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My Lords, we welcome and support the Bill. We welcome the creation of a new framework for the communications industries, including the liberalisation of ownership of the media.
There has been an almost unprecedented amount of debate in advance of the Bill. That was partly to be expected, given the nature and character of the industries involved and the detailed scrutiny of the draft Bill undertaken by the Joint Committee, which was so ably chaired by the noble Lord, Lord Puttnam. I wish that the same could be said of scrutiny in another place. I know that I speak for all my honourable colleagues, who feel a deep sense of frustration that a good 25 per cent of the Bill was not considered at all by elected representatives.
Notwithstanding the overall attention given to the Bill, I wish to make it absolutely clear now that scrutiny to date does not, in our view, obviate the need for noble Lords properly to consider the Bill in its entirety. Although we support the Bill in principle, there are a number of important issues on which we do not agree with the Government. We hope to persuade the Government to change their minds on those issues as we proceed. Given the list of eminent speakers today, I have no doubt that we can look forward to some eloquent, lively and, it is to be hoped, constructive debate that will assist the Government in their thinking.
Although we support the general thrust of the Bill in its approach to economic regulation, we are also aware that the EC directives dictate significant aspects of it. It is to be noted that the Government have said:
"As competition becomes more pervasive in the supply of communications services, it is expected that OFCOM will be able to rely increasingly on [competition] powers, rather than powers specific to the sector, in addressing concerns about competition. However, many aspects of the sector-specific framework, e.g. universal service provision, will remain necessary and will not disappear or become redundant in the foreseeable future".
The noble Lord, Lord Currie, chairman of Ofcom, said :
"Where competition is reasonably robust or where it can be developed to be so, it is usually better for sector regulation to withdraw and reliance placed on competition policy".
We urge those responsible for executing the provisions of the Bill to keep firmly in view the aim of using competition law powers wherever possible rather than ex ante regulatory powers. In particular, even if the Government are right and certain sector-specific aspects will need to remain, they should, wherever possible, be universal obligations and not company-specific conditions. Significant market power conditions, which, by definition, are imposed on some undertakings and not on others, and, in particular, price controls should play an ever-smaller part in the sector because of their inevitably distorting effect on competition. In addition, it should be noted that the EC directives are more prescriptive than most economists think appropriate. We believe that Ofcom should make the greatest possible effort to reach a deregulatory outcome when working within those provisions.
It is vital that the regulatory framework to be established by the Bill is capable of dealing with a fast-changing and market-led environment. No one can predict the mix of communications products, services and technologies that will capture consumers' interest in the future. Nor should government or communications regulators attempt to pick winners, be they technologies, services or particular players in the marketplace.
I turn to the specific duties of Ofcom. We are pleased that the Government have seen fit to respond to pressure from Her Majesty's Opposition by including the interests of the community in Clause 3. That said, we ask the Government how that duty to facilitate the interests of the community will be met. In addition, we shall seek clarification that advertisers, who are by far the biggest source of funding for the UK's commercial media, are consumers of the "relevant markets" referred to in Clause 3(3).
Regulatory uncertainty remains in Clause 3. Although the Government endorsed the principles set out by the Better Regulation Task Force that regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed, Ofcom is not under a duty to apply those principles in all its functions . It need have regard to them only as appears to be relevant in the circumstances. The principles of better regulation should properly underpin Ofcom's general duties. An example of an industry that would benefit if we got that right is mobile telephony. It is a significant success story, but that continued success depends on the right regulatory environment. The industry developed quickly through intense competitive rivalry that has benefited consumers beyond anyone's expectations.
I turn to media ownership. The Bill is intended to be deregulatory, but, although we welcome the move to liberalise existing restrictions prohibiting media convergence, we believe that the Government's approach to ownership is prescriptive and timorous. That is well illustrated by the prohibition on shareholders owning more than 40 per cent of the nominated news provider or NNP. The statutory imposition of a fragmented ownership structure on any core business is bound to undermine its ability to grow and innovate. Limited ownership will act as a disincentive to shareholders in the NNP to invest in its long-term future. Concern has been expressed that, without those rules, the NNP might fall into US hands. That is not a sustainable argument, as the rules do not eradicate that possibility, as practical experience has already shown.
The removal of restrictions on the ownership of national terrestrial broadcasting licenses will open up the broadcasting media to new sources of investment and ideas. Foreign investment has already enabled cable and satellite television to grow in this country. What is there to fear? The concern that liberalisation will lead to a flood of foreign content is misplaced. Commercial companies in a competitive marketplace simply cannot afford to ignore consumer demand. All the evidence suggests that domestic programming is popular in the UK. Any media company that wants to be successful here must provide the local content that people want, or it will not survive. In essence, content is driven by consumer demand, not by ownership. The two issues should not be confused. We should have more confidence in our culture and allow the consumer to choose.
On a separate note, although the restrictions governing ownership of different media could previously be justified with reference to the scarcity of available spectrum, the media have changed exponentially in the past decade, with the advance of new technology and communications. The provisions in the Bill should reflect that change and the different climate in which we now live and work.
Although the Government have decided to lift the restriction prohibiting a newspaper proprietor controlling more than a fifth of the national newspaper market from owning Channel 5, their decision not to disapply that restriction in the case of Channel 3 appears arbitrary and discriminatory. The argument advanced for the limitation by Kim Howells MP in another place was that it was necessary to retain the balance of different media viewpoints. What evidence do the Government have to justify the distinction between the role of Channel 5 and Channel 3? It has been suggested that Channel 3 is universally accessible and has the largest audience share of a commercial broadcaster. That may be the position this week or this month, but what will happen if Channel 5 too becomes universally accessible, as indeed it is likely to? What if Channel 5's audience share increases significantly? What action do the Government envisage taking in such circumstances?
That said, we are supportive of the Government's approach to "must carry", "must offer" and "must distribute" provisions that enable Ofcom to impose conditions requiring particular services to be carried on broadcasting networks that are used by a significant number of end-users as their principal means of receiving television. However, we are concerned by the introduction of a general duty to maintain plurality of providers. That is of particular concern to the newspaper industry, which is wholly united in its objection to the involvement of Ofcom in the newspaper merger regime.
Despite the Government's protestations to the contrary, Ofcom will inevitably have a role in determining newspaper content. That is because, as the Bill is drafted, Ofcom will be inextricably involved in the merger regime at several stages of the merger process on the issue of public interest considerations. How is it possible to judge public interest and thereby test plurality, without taking into account the key players, whose editorial and political stance will be known?
The duties of political impartiality, so integral to the broadcasting field, do not exist in the newspaper realm. Indeed, strong opinion is a mainstay of newspaper publishing. Given the highly subjective nature of the assessments that Ofcom will be required to make before determining its advice to the Secretary of State, is it not probable that its experience and, more importantly, its instincts in broadcasting will influence its advice on newspaper mergers?
I turn to the BBC. I shall set the scene by emphasising our support for the BBC. Any suggestion during the passage of the Bill through your Lordships' House that Her Majesty's Opposition are anti-BBC will be instantly refuted by me. The BBC belongs to us all; its future is the responsibility of all of us, and its relationship with all other broadcasters and viewers alike is intrinsic to the effectiveness and success of Ofcom. That effectiveness will be measured from day one, not 2006 or thereafter.
The UK broadcast media ecology must be kept in a delicate balance that satisfies the needs of public service and commercial elements. The pace of change in a paradoxical era of simultaneous media fragmentation and convergence is rapid and its future direction hard to forecast. Steering the right course and maintaining the balance is a subtle task and one that can be carried out only by a single, independent helmsman—Ofcom. The ecology is out of kilter, given the over-commercial, ratings-chasing approach of the BBC, a combined result of an extraordinarily generous licence fee and a weak advertising market. That is the source of much of the debate about and criticism of the BBC, which, unlike its rivals, operates in a virtually risk-free environment, allowing it, for example, to trial programmes on niche channels, build audiences for them and then promote them on mainstream channels. That is the stuff of dreams for the commercial players, who cannot compete on those terms.
If Ofcom is to act efficiently and fairly, it must be allowed to take an entirely holistic approach, unfettered and uncompromised by having a different set of rules and a different timetable for the public service broadcaster with, by far, the biggest market share. I cannot resist a quote from the Financial Times:
"Not having the BBC fully under OFCOM is like having the Simpsons without Homer".
It has been suggested that Ofcom will have enough to cope with at the outset without the BBC fully on board. The Liberal Democrat MP, Nick Harvey, said that it would be a "huge gamble" to give it—an as yet unproven body—full responsibility for the BBC. That is saying that Ofcom may not be up to the job, but that it is fine to use the commercial sector as guinea pigs while Ofcom gets its act together. That is simply outrageous. The Government have said in response—and I quote Kim Howells MP—
"the BBC does a pretty magnificent job in most respects, but there is no question but that there is room for debate".—[Official Report, Commons, 25/2/03; col. 217.]
The Government have entirely missed the point and in so doing invite and encourage animosity from all quarters, causing great damage to the industry and, most particularly, to the BBC.
We shall also be addressing the need to enable the Comptroller and Auditor General to have full value for money access rights to the BBC and thus to open it up to the same scrutiny on Parliament's behalf as all other bodies that are funded by tax. There is total consensus among members of the Commons Public Accounts Committee on this issue. This scrutiny would not impinge in any way upon the editorial independence of the BBC. What it would do is give some measure of accountability and transparency and that must be in the best interests of the BBC.
Extracts from the recommendations of the Independent Review Panel reporting in July 1999 on the future funding of the BBC, a panel chaired by Gavyn Davies, encapsulate our position. I quote:
"The Government should amend the Royal Charter to give the National Audit Office inspection rights to carry out periodic financial audits of the BBC's accounts and its fair trading arrangements; and it should focus only on administrative efficiency and on proper financial management and accounting and not question policy objectives and programming issues and matters of editorial or artistic judgement".
I turn now to radio. This is an industry that has achieved fantastic growth in the past 10 years and is a world leader in digital radio. We need to show our pride in this industry and to give it room to consolidate and grow, particularly bearing in mind that it has a tough competitor in the BBC. We are concerned that certain provisions in the Bill that micro manage the industry are unnecessary and restrictive. Ofcom should allow the industry to concentrate on what listeners actually want—not what politicians and Ofcom might think they want. We believe that the focus should be on outputs, not inputs—namely, what the listeners hear—and not where, how and by whom it is produced, let alone where those producers live.
While commercial radio understands the importance of localness—indeed, the entire industry has been built on that—it does not need regulation to ensure that localness is retained or what this should mean. The Bill also introduces new restrictions on the development of radio where previously there were none, including a limit on ownership of digital multiplexes in overlapping areas. Similarly, the ownership regime for digital radio licences is more restrictive than for analogue. Surely there must be some mistake.
While we welcome the Government's moves so far to relax the restrictions on the involvement of religious bodies or individuals in broadcasting, the Bill retains a complete ban on religious organisations holding national analogue radio and television licences and multiplex licences. We believe that this is a clear case of discrimination against people holding a religious office in local churches or religious charities and we shall seek to reverse it.
There are many more issues in the Bill which I fear time does not allow me to address today, including for example, spectrum use and conditions and appeals procedures for the provision of networks and services. In addition to the Internet, there are two issues of real significance which, while not captured by the Bill, are central to the development of communications. The first is broadband; an extensive debate in another place highlighted the crucial importance of balancing the need for investment in a competitive market. Investment is vital to ensure that universal access is achieved as expeditiously as possible. This technology will facilitate greater accessibility and social inclusion and must be encouraged.
The second issue is analogue switch off. We believe that it is incumbent upon the Government to act now, as a matter of priority, to raise public awareness of the timetable and implications of digital switch. It is not reasonable to expect industry, which is striving to remain at the forefront of digital technology worldwide, to continue to invest in the future, without proactive support, as opposed to words, from Government.
The communications industry is flagship to our nation and deserves our serious attention. In order to assist Ofcom in carrying out its duties, we need to ensure that the Bill is sufficiently robust to endure change while flexible and deregulatory to allow all our communications industries to thrive for the benefit of us all.