House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Third Report

2 Background

6. During the 1997-98 parliamentary session, the previous Committee published its report, The Multi-Media Revolution.[1] It included the following recommendation: "We recommend the absorption of all current regulatory bodies into one Communications Regulation Commission with overall responsibility for statutory regulation of broadcasting, telecommunications and the communications infrastructure."[2] The previous Committee's report went on to make recommendations for the organisation and remit of the single regulator; these included the oversight for all broadcasters, including the BBC, of broadcast content regulation and of their commercial activities.

7. The Government rejected this view. However, it finally accepted the need for a single regulatory body in the Communications White Paper, published on 12 December 2000.[3] Recognition that the broadcasting and communications industries were co-evolving as a prelude to convergence was embodied in the White Paper's centrepiece: a proposal to establish a single Office of Communications to replace, with updated duties, the five existing, now extinct, legacy regulators: Office of Telecommunications (Oftel), Radiocommunications Agency, Radio Authority, Broadcasting Standards Commission, and the Independent Television Commission.

8. The White Paper envisaged Ofcom as an independent, statutory, regulatory body responsible for economic regulation of communications, content regulation and radio spectrum management. In addition to duties and functions specified in the new Communications Act, Ofcom would apply, concurrently with the Office of Fair Trading, Competition Act powers relating to anti-competitive activity, and the monopoly provisions of the Fair Trading Act.

9. The previous Committee reported on the White Paper in March 2001,[4] welcoming the proposed single regulator and making a number of recommendations as to its structure, organisation and accountability.

10. On the structure of Ofcom, the previous Committee cited reservations expressed in the Communications Green Paper of 1998[5] about the unwieldiness, and lack of transparency and accountability of a single body. This said, the Committee had "no doubt that the advantages of a single regulator far outweigh the disadvantages".[6]

11. The Committee drew attention to the differing dynamics of competition and content regulation: the former was best carried out by a "small core of professionals" while the latter benefited from broader involvement. This led to a recommendation that "the legislation establish a mechanism to provide for greater lay involvement in content regulation than in competition regulation".[7] The Communications Act 2003 subsequently provided for a Content Board as an integral part of Ofcom.

12. Insofar as accountability was concerned, the previous Committee came down firmly in favour of openness: "We recommend that a specific duty be imposed on the new regulator to ensure that its governing body and its sub-commissions or committees meet in public unless the governing body is satisfied that, in the case of any particular issue under consideration, the interests of public disclosure are outweighed by the need for commercial confidentiality. With such a need to weigh these factors in the balance, we would not expect all meetings concerning commercial activities to be held in private. We further recommend that legislative provision be made to ensure that, where any decision is reached by vote, the voting records are published and to require that all meetings with broadcasters to discuss their annual reports on delivery of programme statements are held in public."[8] The Communications Act 2003 fell seriously short in this respect, merely requiring Ofcom to have regard to the principles under which regulatory activities should be transparent and accountable.[9] Again, this is not the first time that the net-curtains mentality has prevailed over the Government's commitment to openness.

13. The short Office of Communications Act 2002 confined itself to the establishment of Ofcom, leaving details of the scope and nature of its activities to the (much) larger Communications Act 2003. The latter began as a draft Bill,[10] published in May 2002 (shortly after the Committee's Report[11] on Communications) and subjected to pre-legislative scrutiny by a joint committee.[12]

14. Ofcom was vested with its statutory powers and functions on 29 December 2003. Administrative work to effect the transition from the old system can be traced to 28 March 2001 - with the announcement of a Memorandum of Understanding between the Broadcasting Standards Commission, Independent Television Commission, Office of Telecommunications, Radio Authority and Radiocommunications Agency. That set out the arrangements for closer cooperation on a wide range of issues, overseen by a steering group of the Chief Executives.

15. While the legacy regulators and the newly established Ofcom were working towards a single organisation, consolidation plans were proceeding apace within the broadcast industry itself. On 16 October 2002, Carlton Communications Plc (Carlton) and Granada plc (Granada) announced a merger aimed at a fully consolidated ITV (save for SMG, Ulster and Channel). The companies argued that the main objective of the merger was to remove the current dysfunctionality within ITV, comprising 15 regional Channel 3 licensees, and allow it to remain an effective player in the competition for viewers and advertisers, in a rapidly changing and competitive environment. There were also significant cost savings to be realized by merging the two companies (estimated to be around £100 million per annum).

16. The Communications Act 2003, which received Royal Assent on 17 July 2003, allowed the merger to go ahead subject to the approval of the Secretary of State for Trade and Industry as advised by the Competition Commission.

17. On 11 March 2003 the Secretary of State for Trade and Industry referred the proposed merger between Carlton and Granada to the Competition Commission (CC) to determine whether the merger could or would operate against the public interest. On 7 October the CC reported that safeguards were required.

18. The CC concluded that the merger could be expected to operate against the public interest in relation both to the other Channel 3 regional licensees and to future competition for the sale of advertising airtime. This was accepted by the Secretary of State. On 14 November the Department of Trade and Industry announced that signed undertakings in respect of these risks were accepted and that the merger could proceed.

19. In relation to the status of the Channel 3 regional licensees and their regulation, it is worth recalling the following recommendation made by our predecessor Committee in its report on the Communications White Paper: "We recommend that, notwithstanding the proposed removal of specific legislative barriers to further ITV consolidation above and beyond the general provisions of competition law, separate licences be retained for each ITV region, including provisions relating to regional production and the contribution of each region to network programming. We further recommend that there be a legislative obligation upon the new regulator to maintain a network of offices in the nations and regions of the United Kingdom to facilitate effective monitoring of compliance with regional obligations by broadcasters".[13]

20. Three reports by the present Committee are directly relevant to the present inquiry:

Fourth Report of Session 2001-02, HC 539, Communications
Fifth Report of Session 2002-03, HC 458, Privacy and media intrusion
Sixth Report of Session 2002-03, HC 667, The British Film Industry.

21. Our Fourth Report of 2001-02 preceded the draft Communications Bill, but contains a number of conclusions and recommendations which remain germane in the context of this short inquiry. Two of our previous recommendations related to the transparency and accountability of Ofcom:

"We recommend that the final Communications Bill sets out specific requirements with regard to the openness and transparency of the conduct of Ofcom, including that its Board should meet in public unless issues of commercial confidentiality make this inappropriate."[14]
"We recommend that the final Communications Bill contains a duty on the Chairman of the Ofcom Board to submit an annual report on Ofcom's activities, expenditure and achievements to Parliament. The Chairman and Chief Executive of Ofcom would then be subject to the same examination by this Committee, on the basis of that report, as has become the practice with the Chairman and Director-General of the BBC and that Corporation's report and accounts."[15]

22. As we have pointed out, the Communications Act 2003 did not implement the first of the above recommendations. Provision for Ofcom's Annual Report to be laid, by the Secretary of State, before each House of Parliament is made in the Office of Communications Act 2002. We also concluded that it "could be a mistake" to increase the size of the Ofcom Board, the experience of the US Federal Communications Commission suggesting that a small executive body functions most effectively. We note that the Office of Communications (Membership) Order 2002 subsequently increased the maximum membership of Ofcom from six to nine.

23. As with Ofcom, we recommended that the BBC Governors hold their meetings in public.[16] Furthermore, we saw a specific role for Ofcom in relation to BBC services: "We are seriously dissatisfied with the present procedures for approving new BBC services. We therefore recommend that the approval of such services should be the subject of published statutory advice from Ofcom to Ministers."[17] Though the Government did not at the time accept these recommendations,[18] the review of the BBC's Royal Charter will provide an opportunity for these issues to be revisited.

24. Our Report on Communications included further recommendations that we touch upon here; for example, recommendations dealing with the promotion of a switchover to digital television and on media ownership. On the latter subject we concluded the following: "We believe that the case for particular restrictions on media, or crossmedia, ownership in any sector is now outdated. We would be happy to rest on the developing competition regime and the vast amount of information and the many voices available through the Internet."[19]

25. Our Fifth Report of Session 2002-03 recognised that relatively few of the complaints about media intrusion into privacy were attributable to broadcasters. However, we recommended that "Ofcom and all the broadcasters should engage with the PCC and the press industry to develop ways of tackling the media scrums that still seem to gather at the scent of a story. Described by Lord Wakeham as 'a form of collective harassment' this is a matter that must be capable of being sorted out - especially when it is the victims of violent events, or their families, that are involved."[20] The Government welcomed this recommendation.[21] In its response, the Press Complaints Commission stated that a meeting with Ofcom would take place early in the New Year (2004) on the subject of cooperation aimed at developing ways of tackling media scrums.[22] We understand that two such meetings as this issue have taken place.

26. We further recommended that Ofcom: "seize the opportunity presented by its new structure to undertake a thorough review, including wide consultation, of how complaints against the broadcasters should be tackled and on the substance of a new code upon which the system will rest."[23] In relation to the BBC we recommended: "The BBC should respond to the preference of individuals for their privacy complaints to be dealt with by an external body (previously the Broadcasting Standards Commission) and should either increase the demonstrable independence of its own system or refer complaints to Ofcom if the initial response from the programme-makers does not resolve the situation. The BBC should participate fully in the Ofcom review that we recommend above."[24] Under the Communications Act 2003, Ofcom has responsibility for policing complaints relating to the infringement by broadcasters of an individual's privacy. This aspect of "negative content regulation" applies to all broadcasters, including the BBC by virtue of an amendment to the main BBC Agreement dated 4 December 2003.[25] Ofcom has already consulted on interim guidelines for the handling of fairness and privacy complaints.

27. In our Sixth Report of Session 2002-03 we investigated the status of the British film industry, expressing a desire to see increased levels of support for film production and exhibition of British product from the public service broadcasters. Of direct relevance to Ofcom was the following statement: "We hope and expect that these hopes will not be disappointed and that Ofcom will be able to take meaningful action to improve the relationship between the British film industry and the public service broadcasters to the benefit of the British people's enjoyment of, and access to, film. One avenue will be through the Statements of Programme Policy required from the broadcasters."[26]

28. Giving evidence to this Committee on the Annual Report of the Department for Culture, Media and Sport, the Secretary of State confirmed the requirement on all public service broadcasters to promote British film in their scheduling; and that retrospective monitoring by Ofcom of Statements of Programme Policy would contribute to this.[27] The Secretary of State added: "We have done a second important thing to promote film and that is through the review of programme supply, freeing up the whole issue of possession of rights to the advantage of the independent production companies. The code of practice may already have been signed by Ofcom or it is very close to being signed by Ofcom. Ofcom will monitor the performance of the broadcasters against the code that they have drawn up in the light of the conclusions of the expert review which I commissioned about 18 months ago."[28] What this means, and whether it will make any difference, is not clear.

1 Fourth Report, 1997-98, HC 520 Back

2 Ibid., paragraph 158 Back

3 A New Future for Communications, Cm 5010, December 2000 Back

4 Second Report, 2000-01, HC 161 Back

5 Regulating communications: approaching convergence in the Information Age, Cm 4022, July 1998 Back

6 Second Report, 2000-01, HC 161 paragraph 133 Back

7 Ibid., paragraph 136 Back

8 Ibid., paragraph 139 Back

9 section 3(3), Communications Act 2003.This subsection also embodies an obligation that Ofcom's regulation be "light touch" Back

10 Draft Communications Bill, Cm 5508, May 2002 (I - draft Bill; II - explanatory notes; III - policy narrative) Back

11 Fourth Report, 2001-02, HC 539 Back

12 Joint Committee on the Draft Communications Bill, Draft Communications Bill, 25 July 2002, HC 876 HL 169 2001-02 Back