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


Memorandum submitted by SMG plc


  SMG plc is a successful and ambitious cross-media business with interests in commercial television, radio, newspapers, on-line, cinema and outdoor advertising. Headquartered in Glasgow, the Group's interests include Scottish regional operations, and UK national businesses. (See Appendix I.)

  SMG has contributed to each stage of consultation on the forthcoming Communications Act. We have twice given oral evidence to the Culture, Media and Sport Select Committee, and have submitted written evidence to the Government, both in response to the initial White Paper and, subsequently, on the specific consultation on media ownership. On each occasion, we have put forward the case for the Government to take a deregulatory approach to media ownership to allow UK media owners to grow, achieve sufficient scale to compete with global players and to reinvest in UK media content and infrastructure.

  We welcome this opportunity to submit our views to the Joint Committee on the draft Bill. With due regard to the Committee's terms of reference, and SMG's specific areas of operation and expertise, we have restricted our comments to those areas of the draft Bill that relate to:

    —  media ownership;

    —  the place of the Nations and Regions in the proposed framework;

    —  the role and powers of OFCOM.

  We intend to make a fuller written response to the Government in due course, once we have reviewed the draft Bill, and the very recently released clauses on media ownership, more fully.


  In broad terms, we welcome the deregulatory spirit of the draft Bill. We believe that at a national level, and in the UK's larger metropolitan areas, it will have the effect of freeing up media ownership regulation, allowing media owners to grow, thereby enabling further investment in quality content and infrastructure, to the advantage of viewers, listeners, readers and advertisers.

  We recognise that a balance must be struck between rules which are flexible and those that are sufficiently prescriptive to provide certainty going forward. At a UK national level, we believe the draft Bill has achieved a fair balance that provides clarity and certainty for media owners while protecting plurality and diversity. However, at a local level, in areas less well-served by media, we believe some of the proposed media ownership regulations embodied within the draft Bill's Policy Narrative and could result in unfair restrictions and anomalies being imposed on media owners. This is clearly contrary to the Government's stated aims of simplifying and liberalising media ownership rules. Furthermore, whilst the Government has stated that these proposals are intended to encourage investment and innovation through the provision of certainty for media owners, they are in fact in danger of creating an environment of uncertainty into which local, indigenous media owners may be reluctant to commit investment.

  Such barriers to support and investment can only be regarded as disadvantageous to viewers, listeners and/or readers, who would not benefit from investment in new products and platforms and the enhancement of existing media.

  It should be noted too, that many media owners operate at a national, regional and/or local level, and do not restrict their operations to only one level of geographic penetration.

  Specifically, there are four areas within the proposed regulations that we believe should be re-examined. These are:

2.1  Three and One Ownership Rule (Policy Narrative: 9.4.2)

  This regulation states that in any one area there should be three distinct media owners, in addition to the BBC, for certain aspects of cross-media ownership to be permitted. Whilst this regulation would have little impact in the principal conurbations that are already well-served by local media, in more rural areas, less well-served by local media, it would seriously restrict the growth of local owners of radio or, to a lesser extent, television. Such a set of circumstances is undesirable as it disincentivises business investment and expansion which may need investment. It is also unfair, as the ownership of local radio, or indeed of regional television, by a local newspaper publisher with up to 49 per cent of the local market would be permitted. This is particularly anomalous, given the close regulation of radio and TV content, compared with newspapers.

2.2  Definitions (Policy Narrative: 9.4.2)

  Some of the terminology contained within the Policy Narrative, upon which the media ownership regulations are effectively to be based, is open to interpretation—and possible misinterpretation—thereby adding to the confusion created by the proposed regulations, resulting in further uncertainty. Such lack of clarity would be likely to discourage any meaningful level of risk-taking by existing, and potential, investors and could result in a chronic stifling of the development of products and services.

For example:

    —  "Local"—it is unclear whether this term is used to depict a specific pre-existing geographic area (eg a town or city or local authority district); or to denote the area served by a specific media business (eg the circulation of a weekly newspaper; the coverage area of a local radio station).

    —  "Regional"—once again it is unclear whether this refers to a local authority area (eg a county council area) or the transmission footprint of what has become known as a "regional" television or radio franchise. We note that at some points in the Policy Narrative the two above terms appear to be interchangeable.

    —  "Media Voice"—the Policy Narrative introduces this term for the first time, insisting that there should be a specific number of "media voices" in a local area. However, it is unclear whether this is simply a synonym for "media owner" or whether it is accepted that, for example, two newspapers targeting different readers, each with its own editor, news agenda and political stance—yet with common ownership—can constitute separate media voices. By way of illustration, SMG owns three regional newspapers, The Herald, the Sunday Herald and the Evening Times which we run as entirely separate entities and are clearly very different products. Are these to be viewed as three distinct "media voices?" Is it the case that the AM and FM services of a local radio station, with separate content and aimed at different audiences, would constitute two media voices? These are important points of principle that require clarification.

2.3  Classifcation of "Editionised" UK National Newspapers (Draft Bill: Sch 14, Part 1, Clause 3)

  The most recently released clauses of the draft Bill state that OFCOM will have the power to determine whether national newspapers that produce different editions for different parts of the UK, will be regarded as purely national; as national and local; or as a number of purely local newspapers. This is an important distinction in areas such as Scotland, where there are indigenous "national" newspapers that circulate across only Scotland, while most of the UK national titles produce Scottish editions—many with heavy Scottish content, created in Scotland and printed in Scotland. This lack of clarity only adds confusion and risks discouraging investment.

2.4  Radio Regulation (Policy Narrative: 9.6.2)

  The Radio sector appears to have been subject to a disproportionate level of regulation under the cross-media ownership rules in that it has been used as the pivotal medium in cross-media ownership regulation—with restrictions placed on co-ownership of TV and radio; and on newspapers and radio. We believe that this places undue focus on the radio sector and risks discouraging investment in the medium. This is particularly invidious, given that commercial radio is already subject to content and format regulation and, in most cases, is principally music-based. In addition, given that the BBC dominates this sector with over 50 per cent of listening hours, is this level of regulation justified at all?


3.1  ITV Charter for Broadcasting in the Nations and Regions (Draft Bill: 189-194)

  We welcome the recently published ITV Charter for Broadcasting in the Nations and Regions and believe that this, along with the accompanying clauses in the Bill, secures the future of regional broadcasting within the ITV regions. This will strengthen and protect its unique service to viewers and local communities. As a "national" broadcaster in Scotland, we are committed to the production of programmes that reflect Scotland's different cultural and political agendas and its educational and religious institutions.

  As part of the ITV Network, we endorse and wholeheartedly support the ITV submission to the Joint Committee and have been involved in the creation of the submission. In particular we welcome the clauses within the draft bill that relate to ITV's public service broadcasting commitments in general and to regional programmes in particular.

3.2  "Must Carry" and "Universality of Access" (Policy Narrative: 8.2.2)

  Of significant importance to regional public service broadcasters whose transmission areas include large rural areas are the twin issues of "Must Carry" and "Universality of Access" on all available platforms, including satellite. We also welcome in Clause 49 of the Bill the proposal to extend the Must Carry obligations to all electronic communication services that are used by a significant number of people to watch television. This is particularly relevant where topography creates technical problems for terrestrial broadcasting. We note from the draft Bill that Channel three licences are designated as a Must Carry service, but in digital format only. This would appear to suggest that the Must Carry status on Satellite will only apply after switchover. Clarification is required on the proposed arrangements for the existing analogue service and also on the charges levied on PSBs to gain access to consumers via these electronic delivery platforms.

Furthermore, there is an obligation on Channel three licence-holders to ensure Universality of Access for all viewers, and to achieve Government targets on investment in regional services and programmes, while also paying a licence fee. Placing "Must Offer" obligations on Channel Three Services without setting parameters for the cost of the Conditional Access risks placing PSBs in an invidious position when it comes to negotiating with the platform owners. We believe this should also be re-examined by Government.


4.1  Scottish Representation (Policy Narrative: 4.4.1)

  We welcome the inclusion of a Member for Scotland on the Content Board of OFCOM and the establishment of an office in Scotland. We believe that this is an appropriate level of regional representation and that such a presence will enable OFCOM to pay due regard to the Scotland-specific issues that are important to Scottish viewers, listeners and readers.

4.2  Content Regulation (Policy Narrative:;; 9.10.1)

  We are concerned about a range of new, apparently far-reaching content regulatory powers proposed for OFCOM in the Policy Narrative for both television and radio. It is our view that there is already sufficient protection of the interests of viewers and listeners embodied within the respective licences that is in many cases also a commercial imperative ie the provision of local news services.

4.3  Channel Three Networking Arrangements (Draft Bill: Section 39 4a and 4b)

  We recognise and welcome the continued support for networking arrangements among Channel Three franchisees as set out in the 1990 Broadcasting Act. However, in the light of current consolidation within ITV and proposed changes to ownership regulations contained elsewhere within the draft Bill, these networking arrangements, and the voting structure within them, are now clearly inappropriate. They vest de facto control with two ITV companies currently, and potentially only one. We believe that OFCOM should be empowered to review the networking arrangements at such time as the draft Bill becomes law with a view to protecting the interests of the minority companies.

4.4  The BBC (Policy Narrative: 5.4.4)

  Notwithstanding the view expressed by Government in the draft Bill and accompanying Policy Narrative, we are still firmly of the view that the BBC should be fully regulated by OFCOM, in order to ensure that its role as a public service broadcaster is regulated in the same manner as commercial broadcasters, thereby creating a level playing field for all UK media owners. Furthermore, we strongly believe that the BBC's influential position in the UK television and radio markets must be considered by OFCOM when it is dealing with issues relating to concentration of ownership.

June 2002

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