Ofcom today published its first Market Impact Assessment (MIA) which examines the BBC’s proposal to develop and bring to market new on-demand services.

The proposed services represent an important opportunity for audiences to access BBC content in new and different ways. The services also have the potential to expand growth in UK-based new media industries.

However, there is evidence that certain aspects of the proposals may have a negative effect on investment in similar commercial services which would not be in the long-term public interest.

OFCOM CONCLUSIONS

The new services could account for almost 4 billion viewer and listener hours by 2011.

A significant proportion of these hours - over half in the case of simulcast and audio download services - could represent additional viewer and listener activity over and above current levels.
The proposed services are therefore likely to stimulate considerable interest in other new media services to the benefit of all UK consumers and businesses. They offer significant potential value to licence fee payers. However, the MIA has raised the following concerns:

* Series stacking could discourage investment in commercial on-demand services and is likely to have an adverse effect on related markets such as DVD rentals and sales. Ofcom believes the scale of series stacking should therefore be substantially reduced or excluded altogether;

* in the case of catch-up TV on the internet, the ability to store programmes for up to 13 weeks could have negative effects on competition and therefore investment in consumer choice. Ofcom believes this storage window should be reduced or removed. In the event of removal, viewers would still have up to 14 days to download and view the content;

* the ability to download free BBC audio content might have a serious adverse impact on specific markets; notably commercial classical music recordings and audio books. Ofcom believes the latter should be excluded from the proposed services and the availability of classical music recordings should either be constrained or removed; and

* the cost of providing extra broadband capacity to deliver the BBC’s proposed services to consumers is likely to be high, though any additional capacity would also be available for use by a wide range of other services including commercial on-demand services.

NEXT STEPS

Ofcom has passed its Market Impact Assessment (MIA) to the BBC Trust to be taken into account alongside the Public Value Assessment (PVA).

The BBC Trust is expected to publish a consultation document setting out the draft findings of the Public Value Test once it has reached its decision. This will be based on the results of both the PVA and the MIA.

Ofcom’s assessment is based on the application submitted by BBC management to the BBC Governors (now the BBC Trust) in August 2006. If the BBC wishes to alter the proposals in any significant way – for example, by exceeding the service budgets it has put forward or by including non-BBC content, specially commissioned content or full-track commercial music – an additional PVT should be considered.