June 2005

Ofcom’s press release accompanying their response to the DCMS green paper on BBC Royal charter was my first point for comment. It initially indicated to me Ofcom were sticking to:

* An institutional model of PSB (BBC fully-funded, cornerstone of PSB, key role in digital switchover, all things to all people, etc.);

* The much-derided PSP concept; and

* ‘The BBC is independent’ myth (Note the irony – this statement is otherwise contained in a document related to how the government will establish the funding, governance and remit of the BBC).

I wondered if I was being a little too hard on Ofcom. If there was original, evidence-based thinking in the document?

Once I’d had the opportunity of read through the whole document, combined with the benefit of reflection, my views changed slightly, leading me to the following conclusions.

1. Ofcom have produced more original thinking than I gave them credit for, initially, perhaps because the introduction and summary to the document are not as robust as its contents. Read on…

2. That being said, Ofcom in its response still embarrassingly clings to the discredited notion that PSB must be fostered by significant and prolonged state intervention in the form of subsidy. I agree with the Financial Times on that point. Will there always be a need for a multi-billion pound state subsidy to this sector?

3. Much of Ofcom’s thinking stems from a very questionable line of logic. Ofcom posit that PSB is in danger of becoming a BBC monopoly because the ‘implicit’ subsidy given to ITV and Channel Five is disappearing as the move to digital is underway. This line of argument is contained in Sections 2.4 through 2.11 of Ofcom’s response. I’ve never been convinced by this argument for two reasons: (i) recent empirical research by the Satellite and Cable Broadcasters Group (SCBG) demonstrated that PSB is being provided in abundance in the digital world without any subsidy and (ii) Channel 4 provides PSB and makes money. Ofcom’s statements–actually they are more like predictions–on this point have simply been unconvincing.

4. Someone should actually listen to what the SCBG has to say. These providers don’t receive scarce spectrum, don’t have must-carry status, and don’t receive public funds. Yet SCBG say their members produce 14,000 hours of PSB programming per month—more than all the terrestrial channels combined. The SCBG say:

[I]n the majority of programme genres that Ofcom defines as “public service broadcasting”, channels other than the BBC’s now provide most of the UK output: more than 60% of news and current affairs, more than 90% of documentaries, more than 80% of arts and music programmes. It follows that publicly funded broadcasting should now be limited to services, or to a quality of service, that the private economy cannot provide or would not provide in the absence of competing public subsidy.

This reflects the EU rules governing the use of State Aid, which require that publicly funded services such as the BBC’s must complement rather than substitute or duplicate provision by the market. Furthermore, where market developments supersede publicly funded provision, the BBC should withdraw from those services or activities and re-direct its valuable public resources to areas of activity where there is a proven market failure. While market failure should not be the only test applied to BBC services, it should provide the underpinning for all publicly funded BBC services. The absence of a market failure analysis raises significant questions as to the compatibility of the BBC’s publicly funded status with European State Aid rules.

5. Give Ofcom some credit – if the SCBG is wrong and instead Ofcom’s thinking is correct and PSB does require massive public subsidy, at least they have it right that the public subsidy should not all go to the BBC. Ofcom also propose a responsible structure to apportion that subsidy.

6. Give Ofcom more credit – they are keen to point out that the BBC’s role in the digital switchover process should not mean a government preference for Freeview over other digital platforms. Ofcom say the switchover should be platform neutral. Amen. Freeview stinks – I recently heard an influential observer charitably call it a ‘transitional technology’, and that’s really about the best you can say for it. Its capacity is limited; it’s not two-way; it has no worthwhile gaming applications, etc.

7. One more area where Ofcom deserve credit – suggesting to DCMS that it consider moving the review date for PSB funding to 2010 instead of post-digital switchover. Ofcom rightly realise that this is a fast-changing area and an earlier review will serve the public interest.

8. Finally, Ofcom say they want an ‘enhanced’ license fee for British viewers. An ‘enhanced fee’ – that can’t be a good thing, right? How much more will that cost us?

Russ Taylor is a co-founder of ofcomwatch.

Review of the BBC’s Royal Charter – Ofcom response to the Green Paper
Ofcom publishes response to Government Green Paper on BBC Royal Charter Press Release
BBC Charter Review