Ofcom publishes its second consultation into the future of Public Service Broadcasting

25 September 2008

25 September 2008

  • £145-235 million of replacement public funding needed by 2012 to keep public service programmes in addition to the BBC
  • New research shows the high value which audiences put on having more than one PSB provider  
  • Proposals to reduce PSB obligations on ITV from next year to sustain viewers' priorities until 2014  

Ofcom today published the second phase of its review of Public Service Broadcasting ( PSB). The review finds that in order to sustain PSB programmes on channels other than the BBC, some £145-235 million in replacement funding will be required by 2012.

Ofcom research shows the high value which audiences put on the provision of public service content outside the BBC even when faced with the possibility of having to pay for it.

Today's review also proposes reducing the obligations on ITV plc and the other channel 3 licensees next year to make the provision of highly valued programmes – original British content and news - more sustainable until the initial expiry date of the existing licences in 2014.

The biggest changes - which prioritise peak time coverage - involve a restructuring of ITV's regional news services in England and the Scottish Borders.

Audiences demand choice of public service content in the long-term …Video briefing Peter Phillips introduces Ofcom's Second Public Service Broadcasting Review: Phase Two - Preparing for the Digital Future PSB Phase 2 Launch - Stakeholder Briefing at Riverside House, London, 25|09|08 Riverside House, London, 25|09|08

Responses to Ofcom's first PSB consultation in April and further research for the second phase of Ofcom's PSB review confirms that audiences clearly value content which meets public service purposes, and regard high quality UK made content as a vital element of this. Television continues to be the main medium for this content, but audiences are enthusiastically taking up the opportunities of digital media, especially younger audiences.

Key findings from new audience research show that:

  • 9 out of 10 people do not want the BBC to be the only provider of public service content in the future;
  • audiences value highly PSB alternatives to complement the BBC. Three quarters of people are willing to pay on average up to £3.50 per month for PSB services on ITV, Channel 4 and five; and
  • a majority of people want ITV1 to continue to provide regions and nations news to complement the BBC.

…But pressure on the current system is mounting.…

Ofcom's analysis confirms that commercial PSBs (ITV1, Channel 4, five) and cable and satellite broadcasters will continue to deliver in sport, entertainment, archive and acquired programming that is made in the UK. But it underlines that some types of UK-made public service content are increasingly commercially unattractive, such as current affairs, nations and regions programming, challenging drama, scripted comedy, and drama and factual programming for children. This is made worse by the deterioration in the advertising market since Ofcom's first consultation document was published in April.

In addition the value of regulatory subsidies to the commercial PSBs (e.g. privileged access to the airwaves) which have paid for delivering these types of public service obligations will decline as we approach the completion of digital switchover. Specifically:

  • The value of ITV1 licences will be significantly lower than the cost of their current obligations before 2012. If ITV is to remain a public service broadcaster at least until the end of 2014, its public service obligations will need to be reduced.
  • Ofcom's latest analysis shows that by 2012 Channel 4 will need replacement funding of around £60-100 million if it is to sustain investment in public service content. Ofcom believes it is a priority to clarify Channel 4's future role and economic model.
  • If audiences continue to want to enjoy the same level of public service content they have today, Ofcom's estimates show that total public funding of between £330 - 420 million is likely to be required in 2012, in addition to the core licence fee. Ofcom estimates that existing regulatory subsidies would contribute around £185 million towards that total, leaving a likely gap of £145-235 million.

….And long term models for PSB in the future need to be refined.

In its first consultation Ofcom set out four possible models for delivering PSB in the future. Responses from audiences and stakeholders showed virtually no support for a "BBC only" model. Ofcom's analysis shows the importance of an effective BBC as the cornerstone of PSB, and also shows strong advantages in Channel 4 remaining as an institutional element of any new system.

As a result, and based on audience and stakeholder feedback, Ofcom has refined each of the remaining three models as follows:

  1. Evolution model: the BBC, ITV1, Channel 4 and five continue to have PSB obligations. ITV1's obligations would focus on content made in the UK origination and international news. Additional funding would be required for nations and regions news. Channel 4 would have an extended remit to innovate and provide distinctive public service content across platforms, with additional funding. Five's role would focus on broadcasting programmes made in the UK, in particular children's programming and news.
  2. BBC/Channel 4 model: the BBC and Channel 4 receive public funding and regulatory assets. Channel 3 licensees and five lose their PSB status and benefits. Funding to provide content for the nations and regions and potentially local news and children's content would be open to a wide range of potential providers.
  3. Competitive funding model: Funding to provide public service content to complement the BBC would be opened up to competition. A wide range of providers (in addition to ITV1, Channel 4 and five) such as online providers, multichannel broadcasters, or other types of media organisations, could all bid.  Tenders might not specify particular forms of content or methods of distribution, but would depend on a providers' ability to deliver the purposes of public service broadcasting and deliver reach and impact. The BBC would remain the cornerstone of PSB provision.

Further feedback and analysis confirms that several possible sources of funding for PSB to complement the BBC remain credible choices. Indeed, audiences would prefer to have more than one funding source. The main choices include: direct public funding; the licence fee funding if the £130m per annum switchover surplus is retained; licence fee funded assets such as a stake in BBC Worldwide; privileged access to the airwaves; or some form of communications sector levy.

Decisions about the funding and structure of future PSB delivery lie with government and Parliament. Ofcom's further work for this second phase of its review underlines the need to signal no later than 2010 to existing PSBs what their long term role and funding will be, with new legislation in place no later than 2011.

…Action is needed now to ensure commercial PSBs' obligations are realistic, sustainable and meet audiences' demands

Ofcom believes that ITV and five should retain important PSB roles for at least as long as the current licence terms, which continue until 2014.

But if significant adjustments are not made now, our analysis shows it will not be possible for ITV1 to balance the costs of holding its licences with the benefits. Therefore choices need to be made to create a sustainable structure for the next few years.

Ofcom believes ITV1 should be focused on programmes made in the UK, network news, and nations and regions news, especially in peak time. For ITV1, Ofcom is proposing the following:

  • ITV plc: prioritising prime time regional news by reducing the volume during the daytime. Protecting newsgathering within a new pattern for regional news in which some material is shared between Border and Tyne Tees; West and Westcountry; and Meridian and Thames Valley. To prioritise regional news, we propose that the minimum quota for regional non-news programmes should be cut from 30 minutes to 15 minutes on average per week. Any change to programming requirements would be subject to the outcome of this consultation and would not take place until Ofcom has issued its formal statement following the consultation.
  • ITV Wales/STV/UTV : peak time news output remains unchanged, but the minimum volume of 'non-news' programmes in Wales, Scotland and Northern Ireland from 2009 would be cut from 3 hours to 1.5 hours per week.
  • ITV network : in line with the proposed priorities for ITV, the quota for original UK production remains unchanged. The volume of current affairs programmes in peak time remains unchanged but the minimum volume outside peak would fall by 40 minutes per week. The quota for programmes produced outside the M25 would reduce from 50% to 35%. This is in line with the ITV quota up until 2004.

Five should be focused on programmes made in the UK, network news and UK children’s programmes. For five, Ofcom is proposing the following:

  • five: a small adjustment to five's current quota for original productions from 53% to 50%, with a reduction from 42% to 40% in peak time. Alongside this, Ofcom welcomes five's commitment to enhance the delivery of children's programmes.

The funding solutions for Channel 4 are a matter for government. Provided new funding arrangements are put in place Ofcom proposes the following:

  • Channel 4: the quota for programmes produced outside the M25 should increase from 30% to 35%, within which there would be a new quota for Channel 4's production in the devolved nations from 2010.

Ed Richards, Ofcom Chief Executive, said: "Audiences value public service programming highly, but strong digital TV takeup means it is becoming harder for our leading commercial broadcasters to provide this. We have provided a clear set of choices for maintaining and strengthening public service broadcasting in the future. Along with our proposals in the short term, timely decisions by government and Parliament will be critical."

Next steps

Ofcom's consultation closes on 4 December 2008. Ofcom expects to publish a final statement in early 2009. Government and Parliament will make a final decision on the future funding of PSBs and, if appropriate, legislation by 2011.


Public Sector Broadcasting in the Nations and Regions

What does this mean for Scotland in the short term?

  • Ofcom accepts that ITV's proposed merger between Border and Tyne Tees news should go ahead.  This will include separate 15-minute sections in the main Lookaround weekday programme for viewers in either area, together with separate late-evening bulletins. ITV have given a commitment to include an average of six minutes of Scottish news within the 15-minute section.  The Border and Tyne Tees programmes may be ‘hubbed’ from studios in Gateshead.
  • In recognition of increasing financial and competitive pressures, Ofcom proposes the reduction of minimum requirements for non-news programming from 3 to 1.5 hours per week from 2009, but with peak time and current affairs obligations remaining.
  • STV will need additional funding sooner than any other nation in the UK in order to maintain its public service obligations. This is likely to be from 2010. Ofcom research shows viewers in Scotland value programmes made in and for Scotland. They value plurality beyond the BBC for both news and other content - although they value non-news less highly than news.

What does this mean for Scotland in the long term?

  • In all models additional funding will be necessary to maintain news provision on commercial PSBs.
  • In order to maintain STV's services at or close to their current level, extra funding from public sources at the UK or Scottish Government level will be needed.
  • In the Evolution model, o ur proposals mean there could be a single channel 3 licence for Scotland in future.  Any Channel 3 PSB licence after 2014 would be likely to cover the whole of Scotland - the Scottish part of the Border region would be incorporated within an all-Scotland service, possibly regionally split into North, Central and Borders. In this model similar nations-based licences would exist for England, Wales, Northern Ireland and the Channel Islands.
  • The competitive funding model would allow for the entry of new Scottish PSB providers.
  • We propose to raise Channel 4's out-of-London quota from 30% to 35% from 2010, and to introduce a new quota for Channel 4's productions from Scotland, Wales and Northern Ireland, also from 2010. These would be aligned to new long term funding arrangements for Channel 4.

Vicki Nash, Director Ofcom Scotland said "These proposals reflect the wishes of people in Scotland to sustain public service broadcasting in the new economic reality of the digital television age.''

What does this mean for regional news and other provision?

Today's consultation includes proposals to ensure ITV1 continues to meet audiences' demands for high levels of UK programmes - including UK nations and regions news- whilst balancing this with the considerable pressures ITV faces today.

To achieve this Ofcom proposes to relax ITV's obligations in several areas and is seeking views on the following.

  • Border and Tyne Tees news to be merged, but with separate 15 minute sequences in the main weekday programme for viewers in the Border and Tyne Tees areas and separate late-evening bulletins.
  • ITV West and Westcountry news to be merged, but with separate 15-minute sequences in the flagship bulletin and separate late evening bulletins
  • Thames Valley ( a former amalgamation of part of Central South and Meridian West) to be absorbed into an expanded Meridian region, with 15 minute sequences for Meridian South-East and Meridian South/Thames Valley
  • Sub-regional output within single licence areas (Central east and west; Yorkshire north and south; Anglia west and east) to be reduced in volume, but retaining short sequences in peak-time programme and after News at Ten;
  • The weekly volume of regional news to be reduced from 5 hours 20 minutes to 3 hours 45 minutes by dropping the weekday mid-morning bulletins and weekend lunchtime bulletins.
  • The requirement for a quota for 'other' non-news programmes in the English regions to be met through an average 15 minutes per week of current affairs and other factual-programme elements, which may be delivered within news slots (this in addition to the 3 hours 45 minutes of weekly news output);
  • The quota for network current affairs to be reduced from 1 hour 30 minutes per week to 50 minutes per week from 2010 (40 minutes in peak);
  • ITVs quota for spend and volume of out of London network production to be reduced from 50 per cent to 35 per cent from 2009.

These changes can take place with retrospective effect from the beginning of 2009.

Stewart Purvis, Partner, Content and Standards said "We regard the provision of regional news for England as an essential requirement for any future model of PSB. The aim of this agreement is to ensure a framework is put in place at a realistic level to enable ITV to continue to meet audience's needs, especially for prime time regional news."

Sustainable provision for Northern Ireland in the short term…..

Ofcom's research shows that audiences in Northern Ireland attach particular importance to programmes made in and for Northern Ireland.  This is especially true for news, where audiences here have told us they want to maintain competition to the BBC.

UTV has a very strong heritage of producing popular programmes, but Ofcom has to be realistic about how much local programming commercial PSB channels like UTV can afford to produce in the face of growing financial and competitive pressures as we move towards digital switchover.

Ofcom is proposing some reductions in the amount of programming UTV has to produce but in response to audiences' clear preferences Ofcom is particularly concerned to prioritise news.

Therefore, Ofcom proposes UTV's minimum hours of local news to reduce from 5 hours 20 minutes to 4 hours per week, while the weekly quota for 'non-news' programmes will drop from the proposed 3 hours to 1.5 hours in 2009.  Peak, near peak and current affairs quotas will remain at their current levels. We would stress that these are minimum requirements and UTV will be free to produce more if they wish.

.….and in the long term

Ofcom proposes three future models for how the public service broadcasting system might adapt. For Northern Ireland, long term changes are likely to revolve around whether ITV remains a designated public service broadcaster, with formal obligations to provide local programming in the UK nations.

Under the refined 'evolution' model, the Channel 3 licence structure could be simplified. News and other content for Northern Ireland could either be delivered through UTV as a nations' based licensee, or through a single UK licensee. New funding is likely to be required.

Under the other two models (BBC/Channel 4 and Competitive funding), UTV would be able to bid for funds to deliver news and other content, as would other providers.

UTV currently relies on networking arrangements with ITV, whereby UTV pays for the ITV1 network schedule, into which it slots local programmes.  If the ITV network schedule was no longer available, it is possible that UTV could partner with another broadcaster from elsewhere in the UK or the Republic of Ireland in order to provide a schedule.  However, it is for UTV to make its own commercial decisions in relation to its current relationship with ITV and any possible future partnerships.

Our research shows that channels from the Republic of Ireland are widely available and watched in Northern Ireland and this provides a degree of choice not found elsewhere in the UK.  Consideration might also be given as to how this could be maintained, or even improved, in the long term.  Decisions on this matter are for the UK and Irish governments and the broadcasters.

In Northern Ireland there are two local community TV services serving Belfast and Londonderry/Derry. Ofcom proposes to auction packages of spectrum freed up by the digital switchover which could be used to create local digital TV services.

What about indigenous language broadcasting?

Indigenous language broadcasting is an important part of the UK's PSB landscape and there are formal obligations regarding broadcasting in Welsh, Scottish Gaelic and Irish arising from both the European Charter for Minority Languages and existing UK legislation.  In the case of Northern Ireland, the Good Friday Agreement commits the Government to making TG4 available in Northern Ireland, and Ofcom has already recommended that TG4 becomes available on Freeview in Northern Ireland after digital switchover in 2012. The Agreement commits the Government to supporting Irish language production in Northern Ireland as well. Ofcom recognises that Ulster Scots is also important to some audiences in Northern Ireland.

Ofcom welcomes proposals from BBC Northern Ireland to increase the amount of Irish language and Ulster Scots programming.  However, there is perceived concern at the lack of a consistent approach to funding for indigenous languages in the devolved nations in the long term.

What is the future for local production?

Provided its long-term future funding is appropriate, Channel 4 is set to increase its production from Northern Ireland (as well as Scotland and Wales) which combined with the BBC's commitment to produce 17% of its output from the nations and regions, 3% of which will be from Northern Ireland, should mean more programming from and about Northern Ireland on UK television in the future.

Denis Wolinski , Ofcom Director for Northern Ireland said:

"Viewers in Northern Ireland clearly value the programming made by UTV and BBC Northern Ireland - and they want both of them to continue providing local programmes, particularly local news. Ofcom is trying to sustain this service, despite the increasing commercial pressures facing UTV and the wider ITV network."

"It is strongly in the interest of viewers in Northern Ireland to retain public service programming from UTV at a realistic level rather than risk losing such delivery altogether. The proposed reductions to UTV's quotas should give UTV room to breathe while they consider their long term relationship with ITV and what their alternatives might be."

“Commitments from Channel 4 and BBC to show more locally-produced programmes should help our production sector and improve how Northern Ireland is portrayed.”

Sustainable ITV News provision in Wales

Our research from phase 1 showed a clear demand for plurality in the supply of news and current affairs for Wales - 91% of respondents thought it was important for ITV Wales as well as BBC Wales to provide programming for Wales. Despite the extensive economic pressures faced by ITV, Ofcom has secured a sustainable settlement which balances the available resources with viewer expectations.

Rhodri Williams , Director Wales, Ofcom said "It is strongly in the interest of viewers in Wales to retain public service programming from ITV at a realistic level rather than risk losing such delivery altogether."

In 2009, ITV Wales news provision would be reduced from 5 hours 20 minutes to 3 1/2 hours. This means that ITV Wales will still screen Wales Tonight in the early evenings but it will no longer be required to broadcast the weekday mid-morning bulletins and weekend lunchtime slots.

The requirement for non-news programming will be reduced from 3 hours (previously set for 2009) to 1.5 hours, but the Current Affairs provision within this total, will be maintained at 47 minutes per week. In addition the requirement that 45 minutes of non-news programming must be screened in peak (along with 30 minutes near-peak) will be maintained, ensuring that the bulk of these programmes will be shown at prime time.

New long term models

All of the models proposed by Ofcom for securing the long-term future of PSB include a key role for S4C in its provision of Welsh Language programming.

In order to sustain English language PSB in Wales in the long-term, Ofcom has refined its original four-model proposal to three. Ofcom has suggested that within the Evolution model a stand-alone Channel 3 licence could be created for Wales (rather than for Wales and the West of England as is currently the case).

A competitive funding model would allow for the entry of new Welsh PSB providers.

What does this mean for the Channel Islands in the short term?

  • In line with the changes to the English Channel 3 regions it is proposed to reduce Channel TV's combined news and current affairs quota to 4 hours per week. Channel TV is free to transmit more than this minimum if it wishes

What does this mean for the Channel Islands in the long term?

  • Ofcom has analysed the future viability of the PSB licences in the UK and Channel Islands. The analysis compares the financial benefits of holding a Channel Three PSB licence with the cost of the obligations which accompany the licence. The benefits include access to the spectrum which allows PSB broadcasters to transmit directly to viewers. The costs include making the programmes such as Channel Report which are a public service to those viewers.
  • Ofcom's research suggests that at present the benefits and costs of holding the PSB licence for the Channel Islands appear broadly equal. Channel TV's broadcasting business is presently at break-even. While this position is not likely to improve under current market conditions Channel has other businesses including the provision of compliance services to the ITV Network. While there have been suggestions as to how the current system might be altered it is important to note that any changes in this area would require Ofcom's agreement. It is also covered by the Granada/Carlton Merger Undertakings so the approval of the relevant competition authorities would also require careful consideration.