Market failure and the BBC

Originally published September 2003.
Azeem Azhar, an independent consultant who coincidentally used to work in the BBC’s policy unit, calls for a BBC which is less a broadcaster and more a provider of infrastructure, pouring its public funds into the development of community tools which would then be made available free of charge under some sort of public license.

This paper is a much-delayed response to his proposals, which are still available to read at http://web.azhar.co.uk/archives/000159.html,
In part his argument is an extension of the tendency to see the point-to-point communications system exemplified by the Net and mobile telephony/texting as a next stage in the evolution of the media.

Instead of mass communication and broadcast technologies we will move to a world of many-to-many contacts, each of us both creating and consuming ‘content’ and building online communities which satisfy many of our needs.

The subtext is that the private sector can be relied upon to provide ‘entertainment’ in the form of soaps, makeover shows, reality TV and blockbuster movies, and that the provision of this content is not therefore something which should be funded from taxation revenue, however collected or hypothecated.

The proper role of the BBC, as a public sector institution, is therefore to leave to the market that which the market can be relied on to provide, and to transform itself into a next-generation content facilitator. It should not be making or even distributing programmes, and whatever content it does generate should be available to all – even commercial organisations – to use freely.

I only disagree with all of this.

In a digitised future there may be no real limits on spectrum, and the ‘tyranny of the majority’ argument may not force all broadcasters to serve a ‘mass’ and therefore homegenised public, but the market pressures on even niche broadcasters are immense and it will remain difficult to be imaginative or creative even in a totally wired world.

Indeed the fragility of the market for anything outside the mainstream is used constantly against the BBC – Nickelodeon objected to CBBC, ArtsWorld objected to BBC4 and BSkyB objects to any expansion of the BBC’s television service. It is worth remembering that pirate stations found Radio 1 objectionable thirty years ago – these are not new arguments.

We must not to let a free market ideology which has never valued the BBC’s public service role determine the direction the corporation takes in future. Nor must we let this particular brand of techno-utopianism, in which every owner of a 3G phone is a nascent Spielberg, every text messager a new UA Fanthorpe, and every schoolkid with an attitude and a microphone an Eminem grise for the rap generation, distract us from a clear-sighted evaluation of the future of the media.

Nor should we ignore the contradiction implicit in the position outlined by Azeem. Apart from the desire to give BSkyB and ITV an easier time, the other side of the argument for moving the BBC from being a broadcaster to being some sort of general resource for the UK’s creative industries is that the private sector will not come up with the tools, technologies or infrastructure needed to support ‘digital britain’ and so this is a good thing to spend the licence fee on. Subsidising these tools is therefore acceptable, but creating content is not, it would seem.

The arguments about the difficulty of justifying investment in what Clay Shirkey calls ‘communal affordances’ seem to me to be grounded in a particular historic monent – the five years after the Silicon Alley Crash of 2000 – and not to reflect the reality of (to take one example) how the Internet itself was built over twenty years by a combination of public funding and private sector investment.
After all the Net is, as I pointed out in ‘e-mutualism ’, the world’s largest co-operative venture, a mutual enterprise that has given us a dot.commons, a truly public space which emerges from a technical infrastructure which is largely privately owned.

Clay seems too willing to take the last twelve months of underinvestment and the attempts by companies to enclose the dot.commons as symptomatic of a general shift, one which will therefore justify this radical shift in the BBC’s operational priorities.

I am less sure that there is a crisis here,

One way to put this into perspectice is to look at the massive increase in the openness of our computing environment over the last decade, and the continuing pressure towards open, standards-based computing that we still observe.

The fact is, that despite the attempts of Microsoft and others, there is still more ‘open’ Net than there was in 1990. Fifteen years ago the computing industry was dominated by IBM and Digital Equipment Corporation, whose systems were proprietary, closed and definitely not interoperable.

The open systems movement – exemplified by the standards-based UNIX operating system and the open architecture TCP/IP network called the Internet – was fighting hard to persuade users and customers that systems should be made to work together, that applications and data should be scalable, portable and interoperable, but it was not at all clear that – to take one example – the open TCP/IP could unseat IBM’s massively promoted SNA .

This battle was won so comprehensively that the victory has been forgotten in the enthusiasm of the victors to embrace even those companies who stood out the longest. Former IBM CEO Lou Gerstner can say on C|Net that the Internet was the saviour of his company, but he is misinformed: open standards were the saviour of IBM, just as they made the Internet possible.

Not everybody likes standards – they make it harder to exert monopoly power, harder to lock customers in to one company’s technology and harder to control the market. Today two companies stand out against these standards: AOL/Time Warner and Microsoft.

We are afraid of them, but perhaps our fear is misplaced. AOL, with its Netscape brower, is paying for the most standards-compliant browser on the market today. Microsoft, with its support for XML and distributed processing, may already be changing inside even though the public face is still set against true open standards.

And whether or not these companies are changing, the open Internet – technically open – makes it possible for innovative companies to emerge, makes it possible for monopolies to be broken and makes new approaches possible. Look at Google and Amazon and their support for Web services: they are leading the way in opening up their systems to small applications which will break the browser monopoly. Look at the Trusted Computing Platform Alliance: they are specifying an open architecture for trusted systems that will make it possible for governments to regulate the net as it regulates other markets and spaces .

I don’t want to claim that everthing is wonderful and we don’t need to worry – I just want us to worry about the right things.

In considering where the BBC should go and how it should fit into the media landscape (old and new media) so that it truly serves the public interest, we need to be sure that we have identified the right problem (the impact on ITV’s share price of BBC1’s success should not be a problem for the Board of Governors) and that we have thought clearly about the situation (there is not really a lack of investment in ‘communal affordances’ if we look at a longer time frame).

We can all accept that there are significant problems to be overcome, but we must focus our limited resources and attention on the right set of problems.

For example, an open standard specifies some functionality and an interface, but the implementation is owned by the implementor. Microsoft can take the open TCP/IP standards and write programs that use them, but they then own the result and have no obligation to make dedicate their work to the public domain.

This is not something we should criticise – it was never the intention of the standards bodies to create ‘free’ or even ‘open source’ software. The Free Software Foundation (and the more radical elements of the Open Source Movement) did not come about because of this – Richard Stallman started the FSF because he was not given access to a proprietary printer driver, not because he could not see the internals of a standards-compliant application.

This is something we should be aware of when people advocate the open sourcing of BBC code or intellectual property: true open standards do not carry obligations on the part of those using them to be ‘good citizens’ of the online community. They do not rule out commercial exploitation or aggressive marketing, or even the ‘embrace and extend’ antics of Microsoft and others. Open standards are about free markets and making them work efficiently, not about social justice, shared source or fighting large corporations. And that is as it should be.

However this does create dangers, particularly when work done as part of the co-operative is exploited and locked up by a corporation.

At the moment there is nothing to stop a company closing off part of the Net – either by firewalling its physical network or, more dangerously, by using intellectual property law to lock of parts of the creative commons: the lack of Instant Messaging interoperability and the battle over streaming video standards are the two clearest examples of this.

In the real world, if a company tried to erect a toll booth over the M6 and charge a fee then they would be stopped. Yet AOL can take the public work invested in messaging systems over two decades, steal the best ideas of the IRC developers, add a veneer of design and functionality and call it their own – with no objection raised.

This is the online equivalent of saying that because you built the tollbooth you own the road beneath it, and it passes without comment. How much of Windows depends on work done by others? How much of .NET derives from work done with public funding?

This is possible because the work done in these areas is part of the public domain in a way that roads or common land is not – but if we criticise this behaviour and try to stop it then we are also saying that an author who takes an old story (from the public domain) and writes a novel based on it should be denied copyright in their new work.

It means that there are significant questions to be asked about how the BBC should make the results of its development work available – the GPL is definitely not the way, if only because it relies on the US approach to copyright law. Nobody has ever really thought about the implications of the GPL on code written in France where the author’s moral rights are inalienable – in theory any GNU/Linux component written by a French programmer could be withdrawn from the distribution by the author, at any time.

MARKET FAILURE?

Market failure is such an attractive term, one that trips easily from the tongue of those whose faith in free markets is so great that they believe markets will usually succeed if left unmanaged and unregulated. To them, market failure is a product of unwonted interference, not an inherent characteristic.

I disagree with this analysis: all markets need to be regulated because the combination of imperfect information and irrational actors makes every market, without exception, subject to wild variation, unexpected turbulence and occasional monopolisation .

The idea that the BBC is fatally distorting the online market in the UK and is therefore responsible for the apparent failure of private companies in this area is one that can only be accepted if there is some very strong evidence – it should not be a default assumption which is allowed to drive the BBC’s strategy (or the government’s approach to the BBC and its charter). Yet Browning, Standage and other ‘marketistas’ state again and again that the BBC is ruining the marketplace for the private sector players – and of course, the failing private sector players find it convenient to agree with this analysis, whether or not they believe it.

Firstly, it is not clear that the market really is failing, either when it comes to community-building or when it comes to content creation. Online communities may not be developing in the way or at the rate we first postulated, but then most of us were seriously wrong about the growth patterns of e-commerce, mobile phones, dialup connectivity and micropayments.

Perhaps the ‘market’ in this case is performing perfectly and the fact is that people do not want online communities of the type we currently know how to build. Or perhaps not – the point is that we should not make dangerous assumptions.

We should also be very wary of suggesting that we take the BBC apart in order to fix that presumed failure. Azeem does not think the BBC should be a major creator or broadcaster and, like John Browning, he thinks that it distorts a market which would otherwise be able to produce global players.

I disagree – I like the BBC and I think it does something incredibly useful, on both a national and a global stage: it shows that there is another way. In particular, the BBC has the opportunity (and the funding) to be a major national player and continue to provide content and services within the UK without the need – felt at various times by BT, ITV, C&W and many other UK firms – to expand to cover the globe.

The decline and fall of the Soviet Union was depressing to those of us who still call ourselves socialist not because the regime was worth supporting – it was corrupt, inefficient and based on oppression – but because of the triumphalism of the capitalist apologists that followed. There was nothing to show that there could be other ways to run a country or manage an economy – even China has moved to a Western model of economic management.

I would argue that the BBC has value just because it shows clearly that there is ‘another way’ – having the public sector can fund a corporation which serves the public interest means that in any argument over the decline of standards in broadcasting, or the breaking of standards in online publishing, it is possible to point to the BBC and say ‘it can be done like this – we do not accept that your way is inevitable.’

If we let the free market ideologues – the marketistas – take the BBC apart in order to allow their friends in the media occupy its ecological niche as a way of making them better able to become ‘global media players’ then we are simply accepting one model of how the media could develop over the next twenty years and sacrificing a unique corporation on the alter of George Gilder-style economic correctness. This would be a mistake.

Why not instead allow the BBC to evolve in its own unique way, occupying a niche in the mediasphere that no other creature has managed to inhabit – that of a public corporation outside direct state control but funded to serve the public good. Let us not forget that AOL, BSkyB, ITV and the other private sector players are not concerned with the public interest but only with their own sectional interests: we are under no obligation to listen to their proposals for the future of the BBC, and nor should we take their views on the way the BBC ‘distorts’ their market at all seriously.

Instead we can see the BBC as we want it to be. For example, I want the BBC to be a broadcaster, to make good and bad television and to do the things it does well. This does not mean chasing ratings on BBC1 on a Saturday night, or taking tired formats from ITV and failing to make them work. It does mean doing interesting stuff that others are not able or willing to envisage, and spending public money to serve the public.

It may be unfashionable, but it seems to be working.

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