With the BBC licence fee set to be culled, what will replace the funding model in the UK?
This article contains affiliate links, we may receive a commission on any sales we generate from it. Learn more
The future of the licence fee has been thrown into doubt, following an announcement by Culture Secretary Nadine Dorries. The UK Government has already announced plans to freeze the BBC licence fee for the next two years – resulting in a real-terms pay cut to the BBC due to the spiralling inflation, that’s also set to trigger record-breaking price increases for those with broadband contracts. The BBC licence fee will remain at £159 a year until April 2024 when it will begin rising in line with inflation until the end of the existing Royal Charter on December 31, 2027. And after that?
The UK Government will introduce a new Royal Charter – the constitutional basis for the BBC, which is designed to set out the broadcaster’s mission and funding model – that will last for the next decade, with a review by ministers at the mid-point. Culture Secretary Nadine Dorries hopes to introduce an entirely new funding model for the Beeb. An ongoing review by the Government will look into whether “a mandatory licence fee is appropriate” in the 21st Century.
Politicians have spoken about ditching the BBC licence fee for decades, but the latest moves from Boris Johnson’s cabinet suggest its days could be numbered. If the UK Government decides to see off the funding model from January 1, 2028 …what could replace the BBC licence fee?
Funded Directly By The Government
This cuts out the middleman, replacing the need for viewers to set-up a Direct Debit and pay the BBC licence fee themselves. Instead, the Beeb receives its funding direct from the Treasury, with the cost coming from taxation on income of all workers in the UK. This is the model used in a number of countries around the world, including Sweden, Croatia and Finland. Like any of the options – including the current BBC licence fee system – it’s not perfect.
Unlike the licence fee, there’s no way to check whether or not the person being taxed listens to BBC radio stations, podcasts, watches the terrestrial channels, reads the BBC website or uses iPlayer. Of course, that’s the nature of general taxation. Taxing PAYE workers would mean there’s no need to hunt down licence fee evasion, which would save the corporation a lot of time and hassle.
Some have raised concerns that funding the public broadcaster from the Government could give politicians greater influence over editorial decisions and strategy – undermining the core principle of impartiality.
Could we begin to see advertising appears on the BBC website and breaking up shows like Strictly?
The most obvious alternative funding model for the Beeb is to allow the corporation to air advertisement breaks during its shows. Other public broadcasters, like ITV and Channel 4, already include ad breaks in their shows. So, what’s the problem? First of all, the rise of streaming services like Netflix, Prime Video and Disney+ has resulted in a decline in revenues from TV advertising, so there’s no guarantee that the BBC would be able to maintain the same breadth of content with funding from advertising alone.
In a bid to bolster its coffers, the BBC could prioritise high-yield programming to sell more advertising. For example, Strictly Come Dancing is a Saturday night juggernaut with 11 million people across the UK tuning in. Those advertising spots are going to bring in some serious cash for the broadcaster, but what about the more niche content – like the GCSE BiteSize shows produced to help teenagers revise for their upcoming exams? These won’t bring in huge viewing figures and could be ditched – or at the very least, have their budgets greatly reduced – as the Beeb follows the money in order to sustain itself.
Using Advertising to fund its programming could cause new frictions for the Beeb, which doesn’t currently have to worry about maintaining relationships with advertisers. Shows like BBC Newsnight or Panorama are likely to trigger headaches for the sales team inside the BBC trying to sell ad spots in the latest episode of Strictly Come Dancing with critical coverage of multi-national conglomerates. If the Beeb depends on those ad breaks to secure its future, it could shift the balance of power. Of course, it’s perfectly possible to maintain editorial independence while being funded by advertising – Channel 4 has revealed some of the biggest scoops of the last decade, including the Cambridge Analytica and Facebook scandal – but it’s something that the BBC doesn’t have to consider at the moment and would require some of its stretched resources.
Introduced by the Labour Government in 1946, Prime Minister Clement Attlee made the annual BBC licence fee a requirement for any household in the UK that consumed content from the Beeb via live transmission. In exchange for funds provided by the licence fee, the BBC is required to provide public service broadcasting. This includes live television shows, podcasts, radio stations, online news and sports via the BBC website, educational shows for children, mobile apps, and much more.
Today, anyone who listens to radio shows, watches channels streamed via BBC iPlayer on a tablet or smartphone, as well as terrestrial channels watched on Freeview-equipped Smart TVs, Sky Q or Virgin Media set-top boxes is required to pay the BBC licence fee. You’ll also need to pay the fee to download boxsets and movies from BBC iPlayer, stream live content from the BBC via third-party websites like YouTube, or record shows onto a hard-drive, like Sky+ or Sky Q.
Anyone who does not pay the licence fee can be taken to court. In 2019, there were a total of 122,603 prosecutions and 114,531 people were convicted for TV licence evasion.
The BBC licence fee currently costs £159 a year, or £53.50 if you only watch via black-and-white TVs.
Paid By A Tax On Broadband
As more viewers turn away from traditional terrestrial channels and enjoy BBC shows via on-demand platforms like BBC Sounds and BBC iPlayer, surely it makes sense to fund the Beeb from the broadband connections that enable access to all of that content? This tax could be paid by consumers or by the internet service providers. According to research by media analytics firm Ampere, an annual fee of £138 a year on all broadband customers across the UK would maintain the current funding achieved by the £159 a year licence fee. So, everyone would have a little extra cash in their pocket, the Beeb would remain independent and would not need to worry about only funding its most mainstream, advertiser-friendly shows. Everyone is happy, right?
Well, not quite.
If internet service providers, like BT, Sky and Plusnet, passed the £138 a year charge onto customers, it could be harder for deprived households to access the internet. While it’s possible to sign-up to a broadband connection from around £20 a month right now (with concessions available to those on Universal Credit), the extra £138 a year licence fee would add around £11.50 extra to each broadband bill.
That means you might not be able to sign-up a broadband contract with average download speeds for under £31.50 a month. With families across the UK already stretched due to the cost-of-living crisis, that’s a hefty rise.
Best Broadband Deals In January 2022
As more people access BBC content over an internet connection, could funding be linked to broadband?
A Netflix-Style Subscription
Netflix has revolutionised how many of us enjoy boxsets and movies. From as little as £5.99 a month, subscribers can stream and download an unlimited amount of telly across a wide range of devices. Due to its mind-boggling scale – Netflix is available in 190 countries worldwide – this relatively small monthly fee enables the streaming service to fund dazzling shows with high production values, such as Bridgerton, The Crown and Stranger Things, as well as reality shows, award-winning documentaries, such as Making A Murderer, My Octopus Teacher, Athlete A, and Seaspiracy, as well as blockbusters with Hollywood A-listers. And if that wasn’t enough, there’s a huge library of syndicated content available too, with the likes of Friends and Seinfeld available to stream from any of your devices.
So, surely the Beeb can continue to produce its high-production documentaries, like David Attenborough’s Blue Planet, Dynasties, and Louis Theroux shows, as well as its Saturday night entertainment, educational content, and radio stations with a similar – or even a little costlier – subscription fee?
According to calculations by the BBC, this is possible. However, the corporation would need approximately 24 million customers signed-up and paying £13 a month to maintain the same level of funding as it currently enjoys. Perfect, right? Well, there are a number of issues with that plan. If you don’t subscribe to Netflix, you can’t login to the video on-demand app or website to access any of its content …and that’s that.
The BBC licence fee currently funds a number of national radio stations, which are available to anyone who tunes into the correct frequency. It also funds the BBC website and terrestrial channels, like BBC One and BBC Two. While it’s possible to enforce a pay wall (a required login screen that checks whether you’ve paid the latest subscription fee) for BBC iPlayer and BBC Sounds in exactly the same way as Netflix does, the BBC website could also be put behind similar checks (a number of news organisations have gone down a similar route, with readers required to subscribe to access the articles posted online) …there’s currently no technology that could prevent car infotainment systems or DAB radios from tuning into a certain frequency. Also, those who listen to BBC radio stations via a smart speaker, like Amazon Alexa or Google Assistant, would need to find a way to verify their identity and login in order to tune-in.
And what about television viewers? It’s tough to imagine a way for the Beeb to ensure that all viewers are paying subscribers while also allowing its channels to remain on services like Freeview. Instead, the Beeb would have to follow in Netflix’s footsteps and go all-in on streaming. Unlike today, anyone who wants to access content from the BBC – including radio and live terrestrial channels – would need to subscribe to an internet package. That means you’d not only have to pay £13 a month for access to the Beeb, but you’d also need to add a Direct Debit to an internet service provider. As mentioned earlier, the minimum speeds you’d need to stream video content will cost around £20 a month.
That brings the total cost to roughly £33 a month, compared to the current BBC licence fee cost of £13.25 a month. Of course, the advantage of this model is, like Netflix, viewers would be able to unsubscribe whenever they wanted. Like Netflix, you could subscribe for a month when your favourite show is airing, then leave for a few months, and return when friends or colleagues tell you about a new must-watch boxset. That offers much more friendly than the current all-or-nothing licence fee.
Unfortunately, there is one more issue with the Netflix-style model …for now, at least. According to research from Ofcom, there are more than one million homes across the UK that are unable to access sufficiently fast broadband to stream video content, like that available from Netflix. These people would be unable to access any content from the country’s public broadcaster, which means it wouldn’t be fulfilling its mission as set out in the Royal Charter.
For a comparatively low subscription, Netflix produces a stream of high-quality TV shows and film
Worse still, a solution to this was on the horizon. Early last year, UK Government quietly confirmed plans to water down its commitment to bring full-fibre broadband connections to the entire country by 2025. The pledge to connect every home in the UK with gigabit-capable cables – more than fast enough to stream video content in ultra-crisp 4K Ultra HD picture quality as well as maintain video calls, download software updates and more at the same time – was a key part of Prime Minister Boris Johnson’s manifesto during the election in late 2019.
In its latest national infrastructure strategy, the Government has walked back its commitment – stating that faster internet speeds will now only be available to 85 percent of premises within the next five years. That means a number of rural areas will still be stranded with slower broadband speeds. The UK has some of the slowest home broadband speeds in Europe, with the average speed only hitting 70Mbps last year.
For those who want to download Call Of Duty on their PC – a video game that takes up more than 200GB of space – players with the average connection in this country can expect to wait six and a half hours. It will take almost 20 minutes to upgrade to the latest version of Windows 11. For comparison, Call Of Duty would take just 27 minutes on a gigabit full-fibre broadband connection, while the Windows update would take a mere 45-seconds.
…And What If The Licence Fee Stayed After All?
There are still five years before we reach the December 31, 2027 deadline. Based on recent political events, a lot can happen in that time. Five years this month, Prime Minister Theresa May was preparing to host a state visit from US President Donald Trump – which had sparked a petition signed by 1.8 million people who wanted to see the event cancelled.
With an election due before 2024 and potentially a new Secretary of State for Digital, Culture, Media and Sport in position – either from the Conservative party, or another Political party, attitudes towards the BBC licence fee could have changed. Nobody believes the current funding model is perfect, but it has sustained the corporation for over 75 years. That’s some pretty thorough road-testing. With full-fibre broadband upgrades still taking place and the way we listen to radio, consume the news, and watch telly changing so quickly… the existing model might not be the best way to move forward. But we’ll need to see the lay of the land in 2027 to make that decision.