Education, Lifelong Learning and Culture Committee, 11 Jun 2008

Meeting date: Wednesday, June 11, 2008

Official Report 306KB pdf

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Public Service Broadcasting Review

I open the 16th meeting in 2008 of the Education, Lifelong Learning and Culture Committee. I welcome Ted Brocklebank to the meeting. I remind all members and visitors that mobile devices should be switched off.

Item 1 is evidence from the Office of Communications. I am delighted that we are joined by Vicki Nash, director of Ofcom Scotland; Stewart Purvis, partner for content and standards; Thomas Prag, chair of Ofcom's advisory committee for Scotland; and—finally, but by no means least—Joyce Taylor, Ofcom content board member for Scotland.

Thank you for joining us this morning and for your submissions. I ask Vicki Nash to make an opening statement before we move to questions.

Thank you. My fellow panellists will talk briefly about their roles. I am director of Ofcom Scotland and, broadly, my job is to represent Ofcom in Scotland and Scotland in Ofcom.

We are happy to be here to talk about our review of public service broadcasting. In members' briefing papers are background papers on Ofcom's duties and the review—a couple of short résumés—and a thicker tome with a yellow cover, which is the review in all its glory. We want to use most of the time that has been allocated to hear the committee's views and take questions on the options that we proposed.

We set out our view on why public service broadcasting is at a crossroads. The public wants high-quality United Kingdom-produced television that reflects the PSB purposes that the Westminster Parliament set, but the pace of change in delivering PSB is challenging, particularly for commercially funded broadcasters. Unless the BBC is to be the sole provider of programmes such as regional news and children's programming, a new system is needed.

We know from our research in Scotland that plurality is important to Scottish viewers, who want PSB to be provided on more than one channel. We put forward four models of a future system for the UK, including ideas specifically for Scotland. We also proposed ideas on funding.

The consultation period for “Ofcom's Second Public Service Broadcasting Review—Phase One: the Digital Opportunity" ends on 19 June and we hope that the Scottish Parliament and as many people as possible in Scotland will make submissions. The review will run until the start of 2009. We will publish a second consultation document later in the year and at that stage we will be happy to come back to the committee and talk about our proposals. The second document will include further proposals to do with Border Television news, which is of particular concern to some members of the committee.

We are delighted to give evidence on the day on which the BBC trust publishes Anthony King's report into the portrayal on network news of the Scottish Parliament and Scottish issues generally. This feels like an important day for broadcasting.

My title—partner for contents and standards—means that I am a full-time executive of Ofcom's senior management. I am responsible for up to 1,000 television and radio outlets in the UK, in relation to which we regulate content and ensure that outlets comply with regulatory codes. We also look ahead to the future of broadcasting.

I am the non-executive member for Scotland of the content board, which also includes representatives for Wales, Northern Ireland and the English regions. My background is in education, broadcasting and television.

I am chairman of the advisory committee for Scotland. My background is in broadcasting and my experience is mostly in local radio. We try to represent Scottish views to Ofcom on the range of what Ofcom does, which includes not just broadcasting but telecommunications issues.

We suggest that I co-ordinate panel members' responses to members' questions.

The committee is keen to ask questions. Ms Nash mentioned that the review document sets out four potential models. Will you describe the four scenarios and suggest matters that we should take into account when we consider them?

I will be happy to do so, and I think that that is a good way of proceeding. We use the phrase "public service broadcasting is at a crossroads", and, at a crossroads, some people turn left, some turn right and some go ahead. There seems to be an assumption in some parts of the UK—I cannot speak for Scotland—that under the proposed models everybody who is in public service broadcasting would continue to be in public service broadcasting. The assumption is false. The ever-present factor is the BBC. We regard the BBC as the cornerstone of public service broadcasting, and it features in all four models in slightly different roles.

We describe model 1 as the evolution model—it is a version of the status quo. In Scotland, it means that there would be a separate licence holder with specific commitments for Scottish programming, particularly on channel 3, in return for access to every Scottish home via terrestrial television. Historically, the commercial side of British television has that extraordinary access via the spectrum into homes, in return for which it provides certain public services in terms of information and programming.

Model 2 essentially says that if the BBC is the cornerstone and there are public services that are found elsewhere, such as on the internet and Sky, PSB should be left mostly to the BBC. In model 3, the position of Channel 4 is reinforced, which would give us two main public service broadcasters—the BBC and Channel 4.

The fourth model relies on a funding agency of some kind, the details of which would be discussed. A variety of content providers—perhaps the old institutions, new players and individual websites—would apply for money to provide the kind of services that we have seen mostly on the internet but which are becoming more mainstream.

My final point, about STV, has not fully surfaced yet. In models 2, 3 and 4, there is no place for a Scottish licensed PSB provider. That is not news to the Scottish Media Group—it is aware of that situation. The reason is that if ITV, which is the licence holder for England and Wales, wished or was invited to depart from the public service scene, there would be no public service schedule into which SMG or whoever might hold the licence in Scotland could insert its programmes. That raises the issue of whether there is a viable commercial television station in Scotland. We are not embarrassed to highlight that issue because we think that it should be the subject of fairly vigorous debate. If this is the beginning of that dialogue, I would welcome that.

That is an interesting point, which I am sure we will consider over the course of the morning.

What response are you getting to the four scenarios? Is there a clear preference for one of them? Are concerns being expressed about any of them? Is the key issue the role of providing independent and commercial coverage for a uniquely Scottish provider?

The initial response has been slow because people needed to take in the complexity of the issue.

In the media coverage, there has been a lot of interest—almost an obsession—in so-called top-slicing, which would involve giving money from the licence fee to providers other than the BBC. That is just one of the options.

What is now becoming clear is the debate about plurality. We think that plurality is important. By plurality, we mean the situation that we have got used to in the United Kingdom, in which someone other than the BBC provides a public service, mostly ITV—channel 3—or, in Scotland, STV. On the future of plurality, the BBC is telling us, "We provide quite a lot of plurality. Do you actually need somebody else to do that?" and Channel 4 is saying, "We need more money to provide plurality."

We have had consultations in Wales and Northern Ireland, and the process is under way in Scotland. I will be honest. I do not think that the issue as it affects the future of commercial television in Scotland in particular is fully at the top of the agenda. We would like to move it up the agenda.

I want to mention Border Television later, as it affects the area that I represent.

I want to probe a bit further the arguments behind your claim that one of the pressure points in the next round of licensing will be the Scottish licence. I understand that in relation to the models that you outlined. However, I want to take a step back to the viability issues that Stewart Purvis mentioned.

If there are questions about the viability of the Scottish service, and of the PSB role within that, that may well point to further options beyond an evolution option. Such viability issues, when considered in the context of the other evidence in the document, point in only one direction, which is that offering PSB services is increasingly not economically viable. What was the rationale behind the models that were produced? I know that you are consulting on them, but in your view, which model is pointed most towards the economic viability argument, and which is pointed most towards what would be in the best interests of the viewing public? The two models might not be mutually compatible.

I will make a start, then let my colleagues come in. The starting point on viability is the equation involving the costs and benefits of being a public service broadcaster. The costs come from producing programmes that are shown only in one area; the benefits come from spectrum access, which means being able to deliver a signal automatically into every home in Scotland—or the United Kingdom, in the case of UK broadcasters. That is a wonderfully simple route into homes, compared with the other ways of trying to get a television channel seen. We expect some public benefits in return for that access, as I said earlier.

On the Scottish licences, there is, of course, a central Scotland licence and a north of Scotland licence. Historically, as Mr Purvis will know, the south of Scotland licence has been linked with the very north-west of England. On the Scottish licences, it appears to us—our analysis is not wildly different from that of SMG—that a crossover is coming, although there is no agreement about exactly when. However, by at least 2010 or 2011, the balance between the costs and the benefits of PSB will go into the negative. That does not mean that the company will not be viable; SMG has other interests, so we are not saying that SMG will make a loss at that point.

I will add another layer. ITV is considering the costs and benefits equation in relation to England and Wales, and believes that it has the option, which is different from that for STV, of walking away from public service broadcasting. ITV can say, "Look, we've done the sums and we would be better off as a UK-wide service that is delivered into every home in the UK without having to do this nations and regions stuff." ITV is not mentioned in models 2, 3 and 4 because the assumption is that ITV has gone off on that course.

ITV has that option, but where does that leave the Scottish licence? If there was no ITV network and no "Coronation Street" or "Emmerdale" coming down the tube, where would the STV news and the other Scottish programming be put? Last week I was in Belfast, and an identical situation faces the UTV licensee in Ulster. It is considering whether it could talk to Channel 4 or form a partnership with somebody else and create a schedule between them—therein lies the economic issue. Joyce Taylor and Thomas Prag can perhaps talk about how those issues might appear to an audience.

Our committee has thought a bit about those matters, but we are still trying to come to a conclusion. We differ slightly from the overall Ofcom view, in that we think that the STV licence has a longer viability. Our simplistic approach to the issue is to ask whether somebody would go for the licence if it were offered to the market in two years' time. The answer is probably yes, because, for example, it is still a profitable enterprise. We want Ofcom to hold STV to providing as much PSB as possible, particularly local news coverage, which we feel is important. However, we would not disagree with the statement that the PSB service will not be viable in the longer term; the relationship between STV and whatever occurs with ITV will be crucial in that respect. An American model could be adopted in which an independent company is affiliated to a much bigger company from which it takes a good deal of its schedule. However, that would involve a commercial decision. Whether one can expect a Scottish company to continue to provide a lot of Scottish material without support is a complicated issue.

Our research and that of the Scottish Broadcasting Commission shows that audiences in Scotland want a plurality of suppliers and that having a mix is important to them. It is important for us to consider not just where we have come from but where we are going. The PSB review is looking at other platforms and other ways in which information and public service content are delivered. At this crossroads, we can throw everything into the air, instead of just looking at and tweaking where we have been. We must take the opportunity to consider the options for much wider supply, in a broadband world.

In the section on future sources of funding, about which we will question you later, you highlight the funders' point of view and the option of competitive funding. How would some of the models that you propose impact on the BBC in Scotland? Mr Purvis, you said that the BBC is

"the cornerstone of public service broadcasting",

but it is not excluded from the options that you intend to consider. From the consultation document, the implications for the BBC were not clear to me. I refer to the whole platform of the BBC, including BBC online, which is an increasingly important local news provider in areas such as the Borders, which I represent. How will that fit in with the models that you outline for the ITV licence? In some of those models, the roles of the BBC and ITV are interrelated.

I will respond as clearly as I can, Mr Purvis—how nice it is for me to be able occasionally to say "Mr Purvis". We in the UK are unused to the idea of funding for broadcasting. The Scottish Arts Council is the funding mechanism for the arts, but there is no comparable mechanism for broadcasting. The Irish Republic has such a fund; it is taken from the licence fee, but it could have come from somewhere else. Producers, in association with broadcasters who want to make a programme or series of programmes about a topic, submit proposals to the fund. Such programmes must meet certain criteria relating to Irish life, Irish culture and so on. The broadcaster must indicate that they like the idea and would transmit the programmes at peak time. Funding is then provided, and the programmes are made and transmitted.

Most of us did not know that that model existed, but it does and it appears to work. Because of European Union rules on state aid, the Irish state broadcaster, Radio Telefís Éireann, can apply to the fund. That is really interesting for the BBC, as it means that it would almost certainly be able to apply to such an agency in Scotland, were one to be set up. You might ask whether the BBC is not already funded to make and transmit programmes. That gets us into a discussion about whether the model would be additional to what the BBC already does.

At issue is exactly where the money comes from. If it comes from Government, does that have implications for editorial freedom and responsibility? To whom are broadcasters accountable at the end of the day? Are they accountable to the funding source or to Ofcom, as the media regulator? We are trying to put into the public arena the alternative models that exist. Traditionally, people are conservative and prefer to continue with the status quo, if it works—sort of. At Ofcom, we are rigorous about putting out other models for people to discuss.

According to our research, 33 per cent of people in Scotland get local information online instead of by watching local television. One could argue that 33 per cent is not a terribly high figure, but it is 30 per cent more than it was five years ago. In Scotland, there are issues of broadband availability and speed, but there has nevertheless been a seismic shift in use of the internet and online services for local information. That is why we think that it is right to include online activity in the mix of what we now call public service content.

You probably read in our report that £150 million is spent by Government—central, devolved and local—on online content. That is a big amount of money. It would be worth discussing, perhaps in another place, how that spend relates to broadband availability and access in Scotland. The fact is that some people will be excluded from that content.

One of the models that we have not mentioned thus far is the Gaelic digital service that is being launched in Scotland. With its different funding situation, it is a model that we should be looking at.

We have to take online services into the mix, but there is a danger that they are seen as a substitute. Research has clearly shown that the public still expects to see public service broadcasting on easily available high-profile channels.

I turn to funding. It is unhelpful that the term "top-slicing" has entered the debate. Let us take the licence fee as a potential source of funding. If we use the term top-slicing in that context, people immediately think that that will damage the BBC—they believe that a lot of its funding will be taken away and given to someone else. There would be resistance to that: the BBC is much liked and is seen as providing a good service. When people use the term top-slicing, they do not necessarily mean that that is what will happen.

The idea of a production fund has a lot of merit, but the crucial factor is where the funding would come from. Two issues are involved: the source of that funding and whether Government funding is involved. Clearly, Government funding should be given at arm's length; if not, the issue of editorial influence arises. People start to worry that the next slice of funding may not come along if they make a programme that the Government of the day deems to be inappropriate.

As Stewart Purvis rightly said, it is no good having a production fund if programmes are then put in a place where people cannot easily find them. In other words, it is easy to put programmes into a ghetto somewhere, but that is not the point of making them—at least as far as Ofcom is concerned.

My first question is for Mr Purvis. The assumption that is implicit in what you said is that you have entirely bought into the economic argument that SMG and other commercial operators make that public service programmes are loss-making. You seem to accept that such programmes are somehow not commercial and therefore require public subsidy or support. In other words, broadcasters have to make a choice between commercial programmes and the news, for example, which never makes a profit. That is not my perception of the situation. Surely it is in the interest of all companies to make good-quality news programming that attracts viewers, and quality viewers at that. I am concerned about the economic model that you seem to be following.

The point is a fair one, but we do not buy into other people's views without making our own analysis. As I said earlier, our analysis differs from that of SMG.

I take the point on investment in programming and in reaching audiences. In Northern Ireland, UTV has a track record of investing more in programmes for its audience than, as it happens, STV—or SMG—does. UTV's audience reach is 39 per cent, which is the highest anywhere in the United Kingdom for national or regional news. That reach figure is terrific, but UTV accepts that the benefits are outweighed by the costs.

The science of forecasting is inevitably slightly subjective. If a broadcaster were to make more programmes, how many people would watch them and what kind of revenue level would they achieve? Even a model with a pretty robust record of local production—for lack of a better description—does not appear to have a solution to the problem.

I will take up Mr Prag's point. If companies think that it is worth bidding for a licence, surely they will think that it is worth bidding for the obligation, too.

Absolutely. However, as Thomas Prag made clear, that is a short-term issue. The existing licences run until 2014. ITV has the right to walk away from its licence before then—for everyone's benefit, let us hope that that does not happen—but, after 2014, a different situation will arise.

In relation to our recommendations to Government, if there is no sustaining service—that may be understating the importance of the issue—or no core, high-performing network service, we have to ask exactly what the Scottish licence is. That is the issue, rather than whether people would apply for the licence. I suspect that if something were to happen to the licence tomorrow, somebody would apply for it.

Another issue, to be blunt, is whether there is anything to advertise. Under models 2 to 4, there would be nothing to advertise. People could not even apply to advertise, because the schedule to insert adverts into would not exist.

Surely if ITV withdrew from its licence, you could find somebody to replace it almost immediately.

Somebody would have to take a different view of the economics from that which is currently taken, but that is not to say that a player is not out there. If ITV went down that route, we would have to consider carefully whether to advertise the licence, although we would prefer to advertise it to see whether anybody applied.

We have not talked about the digital switchover, which is the key change. We are a long way down the road to digital switchover, but we have not quite got there yet. Every home is to have multichannel television, as do the good people of Whitehaven now. In Whitehaven, it is not a narrow group in the community that has multichannel television—every person has it. All sorts of things start to happen to viewing patterns when multichannel television is introduced. That is why we are where we are. The viewing share of the big five channels has declined. It has stood up quite well, given what has happened, but it must inevitably continue to decline, because of the digital switchover.

The march to digital television is increasing. STV will switch over after Border Television does, but it will do so ahead of other broadcasters, so STV will start to run into trouble earlier than other broadcasters will, as Stewart Purvis said.

As I said in my introduction, we know that Scottish people want plurality more than anything, so where we are with the STV licence is quite serious. We must come up with solutions for the short-term obligations and for the longer term, through the models. What is appropriate for Scotland? Do we want to involve broadcasters other than the BBC? Channel 4 and the Gaelic Media Service, which Joyce Taylor mentioned, are an important part of the mix. How much plurality do we want, and how much can we sustain? Fundamentally, the question is about money, as it usually is.

The review acknowledges the tension in public service broadcasting between what is economically sustainable and what suits the public. You mention that opportunities exist to enhance the provision of regional and national content. What are those opportunities?

If we say that our focus on, for example, channel 3 as the main source of plurality is a little bit old fashioned, and if we take the view that a broadband world—involving, we hope, more delivery into more homes—creates more opportunity, in a sense that is the digital opportunity that we talk about. That is why the review is subtitled "The Digital Opportunity". The mix that will be required to deliver the digital opportunity probably involves public service broadcasters and institutions providing more than they currently provide. The BBC already offers an enormous range of online services, but the intriguing question is who else might say that they can provide a public service. Our review talks about art galleries and groups of people who might feel that they have an offering that is worthy of distribution. That is the exciting aspect of the digital opportunity.

Of particular interest in the Scottish Borders is local television provision. We continue to research that—the review contains a whole section on local television. One interest for local television is access to the spectrum. Last Friday, we issued a document on how we will manage the sell-off of spectrum that is released because of the switchover. We will shortly publish a further document on use of the interleaved spectrum, which is of particular interest to local television.

Local television could be another part of the mix, but that brings me back to money. Local television tends to succeed in areas that have big populations. For example, Channel M in Manchester is a viable local television station. As far as I know, Scotland has no viable local television station, although it has a couple of internet television content offerings. The sustainability of local television presents a challenge. The issue is not so much the spectrum as the business model for local television, but that could be a part of the mix for the future to deliver the localness that Aileen Campbell talks about.

In short, a television channel for Scotland using new spectrum is viable in delivery terms; the question is whether it is viable in terms of the cost of making the programmes versus the revenue, wherever it may come from.

That is the question. Traditionally, television advertising has been a mass sell and it is interesting to consider whether there would be an advertising market for a Scottish or even local model. Just because we have not had it before does not mean that such a market could not be created in the future. We can examine American models and other models in Europe where that approach may or may not work.

Local television has been talked about a lot in Scotland and there has been a lot of pressure for it. With my local broadcasting background, I would like to be a fan of it but, as Stewart Purvis said, the jury is out on whether the commercial model would work. If we think that local television is important, other agencies may need to consider it. There is no regulatory reason why local government should not get interested in it as a means of delivering local community services, although that is not a matter for Ofcom. The potential for such services exists, which is one of the reasons why our committee was keen that the digital dividend review should leave space for local television to see whether it could survive. It needs people to try it out and find out whether it works. I hope that it will work; we do not know yet whether it will, but we need to allow for it.

Stewart Purvis knows that switchover is not far away for some communities. In fact, it will happen in November in my constituency and not all my constituents will receive the full digital service. In my view, Ofcom has a responsibility to ensure that all communities receive the same spectrum. That is not the current position, as those who are on relay transmitters will get a reduced digital service. If you have a comment on that, it would be welcome. It is a major consideration for constituents of mine that, depending on where they live, they might get a reduced service. The rather glib response is that they do not need the full service because what they will get will be much better than what they get now, and they should be satisfied with that.

I will comment on two aspects of local television. It was interesting that, on the potential for a single licence in Scotland, you said that the Border TV region finds it difficult to reflect devolution. The contrary argument is, in many cases, far more accurate: a licence that crosses the border is far better equipped to cover devolution than a licence that neatly follows the border along the Tweed. Other committee members will have questions on viewer expectations; in a border area, viewers certainly wish to understand what is happening north and south of the border, and a cross-border licence is an appropriate way to provide that service.

The BBC, Border TV and ITV are developing video journalists, a network news provision and an online news provision. They are recruiting VJs now; it is not something for 2011 or post 2014. How is Ofcom responding to what is happening this month, in the autumn and going forward? It seems to me and to many of my constituents that Ofcom is standing back and letting that happen now and that, rather than saying now how services should be configured within the Border TV area, it will say once the recruitment has happened that we will progress on that model.

We will take that in two parts. Vicki Nash will respond on the digital switchover and coverage issues and then I will respond on the broader issues.

Let us be clear about Ofcom's responsibilities. The Westminster Government determined that, after switchover, the five public service broadcasting channels should be available to 98.5 per cent of the population, but that does not apply to the commercial multiplex operators, who provide the Freeview lite service for viewers who do not get the commercial muxes.

Ofcom has said that, should the commercial mux operators want to provide the service, we would not stand in their way and we would work with them to find available frequencies. Our responsibilities can go no further than that. We cannot compel the commercial multiplex operators to provide a service beyond that which they deem it is reasonable to provide. When the switchover takes place, the service will be available to about 90 per cent of the population, whereas it is now available to about 72 per cent of the population. There will therefore be increased coverage, but we have no responsibility to force provision, because that is essentially a commercial decision. We recognise that it is a matter of concern in the Borders and in other parts of the United Kingdom, but it is not our responsibility, nor is it in our power, to compel the operators to provide a service, although we will provide them with additional spectrum if they decide to roll out more transmitters.

I will ask a brief supplementary before Mr Purvis comes in. Many of my constituents want to be clear about what Ofcom will or will not do, so it would be helpful to have it on the record whether Ofcom sees itself purely as a market regulator instructed by Government, or as a body that represents the interests of viewers. Is it part of Ofcom's remit to represent the interests of viewers? The advisory committee representative might want to come in on that. For example, it is not acceptable that, after the switchover, some of my constituents will get a reduced service. That will split communities and create a situation similar to that which exists now, in which some people can get a terrestrial signal and others cannot. The policy has been put in place and I acknowledge what you said about the UK Government's decision—that is the UK Government's decision. What I want to know is what Ofcom is saying about the interests of the viewers and what they want. Your consultation says a lot about what you have found that viewers want and they are telling you that they want the full service.

I will give an opening response and ask Vicki Nash to pick the issue up.

Ofcom has a statutory duty, conferred by Parliament, which requires us to look after the interests of both consumers and citizens. Those interests sometimes overlap and sometimes do not. We do not do what the Government asks us to do. On some issues we make recommendations to Government and in other areas Government has devolved responsibility to us. A few weeks ago, the team for which I am responsible fined ITV more than £6 million for certain abuses of the broadcasting code. We did not ask the Government whether we could do that; it gave us the power to do that. That is the balance of responsibilities. We take very seriously our responsibilities to consumers and citizens, but we also deal with issues of economic viability when commercial operators are in play.

One of the work streams set out in our annual plan for this year is access and inclusion. That covers a range of areas that are of interest to the committee, including Freeview lite and mobile coverage in Scotland, which is not as good as it is in other parts of the UK. There are also mobile access problems in parts of England, Wales and Northern Ireland. We are also examining issues such as access to broadband and the speed of broadband. We are looking at all those issues but, as Stewart Purvis says, we must be careful to work within our powers. We try to influence other bodies when they have a genuine role to play.

Members might have had a chance to look at our communications market report, which considers the state of access to, coverage and take up of all the digital communication services. That helps to inform our regulatory policy making and we hope that it also helps to inform Governments, including devolved Governments and local authorities. We are very much on the case in respect of access and inclusion, but we can use only the powers that we have to solve the problems that we recognise. We recognise that there is inequity across a number of platforms, not only in broadcasting. Thomas Prag, from the advisory committee, or Joyce Taylor might want to comment.

I will comment. The advisory committee represents all stakeholders. Unlike the BBC Audience Council Scotland, we are not purely an audience council; we are there to represent a much wider range than that, including the broadcasters. We have become aware of what has been called Freeview lite, which is a slightly unfortunate phrase as it implies a lesser thing. As Jeremy Purvis said, most of the folk who will get 20 channels under Freeview lite, which includes all the major channels and the most popular channels, would probably have got only four or perhaps five channels previously. Jeremy Purvis will know more about the situation in his area than I do. We are aware of the issue, we have raised it and we will continue to raise it.

This is not a satisfactory answer, but I suspect that we will come back to the issue when switchover has happened, when we will be able to do research on what people are using, what they are missing and whether they have alternatives. For example, Freesat, which is available now, or will be shortly, through the BBC, will offer folk alternatives. If it were clear that there was still a gap, it would be part of our role to take that up.

I want to follow up on that before we get to the second part of my question, which Stewart Purvis is keen to answer.

I understand that rationale, but do not accept it in any way, shape or form. According to that rationale, we would be talking about a reduction in the number of channels that were available to most of the people who do not receive a relay signal. The Liverpool city of culture channel is available to people in my constituency, although I do not think that any of them watch it. However, the argument is that they should still be able to get it—the platform should be available to all citizens. I would expect Ofcom to be able to say, as a point of principle, that switchover should be equitable for all viewers. I have not heard Ofcom say that this morning—I remain disappointed, although that may change.

Secondly, I am not sure how you can robustly work through the models that you have highlighted if there is a difference in the spectrum that is available, primarily among viewers in rural areas who receive a relay signal. It is not just viewers in rural areas who will be affected. Penicuik in my constituency, which is on the outskirts of Edinburgh and which lies within the STV area, will receive a reduced service because its signal is from a relay transmitter. You cannot robustly analyse all the different options—such as the provision of public service broadcasting by channels that are funded through other sources of funding—if the spectrum is reduced in some of those areas.

Let me put it a different way. We have never hidden the fact that for the BBC's radio services, for example, there is not 100 per cent coverage. The BBC has never attempted to disguise that. I spent a week on Canna two weeks ago. When I drove from Fort William to Mallaig, I did not get many radio signals. That is the status quo, so we should not be entirely surprised if people in some places do not receive the full offering following digital switchover. It is not a question of suggesting to the BBC that it should change its coverage. I am involved in the discussions with Government about digital radio, the distribution of which is even less wide in those parts of Scotland. We should not think that something is being taken away from people. As I understand it, nothing is being taken away from anyone. People are being given more choice than they ever had before. People in some places will get more choice than people in other places. We totally understand that.

I quite understand where you are coming from. I come from the Highlands, in many parts of which the situation will be the same. It is valid to make the point that in considering different ways of delivering public service broadcasting, we need to be careful that such broadcasting is available through the main channels and is not hidden away in channels that appear very far down the electronic programme guide and which are not available to everyone. That is one of the issues.

The second aspect is that even though the issue seems to be quite long term, we are talking about something that is happening now.

When you say "now", you are talking about the Border TV news issue. Let me clarify the situation. ITV put forward a proposal to Ofcom about the future of news services in England, Wales—although no changes were planned in Wales—and what is described as the Scottish Borders, which, in effect, is the top of the north-west of England and the south of Scotland. ITV revised that proposal after discussions. We have received a large number of communications from people in affected areas such as the Borders and the west of England. I forget how many postcards we have had.

More than 10,000.

We even received a delegation that included one of the presenters of Border TV news, which was an interesting career development move on her part. One could not be unaware of the controversy that the proposal has created. We are conducting qualitative and quantitative research into the issues. Inevitably, one issue that is emerging is the direction in which people—especially those in the south of Scotland—look. Crudely, do they look to Edinburgh, to Glasgow or even to Newcastle? A predominantly rural community towards the bottom of the area even looks towards Carlisle, which is not the world's greatest metropolis, but it may crystallise some rural issues. The issue is therefore complex and difficult.

At the same time that we are carrying out the consultation, ITV plc is making contingency plans for what it would do following the various potential outcomes of the consultation. It is inevitable that those plans have resulted in people talking about redundancies, changing working practices and people being hired and fired. We have made it absolutely clear to ITV plc that it has a right to make contingency plans if it wants to do so; it also has the right to hire and fire people. However, we require it to offer a service, which we will monitor to see whether that service is required. We do not micromanage how it does things. You say that it "is happening now". That may be so, but what is happening now is that ITV plc is being held to its licence requirements. If Ofcom agrees to a change in those requirements, we will hold it to the changed requirements. Basically, that is the situation.

I want to turn to viewers' opinions. Ofcom's press statement on its proposals mentions the number of homes that can be reached, and we have just heard that large chunks of the country do not get the full range of programmes. Every viewer ought to be equal and the Government ought to solve that problem for a start.

The other big elephant in the room is the question why, although people have more choice, fewer people are watching public service broadcasters' programmes. Ofcom's report states:

"For many viewers, reflection at network level of where they live … is an important part of PSB. In broad terms, it is seen as being more important by those in the devolved nations, and somewhat less so by those in England, especially in the South. There are some indications that viewers think that this aspect of nations and regions programming is not currently being particularly well delivered."

The BBC trust agrees with that, as we know. What does Ofcom consider to be the policy implications of the finding that viewers in devolved nations demonstrate more support for nations and regions programming than viewers in England do? What will you do about that?

On why the major channels' viewing share is in decline, it is worth noting that total television viewing is not in decline, although I think that we all thought that it would be. The impact of the BBC iPlayer on moving viewing of television programmes to viewing of online programmes may begin to affect the statistics, but total viewing has held up. That said, it is inevitable that if people have more choice, they will exercise their ability to choose and will enjoy a range of offerings that they did not before. However, I think that it was said that the audience's appetite for public service broadcasting remains strong. People also know where they want plurality.

It is inevitable that the appetite for the programmes in question is even greater in the nations than in it is in the regions of England and Wales. That partly reflects devolution. If devolution was a good idea—it clearly was—one would expect people to share their interest in it and their understanding of how it works under the devolved institutions. Understanding the proper and appropriate licence requirements for the nations as opposed to the regions of England is a key part of the review, and that is what we are trying to do.

I invite Vicki Nash to talk about coverage, which Rob Gibson raised initially.

On viewer choice, the take-up of digital television in Scotland was 42 per cent when I joined Ofcom four years ago; the figure is now 85 per cent. That take-up rate is for viewers who have actively chosen to go digital; they have not been forced to do so because of a switchover. They like more choice. As I have said, we know that plurality is more important to viewers in Scotland than it is to viewers in any other part of the UK.

I understand what Rob Gibson said about all viewers being equal, but the fact is that the transmitter map is as it is and the Westminster Government's commitments to public service broadcasting cover 98.5 per cent of the population—that does not apply to the commercial mux operators. That is the system that we have inherited. I absolutely understand the issues to do with access and inclusion and we will consider them, as I said to Jeremy Purvis, but whether we can do anything about them within our powers remains to be seen. We acknowledge that access and inclusion is a live issue.

I also understand, because our research showed this, that there is more support within the nations for programming for the nations and regions than there is in other parts of the UK. I would be interested to hear the committee's view on an all-nation licence for Scotland, which is one of the suggestions in our report, because I sense from some of Jeremy Purvis's comments that there is perhaps not a huge appetite for that. However, members might have different views. Although we put forward four models, we do not have a monopoly on good ideas. I know that a member of the committee has an idea for a new digital channel for Scotland and we very much welcome new thinking and thoughts on what we have proposed.

You should not assume that Jeremy Purvis's views reflect the views of other members of the committee. I think that people in various parts of Scotland would like a Scottish service, by and large. However, such a service would not mean that they were excluded from watching other things.

Is public service broadcasting about high-quality news and coverage of public affairs or is it about series such as "Eastenders" and "Emmerdale"? Do viewers think that public service broadcasting is about things that bind us together or things that differentiate between us?

In the context of plurality, about which we are particularly concerned, viewers put news and information at the top of the list of what they require. Current affairs came further down the list, but above the 50 per cent mark—in that regard the issues in the nations are completely different from the issues in England and the English regions. Further down the list, there is less concern about plurality in the context of religious and schools programmes—by which I mean not that people do not value those genres or programmes but that they are not sure that a BBC religious programme is very different from a Channel 5 religious programme. That is the range of interests.

You are right when you talk about programmes that reflect the life of nations. The news represents a cost-effective way of serving nations and communities with information. It runs a number of times a day, the cost base is fairly fixed and the audience can be predicted reasonably well. Making a creative investment in Scottish drama involves completely different costs and risks. However, there is no doubt that BBC Scotland has had successes with creative investment. STV thinks that it has had some successes but does not feel able to commit to such programmes in future—that is the trade-off between news, which is highly valued in the context of plurality and is relatively cost-effective to produce, and the value of other areas, which contribute to the national life but are riskier and more expensive.

Therefore, in your review you should emphasise the need to invest in capacity to reflect a good deal more of the news and views around the nation. In the light of evidence that we are beginning to get on the matter, it is clear that that must be reinforced.

Joyce Taylor might comment, because in a previous life—in a UK and European but not Scottish context—she made investment decisions about programming, so she might understand the difficulties of forecasting the outcome before making the programme.

I do indeed, but may I first respond to comments about fragmentation and lower viewer numbers? The issues are not the same for all age groups. When we look forward we must consider what younger people are doing. None of us can predict what will happen, so one of our most important considerations is the need to create something that is flexible. We have experienced enormous changes since the previous public service broadcasting review. Another issue that has emerged is the crisis in investment in children's programming.

I do not have anything to add to what Stewart Purvis said about the cost of one type of programming over another, but it is part of the mix of local and national. Where previously there were pseudo-regions that reflected transmitter locations, digital provides the opportunity to reflect much smaller communities, if there is the will. Basically, we are here to listen, and we have done a lot of audience and viewer research on what is important to them.

So it comes down to talking about investing in a particular way and saying that there are higher priorities for public service broadcasting but we have to find a model to support it. Does that include radio and the fact that we have to have a good, differentiated PSB radio service, and that we have to fund it?

I am quite keen that radio should get a mention. We should not forget that we are talking about public service broadcasting, which largely means television, but radio is hugely important in the Scottish context.

One issue is that the BBC provides a Scotland-wide service and a bit of local news. The commercial sector exists, but its local news content has, shall we say, changed; I do not want to comment on that. There are some positives, one of which is community radio, as you would expect me to say, and we might forget that here if we are not careful. That is a very important part of the service. Rob Gibson talked about people wanting to know about where they live and community radio is beginning to provide that service. It was pioneered in the Highlands and it is now rolling out across Scotland. Ofcom has been charging ahead with that, which is very good news, but it might need more support.

If I may, I want to mention something else. We have talked about the coverage problems of digital television in some areas, but digital radio is more of a problem because it does not exist at all in many areas of Scotland and no one is too sure about how it is going to exist. We have to take that up.

I do not know whether that answers Mr Gibson's question, but we should not forget that radio is a very important part of public service broadcasting, including BBC and non-BBC services, whether it be the big commercial stations or, increasingly, the community stations.

I am trying to tease out a view that allows us to come to the conclusion that we need the kind of investment that we are talking about. The ownership of local radio has become so concentrated that it has lost much of the initial spark that created it. Are we not in danger of seeing radio go in the same direction as the television stations, where only two companies provide the bulk of what people watch? Do we not want to extend plurality by both public and commercial support for local radio?

I will defend Ofcom and the view of radio that we put to it. Ofcom recently reviewed radio and the localness provisions, particularly those for commercial stations. There was a lot of pressure to reduce the number of those provisions—commercial stations operate under a code and they are expected to provide so much local programming and so on. Ofcom resisted that pressure and it has maintained a good deal of that local programming provision. However, you are right to say that it has concentrated ownership of the major Scottish stations. A good chunk of them—not all—are now held by Bauer, a German publishing company. There is nothing wrong with that—the stations still have to provide the programming as demanded by their licences.

Yes, there is concern, but I come back to the point that other players are coming in. Community radio is different. It will not provide Scotland-wide coverage. If we get digital radio coverage, there is also the technical potential for a national digital service. The technology exists that can deliver that; the tricky part is how to fund it and what goes on it.

My question is about viewers, although you have answered part of it in response to Rob Gibson. Why do viewers in the devolved nations appear to be more disenchanted with how networked programmes reflect their area?

I will ask Vicki Nash to answer that, but I will give a general introduction. You might be aware that the BBC trust, in consultation with BBC management, announced recently that it will substantially increase over a period of time the amount of production in the nations. At the moment, there is a quota that is described as not "out of England" but "out of London". Cynics would point to the clutch of production companies that exist a few miles outside the M25 boundary, but there are other, positive stories to tell. Possibly because of the establishment of the Scottish Broadcasting Commission and other pressures, the BBC is clearly taking the matter even more seriously than it did. There has been a response from the BBC. ITV's response is that it should not have to have such quotas and that it should follow the talent to wherever the good ideas are. That is the UK-wide position.

It is important for all viewers that what they see on television reflects themselves, their lives and their communities. At the moment we have "EastEnders" and "Coronation Street", which reflect London and Manchester. I think that there used to be a Liverpool soap as well, but there is not a lot of Scottish portrayal on that kind of programme. It is particularly important, probably because it is absent, for people in Scotland.

As Stewart Purvis said, we place out-of-London obligations, but the boundary is the M25. There are no in-nation quotas, but even if we had those, it would not guarantee that people made programmes that reflected Scotland. They might produce more generic programmes. It is interesting to consider whether we could force them to produce programmes that reflect Scotland. Would people want the regulator to enforce portrayal programmes? How could we do that? Ultimately, we depend on the broadcasters to commission programmes, and we are concerned with quality. How far should the regulator force the sorts of programmes that people see on television? Perhaps the interest in the portrayal of Scotland exists because there is not much of it.

The challenge in Scotland is with the creation of the skills base. There is a circular problem. If we do not have the programmes, we do not have the skills base, and if we do not have the skills base, we do not get the programmes. The Scottish Broadcasting Commission is wrestling with that problem and considering how to solve it. Regulation helps by creating certain quotas, such as out-of-London quotas, but Scotland has suffered from the fact that, when there are mergers of big independents and they have an office in Bristol, they move the whole thing out of Glasgow and into Bristol, because in that way they still fulfil the requirements of the quota. We need to examine that, because the quotas exist to try to get the business to stand on its own feet. Ultimately, we would like to be hands off and have no quotas, but the most recent review by Ofcom showed that we are not in a position to do that. We will consider the matter again in the future.

I am conscious that one of my colleagues has some questions on quotas, so I will not pursue that. I return to production and those companies that work in Scotland. As you said, even if production takes place in Scotland, there is no guarantee that the output will reflect a Scottish view, but it could make a contribution. What do we need to do to take that further?

We have talked a lot about looking inwards, but we also need to look outwards. Production companies have to look to the world to create a big enough base and an economy for what they do. Traditionally, broadcasters in the UK have tended to look inwards because they made a lot of money from UK-only broadcasting. However, bigger independent production companies have started to do co-productions with America and so on. I was the chief executive of Discovery, which put a lot of the money into "The Blue Planet", "Walking with Dinosaurs" and such programmes. It was American money.

Companies can make good British programmes, but nowadays everything is about gathering money from a variety of sources rather than waiting for Channel 4 to phone up and bankroll a project. Those days are gone, and people have to look for finance more imaginatively.

We tend to talk about the TV sector because it has a high profile, but the key is to build the creative sector generally. Online, video and radio content have all merged, really, and are produced by the same folk. That is the sector that needs to grow. The answer to your question is that, if the creative sector grows and becomes more confident and more powerful, we are more likely to see portrayal—if you want to describe it in that way—across the networks. If those folk live here, they are more likely to come up with good ideas that will also work in a national UK context. If you create that mass and that confidence, you will get the other.

If the convener will indulge me, I want to return to Ms Nash's point about plurality being more important among viewers in Scotland. Why is that the case?

Gosh—

Suspicion of the BBC?

I did not say that.

I cannot come up with an answer to that. Simply, our research has shown that, when we asked viewers whether they want more plurality from the BBC, more people in Scotland answered yes than in other parts of the UK. The difference may not be significant, but the proportion of viewers who say yes is certainly highest in Scotland. I have not got behind that mindset to be able to answer the question.

The question might be put to Mr Jenkins in the next panel. His research came up with the same conclusion, so he might have an answer.

I might put the question to him. Does Mr Prag want to answer?

This is entirely speculation, but the answer may be that the BBC is sometimes seen as London based. There may be an element of that. It is not that people do not like the BBC, but that they feel they need something more. Perhaps people have not thought of it in that way, but that would be my answer if I were asked to provide an explanation.

I accept that people might take the view that the BBC is London oriented, but that would not explain why other people outside London did not feel equally strongly about the need for more plurality. That caused me puzzlement, which is why I asked the question. However, thank you for trying to answer.

We have talked about the disenchantment of people in the devolved nations. Why has that been allowed to get so bad? Has it arisen only with devolution? Why have things been allowed to go so far down that road without anyone jumping up and down and saying "Stop"?

From what I can recall of the data—on this we agree with the Scottish Broadcasting Commission—there is generally a gap between the level of importance that people ascribe to certain programmes such as news and current affairs and their level of satisfaction. That is generally true throughout the UK, but I am unclear—I cannot remember enough of the statistics in my head—whether that gap is bigger in Scotland than in other parts of the UK. I know that the gap exists and that the Scottish Broadcasting Commission found that such a gap exists in Scotland, but I do not know whether the gap is significantly bigger in Scotland than it is elsewhere. I am happy to get back to you on that point.

On whether the gap has been growing, again I would need to look back at the data from our most recent review of public service broadcasting. Perhaps one of my colleagues has the information in their head. As you will appreciate, we have quite a lot of data to deal with. However, I am happy to get back to you on that. I am not sure whether the gap has widened.

It would be a good idea to get back to you on that. The question is important, so it would be good to clarify the answer.

The need for differentiation within the country is interesting from the point of view of STV and the former Grampian TV. The fact that people in the north can now receive both an Aberdeen-based service and one from further south means that, for the first time, they can get a slightly differentiated view. The BBC has never afforded us proper coverage of the different areas of the country—it could do so, but does not—so one can understand people's dissatisfaction with the overall situation. I think that that is what Mary Mulligan was rightly trying to tease out. STV addresses that to some extent in a way that the BBC has never done.

That is an interesting point. That is why our consultation document raised the issue of what shape any continuing channel 3 licence should have. One model that we suggested, although it might not play well in Scotland, is to have a single UK licence with requirements for different parts of the UK. Another one is for a Scotland-wide licence, which would include those parts of Scotland that are presently served by Border. The other option is to continue with a service that specifies regional or area services in the north, centre and south of Scotland in patterns where transmitters allow. Logically, that debate should take place over the next few years.

I want to return to the question of quotas, which you answered partially. As part of the public service obligation, although one can put restrictions on the number of programmes and the amount of news output, production quotas are another way of getting programmes across the board to be produced in Scotland. That could help to improve Scottish content and the reflection of Scottish views and values in our broadcasting. You will look at that in your next review, but what are your thoughts about it at this stage?

As Joyce Taylor said, it seems likely that if you have more production, you have more portrayal, as we call it. Consider STV's contribution to the UK network; "Taggart" is an obvious example—you could not get more Scottish than that. I also remember a quiz show involving a wheel, although I cannot quite remember what it was called—

"Wheel of Fortune".

If I remember rightly, "Wheel of Fortune" was an STV production, but it could have been produced anywhere. The main presenter, if I recall, was Carol Smillie—or was it Nicky Campbell? That was a Scottish element, but did the people of Scotland feel better about seeing Scottish talent on a UK service? They probably did, but I do not know whether it had any wider meaning.

Our attempts to cajole or nudge broadcasters on such issues are constantly complicated by ITV saying things such as, "Look, we made a programme in Cornwall the other day—it was filmed entirely in Cornwall." However, it happened to be edited in London, therefore it counts as a London programme. BBC Northern Ireland pointed out to me a programme of which it was particularly proud. When I looked into it, I found that it was filmed entirely in England and used only English actors. It could have been filmed anywhere, because it contained just a few people and a few houses—it could have been made in BBC Northern Ireland. Such badging, as it is sometimes called, or brass-plating—in which someone claims a programme for their nation that has not been produced there—is a complication, which we have to be realistic about.

I think that that is a separate concern. We should look to Ofcom, among others, to try to improve regulation in that area so that there is greater transparency. However, what I really wanted was your thoughts on using quotas as a tool to drive up the public service obligation in Scotland. Are you in favour of it or not?

Do you mean the channel 3 licence requirement, or are you talking about the UK-wide situation?

A mixture of the two. You can apply quotas to all the companies, but are you looking to insist—using one device or another—that the ones over which you have regulatory powers make more programmes in places such as Scotland?

The BBC trust, for example, has adopted our methodology, which is about being more transparent about where programmes are made. The trust has increased voluntarily its commitment, which everyone agrees is a positive step. I was at an event the other day at which the BBC controller of nations and regions was very open about being not just London-centric, but what he called Chiswick-centric, after a district of London where many BBC executives live. Although today's report from the King committee looks at a different area, it is also part of a regulation process—not particularly to do with Ofcom—that is transparently opening up a series of issues, which has to be a good thing.

As regards commercial broadcasters being required to go for higher quotas when they are arguing for lower quotas on the basis that they are not economically viable as it is, that is a complex area, to put it mildly.

I was interested to read some of the evidence on that subject that was given to the Scottish Broadcasting Commission. It was probably more in favour of quotas than not, but some people were not in favour of setting quotas.

One of the issues that I hope will be resolved in the short, medium or long term is the extent to which Scotland could respond to those levels of quota. That involves questions of the state of the businesses and how economically stable, viable and vibrant Scotland will be. The BBC has given a welcome commitment to use the Ofcom criteria and has set out its stall in that regard. It is important to note that it has to agree its out-of-London aspirations with Ofcom, so we will expect to have discussions with the corporation about the numbers that are involved and the pace of change that it has proposed.

The advisory committee has, inevitably, been thinking about quotas. We are not awfully comfortable with them as a long-term tool, as they lead to a lot of dodging and diving. Do you really want, for example, "Postcode Challenge"—not that there is anything wrong with that programme—to become a national programme and be called a Scottish programme?

Quotas are a blunt tool, but our view is that, in the short to medium term, they might help to drive the sector forward. Of course, it is important that, to use the jargon, there is an exit strategy, because they are not a good idea in the long term.

The BBC seems to be volunteering to produce programmes in Scotland and to base commissioning editors in Scotland. It recognises the benefit of that approach. That is great, and I would have thought that Ofcom would have wanted to get the independent companies into that situation.

I, too, have reservations about quotas and think that they are a blunt instrument, but there is no doubt that we want to drive up the number of programmes that are made in Scotland, regardless of what those programmes are. The greater the number of programmes like "Postcode Challenge" and the lottery programmes that we make in Scotland, the more likely it will be that we will be able to make more programmes of a better quality that reflect the values that we have in Scotland.

I would have hoped to hear more from Ofcom about that sense of obligation. We have heard a lot about commercial models and the commercial difficulties that are facing companies, but they are commercial companies—either they will bid for the licences or they will not. I would have thought that Ofcom's job would be to enforce the obligations and ensure that the companies have a sense that they are obliged to reflect Scottish culture, values and news—including Scottish regional news.

On the four models in the Ofcom review, there is a lot of talk of funding, but it is not clear where the funding will come from. There is no suggestion that there is any funding available to subsidise commercial companies to do something that they should be obliged to do. They are making money. Regardless of whether they are making less money and are deserving of our sympathies in relation to their commercial difficulties, the point is that they are still making money and, therefore, should have an obligation to reflect our values back to us, including high-quality public service values.

That is my view, but I thought that I would take advantage of this moment to share it with you.

All views are extremely welcome as part of the consultation process. I should make a couple of points, however. First, the BBC is publicly funded. As it is paid for by a compulsory tax, it is perfectly proper that it be held to account with regard to how that money is spent, which is what the trust is trying to do.

However, with regard to holding commercial companies to account, I do not think that you can get away from the reality of the situation that pertains in relation to channel 3. As I have said before, ITV plc has an ability to go a completely different course. Let us be clear about one thing: somebody could start a Scottish channel tomorrow. I have a licensing team that deals with applications all the time. There is nothing to stop someone trying to get distribution via cable, satellite or digital terrestrial television. If someone thinks that that model is viable, we will not stop them from setting it up—indeed, we would like to encourage them. Would we put any specific obligations on anybody who did that? Absolutely not. If, on the other hand, someone wanted access to the public spectrum, we would not think it unreasonable to ask for public benefits in return. For instance, I have seen some suggestions that STV might become commercial on channel 3 and seek to transfer its public benefits to another channel. If that happened, people would be entitled to ask what STV would be providing in return for its use of the public spectrum. There is a debate to be had about that.

It is very difficult to enforce obligations—or, as you suggest, to increase obligations—when people have another choice, which is, effectively, to walk away from public service broadcasting and go down a different, less-regulated route. We hold people to account in the way that they hold their licences up to 2014. We are occasionally flexible on them but, after 2014—indeed after 2012, when switchover will be completed—we will have to look at matters in a slightly different context.

At the moment, we cannot force broadcasters to make programmes in the nations. There are no in-nation quotas; there are only out-of-London quotas, and, as you have probably read in the press, we believe that ITV fell foul of its out-of-London quota in 2006 and 2007. We continue to discuss that with ITV, to get its reaction to that.

As Stewart Purvis said, we have taken quite robust regulatory action, where appropriate, in respect of quiz channels or breaches of the broadcasting code. Where we can take action, we will take action. However, if we do not have the levers, we cannot take any action against broadcasters.

You mentioned Blair Jenkins of the Scottish Broadcasting Commission. What contact have you had with the commission to date?

Our chief executive, Ed Richards, appeared before the commission on Monday. You can ask Blair Jenkins about this later, but I think that we have a good relationship with the Scottish Broadcasting Commission. When we are asked, we talk to it about all sorts of issues. On occasions, we have volunteered to talk rather than wait for an invitation to do so.

In terms of the public service broadcasting debate, I am sometimes told that we need to wait for the SBC to report. Personally, I think that the two processes can run in parallel; I do not see that there is a particular problem with that. Some of the issues that we are highlighting might move up the agenda with regard to the options that are being considered by the Scottish Broadcasting Commission. By and large, our relations are very good.

It is important that we have kept in contact with the commission, as we are both conducting research and the last thing that we want to do is end up falling over each other. The commission's remit is different—it has a different reporting line and a different timescale—but we have had a good working relationship with it. Like us, it is concerned about the future of broadcasting, which is important to the committee and to the people of Scotland. We must try to get it right, and we hope to continue our good working relationship.

Let us move on to a specific point about the commission's report on the cultural phase. It comments:

"There is undoubtedly concern within the Gaelic Media Service and more widely that the new service will be reviewed (and to some extent judged) very early in its existence, at which point a decision on whether or not to secure carriage on DTT"—

digital terrestrial television—

"will be made and will be vital to the long-term health of the new channel."

What is Ofcom's view of the concerns that have been raised by the Scottish Broadcasting Commission on that issue?

As I set out the last time that I appeared in front of the committee's previous incarnation—the Enterprise and Culture Committee—Ofcom has always been very supportive of Gaelic broadcasting. In fact, I chaired an all-party round-table discussion on the future of Gaelic broadcasting, which involved the BBC, STV, the Department for Culture, Media and Sport, the Scottish Government and the Scotland Office. Since then, there has been a welcome development of the partnership between the Gaelic Media Service and the BBC.

Whether the new channel, which will be launched later this year, will go on digital terrestrial television is clearly a matter for the trust to consider in the first instance. We continue to talk to the Department for Culture, Media and Sport, which will have a role to play in the event that the trust decides that the service should not be carried on DTT. The DCMS will then have to make a decision about capacity.

At a recent meeting that the Ofcom advisory committee had with the BBC's audience council Scotland, it was agreed that it is important that there is a degree of transparency in the process by which the trust will evaluate whether the new channel will be carried on DTT. Many stakeholders have an interest in that, including Ofcom, STV—which has some Gaelic obligations at the moment—the Scottish Parliament and, not least, the Gaelic viewers. It is important that whatever process is used to evaluate whether the service should be carried on DTT is made available to as many stakeholders as possible who have an interest in the future of Gaelic broadcasting.

The advisory committee was disappointed that the Gaelic channel was not going on to DTT straightaway. The trust is in a difficult situation. The Gaelic Media Service is a new body that is trying to declare what it does and what it is about—value for money, testing and so on. We are concerned that, because the service will be reviewed fairly quickly, it may not be given enough chance to demonstrate what it can do. I do not want to prejudge, but I think that there is a will to find a way. We certainly hope that the channel will get on to DTT as soon as possible, otherwise it risks not succeeding.

Do you agree that there would be a risk of failure if the channel did not go on to DTT? Would that damage programming in the long run?

I am not an expert, but I am a supporter of Gaelic broadcasting, and have been involved in it in the past. The risk is that it will become, to use a horrible word, a ghetto. If the service is hard to find, or if it is difficult for people to trip over it and watch a programme simply because it is good, that will do Gaelic no favours. The audience for "Eorpa" is a classic example; many people who have no Gaelic watch it because it is a great programme. To answer your question, therefore, I think that there would be a risk of failure.

I concur with that view. I am not a Gaelic speaker, but I followed "Tir is Teanga" every week.

In summarising your view of public service broadcasting, you said that, with the launch of the Gaelic digital service, supported directly by the Scottish Government, Scottish language provision looks secure. The Gaelic language has been partly secured, but there is another language that has not been secured. I hope that Ofcom realises that there is a plurality in Scotland that must be considered in the commissioning of programmes. If Ofcom is asking public service broadcasters about that, I hope that it will consider material in Scots.

Even in London we are aware of the Scots language, which is part of our considerations.

Scots is an important part of the mix. Again, as always, the issue is funding and the reach of such programmes. We get representation from other minority ethnic communities throughout the UK and Scotland that there should be specific programmes for them. If money were no object, we could provide programmes for everyone in whatever language they wished.

If we look ahead to the potential of the production fund that we discussed earlier, other language provision might be part of the scenario. We can foresee a way in which that kind of programming might well bid into that production fund. Somebody could come up with a scheme because it would have a public benefit.

Indeed, but we are not a minority ethnic group.

We use the phrase "indigenous languages".

I did not say it.

I meant other languages such as Chinese or Punjabi.

There is an interesting case in BBC Northern Ireland, which does a news programme in Chinese for the Chinese community there. However, it is now being asked why it does not do similar programmes in Polish and Lithuanian. We think that the priority is indigenous languages, of which Scots is clearly one.

In our conversation here, particularly because of the questions about channel 3, we have perhaps understated the opportunity that could arise for investment via the funding agencies that might be created. That option, which has never existed before, is perfectly viable and logical, and it happens in other places. We have not used it much in the UK before, but it is a way of meeting a series of reasonable and understandable expectations. Perhaps the challenge to us all is to ascertain whether we can grasp the opportunity and the models in that way. If there is no appetite for that course, I suppose that it will wither and die. However, such an opportunity comes up only so often, so we have put it on the table for discussion.

May I ask a question, convener?

Indeed.

I am grateful. I am a guest at the committee, so I will not take up too much of the panel's time.

I have two factual questions, the first of which touches on the production fund that was described. Top-slicing has been discussed with reference to ways of securing funding under, I think, model 1. If channel 3 is to carry on, where would the funding come from? If you do not like the term "top-slicing" with reference to the licence fee, can you give us some idea of where funding might come from under model 1 so that we can retain the plurality and regionality of ITV?

Model 1 is normally, if not entirely, set in the context of what is sometimes called a regulatory settlement. In other words, whether they involve the spectrum or electronic programme guide prominence—how high up the list a channel is—there are certain regulatory assets that we can use as part of the deal by giving a channel or licence holder some of those assets in return for certain commitments. People inevitably talk about hybrids of the models—for example, certain assets and a little bit of funding. There is a model for Channel 4 that involves potentially a lot of funding, but in model 1 is there a little bit of funding for Channel 4? We have to be open to those conversations.

Let me turn to funding. We say that the licence fee has two elements. One is what we all grew up with, which is the idea that money is provided to the BBC to make programmes and to cover its overheads. However, there is another element to the fee that is nothing to do with that. It covers digital switchover and the specific action that needs to be taken to bring that about. We say that, when the licence fee period ends, there will be a sum of money that will have been spent that could have been spent in another way. Ultimately, that will be a decision for the Government, but we call the money the excess licence fee. The BBC says that there is no excess licence fee, but we say that it depends on what we want to call it. It covers the money that is not spent on programmes, and the question is whether that should be retail price index increased into the next licence settlement, go to Channel 4 or form the basis of funding agencies. There are several options.

There are also central Government funds already going into broadcasting. S4C receives £90 million per year of UK Government money from the DCMS, and that is thought to be the right way to do it. There are several ways of working—indeed, the more that I have looked at indigenous language issues, the more that I have understood that every language of the British isles is being catered for in a different way in funding, purpose and media use. One of those is the S4C option.

We have put forward another option, which is known as a levy. The French Government is particularly interested in that. The question is whether we could tax some proportion of the communication industries or the wider media world. Such organisations all benefit from the creation of content, so could they contribute to that in some way?

There are a number of options on the table. Top-slicing, which is normally seen as taking the money that the BBC has already got for programmes, is in some ways the least attractive option. Why would we want to take money from a programme maker just to give it to another programme maker? To create a funding source for programme makers without damaging existing makers sounds a better idea.

My next question relates to something that Vicki Nash said. I have expressed some interest in the possibility of a new Scottish digital channel, and my view is that such a channel might offer the opportunity for city and regional television in a Scottish context. Can you confirm that nothing in the Scotland Act 1998 would prevent Scotland from having such a digital channel in much the same way that we will have a Gaelic digital channel? Is there any reason why that would not be acceptable under the 1998 act?

I will ask the Scotland director to reply to that.

My understanding is that there has to be a degree of separation between the funding body and the channel and that, under the 1998 act, a Government is not allowed to hold a multiplex licence. I am happy to provide chapter and verse on the situation, but the principle is that the Government could fund a channel but it would have to be at arm's length.

I can add to the previous answer. It is worth noting that the Scottish Government funds the Gaelic Media Service and the Gaelic digital channel, so a model exists for the Government funding broadcasting in Scotland. Clearly, there is a degree of separation because of the Gaelic Media Service and its partnership with the BBC, but the model exists and could be extended.

Are you saying that, if the Government decided that as well as giving £12 million a year to the Gaelic channel it would give a similar sum to a Scottish channel, that might not be impossible under the 1998 act?

My understanding is that it would not be, although the mechanism for dispersing the money would have to be examined.

That concludes our questions; I thank the witnesses for their attendance.

Meeting suspended.

On resuming—