Public service broadcasting in the UK has been sustained over many years by a mutually reinforcing mix of institutions, funding and regulation. This delicate balance will not survive the move to the digital age.
The historical compact in which PSB was provided by commercial broadcasters in return for access to the analogue spectrum will come under increasing pressure as the audience using analogue services declines and erodes the financial value of the licences to those who hold them. In this report, we conclude that a new model of provision will be needed in the digital age if PSB is to maintain its unique ability to reach millions of people with a plurality of suppliers providing distinctive content.
The digital model of PSB will be different from today’s analogue model: it will involve explicit and transparent public funding to replace the current opacity and implicit subsidies; it will involve a new mix of providers; it will involve a changing approach to regulation; and it will require the use of new distribution systems alongside conventional TV broadcasting.
Currently, ITV1, Channel 4 and Five receive approximately £400m a year in implicit subsidies for PSB. These subsidies result from their access to the analogue spectrum. By the time of digital switchover, the declining value of the analogue spectrum will have reduced these implicit subsidies close to zero.
We believe PSB in the digital age should not cost any more in real terms than the current £3bn public subsidy for the TV market. But there is a sound rationale, supported by the public, for replacing part of the current £400m implicit subsidy with explicit funding to maintain plurality and competition in PSB supply in the digital age.
The transition to the digital age will be challenging, but holds the exciting prospect of broadcast and other visual content with distinctive purposes available to all alongside a huge increase in consumer choice. This is our vision for maintaining and strengthening PSB
Parliament has asked Ofcom to report every five years on the health of public service broadcasting in television. We are asked to answer two questions. Firstly, 'How well are the existing public service broadcasters - the BBC, ITV, Channel 4, S4C, Five and Teletext - taken together, meeting the public service objectives that Parliament has laid down?' Secondly, 'What recommendations do we make to maintain and strengthen public service broadcasting in the UK in the years ahead?'.
In Phase 1 of our first report, we undertook a detailed and long-term analysis of the programming available on the main channels, and the audience's view of what they wanted, expected and watched. This addressed the first of Parliament's two questions. In our Phase 1 report, we also offered suggestions on the underlying purposes of public service television, in effect the 'why?' of PSB. We did so because we believe that this will provide a more enduring benchmark of what people want from PSB, against changes in the market, technology and viewing tastes, than simply the current 'what?' or 'how?'
We have consulted widely since the agreed date of response of Tuesday 15 June. We have received over 80 responses. We have held public debates around the UK, citizen juries, commissioned qualitative and quantitative research, liaised closely with all the key stakeholders, commissioned extensive economic modelling and analysis and looked at the main international comparators.
The responses to Phase 1 of our report bear out that a properly-funded BBC remains the central core of PSB; but that people do not want the BBC to have a near monopoly of its provision. Competition for quality drives innovation and keeps the BBC on its mettle. There was also strong support for the underlying purposes of PSB that Ofcom had suggested, as meeting both personal viewer preferences and wider social needs.
In this, Phase 2, of our report, we analyse market trends and expected changes in viewer behaviour over the coming years; and we offer some proposals to begin to answer Parliament's second question: 'How can we maintain and strengthen public service in television broadcasting in the years ahead?'.
Our central conclusion is as follows: public service broadcasting has been sustained and financed over many years by a mutually reinforcing mix of institutions, funding and regulation. It is now clear that this balance will not survive the move to a fully digital television age, which on current plans will complete by 2012.
The historical compact in which public service broadcasting was provided by the commercial broadcasters in return for privileges and discounted access to the analogue spectrum, will come under increasing pressure as the audience using the analogue spectrum continues to decline. The issue is not that the commercial public service broadcasters will cease to be viable, or even strong, businesses. It is that the set of incentives which have impelled the shareholder-funded businesses to provide public service broadcasting will disappear. The PSB licences could be traded in for fully-commercial licences, which are freely available in the digital age, and which carry none of the former obligations. That in turn will increase the pressures on the not-for-profit, but nonetheless advertiser-funded, Channel 4.
Some may argue that, since this is not an immediate problem, the PSB framework and its regulation should conduct a fighting retreat until the point of unsustainability is reached in three to five years' time. That is a respectable argument, but one we do not accept; and one that we do not believe best serves the citizen, the viewer or the consumer. Why? Because once that point is reached and absent prior measures, the PSB framework would be broken with nothing having been put in its place save monopoly provision from what would, in those circumstances, be an increasingly isolated BBC.
We do not believe that this outcome would be consistent with our statutory duties towards citizenship in this country, sustained in part through plurality and high quality public service television.
In this report we conclude that a new model for public service broadcasting needs to be developed now, before the surplus in this historical system disappears and the goodwill between public service broadcasters and the public declines.
Our aim is, as our parliamentary instruction, to create a framework that will maintain and strengthen public service broadcasting, not just in the short term but for the medium to longer term. The digital model for public service broadcasting will be different from today's analogue model in one critical respect: it will require explicit and transparent funding to replace the current opacity and implicit subsidies.
We have worked hard to ensure that our administrative timetable for Channel 3, Channel 5 and teletext licence reviews allows us to cast this framework simultaneously for all players. It also uniquely coincides with the BBC Charter Review and an opportunity to clarify the role of the public asset that is Channel 4. The alignment of all of these different pieces of analysis against a background of mutual agreement around the analogue switch-off date should make for
The proposals that we offer in this, our Phase 2 report, should be seen as a whole. They are designed to secure a strong BBC, properly funded by a licence fee model at the core of our country's PSB and competition for quality from several sources: firstly, a not-for-profit Channel 4 enabled to focus on its core public service objectives; a regime for the shareholder-funded broadcasters that plays to their natural PSB strengths in original UK production, drama and news; and the prospect of a new mechanism, which will refresh and provide the spur to innovation that PSB needs every decade or so.
We would however like to highlight particularly the question of PSB provision in the nations. In a post-devolution UK this is a question that our analysis has shown needs to be asked afresh. This report proposes an open and extensive debate about PSB as it relates to Scotland, Wales and Northern Ireland.
As we have said, our propositions in Phase 1 have now hardened into firmer proposals in Phase 2. We believe that greater choice in the digital world will better meet the needs of the viewer as consumer, and that there is both a need and support for intervention to meet the best interests of the citizen, both throughout the UK as a whole and in recognising the particular circumstances and needs of the nations within the UK.
However, we are equally clear that this intervention needs to fit the market of tomorrow, not as it was yesterday. We recommend this report to you and encourage submissions from all interested parties during the formal consultation process, which concludes on 24 November 2004.
So, what happens next? We will consult again and will listen to the feedback. On the basis of that, we will offer our final conclusions. These, we will incorporate as conditions into the licences for ITV, Channel 4, Five and Teletext. Our conclusions will also inform the Government's decisions on when to start and finish Digital Switchover; and, we hope, will inform Lord Burns's and the Government's/ Parliament's consideration of BBC Charter review, so that PSB in television can truly be addressed in the round.
David Currie, Stephen A.Carter, Richard Hooper
A Consideration of Aspects of the Pay-TV Market in the UK in the Absence of Public Service Obligations - Mediatique
Ofcom's public service broadcasting review - the European dimension - European Media Forum