Michael Grade has promised the launch of any new services by the BBC will be scrutinised more closely, but commercial rivals remain concerned about the corporation's expansionist tendencies, writes Jenny Smith.
BBC chairman Michael Grade said last week that the corporation is undergoing a "revolution" in its governance, as the corporation published details of how it plans to make its decisions on the launch of new services more transparent and accountable.But the House of Lords, which attacked the proposals and claimed the BBC Trust was "ill-conceived", is not the only one to have voiced criticisms. Commercial rivals are also suspicious about whether the plans go far enough. The aim of the public service licences - which will be subject to a public consultation process ending in mid-December in the hope that they will be incorporated in the forthcoming white paper on the BBC Charter - is to quell continuing complaints from commercial companies about the BBC's expansionist tendencies.One charge repeatedly levelled is that the BBC tailors its justifications for entering each market to suit its own needs. Grade's comment to Broadcast last week that the service licences will be "as detailed as it's possible to make them without in any way curtailing the creative ambitions and flexibility of the creative people upon which this place depends" suggests that the BBC is leaving itself yet another regulatory loophole.For the first time, the corporation has made a firm commitment to "measure the likely impact on existing or potential value created in the wider market", but other broadcasters question whether the BBC will demonstrate real transparency."Of course we welcome the BBC's commitment to greater balance and transparency towards the rest of the market," said David Lynn, UK managing director of children's channel Nickelodeon. "But we are concerned that the current proposals still allow too much wiggle room for the BBC services to distort the market."No one from the BBC would speak on the record to Broadcast about how the proposed public service and market impact tests will work in practice. In its March green paper on BBC Charter review, the government recommended that new services should be market-tested by Ofcom, but the BBC, while conceding that Ofcom needs to have a role, wants the new bbc Trust to play an equal part in deciding on the validity and scope of new services, along with a third-party measuring organisation."We think there's a potential conflict of interest for Ofcom to do the analysis, given that it is allied with the commercial broadcasters," said one BBC source, who wanted to remain anonymous.Many commercial operators believe that if the Trust were to be involved in market impact assessment it would dilute its value. Nowhere is this felt more acutely than in the commercial radio sector, where a slump in radio advertising in recent months has been exacerbated by BBC services' growing market share.Radio broadcaster GCap Media maintains that the BBC still hasn't grasped the importance of consulting the sector when it tries out new technologies. GCap points to concern at its largest national radio station, Classic FM, about the BBC's recent decision to make Beethoven's works available for free download from its website. The trial attracted 1.4 million downloads and, says GCap, it was in direct competition with services it is trialling for commercial use. "These trials went ahead with no market impact assessment," said Classic FM commercial director Darren Henley. "The BBC did not consult with record companies prior to the launch of Beethoven Week, as Mark Thompson had claimed to a DCMS select committee. Both (record company trade body) the BPI and the major labels including Sony/BMG confirmed they had not been consulted in advance."But this week, the BBC bowed to pressure from the industry, announcing that it will not offer free complete downloads for its Bach Christmas special.There is another area of potential controversy in the proposals. The BBC appears to leave itself a get-out clause with respect to modifying existing services, if an investment proposal "requires a change to existing services but is unlikely to have a significant market impact"."Who gets to decide what a significant change is?" said David McConnell, director of external affairs for the Commercial Radio Companies Association. The CRCA has submitted evidence to the DCMS claiming that radio format changes such as a shift to or from speech, or a change in the type of music played, not considered a "significant" change in the context of the BBC's service licences, can be very significant to radio rivals.UK cable and satellite operators share the concerns of the radio operators. "Who conducts market impact assessments is key to this," says Charlotte Wright, executive director of the Satellite and Cable Broadcasters Group. "What we've really pushed for is for it to be done by Ofcom. We would have no confidence if it was done by the BBC Trust."Commercial operators are particularly alarmed by the idea that the Trust should decide whether a market impact test is necessary; if the Trust vetoes a test, there's no way for Ofcom or anyone else to protest. "This means the final decision to approve a new service or sanction the removal of an existing one would rest entirely with the Trust," says Angela Mills-Wade, director of the British Alliance of Internet Providers.But it's not just a question of who conducts the tests. The impact of a public service broadcaster on commercial markets is relatively untested. Wright argues that the so-called "crowding out" test used to define the negative impact of the BBC on the commercial sector in the Graf report, and which the BBC proposes should be used in future, was "incredibly subjective" and "almost impossible to prove". Graf himself says that the test he used would not stand up to the rigours of European competition law."European law requires a minimum of 'distortion' in unfair state subsidy tests," Wright says. "There are some far more objective tests here, which require that any use of public funds in a market must demonstrate there is 'minimum disruption'. The BBC doesn't use these tests."One area where the BBC's new services will be particularly tested is new technology. One economist, speaking anonymously, draws attention to the BBC's Interactive Media Player, the scope of which is as yet undefined. "If the BBC forces other content providers to use the digital rights management technology behind it, this could be a real issue."The service licences do represent a step by the BBC in the right direction. But commercial companies think the devil remains in the small print. The corporation must show that it's changed its habit of moving into any new market it chooses, planting a prominent public service flag on the summit and asking questions later.And there isn't adequate understanding among regulators of the implications of these new technologies."Companies from sectors ranging from radio to the internet allege that the BBC consistently fails to investigate the damage it may cause by launching services into a commercial market.