Joint Committee on Draft Communications Bill Report


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.[700] 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.[701] 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."[702]

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.[703]

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.[704] 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.[705] Tessa Jowell thought that "OFCOM not being a party to the Agreement is absolutely fundamental to the architecture of the BBC's regulation".[706]

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.[707] 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.[708] 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".[709] 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".[710] ITV argued that there should be a requirement to issue separate statements for each channel.[711] 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.[712] 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".[713] ITV saw no good reason why original production conditions should not apply to individual public service channels.[714] 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.[715] 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".[716] 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".[717] 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 at all".[718] 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.[719] 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.[720] 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.[721] The ITC, the BSC and the Radio Authority all considered that financial sanctions ought to apply to the BBC, not least in fairness to other broadcasters.[722] 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.[723] 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."[724] 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.[725] 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 future.

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 three regulation.[726] Others supported the maintenance of the current arrangements.[727] 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.[728]

378. The Government intends to embark upon the process of Charter review in 2004.[729] 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 Back

701   Proposed Amendments to the BBC Agreement, para 5. Back

702   Q 1021. Back

703   Schedule 8, paragraphs 1 and 2. Back

704   Clause 144. Back

705   QQ 503-506; Ev 218, paras 2.6-2.7. Back

706   Q 1016. Back

707   Ev 218, para 2.6. Back

708   Ev 218, paras 2.3-2.5. Back

709   Ev 218, para 2.4. Back

710   Proposed Amendments, para 34. Back

711   Ev 439, para 26. Back

712   Q 512. Back

713   Proposed Amendments, para 22. Back

714   Ev 439, para 24. Back

715   Ev 28; Appendix 107. Back

716   Ev 409. Back

717   Appendix 106, paras 8-9. Back

718   Q 513. Back

719   Ev 1. Back

720   QQ 507-511, 518. Back

721   Policy, para 5.4.4; Proposed Amendments, paras 31-32. Back

722   QQ 28, 46; Ev 1; Appendix 106, para 15. Back

723   Ev 499, paras 3.8-3.9. Back

724   Ev 174, para 3.6. Back

725   Q 527. Back

726   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

727   Ev 331, para 6; Ev 299, para 6.3; Ev 439, section 5; Ev 484, section 4; Ev 620; QQ 496, 800. Back

728   QQ 39, 827; Ev 511. Back

729   Q 1020. Back

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