Amendment of the Transparency Directive
Mr. Humbert Drabbe
Director State aid II
Rue de la Loi 200
Fax 296 9817
28 February, 2000
Dear Mr. Drabbe
Amendment of the Transparency Directive
The British Internet Publishers Alliance (BIPA) is an alliance of leading UK media companies. BIPA members are listed in Annex 1.
The British Internet Publishers Alliance (BIPA) welcomes the opportunity to comment on the proposed amendment to the Transparency Directive and fully supports the Commission’s intention to subject publicly funded broadcasters to financial transparency as well as separate and analytical accounting. This is essential as publicly funded broadcasters enter new markets, compete globally on the Internet and seek supplementary revenues which bring them into direct competition with the private sector. The BIPA is firmly of the view that the BBC’s Internet activities fall within the scope of the proposed amendment to the Transparency Directive and in particular that the Internet activities affect trade between Member States.
In October 1998, the Oreja high-level group’s report, The Digital Age: European Audiovisual Policy, called for a clear and transparent distinction between a public broadcaster’s public service broadcasting and its commercial activities. This we believe is a pre-requisite to the establishment of a fair and transparent regime.
The BIPA is anxious to establish a fair and transparent environment for Internet publishing, a market in which the BBC – the UK’s publicly funded broadcaster, is already firmly established as a dominant presence. In 1998 the UK Government sanctioned the BBC’s internet activities as an approved extension of its publicly funded role. As such we are keen to ensure that all of their Internet activities are subjected to the full rigour of financial transparency and separate accounting.
Although the BBC has established separate accounting for BBC Worldwide, its commercial arm (under their “Fair Trading Commitment”), there is no external, independent regulation of the BBC as a whole. There is no transparency between its publicly funded activities on the Internet (BBC Online, www.bbc.co.uk) and BBC Worldwide (www.beeb.com; www.freebeeb.net). This means that certain activities, such as cross-subsidy and cross-promotion between the publicly funded activities and commercial sites, have given rise to unfair competition (see BIPA letter to the Commission of 5 October 1999). Stricter requirements of financial transparency and separate accounting would, we believe, require the BBC to (a) calculate the true market value
of its content and brands which is made available to the commercial internet sites, (b) pay and account for the transfer of content and brands and (c) value, pay and account for any cross-promotion of BBC activities from publicly funded TV, radio, press and Internet.
This issue was addressed by the independent panel of experts appointed by the UK Government to examine the options for future funding of the BBC.Chaired by Gavyn Davies, this panel concluded that the BBC’s own procedures, which were originally established to provide transparency, have not yet inspired public confidence, and the most serious lacuna
resulting from this structure concerns financial control, described by the panel as “neither satisfactory nor desirable”. The Davis panel recommended that additional safeguards were necessary and in particular that external scrutiny by the National Audit Office be instituted. The BIPA fully supports this approach which is reflected in the current proposed amendment to the Transparency Directive.
On 21st February the Department of Culture, Media and Sport responded to the Davies Report, announcing an above-inflation increase to the BBC Licence Fee. With regard to the questions of transparency and commercial activities, regrettably the department did not endorse the recommendation to involve the National Audit Office.
Instead it has proposed ‘independent’ investigations of the BBC’s fair trading policies and some financial reporting arrangements, which will be published in due course. As Internet publishers we are alarmed at (a) the
lack of any specific proposals to remove the BBC’s unfair trading practices, and (b) at the delay, which will continue to consolidate the BBC’s dominant position in this market.
These comments are fully supported by the European Publishers Council (EPC). A list of EPC members is attached at Annex 2.
Angela C Mills
British Internet Publishers Alliance