Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 480 - 499)




  480. Mr Wyatt has asked you about the relationship of OFCOM to the BBC. You as the ITC are able to look at all kinds of activities in all of the organisations which are responsible to you, which are basically all the broadcasting organisations with the exception of the BBC, who are under the 1996 Act, and some of the BBC's commercial activities come under the ITC. It is stated in the press today, the Secretary of State for Culture, Media and Sport has set up no fewer than three inquiries into the BBC: one into the BBC's commercial activities, which is an external inquiry; and two internal departmental inquiries, one into BBC News 24, and the other into BBC Online. With the best will in the world, that is very, very messy, is it not? It is messy because of the fact that the BBC is not answerable to anybody except its own Board of Governors. If the Government wants to do something, or establish information for itself about this, it has got to do this. Whereas if the BBC were answerable to the ITC now, and OFCOM later on, then you could do this in an orderly way without any apparent (and I say "apparent" because I do not make any such allegation) government interference into the independence of the BBC?
  (Sir Michael Checkland) We would certainly see that OFCOM would have a role at looking across broadcasting, including the BBC, and advising the Secretary of State. I think I mentioned some of the areas it might be looking at. News 24 might be one of them; news services might be another. Certainly we would see an activity. I think the approach to the BBC is appropriately evolutionary; and that review of the overall role is best done within the Charter. This rather complex process of bringing all these organisations together on the economic and content side is going to take time to settle down. When we move to 2004 we will be looking in any case at the BBC Charter. It seems to me evolutionary up to 2004 and then a review might be a most appropriate way to go.

  481. If you are talking about a complex process, would it not be best to simplify it as much as possible? It is very curious that the Secretary of State can announce that he is setting up an inquiry into the BBC and News 24. On the other hand, the Secretary of State has never regarded himself as having any locus, other than to make statements about the shifting of the BBC news. When ITV sought to shift its news you had a locus. There might be arguments about how effectively you carried out your role, but you had a very specific locus. Nobody has a locus on that. It is mix and match, is it not? He can do Online; he can do BBC News 24; he cannot do switching BBC news from 9 pm to 10 pm. It is all very messy, is it not?
  (Sir Michael Checkland) Evolutionary I would describe it as.

Derek Wyatt

  482. The FCC in Washington does not have a content regulator. Why are we so fussy about content, and how can we regulate it?
  (Ms Hodgson) That may well be the case in 20 or ten years' time. Where we are at the present is, I think there are two differences between the broadcast world in its current state of development and the Internet and broadband world: one is scale (even the smallest cable and satellite channels will reach 100,000 people at any one time which, compared with the one-to-one use of the Internet, is pretty significant); and the other is choice. You make a positive choice to access an Internet site; broadcasting still comes into your home unbidden. At present, although this is obviously changing fast, 80 per cent of all viewing is to a handful of terrestrial channels. All the evidence is that there is still an appetite for two things: one that, with that kind of power of broadcasting, there should be some accepted community standards on those channels; something that has a little more light and shade than the law might have; the watershed still commands a great deal of support from families with children—overwhelming support; and the other, as I began to say in response to Mr Fearn, that the public service channels (and it was the will of this House in the 1996 Broadcasting Act, and there will be a new opportunity when the new Communications Act is debated) still give privileges to the public service broadcasters; which, if you add the licence fee together with the opportunity cost of spectrum and the less than totally commercial schedules that those broadcasters run, it is probably worth anything from £3.5-£4 billion. When £3.5-£4 billion of public money goes into something people generally would like to see it accountable, and would like to know what value they are getting back. Those are the two bases over managing the transition in a fast-moving sector of regulation over the next ten years probably.

  483. You will not be surprised that I disagree with most of that. I agree with the nine o'clock if it is later—it might even be earlier. As regards content, we do not have a content provider for the publishing world or the newspaper world. I really think there is a sort of paternal 1930s feeling about television. That is an aside. That is how I feel about it. Do you feel that radio has been given a high enough profile in the White Paper?
  (Ms Hodgson) It is always difficult to give radio its due. Undoubtedly it has been an extraordinary success story over the last ten years; and, if the burden of your question is, is the importance of ensuring within OFCOM that continues to be the case, you must be right.

  484. We had the community radio people in last week and that is a very different public service, for which there is no money for them currently. Do you not think it would be better if OFCOM collected the licence fee, and if OFCOM decided on a three or five-year rate that the BBC might receive 85 per cent of it rather than 100 per cent of it so that other people who wished to do public service, and wished to do public service broadcasting, television or the Net, had access to a fund?
  (Ms Hodgson) I can understand the force behind OFCOM, that as technologies converge so regulation should converge. I think all of us would be right to be concerned about too much power and too much intervention from a body like OFCOM. I think competition is the bedrock of this sector going forward. I would be very concerned about a proposal that OFCOM started to receive public money, decided what programmes people ought to watch and dish it out. That would seem to me to be a move towards very substantial intervention by bureaucrats that would be inappropriate to the freeing up of the market that we hope to see.


  485. Do you not think it is highly anomalous that in the BBC you have an organisation which is the only organisation in the country which is the recipient of hypothecated tax and collects that tax itself, and even makes the rules on who pays and who does not, unless the Government intervenes say with free television licences for certain pensioners. Would not the arm's length principle be better if the Government itself were not to finance the BBC, if at least some arm's length organisation collected that and had control over it?
  (Sir Michael Checkland) I think the arm's length principle is very difficult in practice. I have had a lot of experience in the Arts Council, and bureaucratic processes get in the way of the arts sometimes. I think Patricia is absolutely right in saying that if we start getting a public service funding body it will be far more difficult to generate the quality of broadcasting which we have developed in this country. I think the three systems of funding we have got—subscription, advertising and the licence fee—have actually been a successful means of financing quality broadcasting here, and we should not upset that. If I go back to the early days of community radio, in the early days of local radio we started that off in discussions with local authorities, and got local authorities to fund the early experiments in local radio. There are other ways in which community services can set up stations than to move towards an argument which says, "Let's have a public service broadcasting fund", which I do not think would work.

Derek Wyatt

  486. But they are a public service—community radio?
  (Sir Michael Checkland) Local authorities are there representing the local community as well.


  487. Local authorities are skint for money, they really are. They are skint for money to provide basic services. The BBC spent £60 million on BBC News 24—a minute fraction of that going to Radio Regen, which operates in one of the most deprived areas in my constituency (there is a scheme with schools in my constituency and radio stations), a few thousand pounds would make all the difference from an organisation like that. As I say, they cannot get their hands on anything. Manchester City Council, with the best will in the world wants to clean streets, mend houses and so on, has not got the money for it and yet, as I say, the BBC has got £60 million to spend on BBC News 24. It can do whatever it likes with all of the money.
  (Ms Hodgson) If Parliament were to decide different forms of funding, and there are probably many ideas on top of carving something out of the BBC licence fee, I would be keen that any such mechanisms did not flow through OFCOM. If you want a neutral regulator that is trying to step back from the industry—encourage competition, only intervene when there are a series of overriding public interests, such as universal service obligations, access, proper matters for regulators—it would be quite difficult if OFCOM were trying to wear two hats all the time: one a player and the other, as it were, judge and jury.

  Derek Wyatt: I would welcome it to be judge and jury. We must disagree again.

Mr Maxton

  488. May I briefly start on what Mr Wyatt said about content. Do you not think you are being very pessimistic, or optimistic whichever it might be, if you really think you can regulate OFCOM for another five to ten years?
  (Ms Hodgson) As I said, 80 per cent of viewing at present is to broadcasters that benefit from public subsidy in one way or another. It would be curious if there was not some accountability for the spending of that money. In digital households, which give us a fair idea of future consumption, 50 per cent of all viewing is to those publicly subsidised broadcasters, and of course more in peak time. As long as Parliament decides that there is a value to be derived from particular arrangements for those broadcasters that provide particular kinds of programmes and audiences demonstrate that they value that, it would be odd not to have some accountability. I think it should be minimal. I have been very keen since I arrived at the ITC for the ITC to step back from any expressions of its own opinion about broadcasting. We have set in train for the coming year a process where we will ask the broadcasters to put forward their own proposals for how they will fulfil their remit for the coming year, and then report on it to their viewers (that is the public at large) at the end of the year: seeing the ITC's role much more in terms of an objective account of developments in the market, which should add value both to public policy decisions made in this place, but also to those broadcasters who can use that kind of independent assessment of the market to assess whether they are fulfilling what they said they would do, and where they fit in the market. I hope that would be the way forward; but it would be odd for there to be nothing, so long as people are in receipt of privileges.

  489. It is the timescale I am arguing about rather than whether or not you are doing it. The fact is, ten years ago Channel 4 putting on the Kama Sutra would have been unthinkable.
  (Ms Hodgson) Nobody can know, clearly. All one can know is what the current situation is. You can look, as I have said, at digital households. The current behaviour in digital households is a fair guide. You can also look at America, which had had multi-channel television for 20 years. We still see the networks there commanding 50 per cent of viewing. Everybody's guess is as good as anybody else's; but since we are in a position of having to decide how to manage the transition from where we are now to where we are going to be, to tear everything up and throw it away when we do not know, I think we would be wiser to manage the transition with the lightest possible touch—being clear where there are one or two things of public interest value that we may wish to support.

  490. Lastly on this area, you did say the nine o'clock watershed has large public support. Is this part of the survey you have done?
  (Ms Hodgson) Yes.

  491. Could I shift to the ownership restrictions on ITV. As you know, I was involved with the problems that arose between STV and Grampian, which I gather now have been solved, but they do show problems that can arise in terms of the regional nature of ITV output when one company owns more than one franchise. If the restrictions are lifted in this area, how can we ensure that in fact the regional content of the ITV companies is maintained?
  (Ms Hodgson) The officials who are drafting the bill are drafting this at present. We said to them, "You've got two options": clearly, you could anticipate the consolidation of ITV and move towards a single licence with particular regional requirements; or you could continue to issue regional licences, albeit they are owned by two or possibly eventually one company. There must be something to be said for retaining the idea of regional licences; because you can include in those licences the kind of obligations that Parliament may feel are necessary—such as production in the regions; possibly, indeed, representation of local people within the business that is actually conducted in the regions. We have suggested a charter for the regions that would embody those two requirements in any bill going forward.

  492. You think this will work, or you hope it will?
  (Sir Michael Checkland) Certainly all the consultations emphasise the important regional role. I think it is something the ITC takes very seriously as something we wish to pursue in the way Patricia has described. I think it is crucial that we do maintain local franchises, local obligations, and local people being involved in the running of those companies.

  493. Do you have a view on switch-off, when it should happen and how it should happen?
  (Ms Hodgson) I do not have the magic solution. It must, I think, depend upon the broadcasters providing it, currently on a commercial basis, and there are some commonsense things we can do. For example, if we were able to confirm that the current spectrum arrangements for the six digital multiplexes would go forward and will not be re-planned we could free up possibly as much as half again of the spectrum that ONdigital currently has; and that could be used by new media operators or ONdigital or others to drive and give a sense of confidence to current services. As we get to the real conundrum in a few years' time of how we switch over the last however many it is, we have a number of things we can look to. We have the £400 million the ITV companies currently pay the Treasury which can be in a pot. We have the spectrum that will be freed up at the switchover, which is fair incentive for companies that will be running a combination of broadcast and new media services. I do not have the solution but I think we can begin to see some of the pieces in the jigsaw.
  (Sir Michael Checkland) It may be that it needs to be not only technically driven but programme driven. It may be that the discussions going on about BBC3 and BBC4, which ought to be universally accessible because they would be funded by the licence fee, would be a more appropriate thing to switch over as a major development in programming in this country, and could well be part of the move. To move that final 30 per cent is going to be very hard indeed without a programme proposition.

  494. Particularly when you look at how many people still have black and white televisions. Do you have a view as to whether or not the answer in the short run will be to provide those households that do not have one with a free digital box when, by then, the actual cost will be minimal?
  (Ms Hodgson) I imagine it is inevitable that something like that will have to happen. The balance that everybody is wrestling with is not destroying the commercial businesses that are currently driving take-up too soon; or landing ourselves with an un-affordable free give-away. We have to do as much as we possibly can commercially. Nobody is yet certain of what the size of the problem will be when we get to that final switch over.

  495. It is not just to put the plug into the BBC against the welter of opposition which seems to be coming from elsewhere. The fact is one of the major barriers to take-up is that the BBC provides such good programming people have no desire to go for anything else.
  (Sir Michael Checkland) I do not think the BBC has been a significant factor in switchover yet.

  496. Not in switchover, but the fact that people do not switch over because they can get good broadcasting without having to switch over.
  (Sir Michael Checkland) We must find something to encourage the final 30 per cent or so. I think it would be a mistake to actually throw the BBC service in too early, not well funded, and not able to commission powerful originated production, because what is lacking at the moment in all the new channels is originated production.

  497. Absolutely.
  (Sir Michael Checkland) It is use of archives; it is acquired material. What we want is strong production in new channels, and that needs to come later rather than now, I think.

  498. And will be very largely done by the BBC, it seems to me?
  (Sir Michael Checkland) Yes.


  499. We are moving into niche broadcasting now. If you look at the last few months we have seen the opening of a new arts channel, Artsworld, which has presumably got only a few hundred thousand viewers, if that.
  (Sir Michael Checkland) Less.

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