(XI) OFCOM AND THE BBC |
364. The draft Bill reflects the Government's commitment
since the Communications White Paper to bring the BBC within the
regulatory ambit of OFCOM with respect to tiers one and two (other
than regulation of impartiality requirements) but to maintain
the existing arrangements for tier three regulation of BBC services
by the BBC Governors. The self-regulatory positions of the BBC
and other public service broadcasters will be more closely aligned,
but backstop powers will remain with the Secretary of State for
Culture, Media and Sport and with Parliament through Charter renewal.
The Government considers that the legislative process underway
ought not to pre-empt the full review of the BBC Charter and Agreement
to be completed by 2006.
Tessa Jowell went slightly beyond this position in oral evidence
when she said:
"I hope that the legislation
will settle the regulatory position of the BBC and it will settle
the model of dual regulation of public service broadcasting, with
the impact of OFCOM where relevant on the BBC, so that the focus
of Charter renewal can be, not on the system of regulation or
financing, but the broader purposes of the BBC."
365. The draft Bill itself makes little detailed
provision with respect to the BBC. The Government proposes to
legislate only on those matters where the BBC is already under
statutory requirements which the draft Bill preserves, namely
quotas for independent productions and the duty to publicise complaints
procedures and related activities of OFCOM.
366. As we have explained in paragraphs 213 to 215,
the BBC has to comply with Competition and State Aid requirements.
In addition to the BBC's continuing internal compliance procedures
in respect of its own Fair Trading Commitment, which represent
an important element in the BBC's governance, OFCOM will become
the external regulator with responsibility for assessing complaints
of anti-competitive behaviour and applying its concurrent powers
to prevent anti-competitive behaviour. We recommend that,
for the avoidance of doubt, Clause 144 be amended to state that
OFCOM has functions in relation to the BBC under Part 5 of the
Bill in respect of competition law.
367. Beyond the specific provisions in paragraphs
1 and 2 of Schedule 8, it is proposed that OFCOM's functions in
relation to the BBC should be determined largely by the terms
of the Agreement between the BBC and the Secretary of State for
Culture, Media and Sport.
On 31 May the Government published its proposals, as agreed with
the BBC Governors, for amendments to this document.
368. We explored with the BBC and Tessa Jowell whether
OFCOM ought in future to be a party to the Agreement, in view
of the key role of the document in determining OFCOM's work. The
BBC argued that, since the effect of the Agreement was comparable
to that of legislation governing OFCOM's work, there was no justification
for OFCOM to be a party to the Agreement, any more than it can
be a signatory to the Communications Act.
Tessa Jowell thought that "OFCOM not being a party to the
Agreement is absolutely fundamental to the architecture of the
369. The BBC's written evidence provided some useful
clarification on the process leading to the final amended Agreement.
The BBC rightly pointed out that the new Chairman of OFCOM would
have the opportunity to comment on the proposed Agreement before
it is concluded.
The BBC also indicated that it expected the final Agreement to
"mirror the provisions of the Bill as enacted", so that
any changes made to tier one and tier two regulation during the
parliamentary process (other than those relating to matters of
impartiality) are likely to be reflected in the Agreement.
The BBC also stated that, "following consideration of points
made by the Scrutiny Committee and in the public consultation,
a draft Agreement will be prepared, to be published and laid in
Parliament during the passage of the Communications Bill".
These statements by the BBC are welcome, and should be matched
by the Government. We recommend that the Government, in its
response to this Report, confirm its intention to ensure that
the provisions of the revised Agreement with the BBC mirror those
of the Communications Bill as enacted. We further recommend that
the Government publish an initial text of the proposed revised
Agreement at the same time as the Communications Bill.
370. The importance of Parliament having a full text
of the proposed revised Agreement is highlighted by some of the
inadequacies of the document issued on 31 May. For example, that
document states that the Agreement will require the BBC to "publish
annually a statement of programme policy and report on performance
against that policy".
ITV argued that there should be a requirement to issue separate
statements for each channel.
When we put this point to the BBC, they told us that it was their
intention to have a separate statement for each public service
channel. We welcome
this decision, but are surprised that it is not reflected in the
amendments proposed. We recommend that the revised Agreement
require the BBC to publish annually a statement of programme policy
in respect of each of its public service television channels and
report on performance against each policy.
371. ITV raised a similar point with respect to original
production targets. It is proposed the BBC will agree with OFCOM
"the proportion of broadcasting time across its Home television
services taken as a whole which will, as a minimum, in each year,
be allocated to the broadcasting of original productions or commissions".
ITV saw no good reason why original production conditions should
not apply to individual public service channels.
Nor do we. We recommend that the revised Agreement require
the BBC to agree original production conditions with OFCOM for
each of its public service television channels.
372. Several areas were identified in evidence where,
it was suggested, the proposed amendments to the Agreement did
not mirror the terms of the draft Bill. Both the BSC and the ITC
expressed concern at the absence from the document of any reference
to payments of charges by the BBC to OFCOM.
The Government confirmed in response to a request for information
by us that it was considering how to provide for such payments
and expected that "a further amendment to the BBC's Agreement
with the Secretary of State will be required to embody the BBC's
obligations regarding payments to OFCOM".
We recommend that the Government set out in its response to
our Report the proposed mechanism for determining payments of
charges by the BBC to OFCOM and ensure that the final Bill or
the Agreement as necessary give effect to these arrangements.
373. The Radio Authority told us that it was "nonplussed"
at the absence of any reference in the proposed amendments to
BBC radio services. Therefore, while the draft Bill imposes format
obligations on independent radio licensees, no comparable provision
appears to be made for the BBC. The Authority understood that
this was "merely a drafting oversight".
The oral evidence of Gavyn Davies suggested otherwise; he said
that he did not find the absence of reference to radio surprising
"since the Bill does not apply tiers two and three to radio
We recommend that, in its response to our Report, the Government
set out its intentions for the role of OFCOM in respect of BBC
radio services. We recommend that the revised Agreement require
the BBC to publish annually a statement of programme policy in
respect of each of its radio channels and report on performance
against each policy.
374. The ITC was concerned at the absence of any
requirement on the BBC to provide information to OFCOM in the
same degree and format as the other public service broadcasters.
Clause 229 imposes a duty on S4C, which like the BBC is not subject
to tier 3 regulation by OFCOM, to provide any information OFCOM
may reasonably require for the purposes of carrying out its functions
in relation to S4C. The BBC told us that it had no desire to block
the provision of information to OFCOM in respect of its functions
under tiers one and two and was happy for the matter to be in
the Agreement, but it did not want to have to provide information
to OFCOM on matters not pertaining to that body's duties in respect
of the BBC. We
recommend that the proposed Agreement require the BBC to provide
OFCOM with such information as OFCOM may reasonably request for
the purpose of carrying out its functions under Clauses 144 and
181 and Part 1 of Schedule 8.
375. Although the BBC will be required to comply
with OFCOM's non-financial sanctions under tiers one and two,
the Government is yet to come to a view on whether OFCOM ought
to be able to impose financial penalties on the BBC.
The ITC, the BSC and the Radio Authority all considered that financial
sanctions ought to apply to the BBC, not least in fairness to
The ISBA argued that a fine imposed on any broadcaster, whether
the BBC or a commercial broadcaster, had the same effect in potentially
reducing the sum available for programming.
The BBC contends that, "for commercial companies, fines provide
a disincentive to break the rules, since they reduce the value
of the company involved. The same consideration does not apply
to the BBC, where any fine would effectively penalise licence
payers, not the BBC."
We find this argument unconvincing: if this logic were pursued,
it would be hard to justify OFCOM fining Channel 4, since such
fines would be reducing the value of a public corporation. Extensive
and repeated payment of fines by the BBC would be a waste of licence
payers money, for which the BBC and its Governors would be held
publicly accountable. This seems to us a reason for the BBC to
so arrange its activities as to ensure that it does not incur
such penalties, and not an argument for immunity from such penalties.
We recommend that the proposed Agreement empower OFCOM to fine
the BBC in respect of breaches of tier one and tier two obligations
(other than those relating to impartiality) in the same way and
to the same extent as other broadcasters.
376. The role played by the BBC has been central
to the unique development of public service broadcasting in the
United Kingdom. This role, and the BBC World Service, are widely
seen across the world as a success story. Concerns have been raised
both about the scope of the activities covered by the BBC's interpretation
of its public service remit and about the scale of the BBC's commercial
activities. However, as the BBC rightly pointed out in evidence,
the BBC has been required by the Government to increase its commercial
revenue to support the public service role that the BBC is expected
to perform. The
potential tension between the desirability of the BBC expanding
its commercial activities to support its primary public service
role and the market impact of the BBC's activities must be borne
in mind by the Government and OFCOM in consideration of the BBC's
377. During this inquiry we received considerable
evidence on future governance arrangements of the BBC. Some argued
that the BBC ought to be brought under OFCOM in respect of tier
Others supported the maintenance of the current arrangements.
Some put the case for returning to the relationship between the
BBC and OFCOM once the latter body had built up a track record
as a regulator.
378. The Government intends to embark upon the process
of Charter review in 2004.
We expect that the range and scale of issues to be considered
during that process will be just as important to the future of
broadcasting and the media in this country as those that we have
considered during our inquiry into the draft Communications Bill.
379. We believe that the relationship between the
Communications Bill as enacted and the review of the BBC Charter
and Agreement due to begin in 2004 could usefully be clarified.
If not, there is a danger that the passage of the Communications
Bill could provide an opportunity for an unstructured debate on
the review of the BBC Charter which could detract from full consideration
of the important matters raised by the Bill itself. We recommend
that the Government, in its response to this Report, set out its
initial proposals on the manner in which it envisages review of
the BBC Charter being conducted.
700 Cm 5010, paras 5.6.4, 5.6.7; Policy, para
Proposed Amendments to the BBC Agreement, para 5. Back
Q 1021. Back
Schedule 8, paragraphs 1 and 2. Back
Clause 144. Back
QQ 503-506; Ev 218, paras 2.6-2.7. Back
Q 1016. Back
Ev 218, para 2.6. Back
Ev 218, paras 2.3-2.5. Back
Ev 218, para 2.4. Back
Proposed Amendments, para 34. Back
Ev 439, para 26. Back
Q 512. Back
Proposed Amendments, para 22. Back
Ev 439, para 24. Back
Ev 28; Appendix 107. Back
Ev 409. Back
Appendix 106, paras 8-9. Back
Q 513. Back
Ev 1. Back
QQ 507-511, 518. Back
Policy, para 5.4.4; Proposed Amendments, paras 31-32. Back
QQ 28, 46; Ev 1; Appendix 106, para 15. Back
Ev 499, paras 3.8-3.9. Back
Ev 174, para 3.6. Back
Q 527. Back
Ev 439, para 22; Ev 533, para 2.7; Ev 499, section 3; Ev 494,
paras 5.10-5.13; Ev 477; Ev 221, para 46; Ev 381; Ev 470; Ev 550;
QQ 38, 825-826. Back
Ev 331, para 6; Ev 299, para 6.3; Ev 439, section 5; Ev 484, section
4; Ev 620; QQ 496, 800. Back
QQ 39, 827; Ev 511. Back
Q 1020. Back