CHAPTER 7: SUMMARY OF CONCLUSIONS AND
Chapter 1: Introduction
1. We recommend that, in responding to our Report,
the Government respond also to the points made by the Delegated
Powers and Regulatory Reform Committee (paragraph 8).
2. We commend the way the Government consulted industry
and consumers in the run up to publication of the draft Communications
Bill and recommend that future Bills also follow this route (paragraph
Chapter 2: The framework for the new
(i) The general duties of OFCOM
3. We recommend that, in the general duties of OFCOM
and elsewhere in the Bill where a specific commercial relationship
between a customer and a service provider is not being referred
to, the term "consumer" be used in preference to the
term "customer" and that consumer be defined so as to
encompass all those who benefit or might benefit from the provision
of services and facilities in relation to which OFCOM has functions
4. We recommend that it be the principal duty of
OFCOM, in carrying out its functions -
(a) to further the long-term
interests of all citizens by -
(b) to further the long-term interests of consumers
by promoting the efficiency of electronic communications networks
and services, and broadcasting
and to do so wherever possible by promoting
effective competition in national, regional and local communications
markets throughout the United Kingdom (paragraph 26).
5. We recommend that Clause 3(2) be amended to require
OFCOM to have regard to the desirability of encouraging investment
and innovation in communications markets (paragraph 27).
(ii) The structure and functions of OFCOM
(a) The main Board
6. We agree with the Government that it would be
wrong to expand the main Board's membership for representative
purposes that could well detract from its strategic role (paragraph
7. We recommend that the Secretary of State make
an order under section 1 of the Office of Communications Act 2002
to increase the maximum number of members of the Board to nine,
and consult the incoming Chairman of OFCOM on the number of members
of the Board to be appointed before OFCOM assumes its regulatory
functions (paragraph 30).
(b) The Content Board and media literacy
8. We recommend that the final Bill endow the Content
Board with executive and determinative responsibility for the
functions of OFCOM relating to programme standards for television
and radio services under Clauses 212 to 220, including all functions
relating to individual complaints with respect to fairness and
privacy under Clause 219. We further recommend that the Content
Board be assigned the main day-to-day role in respect of the public
service remit for television and OFCOM's specific functions in
relation to licensed public service television broadcasters, but
subject to the ultimate decision-making authority of the main
Board (paragraph 34).
9. We recommend that Clause 17 be amended to require
at least one non-executive member of the main Board in addition
to the Chairman of the Content Board to be a member of the Content
Board (paragraph 35).
10. Over and above its contribution to OFCOM's annual
report, we recommend that the Content Board be given a right to
publish its views when it considers it appropriate to do so (paragraph
11. Provided that such a role remains distinct from
the executive, regulatory functions of the Content Board in respect
of standards on licensable content services, we support the proposed
provisions for the Content Board to play a role in examining content
transmitted by means of all electronic communications networks
12. We welcome and support the proposed function
of OFCOM in relation to media literacy in Clause 10 of the draft
Bill. We recommend that executive responsibility for this function
be assigned to the Content Board (paragraph 38).
(c) The Consumer Panel
13. Our earlier recommendation about the merits of
the term "consumer" rather than "customer"
and the need for a broad understanding of the former term apply
particularly in the context of the remit of the Consumer Panel.
We recommend that Clause 96 be amended to enable the Consumer
Panel to advise on matters relating to the interests of all consumers
in the marketplace, rather than the customers of particular providers
14. We see no case for the creation of a separate
small business panel. However, it is important that the interests
of small businesses, as well as those of domestic customers, are
reflected in the composition of the Consumer Panel (paragraph
15. We welcome the Government's commitment to the
role and independence of the Consumer Panel, but we do not consider
that the current proposals provide sufficient safeguards for this
independence. Although OFCOM itself must have consumer interests
at the heart of its work, the Consumer Panel, within its defined
remit, ought to be the conscience, not the creature of OFCOM.
We recommend that Clause 97 be amended so that all appointments
to the Panel and all removals from it are the responsibility of
the Secretary of State, having regard to the advice of OFCOM.
We further recommend that the Consumer Panel be able to elect
its own Chairman and to determine any committees of the Panel
16. We support the current proposals in the draft
Bill, whereby certain issues could be examined by the Consumer
Panel at the instigation of OFCOM's main Board (paragraph 48).
(d) The economic dimension
17. We see no rationale for an economic or competition
board with executive functions (paragraph 50).
18. Paragraph 14 of the Schedule to the Office of
Communications Act 2002 gives OFCOM a general power to establish
committees. It may wish to exercise this power to establish an
industry or economic advisory panel, but we do not favour a further
fettering of OFCOM's internal structures by placing such a requirement
on the face of the Communications Bill (paragraph 51).
(e) Employment and training
19. We would prefer to see the powers granted under
Clauses 11(6) and 224(8)(a) removed; if retained, we recommend
that they be subject to affirmative resolution procedure (paragraph
(f) Representation of nations and regions
20. We welcome the proposal for national and regional
Councils reporting to the Content Board through the designated
national members and we recommend that formal provision for their
establishment be made on the face of the Bill. We further recommend
that, in establishing such Councils, OFCOM be required to have
regard to the views of relevant devolved institutions (paragraph
21. We have already recommended that the Consumer
Panel be granted a power to establish such committees as it considers
appropriate. We expect that this power will be exercised to establish
consumer committees for Scotland, Northern Ireland and Wales (paragraph
22. We recommend that OFCOM be placed under a statutory
duty to maintain offices in Scotland, Wales and Northern Ireland
23. We recommend that OFCOM be required to include
in its annual report accounts of its activities in Scotland, in
Wales and in Northern Ireland (paragraph 59).
(iii) Better Regulation?
(b) The level of regulation
24. We support the duty on OFCOM to have regard to
the principles that regulatory activities should be "proportionate,
consistent and targeted only at cases in which action is needed".
We recommend that these principles, rather than an undefined commitment
to "light touch" regulation, should govern the provisions
of the final Bill regarding regulatory burdens (paragraph 67).
25. We recommend that Clause 5(1) be amended to require
OFCOM to review its activities and functions to ensure that regulation
is at the minimum level necessary to enable OFCOM to fulfil its
general duties, and for the purpose of fulfilling Community obligations
and its functions under competition law (paragraph 68).
26. We recommend that, in order to reinforce the
duty to maintain the minimum regulation necessary under Clause
5, OFCOM be given a power to review and foster the development
of effective and accredited self-regulatory bodies in the communications
sector. Accreditation would depend upon those bodies meeting criteria
relating, for example, to:
- the policy objectives to be implemented;
- the adequacy of funding available to the body;
- the independence of the self-regulatory mechanism
from the sector being regulated;
- the transparency and accountability of the body,
including a requirement to publish a full annual report on its
activities, available to Parliament.
Accreditation would bring with it an
expectation that the sector concerned would be subject to less
statutory regulation. Withdrawal of accreditation similarly would
imply the need for additional or re-imposed statutory regulation.
Accreditation should also be able to extend to Codes of Practice
as an alternative to statutory regulation, consistent with the
general approach used in the Regulatory Reform Act 2001 (paragraph
27. We consider that it should be an early priority
for OFCOM to consult on the scope for creating a more coherent
system of advertising regulation, with a greater element of self-regulation
for broadcast media. We recommend that the Government seek to
ensure that the final Bill does not erect unnecessary barriers
to the evolution of accredited self-regulation in broadcast advertising
(d) Regulatory impact and charging
28. We recommend that OFCOM be required to conduct
regulatory impact assessments, including competition assessments,
for all of its regulatory activities that may have a significant
effect not simply in terms of regulatory burdens but in terms
of market behaviour and competition within markets (paragraph
29. We agree that there should be some cost savings
from combining five regulators as one, but we urge caution in
seeking to apply too much pressure on OFCOM to secure cost reductions.
This may lead to false economy and strike at the heart of the
purposes of the Bill. Effective regulation does not come cheap,
and the long-term costs to industry and to the public will be
greater if OFCOM lacks the resources to undertake effective regulation
30. We recommend that the principles underpinning
charges under Clause 29, namely that charges should be fixed in
accordance with clear principles and related only to relevant
functions, be extended to all administrative charges under the
Communications Bill and the broadcasting legislation that it amends,
except where incentive charging for wider purposes is intended
31. To ensure that OFCOM has adequate resources to
undertake its competition law functions, we recommend that those
functions be funded directly by the Exchequer. We would prefer
to see OFCOM's central functions funded proportionately and transparently
through a levy on all companies above a certain size in the regulated
sectors. If this proves incompatible with the EC Directives, we
recommend that such costs should also be met from the Exchequer
(e) Promptness standards
32. Clause 6 fails to impose necessary requirements
on OFCOM to meet promptness standards. First, we recommend that
time limits be specified on the face of the Bill, including a
requirement for the completion of market analyses and market power
determinations under Clause 64 within four months other than in
exceptional circumstances of a kind to be specified in the Bill.
Second, we recommend that promptness standards under Clause 6
be determined by the Secretary of State following consultation
with OFCOM and other interested parties, rather than by OFCOM
itself. Third, we recommend that OFCOM be placed under a statutory
duty to account for all failures to meet time limits and promptness
standards in its annual report. Fourth, we recommend that, by
analogy with the relevant provisions of the Competition Act, a
party aggrieved by a failure of OFCOM to determine a matter for
decision in accordance with time limits or promptness standards
be enabled to seek a direction by a court to OFCOM if the court
is satisfied that there has been undue delay by OFCOM. Finally,
we recommend that paragraph 7 of Schedule 5 and paragraph 7 of
Schedule 6 to the Competition Act 1998 be brought into force at
the earliest possible opportunity (paragraph 85).
33. We do not favour a formal statutory duty on OFCOM
to meet in public. We nevertheless urge the main Board of OFCOM
and its subsidiary bodies to give early and careful consideration
to ways of ensuring wider public engagement with its work; this
might include regular meetings at which Board members would listen
to, and exchange views with, members of the public across the
United Kingdom (paragraph 89).
34. We recommend that OFCOM be required to include
in its annual report an interpretation of its principal duty and
an account of the way in which that interpretation has informed
its work during the period. We further recommend that OFCOM be
required to make a statement on decisions that, in its opinion,
give rise to significant issues relating to the interpretation
of the principal duty and be encouraged to give reasons generally
for its decisions wherever possible (paragraph 92).
35. In respect of the proposed use of order-making
powers by OFCOM under Clause 82, we share the view of the House
of Lords Select Committee on Delegated Powers and Regulatory Reform
that the power in question (to vary the lower limit under the
electronic communications code below which compensation is not
payable) is more properly exercised by the Secretary of State
than by OFCOM (paragraph 94).
36. We are in no doubt that the scope of OFCOM's
regulatory activities is such that it will be incumbent on the
two Houses to improve their effectiveness in holding regulators
to account. The House of Lords Liaison Committee has already declared
itself in favour in principle of the establishment of a House
of Lords Communications Select Committee when the new legislation
has come into force. This is a welcome development. As far as
the House of Commons is concerned, Chris Smith has suggested that
a special joint sub-committee of the Culture, Media and Sport
and Trade and Industry Committees be established to monitor the
work of OFCOM, receive reports from it on a regular basis and
hold it to account. Although this is ultimately a matter for the
House of Commons and its committees to determine, we consider
that, given the breadth of OFCOM's remit, this proposal has very
considerable merit (paragraph 95).
(iv) The transition to and culture of OFCOM
37. We recommend that OFCOM, under the general powers
vested in it by section 2 of the Office of Communications Act
2002, publish for consultation initial statements of intention
regarding the fulfilment of the regulatory functions it will assume
under the Communications Bill. We further recommend that Clause
21 be amended to require the pre-commencement regulators to have
regard to such statements in fulfilling their functions before
they pass to OFCOM (paragraph 97).
38. If OFCOM becomes little more than an agglomeration
of the existing regulators - badge engineering for five regulators
under one roof - then the process of establishing OFCOM will have
failed (paragraph 99).
39. We urge the Chairman of OFCOM, as an early priority
upon appointment, to review the provisional arrangements put in
place prior to that appointment, to ensure that his or her hands
are not tied by assumptions made by existing regulators. The incoming
Chairman needs a clean slate in order to create a new culture
(v) OFCOM and the Secretaries of State
40. The purposes prescribed under Clause 7(3) are
wide indeed and we are unconvinced that the power in Clause 7(8)
to add extra purposes is warranted. We recommend accordingly that
Clause 7(8) and (9) be removed (paragraph 102).
41. We recommend that a requirement be placed on
the Secretary of State to publish a direction under Clause 8 equivalent
to the analogous obligation under Clause 7 (paragraph 103).
42. We recommend that the general duties in the final
Bill be applied to the Secretaries of State in the exercise of
their functions under that Bill as well as to OFCOM, except when
the Secretaries of State are exercising powers for public interest
purposes prescribed in relevant Clauses (paragraph 106).
43. We recommend that the Secretaries of State be
required to lay before Parliament a joint annual report on the
exercise of their functions under the Communications Bill, the
Office of Communications Act 2002, the 1984, 1990 and 1996 Acts
and the other enactments relating to the management of the radio
spectrum (paragraph 107).
Chapter 3: Economic Regulation
(i) The importance of economic regulation
44. The success of OFCOM will not be assessed by
its ability to re-fight past regulatory battles, but by its ability
to deal with current and future concerns in a proportionate, targeted
and prompt manner. To a considerable extent, this will depend
on its capacity, armed with increased competition powers, to bring
about a step change in the effectiveness of economic regulation
in the communications sector as a whole, and the telecommunications
sector in particular. It is with this objective in mind that
we have framed many of the recommendations in this Chapter. Only
if this objective is achieved will the new regulatory regime provide
the contribution to the more dynamic and competitive communications
and media markets that the Government is seeking (paragraph 113).
(ii) Regulation of networks and services
(a) Implementing the EC Directives
45. We recommend that an additional provision be
inserted in Chapter 1 of Part 2 with the aim of ensuring that,
so far as is possible (having regard to any relevant differences
between the provisions concerned), relevant questions arising
under that Chapter are dealt with in a manner which is consistent
with the treatment of corresponding questions arising in community
law, including in the relevant Directives (paragraph 117).
(b) The scope of networks, services and associated
46. We recommend that, in its response to our Report,
the Government reply to the concerns expressed and explain in
more detail its reasoning for the way in which it has translated
the provisions of Article 2 of the Framework Directive into domestic
law in Clause 22 (paragraph 124).
(c) Designation, notification, condition-setting
47. We recommend that the Government clarify whether
its intention is that procedural safeguards for the enforcement
of sector-specific powers under Chapter 1 of Part 2 should match
those in the Competition Act and respond to the particular concerns
in this regard raised in evidence (paragraph 131).
48. We share the view of the House of Lords Delegated
Powers and Regulatory Reform Committee that the power to vary
maximum penalties under Clauses 28 and 88 either ought to be explicitly
confined to changes in the value of money or otherwise ought to
be subject to affirmative resolution. We recommend accordingly.
We further recommend that the power to vary the multiplier for
the purpose of calculating the maximum penalty under Clause 32
be subject to affirmative resolution (paragraph 132).
49. We recommend that the order-making power in Clause
77(5) be removed; if it is retained despite our recommendation,
it should most certainly be subject to affirmative resolution
procedure (paragraph 134).
50. We recommend that OFCOM be placed under a statutory
duty to prepare and publish guidance on the interpretation of
appropriate and proportionate penalties in Part 2 of the Bill
51. We recommend that Clauses 98 and 99 be amended
to provide protection against self-incrimination and for items
subject to legal professional privilege (paragraph 137).
52. We find the absence of constraints on information-gathering
under Clause 94 puzzling in view of the restrictions imposed by
Clauses 99 and 104 on the other information-gathering powers under
Clause 98. We recommend that information-gathering powers under
Clause 94 be subject to restrictions analogous to those under
Clauses 99 and 104 (paragraph 138).
53. We urge the Government to give the most careful
consideration to the concerns of the Joint Committee on Human
Rights about Clause 93 (paragraph 139).
54. We again urge the Government to give the most
careful consideration to the concerns of the Joint Committee on
Human Rights about Clause 106 (paragraph 140).
55. Before undertaking a technical revision of section
94 of the Telecommunications Act 1984, the Government should ask
itself the prior question of whether such broad powers are either
required or compatible with Convention rights. If the provision
is retained in an amended form, we recommend that the Government,
in its response to this Report, give an account of the use to
which the provision has been put and an explanation of how it
is envisaged it might be used in future (paragraph 141).
(d) "Must carry" / "must offer"
/ "must distribute"
56. We recommend that Clause 49(4) and (5) be amended
to specify a requirement on the Secretary of State to consult
OFCOM and affected parties in carrying out a review of the list
of "must-carry" services and to have regard to the public
service benefit of any service, to capacity constraints and to
the principle of proportionality in coming to any decision leading
to an order under subsection (5) (paragraph 145).
57. Tessa Jowell characterised the proposed provisions
on "must carry"/ "must distribute"/ "must
offer" as "a failsafe". We see no logic in the
Government providing itself and OFCOM with a valuable failsafe
and then circumscribing the time at which it can be used. We recommend
that the final Bill seeks to give effect to the "must-carry"/
"must-offer"/ "must-distribute" arrangements
on all platforms and the most effective solution to regional distribution,
as determined by OFCOM, at the earliest possible opportunity (paragraph
(e) Universal service conditions
58. We presume that the arrangements in Clause 50
are being made to enable the Secretary of State to give effect
to any revision of universal service obligations arising from
a review by the European Commission under Article 15 of the Universal
Service Directive, although we consider both the Bill and the
Explanatory Notes could be clearer on the linkage between the
definition in that Directive and the Secretary of State's powers
under Clause 50 (paragraph 154).
59. We consider that, given the wide political and
social significance of pricing for universal services, the Secretary
of State should play a more direct and politically accountable
role in the matter. We recommend that this aim be secured by amendments
along the following lines: the Secretary of State should be required
under Clause 50(3) to give guidance about relative pricing for
the same service among different customers; OFCOM should then
be obliged to publish proposals relating to pricing in respect
of universal service conditions, including the anticipated effects
on the market of the universal service in question and the arrangements
(if any) proposed for recovering the relevant costs; the Secretary
of State should then make a final determination (paragraph 156).
60. We recommend that, in its response to this Report,
the Government clarify whether it considers that public funding
of the kind permitted under Article 13(1)(a) of the Universal
Service Directive could be made available without explicit legislative
provision. We also note that the Government has not made direct
provision for the exemption of undertakings with limited turnover,
as permitted by Article 13(3). We recommend that the Government
should either confirm that such exemption would be possible under
Clause 56 as drafted or, if not, make such provision in the final
Bill (paragraph 157).
(f) Access-related conditions
61. The provisions of Clauses 59, 209 and 210, taken
together, appear to us to provide ample provision to enable OFCOM
to secure appropriate prominence for public service radio channels
if it is satisfied that there is evidence that such regulatory
action is proportionate and necessary. It is important that OFCOM,
in preparing the Code, should have regard not only to the interests
of public service broadcasters, but also to the interests of commercial
broadcasters, whose classification by genre, listing and degree
of prominence in programme guides may be instrumental to their
business and who will need transparency in determining these matters;
and, if they are dealt with unfairly, a right to appeal for independent
determination by OFCOM (paragraph 163).
(g) Significant market power conditions
62. We recommend that the Government consider whether
it is satisfied that the current drafting of Clause 64 fully reflects
the spirit of OFCOM's obligations in respect of European Commission
recommendations and guidelines (paragraph 168).
63. We recommend that Clause 67 be amended to place
it beyond doubt that the aim of market analyses is to determine
whether a specific market is "effectively competitive"
and to ensure that SMP conditions are only imposed where there
is not effective competition. We further recommend that other
provisions on SMP and sector-specific regulation more generally
be reviewed to ensure that they reflect the same principle (paragraph
64. We recommend that Clause 67 be amended to make
clear the mandatory character of periodic market analyses (paragraph
65. We recommend that the Government clarify the
proposed role of competition authorities in market analysis in
its response to our Report and ensure that the main terms of any
secondary legislation giving effect to the relevant provision
are made known to Parliament at an early stage of the Bill's passage
66. We recommend that the Government (a) consider
whether it would be compatible with the terms of the Access Directive
to enable OFCOM to have regard to the costs of provision of the
proposed network access, as an explicit aspect of feasibility
under the terms of Clause 68(4), (b) report on the outcome of
that consideration in its response to this Report, and (c) reflect
that factor in the final Bill if it considers it possible and
appropriate to do so (paragraph 173).
(iii) Spectrum use and management
67. We recommend that the Government ensure that
the final Bill, including amendments to the Wireless Telegraphy
Acts, provides OFCOM with a set of harmonised objectives, consistent
with the general duty and incorporating the factors under section
2 of the 1998 Act, in undertaking its functions relating to spectrum
management and use (paragraph 176).
68. There is a wider public interest in the allocation,
assignment and management of spectrum that OFCOM, even with its
duty to further the interests of all citizens in its optimal use,
may not be best placed to judge. It is important, however, that
directions under Clause 112 concentrate on the purposes to be
achieved, rather than the details of the means of achieving those
purposes, and we recommend that the Government consider carefully
whether Clause 112 could be amended to reflect this. We further
recommend that any order containing a direction under Clause 112
be laid before Parliament in draft for approval by both Houses
before coming into force unless the Secretary of State is satisfied,
on grounds such as commercial confidentiality, that the procedure
set out in subsection (6) for retrospective approval of such orders
needs to be followed (paragraph 179).
69. We recommend that the Government ensure, by means
of amendment to Clause 119 if necessary, that there is transparency
about the means by which spectrum payments by Government departments
are calculated (paragraph 184).
70. We recommend that no incentive-based spectrum
charges be imposed on the BBC, Channel 4 and S4C in respect of
spectrum use for analogue transmissions, until at least shortly
before digital switchover (paragraph 188).
71. We believe that the Government's developing plans
for spectrum trading and spectrum management more generally would
repay closer parliamentary scrutiny than it has been possible
for us to undertake given the limited time available to us and
the uncertainty surrounding the Government's policy prior to publication
of its response to the Cave review. We envisage that this scrutiny
might be undertaken by the Trade and Industry Committee of the
House of Commons (paragraph 192).
72. The new framework of sector specific powers established
in Part 2 of the draft Bill will require the body or bodies hearing
appeals to secure appropriate expertise and bear in mind the specific
characteristics of the powers being exercised. Provided that it
would not entail a further appeal on merits, we see a case for
price control appeals to be heard by the Competition Commission
73. We recommend that the final Bill establish a
general time limit of four months for appeals under Part 2, subject
to extension only in specified and exceptional circumstances.
We further recommend that, in its response to this Report, the
Government sets out its opinion on whether it would be compatible
with the EC Directives and Convention rights either to introduce
a "leave to appeal" mechanism or to give the appeal
body powers to increase penalties in cases relating to enforcement
where that body considers the appeal to have been an abuse of
process (paragraph 198).
(v) Competition law
(b) The balance of sector-specific and competition
74. We recommend that, before setting conditions
of a discretionary character under Clause 35, OFCOM be required
to decide whether the more appropriate way of proceeding would
be under the Competition Act or Enterprise Act and to give reasons
for their decision (paragraph 207).
75. We have seen no convincing evidence to indicate
that there will be a problem for the regulators or those in the
market with regard to the division of labour between OFCOM and
the OFT and we see no need for further provision in the Bill on
this matter (paragraph 208).
76. The establishment at the very heart of OFCOM's
structure of a properly resourced competition unit, with the full
complement of skills and the will to use competition law functions
effectively, will be crucial to the new regulator's success. If
the Government's aim for less regulation is to be achieved, there
must be swifter and better regulation under competition law. If
OFCOM lacks the expertise to use competition law optimally, it
will fall back on the devil it knows in the form of sector-specific
powers, whether or not it is appropriate to do so (paragraph 209).
(c) Competition law and broadcasting
77. Insofar as the purpose of the BBC Fair Trading
Commitment is to reflect how the BBC complies with Competition
and State Aid requirements, we believe that, in future, it will
be directly relevant to consideration by OFCOM of complaints of
anti-competitive effects resulting from BBC activities and will
therefore, to that extent, be enforced by OFCOM in applying its
concurrent powers (paragraph 215).
78. We recommend that Clause 246 be amended
to provide OFCOM with appropriate discretion in interpreting the
scope of its competition law functions in broadcasting and related
matters, including the creation and distribution of broadcast
content (paragraph 216).
Chapter 4: Media Ownership
(i) Media ownership controls and competition law
79. We recommend that the general merger regime,
as introduced by the Enterprise Bill, be amended by the Communications
Bill to permit the OFT and the Competition Commission to have
regard to plurality, as well as the issue of substantial lessening
of competition, in reaching decisions on media mergers. For these
purposes, we recommend that plurality be specified as a consideration
in respect of which the Secretary of State may serve a public
interest intervention notice and that plurality be defined as:
"The public interest in - (i) the maintenance
of a range of broadcast media owners and voices sufficient to
satisfy a variety of tastes and interests; (ii) the promotion
and maintenance of a plurality of TV, radio and other broadcast
media owners, each of whom demonstrates a commitment to the impartial
presentation of news and factual broadcast programming; and (iii)
the promotion and maintenance, in all media including newspapers,
of a balanced and accurate presentation of news, the free expression
of opinion and a clear differentiation between the two" (paragraph
80. We welcome the proposal to give OFCOM a duty
to review media ownership laws including those relating to newspaper
ownership on a periodic basis. We consider that the first such
review, three years after the coming into force of the Act, could
be of crucial importance, given the knowledge of media markets
and their regulation that OFCOM will by then have acquired (paragraph
81. In giving effect to OFCOM's reviews, we recommend
that the plurality test, as specified above, should be a specified
public interest consideration in relation to the powers to refer
for a market investigation under Part 4 of the Enterprise Bill
(ii) Specific restrictions on ownership
82. It is important that the Government clarify,
before detailed consideration of the final Bill, how it envisages
the broadcasting licensing enforcement regime and the governance
systems relating to local government working together in order
to ensure proper oversight of broadcasting services provided by
local authorities (paragraph 228).
83. We recommend that the prohibition on the holding
of broadcast licences by advertising agencies or groups which
own advertising agencies be retained (paragraph 229).
(iii) Restrictions on religious ownership
84. The case for retention of the general prohibition
on religious ownership of national digital radio licences, and
for the compatibility of that prohibition with Convention rights,
has not been established by the Government to our satisfaction.
We recommend that the Government give these matters further consideration
before presentation of the final Bill (paragraph 237).
85. We recommend that the Government consider the
case for permitting OFCOM, in consultation with religious organisations,
to impose licence conditions on religious owners of a kind not
applying to other licences, as an additional assurance against
breach of licence conditions. We further recommend that the Government
include on the face of the Bill criteria against which decisions
by OFCOM about the appropriateness of religious ownership would
be judged. One advantage of this proposal is that it would allow
Parliament an opportunity to debate more fully the circumstances
in which religious ownership of certain television and radio licences
is appropriate (paragraph 238).
(iv) Restrictions on nationality of ownership
86. The lifting of existing restrictions on non-EEA
ownership of broadcasting licences should not take place until
after a review by OFCOM, and the competition authorities if appropriate,
of the programme supply market in British broadcasting (a matter
to which we return) and until OFCOM has established itself as
an authoritative regulator of, and commentator on, commercial
public service broadcasting in the United Kingdom. In the light
of its experience, OFCOM would be able to facilitate a decision
by Parliament based on evidence, rather than a decision based
on largely unproven expectations as would be the case at present.
Accordingly, we recommend that primary legislation to lift existing
restrictions on non-EEA ownership of certain broadcasting licences
should not be brought forward until OFCOM recommends such a change,
should it do so following any of its formal, periodic reviews
of media ownership (paragraph 249).
(v) Ownership of Channel 3 licences and Channel
87. 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 (paragraph 252).
88. 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 (paragraph 255).
89. 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 (paragraph 258).
90. 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 (paragraph 259).
(vi) Radio ownership and regional cross-media
91. We recommend that, if the "three plus one"
scheme for radio ownership is adopted, the Government amend Part
3 of Schedule 14 to place both an objective and measurable definition
of a "mature" or "well-developed" local commercial
radio market to which the "three plus one" scheme applies
and the broad parameters of the proposed scheme on the face of
the Bill (paragraph 262).
92. We recommend that the "three plus one"
rule applying to local radio ownership in well-developed local
commercial radio markets be incorporated in legislation, but be
subject to a "sunset" provision enabling the rule to
be disapplied if OFCOM identifies that there is no further need
for the rule in the light of a review of media ownership conducted
under Clause 268 (paragraph 266).
93. We welcome and support the concept of three distinct
media voices in the commercial sector as a benchmark for cross-media
plurality at a sub-United Kingdom level, but we consider it essential,
as parliamentary scrutiny progresses, for the Government to clarify
how this system will operate in Scotland, Wales and Northern Ireland
and in the regions and localities of the United Kingdom (paragraph
(vii) Newspaper mergers
94. While we have not been presented with the specific
draft Clauses for the newspaper merger regime, we agree that the
issue of newspaper ownership is sufficiently important to warrant
extended jurisdiction beyond the de minimis limits contained
under competition law. However, in doing so, we would wish the
Government to have full regard to the need for a substantial deregulatory
outcome for the newspaper industry, especially as regards local
newspapers (paragraph 279).
95. We support the Government's proposal to give
OFCOM a defined advisory role in respect of plurality considerations
in the newspaper merger regime (paragraph 280).
(viii) Parliamentary control over legislative
96. We recommend that the provisions of the final
Bill on media ownership should not include any powers for the
Secretary of State to revise primary legislation by means of secondary
legislation other than in the limited case of the nominated news
provider for Channel 3 (paragraph 283).
Chapter 5: Content regulation
(i) The scope of the licensed sector
97. If the Government does decide that it is appropriate
to include video-on-demand services within the scope of the licensed
sector, we recommend that it propose to do so by means of provision
in the final Bill subject to full parliamentary scrutiny, rather
than by means of subsequent secondary legislation (paragraph 298).
98. More generally, we support the powers for the
Secretary of State to amend the definitions of licensable content
services by means of secondary legislation subject to affirmative
resolution procedure as an important means of "future-proofing",
but remain to be convinced the Government should not go further
at this stage. In particular, we recommend that the Government
consider, and in its reply to this Report respond to, the cases
for removing the condition in Clause 238(5) and for granting OFCOM
discretion in choosing whether to license all services falling
within the definition of licensable content services (paragraph
(ii) Standards codes and complaints procedures
99. In the expectation that, in carrying out its
tasks under Clause 212, OFCOM would be required to have the most
careful regard to its duties under Clause 3(1)(f) and (g), we
have concluded that Clause 212 as drafted provides an appropriate
framework for the preparation of standards codes by OFCOM (paragraph
100. We support the principles underlying the proposed
ban on political advertising contained in Clause 214(2) and urge
the Government to give careful consideration to methods of carrying
forward that ban in ways which are not susceptible to challenge
as being incompatible with Convention rights (paragraph 301).
101. We agree that it will usually be in the best
interests of broadcasters and viewers and listeners for complaints
about standards to be directed in the first instance to the broadcaster
concerned, but we view it as an unnecessary restriction upon the
viewer or listener to make such a route mandatory, and we support
the Government's proposals accordingly (paragraph 303).
102. While we accept that it may be inappropriate
to be too prescriptive on the face of the Bill, we consider it
to be of the utmost importance that OFCOM establishes specific
structures for handling complaints relating to fairness and privacy
and ensures that adjudication of such complaints is made only
by those who have heard and considered the case in full (paragraph
(iii) The regulation of commercial radio
103. We recommend that the Government align the provisions
for penalties for contravention of licence conditions between
television and radio. Should it not propose to do so, it should,
in its response to this Report, provide a full account of the
rationale for the differences (paragraph 306).
104. Local content and character must be integral
and central characteristics of local commercial radio, as fundamental
obligations in return for which licensees are granted spectrum
access. In principle, we support the concept of additional duties
and powers to maintain such obligations. We recommend that these
incorporate a duty on OFCOM to award and review radio licences
in such a way as to ensure that the broadest possible range of
tastes and interests is catered for within each local radio area
(iv) Access radio and local television
105. We welcome the provisions in the draft Bill
to enable the structured development of a not-for-profit access
radio sector, which has the potential to enrich both broadcasting
and community development. It will be of paramount importance
for OFCOM and the Secretary of State to ensure that these powers
are exercised in a way that ensures the development of access
radio that serves parts of society that commercial radio fails
presently to address (paragraph 311).
106. Although we welcome the provision in Clause
167 to support the development of local digital terrestrial television
services, we recommend that the Government and the existing regulators
give early consideration to means of fostering the development
of local television services before analogue switch-off, in order
that further provision may be made in the final Communications
Bill if necessary (paragraph 312).
(v) Television services for the deaf and visually
107. Improved provision for sub-titling, audio-description
and signing is a necessity not a luxury. We welcome Clauses 203
to 207 which provide a sound framework to extend such provision
across all licensed services in coming years (paragraph 313).
(vi) Government powers in relation to broadcast
108. We recommend that Clause 223 be amended to specify
the circumstances in which the powers available to the Secretary
of State under subsection (5) may be exercised (paragraph 314).
(vii) The economics and regulation of content
109. We recommend that Clause 224 be amended to enable
licence conditions relating to training to be applied to broadcasters
both in relation to their own employees and more generally in
respect of the creative advancement of the sector as a whole (paragraph
110. We recommend that the Government, the ITC and
the Film Council explore with broadcasters the current relationship
between the broadcasting and film industries and the role that
OFCOM might play in fostering and furthering the contribution
of broadcasters to that relationship (paragraph 318).
111. We recommend that Clause 189 and paragraphs
1 and 5 of Schedule 8 be amended to provide that OFCOM should
monitor levels both for the time allocated to independent productions
and for the value of such independent productions in line with
the Secretary of State's declared intention in evidence to us
that the licence fee should be "venture capital for the nation's
creativity" (paragraph 324).
112. We recommend that the Government, in its response
to this Report, set out its views on the merits of defining independent
productions to include all programmes commissioned by a broadcaster
from whom the producer is independent in ownership terms (paragraph
113. We recommend that Clause 189 and paragraphs
1 and 5 of Schedule 8 be amended so as to require OFCOM periodically
to review the whole of the programme supply market, together with
its associated intellectual property and other rights, including
the role of the BBC in that market, with a view to determining
whether the market is operating in a fair, transparent and non-discriminatory
manner. We further recommend that OFCOM be required under the
terms of the final Bill to undertake the first such review immediately
after the coming into force of the Act. Finally, we recommend
that, having undertaken the first such review, OFCOM consider
whether it would be appropriate to refer the operation of the
programme supply market to the Competition Commission for market
investigation under the terms of the Enterprise Bill (paragraph
114. We recommend that Clause 190 be amended to define
original productions as programmes commissioned with a view to
their first showing in the United Kingdom on the relevant channel
and which were also either produced in the European Economic Area
or were a co-production in which a significant element of the
production was within the European Economic Area. We further recommend
that the same Clause be amended to permit OFCOM to establish specified
levels for original productions in peak viewing times (paragraph
115. We recommend that OFCOM be empowered to review
production commitments of public service channels and Channel
3 licensees in response to any significant change in the revenue
or audience share of the relevant channel. We further recommend
that OFCOM be required to issue guidance on the changes that would
trigger such reviews and give an indication of likely alterations
to requirements for original production arising from such changes
116. We welcome the Government's decision to give
OFCOM responsibility for United Kingdom compliance with obligations
under the EC "Television without Frontiers" Directive
and support the provision for licence conditions to secure such
compliance in Clause 222. We believe that these powers provide
OFCOM with a valuable tool for strengthening the contribution
of all licensed broadcasters to the European production base (paragraph
117. We recommend that the word "suitable",
where it appears in Clause 193, be altered to "substantial".
We also recommend that the same Clause be amended to make it clear
that Channel 3's regional production requirements apply equally
to network and regional programmes. We further recommend that
OFCOM be granted a power to include conditions relating to regional
programme-making in the regulatory regime for Channel 5. Finally,
we recommend that the review provisions linked to audience and
revenue changes that we have earlier recommended in respect of
original production levels apply also to regional production levels
(viii) The public service broadcasting remit and
the remits and regulation of commercial public service broadcasters
118. In general terms, we consider that the Government
has struck the right balance in its definition of the public service
remit. We agree with the proposition that the term "objectives"
more accurately reflects the nature of the commitments involved
than "requirements" and we recommend that Clause 181
be amended accordingly. We also consider that it is right that
a set of objectives for all public service broadcasters should
be more detailed than is necessary for the BBC with its long tradition
of public service broadcasting and we therefore recommend that
the Government gives careful and sympathetic consideration to
the case for including fuller descriptions of topics for programming
in Clause 181(5) (paragraph 338).
119. We recommend that Clause 181(1) be amended to
provide that OFCOM reports on the fulfilment of the public service
remit are to be published every two years (paragraph 340).
120. We have rejected the proposition that reviews
of the public service remit be undertaken annually in part because
we are keen to see the reports arising from the reviews as major
events that play a central role in public debate on public service
broadcasting. We make further recommendations with this aim in
mind. First, we recommend that OFCOM be required to conduct its
review with the purpose of sustaining and strengthening public
service broadcasting in the United Kingdom. Second, we recommend
that OFCOM be required to review the ecology of public service
broadcasting, including the costs and financing of public service
broadcasting. Third, we recommend that OFCOM be required to report
on the contribution to public service broadcasting made by broadcasters
other than the BBC, S4C and holders of licences for public service
channels (paragraph 341).
121. We recommend that Clause 188 be amended to provide
that an order to amend the public service remit in Clause 181
can only be made by the Secretary of State in response to a recommendation
made by OFCOM in the reports arising from its periodic reviews
of the public service remit and even then only after a full public
consultation on that recommendation (paragraph 342).
122. We recommend that the public service remit for
every Channel 3 service in Clause 182 be amended to require the
provision of a wide range of high quality and diverse programming
which, in particular, includes a substantial range of high quality
original production and satisfies the tastes and interests of
the part of the United Kingdom for which that service is licensed
123. We welcome and support Channel 4's public service
remit as set out in Clause 182(3). We recommend that the Government
consider the case for inclusion of Channel 4's educational role
in that remit (paragraph 344).
124. We oppose the power to amend the public service
remits of licensed public service channels by means of secondary
legislation and recommend accordingly that this provision in Clause
188(1)(a) be removed (paragraph 346).
125. We recommend that Clause 191 be amended to retain
the existing legal obligation on Channel 3 licensees to devote
a sufficient amount of time throughout the day and in peak viewing
hours to news and current affairs programming (paragraph 347).
126. We recommend that the provisions for prior consultation
with OFCOM on changes of programme policy as set out in Clause
184 be superseded by a system of annual reports by OFCOM on the
performance of each licensee in relation to the relevant statement
of programme policy (paragraph 351).
127. We recommend that OFCOM be given a power to
review the financial terms of Channel 3 and Channel 5 licences
at the mid-point of any licence and to vary licence payments for
the remainder of that licence period. In view of this added flexibility
to ensure the correct balance between the benefits of spectrum
access and the burden of public service obligations, we further
recommend that the possibility for exemption from detailed regulation
under Clause 187(2)(a) as a result of failure to fulfil public
service remits when such failure is due to economic or market
conditions be removed (paragraph 352).
128. Twelve years is a long time in broadcasting.
We have concluded that the Government is right in principle to
establish mechanisms for measuring the overall value of Channel
3 and Channel 5 licences beyond analogue switch-off. An explicit
process of licence allocation for the years after 2014 has advantages,
including as a safeguard for the regional character of ITV licences.
However, there is a danger that the process may serve as a disincentive
to invest in the years before then. We recommend that, in its
response to our Report, the Government set out its views on the
proposal by the ITC for separate spectrum charging as the best
way of capturing changes in licence value before and after digital
switchover and clarify how it envisages the new allocations being
made for the years after 2014 (paragraph 355).
(ix) The remit and regulation of S4C
129. We recommend that paragraph 3 of Schedule 8
be amended to provide that an order to amend S4C's public service
remit may only be made as a result of a review conducted under
Clause 226 (paragraph 357).
130. It appears at odds with the concept of future-proofing
for legislation to contain a barrier to increased funding for
S4C, should the Secretary of State decide that such an increase
is appropriate. We recommend that the final Bill seek to amend
section 61(4) of the Broadcasting Act 1990 to enable additional
payments to be made to S4C to support the development of digital
services (paragraph 358).
(x) Gaelic broadcasting
131. If the forthcoming Communications Bill is to
be future-proof in the way the Government hopes, we consider that
there is a compelling case for ensuring that the relevant provisions
facilitate rather than inhibit the future development of a Gaelic
television service (paragraph 362).
(xi) OFCOM and the BBC
132. We recommend that, for the avoidance of doubt,
Clause 144 be amended to state that OFCOM has functions in relation
to the BBC under Part 5 of the Bill in respect of competition
law (paragraph 366).
133. We recommend that the Government, in its response
to this Report, confirm its intention to ensure that the provisions
of the revised Agreement with the BBC mirror those of the Communications
Bill as enacted. We further recommend that the Government publish
an initial text of the proposed revised Agreement at the same
time as the Communications Bill (paragraph 369).
134. We recommend that the revised Agreement require
the BBC to publish annually a statement of programme policy in
respect of each of its public service television channels and
report on performance against each policy (paragraph 370).
135. We recommend that the revised Agreement require
the BBC to agree original production conditions with OFCOM for
each of its public service television channels (paragraph 371).
136. We recommend that the Government set out in
its response to our Report the proposed mechanism for determining
payments of charges by the BBC to OFCOM and ensure that the final
Bill or the Agreement as necessary give effect to these arrangements
137. We recommend that, in its response to our Report,
the Government set out its intentions for the role of OFCOM in
respect of BBC radio services. We recommend that the revised Agreement
require the BBC to publish annually a statement of programme policy
in respect of each of its radio channels and report on performance
against each policy (paragraph 373).
138. We recommend that the proposed Agreement require
the BBC to provide OFCOM with such information as OFCOM may reasonably
request for the purpose of carrying out its functions under Clauses
144 and 181 and Part 1 of Schedule 8 (paragraph 374).
139. Extensive and repeated payment of fines by the
BBC would be a waste of licence payers money, for which the BBC
and its Governors would be held publicly accountable. This seems
to us a reason for the BBC to so arrange its activities as to
ensure that it does not incur such penalties, and not an argument
for immunity from such penalties. We recommend that the proposed
Agreement empower OFCOM to fine the BBC in respect of breaches
of tier one and tier two obligations (other than those relating
to impartiality) in the same way and to the same extent as other
broadcasters (paragraph 375).
140. The potential tension between the desirability
of the BBC expanding its commercial activities to support its
primary public service role and the market impact of the BBC's
activities must be borne in mind by the Government and OFCOM in
consideration of the BBC's future (paragraph 376).
141. We recommend that the Government, in its response
to this Report, set out its initial proposals on the manner in
which it envisages review of the BBC Charter being conducted (paragraph
Chapter 6: Further Conclusions
(i) The resilience and adaptability of the proposed
142. Our central task has been providing means to
enable the Government or Parliament to make a good Bill better
143. We make points in paragraph 384 not with the
aim of questioning the rationale for the five pillars. Rather,
we wish to emphasise that it would be mistaken to assume that
each and every aspect of the new framework will prove enduring.
In legislating this year and next, Parliament should not imagine
that it will be absolved of the duty both to examine the implementation
of the new framework with great care and to be prepared to return
to the process of legislating again should the need arise (paragraph
144. In view of the considerable likelihood that
new primary legislation may well become necessary in the medium
term, we urge the Government to re-examine the general scope of,
and particular proposals for, seeking power to amend the new primary
legislation by means of subsequent secondary legislation (paragraph
(ii) The merits, limits and future of pre-legislative
145. We welcome the Government's decision to enable
the draft Communications Bill to be considered by an ad hoc
Joint Committee and the positive spirit in which the Ministers
have so far responded to our work (paragraph 387).
146. We have interpreted our orders of reference
as requiring us to focus first and foremost on the proposed provisions
of the draft Bill, from their wording to their likely practical
effect. The terms of the Government's own invitation for consultation
have made this process harder, not easier (paragraph 392).
147. We recommend that the Government give an undertaking
that it will provide an opportunity for both Houses to debate
and come to a decision on the establishment of any future Joint
Committee proposed to be appointed to consider a draft Bill at
least two sitting weeks before the publication of the relevant
draft Bill, and further in advance if possible (paragraph 393).
148. We recommend that, as a general rule, the Government
should propose to the Houses that the deadline for a Report by
a Joint Committee established to examine a draft Bill be set at
least one month after the deadline for submissions to Government
consultation exercises on the relevant draft Bill (paragraph 397).