Joint Committee on The Draft Communications Bill Appendices to the Minutes of Evidence


APPENDIX 6

Supplementary Memorandum submitted by the British Internet Publishers' Alliance (BIPA)

1.0  WHAT IS BIPA?

  1.1  The British Internet Publishers' Alliance (BIPA) was formed in December 1998. It comprises a number of substantial newspaper and magazine publishers and commercial broadcasters, several of whom made early and significant investments in pioneering Internet services. BIPA has grown rapidly in size and influence in the past four years. A full list of current supporters is attached at Annex 1.

  1.2  The core purpose of the Alliance is to promote the growth and development of new Internet services in a way which permits a wide diversity of entrants to the market, on a free and fair competitive basis.

  1.3  On 22 May 2002 BIPA circulated a list of questions to members of the Joint Committee relating specifically to the sessions which had been planned with the ITC and OFT.

  1.4  The most pressing problem facing British Internet publishers is the scale and scope of the activities of the BBC, which have grown rapidly and without effective regulatory control. While there is clearly a legitimate migration from broadcasting to Internet provision, there is also a legitimate migration from publishing to Internet provision. The interests of the latter need to be addressed effectively in the legislation, if a fair and plural market is to flourish. At present the size of the BBC's activities, together with the total lack of clarity about its future ambitions, have created a severely distorted market in which commercial provision is being crowded out.

  1.5  While there is much to admire in the BBC's Internet provision (and it would be remarkable were it not so, given the generosity of the budgets deployed), the healthy development of British Internet publishing requires a fair, transparent and predictable commercial framework. In particular:

    —  There is an urgent need for the BBC's Internet activities to be more rigorously scrutinised to ensure fair competition (for example the digital curriculum plans; the distortions created and amplified by high levels of marketing with risk-free Licence Fee money; and continuous cross-promotion across all BBC media);

    —  All BBC Internet services should be subject to prior scrutiny and ongoing assessment in the same way as new BBC digital television services;

    —  In the longer-term and by 2006 at the latest, the BBC should be fully under OFCOM in common with its competitors across the media landscape;

    —  As a first step OFCOM should initiate a comprehensive competition inquiry into the market impact of the BBC's existing Internet services.

2.0  KEY ISSUES

2.1  Self-Regulation of the Internet

  BIPA supports the Government's decision to exclude the regulation of the Internet from the scope of the Bill. As with print, both editorial and advertising content remain properly subject to the law of the land in terms of libel, obscenity etc, and also to industry self-regulation.

2.2  Internet Publishing and the BBC

  2.2.1  BIPA acknowledges that the BBC has a legitimate right to migrate to the Internet, but there must be clearer rules than currently exist. We believe that the Joint Committee could play a key role in addressing this issue, particularly in the light of the Government's decision to exclude the BBC from much of OFCOM's future remit.

  2.2.2  Over recent years the Government has permitted the rapid expansion and increasing commercialisation of the BBC's Internet offering, apparently by treating the original BBC Online service and newly branded "BBCi" as an extension of its broadcasting remit. There appears to have been an underlying assumption that a state-funded national champion would benefit the UK position in the Internet market.

  (This has been accompanied by the specious post facto justification that the dominance of the BBC's Internet expansion has delivered for the public at a time when the "dot.com boom " has proved a failure. BIPA members represent serious publishers, not transient traders, and many of them were investing in the medium well before the BBC.)

  2.2.3  In reality, broadcasting and Internet publishing have significant economic and cultural dissimilarities. While the BBC has a right and duty to make its existing provision available on new platforms like the Internet, overall regulation, and the development of a plural market, calls for a different approach, and different safeguards.

  2.2.4  The differences are fundamental: broadcasting remains a medium with a high cost of entry, and high ongoing production costs. The bulk of viewing is attracted to a very few channels, which are licensed and regulated. Although the BBC is the biggest single broadcaster, it faces strong competition for audiences from well-funded and highly-visible rivals (such as ITV) who enjoy significant market share.

2.2.5  In the Internet market the reverse is true: it is a market more analogous to print. Lower entry costs create the potential for a multiplicity of suppliers, which need not be licensed and regulated like broadcasters. In this evolving market, however, the BBC's dominant position directly inhibits the entry of competitors who are much smaller, lack the Corporation's ample and secure funding, and lack the power of its branding, its cross-promotional advantages, and its now considerable promotional budgets. This has raised particular problems for those companies in the private sector wishing to develop Internet services of their own.

  2.2.6  In short, the BBC dominates serious Internet publishing in a way that it has never dominated the broadcasting market since the introduction of commercial television in 1955. For this reason the public service argument in respect of the Internet is quite different. The public interest calls for a new regulatory regime, which can consider the impact of BBC Internet activities on the wider provision of choice.

  2.2.7  A "once-and-for all" blanket approval, given at the time of the original launch of BBC Online in 1998, has been used by the BBC to justify the launch of a wide range of new services which compete head on with the private sector including: an ISP (freebeeb.net); BBC branded content provision via mobile, email and PDA platforms as well as on-board planes and more recently trains, as well as the launch of their controversial new BBC search engine.

  2.2.8  The BBC, through its public funding and privileged position in terms of branding is vastly bigger than its competitors and therefore dominates the Internet "content" market (ie news, sport and entertainment). The Corporation's claim that it only attracts less than 1 per cent of total UK online traffic as measured by "page impressions", is highly misleading, leading to an inaccurate measure of the relevant market size and its own impact within that market.

  2.2.9  The BBC intensively cross-promotes all of its services, including its Internet and new digital TV services, across its unique multi-media network of TV, radio, magazines and Internet. This advantage, comprising promotions, advertisements and trailers (during and between programmes) is entirely unavailable to the private sector.

  2.2.10  The BBC announced at the beginning of the year they were deploying an annual promotional budget of £20 million for their digital services. In terms of the rest of the market, this is a huge sum, larger than that of, say, Coca-Cola (which spends approximately £15 million in the UK). If even only a small proportion of it is devoted to the promotion of BBC Internet sites, it vastly outstrips the combined promotional budgets of the BBC's many commercial competitors. In the context of the Internet it threatens to be a disproportionate and highly damaging use of public money. It should be noted that this £20 million is additional to the significant value of the BBC's self-promotional opportunities through its existing broadcast media.

  2.2.11  It is in the public interest that these distortions and imbalances be rectified. In respect of traditional print media, the draft Bill rightly stresses the Government's objectives of plurality, diversity and consumer choice. These values are equally desirable in the newer technology of Internet publishing. It cannot be in the long-term interests of consumers to allow an outcome in which serious Internet publishing is overwhelmingly dominated by the BBC, with commercial competitors driven out by the scale of its resources and lack of clear regulation. At present there is no effective structure to ensure fairness and to deliver plurality.

3.0  WHAT THE BILL SHOULD DO:

  3.1  If the BBC's services are to remain largely overseen by DCMS rather than OFCOM, (at least until the time of the BBC's Charter renewal) then it is imperative that new service approvals should be much more specific. In terms of the BBC's Internet services, clear boundaries need to be set which would give clarity to commercial competitors, in the light of which realistic business plans and sensible investments could be made.

  3.2  Firstly we urge the Committee to request the full set of documents which relate to the BBC's original request to expand its public service offering to the Internet (as BBC Online in 1998). This should include the Government's requests for assurances that the BBC's plans would not unfairly compete with the private sector and the BBC's evidence given at the time. An analysis by the Joint Scrutiny Committee will be necessary in order to assess whether these assurances were adequate and relevant to the emerging market in the first place and whether or not they have in fact been met. At present, there is no publicly available documentation relating to BBC service approvals (eg for News 24 and BBC Online).

  3.3  Secondly we ask the Committee to query whether, in the light of the BBC's expansion into a whole range of additional services (see paragraph 2.2.7 above), the practice of issuing blanket approvals can be sustained. This further analysis should include reference to the BBC's own Fair Trading Commitment.

  3.4  We recommend that in future OFCOM should be given a role in a revised approvals process. It is no longer tenable in a highly complex market to allow the BBC to expand its Internet services unchecked, on the grounds that these merely form part of their public service, without additional and prior approval. Under the current regime, the Board of Governors is clearly an inappropriate body to monitor adherence to agreed approval criteria, since it is involved in the whole prior process of seeking such approvals. DCMS officials have neither the time nor professional skills for detailed work of this kind.

  3.5  Just as the ITC has offered expert advice on the market impact of the current proposal for the BBC-3 digital television channel, so OFCOM could be the expert professional body to monitor adherence to other approved services. As a first step OFCOM should be required to investigate the market impact of the BBC's existing Internet service.

  3.6  Finally we urge the Joint Scrutiny Committee to unpick the confusion of roles and responsibilities between OFT, OFCOM and the Competition Commission, which as proposed in the draft Bill threaten to shuttle issues and parties between conflicting regulators.

June 2002

Annex 1

MEMBERSHIP THE BRITISH INTERNET PUBLISHERS' ALLIANCE

CHAIRMAN: Hugo Drayton, Telegraph Group

  Associated New Media

  Capital Radio

  Commercial Radio Companies Association

  Chrysalis

  EMAP

  Guardian Unlimited

  Independent Digital

  News International Plc

  The Publishers Association

  Trinity Mirror New Media

  Telegraph Group Ltd

Annex 2

Briefing sent to members of the Joint Committee for the Sessions taking place on 23 May (ITC) and

27 May 2002 (OFT)

  The British Internet Publishers' Alliance (BIPA) represents the interests of commercial internet publishers who are committed to ensuring a free and competitive internet environment. BIPA will in due course be submitting written evidence to the Committee concerning issues of fairness and market distortion on the Internet. There are however a number of broader issues of practice and principle, concerning the impact of new BBC services, which may be pertinent to raise with some of your early invited witnesses, most notably the ITC and the OFT.

  With respect to the ITC, on the current question of approval for the new digital BBC3 Channel, the Commission has become involved for the first time representing the interests of commercial broadcasters who feel that the BBC's proposals will make heavy inroads into their income. The ITC put together research for Tessa Jowell on the commercial impact (which it assesses at £25 million per annum, against the BBC submission figure of £4 million.)

  The wider questions are relevant to the areas of the draft Bill which relate to the application of competition policy to the BBC's broadcasting channels, and we believe their Internet services. Pertinent questions include:

  1.  Compared with the requirements of commercial broadcast licences, are the current criteria for approvals for new BBC services sufficiently clear, and adequately open to public examination and comment?

  2.  The ITC has become involved assisting the DCMS assessment of the market impact of the new BBC digital television channel BBC-3.

    Does the ITC think that OFCOM might have a similarly useful role in advising the Secretary of State on the broader sector implications of all new BBC services?

    Given the BBC-3 discussions, is such an involvement now necessary in view of the impact of BBC services on commercial competitors?

  3.  If OFCOM is not to have this input, can increasingly complex judgments of commercial impact be handled effectively either by departmental civil servants, or by the BBC Governors?

  4.  Should OFCOM have a professional role in monitoring whether or not the BBC meets the remit of particular service approvals? Again, if not OFCOM, have departmental officials or BBC Governors the resources (and in the latter case the manifest impartiality) to fulfil this function?

  5.  Should OFCOM be specifically empowered to apply competition policy to the BBC, or at least to advise the Secretary of State on competition related issues?

With respect to the Office of Fair Trading (OFT) the core issue is the degree to which it (or after the enactment of the Bill, OFCOM too) has adequate power to ensure that the BBC's Fair Trading Commitments are adequate in themselves, are fully transparent and are subject to effective scrutiny and, where necessary, appropriate sanctions.

  Where the private sector has referred concerns about unfair competition to the OFT, there appears to have been a reluctance to act. Consequently the BBC maintains an apparent record of fair play. In our evidence to the Committee we will furnish more of the details of this but in the meantime the key question is whether the structure of self-regulation is sufficient for an increasingly complex market. Key questions include:

  1.  How often have questions concerning the market effect of BBC services been referred to the OFT?

  2.  Does OFT treat issues concerning the BBC in the same manner as those concerning purely commercial organisations?

  3.  The BBC is required to comply with its Royal Charter and Agreement, and to observe its Fair Trading Commitment. Do these in any way replace or reduce the impact of general competition law on the BBC, or the willingness of OFT to apply it?

  4.  New BBC services are approved by the Secretary of State for Media Culture & Sport. Does OFT believe that these approvals are

  (a)  conducted with proper regard to their impact on fair trading, and

  (b)  sufficiently precise and public in their terms?

  5.  If the special status of the BBC protects it from the full rigours of competition law, does this—should this—apply to all BBC activities of whatever kind and scale, even if not directly related to broadcasting?

  6.  What specific competition powers should OFCOM be able exercise in these areas?

  7.  DCMS has commissioned an enquiry into BBC News 24 by Richard Lambert. Is such a one-off enquiry a sufficient test of the delivery of the BBC's agreements on this service, and its effect on the market?

22 May 2002


 
previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2002
Prepared 5 August 2002