Ofcom (the Office of Communications) undertakes a market impact assessment (“MIA”) as part of the BBC Trust’s Public Value Test (“PVT”) regime to assess whether the BBC’s proposals to launch new services, or to amend existing services, would be in the wider public interest. The MIA, which is carried out independently by Ofcom, assesses the likely impact of proposed BBC services on commercial providers. The MIA does not consider whether the proposal meets the BBC’s public purposes in terms of likely value to licence fee payers. This is considered separately by the BBC Trust in its Public Value Assessment (“PVA”).
This MIA looks at the BBC Management’s proposal to launch a Local Video service. The proposed service would offer an enhanced version of the “BBC Local” websites (part of the bbc.co.uk website) and would be available on any internet enabled device. The service would provide local news, sports and weather in 60 geographic areas across the UK, with an additional five Welsh language news sites.
Our analysis has considered the potential impacts of the proposed BBC Local Video service on: local and regional newspapers and their associated web services; local radio stations and their associated web services; local and regional TV services and their associated web services; mobile TV services; and other relevant services (including third party content providers, journalistic services, and Welsh language services).
Overall, we conclude that the launch of the proposal would have a significant negative market impact on commercial providers. We expect the impacts on these services, as they are currently provided, to be no more than about 4% of annual revenues. However, our main concerns are about the effect of the BBC’s proposal on future commercial innovation in online local news, sports and weather services.
Even in the absence of the BBC proposal, commercial prospects in these sectors are highly uncertain; a central issue being whether local online news services will be able to generate sufficient advertising revenues. Despite this, there are strong ambitions on the part of commercial providers to develop these areas of their business. Indeed almost every local newspaper now has its own website, although these vary widely in terms of numbers of stories, presentation, and the use of video content. The BBC Local Video service would represent a major presence in this area, and is likely to be of significantly greater scale than commercial providers could offer. Moreover, the current cyclical downturn in the economy means that the damaging effects of this proposal on commercial providers would be particularly acute if launched at this point in time.
Given the potentially adverse effects identified, we have looked at ways in which the proposal could be modified to limit those impacts and increase the overall net benefits of the proposal i.e. reduce the market impact without having a correspondingly negative effect on public value.
We conclude that there are only a very limited number of potential modifications to the proposal which the Trust might want to consider in order to mitigate its market impact. These are to:
We do not believe, however, that these modifications would be sufficient to offset the negative market impacts we have identified. Therefore, in our view, the PVT should turn on whether there is a strong public value finding in the BBC Trust’s PVA.