Supplementary Memorandum submitted by
the British Internet Publishers' Alliance (BIPA)
1.0 WHAT IS
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
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
3.0 WHAT THE
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
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
CHAIRMAN: Hugo Drayton, Telegraph Group
Associated New Media
Commercial Radio Companies Association
News International Plc
The Publishers Association
Trinity Mirror New Media
Telegraph Group Ltd
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
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
5. If the special status of the BBC protects
it from the full rigours of competition law, does thisshould
thisapply 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