Carolyn Fairbairn is director of strategy and distribution at the BBC, reporting to director general, Greg Dyke. She recently spoke to [itvt]'s Tracy Swedlow about what she considers to be the most important issues facing the BBC over the next few years, about the BBC's DTV investment priorities, about its controversial decision to bypass BSkyB's conditional access system and transmit its digital channels unencrypted on the Astra 2D satellite, and more.

[itvt]: Carolyn, could you tell us a little about your background and what it is that you do at the BBC?

Fairbairn: I am director of strategy and distribution. I am on the BBC's executive committee reporting to director general, Greg Dyke.

[itvt]: What are your responsibilities?

Fairbairn: I run the strategic planning department for the BBC. I also run the distribution department, so I manage all our relationships with Sky, ntl, Telewest and Crown Castle.

[itvt]: And your background?

Fairbairn: I have been at the BBC about 6 years, and before that I spent 7 years with McKinsey, a consulting firm. I also spent a number of years working in the policy unit of Number 10 [Downing Street, the office of the UK prime minister].

[itvt]: The policy unit?

Fairbairn: That is right, yes. I was in the policy unit. It was all health policy, nothing to do with media. I joined the BBC in 1997. I initially worked as director of strategy for BBC Worldwide, which is the commercial subsidiary of the BBC. I became director of strategy for the BBC overall in April 2001, and I also joined the executive committee of the BBC. I took over responsibility for our distribution service that deals with transmission and so on about a year and a half ago.

[itvt]: Obviously, as strategy director you must spend a lot of time thinking about the long-term future of the BBC. What are the most important issues facing the Corporation over the next 5 years?

Fairbairn: Well, a very interesting thing about the BBC is that the long- term really involves you understanding not just the economics of your industry and the technology and regulatory issues, but also the politics, because we are publicly funded. So most of the interesting issues facing the BBC are the public and private sectors meet, if you like. They are about the future role of the BBC in the digital age: does it still have a role? what is that role? and so on. One important issue coming up is the charter renewal decision about the BBC, which will be made in 2006. We have fundamental issues about the portfolio of services that we have. We think we have resolved them now: we have launched a range of these services, including 18 channels--a mix of radio and television--over the last year. The other big issue is how we can now get our services out to more people. Because, having launched a range of digital channels, we care very much that as many people as possible can access them. That has led us into Freeview, and will continue to be a very major concern of ours.

[itvt]: I understand that you have been very closely involved in Freeview.

Fairbairn: Yes, I ran the Freeview launch.

[itvt]: I hear that Freeview has been quite successful so far.

Fairbairn: Yes, it is going very well. 600,000 digital terrestrial adapters have been sold since Freeview launched. We think there are more DTT adapters now being used by consumers than were in use at the height of ITV Digital's growth. So yes, it is going extremely well.

[itvt]: Why is it so important to get BBC content out to so many more people?

Fairbairn: I am really a passionate believer in the value of public service broadcasting, and I think that the new services that we launched have fantastic programs and content which I think the audience will love. From BBC4, which has a lot of documentaries and arts programs, to our children's channels, which feature advertising-free British content. All this high-quality public-service programming from the BBC can at the moment be received by 50% of households. I believe people should not have to pay a subscription to get it. It should be free.

[itvt]: You mentioned earlier that the license fee, which funds the BBC, is up for review as part of the BBC's next charter renewal. Do you think that the BBC will be able to count on funding from the license fee going forward?

Fairbairn: Well, I think nobody has been able to invent a better way of funding the BBC. I don't think anyone thinks it's perfect, but nobody has come up with a better way. So, while it is not out of the question, I believe it is very unlikely that that there will be a major move to change the means of funding for the BBC.

[itvt]: How much money does the BBC spend on digital each year, and which areas are you investing in?

Fairbairn: We already spend around £300 million a year on our digital assets, which is a fantastically rich investment in digital content for this country. At the same time, we are increasing our expenditure on distribution--which is my area--to try to get our digital offerings out to people. We don't plan to invest any more in digital channels. We will continue to increase our investment in interactive TV, but our digital channels are pretty well there. The big question, like I said, is now we have got them in place, how do we get them out to as many people as we can?

[itvt]: The BBC recently announced that it will bypass Sky's conditional access system and broadcast its digital channels unencrypted. What was the reasoning behind this decision?

Fairbairn: We are really concerned with getting our services out to the public, because we are funded by our license-fee payers. So the decision was motivated by 2 goals: The first one was to use our money wisely. We don't need encryption or conditional access. It is costly for us: we estimate it would cost over £85 million over the next 5 years. We don't need it, so we'd rather save that money and spend it on other things of more value to license-payers. The second objective was to attempt to broaden the appeal of digital satellite. Digital satellite has been very successful in the UK, and Sky now has got about 7 million homes. However it has been built on a pay proposition. What we believe--and what Freeview is now proving--is that there are a lot of people who are interested in DTV, but who don't want pay-television. By making it possible for a free-to-air satellite proposition to develop--a kind of Freeview on satellite, if you like--we think we can greatly broaden the appeal of digital satellite to the people out there who want digital, but who don't want to pay.

[itvt]: Had the decision been in the works for a long time?

Fairbairn: Yes, we have been looking at this for many years. We have been negotiating with Sky about it for about 6 months. This is something we have been considering very seriously for a long time. Most European public broadcasters don't encrypt. We have really been trying to understand what we need to do to become more like other European public-service broadcasters.

[itvt]: How do you think the BBC's move will affect Sky?

Fairbairn: We think it has got some benefits for them: the first one is we are going to make all our regional services available to our satellite viewers, no matter where they are in the country. We can't do that on cable, and we can't do it on Freeview--we can't even do it on analog. So satellite will have an advantage over other platforms. The second thing we hope Sky will like about it is this: if the free-to-view segment of the satellite market does develop, then Sky can potentially market to this segment, persuade them to upgrade to pay. They won't have to subsidize their box, and they won't have to pay for their dish, because that will already be there.

[itvt]: Do you think that broadcasting without encryption could negatively impact the BBC's ratings?

Fairbairn: No, in the long run, it should mean that more people can see our digital services. So we're hoping that it will bring viewership to those services.

[itvt]: Are you concerned at all that Sky will remove the BBC from its currently prominent position on the SkyDigital EPG? I know the Communications Bill stipulates that the BBC should have prominent placement on the EPG. Does that apply yet?

Fairbairn: Yes. BBC One and Two are already required, under the Independent Television Commission's code of conduct, to be placed prominently on the EPG. The Communications Bill will extend that to all the BBC's digital services.

[itvt]: The BBC has run into some criticism recently for being too commercial--or rather for being too competitive with the commercial sector. Do you think that the BBC's decision to broadcast its digital channels unencrypted will fuel that criticism?

Fairbairn: The commercial TV companies are extremely supportive of what we have done, because they face similarly high costs from Sky for encryption and conditional access. ITV and Channel 4 actually released press releases in our support on the day of our announcement. So I think the answer is no.

[itvt]: Some have argued that the BBC's decision to broadcast its channels unencrypted could lead to rights problems with the 3rd-party programming that airs on those channels. While the BBC has argued that the Astra 2D satellite it will be transmitting on has a tightly focused signal, there is still some spillover into northern and western Europe. What is your take on this?

Fairbairn: We feel that this is completely manageable. There is always spillover, except for cable. But you have to be practical about how many people are actually going to watch the service. In northern Europe, for example, for people to get BBC channels from Astra 2D, they would have to turn their satellite dishes and stop receiving their regular service. I think you have to ask how likely that is.

[itvt]: The BBC has been a major driver of the interactive television medium. Does it have a mandate to foster new technologies?

Fairbairn: Well, the BBC is a unique organization, and I don't think there is anything quite like it in the States. Right from when it started in the early part of the 20th century, it had a tradition of being in the vanguard of new technologies. You know the story of the origin of the BBC: that basically the industry created the radio, but there was no content, so the BBC was created in order to create content. The BBC pretty much developed TV in the first place; it was at the forefront of launching color TV, of launching FM radio, and, more recently, of launching DAB radio here.

[itvt]: How high a priority is interactive TV for the BBC?

Fairbairn: I think it is a very high priority: we are finding that audiences love it. Our interactive news has been very popular. Interactive Wimbledon was fantastically popular last year on Sky. We do see this as a way of taking audiences behind our programs in a deeper, richer way.

[itvt]: How would you like to see digital television develop over the next few years? Would you like to see more content, more services, more transactional capabilities? What?

Fairbairn: I think what we are still looking for are the killer applications for interactive television. People like it and are using it, but it has not yet got anything that is completely, overwhelmingly compelling, that makes people say, "I have to go out and get digital interactive." As far as other, non-interactive TV digital content is concerned, I hope that it develops to meet the same high standards that have always characterized our content. I think it will. I think all the signs are there.

[itvt]: What is the BBC's budget?

Fairbairn: £2.5 billion. So about $4 billion.

[itvt]: Does all that come directly from license fees?

Fairbairn: Yes. If you have a TV set you have to pay £116 a year.

[itvt]: The government does not subsidize the BBC at all, correct?

Fairbairn: No.

[itvt]: We are an international publication, so is there anything in particular that you would like to say to international network operators and content developers about where the BBC is going?

Fairbairn: Not really. We make our programs for the UK market, and we will continue to invest in very high quality programs for our UK license-payers. We hope international operators will be interested in showing them on their channels, but that is not our primary concern. Our primary concern is the investment in great British content for the UK audience.

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