Question: How do you see the future of broadcasting?

Lord McNally: The future is still enormously bright. We've got a technical revolution going on which should give to both programme makers and the consumers massive new opportunities. But what the Broadcasting Bill is about, and the various studies that there have been about it, is ensuring that we get the right framework that allows both entrepreneurial freedom but guarantees also a basic "iron pole" public service commitment. That gives you a broadcasting system of which we could be proud.

I always think the miracle that in the 1920s they came to the conclusion that broadcasting would best be covered by a public corporation with a remit to educate, inform and entertain was an act of genius. It gave Britain a balance between technical development and creative development that gave us a broadcasting system of which we were rightly proud.

With the converging of new technologies we've got to look again at the structures of the industry and get the right balance between regulation and freedom to underpin what has been described as quality, diversity and choice. I would add to that pluracy of ownership.

Question: The BBC is a major media player, do you think it needs state protection?

Lord McNally: I'm not one of those who's afraid of the BBC's success. We often hear that publicly-owned bodies are inherently inefficient and without imagination. All the criticisms of the BBC these days are about its successes not its failures.

I'm not worried about that. What I am worried about is that the BBC itself remembers that its core business is public service broadcasting, and although parliament has rightly asked it to look for other sources of income and to be more entrepreneurial and more global in some of its activities, it must not be at the expense of its public service remit. It has to be carefully watched.

Both [culture spokesman] Nick Harvey and myself have said we are friends of the BBC but we are candid friends. What I do not want to see, which I think is in the mind of some of the BBC critics, is public service broadcasting driven into a ghetto where it occupies two or three per cent of viewership and rests on charity.

I want to see a strong BBC but a BBC that knows what it is and why it has that public support. It does have an enormous benefit from a £2.5 billion payment from public funds and that demands a great deal of public service in return.

Question: Do you think there is a danger of the BBC ending up like the North American public service broadcasting channels?

Lord McNally: There is undoubtedly a slippery slope. At the very beginning of this process, there were those who argued that there should be severe limitations on the BBC.

One of my concerns, why I want to wait and see what kind of organisation Ofcom is, is that if the BBC is put entirely under Ofcom will we then be subjected to a kind of 'whine of the week' from the private sector about BBC successes. If the private sector accepts that we the people and parliament want a public service sector of our broadcasting ecology - which is about 30 per cent - on merit and that within the rest of the media they are free to compete as vigorously as they want, then fine.

If we are going to have a war of attrition where there is constant sniping at the licence and various BBC programmes, a desire to push it into the ghetto then those of us that don't want that are going to fight back.

Question: Dumbing down is one of the central media debates. Do you think the BBC is guilty of it?

Lord McNally: I think the BBC has dumbed down to a certain extent - though they deny it. Of course it's caught in a catch 22. If it is too high-minded of public service broadcasting and does not carry out its remit to entertain then its viewing share drops and those very same critics that complain about its successes will be saying 'it's only getting 17 per cent of the audience and it's getting all this money - we should take it away.

The other side of it is that there is no doubt that quality makes good sense. The West Wing, Frasier, Friends - they are quality broadcasts and they make lots of money. The idea that commercial means dumbing down is not true.

But nevertheless, if you are driven by the bottom line, if you are driven by shareholder value, then some of the public interest nature of broadcasting - which are very different to commercial activity - are going to go to the wall.

There has to be a balance. We no longer in Britain blithely say we have the best broadcasting in the world because the truth is that we don't. Part of that has been the dumbing down of our commercial sector which is not as wealthy as it once was - certainly not in this advertising recession - but also because it has tended to go for the line of least resistance.

I think there is a need to re-insert quality into the debate, and into the regulation. Indeed the content commission of Ofcom is going to be a very important and powerful body.

Question: Broadcasters can argue that 100 per cent quality isn't possible 24 hours a day and that content is not the business of politicians. How would you respond?

Lord McNally: I don't think politicians can be schedulers or programme commissioners. What they can do is create a framework but the framework must encourage the best to prosper. If you create a free for all which does allow for cheap and cheerful and dumbing down then you are going to end up with a 24-7 television which is filling in the gaps between the adverts.

Against that I do accept the argument that people will seek out the West Wing or even The Simpsons. Quality is not high brow. Quality can be good, popular television. I don't want a framework where we have a kind of nanny state but I do want to encourage particularly a strong BBC that can be a benchmark for the other broadcasters. Perhaps in the same way Channel 4 was at its inception.

These are the kind of things that have to go into the mix if we are going to get something better than a series of programme services where the bean counters are the determinants rather than the programme makers.

Question: What are your worries about media ownership?

Lord McNally: The main worry is of concentrations of power. That's why both in the Lib Dem document and the Puttnam Committee, on which I also served, we come out very strongly in favour of Ofcom being able to apply a plurality test and a public interest test to media mergers. Unless we are allowed to do that there is a danger of concentrated media power.

What we've said - and for the life of me I can't understand why the government is rushing to judgement on this - if you're setting up this new, wonderful expert organisation surely the first thing you should ask it to do is to see if there are any big mergers that are on the table rather than saying 'these are a done deal, you can't look at them'.

Question: What do you think are the odds of getting that?

Lord McNally: I think that there will be an amendment carried in the House of Lords and then the government will have to make up its mind on whether it wants its bill with the amendment or whether they want to fight us on this. I do think there is a great deal of public concern.

By any standards ITV at the moment are in the depths of an advertising recession, the industry is leaderless and there is a possibility of consolidation. Talk about fighting a battle at the bottom of a hill where the two maps join. This is not the time to simply throw ITV to the wolves. It's a time for reflection about where the public interest lies before any snap judgements are made.

Quite frankly I am appalled that when Puttnam came out with his quite modest recommendation of Ofcom being allowed to look at big mergers, within an hour Tessa Jowell and Patricia Hewitt were on the air rubbishing it.

I wonder why there is such dogmatism and hate about the future about both Channel 5 and ITV when these are important decisions which Ofcom should be competent to look at in the public interest.

Question: What was your reaction to the failure of ITV Digital/OnDigital?

Lord McNally: One of the things about this industry is that it's big players playing for big stakes. That's why the government has got to hold its nerve.

In some ways, and I'm sure the shareholders don't look at it this way; we have a second chance which may be a blessing in disguise. I think the free-to-air offer, if properly put together and marketed could allow for digital switchover within the government's target.

I think On-Digital was a heroic failure but I think it may win people over to digital television.