The BBC has not adopted opportunities to digitise the licence fee, resulting in missed opportunities for cost efficiency and more customer engagement. The cost of collecting the licence fee is rising, partly because of the BBC’s reliance on postal correspondence and its increasing cost. Around 40% of households still receive a paper licence by default, yet the BBC has not set any target to increase take-up 2 of paperless licences. Enforcement also depends heavily on letters sent to households without a licence or declaring they do not need one, which adds to costs and is a less efficient way of engaging with customers. We are concerned that delays to Capita’s IT upgrade programme, intended to improve the website and customer experience, have further limited progress towards digital engagement. Although the BBC has now moved this contract to a “payment by milestone” basis, we note that the change was made late and that this approach has not been used more widely with the BBC’s contactors. The absence of meaningful incentives in the Capita contract, and in other contractual arrangements, may have contributed to slow progress in increasing digital delivery, improving customer engagement, increasing sales and reducing licence fee evasion. recommendation To achieve cost savings and improve customer engagement, the BBC should in its response to this report: • set a timeframe for moving to digital licences to further reduce reliance on costly paper licences and letters • set out its plans to capture and use customer email addresses to enhance digital engagement and streamline customer communications • outline the lessons learned from managing the Capita licence fee contract and how it will establish clear milestones and incentives in all areas of the business to increase income and reduce evasion.