NEW MEDIA: SPOTLIGHT ON BBC ONLINE - Government steps in to force BBC to justify its online spend

The dominance of the BBC's online news may be stifling rivals, Alasdair Reid reports.

Just how much rope does the BBC need? We all know what happens when you put up a feeble response to an organisation determined to push its luck just as far as it will go - and then some. The longer you put off the inevitable, the messier it is to sort out when you're absolutely forced to get round to it.

Let's face it, of all the areas in which the BBC has been pushing its luck (and they are legion), the internet is now the most blatant. And let's also face the fact that the response from the rest of the industry has been less than robust. So it has been an unequal struggle. Until now, at any rate.

Last week, much to the delight of many in the online world, the Government became involved when the culture secretary, Tessa Jowell, told the BBC that it has until June to justify the amounts it spends on its internet and interactive TV services, ahead of a formal review.

When the BBC first moved into online services back in 1996, it was touted by the BBC management at that time as a necessary but modest adjunct to existing services. And after all, it was unthinkable, surely, that the BBC would have no online presence as the true mass-market internet era dawned. So there was relatively little fuss when the corporation announced that it was devoting a relatively large £21 million yearly budget to this part of its activities.

Since then, spending has soared and it is now somewhere in the region of £120 million a year. The BBC has more than 25,000 websites and the main BBC portal is one of the most visited sites in Europe. It is a major player in the new medium and its activities effectively stifle competition from the commercial sector.

It's not hard to find analysts who will tell you this is bad for the media business, bad for Great Britain plc and very bad indeed for cultural plurality and diversity. The internet, remember, was where we were going to get infinite variety, not just more from the ministry of broadcasting.

And the absolutely hilarious bit is that we all pay for this through the licence fee.

Hugo Drayton, the Hollinger Telegraph New Media managing director, is also the chairman of the British Internet Publishers Alliance - an organisation formed to lobby against the BBC. So he is obviously delighted with this latest development. "Absolutely. This has been pushed underground for too long," he says.

But is he optimistic that Jowell's intervention will ultimately be effective? "You can't blame the BBC for trying it on," he says. "Although, with charter renewal coming along, it knows it will have to get its house in order. The only way things will change is if there's an end to the cosy relationship between the Government and the BBC. We'd be surprised if it happened. Ideally, for proper controls to work, Ofcom should have some sort of authority over the BBC."

Many observers are in agreement with Drayton's point about the cosy relationship that seems to exist between the BBC and the Government. On the other hand, this isn't the first time Jowell has made aggressive noises. For instance, she stepped in to tell the corporation that its initial plans for BBC3 were unacceptable.

Jowell also ordered an inquiry into the activities of News 24. Conducted by the Financial Times' former editor Richard Lambert, it was damning in parts and bland in others, and was viewed generally with disappointment by the commercial sector.

So the odds are surely that the BBC will wriggle off the hook yet again.

The most important new factor, though, is the charter review referred to by Drayton. The BBC's equivalent of a broadcasting franchise, the charter is due to be renewed in 2006 but the political manoeuvring has clearly begun already. Can the advertising industry use this to its advantage?

Ian Twinn, the director of public affairs at ISBA, certainly hopes so.

"The BBC is in a very privileged position. It's funded by a poll tax to provide a public service. So it abuses that position if it takes people's money and then uses that money to deprive them of services and choice. And it is clearly depriving people of choice on the internet - because of the economically privileged position it is in, rival services find it very difficult to compete," he says.

"So, yes, I hope it will be a serious review - and the charter review is an interesting factor. I think that there is every indication that the Government is uneasy about the BBC and the possibility that it is abusing its position."

And what about the advertising agencies? Sometimes in the past, agencies have appeared to have an equivocal stance towards the BBC's online activities.

John Owen, a director of Starcom Motive and the chairman of the IPA's digital marketing group, agrees that there was a time when it was valid to take the long-term view about the BBC's online activities. At one stage, you could have argued that its presence was needed in developing the market and taking the internet to the masses.

However, that is certainly not the case now. And Owen believes that a combination of factors could help to reclaim territory that has been annexed unjustifiably by the corporation.

Owen concludes: "Since Greg Dyke took over (as its director-general, in 2000), the BBC has been openly aggressive, especially in the way it has targeted commercial rivals and there's no doubt that this is its objective in the online market if it is unchecked.

"With the charter review coming up, the BBC is mellowing, although it is always going to be tempted to argue that providing news online is a public service and very much in line with its remit. However, the BBC is scared of negative publicity and this is potentially very negative."

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