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My Lords, I welcome the Bill. Our communications regulation is outdated and in need of reform. I congratulate the noble Lord, Lord Puttnam, and his Joint Committee on the fine work that they have done on the draft Bill. They have produced an excellent report on an enormous piece of legislation in a very tight timescale.
A year ago I would have had to declare an interest as a director of ITV Digital. Sadly that company is no more, leaving the Government's digital terrestrial ambitions badly dented and the prospect of analogue switch-off now some years away.
Its collapse demonstrated quite clearly the need for a single regulator. Attempting to improve digital terrestrial television coverage in conjunction with a plethora of different regulators, all with competing agendas, proved impossible. Of course there were management failures, but these alone did not put the company out of business.
Broadcasting is not a licence to print money; it is a risky business. ITV Digital cost its shareholders about £1 billion. But BskyB lost around that amount on Open, and even more on its investment in Kirch. Cable companies in this country have lost many billions of shareholders' funds in establishing their networks.
However, I want to look forward and to address six areas of concern raised by the Bill. I shall start with the BBC. The BBC is a wonderful institution which produces fantastic programming both on television and radio. Under the charter and agreement, the BBC should be answerable to Parliament, but there is no adequate mechanism which currently allows that to happen. I have no issue with the licence fee and believe that when the current charter and agreement ends, the licence fee should form the basis of any new agreement. However, I take issue with the lack of parliamentary scrutiny over how the licence fee is spent. We are considering £2.5 billion-worth of public money that is raised via a compulsory levy.
It is no longer sustainable for such a large sum of money to be beyond public scrutiny. Both the National Audit Office and the Public Accounts Committee should carry out value-for-money and financial audits of the BBC. Opponents argue that that could undermine the editorial independence and governance of the BBC. I have to say that I believe those arguments to be very weak. The National Audit Office and the Public Accounts Committee will not examine the editorial policy of the BBC, but whether licence fee payers' money is being spent effectively.
The position is similar to that of government departments. Both the National Audit Office and the Public Accounts Committee know that they cannot question the merits of any particular policy, but they can investigate whether the money used to implement any policy has been spent effectively. I believe that the BBC has nothing to lose; in fact it has much to gain. Parliamentary scrutiny would not affect the role of the governors, and to those who say it would, I say this: it is like claiming that shareholders at an AGM inhibit the role of a board.
In 1999 Gavyn Davies's own committee of inquiry recommended that the BBC should be audited by the National Audit Office. The alternative would appear to be more scrutiny by the Government, in particular by the Department for Culture, Media and Sport. That would risk political interference in the management of the BBC. I should have thought that scrutiny by an independent auditor and by Parliament, conducted in an open and transparent manner, would be far preferable.
There is also the risk of widening the debate when the BBC's charter comes up for renewal in 2006. The BBC should be independent of government but answerable to Parliament in the same way as other bodies funded by taxation. As a compulsory levy, the licence fee is in fact a tax.
My next concern relates to the BBC and Ofcom. As drafted, the Bill limits Ofcom's remit over the BBC to the second and third tiers. The BBC is a large player in the market and a strong competitor to commercial operators. Like the other public service broadcasters, ITV and Channel 4, it should be brought fully within Ofcom's remit. The defence put forward that the backstop should reside with the governors of the BBC is not good enough. We need independent scrutiny and that should be conducted by Ofcom. The BBC has the ability to cross-promote via television, radio and publications like no other broadcaster. Ofcom should also have overall responsibility for approval of any new BBC services and scrutiny of existing digital channels. That is not to downgrade or inhibit the role of the governors. I believe that it would make life easier for them and it would protect the BBC as it faces charter renewal.
I turn next to the issue of media ownership. The proposals from the Government lack consistency. They agree that, subject to competition law, ITV should be one company. I agree with that; ITV needs to consolidate in order to survive, otherwise it will remain a minnow in comparison with its European competitors. Let us take RTL, owner of 35 per cent of Channel 5. It is worth £3.5 billion—double the combined market capitalisation of Carlton and Granada—and a staggering £11 billion less than BskyB is currently worth. Those figures put the values into perspective.
As we have heard, the Bill prevents single ownership of ITN. Every other major television channel in the world is allowed to own its own news supplier, but apparently not ITV. Single ownership of ITN would provide focus, secure future investment and strengthen rather than diminish it.
The cross-media ownership rules in the Bill are arbitrary. For example, they would allow a newspaper proprietor with just under 20 per cent of circulation to own Channels 3 and 5, with a combined audience share of around 40 per cent. But on the other hand, they would restrict a proprietor with just over 20 per cent of newspaper circulation share to Channel 5, which has an audience of only 6 per cent. Can the Minister explain the discrepancy? How can the rules be "proprietor neutral", as the Minister claimed in her opening remarks?
Will the Minister explain why some regulations on media ownership are in the Bill or are governed by Ofcom, but other cross-media ownership issues are left to the competition authorities? What are the principles, the rationale, governing these policies? What is the reason for that split? How did the Government decide which body should govern what?
Rights of appeal are vital if operators in the communications business are to have the confidence to invest—as they guarantee an independent decision on flawed decisions. I have some concerns that the Bill as drafted does not give broadcasters sufficient rights of appeal. It allows telecoms operators to appeal to an independent tribunal against any Ofcom decision made under Part 2 of the Bill, but limits appeals by broadcasters under Part 3 to decisions made for competition purposes only. For example, a mobile phone operator would have a guaranteed right of appeal against an Ofcom decision to regulate the packages it offered or the prices it charged; yet, were similar restrictions to be applied to a broadcaster, that broadcaster would have no right of appeal if Ofcom purported to make the decision on consumer protection grounds.
The Government have introduced a series of amendments to the Bill bolstering the position of the independent production sector. I welcome those. However, it appears that there are still a few gaps.
Two weeks ago, the OFT announced that the BBC had missed its statutory obligation to ensure that at least 25 per cent of its qualifying programmes were made by independents. One way of helping both the BBC and the independent sector would be, as we have heard from many speakers, to allow regional ITV productions to count towards the quota. So, for example, Border Television could bid to make BBC programmes which would count as part of the BBC's independent production quota. That would help the BBC and would have the added benefit of boosting regional production.
I am also concerned about the situation in radio. The independent radio supply market is dominated by the largest commissioner—the BBC. That puts the BBC in a powerful position over independent radio producers. One solution would be to extend the 25 per cent independent production quota provisions to BBC Radio. Another answer could be for Ofcom to be given responsibility for regulating the terms of trade between independent producers and the BBC. That would introduce an element of external scrutiny into the process.
I turn to the "must carry/must offer" rules in the Bill. There seem to be a number of inconsistencies which I should like the Minister to explain. Will the Minister explain why cable operators, which are subject to "must carry" obligations, cannot charge public service broadcasters for carriage on a fair, reasonable and non-discriminatory basis? Why do the "must offer" obligations not cover the BBC? As drafted, they apply only to public service channels licensed by Ofcom. Will the Minister explain why?
Finally, will the Minister explain the Government's position regarding regulations covering electronic programme guides (EPGs)—the on-screen TV listings? Current regulations require that public service broadcasters must be given due prominence and the system is regulated jointly by the ITC and Oftel. The current regulatory regime appears to work well. Is there a need for change? The BBC is pressing for change. Could that be connected with its decision to broadcast unencrypted—without making use of Sky's conditional access facilities—on satellite?
Will the Minister confirm that the BBC will be able to broadcast in the clear without regulatory change? If change is needed, how will that affect ITV? A requirement for satellite and cable broadcasters to give due prominence to every permutation of public service broadcasters' regional output could severely affect ITV.
I apologise to the Minister for asking so many questions, but the Communications Bill is a huge piece of legislation. I do not expect all the answers this evening, but I hope that the Minister will be able to write to me before Committee stage.
We have heard a great diversity of views from all sides of the House. Many issues need to be resolved. I look forward to debating them in more detail in Committee.