UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE

UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 132-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

CULTURE, MEDIA AND SPORT

Ofcom: Preparedness and handOVER

Tuesday 16 December 2003

LORD CURRIE OF MARYLEBONE and MR STEPHEN CARTER

Evidence heard in Public Questions 1 - 90

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 16 December 2003

Members present

Mr Gerald Kaufman, in the Chair

Chris Bryant

Mr Frank Doran

Michael Fabricant

Mr Adrian Flook

Ms Debra Shipley

Derek Wyatt

________________

Memorandum submitted by Ofcom

Examination of Witnesses

Witnesses: LORD CURRIE OF MARYLEBONE, Chairman, and MR STEPHEN CARTER, Chief Executive, Ofcom, examined.

Chairman: Good morning, gentlemen. Thank you very much for coming. I am sorry for the delay in starting the public session but we had some private business which we needed to dispose of in view of the fact that the recess is coming later this week. Lord Currie, you will, of course, recollect that this session is at your own suggestion?

Lord Currie of Marylebone: Indeed.

Chairman: We are grateful to you for that. We did, because of other events, decide to turn it into a two-session inquiry, but we are very grateful to you for coming along and particularly grateful for your understanding in sending us an advanced letter and dispensing with an opening statement, so the opening statement will, in fact, come in the form of a question from Mr Derek Wyatt.

Derek Wyatt: Good morning, gentlemen. I apologise, I have to go early because I am giving evidence at a public inquiry in my constituency later this morning. You will know we have been looking at Meridian - at least one of us has because it is in my patch - and I want to better understand, because of the ITC takeover and Ofcom coming into being at the end of the month, whether you intend to have an inquiry into the changes that are going to come from Meridian and, secondly, whether you will conduct that in the public domain?

Lord Currie of Marylebone: May I first, by way of introduction, say how pleased we are to be here? We take accountability of the Department very seriously and therefore this hearing very seriously. Clearly there are questions around the Meridian issue that the ITC has been considering, and Ofcom will be looking at the questions. It is important to note that the Communications Act gives us powers over regional output but the local facility questions are built into licence powers rather than elsewhere, and therefore we need to look rather carefully at what our powers are in that area.

Derek Wyatt: When you conduct the inquiry, will it be done in the public domain? In other words, will the hearings be in public so we can come and listen?

Mr Carter: The straightforward answer is we have not given consideration to that question either in process or in content. As David says, the ITC are currently I know in discussion with the relevant ITV licensees and that will be one of the conclusions they will pass to us. As a general rule we have tried, in the way we have laid out how we are going to approach things, to be pretty open and transparent in the way we can in public consultations and in tours and in public statements and so on and so forth, so that has definitely been the approach we have taken, but on the specific question we have not addressed it.

Derek Wyatt: On the broader philosophical point about transparency, would you say that in principle, whatever it is that you will be looking at - let's leave Meridian to one side - you will conduct hearings in public? We are interested to hear about that.

Lord Currie of Marylebone: I think we should be absolutely clear that the Ofcom board in reaching decisions will not be meeting in public. We will be transparent in the reasons why we have reached our decisions, but the commercial sensitivity of many of the decisions we are making means we cannot in practice meet in public. We will, however, be very open and transparent in our consultation processes, and if we do have public meetings we may well decide to do it in writing but, if we decide to have verbal public meetings, then of course those would be transparent.

Mr Carter: Can I augment that? On the two substantive reviews we have announced and started doing work on, both the PSB review and the spectrum trading review, we have already had open meetings in a variety of locations on those subjects.

Derek Wyatt: Are they web cast?

Mr Carter: Neither of them have been but we are, after today, doing a presentation to a whole group of people which is being web cast, so where we can we do.

Chairman: You are not alone in this. Why are you so scared of meeting in public? We all recognise the issue of commercial confidentiality and nobody is suggesting that meetings involving issues of commercial confidentiality should be in public, but the FCC in the United States has such issues to deal with as well and yet it is its rule - indeed I believe it is required - that it should meet in public and we met the FCC before the Communications Bill went through. It is not only you - it is practically every public body, the BBC Governors, for example, who refuse to do it. Why? What is anybody scared of about meeting in public and letting the public see what is going on in an organisation which is supposed to represent them?

Lord Currie of Marylebone: In respect of the FCC it is absolutely true that the Sunshine laws there require the FCC Commission to meet in public. I have to say, from our discussions with the FCC, there is a very widespread view that that is highly dysfunctional. It means that commissioners cannot meet as a group and discuss the issues except in public; they cannot therefore interchange ideas in a free and effective way; and what it does in effect is to put the process of interaction and policy formulation down into the executive team and away from the Commission, and therefore I think it has a very undesirable consequences. One of the things I have been very keen to ensure that the Ofcom board does is to work very effectively to get its collective mind around the issues, and that requires free and open interchange between the board members, and I think that would be severely prohibited if we met in public. Therefore we will be having public meetings; we will be interacting very effectively with the public and we put great store on that; but in terms of the actual decision-making process, I think that is a matter for the board. We will be transparent on the reasons we have taken to reach our decisions, but the process of reaching those decisions I think would be dysfunctional to meet in public.

Derek Wyatt: Can I push you on then on the transparency part? Will there be no closed deals, no phone calls, no letters that are confidential, so that when you are approached by the BBC or any other, I just choose those as an example, the letters will be put on the website immediately and the responses? In other words, we can see what you are doing so we can judge that it is transparent?

Mr Carter: The approach we have taken so far, and we are feeling our way to what is the right way to execute these responsibilities and tasks, is that where we can we do. We have been certainly substantively transparent in many things and many people have certainly said to us that we have been substantively more transparent than many others. It is one of these questions: How far do you go? To a degree it does involve making judgments on a case-by-case basis because quite often it is quite difficult to disaggregate the commercially sensitive issues from the flow of debate and discussion and, as David says, we will always be one hundred per cent transparent when it comes to the explanation and rationale behind other decisions, and where we can, in a prior process that leads to them, we will be.

Derek Wyatt: I am interested also in switch-off really, because I am not sure where we are in Government policy. As you know, on average, consumers buy a new television set every eight years, so if we were to switch off we are already talking about 2011, yet the Government seems committed to 2006 and 2010. Can you tell me what influence you can have over switch-off and what criteria you use, or will use, and secondly, if free view was to include an internet access point in the near future, would that enable all the other sets that people have in their homes, in other words to go digital or part digital, and would that influence the bringing forward of the date?

Mr Carter: The switchover issue is ultimately a decision of Government. Clearly we recognise that, and we will do whatever is useful to assist the process of reaching that. We do support an accelerated move to switch-off. It is important to appreciate that this is Ofcom in a supportive role rather than in the lead on this particular question.

Derek Wyatt: On the free view, have you any influence on how the box might develop? Can you have any discussion with them about enabling the spare set, which I understand is the issue here?

Mr Carter: We have influence over free view insofar as it is a licensed multiplex and David is absolutely right, it is a Government decision as to what the date is. There are a range of things that we will be responsible for which will directly or indirectly impact upon the analogue switch off question. Spectrum trading is not an inconsequential one and you will see in that consultation document we have deliberately put out to 2007 the question about when broadcast spectrum moves into a trading model in order to provide time for a lot of these questions to be asked and answered that you allude to, and then there is the knotty question of who is going to pay for it if the market is not going to take one hundred per cent of all sets and all homes to full digital take-up. You have to then ask yourself the question where does that money come from? There are a variety of pots, and undoubtedly one of the questions being asked by the commercial public service broadcasters, as we renew and re-issue their licences, is if we are being asked to carry some of the cost of building out the transmitter capability, is there a trade-off there and should we take that into account. I think the message we have given the Government, and we have said this publicly, is there has been a lot of very good preparation work done and the digital action group under Barry Cox' leadership in our view has been an extremely effective pan industry group, and we are at 50 per cent, but there is a need now to move it to, "What is the plan? What is the date? What is the process? What is the budget?"

Derek Wyatt: Is it your view that the longer we delay on the switch-off, the less worthy the actual analogue spectrum becomes of trading? It does not have as much value?

Lord Currie of Marylebone: I am not sure we have that view. I am not sure we really have an accurate measure of what spectrum is worth and, of course, it is impacted quite significantly over time by technological changes.

Derek Wyatt: In your public service broadcasting view that you are starting, is it your intention to visit Spain, France, Germany and Italy to see how they fund it? How wide a remit will you take just to look to see how public sector television is funded worldwide before coming back to how the BBC may or may not proceed?

Lord Currie of Marylebone: I am sure we will be looking extremely widely. The PSB review is very wide-ranging. We intend to gather evidence from a whole range of subjects and look at the international experience, where that is relevant.

Derek Wyatt: And will your report be filed in the wastepaper basket? What will happen to it? How much authority will it have?

Mr Carter: It will have quite a lot of practical uses because we intend to use the conclusions of it to inform some of the things we are required to do under the Act, not least the quotas and the relicensing of the Channel 3 and Channel 5 commercial broadcasters. It will also I suspect inform substantially your previous question around analogue digital switch-off and where the costs and benefits lie, and will also be used to help us get to specificity around the regional production quota. So for our purposes it will have very specific practical use. Clearly at a broader level one of the reasons we have framed it in the way we have and as broadly as we have is that we see it as an opportunity to provide an overall framework for public service broadcasting which, up until now, has largely been a discussion solely around the BBC.

Derek Wyatt: Will it be able to do anything about where news is played in the public sector? On ITV it has been played around too much, in our view, as we reported before. To what extent will you be able to say that news ought to hold a certain position in public sector broadcasting?

Lord Currie of Marylebone: I am not sure it is necessarily our role to specify the precise time but we certainly agree that the news has moved around too much and there is a case for settling that issue and maintaining it at a sensible time.

Derek Wyatt: Patricia Hewitt this morning said she hoped that every person in Britain would be on the internet by 2008. That brings in content regulation, or at least it becomes a bigger part of content regulation. What part does Ofcom play in content regulation on the internet?

Lord Currie of Marylebone: The Communications Act gives us no power in that area.

Derek Wyatt: So, given what the Government is saying then, who is going to regulate the content bit of the internet?

Lord Currie of Marylebone: I think that is a matter for Government to consider. There is a serious question as to the feasibility of content regulation in the internet but there are some big questions there that have to be addressed.

Chairman: Could I intervene on that? When we conducted a previous inquiry we went to Brussels and we had very useful meeting indeed with the then Commissioner, a gentleman from Portugal. He came to a conclusion which no evidence I ever received could contravert: that it is impossible to regulate the internet. Since it is a myriad series of telephone calls, apart from being able to take action against originators of material in this country who appear to be breaking the law and who can be identified, it is futile to pretend that one can regulate the internet. What is your view about that?

Lord Currie of Marylebone: I have certainly heard that argument put and I think there is a lot of truth in it. I am not a technologist and therefore I do not know whether a clever technologist would be able to come up with ways of regulating content on the internet. I suspect, though, that the direction in which content regulation is likely to go is in the direction of smart navigational devices that allow people to access content that they want, hopefully subject to the law, and to avoid content that they do not want, and I think that is more likely to be the direction in which content regulation over time will move. How quickly it will move depends clearly on take-up.

Chairman: Could I ask one other question before I return to Derek, arising out of what Derek said? He was talking about public service content on Channel 3. Could you devote whatever time is necessary, which I suspect is not very much, to itemising those parts of the Channel 3 schedule that could be described as public service broadcasting?

Lord Currie of Marylebone: I think there is quite a significant part of ITV output that can be seen as public service broadcasting. One should not define public service broadcasting in too narrow a way but that is an issue that the Ofcom board will come to and consider when the public service broadcast review is well under way and when we have substantive conclusions coming out of that.

Chairman: Lord Currie, if I may say so without in any degree being patronising - which I have no right to be in any case, you are a man of considerable intelligence, expertise and acumen, and I would have thought that even at this early stage, let's set aside the news bulletins on which I have a bone to pick with you in any case later on, can you offhand give me, say, ten items on the ITV schedule that could fairly be described as public service broadcasting?

Lord Currie of Marylebone: I am not going to attempt to do that off-the-cuff on this occasion, Mr Chairman.

Chairman: Thank you, Lord Currie. You have answered my question!

Mr Doran: I want to pick up one of Mr Wyatt's themes which is the regional commitment of the Channel 3 television companies. There is obviously a lot of financial pressure on the Channel 3 companies. That has led to the Carlton-Granada merger, to the Government ripping up the rules on such mergers and introducing new legislation to permit it. There is obviously a concern about the way in which the regional commitment which exists in the original licences is going to be able to withstand these commercial pressures in the future, so that puts quite a responsibility on Ofcom's shoulder, and I would be interested to hear how you plan to deal with that.

Lord Currie of Marylebone: The first point to make is that regional commitments on public service broadcasters have to be balanced against other commitments that are placed on them. They operate in a commercial market place that increasingly has been quite difficult for them, and therefore the more that is put on the regional side the more there will be trade-offs to be considered amongst the various obligations placed upon them. There are quite clear regional output obligations that we will be enforcing and there are, as you say, the commitments in the licences that broadcasters have made about regional production, but we will be looking very carefully at those and be drawing up and entering into discussions with the Channel 3 broadcasters.

Mr Carter: Specifically we have effectively rolled the existing licence obligations for twelve months. It goes back to the earlier question about the public service broadcasting review. One of the outputs we want to take from that, having seen all the obligations you want to put on those commercial broadcasters, is how do you balance them? In the meantime the existing obligations, which are 30 per cent for Channel 4 on regional which is in their licence, 50 per cent on Channel 3 which is voluntary, 10 per cent for Channel 5 which is voluntary and 30 per cent for BBC which is voluntary, on regional output deals exists for another twelve months.

Mr Doran: That makes me even more concerned because when we use language like "trade-offs" and "balance" and "priorities" it does strike me that the history so far tells us that the overall commercial viability of the companies will be much more important than the regional commitment. Is that a fair conclusion?

Lord Currie of Marylebone: That is not what I said --

Mr Doran: I know it is not what you said but --

Lord Currie of Marylebone: We have to be concerned with commercial viability of the companies, but we equally are concerned to place on them appropriate obligations.

Mr Doran: So can you give a clear statement that the regional licence requirements will be a high priority in Ofcom's supervision of the Channel 3 licences?

Lord Currie of Marylebone: As Stephen has said, we have rolled forward the obligations for our twelve month period, and that is an important issue we will come to during that twelve months.

Mr Doran: On another issue, one of the new requirements of the Communications Act is to put some responsibility or element in the public service broadcasting requirement to include film, and we know from previous inquiries that we have made that the United Kingdom broadcasters have a pretty poor record, particularly in relation to British film in two respects: one is investing in film which may not be your territory, but in British films shown on television I got some recent figures which suggested that 2.6 per cent of all films broadcast by the five terrestrial channels in the first six months of 2003 were recent United Kingdom titles. That is a pretty low proportion, and I would be interested to hear how you see your responsibilities in relation to films and the public service broadcasting requirement, and what inquiries you are making at the moment to harden up the commitment to British film.

Mr Carter: I will be relatively brief in my answer which demonstrates the depth of my knowledge on this question. We have an obligation in the Act, as you rightly identify, and therefore we have made it an explicit part of the PSB review. Why? Because as ever in these things it often boils down to definition, and one man's definition of a British film and another person's definition of a British film is often different. The Film Council have made some quite detailed and, from our perspective, helpful suggestions to us so far, and we are encouraging them to give us a very clear documented approach to that, and one of the - hopefully - significant outputs from the review will be some clarity around the definition which will then help us execute that statutory responsibility.

Mr Doran: Can you say what questions you are asking the broadcasters?

Mr Carter: Similarly, what is their view? At the moment the broadcasters make statements about proportions of films and then give genre examples. Metaphorically, are five Bond films British films? It is not for us to judge yet, but it will be at the end of the review.

Mr Doran: One of the criteria which the Director General of the BBC enunciated, I think under his breath and I do not think it was recorded in the transcript, was that the cost of films was a consideration. From my own questions outwith this Committee I am told that is not an issue but somehow or other it seems to be on the table as an issue. Would that be something you would be examining? The suggestion is that second rate or third rate American films are much cheaper than good British films.

Mr Carter: I could not comment on that.

Mr Doran: On another issue, briefly, I welcome the paper which you presented to us; it was clear and obviously a lot of work has been done in the short time that you have been in existence, and congratulations for meeting target. Quite a lot of targets are not met these days. Looking at your list of forthcoming activity at the end of the payer for 2004, I notice you have not included community radio, and I would be interested to know where we are on community radio. I know there are some pilot schemes at the moment and that they have been pushed back a little at the end of 2004, but I would be interested in the general approach to community radio and why it does not figure here in your strategy.

Mr Carter: It is on the work plan for next year. In the interests of brevity we made some selections and it is not intended to suggest that other things are less important; we just put these down as a selection. Specifically on the community radio question we are waiting for an order from the DCMS as to what the next step is in terms of process, and when we receive that - and the expectation is that will be the middle of next year - we will go into the formal licensing process. As you know, there are about sixteen stations that were licensed by the Radio Authority. So far, in all candour, all we have done is given warm noises that we think it is a good thing and we will be supportive of it and we do and we will, but on the specificity around the process we really need to wait until we get that order from the DCMS.

Mr Doran: In terms of anticipating the DCMS, however, you must be in discussion with officials over their plans because it would be normal for officials to discuss any order in advance as part of the consultation process. What work are you doing to be ready for that order when it is implemented?

Mr Carter: One of the things we have created, and I cannot remember if it is mentioned in the note, is a liaison unit between the DTI and DCMS and Ofcom, so these areas of overlap and intersection are not missed, and I know that is one of the items on that working agenda. As I say, our going-in assumption at the moment is we will get clarity around that by the middle of 2004. Simultaneously what we are doing in another place which is not specifically on the community radio question but it is relevant, is we are re-looking at the whole radio licensing process, because clearly with the demise of the Radio Authority we need to replace the licensing process they had with the new licensing process, which clearly is not just for community radio but for the residual analogue spectrum and, indeed, for relicensing of existing stations, and the intention clearly would be to devise a process which covers all of the licences that we would wish to issue, and that will come out, hopefully, in mid or late January.

Mr Doran: And that will deal with the new FM licences?

Mr Carter: Yes.

Mr Doran: On the access fund, have you any indication when that is likely to be established?

Mr Carter: I do not, I am afraid.

Mr Doran: It is not part of the consultation you have had with the DCMS?

Mr Carter: I do not have enough clarity on that to give you a helpful answer.

Michael Fabricant: Can I just take this opportunity of reiterating what Frank was saying just now because one of the concerns I had when the Communications Bill was going through Parliament was where radio would rest in all of this. I remember when radio was a very, I think, passed-over division within the Independent Broadcasting Authority and, as a consequence, it was pulled out and made into a very separate organisation, the Radio Authority, which has done a tremendous job and I think everyone in the Radio Authority is to be congratulated on the expansion of independent radio in the United Kingdom. I do hope that radio is not going to become a very minor aspect of Ofcom's work, and perhaps you would like to reassure me further on that particular point?

Lord Currie of Marylebone: I can give you an absolute assurance that radio will be taken very seriously indeed. If you look at the forthcoming activities in that list, at least two of them explicitly focus on radio and that reflects the importance the Ofcom board places on radio, and with Richard Hooper, the ex chairman of the Radio Authority, on the board and Tony Stoller in a senior position in Ofcom and other members of the Radio Authority firmly embedded within the Ofcom structure, there is no danger that radio will be forgotten. However, we thought it very important in the design of Ofcom to create a genuinely converged organisation, so radio does not become a silo within Ofcom: it is a central concern and we are absolutely committed.

Michael Fabricant: Let us talk about that convergence because, at the moment, the questioning has really concentrated on the media, but of course you take in telecommunications as well. One of the reasons why Parliament wanted this - and it was not a party political issue, as far as I know all parties supported it - was because of the issue of convergence on the digital scene. In fact, that has happened rather slower than we would have liked because of lack of take-up by the general public and, indeed, some of the costs of the equipment and the roll-out. Where does Ofcom stand in this? Since it is your first opportunity to speak to us in this position, perhaps you could give us a little bit of an insight as to how you see Ofcom is going to work with telecommunications side, what degree of regulatory power you intend to exert, and how you see convergence and organisational convergence between telecom and the media?

Lord Currie of Marylebone: I gave a speech a couple of months ago on this topic and in general terms convergence, as you say, is coming more slowly than perhaps we expected in the heady times of two or three years ago, but it is nonetheless coming and technology is advancing in a way that will make convergence a reality. Inevitably for some people convergence will come quicker than others because of different speeds of adoption and so on. It is very important to have created a regulatory framework that can put the regulation across the sector on a common basis, because that prevents regulatory differences from driving the development of businesses, and I think that is extremely unhelpful. Development of new businesses should be driven by technology and commercial realities, not by regulatory differences between different bodies, and that is the rationale for Ofcom. It is in many respects very good that the convergence regulatory structure is in place in advance of the full process of convergence because otherwise those regulatory differences could have driven commercial developments. So in general terms that is the way I think about these issues. It will come and we have the right regulatory framework in place in readiness for it.

Michael Fabricant: Let me pursue that. In the last year or two we have seen a rapid expansion of the coverage of broadband in the United Kingdom, and that is very welcome, but sadly we have not seen the take-up match the coverage. You talk about Ofcom as a regulator: does Ofcom have a role at all - and perhaps the answer is simply no, I do not know - to encourage the general public in some way to take up broadband? Do you have a role in persuading the public to take a particular line on broadband, broadcasting or other issues? Or are you solely a regulatory body?

Mr Carter: I certainly think and hope that we have made it very clear that we do not see ourselves as solely a regulatory body. We have deliberately designed the organisation and staffed it to try to cover all the questions based on where it is going, because the television market is going from analogue to digital, as we have discussed; the internet market is going from dial-up to broadband; the telecommunications market is going from voice to data. All those trends are quite clear and there were some sceptics two or three years ago when the world looked like an unpleasant place who said this whole convergence issue was a busted flush, but now I do not think you will find anyone arguing about the direction of travel - just about the speed and distance. The question then becomes: What is our role in the speed and distance? What we have said strategically is we are going to run three reviews in tandem: a review of public service broadcasting, and within that look at the analogue/digital question and other output questions; a review of telecoms, and run a review of the underlying point of commonality which is spectrum. Why those three in tandem? Because they are all interlinked and converged, and the intention is to try and come out the other side with a map or a picture that means the regulatory framework helps that pace and direction of travel. Specifically on the broadband question we have a very specific economic responsibility to regulate access, and this morning we made an announcement conjointly with Oftel on a determination on the review of the broadband wholesale market, where we have recommended the introduction of a specified margin to be calculated for other wholesale providers in order to improve competition at the wholesale level to help stimulate broadband take-up. Personally, I am not sure I think it is going that slowly. I remember when the first broadband customer was connected and I remember whose company provided it, and three years on we have over three million broadband homes. As I recall, it took nine years to get passed a million mobile customers, and we are at 50 per cent digital penetration. The numbers are pretty good and a number of people can take credit for that - not least many of the companies, on your education point, who have significantly driven that knowledge and education. We have a peripheral role in that - a very peripheral role. We have a statutory obligation on media literacy, and you could expand that to include technology understanding, but in financial terms that is going to be driven by the market.

Lord Currie of Marylebone: Underscoring that, the best way of ensuring effective take-up is to ensure there is competitive and vibrant market in this area because it is then the companies that will have a strong interest in selling their product to customers, and thereby achieve take-up. That is the right way to think about it. We have a facilitating role primarily in making sure the market is genuinely competitive and open.

Michael Fabricant: You start operating on December 29, and at the moment you are liaising with the existing bodies - ITC, Oftel, the Radio Authority and others. Have there been areas of policy identified where you will reverse decisions, or at least change a course of emphasis that have currently been put in place by the existing regulators?

Lord Currie of Marylebone: It would be wrong to say we have identified areas where we are overturning decisions. However, we have made it absolutely clear that Ofcom will look at each of the areas of our responsibility, review the way in which those have been undertaken, and think anew about these questions. That may end up with us doing things in the way the existing regulators have done it, or it may well be different. The PSB review gives us a chance to look at the whole of broadcasting. Spectrum trading is a very important area, following on very much from what the Radio Communications Agency has done, and the strategic review of telecoms is very much an opportunity to ask the question: Should we be doing telecoms regulation in the same way as Oftel or in a different way? We have not pre-judged those questions, but we will be looking at them.

Michael Fabricant: What influence are you going to have on the BBC, in particular its charter renewal? This is due in 2006, and will be done by DCMS. The BBC has resisted to a large degree control at any level from Ofcom. To what degree are you going to provide input into their charter renewal agreement?

Lord Currie of Marylebone: Firstly, on December 29 we immediately do take on some powers over the BBC. The timing of the PSB review is intended to provide an input into the charter renewal process, which of course is a matter for Government, not Oftel.

Michael Fabricant: Finally from me, very specifically, the question of audio description. Channel 5 is to be congratulated; they are providing audio description. The BBC is not. ITV came up with some rather spurious excuses last week why they could not but, in fact, that is not correct because when there are network programmes it does not require there to be 23 different audio description services, just one so it is not particularly costly. What impact or regulation, if any, is Ofcom going to impose, if that is the word - and having said I wanted a light regulatory touch I am now going to say can we have heavy regulatory touch! - in order to ensure that this sort of description is going to be made available for people who are partially sighted?

Mr Carter: In this area we are attempting to square the unsquareable circle of a desire to maintain light-touch regulation but a desire to make people take it seriously, which is the point you are making. We are currently in consultation with all of the broadcasters, and our going-in position you could describe as we would like to get everybody past the starting line and taking it seriously rather than having a welter of individual, annually-incremented obligations, on the grounds that our feeling is - and, indeed, you are right to make the point about Channel 5 - that when people get into it they discover that it is nowhere near as much of a burden as they think, it can be useful, and it plays very well with the audience. So that has been our approach, but it is a live consultation and we would welcome strong views.

Lord Currie of Marylebone: And we are also consulting actively with the disability groups themselves. That is a very important part of the consultation process.

Chairman: I would like to follow up a question that Michael Fabricant put to you about decisions made by the ITC in its closing moments. One of those decisions was finally to destroy News at Ten, a process first started by Mr Greg Dyke when he was at LWT when he wanted to destroy News at Ten, and he now has the cheek to say that the departure of News at Ten is a dumbing down of ITV which many years ago he wanted to achieve himself. Patricia Hodgson wrote an article about the decision to scrap News at Ten and said that you participated in it. Now a statutory obligation until recently with regard to ITV news - I recognise that it has changed in the Communications Act - was a tea time news plus a bulletin in prime time, peak time. When the effort was made to get rid of News at Ten when Sir George Russell was doing an extremely good job in charge of ITC, he refused to allow them to do it on the ground that taking News at Ten to 10.30 which is outside the peak period did not fulfil the statutory obligation because although 6.30 is within peak it is a tea time news plus a later news at peak. What we have now is a 6.30 news and we are going to have news at 10.30 which is not a peak hour bulletin, and it completes the attempt that Mr Dyke started to downgrade news as a main item on Channel 3. Why did you agree to that?

Mr Carter: I think it would be accurate to describe our approach to this as "minor". We have been a minor participant in the process but Patricia is absolutely right to say that Ofcom did endorse that ITC recommendation. As I am sure you know, Chairman, the view has been that, over and above the principal question you raise, there has been a very practical problem of the news moving around all over the place, and the view was that to move from the news at when to the news at 10.30 was an improvement.

Chairman: Why?

Mr Carter: Because it provided certainty of scheduling and knowledge on the schedule.

Chairman: They could have done it at midnight and that would have provided a certainty of scheduling, would it not?

Mr Carter: It would, but probably for fewer viewers.

Chairman: But it is fewer viewers now at 10.30. It is outside peak period; it is a down-grading of the concept of news on Channel 3; it is exactly what Sir George Russell rejected; and it is exactly what Mr Dyke wanted all of those years, so you can have certainty in all kinds of ways. Saddam Hussein may not be too satisfied if he finds out that one aspect of certainty is that he will be executed. I simply fail to understand why, on the issue of certainty, you decided now on what has happened - namely that although Channel 3 is supposed to be a public service channel news has finally been down-graded on Channel 3?

Lord Currie of Marylebone: I think it is important to appreciate we have to work within powers. Of course, the ITC has made this decision before Ofcom has taken its powers, but the licence requirement placed on Channel 3 is for one news bulletin in peak, therefore they are conforming with the licence conditions. You may well say you would prefer to see the news go back to a different time: we have to work, however, with the regulatory powers that are at the disposal of the regulator.

Ms Shipley: The Secretary of State has announced to the press and confirmed to me in writing that she would ask Ofcom to look into the issue of advertising of food and drink during children's television scheduling. Could I ask you what timeframe you are working to?

Mr Carter: Literally yesterday we responded to the Secretary of State. We are about to put the letter on the website, and that letter lays out our response to her series of questions. On your timescale point, from memory our plan I think is to work to a six month schedule between now and then --

Ms Shipley: But she will be gone by then if there is a reshuffle --

Mr Carter: The position of Secretary of State we are assuming will not be.

Ms Shipley: -- Promoted, of course!

Mr Carter: That lays out consultation all the way through research, and then issuing of new codes if that is what is needed.

Ms Shipley: Now that really disturbs me because when I took this up a year ago she said "More research" and was waiting for the Food Standards Agency research to come out. All the existing research suggests that something has to be done about food and drink advertising and when she wrote that letter, which she copied to me, in it I could see she asked you to do more research, so she is asking you to do yet more research putting it back another six months, and I put it to you that that is just a delaying tactic, frankly, of a difficult problem.

Mr Carter: To be accurate to the Secretary of State she did not ask us to do more research; she asked us to look at the question --

Ms Shipley: No. In the letter she copied to me there was "more research" - I urge you to carry out more research. There was the word there.

Mr Carter: The view we have taken and I think it is a sensible one given it is ground zero for us on 29 December is that there is a body of research out there from a variety of different sources, of which the Strathclyde research is the most recent, but our view was that it made sense to look at the question in the round, because not all of the research does: to consult with all the interested parties, of which there are many; and to do that on as speedy a timescale as we can in the interests of public consultation. It is difficult to do that in under six months.

Ms Shipley: I accept that actually; that is difficult for you to do. What I would like to put on record is that it is a delaying tactic from the Secretary of State because she already said wait for the FSA report that looked into 118 pieces of information, and the industry has consulted with her and given her endless meetings. She has listed those and they are now on record in the library. The public has responded to endless polls - all the information is there for her to make a decision on, and to ask you to do more research to me is a delaying tactic.

Lord Currie of Marylebone: Could I just say that it is important to note on the Strathclyde research that Professor Hastings himself argued for a forward-looking research agenda, and made the point that a lot of the evidence on which he was drawing was old and American in source. The research base here is not as strong as one would like.

Ms Shipley: 118 pieces of research were reviewed. If you are going to ask for new research then the timescale is going to be considerably more than six months. If you are working within six months it is a delaying tactic because all the information already exists. Moving on, ITC confirmed to this Committee in a meeting with the Secretary of State that it had no powers to deal with this issue. It has confirmed that in writing to me, to the Secretary of State in a meeting, and in front of this Committee. So, what sort of powers would you be looking at from Ofcom's position?

Lord Currie of Marylebone: The Secretary of State has statutory powers --

Ms Shipley: No. She said to this Committee it was an issue for ITC and then an issue for Ofcom, so it is Ofcom that is going to have to be looking at this. So what elements are you looking at?

Mr Carter: The responsibility for this in truth lies in about three different places. There is a very clear line of authority back through the statute to the Secretary of State on direction around advertising and minutage and control. There is a very clear responsibility on us to issue assessive codes around advertising guidance, and then clearly, most importantly of all, there is the responsibility of the broadcasters and the advertisers in the way in which they approach it. We are enjoined by statute to try and be self-regulatory and co-regulatory where we can, so our start point would be to see whether or not we can find a co-regulatory solution rather than a mandated solution, but in those mixture of places that is where the responsibility lies.

Ms Shipley: So for you specifically it will be the codes; that will be your main focus. Under the existing codes there is no power for the advertising industry, the television regulator or anybody at all to stop the advertising of high fat, high sugar, high salt content food and drink during children's schedule. There are no existing mechanisms to do this?

Mr Carter: There are no existing mechanisms. I would describe our role in this as one of responsibility and influence. Our responsibility lies around the codes, as you rightly say. Our role in terms of influence lies around the broader questions, and one of the reasons for us wanting to do, even if it is only a wrap-up piece of research with a little bit of original thinking, is to say what is this entire picture and then present it, of which clearly there will be a narrower sub-set which is where we can contribute directly if it is needed.

Ms Shipley: The advertising industry says this is not a problem, that high fat, high sugar, high salt content food and drink - and by "high" I mean World Health Organisation figures for high, so we can define it - is not its problem, it should be allowed to carry on advertising. The television industry has mailed MP colleagues saying it is not a problem, they should be allowed to carry on doing it. However, there is a very large body of evidence which suggests it should not, so we are going to come down to regulation and you will have to make a decision no doubt whether you regulate or not. I would suggest that if something is not a statutory requirement, if it is not actually required to do it, the industry will not do it because the industry does not recognise it is part of the problem.

Mr Carter: I cannot speak for the advertising industry, they can speak very well for themselves. There seems to us as a regulator quite a number of examples in other places where there is no statutory responsibility or specificity but there is quite a lot of voluntary action.

Ms Shipley: Not in this area. They positively flatly refuse.

Mr Carter: I am just making the general point it is not de facto the case you cannot get to a sensible place without statutory authority. In fact more often than not you can get to a much more sensible place. Clearly one of the objectives is to get to a sensible place. All we are discussing here is what is a sensible place and, as I say, we are going to approach this, do some fresh research, look at what there is, work with the industry and try to get to that sensible place.

Ms Shipley: Work with the industry?

Mr Carter: The industry being the broadcasters and advertisers. They will be a consultee in the research process.

Ms Shipley: You are looking at the people you have just said, but what about the whole of the other side? What about the medical groups, the voluntary groups, the huge number of other people.

Mr Carter: And, and, and, and.

Ms Shipley: The chief executive of the ITC, when she came in front of this Committee and indeed at a meeting with the Secretary of State, argued on behalf of the television companies and how a loss of revenue would affect them, and that is why things should not be done, and on behalf of the advertisers. I thought that was a completely disgraceful position for the watch dog to take. Could you please reassure us today that you will take a considerably more independent position than the ITC took?

Mr Carter: Again, I am not as familiar as you are with the ITC's position.

Ms Shipley: It is on record to this Committee.

Mr Carter: Definitely I will refer to it. It seems to me entirely appropriate for the regulator to look at all of the perspectives, and we have a group of commercially funded public service broadcasters and their views are relevant. The people who partially fund that are the advertisers, their views are relevant. So are the consumer groups, so are the consumers, so are the parents, so are the doctors, so are the medical experts. There is not a defining single view that ranks above the others. So it seems to me the role we have here is to do exactly that, which is to look across all the issues and then make a balanced analysis and judgment.

Ms Shipley: Finally, could I ask you, is children's television public service broadcasting?

Mr Carter: Good question. As the current definition would have it, yes, part of it yes.

Ms Shipley: Which part?

Mr Carter: That is probably a subject for a longer discussion at another time. There is a significant proportion of original production, UK production and UK children's programming, which would pass the definition of commercial public service broadcasting.

Ms Shipley: Which part would not?

Mr Carter: Hopefully, as David said earlier, we will get to clarity around that at the end of the PSB review.

Lord Currie of Marylebone: In the whole general area of public service broadcasting, the definitions have been rather unclear. We intend that review to give clarity, exactly to be able to answer questions of that kind.

Ms Shipley: Thank you.

Chairman: You will have noted, gentlemen, when Debra Shipley says "finally" she means finally. A lesson to us all.

Chris Bryant: That was a pointed remark from the Chairman because I used the word "finally" in a penultimate question last week rather than an ultimate question. You said earlier, Lord Currie, that obviously the most important thing is to try and achieve competitive and vibrant markets. I wonder in the areas you are dealing with how many problems you think you will have to face in terms of monopolistic practices which prevent competitive and vibrant markets?

Lord Currie of Marylebone: If one looks at the markets with which we deal, you have in broadcasting a considerable weight and influence from the BBC, in the telecoms area clearly BT occupies a very strong position. We will need to be vigilant in ensuring those strong positions are not abused and do allow effective competition to emerge.

Chris Bryant: You said the BBC, did you?

Lord Currie of Marylebone: I said in broadcasting, in general, the BBC plays an important, significant role. That does not mean we have powers over the BBC necessarily. We have some powers in some content areas.

Chris Bryant: Sky now brings in more money every year than the licence fee and it is vertically integrated between providing the platform on which channels go out and the content which goes out on them. Do you think you have sufficient powers to be able to make sure that the dangers of monopolistic practice in there, of abuse, are dealt with?

Lord Currie of Marylebone: We have all the powers of the Competition Act, we have the current powers with the OFT in that respect. We have the powers of the Enterprise Act. Those are quite significant powers. In respect of Sky, it is important to remember that although Sky is now in a strong position it was a new entrant sometime ago and took very considerable commercial risks. That is a factor in looking at the situation which needs to be considered, but we will be applying the Competition Act and the Enterprise Act powers in a rigorous way.

Chris Bryant: There will never be another new entrant in there, will there?

Mr Carter: Time will tell is the answer to your competition question. We have more significant competition powers than the previous broadcasting regulators.

Chris Bryant: What about local loop unbundling? I know you are going to be reviewing it this next year. Do you think there are lessons to be learnt about the way the European Union and the Commission and Britain have tried to push this forward?

Mr Carter: I think there are a lot of lessons to be learnt. The European review process is certainly in strategic terms pretty much completed, in actual market review terms it is moving at varying paces depending which country you are in. We are predictably very good European citizens and are at the head of the market review queue. As you rightly say, local loop unbundling will be something we will look at specifically in the first quarter. To your broader question, there is undoubtedly a time to say, "We have had four years of the European Framework Directive in telecommunications, what value has it created?"

Chris Bryant: On a slightly different issue, you will know that large parts of the country do not have free view, there is no plan they will have it over the next five, seven years, and in those areas now the only opportunity of a free to air digital offering has been the free to air offering on Sky which closes as an option at the end of Christmas. Do you think that is a problem?

Mr Carter: Digital coverage is - I am not sure I would call it a problem - a big question that definitely needs some answering. Part of that is DTT coverage. Part of it is, are there other technologies, going back to the question one of the other members of the Committee asked earlier, which could help conversion. Part of it is who is going to fund the transmission build up, and what are the trade-offs associated with that. Is it a glass half empty and a problem or a glass half full and an opportunity. I do not know, we will see.

Chris Bryant: There is a free to air offering which continues for those who pay their £23.50 or whatever - the Solus Card question - but no new people can take it on after Christmas. So if you are going to drive up digital take up in areas, in particular poor areas, where people do not want to commit themselves to an extra £15 or £20 a month subscription, and they do not have the option of free view, there will be significant problems, will there not? Is that an issue for you or do you wash your hands of it?

Mr Carter: It is not directly an issue for us but one of the things we are going to be asked to do by the DCMS is submit a report at the end of the first quarter on the progress towards analogue-digital switch off and what are the attendant questions, and clearly exclusion is an attendant question. How that gets addressed is undoubtedly going to have to be part of the plan that is put in place when the process moves from preparation to implementation.

Chris Bryant: It seems an irony to me now that broadband is available throughout the two valleys in my constituency, throughout the Rhondda, but digital terrestrial television is not and has no prospect of being so in the next five to ten years. Do you think broadband is going to be a possible answer to televisual digital solutions?

Mr Carter: We are a way from that, I would say. I certainly hope as broadband develops we can move into genuinely usable band width and more flexible band width but right now it replacing broadcast television technology as a transmission platform on a mass basis is a few years away.

Chris Bryant: Analogue switch over. Do you think it is likely to happen across the whole country at the same time, or region by region?

Lord Currie of Marylebone: I think it will be a region by region process.

Chris Bryant: Do you think Wales could be the first region? It has the highest penetration of digital television and some of the more problematic areas of the country are in Wales, so if we can solve Wales we would probably be solving the country's problems.

Mr Carter: You will be reassured to know that Ed Richards is leading the PSB review and I am sure that case will be put powerfully.

Chris Bryant: I have some mixed feelings about the PSB review because I remember when I worked at the BBC, Commissioner Van Miert tried to define public service broadcasting and basically he ended up saying that sport by definition could not be a public service broadcasting, which would of course smash a hole in nearly every public service broadcasters' scheduling. So I wonder what the real purpose is of the review. Is it to define what the licence fee should really be paying for because if it is not public service broadcasting then the licence fee should not be paying for it? Does that take you into very tight definitions of market failure? Or is it there to define what public service broadcasting requirements which are in present ITV licences should be ditched the next time round for licences?

Lord Currie of Marylebone: I do not think we have any of those purposes directly in mind. The purpose of the review is to inform our consideration of re-licensing, in Channel 3 certainly. We have no pre-judged view as to which direction that will take us, that will be a matter for consultation, looking at the evidence and hard analysis.

Chris Bryant: There is a possibility then there would be present public service broadcasting requirements such as religion, say, which you might think should be ditched in the future?

Lord Currie of Marylebone: I did not say that. Who knows? The review may conclude in some areas the requirements should be tightened. We have an open-ended review which will look at the evidence in an open way, consultation, evidence-based. We do not want to pre-judge that.

Chris Bryant: I still am slightly perplexed by what you mean by what public service broadcasting is. I can understand what public sector broadcasting is, or that which is provided by state subsidy in some form, either a licence fee or direct subsidy, as it is in the case of the grant in aid to the World Service for instance. What I do not understand is what public service broadcasting is other than that.

Mr Carter: It is in part, although not in whole, the series of obligations which are laid on the commercial public service broadcasters. It also includes broadcasting that is provided by non-commercial public service broadcasters and you will have seen in our review we have broadened it to include many people who certainly have argued the case to us that they make a contribution to public service broadcasting, however defined, but yet do not have a commercial licence. So what we are trying to do is say, "The public sector broadcasting is clear, the public commercial public service broadcasting is unclear" as indeed evidenced by this discussion. One of the things which would be useful as we move to 100 per cent digital is to get some clarity around what it is, how it is valued, how it is used and how it should be paid for.

Chris Bryant: So does that make it market failure?

Mr Carter: Not entirely, no. The review makes it very clear that we will look at both qualitative and quantitative measures, and market failure is one of the concepts and precepts we are testing but it is not the only one.

Chris Bryant: Bearing all that in mind, because you just said it is also about commercial players, including some people who have not got any specific requirements on them, why is Sky not included in your list of broadcasters?

Mr Carter: In what sense included in the list? We are consulting Sky.

Chris Bryant: In your press statement it lists the broadcasters you are talking to - BBC, ITV1, Channel 4, 5, S4C.

Mr Carter: That list refers to what is specified on the face of the statute. What we have also done, as Sky I am sure would validate, is we have broadened the consultation to involve those broadcasters who do not appear on the face of the statute but may well believe they make a contribution, of which Sky is one.

Chris Bryant: Digital radio has been one of the sort of slow burn successes, I guess, over the last year, in particular last Christmas was an enormous success in terms of selling sets because there were finally sets available to buy, and this year there is a multiplicity of them around. One of the great things about radio of course is that many people listen to it in the car and we still do not seem to be at a point where there are any digital radios appearing in cars or even available to be had for cars. Do you have any role at all in enabling the roll-out of hardware?

Mr Carter: Pretty indirect, to be honest. We have a role in the way in which we handle the licensing process, we have a bully bull pit (?) role in terms of promoting digital radio, and clearly there is a licensing and relicensing question around that. But specifically on hardware, no, that is a function of demand and supply.

Chris Bryant: But it is difficult, is it not, because for digital radio it has been chicken and egg and people are saying, "We are not going to produce services until there are radios" and others saying, "We are not going to produce radios until there are services."

Lord Currie of Marylebone: This is a particular problem, especially given the nature of production in this area which is international in character, and the UK being the leader in digital radio in that respect makes the problem a little less tractable. But I have to say the radio industry has moved an enormous distance in getting equipment manufacturers to produce sets of an increasingly attractive kind. I would expect to see a break-through into the car market in due course.

Chris Bryant: In due course?

Lord Currie of Marylebone: It is not for us to determine.

Chris Bryant: Maybe you will need to use a bit of the bully bull pits.

Mr Carter: There is a role for us in "where to next" for digital radio as part of the digital transmission question. As is often the case, it is a bit like the digital TV question, what a lot of the manufacturers are looking for is direction and indication as much as anything else.

Chris Bryant: Finally, Chairman, how much will you cost next year?

Mr Carter: Next year, if you take from April to April as a full year, £136 million plus the repayment of the start-up loan and VAT on top.

Chairman: Just before I call Adrian Flook I would like to follow up on this issue of public service. It is very difficult to define public service and I think it is very unfair to ask anybody to define it as such. The BBC, as I have said before on this Committee, follows Herbert Morrison's response to the question, "What is socialism?", which was "Whatever a Labour Government does", though I do not think Mr Blair would like that. The BBC would say that public service broadcasting is whatever the BBC does and that just shows what a bad definition it could be. If one looks at an agglomeration, one could certainly say that despite certain big teases on its schedule Channel 4 fulfils very well indeed its statutory remit of public service broadcasting. It could be said, I suppose, if one looks at the whole spectrum of Sky provision, Sky does public service broadcasting with several very good sports channels, wonderful movie channels, plus what in my view is easily the best news channel on television probably in the world. On that basis I cannot really see how Channel 3 could be regarded as fulfilling its public service remit because you, Lord Currie, with all your expertise and with the generosity which has become a byword for your approach to things, were put in a little difficulty when asked to provide some examples of public service broadcasting on ITV.

Lord Currie of Marylebone: Those set of issues will be looked at very carefully by Ed Richards and his team. Much better minds than mine will be brought to bear on this question and I hope we will come up with some clearer definitions than we have had in the past.

Chairman: Lord Currie, if there were better minds than yours it would be they who would be chairing Ofcom. Therefore I think together with all the other attributes we seen, modesty is another one.

Mr Flook: Gentlemen, you will be very aware this session is entitled Ofcom Preparedness and Handover, how well have you managed that transition from the current, as we sit here on 16 December, until you take over on 29^th?

Lord Currie of Marylebone: As the person who has been in this the longest, I have to say I think it has gone much better than I could have hoped when I was appointed back in July last year. The organisation only came together, it is important to realise, last week. The organisation was fully formed last Monday, we opened our front door for the first time on that day, and before that in successive weeks staff and the existing regulators had moved over but only about six weeks ago we were in effect only 40 people in Ofcom managing the hiring and complex plumbing issues, as we call them, all the HR issues, processing and the like, and also starting to prepare our policy function. I think the way in which that has been done has been very effective and I am more than happy with the way in which my chief executive and his team have delivered on the remit. We are ready to go on the 29^th.

Mr Flook: In the light of that, you will be pleased and probably displeased to hear the following quote which you may have picked up in preparing for this session this morning. "Lord Currie is providing outstanding leadership to Ofcom. I think he has assembled in the chief executive and the management board people of outstanding quality including some of the very bright stars from my own Department. I do not have wholly unmixed feelings about Ofcom's success in building an organisation of real calibre." To untwist the double negatives the Secretary of State made on 2 December, how do you interpret those remarks? She has "mixed feelings". Are they more than just a lament about the loss of some of her bright stars?

Mr Carter: I do not know what the Secretary of State was referring to but she has said to me, and I am sure to David in passing, that pleased though she is that Ofcom is coming together well she would be happy if we did not hire any more of her best people.

Mr Flook: Are you going to be hiring any more of her best people?

Mr Carter: We are not planning it.

Lord Currie of Marylebone: I think that is all that underlines that remark, from the conversations I have had with both our Secretaries of State. They seem very content with the way Ofcom is progressing.

Mr Flook: I am happy that the record has been put straight. Whilst you have been in this long glide towards 29 December, one or two things have been happening, particularly the ITV merger. Are you happy with the way the conditions for the approval of that merger have been put together?

Mr Carter: As David said, whilst we have been a relatively small team and pretty much focused on the structure and plumbing and hiring and transfer, we have found ourselves deeply engaged in some policy activities and that is one. We have had a joint team between ourselves and the ITC working on that pretty much since July in tandem with the OFT who took the lead on that process once the decision was made. I think we feel, and the industry really will be the judge of it, in relatively short order we have made some significant progress. The remedies are now in existence, there is no doubt they are complex, but I have to say the air time sales market is also quite complex, so there is a direct correlation there. We have had to appoint an adjudicator so we had to go through that selection process and we have found a really first-class person to do that job. We also in parallel run a consultation on the codes on air time sales we are inheriting from the ITC, and we have deregulated there in effect because we have said we will go to ex poste Competition Law rather than having specified rules, and we have done all those things in three months and have now started a process of information cascade and holding seminars and training events so people practically understand what the remedies are. The deal season was delayed as a consequence of all those things, but that was an inevitable consequence of the decision, but that started on 1 December and my sources tell me is running well and fast.

Lord Currie of Marylebone: It is worth adding that the timing of the Competition Commission Report and the subsequent approval by the Secretary of the State did create a very tight timetable for us to put all of that place. I have to say I regard the success of us doing that - some people in the industry thought we would not be able to do it in the time available - is an exemplar of how we want to operate as a regulator, to be timely, fleet of foot but of course paying proper attention to due process.

Mr Flook: Moving on to public service broadcasting, what role does the availability of digital BBC channels play in the definition of public service broadcasting? I say that in the light of quite an amusing article written in today's Telegraph by Christopher House where a chap went along and tried to buy a set top box to literally get BBC 4, which he was mainly interested in it seemed. The point of the article was that it is not that easy, so there is not as great an availability as there might be. I am someone who is not scared of technology but not very good with it, so how are you looking at that availability going forward?

Mr Carter: This sounds like an evasive answer, it is not meant to be, it will be part of the report we will provide by the end of March to the DCMS, and it will have to deal with that question as well, which is the simple fact of availability and also how understandable it is to get that availability.

Mr Flook: Things like, there was not a start lead in the box.

Mr Carter: There is not a start lead in the box when you go to the store and buy it, or when you go into the store what happens is that they ask you to spend £1,200 buying an analogue flat screen TV rather than a digital TV. These are all relevant issues in the real world of going digital. Part of it is transmission coverage for sure and an availability question but there are very, what I would call, day-to-day questions around people's interaction with the process of trying to go digital, and laying that out very clearly and where the obstacles are is hopefully part of the contribution we can make to the debate.

Mr Flook: That is very good news. Thank you.

Chairman: There is going to be one ITV and that is inevitable, nevertheless although ITV is able to become one ITV as a consequence of communications, it is made up of regional broadcasting organisations each one of which has its licence provided by the ITC carried over to Ofcom. Therefore one ITV is nevertheless an agglomeration of organisations each one of which has been given its licence on the basis of a specific regional remit. What action will you take to make sure that each of those regional companies fulfils the regional remit upon which the licence has been awarded? If that remit is not fulfilled in a manner which you regard as satisfactory, will you withdraw licences?

Lord Currie of Marylebone: I think the withdrawal of licences would be an extreme measure. We would have to make sure any response to breach of the licence conditions was proportionate and appropriate. We will look at deviations from that and we will consider what steps we should take as a regulator.

Chairman: There have been many concerns expressed in a series of inquiries about the way in which specific licensees seem to renege on their obligations. Before Mr Doran became a member of this Committee we, at his instance, looked for example at what Grampian was doing or not doing. There have been many concerns and I think the latest communication from Sir Robin Biggam may allay misgivings about the news-gathering in Meridian. When we had Granada Carlton before us last week, I asked questions about what Granada was going to do to maintain a proper and appropriate and necessary presence in the North West and particularly Manchester. I have to say that the responses I received did not reassure me in any way whatsoever, namely they were going to move out of their present building - which I would not criticise them for because it is a very unsatisfactory building - but the replacement, as they said, on their present plans was not going to replicate the facilities available in the present building on the curious basis that not much work is done in studios any more. Will you maintain a very strong vigilance to make sure that Granada is not going to use the merger with Carlton to do what the Manchester Guardian did between 1959 and 1961 and turn itself from a regional paper based in the North West into a national paper based in London? I will immediately veer away from that analogy with the Guardian but that is what happened with it. Granada is what worries me.

Mr Carter: We are approaching, as the regulator, the consolidation of ITV, excluding obviously SMG and Ulster and Channel, as an opportunity to, if you like, tidy up the historical mish-mash which I think has allowed a little bit of playing both ends to the middle. The Act is very clear it seems to us in that it provides greater economic liberalisation in return for a greater reserve and some very prescriptive rules - regional output rules, regional production rules, independent production rules, PSB obligations - and we intend in this area, much as we do in telecommunications, to be very clear about what the rules are.

Chairman: If you have not already had the opportunity to do so, I would be grateful if you would study the transcript of the response by Carlton/Granada to the questions which were put to them last week which struck me as evasive and unsatisfactory. While you may not necessarily share my view of those answers, I hope you will study them with great care and make sure they will fulfil the obligations on which they were awarded their licences regardless of their predominant role in the merger.

Lord Currie of Marylebone: We will certainly look at that evidence very carefully, Mr Chairman.

Chairman: Thank you very much. Thank you very much for coming here today. I hope you have found it useful. We certainly have. For what it is worth, and again without being patronising, I as Chairman have certainly found the demeanour of yourselves a good deal more attractive than that in some comparable sessions we have had.

Lord Currie of Marylebone: Could I say thank you very much. We appreciate this and we look forward to our future meetings before you.