Ofcom 2nd stage review of public service broadcasting - BECTU submission

25 November 2004

Response to Ofcom's consultation in Phase 2 of the regulator's review of Public Service Broadcasting. Questions (in italics) relate to the document: Ofcom PSB Stage 2 Consultation.

Introduction

1. BECTU is the trade union for workers (other than performers and journalists) throughout the broadcasting and independent production sectors. We have made a submission at each previous stage of the consultation and present our Phase 2 response below, addressing (sometimes in groups), the specific questions asked in the consultation document:

The end of the analogue PSB model

Q1 Do you agree with our analysis that the existing PSB system will not survive the move to the digital age, and may decline before then?

2. We accept that Ofcom's analysis is evidence-based. We note the key argument that 'The historical compact in which PSB 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' (p4); and the further hypothesis that if this arises 'commercial broadcasters may find a strong economic incentive to seek an alternative route to market.....with few, if any of the costs of PSB status' such as 'to gain carriage on DTT, Sky and/or cable on a purely commercial basis' (para 3.48).
3. We do not disagree that the 'end of analogue' will have a significant impact on our broadcasting system nor that there may indeed be negative pressures on commercial broadcasters' PSB services. We positively advocate a reduction in ITV licence fees (see paragraph 40 below) as one means of reducing this pressure. This apart, we do not believe that Ofcom's analysis - however well grounded in research - is yet conclusive as to the inevitability of such broadcasters seeking to surrender their PSB licences. This remains a hypothesis - not a proven fact. There are alternative and perfectly feasible scenarios under which commercial PSB could have a more vigorous and prolonged lifespan than is allowed in Ofcom's argument. Nor is it automatically the case that a purely commercial ITV channel, stripped of all PSB elements, would be guaranteed alternative success. The narrowing of ITV's schedule could lead to a loss of audience reach and a loss of ITV's mass audience appeal to advertisers.
4. Therefore, while accepting some of the force of Ofcom's analysis, we do not consider that its conclusions - on the end of commercial PSB - can be accepted as inevitable. The evidence is simply not conclusive. We certainly do not believe that such conclusions are desirable and believe that Ofcom, in line with its statutory obligations, should be working to prevent such an outcome. We further hope that the commercial PSB broadcasters can themselves develop a strategy for retaining their PSB role - in contrast to previous strategic failures in relation to News at Ten, ITV Digital and becoming international 'players'.

   The continuing case for public funding of PSB

   Q2 Do you accept that public funding for PSB continues to be justified as we approach switchover, and should remain broadly at a similar level to that provided today?

5. We agree with the statement of the purposes of PSB and the distinctive characteristics of PSB programmes set out in paras 2.12 and 2.13. These broadly correspond to our own views on the definition of PSB, which were set out in our initial submission to the consultation.
6. We further accept that an entirely free market in broadcasting would simply not provide an equivalent amount of high quality, wide-ranging original programming on a universally available, free-to-air basis. The market, left to itself, will produce a greater proportion of low-cost programming, a lower level of original production, and a narrower range of material that is made universally available.
7. As already indicated in research by Oliver and Ohlbaum as part of the BBC Charter Renewal debate and confirmed by Ofcom, PSB programming does not 'crowd-out' private expenditure on original production. Without PSB, there would simply be a lower level of investment in original production. From this viewpoint, our PSB system has clearly worked and as a result 'the UK receives one of the highest levels of domestically originated programming in the world' (para 4.26).
8. Given the continuing evidence of public appreciation of PSB and of approval of the level of funding required to sustain our current level of PSB provision, we therefore accept the conclusion that at least the current level of PSB funding continues to be justified as we approach switchover. A free market in broadcasting is simply an inferior model which would fail to match the public's expectations of their broadcasting system.

   Principles for a future PSB system

   Q3 Is plurality vital to the future of PSB?
   Q4 Will PSB need to take a new form, across new technologies, in future? If so, which technologies should PSB embrace in the digital world?

9. We are strong supporters of our PSB system, which rests not just on one publicly-financed PSB provider - ie the BBC - but also on a range of other providers (ITV, Channel 4, Five) which are subject to a variety of PSB requirements. The maintenance of such a range of PSB providers should, we believe, be at the forefront of Ofcom's thinking.
10. Plurality and competition within PSB are, in our view, healthy and allow each PSB provider to be judged in comparison to others, while letting different channels approach the same genres in different ways. We further accept that allowing PSB to be identified solely with the output of a single provider - such as the BBC - would make the whole future of PSB potentially more vulnerable. We believe that plurality - especially in areas such as news and current affairs - is an essential public good. Plurality, on this view, will of course be vital to the future of PSB.
11. The development of new technologies (of the sort, for example, outlined in para 3.22) will inevitably impact on PSB. At this point, however, we believe the primary focus of our regulatory system should be on ensuring we have a continuing range of PSB providers and originators, regardless of the evolving technical means of distribution and exhibition.

    The BBC

    Q5 Do you agree that the BBC should remain the cornerstone of PSB, but that there ought to be a mid-Charter review and a clarification of the roles of governance and regulation?

12. We emphatically agree that 'The BBC should remain the cornerstone of public service television broadcasting. An effective, strong and independent BBC is essential to the health of PSB in the UK.' (para 2.20). We believe the BBC remains a centre of excellence and a benchmark for other broadcasters on many criteria, but especially as a provider of high quality and wide ranging programmes both to a mass audience and to a diversity of more particular audiences throughout the UK. The BBC has long been and remains not only the UK's primary source of original programme production but also the most significant employer and trainer in the UK audiovisual sector.
13. Central to our view of the BBC, however, is that it retains a strong in-house production base. As primarily a programme producer rather than a mere commissioner, the Corporation commands a broad range and critical mass of creative and technical skills in its labour force. This, in our view, is a guarantor of high quality programming across all genres and provides the necessary space to develop talent and innovation.
14. We simply do not accept, therefore, that 'there remains the serious risk that BBC in-house producers are favoured over independent suppliers to sustain its production resources rather than in search of the best programme ideas.' (para 6.15) On the contrary, it is precisely because of the range and quality of in-house production skills that the BBC can itself produce much of its best programming. Our further views on independent production are set out in response to Q13.
15. We further believe that the BBC should retain its full range of commercial activities - which provide vital additional funding for the Corporation's core PSB role. We would therefore strongly oppose 'asset sales' or the privatisation of the BBC's commercial operations.
16. On the issue of the Royal Charter, we can certainly agree that for reasons of stability both up to and beyond switchover 'the next Royal Charter should run for ten years until December 2016 to take the BBC through the period of digital switchover ' (para 6.7). We are less convinced of the base for a 'substantive mid-Charter 2011 review' (para 6.7), which would coincide with Ofcom's next PSB review so that 'The two reviews should examine in detail the role and funding of the BBC in a fully digital world' (para 6.8). We believe the unsettling effect of a significant 'double review' after only 5 years contradicts the professed aim of stability over the whole life of the Charter. We further believe Ofcom is potentially presuming a greater regulatory influence over the future of the BBC than is appropriate.
17. On the issue of governance and regulation, we have long supported a strong and independent role for the BBC governors and we support the recent measures to enhance the Governors' resources and their separation from the senior management of the BBC through a strong Governance Unit. We believe the new arrangements should now be given time to work and that further significant change (eg bringing the regulation of the BBC wholly under Ofcom) should be resisted.
Q6 Do you agree with our proposals on the future funding of the BBC?
18. We strongly agree that 'a TV licence fee model should continue to fund the BBC; the BBC should not carry advertising, nor should existing services become subscription-funded' (para 2.28). We continue to believe the licence fee is a brilliantly effective mechanism providing the full range and quality of BBC services to the public at minimal cost. We further believe that the licence-fee, in order to be effective, should be increased in line with broadcasting inflation.
19. We oppose alternative funding mechanisms such as direct funding from taxation, advertising, subscription and sponsorship and we are pleased to note that the report also rejects these. We are particularly pleased at the rejection of so-called 'top-slicing' of the licence fee (ie reallocating part of the licence fee to a contestable fund to which commercial broadcasters could make bids for funding PSB programming). We believe such an approach would seriously weaken what is now a viable service, redirect scarce public resources to private profit, introduce a layer of chaotic competition and, as a final consequence, produce an inferior broadcasting service for viewers.
20. We are wary, however, of the proposition that 'the Government should consider the case for the BBC to supplement its income with limited subscription services to fund any future growth in the BBC's services'. The basic arguments against subscription for the BBC still stand - it is a wholly inappropriate funding mechanism for what should be a universal service. Its introduction in one part of the BBC could easily undermine the case for resisting it for the Corporation's existing services. If the underlying concern is to secure additional BBC funding, this contradicts the suggestions elsewhere that the BBC should sell of some of its commercial assets. Far better, in our view, to retain existing assets which provide a valuable income stream to the BBC than to sell them off and compensate by introducing subscription.

    ITV1

    Q7 Do you think we have judged ITV1's PSB role correctly, both in the short term and the long term?

21. In our response to Q1, we have already indicted that while accepting some of Ofcom's analysis on the future impact of digital switchover, we simply do not accept that the conclusions drawn - on the end of commercial PSB - are supported by the evidence as being inevitable. We do not accept as inevitable, therefore, that declining revenues will cause ITV1 broadcasters to hand back their PSB licences and trade them in for fully-commercial digital licences. The conclusions seem to outrun the evidence presented. They also seem to ignore the continuing benefits of PSB status, including prominence on the Electronic Programme Guide; and the potential for Ofcom to enhance these eg by seeking to prevent significant scheduling clashes among PSB providers.
22. Leaving aside the issue of ITV regional programming (covered in Q12), it follows that we do not agree with the argument for immediate changes in ITV's PSB regulations. A 'more flexible approach to Tier 3 content regulation' (para 7.19) is indeed allowed by the Communications Act but we seek clarification that the move away from the much derided 'box-ticking' approach is a reorientation rather than a weakening of PSB regulation.
23. The longer term approach to ITV after switchover is linked to the issue of future funding for PSB and for ITV in particular. We address this in our response below to the proposal for a Public Service Publisher (PSP). Leaving funding aside, we do not agree that the regulatory aim for ITV post-switchover should be simply for a residual core of PSB obligations, as indicated in para 7.20.
24. We believe, in line with much of Ofcom's analysis, that a great strength of our broadcasting system is in our range of PSB providers and that plurality in PSB provision should be maintained post-switchover. We believe that ITV, with its PSB track record and its regional structure, is uniquely placed to continue as a significant PSB alternative to the BBC - as part of the PSB landscape which Ofcom itself advocates.
25. We do not, therefore, accept that ITV's obligations should be reduced to a residual core. This would, in our view, render ITV vulnerable to foreign takeover - possibly to the benefit of ITV executives with considerable shareholdings but clearly to the detriment of our PSB system as a whole. Furthermore, we believe Ofcom has a duty, as set out in Section 264 of the Communications Act, to 'maintain and strengthen PSB in the UK' (p4). Allowing ITV to retreat to such a residual core would, in our view, represent a serious failure on the part of Ofcom to carry out its statutory obligations - a failure which could itself be the subject of judicial review.

    Channel Four

    Q8 Do you agree with our proposals for the role of Channel 4, and are we right to ask Channel 4 to look to self-help and joint ventures to fund PSB for the foreseeable future?
    Q9 Should other means of support for Channel 4's remit be considered in the longer term? If so, what form should they take?

26. We welcome and support Ofcom's view that Channel 4 'should remain a vital force in the provision of PSB'; that it 'should focus on the reflection of diverse and alternative perspectives and the provision of innovative content for its particular target audience group'; and that it should 'ensure a sharper focus on its public purposes, as set out in the Communications Act' (para 7.21). These public purposes should not be sacrificed in any further drive towards a young upmarket audience. We further believe that in the short term, Channel 4 should be able to sustain itself in its role through the range of existing mechanisms - including self help and joint ventures - referred to in para 7.23.
27. We believe, with Ofcom, that Channel 4's long term role remains as a 'not-for-profit provider of innovative and diverse programmes for its target audience group' (para 2.73). We welcome Ofcom's clear declaration that 'we do not support the privatisation of Channel 4' (para 7.24).
28. We note Ofcom's concern that 'after digital switchover, Channel 4 may face an increasing tension between maintaining advertising revenue and its PSB remit' (para 6.61). In line with our response to Q1 and Q7, we do not deny this is a genuine issue but we would resist policy prescriptions based on an overstated case unsupported by the evidence.
29. In so far as there are long-term concerns about Channel 4 funding, we address these below in our response to the proposal for a PSP. In the light of that, we definitely disagree that 'there may be a case for considering further action such as the transfer of income-generating assets from the BBC to Channel 4' (para 6.62). We believe any possible strains on the Channel's funding can be solved in another way (see below) and that removing income - generating assets from the BBC is undesirable for the Corporation in particular (see para 15 above) and self-defeating for Ofcom's broader aim of maintaining a plurality of PSB providers (removing badly needed PSB funding from one PSB provider to subsidise another does nothing for our PSB system as a whole).

    Five

    Q10 Are we right to take a more flexible approach to the regulation of PSB on Five?

30. When have regulators not taken a flexible approach to Five? The Channel is part of the PSB universe - but only just. Since its inception the recurring policy theme has been that the Channel requires a loosening of its PSB obligations and/or a reduction in its licence fee in order to survive - and the Channel has indeed been rewarded with successively lower levels of PSB requirements.
31. The 'flexible approach' to Five is therefore all too familiar. If carried much further it will beg the question of why the Channel exists in the first place - its only justification is that it adds something to the range of PSB provision in the UK, and if the PSB element is progressively weakened there will at some point be little or nothing to chose between Five and a purely commercial channel. We do, however, in the light of this, support Ofcom's conclusion that 'we will expect the channel to invest more in original production in the run-up to switchover'. We would expect original production to continue to be a required characteristic of the channel in exchange for its continuing PSB status.

    Programming for the nations and regions

    Q11 Do you support this long-term vision of programming for the nation and regions'.
    Q12 Do you support our specific proposals for the future of regional programming on ITV1?
    Q13 What do you think a sustainable model for PSB in the regions would be? [NB: The second Q13, on independent production, is dealt with separately below]

32. We note Ofcom's research on this issue as summarised in 'Reshaping television for the UK's nations, regions and localities'. By far our major concern in this area - as indicated below - is in relation to ITV (and therefore to Q12). On other specific issues, we make the following comments:
    • We support the recommendation for 'a new commitment to regional programming from the BBC, in line with the Corporation's own proposals' (para 7.30) and 'for the new Charter for the BBC to require more of the BBC, following its own lead in this area' (para 3.54 of 'Reshaping television'. Our concern will be to ensure that the transition to (in the Corporation's own words) 'a BBC that is less London-centric' is accomplished without job losses, on the basis of voluntary relocation for staff directly affected and with full staff consultation. We do not believe, however, that there should be any presumption that BBC regional production will or should be able to compensate for reductions in ITV regional production.
    • We note that local TV, currently provided through the restricted service licences, has future potential but since, in Ofcom's words, this is 'currently far from established' (para 3.60 of 'Reshaping television'), we believe the core of the debate on programming for the nations and regions has to rest on provision by the BBC and ITV. The rest of this section will therefore focus on regional ITV.
33. We note Ofcom's general analysis of the problems facing our PSB system as a whole in the transition to the digital age - and our views on this are set out in or response to Q1. We have addressed the proposals on ITV's general PSB role in our response to Q7. With this as background, we have major concerns about Ofcom's specific proposals in relation to ITV in the nations and regions ie.
    • In the immediate future a proposed reduction in ITV non-news programming in the English regions from 3 hours a week to 1.5 hours a week in 2005 (as set out in para 7.31).
    • The further argument that 'after digital switchover, it will not be possible to produce non-news programming in the nations or in the English regions' (para 2.46 as amplified in para 7.28) - with the additional comment that even 'a core regional news service' will only be maintained ' if financially sustainable' (para 7.20).
34. We strongly oppose the proposal for an immediate reduction in regional non-news programming from 3 hours to 1.5 hours per week. Before addressing the substantive argument, we believe that Ofcom's self-proclaimed 'proposal', which is supposedly subject to further consultation before any final decision, is already being taken as a fait accompli by ITV:
    • The Managing Director of Granada TV, in a communication to all Manchester staff dated 1.10.04, states that 'You will all have seen the announcement from Ofcom today which allows ITV companies to reduce their regional non-news commitment from 3 hours to 1.5 ours a week from January 2005'.
    • Similarly, the News and Regional staff of Yorkshire TV were called together at the beginning of October to be informed by management of Ofcom's 'decision' to allow a reduction in regional non-news from 3 to 1.5 hours per week.
35. Is Ofcom aware that ITV management is making these statements? To what extent is Ofcom open to argument to retain the current 3 hours per week obligation? If Ofcom is knowingly allowing ITV management to take active and immediate steps for this reduction, does this not completely undermine the credibility of the consultation process? If not, will Ofcom now issue an instruction to ITV to cease all such action until the consultation process is complete? Urgent answers to any or all of these questions will be much appreciated.
36. On the substantive issue of regional non-news output, we note from Ofcom's own research that 'Total output of original first-run programming for the nations and regions has been in steady decline since 1999' (para 3.10 of 'Reshaping television'); that 'most of the decline over this period came in non-news output, and particularly non-news provision on ITV1' (para 3.11); and that 'ITV1's hours of non-news programming in the English regions almost halved between 1998 and 2003, largely as a result of the standardisation of regional licencees' hours in 2002' (para 3.16).
37. We believe that the clear downward trend in ITV's commitment to regional programming is in direct contradiction to ITV's historic distinguishing characteristic of strong regional identity; in contradiction to viewers' expressed preferences (confirmed yet again in Ofcom's research) for 'more TV made specifically for and about their region' (para 4.6); and in contradiction to the evidence that such programming can be extremely successful (para 4.31), especially when compared on the basis of like-for-like scheduling with network programming (para 4.32). Recent successful examples of regional programming involving ITV Granada alone include: Criminal Tales; Wythenshawe Law; Better Cars; The Last Word; The Afternoon Show; and Home. Further examples from around the network (and in no particular order) include: That's Entertainment (Granada/Yorkshire), Animal 24/7 (Yorkshire), Update (Westcountry), RPM (Ulster), Around The House (Tyne Tees), Heart of the Country (Central), Walk this Way (Meridian), Politics Now (Scottish), That's Your Lot (Anglia) and Tarrant's Way (London). Such examples contradict the portrayal of regional programming as unsuccessful.
38. We believe the decline in ITV regional programming is directly contrary to the spirit and intention of the Communications Act. In our view Ofcom's almost unquestioning collaboration in this process is extremely unfortunate and should now be reversed - or else be subject to the possibility of judicial scrutiny. Yet further reductions in ITV regional programming are premature, are unjustified by the evidence and should not be accepted. ITV's wilful pursuit of this strategy has proceeded by creating the circumstances (poor scheduling, lack of investment) for regional programming to fail. Far from accepting this self-justifying strategy, we believe Ofcom should have the independence to challenge and reverse this process. This is, in our understanding, what the Communications Act now requires. The alternative will be the effective end of ITV regional programming.
39. It follows that we also flatly disagree with the proposal that, post switchover, there should be no non-news programming in the English regions. We believe, for the reasons set out above, that such a policy should be rejected and that a continuing commitment to regional programming - not just in selected centres but throughout the network - should be included alongside Ofcom's eminently sensible and supportable policy aim of an increased commitment to ITV network production from the regions ie:
    • 'a continuing and important role for ITV1 in the reflection of regional stories, characters, places and issues on its main network, with a high proportion of original production outside London' (para 2.47);
    • and the specific proposal 'to raise the out of London production quotas to lock-in the current levels of production for ITV1 (currently over 50%) and to explore the options for a wider dispersion of production outside London and across the nations and regions of the UK' (para 2.49).
40. We believe that a strategy that aims to build both regional and network production capacity in the nations and regions would play to ITV's traditional strengths; would sustain rather than destroy our unique regional pool of skilled labour (both staff and freelance) and facilities; would bring broader regional economic benefits through the multiplier effect; and would, together with BBC regional production, offer a strong future for PSB programming in the nations and regions.
41. Where would any necessary funding come from? Some relevant funding issues are addressed in our response to the proposal for a PSP. One specific additional point, however, is that we continue to advocate a reduction in ITV licence fees - on the proviso that the monies released for ITV are ploughed back into original production, specifically including regional and network programming made in the nations and regions.

    Production

    Q13 (sic) Do you think this is the right approach? What issues should we take into account in judging whether further action is needed in 12 months time?

42. We welcome Ofcom's conclusion that 'now is the wrong time to change the independent production quota' (para 7.36). We represent both full-time staff working for the broadcasters and freelances working in the independent production sector. From close practical involvement with the sector we believe the current 25% quota has worked well and should be retained.
43. It follows that we have concerns about Ofcom's indication of the future possibility that, in relation to the BBC, 'further action will be needed to secure a fair role for independent producers as suppliers to the BBC' (para 2.26); and in relation to BBC and ITV that, 'In 12 months' time, if it is not clear that the market is working effectively, we will take further action', including consideration of 'the effectiveness of the existing quota' (para 7.37).
44. We note that the independents' lobby has historically been ruthless, self-serving and extremely effective in shaping the attitudes of Government and regulators. We hope Ofcom does not take the independents' claims for an increased quota at face value. The independent sector is now large (with recent estimated annual turnover of £1.4B) and increasingly concentrated (with the largest 5% of companies making 80% of the programmes and broadcasters habitually dealing with small groups of preferred suppliers). This is a far cry from the original liberating and decentralising impulse behind the independent quota. The super-indies now dwarf a number of the ITV broadcast franchises and concentrate on producing not distinctive one-off programming but long runs of mass-market product. They are in a position, in some cases, to award their executives with remuneration that matches if not exceeds that of the broadcaster 'fat cats' who they previously sought to distinguish themselves from.
45. The dominant super-indies are now part of broadcasting establishment, with rights and terms of trade to match. If there is to be any reconsideration of the relationship between broadcasters and independent producers, we question any presumptions that such consideration should favour the independents.
46. On the contrary, we believe the time is long overdue for regulators to question the independents' own practices - including their record on employment, on training, on equal opportunities, on regional production and on the rights of individual creators. We hope that Ofcom will have the courage and independence to break free from what in our view has in the past been a weak and overly favourable attitude by regulators to the independents' demands and to reject the arguments for yet a further extension of the independent quota. The issue should cease to be 'what is good for independents' but instead should be 'what is good for PSB?' If the question is posed in this way, we believe the answer lies in retaining rather than reducing broadcasters' in-house production capacity (as outlined, in relation to the BBC, in our response to Q5 above).

    Competition for the supply of PSB

    Q14 Do you agree with our assessment and preference for a system which introduces competition for the provision of PSB?

47. We have indicated, in our response to Q3, our support for a plurality of PSB providers. We can therefore fully support Ofcom's view that 'maintaining a plurality of outlets for PSB and commissioners of PSB is vital for the health of the system' (para 2.57).
48. We further support Ofcom's rejection of an 'Arts Council of the Air' as a means of ensuring a plurality of PSB providers for the reasons outlined in para 6.31 (especially the excessive and confusing bureaucracy involved) and - if the proposal is combined with any attempt to divert funds from the BBC - for the reasons cited against 'top slicing' in our response to Q6 above.
49. We outlined our further view on funding sources in our response to Q15 below.

    A Public Service Publisher

    Q15 Is the idea of a PSP one worth pursuing? If so, what form should the new service take? How should a PSP be awarded?

50. We acknowledge that the proposal for a Public Service Publisher (PSP) represents an attempt to secure a long-term future for a plurality of PSB provision in the UK and to make full use of new technology (as outlined in para 2.61) for innovative future means of distributing PSB programming.
51. We further note Ofcom's analysis that ITV, Channel 4 and Five stand to lose £400m per year in implicit subsidies for PSB that currently result from their access to the analogue spectrum; that 'we would not rule out' ITV, Channel 4 or Five 'from bidding to operate the PSP' (para 2.64); and that 'up to £300m a year at switchover (2012) could enable the PSP to provide a deliberately limited quantity of high-quality content' at 'an average per programme hour budget of around £200,000' (para 2.68).
52. Our reservations are not about the spirit and intent of the proposal but rather about the viability of a PSP as a new and freestanding programme provider. Rather like the arguments against a new 'Arts Council of the Air', we see the creation of a completely new PSB institution of this type as creating serious problems of bureaucracy, confusion and hostility from existing PSB providers. Furthermore, we do not see 'a deliberately limited quantity of high-quality content' as providing an adequate replacement for the anticipated reductions in PSB programming - including regional programming - from existing providers
53. Our favoured solution would be to accept much of Ofcom's analysis (although with reservations, as outlined in our response to Q1, of switchover as the end of commercial PSB) - and to plan, from the start, for the new 'PSB funding' to be operated and delivered via existing PSB providers other than the BBC (principally ITV and - if a case can be made on financial grounds - for Channel 4). Ofcom does not itself rule out such a solution. We simply believe it should, from the start, be earmarked as preferable to a separate and freestanding PSP. Channelling such funds via ITV (and Channel 4) will both make up the financial shortfall predicted for them by Ofcom after switchover and allow the resulting programming to be distributed by established PSB providers with wide public availability and a ready made profile in the market.

    Q16 What do you think the best source of funding would be?

54. We note Ofcom's three alternative possible sources of funding - general tax revenue, an enhanced licence fee and a tax on the turnover of licensed broadcasters.
55. We would not favour the use of additional general tax revenue as a funding source. This would represent a politically vulnerable method of financing, would have negative implications for editorial independence from government and could easily become extremely unpopular with the public. However, we would not wish to rule out some consideration of financial support from the proceeds of auctioning the analogue spectrum - not as an ongoing primary source but as a supplementary or even on-off start-up source of funding.
56. We would strongly oppose an enhanced licence fee. We believe such a proposal could have extremely negative implications for the long-term financial future of the BBC. We are not convinced that an 'enhancement' would not be directly at the expense of funding needed for the BBC itself either initially or in the future; we believe a rise in the overall level of the licence fee would lead to an erosion of public support for the basic BBC licence; and we believe that having set a precedent of using the licence fee revenue to fund other broadcasters, there would be a significant danger of yet further future demands of this kind (a form of top slicing by any other name).
57. Of the three alternatives put forward by Ofcom, we therefore favour that of a tax or levy on the turnover of UK licensed broadcasters (other than the current PSB providers). We would extend this levy to all deliverers of PSB programme content, which could in the future include telecom companies (via broadband and mobile phone) and internet service providers. BSkyB in particular is an immensely powerful and fundamentally lucrative commercial franchise which has long enjoyed the benefits of light regulation and the ability to 'commodify' areas such as live sport while contributing, relative to its revenue stream, a pitifully small amount of high value original UK programming. The levy could, if necessary, be linked on a sliding scale to the provision of original PSB programming ie the more such provision, the less the levy.
58. We believe such a tax would be easily financially supportable by such major commercial players, would avoid any additional burden of general taxation and, most importantly, would secure for viewers a long term future for a pluralistic PSB system (which is what, on the basis of Ofcom's own research, they want).

    Conclusion

59. We hope you will take note of our views on all the issues covered above - but particularly, in the short term, on the proposed cut in ITV regional non-news programming. We look forward to the next stage of the review, as Ofcom moves towards its conclusions on the future of PSB.