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Radio stations turned off by broadcast levy
07 March 2010
Debate over a controversial levy on broadcasters to fund regulation is set to rumble on for several more weeks.
The issue came to a head last week as the Oireachtas Committee on Communications, Energy and Natural Resources disputed the levy, which was due to come into force this week. They asked for more detailed budgetary information from Michael O’Keeffe, chief executive of the Broadcasting Authority of Ireland (BAI), on March 24.
Eamon Ryan, the Minister for Communications, promised the committee that he would work with them and the BAI to reduce the financial burden on broadcasters ‘‘at a difficult time’’, while still funding a decent system of regulation.
He pledged flexibility and innovation, and suggested that it might not be necessary to ‘‘hit broadcasters twice’’ in the next few weeks with bills for regulation for the last three months of 2009 and 2010.
The controversy has arisen because of a drop of up to 30 per cent in radio stations’ commercial revenue.
Commercial broadcasters have said they cannot afford what they expect to be levies of at least €40,000-€50,000 for smaller local radio stations, or up to €350,000 for national stations.
They claimed the charges would be particularly punitive for newer market entrants which have yet to turn a profit.
They said jobs would be lost and wanted the BAI significantly to reduce its projected costs for 2010.
The BAI’s 2010 budget is €7.6million, 46 per cent more than the €5.2 million that, was spent last year by the bodies it replaced, the Broadcasting Commission of Ireland and Broadcasting Complaints Commission.
‘‘We’re in the teeth of a recession," said Willie O’Reilly, chairman of the Independent Broadcasters of Ireland (IBI) group, which has been lobbying TDs on the issue. ‘‘When putting together a budget, the overarching principle needs to be modesty.
We would ask the BAI to be realistic and operate under the same rules as everyone else."
RTE has not made any comment and is understood to be prepared to comply with any new regulations.
The BAI has pledged to review its budget and said it could refund any excess funds it receives. But it defended the levy scheme, which is imposed under the 2009 Broadcasting Act. Its argument was that it now had additional responsibility for overseeing public service broadcasters and for implementing new policy measures.
It needs to create new compliance and complaints mechanisms, including sanction procedures for regulatory breaches. It’s understood that PricewaterhouseCoopers had initially recommended that it seek €9.2 million in funding for 2010 to handle all its extra work.
O’Keeffe argued that the levy model he had proposed was the fairest system possible, and said it would require public service broadcasters to pay almost half the overall bill.
This is being queried by some TDs, who have argued that commercial radio stations are footing too much of the bill. O’Keeffe noted that a regulatory levy system in the broadcasting sector from 1989 to 2001, cost commercial radio stations 3 per cent of their gross advertising revenue.
The new levy of up to 3 per cent of revenue is based on net income. O’Keeffe said the BAI was re-examining its cost base and that he hoped to be able to reduce the projected €7.6 million total over the next few weeks. But he was not specific on what cuts were achievable.
‘‘If we are going to be paying for all of this, we need transparency," said Gabrielle Cummins, chief executive of eastern regional radio station Beat.
‘‘I can understand the BAI has been at the mercy of a lot of political wrangling, but we’ve all had to cut our cloth according to how the market is. We’ve implemented some serious cost-cutting measures. I don’t think they are grasping this."
Liam O’Shea, an IBI board member and chairman of Clare FM, said: ‘‘For the newer entrants in particular, there is a problem. There are stations that will end up being loss making because of this. I think we need to be level-headed about this.
I believe in regulation.
‘‘The industry accepts that it needs to pay something, but the timing of this is allwrong. This industry is in serious difficulty, and I have no doubt that we are being asked to pay for a lot of work that we don’t really have to pay for."
O’Shea said Clare FM was reckoning on a levy of around €60,000.
He was confident that O’Keeffe was sincere when he promised to do his best to find cost savings, but said he would not be reassured until he saw the results of the exercise.
O’Keeffe said that the BAI’s €5.2 million bill for 2009 - which was used as a basis for comparison by critics of the levy - was lower than normal because last year was a transitional one.
He said it required the framing of policy to be delayed while the move took place from the old regulatory system to the new one under the BAI. In most years, he said, the costs of broadcasting regulation exceeded €6 million.
The outsourcing of the levy administration to PwC was also questioned by members of the Oireachtas committee, which wanted to know why the BAI could not handle the service internally.
O’Keeffe said PwC earned €125,000 a year for managing the BAI’s financial affairs and levy collection, and said this was less than recruiting two people to managing this internally.
Fine Gael TD Simon Coveney was critical of the BAI’s approach to the issue. ‘‘We’re being asked to approve a levy order without being given detailed costings."
Fianna Fáil Senator Mary White said the authority’s proposed budget for this year would cause an ‘‘earthquake in the finances of local radio stations, and put jobs at risk’’.
Ryan said there was a ‘‘common understanding that we need to be sensitive and careful’’ about the needs of the broadcasting industry. This one looks set to run and run.
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