As noted earlier today, Ofcom has released its response to the Green Paper on the review of the BBC�s Royal Charter. Ofcom makes several points about competition matters.

A key proposal in the Green Paper was that the BBC Trust would undertake a public value test in approving “new services” as well as reviewing existing ones. This process would include an assessment of the market impact of the service, which would be undertaken by Ofcom only in the case of new services. Ofcom�s response proposes that it should undertake the market impact assessment for all significant changes to existing services as well as for new services.

Ofcom should be given credit for trying to address the somewhat hazy treatment that is given in the Green Paper to the allocation of responsibilities for market impact assessment. Ofcom suggests that the “new service” test could be circumvented by treating what many would consider a new service as a change to an existing service. Although not mentioned by Ofcom, the fact that BBC3 evolved from BBC Choice provides an example of something that could straddle the borderline between a new service and a change to an existing service. And “new media” services are more than likely to develop gradually from existing services and thus hamper attempts to identify new services.

I feel that the “new” versus “existing” services debate is the side-effect of a slightly deeper problem. The Green Paper is simply not clear as to what level of disaggregation the public value test, and hence the market impact assessment, would be applied. There is perhaps some guidance, from the precedent of the Graf, Barwise and Gardam reviews for the DCMS, that it would apply to big things like BBC Online and each of the BBC�s digital-only radio and TV channels. But some might see this as too high-level.

An important question is therefore the point at which a market impact assessment becomes a firm obligation on the BBC Trust (whether this is to be conducted internally, by Ofcom, or by someone else). Ofcom�s response addresses this point by nominating itself as the arbiter of when an evaluation is required. Ofcom argues that it needs to be able to assess market impact where it �reasonably considers that a service launch or change may have a significant market impact�. The BBC is likely to oppose this (the BBC�s own response to the Green Paper proposed that an independent third party should be charged with the market impact assessment, rather than Ofcom).

The Ofcom response also sets out proposals (i) that “The BBC Agreement should contain a general obligation that the BBC should have due regard to its effect on competition” and (ii) for an extension of the BBC Fair Trading Commitment to licence-fee funded as well as commercial services, together with a major role for Ofcom as adjudicator. Ofcom�s new Fair Trading Commitment powers would apply over and above the powers it already has to enforce competition law. Ofcom argues that this is important because of some of the complexities surrounding the applicability of the Competition Act to the BBC, in particular because of the (not uninteresting) question of whether the BBC is “an undertaking” for the purposes of competition law.

There is certainly some sense in these points, but I have not found quite enough in Ofcom�s response to justify the significant changes that are proposed. For instance, the response conveys the rhetoric that the proposed approach would “secure a level playing field in competition across the broadcasting sector” but, even to those who think that the concept of a level playing field is useful for competition analysis, I doubt this argument is convincing (the BBC has �3 billion to play with regardless of who polices BBC Fair Trading). Furthermore, the point on the applicability of competition law to the BBC is a complex one, and it does not follow that because the BBC might not be an “undertaking” (in some cases) there is necessarily a gap that needs to be addressed by another instrument. Indeed, if case law suggests that the “undertaking” condition might not be met this could be interpreted as a warning sign as to the appropriateness or even viability of attempts to apply competition powers.