Select Committee on Business and Enterprise Minutes of Evidence


Examination of Witnesses (Questions 100-111)

LORD CURRIE OF MARYLEBONE AND MR ED RICHARDS

22 APRIL 2008

  Q100  Chairman: Why is it not 5% of the total yield of licence fee? That would send them a message.

  Lord Currie of Marylebone: That is a question we could put to parliamentary colleagues. We are not suggesting that would be appropriate.

  Q101  Chairman: You list as one of your priorities for the year promoting competition in the pay TV market which suggests to me that you currently think there is not sufficient competition in the pay TV market. It is something you are looking at. Can you tell us whether you have reached any conclusions as to whether or not there is a serious competition issue needing to be addressed here?

  Mr Richards: We have not reached that conclusion yet. We are looking at the issue still. We expect to publish something on that before the summer. As you know it is an extremely complex set of issues. We have had an enormous response to this question. It is linked of course to the question of Sky's application to go onto DTT. We had over 400 responses to that application alone. We have had very substantial responses to our market investigation on pay TV; some of those have only just come in which has caused us to be a few weeks behind (we have literally only just received them). However we do intend to publish something on that and make clear where we stand before the summer.

  Q102  Chairman: Is your examination simply going to concentrate on the Picnic proposal of Sky or are you going to be looking at the wider position of Sky within the market and possibly even consider recommending some changes to the structure of the company rather as you did with BT?

  Mr Richards: There are two issues we are looking at. There is the specific issue about Sky's proposal to go on DTT. There is a separate market investigation into pay TV much more widely. In reality of course the two are connected and need to be considered closely together, but they are technically separate questions. We have to treat the application to go on DTT as a specific question which we need to answer. Of course we are looking at them in the round; we are looking at a broader view on this but we also need to deal with the specific DTT application within that broader context.

  Q103  Chairman: That could ultimately lead to an Enterprise Act reference.

  Mr Richards: It could indeed; that is one possible outcome.

  Q104  Chairman: When do you expect to come forward with your conclusions?

  Mr Richards: We would hope to do the next step before the summer. There may be further steps after that but we would certainly expect to say something before the summer.

  Q105  Chairman: In terms of competition, do you have any concerns about the Kangaroo proposal of the BBC, Channel 4 and ITV all coming together to provide a single seller of archive TV programmes?

  Mr Richards: That is an interesting question. We have not had any complaints or concerns expressed to us about that yet.

  Q106  Chairman: You will have.

  Mr Richards: It is possible that we will. We have to look at which economic market it is relating to and whether that economic market is actually very, very broad, in which case you might be less concerned about it and also look at the arrangements made between the parties. We are aware of the issue, we are aware of the question; we have not actually had any complaints in relation to it yet.

  Q107  Chairman: If you received a complaint you would do something about it.

  Mr Richards: Whenever we receive complaints about things of that nature we would have a look at it, we may not take it any further or we may do. We certainly respond and think carefully about any issues of that kind that are raised.

  Q108  Mr Luff: I have a concern that economic regulators like you and Ofgem quite often end up making policy rather than simply being regulators. What I am curious to know is whether this is because you want to make policy or because the Government leaves a vacuum which you are obliged to fill. One thinks about the questions of children's programmes and advertising; one thinks about some of the issues around the PMSE sector, and convergence itself is raising a host of new questions about the way we regulate the various platforms. You say that regulatory approaches may need to be adjusted to reflect the new delivery mechanisms and ways of consuming communication services. The Government takes the decision that it is the regulatory mechanisms that should be changed and not the regulators. It is a public policy matter. You are not actually on the Convergence Think Tank but you contribute to its work as I understand it and that is good. Do you think that the establishment of the Convergence Think Tank was a shot across your bows for being too ambitious as a regulator, grabbing policy for yourself, or is it a helpful way of actually relieving you of a burden you do not want?

  Lord Currie of Marylebone: We certainly regard it as a useful thing that the Government has done in creating that. We, as a regulator, have a set of clear duties given to us by Parliament in the Communications Act. Translating that into regulatory action requires one to think through the mechanisms and it requires one to think through how those mechanisms need to adjust in the light of the market developments. The issues you allude to I think are a perfectly legitimate part of what we are doing in pursuit of the duties given to us as an independent regulator by Parliament. There are some other issues which are outside those regulatory duties where government has to act. We touched on some of them today: the possible continuance of plurality in public service broadcasting which will need a funding mechanism which is not to do with us. Digital switchover is another case where it is a government action and we work closely with government on those issues. We hope our analysis helps to guide government in its policy decisions. There is a very clear distinction between those areas where government has to take the lead because it is its responsibility and us pursuing our regulatory duties given to us by Parliament.

  Q109  Mr Luff: There is a clear conceptual distinction; I accept that. In practice it often gets muddier than that.

  Lord Currie of Marylebone: You have to be pragmatic in that interpretation. I hope you are not suggesting that Ofcom is overstepping the mark in trying to do things which are beyond the very broad remit that Parliament has given to us.

  Mr Richards: It is a question of judgment but we try very carefully to err on the side of caution in this. I think we recognise the line and the difference that you are describing. I think the discussion we had about public service broadcasting earlier is a good example. We will not say that the answer is X because we think that that is what government and Parliament should do. We see our job as setting out the range of options, helping wherever we can to bring evidence and research to that, the pros and cons and so on, but the decision in that area is not a policy decision for Ofcom, it is a policy decision for government and Parliament. We are very, very clear about that. In some cases Parliament has given us the decision making authority (the economic regulation of mobile call termination rates is an example). Where that is the case we clearly have to discharge that duty.

  Q110  Mr Luff: To maximise the revenue for digital dividend review and secure full broadcasting of the 2012 Olympics there may be a public policy decision you are actually being asked to take as a regulator.

  Mr Richards: In that case we are very clear. We do not have a duty to raise revenue from the auction of spectrum. We have a duty to optimise efficient use of spectrum which is why I made the remarks I did about bringing it into use as quickly as possible. The Government retains a right to direct us in relation to spectrum matters and could always do that, but it is not our job to raise revenue for the Treasury or anybody else; it is our job to bring it into efficient use.

  Q111  Chairman: I think we have covered all the ground we intended. Can I, on behalf of both Committees, thank you very much.

  Lord Currie of Marylebone: Can I express our thanks also. We do find these sessions stimulating but also useful. It is very good to hear your concerns and to have the opportunity to discuss in this way.






 
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