TUESDAY 7 DECEMBER 1999

SIR CHRISTOPHER BLAND, SIR JOHN BIRT, MR GREG DYKE, MR JOHN SMITH AND MR DOMINIC MORRIS

  780. It was taken into account that it would cost you more in the future?
  (Mr Smith) The "cost more in the future", as you say, if I may say so, Chairman, the extra cost that is coming now is as a result of doing more things. It is about transmitting.

  781. It is about digital, which you knew was coming?
  (Sir Christopher Bland) Yes.

  782. So the answer to that is yes?
  (Mr Smith) I am not going to pretend that at the time of the sale, which was conducted in 1996, we had an absolutely clearly thought-through digital plan because, of course, we did not then; neither did anyone else, and the sale in 1996 was about selling the existing arrangement, not predicting the future arrangement.

  783. Just one more on that subject: could you tell me if anything was done to protect the amateur groups who use the facilities for transmission? Was anything done in the contract to protect them?
  (Mr Smith) I do not know.
  (Sir Christopher Bland) Chairman, that rings a bell but whether it rings a bell that we were asked to and did not or we were asked to and did I think is something we should check and respond.

  784. Maybe, Sir Christopher, if you are able to, you can drop us a line about that fairly quickly?
  (Sir Christopher Bland) I will, yes.

  785. In answer to earlier questions to both the Secretary of State and yourselves, there was a question mark as to whether or not accepting advertising on BBC Online would be in breach of EU regulations. I slightly feel in my mind that that was a red herring because, of course, this will also apply to the Radio Times, where you do get fee income for advertising?
  (Mr Morris) The difference, Miss Kirkbride, is that the Radio Times as part of BBC Worldwide receives no licence fee payer funding. I think that is what was behind Mr Maxton's question. If BBC Online in the United Kingdom were funded from advertising, either it would have to become wholly separately funded and receive no licence fee income and that whatever commercial model would have to fund the whole thing, or you would be into, as the Secretary of State rightly said, significant concern in Brussels, which they have raised with other state funded broadcasters around Europe, where some of them have taken a mix of advertising funding and state funding or licence fee funding in one or two cases. There is a difference. In effect, complete separation, Radio Times among other things commercially funded, fine, complete licence fee, fine. Mix the two together and the European Commission gets very interested and says, "What's all this then?" under the Treaty of Rome.

  786. But I thought that the profits of the Radio Times did go to the BBC. Is that not the case?
  (Mr Morris) Of course.

  787. What is the difference?
  (Mr Morris) In effect it is a one-way process. Worldwide has to be completely at arm's-length and must be completely commercial. It cannot receive a penny of public subsidy. However, it exists for one major rationale, which is the secondary exploitation of the BBC's activities, the brand, related products such as the Radio Times, to bring money back in to create about 900 extra hours of programming or, in effect, to reduce the licence fee by the equivalent of £4 or £5 for every person at the moment. There is no fair trading difficulty with them providing money to the licence fee. Where it is difficult is taking a mixture of, if you like, public subsidy and private income within the same service. That is the thing the Commission finds most difficult.

  788. There we are. I think one of the biggest difficulties the Committee has is reconciling certainly the extension of the licence fee to the BBC with the concern of private operations. As Sir Christopher mentioned earlier, CNN nearly went bankrupt in creating CNN and BSkyB had difficulties when it first started doing it own News 24 hour programme, and I suppose as an aside, when I watch BBC news programmes and I watch Sky news programmes I tend to find myself less aggravated by the political content of Sky programmes. However, that is a slightly different issue but one which I think you also need to address. Sky quite legitimately gets very upset that you are able to go to Cable for your 24-hour service when they have risked their shirt on providing this service on their own satellite platforms and the list goes on. We have heard from the Internet providers that they are very concerned about the cross-subsidy that the advertising on BBC TV can give to your website and how that also creates difficulties for them when they raise private finance for their website. I find it very difficult to see how you can reconcile these two things and I wonder if you can help us to give any suggestion of where there might be a bit more fairness between the taxpayer funded BBC media outlets and how we maintain a diversity of programming in the private providers?
  (Sir Christopher Bland) Chairman, it is an issue for the BBC and we do operate probably the strictest, most detailed and most scrupulously enforced fair trading regime of any public sector organisation. We have a fair trading audit, a fair trading compliance committee and we trade fairly. I think the key to assessing whether the BBC is behaving properly is not simply to assess whether we are complying with the fair trading regulations, which we are, but to take a view on whether there is a public purpose, a genuine public service purpose, behind the service in question, and if there is, I am afraid, this being the real world, you have to aim off for the likes of Kelvin MacKenzie, who feels deeply threatened by the existence of Radio 5 Live. Radio 5 Live is a service of news and sport that was invented by the BBC and the arrival of a commercial operator late in the day trying to take over an innovative and thoroughly popular news service I think is typical of some of the axe-grinding and special pleading that you will have heard and, being a wise Committee, will have aimed off for. Each of these commercial competitors has very specific interests and you need to disentangle those from the underlying importance of the public service involved and whether there is fair trading. All our services, not just News 24 but BBC 1 and BBC 2, are available on cable and through satellite free. So we are a free service, free at the point of delivery, but funded by the licence fee and that is the raison d'être. We come back, as the Secretary of State said, to our goals being different, not commercially constrained, not driven by the needs of advertisers, not driven by the needs of subscription, but the provision of a universally accessible, genuine public service that sets standards for the private sector, that raises the sights of our viewers and listeners, that seeks distinctiveness, that remedies market failure, that provides a universally available, high-quality public service on radio, television and the Internet to every home in the United Kingdom. That is what the BBC is for and that is why it is a justifiable expenditure of £101—terrific value.

  789. I think we ought to leave Sir Christopher with that last word. I close the session on that point. I would like to thank you, gentlemen, for coming back again. I am very sorry Miss Hodgson was unable to come. We understand there were family reasons why not. I thank you and we would like to extend to you the same seasonal greetings as we did to the Secretary of State.
  (Sir Christopher Bland) Chairman, thank you for your courtesy and listening to us and the patience with which you both framed your questions and listened to our answers. Thank you.