House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Second Report

II. COMMUNICATIONS REFORM: CONTEXT AND RATIONALE

Previous broadcasting legislation in context

5. The legislation foreshadowed in the White Paper is designed in part to supersede the Broadcasting Acts 1990 and 1996. The Broadcasting Act 1990 built structures for a radically different broadcasting environment to that today. Broadcasting had been confined to four terrestrial channels, all with public service obligations.[18] Provision was made for a fifth such channel. Sky television had just launched non-domestic satellite television using the Luxembourg-based Astra satellite with a handful of channels.[19] A domestic satellite service with five channels was launched by British Satellite Broadcasting (BSB) in April 1990, although it merged with Sky almost before the ink was dry on that year's Broadcasting Act.[20] Cable television offered the potential for 16 or more television channels, but in terms of both content development and infrastructure, cable television was in its infancy.[21] In that year there were 74 Independent Local Radio stations.[22] The technical possibility of digital television was foreseen, but the Government was sceptical about its potential as a major broadcast medium.[23] The Internet did not exist as a consumer service.

6. The Broadcasting Act 1990 established the regulatory structure that persists to this day. The Independent Broadcasting Authority was replaced by the Radio Authority and the Independent Television Commission (ITC), the latter also assuming some of the responsibilities of the Cable Authority. Although the Government acknowledged as early as 1989 that "broadcasting and telecommunications are increasingly converging", the regulation of the two remained and remains structurally distinct.[24]

7. By the time of the Broadcasting Act 1996, the television landscape was very different. About one in five homes had access to multi-channel television through either cable or satellite. The number of satellite channels available was rising towards 200.[25] A franchise for the fifth analogue terrestrial channel was awarded in that year.[26] It had become evident that full-scale digital television was technologically feasible and the Broadcasting Act 1996 successfully laid the foundations for digital terrestrial television.[27] However, the Act did not reflect the broader impact of technological change. In introducing the Bill that became the Broadcasting Act 1996, the then Secretary of State for National Heritage made no reference to the Internet or to the potential impact of convergence. She concluded by commending to the House "a common-sense Bill for the new millennium", but the outlook that underlay the 1996 Act has been superseded as that new millennium is just beginning.[28]

The theory and practice of convergence

8. Any attempt to plan for the future of communications must begin with an understanding of the concept of convergence. In essence, convergence is "the ability of different network platforms to carry essentially similar kinds of services".[29] Convergence facilitates rapid and combined transmission of audio, video and text. Telecommunications networks can be used for video material. Transmission systems such as satellite traditionally associated with television can be used for accessing the Internet.[30] The transforming potential of convergence was encapsulated in the submission from AOL UK:

9. For television, the initial gateway to the converged world is through digital transmission by cable, satellite and the terrestrial network. The United Kingdom has established a leading position in digital television.[32] This has been driven to a considerable extent by effective competition between the three platforms.[33] Over 20 per cent of households now have digital television and the total number of subscribers seems likely to rise above 7 million in the course of this year.[34] Digital television is changing viewing habits. While in August 2000 the terrestrial channels still attracted 81.5 per cent of viewing across the country as a whole, in multi-channel homes that figure fell to 57.1 per cent. In digital homes, the combined share of the terrestrial channels stood at just 50.2 per cent.[35]

10. Digital television is part and parcel of a wider transformation of communications technology in the home. In 1998 we argued that the startling growth of the Internet would have a transforming effect on what was traditionally seen as broadcasting and expressed concern "at a prevailing and somewhat complacent view that the impact of the Internet on broadcasting will be gradual, perhaps even marginal".[36] The Government poured cold water on our suggestion:

"The International Bench-marking Study 1998, 'Moving into the Information Age', states that 4.4 per cent of United Kingdom households were online in 1997, and projects an increase to 14.6 per cent by 2000. It is impossible to say at this stage when, if ever, the Internet will begin to have a significant impact on broadcasting in the United Kingdom."[37]

11. In fact, by November 2000 about 30 per cent of homes in the United Kingdom were connected to the Internet and it has been estimated that at least 16 million people use the Internet at home.[38] This growth has been driven principally by use of e-mail. The Internet has not yet become a mainstream medium for video content, in some measure due to problems with the development of broadband networks that we examine later.[39] Although Internet radio accounts for only one per cent of radio listening and remains costly, the Internet is developing rapidly as a complementary medium with radio.[40] The future of broadcasting is inter-twined with the dramatic transformation being wrought by the Internet. The scale and nature of this transformation were described by Ms Karen Thomson, Managing Director of AOL UK, in the following terms: "people are starting to build the Internet and online services into their daily lives in a way that was unimaginable five years ago".[41]

12. Almost as startling as the growth of the Internet's influence has been the development of mobile telephony. By November 2000, the number of mobile telephone subscribers had reached 35.8 million. Seventy per cent of homes in the United Kingdom now claim to have at least one mobile telephone.[42] Mobile telephone networks already carry more data—in the form of text messages and images—than conversations, with over 1 million messages every hour.[43] Mobile telephones are increasing in their interactive functionality and, with the planned launch of third generation mobile telephony next year, they will become a means of receiving video content.[44]

13. These are some of the changes that make a converged regulator for converging markets so necessary. The functional divisions of current regulators are ceasing to reflect the realities created by technology. Current operators, and in particular those concerned with networks and with innovation, face a confusing, overlapping and inefficient regulatory environment.[45] In these circumstances, the case for a new regulatory framework of the kind proposed in the White Paper is overwhelming.[46] It is also unsurprising that, as Mr Smith told us, there has been a "broad consensus" in favour of a converged regulator in the consultation that has followed the White Paper.[47] Having ourselves recommended the creation of a single regulator in 1998, we have no hesitation in supporting the proposal for a new unified regulator contained in the Communications White Paper.

Services for citizens: a missing chapter

14. The White Paper refers to three main objectives of the Government in the areas with which that document is concerned:

· to make the United Kingdom "home to the most dynamic and competitive communications and media market in the world";

· to "ensure universal access to a choice of diverse services of the highest quality"; and

· to "ensure that citizens and consumers are safeguarded".[48]

The chapters that follow in the White Paper are concerned with the ways in which those objectives are to be promoted. These three objectives are commendable. However, we are concerned that there is a perspective almost entirely absent from the White Paper, what might be termed a missing chapter—on the links between public services for the citizen and new communications technologies.

15. The White Paper is overwhelmingly about the interests of the people of the United Kingdom as commercial consumers of new services. The document employs the concept of citizenship, but usually only in a very narrow sense. The word "citizens" in the White Paper is largely inseparable from words such as "safeguard" and "protect".[49] The interests of citizens are largely couched in terms of broadcast standards, privacy and informed choice over viewing. These are legitimate interests, but the interests of citizens in the new technologies and the market manifestations of those technologies go rather wider than the White Paper acknowledges.

16. The White Paper does accept that the Government must have a clear policy framework for "this rapidly developing sector, which will be so central to our economy, democratic life, culture, entertainment and education",[50] but does not itself offer such a framework. Not only is the Internet giving citizens greater choice of information and entertainment than ever before, its growing interaction with television will transform the role of the television set. Mr Tony Ball, Chief Executive of BSkyB, said that payment for services through the television set would be introduced this year and agreed that the same principle could be applied to Government as well as commercial services, adding that "eventually, the television will become a means of running the household, as much as one uses it for entertainment".[51] With the services available through the television set expanding, "television will become more of a necessity", as the National Consumer Council observed during a previous inquiry.[52]

17. In future, the delivery of public services direct to the citizen in his or her home must be central to public policy in this area. We see insufficient signs of such centrality in the Communications White Paper. Reference is made in the White Paper to the Government's commitment to deliver all of its services electronically by 2005.[53] This commitment itself is welcome, not least because it will bolster the wider commitment to ensure universal access to new technology.[54] However, no clear link is forged in the White Paper between these public sector initiatives and commercial developments in the communications sector. Mr Jerry Roest of ntl noted the importance of "public services that could interact with people at home through their television set", but argued that "there needs to be some sort of encouragement for that kind of content".[55] There are few signs in the White Paper of the Government's thinking on how that encouragement might be offered.

18. When we examined these matters in 1998 we took evidence from the Rt Hon Dr David Clark MP, the then Chancellor of the Duchy of Lancaster, and Dr Kim Howells MP, the then Parliamentary Under-Secretary of State in the Department for Education and Employment. We were impressed with the evidence we received from both Ministers, in particular the determination of the former to empower people by the provision of public services through technologies such as digital television and the vision of the latter about new learning and teaching material for the school and the home.[56] These priorities are barely apparent in the White Paper. We recommend that, in its response to this Report, the Government set out its views on the relationship between the development and regulation of new services in the communications market and the electronic delivery of public services. We further recommend that, in the same document, the Government set out its views on the scope for the new regulator to have a specific duty to pursue the interaction between the two.

18 QQ 371, 444. Back

19 Broadcasting in the '90s: Competition, Choice and Quality: The Government's Plans for Broadcasting Legislation, Cm 517, November 1988, paras 6.21, 4.26; Q 371. Back

20 Report of the Independent Broadcasting Authority, April-December 1990, pp 7-8. Back

21 Cm 517, paras 4.11-4.14, 5.12. Back

22 Report of the Independent Broadcasting Authority, April-December 1990, p 32. Back

23 Third Report from the Home Affairs Committee, The Future of Broadcasting, HC (1987-88) 262-I, para 87. Back

24 Cm 517, para 2.4. Back

25 Fourth Report from the National Heritage Committee, The BBC and the Future of Broadcasting, HC (1996-97) 147-I, para 16. Back

26 Ibid, para 58. Back

27 HC (1997-98) 520-I, para 13. Back

28 HC Deb, 16 April 1996, cols 537-551. Back

29 HC (1997-98) 520-I, para 9. Back