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Disrupter disrupted: BSkyB, formed by Rupert Murdoch in 1990, has overtaken the BBC in revenue but is threatened by BT

Time and technology wait for no organisation, no matter how revered. The next two years will see a lively debate over the future of the British Broadcasting Corporation, with the current Royal Charter due to run out at the end of 2016. The early talk is of an extension of the licence fee for a further decade to 2026, but of possible reductions in its value and certainly of freezing it in real terms. According to an ICM poll in the Sunday Telegraph last month, 70 per cent of voters believe that the licence fee should be abolished or cut.

A huge and very public intellectual brawl seems certain. Already a former BBC director-general, Greg Dyke, has quarrelled openly with Grant Shapps, the Conservative Party chairman, over Shapps's suggestion that after 2016 licence fee money ought not to given exclusively to the BBC. The debate so far has tended to take for granted both the survival of the licence fee in some form and the Beeb's status as a nationalised organisation. But can a case be made that the licence fee is now obsolete as well as unpopular? And what would the ending of the licence fee mean for the structure of British broadcasting? With the licence fee scrapped, should the BBC remain in public ownership? Or should the BBC be privatised, so that it can compete on a level playing field with the global media giants that are now emerging? 

A potted history of the licence fee and its place in British broadcasting is needed to answer these questions. In the early days of television in the 1940s technology imposed tight constraints. The transmission of programmes "over the air" from land-based masts and towers was limited by a shortage of spectrum. Only one channel was readily feasible. Further, if programmes were broadcast "free to air" from the masts, any household with a TV set could watch. Pay per view and subscription for a particular channel were impossible. Although payment could have been by advertising, the postwar Attlee government was unenthusiastic about capitalism, consumerism and marketing jingles. The introduction of the BBC licence fee in 1946 was almost inevitable, given the contemporary political and technological context. Paul Samuelson, the Nobel-prize-winning American economist, advanced the concept of "public goods" in his classic 1954 paper "The Pure Theory of Public Expenditure", demonstrating that such goods had to be financed by taxation and could not be left to the free market. The hostility to advertising meant that broadcasting was the textbook paradigm of a "public good".

Still benefiting from the halo conferred by its wartime role, the BBC was by far the most influential broadcasting service in the world. Further, with the UK accounting for almost 10 per cent of world output in the late 1940s, its state-owned monopoly was a vast broadcasting business by international standards. The BBC may not have been part of the British constitution, but it was undoubtedly a "national champion". However, its special status was already being undermined. Spectrum scarcity — the original rationale for monopoly — was being overcome. In 1954 the Conservative government under Winston Churchill passed the Television Act, so that independent broadcasting financed by advertising could compete with the BBC. For the next 20 years British broadcasting was a highly regulated duopoly of Auntie Beeb and the profit-hungry (and indeed very profitable) "independent" television companies. 

Advertising is sometimes demonised by left-wing commentators as capitalism without taste or shame, and as free enterprise at its selfish worst. As long as advertising was the only alternative means to finance broadcasting, the licence fee was safe. But by the 1980s satellites with programme transmitting capability could be launched into space, promising a new world of satellite-based broadcasting. At first two businesses were envisaged, Sky Television and British Satellite Broadcasting, but they merged in 1990 to form BSkyB. The plan of the entrepreneurs behind BSkyB, notably Rupert Murdoch, was that viewers would pay for TV channels by subscription, usually on a monthly basis. 

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Capt Cluster
January 13th, 2014
3:01 PM
The BBC has become a bleeding heart liberal and the presenters, commentators and comedians have become unwatchable by non ex-pollytech lefties. The sooner this over privileged propaganda machine is sold off the better. Tragic!

January 10th, 2014
6:01 PM
I'll be brief as I'm not going to convince anyone here. Graphs rarely 'prove' anything. They display data which can be interpreted in different ways. In this article they illustrate the simple point that the BBC used to be the biggest beast and now it's Sky. We all know this, it could have been explained in a short paragraph and it's irrelevant to the argument. There is an increasing misuse of graphs, charts and tables in non-scientific articles precisely to try and convince lazy readers that they are scientific and impartial. Well, it worked on PP. There is a perfectly rational free-market argument for abolishing the BBC. I just don't agree with it. I would have more respect for Mr Congdon if he hadn't hidden behind the fiction of privatisation. I don't believe the BBC is perfect but when Sky is promoting Fox News as news I can live with a bit of soft left bias. Advertising isn't in itself a bad thing but any organisation that accepts it is beholden to the advertisers. I reserve a reaction of horror to more rather more frightenng apparitions PP - grow up. As a Sky subscriber I can tell you that the cost of a full Sky package for one month DOES cost more than the the licence fee. Not possibly but definitely. This is an ideological argument masqerading as an economic one. You believe in privatising everything. I don't. This isn't an argument but a clash of beliefs.

December 30th, 2013
6:12 PM
We've said this before,30-Dec-2013 but, We think the BBC Licence Fee wastes about £85milion p.a., because the cost of collection is about 3.5% of money collected, whereas 'general taxation', with 3 exceoptions, currently costs less than 1% of money collected. Were UK 'governments' able to trust oneanother, we argue that they could agree a percentage of the UK's GDP to be allocated to the Beeb ( currently for Radio, TV , World Service, and BB roll-out), and restrict broadcasts to only top-quality material for the public good.

Principled Peter
December 3rd, 2013
5:12 PM
" graphs to demonstrate that this is science and not just the usual Thatcherite claptrap." How awful. Proving stuff. Not sure what is offered in your response by way of a counter to actual evidence in graphic form, beyond not making sense. "No mention of quality or impartiality or trust" McAlpine. Pollard. Rose. PAC. Just this last year. Maybe best they were not mentioned? "No mention that Sky costs its customers as much in a month as the BBC charges for a year" Possibly. But with the BBC it is by compulsion backed by fine or prison. On top of being, well, on top of the 'fee' charged? "AND it takes advertising" The horror. Excuse me while I wait for the next Xmas endless incestuous promo break doing the same job. "No mention of cosy backroom deals between Murdochs minions and Cameron." Yes, well, the lack of interest conflict and degrees of ethical separation between such as Ed Richards of OFCOM and all Lord Hall's hires hiring hires from Purnell to Katz, etc, are nothing in comparison. And yes, I do know Lord Patten is supposed to be a Tory. But it's the deeds that matter. And they are getting darker daily with each BBC-untrustworthy redaction or untransparent obfuscation as they find they can be held to account just as much as they think they could, without any accountability, target others. "You can't privatise the BBC. Once it moves out of public ownership it becomes just another media company." Too what to fail then? Hardly the best excuse for a £4B questionably accurate or ethical or impartial propaganda machine on the public tab.

Patrick Heren
November 29th, 2013
12:11 PM
I agree with Majorian that Mr Congdon's article is over-long, but Congdon's analysis is spot on. Not only is the BBC as currently constituted several decades out of date, but its pervasive soft-left influence on British life hinders real debate and reduces this country's ability to deal with the real world. Privatising the BBC, as I argued in Standpoint some years ago, would be a tremendous one-off bonus for the Exchequer, as well as opening up real debate and discussion in our country's politics.

November 27th, 2013
8:11 PM
An unnecessarily long article with a ton of extraneous detail presumably included to convince us that Mr Condon is a broadcasting expert and not just another fifth rate economist in denial since 2008. He supplies graphs to demonstrate that this is science and not just the usual Thatcherite claptrap. His argument can be summarised as 1 Sky now generates more revenue than the BBC 2 Times change - people have mobile phones and stuff 3 No-one knows what the future will bring but it will probably be different No mention of quality or impartiality or trust. No mention that Sky costs its customers as much in a month as the BBC charges for a year AND it takes advertising. No mention of cosy backroom deals between Murdochs minions and Cameron. You can't privatise the BBC. Once it moves out of public ownership it becomes just another media company. Privatisation is abolition by the backdoor as Mr Condon knows very well but, for some obscure reason, won't say. I suspect he doesn't watch much television. Most people pontificating about TV don't, and don't care about it. For Mr Condon it's just another privatisation to make more money for him and his rich chums. And screw the people who actually use it. But that's the story of the last thirty years.

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