The TV licence fee heads for the zapper

The BBC wants another hefty increase but it knows the public may not wear it much longer
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But a bigger issue lies behind all this. What will happen next time, after the 10-year, 2006 deal runs out? In an age when the nation gathered around to watch the patrician BBC address the nation, the licence fee made sense. But in a multi-channel, digital world, the universal licence fee is much harder to justify.

A senior BBC source says "This time, the Government was right. It could have set up another Royal Commission on the licence fee, but there was no point because nobody had a realistic alternative. Even our commercial rivals agreed that we should remain licence-fee funded. Next time, the game will change." The need to find a new funding mechanism is not as far away as it might seem. Negotiations for the 2016 deal will begin in just over a year's time.

Tory MP Nigel Evans, a member of the Commons Media Select Committee, says evidence about viewing habits will be much firmer next time. "As the percentage of viewers watching BBC programmes declines, the BBC will have a problem. It will be harder to justify a universal fee."

As Professor Justin Lewis of Cardiff University puts it, "in the age of multi-channel, the BBC will struggle to retain share. The regressive aspect of the licence fee has always been a problem. It will be a bigger problem when a substantial proportion of the audience can prove that they do not watch or listen to BBC services."

Officially, the BBC knows that the share of viewing achieved by its mainstream channels will decline, but it emphasises that the public is willing to pay the licence fee anyway. More people, it says, are paying the fee than ever before, although critics say that has more to do with how it is collected than a fondness for forking out for Auntie.

Privately, the BBC knows that change has to come. One top source at the corporation admits: "The survival of the licence fee in the next decade will depend on how much affection the public feels for the BBC. Nobody would invent the licence fee now. It is not a modern idea."

So what is? The BBC will not concede the principle of universality. But universal payment need not mean uniform payment. "It might become possible for the BBC to create a basic package consisting of the main national television and radio channels and then charge extra for add-ons," says Mr Evans. "The trail of information will exist to create a variable fee with people who want access to more BBC services paying more. I would pay more for specialist political news."

It will soon be possible to build a set top box capable of charging per hour of BBC television watched, but that would generate pressure to maximise audiences by dumbing down. The political consensus that has just preserved the universal flat rate licence fee is about to disintegrate. Politicians will find it impossible to justify as fresh millions of constituents pay for digital subscriptions but ignore BBC services. Some at the BBC hope to retaliate by launching new services until there is a BBC station for every taste. But such intense cultivation of niche markets infuriates commercial broadcasters, threatens local newspapers and alarms MPs.

As soon as its new charter takes effect in December 2006, the BBC will come under unprecedented pressure. By helping the Government to make digital television universal, the BBC is accelerating the pace of fragmentation. The consequences for its own funding are unavoidable.

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