Barry Cox, the deputy chairman of Channel 4, accuses the BBC of a "category error" in drawing parallels between broadcasting and other public services like health, education, parks and museums. In his view, the expansion of choice is making broadcasting more like a normal consumer market. Moreover, he believes that changes in technology will lead to the BBC becoming a subscription-based service after digital switchover.
The intellectual origins of this view can be traced back to the Peacock report of 1986. But for the BBC, such arguments lead us into a trap where public service is replaced by market economics as the basis of policy decisions. Moreover, they are based on a technological determinism which dictates that because something is possible, it must happen.
The BBC does not pretend that health and education are perfect analogies for broadcasting. The scale of market failure and public intervention in the former is, of course, greater. But we do argue - in the document "Building public value" - that all three have many basic characteristics in common.
As a society, we have decided that everyone has the right to high-quality broadcast services, whoever they are, wherever they live. This has been achieved by ensuring that a large part of broadcasting is delivered according to the principles of universality, equity and accountability to the public. These are the same principles that drive decisions about healthcare and education. Each is a mixed economy, combining universally available provision with a range of services for those willing and able to pay more for extra choice.
Different countries have taken different approaches. In the US, for example, the market is supreme in health and broadcasting alike. PBS, the sole US public service television broadcaster, survives mostly on donations and has an audience share of around 2 per cent.
While the scale of public provision in UK health and education exceeds that in broadcasting, the basic rationale for intervention is similar. Free markets are generally the best option for the organisation of human activity. But there are important aspects of our lives where the market mechanism is unlikely to deliver the desired outcome for individuals or society at large. Broadcasting is one of these, as are education and healthcare. They all exhibit market failures caused by the existence of "externalities" and "merit goods." Distributional concerns also provide good reasons for intervening.
Broadcasting can produce significant external effects. An individual's viewing can have benefits for society, for instance, through his or her engagement in the democratic process as a better informed citizen. A negative externality might arise, say, if exposure to television violence causes an individual to harm others. The point is that individuals may not account for such benefits (or costs) when making viewing choices. As a result, the market is likely to undersupply programming that yields broader benefits. Similar arguments apply to health and education and are one of the reasons why provision of these services, in most western societies, is not left to markets.
Markets work on the assumption that individuals are the best judges of their own wellbeing. However, they have to be informed of the choices available to them and of the implications of those choices. There is plenty of evidence to suggest that individuals cannot always recognise the full value to themselves of consuming particular goods or services. Public service broadcasting, like education and preventative healthcare, falls into this category of merit goods. Because individuals may not appreciate the value of educational programmes, or of high-quality news, they are likely to underinvest in consuming them. The market would tend to under-provide such programming.
Broadcasting is subject to distinct market failures that do not apply to healthcare and education. Even in a fully digital world with the possibility of excluding people using encryption, broadcasting will retain a crucially important feature: it can be supplied to many people at the same cost as to a few people. The Blue Planet, for example, cost about £7m to make, and the same amount to provide to 250 homes as to 25m. Charging for the BBC's television services via subscription, as Cox advocates, would result in many people being excluded from content that would cost nothing to give them.
There is no doubt that the growth of digital television is posing new challenges for public service broadcasting. But just because technology may, in a fully digital future, make it theoretically possible to change how the BBC is funded, it does not mean that this would be in the public interest. The BBC would become a different kind of broadcaster, in competition for revenue with other subscription-funded broadcasters and driven by commercial imperatives rather than public service goals. One of its main sources of public value, its universality, would be lost.
Research commissioned by the BBC shows that without the licence fee we would need to charge a subscription price of £13 a month, which is 30 per cent higher than the current licence fee. However, even at this level the BBC would only generate around 90 per cent of its current income, and one third of households would choose not to subscribe. Access to the BBC's services would be partly determined by ability to pay. As a result, there would be a significant loss of consumer welfare, because it would cost nothing to provide the BBC's services to the 20m people excluded. Moreover, the two thirds of people who did subscribe would be paying substantially more for a narrower range of services.
The BBC makes a different judgement to Cox about the appropriate balance between the public and private and the importance of social goals over purely economic ones. Where we agree with Cox is that the future of the BBC rests with its owners, the British people. They may, at some point, decide to turn it into a wholly commercial organisation. Or they may choose to keep large parts of it in the public realm of our national life. n
