The BBC behemoth: how Auntie’s rivals missed a trick

In these post-Hutton days every paper under the sun seems to have lined up the City’s most distinguished media and competition lawyers to predict the BBC’s imminent demise at the hands of the 2006 charter review.

But the Beeb’s commercial competitors have been at loggerheads with our national institution for years over the ever-extending empire of its non-public service broadcasting activities. Just ask them how easy it is to skin Auntie.

Radio, TV and satellite broadcasters, TV production companies, print and internet publishers… they all have their gripes about unfair competition from the Beeb, be it BSkyB’s objections to News 24 or profit-making educational publishers who resent the corporation’s incursions onto their turf.

Since the 1996 charter review the BBC has expanded its commercial activities relentlessly, particularly under its former director general Greg Dyke. Not one of its competitors has managed to stop Aunties’ tentacles spreading, despite disparate attempts by competitors to fight the Beeb on its own turf.

Few people would say so publicly, but last summer the competition got a rare opportunity to present a united front. The Beeb’s commercial competitors from across publishing, broadcasting and production seriously discussed pooling their resources to launch a competition law-based attack on the public service broadcasting monolith that is the BBC.

“Fairly recently,” said a representative of one of the competitors, “there has been a number of attempts to get parties together.” It was precipitated, at least in part, by earlier competition law-based actions brought by educational publishers and their trade associations, such as the British Education Suppliers Association (Besa).

“When we were beginning negotiations, we were contacted by a number of independent broadcasters, who said, ‘We admire what you’re doing, but it’s never going to work’,” says one representative of the educational publishers.

Ultimately, it proved impossible to reconcile the disparate interests. In retrospect, given the subsequent bust-up between the BBC and the Government, this looks like a let-off for the corporation, because otherwise it would have faced a two-pronged attack over its commercial activities and its editorial status.

So, why couldn’t the competition get it together? The easy answer is that, despite all the legal advice, ultimately the big boys such as BSkyB and the other large broadcasters wouldn’t sign up to it, and at least one major sponsor was needed to bankroll the proceedings. “It was likely to be an incredibly expensive affair to get everyone together,” says one source close to the discussions.

The other issue, said the source, was that “we could all agree that change was necessary, but we couldn’t predict which aspect would get the most attention”; or, in other words, the interests were just too disparate to reconcile.

The more cynical among us might also speculate that the likes of BSkyB and the newly-merged Carlton-Granada, with its dominance in the advertising sector, might not relish too close an examination by the competition authorities.

Also, the precedents were not great. The educational publishers, led by Besa, were the latest to take on Auntie. “All of our issues with the BBC surround the potential for the digital curriculum,” says one representative. “We still have difficulty in understanding why the public sector should walk into an area with a 20-year industry about which the customers, the schools, have no complaints,” he explained.

The publishers tried everything: judicial review, a complaint to the Office of Fair Trading (OFT) and a state aid complaint to the European Commission.

The OFT ultimately decided that it was too early to give the publishers a favourable ruling, because there had not yet been any infringement. One person involved says: “I believe that we all felt we got a very good hearing from the OFT. Had they had an opportunity to pursue it further, they would have been happy to do so.” So, close, but no cigar.

The judicial review never got further than an initial hearing, after which some concessions were made in private, so the issue was never fully aired in public.

The publishers loved the EU state complaint, partly because it didn’t cost them much – they simply put a folder together and then the Commission took over. However, although there were favourable elements to the decision, ultimately the Commission said it was legal for the BBC to support its foray into the educational sector with public money, despite the fact that there were commercial competitors.

There were certainly major legal roadblocks. One lawyer explains: “The Commission is very sensitive to subsidiarity, many of the broadcasting issues are left to a national level – there’s no harmonisation over ownership rules.”

Also, although you would expect a lot of lobbying on any issue being considered by Brussels, the publishers think the UK Government outdid itself. “My understanding is that they came under intense pressure from the UK Government not to make waves,” says one source. “In fact, whenever logic suggested things would go our way, the BBC has managed to use its political influence.” (The BBC did not return calls for comment.)

Which brings us to the charter review, on which commercial competitors are now pinning their hopes. The same source has few hopes that the Beeb’s smaller commercial competitors will fare any better. “There’s no great belief that the charter review process is going to be fair and logical,” the source claims.

Historically, the prospects for change do not look good. In 1986 Margaret Thatcher proposed radical changes to the BBC, including a partial privatisation, but nothing happened. In 1996, the Labour Party looked at the issue, but again did nothing.

The next review comes up in 2006, but just like the last two it is very close to the general election and the Government may be reluctant to take on the BBC. “One view is that the BBC is like a wounded animal and people are nervous about the reaction to things they say when public sympathy is so clearly with the BBC,” says another source.

In the light of Hutton, the charter review is deeply politicised. Perhaps, despite the legal problems, the Beeb’s competitors missed a trick in not pursuing the competition law route.