1. Evidence F 1 of 3
26. Why would the Competition Commission get involved in a market like VOD, which is still in its formative stages? That’s the very best time to get involved. If they allow a merger to create a monopoly as the industry gets under way, then potential entrants may find it impossible to get a foothold later on. 27. What was the key fact that led to project Kangaroo being turned down? Kangaroo would have controlled ‘the vast majority of UK-originated content’ (lines 11-12). Elsewhere in the report, the CC makes it clear that overseas content was a poor substitute for UK content in viewers’ minds.

2. Evidence F 2 of 3
28. What is the flaw in the argument in the final paragraph, which points at ITV’s and Channels 4’s current financial difficulties? The issue is whether the proposed merged entity would wield market power. This has nothing to do with the current financial strength of the individual participants. 29. Why was BBC Worldwide involved rather than the BBC? BBC Worldwide is the commercial arm of the BBC, and is responsible for selling BBC content around the world as well as managing spin-off, potentially cash- generating activities such as VOD.

3. Evidence F 3 of 3
30. What is the best argument made here in favour of allowing the merger to go ahead? It is Michael Grade’s comment that Kangaroo would be ‘competing against dominant global brands’ – presumably the likes of Time Warner and Disney. It is sometimes possible for global competition to provide the same benefits to consumers as domestic competition. The CC turned down this argument because its research indicated that overseas content was a poor substitute for UK-origin content. If this view is correct, then Kangaroo would have had real monopoly power.

4. Evidence G 1 of 1
31. How does President Sarkozy’s proposal illustrate the mixed motives of so many major political decisions? While an economic case could be made for freeing French state TV from the need to accept advertisements, it is also the case that the President’s personal friends stand to make a lot of money. 32. Why might the EC Competition Commissioner want to minimise state subsidies for Public Service broadcasting? So that competition flourishes in the wider broadcasting industry – without unfair, subsidised competition from the Public Service broadcasters.

5. Evidence H 1 of 4
33. The table shows that the Licence Fee model, as a means of supporting Public Service broadcasting, is very common across Europe. What is the historical explanation for this? The BBC led the way in the early 1920s with Public Service radio funded by a 50 pence Licence Fee. It was widely admired – and emulated – across Europe. 34. What is the theoretical benefit of Licence Fee funding compared to a government grant? It should make the state broadcaster more independent of government – but this only works if the size of the Licence Fee is set independently of government.

6. Evidence H 2 of 4
35. What is the obvious benefit of allowing advertising on Public Service (i.e. State) TV? The Licence Fee can be lower. Almost all the countries in the Table which accept this advertising have lower Licence Fees than those which do not. 36. What is the obvious drawback of allowing advertising on Public Service TV? It will be under commercial pressure to maximise viewing figures, which may conflict with its educational and news-gathering priorities under its Public Service objectives.

7. Evidence H 3 of 4
37. Which three countries in the Table rely entirely on the Licence Fee to fund Public Service broadcasting? Denmark, the UK and France (though French state TV has in reality not yet abolished advertising). 38. Denmark and the UK are the only two countries whose Public Service channels rely entirely on a Licence Fee. Why, other things equal, does Denmark’ s Licence Fee need to be over 50% higher? The UK benefits from economies of scale. Denmark has a population of under 10% of the UK’s 60 million. So the cost per household of providing a remotely equivalent service will be much higher.

8. Evidence H 4 of 4
39. Does the Table provide support for the principle of funding Public Service broadcasting through a Licence Fee? Not necessarily. All it shows is that a lot of other EU countries use this method. In the 1980s , Britain led a global shift towards privatising state-run industries. It is always possible that the UK could set a similar lead here. 40. Does Public Service broadcasting have to be funded out of taxation i.e. by a Licence Fee or a government grant? Probably. While ITV and C4 fund their Public Service obligations from advertising revenue, as television audiences fragment so does the advertising revenue. This model is becoming increasingly difficult to sustain.

9. Evidence I 1 of 1
41. Does this information support the idea that TV viewing is a demerit good?
Only at the margin. Most of the adverse health impacts of watching too much TV generate costs which are primarily internal, not external
Correlation does not prove causation e.g. being obese and in poor health might cause you to spend more time watching TV – not the other way round
We also have to bear in mind the external benefits of watching TV, which lie behind the whole principle of Public Service broadcasting