BBC's online services to face greater scrutiny

LONDON - The BBC's online services, which received £110m in the last year, will not be allowed to receive new investment without close scrutiny, the BBC Trust said today in a development that will appease the corporation's commercial competitors.

The announcement is outlined in the trust's BBC.co.uk review and new service licence, which was revealed at midday.

It comes as the BBC's commercial rivals fear they will not be able to compete with the corporation's digital ambitions, if those ambitions are backed by the licence fee war chest without adequate checks.

The BBC has come under fire from its commerical rivals for the money it is able to invest in its online operations, which they can not match.

Emily Bell, Guardian News & Media's director of digital content, told the Online Publishers Association conference in London recently that "the BBC funds the biggest online news site in the world".

She was talking about the impact its international website BBC.com had on the marketplace, saying it was "enormous state-funded intervention in the international news advertising market", which is starting to hit international news sites as well as UK web publishers.

"It will be interesting to see how The New York Times and everyone else reacts. This is not our problem -- it is everyone's problem."

The Trust said it will not approve new investments in the BBC's online services until it is confident "that improved management controls are in place to ensure better financial accountability and editorial and managerial oversight".

Dame Patricia Hodgson, who led the review for the Trust, said: "We need to be sure that additional investment of licence fee payers' money will deliver their [licence fee payer's] expectations and, in doing so, does not stifle enterprise from others who seek to offer excellent online services to the public."

The review also said that as bbc.co.uk develops and responds to the fast-changing online market and the demands of users, it is "essential that the service remains distinctive and the boundaries in which it operates are strong enough to make this a reality".

The Trust's review began on July 26 2007 with a 12-week public consultation and independent audience research.

The public's response was overwhelmingly positive, with evidence suggesting that the service is providing good value for money, the Trust said.

In 2006 and 2007, the BBC spent 3% of the licence fee on BBC.co.uk compared with 70% on television channels and 17% on its radio services, yet it is now the BBC's fourth most widely used service.

The trust's review also revealed that in 2007/2008 the actual spend on BBC.co.uk was £110m, 48% higher than the Service Licence baseline budget.

It said most of this increase was not overspend, but the misallocation of £24.9m in overheads and costs to other budgets within the BBC, representing poor financial accountability.

In light of the misallocation, the trust has demanded tighter management controls for BBC.co.uk and has requested these be implemented before it will approve additional investment.

The trust has also rubber-stamped plans to make a significant increase to BBC.co.uk's investment from licence fee money over the next six years. BBC management has already proposed to spend £39m of this investment in 2008 and 2009.

Hodgson said: "The trust endorses the management's plans to develop the service further -- particularly on areas like search and navigation, which audiences tell us could be improved."

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