Examination of Witnesses (Questions 561
TUESDAY 13 FEBRUARY 2001
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.
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
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.
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
(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.
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
(Mr Cruickshank) Is retained?
(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.
(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
(Mr Cruickshank) Yes, very poor.
Mr Fearn: Thank you very much.
Chairman: That is pretty severe.