In June, the BBC published the report "Building public value," laying out a case for the renewal of its status and funding as its contribution to the government's review of the royal charter and the licence fee. Decisions about both have to be made by 2006. Central to this defence is a new concept of "public value," both as justification for the existence of the BBC in its current form and as a series of tests which could be used to monitor the BBC's performance.
Much intellectual effort has gone into defining this concept, and elaborating its relevance to the BBC. This effort is a recognition that the BBC faces more serious threats to its traditional structure than at any time in its history, largely because the development of digital technology is undermining conventional broadcasting and creating vibrant new commercial alternatives. As a result, the assumption that we need a state broadcasting institution financed by a compulsory poll tax no longer commands universal assent.
To meet this challenge, the BBC is trying to put itself into the camp of other public services - health, education, parks, museums and libraries. This seems smart. No one seriously suggests privatising our parks, museums and libraries, and while there are important debates about how health and education are delivered, the majority think that the state will have to fund most of these services for the foreseeable future. If the BBC can persuade us to see its operations in a similar light, it will have gone a long way towards securing its future.
However, it is not true that broadcasting shares the fundamental characteristics of these other public services. In the past, large-scale public funding of the BBC was justified because the usable radio spectrum was a scarce public resource managed through international agreements between governments. Governments therefore had to decide how it would be used - and the US decision to exploit it commercially was radically different from the European decisions to go down a predominantly public route. But digital and other technologies developed over the past 20 years have hugely expanded our use of the wireless spectrum and enhanced the capacities of the wired cable and telecoms infrastructures. As a result, governments are retreating from their dominant position in the communications industries, and individual consumers and citizens are increasingly able to choose what they want to watch - much in the way they can behave in normal, market-based sectors.
The BBC acknowledges this, but persists in arguing that its traditional public structure should be maintained, because only in this way can the "public value" in broadcasting be maximised. And it is in support of this argument that it deploys the analogies with health, education and other services.
A moment's thought should make it clear that similarity with the NHS is almost non-existent. With health, effectively we have a compulsory insurance system which tries to guarantee that we will all have access to medical care when we need it. Such access is not determined by our ability to pay. This not only reflects our belief in social justice but, more self-interestedly, prevents contagions that would be a serious risk if funding and receiving medical care was conducted on a voluntary basis. Private payment for healthcare is marginal. In contrast, there is no "insurance" aspect to broadcasting; and the commercial supply of television services - advertiser-funded and paid-for - comfortably exceeds the public provision, a gap which will greatly increase over the next decade.
It is possible - just - to talk in terms of public broadcasting and the "cultural health" of the nation. But at bottom, broadcasting is not a life and death matter. If we ever decided to leave it entirely to the market to provide, there would be some adverse consequences but nothing like those that would obtain in healthcare under such a scenario.
The comparison with education does have the virtue that quite a lot of broadcasting - and not just from the BBC, as it acknowledges - has an educational function. Indeed, a significant amount derives from programmes such as Jamie's Kitchen on Channel 4, which carry an entertainment rather than educational label. It is likely that a pure market system of broadcasting would still deliver a large number of such programmes, and that, where necessary, this could be supplemented by a limited public provision.
More importantly, public education has justifications which public broadcasting lacks. Many more people would like to send their children to private schools than can afford to do so, and it is this limit on private provision that underpins a system of universal state education funded through taxation. Only in this way can we be sure that everyone gets some kind of education. Again, like public health, we accept this for reasons of both social justice and self-interest. It is not only fair that everyone has the chance to go to school, it is economically important that we have as well educated a population as possible. The BBC's concept of the public value of its broadcasting tries to incorporate the fairness principle, but it cannot make the economic justification for public funding that underlies state education. Our prosperity does not depend on the continuation of the licence fee.
If the BBC cannot make the case that it deserves a place in the public pantheon alongside health and education, what about the activities of museums and galleries, or public parks? Here the similarities are closer, but the differences are still illuminating.
The BBC quite reasonably argues that some aspects of broadcasting can, like museums and galleries, be defined as "merit goods," services whose value is only appreciated after they have been experienced. Because we have a tendency, left to our own devices, to underinvest in such services, public money is provided to compensate for this and make sure such services are available - a classic form of dealing with market failure. However, this analogy is of limited value to the BBC's case since the problem in broadcasting could be met either by a much smaller BBC which only produced the programmes the commercial sector didn't, or by creating a central fund to give financial support to any broadcaster willing to provide such programmes. The latter model partly applies to museums and galleries - they compete with each other for a range of public grants and private donations. The BBC is resolutely opposed to such a model in broadcasting.
In addition, much of the support for museums comes from general tax - not a hypothecated tax like the licence fee. This conceals how much is spent, but because we know that the amount must be relatively small, there is no agitation to reduce or abolish it. In other words, we don't have to understand or accept the "merit good" argument to tolerate the subsidy. Not so with the licence fee, which is specifically linked to the BBC via the purchase of television sets.
Finally, what about the analogy with public parks? The BBC rightly includes traditional broadcasting in the category of "public goods" to which parks and street lighting also belong. Such goods "can be supplied to many people at the same cost as to few people," as the BBC says. "The most efficient price for a public good is zero. If it is charged for, some people will choose not to buy it, even though it would cost society nothing to give it to them."
Both the BBC and parks are public spaces within what are otherwise largely privately owned environments. Both are funded from public money and are free at the point of use. But there is a big difference. There are no commercial competitors to public parks, other than in the meaningless sense that every other leisure activity is a competitor. No commercial organisation wants to provide a free park, and free public parks have no negative impact on any commercial organisations.
But there are commercial competitors offering comparable products to most of those provided by the BBC. (Indeed, those financed by advertising are a better example of a public good - the price of their services is zero, not the ?121 a year for the BBC licence fee.) As demonstrated by the rows that accompanied the BBC's creation of digital channels for children and young people, the BBC has a definite impact on commercial companies already operating in these areas. It is not as unique or as benign in its effects as a public park.
So the BBC's attempt to align itself with other publicly funded providers of public value is flawed. It is trying to make out that broadcasting is more important than it is, and that public provision is more necessary than it is. As Stephen Carter, head of Ofcom, put it recently, "broadcasting is special but not as special as broadcasters think it is."
Does this undermine the case for a continued licence fee? In the longer term, yes, but not immediately. This is because it is only when we have a fully digital Britain - around 2012 - that the BBC will be able readily to switch from a compulsory licence fee to voluntary subscription, the most obvious alternative. Digital technology enables every television receiver to handle encryption, essential for subscription services. The BBC disagrees, but its discussion of this issue has some interesting features.
In "Building public value," the BBC reports the outcome of research it commissioned on the consequences of subscription. It would have to charge 30 per cent more than it does now to achieve 90 per cent of its current income, and at these prices less than two thirds of households would choose to subscribe. (It doesn't say how many households would refuse because they couldn't afford it and how many because they no longer thought it was worth it, although elsewhere it reports research which found that 81 per cent of us believe the BBC is worth the current fee.)
Unlike the BBC, I find it welcome to learn that so many people would voluntarily pay over ?150 a year for its services - though not surprising, given that 7m households pay more than that for Sky. The BBC implies that the one third who did not pay would be deprived of the chance of seeing its programmes, breaching what the BBC regards as one of its most important attributes, its universality. But this is disingenuous. Many American programmes are first seen on Sky's subscription channels, and then free on the traditional channels like Channel 4. The same process would work for BBC subscription services - programmes would subsequently appear on free channels.
Of course, this would mean the loss of the chance for everyone to see the same BBC programme at the same time, something which the BBC and its supporters - like Martin Brookes, an economist whose pamphlet "Watching alone: social capital and public service broadcasting" celebrates this distinctive feature - value highly. But how often do we watch things in this collective way? Maintaining a regressive poll tax like the licence fee is a high price to pay for this arguably rather rare phenomenon. Moreover, the "national conversation" role for broadcasting does not require public funding, it merely requires that a critical mass of people watch the same programmes and talk about them on the bus. Does the BBC provide those shared experiences better than commercial television? In recent years, the most talked-about programmes, such as Pop Idol and Big Brother, have come from the commercial sector.
News programmes are different. They ought to be available free to all and should continue to give us impartial, high quality news services in the digital era. The BBC could either fund these from advertising, or - better - receive public money from a source independent of the government, possibly along with organisations like ITN or Channel 4.
"Building public value" makes brief mention of other problematic features of the current system, some of which are likely to get worse. The BBC is understandably embarrassed by having to take to court some of the poorest people in the country for failing to pay the licence fee. It makes a vague offer to work with government to find ways of moderating this unattractive policy. Unfortunately, any remedy short of making the licence fee voluntary is likely to create fresh problems. Few people objected when the government decided to allow those over 75 to get free television licences - after all, we can all hope to benefit from this in due course. The reaction would be very different if other categories, decided by income level or other financial circumstances, were similarly favoured. Those on the other side of whatever line is drawn would justifiably feel aggrieved.
Then there is the radio anomaly. Payment of the licence fee is linked to possession of a television set, even though 16 per cent of the money spent on programmes goes to radio. The BBC reveals that 2 per cent of households, around 500,000, do not have television sets but probably have radios, and therefore get the radio services free. This is not an issue, presumably because most of us are either unaware of it, or don't care. It would be absurd to expect everyone buying radios to pay a mini-licence fee just to catch this small minority of free riders, but it does suggest that, despite the BBC's high-minded assertions, the important principle of universality - everyone pays and everyone receives - can be breached when it suits.
Unfortunately for the BBC, what is acceptable at this level in radio may be far more problematic when technology allows us to pick up its services off the internet, store them on a hard disk or server and distribute them around our homes to individual screens - without passing through a television set at all. The BBC briefly acknowledges this issue, but claims it will not be a problem for at least 15 years and does not need to be addressed now.
But it could happen a lot sooner than that - certainly within the period of the next charter. If so, what policy should the BBC and the government adopt? Do they extend the need to buy a licence to computers, video game consoles, media players and so on - all of which can usurp the functions of the television set? Or do they allow the emergence of households which legally escape paying the fee even though they are consumers of BBC programmes?
This is the nub. Whether or not one agrees with the BBC's assertions of its public value and the principles that sustain it, the institution currently survives because enough people value it as it is and don't want it changed. All other "tests" invented by the BBC are window-dressing. The question is whether - or when - the current changes in technology, markets, and consumer behaviour will turn what are now minor anomalies into gross distortions and result in public disaffection with the licence fee. Let us hope that the people at the BBC who wrote "Building public value" are devising a plan B, just in case the tipping point comes sooner than they think.
