Public goods and their importance to the society (UK)

Public goods are also known as collective goods. These are a special class of goods. These goods can't be controlled i.e. they cannot be withheld for a certain customer without withholding them from all customers (the non-excludability characteristic). Also, once they have been produced, the marginal cost of an additional consumer censoring them is zero (the non-rivalrous characteristic). One example of a public good is the national defence service. Soldiers cannot defend the borders of the region without protecting the consumers inside the borders. This means that the providers are unable to exclude those consumers who consume and benefit from this service but deny to pay for them (through taxes). Such consumers are called free riders. Consequently, private production of public goods is not profitable due to the free rider problem and hence not many public goods are available in the free market. Mostly, public goods are provided by the government of the country.

 The characteristics of public goods are:

• They are non-rivalrous i.e. several consumers can consume the same good without diminishing its value.
• They are non-excludable i.e. an individual cannot be prevented from consuming the good.

Public goods result in positive externalities. Positive externalities are always undersupplied by the market. This is because the marginal private benefit is lower than the marginal social benefit. Take our education example.We all go to colleges because we want to gain education and this means that we might invent something in the future or maybe think of important ideas from which everyone will benefit, even those who did not pay for our education. This means that society is at a benefit and this is know as marginal social benefit which would be higher than the marginal private benefit due to the free rider problem.

One of the major ways by which UK supports the distribution of public goods is by public investments. The graph for public investments made by UK is shown below:

The current United Kingdom government has adopted two fiscal rules:

● The golden rule: over the economic cycle, the government will borrow only to invest and not to fund current spending; and

● The sustainable investment rule: public sector net debt as a proportion of GDP will be held over the economic cycle at a stable and prudent level.

Free-to-air (FTA) describes television (TV) and radio services broadcast in clear (unencrypted) form, allowing any person with the appropriate receiving equipment to receive the signal and view or listen to the content without requiring a subscription, other ongoing cost or one-off fee (e.g. Pay-per-view). In the traditional sense, this is carried on terrestrial radio signals and received with an antenna.

In the UK, around 70 free-to-air television channels and 25 free-to-air radio channels are available terrestrially via the Freeview DVB-T service. Seven HD channels are also broadcast via a public service broadcast multiplex and a commercial multiplex, both DVB-T2.

The UK has 5 public service television broadcasters. These broadcasters receive benefits like the licence fee (in the case of the BBC), guaranteed access to the spectrum (or section of the airwaves) they need for broadcasting, and prominence on TV electronic programme guides. In return they commit to providing services that give a benefit to the public, like news, local programming or cultural content. 

The public service television broadcasters are:

• The BBC, a public corporation, funded mainly by the television licence fee 
• Channel 4, a public corporation self-funded by advertising 
• S4C, a public corporation broadcasting in Wales and funded by a combination of BBC funding, government grant and advertising 
• Channels 3 and 5, whose licences are held by commercial television companies funded by advertising (currently for Channel 3, ITV in England and Wales, STV in Scotland and UTV in Northern Ireland)

The BBC’s Royal Charter sets up their independence and defines what it does. We review the charter every 10 years. The current  runs out at the end of 2016, and we will carry out the next review before that.

The BBC trust regulates the BBC on behalf of the licence-fee payers. The chair of the Trust is appointed by the government.

The Office of communication is responsible for licensing, regulating and monitoring other broadcasters. 

Television licences

The current BBC Royal Charter says that the BBC should be funded by the fees paid for TV licences. If you watch or record TV programmes as they’re broadcast you will need a TV licence.

Reference:

http://njsanders.people.wm.edu/1A/Public_Goods.pdf

http://www.oecd.org/unitedkingdom/43469354.pdf

http://www.auburn.edu/~johnspm/gloss/public_goods

https://www.gov.uk/government/policies/making-it-easier-for-the-media-and-creative-industries-to-grow-while-protecting-the-interests-of-citizens/supporting-pages/public-service-broadcasting

http://en.wikipedia.org/wiki/Free-to-air#United_Kingdom