Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 561 - 579)



  Chairman: Mr Cruickshank, I welcome you and your colleagues here today. You have got a very, very interesting perspective on the issues we are looking into. Who better than Mr Wyatt to start the questioning.

  Derek Wyatt: Good morning, gentlemen.

  Chairman: No disrespect to any other member of the Committee.

Derek Wyatt

  561. Do you think that there should be a public service network for Scotland? Do you think that there should be something distinct from the BBC? In other words, do you think it is a natural development from the devolution that they should also devolve or, at least if not devolve, allow OFCOM to allow some sort of public service funding?
  (Mr Cruickshank) I would pose back the question "what is public service broadcasting?", but I will not. Let me try and answer the question. I think the state and the culture of the UK can reasonably take upon itself the obligation to procure that some minimum range of services are universally available to everyone who wants to access them at an affordable cost. That, I think, is a 21st Century definition of "public service". It is not about whether the BBC is the only one who would produce Love in a Cold Climate, it is about this access to information, whether it be about education, whether it be about cancer, whether it be about children's health or whatever, these are the more important issues. In this case it is very difficult to imagine that the needs of the populace of Scotland would be very different in that respect from the needs of the populace of the UK. However, if the Scottish Executive, going back to the OFCOM example, were to suggest, notwithstanding it has not competence in this area, that there were particular needs to be met perhaps in rural Scotland, particularly in Grampian, then I think the answer is for public money to be made available for us, the BBC and others to compete for the best use of that money in the advancement of whatever it is the Scottish Executive were to define as "public service broadcasting".

  Derek Wyatt: That is a good answer. You are though, as a media group, across quite a lot of media in Scotland which draws its own criticism. We do not get Scottish papers every day, although John does online no doubt.

  Mr Maxton: It is far too intellectual for the Scottish papers to deal with.

  Chairman: I am glad it is a Scotsman who said that.

Derek Wyatt

  562. In a sense you can understand why that is. There ought to be a sort of association where you can shout "Scotland" loudly. Do you think that it will stop, as it were, the younger innovators and the younger creative talent coming through if you grasp everything?
  (Mr Cruickshank) Can I just deal with the economics and the competition issues first just to get those out of the way and then come on to the softer, social issue. I do not think there is a case for looking at Scotland or, indeed, the North-East of England or London as a market for competition purposes. We are exposed to competition not just from the rest of the UK but from the rest of the world now via the Internet on our news services, for instance, and you were discussing that earlier. Our consumers, our audiences, have the opportunity to ignore the products that we sell, and there is no question that we have significant market power even if we were allowed to consolidate even more in Scotland, as there was a reference to earlier. I do not think there is a competition issue. We also argue in our submission that the cross-media ownership rules are now more of a cost to society and economy than they are of benefit. We might come back to that. Whether the particular audience in Scotland has particular needs and whether we across our variety of media can serve them best is something which is at the front of our minds. How else do we differentiate ourselves from the national media or the international media? I think we devote ourselves to that and I am very proud of the way we devote ourselves to that. In effect, we see Scotland as different because of its culture, its tradition, the Scottish Executive and the politics surrounding all of that, but that is because we want to serve our audiences, not because there is no competition or we have market power.

  563. The Committee has made two visits to Scotland in the last four years, including last year when we looked at the Highlands and Islands University Project, so we are familiar with WANs and LANs and the problem with rural society in Scotland. I suppose in a sense the solution to that is for you to give a digital box away free to everybody in Scotland and for you to take the lead and for you to actually online the whole place?
  (Mr Cruickshank) You are now moving to the economics of the move from analogue to digital, which is a particular issue in Scotland. If I may I will ask Donald Emslie, who is Chief Executive of Television, to say something about that issue, how it happens, the costs and the sharing of the costs.
  (Mr Emslie) Since the 1996 Act and the advance of digital communications, the ITV broadcasters have invested considerable amounts of their own resources in developing digital terrestrial equipment through the digital network and, in ITV's position, digital three and four, which is the joint owner of the multiplex between ourselves and Channel 4. At our own cost we have invested in 81 transmitters which in theory gets us to 80 per cent of the population. That is a little bit less in Scotland. We have particular concerns that in the Grampian region, which represents probably about 20 per cent of the total transmitter network in the United Kingdom, for Grampian Television to invest its own resources into transferring every digital transmitter and relay station from analogue to digital would be prohibitively expensive. I would come back to the points made earlier on this morning by the ITC that you cannot disturb the economies of businesses who are driving digital technology forward at the moment, people like ONdigital and BSkyB, who are subsidising boxes. We are building the digital network transmitter system throughout Scotland and together I think the market is seeing success in gaining digital penetration. I think the problem will come, and it was identified this morning, as to how do you reach the criteria that have been set by the Government about switching off analogue and switching over to digital when perhaps five per cent of the population cannot receive it. In our submission we have asked that consideration be given to some form of funding mechanism by the Government in order to reach universality on the digital platform.

  564. You gave some statistics there but they do conflict with what ONdigital said last week where they said that the digital signal was interrupted by the analogue signal, which was a problem they were not anticipating, and they could only get across to about 52 per cent of the country. I understood you to say that ONdigital can reach 80 per cent of Scotland.
  (Mr Emslie) I used the words "in theory". The 81 transmitters theoretically can reach in Scotland, we believe, 78 per cent of the population, but there has to be some work done on the transmitters in terms of re-tuning and maximising the penetration of these 81 transmitters.

  565. These were originally the BBC transmitters that were sold to ntl?
  (Mr Emslie) Yes, that is correct, and we are all using them as broadcasters, both radio and television.

  566. And the BBC kept the billion or whatever it was? This was Government money laid down 50 years ago, the BBC kept the money, and now you are having to pay a commercial rate to get back on to ntl, is that right?
  (Mr Cruickshank) As the person who took that decision in a previous incarnation, it was a very reasonable transaction.

  567. Very reasonable for the BBC.
  (Mr Cruickshank) No, for the economy and the parties as a whole, including the viewers.

  568. To reach Scotland you are saying you need how much money to add additional transmitters or convert analogue to digital transmitters?
  (Mr Emslie) We have not put a figure on it because all the work at the moment and all the resource is going into maximising the penetration of the 81 transmitters that have currently been converted to digital.

  569. That roll-out will take three more years before it is done?
  (Mr Emslie) I think the digital network is working to do it quickly. There is an issue that ITV, as a body, wants to progress digital penetration quicker than some of the other public service broadcasters because there is a commercial benefit for us to be on digital sooner than, say, for example, Channel 4 or BBC who have no licence payments, no levy payments to the Government. As you know, on the digital spectrum and on digital viewing we get a benefit in order to progress digital quicker than many other broadcasters. There is a bit of a tension there but we have not placed a sum of money on it because it is several years down the track before that becomes an issue. The technology will change and the cost of technology will change, therefore to put a sum on it now would not be pointless but I think it would change so quickly as to be almost irrelevant just now.

  570. On the ADSL roll-out, BT were here two weeks ago I think, it seems like so many years ago, saying that ADSL would only roll-out finally at 70 per cent of the UK. Looking at the way they were telling us how that would roll-out in Scotland, it seems only Glasgow, Edinburgh and perhaps Aberdeen would be included. Is that how you read it as well?
  (Mr Emslie) Yes. It is certainly our understanding with ADSL for two reasons. One, the network is not going to go beyond the conurbations, as you have suggested. Currently our advice is that the ADSL signal for broadband video transmission only goes four miles from the exchange, so in the North Western Highlands of Scotland at this stage ADSL would not be a route to universal access to digital transmission.

  571. Does it concern you not necessarily in terms of the ownership of your jobs but for Scotland per se? Are you at a disadvantage in this digital future or are you at an advantage?
  (Mr Emslie) I think there is a concern that we have in any society that is based on access to information, and universal free access to information, that Scottish consumers would be at a disadvantage if that was not available on a parity with their fellow citizens of the United Kingdom. Yes, we are concerned that from a commercial perspective Scotland is seen as almost a second class digital area, but we have got a wider concern for the consumers and society in Scotland that they should have free and equal access to this information.
  (Mr Cruickshank) Which goes to my previous definition that public service communications services should be available to everyone at an affordable price. It is a particular issue in parts of Scotland but it is a UK issue.

  572. The Home Office laid down in the 1920s the infrastructure for radio and broadcasting, it was the infrastructure. What we have not got is a commitment in the White Paper that this is actually infrastructure build.
  (Mr Cruickshank) There is by inference if the commitment to universal service is honoured. One can infer from that that there is a commitment from the state at some point and from some source, perhaps selling the analogue spectrum, to finance the last and probably physically that will be in Scotland.

  573. I do not want to hog the show but I have one more question. I think you are being very generous about the White Paper commitment there.
  (Mr Cruickshank) No, commitment to universal service which was in the Labour Party manifesto and I suspect will be in the next one as well. That was what I was referring to. If I may say, the White Paper is a very disappointing document, if we can get on to it.

  Derek Wyatt: You wrote it three years ago, I remember, from your evidence wearing another hat. Let me come back to the issue, if I can remember where I was then. Sorry, I have lost my thread, Chairman.

  Chairman: If you pick it up again you can return later.

Mr Fearn

  574. You argue that OFCOM should report to a new Department of Communications. A lot of people are arguing for that, perhaps you can say why. What do you see as the consequences if the current division of responsibility between DCMS and DTI is retained?
  (Mr Cruickshank) Is retained?

  575. Yes.
  (Mr Cruickshank) Let me say why we recommend it. I had more than five years of being able to closely identify the problems of the overlap between the two departments, the unnecessary tensions that it brought to the development of Government policy, the way in which issues tended to go to No 10, which I think is unhelpful, and I could go on. We do not have a Department of Communications but that is actually more important, in my view, than the integrated OFCOM. The OFCOM proposals are second or third order issues. I think the capacity of Government to act with the Secretary of State responsible for the scope of interests which are addressed in the Communications White Paper would be enormously beneficial. It would then follow that the sponsor department and the new regulator, or regulators, would be that department.

  576. Thank you. If new radio and TV content is produced exclusively for the Internet by licence-holders, should such content be subject to regulation by OFCOM?
  (Mr Cruickshank) Let us assume that there is no competition issue, shall we, and, therefore, we are on to standards issues.

  577. Yes.
  (Mr Cruickshank) We should have common standards across the communications media. There is a sharp distinction to be drawn between the technologies, the media literally in the old sense of the word whereby we as the audience access information or entertainment, and the regulation of that matter wherever it comes from. You had an interesting discussion with AOL about, in effect, using technology to enable individuals to protect themselves against information which was from outside the UK's jurisdiction.

  578. In your paper you suggest that OFCOM's "backstop powers" apply to the BBC. Which powers do you have in mind?
  (Mr Cruickshank) I think one of the weaknesses of the paper is that it does not address the effective regulation and governance of the BBC. There is a whole range of issues. I am talking of the sorts of issues Chris Smith has just asked Richard Whish to comment on that should not require a special report by Richard, that should be central to the Communications Regulator in the UK, and then governance. I think that the relationship between the BBC through its Charter with the Secretary of state is not a modern relationship and could do with being readdressed very fundamentally. I am very sorry that the White Paper has not even opened up the question. It does not open up the question of proper governance and regulation of the BBC's activities, it does not open up the issue of what better cross-media ownership might we want to see in the UK, it does not open up the issue of spectrum efficiency, all the things that matter to what the objective is, a competitive and dynamic communications industry in the UK. It is very disappointing.

  579. You think it is a poor White Paper, do you?
  (Mr Cruickshank) Yes, very poor.

  Mr Fearn: Thank you very much.

  Chairman: That is pretty severe.

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