Joint Committee on Draft Communications Bill Report


250. At present, there are a number of restrictions on ownership affecting holders and potential holders of Channel 3 licences and the Channel 5 licence. The main ones are as follows:

    (i)  no-one may hold both a Channel 3 licence and the Channel 5 licence;

    (ii)  no-one may hold the two London ITV licences;

    (iii)  no-one may hold two or more television licences where the licensee exceeds 15 per cent of total television audience share;

    (iv)  no-one may own more than 20 per cent of the ITV nominated news provider;

    (v)  no-one may hold a licence to provide a national Channel 3 service or Channel 5 and a licence to provide a national radio service;

    (vi)  no-one may hold a licence to provide a local radio service or local digital sound programme service and a licence to provide a regional Channel 3 service whose coverage area is to a significant extent the same;

    (vii)  no person who runs one or more national newspapers with combined market share of 20 per cent or more may hold a licence to provide a regional or national Channel 3 service or Channel 5;

    (viii)  no person who runs one or more local newspaper with a combined local market share of 20 per cent or more in a Channel 3 region may hold a licence to provide that regional Channel 3 service; and

    (ix)  no proprietor of national newspapers with a national market share of 20 per cent or more may have more than a 20 per cent share in a regional or national Channel 3 service or Channel 5.

—  In addition, there is a public interest test to which applications to hold Channel 3 licences or the Channel 5 licence by certain newspaper owners are subject.[465]

251. The Government proposes quite radical changes to this framework. Restrictions (ii) and (iii) are to be removed, thus lifting all specific legislative barriers to the creation of a single ITV.[466] This policy has been consistent since the Communications White Paper.[467] In that document, the Government also envisaged maintaining restriction (i), but it is now proposed that this be lifted, allowing potentially for a single owner of ITV and Channel 5.[468] Restriction (iv) is to be amended to allow a single shareholder to own 40 per cent of ITV's nominated news provider.[469] Restrictions (v) and (vi) are to be lifted in their current form.[470] Restrictions (vii) and (ix) are to be lifted with respect to Channel 5, but maintained for ITV companies. Restriction (viii) is to be retained.[471] The public interest tests, which have been criticised for being "subjective and opaque", are to be abolished.[472]

252. The measures to lift specific legislative barriers to single ownership of ITV were, unsurprisingly, welcomed by ITV itself, which argued that further consolidation would "sustain the channel's ability to compete and, therefore, deliver its significant public service obligations".[473] There remains concern about ITV consolidation, which is focused on, but not confined to, issues relating to advertising sales and regional programming commitments.[474] The Government has already responded to some of these points as follows:

    "Some respondents to the White Paper expressed concern that consolidation could lead to a dominant market position for ITV and hence drive up the cost of TV advertising. However, this is solely a market issue: the competition authorities would have to consider such matters and competition law should provide sufficient protection."[475]

—  The Institute of Practitioners in Advertising argued that advertisers would be constrained in making complaints to competition authorities against their main media outlet, and therefore proposed a range of restrictions on advertising sales by a single ITV as a prerequisite for consolidation.[476] The sheer complexity of the controls proposed reinforces the value of an examination of such matters, and the imposition of any appropriate measures, by the competition authorities. We agree with the Government that the economic considerations relating to single ownership of ITV will be best determined by the operation of competition law, which would be significantly strengthened by the plurality test we have recommended. We also consider that matters relating to the consolidation of ITV and Channel 5 could properly be decided through competition law, strengthened by the plurality test.

253. It is not proposed by the Government that the process of ITV consolidation can, in the near future, extend to its own news provider. Although a single shareholder will in future be able to own 40 per cent of the ITV nominated news provider, that system itself is to be retained. The aim of this system is to ensure that the licensees network their news service and appoint as provider an organisation approved by OFCOM as able to provide a high quality, competitive news service.[477] ITV, Teletext and BSkyB all criticised the retention of this system.[478] ITV argued that it undermined investment in Channel 3 news, both because of the competitive tendering process and the general lack of an overwhelming ITV interest in its own news provider.[479] Teletext took the same view, and thought that concerns about independence could be dealt with through licensing conditions.[480]

254. Mark Thompson of Channel 4 disagreed, seeing the ownership separation as an important protection for plurality in news provision.[481] ITN itself, having previously advocated abolition of the nominated news provider system, acknowledged that proposals for liberalisation of ITV ownership might help to explain the Government's decision to retain the system.[482] The Government proposes to obtain a power to repeal the provisions should it consider such a move appropriate.[483] The Government is also seeking to create a framework in primary legislation to allow for the imposition in future of a nominated news provider system for Channel 5 by means of secondary legislation.[484] It is intended that this power would be available if Channel 5 gained a significant share of the free-to-air television audience.[485]

255. We are not convinced that the retention of the nominated news provider provisions for Channel 3 provides a safeguard for the quality and impartiality of news on ITV that could not be provided by licensing and networking arrangements. However, given the current uncertainty surrounding the ownership structure of ITV and its commitment to investment in news, we have concluded that the Government is right to include a nominated news provider Clause in the Bill, with a power to repeal that requirement. We recommend that OFCOM hold an early review of the restriction on the proportion of the Channel 3 nominated news provider that may be owned by any one organisation to determine whether it is the best way of ensuring that there is a strong news provider to compete with the BBC and BSkyB.

256. The most significant divergence in the treatment of ITV and Channel 5 in the Government's proposals is that the latter may be owned in future by a large newspaper group - and thus potentially also by the dominant operator in the satellite television market - while such an organisation would remain unable to acquire a Channel 3 licence. This difference in treatment is explained by the Government as follows:

    "Joint ownership of a substantial share of the national newspaper market and a substantial part of Channel 3, the only commercial public service broadcaster that currently has access to a mass audience, would represent an unacceptable concentration of influence in the current circumstances."[486]

—  News International argued that this distinction in treatment was based on a "vague and subjective concept" of influence.[487] BSkyB also found the difference in approach "curious", while admitting that it was unlikely that a major player in the newspaper market and in satellite television would be permitted to obtain a controlling influence in ITV under competition law.[488]

257. Others argued for consistency in the other direction, namely the retention of the prohibition on ownership of Channel 5 by a major newspaper group. Professors Steven Barnett and Jean Seaton warned that joint ownership "offers significant opportunities for cross-promotion of media products and exploitation of editorial space to denigrate any regulatory attempts to impose fines or onerous public service obligations".[489] Both ITV and Channel 4 were concerned at the potential for joint ownership of Channel 5 and the major satellite provider, in terms of the impact on acquisition of pay-to-view and free-to-air rights and cross-promotion.[490] John Clark of the Voice of the Listener and Viewer and Lara Celini of the Edinburgh Media Policy Group expressed similar concerns in our online forum.

258. Tessa Jowell maintained that different approaches were justified for "a mature universal broadcaster" and for "a much smaller enterprise". She claimed that the proposals combined an important safeguard with respect to ITV while that channel remained the dominant commercial player with flexibility should the balance of power between ITV and Channel 5 change.[491] We are not convinced by this argument. The Government suggests that special protection is justified for ITV because it is a major terrestrial broadcaster, but not justified for Channel 5 because it only has the potential to become a major terrestrial broadcaster. This potential, indeed, is recognised by the Government in its provisions potentially to include a growing Channel 5 in the nominated news provider scheme. If the Government believes that it is unacceptable for a major terrestrial channel, a major newspaper group and the dominant satellite network to be open to shared ownership, then the clearest and most straightforward way to achieve this is to maintain the prohibition on ownership of Channel 5. Subsequent enforcement of such a rule if Channel 5 grew in audience and market share, with possible requirements for disinvestment, would be much more problematic. In advance of the first review by OFCOM of media ownership, in or around 2006, we consider that the case for lifting the prohibition on joint ownership of Channel 5 and a major national newspaper group has yet to be made. We recommend accordingly that the prohibitions in Part 1 of Schedule 14 be extended to Channel 5.

259. We have one further recommendation to make in this context. Much of the persuasive evidence we heard in this area concentrated on the potential detrimental effects of shared ownership between a public service broadcaster and a major satellite packager, in terms of shared rights acquisition and cross-promotion, for example. Channel 4, for example, argued forcefully that regulators should recognise "platform ownership" as a distinct form of media ownership with respect to drawing up cross-media ownership rules. As it happens, due to current ownership structures and regulatory classification of forms of media ownership, the rules regarding newspaper groups have the side effect of encompassing the major satellite packager. Ownership structures can change. Accordingly, we recommend that, as part of its first review of media ownership rules, OFCOM consider the case for specific controls relating to ownership of a major satellite packager and of certain other broadcasting licences.

465   Cm 5010, pp 98-101. Back

466   Policy, para 9.5.1. Back

467   Cm 5010, para 4.6.1. Back

468   Cm 5010, para 4.6.2; Policy, para 9.5.2. Back

469   Policy, para 9.5.4. Back

470   Policy, para 9.4.5. Back

471   Policy, paras 9.4.2-9.4.5. Back

472   Ev 349, para 2.1.3; Policy, para 9.4.7. Back

473   Ev 194, para 50. Back

474   Ev 177, para 6.2; Ev 204, para 4.32. Back

475   Media Ownership Rules, para 6.2.4. Back

476   Ev 495, section 5. Back

477   Clause 261; Policy, para Back

478   Ev 193, paras 44-46; Ev 351; QQ 660-663. Back

479   QQ 562-566. Back

480   Q 885. Back

481   Q 596. Back

482   Ev 599, para 2.10, 2.16. Back

483   Clause 262; Policy, para 9.5.6. Back

484   Clause 263. Back

485   Policy, para, 9.5.5. Back

486   Policy, para 9.4.3; Schedule 14, paras 1-6. Back

487   Ev 362, para 3.2. Back

488   QQ 657, 664-674. Back

489   Ev 439, para 2 iv. Back

490   Ev 194, para 51; QQ 567, 589. Back

491   Q 994. Back

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