BBC closes websites in wake of competition report

1.00pm - By CIAR BYRNE

LONDON - For nearly a year, the BBC's online services - accused by rivals of stifling competition - have come under the watchful eye of the former Trinity Mirror chief executive Philip Graf.

Yesterday, in response to the long-awaited results of the Graf inquiry - he was commissioned by the Department of Culture, Media and Sport to look into the implications of the BBC's spending on the internet - the BBC announced that it is to close down five websites identified by Mr Graf as not being sufficiently distinctive from its commercial competitors.

Fantasy Football, the What's On events listings, the surfing and games portals and the soap opera site Pure Soap will all close by the end of this financial year, Ashley Highfield, the BBC's director of new media and technology, said yesterday.

"In some cases, there seems little real difference between BBC Online and its commercial rivals, apart from advertising content," Mr Graf warned in his report, highlighting some of the sites marked for closure as lacking distinctiveness.

He identified a "fundamental lack of trust" in BBC Online among its rivals, which he blamed on the "wide interpretation" of its remit, "early expansion", "poor communication", "opaque financial information" and a policy of linking to external websites which seems "unfair and discriminatory".

Mr Graf added that the belief within BBC management that its internet division had a role to play in increasing the number of people using digital technology was a "largely self-appointed" role, which "has yet to be sufficiently tested for delivery or appropriateness for a single public service broadcaster".

But there were words of encouragement for the BBC as well. While the original remit of BBC Online was, in Mr Graf's opinion, "widely drawn and widely interpreted", he said it has also largely been fulfilled.

"The present BBC Online site is impressive in terms of its breadth, depth and technical capabilities. I found clear evidence of innovation and creativity, and this must not be lost," Mr Graf said.

The Culture Secretary Tessa Jowell, who welcomed Mr Graf's report as "authoritative and constructive", has given the BBC until October to respond to his recommendations with a redrafted version of BBC Online's remit.

Mr Graf, who was commissioned to carry out the review last August and conducted it between October 2003 and May 2004, recommends the BBC should take a "precautionary approach" to future investment in BBC Online. If there is a "close call" between the public service benefits of a proposed website and its cost, the proposal should not go ahead.

He found no evidence to prove or disprove that BBC Online has had an adverse impact on the internet market in the UK, but said there were indications that it had deterred competition.

Last week, in its submission to the Government's review of its charter, the BBC announced that it is to subject all new services to a public value test, a trial of which has already been carried out on BBC Online.

Mr Graf also recommended the appointment of a BBC governor with specific expertise in new media and another who is an expert in competition law and said the board of governors should seek more independent advice.

In its charter review document, "Building Public Value", the BBC announced last week it will set up a new governance unit to ensure the board of governors receives advice and support separately from the organisation's management.

The BBC's governors greeted Mr Graf's review as "thorough and insightful" yesterday and said his recommendations would be taken fully into account in the new "service licence" - another idea that has arisen from charter review - which will set out the remit of BBC Online.

Other recommendations in the report include commissioning at least 25 per cent of online content from external or independent suppliers by 2006 and prioritising news, current affairs, education and "information which is of value to the citizen".

In 2003, BBC Online doubled the amount it spent with external companies from 6 per cent to 13 per cent, but Mr Highfield said the BBC remained "committed to examining what we can do to further increase that figure".

"In general, I am pleased that Graf recognised that bbc.co.uk has met the terms of its original consent and that he is supportive of the current online service," Mr Highfield said.

BBC Online, which was granted approval by the Government in 1998, is now used by about a quarter of the adult population in the UK. It cost £72.25m ($204m) last year, dropping to £67m ($189m) this year.

Mr Graf said yesterday he was "very encouraged" by the BBC's initial response to his report.

"The critical thing is what the remit will be and what the governance structure will be. It's about a more focused BBC Online and a more transparent BBC Online which can therefore deliver value to the licence payer and have a much healthier relationship with its suppliers and its competitors," he said.

The BBC's competitors were more cautious in their response. Hugo Drayton, the chairman of the British internet Publishers' Alliance and the managing director of the Telegraph Group, said: "On balance I'm very glad that something positive has come out. It's taken a long time. BIPA has been banging this drum for six years and there's been no response. The [BBC's] governors have proved how untenable their position is. It underlines that this needs Ofcom or some other independent regulator to be intervening.

"The British consumer and taxpayer are being cheated by the BBC... The bottom line is there's no regulation, no remit and no recognition of the damage their activities have done to the commercial market."

Simon Waldman, the Guardian's director of digital publishing who oversees Guardian Unlimited, the ninth most popular web destination in the UK and one of BBC Online's main competitors, described the Graf report as a "sensible framework".

But he was dismissive of the BBC's decision to axe a handful of websites, saying: "None of these closures will have a significant impact - they are all pretty flimsy measures."

The BBC sites earmarked for the axe represent only a tiny proportion of BBC Online's total output - between 1 and 2 per cent - and no jobs will be lost from the BBC's 300-strong new media division as a result of the closures.

Mr Waldman added: "We believe the BBC should be online, but they have to be very careful about the impact it's having on other players, and be much more transparent about their plans. This starts to put some of the measures in place to ensure much more effective co-existence between core players and BBC Online."

The Guardian Unlimited chief highlighted news provision as one of the areas where the BBC has put his operation at a disadvantage over the last six years.

"We use our news site as our main magnet for audience. When you have got an enormous number of people going to the BBC's news site, you're basically taking the audience away. Online advertising is booming. We all need as many page impressions as possible to satisfy the demand from advertisers and to grow our businesses," Mr Waldman said.

The BBC has also come under fire from local newspapers, who fear that its regional Where I Live websites could erode their business. Mr Highfield addressed this criticism yesterday, promising an "immediate dialogue" with local newspapers to explore ideas for closer collaboration.

The shadow culture secretary Julie Kirkbride welcomed the report, saying the Conservative party has long been concerned that some of the content on BBC Online "has had an adverse impact on the net". She added that the BBC's response to the report would be "the first test of how they apply the so-called 'public value' criteria which Michael Grade outlined last month".

Don Foster MP, the Liberal Democrat culture spokesman, said the Government had to "take their share of the blame for the lack of clarity in BBC Online's remit". He called for regulation of the BBC's internet services to be handed to a new independent public service broadcasting regulator.

- INDEPENDENT