Costs and robustness of possible models for delivery of Public Service Content

Plum was commissioned to produce a report exploring different mechanisms for delivering public service content (PSC).  The report assessed the economic costs of the various mechanisms and their robustness over the period to 2014 (and beyond).

The mechanisms considered comprised different organisational forms (private vs. state owned, for profit vs. not for profit) and different approachs to contracts (contestable vs. not contestable, the scope of the activity that can be contracted for).

For each mechanism, the report considered:

  • The direct financial cost to tax and BBC Licence Fee payers
  • The impact on productive efficiency
  • Transaction costs
  • The effectiveness in delivering public service content (PSC). This includes the dynamic efficiency benefits from investment and innovation.

Key assumptions included the assumption that PSC will be delivered over traditional broadcast platforms and on some new digital platforms, particularly the internet and mobile devices; that competition for audiences and advertising revenues on traditional media will  intensify as the internet grows in prominence; and that the BBC remains licence-fee funded.

The report concluded that:

  • There is a good case for competitive tendering of contracts (and funding) to produce and distribute PSC for new media
  • The case for competitive tendering of the contracts (and funding) for high quality innovative PSC on traditional broadcast services is less clear cut, in large part because of incumbent advantages of reach and impact.
  • Direct allocation of the contracts and some (or all) public funding for PSC to private for-profit broadcasters is not generally feasible but would be possible for Channel 4. If it is directly allocated to Channel 4 then the regulatory model will need to be modified and funding ring-fenced (so it does not get spent on other ventures).