ITV, Channel 5 PSB commitments trimmed if licences renewed

Editor ©RapidTVNews | 24-05-2012

As under fire UK Secretary of State Jeremy Hunt mulls over the renewal of Channel 3 and 5 licences, the channels are warning that they will be challenged to maintain public service broad casting (PSB) commitments contained under the existing terms of broadcast.

As part of its duty to advice the Secretary of State on renewal of UK Channel 3—namely ITV, STV and UTV— and Richard Desmond’s Channel 5 independent TV licences, UK regulator Ofcom is required to give its opinion as to whether the existing licence holders will be able to contribute, at a commercially sustainable cost, to the fulfilment of the public service broadcasting purposes in the 10 years from 2015.

The ramifications of the decision could have huge effect on the UK broadcasting industry: The Secretary of State's powers in relation to relicensing provide for either intervention to block licence renewal, requiring Ofcom to auction the vacant licences; no intervention, so that Ofcom proceeds with the renewal process; and extending the existing licences, potentially until after the Communications Bill is completed. The UK Secretary of State also has the choice of exercising his powers to remove (or in some cases amend) the statutory obligations that must be included in public service broadcasting licences.

And as a result of its analysis of the independent TV market going forward, Ofcom has called into question whether the licensees could continue to make a sufficient contribution to the fulfilment of public service purposes; and whether those contributions would be commercially sustainable in the next licence period.

Ofcom's view is that even though the potential value of PSB licences have declined, and that the background to the present assessment of licence renewal is very different from the environment in which the licences were first awarded in 1991, Ofcom believes commercial PSB services could make a sustainable public service contribution over the next licensing period, creating a case for renewal.

Licensees receive specific benefits such as the right to appropriate prominence on EPGs as well as access to spectrum that enables them to make their services available to 98.5% of the UK population on the DTT platform.

Channel 3 and Channel 5 licensees had argued to Ofcom that the benefits they receive in return for PSB status have declined significantly as digital switchover has progressed and choice for viewers has grown. Moreover, some of the Channel 3 and Channel 5 licensees also made it clear that given uncertainty around future changes in technology and viewer consumption patterns, they were uncertain as to whether their commercial imperatives and obligations to fulfil public service remits will remain aligned throughout the next licence period. Channel 5, in particular, argued that amendments to certain PSB obligations may be necessary. Equally, all licensees stated that they consider a contribution beyond existing levels is not possible.

However in making its assessment, Ofcom noted that overall Both Channel 3 and Channel 5 exceeded their respective production and programming obligations between 2007 and 2010. For Channel 3 collective spending on original content second only to the BBC, of which around 40% has been sourced from independent producers in recent years. Yet by contrast the regular observed that delivery by Channel 5 was more modest, in part a reflection of the more limited range of PSB benefits it receives. Furthermore, between 2007 and 2010 spend by Channel 5 declined by 49% from £122 million to £62 million.

In choosing between the options open to him, Ofcom advises the Secretary of State to be mindful of certain specific concerns, the most notable of these to be the potential impact his decision could have on the future of ITN and news plurality more generally, particularly if he were to require an auction for the licences. Also it says that some amendments to the existing licences may be required in preparation for renewal. These include the possibility of establishing a separate, stand-alone licence for Channel 3 in Wales; ensuring a provision of Scottish news in the south of Scotland; and/or require a continuing commitment from Channel 5 to make children's programming.

Fundamentally though the regulator says that the Secretary of State shouldseek both to establish that commitments proposed by the licensees represented minimum licence requirements during the next period and expect the future regulatory and legislative framework to discourage further reductions in PSB delivery.