Examination of Witnesses (Questions 480
TUESDAY 13 FEBRUARY 2001
480. Mr Wyatt has asked you about the relationship
of OFCOM to the BBC. You as the ITC are able to look at all kinds
of activities in all of the organisations which are responsible
to you, which are basically all the broadcasting organisations
with the exception of the BBC, who are under the 1996 Act, and
some of the BBC's commercial activities come under the ITC. It
is stated in the press today, the Secretary of State for Culture,
Media and Sport has set up no fewer than three inquiries into
the BBC: one into the BBC's commercial activities, which is an
external inquiry; and two internal departmental inquiries, one
into BBC News 24, and the other into BBC Online. With the best
will in the world, that is very, very messy, is it not? It is
messy because of the fact that the BBC is not answerable to anybody
except its own Board of Governors. If the Government wants to
do something, or establish information for itself about this,
it has got to do this. Whereas if the BBC were answerable to the
ITC now, and OFCOM later on, then you could do this in an orderly
way without any apparent (and I say "apparent" because
I do not make any such allegation) government interference into
the independence of the BBC?
(Sir Michael Checkland) We would certainly see that
OFCOM would have a role at looking across broadcasting, including
the BBC, and advising the Secretary of State. I think I mentioned
some of the areas it might be looking at. News 24 might be one
of them; news services might be another. Certainly we would see
an activity. I think the approach to the BBC is appropriately
evolutionary; and that review of the overall role is best done
within the Charter. This rather complex process of bringing all
these organisations together on the economic and content side
is going to take time to settle down. When we move to 2004 we
will be looking in any case at the BBC Charter. It seems to me
evolutionary up to 2004 and then a review might be a most appropriate
way to go.
481. If you are talking about a complex process,
would it not be best to simplify it as much as possible? It is
very curious that the Secretary of State can announce that he
is setting up an inquiry into the BBC and News 24. On the other
hand, the Secretary of State has never regarded himself as having
any locus, other than to make statements about the shifting
of the BBC news. When ITV sought to shift its news you had a locus.
There might be arguments about how effectively you carried out
your role, but you had a very specific locus. Nobody has
a locus on that. It is mix and match, is it not? He can
do Online; he can do BBC News 24; he cannot do switching BBC news
from 9 pm to 10 pm. It is all very messy, is it not?
(Sir Michael Checkland) Evolutionary I would describe
482. The FCC in Washington does not have a content
regulator. Why are we so fussy about content, and how can we regulate
(Ms Hodgson) That may well be the case in 20 or ten
years' time. Where we are at the present is, I think there are
two differences between the broadcast world in its current state
of development and the Internet and broadband world: one is scale
(even the smallest cable and satellite channels will reach 100,000
people at any one time which, compared with the one-to-one use
of the Internet, is pretty significant); and the other is choice.
You make a positive choice to access an Internet site; broadcasting
still comes into your home unbidden. At present, although this
is obviously changing fast, 80 per cent of all viewing is to a
handful of terrestrial channels. All the evidence is that there
is still an appetite for two things: one that, with that kind
of power of broadcasting, there should be some accepted community
standards on those channels; something that has a little more
light and shade than the law might have; the watershed still commands
a great deal of support from families with childrenoverwhelming
support; and the other, as I began to say in response to Mr Fearn,
that the public service channels (and it was the will of this
House in the 1996 Broadcasting Act, and there will be a new opportunity
when the new Communications Act is debated) still give privileges
to the public service broadcasters; which, if you add the licence
fee together with the opportunity cost of spectrum and the less
than totally commercial schedules that those broadcasters run,
it is probably worth anything from £3.5-£4 billion.
When £3.5-£4 billion of public money goes into something
people generally would like to see it accountable, and would like
to know what value they are getting back. Those are the two bases
over managing the transition in a fast-moving sector of regulation
over the next ten years probably.
483. You will not be surprised that I disagree
with most of that. I agree with the nine o'clock if it is laterit
might even be earlier. As regards content, we do not have a content
provider for the publishing world or the newspaper world. I really
think there is a sort of paternal 1930s feeling about television.
That is an aside. That is how I feel about it. Do you feel that
radio has been given a high enough profile in the White Paper?
(Ms Hodgson) It is always difficult to give radio
its due. Undoubtedly it has been an extraordinary success story
over the last ten years; and, if the burden of your question is,
is the importance of ensuring within OFCOM that continues to be
the case, you must be right.
484. We had the community radio people in last
week and that is a very different public service, for which there
is no money for them currently. Do you not think it would be better
if OFCOM collected the licence fee, and if OFCOM decided on a
three or five-year rate that the BBC might receive 85 per cent
of it rather than 100 per cent of it so that other people who
wished to do public service, and wished to do public service broadcasting,
television or the Net, had access to a fund?
(Ms Hodgson) I can understand the force behind OFCOM,
that as technologies converge so regulation should converge. I
think all of us would be right to be concerned about too much
power and too much intervention from a body like OFCOM. I think
competition is the bedrock of this sector going forward. I would
be very concerned about a proposal that OFCOM started to receive
public money, decided what programmes people ought to watch and
dish it out. That would seem to me to be a move towards very substantial
intervention by bureaucrats that would be inappropriate to the
freeing up of the market that we hope to see.
485. Do you not think it is highly anomalous
that in the BBC you have an organisation which is the only organisation
in the country which is the recipient of hypothecated tax and
collects that tax itself, and even makes the rules on who pays
and who does not, unless the Government intervenes say with free
television licences for certain pensioners. Would not the arm's
length principle be better if the Government itself were not to
finance the BBC, if at least some arm's length organisation collected
that and had control over it?
(Sir Michael Checkland) I think the arm's length principle
is very difficult in practice. I have had a lot of experience
in the Arts Council, and bureaucratic processes get in the way
of the arts sometimes. I think Patricia is absolutely right in
saying that if we start getting a public service funding body
it will be far more difficult to generate the quality of broadcasting
which we have developed in this country. I think the three systems
of funding we have gotsubscription, advertising and the
licence feehave actually been a successful means of financing
quality broadcasting here, and we should not upset that. If I
go back to the early days of community radio, in the early days
of local radio we started that off in discussions with local authorities,
and got local authorities to fund the early experiments in local
radio. There are other ways in which community services can set
up stations than to move towards an argument which says, "Let's
have a public service broadcasting fund", which I do not
think would work.
486. But they are a public servicecommunity
(Sir Michael Checkland) Local authorities are there
representing the local community as well.
487. Local authorities are skint for money,
they really are. They are skint for money to provide basic services.
The BBC spent £60 million on BBC News 24a minute fraction
of that going to Radio Regen, which operates in one of the most
deprived areas in my constituency (there is a scheme with schools
in my constituency and radio stations), a few thousand pounds
would make all the difference from an organisation like that.
As I say, they cannot get their hands on anything. Manchester
City Council, with the best will in the world wants to clean streets,
mend houses and so on, has not got the money for it and yet, as
I say, the BBC has got £60 million to spend on BBC News 24.
It can do whatever it likes with all of the money.
(Ms Hodgson) If Parliament were to decide different
forms of funding, and there are probably many ideas on top of
carving something out of the BBC licence fee, I would be keen
that any such mechanisms did not flow through OFCOM. If you want
a neutral regulator that is trying to step back from the industryencourage
competition, only intervene when there are a series of overriding
public interests, such as universal service obligations, access,
proper matters for regulatorsit would be quite difficult
if OFCOM were trying to wear two hats all the time: one a player
and the other, as it were, judge and jury.
Derek Wyatt: I would welcome it to be
judge and jury. We must disagree again.
488. May I briefly start on what Mr Wyatt said
about content. Do you not think you are being very pessimistic,
or optimistic whichever it might be, if you really think you can
regulate OFCOM for another five to ten years?
(Ms Hodgson) As I said, 80 per cent of viewing at
present is to broadcasters that benefit from public subsidy in
one way or another. It would be curious if there was not some
accountability for the spending of that money. In digital households,
which give us a fair idea of future consumption, 50 per cent of
all viewing is to those publicly subsidised broadcasters, and
of course more in peak time. As long as Parliament decides that
there is a value to be derived from particular arrangements for
those broadcasters that provide particular kinds of programmes
and audiences demonstrate that they value that, it would be odd
not to have some accountability. I think it should be minimal.
I have been very keen since I arrived at the ITC for the ITC to
step back from any expressions of its own opinion about broadcasting.
We have set in train for the coming year a process where we will
ask the broadcasters to put forward their own proposals for how
they will fulfil their remit for the coming year, and then report
on it to their viewers (that is the public at large) at the end
of the year: seeing the ITC's role much more in terms of an objective
account of developments in the market, which should add value
both to public policy decisions made in this place, but also to
those broadcasters who can use that kind of independent assessment
of the market to assess whether they are fulfilling what they
said they would do, and where they fit in the market. I hope that
would be the way forward; but it would be odd for there to be
nothing, so long as people are in receipt of privileges.
489. It is the timescale I am arguing about
rather than whether or not you are doing it. The fact is, ten
years ago Channel 4 putting on the Kama Sutra would have been
(Ms Hodgson) Nobody can know, clearly. All one can
know is what the current situation is. You can look, as I have
said, at digital households. The current behaviour in digital
households is a fair guide. You can also look at America, which
had had multi-channel television for 20 years. We still see the
networks there commanding 50 per cent of viewing. Everybody's
guess is as good as anybody else's; but since we are in a position
of having to decide how to manage the transition from where we
are now to where we are going to be, to tear everything up and
throw it away when we do not know, I think we would be wiser to
manage the transition with the lightest possible touchbeing
clear where there are one or two things of public interest value
that we may wish to support.
490. Lastly on this area, you did say the nine
o'clock watershed has large public support. Is this part of the
survey you have done?
(Ms Hodgson) Yes.
491. Could I shift to the ownership restrictions
on ITV. As you know, I was involved with the problems that arose
between STV and Grampian, which I gather now have been solved,
but they do show problems that can arise in terms of the regional
nature of ITV output when one company owns more than one franchise.
If the restrictions are lifted in this area, how can we ensure
that in fact the regional content of the ITV companies is maintained?
(Ms Hodgson) The officials who are drafting the bill
are drafting this at present. We said to them, "You've got
two options": clearly, you could anticipate the consolidation
of ITV and move towards a single licence with particular regional
requirements; or you could continue to issue regional licences,
albeit they are owned by two or possibly eventually one company.
There must be something to be said for retaining the idea of regional
licences; because you can include in those licences the kind of
obligations that Parliament may feel are necessarysuch
as production in the regions; possibly, indeed, representation
of local people within the business that is actually conducted
in the regions. We have suggested a charter for the regions that
would embody those two requirements in any bill going forward.
492. You think this will work, or you hope it
(Sir Michael Checkland) Certainly all the consultations
emphasise the important regional role. I think it is something
the ITC takes very seriously as something we wish to pursue in
the way Patricia has described. I think it is crucial that we
do maintain local franchises, local obligations, and local people
being involved in the running of those companies.
493. Do you have a view on switch-off, when
it should happen and how it should happen?
(Ms Hodgson) I do not have the magic solution. It
must, I think, depend upon the broadcasters providing it, currently
on a commercial basis, and there are some commonsense things we
can do. For example, if we were able to confirm that the current
spectrum arrangements for the six digital multiplexes would go
forward and will not be re-planned we could free up possibly as
much as half again of the spectrum that ONdigital currently has;
and that could be used by new media operators or ONdigital or
others to drive and give a sense of confidence to current services.
As we get to the real conundrum in a few years' time of how we
switch over the last however many it is, we have a number of things
we can look to. We have the £400 million the ITV companies
currently pay the Treasury which can be in a pot. We have the
spectrum that will be freed up at the switchover, which is fair
incentive for companies that will be running a combination of
broadcast and new media services. I do not have the solution but
I think we can begin to see some of the pieces in the jigsaw.
(Sir Michael Checkland) It may be that it needs to
be not only technically driven but programme driven. It may be
that the discussions going on about BBC3 and BBC4, which ought
to be universally accessible because they would be funded by the
licence fee, would be a more appropriate thing to switch over
as a major development in programming in this country, and could
well be part of the move. To move that final 30 per cent is going
to be very hard indeed without a programme proposition.
494. Particularly when you look at how many
people still have black and white televisions. Do you have a view
as to whether or not the answer in the short run will be to provide
those households that do not have one with a free digital box
when, by then, the actual cost will be minimal?
(Ms Hodgson) I imagine it is inevitable that something
like that will have to happen. The balance that everybody is wrestling
with is not destroying the commercial businesses that are currently
driving take-up too soon; or landing ourselves with an un-affordable
free give-away. We have to do as much as we possibly can commercially.
Nobody is yet certain of what the size of the problem will be
when we get to that final switch over.
495. It is not just to put the plug into the
BBC against the welter of opposition which seems to be coming
from elsewhere. The fact is one of the major barriers to take-up
is that the BBC provides such good programming people have no
desire to go for anything else.
(Sir Michael Checkland) I do not think the BBC has
been a significant factor in switchover yet.
496. Not in switchover, but the fact that people
do not switch over because they can get good broadcasting without
having to switch over.
(Sir Michael Checkland) We must find something to
encourage the final 30 per cent or so. I think it would be a mistake
to actually throw the BBC service in too early, not well funded,
and not able to commission powerful originated production, because
what is lacking at the moment in all the new channels is originated
(Sir Michael Checkland) It is use of archives; it
is acquired material. What we want is strong production in new
channels, and that needs to come later rather than now, I think.
498. And will be very largely done by the BBC,
it seems to me?
(Sir Michael Checkland) Yes.
499. We are moving into niche broadcasting now.
If you look at the last few months we have seen the opening of
a new arts channel, Artsworld, which has presumably got only a
few hundred thousand viewers, if that.
(Sir Michael Checkland) Less.