A naive fish in very dangerous waters

Rupert Murdoch is about to seize control of terrestrial television. So why, at this crucial moment, has the BBC thrown its support behind the great predator?
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The Independent Online
This is important: in some 10 years' time they are going to switch off your television set. It will be a drastic change, ordered by last year's Broadcasting Act. It means everyone will have to buy into the digital age with a new black box on top of their television set sold by a private company. There will be no choice in the matter - you will only be able to view your existing channels on new digital television.

That is why the question of who wins control of that box matters more than any other broadcasting issue for a long time. Rupert Murdoch's BSkyB already controls satellite broadcasting. He already has 90 per cent of all paid-for viewing, as well as over 40 per cent of national newspaper readership. Now he has joined a consortium to bid for control of digital terrestrial television as well, threatening to give this monopolist vast extra power.

But there is still time for him to be stopped. There is another bid in for this key licence and soon the Independent Television Commission (ITC) will have to choose between the two: one is BDB - the Murdoch/Carlton/Granada consortium, a Goliath with loads of money, experience and sports rights. The other is a David in comparison, a good bid but with a lot less clout - DTN, Digital Television Network - run by CableTel, one of the existing cable operators. (No money changes hands in this bidding: the ITC gives away this licence only on grounds of best quality and feasibility). This Friday, 14 March, sees the end of the public consultation period, so there is still time to lobby the ITC. Can the ITC be the first British institution to take a stand against the galloping power of the Murdoch monopoly where all others have failed?

The BBC's role in all of this has astonished onlookers. Suddenly and unexpectedly the BBC announced its backing for the Goliath-Murdoch consortium. It looks like a serious and puzzling blunder. After a long and as yet inconclusive fight against Murdoch domination of the gateway to satellite digital broadcasting, the BBC has jumped straight into the jaws of the enemy. Why is our national public broadcaster backing the nation's most dangerous media predator?

"No, the BBC is not in bed with Murdoch, only in the same bedroom," protests Sir Christopher Bland, the BBC's chairman - the sort of defence which judges in old-style adultery cases rightly look at askance. This from the man who only three months ago warned the world of Murdoch's abuse of his uncompetitive dominance in satellite. (Murdoch threw the BBC off his Star satellite when the Chinese government objected to BBC reporting.) So why did the BBC do it? When I asked Sir Christopher Bland he said that they regarded the BDB bid (Goliath) as the only one that was likely to succeed in getting digital terrestrial off the ground.

Why? Because, he says, in the end Murdoch has shown that premium sports events are the battering ram that force pay TV into British homes. He who controls football rights is king - and Murdoch has them all sewn up. So, if it is inevitable that the BBC will be forced not only to go through Murdoch's satellite box, but also his terrestrial box, they had better jump in with him quick and take the extra money he is offering now for their support while it matters - to help persuade the ITC to give them the licence. (The David bidders would, of course, have matched or bettered this bribe to get the BBC on their side, had they been given the chance.) The backing of the BBC gives huge added respectability to BSkyB, Carlton and Granada.

But the BBC did not have to endorse either bid. That might have been the proper unbiased stand, since all the existing BBC and ITV channels will appear anyway on whichever system wins the licence. Even better, and maybe what Murdoch feared, the BBC could have taken a principled stand and publicly exhorted the ITC not to give away further control of Britain's media to Murdoch. Would the ITC have dared to award it to Murdoch had the BBC stirred up a very proper public anxiety about the malign influence of the Murdoch empire? I doubt it, and so, presumably, did the Murdoch BDB consortium.

Is the BBC right that Murdoch's sports rights will inevitably win the day? No, because it is by no means clear that Murdoch has those rights for digital terrestrial television sewn up, a fact backed up by City media analysts. Much depends on a case being brought by the Office of Fair Trading. What's more, if the ITC wants to oppose Murdoch, they could throw their weight behind a demand that the sports rights cartel should be broken and the rights unbundled.

But anyway, who says sports rights are the only battering ram to break into the pay TV market? Sports may not be king, after all. Sales of Sky services have been unexpectedly sluggish, only reaching 23 per cent of homes. Sports fanatics do not rule the roost. CableTel recently has been experimenting with a far more successful approach. Instead of offering a very expensive package of channels, they have offered a very cheap starter pack. People resent paying BSkyB's high price for a package of many channels when they may only want two or three. This low-cost approach has achieved a spectacular 40 per cent penetration of households in the areas where it has been tried, not led by sports.

Why should the terrestrial licence go to David (DTN) and not to Goliath (BDB)? The single overwhelming reason is because they are not Murdoch. It would keep open a genuine free market in the digital future for competition between two different digital operators, in satellite and terrestrial, instead of, in effect, just one.

What else is in their favour? They will produce a single set-top box that will be compatible with all three systems - satellite, terrestrial and cable. (The Goliath bid will not offer cable on their box so those who want both would need two boxes.) DTN's box will be capable of offering interactive services from day one - shopping, banking, information on tap. (Goliath will have no interactive services for the time being.) DTN will take the BBC's new arts and education channels. (Goliath says they have no room for these uncommercial ventures.) Both bids will have premium movies. Finally, DTN will charge viewers only half the sum for the same number of channels in its full package that Goliath plans to charge. That means they would stand an excellent chance of making digital terrestrial work. Even Sir Christopher Bland acknowledges that DTN has put together an excellent bid.

The BBC has no choice but to ride the tiger of the commercial world, because there is soon to be no other access to broadcasting. But this first crucial brush with it bodes very ill for future dealings. The BBC is a delicate, glittering and tasty angel fish aswim in shark-infested waters.

Consider this: by the year 2005 media analysts expect Murdoch to make some pounds 500m a year out of the terrestrial deal if they win the licence. The BBC, on the other hand, will make a paltry pounds 40m (a tiny fraction of its pounds 1.8bn licence fee). Other members of the consortium also stand to make far less than Murdoch. The BBC is selling its soul for very few pieces of silver. Sir Christopher, himself a millionaire television entrepreneur, was affronted when I suggested they the BBC had been naive, but there is no other word for it. The BBC's endorsement was worth a very great deal to Murdoch - and they have given it wantonly, virtually for free, when they should not have given it at all.

One example of that naivety that has astounded media analysts: the BBC announced its backing for the Goliath consortium without having negotiated the most essential terms. The BBC has always expressed alarm that, whether on satellite or terrestrial, it will be the Sky channels that come up on the screen when viewers switch on - BBC channels may be relegated to some obscure hard-to-find part of the programme menu. Why did the BBC not withhold its endorsement of the Goliath bid until it had secured the best terms on everything before giving away its precious public endorsement?

All is not lost. If the ITC is not bamboozled by the BBC's bizarrely wrong-headed endorsement of Goliath, it can still make the daring decision to give the licence to David instead. It would be a brave decision - for DTN is untried, small and independent. Goliath is a safe pair of hands - the same hands already throttling competition out of so much of the British newspaper and television industries.

Today the British Film Institute will host an open debate where both bidders will face one another. Meanwhile, you have four more days to complain to: The Director of Public Affairs, Independent Television Commission, 33 Foley Street, London W1P 7LB. Take up your pens and write now.