Greg Dyke has been greatly criticised since he took over as director-general of the BBC but he has confidence in his strategy for the corporation, writes Tim Burt.

When the BBC first considered a job application from Greg Dyke, it rejected him. The corporation decided he was not cut out for broadcasting. He did not re-apply for another 30 years. And then it was for the top job. He is secretly glad to be the first director-general never to have worked at Britain's public service broadcaster.

Mr Dyke says his apprenticeship from London Weekend Television via TV-am and the boardrooms of Channel 4, ITN, BSkyB and Pearson, the Financial Times's parent company, qualifies him to defend the BBC in a market defined by US programming, weak advertising, aggressive subscription channels and a fragmenting audience.

"If you are a commercially funded broadcaster and you lose share year-in and year -out, in the end you fall off the cliff unless you change your cost base. And that's the process ITV the [commercial terrestrial channel\] is going through," Mr Dyke says. "This isn't a criticism, that's what they've got to do.

"But what it means is the role of the BBC becomes more, not less, important if you want a television system that reflects our culture. That's the process we're going through and it doesn't surprise me at all that we're getting widely attacked from different areas - predominantly from the commercial area but also from people who thought the BBC was theirs."

Those attacks have grown ever since Mr Dyke succeeded Mr John Birt as director-general. But in the past three months, the pot-shots have turned into a barrage from commercial rivals, politicians, regulators and some newspapers.

Media moguls, including Mr Rupert Murdoch at News Corporation and Mr Sumner Redstone at Viacom, have attacked the corporation's funding and its introduction of digital channels. Politicians have complained about BBC performance in every area. The botched launch of News 24, the BBC's rolling news channel, was criticised in a government-commissioned report.

Lord Lipsey, the broadcasting expert and ally of Tony Blair, recently published an essay claiming "Dyke's instincts are to colonise, to compete and to destroy. They mean that he has not grasped the emerging threat to the BBC. If the BBC is just doing the same as other broadcasters, what is the case for it?"

However, the 56-year-old executive is remarkably relaxed. "You've now got the same old criticism coming round," he says. "The Lipsey stuff I don't take very seriously. It was unnecessarily personal, for which he has apologised."

But this is a sideshow. The BBC, under Mr Dyke, faces a serious challenge to justify its role. In 2006, the government will decide whether to renew its charter as a state broadcaster, funded with £2.53 billion sterling (€3.8 billion) of licence fees, rising at a rate of 1-5 per cent above inflation.

Previously unpublished internal figures show the corporation will receive total additional funding of £4.25 billion for the charter period of 2000-06. Some £960 million will come from increased licence fees but £3.29 billion will depend on "self-help measures".

Those measures are controversial because they involve internal savings of £1.99 billion and a new reliance on commercial operations. Those businesses are expected to generate annual cash flow of £75 million.

Mr Dyke argues that it will free up huge additional resources for programme spending. For the three years to June 30th, 2003, the corporation plans to spend an extra £1.24 billion with further investment in digital channels, online services, education and regional coverage. This year, the extra investment will exceed the BBC's cash resources.

Confidential internal documents state: "By the end of 2002-03 we anticipate that the BBC's cash balance of about £250 million will have been spent and that the BBC will have debt of about £80 million."

The director-general is not alarmed. By the end of the current charter period he expects the corporation to be debt free.

That requires a two-hand trick: behaving as a commercial operator from a finance perspective, while remaining a provider of serious programmes that no commercial operator would consider funding.

BBC critics claim the corporation has already failed in that. Mr Dyke rejects the charge. "We have invested another £100 million a year in BBC1, a lot of it into drama, and we've stemmed the decline in audience viewing. The second stage of that is now, when we're investing in arts and documentaries."

He also sees sport as a test case of his regime. In the Birt era, investment in it was cut in favour of drama, documentaries and news. Mr Dyke admits BBC sport will never dominate the airwaves as it did 20 years ago mainly because of BSkyB's spending power. The satellite channel, 36.3 per cent owned by News Corporation, has captured viewers. But Mr Dyke says the digital investment of £278 million in the past financial year was justified. Assuming that most viewers will be able to receive digital channels within 10 years, he says the BBC must be a major provider of such services.

"The one thing we learned from the US is that if you didn't go into the multi-channel world in the long term, you're going to be severely damaged."

Mr Dyke says the BBC can do so because it is no longer distracted by inherited problems. While praising his predecessor's reforms, he says: "The cost and the way that was done was a deeply disillusioned organisation."

Rumours of further large cutbacks have been exaggerated, he says. "You're looking at an organisation that has been cutting everything for the last 18 months. You can't carry on doing that, it's too demoralising. We've got to make sure we don't let the overheads start growing again - that's as big a challenge as taking any more out."

That means devolving more financial decision-making from London. Already, Mr Dyke says the BBC has seen the benefit by becoming the pre-eminent regional broadcaster but denies that audience numbers have been propped up by aping commercial TV.

"There is a terrible danger of listening to an intelligentsia who believe that the BBC is principally for them, but it isn't. The BBC is principally for everyone in the country," he says. "We're not trying to get ratings but to have challenging, interesting and exciting programmes."

Mr Dyke claims the BBC offering depends crucially on a universal licence fee. "There have been times in my life when I believed in subscription at the BBC. The problem is it misses that one thing about the BBC, which is universal appeal." He says the BBC "is part of the national glue", commanding huge audiences for landmark events from royal occasions to sporting championships. Nevertheless, he is not complacent about preserving the current licence-fee arrangements. "I don't think it will be easy because I think there is quite a strong commercial broadcasting lobby which basically says 'if we haven't got any money why should you?' Which is why we would quite like to see an increase in advertising revenues."

Or a takeover of the weaker broadcasters by the Americans? Mr Dyke says: "I'm not a great fan of the \ legislation that's going through, particularly over ITV."

The BBC, in Mr Dyke's vision, is a bulwark against increasing Americanisation of British broadcasting. He would like to counter that by extending the BBC brand in America.

Mr Dyke expects to retire in four years. By then, he hopes to have fulfilled a personal checklist of reforms and modernisation.

That will mean internal cultural change, more analysis and flagship documentaries, high-rating soaps such as EastEnders, expansion in the US, sport and children's programmes, and less reliance on US shows.

To Mr Dyke, the right formula is relatively simple. "When I got here, everyone said to me it was a terribly complicated organisation. I said it doesn't look complicated. We get £2.5 billion and we spend it. The BBC made itself too complicated and we've got to simplify it." - (Financial Times Service)