A NEW FUTURE FOR COMMUNICATIONS:
ITC COMMENTS
EXECUTIVE SUMMARY
1.
Convergence is driving economic growth and improving consumer
choice, but services are likely to develop in unpredictable ways. Consumer
behaviour
and
preferences
must
guide
public
policy
and
OFCOM should, as far as possible depend on competition rather than
regulation to deliver success.
What follows sets out how competition can deliver and where public
interest safeguards remain necessary to deliver social objectives.
Access (White Paper Chapter 2)
2.
The ITC welcomes the White Paper’s view that OFCOM’s first
regulatory objective should be the protection of consumers through
“promoting open and competitive markets”.
3.
In areas where full competition has yet to develop, OFCOM’s
sectoral expertise and ex ante powers to act to prevent damage to nascent
competition will be important safeguards for the consumer. It will be vital
that the provisions of the EU Access Directive and the EU definition of
‘significant market power’ give OFCOM sufficient flexibility to ensure
access, not just to markets dominated by a single network operator but also
to markets characterised by high barriers to entry and a very limited
number of network operations.
4.
The ITC welcomes the White Paper’s proposal to enable OFCOM to
apply its pro-competition powers to new systems such as electronic
programme guides. OFCOM should have powers to ensure fair, reasonable
and non-discriminatory access by service providers to such new systems.
If the access terms are right, competition can do its job of delivering
growth and consumer choice. Access is a deregulatory issue.
5.
OFCOM should have a statutory objective of reducing barriers to
market entry and consumer switching costs. The promotion of industry
standards for interoperability have a potentially important role. Where
proprietary standards prove to be too strongly entrenched, OFCOM will
need powers to require access to information on essential technical
interfaces to allow the market to develop competing solutions.
Universal Service (White Paper Chapter 3)
6.
The ITC welcomes the Government’s commitment to ensure that
public service TV channels are available to everyone free at the point of
consumption, both before and after the switchover to digital television.
This is an essential precondition for the process of switchover itself to be
possible.
7.
That commitment requires an obligation on the public service
broadcasters both to supply their TV channels to all the main platforms and
to do so without any requirement on viewers with the appropriate receiving
equipment (i.e., broadcast receivers) to subscribe to pay services and for
the platform operators to guarantee carriage of those channels (“must
offer” and “must carry”).
8.
In the case of cable networks, the public service channels are and
should remain carried in the basic subscription tier at no additional charge
to the consumer, the cable operator or the broadcaster. On satellite the
public service broadcasters should be guaranteed access on fair and
reasonable terms to the proprietary conditional access systems, Electronic
Programme Guides and applications programming interfaces needed to
deliver their services to the public.
9.
The White Paper envisages that new television channels or services
might in future be added to the list of public services benefiting from ‘must
carry’ and ‘due prominence’ subject to overall capacity on the network.
Just as decisions on whether to extend public (i.e., universal) service
obligations in telephony will rest with OFCOM, the ITC believes that the
same should apply to any new public television services.
Securing Quality: streamlined and effective content regulation (White
Paper Chapters 5 and 6)
10.
The ITC strongly supports the three-tier approach to content
regulation proposed in the White Paper. For the first tier, the core principle
is fewer, simpler, clearly understood codes, effectively enforced. This
requires an effective regime of licensing for commercial operators and of
statutory powers in respect of all broadcasters, including those who are not
OFCOM content licensees (eg, the BBC, S4C).
11.
An effective complaints system for individuals has been a successful
feature of content regulation and needs to remain central to industry-wide,
first tier regulation. While the broadcaster, should be the normal first port
of call for aggrieved complainants about programmes, individuals should
be able to go directly to OFCOM who should also have powers to set
reasonable deadlines for the processing of complaints by broadcasters.
12.
As regards the second and third tier of broadcasters, the ITC
agrees that public service broadcasters should have greater flexibility in
how they deliver their obligations.
13.
The ‘statements of programming commitment’ developed annually
by the broadcasters will be the essential basis of the public service
broadcasters’ ‘contract’ with their public. It remains vital that performance
against such statements is independently monitored, publicly reported on
and that broadcasters should have regard to OFCOM’s published findings;
the legislation will need to give OFCOM adequate powers to access
information from the broadcasters to enable it to make such assessments.
14.
An effective process needs to be found to ensure that the BBC’s
obligations and contributions to the range of public service provision are
considered as a whole with those of the commercial public service
broadcasters. The ITC believes it essential that OFCOM has a specific
remit to advise the Secretary of State annually across the whole of public
service broadcasting.
15.
The ITC agrees that Channel 4’s remit should be couched in more
positive terms to reflect its distinctive contribution to the public service in
return for its non-profit status and free access to Spectrum. The ITC is
working with Channel 4 to help develop Channel 4’s statement of
programming commitment to help provide more flesh for such a positive
remit.
16.
The ITC supports the extension of Channel 4’s activities into new
service areas, subject to satisfactory safeguards through its statement of
programming commitment for continued investment in public service and
guarantees against unfair competition including the separate accounting for
Channel 4 and its new service ventures. It is developing detailed proposals
in this area.
Maintaining diversity and plurality (White Paper Chapter 4)
Regionalism
17.
The ITC strongly supports the emphasis in the White Paper on
regionalism. The ITC proposes that the legislation should encompass a
Charter for Nations and Regions including specific targets set by OFCOM
for: regional production, an ‘out of London’ network production target and
minimum hours of output within each region for news, current affairs and
regional diversity; OFCOM should have powers to require the appointment
of local independent Chairmen and a local MD for each ITV franchise.
18.
The independent production sector has been a significant contributor
to programme diversity and the regional production base.
The
Independent’s Quota should be retained, subject to modest amendments to
remove current anomalies.
19. The ITC welcomes the Government’s decision to abolish the 15 per
cent limit on share of TV audience. The ITC agrees that the potential
benefits of further ITV consolidation, subject to competition safeguards for
the TV advertising market, outweigh concerns about plurality of
ITV ownership.
20.
There is a need to balance the consolidation which is driving investment in the
sector with ensuring plural sources of information and ownership. Detailed ownership
constraints on the face of primary legislation have become too inflexible for today’s
fast changing market. But there would be disadvantages in resting solely on
competition law and a ‘public interest’ test. Defining public interest is complex. That
introduces greater uncertainty for players in the market and, given the power of media
companies, is subject to more effective political lobbying in this sphere than any
other. The regulator needs the protection of some simpler, but objective, rules in
secondary legislation. What should those rules aim to achieve?
21.
In television and radio, the BBC has a 40-45% share of voice. The interests of
plurality suggest a need for at least two to three other significant operators in the
market, especially in news where the tendency to concentration is highest. This could
be achieved by a much-simplified set of rules such as:
-
sustaining a third national television news force that is not subject to
influence by the other two and with the ability to create scale in output,
probably by being guaranteed more than one owner
-
a move to competition rules to determine ownership in any single
medium
-
Maintaining the current system for cross media market share thresholds,
but perhaps raising the television and newspaper threshold with a still
more relaxed cross ownership threshold, between newspapers and radio
or television and radio, where cross media plurality concerns are less
acute.
22.
Such an approach would create substantially more freedom than today for
operators to create and follow market opportunities. If such rules were
embedded in secondary legislation they could evolve flexibly as technology
and the market evolves.
The new organisational framework (White Paper Chapters 8 and 9)
23.
Convergence brings with it a need for consistency across the sector -
not the same regulation for each medium, but a coherent system able to see
across the whole sector: telecommunications, television, radio and Internet.
The ITC therefore strongly supports a single regulatory system covering
the three key functions of infrastructure/network, broadcasting and
spectrum management, with common services supporting these three
functions.
24.
The content or services carried by these converging delivery
systems are different in kind from the supporting infrastructure. They are
relevant to our democracy and culture and cannot be regulated solely by
competition criteria. Economic regulation of infrastructure is best carried
out by a tight core of professionals where economic and competition
expertise and streamlined decision making are of the essence. These also
have relevance to broadcasting but, in addition, regulatory judgements on
content issues must be rooted in research and strong consultative
arrangements to gather and reflect a broad and representative blend of
opinion.
25.
OFCOM’s structure needs to be able to embody and reflect the
tensions between carriage and content in a way which is transparent and
accountable to the public and Parliament; and has authority in all the
constituent parts of the United Kingdom for its decisions to command
widespread acceptance and respect.
26.
The legislation should give guidance to OFCOM on how to balance
its statutory objectives and reconcile tensions between ‘commerce’ and
‘culture’. The ITC suggests that OFCOM’s over-riding objective should
be the protection of the interests of consumers.
NEW FUTURE FOR COMMUNICATIONS:
ITC COMMENTS
Introduction
1.
The White Paper, with its dual emphasis on competition and access
for the consumer, and on choice and quality in broadcasting, including a
high quality universal public service, together with its simplified three-tier
approach to content regulation and standards, provides a firm foundation
for a regulatory framework which should bring to the UK both economic
and cultural dividends from developments in the communications sector.
The following sections of this paper comment on specific White Paper
proposals in these areas and on other areas on which the White Paper seeks
views. The ITC is submitting a separate paper developing its comments on
the specific proposals for the structure of the new regulatory body,
OFCOM.
Access (White Paper Chapter 2)
2.
The ITC welcomes the White Paper’s view that OFCOM’s first
regulatory objective for access should be the protection of consumers
through “promoting open and competitive markets”. Access to all – and
for all - to the widening range of content and services which convergence is
making possible is a prerequisite for the full range of benefits, both social
and economic, to flow.
3.
Unlike telecommunications and the Internet, digital television has
developed as a series of discrete networks/service packages, with no
interconnection and few common standards. De facto monopoly control
over Electronic Programme Guides and interactive applications rests with
each network operator. As a result, consumers face high switching costs
from their initial choice of network (which also determines what content
and services they can receive). Television is ubiquitous and is likely to
become the mass means of access, not just to programmes but to the
Internet and a wide range of customised interactive services. This
reinforces the importance of regulatory provisions which both give
consumers genuine choice over the services they can receive and service
providers access to the consumer.
4.
The ITC therefore strongly welcomes the White Paper’s proposals
to:
 Retain for OFCOM concurrent powers with the OFT under the
Competition Act and to give OFCOM sector specific powers to
promote effective competition in the communications services
sector.
 Enable OFCOM to apply its pro-competition powers to new
systems such as electronic programme guides.
 Provide for stronger sectoral competition rules for companies
having significant market power.
5.
The ITC agrees that, where competition becomes well developed
there should be a shift from the application of sector specific to general
powers. But in areas where full competition has yet to develop, OFCOM’s
sectoral expertise and its ex ante powers to act to prevent damage to
nascent competition will be important safeguards for the consumer.
Digital television platforms, like mobile telephony networks, are a
market characterised by high barriers to entry, relatively few players
and, hence, a propensity to tip over into oligopoly. While the market
retains these characteristics, OFCOM needs the ability to provide for
fair and reasonable access pricing in the interests of consumers and
service providers.
6.
There are objective reasons why some ‘new systems’ may remain de
facto monopolies to the network operator: eg, limits on memory and
processing capacity of the set top box in the case of EPGs. In the case of
Applications Programming Interfaces, there is an inherent difference
between interactive applications in the computer/Internet world, where the
user has the choice whether to download an application in the knowledge
that a faulty application could crash their computer; and applications in
digital TV, where the one to many broadcast of the application may
inadvertently damage other users’ receiving equipment. In such
circumstances the network operator may reasonably require a greater
degree of control over applications run over their network. The policy
principle should be that as long as there is a de facto network
monopoly over such ‘new systems’ OFCOM should have powers to
ensure fair, reasonable and non-discriminatory access by service
providers to such new systems, including the way in which services are
displayed on EPGs. Such access and display listing should be subject
to periodic review to ensure that the new systems fairly reflect the
evolving marketplace and that regulatory intervention remains
justified.
7.
The effective and timely application of stronger sector specific
powers to major players will depend critically on the definition of
significant market power adopted in the EU Directives and subsequently
in UK legislation. The definition needs to be able to apply to oligopolistic
behaviour, where competition case law on joint dominance is little
developed (see paragraph 5 above). The definition should not be
mechanistic but be capable of incorporating flexibly factors such as the
degree of vertical integration, incentives for abuse of market power and
consumer switching costs.
8.
Where switching costs are significant, it matters little to the
consumer that there may be potential competitors to their network/service
supplier; they are effectively locked in. OFCOM should therefore have a
statutory objective of reducing barriers to market entry and consumer
switching costs.
This has already been applied successfully in
telecommunications, for example with the introduction of number
portability. The promotion of industry standards for interoperability, eg, in
interactive services, facilitating their carriage on all platforms, will be an
important part of OFCOM’s technical remit. Where proprietary standards
prove to be too strongly entrenched, OFCOM will need powers to require
the access to information on essential technical interfaces to allow the
market to develop competing solutions.
9.
The ITC supports the White Paper’s proposals on spectrum
management.
It is important to maintain pressures on public service
broadcasters, including the BBC, to be efficient in their use of spectrum
while ensuring that the regime for public service broadcasters remains
appropriate and supports their public obligations. In that context, the ITC
agrees that the valuation of broadcasting spectrum should be undertaken as
part of the digital switchover process and should take into account the cost
of the public service/universality obligations accepted by broadcasters in
return for spectrum and the switchover to digital broadcasting itself. The
work the ITC is already undertaking to measure the costs and benefits of
public service broadcasting status should provide the basis of a useful input
to the review of spectrum management principles.
Universal Service (White Paper Chapter 3)
10.
The dual commitments to universal access to public service TV
channels, free at the point of consumption, and to telephone services, on
reasonable request at an affordable price, are central to an equitable,
informed, democratic society. The ITC welcomes the Government’s
commitment to ensure that public service TV channels are available to
everyone free at the point of consumption, both before and after the
switchover to digital television. This is an essential precondition for the
process of switchover itself to be possible.
11.
That commitment requires both an obligation on the public
service broadcasters both to supply their TV channels to all the main
platforms and to do so without any requirement on viewers with the
appropriate receiving equipment to subscribe to pay services (‘must
offer’) and for the platform operators to guarantee carriage of those
channels (‘must carry’).
12.
In the case of cable networks, where consumers’ access to the
network and receiving equipment is conditional on at least a basic service
subscription, the public service channels are and should remain carried in
the basic subscription tier at no additional charge to the consumer, the
cable operator or the broadcaster. This ‘free/free’ arrangement has worked
well and involves little or no detailed regulatory intervention.
It is
essential that the EU Directives continue to permit that arrangement.
13.
While, on cable networks, public service channels are ‘bundled’ into
the initial subscription package, on satellite consumers can acquire the
channels and receiving equipment independently of any other service
offered by the satellite platform operator. The operator, however, incurs
costs in providing conditional access and EPG services to the broadcaster
(in addition to box subsidy). The key to universal access on satellite
therefore is that the public service broadcasters should be guaranteed
access to the proprietary conditional access systems, Electronic Programme
Guides and applications programming interfaces needed to deliver their
services to the public on terms that are fair and reasonable to both
broadcaster and service operator. Where there is any difference in the
terms offered to each public service broadcaster, such differences should be
objectively justifiable. OFCOM should be given clear powers to regulate
such services and these powers must be enshrined at EU level in the
forthcoming Access and Universal Service Directive.
14.
The White Paper proposes an initial list of public service channels
for inclusion in ‘must carry/must offer’ and ‘due prominence’ on EPGs.
The ITC agrees with the proposed list for ‘must carry/must offer purposes;
but believes that the list for ‘due prominence’ purposes should be
consistent with it.
15.
The White Paper envisages the possibility that the universal
telephone service obligation might be extended in the future; and that new
public television channels or services might be added subject to the overall
capacity of the network. The White Paper implies that the decision to
extend universal service obligations in telephony should rest with OFCOM.
The ITC believes that the same should apply to any new public
television services; and, at least, in the interests of transparency,
OFCOM should determine the “reasonable compensation” to be paid
to platform operators for the carriage of any such new public services.
16.
The White Paper (para 8.5.2) includes, among the factors to which
OFCOM should give weight in carrying out its duties: “the special needs of
people with disabilities, of the elderly, of those on low income and those
living in rural areas”. For all these groups, measures over and above open
competitive markets may be needed to ensure social inclusion and effective
universal service. As part of the legislation to give effect to universal
service therefore, specific reference to rural areas will be important if
OFCOM had to act to preserve national pricing.
Securing Quality: streamlined and effective content regulation (White
Paper Chapters 5 and 6)
17.
The ITC strongly supports the three-tier approach to content
regulation proposed in the White Paper, with a single industry standards
code applied to all, higher obligations for public service broadcasters and
the adoption of the ITC’s plan for annual programme policy commitments
from the main networks. The ITC intends to work with the main networks
to launch these ‘statements of commitment’ in the early months of 2001 so
that we will be able to test their effectiveness for at least a year before
legislation is in place.
18.
For the first tier, the core principle is fewer, simpler, clearly
understood codes, effectively enforced. This requires an effective regime
of licensing for commercial operators and common sanctions in respect of
all broadcasters, including those who are not OFCOM content licensees
(eg, the BBC, S4C). The breadth of such rules should clearly depend on the
extent to which the viewer is in control of the material they receive: from
the strongest end in free-to-air television, less in subscription TV, less
again in pay per view, and least on the Internet, where the encouragement
of classification and filtering systems should be the main safeguard. A
graduated system of sanctions, including fines, similar to that currently
available to the ITC, remains important, not simply to ensure that viewer
expectations continue to be met, but also to ensure fair treatment of all
service providers in the first tier. Reputable service providers will be
among the first to object if one service provider is permitted to flout
industry codes with impunity, particularly where the industry itself has
played a significant, co-regulatory, part in drawing up the industry code.
The ITC agrees that, eg, categorisation and filtering systems are areas ripe
for co-regulation (though with reserve powers for OFCOM to set a
deadline by which such systems should be available).
19.
The ITC agrees that the areas to be covered in the first tier are right.
It endorses the White Paper’s conclusions on:
 Religious content.
 Political advertising.
 The watershed.
 Accuracy and impartiality (where the ITC shares the
Government’s expectation that broadcasters, particularly the
main networks, will sustain the same high standards in their
services provided over the Internet but believes that this should
rest on the broadcaster’s brand reputation rather than on
regulation).
 The use of ‘generally accepted community standards’ as a
criterion more appropriate to multi-media content delivery than
‘taste and decency’, and one more relevant to a consumer based
regulator.
20.
As the White Paper recognises, the three tier approach to content
regulation rests on the continued need for an effective regime of
broadcasting licences to exist alongside the general authorisations for
telecommunications. It will be vital that the forthcoming EU Directive
on Authorisations is consistent with this regime and deals satisfactorily
with national powers to license multiplexes (which involve both
content and carriage issues).
21.
The ITC strongly agrees that OFCOM should retain the core
responsibility for regulating advertising in the broadcasting media and
related issues such as sponsorship and commercial involvement in
programmes. Co-regulation and industry codes have an important part to
play in this area. This needs to involve both advertisers and broadcasters
(who act as gatekeepers controlling which ads get screened and which are
rejected as unsuitable). TV broadcasters do not yet have any pan-industry
body directly able to perform this co-regulatory function, although the
Broadcast Advertising Clearance Centre, like its sister organisation the
RACC, already enjoys industry-wide support for its pre-vetting activity.
The legislation would need to give OFCOM clear powers to authorise such
a body (and where appropriate, encourage its establishment). OFCOM
would also need to be satisfied that any broadcasters who were not
included in the co-regulatory organisation had a clear framework for
maintaining adequate viewer protection standards
22.
The increasing reliance on coregulation places a greater premium on
a media literate public. In that context, the White Paper’s proposals to give
OFCOM responsibility for promoting media literacy are welcome. This
will provide a useful bedrock for informed audience expectations and could
be subject to measurable targets (eg, the proportion of broadcasting and
Internet users who are aware of and actually use filtering and categorisation
systems).
23.
Issues in programming around fairness, accuracy and privacy give
rise to the largest number of individual complaints. The current systems
operated by the ITC, BSC and radio Authority have been a successful
feature of the current regulatory framework. Once amalgamated within
OFCOM these complementary systems should provide a fast and
independent response to complaints. That is what viewers want. Effective
redress for justifiably aggrieved individuals needs to be central to industrywide, first tier regulation. While the ITC agrees that the broadcaster,
should be a normal first port of call for aggrieved complainants about
programmes, the ITC believes that it would be wrong to deny
individuals the opportunity to seek redress directly and independently
from OFCOM, or that they should have to wait for independent
redress until the time ‘when the broadcaster’s process is exhausted’.
In principle this could take years. That would be a far cry from either
individuals’ or the Government’s expectations. OFCOM should thus
have powers to review the structures broadcasters use for dealing with
complaints and to set reasonable deadlines for the processing of
complaints.
24.
The process for advertising complaints needs to differ from that for
programme complaints.
Viewers do not usually relate an offending
advertisement with an individual broadcaster and do not complain to the
broadcaster; unlike programmes, advertisements can repeat incidents of
harm, offence or misleadingness many times during an ad campaign; and
where advertisements are run on several channels, swift pan-industry
action is necessary to prevent harm being repeated.
OFCOM should
therefore have the initial role in assessing complaints about advertising
and should be required to publicise its role to viewers so that they
know where to direct their concerns.
25.
The White Paper proposes helpful clarification of the current system
for services for people with disabilities.
The ITC has proposed that
subtitling requirements should be platform neutral: the hard of hearing
should not be restricted to one platform, DTT, to receive a full service.
Subtitling targets should be increased over time from the current maximum
of 50 per cent. For audio-description and signing, the new legislation
should give OFCOM more flexibility than is available to the ITC under the
1996 Act in setting requirements for these forms of provision, to ensure
that the most effective solution were enabled against technical possibilities
and receiver availability.
26.
As regards the second and third tier of broadcasters, the ITC
supports the emphasis given to self-regulation backed by reserve powers.
The White Paper is, however, right to identify: original programming,
regional programming, independent programme commissions, and the
availability of news and current affairs in peak time as quantifiable
obligations where intelligent, external regulation can ensure that core
public service obligations are maintained.
27.
Beyond these areas, the ITC agrees that public service broadcasters
should have greater flexibility in how they deliver their obligations. Indeed,
the White Paper suggests a wide range of obligations which the public
service broadcasters meet in practice, because of their ethos; but which it
would be both onerous and impractical to impose upon them in terms of
specific quotas and measures.
The delivery of ‘cultural diversity’ for
example is a prime example of the areas where the public is entitled to look
to the broadcasters rather than to regulatory ‘box ticking’ to ensure that the
whole community’s expectations are met.
28.
The legislation should recognise a hierarchy of public service
obligations in line with market reality and the funding streams of the
respective broadcasters. The BBC receives a guaranteed income from the
Licence Fee and Channel 4 has a special position as a public body albeit
financed by commercial revenue. It is therefore right to expect the highest
level of public service obligation from the BBC next from Channel 4, then
from ITV and Channel 5 (which, while universal in digital homes, will
never achieve full universality in analogue homes).
29. The ‘statements of programming commitment’ developed between the
broadcasters and OFCOM (or, in the BBC’s case, between the Board of
Governors and the Secretary of State) will be the essential basis of the
public service broadcasters’ ‘contract’ with their public; and delivery
against it, the basis of the continued privileges available to public service
broadcasters. But it will remain vital that performance against such
statements is independently monitored and publicly reported on. The
ITC welcomes the Secretary of State’s statement (Hansard, 12
December 2000, Col 490) that OFCOM will be expected to analyse and
report programming commitments before the following year’s
statement is issued. The legislation will need to give OFCOM adequate
powers to access information from the broadcasters to enable it to
make such assessments.
30.
It needs to be recognised that the move to self regulation is likely to
be irreversible, especially if the ‘backstop powers’ are an ‘all or nothing’
nuclear option. These powers need to be capable of being deployed on a
graduated and flexible basis (eg, if performance across most genres met the
statement of commitment, but in one or two areas repeatedly did not and
with no credible remedy at hand, specific but limited quantifiable
obligations could be re-imposed).
31.
ITV and Channel 5 have rightly argued for the costs and benefits of
public service obligations to be reflected in the level of payment made for
the franchises. Actual performance against the statement of commitment
should, by the same token, be similarly reflected. The legislation should
clarify that this would be a legitimate factor for OFCOM to consider in
licence renewals. It will also be an important factor, in the run-up to digital
switchover, in helping to determine whether (and on what terms) licences
are renewed indefinitely or whether there is a tendering process for public
service licences (see para 51 below).
32.
An effective process needs to be found to ensure that the BBC’s
obligations, as the foundation of public service broadcasting, are
considered as a whole with those of the commercial public service
broadcasters. The ITC believes that in addition to the Secretary of State
consulting OFCOM on new BBC services or major strategic changes,
OFCOM should have the remit to advise the Secretary of State
annually across the whole of public service broadcasting.
33.
The ITC agrees that Channel 4’s remit should be couched in more
positive terms to reflect its distinctive contribution to the public service
ecology. The ITC is working with Channel 4 over the coming months to
help develop Channel 4’s statement of programming commitment to
provide more flesh for such a positive remit.
34.
The White Paper also proposes that the framework for ensuring that
Channel 4’s new services support its remit and are not unfairly subsidised
will be clarified. The ITC believes that there are strong public interest
reasons for supporting Channel 4’s move into new services; if the ventures
are successful they will strengthen the core channel, add value for viewers
and build assets for the future. In order to do so while addressing concerns
about the maintenance of Channel 4’s free to air remit and quality and
about competition, the ITC suggests that in addition to the arrangements
for monitoring Channel 4’s programming commitment, Channel 4 should
among other things:
 draw up a clear statement of its objectives in establishing new
services and how they contribute to the overall public service aims
of the organisation.
 should establish adequate internal processes to review and report on
annual performance against the core channel remit and progress
against the wider aims of its new services.
In particular, to
guarantee the security of the main Channel’s funding, Channel 4
should monitor and report on real levels of investment in the main
channel.
 And publish separate financial accounts for the core business and
the new services.
 OFCOM should licence new Channel 4 services.
Maintaining diversity and plurality (White Paper Chapter 4)
Regionalism
35.
The ITC strongly supports the emphasis in the White Paper on
regionalism. The ITC proposes that the legislation should encompass a
Charter for Nations and regions comprising:
 Powers for OFCOM to set specific regional production targets,
including an ‘out of London’ network production target and
minimum hours of output within each region for news, current
affairs and regional diversity.
 That ITV's ‘statements of programming commitment’ should
rationalise the current wide diversity between franchises in the
number of hours of total regional output. It would be for ITV to
determine the detail but a three tier approach, with most in the
Nations, less in larger English regions and least in the small
regions would seem a sensible way forward
 Powers for OFCOM to require: the appointment of local
independent Chairmen for each franchise, a local MD and
(scaled to the size of the franchisee) other locally based directors
to ensure that regionalism is properly reflected. This would
counter the shift of power and decisions on local matters to
Group Boards as ITV consolidates.
 Alongside the expectation that OFCOM should develop strong
links with the devolved assemblies and representatives of the
English regions (White Paper, para 8.7), we suggest that
OFCOM should be given a statutory objective of promoting
regional diversity and production, to provide the necessary
underpinning powers to give effect to the ‘Charter for the
Nations and Regions’.
36.
While the level of regional commitment should be graduated
between the different broadcasters, the ITC believes it would be helpful if
Channel 5 had some regional commitment, perhaps expressed in the
Channel’s Tier 3 annual statements. This would further reinforce the
regional production bases and be consistent with the White Paper’s broader
aim of strengthening Channel 5’s contribution to the public service ecology
as the take up of digital TV makes popular programming of the sort it
provides more widely available.
37.
Now that the first phase of ITV consolidation has taken place it is
worth considering, in cooperation with Carlton, whether there should be
some redefinition of HTV’s franchise boundaries to separate HTV’s Wales
and Bristol operations and make HTV’s boundary contiguous with that of
Wales.
Media Ownership
38.
Media ownership raises issues of: competition, plurality (especially
in news and current affairs) and competitiveness. Media ownership is one
of the most important issues for democracy and choice. But industry
players want certainty and the regime should minimise the scope for
detailed and unpredictable intervention by regulators.
That points to
having a limited number of clear but tough ex ante rules, but which provide
greater flexibility than current legislation to deal with a rapidly changing
market place.
39.
Against that background, the ITC welcomes the Government’s
decision to abolish the 15 per cent limit on share of TV audience. The ITC
agrees that the potential benefits of further ITV consolidation outweigh
concerns about plurality of ITV ownership. Clearly, further consolidation
would have competition implications in the television advertising market
while ITV retained such a significant share of that market.
But, in
principle, the decoupling of advertising sales from ITV ownership should
not be insuperable. In other sectors, competition regulation has found
behavioural or structural solutions to similar vertical integration problems.
The ITC believes that strict ownership safeguards should remain where
ownership itself is likely to lead to the channel being used to proselytise
rather than to inform, educate and entertain. The current disqualification of
political bodies should not be relaxed; nor should the restrictions on
religious ownership be relaxed beyond the White Paper’s proposed
removal of the anomaly between local analogue and local digital radio.
Local authority information services via television and radio, however,
have a potentially useful role to play for the citizen provided that they are
factual, information-only and do not contain political commentary. The
current Broadcasting Act requirements on impartiality will be an important
safeguard. The current disqualification of advertising agencies has both a
competition rationale and one of ensuring effective separation between
advertising and editorial content.
Removing this disqualification will
require counterbalancing provisions in the industry-wide advertising and
sponsorship codes to ensure that that effective separation remains.
40.
It will remain vital to maintain plurality in the provision of news and
current affairs by and from a UK perspective, particularly in television
news which remains the single most important news source for citizens.
There are three main British providers of television news.
The BBC
(which has over 50 per cent share of all TV news and a substantially higher
share of TV and radio news combined), Sky News (which remains the
UK’s leading provider of rolling television news owned by the News
International Group which has a significant share of the national newspaper
market) and ITN (which currently provides news for ITV, the free-to-air
commercial public service broadcasters Channel 4 and Channel 5) These
three providers have together ensured plurality in television news and
‘competition for quality’. ITN’s key contribution has been as an
independent third force, providing high quality news services to an
increasingly diverse range of channels and new media.
41. The public policy objective should be to guard a third force, whoever
that may in future be, which is independent of the other two, which is
capable of scale in news provision, probably by being guaranteed more
than one owner.
The new organisational framework (White Paper Chapters 8 and 9)
42.
As noted in paragraph 1, the ITC will be submitting a separate paper
developing its comments on the structure of OFCOM.
43.
Convergence brings with it a need for consistency across the sector.
As the White Paper recognises, it should not demand the same regulation
for each medium, but a coherent system able to see across the whole sector:
telecommunications, television, radio and Internet. The ITC therefore
strongly supports a single regulatory system for all these media covering
the three key functions of infrastructure/network regulation, content and
spectrum management, with common services supporting these three
functions.
44.
The content or services carried by these converging delivery
systems are different in kind from the supporting infrastructure. They are
relevant to our democracy and culture and cannot be regulated by
competition criteria alone.
element of
Competition economics may still have an
‘art’ as well as science, but content issues are essentially
subjective, involving editorial judgements about standards, quality, wider
community acceptability etc. Competition regulation of infrastructure may
best be carried out by a tight core of professionals where economic and
competition expertise and streamlined decision making are of the essence.
These also have relevance to broadcasting but, in addition, regulatory
judgements on content issues, must be rooted in research and strong
consultative arrangements to gather and reflect a broad and representative
blend of opinion.
45.
Apart from the obvious need for OFCOM to be able to incorporate
the different skills needed to regulate carriage and content, OFCOM’s
structure needs to be able to embody and reflect the tensions between
carriage and content in a way which is transparent and accountable to
the public and Parliament; and authority in all the constituent parts of
the United Kingdom for its decisions to command widespread
acceptance and respect.
46.
This suggests that a unitary OFCOM will need to have an adequate
arrangement for representing key interests of the Nations and Regions as
well as to reflect the interests of consumer accountability and redress. No
single structural model can encompass all the advantages and no
disadvantages but the White Paper is right to point towards a preferred
model.
47.
We suggest that as an early step regulators and Government together
investigate options for integrating the operational technical activities
currently carried out by the various regulators – particularly spectrum
interference and planning work.
48.
In respect of the powers and duties of OFCOM, subject to specific
points made above, the ITC agrees that the powers proposed in paragraph
8.9 should provide an adequate toolkit. In terms of regulatory objectives, it
will be important for the legislation to give guidance to OFCOM on how to
balance its statutory objectives and reconcile tensions between ‘commerce’
and ‘culture’. The ITC suggests that OFCOM’s over-riding objective
should be the protection of the interests of consumers. This may be
delivered by competition powers or by sector specific non-competition
regulation. Any other specific obligations should be subservient to this
over-arching duty.
49.
The White Paper invites views on a few specific organisational
issues. Should BBFC video classification be included within OFCOM’s
functions? The ITC believes not: the BBFC is primarily engaged in prepublication regulation, while the remainder of OFCOM’s content work is
primarily post publication. The BBFC’s work should be kept separate
from OFCOM but the two bodies should work closely together over the
application of standards, as the ITC and BBFC currently do.
50.
OFCOM staff should sit alongside representatives from the relevant
Government departments in EU and international negotiations affecting the
sector. This would reflect the fruitful relationship which has developed
between OFTEL and the DTI over the EU Access Directives; it would
build on the deservedly strong reputation which UK regulators have in fora
of National Regulatory Authorities; it would be in keeping with the
expressed wishes for consistency from the convenors of EU and
international organisations; and, as the various regulatory bodies
increasingly work together in the run-up to the formation to OFCOM, the
understandable concerns of Departments not to be seen to favour one
regulator over another will inevitably disappear.
51.
The White Paper asks whether, at the time of digital switchover,
digital terrestrial licences should be renewable indefinitely and if not, the
criteria for their award. As the White Paper recognises, this implies a
decision in legislation, which may be some years before digital switchover.
The legislation could specify the terms on which licences might be
renewed indefinitely, subject to a Parliamentary Order, and provide for an
Order, perhaps based on a recommendation from OFCOM, of the criteria
for renewal. Alongside that the legislation could set out the enabling
process for competitive bids for commercially-funded public service
channels described in paragraph 8.8.4 of the White Paper. This would
retain the legislative flexibility to deal with circumstances which, today, it
is not possible to predict.
As noted in paragraph 31 above, the
performance in practice of ITV and Channel 5 against their ‘statements of
programming commitment’ should be a material factor in this decision.