Joint Committee on The Draft Communications Bill Appendices to the Minutes of Evidence


Memorandum submitted by ISBA (the Incorporated Society of British Advertisers)


  1.1  ISBA—the Incorporated Society of British Advertisers—represents the interests of major UK advertisers in both the private and public sectors across all areas of marketing communications, from media advertising and direct marketing to sponsorship and public relations.

  1.2  Some 300 companies comprise its membership, including all 25 of the largest TV advertisers. Members' combined expenditure on advertising media amounted to over £4.5 billion in 2001, whilst their total television advertising expenditure alone for that period was some £2.3 billion, nearly two-thirds of the total.

  1.3  They recognise that advertising represents a very important part of their activities—to many, it is one of their largest operational costs. Within this, television advertising continues to hold a special place in their favour—a fact reflected by the price premium it commands over other media.

  1.4  At the same time, ISBA's members are also rapidly increasing their use of the new communications and marketing opportunities afforded by the new technologies.

  1.5  ISBA welcomed the announcement of the process which led to the publication of the Communications White Paper in December 2000, as it offered clear signals that Government recognised the pace of change in media, and also the impacts of convergent technologies.

  1.6  We have made submissions at each and every stage to date (reference copies of which have been sent to the Clerk to the Committee) and therefore welcome the opportunity to continue to make what we hope is significant and useful input in the final stages of the run-up to a new Communications Bill.

  1.7  A consistent thread throughout these extensive submissions has been the call to ensure that adequate levels of competition are maintained in the markets for advertising time and space in the UK media. Our relevant objectives can be summarised thus:

    1.  To see strong commercial media, delivering maximum audience and hence effective commercial communications for ISBA members.

    2.  To ensure competition in the market for airtime sales.

    3.  To reinforce advertisers' fundamental belief in the value and effectiveness of self-regulation.


  Overall, ISBA considers the April 2002 Draft Communications Bill and its attachments encouraging. Indeed, there is much in the Bill to support advertisers' fundamental aims:

  2.1  A broad deregulatory stance, which we strongly support.

  2.2  It appears to give due regard for the first time to the interests not only of the consumers of communications media, but also of their customers—in the case of this response, the advertisers who fund the large majority of the UK's media and whose interests overlap keenly with those of their customers—the same consumers who are also viewers.

  2.3  It confirms that OFCOM will have some dominion over the currently largely-unregulated BBC, which, despite existing to cater for "market failure", is currently arguably one of its major causes! However, we have some concerns regarding the further clarification as to the extent of OFCOM'S exact powers which is contained in the proposed amendments to the BBC Agreement (see section 3 below).

  2.4  Recognising convergence, it gives strong encouragement to industry to come forward with proposals for increased self-regulation of advertising in the broadcast media (see section 4).

  2.5  We welcome the announcement that OFCOM and the OFT will have concurrent competition powers, but seek further clarification over exactly how this would work in practice (see section 4 below).

  2.6  We support the opening up ownership of UK media assets to foreign, non-EAA, companies, provided it leads to significant inward investment in the UK media and greater competition in the marketplace.

  2.7  We are heartened see the explicit recognition in the Bill of the need for the application of competition law before any further consolidation of ITV ownership, could go ahead. We will expect any such consolidation to invoke careful scrutiny by the competition authorities.

  2.8  The opportunity the Bill creates for companies such as ITV's or BSkyB's owners to acquire Channel 5 may excite similar concerns over monopoly power. Whilst recognising that certain consolidations may argue benefits for viewers, advertisers will nevertheless expect to see the airtime sales market protected from the potential for monopoly behaviour.

  2.9  ISBA and its colleagues at the IPA, representing UK advertising agencies, have recently developed a set of guidelines for such instances which we plan to use in our future discussions with policymakers, OFCOM and the competition authorities. A copy of this appears at section 6.

  2.10  In Radio, we consider the rules requiring three commercial stations plus the BBC in each locality to a necessary but bare minimum protection against the adverse effects of over-concentration of ownership, and propose certain enhancements. We do not support the Bill's opening ownership of more than one national radio station to the same holder (see section 7).

  2.11  We do however, continue to challenge the omission of the Outdoor and Cinema media from the scope of the both the Bill and OFCOM (section 8).


  3.1  Clause 144 of the Bill outlines OFCOM's powers in respect of the BBC, and refers to the Agreement between the BBC and the Secretary of State as the instrument through which these powers will be specified. However, the intended extent of OFCOM's powers is less than clear.

  3.2  The attendant Policy Document confirms that the current Agreement will need to be amended in order to give OFCOM powers over the BBC, and that this process will be initiated shortly. The Government's proposed amendments to the BBC Agreement were circulated on May 31 and comments invited concurrent to consultation on other parts of the Bill.

  3.3  ISBA has consistently argued against the exclusion of the BBC in any part from OFCOM's remit. We continue to have serious concerns that, once again, the Government may forego an opportunity to create a level regulatory playing field for commercial media, which would only be achieved by bringing the BBC under the full regulatory control of OFCOM.

  3.4  We would assert that such a level playing field is crucial for the future success of the UK media ecology. We see no sense for a broadcaster, which controls around 40 per cent of UK viewing to be excluded from the "single" regulator.

  3.5  Nor do we believe that the BBC's current behaviour can be overlooked. On the one hand, it is the nation's publicly—and mandatorily-funded public broadcaster, and should therefore meet the very highest expectations of public service delivery. Yet on the other, it has for some time been behaving in an increasingly commercial and opportunistic manner to the demonstrable detriment of its commercial counterparts. We see the former as simply irreconcilable with the latter.

  3.6  Indeed, hardly a week now passes without another example of the BBC's increasingly opportunistic behaviour—from cross-promotions for radio programmes within morning TV news bulletins (which practice is strictly forbidden to commercial licensed broadcasters), to the BBC's recent broadcast of an electronic command to the UK's 50,000 installed hard-disk TV recording devices (TiVO & SkyPlus) commanding them to record a programme without the user's instruction. This latter act has led to calls from MP's and consumer groups for the BBC's activities to be constrained by "a strong OFCOM".

  3.7  However, the Government's proposals for amendments to the BBC Agreement concentrate mainly on second-tier "editorial" issues such as independent and original productions, news and current affairs in peaktime and party political broadcasts. In so doing, they fall well short of ensuring that the BBC is regulated in every respect in a manner consistent and compatible with its commercial counterparts.

  3.8  Point 32 of the proposed amendments suggest that one of the reasons Government may be wary of full regulation of the BBC by OFCOM is that regulatory sanctions might include fines which would in the BBC's case have to be paid from licence fee revenues, thus reducing the funds available for programme-making.

  3.9  We would ask why this should be problematic, as exactly the same holds true for commercial broadcasters. A commercially-funded broadcaster which infringes regulations may be subject to a fine which would similarly impact up on its ability to invest in its programming, since it cannot simply go into the market and call for more advertising revenue are this is by market forces.

  3.10  Further, we would suggest that the BBC might find the (very public) imposition of financial sanctions more embarrassing than would a commercial broadcaster, making the threat of such sanctions yet more powerful.

  3.11  Finally, the BBC has suffered frequent criticism for using funds raised by a universal licence fee to launch digital and/or subscription channels which are not available to all. We believe that only holistic, all-inclusive regulation can effectively deal with such issues. Whilst the BBC is regulated in any way separately or differently, it will not be effectively regulated.

  3.12  Whilst we recognise the formidable lobby which the BBC represents, we continue to call for it—and its Board of Governors if it to continues to exist—to be brought fully under the control of OFCOM.


  4.1  The UK model for self-regulation of advertising in the non-broadcast media has been widely recognised as effective, efficient and fair. The Advertising Standards Authority is an independent body that implements the Industry's Codes of Advertising Practice and Sales Promotion and is funded by a levy on advertising media spend collected by the Advertising Standards Board of Finance.

  4.2  ISBA, together with the UK Advertising Association, has argued that the proposed reforms in the Communications Bill provide the right vehicle to extend self-regulation to all media. It is not part of our case that the role of the ASA should be extended, but rather that the ASA is the role model for a new self-regulatory body to cover the broadcast media.

  4.3  As the broadcast media adapts to the challenges of the new media and the burgeoning choices available to viewers and listeners, the dividing lines between the media will become less distinct. Yet no one doubts the need for standards to be set and applied. Self-regulation is a well-tested means to achieve regulation, without the legislative and organisational hurdles that State regulation inevitably entails.

  4.4  In the Policy Paper, published with the draft Bill, the Government has noted that it awaits proposals from the industry before considering the issue of self-regulation further. There are however good reasons for our decision to await the opportunity to enter into a discussion with Government and Parliament about the nature of self-regulation. Our principal concerns surround definitions. Pure self-regulation, where industry draws up codes in consultation with interested parties, then administers them and applies sanctions is not one that, in practice, we have adopted in the UK.

  4.5  The ASA model is a form of co-regulation which gains its strength from the double authority of industry codes backed by the power of the Office of Fair Trading. That is to say the codes are not voluntary in a way that some industry "best practice" codes would be. It is this co-regulatory model we recommend for broadcast regulation. It is important to us however that industry owns the codes and that the implementation of the codes resides with a fully independent body.

  4.6  A reading of the Policy Paper leaves open the possibility that the Government wishes to exercise authority over both the codes production and the implementation, whist asking industry to pay. This is not a model that is likely to find support.


  5.1  ISBA welcomes the indications in the Bill's clauses 246 to 248 that OFCOM and the OFT shall have concurrent competition powers with regard to the media, and particularly welcomes the indications that OFCOM may itself make a reference to the Competition Commission (clause 248/7).

  5.2  We believe that the effectiveness of previous interventions by the competition authorities has suffered from a lack of first-hand knowledge of the precise and sometimes quite peculiar workings of the UK media markets.

  5.3  The sector regulator should be expected to have a much closer knowledge of these issues than is practical for the general competition authorities to achieve. This being the case, we would welcome its having the power to consult and intervene.

  5.4  However, we call for greater clarification of exactly how such concurrent competition powers will be exercised and will work.

  5.5  We note the detail in which section 9.7 of the Policy Document sets out the procedures and roles of The secretary of State, the OFT and OFCOM for reviewing changes in newspaper ownership. We call for Government to set out the way in which OFCOM and the OFT will work together on all other relevant competition issues, including advertising matters, with equal clarity.


  We are including the exhibit below, which has been developed jointly by ISBA and the IPA representing the UK advertising agencies, as we believe that is both relevant and gives a good insight into our concerns and position.

Media ownership—the needs of advertisers


  1.1  ISBA exists to represent its ca.300 advertisers-members, who comprise many of the UK's largest companies and owners of the nation's best-known and -loved brands. Their combined expenditure on TV advertising alone accounts for £2.2 billion, or some two-thirds of the total.

  1.2  ISBA and its members have long held that competition is fundamental both to the effective operation of markets and to the consumer interest.

  1.3  Meanwhile, the UK's media are consolidating rapidly. ISBA therefore seeks to ensure that acceptable levels of competition are maintained in the marketplace.

  1.4  The markets for advertising media time and space (and in due course, bandwidth) should operate as proper competitive markets. Restriction of supply or other forms of price fixing should (continue to) be outlawed.

  1.5  ISBA recognises that some media mergers and/or acquisitions may be predicated on commercial grounds alone, whilst others may be based in whole or part on more subjective public interest enhancements, such as improved editorial. We assert that the following criteria and solutions should be applied to all potential consolidations regardless of their motivation.


  2.1  To protect our members' interests and indeed the wider issue of competition in general, our several recent relevant submissions to Government have called for ownership limits of 25 per cent by medium and 15 per cent overall in the UK. (See also point 4.4)

  2.2  This would mean that no less than four companies could own all the commercial assets in any given medium, and no less than seven could hold the commercial assets across all UK media.

  2.3  We have acknowledged that these proposed limits should not apply to companies which have already achieved higher market shares through organic growth, and should therefore not be retroactive or apply to pre-existing situations.

  2.4  We also recognise that these limits might constrain any further movement in those sectors which have already settled beyond them, such as cinema. We call for further consultation by the sector regulators and/or competition authorities before granting authority in such instances.

  2.5  ISBA recognises that the primary role of regulation is to protect the public/consumer interest. However, we also assert that each and every transfer of media asset ownership will excite different degrees of industry concern according to any or all of the following influences:

    —  the sizes of the merging parties;

    —  the medium or media they operate in;

    —  the size of those markets;

    —  relevant market precedents;

    —  above all from the advertiser perspective, the degree of substitutability of the mediaassets under proposed ownership and thus control.

  ISBA therefore argues that the response, and solutions or remedies—either applied by the industry itself or imposed by the sector regulator or competition authorities—should be proportional to the scale of the concerns thus aroused.In some significant cases —such as the further consolidation of ITV, for example—the solutions sought may well exceed the minimum safeguards proposed in this paper.

  2.6  In arguing for effective market competition in all sectors of the UK's media, ISBA also seeks balance between the offerings and inventories arising under any potential merger. ISBA would therefore seek referral to the competition authorities of any concentration in media asset ownership—editorial and/or media sales—which might lead to excessive market imbalance.

  2.7  These limits should not only apply at national level but also to key and sensitive regions of the UK, defined thus:

    —  "Political": Where a part of the UK might be set to devolve to such an extent as to adopt its own laws with regard to media content and ownership (ie Scotland).

    —  "Significance": where the distribution areas or catchments of the media in question account for a significant proportion—ie 20 per cent—of the relevant total UK market (such as London ITV, for example) as measured by a) advertisement revenue share and b) share of key demographic groups, particularly in those instances share a market player's influence cannot be determined by advertisement revenue (ie licence fee, subscription or pay-funded services).

  2.8.1  As a minimum safeguard, wherever mergers or acquisitions arise within the media sector which lead to market shares in excess of these limits, sales of the advertising inventory which represents market share in excess of these limits must be handled by separate and independent sales companies. (See also point 4.4)


  3.1  The UK has a well-established, long and successful history of independent media sales companies. However, we recognise that their introduction to handle separated advertising sales for market shares in excess of the 25 per cent and 15 per cent limits will present some difficulties, albeit not insurmountable. In these instances, to prevent undue influence or collusion, the following rules should apply:

  3.2  In accordance with established practice, the enforcement of adherence to these rules should in the first instance be the responsibility of the sectoral regulator—OFCOM—and its appointed specialists.

  3.3  A media owner on whose behalf an independent sales company operates may not own more than 19 per cent of the sales company, whether directly or indirectly.

  3.4  An independent sales company may not have any direct or indirect interest in any media owner which they represent.

  3.5  Independent sales companies which jointly represent a common media owner must not have any direct or indirect interest in one another.

  3.6  Nor may a media owner be represented on the board of any independent sales company on whose behalf it operates.

  3.7  Whilst the media owner should have access to sufficient information to enable it to determine the independent sales company's effectiveness on its behalf, it should not have access to any information whatsoever on the sales company's specific arrangements with individual advertisers and/or agencies, nor within overly narrowly-defined advertiser sectors.

  3.8  Whatever their basis, any sales incentives operated by the media owner for the independent sales company must relate entirely to the performance of the sales company on its behalf, and must not relate in any way to the overall performance of the media owner or of others within the market.

  3.9  The contract between the media owner and the independent sales company should acknowledge and be based upon these enforcible rules. Likewise, the contracts between the media agencies and the sales companies, and between advertisers and their media agencies should also acknowledge and base themselves upon these rules similarly, carrying their currency right through the business process


  4.1  The relevant markets are currently: television, radio, national newspapers, regional and local newspapers, magazines, outdoor/out-of-home (posters, transport and other location specific advertising), online (ie internet) and wireless messaging (SMS).

  4.2  Ownership of sales is defined as ownership of the sale of advertising. The most effective measure of this is the revenue thus generated.

  4.3  Advertising is defined as all forms of paid-for commercial communications, and includes spot and space advertising as well as sponsorship, "advertorials", items inserted into or onto publications etc.


7.1  Local ownership controls

  7.1.1  Although ISBA has always argued for rather tighter restrictions—specifically no less than four operators in addition to the non-commercial BBC—we sense that Government has clearly been strongly impressed by joint submission presented by the Radio Authority and the Commercial Radio Companies' Association, whose contents are reflected in the Radio ownership provisions of the Bill.

  7.1.2  However, we do not feel that the "currency" on the basis of which market substitutability proposed at point (a) and of the Policy Document—that of stations' population coverage—is sufficiently revealing. We would strongly argue for this determination to be based on each station's relevant reach as measured by RAJAR, the BBC & industry-agreed radio audience measurement system, which is sufficiently robust as to bear such interrogation.

  7.1.3  This is because stations' market dominance stems from high reach of key populations or demographic groups. Under the rules proposed in the Policy Document's section, media owners of stations with relatively dissipated listenerships—ie large population coverage but small reach, such as specialist stations—might be prevented from local expansion, whereas those owning stations with more concentrated listenership—ie smaller catchment but much higher reach, like city centre mainstream music or talk channels—should excite scrutiny but might well be overlooked.

7.2  National ownership controls

  7.2.1  We are also concerned by the indication that the rule preventing ownership of more than one national analogue radio service will be removed (Policy Document, section This not only puts heavy pressure on the regulator to enforce the differences between the existing services through their licenses, it also disregards advertisers' concerns regarding possible undue exercise of market dominance.

  7.2.2  The UK's national radio stations are all, to a greater or lesser extent, successful in generating advertising revenue as they provide advertisers ready access to segmented national listening audiences. Whilst they are owned by different companies, market competition exists between them. This competition would be most seriously threatened were one or more to be acquired by the same owner. ISBA argues that these key assets should not be allowed to fall into the same hands for the foreseeable future.


  8.1  Despite the comments in our several previous submissions, the Bill continues to ignore the Outdoor (poster/billboard) medium completely. We can only assume that this oversight arises from the fact that outdoor has no editorial content and therefore does not excite Government's concerns regarding undue influence.

  8.2  We feel this is gravely misguided—other parts of this Bill clearly indicate that one of the key aims of this legislative process is to avoid the accretion of undue influence, whether editorial or commercial.

  8.3  Hitherto, the scrutiny of the competition authorities alone has not delivered controls which have addressed and satisfied advertisers' concerns regarding the Outdoor medium. Four major companies now control this medium, and continue consistently to mop up its remaining independent assets.

  8.4  This impacts adversely on the opportunity for effective competition, especially since each company has areas of specialisation. For example, Viacom outdoor, a subsidiary of the US-based broadcast holding company, controls all transport media, and two companies, US-based Clear Channel's subsidiary More Group and French J C Decaux control all local authority contracts.

  8.5  Outdoor's omission from the scope of both this Bill and OFCOM's responsibilities does not bode well for advertisers into the future.

  8.6  We believe the same to holds true for Cinema. Advertising sales for Cinema have been controlled by only two companies for many years—one, a subsidiary of Carlton Communications, controlling ca. 75 per cent of the market, the remainder being controlled by a subsidiary of Scottish Media Group.

  8.7  Regrettably in our view, the Bill also fails to cover cinema.

June 2002

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