone: I am not sure Ofcom aspurposes and characteristics of public servicesuch has thought about that issue and deliberatedbroadcasting.on it.

Q573 Mr Flook: So that is an aspiration and not aQ570 Alan Keen: Just as individuals. I have already prediction? My next question was going to be: dofreed you from the Ofcom remit. Do you think that you see that ratio or that percentage increasing as wethe licence fee payer should have some direct move towards a digital age of what is public serviceinfluence on who is on the BBC Board of broadcasting?Governors? Mr Carter: If you look at the fragmentationLord Currie of Marylebone: Direct representative association with digital take-up, what that serves tomechanisms can be rather diYcult to make work. I do in relation to the BBC is to show into muchthink what is crucial—and this is true as much for sharper focus its contribution to the purposes andOfcom as it is for the BBC—is that the BBC characteristics of public service broadcasting;understands its viewers and listeners; that it because it will be more evidently diVerent in itsunderstands the people it is seeking to reach. Just as provision than the multiplicity of other providers;we need to fulfil our functions, we absolutely have to whereas when it was essentially a duopoly thathave very good researchwhich tells us what ordinary sharper focus was not so visible. I think inevitablyconsumers and ordinary citizens think about what is the direction you paint will happen.happening to the communications industry. Beingextremely well informed seems to be absolutely at

Q574 Mr Flook: I should have prefaced my remarksthe heart of whatwe are doing andwhat the BBChasby saying I really like the idea of a public serviceto do.publisher. I think that is very clever and veryinnovative. You put a value, which I think we caneasily come to, of £400 million as ITV and Five’sQ571 Alan Keen: I used the word last week, shouldanalogue broadcasting ability; that is eroded. Youwe be looking somewhere between a Tescothen come up with a figure that the public servicedemocracy where Tescos provide the food thatpublisher would have to play with of £300 million.people keep on buying and, therefore, they knowHow did you get to £300 million? Keep in mind inthat is what people want, which is what you areyour answer, will that be enough if the BBC’s, ontalking about. Has Tony, for instance, given anyyour own say so, public sector element increases,thought as to whether the licence payer should havewhich was an aspiration and not a prediction.any direct input into elected representatives?Mr Carter: We do not know is the answer at thisMr Stoller: I think it is noticeable that the publicpoint. We undoubtedly derive the £300 millionprocesses which arose post-Nolan have tended tonumber in part from the £400 million currentplace on boards a rather diVerent spectrumof peopleprovision, as you rightly say. We judged £300than would have applied previously. That seems tomillion to be a sensible funding sum to put out in theme to be extremely important. There should be ainitial proposal, because it seemed to us to provideclear public process followed. As David said,the necessary level of reach and scale without beingactually arranging representativemechanismswhichso distorted to themarket. Part of what we are doinggo beyond the representative mechanism whichat the moment is consulting on the entire idea,exists here is very tricky indeed. It does seem toincluding the funding level. It may well be that it isme that your scrutiny brings that universalthe wrong number or, indeed, it needs to be judgedrepresentation, in a way in which any otherdiVerently depending upon the source of the funds.mechanism would be, to a degree, a pale imitation.

Q575 Mr Flook: I note in our notes (and I think youQ572 Mr Flook: What element of the BBC’s £2.6 may well have provided it) the expected growth inbillion is public service broadcasting in your minds? households over the next few years will give the BBCLord Currie of Marylebone: I think we have roughly an extra 10% in income or an extra £260indicated that in doing a Phase 1 report we looked at million, but that is going to make it even bigger sohow well the public service broadcasters were your £300 million in itself how will that grow in

real terms?delivering against their remit. I think we came to the




Mr Carter: I think these are all questions to be broadcasters which are obligations they would notchoose to execute if it was solely for the market toanswered and in part will be answered, assuming the

idea has merit and flies, by the funding mechanism. provide this. There are some judgments involvedthere which we are currently consulting on.If, for example, the chosen funding mechanism for

the PSBwas the augmented and enhanced licence fee Fundamentally, if you look over the time period ofyour question, some of those thingswill come to passthen inherent in that would be a benefit associated

with growth in the absolute number of households. or not.If, however, you chose the funding method ofhypothecation of spectrum receipts then you might Q579 Rosemary McKenna: You cannot do anythingneed to find either a retail prices mechanism or some to ensure real choice and competition for the BBC?other mechanism to keep pace both with the cost of Mr Carter:We have put an idea out which we thinkdoing business— has the potential to provide choice and competition.

I am not sure I share your cataclysmic view of thequality of the alternative provision in the market. IfQ576 Mr Flook: AnX-plus rather than an X-minus?I look at the television market for 2004 byMr Carter: Indeed. I think it will in part becomparison to 1984 overall does it provide moredetermined by the source of funding.choice, more variety, more control, more interestingthings, more investment, more innovation? Yes, itQ577 Rosemary McKenna: Good morning,does.gentlemen. I am very much of the view that the

BBC Charter Renewal should include a 10-yearQ580 Rosemary McKenna: Based on commercialprogramme, because I believe with what youadvertising.described as broadcast versus broadband it isMrCarter:Based on subscription. 20 years ago thereabsolutely essential the BBC are in there providingwas no subscription market; today there is morehigh quality programmes. It is quite clear fromsubscription income in television than there isparticularly the young people we have spoken to—advertising. That is a revolution in the economics ofand we went and spoke to a school and college totelevision.find out how young people view and listen to the

radio and watch television—that they will choose,and the way they view in the future will be verymuch Q581 Chairman: One can have arguments about thea matter of choice. They will not sit down and watch nature of the content of the BBC programmingright through an evening’s broadcasting, it will be a schedules; one can have arguments about thematter of choice. Would you agree that it is essential funding of the BBC; but what is universally agreedthat the BBC Charter Renewal must include a now, including by the Chairman of the BBC, is thattotal and absolute commitment to high quality there area very serious issues relating to theproduction of all types of entertainment, as well as governance and accountability of the BBC. Perhapsnews? you could share your thoughts with us on that?Lord Currie of Marylebone: I think that is in broad Lord Currie of Marylebone:We went a certain waytermswhat we have said in our report. The point you in our report into that question but, broadlymake is a powerful one, that it is the behaviour of speaking, the Ofcom position is that it is really notyoung people which has provided the indicator of for us, sharing regulatory responsibility in paralleltheway things are changing. It is very important that with the BBC Governors, to be putting forwardbroadcasters retain the loyalty viewing of that young proposals as to how that set of issues should becohort of people. addressed. What we are clear about is that we do

think there is a very important distinction betweenregulation and governance. Those are two functionsQ578 Rosemary McKenna: How then would youthat the BBC Governors at present have been askedprotect the range of provision, because clearly whatto combine. We think being clear about thatis going to happen is when young people watchdistinction is important. There are many ways incommercial television they are going to fast-forwardwhich that distinction could be carried through andand skip through the advertising, and if they do notI do not think it is for Ofcom to particularly expressget advertising revenue then they are not going to bea view on that. I think it is for us to make whateverable to provide the quality that is going to providearrangement Parliament and Government decide toreal choice against the BBC? How would you, asmake work—just as we are makingwith the BBC theOfcom, protect that?arrangements in the Communications Act, whichMr Carter: I am not sure that is in our gift and I amare complex; we are making those work innot sure it should be. Clearly one means ofcooperation with the BBC.protecting it is providing an alternative provider of

high quality content which takes us back to ourpublic service publisher idea. Clearly another source Q582 Chairman: Mr Grade, both when he came

before us and on other occasions since he took overof provision of more directed content is the remit,range and role of Channel 4 which, whilst it is an as Chairman, has stated very openly there is

schizophrenia between the Board of Governors as aadvertiser-funded broadcaster it is a not-for-profitadvertiser-funded broadcaster and, therefore, in champion of the BBC and the body to whom the

BBC is accountable, without going into themerits ofthat sense more directable. Partly it goes back againto the earlier question about the level of obligations the Hutton aVair. What is clear is, that is a problem,

and it is a diYcult problem which needs to be solved.levelled on the commercial shareholder-funded




I know it is your view—and it has, on the whole, problem. As long as you have got a Board ofGovernors made up of amateurs who can bebecome my view—that you should not take on total

responsibility for the BBC. How do you deal with railroaded by their Chairman when it comes to thecrunch, and as long as you have got thatthat?Do you set up yet another new body, anOfcom

for the BBC alone, as it were? Do you set up two schizophrenia then the problem of the BBC remains.Channel 4 is very clear: (a) it has a structure but (b)diVerent sorts of management within the BBC, or do

you change the whole nature of the BBC as it it is accountable to you on a statutory remit, whichthe BBC has not got. Peter Mandelson’shas operated since 1927 of governance and

administration and get rid of the Board of grandfather, Herbert Morrison, when asked whatsocialism was said, “Socialism is whatever a LabourGovernors and the chairmanship as it is now, and

have an Executive Chairman and a Board of government does”. I do not think Tony Blair wouldsay that today. The BBC’s attitude appears to beDirectors, including some non-executive directors?

Is it really appropriate in this day and age that the public service broadcasting is whatever the BBCdoes. If we are going to go on having the BBC, andBBC should be governed by people who, on the

whole, have got no experience in broadcasting, and we are going to go on giving it incrementally largesums of money, as Adrian Flook has pointed out,who are largely there on tokenism, whether it is

ethnic tokenism, sexual tokenism, class tokenism or then in this day and age, well into the 21st Century,77 years after the BBC’s present structure wasterritorial tokenism?

Mr Carter: Blimey! created, this is a problem which is not going to goaway and may cause another crisis at some point,although one hopes it will not.Q583 Chairman: That is what you are there for!

MrCarter:No-one toldme that when I took the job, I Lord Currie of Marylebone: You are reinforcing thepoint we have made, that separation betweenhave to tell you,Chairman! Ifwehadapound forevery

time we have been asked the question, “Surely you regulation and governance is important. There arediVerent ways of accomplishing it, one of whichwould like to take on full regulatory responsibility for

theBBC”,wecouldprobably fundOfcomwithoutany would be to put the BBC into the same relationshipto Ofcom as Channel 4 is. There are other solutions.tariYngon industry.Wehavenoimperial ambitionsat

all.We aremore than busy enough.With that caveat I I am sure these are issues that Lord Burns and histeam, who advise the Secretary of State on thiswill give you my view on the important question. The

first point is, I genuinely believe—and I think we have question, will be considering very carefully indeed.some responsibility for this and I think the BBC havesomeresponsibility for this—there is a lackof clarityof Q585 Derek Wyatt: I just wanted to ask an

additional question. Lord Currie, in your Flemingunderstandingabout the range of our regulatory remitwiththeBBC.Itisquitesubstantialalready:Tier1;Tier Lecture you say that the Communication Act is

carefully framed to make the distinction between2: independent quotas; we are a competition authorityof broadcasting; we license the multiplexes. I could go television and radio, broadcast content as opposed

to material delivered over the Internet, so aon. My strong advice and recommendation on thisquestion is that if change is going tobemade,please, let complaint to Ofcom about harm and oVence in a

television programme would be investigated by theus not have an incremental change which just layersanother tweak on a series of changes that appear to regulator. You go on to say if the samematerial were

then to be screened on a broadcaster’s website italready have beenmade incrementally. That would bemy first point. On the second point—is an Ofbeeb or would be for the Internet user to act and choose their

own regulator. Often there is no role to playOfpsb a good idea—it may well be. My only personalobservation on that, Chairman, would be that the whatsoever. Earlier this morning I asked whether

you would consider a 24 hour, seven days a weekregulatorneeds tohave institutional clout and size andscale. I think thereare some importantquestionsabout broadband channel, but if you do that you could not

regulate it. One of the problems, therefore, is howwehow that could be achieved as a solitary regulator ofone entity, even if that entity is of scale. Thirdly, is it approach this next area. This is really just a

suggestion. Is there some way that Ofcom wouldpossible forthatschizophreniatobemadetoworkwithhard and fast separation of roles between the hold a conference to look at this particular issue,

because you do not want to hold it but, on the otherGovernors as regulators and the Governors aschampions? In theory I think it is and we, like others, hand, if we are going down the broadband route

somehow we have got to tease these issues out?lookforwardtoseeing theBBC’s recommendationsonhow they could do it. I do not know if that helps or Lord Currie of Marylebone: I agree with you that

that issue, the collision between these two worlds,answers your questions?one regulated and one unregulated, is a big issue. Inthat lecture I think I indicated there needs to be aQ584 Chairman: I must confess it does not. It is not

so much the role of Ofcom—I can quite understand strong public debate around these questions withoutpre-judging what the solutions might be.that Ofcom does not want to take on any more. The

problem is—although, as you have said, the range ofresponsibilities towards the BBC that Ofcom has Q586 Derek Wyatt: Will you lead that debate?

Lord Currie of Marylebone: We will think verydoes not solve the central dilemma—that centraldilemma will not go away; because although, with seriously about that.

Chairman:Youhave satisfied everybody. Thank youluck, there will never again be an episode of the kindthat there was last year, one cannot rule out the very much indeed.



Tuesday 2 November 2004

Members present:


Chris Bryant Mr Nick HawkinsMr Frank Doran Rosemary McKennaMichael Fabricant John Thurso

Witnesses: Rt Hon Tessa Jowell, a Member of the House, Secretary of State, Rt Hon Lord McIntosh ofHaringey, a member of the House of Lords, Minister for Media and Heritage, and Mr Andrew Ramsay,Director General, Economic Input, Department for Culture, Media and Sport*, examined.

Q587 Chairman: First of all, Secretary of State, is obviously something that we are looking at. I amdeeply committed, as we move to switchover and ascould I oVer you our condolences on your

bereavement. I would like to welcome yourself, your we move to more multi-channel choice for viewers,to looking at the robustness of the mechanisms toministerial colleague andMrRamsay for what is the

final session in our inquiry into BBC Charter preserve public service broadcasting. I think this is avery important part of our national identity, withoutrenewal. The old National Heritage Committee

which we succeeded recommended, as you will overstating the case. The consultation that we havecarried out as part of the Charter review has shownrecall, a 10 year Charter funded by a licence. We do

not know what conclusions we shall come to this that public service broadcasting is popular withpeople. I think it is a very interesting proposal. I liketime. We are grateful to you and your associates for

coming here this morning. the idea of locking in the funding which is currentlyavailable to public service broadcasting. ObviouslyTessa Jowell: Thank you very much indeed.

Chairman: Michael Fabricant. it is a proposal that we will give proper and detailedconsideration to.

Q588 Michael Fabricant: Good morning. How doyou think the BBC should be funded under the Q590 Michael Fabricant: The BBC has gone into anew licence? whole series of diVerent areas over the last few years,Tessa Jowell: This is obviously the meat of Charter including BBCi, which I personally think has beenreview. I have made pretty clear for some time now quite successful, but where does it end? We have gotthat I see the licence fee as very much the default BBC News 24, BBC3 and BBC4, which got someoption, in other words there has to be a better criticism, although I think to some degree it wasalternative to the licence fee for the licence fee to be unjustifiable, I think BBC3 andBBC4 do a good job,replaced for this Charter. That said, we are certainly BBCi and all the other services the BBC oVer. Dolooking at alternatives and we have not yet reached you think the BBC should be restricted in any wayany final view. Alongside the consideration as to or would you say, providing it has got a licence feehow the BBC will be funded over the period of its and providing the Secretary of State of the dayCharter is obviously the role of the BBC in leading approves it, there is nowhere that the BBC shoulddigital switchover and in making a substantial not be allowed to go?contribution to the costs of funding digital Tessa Jowell: No, I do not take that view. My viewswitchover. That is my answer to your question. I is closely aligned with the view of the Chairman ofwould rather in reverse, Chairman, like to say two the BBC and the Director General. I think thisthings: first of all, to thank you for your kindness in Charter review needs to provide a sharper definitionagreeing to rearrange this session and, secondly, to of the BBC’s role and purpose and to allow the BBCsay what importance we attach to your report as we to flourish within that sharper definition of its rolemove to beginning to shape the interim conclusions and purpose. I also agree with the conclusions ofof Charter review which will form part of a Green Mark Thompson’s view and Michael Grade’s viewPaper to be published in the early part of next year. about some of the diversity of functions the BBC has

developed over the last 10 years and it should nowcome under very close scrutiny. There are twoQ589 Michael Fabricant: Your earlier answerquestions to be asked. First of all, is this to be partsounded quite Churchillian—and there is nothingof the BBC’s core purpose or is it a diversion fromwrong with that—when he said that democracy isthat core purpose? The second is the impact on thenot a particularly good system but it is the best onewider commercial market. I do not think that by andwe have got. What do you think of Ofcom’slarge the BBC should be investing licence fee payers’recommendation that there should be a Publicmoney in those areas that are already very wellService Publisher? Are you attracted by that idea?served by commercial services in all their forms,Tessa Jowell: I think what is attractive about thewhether it is magazines or whatever. The BBC’s roleidea is maintaining the value of investment in publicshould be one which is a direct expression of its coreservice broadcasting. I hope that it will not becomepurpose and here I would quote the Ofcom report,tedious over the course of the morning if we say this“as the cornerstone of public service broadcasting”.I think it is much more besides in this country.* See HC598-i Ev pp14–15



2 November 2004 Department for Culture, Media and Sport

Q591 Michael Fabricant: We do not know how long Lord McIntosh of Haringey: I am sure that in duecourse you will be having a full inquiry on digitalthe licence is going to last, there is no clear definition

of that, it used to be 15 years but the last one was for switchover. We are in danger of going over theboundary between Charter review and digital10 years. Let us say it is 10 years and that takes us

through to 2016, we do not know what the future switchover, although they are very properly linked.I think the answer is yes, DCMS has given a greatof broadcasting will bring, although many

commentators argue that the sort of system that we deal of thought to this and the conclusion that wehave to come to is that if you are planning for digitalhave at present whereby there are set channels,

where programmes are pushed at the viewer, is not switchover you have just got to take the technologyat the time that you are planning it and you have gotgoing to be a sustainable system. I know John Lewis

are now oVering a Freeview box which will record, a to stick to it otherwise you will never get anythingdone at all. I have been listening to overseaslittle bit like Sky!. Instead broadcasters could

download the whole week’s programming ahead of broadcasters who argue that in France, for example,you should not be touching a switchover withtime and, apart from news and current aVairs, you

would make up the schedule. Given that particular MPEG-2 because MPEG-4 is coming along andwhen I ask them how long that is going to last theypanorama of broadcasting, how can one define what

will be the core function of the BBC 10 years ahead? say 10 or 15 years and I do not believe it because ifyou wait for the next technology and certainly if youTessa Jowell: I think we always have to be cautiouswait for convergence youwill nevermake the changeabout the pace of technological development and,at all.more particularly, the pace of public acceptance of

new technologies. Even the technologies which areavailable now I do not think have presented a huge

Q593 Chairman: I would like to follow up whatchallenge to current viewer behaviour. By and largeMichael Fabricant has been asking about digitalit is still the terrestrial channels that, whether theyswitchover in relation to the Barwise report that youare watched on analogue or on digital television, arerecently received. The assumption in the Barwisestill the most watched. As you will be aware, there isreport appeared to be that there was never going toa very lively debate going on in the industry aboutbe a digital switchover because he was basicallythe extent to which the whole concept of arecommending that BBC3 and BBC4 be turned intobroadcasting channel is a looming anachronism andclones of BBC1 and BBC2, in which case we wouldto what extent there is an appetite for people simplyhave four very similar channels. Secretary of State,to create their own evening’s viewing whichwhen you say, rightly in my view, that the BBCtechnology will shortly allow. I think we need toshould not necessarily go into everything, on theproceed cautiously on this. There are restrictions onother hand there seems little point in creating newthe technology which unless they were addresseddigital channels unless they have some individualitywould be a break on its development. It is importantfor better, in the case oV BBC4, or for worse, BBC3.that the technology keeps pace with viewerBBC4 does have individuality. On the other hand,behaviour and enthusiasm. I think we can be prettyBBC3 does not have much individuality if youconfident that the more apocalyptic predictionscompare it to E4 or Sky One and so it is anabout the end of broadcasting as we know it withininteresting question of what justification therethe next 10 years are likely to be overstated.would be for that. Although Professor Barwisepraises the two children’s channels, there are hugenumbers of children’s digital channels already, soQ592 Michael Fabricant: The type of encryptionyoumight say that there is no particular justificationwhich Freeview has at the moment, MPEG-3 orfor the two BBC children’s digital channels. To whatMPEG-2, means that, given the frequencies that areextent in digital switchover are you looking at theavailable, there are a restricted number of channelsappropriateness of the BBC doing everything, asMravailable, but it is a big improvement on terrestrial.Dyke appeared to believe that they ought to do, andFor example, the launch of ITV3 has meant a re-you still having a power under the Charter to refuseengineering of ITN’s provision and yet theto authorise new channels, which you exercised intechnology now is available using the samethe case of BBC3 for a while?frequency as used by Freeview. In fact, you could get

three or four times as many channels as there are at Tessa Jowell: The question you raise is in relation toPaddy Barwise’s report. This report is now with thepresent. The only problem is that you would have to

take back all the Freeview boxes and upgrade them BBC for their observation so I will not commentextensively on the detail of the report until I haveand you would have to change the whole system.

Given that there is a problem of digital switchover had the opportunity to get their reaction. Thequestion goes right to the heart of the issue, which isfrom analogue to digital, there may well be a

looming problem—I do not know whether the the extent to which the future of digital television isa future of the kind of mixed genre channels, as aDepartment has thought about it—in having to have

a switchover in the next few years if we are going to continuation of an analogue model, or to whatextent we will see, and indeed want to see, channelsexploit digital technology from the current rather

basic digital technology to a digital technology which aremore specialist, covering a narrower rangeof genre and very particularly geared to particularwhich will enable digital terrestrial television to have

virtually as many channels using the same spectrum audiences. When I gave approval to BBC4 that waswhat I had very clearly in mind, that there is anas is available from satellite. Has DCMS given that

any thought? audience which is reportedly unsatisfied. I do this




from anecdote rather than anything rather more one of the answers to justify BBC4 and to setalongside the criticisms of low ratings and that issystematic, but I think among its devotees BBC4 is

extraordinarily popular. BBC3 has found it harder that I believe that one of the BBC’s many roles is toservice with a high quality of programming oVeringto define its identity because in a way its challenge is

greater. I thought that Paddy Barwise’s observation the interests, enthusiasms, the curiosity of the Britishpeople across a very wide range. Your viewing tastesthat channels which are specifically geared at a

specific age range will find it diYcult to generate a and my viewing tastes may be quite diVerent. If weanalysed the viewing tastes of all the people in thisbig enough audience or to discharge that ambition

successfully is right and that BBC3 ought to broaden room and the things that we would particularly liketo see more of I suspect we would see quite a wideits age range appeal both down the age range and

also up the age range. I think it is worth range of programming preferences which are not yetbeing fully met. Digital channels are a way of doingremembering that—and I think in time this will

become an important way of judging BBC3 and help that, they are a way of providing disproportionatebenefit, pressure or interest to people who have aus to think about this—when Greg Dyke and

Christopher Bland put in their proposal for BBC3 it particular interest in a particular topic and I do notthink that that is a factor which is (a) suYcientlywas because they felt that there was a demographic

of young people who were not bound in to the taken into account and (b) which fits with theconventional way of judging the success of channels.understanding of enthusiasm for and commitment

to public service broadcasting through the BBC inthe same way that older people and young children Q595 Mr Hawkins: In the harsh world of the rest ofthrough the children’s channels were and so BBC3 the media things are measured by audience size, arewas the answer to that. I think that we have to give they not? If any commercial people were here theyBBC3 rather longer to develop. I will be interested to would be saying the BBC are really being protectedget the BBC’s response to the Barwise report. I think by their privileged position of the licence fee andBBC3 is a bigger challenge in terms of the they are able to waste vast amounts of money oncontemporary debate about broadcasting than is producing programmes nobody wants to watch.BBC4. In relation toBBC4, I think the future will see Tessa Jowell: They are protected because that isthe growth of niche channels rather than the what the people of this country want and to thatcontinued growth of mere genre channels. degree the public service remit for the BBC isChairman: BBC4 seems to be very imaginative. Let diVerent from the public service remit for the otherus take the Booker Prize as an example. You would commercial public service broadcasters. The pointhave coverage on BBC2 and then, when that was you make is an important one and it really doesover, if people wanted more information and more establish the dividing line. The BBC is diVerentcoverage they could go on to BBC4 and that seemed from commercial broadcasters. I think the veryto me a very, very good way of having a spectrum of interesting ideas that are being developed within thecoverage by the BBC. BBC as a way of expressing this distinction are that

we make clear that the BBC’s protected status is notan accident, it is a democratic choice, but it is aQ594 Mr Hawkins: Secretary of State, it is often saiddemocratic choice which creates for the BBC verythat the Public Accounts Committee is one of theclear responsibilities and one of them is to ensuremost important and prestigious Parliamentarythat money is not wasted, so the sustainability of thecommittees. They were, as you will know, prettylicence fee relies to a very large degree on publicsavage in their criticism of the amount of money thatconfidence that it is their money that is beingin their view, particularly in the view of the formerproperly spent and waste and evidence of waste isLabour Minister Alan Williams, was wasted onone of the surest way of undermining that.digital channels when in some cases the number of

people watching was so low it could not really bemeasured. How seriously do you take that very Q596 Mr Hawkins: I agree with you entirely on yourstrongly expressed view by the PAC? last point because that is what this Committee has toTessa Jowell: I would take any view of the PAC very decide, whether there would be a better way ofseriously indeed. One of the facts about digital avoiding waste if they did not have a 10 year Charterchannels is that we cannot measure their value or they did not have a licence fee. I wanted to ask youpurely in terms of how many people watch them. In about a slightly diVerent but still related point whichrelation to the BBC digital channels, the audiences is to do with the complaints that have been made toare developing and the audiences will grow as us by commercial channels who have established anparticularly Freeview continues to be as popular as audience for their own particular digital channel init is. I am not saying that if you have 3,000 people the world of history or the arts and then have foundregularly watching a channel it is necessarily a that the BBC have said they have been successful, wesuccess and value for money, but we have to get used can now come in and compete with them, but withto the fact that instead of looking at viewing figures the benefits of what they regard and we mightin the high 20 millions we are going to be looking at regard, I do not know how my colleagues feel aboutviewing figures in the future for channels which are this, as an improper cross-subsidy and improperlyhalf or less than half of that. However, I think there beneficial position because they can use theiris an important consideration here which is what existing channels to advertise what they are doing inI would call the disproportionate benefit or their digital channels. How do you react to that

concern?disproportionate appreciation test and this would be




Tessa Jowell: I think there are two parts to the targeted assistance and we will do that having takeninto consideration the financial resources availableanswer. First of all, I think we have to be rigorous infor it.judging the impact on the wider market of BBC

activity. That is not to say that the BBC should stayout of anything which is commercially attractive or Q598 Chairman: Do you know whether in your ownis commercially successful for other providers, but Department or in the Treasury there has been anywe do need to be vigilant about the impact on the assessment made of the financial implications of thewider market of BBC activity. On the second point, trade oV between assisting deprived people to havethe evidence by and large shows that BBC access to digital television and the income thereintervention in the market can create choice for would be from the sell oV of analogue spectrum?consumers. It does not necessarily lead to the Lord McIntosh of Haringey: Those are bothdestruction of the competitor channel. It is not the potential elements in the cost-benefit analysis whichBBC’s job simply to act as a commercial predator has been done both by ourDepartment and theDTI,

who are the partners in digital switchover, with theand to identify what would be, if they were ainvolvement of the Treasury. They are not the onlycommercial broadcaster, regarded as profitable gapsconsiderations. The revenue from the sale ofin the market or to move into areas of the marketanalogue spectrum is perhaps the least finalised ofwhich are already overcrowded. Youmay rememberthe amounts of money because decisions have to bethat one of the reasons that I turned down the firsttaken aboutwhat the analogue spectrumwill be usedsubmission for BBC3 was that I was not persuadedfor and some of the potential uses are not revenuethat it was a distinctive oVering in what is a prettyproducing, but certainly it is all part of thecrowded part of the marketplace, the marketplaceanalysis, yes.for 16 to 35 year olds. I think those are the two

considerations that need to be borne inmind. I thinka sharper definition of the BBC’s role and purpose Q599 Chris Bryant: That did not sound like a figure,

but you seemed to think there was a figureand greater certainty about its scale would quellsomewhere around.some of the reasonable fears in other parts of theLord McIntosh of Haringey: There is a figure for theterritory.benefit in net present value to the United Kingdomof switchover and the figure that we have at the

Q597 Mr Hawkins: I am very concerned about the moment is between £1.5 billion and £2 billion, butpressure that there seems to be building up for an that will be aVected by the timetable, whether thereearlier switchover and you will have seen what is any slippage or advance in the timetable and byOfcom have said about the need to have a SwitchCo quite a number of factors which are yet to beand that kind of thing. One of the things that you decided. However, you have to start with having aand your colleagues have been vaguely suggesting is cost-benefit analysis and we did that and wethat if there were to be a switchover at a time when published it at the time of the Secretary of State’sperhaps 30% or thereabouts of the population did announcement in September last year.not have digital television there might be someprotection from the Government in relation to those Q600 Chris Bryant: But with many digital set topwho were elderly or not in good health or with very boxes coming down to £25 that £2 billion would golow means. If your party were to be in Government a long way, would it not?at that time—and we are looking a number of years Lord McIntosh of Haringey: It is not the intentionahead—do you have a firm commitment from the that we should be paying for everybody’s set topChancellor of the Exchequer of a specific amount of boxes, nor has it ever been the intention.taxpayers’ money that would be available to enablepeople who were not able otherwise to aVord to buy Q601 Chairman: This Government has got andigital television to have that at a time of switchover? interesting record in terms of assisting people withLordMcIntosh ofHaringey:The first thing to be said various expenses, ie the £200winter fuel payment foris that whatever time you have a switchover, and I pensioners, £100 towards the Council Tax, the freeam not conscious of any particular pressure for an television licences for 75 year olds. Has there beenearlier switchover, 27% of the population will not be any consideration whatsoever, including of theseable to get digital terrestrial television in advance various benefits, of a free set top box for peoplebecause the transmission simply is not there. The either of pensionable age or 75 years old or whateverpressure for an earlier switchover is from the people because that would certainly take into account thein that 27% who are deprived of it and that is what kind of thing Mr Hawkins has been talking aboutI am getting from MPs’ letters at the moment. In and also the kind of thing that Chris Bryant is justanswer to the question about those who are deprived talking about?at the time of switchover, this is something which we Lord McIntosh of Haringey: We have beenwill be covering in the announcement that we will be consulting and we have been talking tomaking about digital switchover early in the New representatives of poverty charities and AgeYear. At that time we will have to cover all of the Concern and people of that sort about a number ofoutstanding issues that need to be resolved in public options and those options have included theabout the switchover, including all of the issues over provision of free equipment or a voucher towardsthe timing region by region, the total timing, the free equipment or the possibility of technical

assistance, in other words helping people tospectrum allocation and indeed any issues over




understand how to put the kit in, which seems to us relation to the principles underpinning switchoverbut also to the principles underpinning the BBC’sto be more important for the over 75 year olds

possibly than financial help. All of these options new Charter.have been very closely studied, they have beencosted, they are being discussed with the people Q604 Chris Bryant: I want to change tack slightlyconcerned andwe shall bemaking an announcement and ask about what level of involvement thereabout it at the same time as we make our next major should be from outside in the running of the BBCannouncement about digital switchover. either through the Charter or through ministerial or

Parliamentary scrutiny because on the one handeverybody will want to see a fully independent BBCQ602 Chris Bryant: You mentioned diVerent MPs

writing to you. I think it would be true in my that sails oV into the sunset and produces wonderfulprogrammes for everybody and everybody loves it,constituency that the vast majority of people would

want us to move to digital switchover as soon as but on the other hand some peoplemight say that thefact that the BBC has got 300 journalists in thepossible because that would resolve many of the

issues that they have. We are talking about access United States today for the American electionsmeans there may be a certain degree of wastefulnessissues in part because everybody pays the same

licence fee but not everybody gets the same deal in going on there. Some might say the BBC does awonderful job and yet they are thinking of movingthe end because they do not have the same access to

all of the channels. Do you think that in the next Panorama and it will not be on at the right time.When you gave your licence for BBC3 youCharter there should be specific obligations or

targets of some kind in terms of access for the BBC? intervened quite directly in quite a series of issuesabout genre. Do you not think that the CharterLordMcIntosh of Haringey: These are targets which

are not only for the BBC but they are for renewal process itself is one of the few ways that wecan keep the BBC honest because they know there isbroadcasting as a whole. Chris Smith set those

targets five years ago now when he set targets of a time when they have to produce a lot of publicservice broadcasting on television so that politiciansaVordability and accessibility and we feel bound still

by those targets, but they do not just apply in the think they are doing a very good job and so on? If so,do you think a long Charter is a bad idea or shouldBBC, they apply to all public service broadcasters.there be other points where scrutiny can be morerobust?Q603 Chris Bryant: But many of the licence payersTessa Jowell: Just as I know this is reaching to thewho only pay a specific amount of money for theheart of your inquiry, this is an issue that we areBBC through the licence fee are troubled by the factgiving a great deal of thought to, Terry Burns isthat they do not have the same access to all thegiving a great deal of thought to it and I think thechannels that other people do for a whole series ofBBC are themselves. I know that in the course ofdiVerent reasons and on top of that we are enteringyour inquiry you have looked at whether or not thea world where the electronic programme guide, theCharter, the relationship between the sovereign andtechnical standards inside the box and there may bethe BBC, is the best institutional structure tolots of diVerent kinds of boxes, some people withpreserve the independence and integrity of the BBCHome Choice, some with Sky, some with Freeviewand we will obviously look with interest at what youand so on, all these diVerence systemsmean ordinaryhave to say about that and about the role oflicence fee payers will have to navigate their wayParliament in this. We are looking at anotherthrough. Do you think that the Charter should bedimension in this relationship, which is how theBBCvery explicit about the way that the BBC has tocan build its accountability to licence fee payers, itsoperate in that field to maintain universal access?shareholders if you like and we are looking at aTessa Jowell: I think we will want to think aboutnumber of modes of governance and a number ofthat. This is the point at which the action that we areways in which the regulation of the BBC might givetaking to achieve switchover interconnects with theexpression to this. Where we would agree with therole of the BBC as one of the major funders ofthrust of your argument is that this continued andswitchover and I think Andrew has put the positionexplicit accountability is important. Governmentsvery clearly indeed. There is another point whichare not elected for 10 years without a break in theyou have raised with me and others on a number ofmiddle. This sense for the BBC that it is underoccasions, which is the sense of being short-changedscrutiny and that its obligations to licence fee payersthat many licence fee payers have if they cannot getare constantly under scrutiny is important. What weFreeview. That is whywe aremoving ahead as fast ashave to achieve is a balance between this sense ofwe think is prudent and achievable with switchover,uncertainty and turbulence and accountability; thatbecause I think that if that position remained moreis the tension that we are grappling with at theor less unaltered for another five or 10 years then themoment.high level of public support that we have at the

moment for the licence fee would begin to breakdown and show quite a large degree of regional Q605 Chris Bryant: At the moment one of the things

the governors do is they are set objectives or tasksdiVerential and the parts of the country that wouldbegin to withdraw support for the licence fee would every year and they have reduced their number from

30 down to 10 or so. I just wonder whether that jobbe those that felt they were being denied the benefits,a sort of full membership of the BBC. This is a factor of setting the annual targets should not be set by

somebody outside the BBC, for instance this Selectwhich is very much influencing our thinking both in




Committee, the Department or Parliament or Q608 Chris Bryant: Would a bigger independentproduction quota help that?whoever and then for the BBC governors toTessa Jowell: I think that could well, yes. As I haveadjudicate against that set of objectives. What dooften said, I see the licence fee as venture capital foryou think?the nation’s creativity and I think that the BBCTessa Jowell: I certainly think that that is an ideainvestment in the independent sector is not onlyworthy of consideration. I thinkmy feeling is that wegood for working but it is good for the state of thatwant the BBC to be moved away from what is theparticular and very important part of the creativeperceived influence of Government, that wasindustries more generally.actually a very interesting but consistent piece of

feedback from the consultation and that within thatby and large people support the idea of this Q609 Rosemary McKenna: The Chairmanrelationship between the BBC and the sovereign, but mentioned children’s digital television earlier andthey were less keen on the idea of a stronger that it is a very good example of where the BBC hasrelationship between the BBC and Parliament, a very important role to play. If you look at the vastfeeling that that could compromise the majority of digital children’s programming, it isindependence of the BBC. Youmay well make some Disney and all of that genre, which is fine, but BBCspecific proposals on this which we will obviously Digital actually provides quality programminggive proper consideration to, but I expect that the which I know lots of parents and educators valuedebate about governance and accountability will be and I think that shows how important it is that theythe debate that will characterise this Charter review should be in there doing that. However, the

Chairman and the Chief Executive are saying at theboth at the time and in retrospect.moment that they want to look very carefully at thecore purpose of the BBC and what it ought to be

Q606 Chris Bryant: Paddy Barwise made the providing. If they do that and they decide thatsuggestion about the BBC3 and BBC4 that they something is not working and it is not their coreshould have targets for audience share and reach. purpose, how can they deal with that? Can youDo you think that is the right route or does that leave provide something in theCharter review that will sayyou in a situation where the BBC, contrary to the that it is appropriate for them to remove some kindlogic of the licence fee, is basically scrambling for of programming that they are providing, because itaudiences? We have been trying to say that audience seems to me that that is something that would befigures are not the only things that matter. extremely diYcult for them to do? Once an area ofTessa Jowell:For the reasons that I set out earlier we broadcasting is provided, how can you remove thatwould obviously want to avoid that because if the without there being this major uproar that happensBBC is only scrambling for audiences all the in this country every time there is some change?pressures are towards the middle ground and Tessa Jowell: I would certainly see children’saway from the distinctiveness of BBC4 and the broadcasting as part of the BBC’s core purpose.distinctiveness that BBC3 is aspiring to. Paddy Barwise’s report makes the case for children’sLord McIntosh of Haringey: I think what we have broadcasting through the BBC very clearly indeed,

the assurance of quality, no advertisements and sogot to guard against all the time is the idea that aforth. I think CBBC was described as a triumphpublic service broadcasting obligation can bewhich has not undermined the preschooldefined as dealing with market failure. You reallyprogramming on BBC1 and BBC2, so its oVer ishave to have a public service broadcastingdistinctive. He praised CBBC, but I do not think heobligation which covers the full range of qualityliked young people sticking their tongues out andprogramming that people want in all genres rathersome of the language was a bit rich for him,than picking up the pieces and that is why pluralitynonetheless he recognised that this was a justifiableof public service broadcasting is so important.part of the BBC’s remit. I think that in a waychildren’s broadcasting is the easy part of the answer

Q607 Chris Bryant: Is not one of the dangers about to your question, there is not a huge dispute abouta very large BBC, and it does get a large amount of that. I think what is more diYcult is the role ofmoney, it is going to get another £320 million over religious broadcasting on the BBC, the role of artsthe next few years simply by virtue of the fact that coverage for instance, those areas of the genre rangethere are more single person homes, that it becomes for which there will not continue to be enormous

audiences and this is an important point that camesuch a monolith that it is very diYcult to get aup in the course of the consultation. Even thoughplurality of voices, whether you are talking aboutpeople do not want them, they like to know they areregional accents and diVerent coloured faces andthere. That would be my answer to those who saydiVerent perceptions of the way Britain is throughthat if nobody is watching them then the rangethat monolith? Is that a problem?should be shut down. Once you start reducing theTessa Jowell: I think it is a risk.BBC’s range then you risk the BBC becoming aLordMcIntosh ofHaringey: It is an opportunity too.broadcaster like any other.Tessa Jowell: I also think that it is a risk which the

BBC are addressing and something that we arelooking at in the Charter through recognising that Q610 Rosemary McKenna:Let us take BBCNews 24they have got to move substantial parts of the which people criticise for its cost in comparison to

the number of viewers that they have. If the BBCoperation out of London for precisely that reason.




decided as part of the review that BBC News 24 was other channels as well and I think that that willanswer some of the questions that you areunnecessary and they were not getting the audience

share or whatever, can they make that choice? Is it expressing.part of the renewal to say that that would be a choiceopen to them, to say we are not going to go into 24

Q612 Rosemary McKenna: Is it part of the Charterhour news broadcasting?renewal that they should do more in terms of publicTessa Jowell:Within the present structure the mostconsultation? I know they invite people in from thedraconian step I could take where it was establishedregions. I think they should do a lot more of that.through independent review that the BBC had notTessa Jowell: I absolutely agree with you. One of thecomplied with the conditions that were attached toproblems of the present arrangement is that there isa news service would be to say that it should bethis great flurry of activity round about the period ofdiscontinued.Charter review and suddenly more of the kind ofprogramming that everybody thinks the BBC isabout appears to be put back into the schedules. IQ611 Rosemary McKenna: It is said that the publicthink that the BBC need to have a continuingsector broadcaster should be a risk taker in all sortsconversation with the people who pay for it and forof areas, music, radio, everything, they shouldthat not to be something which is focused on thealways be able to take risks and try something new.period ofCharter review.Howyou keep that processI think the problem arises if they then try to say itfresh and stop it becoming a sort of box tickingdoes not work. How do they get out of that? Howexercise is quite a challenge, but I think it is ancan they remove that without creating the hugeimportant one for them.campaign to save something that is clearly not

working?Lord McIntosh of Haringey: Surely the two go Q613 Mr Doran: That last suggestion suggests thattogether. If you are encouraging the BBC to take it might be a good idea to have a permanentrisks, that is why it has long-term funding rather Charter review.than year-by-year funding, then they are going to Lord McIntosh of Haringey: Trotskyism!make mistakes and they are going to have to havethe power to correct them and the role of the BBCgovernors in their non-executive director rather than Q614 Mr Doran: I am not sure we should get into atheir regulatory role is precisely to make sure that debate about that. One of the things we are trying tothey do react appropriately. If you try andmake any do on this Committee is to look ahead and to seechange on Radio 4 there are hundreds of thousands how the landscape of broadcasting is going toof people who will scream about it, but they have to change and obviously we are living through a period

when there is substantial change afoot. Newbe prepared to do that.technology is providing consumers with a choiceTessa Jowell: I think there are a number of ways ofwhich they have never had before. On some of theaddressing this. One is having very clearvisits that we have made we have heard someexpectations attached to diVerent services, so youstaggering assessments of just how things mighthave a degree of transparency against which thechange. As this is a review which potentially will lastpublic assessment, not just the rather private processuntil 2016 or 2017, can you say a little about thebetween the BBC and the Secretary of State, canassessments that the Department is making aboutactually be conducted. There is, of course, thethe way the landscape will change through the life ofexperience where BBC Choice and BBCKnowledgethis Charter?came from. BBC3 and BBC4 actually arose because

BBC Choice and BBC Knowledge were not Lord McIntosh of Haringey: That is futurology witha vengeance, is it not? It is diYcult enough to sayregarded to have been successful. That was a

judgment that was made by the BBC. Had the whether the start of the Charter review period will bethe same broadcasting landscape as now let aloneCharter review coincided with that period of

realisation that these were not working, would the two or three years away and to start to makeestimates of what it will be 12 years away in 2016, ifCharter review process have addressed them? I

suspect that probably it would have done. Michael that is the period that we adopt, is even morediYcult. I think the challenge to us is not to estimateGrade’s suggestion about service licences, which is a

way of capturing the expectation of a particular the speed at which in particular convergencewill happen, it will happen and the distinctionchannel and capturing the standards by which the

eVectiveness of a channel can be judged, is a very between broadcasting and telecommunications willgradually diminish, but to make sure that we have agoodway through this. It slightly begs the point as to

how those standards are reached and to what extent Charter which is robust enough to deal with that. Ithink the great advantage that we have in thisthere is some kind of involvement of licence fee

payers in helping to shape the process of individual country of having a BBC which is not onlyindependent ofGovernment but also has historicallychannel identity, but I think that that is a discipline.

In a sense we have moved ahead in eVectively setting maintained an astonishingly high audience share forpublic sector broadcasting is a very good augury fora service licence for BBC3 as a condition of

approving it. I welcome the fact that the BBC have our ability to manage convergence and yet not tolose the standards that we value.now seen this as a model which could be applied to




Q615 Mr Doran: Some of the evidence we have had given. At what point does the BBC’s share of theaudience fall to a level where a licence fee as a waysays that that is unlikely to be the situation in the

future, even the near future. One of the people that of funding the BBC is no longer justified?we have met, an American analyst (and this was Lord McIntosh of Haringey: I have two commentsbacked up by others) was quite clear that the future on that, Chairman. First of all, you have beenof broadcasting has to change because the consumer receiving a lot of evidence about this and thereforeis becomingmore andmore in control because of the you are particularly well informed and you aretechnology and the ability that the consumer now collectively up to date but I think you willhas not simply to sit there and be forced to watch a acknowledge that the futurologists do not agreeprogramme but to choose if he or she watches a about these matters and that there are veryprogramme and the form in which he or she watches significant diVerences of view between them aboutit. We have heard all sorts of assessments that public the speed at which this takes place and the degree tosector broadcasting and broadcasting as we know it, which it will have taken place at the end of a newwhether it is digital or analogue, could reduce and putative ten-year Charter review period. The secondbecome a nichemarket and a nichemarket at the low comment I would make is that in responding to Mrend of the market. Doran I very specifically did not say that linearLordMcIntosh ofHaringey:Thatwas the distinction viewership of the kind that we have now where wethat the Secretary of State was making half an hour accept the time slots which are given to us by theago. There is the potential for technological change, broadcaster will continue to be anything like asthe potential for convergence, and nobody denies important as it is now.that that is proceeding apace, but the distinction thatthe Secretary of State was making was the speed at

Q618 Mr Doran: One of the other important pieceswhich consumer take-up of it exists. It is certainlyof information that we have taken on board is thattrue that over a long period of time people will bethe content producers will be king in the future whenmore likely to take up the new opportunities whichwe have a range of broadcast options and receivingtechnology provides. It is also true that a very largeoptions available to consumers. Potentially, given itsnumber of people, perhaps not the youngest peopleback catalogue and its ability to make programmes,but a large number of people, are going to stick towe could see an evenmore powerful BBC, one whichthe comfort of the broadcasting that they know andis obviously receiving money from the taxpayerare going to stick to the existing five terrestrialthrough the licence fee and in addition to that willchannels. I think a lot of the forecasts of the declinehave a library which will be potentially the envy ofof those channels and therefore of their viability inthe world in the programmes it is able to sell, whichterms of advertising or in terms of justification forcould skew its relationship with the commercialthe licence fee are, shall we say, excessive.broadcasting industry evenmore than it is skewed atpresent. Is that an issue that you have addressed andQ616 Mr Doran: So in 2016 you think we may have do you see the potential for that and, if you do, willa landscape which is similar to what we have at the you have any remedies for dealing with it?moment, still with a strong terrestrial broadcaster?Lord McIntosh of Haringey:We have certainly hadLord McIntosh of Haringey: We will have a lot ofa lot of evidence on this point. You have beenconvergence. We will have a lot of people, market-listening to Peter Bazalgette, I guess, on some ofled, who will be taking advantage of the huge newthese things but yes, certainly this has been aopportunities which will be available. In addition wesignificant element, not just in our publicwill still have a lot of people behaving as theyconsultation but also in the seminars which Terrybehave today.Burns has been running and it is part of ourconsideration.

Q617 Chairman: How do you know? And what is “alot”? If you have, as I take it you have, been doing

Q619 Mr Doran: On the relationship between thethe kind of research that we have been doing in thisBBC and the rest of the broadcasting industry thereCharter review, you will know that by 2016, to takeare a couple of points I would like to make. We metthat particular date that we have been concentratingOfcom last week and there were two points thaton, the variety of ways of receiving audio-visualconcerned me about their evidence. One was, in theentertainment will be such that sitting down andcontext of the public sector service broadcastingwatching a continuous stream of entertainmentrequirement, the position of film. I have to say I wassupplied to you by television channels will not be thea wee bit surprised that when I asked questions onway that most people are receiving television and isthis it did not seem to figure at all on the Ofcomnot the way already that 15-24 year-olds arelandscape. I would be interested to know just wherereceiving television. That being so, and that whatDCMS sees the role of film. The context in which Ipeople are already doing to a considerable extentasked the question was the pretty appalling recordbut, as Frank Doran points out, are going to do towhich television generally in the UK has, includinga very much greater, perhaps almost exponentiallythe BBC, of showing recent British films.We seem togreater extent in a dozen years’ time, will inevitablygo for third-rate American films which are verymean that, whatever the virtues or otherwise of thecheap rather than our home produced product,BBC, its proportion of the audience may well havesomething which people would argue is a key pointfallen a very great deal in the sense of doling out the

kind of entertainment that we used to accept as of our culture.




Tessa Jowell: To take your second point first, we which is amulti-occupation building.A similar thingis for students, or indeed staV working in thewould largely agree with you on that. Secondly, we

welcome the fact that we have seen since 2000 catering industry, who live in hostels and havemulti-occupation buildings where they are required to payan increase in what the BBC spends on UK

acquisitions. The figure was £1.75 million in 2000. It a licence fee for one room almost. Would youconsider looking at those to see if there is some waywill be £4.75 million—inwhich there could be amulti-use licence that couldcover them because that is clearly an area whereQ620 Mr Doran: It is still a tiny part of theprobably a lot of work is done for unpaid licence fees£80 million that we spend on films.and it is probably quite expensive?Tessa Jowell: I absolutely agree with you. You willTessa Jowell: I know, Chairman, that John Thursoknow that we wrote a specific requirement inwill be aware first of all what a diYcult area this is.relation to film into the Communications Act duringWe have great diYculty in reaching a fair solutionits committee stage. No;much of the analogy appliesfor people living in sheltered accommodation, forto film that applies to the independent sector andinstance, but yes, of course we will look as we drawindependent programme makers more generally.up the proposals at any area where the presentsystem appears to be an inequitable one. I was

Q621 Mr Doran: The second issue is on regional interested in the Ofcom research that they publishedbroadcasting. You will be familiar with the phase as part of their part two report. It was a publictwo document which Ofcom produced on the consultation on the licence fee where, contrary topublic service broadcasting requirement. Regional expectation, people appeared by a majority tobroadcasting is something that every politician takes recognise that the licence fee is a regressive tax butan interest in. The only interpretation I could make not to mind the fact that it is a regressive tax becauseof the Ofcom position—I understand it is a it was seen as paying for something that was not aconsultation document—is that it seemed to suggest core essential of everyday life. I think the regressivethat in the new digital era the Channel 3 companies nature of the licence fee is not necessarily its greatestare going to find it almost impossible and financially threat and certainly if there are very specificunattractive to continue with a regional requirement instances of unfair treatment then of course we willand that that should therefore be shunted on to the look at those.BBC. Including some other areas, in the Ofcom viewwe should be moving towards a worthy BBC which

Q623 John Thurso: Particularly the servicedeals with the programmes that are not commercialpersonnel.and that no-one else should be dealing with. I knowTessa Jowell: I have certainly had representationsI am probably exaggerating their view and theyabout that point.would be horrified at the way I am presenting it, but

it is certainly the way it came across to me and Iwould be interested to know what you, the Q624 John Thurso: At the outset you said there were

a great many things that you were still looking into,department, has to say on that general approach tobroadcasting. which is absolutely right and proper for an open

review, but recently there seem to be reports thatLord McIntosh of Haringey: We rely on the verytough provisions in the Communications Act which quite a lot of things have become a kind of done deal.

I was particularly interested to read the article inThecover not just regional production but alsoprogramming directed at people in nations and Independent of 18 October, which stated, “The BBC

is close to a historic deal that will protect its licenceregions. Ofcom, of course, is free to express its ownview about commercial trends but, as we have public fee, its basic structure and its institutional future,

complete with a new Royal Charter to run forservice broadcasting obligations as laid down bysection 264 of the Communications Act, they are another 10 years. The decision is all but taken and a

comprehensive deal is now clearly there to bevery tough and they are still minimal as far as we areconcerned. struck.”

Lord McIntosh of Haringey:Why are we here?Q622 John Thurso: Secretary of State, I would likeprincipally to ask you some more about governance Q625 John Thurso: That was my question.

Tessa Jowell: That is excellent journalism but thewithin the BBC but before I do that can I ask onequestion with regard to the licence fee? All of the another 10 years. The decision is all but taken and

deal has yet been done; that is absolutely ridiculous.mood music seems to be that the default position, asyou have described, it is probably where we are There is a process which I have been at great pains

to set out and ensure is a process which is trustedgoing.Will you be able to look at how the licence fee,if that is what comes in, is operated, and particularly because it is a transparent process. The point

which we are at is in focusing on the specificwith regard to one area we have already acceptedthat it is a bit of a regressive charge and we give it to recommendations that we will make in the green

paper and to what extent we have a mixture of inpeople over 75 free? Two groups of people, it strikesme, do rather badly out of the licence fee. One is eVect white paper decisions as opposed to proposals

for further consultation. That is the point where weservice people, who very often have a home wherethey pay for a licence fee but it is a long way from the are at the moment but I think it is absolutely right to

say that the areas that the debate coalesces around,barracks where they live, so service people now arehaving to pay a separate licence fee in their barracks which will be no surprise to you, are governance,




funding, scale and purpose and some of the issues Tessa Jowell: For the reasons I have given I am notin a position to give a binding guarantee on that forthat you have touched on in relation to the future:

the BBC’s role in what is an environment of very ever. I think that in principle that is a good approachand I welcome the fact that we will have at therapidly changing technology.beginning of next year a Lords committee onCharter review sitting. That will obviously assist

Q626 John Thurso: You mentioned governance the process. I have always said that scrutiny,there and I personally think that is one of the most consultation, exposing proposals which are in theimportant elements of this. You talked about a early stages of development towider debate is a goodsharper definition for the function of the BBC but I thing. It is an extraordinarily diYcult thing to do inthink there needs also to be sharper definition within government, believe me, but just because it isthe governance, which clearly failed earlier in the diYcult does not mean we should not continue to tryyear. The BBC itself, when I asked this question of and do it.the Chairman, set out what they are doingvoluntarily and they clearly recognise themselves

Q628 John Thurso: As it is a one-in-ten-yearthat much needs to be done. Voluntary solutions,opportunity it would be a good thing if Parliamenthowever, tend to be towards theminimum end of thecould have that once-in-ten-years debate.scale rather than necessarily where one might wantLord McIntosh of Haringey: We have said thatthem to be. At the core it seems to me there are theseparliamentary scrutiny will be no less than in the lasttwo conflicting functions, one of being the championCharter review.of guarding the BBC’s independence, ofChairman: One area that we have not dealt with butchampioning what it does, and the other of being thewhich is absolutely fundamental to the future of theregulator of it. What thoughts are the departmentBBC (in whatever form) is governance. The BBC ishaving with regard to how much should begoverned in the way that it was 77 years ago when itenshrined in the Charter relative to governance,was set up. The events of last year, which thisactually taking what the BBC is doing voluntarilycommittee has not considered and will not considerand putting it into the Charter and whatas such, nevertheless demonstrated the utterconsideration of perhaps even taking it a bit further?inadequacy of the Board of Governors as a systemTessa Jowell: As you rightly say, the BBC haveof governance of the BBC. The Board of Governorsrecognised the unsustainability—it is a strong wordconsists almost totally, if not totally, of people withto use but I mean unsustainability—of this dualno experience or knowledge of the media and thatfunction. There are, as you say, two roles, if notincluded the Chairman until he resigned a while ago.more. There is the non-executive role, if you like;How is it possible for this country’s most importantthere is the broader governance role, but there is alsoand internationally renowned broadcastingthe regulatory role. This is the topic of Terry Burns’sorganisation to have as those in charge of it, both asmost recent seminar, is it not?its champions and, irreconcilably, as those to whomLord McIntosh of Haringey: And the one at the end it is accountable, the group of peoplewho are chosenof November. on the basis of tokenism, whether it is gender

Tessa Jowell:Yes. The work on this in preparing the tokenism, ethnic tokenism, class tokenism, regionaladvice on options is not yet complete but I think tokenism or in some other way? Is it not really timethat, just as the BBC has made very welcome moves now, 77 years later, for the BBC to be run in ato achieve this separation, it is fair to say that we professional way and is it not also time that therewould not regard the status quo as an option that were a form of accountability by the BBC run bywould be acceptable or sustainable for the next people who knew what they were about and alsoCharter review. That said, this is very much a who were independent of the running of the BBC?discussion and a conversation which is in train at the Chris Bryant: Do youmean there are too many poshmoment, so have we reached firm conclusions? No, ladies, Chairman?we have not yet reached firm conclusions. Does thatmean that we do not knowwhat the alternatives are?

Q629 Chairman: If I had meant that I would haveWe have a very good idea about a range ofsaid it, Chris.alternatives. Obviously, these need to be developedTessa Jowell: Chairman, I do not want to repeat theby discussion, they need to be tested and by the timeanswer I have given to John Thurso on this but Iwe get to the green paper we will be in a positionhope that the answer I have given you gives you aeither to set out options with a preference or to inviteflavour of our thinking to date. It is thinking whichfurther discussion and reaction to a scaled-downis currently in the course of development and we willrange of options. As a postscript to that, the areaspendmuch of the next three or fourmonths lookingthat we are most keen to address is how youat precisely the kinds of questions that you havestrengthen the relationship between the public, toaddressed. We look forward to your committee’swhom the BBC belongs and who pay for it, and thereport, as ever, for a number of reasons but I will beBBC as an institution.particularly interested to see what you concludeon governance. Just on the membership of the

Q627 John Thurso: Can you confirm that any future governors, you will know that there is now morechanges when the Charter is proposed will be broadcasting expertise represented on the Board ofdebated by both Houses of Parliament although the Governors. I think the way you characterise it is a

very interesting one. Accountability needs to bestanding order requiring that was repealed in 1997?




clearer, I think that the whole arrangement needs to would establish a closer accountability toParliament rather than to an external regulator. Thebe more transparent, but my very particular concern

is about a stronger sense of connection between the parliamentary relationship, you are right to pointout, is an ambiguous one and John Thurso’sgovernance and regulation of the BBC and the

people who fund it. There should be a line of question about the nature of parliamentary scrutinyI think underlines that. I would mislead you,accountability that keeps the BBC honest and keeps

it true to the purposes and functions that it has for however, if I said that we had given detailedconsideration to a structure for the BBC that movedwhich the licence fee is paid.it out of its constitution byRoyal Charter. That said,I go back to the point I made about the overhaul ofQ630 Chairman: Whatever form of governance orgovernance, and of course, just because there is aexecutive control for the BBC arises from thisRoyal Charter it does not mean that there cannot beCharter review, and there has been a view putan external regulator. It is not precluded in any wayforward that particularly with the kind of experienceby the Charter relationship of itself.that the new Chairman of the BBC has this could

work very well, namely, that there should be anexecutive chairman and a Board of Governors and Q632 Chairman: But the government in no waythe Director General—excellent person as he is— whatsoever has a hands-on relationship withturned into a chief executive, is the government Channel 4.considering seriously whether this form of Tessa Jowell: No.governance is now appropriate with the BBCcompeting in a way it has never had to do before

Q633 Chairman: Channel 4’s remit can beagainst an array of other broadcasters with it beingreconsidered when the Communications Bill isa big business, an international business, andbrought forward. Its accountability can benobody (at least I would not) would quarrel withreconsidered. Nobody can say that the statutorythat? Is this something which could be regarded as

fundamental that the government is considering basis for Channel 4 has meant that Channel 4 is lessseriously rather than just saying, “Oh well, we might independent than the BBC; far from it. There is aas well go on as we are”? huge temptation for government—and I do notTessa Jowell:Yes, it is, and, as I have said already, I mean necessarily this government; I mean anysee this as probably the most fundamental area for government—to try to find ways of meddling in thereform arising from the Charter review. operations of the BBC. Leon Brittan did it in the

Zircon aVair. Anthony Eden did it in terms ofcoverage of the Suez war. If the BBC has thisQ631 Chairman: Linked to that, the Charter is goingpeculiar and, some might say, anomalousto expire at the end of December 2006. The BBC hasrelationship with the government and Parliament, itbeen governed by a Royal Charter since 1927. Wecan be argued that governments of any politicalhave got another public sector broadcastingpersuasion have a far greater temptation to meddleorganisation, Channel 4, which is not governed by aone way or another with the BBC than with ChannelCharter. It is embedded in a Communications Act.4, to meddle with which no government has everWhereas the BBC, curiously, has got no clear remitattempted. It would seem to me that it would be ain its Charter, Channel 4 has got a statutory remitvery serious error if the government were simply toand if it fails in adhering to that remit—and there isoperate on the basis, whatever conclusion it came to,some discussion now as to whether it is adhering tothat it was utterly wedded to a Royal Charter as ait—then there is an external regulator which canway of continuing the BBC because an opportunityhold it to account or which can, if need be, fine it,might be lost to set the BBC on a new independentand indeed there has been a very severe reproof ofpath.Channel 4 quite recently.Without sayingwhether anTessa Jowell: I can assure you that we will look at allexternal regulator ought to be Ofcom, as it is withthe available options for strengthening theChannel 4, has the government considered or willindependence of the BBC. I have said on manythe government be considering whether it might beoccasions that we want to see as a result of thismore appropriate for the BBC in future to beCharter review a BBC which is strong andgoverned by aCommunications Act with a statutoryindependent of government. In discussions we hadremit in an act in the way it is for Channel 4, andvery recently we commissioned further work onalthough Chris Bryant has made the point that theways inwhich the independence of the BBCmight beCharter review gives an opportunity for reviewingunderpinned. I do not feel that there is a problem inthe extent to which the BBC is adhering to itshaving diversity in our broadcasting ecology ofobjectives, Communications Acts, which are moreforms of governance, forms of regulation and formsfrequent than Charter review, could provide theof statutory constitution. The BBC is diVerent fromsame opportunity? Is the government wedded to theChannel 4 in many respects, not least in terms ofidea of a new Charter or is it looking at thescale, and also purpose, but securing the BBC’spossibility of continuing the BBC as a permanentindependence, securing a greater degree ofinstitution in a diVerent way?accountability and a greater degree of transparencyTessa Jowell: The balance of analysis and thein the way the BBC operates and its availability tobalance of discussion to date have been within theits shareholders, is a major objective for me in thiscontext of a renewed Charter rather than putting the

BBC constitutionally on a diVerent footing that Charter review.




Q634 Michael Fabricant: I just want to pursue one conclusion on that. I would only say—and it links tothe Chairman’s point about the regulation of thepoint. Regardless of whether there is a Charter or

whether there is a BBC Act or whatever, your BBC by Ofcom—that I do think that there arebenefits in broadcasting of plural regulation and,predecessor, Chris Smith, used to argue strongly—

and I am not attacking Chris Smith in any way, by secondly, I think that another objective of thisCharter review is to define the distinctiveness of thethe way—that the BBC’s current position should not

be changed with regard to external regulators, and BBC being a broadcaster which is unlike any of theother broadcasters, even its close siblings.then when he stopped being Secretary of State he

took an alternate view, which is perfectly legitimate Mr Hawkins: Secretary of State, you have said thatyou are particularly interested in what thisand in my view very understandable. Given that the

Broadcasting Act, when that came out, was almost committee may have to say in due course aboutgovernance and you gave what I would regard as aout of date within six months, and given that since

the Communications Act there has been a whole very constructive response to the Chairman’s recentquestions. I just wanted to ask you—and I have noseries of events which the Chairman has mentioned,idea what our committee is going to recommend; wedo you not think that despite the fact that there washave not, of course, started discussing the nature orargument during the committee stage for Ofcomcontent of the report or anything—if our report wereor some other external regulator to have someto contain the kind of radical suggestion aboutadditional control over the BBC—partly to protectmoving completely away, not only on governancethe BBC, I might add, because being its own judgeissues but on the whole concept of the licence fee,and jury is not always a good thing—have you giventaking account of some of the views expressedsome thought to that? It would need a change in therecently, for example, by David Elstein’s committee,law, I know, and there may not be time available towould you take that equally seriously if that were todo that, but do you think that the Communicationsform part of our thinking?Act is as up to date now as it was 18 months agoMichael Fabricant: Or would the shreddingwhen it was first drafted?machines be used?Tessa Jowell: The short answer is yes, I do. You are

well aware of the extent to which the BBC is subjectQ636 Chairman: Order, Michael, order.to Ofcom and (a point which is often forgotten) isTessa Jowell: I have always treated thesubject to dual regulation rather than simply therecommendations of this committee withregulation by the Governors.seriousness and great respect. Of course, I am notsure when you expect to publish your report,

Q635 Michael Fabricant: In certain areas though. Chairman, but certainly from our point of view theTessa Jowell: In certain areas, absolutely. I hope I sooner the better in order that we can have thehavemade clear to you thismorning that none of the benefit of your view and the very extensive analysisoptions for regulation, and indeed none of the of the market and discussion that you have beenoptions for securing the strength and independence involvedwith, not only here but also internationally.of the BBC, has been shut down. We are looking Of course we will give very serious consideration notacross a very wide range. As I say, when we come to just to the proposals but also the argument that youpublish the green paper either that range will have mount in support of the proposals that you havebeen reduced to a narrower range of options or we made.may by then be suYciently certain. This will be oneof the biggest decisions about the future of the BBC Q637 Chairman: With regard to publication of ourtaken for many Charters. I cannot think of another report, we hope to be able to publish it before theCharter that took a decision of such profound House adjourns for the Christmas recess.importance for the BBC. We may well want further Tessa Jowell: Oh, good.

Chairman: Thank you very much.consultation in a green paper before reaching a



Written evidence

Memorandum submitted by the Alliance of Black Media Professionals

Background to the ABMP

The ABMP—Alliance of BlackMedia Professionals—is an organisation comprised of actors, producers,directors, writers, casting agents and technicians of black African heritage who have worked for all themajor British broadcasters and film institutions over the past two decades.

As a direct result of these professional experiences, the members of the alliance have come to recognisethat while a small (but significant) increased ethnic and cultural diversity has been achieved across Britishfilm and television as a whole, there are still major issues relating to the crucial fields of representation,production and funding, and commissioning/decision-making that have yet to be properly addressed.

The ABMPwas formed to address and bring about changes regarding this situation through consultationwith broadcasters, funding bodies, industry organisations and relevant Government bodies. We haveprepared a series of strategy documents and embarked on meetings with key figures within the film andtelevision industries with a view to pressing for changes that are considered by many in broadcasting andthe country at large to be long overdue.

The ABMP’s Aims

Through discussion among its members, consultation with outside media bodies and individuals, anddrawing on a wealth of statistical reports and surveys, the ABMP has drawn up a series of strategydocuments outlining our position on and proposed solutions to the problems of a true and fair reflection ofcultural diversity (both on-screen and oV) by the publicly-funded film and broadcasting organisations.These documents have thus far been made available to the BBC, Channel Four, The Film Council andOfcom, with whom we have also held initial meetings. We also hope to have the documents publiclyavailable on our website: www.abmp.org.uk in the near future.

A copy of our submission to the DCMS inquiry on the BBC Charter Renewal is attached (not printed).

In brief, the ABMP’s aims are:

— The ring-fencing of funds and commissioning to ensure the creation of black-instigated projects.

— A clearer definition of black-instigated projects (writer, producer or director of black origin andat least 40% of the production crew).

— The appointment of senior commissioning executive(s) and/or department to ensure compliancewith these proposals.

Whilst this strategy broadly encompasses the media as a whole, we believe it has special relevance for theBBC as the major public service broadcaster in this country.

Our attached DCMS submission (not printed) provides further analysis of our position regarding theBBC. However, its primary purpose is to address failures and possible solutions within the organisation ascurrently constituted, and therefore while it hints at long-term trends and developments, it does notspecifically address itself to the broader question of the future of the BBC as defined by the committee.

To this end, we have provided an initial response to the Committee’s main lines of inquiry below:

Given expected growth in digital TV and likely developments in the internet and other new media, what scopeand remit should the BBC have?

As stated in our strategy documents, the ABMP believe that the BBC still provides a valuable role as thiscountry’s primary public service broadcaster—a window on Britain if you like—and that unlesstechnological developments so fragmented and reduced its audience as to make the notion of a universallylicence-funded broadcaster untenable, we see reason why its current scope or remit should fundamentallychange. If anything, its remit to provide diversity (both on-screen and oV) should be strengthened, withgreater transparency, accountability and sanctions for non-compliance. Though we may diVer politically,we share the view expressed by the Broadcasting Policy Group that the “unfashionable” yet accuratedefinition of public service television is one of “what the market cannot or will not provide”. We believe theBBC should be protected from attempts (both internal and external) to justify its licence fee by neglectingor abandoning certain “minority interest” programming in favour of the mass audience.

In our view, the BBC’s very raison d’etre is its need to strike the right balance between both, and thatratings should not be the ultimate arbiter.




Whilst the licence fee may no longer be the ideal catch-all solution it was once considered, if a robust BBCthat actively represented Britain’s diversity was to be encouraged both internally and externally, the ABMPwould support the continued funding of the BBC by licence fee. Whilst other funding models, with perhapsgreater relevance, could also be supported (for example: subscription, advertising, mixed funding), thelicence fee, for all its faults, is still by far the most viable option for satisfying the demands of the broadestrange of society, including our own objectives. However, wemust state again that any support for the licencefee must be linked to greater transparency, accountability and sanctions for non-compliance.


The ABMP believe that a universally licence-funded BBC should retain its independence fromGovernment together with a non-regulatory tier that represents the interests of viewers and listeners inconsultation with BBC management. We believe the composition of this tier—whether they be governorsor non-executive directors—should more accurately reflect a balance between ordinary viewers from allwalks of life and media practitioners (rather than the great and the good), and that they should beresponsible for insuring the BBC carries out its public service remit to the full. Ofcom could be givenresponsibility for the advertising and appointing of members to this new board, as well as monitoring thefulfillment of the public service remit, with the power to impose sanctions for non-compliance. In the eventthat the new BBC board is unable to insure BBC management carries out its public service remit, thisresponsibility will then pass to Ofcom as well.


The ABMP believe that in our changing communications environment, the 10-year Royal Charter andAgreement with the Secretary of State are no longer viable options.

If the BBC is to continue as a universally licence-funded public service broadcaster, it must be mademoredemocratically accountable and responsive to changing audience and technological developments. Webelieve the BBC’s Charter should be reduced to five years in the first instance, and the functions of itsAgreement with the Secretary of State delegated to Ofcom.

This submission is purely an initial response and must be taken in context with our written strategydocuments, background research and verbal submissions to the Committee (or individual members) as andwhen further clarification or detail is required.We hope this initial document and accompanying papers willprove of use in opening a dialogue and look forward to your feedback.

October 2004

Memorandum submitted by Graham Allen MP

I have been watching on the Parliamentary Channel a number of the excellent exchanges in yourcommittee on the BBC’s Charter renewal and I felt moved to submit this memorandum of evidence toyour inquiry.

One of the key things whichmakes theBBCdiVerent to other broadcasters andwhich allows it to continuewith some of its financial and other privileges is its Public Service Obligation. If this is no longer relevantand important, then a central pillar of the need for aBBCdistinct fromother broadcasters is removed. Thoseof us who want a strong, independent BBC must answer the question, how do we renew and strengthen thePublic Service Obligation, so that it can last another 50 years? I outline below my answer to that questionand I hope you will take a few minutes to consider it.

Politicians of all parties here in Westminster are failing in our own Public Service Obligation and arestruggling to re-ignite people’s interest in our democracy. It is a sad fact that—rightly or wrongly—manyof the public perceive us as out of touch, out of date and unresponsive to outside opinion. They do notunderstand (or even care) about what they feel to be our archaic and irrelevant procedures and practices.The media—including the BBC, which appears to oVer less and less which is diVerent here—does little tohelp, content to have its own cosy relationship with the government.

The alternative is to put both Parliament and the BBC back at the heart of our democracy—a strongrelevant democratic forum, linked to a participating electorate, by a trusted and impartial mediaorganisation.

There is now on oVer a massive leap forward for our democracy, restoring a useful function for ourParliament, a 21st century role for the BBC, and opening the door to the participation of our people inimproving the laws that govern them—the last great extension of the franchise in a mature democracy.



This breakthrough both for democracy and for theCorporation’s renewal of its public service remit wouldbe the badgeing by the BBC of the online pre-legislative scrutiny of Bills by Parliamentary Committees. Iknow it sounds dry but let me explain.

Pre-legislative scrutiny is a means by which Government policy proposals can be improved upon byParliamentary committees in advance of their becoming law, rather than leaving us to clear up the messafterwards when mistakes have been made. This proposal enables not only Parliament but every BBClicence-payer to contribute to improving the law. When proceedings are broadcast over the internet by atrusted and well-known source, it would enable any elector who can organise access to a computer toparticipate in the democratic process. As politicians, civil servants and experts give evidence to theCommittee, viewers can submit their own comments to the e-mail address which runs across the bottom ofthe screen direct to the Committee mediator (usually the impartial Hansard Society) who would put anynuggets in front of the committee on paper as proceedings unfold. Recently, Lord Puttnam did just this withthe Communications Act. I am sure he would be happy to tell you more about it.

The BBC would enable those electors with practical experience to contribute. Imagine, for example, anAnti-Social Behaviour Bill with serving police oYcers, victims and housing oYcers etc, all contributing toimproving its nuts and bolts. Government would benefit too. Many of the legislative disasters whichgovernments have imposed upon Parliament and people could have been avoided. I have no doubt that theChild Support Act, on which I led for Labour, would not have had to have been rewritten five times had welistened, through a sensible pre-legislative scrutiny, to practitioners and those it aVected. The BBC couldensure that the constituency voices we currently hear as screams of anguish and despair could instead beheard as wise and timely advice; a public service of tremendous proportions.

The BBC, working closely with Parliament and its select committees, could plan well ahead and producethe Parliamentary equivalent of the Radio Times, allowing community groups, individuals and front-linepractitioners time to plan their viewing and contribution.

Were the BBC in the context of its Public Service Obligation to lend its brand and credibility to promotingpublic access to on-line pre-legislative scrutiny, it would be beneficial to all involved. No editorial isnecessary or helpful. The BBC website would merely present the live feed, with no commentary andtherefore no accusations of bias. This is not to say the BBC could not creatively and actively promote publicparticipation—imagine a promotional ad by, say, AndrewMarr after the 10 o’clock news along the lines of“You’ve complained about (for example) anti-social behaviour, well tomorrow send your practicalsuggestions in to the Committee taking evidence from the Home Secretary. Use your experience to helpParliament make better law.” Those whose bright ideas actually became law could be properly recognisedas they are in the Scottish Parliament. It would cost very little (the pictures already exist, as does the BBC’swebsite) and will be considered a laudable objective for the BBC to pursue. Millions could be made awareof what was happening; and between us we would create better law.

The BBC could re-centre itself as an integral element of our democracy and make itself once again anauthoritative and respected element in our public life, abundantly fulfilling the Public Service Obligationand facilitating the public working with elected representatives to make laws better for everyone.

Recommendation

That the Select Committee recommends that, as a condition of Charter renewal, the BBC’s Public ServiceObligation should include facilitating public participation in the on-line pre-legislative scrutiny conductedby Parliament of Parliamentary Bills.

3 June 2004

Memorandum submitted by the BBC

Having examined the written evidence submitted to the Inquiry into the BBC Charter, there were severalstraightforward factual inaccuracies, as opposed to points of contention, which we believed we should drawto the Committee’s attention.

They concern the submission by the Commercial Radio Companies Association,* and are as follows:

EU State Aid Rules

The CRCA say they “think it reasonable to expect BBC Radio to be regulated no more lightly thanCommercial Radio in both content and competition terms. In addition we expect BBC Radio’s funding torespect the principles of the EU state aid rules”.

* See Ev 37-43.



BBC Radio, like the BBC as a whole, is fully subject to both domestic and European competition law,including the state aid rules. Over and above the need for the BBC to comply with competition law, theBBC’s responsibility to trade fairly is reflected in the more demanding requirements arising from theCharter.

Freeview

The CRCA says the BBC “. . . provides all its radio services via all digital platforms including Freeview,the national terrestrial television multiplex which is controlled by the BBC”.

There are six multiplexes on the digital terrestrial TV platform. Freeview oVers free-to-air programmesacross all the multiplexes. It is the brand name used by Digital TV Services Ltd—a consortium made up ofthe BBC, BSkyB and Crown Castle—each owning a third of the shares in the company. The BBC does notcontrol Freeview or the platform.

Pioneers in Charity and Ethnic Minority Broadcasting

The CRCA says that Commercial Radio “pioneered charity broadcasts and auctions and continues tosupport local charities across the UK with fund raising and coverage every year”.

The BBC’s first appeal for children took place in 1927. The Christmas Appeal also dates back to the sameyear; it is the longest running broadcast charity appeal in the world. Commercial Radio began the charityauction with the Capital Radio Telethon, Help a London Child in the mid 1970s. Radio 2 participated inthe Children in Need telethon from 1983 onwards.

“Commercial Radio continues to be innovative. It pioneered sports and general phone-ins,broadcasting to ethnic minorities, genre specific radio stations and the mix of light music withcurrent aVairs and information which is now almost universal. All these initiatives have beenimitated one way or another (and well) by BBC Radio”.

The first phone-ins began on the BBC in 1967 with the arrival of first of the BBC’s Local Radio stations.Radio SheYeld featured a phone-in on its first day of broadcasting; from its inception Radio Nottinghamhad a phone in every Wednesday morning.

All the Local Radio stations experimented with the mix of music, current aVairs and information. It wastheir standard format. The Jimmy Young Programme, broadcast on Radio 1 and 2 from 1967, also usedthis format.

As for ethnic minority programmes these were standard for many of the BBC’s original stations whichhad high ethnicminority populations. TheBBC’s first ever local station, RadioLeicester, had a “programmefor immigrants” in its opening schedule in November 1967. Its title was “Getting Together” in English and“Milan” in Hindi Urdu.

Similarly Radio SheYeld which opened in the same week had an English/Urdu programme “Majlis” anda Bengali programme. Radio Nottingham was broadcasting Nawrang in Hindi-Urdu before the end of thatdecade, they also ran a programme for African Caribbeans. Before the BBCLocal Radio stations launched,the bi-media Asian Programmes Unit had been broadcasting Asian programmes on BBC TV and Radio 4since 1965. The radio programme “ApnaHiGhar Samajhiye”was broadcast early on Sundaymorning. Thisis what the Commission for Racial equality made of the BBC’s eVorts in the publication “Who Tunes toWhat?” dating from May 1978.

Spectrum Management

The CRCA speaks of the BBC’s “generous FM spectrum provision” referring to the BBC’s ownership of“70% of available FM broadcast spectrum”. The BBC uses just under 58% of the spectrum available.

In the FM spectrum allocated to the BBC, we oVer the following national services with coverage of98–99% from around 200 transmitters: Radio 1, Radio 2, Radio 3, Radio 4.

We also provide services from Scotland, Northern Ireland and Wales (Nan Gaidheal, Scotland, Ulster,Foyle, Cymru and Wales).

We also provide 40 local radio stations.

There are of coursemany further areas in this and other submissions that wewould take issue with, but wethought it most important to correctly those, that are statistically or factually incorrect in a significant way.

19 July 2004



Supplementary memorandum submitted by the Chairman of the BBC

I have been considering the concerns you raised at the Select Committee hearing about the TV Licensingadvertising campaign. You may remember that in response to your comments about the inappropriatenessof the publicity campaign, I said that it was something I would like to examine more thoroughly for myself.Having done so, and after careful reflection, I have concluded that is the right approach for the BBC to take.

In the light of this, and since the campaign “Get one. Or get done” is being re-run this autumn and winter(although only in specific areas of the country with higher than average levels of licence fee evasion), I shouldlike to explain the background and to provide some of the information which led me to give it my support.

The campaign was, of course, aimed at evaders so the message needed to be firm. Actually, the tone isconsistent with campaigns which have similar aims such as cutting down on road tax evasion and benefitfraud which use the tag lines respectively “No exceptions, no excuses, no escape” and “We’re onto you”.

Research carried out by ICM on behalf of TV licensing has established that the general public do not likethe fact that some people evade whilst the honest majority pay for their TV Licence. Of respondents, 91%agreed that such people should not be able to get away with it. This specific campaign was researchedthoroughly prior to release by testing it with focus groups made up from members of the public, whoconfirmed that the most motivating messages were consequence based and factual, often involving financialconsequences. Interestingly, despite criticising other options for being too threatening, the respondentsthought the “Get one. Or get done” was suitable for TV Licensing.

Once an advertisement has been drafted it is carefully assessed as part of the BBC TV LicensingManagement Team’s approvals process. This includes scrutiny by the Licensing Authority’s CustomerRelations Manager and legal advisers to ensure compliance with legal and industry standards.

Importantly, all the evidence suggests that the campaign works. A tracking study which took place whilethe previous campaignwas underway discovered that there were some noticeable diVerences which occurredin the mindset of the evaders surveyed. For example the belief that it was an unnecessary risk not to buy alicence increased from 13% of evaders to 26% of evaders. Also, the belief that they were likely to get caughtincreased from 21% to 49% of evaders as a result of the campaign. This evaluation also showed that thecampaign contributed to increased sales and a national reduction in evasion.

It is incumbent on the BBC to collect the licence fee fully and eVectively in order to ensure optimumfunding, and to treat all licence fee payers as fairly as possible whilst doing so. Advertising campaigns helpto achieve this, though I accept that they need to be carefully monitored. I hope this letter goes some wayto reassure you about the level of research and scrutiny which was applied to this advertising campaign, andwhich is applied to TV Licensing campaigns in general.

Memorandum submitted by Mrs Judith Bramley

Can you help us stop the BBC from dumbing down Radio 3? The present controller, Roger Wright, hasalready considerably altered the output by his emphasis on “World Music”, and an increase in Jazzcoverage, and we have groaned and waited for him tomove on and be replaced by someone who really caresabout classical music.

What a shock, therefore, to find that he now intends to impose his views on the future as well by changingthe schedule from a programme “with classical music at its heart” to a programme with a “broad range”of music.

BBC Radio has so far escaped the slide into triviality of BBC TV, but this looks all set to change. If theprime position of classical music is not firmly enshrined in the schedule, its position will be chipped awayday by day.

I fail to see why Jazz and world music should not be placed on Radio 2, and I resent the lack of discussionwith which this decision has apparently taken place. Is it a coincidence that there was no Director Generalor Chairman in oYce when this schedule was produced?

One of the main faults of the BBC is lack of “shareholder” control. There is no mechanism of channel bywhich protesters can make broadcasters accountable. That Controllers will make their channels expresstheir own personal interests is perhaps inevitable but that one should now propose to stamp his work on thefuture is surely a step too far.

It is well known that the audience for Radio 3 tends to be the elderly, so this proposed change could beseen as very discriminatory. I was particularly incensed to be told in response tomy letter to the Chairman—“who of course” receives more correspondence than he can deal with personally—that access toprogrammes “more to my taste” will be available on the Internet. Is this fair to the older listener? Whyshould not listeners to Jazz and World Music have to tune into the internet instead?

It is claimed that listenership to the programmehas dropped a lot recently, so theController’s proud boastof how well his new schedule is working should be taken with a pinch of salt.



We are not asking for all Jazz andWorldMusic to be removed from the output, only that the importanceof classical music should be firmly enshrined in the schedule as it always has, so that future controllers canbe held to account. Otherwise we shall soon see this beacon of excellence slide down the hill, just as we haveseen on BBC 2 TV—which you may remember was set up as the culture channel—slide into its present stateas a kind of “magazine”.

Apparently the Minister for Arts etc. cannot intervene, though I feel that a substantial and permanentchange of direction as this should be a matter of standards under the Royal Charter, but perhaps you andyour committee could at least ensure some public discussions of the matter.

July 2004

Memorandum submitted by Richard Collins, Professor of Media Studies, The Open University

Given the expected growth in digital TV and likely developments in the Internet and other new media, whatscope and remit should the BBC have?

Broadcasting markets fail. Markets are unlikely to fully realise public policy objectives such as universalaccess at aVordable prices to a range and quality of programmes and services which enable viewers andlisteners to participate fully in their society. But how much do markets fail? What’s an appropriate andproportionate redress of market failure? Too little intervention leaves viewers and listeners sold short, toomuch swamps private sector provision reducing pluralism, diversity and innovation. We need clearerdefinition of public policy objectives and thus of public service broadcasting’s remit (and the BBC’s remitin particular) to know whether the BBC is too big, too small or just right.

The BBC should improve the QUID—the Quality, Universality, Independence and Diversity—of UKbroadcasting and online services. Its provision should be distinctive and recognisably diVerent tocommercial services. The BBC should augment pluralism and diversity not provide “me too” competitionand/or “crowd out” alternatives.

The complexity of broadcast and online goods and services and the desirability of innovation andoriginality means that the BBC’s remit can’t be prescribed “ex ante”. The BBC’s Governors should publishforward looking QUID objectives and retrospectively publish performance assessments using objectivecriteria. See Collins 2004 and Collins and Purnell 1995 for detail and discussion.

The BBC is custodian of an enormous portfolio of publicly funded intellectual property, new technologiespromise to make this accessible to the public that has paid for it. The BBC should use Video On Demandto make its archive of programming available to UK licence fee payers.


The BBC should continue to be funded through a licence fee and insulated from direct Governmentinfluence. TheBBC’sGovernors should have the primary responsibility for defining the BBC’s public serviceremit, their proposals should be published for public consultation and Ofcom comment. The enormous risein BBC licence fee revenues (c30% in the current licence period) shows the diYculty of ensuring the BBCreceives the right amount to discharge its public service mandate. So, every three years, a new body, like theGerman KEF, should set the level of the licence fee in the light of the BBC’s public service remit, thewillingness of the public to pay and the costs a reasonably eYcient organisation should require.


A single independent body, able to develop regulatory expertise and ensure eVective regulation, shouldhave overall authority in respect of the BBC. Although the BBC has commercial and public service rolesthese cannot always be distinguished. An egregious example was the BBC’s launch of a commercial newsto mobile telephones service: when this proved unprofitable it was re-designated as a public service.Moreover, the size of the BBC’s notionally public services, more than 50%of radio consumption and around40%of television consumption, inevitably aVects commercial broadcasting and thus diversity, pluralism andcompetition. The BBC is a commercial force of some magnitude—depending on how intra-group transfersare considered the BBC’s commercial activities equate to between three and five Channel 5s!

The established regulatory three way split between DCMS (approval of new services and the level of BBCfunding), Ofcom (oversight of competition, tiers 1, 2 and 3 content issues and the independent productionquota) and the BBC Governors (other matters) does not address these issues adequately. Moreover, theBBC’s mix of commercial and public service activities makes relevant competition law of uncertainapplication. The BBCwill only be caught under the CompetitionAct 1998 if it is an “undertaking” (an entitycarrying on an economic activity), and it will not in every case be acting as such. Even where the BBC isregarded as an “undertaking” the force of the Competition Act as a whole may not apply if the BBC wereperforming services of general economic interest. The BBC’s mix of activities might thus aVord somethingof a “safe harbour” from law which would apply were it a purely commercial operation.



Moreover, Article 81 EC and Chapter I of the Competition Act 1998 only apply to agreements betweenundertakings. If the BBC and its various subsidiaries are viewed as a single economic entity these will notapply. The BBC’s Fair Trading Commitment may not be an eVective substitute, although it’s auditedannually by an independent auditor in practice the auditors audit the eVectiveness of the compliance processrather than substantive issues.

It is vital that actual or potential suppliers are assured of protection against anti-competitive conduct bythe BBC (and others). There is prima facie evidence that:

— the BBC is at or close to a position of dominance in a number of markets;

— it is using this position to enter a number of horizontally or vertically related activities; and

— inevitably opportunities will arise for the leveraging of market power, to the detriment ofcompetitors and consumers.

Potential problems include predation, refusal to supply, cross subsidy, abuse of buyer power and failureto trade fairly. Many of these potential abuses may be motivated by the desire to leverage dominance fromone market into another and are exceptionally diYcult to detect unless the regulator can build upinformation and expertise. Because the BBC is not an ordinary object of competition law special remediesare required, such as some form of structural separation or rigorous independent ex ante regulation by asingle independent and expert body. Ofcom is the obvious body to so act and undertake competitionanalyses, monitor developments, develop expertise and engage in a constructive dialogue with the BBCregulatee.

The BBC has gone some way down the route of legal separation, through the separate incorporation ofBBCBroadcast, BBCTechnology, BBCWorldwide andBBCResources.However, the presence of theCEOof BBC commercial services on the BBC Executive Committee suggests that their separation may be moreapparent than real.

In default of structural separation, rigorous independent ex ante regulation is required. This should:

— prevent the BBC from cross-subsidising its commercial subsidiaries;

— prevent the BBC from showing undue preference towards its commercial subsidiaries;

— require the BBC to furnish the information which the regulator requires in order to enforce theseprohibitions; and

— require the BBC to notify the regulator confidentially of its commercial plans ahead of theirimplementation.

These requirements are akin to licence conditions imposed upon telecommunications operators, whichprohibit the showing of undue preference and prohibit a cross-subsidy. For fuller discussion see Cave,Collins and Crowther 2004.


Yes, the long life span of the Charter and Agreement provides an important measure of independence forthe BBC.However, as indicated above, major changes to the funding, regulatory and accountability regimesthat bear on the BBC are required.

References

Cave, M, R Collins and P Crowther (2004) Regulating the BBC. In Telecommunications Policy 28p 249–272.

Collins, R (2004) Public Service Broadcasting: too much of a good thing? In From Public ServiceBroadcasting to Public Service Communications. p 130–150 EdDTambini and J Cowling. London. IPPR.

Collins, R and J Purnell (1995) The future of the BBC: commerce, consumers and governance.London. IPPR.

Memoranda submitted by the Cultural Diversity Advisory Group

I regret the delay in submitting our views to the Select Committee on the above matter. I had hoped thatin the light of the criteria in the Communication Act of diversity and plurality, suYcient evidence in thatarea would have emerged. However, during my attendance of the Select Committee’s meeting, it becameclear that it did not appear to be the case. Nevertheless, many others quite ably covered several othercontributions that I will not repeat here. Accordingly, I request that the following issues focussed solely onour groups aims and objects are circulated amongst all members of the panel.



Summary and Recommendations

1. As a Public Service Broadcaster the BBC ought to be accountable to all licence fee-payers. However,there is a strong case that domestically it has unwittingly or otherwise largely ignored the needs of minoritycommunities and that of today’s culturally diverse United Kingdom.

2. In not being able to make the network fully inclusive of minority viewers, it is unfair that it shouldexpect a contribution to its funding from that source.

3. The BBC should be fully regulated by Ofcom as in our experience it has so far failed to regulate itselfthrough its outdated internal structures and management.

Substantive Submissions

(a) Cultural Diversity and fair portrayal is of prime importance to our group and presents the currentflavour of approach of Her Majesty’s recent Communications Act. This area has received a considerableamount of what is known as box ticking by the domestic BBC both nationally and particularly so in theregions.

(b) Our group meets the BBC regularly and our agenda has not significantly changed in all these years.Lack of delivery remains frustrating.Our informed group of individuals have been actively engaged in tryingto improve the fair portrayal of visible and other minorities, for well over 11 years. We acknowledge thatalthough a little progress has been made, generally it has not gone much beyond action plans, policies or theever-fashionable rhetoric. In some regions it has not even started and managers lack courage, competenceor confidence to proceed. Therefore, we find the current overused term begun to respond or continuing ratherpatronising to say the least.

(c) Managing diversity within the domestic BBC workforce will take more than lip service to equalopportunity policies, camouflaged tokenism or the old divide and rule tactics. Equal opportunities can onlyoccur through conscious eVorts to create a conducive working environment. A diverse and multiculturalworkforce will include more than mere token eVorts at recruitment but plans for retention or progressionat every level. The Race Relations (Amendment) Act requires public sector employers to tackle institutionalracism and promote racial equality.

(d) All of us are volunteers and give up considerable time and energy freely advising and encouragingthe BBC. However, the gatekeepers of this old institution, its Board of Governors or their internal advisorycouncils appear to prefer the status quo. Many in our communities have now lost faith and sadly butunsurprisingly do not access BBC at all. They appear to have passed their threshold of intense anger andpatience as they see this white ghetto beyond their reach despite Scarman, Macpherson and other reports.We had warned the BBC many years ago that this would happen and we warn them again that it willinevitably get worse as the broadcasting sector continues to expand oVering greater choice.

(e) We recognise that there are two BBC’s—the World Service and the Domestic service, operating ontwo distinctly diVerent planets. We have no complaints about the World Service. Indeed the World Serviceis second to none and we would join the entire world in applauding and protecting it at any cost. DomesticService leaves much to be desired and we are becoming less than optimistic about its ability to play its partin a new diverse and multicultural world unless there is a radical change soon.

(f) In accordance with our long-standing aim, we seek inclusion and full integration within British societyin which minorities are now over 10% of the population and growing. Added to this are several new citizensjoining us from the expanded European Union. Merely, small oVerings of slots in respect of our variousfestivals or events, usually during non-peak hours are divisive and also fail to serve the enlightened widercommunity. This paternalistic and arrogant approach has led people to rely solely on Sky digital or otheroverseas channels. Watching some BBC programmes through Sky means that viewers are forced to payagain over and above the licence fee.

(g) Minorities have gradually drifted away from the British media for some considerable time. They donot see much in it that attracts them. Moreover, some of the negative and stereotyped language used on thelocal BBC radio stations against sections of the community, such as asylum seekers, Islamic terrorists etc,is simply oVensive. Our complaints receive apologies and often-unconvincing excuses but the show goes on.Currently, minorities perceive that their inclusion is rather illusionary and oVers little positive direction tolure them back to play an active role within a non-inclusive BBC. We certainly would never promote anypositive discrimination of any sort. What we continue to face is naked negative discrimination from theinstitution. Consequently, this makes our work of encouraging our communities to participate, extremelydiYcult.

(h) The mistaken belief that setting up separate, independent ethnic broadcast solves the problem. Suchbroadcast is always welcome but is just another smokescreen as far as recognition of minority issues withinthe mainstream is concerned. Minority broadcasting could provide solutions to our problems; at themoment it is merely palliative.



(i) For example we have not seen any credible schemes to train existing white staV to meet the challengeof a new culturally diverse Britain. Encouragement for staV to go out and build genuine links and trust withthose isolated communities is patchy or completely lacking. Minority broadcasting (amongst othermeasures) could provide a link here. We await progress.

(j) We notice a sudden surge of activity in this field recently. We put that down to be in the spirit of theCharter renewal season and are unsure whether this would last post renewal. Therefore we urge a shorterperiod of renewal of say three years or an annual review by OFCOM of its performance and strict financialaccountability.

(k) The Board of Governors and the internal advisory councils ought to be representative of the entirenation and their appointment system made transparent. Views have been expressed that the Governorsought to be elected by the licence fee payers and in the electronic age today this ought to be possible. TheGovernors terms of service ought not to exceed five years. The Director General as a day-to-day managerought to be encouraged to attend Governors meetings but she or he while taking advice from them shouldremain entirely independent of them.

(l) There does not appear to be a defined requirement to broaden the domestic BBC’s workforce toinclude minority communities at all levels within a reasonable time frame. In this context, retention andmeritorious promotion is of far greater importance than recruitment. We believe that OFCOM would beable to monitor this process eVectively and with greater transparency. The present system of relying on theold boy or girl network has proved to be largely unsatisfactory and in any case lacks creditability. We feelconfident that OFCOM and its advisory panels would reflect the diversity of our communities and grass-root minority views, such as that of this independent group, will be encouraged rather than suVocated as atpresent. The Secretary of State or politicians ought not to have any role whatsoever in policy ormanagementof the BBC.

(m) Finally, we love and admire the BBC. It is a great institution and as we have said the independentrole it plays globally is invaluable. However, in its national and regional role it falls woefully short. Thus ithas got it right in one area but not in another and it is for this very reason that many of us have and willcontinue to struggle to preserve its unique independence and help it reform.We hope our above frank viewsare appreciated and urge the Select Committee to take them into account.

10 June 2004

Memorandum submitted by Cory Doctorow1, Electronic Frontier Foundation2 (EFF)3

1. The BBC’s public service mission has led it to create a media production culture for Britain. Today,that culture stands to explode in into a Creative Nation where ordinary Britons can reap new benefits fromthe fallow resources in the Corporation’s archive. The BBC Creative Archive project is the purest and mostexciting exercise of its remit to date, and it should be enshrined in its new Charter.

A Remix Culture for England

2. The BBC’s “Building public value: Renewing the BBC for a digital world” contains a recommendationto enshrine aBBC“CreativeArchive” in the newCharter4, such anArchive to ultimately consist of thewholeof the BBC’s extant archive of radio and television programming, placed online under a license that permitsand encourages noncommercial redistribution and reuse of this material.

1 Cory Doctorow can be reached on coryweV.org or !44.207.127.64682 Electronic Frontier Foundation (EFF) is the best-established technology-focusedcivil liberties group in the world, with morethan 13,000 dues-paying members and over 50,000 mailing-list subscribers. EFF’s key courtroom and policy victories havein past safeguarded the rights of the public to communicate in private by means of strong cryptography tools and to havetheir electronic communications protected by the same due-process rights that apply to postal mail and telephone calls. Today,EFF is at the front of the policy debate on the future of digital media, providing legal counsel to technology projects, personalvideo recorder vendors, and P2P softwaremakers.We participate in standard-setting eVorts at the Copy Protection TechnicalWorking Group, OASIS, and the Digital Video Broadcasters Forum, and in treaty-setting processes regarding broadcastrights at the United Nations’ World Intellectual Property Organisation (WIPO). EFF’s members come from all over theworld, and EFF supports the eVorts of groups in the UK such as FIPR, CDR and FF11 to uphold civil liberties values intechnology policy, law and standards.

3 This document is available at http://www.eV.org/IP/BBC–CMSC–testimony.pdf4 See page 63, “The BBC Creative Archive will establish a pool of high-quality content which can be legally drawn on bycollectors, enthusiasts, artists, musicians, students, teachers and many others, who can search and use this material non-commercially. And where exciting new works and products are made using this material, we will showcase them on BBCservices.“Initially we will release factual material, beginning with extracts from natural history programmes. As demand grows, weare committed to extending the Creative Archive across all areas of our output.“We are developing this unique initiative in partnership with other major public and commercial audio-visual collections inthe UK, including leading museums and libraries. Our ambition is to help establish a common resource which will extend thepublic’s access while protecting the commercial rights of intellectual property owners.”



3. Were the Creative Archive to come to pass, it would have a profound eVect on the future of Britishcultural identity; on the future of newmedia technology; and on the disastrous P2P wars. It would be a truly21st Century realisation of theReithian values for theCorporation, a duty served to the license paying publicand to Britain.

4. The BBC’s many public service remits over the decades have been crucial to Britain’s media health,but none have been so far-reaching as the fostering of a British media industry. The Corporation’scommissioning and broadcasting of English programming of the highest quality has created a truly Britishform of television, distinct from American, Continental and Commonwealth TV.

5. Britain’s influence on the world’s television is wildly disproportionate to the actual population ofBritons, and the BBC is the reason for it.

6. This has two salutory eVects at home: first, it ensures that native and transplanted Britons have readyaccess to programming that is in tune with British values and sensibilities; secondly, Britain’s influence onthe rest of the world makes all television just a little British, so that even when a Briton watches foreignprogramming, the odds are that the writer, director and producer were all influenced by Britain’s world-class television.

7. Television today is being supplanted by interactivity. Today, children increasingly use PVRs to time-shift their favorite programming, and spend the rest of their TV-time playing games, including multiplayergames. They engage in file-sharing, and as they get a little older, they begin to play with theirmedia, remixingand recutting it.

8. It’s the dawn of a “creative nation” a Britain which, like many other countries around the globe, makesuse of the new tools to actively participate in media, a nation of recasters and reworkers, folk artists andappreciators of folk art.

9. The raw material of that creative nation need not be British. Substantial parts of it will not be: Britainis a land ofmany cultures, and the fusion of the art and culture of other lands is a progressive step in Britain’songoing multiculturalism.

10. But what if none of the materials of this new British folk culture is, indeed, British? What if thecreative nation relies upon material from abroad as the raw ingredients for the popular new medium?

11. It may be that the majority of today’s Britons will continue to be the audience for others’ creationsrather than creators in their own right, but will the cultural norms and ideas embedded in those creationsbe British or American or European or Asian?

12. The evidence to date suggests that remixers rely on a mix of factors when selecting their materials: afragment’s recognisability, aesthetic properties and fit in the overall piece are important, but just asimportant is the availability of the fragment: how easy it is to lay hands on.

13. The world’s media companies are running away from remix culture, locking up their media inincreasingly baroque copy-restriction schemes that aim to block playful, sticky-fingered artists fromappropriating an image, a beat, a phrase. The works of the commercial entertainment world grow ever less-available to remixers.

14. But not the BBC—while the private sector strives to keep its material away from remixers, the BBCproposes to do the opposite.

15. The Creative Archive project will take the very essence of British popular culture—the material thatthe United Kingdom spent billions of pounds on in order to entertain, educate and inform itself—and giveit to Britons to extend, to make their own, to interweave with the stories they tell and hear.

Other Benefits from the Archive

16. A Creative Archive does more than serve the creative nation. It is also an incalulcable boon toscholarship and to the British institutions of scholarship.

17. For example, a publicly available Archive could bemined to track, over time, the portrayal of women,of visible minorities, of children of every segment of society, through time.

18. The Archival news and other factual programming could serve as the basis for educational units inour schools and as input for studies into shifting cultural attitudes.

19. From tracing the changes in accent over time to watching the shifts in UK vocabulary5, the value ofthe Creative Archive in enabling Britain to better-understand itself cannot be overstated.

20. Likewise, the tools and techniques developed in the course of mounting and making the Archiveavailable will undoubtably produce IT infrastructure of use to other British institutions. The British Libraryis presently embarking upon an ambitious project to archive and then make available millions of BritishWebsites6 the Creative Archive’s content-management, content-distribution and licensing scheme can all be

5 The The International Corpus of English (ICE) project at University College London (http://www.ucl.ac.uk/english-usage/ice/) already undertakes this research with written works to the great benefit of scholars around the world.

6 See the BBC’s “British Library archives websites” at http://news.bbc.co.uk/l/hi/entertainment/arts/3231483.stm



used as the basis for the Library’s archive (what’s more, this would ensure interoperability and a familiarinterface between the two projects). The Arts Council, Open University and local Councils all stand tobenefit likewise.

The Archive Complements the Private Sector

21. Today, there is increasing scrutiny of BBC spending in an eVort to identify areas in which the BBChas found itself to be competing with the private sector.

22. In this area, there can be no question that the Creative Archive is working to complement the eVortsof the private sector, from broadband companies (who will benefit from increased custom as the trade inlegal-but-outsized files picks up) to other broadcasters (who will find their entries into the world of remixingeased by the BBC’s work in fostering a public remix culture).

The Archive Benefits UK Creators

23. The Archive’s remit will be to make work available solely for noncommercial exploitation. As others7have discovered, this noncommercial exploitation is, in eVect, a gigantic and clever series of advertisementsfor the commercial rights to the works.

24. The audience of commercial license-takers—DVDpublishers, international distributors, filmmakers,soundtrack publishers, advertisement producers, and so forth have their pick of a nearly bottomless supplyof cultural material to license. When remixers make popular, creative, noncommercial new uses from theworks that the BBC has commissioned, it takes them out of the BBC’s opaque vault and makes them visibleto the world’s license-takers. Moreover, the best of these creations has the eVect of showcasing the value ofthese wares, creating an “upgrade pitch” for the works they are composed of.

The Archive Benefits Public Service Broadcasters the World Round

25. Around the world, the BBC is acknowledged as the gold standard for public service broadcasting—this is why America’s National Public Radio (NPR) syndicates BBC international news rather thanproducing its own. It’s not just NPR, either: all over the world, public service broadcasters look to NPR toset the bar for public service performance.

26. In creating the first Archive of its kind, the BBC proves the case for such a project to the CanadianBroadcasting Corporation, the Australian Broadcasting Corporation, Deutsche Welle, Radio France, andall the other broadcasters around the world who seek to promote national identity through public spending.

27. Should these broadcasters adopt similar projects, its even possible to imagine a quid-pro-quoarrangement with the BBC, in which the BBC’s material is made available to, say, Canadians in return forthe CBC’s material being made available to Britons.

28. This has the potential to be the best of all possible outcomes, for it poses the possibility of the licensefee being used to buy Britons access to the whole world’s public service programming, not just the BBCs.

The P2P Wars

29. The P2P wars the fights over peer-to-peer file-swapping tools worsen every day. The legal attacks onP2P users—which, in the US, has led to the spectacle of OAPs and underprivileged schoolchildren havingtheir life’s savings confiscated for downloadingmusic8—have not slowed down the growth of P2P networks.Indeed, P2P remains the fastest-adopted technology ever.9

30. Creators’ and rights-holder organisations’ initial response to the growth of P2P was fear and anger,and this was expressed in a rhetoric of theft “If you download, you’re stealing” without even a nod to theculture and communications elements of the copyright debate that makes the infringement of intellectualproperty very diVerent from theft of non-metaphorical property in the real world.

31. Predictably, calling customers thieves did nothing to solve the problem. The next resort of rights-holders was the use of “Digital Rights Management” (DRM) technologies, which indiscriminately restrictwhat the lawful owners of digital copies of music, books and movies may do with their property. Luckily,none of these DRM technologies actually work very well, so Britons and others with a little tech savvy areable to defeat them this is what you do when you buy a DVD player in the High Street and take it homeand look up the code to turn oV the region-restrictions built into it.

7 Rick Prelinger, curator of one of the world’s largest commercial film archives has used “open” licenses from the CreativeCommons to good commercial result, something he details in a letter to the DCMS reproduced at http://lists.essential.org/pipermail/creative-friends/2004-July/OOOO71.html

8 See CNN’s “12-year-old settles music swap lawsuit” at http://www.cnn.com/2003/TECH/internet/09/09/music.swap.settlement/

9 See, for example, “P2P Usage Trends, July 2003–March 2004” at http://www.digitalmusicnews.com/data/040904bigchampagne



32. This led to the inevitable reply salvo: a series of worldwide “anticircumvention” laws10 that ban thedissemination of information on how to break DRM systems, regardless of the purpose of suchdissemination.Distinguished academic engineers fromPrincetonUniversity have been threatenedwith legalaction if they present on the weaknesses of DRM systems at learned conferences11, and the FBI jailed aresearcher for presenting on the same subject at a technology conference in Las Vegas.12

33. Protecting DRMnot only demands the criminalisation of certain maths, it also sets up a world wherethe manufacturer of a virtual “record” gets to tell his customer whose record-player she may use to listento it, and gets to specify every feature that said player will and won’t have. This is because DRM systemscontain proprietary secrets and patents whose licensing is conditioned on certain features being present andothers being absent in licensed devices. These licensing schemes are the reason that your PC’s DVD drivecan’t be easily used to copy your movies to your hard-drive (contrast this with the way that your PC canreadily move music from your CD collection to your hard-drive) that feature has been banned by theorganisation that controls DVD player licensing and no amount of customer demand will sway them intoauthorising such a scheme.13

34. It must be repeated here than none of this is doing anything to slow the growth of the P2P networks.None of it is putting one penny in the pocket of an artist. Worst of all, none of it is responsive to the publicclamour for the digital delivery of cultural material over P2P networks.

The BBC and the P2P Wars

35. This sort of technological Gordian knot is par for the course. Ever since the printing press, theincumbent creative industries have responded to new technologies for copying and distributing works withfear and anger, even though ultimately these technologies—phonograms, radios, jukeboxes, cabletelevision, and VCRs—have created a bigger industry with more money on the table for more players.14

36. Part of the BBC’s remit is to fill those voids that the market, for whatever reason, is unable orunwilling to fill. In doing so, the BBC can prove out the viability of an advanced service or technology suchas the BBC’s Red Button interactive television services and sow a field that the private sector can later reap.

37. In the P2P wars, we have a true marketplace catastrophe in the oYng. Britons—indeed, media“consumers” the world over—are no longer content to consume the programming made available to themat the appointed hour. Rather, they demand higher levels of interactivity, beginning with the simple act ofreceiving programming on demand—whether through realtime delivery systems or through automatedtime-shifting technologies such as the personal video recorders (PVRs) built into the Sky set-top boxes.

38. More significantly, though, the audience for creative work is demanding the ability to play back theirprogramming using whatever player they choose—from pocket-sized mobile devices to PCs to game-consoles—with new features unimagined by yesterday’s creators, from simple commercial-skipping toadvanced features such as text-chatting overtop of programming, creating “playlists” of favorite scenes inshows (or conversely, “reverse-playlists” of scenes that should be omitted when children are viewing), andthe ability to accumulate collections of works in hardware-neutral formats that can be moved from today’sdevices to tomorrows.

39. Most importantly, the audience is awakening to the possibility of mining the culture that surroundsus for the raw materials from which new works may be constructed, from school projects that include clipsandmusic captured from variegated sources to “mash-up”mixes of cleverly combined and juxtaposedmusicto re-dubbed and re-edited parodies of popular works. This “remix culture” grows by leaps and bounds asthe public realises the value of a new kind of folk-art, something that both aYrms and defines shared culturalidentity by allowing all comers to actively participate in the creation of media, rather than simply eatingwhat we’re fed.15

10 For details on the WIPO Copyright Treaty’s “anticircumvention provisions” see “Technological Measures for Protection ofCopyright And Related Rights on the Internet—Present and Future Technologies” at http://www.wipo.org/copyright/en/meetings/200l/cr–rio/doc/cr–rio–01–5.doc

11 SeeEFF’s files on “Felten vRIAA, “a legal eVort in support of Princeton professor Ed Felten and his research team, at http://www.eV.org/IP/DMCA/Felten–v–RIAA/

12 See EFF’s Frequently Asked Questions file on the “US v ElcomSoft & Sklyarov” case, which arose from this incident, athttp://www.eV.org/IP/DMCA/US–v–Elcomsoft/us–v–sklyarov–faq.html

13 For more on the threats of DRM to competition, see the author’s “Microsoft DRM Talk” at section 3, “DRM systems arebad for biz” at http://craphound.com/msftdrm.txt

14 Professor TimothyWu of the University of Virginia’s paper on “Copyright’s Communications Policy” contains a cogent andeven gripping account of previous installments in the struggle between copyright at technology, see http://faculty.virginia.edultimwu/occp.pdf

15 Siva Vaidhyanathan’s “The Anarchist in the Library”, (Basic Books 2004) contains a stirring account of the rise ofparticipatory entertainment.



Conclusion

40. The Creative Archive is a watershed moment in the history of the BBC and of the world. It has thepower to lend cultural identity to the coming generation of Britons, to benefit UK cultural institutions,artists and commercial broadcasters, and to push the whole world towards a new height of freedom andco-operation.

41. The BBC has asked its Governors to grant it a Charter provision allowing it to make the Archive,and the Governors, in turn, have asked the DCMS for this.

42. It is EFF’s hope that the DCMS will see fit to give the Governors what they seek.

11 September 2004

Memorandum submitted by Friends of the Creative Domain

Over the last three weeks many of the constituencies that have a stake in the BBC’s plans for the CreativeArchive have started to talk about how this Archive can best serve the public interest.

A fully-realised Creative Archive would transform the BBC’s deep archive into a springboard for a newcentury of participatory creation by Britons. The project stands to re-aYrm the BBC as the banner-carrierfor public service broadcasting worldwide in the information age. However if the BBC scales back itsambitions, the Creative Archive could amount to little more than brochureware and failed promise.

On 26 May 2004, a group of researchers, educators, archivists, artists and licence-payers gathered inLondon to launch the “Friends of the Creative Domain”—a group that stands in support of a fully-realisedBBC Creative Archive.

We believe that the Creative Archive is the single most important issue that will shape how the BBCcontinues in its mission to inform, educate and entertain. Over the course of many discussions, we haveconcluded that in order for the Creative Archive to be viable, useful and relevant it must, as a minimum,reflect the following key characteristics:

— It must be broad: drawing from all areas of the BBC’s broadcasting from news and factualprogrammes to light entertainment, from drama to sport, and everything in between.

— It must be accessible: files must be made available in open, standards-defined formats without“digital rights management” or other technology locks that will keep Britons from creativelyre-using the BBC’s oVerings.

— It must be free:Material should be licensed under conditions that do not restrict any licence-payerfrom accessing, storing, modifying or sharing archive material for non-commercial use.

— It must be whole:Material should be provided in its entirety for non-commercial use and not onlyin excerpted form.

— It must be soon: thematerial that the BBCalready owns the rights in should be a part of theArchiveat its launch or as soon after its launch as is possible, with other material to follow as soon as rightsare cleared.

— It must be complete: the BBC should take steps to clear the rights to the independently producedmaterial in its archive and make this material available.

— It must be sustainable: future licensing agreements with independent producers must allow theBBC to make the works freely available in the Creative Archive for non-commercial use.

In light of the BBC’s accelerated schedule for submitting new charter language, we have decided to releasethe attached letter signed by some of the many supporters of the “Friends of the Creative Domain”.

We see this as the start of a longer public conversation on the form and function of a fully-realisedCreativeArchive and we look forward to speaking with you about these issues.

We write to express our support for the BBC Creative Archive, and our concerns relating to how it willbe implemented.

As TV licence holders, citizens concerned about access to our national heritage, and artists and studentswho have witnessed the shrinkage of the creative domain, we strongly supported Greg Dyke’s August 2003commitment to take “a massive step forward in opening our content to all—be they young or old, rich orpoor.”

There are many obvious reasons for taking such a step. Digital technology now gives us the chance tounlock and democratise an otherwise inaccessible part of our national culture, an opportunity ofimmeasurable educational value. An online archive of past and present BBCmaterial could give artists andstudents unprecedented ways to build creative works, and making material available for non-commercialuse would open new markets for our nation’s artists and the Corporation. In short, the Archive has thepotential to ignite a “digital campfire” for the nation.



However, we have become concerned that the BBC will not ultimately implement the Archive in a waythat is conducive to these social goods. Some commercial broadcasters have already expressed oppositionto an accessible archive of free material for non-commercial use, even while asking the BBC to “seed” themarket for digital content. We worry that the BBC will face political pressure from these broadcasters topursue commercialisation above access.

We also worry that the recent changing of the BBC guard places the original vision of the Archive injeopardy. The BBC’s new chairman, Michael Grade, has said that a top priority of his is creating acommercial plan for the archives. Recent reports that the Board of Governors will take more control of theBBC’s policy and planning division suggest that champions of the Creative Archive may not be able toovercome pressures to limit access.

We do not object to a commercial plan in principle, as long as it does not unreasonably impede non-commercial use by licence holders. However, the latest reports about the initial implementation of theCreative Archive indicate that only short three-minute clips will be available. Although we are confidentthat the BBC management has more ambitious long-term plans, the lack of concrete proposals or publicdiscussion of these plans stokes our fears that the Archive will not go beyond a shop window for contentthat TV licence holders have already paid for.

We believe that the stakes for the Creative Archive are high enough to merit a public discussion on howto achieve the project’s fullest potential. This discussion should bring in all the relevant stakeholders,including TV licence holders, digital video artists, actors. musicians, producers, librarians, archivists,historians and students.

Now is an ideal time to open this discussion and to update the BBC Charter to allow the BBC to fulfil itspublic mission in the digital age. We support new charter language that would:

— Make the Creative Archive one of the primary objectives of the Corporation, with an emphasis onaccess and creative use.

— Specify prospective licensing of content for online use in a way that allows licence holders to gettheir best value for money.

— Specify the conditions of retrospective licensing of content for online use in a way that wouldmaximise the educational and cultural value of the archives.

We respectfully request a meeting with you and your staV so that we may discuss these concerns andproposals.

10 June 2004

Memorandum submitted by Gaelic Media Service

1. Background—Gaelic in Public Service Broadcasting

From the transmission of the first Gaelic programme by the British Broadcasting Company in 1923 tothe present day, the relationship between the Gaelic community in Scotland and broadcasting, thoughlimited and at times strained, has been sustained by public service principles in recognition of the uniqueposition of Gaelic in the linguistic and cultural ecology of the UK.

The BBC’s Gaelic radio service, Radio nan Gaidheal, and its regular slots for Gaelic televisionprogrammes are funded from the licence fee and by the Gaelic Media Service.

The Scottish Media Group companies, Grampian and Scottish Television, also produce and broadcastGaelic programmes funded from their own resources, and by the Gaelic Media Service, as part of theirregional services.

These public service programmes are accessed and appreciated by audiences not only of native Gaelicspeakers but also of interested people who value the language and the opportunity to participate in itsculture.

2. Current Constraints—Barriers to Access and Inadequate Provision

Despite the public service goal of universal access, and availability of a limited range of Gaelicprogrammes on radio, television and the internet, it cannot fairly be said that the Gaelic community is wellserved in the modern media environment. There are communities in Scotland that have to use self-helpschemes to access analogue television, and others that do not receive Gaelic radio. Gaelic televisionprogrammes are scattered across BBC and ITV analogue schedules, and a significant proportion are shownat times that are not convenient for the target audiences.



Current arrangements for Gaelic broadcasting are fractionated and unco-ordinated despite the widelyheld perception that the UK has a vibrant public service broadcasting ethos. The existing arrangements,designed for an analogue broadcasting environment, are not acceptable to Gaelic viewers and listeners inthe 21st century, howevermuch the community has had to put upwith the technical and financial constraintswhich were previously advanced as reasons for this state of aVairs.

3. Demand for a Gaelic Television Channel

The case for a Gaelic television channel has been advocated since 1997 by two government initiatives: theFraser Report and the Milne Report, both of which criticised the flawed structural arrangements for Gaelicbroadcasting and recommended the establishment of a channel.

Audience research also provides clear evidence of demand for a dedicated Gaelic digital televisionchannel. Should it be created, it would be a strong incentive for Gaelic viewers to invest in digital equipment,contributing to Government targets for switch-over.

The frustration of the Gaelic community in Scotland and its supporters is fuelled by a growing sense ofinequity as other minority language communities in the UK enjoy enhanced support whilst funding forGaelic broadcasting declines. This is evident in the existence since 1981 of the Welsh Channel, S4C, whichenjoys an index-linked government funded budget of £92 million and an additional 10 hours weekly of BBCprogrammes contributed from the licence fee, and the recent announcement that Irish language speakers inNorthern Ireland are to benefit from increased hours of broadcasting from a new NI government fund of£12 million over three years, in addition to receiving the publicly funded channel TG4 from the Republic.

TheUKGovernment has recently been criticised in a report by aCommittee of Experts on the applicationof the European Charter for Regional and Minority languages for its failure to make adequate provisionfor a Gaelic television channel.

The Gaelic Media Service recommends that the Select Committee on Culture, Media and Sport supportthe principle of the establishment of a Gaelic channel to reinforce the UK public service broadcastinginfrastructure.

4. Sustaining a Public Service Gaelic Channel

Spectrum scarcity is no longer a barrier to progress in relation to setting up a Gaelic digital channel, butmarket failure is. Despite audience demand, and the interest of a wider sector of the community than thosewho actually speak Gaelic, a Gaelic channel is not a viable commercial proposition. This is underlined byconsideration of the arrangements for sustaining S4C since its inception, through a combination ofGovernment funding and BBC licence fee funded programmes.

The Gaelic Media Service is charged with ensuring provision of a service to the Gaelic audience, but doesnot have the resources to fulfil this remit.

The Gaelic Media Service recommends that the Select Committee supports the argument that the BBC,Grampian Television and Scottish Television should commit to produce a consistent hourage ofprogrammes to be broadcast on a dedicated Gaelic digital channel, to complement Government funding fora Gaelic broadcasting service through the Gaelic Media Service.

5. The BBC Licence Fee

The BBC licence fee is the cornerstone of the broadcasting economy in the UK. It is a fundamental aspectof the BBC’s relationship with its audiences and highlights the BBC’s commitment to quality and innovationin provision of information, entertainment and education services. It provides stability in a rapidly changingenvironment.

Licence fee funding of minority language programmes ensures services to communities in the UK whichwould not otherwise be served in a purely commercial environment. It is also important that programmesfor minorities are of a higher quality than can be guaranteed in a market environment and that theirscheduling is consistent with the requirements of listeners and viewers.

Like an insurance policy, the licence fee is a safeguard for the future. The Gaelic Media Service believesthe licence fee should continue to be the core funding of the BBC.



6. The BBC Charter—Gaelic Commitment

The Royal Charter is the bedrock upon which the BBC’s public service broadcasting commitment isfounded, guaranteeing its existence and freedom from political interference and charging it withconcomitant responsibilities.

The BBC’s Charter remit to serve and represent the diversity of cultural and linguistic influences whichenrich the life of the nation continues to be of critical importance to minorities, and arguably more so astechnological and economic developments increasingly expose communities to the influence ofglobalisation.

In these circumstances recognition of the importance of public service broadcasting to the maintenanceof the autochthonous UK minority languages will be even more crucial in the modern digital environmentthan in the past.

Government has recognised the significant role of the BBC in Gaelic language broadcasting by ensuringparticipation by the BBC in the Gaelic Media Service under the provisions of the Communications Act2003.

The Gaelic Media Service is, however, concerned that the BBC’s current Charter makes no specificreference or commitment to Gaelic broadcasting per se. Although the BBC saw fit under its previous, andcurrent, Charters to interpret its remit so as to include Gaelic broadcasting, the road to the current level ofprovision has been fraught with many setbacks, and its future direction, in an increasingly competitivedigital environment, is worryingly uncertain.

The Gaelic Media Service recommends that the Select Committee supports the view that the BBC’scontinuing commitment to Gaelic language broadcasting should be expressly acknowledged in the newCharter.

Memorandum submitted by HICBF Community Radio

It has come to our attention that the commercial radio industry is lobbying the government to preventcommunity radio raising commercial revenue. In general we have to disagree with this standpoint. In theHighlands and Is1ands area, due to the topography alone, the development of a small radio under the“Licensing Community Radio” guidelines is going to be diYcult enough without pecuniary restrictionsbeing placed upon them.

I am writing on behalf of the Highlands and Islands Community Broadcasting Federation, anorganisation that represents the “Community Radio” stations in the Highlands and Islands. While manyof our members have full ILRs they have always worked under the banner of Community Radio, providinga service to tbe local populace with matters pertinent to the area. We are therefore very much aware of thediYculty of establishing a community radio station and are supportive, in themain, to the new “CommunityRadio Licences” which are presently under consultation.

We however do not support the commercial radio industry proposals of restricting the development ofsmall Community Radio licensing through financial limitations. Or their proposal that no community radiostation should be allowed to exist in any area overlapping by more than 50% with a commercial radiostation, serving 100,000 people or less. If an individual or group wishes to take the risk of starting acommunity radio station they should be praised for their commitment to the community not restricted bylarge organisations’ fear of competition.

21 May 2004

Memorandum submitted by Jean-Jacques Marmont

Members of Parliament routinely receive complaints from their constituents about the behaviour andtactics of the BBC’s licence fee collection agent Capita Business Services. You raised that point at acommittee meeting on 16 July 2004, where Mr Michael Grade oVered a rather pathetic excuse to yourcriticism.

Unfortunately, nobody is able to complain to an independent authority about Capita’s behaviour,because they are answerable only to the BBC. And, the BBC is accountable exclusively to itself. through itsBoard of Governors. Even the Secretary of State’s OYce does not consider it a “court of appeal” againstdecisions and behaviour of the BBC or its agent, Capita Business Services. I have detailed letters from MsTessa Jowell’s oYce using those precise words.

I have been active in the BBCCharter Renewal process promulgating funding, governance and regulationreform of the BBC, as well as some associated issues at the EuropeanCourt ofHumanRights. In the CharterReview process I have attended public meetings of the Commons Committee on Culture, Media and Sport,and, various “seminars” convened by Lord Burns’s Independent Review Panel at the Department of



Culture, Media and Sport. I cannot help but notice a conspicuous absence of Capita oYcers being called toaccount for their behaviour, tactics and connection with £160 million per annum of the BBC’s public moneybeing spent.

Your Parliamentary Committee has an obligation to residents of this country who are forced to relinquisha yearly “poll tax” to fund the BBC. To fulfil that responsibility, perhaps Capita Business Services shouldbe summoned to future meetings of the Culture and Media Committee where the BBC is being discussed.Capita would then be forced to explain its questionable actions towards residents of this country, not tomention justify its annual use of £160 million from the BBC’s budget.

On a final note I can say that at least one person has acted upon those oVensive “get one or get done” TVlicensing ads you mentioned to Mr Grade before your committee on 16 July. I recently lodged an oYcialcomplaint against them with Ofcom, the Advertising Standards Authority (ASA), and the TradingStandards Services.

4 October 2004

Memorandum submitted by Mr Kenneth Wood

Your Committee is listening to the BBC as it presents its case for a renewal of the Charter. Economiesand disposals are said to be the order of the day.

What has not been on oVer is a reduction in output.

Why is it necessary, given the number of channels soon to be available to the public, all competingthroughout the day and most of the night, frantically dumbing down as they go, for the BBC to put outprogrammes 24 hours a day, every day?

Why not BBC1, say, from 7 am to 9 am, 12 noon to 2 pm, then 4 pm to 11 pm, supplemented by BBC2on special occasions, if it still has the rights to any major sporting events for instance.

Similarly with BBC Radio. Keep the World Service, of course, but one channel could go, probably two,and there is absolutely no need for simultaneous news bulletins as on 4 and 5 Live.

A transformed, skimmed down public service broadcaster would then be free to concentrate onprogrammes of quality, leaving the rest to the Commercials to do as they wished. By using a licence fee theBBC should be required to oVer an alternative to the increasingly Americanised pop-culture which ispervasive in Broadcasting House and almost everywhere else.

14 July 2004

Memorandum submitted by Mrs J Ferns

I wonder if you could bring your undoubted gifts to bear to do something, preferably remove altogetherall the junk advertising and all advertising from the BBC. We are not paying licence fees for this junk whichgets longer every day and brings considerable fortunes to the many involved.

The BBC is going down hill fast and it is only by those with clout to stop it. It’s got beyond a joke andprompts you to switch oV. There has got to be an almighty upheaval I know, but I do not think it is beyondyour influence.

Incidentally, the advertising is junk at its highest.

1 June 2004

Memorandum submitted by Mr James G Tough

May I ask you to give consideration to the following option for raising the required revenue:

All tax payers have their personal allowance “REDUCED” by an amount such that the extra tax raisedmatches the current TV licence revenue.

The additional tax collected must match the cost of Public Service Broadcasting and not be used to raiseadditional money for the Government. The “purpose” of this reduction should be clearly described oneverybody’s tax-coding form.



Social Advantages:

— It is a regressive method of payment—those on very low incomes (many pensioners and those onbenefits) will pay nothing, or very little.

— Those on around average income should find it financially “neutral”.

— Higher rate taxpayers will make a larger financial contribution to the service—reflecting theirgreater income.

Administrative Advantages:

— The existing InlandRevenuewould “collect” the funds with theminimumof additional overheads.

— The large amount spent on enforcing the current licensing regulations (£l30 million annually)would be saved—equivalent to about £5 oV the current licence fee.

— The current administrative jobs are “classic” examples of a totally unproductive, paper shifting/filing, service.

— Saving on Court time and costs prosecuting those charged with evasion—most of whom I doubtare fined, or could pay, the £1,000 fine.

— Saving to businesses trading with TV receivers—no need for them to fill in forms informing theLicensing Authority of each sale (even Salesrooms selling old “junk” quality TVs have to sendin forms!).

Future Technical DiYculties defining a “TV” Receiver:

— Currently the licence applies to all equipment with a “tuning circuit” capable of receiving TVbroadcast signals.

— Modern technology will make it possible to receive digital, “TV” style pictures/services downcables without a device containing a tuning circuit and hence rendering the current detectionmethod obsolete.

20 October 2004

Memorandum submitted by the Director-Genereal at the BBC

At our oral evidence session on 19 October there were several areas where I gave an undertaking to lookat issues raised by members of the Committee. I wanted to respond promptly on these.

Firstly, you raised what you saw as the BBC’s lack of ability to respond to complaints quickly. We arecurrently overhauling our complaints procedures and for the first time complaints arriving in theprogramme areas will be logged and monitored on a BBC-wide system and handled according to a BBC-wide code of practice. This will include new standards for response times. In addition, there will be a fast-track procedure for referring particularly serious complaints straight to the Editorial Complaints Unit forinvestigation. Some of these provisions are already in place, and the BBC is moving towards fullimplementation by 1 February 2005.

Secondly, Mr Fabricant raised the issue of the future of BBCWorldwide. We are conducting a review ofour commercial services as part of the Charter Review process. This review is tasked with considering: theright balance between maximising the value of assets and rights whilst ensuring public service needs comefirst, against the principles we have set out in Building Public Value; the extent to which the BBC needs toown its subsidiaries (BBCResources, BBCBroadcast, BBCWorldwide) andwhether a change of ownershipwould increase value to the BBC; how dowe ensure commercial activities meet our fair trading commitmentand to what extent does this restrict activities under their current ownership, and what the best structure forthe future governance of the commercial subsidiaries would be. The review is due to report later this year,but I can assure the Committee that the BBC will not continue to run businesses without demonstrablepublic benefits.

Thirdly in answer to Mr Doran, I said I would look at whether £10 million investment in British Filmproduction was enough. The BBC is looking at various initiatives to help fulfil the creative ambitions of theUK Film industry. I would like to give the Committee an undertaking that as part if its ongoing strategy,the BBC will investigate the pros and cons of an increased investment into original feature film productionwithin the context of the BBC’s core remit as a TV broadcaster. Importantly, this analysis is also subject tothe wider industry issues that face the film community in the UK.

Additionally, in the area of film, Mr Wyatt raised the issue of a British Film Channel. There are clearlyissues to explore as to whether this should be a priority for the BBC, the impact such a venture might haveon the existing commercially provided film channels, and importantly, whether it would pass the publicvalue test. However, I will ask Alan Yentob, our Creative Director, to look at whether we could take thisforward, with others, as a proposition.



Fourthly, I told MrWyatt that I would look at the support we give to young people in Jazz. BBC Radioand Music is actively engaged is supporting young musicians across a number of genres, not solely thepopular music areas represented by Radio 1. When it comes to Jazz, the BBC Jazz awards, supported byboth Radios 2 and 3, gives an annual award to the best newcomer. Radio 3’s partnership with YouthMusicled to the network broadcasting the Big Gig, the celebration of five years of Youth Music which featured ayoung Jazz band. Radio 3 is also the sponsor of the London Jazz festival. In addition, all of the BBC’sperforming groups have Learning managers who are involved in a wide range of activities supported byRadio 3 and all designed to encourage greater participation in music making. Although there will alwaysbe areas of music where we can potentially do more, I do think we are making headway in providingopportunities in Jazz.

I hope that the Committee will find this additional information of use.

8 November 2004

Further supplementary memorandum submitted by the BBC

BBC Response to Culture, Media and Sport Committee’s Detailed Observations on BBC 2002–03Annual Report

Last November the Culture,Media and Sport Committee wrote to the thenChairman of the BBC,GavynDavies, making recommendations on how the BBC’s Annual Report and Accounts could be made clearer.In this document we set out the BBC’s response to these recommendations.

1. The Committee found some diYculty in assessing the performance of the BBC against its objectives giventhat some were unspecific, some not readilymeasurable and some incremental without reference to the adequacyof current levels of activity. As discussed at the evidence session, we had some concerns over the statementswithin the Governors assessment such as reference to “a year of strong BBC performance” withoutaccompanying reference to measurable achievements against specific objectives—especially qualitative andquantitative comparisons with other broadcasters (beyond comparative reach and share).

The Governors’ own review of the 2002–03 Annual Report led them to decide that there should besignificant changes in their assessment of performance against objectives in future annual reports, muchalong the lines identified by the Committee. This section in the 2003–04 Report is more objective, moredata-based and, where appropriate, more critical than last year.

The objectives for 2004–05, published in this year’s Annual Report, are focused on major pan-BBCpriorities while the individual channel, service and genre objectives (as well as tier 2 and 3 commitments) arecontained within the SoPPs. The measurable commitments and criteria by which the performance of BBCservices may be judged are therefore now to be found in the SoPPs.

2. It would be helpful if the report could include a clear statement of what the BBC needs to do in order to beachieving its public service remit and providing the added value compared to other broadcasters. The Chairmanstated in the report that the BBC needed to provide a “richer andmore ambitious” package than the commercialsector. This is clearly a reference to the BBC’s vision but it would be helpful if clearer criteria could be set outagainst which the eVectiveness of the Corporation in achieving this distinctiveness can be judged.

The Governors agree with the thrust of this point and the 2003–04 Report goes further than previousReports in reporting on the performance of each BBC service against its public service remit (as set out inthe Statements of Programme Policy for 2003–04 published in April 2003).

In Building Public Value the Governors outline plans for a new and comprehensive framework for thescrutiny of BBC services based on four key performance metrics—reach, quality, impact and value formoney. In future the Governors will grant each public service a “service licence” which will set out the remitand performance targets that they expect to be met and the budget they have agreed for the service. Theirperformance against this licence will be monitored annually and the Governors will undertakecomprehensive reviews of all services on a rolling basis.

3. We would suggest that the use of more comparators to illustrate and analyse the BBC’s use of resources,output and performance compared with other broadcasters (both TV and radio) would be helpful. In the samevein, we believe that this may be a useful tool (for internal and external scrutiny) for the future.

We agree. In the 2002–03 Annual Report andAccounts, certain tables, or information within tables, wereremoved from the facts and figures section of the report. These have been reinstated in the 2003–04 report.



These are:

— the competitor information in tables 1 and 2, 15-minute weekly reach by service and platform andShare by service and platform. Digital homes data for 2002–03 has been restated due to Freeviewhomes not being included in the digital definition last year;

— the table detailing Range of peaktime UK-made programmes on network television (table 9). Thistable compares the BBC to ITV, Channel 4 and Channel 5; and

— the table detailingComparative cost per household of viewing/listening per hour. This table comparesthe cost of the licence fee with other forms of entertainment for each hour of viewing or listening(Sky family package, all pay television and video hire) (table 3).

4. We recognise that the targets from the BBC’s Statements of Programme Policy will be a matter fordevelopment in line with forthcoming Ofcom guidance. For our purposes, we believe that these could usefullybe reviewed in terms of: a clearer correlation with the BBC’s objectives; increased specificity, measurability andtackling the vaguer instances of bare incrementalism. Some of these targets also seem to be relativelyundemanding and this raises a potential question mark over their usefulness (for instance we note that in 2002Channel 4 exceeded all of BBC’s Two’s quantified Statements’ targets and a majority of BBC One’s). Wesuggest that it might also be useful to check performance against the Statements by external, as well asinternal, audit.

Ofcompublished its consultation paper on Statements of ProgrammePolicy (SoPPs) on in June, thereforethe BBC’s approach to SoPPs has not yet been informed by Ofcom’s guidance.

The BBC’s SoPPs for 2004–05 are more detailed, more factual andmoremeasurable than in the prior twoyears. In addition, the report on performance against the 2003–04 SoPPs in the 2003–04 Report issignificantly more thorough than in last year’s Report. The Governors’ Review of Services (pages 24–67) isspecifically a review of performance against SoPPs—and contains both quantitative and qualitativeevidence.

As to the specific hours commitments by service, these are floors, not ceilings. The commitments indicatethat each channel or network will deliver programming of that type. They say nothing about quality andrange within each genre. The BBC is committed to providing something for everyone. For example, incurrent aVairs, BBCOne oVers “Real Story” and “Panorama”. On BBCTwo, it oVers international currentaVairs through “This World”. Licence Payers want to know that their needs are being met and they cannotdetermine that from a simple commitment to hours. The SoPPs for 2004–05 demonstrate a moresophisticated approach through their clarity and specificity. It is worth noting that the minimumrequirement for news on BBC One has been increased in this year’s SoPP from 570 to 1,380 hours. Moreimportantly, they are an improved mechanism for holding the BBC to account.

The comparison of BBC Two’s targets with Channel 4’s performance is interesting. BBC Twooutperformed Channel 4 on every relevant indicator in 2003–04 except hours of religion, since the BBCconcentrates its religious programming on BBC One. It could be argued that the outcome is more relevantthan the target. It is also true that Channel 4 outperforms some (but certainly not all) of BBC One’s targets.But BBCOne’s performance is significantly ahead of Channel 4’s in many PSB genres. That said, the overallperspective is that since these channels have diVerent remits, and audiences have diVerent expectations ofthem, such comparisons are rather invidious and of limited value.

5. We note that the report contains four targets relating to financial eYciency (under objective 8): licence feecollection; commercial activities; central overheads; and programme production costs. The first three targetsare reported upon but relate to relatively small potential gains in comparison to the BBC’s spending onproduction. Licence fee evasion currently represents £200 million (and improved collection must be subject todiminishing returns); the return from commercial activities was £142 million; and central overheads were£347.5 million. On this last point, we note that overheads were reduced by 2% during 2002–03 to 13% whenmeasured as a proportion of increased expenditure on output. However, the absolute gain on 2001–02 was£1.5 million (or 0.43%). It would be helpful for future reports to explain the relationship between output andcentral overheads in more detail.

6. The target to improve the eYciency of programme production while maintaining quality does not seem tohave been reported on explicitly despite its obvious importance. Programme production is the BBC’s coreactivity representing £2,378 million in 2002–03. The Governors’ set out their awareness of a need to benchmarkproduction costs and review eVectiveness-based, value for money measures of performance. We believe that astatement of the progress of these initiatives would be extremely helpful in the 2003–04 report. We note fromtables 2b and 7 in the report, that bald fact that the costs BBC1 and BBC2 output in 2002–03 was 17–19%greater than in 2001–02. This may be an occasion when comparative figures for other broadcasters, if available,would be useful. The ITC for instance, records that the programme budget for BBC1 exceeded that of ITV1by between £100–200 million in 2001, 2002 and 2003.

Objective 8 for the BBC in 2004–04 was to “Continue to increase the amount of money available tospend on the BBC’s public services by enhancing the eYciency and eVectiveness of the way the BBCoperates”.



In discussing the performance of this objective, the Governors state that the BBC is making steadyprogress towards the target of putting an additional £3.3 billion into services through self-help initiativesbetween 1999–2000 and 2006–07. This target obviously includes significant savings in production costs, butit will be important to demonstrate, to the Secretary of State’s satisfaction, that all aspects of this target aremet, by the end of the Charter.

The Governors also note in 2003–04 the improved eYciency of licence fee collection (evasion reduced to5.7% from 6.7% in 2002–03), something which John Bourn praised in the recent NAO report on licence feecollection; increased cash flow from the commercial businesses (increased to £135 million from£124 million); and additional savings made in support costs (£29.3 million).

The Governors do not go into more detail on the production eYciencies in this Annual Report but theBBC recognises that this is an area where a renewed push towards world class levels of eYciency is urgentlycalled for.. TheGovernors detail the key challenge ahead—improving the eYciency of production processesand in particular the benchmarking of production costs. The Governors note that progress in this area hasnot been as rapid as expected, but state that a new Head of Value for Money has recently been appointedwho will lead the review of these and other internal costs.

This initiative is one of the four key reviews announced by the Governors, as part of a package of reformsassociated with the renewal of the Charter.

The financial review (p 98) explains the major movements in spend year on year, in both programme andoverhead spend. Central overheads total £325 million, with a £4 million increase since last year due to theacceleration and early completion of a major IT project and short-term migration costs as the new MediaVillage buildings are occupied. There is therefore little relationship between changes in output spend and incentral overheads as the latter tend to change as a function of central initiatives.

Note 2b in the financial statements shows that spend onBBCOne andBBCTwo fell in 2003–04 comparedto 2002–03. There are now a range of explanatory footnotes on page 110 on the movements in spending,between financial years, on each service. The movement in spend on BBC One and BBC Two is due tocoverage of major sporting events in 2002–03, such as the FootballWorld Cup and CommonwealthGames.

We are keen to include comparisons with other broadcasters, but those other broadcasters do not wantto disclose the information to allow us to do this. We will, however, renew our attempts to secure data fromthem as part of our VFM programme.

7. Regarding cost targets in general, we believe the report would be enhanced by more information about andfrom, the BBC’s internal financial performance measure and indicators to provide a comprehensive picture ofthe BBC’s financial performance.

The annual report currently contains most of the financial performance measures and indicators usedinternally in the “Broadcasting facts and figures” section of the report. These measures include: networktelevision hours of output, radio hours of output, monthly bbc.co.uk and BBCi reach, monthly bbc.co.ukpage impressions, cost per hour of originated programmes, distribution costs, cost per hour of originatedprogrammes by genre, and creative spend outside the BBC. As noted previously, objective 8 also details the“self-help” target of £3.3 billion and the progress in meeting this by 2006–07.

The other main measure of internal financial performance is comparison to the budget. It is notconsidered appropriate to disclose details of the BBC’s internal budget in the annual report and accounts.However in Spring 2005, the Governors will grant service licences for each BBC public service which willspecify the budget of each service, as well as its remit and performance targets.

8. Some information on the report is presented oddly such as the increased expenditure on programmes. Anoutturn increase of expenditure of £616 million in the two years to 2002–03, against an expected increase of£450 million, is set out solely as an achievement. This presentation raises a potential question mark over theBBC’s planning function and cost control system. Some further details of the value achieved from this extra“investment” would be helpful.

We endeavour to provide the licence payer with an understanding of the movements in spending, cashetc, but appreciate that sometimes the explanations we have provided in the past have not been completelysatisfactory. We have learnt from this. We agree that last years explanation for the increase in spendingcould have been fuller.

The increase in spending from the amount planned in the strategy of 2000—£452 million to £616 millionshown in last year’s report was simply due to inflation. The £452 million figure is at 1999–2000 price levelsand adding four years of inflation increases this figure.



In the 2003–04Annual Report andAccounts, you will see in the Financial Review and in the detailed noteon the UK Public Service Broadcasting Group expenditure (note 2b) the following:

— We have sought to refine the allocation of overheads.

— The proportion of spend on programmes has remained at 88%, although overheads total£325 million, with a £4 million increase due to the acceleration and early completion of a majorIT project and short-term migration costs as the new Media Village buildings are occupied. This,of course, means that inflation in overheads has been absorbed.

— Of the total of £2 billion spent on transmitted programmes, 85% is spent on analogue output and15% on digital output.

— Overall spending on programmes fell by £38 million. This is mainly due to 2003–04 being a yearlow on major sporting events. Other than this, spend on analogue services stayed level. Spend ondigital services did increase in 2003–04 and this is due to the new digital services, BBCThree, 1Xtraand BBC 7, having their first full year of broadcasting and their spend increasing accordingly.

July 2004

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