This is taken from The Guardian:

Fired up for a licence fee battle
BBC boss Mark Thompson says his competitors are trying to reopen a lost argument in their last-minute fight to limit the licence fee increase

by Mark Thompson
Monday May 22, 2006

A couple of weeks ago I spent a day at the Department for Culture, Media and Sport discussing the future funding of the BBC. Outside, it was a bright spring day. People were eating ice-creams. Tony Blair was reshuffling his cabinet. Inside, it was all market impact and consultant-speak. Indeed it was weeping and wailing - many of the commercial broadcasters had arrived in full sackcloth and ashes. This was the Burns seminar - part of the admirably open process of public consultation and debate that the department has run to air the issues around BBC charter renewal.
Critics hoped the white paper would rein in the BBC and limit its scope. In fact, it endorses a very different vision for the BBC - strengthening and enriching its existing services, developing on-demand and other digital services, playing a central role in building the infrastructure and the promotion and public awareness needed to create a digital UK.

For those who wanted to see a weakened, constrained BBC, the white paper is therefore a bitter disappointment. Even this month, another high-minded coalition of commercial radio companies and newspaper groups, including the Rupert Murdoch-chaired News International, has emerged to warn of the perils of a rampant BBC. They are concerned about the digital mission laid out in the white paper.

Desperation

After two years of public debate, their hopes of overturning the contents of the paper are not great, so they propose instead to limit the BBC's ability to deliver that mission by holding down the licence fee. This does not make sense: the right sequence of events is to arrive at a clear set of public purposes and objectives for the BBC - which is what the white paper does - and then work out how much it will cost for the BBC to deliver. To use the licence fee settlement retrospectively to rewrite the white paper not only smacks of desperation but makes a mockery of the years of debate and analysis that led to this piece of settled public policy. But then there is much about the licence-fee debate that does not add up.

There are, of course, genuine concerns and legitimate questions about the level of the fee, but there are also honest misunderstandings, wilful errors and some wild urban myths. So here are a few facts.

The first is that over the past decade the licence fee has grown much more slowly than broadcast and online industry revenues. As a result, BBC revenue as a proportion of total industry revenue has declined. In the early 90s, BBC revenue accounted for about 46% of total revenues. Now it is around 23%. Assumptions about the growth of advertising and subscription suggest it will decline to 20% or less.

While our revenue has risen more slowly than any other sector in broadcasting, we have chosen to invest extra money in quality content and innovation.

In last week's MediaGuardian, Paul Robinson suggested that the radio stations that were succeeding were those that had invested in talent and creativity. In fact, the programming budget for the five main BBC radio networks has remained flat in real terms during the present settlement. But on Radio 1 and 2 we have tried to identify the very best talent - whether Chris Moyles or Jeremy Vine or Jonathan Ross - and given them the creative space they need to do their best work. It is legitimate to ask those who say the BBC's 2.1% annual TV and radio growth was far too much: what happened to your 2.2% growth in TV ad revenues over the past 10 years? Or your 5.1% annual growth in radio ad revenues? Did you spend it on content? Did you focus on your audiences and core creative proposition? If not, be careful before laying the blame for your problems at our door.

The BBC has sometimes sounded arrogant or dismissive of the economic challenges that commercial broadcasters face - and that is wrong. But it is also wrong to jump to the conclusion that the BBC's income should automatically track the ups and downs of different commercial broadcasting markets. The licence fee is a contract between the BBC and, ultimately, the public for the delivery of content that furthers various public purposes. The need for that content - and the cost of providing it - does not reduce because TV or radio ad markets have caught a cold. The same is true of the argument that the level of the licence fee should be linked to ITV's revenues. But how does that further the interests of the viewing public? ITV has never argued that the licence fee should leap up if ad revenue leaps up.

Listening to the critics, you could be forgiven for believing that negative market impact - the unfair distortion of existing markets for commercial competitors and the crowding out of future markets by the BBC - was proven fact. More than that, that this is a national scandal that the commercial players have known about for years but which only now - and more in sorrow than in anger - they have decided to bring to the attention of the authorities.

Every digital service we have launched in this licence fee period has been subject to a market impact test before being agreed. Multiple studies of our core TV services have failed to show any negative market impact. Messrs Barwise, Gardam and Graf looked closely at the question of market impact and, again, determined that there was no conclusive evidence that there was any large-scale effect. There is no systematic evidence of any large-scale negative market impact or crowding out by the BBC. There is no independent report that proves it, or even asserts it.

Radical programme

It is reasonable to insist the BBC's services should be distinctive, and substantial changes, or proposals to launch new services, should not go ahead without careful scrutiny, consultation and assessment of the market implications. This is why the government has set out the most radical programme of governance reform in the BBC's history with the new independent BBC Trust at its heart.

The new alliance of commercial media companies said last week that the Trust's independence was "largely illusory". But the Trust does not yet exist so surely it is a bit early to form a definitive judgment. The Trust represents the last, best hope for independent governance of the BBC and over the next charter period the Trust will bend over backwards to demonstrate its independence from management.

This brings me to my last set of facts about the licence fee. No tax or compulsory charge will ever be popular, but it is extraordinary how level-headed the public are about paying for the BBC. Over the past 10 years, the licence fee has declined as a proportion of household income, including the poorest 10% of households. If the UK economy grows in line with Treasury estimates, we predict that - even with the increase we have proposed - it will continue to decline as a burden for both average and the poorest households.

It is a time of creative renewal at the BBC, with some real ambition and success on air - recognised in recent weeks in both Baftas and Sonys - with programmes that challenge, such as last week's The Line of Beauty, and programmes that everyone talks about, such as The Apprentice. Success at the BBC begins and ends with the quality of content. We have started to lay out a vision of our creative future and have produced a blueprint for our programmes and services for the next 10 years.

The debate about the licence fee will continue. It should be vigorous, but it should be based not on exaggeration and myth but on the real numbers and real facts.

· Edited from a speech to a Voice of the Listener and Viewer seminar on May 18