Examination of Witnesses (Questions 380
THURSDAY 8 FEBRUARY 2001
380. It says that it will not pay it because
it is pure profit to you?
(Mr Rhodes) That cannot be correct because the conditional
access régime is based on cost recovery. The régime
which Oftel regulates entitles us to earn a reasonable return
on the costs that we have incurred in putting in place the platform.
To describe it as pure profit cannot be correct.
381. How much is the BBC paying you to be on
(Mr Rhodes) That is governed by a confidentiality
clause in our agreement with it. I am content to write to you
privately about that.
382. It is quite significant. We do not deny
you the right to make a profit, but the BBC is effectively paying
a great deal of licence fee money for the privilege of appearing
on your platform?
(Mr Rhodes) At the time that the BBC signed the deal
with us it publicly stated that satellite distribution was cheaper
than DTT distribution.
383. What does it pay to be on the various cable
(Mr Rhodes) I am not sure what it pays for its new
channels, but its two universally available channels are must-carry
384. So, they do not pay anything?
(Mr Rhodes) There is no payment for those.
385. Therefore, it pays you. For example, it
does not have to pay anything to ntl?
(Mr Rhodes) But it is not taking a conditional access
service from ntl. It takes a specific technical service from us,
and we are required by European legislation to charge people for
that service on a non-discriminatory basis.
386. I do not argue with your right to make
(Mr Ball) It is not to make a profit; it is to recover
the investment in the platform.
387. You argue that the new BBC services should
not duplicate commercial services. Would that not mean that the
commercial sector could prevent the BBC being able to develop
into any new market regardless of the kind of product that is
put up against it?
(Mr Ball) We are not saying that. We would be happy
if the BBC was subject to scrutiny by OFCOM as far as any new
channels that it might launch. The concept of market failure is
the one that we should like to see applied to the question whether
there is a need for a public service broadcaster to go into new
areas which are already satisfied by commercial channels.
388. Who is to say that they are satisfied?
Who makes that decisionyou as a commercial company?
(Mr Ball) OFCOM could be the vehicle that scrutinised
these new channels and decided whether there was a need to spend
licence-payers' money on them. BBC News 24 is an example. There
are already 24-hour news channels, for example Sky News, CNN and
ITV's 24-hour news channel. The BBC is now providing one. I do
not believe that there was any test to see if there was market
failure in the provision of news. It may be a good thing for the
BBC to have a news channel. It does not rate particularly well
and costs a fair bit. But we argue that the new proposed regulator
OFCOM should have power to scrutinise any plans that the BBC might
have to go into new digital channels.
389. It was suggested to us yesterday that in
some of these areas the problem might be that the commercial services
offered particularly in niche areas could be driven out by the
ability of the BBC to come in, mirror it and then push them out
of the market. The argument the other way is that there is a particular
role for public service broadcasters in new services to provide
those niche areas because the commercial market will not do it?
(Mr Ball) I totally agree that if the commercial market
does not satisfy those areas the BBC should provide those channels.
However, I do not believe that that is the BBC's plan. To give
you an example, the BBC launched News 24. We have a 24-hour news
channel which has been in existence for 11 years. A number of
operators to whom we supplied that channel on commercial terms
dropped it because the BBC was giving away a news service. Therefore,
we took a commercial loss because of it or had to renegotiate.
There is less plurality or availability of 24-hour news coverage
in the home. There was not a market failure in the first place.
I should like to see that kind of area being addressed by OFCOM.
I should like OFCOM to have the ability to test the need for any
service that the BBC intends to launch.
390. Do you say that if the BBC's 24-hour news
service had been set up prior to your service which was set up
11 years ago you would not now go into that market place?
(Mr Ball) I am not sure that I am saying that. We
might have other reasons for deciding to have a go at it. For
example, ITN has come into the market later. But it would certainly
have been a tougher decision to make. I cannot say that we certainly
would not have decided to go in.
(Mr Gallagher) ITN has also come in at marginal cost
on the back of its existing news operation. The cost was reported
to be about £15 million for the new channel. It is difficult
to see new entrants coming into the news market and assuming the
full cost, so in a way that can limit plurality and foreclose
entry to additional voices in the market.
391. Obviously, you have done quite a good deal
of market research into your age profiling and what channels people
are taking up. Have you done any work as to whether people have
found satisfaction with digital because of the quality or the
services or channels on offer?
(Mr Ball) What drives the business is, first, the
availability of additional channels and so greater choice; and,
secondly, the ease with which one can navigate through the channels
using an electronic programme guide. People like that very much.
The third factor is perhaps the quality improvements in digital.
The fourth factor would be the kinds of services that can be wrapped
around digital. Earlier we were asked how we appealed to an older
audience. The e-mail and e-commerce services through the television
set will eventually play to the older demographic profile. But
choice still comes first.
392. Do you see it developing slightly differently?
We have been talking about the possibility of obtaining new passports
and driving licences and sorting out benefits, child support matters
and so on. That might alter the priorities of how people look
(Mr Ball) It could. There would also be phenomenal
savings to both government and companies if those services could
be provided through the television. This year Sky is launching
bill settlement of the Sky account through the television, which
is obviously a benefit to us. We are speaking to various telecommunication
providers about telephone bill settlement over the television.
We are still on the nursery slopes in that respect, but eventually
the television will become a means of running the household, as
much as one uses it for entertainment.
Chairman: Gentlemen, thank you very much
indeed. It is always a pleasure to see you. We are grateful to
you for your answers.