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Home > Media and Analysts > Speeches and Presentations > 2004 > May > 25|05|04


25|05|04

Speech to Westminster Media Forum - Ofcom Review of Public Service Broadcasting

by Ed Richards, Senior Partner, Strategy & Market Developments, Ofcom

Let me start by welcoming Mark Thompson's appointment at the BBC - he is an excellent appointment and it is good news for the whole of broadcasting and indeed the UK more generally that the BBC now has both a first class Chairman and Director General.

In many ways it is a perfect week to have an opportunity to discuss the interim findings of Ofcom's PSB review published last month and to hear your reactions.

This is certainly a welcome opportunity to talk directly to you here this morning, many of whom were heavily involved in bringing the Communications Act 2003 onto the statute book.

It is an opportunity to bring you up to speed on the progress of the PSB review, to reflect on some of the feedback we have already had and in particular to let you know where Ofcom stands on some of the key issues.

As you are well aware, the purpose of the Ofcom PSB review is to answer two questions:

We have reported on the current effectiveness and have put forward an underlying case for PSB that can endure into the digital age. We have also put forward ten propositions that could flow from that underlying case - propositions that need interrogation and review.

We set out the propositions to provoke reactions and responses, while giving ourselves the opportunity to seek evidence or analysis that might prove or disprove them. We judged that a document merely setting out a list of questions would not move the debate forward. So we opted for a series of propositions for examination; propositions none the less which many linguistic alchemists have sought to turn into 'conclusions'. They are not conclusions - we have only completed the first of three phases of our review.

In this first part of our review, we have assessed the effectiveness of current delivery of PSB by the main terrestrial channels, taken as a whole. We used three criteria:

Our conclusion is that the five main terrestrial channels have partially but not completely met the collective remits as set out in the Communications Act.

But the overall story remains a good one - and one which we must not lose sight of. The UK TV system delivers an awful lot of what people want, it delivers many of our public policy objectives and often does so with class, style and panache.

The last five years have seen increased investment, and the five channels as a whole have consistently produced a broad range of varied programmes that audiences value and enjoy.

News, taken in the round, has been a success story - hours up, spend up (at least on BBC) and audiences not only believing that it is the most important component of TV, but also the vast majority think it is being delivered effectively.

Significant audiences have been attracted to some challenging issues - often where new, innovative approaches have been taken.

Not just Great Britons but The Secret Policeman. Not only programmes like Coliseum but also the dramas to mark the 25th anniversary of Bloody Sunday. A new wave of arts programming, stimulated in part by Five's initiative in this area but followed by major programmes on Michelangelo, Leonardo and now Van Gogh - not to mention the sustained quality of the South Bank Show. And also programmes that get to the heart of major contemporary issues - including for example Beneath the Veil and The Hadj on C4.

But our analysis has also identified some weaknesses:

Our Content Board are also looking at this issue, working with broadcasters and people in the regions to consider the options.

In order to make recommendations on maintaining and strengthening PSB in the future, we need to first understand the role for PSB as we move into the digital age. Our contention is that there is an enduring rationale for PSB.

There have been a variety of arguments used over the years but these can be summarised as the 'consumer' and the 'citizen' cases for intervention in the market for broadcasting.

We have already had some interesting comments on this view and are reflecting on this in light of the arguments made. But let me just briefly recap one or two of the key arguments.

It is certainly not our position that the consumer rationale has disappeared or that it will on January 1 next year. It is that post analogue switch off we will see the evolution of something approaching a reasonably well functioning market in broadcasting. Channel providers will be able to enter the market and reach the audience (unlike in the past), they will have multiple means of seeking to identify the value consumers place on their services (advertising funding, subscription or pay per view) and in turn consumers, through their own choices will be able to express their preferences - through what they choose to watch, what they choose to subscribe to or what they choose to buy on a per view basis.

With encryption and conditional access technology the public good problem in broadcasting will be reduced to a challenge which is not significantly different to any other industry with high fixed costs and low marginal costs. Books, publishing, the music industry spring to mind. As with these industries the solution is not to fund the product through state intervention but to devise ways in which the high fixed costs are recovered, often through a variety of different points of sale which reflect the different value consumers place on the product or service. That is precisely what windowing and conditional access technology enables in broadcasting - and precisely what the film studios have been doing for years.

Are there residual consumer market failures in this future broadcasting market? Let's wait and see how the argument develops but we should be clear - if what we don't like is the outcome of consumers expressing their preferences in an open market, then that is not a consumer market failure. It may be that we object to the outcome for other reasons - perhaps as citizens, perhaps on grounds of fairness or other social concerns - but we should not rest our case on claiming that the market has not worked, when that is precisely what it will have done.

Let me now move to where we think the heart of a long term rationale for a broadly based form of PSB really lies in the future.

We argue that there are four core purposes of PSB that reflect the potential of broadcasting (not just television) to benefit society more generally, beyond our interests as private consumers. Our argument is that the benefits, reflected in the core purposes will endure beyond digital switchover - beyond the creation of a more conventional consumer market. The purposes are:

Now it is clear that the market can and does provide programmes that meet these core purposes - Sky News, channels such as Arts World and the History Channel are just some examples. So we are not saying that the market will not deliver, rather that it will not deliver enough. That even in a digital world, there will be under provision of programming that meets these purposes.

To ensure that PSB is distinctive, that it is really adding qualitatively to what a well functioning market would provide, we suggest that our purposes need to be matched with demanding characteristics -

So, as well as serving the four core purposes, PSB programmes should also aim to be:

PSB should not be 'marginal broadcasting' or the 'Himalayan heights' - otherwise it will not be able to deliver the broader social benefits we have identified as its core rationale. It should be both entertaining and challenging - popular and setting a benchmark for quality, originality and innovation.

Sometimes that will be reflected in a mixed schedule. On other occasions it will mean using genre and format innovation to make more challenging issues more accessible. On other occasions, PSB will be about high ambition, setting the gold standard for quality within a broader market. And in a sense preceding all of these purposes is the one overriding capability of television, the one thing that draws in audiences and brings us to the television in such large numbers. That is entertainment, something television brings that other media cannot do in the same form or on the same scale. It is because it can entertain that television is an effective means of achieving public purposes, not that it can do these things instead of entertaining us.

Measurement

We have had a great deal of support for our core purposes, with the vast majority of people expressing broad support. We have also already had some interesting feedback. The most clearly expressed concern is that people feel they are on occasion a little too passive, that they need a little more edge. A stronger sense of broadcasting's role in a free society and of the ability to challenge authority, to put a contrary view, perhaps even on occasion an 'intolerant' point of view as one participant at a seminar put it. Of course we would welcome further feedback this morning.

A second concern is that they will be impossible to measure against - to hold a broadcaster to account.

We agree that it will be challenging, and that traditional 'box ticking' is inherently more easily measured. But our approach also means we give the broadcasters the creative freedom to find new and innovative ways to reach out to audiences, while also playing to their strengths. It allows regulator and broadcaster to concentrate on what matters most - the underlying purposes of PSB. If we force broadcasters to produce so many hours of a particular genre, we limit them to existing definitions and curb their creativity. Some of the best examples of public service broadcasting defy current genres, and we want to encourage that, rather than regulating to prohibit it.

Our analytical approach to this review could form a basis for evaluating the effectiveness of the broadcasters in the future - using a basket of qualitative and quantitative measures to assess output, input and value. Some of this is already available, audience data, hours and spend on programmes, reach and share. Research can give us qualitative evidence on audience appreciation and enable us to tap into expert opinion. More difficult, but by no means out of reach, are measures of innovation and originality. Indeed much has been done among the broadcasters on this subject already. We are now working with researchers, broadcasters and others to develop a robust but workable framework that fits into the current Tier 2 and 3 obligations.

Central components

Let me also take this opportunity to make our position on the near term a little clearer. We set out our view in the phase 1 document that the central components for ITV and Five should be news and original UK production (plus regional news for ITV1).

That is where we start and in addition to current affairs this reflects the will of Parliament as expressed in the tougher requirements of Tier 2 regulation, compared to the self-regulatory approach of Tier 3 set out in the Act. This provides a backbone against which we can make trade offs in the future should we need to do so.

There is an argument that we should move immediately to this minimalist position jettisoning all other expectations upon the commercial broadcasters as early as possible. Some will put this argument with force.

Equally, others will argue for the alternative view that ITV in particular remains in an extremely strong economic position and should be expected not only to maintain all current obligations but actually to strengthen them in some key areas.

Just to be clear, we will be assessing both these views. We anticipate responses making both cases. We will seek to make that assessment by reference to the Act, by reference to our core purposes and through a rigorous economic assessment of the main terrestrial channels' commercial position over the next five to ten years - a task that forms part of our phase 2 work. The Act gives Ofcom some regulatory discretion in relation to Tier 3 but also the ability to hold a line where we judge that it is necessary to do so in the public interest.

Propositions

Finally, a few words about our propositions. I am not going to walk through each of them since hopefully many of you here will be familiar with them by now. I would like to highlight one or two issues that have arisen.

The first point to note is that we have had widespread support for our proposition that competition in the provision of PSB is at the heart of an effective system. That a plurality of broadcasters seeking to deliver PSB purposes is a good place to be and to try and stay.

It was for that reason that we felt it was important, for the longer term, to examine the case for different funding streams and for the allocation of funding. This has been taken by some to signify a 'conclusion' that Ofcom wants to top slice the BBC. Not so. We want to assess the arguments for and against contestable funding, having first identified the possible sources of funding, including but not necessarily only the licence fee.

No one should be scared of this argument. There are good arguments for contestability, notably that having to compete for access to funds is more likely to deliver higher quality, better value for money and more innovation than where such a contest is absent.

Equally, and in particular in relation to the licence fee, there are strong arguments against:

Ofcom's aim in this area is simply to help weigh up the arguments and make recommendations that are in the interests of 'maintaining and strengthening' public service broadcasting - in line with our remit from Parliament.

In this context it is important to say that we see no outcome that does not include a strong, independent, effective and focused BBC. We set out even in our Phase 1 Report the view that there is a 'strong case for a BBC undertaking a wide range of activities which underpin the purposes and characteristics of PSB'. We also made clear that the critical questions about the licence fee are not whether it should exist but about the scale and scope of the licence fee and whether there is a case in the future for distribution to more than one organisation. There are also sensible questions about the range of BBC activities and the extent to which each one offers a distinctive contribution to achieving public purposes.

Digital Television

Finally, let me mention digital television. Ofcom has welcomed the rise of digital television. We published a report setting out what we think needs to be done to achieve digital switchover and discussions on that subject are underway. There is no doubt that we are going through a transition towards a digital world, let me conclude this morning by announcing the latest digital TV take up data that we release on a quarterly basis. It shows that:

So the world continues to evolve at a brisk rate. It's a good time for Ofcom's review, it's a good time for the BBC Charter review and it's a good time for a thorough public debate about these important issues.


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