BBC Trust Chairman Michael Lyons: 'Negative impact would be significant'
The BBC Trust has rejected controversial plans to launch a £68m network of local news websites with video content.
The plan has faced fierce opposition from newspaper publishers, who have argued that it could damage or kill off their own local online operations.
The trust said the BBC's proposal did not meet its criteria for offering value to the public.
Instead the corporation should focus on improving existing regional services.
A study by broadcasting watchdog Ofcom found that if BBC local video services were launched, annual revenues at existing commercial providers would fall by up to 4%.
We believe the BBC's priority should be improving the quality of existing services
Sir Michael Lyons BBC Trust chairman
The provision of local video services could also deter local commercial media from further innovation in online local news, sports, and weather services, Ofcom added.
Earlier this month, bosses of local newspaper companies told MPs on the Commons culture select committee that local papers - which are already struggling in the difficult economic climate - would be further damaged by an "out-of-control" BBC .
Sir Michael Lyons, chairman of the BBC Trust, said that while licence fee payers wanted better regional and local services from the BBC, the proposal to run 65 video websites was "unlikely to achieve what they want".
"We also recognise the negative impact that the local video proposition could have on commercial media services which are valued by the public and are already under pressure," Sir Michael added.
People don't think we serve local audiences well enough and they want us to do more
Caroline Thomson BBC chief operating officer
"Our decision to refuse permission for local video means that local newspapers and other commercial media can invest in their online services in the knowledge that the BBC does not intend to make this new intervention in the market."
He called on BBC management to consider carefully the conclusions of the trust's public value test before putting forward new proposals.
"We believe the BBC's priority should be improving the quality of existing services. The public wants better quality regional television news programmes and more programmes of all kinds produced in and reflecting their areas," Sir Michael said.
No improved reach
The BBC's proposal had envisaged websites with on-demand videos, featuring news and sport as well as weather and user-generated content.
Ofcom said the BBC plan may stifle innovation by other news organisations
Users would access the free content, which would not have carried adverts, using either a computer with a broadband internet connection or a 3G mobile phone.
But the trust said the proposal would not have improved the BBC's reach to audiences it was not serving very well, such as poorer people and those living in remote areas without access to broadband.
The BBC's chief operating officer, Caroline Thomson defended the proposal, describing it as "our suggestion about what more we could do".
"What the trust has been saying to us is that we have gaps: people don't think we serve local audiences well enough and they want us to do more," she said.
Local papers are closing and job cuts mean thousands of journalists don't have the time to do their jobs properly anymore
Jeremy Dear NUJ general secretary
The industry body for Commercial Radio, RadioCentre, said that the trust had reached "a sensible conclusion".
"Local communities already receive valuable local news and information from 320 commercial radio stations spread across the UK," chief executive Andrew Harrison said.
"The introduction of a publicly funded service of this nature would have had a devastating effect on these small local businesses."
But the National Union of Journalists said that the rejection was "a missed opportunity to enhance local media".
"Local papers are closing and job cuts mean thousands of journalists don't have the time to do their jobs properly anymore," said the NUJ's general secretary Jeremy Dear.
Examples of BBC local TV service
He added that while ITV was scaling back regional and local news, the BBC proposal was "an opportunity to take a small step in the opposite direction by actually enhancing local news provision" and called on the BBC to ensure other local news services benefited from investment.
The NUJ also accused local media bosses of cutting jobs to boost profits and of opposing the BBC plan to protect their investment.
"Now is the time for them to put their money where their mouth is and invest more in local journalism - in jobs, in training and in resources for hard-pressed newsrooms."
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