Panel: Jonathan Thompson (Director of Strategy, Ofcom), Richard Hooper (former Deputy Chairman, Ofcom), Geraint Talfan Davies (chairman, Institute of Welsh Affairs), Blair Jenkins (Scottish Broadcasting Commission)

Steve Hewlett noted that a key Labour government proposal for maintaining plurality – the pilot schemes for Independently Funded News Consortia (IFNCs) – had been executed by the incoming administration on Tuesday afternoon, June 14th.  It was the first point he raised with JT, along with the search for a structural solution for the reported financial problems faced by Channel 4.  Ofcom had pursued these two issues, devoting much time and effort.  Some might say the IFNCs had been made the highest priority after the Channel 4 situation had proved intractable: but with both policies at a dead end, was the process wrong?

JT noted he had been Channel 4’s director of strategy before moving to Ofcom, so he was familiar with the arguments.  All the non-BBC PSB was based on spectrum value, which was in historic decline.  What to do?  Ofcom’s view was that PSB was about content, not institutions, and that this approach was based on viewer research.  The emphasis on plurality of supply reflected viewers valuing choice, especially in the areas of news, current affairs, children’s and national and regional programming.  Ofcom’s job is to put forward – within the framework of its statutory remit and what the economy could support – a range of ideas as to how to sustain certain key genres, such as regional news.  He did not accept that the IFNCs had displaced Channel 4 as the central policy option.  Choices had to be made, and politicians made those choices.

JT resisted the notion that Ofcom had led the way in Channel 4 re-structuring.  We all wanted Channel 4 to continue its PSB activities within available financial resources.  If you ignored annual fluctuations, the case for intervention on the Channel 4 issue was not cast-iron.  Ofcom had simply listed choices – it was the government, in its Digital Britain report, which had stated its preference for integrating Channel 4 with BBC Worldwide.  It was good to see politicians endorsing Channel 4 as a key PSB supplier.  That said, if there were no structural solutions available, Channel 4 simply had to manage as best it could.  As with regional output, Ofcom can list options, but only politicians can decide.

SH pressed harder, claiming to have heard Ofcom’s CEO making a speech advocating use of the licence fee to support Channel 4.  JT insisted that Ofcom reviewed and recommended, but did not advocate.   It only decided matters within its statutory remit, like quotas.  Asked whether he welcomed ITV’s apparent return to the regional news business, now that the IFNCs were moot, JT noted the possibility, but Ofcom would need to see what regulatory concessions ITV might seek in return.

SH expressed surprise at the sight of what Ofcom’s critics – such as Sky – had called a “regulation-based evidence-maker” (in satiric contrast to its stated role as an “evidence-based regulation-maker”) now appearing so circumspect.  JT continued to state that Ofcom did not “do policy”.  If the new government wanted to allocate spectrum for the proposed local TV roll-out, Ofcom would offer advice if asked.  The vast majority of what Ofcom did was economic regulation, of which only a small part was in media.  If government wanted Ofcom to do less, it would do less.  It was not in the grand vision business.  Ofcom had made changes to ITV licences, in response to requests, as it was entitled to do under the Act.  But changing Channel 4’s remit was a government decision.

RH wanted to be absolutely clear: Ofcom was not in the policy business – there was a distinct divide between advice and political decisions.  The cancellation of the IFNC process (which he had chaired) was a political decision, which the government was entitled to make.  What would take the place of that policy was another matter.

SH asked what content deserved public funding.  RH responded by defining PSB – as that which the market cannot or does not do: though he had failed to persuade his colleagues at Ofcom to adopt that approach.  He would only intervene with state subsidies where the market was not delivering, and he would be narrow in his definition of what was needed.  That said, he was not in favour of a US PBS-style BBC, but the Jonathan Ross show – excellent of its type as it might be – was clearly a commercial product: it was pointless to include it in a definition of PSB.  The BBC should be transparent about this.  The issue was not whether public service broadcasters can show commercial product – of course they should – but they should not try to define that as PSB.

SH asked about the role of plural supply of PSB.  RH said that Ofcom supported diversity of supply: it’s like a religious belief – but what can we afford?  Do we need anything beyond the BBC?  Certainly, we need choice as far as news and current affairs were concerned.  In Wales, there is a significant news deficit, which the IFNCs tried to address – 87% of newspapers sold in Wales come from England.  Well, the world has changed – we now have a Welsh Assembly, and broadcasting needs to reflect that.  He was less convinced about drama – there was a danger of confusing industrial policy with PSB, as was the case with the film industry.

SH asked about contestability.  RH said there had been contestability in the system ever since the launch of Channel 4, which allocated its budget on a contestable basis.  Moreover, the WOCC (window of creative competition) at the BBC meant that some of the licence fee was contested between creative suppliers.  However, he was not convinced, despite its elegance, by the notion of a contestable fund (as outlined by David Elstein in the PSB Forum).  He was torn on this, but on balance wanted to preserve the role of institutions, whose public service ethos deserved recognition.

RH did not believe that in the end public shareholders and PSB sat well together.  Yet he was impressed by the mixed system in New Zealand, where NZ On Air ran a contestable fund alongside NZ Radio, an institution.  As for top-slicing of the licence fee, he was undecided, but he was happy to see Ofcom driving the debate over identifying PSB deficits.  He could see a lot of public service content in the broad content world.

GTD praised RH for the good work he had done in chairing the IFNC process.  It had been a strong contest, but the results were now in limbo.  Both the BBC Strategy Review and Jeremy Hunt in his recent speech had been entirely silent on how to serve the nations, and the failures that had been identified in the King report on BBC News had earned just a slap on the wrist from the BBC Trust.  He quoted Reith on “prolonging the everlasting Welsh trouble”, but the fact was – as RH had just mentioned – that, by contrast with Scotland, there were no Welsh editions of London papers.  As a result, Wales was unknown territory, such that when The Guardian splashed on its front page the prospective abolition of SATS in England, few would have realised that Wales had abolished SATS 10 years ago.  There was no speech-based commercial radio competition for the BBC in Wales, and ITV’s investment in content for Wales had been reduced by 80%.  At the same time, spend on Welsh content by BBC Wales was in decline, by a figure he calculated as 33%.  BBC Wales radio had just 62% coverage in Wales on FM and 40% on DAB.  BBC1 HD will have no opt-outs for nations and regions, so it will compete with network product against BBC Wales.  That is why so many people were depressed when Jeremy Hunt cancelled the IFNCs, whilst making no allowance for what should happen in Wales – indeed, without even consulting the Secretary of State for Wales.  We need to re-balance power in the public sector.

GTD wanted to see the S4C Authority morphed into a Welsh Media Commission, which could respond to changes in technology.  He also wanted the BBC Trust’s audience councils in the nations to be abolished.  The BBC should be federalized.  He wanted the licence fee to be broken up into national block grants.  Central government needed to address the realities of devolution, and change the central power structure, in the run-up to BBC Charter renewal.

RH intervened to recommend reading Ed Davey’s chapter on localism in the LibDem Orange Book.  He is now a minister in the Department of Business, and appears to believe strongly in de-centralisation.

GTD saw a real problem with vocabulary.  This was not a case of the UK versus localism, let alone hyper-localism.  He had never heard of an English village being called hyper.  There is no evidence that Jeremy Hunt “gets it”.  If you want to run with local TV in England, that was between you and your electors.  But in Wales there had been unanimous support for the IFNCs, across all four political parties.  We need a specific separate licence for ITV Wales (as with Scotland) when these come up for renewal.  There is no direct reference to this in the Digital Economy Act, but talk of an English licence implies a Welsh one.  The problem is that Wales is not a natural commercial entity.  Two thirds of the population lives in the South East of Wales.  The problem with ITV’s approach to Wales was: which end of the telescope were you looking through?  Under Michael Grade’s leadership, Wales was seen as just a cost centre.  Archie Norman had just announced a completely different view, but was Ofcom accepting that apparent change too easily?  If you started a Welsh licence from scratch, you could avoid a great deal of legacy costs.

BJ made a simple point in terms of plurality: the BBC could not compete with the BBC.  In Scotland, there had been hyper-unanimity over the proposal for a Scottish Digital Network.  There was virtually a PSB monopoly in Scotland, with STV offering little more than non-BBC news.  We need more.  The opt-out model has outlived its usefulness.  For corporate reasons (with BBC Scotland executives trying to sell programmes into the London-based networks) BBC Scotland rarely opts out of BBC1 and BBC2; and for PR and commercial reasons, STV rarely opts out of ITV1.  Unfortunately for Scotland, just a week after the publication of the Scottish Broadcasting Council report, recommending a Scottish Digital Network, Lehmans had collapsed (all caused, SH commented, by the Royal Bank of Scotland).  This limited the available sources of funding.  BJ thought the licence fee was now in play, because of the political dimension.  STV had reduced its local programming hours by 75% since devolution, and tensions between plc status and PSB delivery meant that STV was unlikely to be the answer to Scotland’s needs.  Despite making separatist noises, it hangs onto ITV1’s schedule.  There is no market-driven PSB option.  Some parts of broadcasting policy need to be decided at the Edinburgh level.  A Channel 4 model might work, but there were political difficulties in creating a new hybrid model.

SH asked what could be done.  BJ replied that we could not go on as present, and that the 2011 Scottish Assembly elections would make this apparent.  Perhaps the proceeds from the 2012 spectrum auction could be used for a Scottish Digital Network, but he acknowledged there was little prospect of additional public funding.  If push came to shove, sharing the licence fee might be the only answer.

GTD agreed: there was recognition in Wales that this might be the least worst option.

BJ said he was a 100% supporter of the BBC – but not of 100% of the licence fee being reserved for the BBC.

Ray Gallagher (parliamentary advisor) asked BJ about cost.  BJ replied that £75m pa was the current estimate for the Scottish Digital Network, or 2% of the licence fee – a figure that coincided with Ofcom’s estimate of £77m.

GTD said it was important to understand the difference between the £100m pa spent by S4C on programmes for the 20% of Wales that speak Welsh and the £23m pa spent by BBC Wales on English language content for Wales.  If we accept the figure put out by the BBC Trust of £1.814bn as the total spent on licensed BBC services annually, that £23m represented 1.3% of the licence fee, a figure due to reduce to 1% by 2012.  He thought the correct amount should be £40m pa, to ensure a range of expression – pluralism is not just about the staples of journalism, news, current affairs and sport, which account for 85% of current BBC Wales origination for the Welsh audience.

Sylvia Harvey (University of Leeds) looked back to numbers on disaggregation in 1993.  This had led to a problem with England.  Might the answer be co-production between the nations?  After all, the indies have their WOCC – perhaps re-shape it?

GTD said we should not confuse network production with content for Wales.  Producing Torchwood out of Wales does nothing for Welsh culture.  We need a BBC Trust and a national service licence just for Wales.

Richard Collins (Open University) agreed there was a danger of ghetto broadcasting.  But there was a lack of understanding of N Ireland, Wales and Scotland in England – what need was there for representation of those cultures?

Clare Enders (Enders Analysis) asked JT whether the cancellation of the IFNCs would leave a PSB deficit, and what the timetable was for the Shott inquiry and the search for an alternative.

Steven Barnett (University of Westminster) could not understand why the case for levies and re-transmission fees – as was common elsewhere in the EU – had not been included as an option for funding PSB in the final Ofcom report.  It had been an explicit recommendation from the House of Lords Culture Committee.  He noted that the UK licence fee was by no means the highest per capita in the EU.

David Graham (Attentional) wondered whether the case for economic affordability and “narrow” PSB (as mentioned by RH) suggested that provision of entertainment be left to market financing – so if the BBC wanted to provide entertainment, it should not be paid for by the licence fee.

BJ commented that, compared with Scotland and Wales, N Ireland suffered even more from lack of visibility on UK screens.  He also noted that, now most newspapers had Scottish editions, the London editions treated Scotland as a faraway place of which they knew and cared little.

GTD said that the issue of portrayal needed an external King-style report (as with news).  BBC Wales certainly gets network slots under the drive to shift spend outside the M25, but BBC Wales drama had little to do with Wales – indeed, channel controllers were prone to check “it won’t be too Welsh, will it?”

RH felt this was not a time for “business as usual” – we needed to think laterally, and throw a lot of balls in the air.  The licence fee is not the BBC licence fee – why not allocate a proportion of it just for quality TV and radio, with the expectation that much of this would go to the BBC.  Voluntary subscription is a very interesting model – he was a subscription “junkie”.  He knew from the experience of his son, a drama director, that HBO in the US – which is funded that way – is a powerhouse of quality output, which if it were produced here would undoubtedly be described as PSB.  We have proven encryption systems.  Is it really correct to say that being free at the point of delivery is central to the concept of PSB?  In the mobile space, we are happy to pay for apps – why are so worried about paying for content?  The real madness is compulsion – 168,000 prosecutions a year for non-payment of the licence fee – a third of all court cases.  At the very least, we should remove the criminal sanctions that currently apply.  That would call everybody’s bluff – the middle class, who would happily pay more (as they did at the Royal Opera House), Murdoch and the politicians.

JT responded to the question about timetables by saying that Ofcom would be making recommendations about ITV licences – which expired in 2014 – in 2012, and probably holding a further PSB review in 2013.  He said that Ofcom had indeed looked at levies during the last PSB review, but had – he conceded – not said much about them in the final report.  Many stakeholders were negative.  Jocelyn Hay (Voice of the Listener and Viewer) interjected: not surprising!  JT said we had not previously had levies in the UK, but it was certainly possible to re-visit the subject, and he acknowledged the House of Lords view.  It was up to the government to decide the agenda.  In response to the final question from SH, JT said it might even be possible to incorporate the IFNC approach to local TV – after all, Ofcom had envisaged IFNCs being grafted on to Channel 4, so why not?

End of session two. Read and watch session one or session three