Dyke 'promoted Freeview to save licence fee'

Greg Dyke
Dyke: 'Freeview will ensure the future of the licence fee for another decade'

Greg Dyke has confirmed suspicions in the commercial sector that he launched the digital terrestrial TV service, Freeview, as a way of delaying the day the licence fee would be scrapped.

The former BBC director general reckoned that if millions of homes were hooked up to Freeview, the move to turn the BBC into a subscription service could be prevented.

This is because under Mr Dyke's original plans the Freeview service would be a Trojan horse, offering free channels exclusively with no means of collecting subscription fees.

In his book, Inside Story, Mr Dyke admits for the first time that part of the rationale behind the launch of the digital terrestrial service was to flood the market with "dumb" boxes incapable of turning the BBC's channels into "pay as you go" services at a later date.

Because most Freeview boxes do not contain the card slots or encryption technology required to operate a pay-TV service, Mr Dyke concluded that leading the launch of the service following the collapse of ITV Digital was "important to the BBC defensively".

"Freeview makes it very hard for any government to try and make the BBC a pay-television service. The more Freeview boxes out there, the harder it will be to switch the BBC to a subscription service since most of the boxes can't be adapted for pay-TV," wrote Mr Dyke, who was forced out of his job in January following the Hutton report.

"I suspect Freeview will ensure the future of the licence fee for another decade at least, and probably longer," he added.

Freeview has been a huge success since launching as the replacement for ITV Digital in October 2002, with 4 million households estimated to have taken up the service that offers 30 TV channels for a one-off payment of around £50.

But up to now the BBC has said it opposed having a pay-TV element in the Freeview package because it would confuse the consumer.

However, outsiders have always suspected that his was not the case - that Mr Dyke had a long-term, more defensive reason for blocking pay-TV on the network.

Mr Dyke's revelation that this was indeed the case comes as the BBC admitted for the first time that it costs more than twice as much to transmit its channels to Freeview customers than it does to broadcast over satellite.

Appearing before the public accounts committee for the first time earlier this week, Caroline Thomson, the director of policy and legal at the BBC, confirmed to MPs that while it costs £2 per licence fee payer a year to transmit an analogue signal and £3 a year to broadcast on digital satellite, licence fee payers shell out £7 a year for Freeview customers.

Protecting the BBC
Mr Dyke's admission will confirm suspicions at the time of the Freeview launch that the joint venture between the BBC, Crown Castle and BSkyB was as much to do with protecting the BBC's position as encouraging digital take-up.

For several years, advocates of reform have argued that as soon as the entire country is watching on digital sets, the argument for collecting the licence fee electronically becomes irresistible because it cuts down on evasion rates and the cost of collecting the tax.

Many broadcasting grandees, including the former Five chief, David Elstein, and the deputy chairman of Channel 4, Barry Cox, have gone further and suggested that digital technology will mean viewers should be free to stop paying the licence fee and pay only for those channels they want to see.

"One of the main arguments for the BBC has always been that it corrects 'market failure' in broadcasting. In the digital age, the BBC is starting to look like one of the main reasons why a market in television can't develop properly," argued Mr Cox in a pamphlet published earlier this year by Demos that was based on a series of lectures delivered the previous year.

"A situation where people can essentially choose what TV they pay for argues for the end of the poll tax we call the licence fee, and with it a fundamental reformation of the BBC," Mr Cox concluded

But by heavily promoting a technology that does not have the means to accept electronic micro-payments or subscription services, Mr Dyke hoped to stop the argument in its tracks.

Industry insiders confirm that the policy of stopping the growing clamour for a digital licence fee was one of the main planks of the BBC's policy when Freeview was first discussed.

Keeping up the BBC's audience share
In his book, to be published on Monday, Mr Dyke also pinpoints another key reason why the BBC launched Freeview. In order to keep the BBC's share of viewing up, he argues that it was in the corporation's interests to encourage the free-to-air service - a stance that flies in the face of the corporation's public stance of platform neutrality.

"Given that the government plans to turn off the analogue signal in the early part of the next decade, it is obviously very much in the BBC's interest for people to go digital via Freeview rather than through BSkyB. In Freeview homes they watch 8% less BBC programming than in traditional five-channel homes; but in Sky homes the loss is a massive 50%," he wrote.

Mr Dyke, who throughout the book makes his distaste for Rupert Murdoch and BSkyB patently clear, also predicted that Sky would come to rue agreeing to be a partner in Freeview.

"I've never really worked out why BSkyB wanted to help us build Freeview. To me, it was always obvious that if it worked it would undermine their own basic-tier pay business. This is now happening, and again, I think history will show that it was a business mistake for BSkyB to help us grow Freeview," he said.

There were understood to be serious rifts between senior executives at the pay-TV broadcaster over whether to get involved but the then chief executive, Tony Ball, had the final say.

BSkyB recently reacted to stalling subscriber levels by announcing the launch of a "freesat" service that will essentially compete with Freeview.

Once viewers have the free service, which will offer 150 channels and added interactivity for a one-off payment of £150, Sky hopes they will upgrade to its pay-TV packages.

But chief executive James Murdoch continues to insist that Freeview has not had an adverse impact on Sky subscriptions, describing the key distinction as being between free and pay rather than analogue and digital.

