The media watchdog, Ofcom, has warned that British public service broadcasting is under threat unless the UK moves to a new system by 2011.
Top-slicing the BBC licence fee, placing levies on the industry or diverting more taxpayers' money to broadcasting are all being considered as options to ensure that Britain continues to produce original programming.
In the digital era, implicit subsidies paid to ITV, Channel 4 and Five in the form of free spectrum, are worth only a fraction of their former value, while the battle for viewers has intensified. As a consequence, Ofcom says, unless action is taken in the next three years, the BBC could be the sole provider of public service programmes.
But extensive audience research has shown that viewers want the BBC to face competition in making high-quality programmes that inform the audience about the world they live in.
Ofcom's chief executive, Ed Richards, said: "Public service broadcasting is at a crossroads. Viewers still want a mix of high-quality, UK-made content, but the traditional television model is not enoughto meet all their needs."Ofcom has set out four options:
*evolution: the BBC, ITV1, Channel 4 and Five continuing to provide public service broadcasting, either with extra public funding or fewer obligations on the commercial broadcasters;
*the BBC becoming the only provider of public service programmes;
*the BBC and Channel 4 sharing the duty to provide high quality broadcasting;
*a range of broadcasters bidding for long-term funding to make public service programmes.
Mr Richards said: "We do not see this as a choice between a properly funded, strong, independent BBC and everybody else. We're not interested in a solution in which the BBC is undermined."
At present, £150m a year of the BBC licence fee goes towards digital switchover. In 2012, when switchover ends, Ofcom has suggested that this "excess" could be creamed off to fund other broadcasters. Another option would be for a greater proportion of the licence fee to be diverted from the BBC.
Ofcom opposes an "arts council of the airwaves" to distribute this money, and proposes an agency which would allocate "stable but transferable funding" to broadcasters. This model already exists on a small scale with the government-funded Teachers TV.
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