Just two years to go until the BBC Royal Charter is renewed and a decision is made over what to do about the increasingly unpopular TV licence.
- Half a million households a year cancel TV Licence.
- A number of alternative ways to fund public broadcasting to be considered.
- Current TV Licence system difficult to enforce in online world.
- Changes could lead to two-tier BBC.
Despite the recent change in Government, the licence fee’s future is anything but certain.
The future funding of the BBC is still up for consideration as part of the BBC Royal Charter renewal process. The new charter, to start in 2027, will also determine the BBC’s role in the coming decade. The previous Government sought to cancel the TV Licence. The current Government has not taken such a stance, but will still need to look at alternatives.
In the meantime, the licence fee is becoming increasingly unpopular. In 2023, half a million households cancelled their licence. As the BBC cuts public service output, including BBC News and local radio and loses out on sports rights, households are wondering why they should pay for the service.
Meanwhile, changes have sought to keep the licence fee legal framework up to date with the switch to streaming. TV licence rules extend to watching foreign TV or YouTube live, raising questions about how this can actually be enforced.
The Charter Review will include a public consultation enabling audiences and stakeholders to give their views.
What are the alternatives to the TV licence?
There are a number of alternative methods to fund public broadcasting, some methods are already used in other countries. Each have their advantages and disadvantages…
Subscription
The BBC could become solely available to subscribers, just like Netflix and Prime Video. A monthly fee would give viewers access to all BBC content online. While this would put a paywall around the broadcaster, the BBC could choose to make some content available for free. Alternatively, it could sell some programmes to third party broadcasters to make them available to a wider audience.
Upside:
Households would be free to choose what services they want to receive and pay for. It also would remove the current rules on requiring a TV licence for all live TV, even if the live TV service is a non-BBC channel or online stream. So you could watch ITV live and not pay anything to the BBC.
Downside:
The BBC is tasked to be a public service broadcaster, providing universal access to news, current affairs and coverage of major sporting and cultural events. A subscription-only BBC would struggle to fulfill that obligation. Focused on retaining subscribers, the BBC could drop expensive arts and culture programmes in favour of cheaper formats that attract mass audiences.
Additionally, FM analogue radio and DAB digital radio are geared up to be free-to-air. Receivers do not having the ability to unencrypt stations. Therefore, a different solution would have to be found to keep BBC radio, or close down services and move them to BBC Sounds (online-only).
A subscription-only BBC would not work on Freeview, hastening its demise to the detriment of homes currently unable to enjoy streaming through a full fibre broadband connection. It would undermine newly launched Freely.
Putting a public broadcaster completely behind a subscription paywall is unchartered territory, also internationally.
Household levy
A simple levy to be applied to all households to fund public service broadcasting. No opt-outs.
This is the German model, where the household levy replaced the previous system of TV and radio licences.
Upside:
Clear and simple to understand. As everyone pays, the levy can be set lower than the current TV licence fee and the BBC would still get the same or more income. (Currently the BBC is funded by an ever shrinking number of households meaning fewer people shouldering the burden of the BBC.)
And as everyone pays unlike now, the BBC could make content available via a wider range of online platforms, such as streaming BBC News live on YouTube. (At present, keeping BBC content on the iPlayer and Sounds ensures the BBC has the means to close off access to non-licence fee payers if it wanted to in the future.) This would align it with other broadcasters who are seeking to make content available on platforms used by their target audiences.
Downside:
The UK is poorer than Germany. Average disposable incomes are 27% lower and the poorest fifth of British households are more than 20% poorer than their German counterparts. This means that just like the TV licence fee, some households would struggle to pay a household levy. That means a simple universal levy with every home paying the same might not be feasible. Means testing it or linking it to council tax bands would complicate the system.
In return for a universal household levy, the BBC would face even more scrutiny that it is providing something to watch or listen for all people.
Additionally, newspaper owners would be quick to demand further assurances that a universal household levy was not subsidising a competitor. Under the German system, many of the country’s public broadcasters are subject to rules that limit online news articles to content that has already been reported on traditional TV or radio services.
Broadband levy
Similar to the household levy, but in the form of a fee added to your monthly broadband bill. As most homes need broadband to access public services, homes would automatically have to pay for the BBC.
Upside:
Collection of income piggybacks off Internet Service Provider (ISP) bills to customers. No easy way to evade paying, cuts the cost of running the existing TV Licensing operation.
Downside:
The cost of broadband connections continues to rise above the rate of inflation, despite Ofcom’s attempts to curb inflation-linked rises. An extra increase on internet bills caused by the levy would be seized upon by critics.
For the same reasons as the household levy option (above) it would make broadband internet connections unaffordable for some households. This would likely prompt calls for more social tariffs. ISPs could be reluctant to offer more social tariffs without taxpayer-funded subsidies. ISPs may also argue for a cut in the broadband levy to cover their costs in administering the payments.
With some of the UK’s biggest ISPs under the control of large multinationals, they would gain considerable clout as effective gatekeepers to public service content.
Advertising
The BBC’s public service channels do not currently carry advertising. However, the BBC’s commercial channels, operated by BBC Studios subsidary UKTV, do. In the future, that divide could be removed, so that all BBC channels are ad-supported.
Upside:
Free of the receipt of public money, the BBC would no longer be accountable to the public and could invest in radical changes in its output, leveraging the data insights it already gains from BBC user accounts for its commercial advantage. Advertisers would no doubt be keen to place their commercials during episodes of Strictly Come Dancing, Match of the Day or The Traitors.
Downside:
Practically every commercial TV channel and radio station would object.
Advertising on the BBC’s main channelsa and radio stations could seriously distort the TV, radio and streaming advertising market, with advertisers choosing to spend their limited budgets on well-watched BBC shows. Smaller channels in particular would have to drop the prices they charge advertisers making them unviable.
Commercial broadcasters are already suffering from a downturn in the advertising market. Now streamers have started to include adverts for some subscribers. The results of the downturn? Channel 4 was forced to cut down on the shows it commissions. ITV said it lost £1m on hit drama Mr Bates vs The Post Office with cast and crew accepting below market rates to work on the series. Further erosion of the advertising market would stop such shows being made (this may be an upside if you’re running a dodgy company).
And while advertisers may find commercials during Strictly appealing, could programmes like Springwatch, Songs of Praise and the BBC Proms attract sufficient ad revenue to keep them going?
Extra tax on income
Finland introduced an extra tax on adults in 2013 to fund its public broadcaster. The model could be extended to all UK taxpayers.
Upside:
Collection of tax using existing PAYE and Self Assessment processes. It’s how other public services are funded. And an upside for taxpayers: the percentage amount would stay the same, not constantly increasing each year based on the rate of inflation. The amount you paid would reflect your income.
Downside:
Politically awkward. Even if didn’t mean an overall increase in household expenses (as households would no longer pay a TV licence), it would be portrayed by critics as an extra tax burden on hard working individuals.
As for the BBC, there would be ongoing scrutiny of everything it spends money on, which could stifle innovation.
Government grants
The BBC World Service was once funded entirely by the Foreign and Commonwealth Office. A similar model could apply to the entire BBC.
Upside:
The public no longer directly pays for public broadcasting.
Downside:
Without safeguards, the BBC could become subject to even more Government interference, with budgets subject to annual fluctuations subject to the whim of the incumbent Government. Ongoing pressure from lobbyists from commercial broadcasters to keep BBC funding low.
Funding from commercial broadcasters and telecoms companies
In Spain, part of public broadcaster RTVE’s income comes from a tax on revenues applied to commercial free-to-air and pay TV channels, subscription streaming services and telecoms companies.
Upside:
The public no longer directly pays for public broadcasting.
Downside:
Every commercial broadcaster, streaming and telecoms company in the UK would be summoning their legal teams to mount a challenge to any such proposal. The UK has commercial public broadcasters, like ITV and Channel 5. They would have additional objections, as a tax on revenues would divert money away from their own public service obligations.
Hybrid of any of the above
The BBC could be funded by a combination of the above options. For example, the BBC could be funded partially through subscriptions and partially through a household levy.
This could result in a two-tier BBC. One outcome could be a core service of the main channels reminiscent of the BBC of the 1990s supported by public funding, with extra channels and access to the BBC’s full streaming offer available to subscribers only.
Upside:
This could reduce the amount paid for the BBC. Income from subscriptions could offset the cost of providing public services such as distributing core channels on UK-wide platforms.
Downside:
Some BBC content would not be universally available to all. The BBC could hold back top dramas from non-subscribers.
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Technically, the BBC is already a hybrid service: UKTV, solely owned by BBC Studios operates pay TV and ad-supported channels. Any hybrid option would effectively expand the BBC’s current commercial operations to apply to more of the BBC’s output.
Licence fee
Keeping the licence fee is still an option on the table, following the recent change in Government.
For example: After long drawn out consultations and discussions, Ireland’s Government decided last year to retain the Licence Fee and give Ireland’s RTÉ additional Government funding. The UK Government could similarly decide to keep the status quo.
Upside:
Tried and tested system.
Downside:
More and more people are cancelling their TV licence. This will reduce BBC funding further and will result in it having to cut more services, which in turn will lead to more viewers concluding the licence fee isn’t worth the money and cancelling.
Finally, keeping some form of public funding also means whichever Government is in charge can continue to exercise some influence over the BBC’s output.
By: Marc Thornham