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MPs: ‘Government has no options on licence fee’

March 25, 2021

By Colin Mann

The Government’s failure to enable a viable and alternative form of funding for the BBC means it will be forced to rely on the TV licence fee for the term of the next Charter, according to a cross-party group of MPs. In a wide-ranging Report, The future of public service broadcasting, the House of Commons Digital, Culture, Media and Sport Committee concludes that the Government has left itself with no option on the licence fee, not least because it has failed to put in place the necessary broadband infrastructure that would facilitate other funding mechanisms.

As a result, it says the Government must now act quickly to end damaging speculation about decriminalising non-payment of the BBC licence fee with continuing uncertainty likely to boost evasion rates and lead to a further drop in funding and has called on the BBC to clarify the scale of licence fee evasion .

The Report finds that Public Service Broadcasters are being let down by out-of-date legislation and calls for a new broadcasting act which would enable them to compete and thrive in a new media age with a right to prominence on digital platforms.

“It’s clear that the BBC TV licence fee has a limited shelf life in a digital media landscape,” commented DCMS Committee Chair Julian Knight MP. “However, the Government has missed the boat to reform it. Instead of coming up with a workable alternative, it has sealed its own fate through a failure to develop a broadband infrastructure that would allow serious consideration of other means to fund the BBC.”

“Not only that, but the Government is effectively allowing the BBC to haemorrhage funds through non-payment of the licence fee as a result of continued speculation over decriminalisation of licence fee evasion, a situation it must bring to an end.”

“To enable public service broadcasters to compete in a digital world, Ministers must renew broadcasting laws that are nearly 20 years out of date. It’s a question of prominence – too often public service broadcasters lose out on dominant platforms with content that’s hard to find or isn’t branded.

“However, there is more that public service broadcasters should be doing for themselves and only by pooling resources can they hope to compete with the likes of Netflix and the platforms. The collaboration by the BBC and ITV on BritBox is a striking example of how they can work together to create a ‘one stop shop’ for video on demand content – a model for future work.”

MPs found that as a result of Government delays to full fibre broadband rollout, a wholly-online public service broadcasting system allowing for universal access is not yet viable. While a significant amount of content is being made available online, during the current period of transition the interests of consumers who rely on linear TV must be preserved. Future services would be likely to be delivered via the Internet, however the present reality was that lack of access to broadband and lack of digital literacy skills could result in 1.8 million households losing television and public service broadcasting services if they were entirely Internet-based.

In the Report, MPs call on the Government to enact new legislation by the end of 2022 to replace the outdated Communications Act 2003, echoing a call from regulator Ofcom for a new legislative framework. The Report finds the Government has been too slow to act on Ofcom’s 2019 recommendations to update legislation on prominence, ensuring not only that public service broadcasting content remains easy to find for viewers on Internet-connected services and devices but that it goes beyond the Electronic Programme Guide.

As PSBs increasingly rely on third-party platforms such as social media to distribute their content in order to reach younger audiences, MPs call on the Government to broaden the Digital Markets Unit’s remit to consider whether the dominance of online platforms gives them ‘undue influence’ over the ability of consumers to access public service broadcasting content, both online and through streaming.

MPs note that the BBC’s target of a 5.9 per cent licence fee evasion rate was likely to be missed by a ‘significant margin’ and express their concern that the situation could be exacerbated by the Government’s failure to make a final decision on decriminalisation.

The Report calls on Ministers to provide assurances that this unresolved issue will not be used as bargaining tool in ongoing licence fee negotiations with the BBC and S4C. To do so would risk undermining a core principle of public service broadcasting, that it should be removed from Government interference.

The Committee says that ensuring adequate funding is essential for PSBs to continue providing linear broadcasting, which remains crucial to older audiences, while also investing in on-demand services. For commercial PSBs, the Digital Markets Unit should address the lack of competition and regulation in online advertising.

In a call for greater collaboration by PSBs, the Committee says they should do more to help themselves to attract digital audiences rather than wait for action by Government. MPs cite the collaboration of the BritBox SVoD joint venture between the BBC and ITV. PSBs should be allowed to collaborate to give them a better chance of competing in the crowded video on demand market. The Report recommends that PSBs explore options for collaboration on a single video on demand platform, and Ofcom should support PSBs in this endeavour.

The inquiry considered a number of alternatives to the BBC licence fee to support public service broadcasting, including models from Germany, Finland and Switzerland, such as household or individual fee; state budget funding; advertising; subscription; supplementary taxation. None of these were sufficiently better as a whole to recommend as an alternative.

Key Recommendations to Government:

  • Prioritise new primary legislation to update the Communications Act 2003 and grant PSBs prominence which extends beyond the Electronic Programme Guide
  • Unless PSBs do more to attract younger audiences, the core principle of universality that underpins their existence will be threatened. Recommend that changes be made to the regulatory structure to enable PSBs to innovate more rapidly and easily, and to be able to better compete online
  • Come out with a strong alternative to the BBC licence fee that it can put to Parliament, or strongly support the current model for at least the next Charter period (2028 – 2038) and actively aid the BBC in driving down evasion
  • Provide assurances that the issue of decriminalisation will not be used as a bargaining tool during the ongoing licence fee settlement negotiations with the BBC and S4C
  • If budgets are going to continue to decline in real terms, the Government should review the expectations set for PSBs

To Public Service Broadcasters:

  • Rather than waiting for the Government to help them, MPs recommend that PSBs help themselves by exploring options for collaboration on a single video on demand platform, and Ofcom should support PSBs in this endeavour.

The Report also identifies concerns about the decline in local and regional news provision both by ITV and the BBC and calls on Ofcom to review the quality and relevance of the local and regional news provision, to be reported on before the new BBC Charter negotiations begin.

The Report highlights a changing media landscape:

  • Dramatic change in how we access and consume TV particularly in younger age groups
  • On average, adults in the UK watch around 30 minutes of YouTube content every day
  • Most popular streaming services and platforms owned by US corporations with PSBs small national players in global market
  • Almost two thirds of UK households subscribe to a subscription on demand service
  • Take up of subscription and online services has fractured TV viewer behaviour
  • Covid-19 pandemic accelerated the already fast-paced growth in online viewing

Separately, Knight has called on BBC Director-General Tim Davie to provide updated figures on rates of licence fee evasion in the light of concerns that the numbers are significantly higher than those previously published.

BBC Annual reports identify a rise from just over 5 per cent ten years ago to the most recently published figures of between 6.5 per cent and 7.5 per cent. The BBC had not provided more precise figures to the Committee’s inquiry into Public Service Broadcasting, however it is noted the BBC had provided detailed information to Lord Botham regarding licence fee figures for those over 75.

“We want the BBC to address real concerns about licence fee evasion – we’ve heard that current rates are significantly higher than the figures it has published to date,” advised Knight.

“When we asked for this information we were pointed to published annual reports that were nowhere near as detailed as what appears to have been sent to Lord Botham about the over-75s. We are left asking whether there is something to hide.”

“This matters because there is a real risk that the BBC licence fee funding model could become unsustainable as a result of evasion, a point flagged in our Report published today.”



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