British broadcasters including the BBC and ITV could be allowed to charge cable and satellite pay-TV companies for carrying their channels, the media regulator said on Monday, potentially pointing to a major funding change in the sector.
Launching a consultation, watchdog Ofcom said the freedom to charge so-called retransmission fees would help compensate public service broadcasters (PSBs) for their costly obligations such as news provision.
Ofcom said the public service broadcasters were performing well despite falling viewing figures, but changes could be needed to secure the future of services in an increasingly fragmented television market.
Channels from the BBC, funded by a 145.50 pounds ($228) license fee paid by all British households, and rivals ITV, Channel Four and Channel Five, paid for mainly by the advertisements they carry, are carried for no fee on the platforms of cable company Virgin Media and satellite broadcaster Sky.
But ITV and Channel Four want those rules changed.
Shares in Sky were trading down 2.2 percent at 882.5 pence at 1318 GMT, while shares in ITV were up 0.2 percent at 204.5p.
Ofcom's comments are in line with remarks by Culture Secretary Sajid Javid, who said in September he would consider allowing broadcasters to charge retransmission fees, which are a significant source of revenue for PSBs in the United States.
Ofcom did not say what level of fees it envisaged or how much they might raise. The BBC's license fee has become a hot political issue in recent years and the Government has frozen the fee at its 2010 level until March 31 2017.
Sky opposes any change, saying ITV wants the significant benefits of its PSB status while cherry-picking from a fundamentally different U.S. market.
Ofcom said changes to the regulatory regime to help maintain public service broadcasting could include allowing retransmission fees, relaxing TV advertising rules and new tax breaks to encourage investment.
"The entire TV industry must meet new challenges from an evolving media landscape, which brings risks and uncertainties," said Ofcom Chief Executive Ed Richards.
The watchdog said viewing of the main PSB channels accounted for just over half (51.1 percent) of all TV viewing in Britain in 2013, down from 60.8 percent in 2008, although public satisfaction had risen in the period.
Ofcom has a duty to review the performance of public service broadcasters in fulfilling the requirements of their licences, but any changes to the rules are a matter for lawmakers.
The findings of its review will be published next summer.
