BSkyB's Murdoch accuses rival BBC of megalomania

LONDON, Dec 1 (Reuters) BSkyB Chief Executive James Murdoch launched a withering attack on the British broadcasting industry and the BBC in particular, accusing it of megalomania.

In a speech in London hosted by media regulator Ofcom, Murdoch also appealed for less regulation and a free market, which he said was not currently the case in the industry.

''The triumph of the free market surely indicates that broadcasting should be more like other industries,'' he said yesterday.

''Not in the case of broadcasting, at least in the UK. Indeed, the UK's main state broadcasting agency, the BBC, famously fantasizes about creating a 'British Google' -- and wants the taxpayer to fund it.

''This is not public service; it's megalomania.'' The publicly funded BBC has invested heavily in its Web site, which is the market leader for online news in the UK.

The BBC also has a dominant market share in Britain's radio and television. Many of its private-sector rivals have lobbied for the broadcaster to be overseen by UK media regulator Ofcom.

Murdoch said it was perhaps no coincidence that the BBC had managed to avoid any meaningful oversight by ''concocting a governance fudge that Thornton's (a UK confectionary chain) would be proud of''.

Meanwhile, Murdoch's latest move in the broadcasting market, BSkyB's purchase of a 17.9 per cent stake in commercial broadcaster ITV, is currently being examined by Ofcom.

Cable operator NTL, which is set to rebrand itself as Virgin Media, had considered making a bid for ITV, a move that was effectively blocked when rival BSkyB bought the stake.

NTL's leading shareholder, Richard Branson, said this week he would fight the BSkyB move. ''The Murdoch empire was, I think, absolutely terrified at the idea of Virgin taking over, because we would have given Sky some real competition.'' REAL HARM Murdoch, the younger son of News Corp Chairman Rupert Murdoch, said Ofcom should operate with a strong and undiluted bias against regulation, because this would allow more innovation. BSky is 39 per cent owned by News Corp.

''We often think of broadcasting as a special case. The dead hand of history is to blame,'' he said, taking a swipe at Lord Reith, the BBC's first leader, who ''took a pretty firm view of the need to keep the lower classes in their place''.

Too much regulation resulted in a reduction in human freedom, a corrosion of enterprise and all at a huge cost, estimated in the UK at around 10 to 12 per cent of GDP, he said.

He said there were two fundamental drivers behind a desire for regulation and intervention: self-interest and elitism ''usually disguised as concern for 'standards'''.

''That is ... why Channel 4 (publicly owned but funded by advertising) wraps up its desire to be able to spend more of our money under the guise of public service competition to the BBC.

''Or indeed why the BBC favours digital terrestrial television even though it is an inferior technology -- in terms of both choice and functionality.'' However, he said the progress of consumer empowerment and innovation would continue, as seen with the growth of user-generated content.

Speaking later, Andy Duncan, the chief executive of Channel 4 agreed that some regulation and intervention could be reduced but he also said it had resulted in some great broadcasting, citing the creation of the BBC, ITV and Channel 4 among other initiatives.

''James can say what James wants to say but I would just say that ... the quality of television in the country and the amount of money invested in original production has come about because of intervention, unquestionably,'' he said.

REUTERS SBA BST0731