1. Preface

　The UK has adopted a dual system with a public broadcaster, the BBC, and several commercial broadcasters. The BBC leads the country’s broadcast media. Among the world’s public broadcasters, the BBC has pioneered efforts with respect to the Internet. The UK launched the world’s first terrestrial digital broadcasts in 1997, with the BBC positioning the Internet as the “third medium” after radio and television in its vision of the coming digital age. At the end of that year, it merged its ten existing websites into BBC Online, which it made into a full-fledged service.
　At Christmas time in December 2007, the BBC launched its iPlayer “catch-up service.” Prior to that, the BBC had made radio programs available on demand via the Internet since 2002. The BBC iPlayer service extended this service to television programs. In 2008, the BBC started simultaneous broadcasting over the air and via the Internet. The BBC iPlayer service consists mainly of two parts: a streaming service simultaneous with broadcasting over the air, and a catch-up service that allows viewers to watch programs for up to 30 days after they are first broadcast. The BBC has also started to provide content specifically for the BBC iPlayer as well as content created by external public institutions.
　The BBC is regarded as a model global public broadcaster. It is closely watched worldwide, as trends at the BBC are believed to impact broadcasting industries overseas. In this report, I would like to focus on the BBC, but will also include some remarks about commercial broadcasting and other areas.


2. History of the BBC’s Internet services

　The BBC was established in 1922 as the commercial British Broadcasting Company (BBC). In 1927, it was reorganized as a public broadcaster under the name of the British Broadcasting Corporation (BBC) and its operational and systemic framework was decided. It was to be a public corporation operating based on a charter and an agreement with the British government. It would be funded via a license fee system. In other words, the BBC operates based not on a broadcasting law passed by parliament, but on an agreement and a Royal Charter granted to it by the Crown that is drawn up by the government of the day.
　The Charter is renewed roughly every ten years. At that time, the BBC’s mission, scope, and governance are debated and adjustments are made to bring it up to date. As previously mentioned, the BBC launched an online service in 1997. The Charter at that time (the seventh, covering 1997 to 2006) designated online services as “the Ancillary Services”, which the BBC could provide subject to the prior approval of the Secretary of State. In the eighth Charter (2007-2016), provision of online services was positioned as part of the BBC’s mission alongside radio and TV and as a public service provided via the license fee. The Charter and agreement stated that the BBC could provide new services in the future, including services yet to be developed, alongside radio, television, and online services. This has been maintained in the ninth, and current Charter (2017-2027).

Institutions that regulate broadcasting and communication have also merged
　ITV, the UK’s largest commercial broadcaster (licensed as Channel 3), was established in 1954. Channel 4, a non-profit corporation funded via advertising, started broadcasting in 1982. Channel 5, a commercial broadcaster, was launched in 1997.
　The BBC previously had an internal regulatory authority. Commercial television was regulated by the Independent Television Commission (ITC), while commercial radio was supervised by the Radio Authority (RA).
　When broadcasting started to merge with communication in 2002, the Office of Communications (Ofcom, an independent regulatory body) was established via the merger of five organizations: the ITC, the RA, the Broadcast Standard Committee (BSC), the Office of Telecommunications (Oftel, the regulatory body for communication), and the Radiocommunications Agency (RCA, which handles allocation of radio wave frequencies). Until then, Ofcom had only regulated commercial broadcasting, but in April 2017, the BBC also fell under the body’s remit. For the first time, regulation of the BBC moved to an external organization.


3. Changing TV viewing habits and broadcasters’ responses

The current state of the BBC’s television service
　In September 1998, the BBC launched the world’s first digital terrestrial broadcasts. Initially, it strove to popularize digital terrestrial broadcasting via pay-to-view multi-channel broadcasting. However, on 30 October 2002, it switched to a free-to-view service, thus developing the Freeview platform.
　Analog broadcasts were switched off region by region from 2008. Analog broadcasting in London ended in April 2012, prior to the start of the London Olympics. By 24 October 2012, the whole country had switched over to digital terrestrial broadcasts.
　The BBC operates a nationwide network of radio and television services. In tandem with the digital TV switchover, the BBC increased the number of television channels from two to nine. However, the youth-oriented channel BBC Three ended in February 2016, becoming an online-only presence. Cost cutting was a key factor, but the BBC also wanted room to experiment as it seeks the future of broadcasting. The BBC is also promoting a switch to digital radio. With the migration to digital, the BBC has increased the number of radio channels from five to ten.

BBC television channels

• BBC ONE (general)
• BBC TWO (general)
• CBBC (aimed at children)
• Cbeebies (aimed at pre-school children)
• BBC FOUR (culture, art)
• BBC NEWS (24-hour news)
• BBC PARLIAMENT (live broadcasts of parliamentary debates)
• BBC Alba (Gaelic)

*BBC THREE became an online-only service in February 2016.

　The BBC leads the broadcasting industry in the UK in terms of audience share as well. This can also be said of its development of online services. The BBC is expected to lift and revitalize the UK’s film and television industry.

Viewing shares by broadcaster (FY2016)

BBC

32.2%

ITV

21.5%

Channel 4

10.3%

Channel 5

6.3%

Sky

8.3%

(BARB survey)
3-1. Broadcasters’ on-demand services

　According to Ofcom’s 2017 Communications Market Report, UK citizens spent around 3 hours and 32 minutes a day watching television in 2016, down by four minutes compared to 2015’s time. The decline was largest among people younger than 24 years of age. The time this group spent watching TV fell below two hours. Among this group, the decline among people aged 16 to 24 was substantial. The generation gap between that group and elderly people, whose viewing habits remained broadly unchanged, widened. There is also a significant difference between generations in terms of how they watch TV. Among all households, live viewing is still the most common form, with elderly people tending to watch slightly more live TV. Young people, however, are increasingly migrating to on-demand viewing. Around 60% of their TV viewing time consists of on-demand and time-shift viewing.
　Due to these changes in viewing habits, broadcasters are striving to expand their on-demand services. In the UK, the BBC and all terrestrial commercial broadcasters distribute program content via the Internet. Viewers can watch programs broadcast live over the air and via the Internet. They can view programs they miss on-demand.

BBC iPlayer
　BBC iPlayer is the platform at the heart of the BBC’s online services. It has been provided free, funded from the license fee, since 2007. Initially, programs were available to watch up to seven days after they were first broadcast, but in 2013, the period was extended to 30 days.
　BBC iPlayer can be used on a wide range of platforms and receivers, including PCs, game consoles, tablet PCs, mobile devices, and cable TV. It is used around 3.6 billion times a year, including TV and radio. Some 85% of TV viewing via iPlayer is catch-up, while 15% is live viewing. With radio, 35% is time-shift listening and 65% is live. The BBC intends to make iPlayer its “main entrance” through which all its content can be accessed.

Commercial broadcasters’ on-demand services
　Commercial broadcasters also provide on-demand services. ITV launched a service for on-demand viewing via the Internet, dubbed ITV Hub, in 2007. Advertising is said to be the same as on broadcast TV when watching live content, while different ads are inserted in the case of on-demand viewing. The company also provides an ad-free service for £3.99 (around ¥700) per month. ITV includes 16 broadcasters, of which 15 are in 14 regions nationwide (two in London) and one handles nationwide broadcasting via the Internet. ITV Hub allows viewers to watch only the nationwide service. It is not possible to watch regional programming. When I spoke to people connected with ITV in 2016, I got the impression that they are aware that monetization is an issue and are focusing on live programs, with viewing on-demand as an ancillary service.

　Channel 4 launched its All4 on-demand service in 2006. When I spoke to those responsible in 2016, I learned that in contrast to ITV, Chanel 4 focuses more on catch-up services than on live TV. The number of accesses per year is large, at around 700 million, second only to the BBC. Channel 4’s mission is outsourced production of public programs funded by corporate advertising. The large number of accesses appeals to company sponsors.
　In addition to the free on-demand services provided by domestic terrestrial TV companies, satellite broadcaster Sky and communication companies BT and TalkTalk provide pay-to-view over-the-top (OTT) services under the respective names of NOW TV, BT TV, and TalkTalk TV. America’s Netflix, which is expanding worldwide, launched its service in the UK in 2012. Amazon started an OTT service for Prime members in 2014. Subscribers for both of those services have been growing. Netflix has around 6 million subscribers in the UK and Amazon around 3.8 million. Sky’s NOW TV service has 781,000 subscribers, according to The Communications Market Report issued by Ofcom in August 2017.i

Impact of OTT businesses
　In the US, TV viewing declined by 12% in 2014 due to rapid business developments by Netflix and other OTT service providers. This lead to “cord cutting”, that is, cancelling contracts for cable TV and other pay-to-view services, and “cord shaving”, i.e., switching to minimal contracts. This had a major impact on existing broadcast media. However, BBC iPlayer is still the most-used service in 2017. Additionally, the rapid progress of US OTT service providers has not had a direct impact, such as causing declines in the use of terrestrial broadcasters’ free-to-view OTT services or in the number of subscribers to pay-to-view services provided by companies such as Sky. That said, changes in viewing habits such as increased on-demand viewing (which OTT service providers have promoted), growth in time-shift viewing, and binge watching are indirectly putting pressure on existing broadcasters in the UK to respond. Their responses include enabling viewers to tailor services to their preferences via recommendation functions and the development of advanced VOD services.


4. License fee system revision

　With both TV reception methods and viewing habits diversifying, broadcasters are facing the issue of devising reception fee systems, which used to be based on TV receiver ownership, that are suited to the Internet era. In the UK, the license fee system has been revised to meet the needs of the Internet era, but a thoroughgoing revision such as Germany’s, where a system of shared broadcasting costs has been introduced, has yet to take place.

Licensing system changes
　The BBC launched radio broadcasting in 1922. The BBC was established by a consortium of wireless equipment manufacturers such as Guglielmo Marconi, whose experimental radio broadcasts, the first in the UK, had been a success. The motive behind the launch of broadcasting services is said to have been to sell radio receivers, but funds were needed to create and manage service content. Thus, owners of radio receivers had to obtain a license to receive BBC programs, pay royalties (patent fees) for using radios manufactured by the BBC, and get an experiment license. Part of the funds raised via these three licenses was allocated to running broadcasting services. The UK government subsequently merged the three licenses and in 1927, when the BBC was reorganized from being a private company to a charter-based public corporation under the name British Broadcasting Corporation, its funding was set as the license fee.

　The license fee started with radio. In 1946, a monochrome television receiver license fee was introduced, followed in 1968 by a color TV license fee. In 1971, the radio license fee was abolished, and now there are two licenses, one for monochrome TVs and one for color TVs.

　From 1988, the license fee rose annually in tandem with the retail price index (RPI). However, due to the economic slowdown that followed the collapse of Lehman Brothers in the fall of 2008 and the program of public spending cuts introduced by the conservative and liberal coalition government that won the May 2010 general election, the color TV license fee was fixed at £145.50 and the monochrome TV license fee at £49.00 per year from FY2011 to FY2016.

　In the course of discussing the renewal of the BBC’s Charter, the government and the BBC agreed to again raise the license fee in line with the RPI. From 1 April 2017, the color TV license fee was raised to £147.00 and the monochrome TV license fee to £49.50.

License fee system merges broadcasting and communication
　The current license fee is based on the Communications Act 2003. The act is regarded as a combined broadcasting and communication law, as it makes the rules that comprise the new regulatory framework in the EU electronic communication field adopted in 2002 into domestic law. “Communications Act 2003, Part 4 Licensing of TV reception, 363 License required for use of TV receiver” indicates that there is a license system operated by the government for use of television receivers.
　The platforms that provide TV programs and the equipment via which they can be received and viewed have diversified. In response, the Communications (Television Licensing) Regulations 2004, stipulated by the Secretary of State, clearly state that the phrase television receiver is not limited to traditional “broadcasting.”
　In 2004, receiving a television program was defined as receiving any program at the same time (or nearly the same time) as it is received by members of the public during broadcasting. As a result, there was no need to pay for a license if you did not own a TV, used BBC iPlayer on devices such as PCs, did not view simultaneously transmitted programs, or only watched catch-up TV. However, this was criticized as a loophole through which people could avoid paying the license fee. In September 2016, the system was changed and made it necessary to have a license for using BBC iPlayer regardless of whether the user watched simultaneous or catch-up programs.
　Also, previously, as long as the user was located in the UK, there was no need to register, as anyone could use the BBC iPlayer service for free, regardless of whether they were residents or visitors. However, in February 2017, the BBC started to call for voluntary registration by those accessing the service via PCs and other devices. In May 2017, it announced that registration would be mandatory. The BBC said this was not to confirm whether people had paid the license fee, but to enable greater personalization of the service. Registration requires entering one’s email address and post code, and setting up a password required when using iPlayer on mobile devices.ii


5. Outlook and issues

　The BBC’s Charter was renewed in January 2017. The ninth Charter (2017-2027) outlines five items as the BBC’s goals. The preceding Charter (2006-2016) had six items, but “taking a leading role in the switchover to digital television” was deleted as the switch to digital terrestrial broadcasting was completed in 2012.iii
　The first public purpose of the BBC as outlined in the Charter is “to provide impartial news and information to help people understand and engage with the world around them.” The BBC’s mission from the time of its first director-general is to inform, educate, and entertain. The latest set of public purposes also places the provision of impartial news and information as its first purpose.
　The second purpose is “to support learning for people of all ages” and the third is “to show the most creative, highest quality and distinctive output and services.” These are also based on the BBC’s purpose of “Inform, Educate, and Entertain.” The BBC also provides programs in a wide range of genres, from news to entertainment, via the Internet. However, the third purpose demands that BBC programs are “creative, highest quality, and distinctive.” The BBC acquired the format of “The Voice”, a song contest program from the Netherlands that had been a worldwide hit, and in 2012, started broadcasting the program. It was criticized as not being a program the public broadcaster should handle. Ultimately, it was broadcast by commercial broadcaster ITV. Conversely, “Strictly Come Dancing”, a ballroom dancing contest program developed by the BBC, was a huge hit, enough for it to be exported worldwide, with many calling it an original, high-quality program. Thus, the BBC’s entertainment programs are required to be creative and distinguishable from commercial broadcasters’ offerings. “Distinctiveness” looks set to remain a keyword from now on.iv
　The BBC’s fourth public purpose is “to reflect, represent and serve the diverse communities of all of the United Kingdom’s nations and regions and, in doing so, support the creative economy across the United Kingdom.” The latter half, concerning supporting the UK’s creative economy, was added this time. The phrase “to reflect the United Kingdom, its culture and values to the world”, in purpose number five, includes the idea of striving hard to develop programming content produced in the UK internationally. It means not only that the services the BBC provides will not put pressure on private enterprise, but also that part of its purpose is to support creative industry. The BBC, jointly with ITV and others, launched BritBox, a pay-to-view OTT service that develops content made in the UK in America, in 2017.

Trial and error in the era of merged broadcasting and communication
　The BBC engages in trial and error as the media environment changes. Although the license fee system will be maintained for the duration of the current Charter through 2027, the BBC has introduced measures, such as an obligatory certification system for iPlayer in June 2017, in anticipation of growth in the number of people who view BBC content only on PCs and mobile devices.
　It has also tried to implement reform on the services front, including scrapping TV broadcasting of the youth-oriented BBC Three channel, which it moved to online only, in February 2016. Changing BBC Three to an online-only service initially attracted considerable criticism. However, over the first 18 months, weekly reach rose from 3.5% to 8.1% and the number of followers on social networking services also increased sharply. In September 2017, the BBC said it believed moving BBC Three online had been a success. In contrast, the BBC Store service, which launched in the fall of 2015 and made it possible to purchase BBC programs via iPlayer, was scrapped in November 2017 due to sluggish demand.v
　With the media environment changing radically, what does the BBC as a public medium want to protect and what does it want to change?
　Director-General Tony Hall has announced that over the next ten years, the BBC will “ride two horses”, referring to traditional broadcasting and new online services. He has made it clear that BBC iPlayer will become the “main entry to all BBC content.” When I spoke with those responsible for the BBC’s digital output, they said that they expect all program content to be delivered to viewers via communication links.vi
　In September 2016, Director-General Hall announced plans for the next ten years. The roughly 100-page plan is named “British, Bold, and Creative” after the BBC initials. Specific goals include making it possible to view non-BBC content via the BBC iPlayer service; making iPlayer an “integrated window” for content made in the UK; establishing iPlay for children, through which they can enjoy TV programs, blogs, games, and educational content; and, similar to how Google is making the world’s information searchable, setting up a “BBC idea service” in order to understand the world. The BBC Idea Service would be an online open platform, run not just by the BBC, but in collaboration with the British Museum, the Royal Shakespeare Company, and other cultural institutions, the aim being for the service to play a role as a curator of UK culture.vii
　The plan suggests that the BBC regards expanding Internet services based on the iPlayer platform as a key part of its strategy. The corporation’s FY2016 annual report says the weekly television reach of BBC channels is 78.8%, down 7.3 percentage points from 86.1% in FY2010. However, at 95%, weekly reach of all BBC services remained high in FY2016. This suggests that the BBC has strengthened its online offerings, thus offsetting the decline in reach in traditional TV broadcasting.
　The BBC is striving, with iPlayer as its key platform, to expand its presence on social media to boost reach among the young, and to reform systems and expand the range of services it provides in anticipation of a shift to Internet services. It is impossible to say whether the BBC’s plans will go smoothly, but the direction in which it is moving hints at how public media should be in an era when broadcasting and communication have merged.

• i Ofcom (2017) “Communications Market Report″
  https://www.ofcom.org.uk/research-and-data/multi-sector-research/cmr/cmr-2017
• ii From Andrew Scott’s May 11th, 2017 BBC blog “The Next Stage of a More Personal BBC for everyone”
  http://www.bbc.co.uk/blogs/aboutthebbc/entries/77bdafd0-20b3-414d-aa53-48786b194543
• iii From Article 6 of the 9th BBC charter “The Public Purposes”
  http://downloads.bbc.co.uk/bbctrust/assets/files/pdf/about/how_we_govern/2016/charter.pdf
• iv Grade, M. (2015) “A Smaller BBC?”, p.9, in “The BBC Today, Future Uncertain” edited by Mair, J, Tait, R and Keeble, R.L
• v From the BBC’s annual report January 2016, p.29
• vi They repeated a speech BBC Director-General Hall gave on 8 October 2013.
• vii BBC (2015) ‘British Bold Creative’
  https://downloads.bbc.co.uk/aboutthebbc/reports/pdf/futureofthebbc2015.pdf

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