The method of funding the BBC’s globally-admired public service broadcasting is under debate once again in UK politics, but its Licence Fee provides a different business model that might make for healthier competition in digital markets if extended beyond traditional broadcasting, writes Diane Coyle.
The BBC and specifically its unique Licence Fee model of funding have been in the news in the UK, not because of anything it has done but rather because the current UK Minister responsible for broadcasting has threatened its abolition, as part of the Government’s attempt to distract attention from its Covid19 rule-busting parties. The tactic has reopened a longstanding debate about the scale and financing model for the BBC – now in its centenary year.
Since Mrs Thatcher’s government, many Conservatives – supported by some competitors of the BBC in the UK media – have kept up a sustained and sometimes vitriolic attack on the public service broadcaster. Its finances have been squeezed over the years. At the same time the broadcast market has been transformed by technology. While the BBC itself has a superb R&D division and has introduced innovations such as the iPlayer and high definition television to the UK, cable and satellite broadcasters then streaming services such as Netflix and Amazon, not to mention YouTube, have greatly expanded.
For nearly eight years (2007-14) I was one of the BBC’s Trustees, charged with overseeing the organisation, much as a supervisory board does in the corporate world, on behalf of all the UK’s licence fee payers – and as a licence is compulsory for anyone with a device able to receive BBC content, that’s almost everyone in the country. I am also married to someone who only recently retired from the BBC (in an audience-facing, not managerial, role) after 40 years of employment there. This makes me predisposed to think it is a valuable organisation. Still, BBC executives frequently irritated us. And there is no doubt that it makes mistakes, from minor to major.
Nevertheless, foreign observers find it impossible to understand why UK governments are so keen to weaken one of the country’s principal elements of soft power, especially at a time of misinformation and polarization. The BBC has also been a keystone of in effect a century-long successful industrial policy to keep Britain at the forefront of the creative industries. Some of the policy instruments have included obvious ones: training for the whole sector; procurement rules that favour British suppliers, from composers and bands to production companies; and investment in technological innovation diffused to the whole sector either for free or through open licences.
However, one thing I grew to appreciate during my time as a Trustee was the benefit an independent, large scale and publicly-funded BBC played in shaping the nature of competition in broadcasting. Its different business model and its Royal Charter setting out public service aims – particularly for news provision – has meant that competition for audiences does not occur only along a single dimension – the most popular shows. There has been competition also in terms of genres, innovation and quality of output, as well as civic value. This helps explain why British writers, directors and technical experts are in such demand elsewhere, particularly by the newer US services. A combination of good and well-enforced regulation and the BBC mean the UK punches above its weight globally in exports, and influence.
There are many other arguments to be deployed in favour of an adequately-funded BBC, from its unique role in high-quality children’s programming to its value for money and response to the national interest in times of crisis – such as providing material for school lessons during Covid-19.
My point is a narrower economic one about how to make competition in a market serve consumers well. There is no doubt a debate is needed about whether the Licence Fee should be replaced with a different mechanism, whether a household tax or a charge on purchases of devices (as used to be the case). Whatever the outcome, competition needs to occur on the basis of the business models too: different financial incentives will lead to different behaviours, increasing quality, variety and choice.
This point applies to other online markets where (as I argue in a forthcoming paper in Philosophy) most of the revenues of most tech companies come from selling advertising. This drives behaviours like tracking individuals, amassing personal data, and favouring whatever will drive viral clicks. These are arguably the main source of many of the online harms governments – including in the UK – are grappling with now. There is nothing wrong with funding a service through selling advertising as long as there is another business model operating in the market.
So rather than attacking the BBC, the UK Government – and others – should be considering whether a mixed economy that has worked so well in broadcasting markets can work in online markets, particularly social media. As others have also pointed out, there is a case to be made for a publicly-funded, public purpose and independent competitor of scale in the online world.
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.