A Sound View of Public Service Broadcasting

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A SOUND VIEW OF PUBLIC SERVICE BROADCASTING

Richard Hooper
Chair of the Radio Authority

Speech given on Tuesday 29 January 2002 at the Broadcast Conference ‘The future of public service broadcasting’

According to the New Statesman a couple of weeks ago "the future has been cancelled" so far as the communications revolution is concerned. I don’t agree, although I think we all understand that convergence is happening at a different rate, and more unevenly, than its proponents tried to persuade us was the case a year or so ago. And, as we approach the brave converged new world of OFCOM, I believe that the need to re-think public service broadcasting (I’ll define what I mean by it in a moment) is as relevant today as it ever was, if not more so. The changes which are happening demand that we are absolutely clear on this key component of the broadcasting mix.

The shareholder pressures on commercial broadcasters (television and radio) are leading irrevocably across the world to ever greater consolidation of ownership, ever greater concentration on those target audiences which advertisers want to buy and/or which can afford high subscription payments, ever greater belief that they are in the business of giving listeners and viewers what they want, and an ever greater sense of justification that whatsoever interests the public is somehow automatically "in the public interest". As a result, the plurality and diversity of broadcasting would diminish in the absence of a strongly funded and self-confident system of public service broadcasting.

James Jones, the Bishop of Liverpool, said in a lecture last autumn: "The Market has emerged as the latest moral arbiter so that if an idea sells then it’s cool and right. In a culture where choice and the right to choose are elevated to a moral principle, whatever the individual chooses in the marketplace is good and right and not to be denied so long as it does not harm anyone else at least visibly in the short-term."

How much simpler it would be if competitive broadcasting markets could yield the plurality and diversity we seek. Even in a world of infinite spectrum, even in a world where subscribers pay for their broadcasting directly not just via advertising intermediation (this is well established for TV but pay radio barely exists), I have seen no evidence that broadcasting market forces alone can ever produce what many people in this country treasure from broadcasting. Hence the need for publicly funded, public service broadcasting.

Broadcasting is not unique in this regard - the same arguments work in the performing arts - theatre, ballet and opera. For hundreds of years, the success of the performing arts has been driven above all by public or private subsidy not solely by the operation of audiences paying at the box office or advertisers advertising in the programme. By acknowledging this, one is not attacking commercial players, but one is acknowledging the real limitations of profit-seeking endeavour and the proper contribution of true public service.

Where broadcasting and telecommunications differ

I think this is where, in the new OFCOM environment, a key distinction between broadcasting and telecommunications can be made. With one exception (to which I will return in a moment), the action of competition can yield the range of consumer benefits in telecommunications - low prices, quality of service, range of products etc. The regulator, Oftel today, OFCOM tomorrow, mimics competition in the face of incumbent monopoly players like BT. As a result sectoral telecoms regulation should disappear when telecoms markets, fixed, mobile, internet access, are sufficiently competitive.

The exception is the reasonable requirement that all citizens of a country, not just those in affluent cities, should have access to telecommunications as part of network operators’ universal service obligation. If telecoms was just left to the market, then people living in remote areas just would either not be offered service at all or it would be at prohibitive rates. That is clearly not in the public interest.

But broadcasting markets will never yield the cultural objectives of plurality and diversity (nor universal service ie 98% transmitter coverage) however competitive they are. Indeed the more competitive markets become, the less diverse and plural, and the less universal, could be radio and TV output. This is especially true of advertising-supported free-to-air broadcasting since there are demographic groups that advertisers are not interested in. In relation to universal service objectives, the last few percentage points of national transmitter coverage, for example in remote rural areas, are exponentially expensive for ever smaller numbers of people.

Thus OFCOM, which will regulate broadcasting and telecommunications, will have two top level objectives, neither of which should be allowed to dominate the other, both of which should be held in tension the one with the other. One objective is competitive markets, and the other is the promotion of the cultural public interest with specific objectives such as plurality and diversity. These two objectives – competition and culture - map across respectively to the major concerns of OFCOM’s two sponsoring departments – DTI and DCMS.

Public service broadcasting defined

Let me spend a moment on definitions (debates about public service broadcasting without time spent on definitions are pointless). At the heart of my definition of public service broadcasting (and public service theatre such as the National or Royal Shakespeare) is the obligation to do things which commercial companies cannot and will not do. This is multi-dimensional in that it can mean many different things

addressing audiences (over 55 yr olds for example) that advertisers are not interested in

creating programming that will only ever have small audiences

innovating with programme forms and talent which may fail

producing a quality of output that the market cannot afford to invest in but which raises the bar for commercial competitors

offering the Reithian ‘what audiences need’ not just ‘what audiences want’

But, and here’s the rub, a public service broadcaster like the BBC or a public service theatre like the National, has also to be popular given that the population as a whole is paying for them. In search of "what audiences want" the BBC has Eastenders and the National Theatre has South Pacific. It is interesting to note the very large audiences that Walking with Dinosaurs/Beasts got last year – programmes that are probably too expensive for commercial operators to invest in and thus are at the heart of the BBC’s public service remit. Both wide popular appeal and public service! It is also interesting to compare American musicals done at the National Theatre with those done by the commercial theatre – the latter has to save money on numbers of dancers and the quality effect is "thinner".

So how do we handle commercial broadcasters? What does the public interest require for them in their use of scarce public spectrum? How do we regulate public service broadcasting? How do we achieve plurality with the creation of new media ownership rules?

UK radio as a useful paradigm

I think radio in the UK serves as a splendid paradigm for working out these issues. I want to focus on three of them in particular:

Commercial radio’s obligation to broadcast in the public interest

BBC radio and BBC radio regulation

Achieving plurality via new ownership rules

Commercial radio broadcasting in the public interest

Our argument is straightforward. If, like the Independent National Radio (INR) stations stations Classic, Talksport and Virgin, you purchase publicly owned and valuable (because scarce) spectrum via an auction process then to a large extent your public interest obligations have been met by cash payments to the Treasury (in the case of INR £10 million last year).

In our recommendations for the new Communications Bill, INR stations should still be required to meet the very simple format obligations in the 1990 Act, and they should still be required to meet the content and engineering standards set out in our Codes of Practice. But otherwise they should to a large extent be unregulated.

If you don’t buy your spectrum but get it free, which is the case for all local and regional radio stations, then present legislation - and the logic of this argument - do require you to meet certain obligations which come with the privilege of a licence. Local commercial stations, getting spectrum for free, are obliged to stay within the format which won them the original licence against other competitors in the beauty parade system of licence awards.

A crucial element of formats is localness, as localness is at the heart of the political intention in the 1990 Broadcasting Act. This is probably the toughest area for the regulator at a time when advertising is in recession and shareholders are demanding cuts in costs to save profits.

Other aspects of regulating in the public interest include ensuring the provision of reliable and impartial news and information and providing for diversity of choice for listeners in all demographic sectors across the UK in both speech and music. This thinking was one of the elements which led us to license Saga Radio in the West Midlands last year.

There are commercial operators who would prefer the Australian system – auction the spectrum for local radio and enforce no format regulation or public interest requirements beyond acceptable content and engineering standards. We on balance prefer, and believe that politicians prefer, beauty parades and free spectrum with sensible obligations enforced by the regulator – with a light touch but not a soft touch. We believe that the Communications Bill will continue to follow that line of thinking.

BBC radio

BBC radio is I believe a very good example of my definition of public service broadcasting (better in my view than BBC Television). BBC radio, as a whole, manages to balance both the drive for popularity with the drive to do things that commercial operators cannot do. Yet commercial operators feel that BBC radio, in terms of individual stations, enjoys a lightness of regulatory touch from the Governors which commercial radio does not enjoy from its regulator, the Radio Authority.

The example usually quoted by commercial radio companies is format regulation. The BBC is perceived to be much freer to change formats, than commercial stations (Radio 2 is usually the example quoted). My own solution is to ensure that the BBC, sooner or later, comes under the regulatory auspices of OFCOM. It is perverse to go to all the trouble of creating a converged regulator from the five existing bodies and then leave out the largest single TV and radio broadcaster – the BBC. In competitive markets, major players whether or not they are commercial cannot also be regulators, a principle well established in European telecommunications.

Plurality

Let me finally turn to plurality issues, a key cultural objective for OFCOM.

The Radio Authority has already agreed with the commercial radio industry an approach to new media ownership rules – an approach that has been positively received by Government. At the national level the current points system should be given up and instead ownership should be subject to competition authorities only. At the local level, we have suggested the ‘3 plus the BBC rule’.

In any market of sufficient size, there shall be a minimum of three commercial owners plus the BBC. The Government in its consultation document on Media Ownership Rules has suggested that the ‘3 plus the BBC rule’ could also be used for terrestrial free to air television, where a minimum of four owners should be required (ie three commercial plus the BBC).

This leaves the need to agree new rules for cross-media ownership – an important part of the pluralism story. Should, for example, national newspapers be able to own TV stations and radio stations (leaving aside any competition concerns)?

I am happy to announce today our recommendations on cross media ownership in response to the Government’s consultation. The Radio Authority recommends that cross-media ownership in the UK should be governed not by share of voice calculations (the exchange rate mechanism sadly just does not work), not by share of revenue calculations (revenue shares are relevant to competition regulation not to diversity and plurality), but by an elegant, we believe, extension of our ‘3 plus the BBC rule’.

Let me give three examples of the rule as applied to cross media ownership:

A national newspaper or national TV channel should be allowed to own one but not more than one INR station (thus allowing two other INRs, in separate ownership, plus the BBC). Thus DMGT could own the Daily Mail and Classic FM for example.
A local newspaper group or local ITV company can own a local radio station in its circulation/broadcast area if there are two other radio stations not so owned (thus allowing two not so owned plus the BBC), with some modifications for the very smallest areas.
A national newspaper can own not more than one national terrestrial free to air TV channel (thus allowing two not so owned plus the BBC).

The application of the ‘3 plus the BBC rule’ to cross media ownership has the merit of certainty, simplicity and transparency. The application of the rule would of course still be subject to competition considerations. The rule might possibly also be subject to an exceptional public interest test, but it has to be exceptional not routine. We want to get away from the current system of labour-intensive and opaque public interest tests which create considerable market uncertainty.

The rule might also be adjusted with an "and/or" qualification, ie a national newspaper can own either a national radio station or a national TV channel, but not both. Media ownership rules are intensely political decisions. Unelected regulators like myself may propose, but elected parliamentarians ultimately dispose.

The ‘3 plus the BBC rule’ will we believe guarantee a sufficient level of pluralism whilst allowing media groups to consolidate – thus the public interest in broadcasting can and should be protected, and balanced with the reasonable demands of the commercial interest.

Conclusion

In conclusion, let me reiterate. In the wonderful world of OFCOM, driven by convergence and a greater reliance on competition, the future of public service broadcasting has not, definitely not, been cancelled. Public service broadcasting will need to be brought into the regulatory equation accordingly.