The Endless Death of Chartered Monopoly

The BBC, originally the British Broadcasting Company was founded as an independent business in 1922 (with British manufacturers exclusively permitted to hold shares), led by its first Director General John Reith, and supported by companies like Marconi, who supplied its first studio. This arrangement did not last long after Parliament reflected on the new prospect of broadcast programmes in Britain, that the operation of the BBC as a private company implied. In 1925 a parliamentary committee proposed a radical change; to the BBC the liquidation of the private company, and a transformation into a public corporation, the British Broadcasting Corporation. Parliament was taking no chances; and it had just the solution, ready to dust off from a musty, long forgotten past.

The new BBC thereafter, became a quite different form of corporation under a new Royal Charter, granted by Parliament for ten years from 1927; ultimately making the BBC answerable to Parliament. Under the Charter the BBC thus became a Chartered Monopoly; it was to become the monopoly broadcaster in the UK, with the Charter renewable at ten year intervals. The Charter, under which the BBC operated, fell under the supervision of a Board of Governors, until the eighth Charter renewal in 2007; when the Trust and Executive Board were introduced.  Everything happening now follows from the BBC’s origins as a Chartered Monopoly, and the problems built into that peculiar, long lost form of undertaking.

Chartered Monopoly has a long history in Britain, and survived its operation sufficiently long to outlive its usefulness and bring on disaster. The first, and most powerful of all Chartered Monopolies was granted its Charter by Queen Elizabeth I at the dawn of the 17th century: the East India Company (EIC). The critical feature of Chartered Monopoly is the Monopoly that is granted. Great power is granted to the Chartered corporation, and considerable independence from Parliamentary control. In the case of the EIC it was set up to grant rights to trade in the Far East by Parliament; with minimal control over the Governors, and indeed passive official acceptance (and even connivance), and a very loose interpretation of the rules of engagement, wherever trading opportunity arose. During the 17th century to the 19th century the EIC grew to be the most powerful corporation in the Far East, in the early age of Empire; and at the same time the most successful, profitable (and largest) major commercial stock in the City of London. It was not just a trading company, but turned itself into the governors of large swathes of India, with its own army and bureaucracy. It effectively became the face of British Empire in India; a State within a State running an Empire. The EIC represented the Mercantilist form of early British Capitalism. The Model Chartered Monopoly so successfully established by the EIC was repeated in the Royal African Company, and the South Sea Company; the latter a Ponzi scheme to privatise the National Debt, that went spectacularly bust in the greatest financial crash in British history; the South Sea Bubble, 1720. In most cases the Chartered monopolies (save the EIC) traded primarily in slaves.

Chartered Monopoly as a structural form works; so long as you have the Monopoly granted by the Charter that established it. Once the monopoly is undermined, it simply does not work. The rise of Capitalism, as an open system allowing any competition at all against the Chartered Corporation, and the Chartered Monopoly will fail; in Britain, inevitably, later rather than sooner, because the failure is never acknowledged. Mercantilism was driven out by the political and commercial pressure of Capitalism, and by the necessity of Government and Parliament overseeing the problem of controlling an Empire. The problem is that in Britain it is almost impossible for Government or Parliament to recognise structural failure. Instead of recognising the real nature of the problem, the EIC Charter renewals continued, while the key monopoly power was rescinded, and Government, through a mixture of money, and asserting direct Government control, slowly eroded the independent power of the EIC. It all ended very badly, with the Indian Mutiny in 1857; too late to achieve much of lasting benefit, except for the abolition of the unlamented EIC (even that took almost another twenty years). The reason for Government foot-dragging in the case of mercantilist monopolies was in part the membership of Parliament itself; typically significantly bolstered by shareholders, or beneficiaries of Chartered monopolies, or of the slave trade (among both Tories and Whigs).  Slavery in the British Empire was not abolished until 1833; and even then only at great cost to the Treasury to recompense the slave owners (but not the slaves).

The point of this seeming historical curiosity, this apparent diversion is that the BBC is the last Chartered Monopoly. The deeper irony is that over the last 100 years we have seen exactly the same slow, confused erosion of the BBC monopoly as happened to the EIC (and the same ‘wriggling’ on the hook, if you care to interrogate the history); and the same endemic failure to recognise the consequences. Parliament chips away at the dissipated monopoly, puts the money and political pressure on the sagging faux-monopoly, but does not offer to fix the problem. In the Age of Communication, politicians like having something like the BBC, permanently ‘on the ropes’; putty in Government hands, but somehow still ‘independent’ (not me guv). It works well enough for politicians in government, ever the victim, ever with the BBC falling over; what needs fixed?

The concept of “impartiality” (probably borrowed by Reith from Adam Smith) worked well for the BBC, as long as it retained the monopoly capacity to apply it – absolutely, to everyone. It is Monopoly alone that guaranteed that power to the BBC to ensure the universal application of “impartiality” (whether fairly or not is beside the point; it writes the rules, and interprets them accordingly).

What was the BBC monopoly? Effectively it was the grant of monopoly rights over the spectrum; or at least that part of the spectrum designated by government to be used for terrestrial broadcasting. The BBC operated exclusive rights, set the standards, and applied them. The problem comes in exactly the same way as it affected the EIC. Business sees potential profitable opportunities in operating different services from the BBC, and begins to pressurise Government to end monopoly to fair competition. It began in the 1960s, with radio ‘pirate’ broadcasting, just offshore Britain. The beauty of that illustration is that the earlier form of competition the EIC faced as early as the late 17th century was (mutatis mutandis the changing culture): British pirates, leaving the Caribbean for rich pickings in the EIC’s fiefdom of the Far East. It is ever thus.

In the late 20th and 21st century, capitalism, competition and new technology, the last the dynamics of everything from Direct Broadcast by Satellite to digital social media, would wreck any terrestrial broadcast monopoly. Yet Government had already begun whittling away the BBC’s power from 1955 by ITV, and later C4 and others, in the terrestrial sphere. The underlying problem, however is never addressed; but kicked down the road, with fiddly non-solutions. How does a Chartered monopoly survive with no monopoly? It can’t. The BBC is now trying to operate “impartiality”, as if it still had a monopoly over its operation in the 21st century. It hasn’t. The way it hires people has already accepted the new commercial reality; self-employment and short-term contracts abound. It cannot police “impartiality” as it has no police, and no jurisdiction, unless the person signs a contract to terminate their freedom of speech; in a world of social media in which everyone else in broadcasting retains their freedom of speech. Without the monopoly such arrangements are unsustainable in the 21st century digital age.

The BBC is now going to rewrite the rules. “Transparency”, no doubt will become the new “impartiality”. The quaint eccentricity of not facing the real problem will continue. It is just another failure to address the real failure – the Chartered Monopoly structure of the BBC, which requires replaced; designed for the 17th century, still ineffectually being held together with ill-fitting sticking plaster; largely because Parliament, public and BBC are incapable or unwilling to contemplate thinking any problem through; while this Government prefers to manage every problem in three word slogans.