Tim Luckhurst: Michael Grade has a unique opportunity

The instant assessments were right. There were springs in steps and grins on faces as soon as Michael Grade's appointment was confirmed. Television Centre felt happy. Grade's immediate decision to reopen the contest for the next director general further cleared the air. Informed opinion was confident. Mark Byford will not, now, be appointed.

Then the challenge. Charter renewal is due in 2006. With it come crucial questions about the proper size of the BBC, the role, if any, of the governors and the dividing line between public service broadcasting and the commercial sector.

Greg Dyke was an inspiring director general. But neither Dyke nor his chairman, Gavyn Davies, thought deeply about these things. Dyke enjoyed the creative side of broadcasting too much to want to immerse himself in politics. He was never terribly interested in the process of renewal. He hoped it would just be a question of nipping down to the Department for Culture and having a chat.

It would never have been that simple. But no matter how large and urgent the questions, Grade starts with a unique advantage. Following the resignation this week of Richard Ryder he will begin his new job with neither a vice-chairman nor a director general. No previous chairman has ever had such a free hand to define the criteria on which the BBC will base its future and the personnel who will lead it through the process.

Grade must begin with size. It does matter. The corporation has expanded too aggressively into roles in which it has no business. There are public service challenges, including the supply of genuinely local television to cities and communities of interest, which the commercial sector will never be able to afford. In the Davies-Dyke era it was heresy to imagine such things might be financed by questioning the BBC's relentless growth into every broadcasting niche. Now that is possible.

Is there really a case for BBC3? What does News 24 supply that Sky does not? Is BBC1 justified by ratings alone? Grade can approach these questions with an open mind. His appointment proves how much the Government has suffered from the nigh-universal incredulity that greeted Lord Hutton's report. The elevation of a broadcast expert to a position traditionally filled by a placeman is evidence of political weakness. Grade can exploit it.

When he seeks to define the parameters of public service broadcasting he need not fear open debate. There is reduced danger now of a real threat to the licence fee. Ministers will not invite the public wrath that would greet fresh attempts to bully the BBC. Mark Byford may have struggled to grasp it, but the corporation has emerged from the Hutton inquiry more widely trusted than the politicians who will decide its fate.

Grade will, and should, reject ITV's demand for top-slicing of the licence fee to share the funds around whoever is prepared to make public interest programmes rather than just the BBC. But Grade has the freedom to offer a compromise. The BBC does not need to do everything. It can afford to leave further abasement of the game show and pseudo-reality formats to others.

Make those strategic judgements and both charter and licence fee can be secure. The tougher problems will emerge in day-to-day relations with government. Ministers still loathe BBC News and Current Affairs. Many would relish more of the caution Mark Byford has come close to making his trademark. It is here that Grade's choice of director general will be critical. His own background is in drama and entertainment not news. He will need someone who can protect and nurture the BBC's journalism.

A new leader must restore the confidence Hutton shattered and reassure journalists that digging deep and breaking exclusive news is very much the BBC's meat and drink. The internal witch hunt Byford should not have allowed must end now.

If he can define the BBC's remit Grade's next task will be to reform its structure. The Gilligan affair killed the myth of the board of governors as independent from management. The new chairman has a chance to embrace the sort of transparency that can enhance the corporation's reputation. The board can and must defend the BBC's independence, but granting a carefully defined regulatory function to Ofcom would harm nobody.

A crammed in-tray indeed, but the simple reality is glorious. Michael Grade's appointment makes a confident and assertive BBC possible once again. So soon after Hutton that is a tremendous thing for licence payers.