Communications Bill

Part of the debate – in the House of Lords at 11:30 am on 22 May 2003.

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Photo of Baroness Buscombe Baroness Buscombe Shadow Minister (Home, Constitutional and Legal Affairs) , Shadow Minister (Digital, Culture, Media and Sport) 11:30, 22 May 2003

This amendment seeks to extend Ofcom's regulatory functions to include the BBC's fair trading commitment. The Royal Charter currently requires that the commitment is enforced by the BBC Board of Governors. The fair trading commitment places a strong obligation on the BBC to trade fairly and not to use the publicly-funded licence fee to its advantage against other commercial broadcasters. While we welcome such a commitment, we believe that the BBC governors have failed to effectively enforce its requirements to date.

The position of the BBC fair trade commitment, and the process by which compliance is achieved by the governors, requires closer scrutiny. The fair trade document contains provisions asserting the means by which the BBC brand should be used, in addition to including fair trade obligations that we believe should be subject to external regulatory oversight. The amendment ensures that the fair trade commitment as currently drafted would be subject to further scrutiny.

The power of the BBC brand cannot be underestimated. It is critical that its commercial activities are regulated in such a way that no question of cross-subsidy between licence fee-funded activities and commercial interests arises. It is critical that public confidence in the institution is maintained. If doubt arises as to the legitimacy of the commercial activities of the corporation and no, or insufficient, mechanisms exist to ensure transparency, public confidence will be lost.

The role of the governors is of paramount importance in the BBC. It is twofold. The governors are responsible for policy formation, albeit strategic, and for internal regulation. The amendment, coupled with Amendment No. 152, seeks to give Ofcom the necessary authority to confer legitimacy and to ensure compliance with the fair trade commitment as it applies to the BBC's commercial activities.

Amendment No. 152 concerns the monitoring of the BBC's commercial activities. It seeks to confer a duty on Ofcom to monitor compliance by BBC companies with self-published guidelines regulating their commercial interests. It is essential that the regulatory framework within which the BBC commercial arm operates is clearly defined and monitored to remove any ambiguity among other parts of the commercial broadcasting sector.

The procedure through which compliance is currently adjudicated remains unclear. It is not appropriate within today's broadcasting ecology for such practices to remain without an adequate mechanism to ensure conformity. The amendment supports the proposal suggested by Amendment No. 146 and would enable Ofcom to obtain any BBC information, including access to books of account or contractual documents, as it believes necessary to fulfil its obligations under the clause.

The amendment would create a level playing field for all commercial broadcasters and would clarify the position of the BBC governors and Ofcom in respect of BBC Worldwide. It would ensure that the BBC's fair trading commitment and the relating commercial policy guidelines are scrutinised both internally by the governors and then externally by Ofcom. Implementing the clause alone would not remove the power from the governors to enforce these obligations; it would simply allow Ofcom to monitor the BBC's regulatory compliance. Amendment No. 146 would provide the mechanism of enforcement while Amendment No. 152 would grant Ofcom the necessary power to discharge its duty effectively.

The commercial arm of the BBC—BBC Worldwide—is not licensed by Ofcom but is conferred authority by the Royal Charter. This produces a notable irregularity. The commercial activities of the BBC would not, as the Bill is drafted, fully come under the external regulatory scrutiny of Ofcom, which does not have the same powers to monitor or request information from BBC Worldwide as it does from other commercial broadcasters. The only power that Ofcom will retain is the concurrent power exercisable with the OFT if it is proved that the BBC or BBC Worldwide are guilty of abuse of their dominant market positions, or if the BBC can be proved to have distorted the market. Such an abuse of power would be extremely difficult to assess and substantiate.

Transparency within the BBC is essential to guarantee the confidence of other broadcasters and the public, who are so important in this process. If the governors are certain that the fair trading requirements have been adhered to, there should be no resistance to the proposed external scrutiny of the BBC fair trading obligations. Such an amendment can only serve to ensure that trust is developed within the industry as a whole and that any ambiguity as to the BBC's commercial activities is removed.

Amendment No. 275 seeks to ensure parity between the BBC and commercial operators in the matter of cross-promotion. It seeks to confer a duty on the BBC to make arrangements to secure that any rules made by Ofcom regarding the regulation of promotion of programmes, channels and related services are observed. This would ensure that any rules set by Ofcom which apply to commercial broadcasters apply equally to the BBC, thus reflecting the objectives of Amendments Nos. 146 and 152.

It is important to emphasise the problem of one-sided, unbalanced cross-promotions which can confuse viewers seeking to make informed choices between services to the detriment of broadcasting as a whole. Cross-promotions for mass market channels can be used to stifle competition unfairly. In both areas there is a strong case for the BBC to adhere to much more concrete and objective standards and to be subject to some kind of external scrutiny.

This is not only a theoretical problem. Many viewers and listeners complain—only slightly tongue-in-cheek—that the level of advertising on the BBC is now worse than on commercial channels. Equally, there are concerns among rival broadcasters that new BBC digital services enjoy the benefit of free promotional airtime on BBC1 which would, if purchased from commercial stations, costs millions of pounds. Now that the BBC is a fully-pledged partner in the digital terrestrial platform, it is noticeable that its advertisements for digital television contain a throwaway reference to cable and satellite, followed by a eulogy on the benefits of Freeview.

A code on cross-promotions, most recently reissued by the ITC in January 2002, contains rules to which all commercial licensees must adhere. Consulting on the rules at the time, the ITC said that it sought to strike a balance between,

"giving viewers greater access to more information about the choice of services available in a multi-channel digital environment, whilst limiting the amount of promotional clutter and protecting the quality of the viewing experience".

In implementing this eminently sensible policy, the ITC introduced specific rules on avoiding excessive amounts of cross-promotional activity in any given period; avoiding excessive promotion of a particular channel, service or suite of channels or services; and a restriction on the promotion of any particular digital platform or platform service provider outside paid-for advertising minutage. In-programme promotions should provide information likely to be of value to the viewers of the programme containing the promotion and must not become advertising or compromise the editorial integrity of the programmes within which they are placed.

We would expect this code, or something like it, to be taken up by Ofcom. Ironically, the rules are now at least as much relevant to the BBC as they are to its main commercial rivals. It would appear that the BBC falls outside the code and has no intention of operating within it. In our view this is unacceptable. The code, by its nature, encompasses both content rules and competition rules, both of which the BBC and the Government have stated should apply to the BBC going forward. The amendment, which would add cross-promotion to Schedule 12 alongside all other matters where the BBC is expected to act as if subject to Ofcom's jurisdiction, plugs this important gap. I beg to move.