UK broadcast regulator Ofcom has today published two decisions relating to the BBC’s commercial and content activities focusing on the areas of transparency and reporting as well as the amount of programming it commissions.
Since 2017, 2018, Ofcom has undertaken reviews of a number of the BBC’s activities, mainly to ensure that its commercial and trading activities do not, as a result of their relationship with the Public Service, distort the market or create an unfair competitive advantage. The regulator has now reviewed how the commercial and trading requirements it imposed in 2017 were working in practice and has made a number of key recommendations.
Namely, Ofcom says that it has clarified a number of the existing requirements and introduced some additional reporting measures to provide greater transparency of how the BBC is meeting its requirements.
However it stressed that is was not imposing any new substantive requirements with respect to commissioning for the public services in the BBC’s Operating Framework, because the BBC was already subject to a requirement to ensure fair, reasonable, non-discriminatory and transparent (FRNDT) commissioning. It was though introducing guidance setting out the factors that it would consider in assessing whether the BBC has met its obligations regarding FRNDT commissioning in the event of an investigation.
Operational separation obligations require that the governance of the commercial subsidiaries is distinct and separate from the Public Service and place restrictions on the commercial subsidiaries accessing information regarding the Public Service’s strategy, priorities and activities which is not available to third parties.
Going forward, Ofcom has broadly retained the existing requirements with clarificatory amendments. It has also introduced new transparency and monitoring obligations, including a requirement on the BBC to publish an Annual Statement on operational separation. This says Ofcom will give it and other stakeholders confidence that an appropriate internal framework has been developed to ensure compliance with the requirements around information sharing and governance.
As for supply and pricing of goods and services, Ofcom remains of the view that the BBC should set prices for such things based on the relevant market price or market benchmark. Where there is no available or reliable market information, prices should be based on costs. Ofcom has decided that prices for business support services that the Public Service only provides to the commercial subsidiaries, such as HR, IT, finance and legal, should be based on their long run costs of provision. It also insists that the BBC must earn a commercial rate of return for each line of business as well as each commercial subsidiary.
In its statement, Ofcom has also made it clear where appropriate that its requirements apply to joint ventures that the commercial subsidiaries have entered into. It concluded by emphasising that its decisions take immediate effect.