APPENDIX 58
Memorandum submitted by Granada plc
INTRODUCTION
1. Granada welcomes this opportunity to
participate in the Select Committee's inquiry into the Communications
Bill. Granada endorses the ITV submission to the Committee. This
paper focuses on those issues of particular concern to Granada
that are not covered in the ITV submission.
2. Granada is the UK's leading commercial
television broadcaster and producer, with strong positions in
content creation, free-to-air broadcasting and pay-TV.
3. Granada holds seven regional ITV licences—Granada
Television, LWT, Yorkshire Television, Tyne Tees Television, Anglia
Television, Meridian Broadcasting and Border Television. Granada
also has interests in GMTV, SMG and ITN.
4. Last year Granada made 60 per cent of
ITV1's original commissions in all genres, including Coronation
Street, Cold Feet, Trisha, A Touch of Frost, Where the Heart Is,
Popstars, The South Bank Show and Jonathan Dimbleby. In addition,
Granada produces some of the most successful programmes on other
UK channels, including The Royle Family and What the Papers Say
for the BBC; and Countdown and The Six Wives of Henry VIII for
Channel 4.
5. Together with Carlton Communications,
Granada owns ITV Digital, the digital terrestrial television (DTT)
platform. Granada also has interests in a number of pay-TV and
free-to-air channels and broadband.
6. Internationally, Granada has established
production bases in Australia, the United States, Germany and
the Far East. Programmes from Granada's massive programming archive
are distributed to more than 120 countries.
ITV OWNERSHIP RESTRICTIONS
7. An overhaul of media regulation is long
overdue. The full Communications Bill is unlikely to be enacted
before 2003 at the earliest, five years after the original green
paper, Regulating Communications.
8. Reform of the ownership restrictions
on ITV is even more pressing. A more sensible regime, that allowed
further consolidation, would have significant benefits in terms
of ITV's ability to compete at home and in new markets. Consolidation
would release significant back-of-house savings, eliminating off-screen
duplication and inefficiencies. A consolidated ITV would also
be better able to tackle the strategic challenges posed by the
transition to digital.
9. The Government proposed removing the
statutory barriers to further ITV consolidation in its Communications
White Paper in December 2000. Government support for removing
the 15 per cent audience share limit and the London licence rule
is even more explicit in its recent consultation paper on media
ownership.
10. There is a clear consensus in favour
of early movement on ITV ownership, spanning all major political
parties, the Independent Television Commission (ITC) and the BBC.
Sir Robin Biggam, the Chairman of the ITC, recently called for
Government to introduce "interim legislation" to reform
the television ownership rules[15].
Similar sentiments were expressed on all sides of the House of
Lords during the recent passage of the Office of Communications
Bill[16].
The Conservative broadcasting spokesman has also announced his
intention to table a short bill relaxing ITV ownership restrictions
early this year[17].
Granada would support the ITV ownership restrictions being lifted
at the earliest possible opportunity.
11. The case for swift action on ITV ownership
has gained weight due to changing economic conditions and developments
in the UK broadcasting sector. The ITV companies are facing a
series of formidable challenges that have opened up a substantial
imbalance in the UK broadcasting ecology.
12. ITV is going through the most serious
revenue downturn in its history. ITV's advertising revenues fell
by £250 million last year. At the same time, ITV is being
squeezed by a BBC in receipt of an annual 1.5 per cent real terms
increase in the licence fee. The BBC's spending power will be
boosted by £200 million every year to 2006-07, thanks to
an unprecedented seven year settlement.
13. Unlike any other UK broadcaster, ITV
pays a full price for its access to the analogue terrestrial spectrum.
The ITV companies paid around £300 million in licence fees
last year alone. The major ITV companies, Granada and Carlton,
have also been building the UK digital terrestrial platform, ITV
Digital, through its most expensive phase of development, spending
around £300 million on the project last year.
14. With digital competition also intensifying,
ordinary competition law, rather than specific ownership rules,
should be sufficient to safeguard the interests of advertisers
and viewers within analogue terrestrial television. Any proposed
ITV mergers would naturally remain subject to examination by the
UK's competition authorities.
15. Ownership consolidation should not affect
ITV's commitment to the regions. Granada regards sustaining regional
production and broadcasting as central to ITV's public service
role. All Granada's ITV licensees comfortably exceed their basic
licence requirements for regional programming. Under the regulatory
structure outlined in the Communications White Paper, ITV licensees'
regional obligations would remain in force, even if the number
of ITV companies reduced further.
16. Restrictive ownership rules have hampered
the ability of UK commercial broadcasters to compete internationally.
The restrictions preventing unified ownership of the main commercial
channel, ITV, are without parallel anywhere outside the UK[18].
The greater efficiency and scale achieved through consolidation
will improve ITV's ability to compete and expand into new markets.
ITV NEWS PROVIDER
17. ITV faces unique constraints in selecting
its own news service due to the "nominated news provider"
system. The same rules also restrict ITN's ownership structure.
As a major shareholder in ITV and ITN, Granada supports the removal
of the Channel 3 nominated news provider system in its entirety.
18. The Government believes that "the
nominated news provider system has a role to play in ensuring
impartiality and plurality"[19].
However impartiality of news services is separately protected
by the ITC Programme Code, which sets out in detail rules governing
impartial treatment of news issues. The code also rules out commercial
interests impinging on editorial judgement.
19. ITV licensees are additionally required
to include "news programmes of high quality dealing with
national and international matters." The ITC has shown itself
ready to intervene to ensure that these commitments are met. The
regulator itself has questioned the need for the nominated news
provider system on top of these powers.[20]
20. The Government suggests lifting the
ownership cap on the ITV news provider rules from 20 per cent
to 40 per cent. Full deregulation would make more sense. There
are no equivalent limits on any other UK broadcaster or news provider.
Any limit creates uncertainty and could place a brake on long-term
investment. The structural separation also makes provision of
an integrated regional, national and international news service
more difficult. Lifting the cap would allow ITN management and
its shareholders to arrive at the best structure for the company,
its clients and UK news viewers.
21. The nominated news provider rules do
not protect ITN. Other providers can— and have—achieved
NNP status and challenged ITN for its core ITV news contract.
Abolishing the nominated news provider system would allow ITV
to normalise the relationship with its news supplier and would
provide the strongest long-term bulwark against concentration
of television news provision.
ITV LICENCE PAYMENTS
22. The exceptional circumstances currently
facing commercial television have exposed the lack of flexibility
in the ITV licensing regime. Under current broadcasting legislation,
the regulator has no way of varying the financial terms of ITV
licences to take account of massively changed economic circumstances.
This is unlike the position that exists in many other regulated
industries, including water and energy.
23. Notwithstanding the unprecedented advertising
downturn, ITV companies paid around £300 million last year
in licence fees. All ITV licences have recently renewed for a
further 10-year licence period. Licence renewal involved the regulator
setting licence payments, rather than companies bidding as in
the previous licensing round. The regulator set the franchise
fees before the depth of the current downturn was apparent. The
licence fee terms are fixed to at least 2006. Without adjustment,
the ITV companies are set to overpay by several hundred million
pounds over the next five years.
24. The Government should urgently consider
introducing greater flexibility into the financial terms of ITV
licences. If possible, this measure could be advanced ahead of
the full Communications Bill. This suggestion received cross-party
support in the House of Lords during the passage of the OFCOM
paving Bill.
15 January 2002
15 ITC Chairman calls for fast legislation, 17 October
2001. Back
16
eg Lords Hansard, 22 November 2001, columns 1246-1305. Back
17
Yeo: I propose to modernise media competition rules, Conservative
Party PN 2 January 2002. Back
18
Germany operates a national TV audience share limit of 30 per
cent. In Italy, Mediaset's three national networks have 45 per
cent peak audience share and 60 per cent of TV advertising revenues. Back
19
Consultation on Media Ownership Rules, DCMS/DTI, November 2001. Back
20
Response to consultation on proposals for reforms, ITC, page
17. Back
| 
