Report puts BBC under siege with warning to stop the dumbing-down

THE COMMERCIAL television companies are fuming, while the BBC is irate at the Davies Committee recommendation for a new digital licence fee set initially at pounds 1.99 a month. "If both sides are angry," a committee member said yesterday, "it might be a sign that we are getting things right."

The Davies Committee argues that analogue consumers, who currently subsidise BBC digital services by pounds 10 a year each through the main licence fee, will no longer be subjected to gross unfairness. Indeed they will be better off, as the main licence fee will be reduced by 3.5 per cent in real terms in the next two years.

But the BBC is distraught. It wanted a digital fee of pounds 30 plus, and planned to spend an extra pounds 650m a year on its digital channels. The report has delivered less than a third of BBC demands, at pounds 150m-pounds 200m extra a year for the corporation. The BBC was "not greedy, just very ambitious", Gavyn Davies said yesterday.

Sir John Birt, the outgoing director general, is now arguing in emotive language that the corporation's digital future will be less bright than it might otherwise have been. "We wanted a public service alternative for children on digital television," he said yesterday. "But our children's channel now won't be as rich an experience as we want it to be."

While not delivering enough cash, Mr Davies is demanding much higher standards. "There has probably been some dumbing down of the BBC's programming in order to maintain market share," he said. "We want this to stop."

And to ensure that it does stop, the committee is recommending that the authorities "look at all channels the BBC launches when Charter Review comes up in 2006, and decides whether they still fulfil a public purpose".

The committee, in effect, says that the BBC is whinging - that it will be able to deliver better quality if it makes further big efficiencies. "Gavyn Davies has spoken to the new director general, Greg Dyke, behind the scenes," a BBC executive said yesterday, "and is convinced that Greg is prepared to make big efficiency cuts. For a start he will tackle the 3 per cent of total spending that goes on bureaucracy and strategists at the Corporate Centre."

Commercial television companies, meanwhile, are quick to criticise a "bleating BBC".

"We are sick of this notion of the poor BBC," a spokesman for the commercial alliance, which includes BSkyB, ONdigital, Carlton, Granada and Telewest, said. "The corporation has got a pot of gold by getting its income linked to the retail price index after 2002."

They also argue there is a flaw in the report. "Gavyn Davies says that as an economist he recognises that a digital licence fee will reduce demand," the spokesman said, "but says the effect will be compensated by the attraction of BBC digital channels. That's just wrong. Research done by Sky shows that wanting more BBC channels does not even figure in the top 10 reasons for signing up to digital - 53 per cent of subscribers want a greater choice of channels, and 21 per cent a better picture. Less than 1 per cent said they want more BBC channels.

"In a survey of channel awareness done in June, 97 per cent were aware of BBC1 and 95 per cent aware of BBC2, but only 1 per cent were aware of BBC Choice and 0 per cent were aware of News 24, both BBC digital channels."

Overall, the effect is of a BBC under siege. It is also keen to keep at bay a proposal that the government watchdog, the National Audit Office, should investigate BBC spending. "The BBC's independence has been fundamental to its status in the nation and its impact on political life for the last 25 years," Sir John said. "We would resist any suggestion that the NAO should review the BBC's spending and programming decisions, since it would undermine that independence."

The committee has also annoyed the BBC by saying that it must sell 49 per cent of its commercial arm, BBC Worldwide, to private investors. The key members of its expert panel, Davies himself and the newly ennobled Labour peer, David Lipsey, speak with the language of the free market and argue that partial privatisation will allow Worldwide more clout in television markets to promote BBC programmes and products.

But the BBC is furious. It traditionally has a cosy relationship with Worldwide that ensures the commercial operation maximises the amount of money, currently about pounds 80m, that it delivers back to the BBC for programme making.

One media analyst said yesterday: "It is hard to see how the priority the BBC gives to repatriating Worldwide funds is compatible with shareholder demands for dividends."

Demands to privatise BBC resources, responsible for the studios, technical staff and technical broadcasting operations, have been similarly dismissed by the BBC. But the fact is that the two privatisations together would deliver the BBC pounds 450m in extra cash, which would be essential revenue given the strictures imposed elsewhere in the Davies report.

The great unknown for the BBC, though, lies in its online services. The Davies Committee is basically friendly to the idea of floating beeb.com, the BBC's commercial Internet site - which, if the current frenzy for Internet stocks is any guide, could turn out to be worth hundreds of millions of pounds to the corporation.

The Main Proposals

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FUNDING:

A temporary digital supplement of pounds 1.99 a month - pounds 23.88 a year - will start in April 2000 and be phased out when the analogue signals most people now watch are finally switched off.

Television licences should be expressed as monthly fees so consumers can compare them more easily with their television subscriptions.

The BBC's income from the digital fee will grow to between pounds 150m and pounds 200m by 2006, depending on take-up of digital TV.

n The BBC has to find an extra pounds 350m a year in savings and pounds 250m a year og new commercial income by 2006.

Advertising, sponsorship and subscription are rejected as new sources of revenue.

The BBC licence fee should fall by 3.5 per cent in real terms over the next two years as planned.

Only digital levy money should be spent on the BBC's digital services - BBC Choice, BBC News 24, BBC Parliament, BBC Knowledge and BBC Online.

Two licence fees should not mean a two-tier service, and the BBC should actively seek to expand access to digital services and mount community- wide campaigns.

ACCOUNTABILITY:

BBC accounts to be examined by the National Audit Office and MPs.

n Ministers jointly to appoint accountants who oversee the BBC's fair trading commitment.

PRIVATISATION:

Most of BBC Resources, the pounds 200m division that includes studios, outside broadcast units, costumes and other technical and craft support, should be sold off.

BBC Worldwide, the corporation's commercial arm, should sell a 49 per cent stake to private enterprise.

CONCESSIONARY LICENCES:

The concessionary television licence for blind people should be increased from pounds 1.25 to half-price.

Existing concessions for elderly people in sheltered accommodation with wardens should be retained.