Examination of Witnesses (Questions 720-741)|
MONDAY 24 JUNE 2002
720. Have they said why?
(Lord Eatwell) I think the main arguments have been
with respect to issues of content, where we feel that existing
content regulation and indeed the regulations which apply to news
on radio, are sufficient, are strong, are replicated in television,
and that other measures, such as the ownership rules proposed,
are not needed to secure balance and fairness.
(Mr Carnegy) I think the reason we have had as to
why is that in radio it is architecturally possible to regulate
it more thoroughly and vigorously than it is in television and
newspapers, so that is where we stand. A little emblematic nugget
from the Bill is that for a first offence the maximum you can
fine a television company is £100,000, the maximum you can
fine a radio company is £ million. We cannot explain that.
721. To echo a question often asked by Lord
Crickhowell, are there specific sections in the Bill that you
would want out or dramatically amended?
(Mr Carnegy) I think that clarification is crucial.
We are talking about content regulation here. We see the Content
Board as having an absolutely vital role to play and a very positive
role to play, particularly at the licensing stage. We think it
would be helpful also to take on board what we think would be
a duty to promote local content, if it were clarified that that
is a duty that is discharged at licensing, and then the deal is
that the Content Board must keep us to our licence promises. At
the moment we are a little nervous, because of their vagueness,
that that duty might hop back in in mid-licence and I might be
told that because my radio station is in Southampton I cannot
put out a play by a Welshman. Tom Jones's career would take a
nosedive! It is not beyond the wit of regulators to create odd
rules. We think they should be charged with giving regulatory
clarity once the regulation has been made and once we are held
to those promises.
722. To follow on that theme, I think you quote
in the evidence that "it is illogical to suggest that a regulator
is better placed to determine what comprises local content and
character than those working daily in the community". That
is the quote. From what you have said, you are not arguing from
that point of view. You could argue logically that broadcast content
should not be regulated at all in that case, but you are not saying
that. To make it very clear, I think you are saying that the additional
powers that are given in Clause 211 regarding local content and
character should just be allowed at licence time. It is not just
news, is it? If a radio station starts producing all of its programmes
from 100 miles away or whatever, presumably the regulator would
be able to say something?
(Mr Carnegy) Especially if you were in Australia and
it came from America, yes. The deal is not like that in this country,
and we feel very strongly that that needs to be understood. We
support the content regulation, we support the idea of formats.
We think that competitive bidding of content as the driver for
licensing delivers the social objective in radio regulation. We
must never forget that at all times when we are putting forward
promises on a licence, we can be held to those promises. It is
as simple as that.
723. Thank you. I have just one other question.
We have heard about reciprocity and so on. I notice that Capital
support reciprocity regarding foreign ownership, in their submission.
Is that a view shared across the radio sector? We have all heard
that there is not much chance, so we are told, of the British
buying anything American. Would that be true in radio? Would some
of your members possibly want to buy American radio stations at
(Mr Mansfield) I think we would like the opportunity
to be able to consider it.
724. That is not the most helpful answer, because
it is a quite crucial issue. We are looking at a situation where
literally no one around this table could buy a 20 per cent stake
in Radio Cincinnati. It would help us if you were rather more
concrete, because this is one area where I think it is open to
Capital to make serious inroads into a US purchase.
(Mr Mansfield) Are you asking me as Capital or as
Mr Grogan: Whichever you choose to answer as.
725. As David Mansfield!
(Mr Mansfield) No, I do not represent him tonight!
I think that as far as Capital is concerned, we would be happy
if reciprocity did not exist, so we support it in our submission,
but it is not a point that we feel that strongly about. I think
that it is difficult for companies, particularly as has been mentioned
earlier, to make major purchases in marketplaces such as the United
States. That is a very difficult situation. I do not think you
would find very many that could do that.
726. Could we put the same question to GWR who
do have holdings in Australia, for example? What is your view
(Mr Bernard) It is a very difficult question to answer,
in the sense that one does not want to take away the fact that
these are businesses which are run by people on behalf of shareholders,
and it is clearly in shareholders' interests to think about reciprocity
as something which is not necessarily in their own interests.
What we have said to date is that reciprocity was something we
would like to have in respect of the UK, because we were allowed
to buy radio stations in Australia. Frankly, we did not ever think
we would get the opportunity to buy radio stations in America,
and it was something of a surprise to see the Bill drafted as
727. I am sorry to push you on this. There is
a real danger here that you could be accused of trying to play
both ends against the middle. That is to say, yes, you are attracted
to the idea of an American company coming in, which could have
the effect of pushing your share price up or indeed your sale
price up, but if the price of achieving that is the UK holding
out for reciprocity, then that presents a problem. Where does
schedule value lie in this? Does it only lie in the ability to
enlarge the potential investment put into UK radio?
(Mr Bernard) I do not think that is necessarily the
case. What we are talking about is radio in the UK requiring investment.
It requires a lot of investment at the moment, because it is fighting
almost single-handedly the battle for digital radio, it is fighting
almost single-handedly as far as the world is concerned. If we
had the opportunity to have investment from America to support
our efforts in digital radio in particular, that would serve the
shareholders' interests, but it would also servevery much
728. Does it not smack of a banana republic?
(Mr Bernard) I do not think that is so. Why would
that smack of a banana republic?
(Mr Mansfield) The opportunity already exists for
companies outside the EU to invest in digital radiothe
rules are different, as you know, for digital and analogue radiobut
so far there is no evidence of anyone doing it.
729. My question is about access to radio. The
Community Media Association have told us that they "have
found no evidence from other countries that allowing community
media organisations to access advertising and local sponsorship
has had any detrimental effect on local commercial media companies
and it may have the opposite effect in bringing new smaller enterprises
into the broadcasting advertising market". Is there any firm
foundation for the view that commercial funding of a distinct
community sector will undermine commercial radio?
(Mr Carnegy) We do not take that view.
What is different potentially about the UK marketI am not
sure what are the markets you are referring tois that we
already have a pretty thriving community radio sector within the
commercial radio umbrella. I own a radio station where the entry-point
advertising deal costs £50 a week. I do not think there are
many stations like that in some of the more free-market markets
elsewhere in the world that perhaps we are comparing with. There
are radio stations, under the current licensing regime, which
serve universities, relatively small ethnic groups, serve very
small populations. I ran the radio station for Shaftesbury in
Dorset, population 8,000, the hinterland a bit bigger than that.
So we already have a good chunk of community radio in the current
setup. I think that is the important thing, and that is potentially
what makes us different. I think we share as an Association, with
the Radio Authority, a little bit of mystification that more community
groups have not applied for the small licences that have been
made available over the last ten years. What we are most concerned
about is that there may be out there a bunch of people who do
not want to deliver the stable audience delivery promise that
you have to conjure at the moment to win a licence, but do want
to take public subsidy to come in and distort the small local
market already in. I hope that is not the case.
730. What would you do about that?
(Mr Carnegy) I would say that access radio is potentially
a great new tier, but it should be defined as that which cannot
be supported under the current system. There is a little nugget
in the old legislation that says that on day one you have to effectively
prove that you can support your service for the full licence term,
and that has obstructed the Radio Authority broadly from licensing
some community groups who otherwise would be looked at. If maybe
that will change in the legislation, that might help. Given a
sufficiently clear definition, the kind of community public service
radio stations which would not be supported under any fully commercial
model, then why not create a new publicly funded access radio
731. You opened with a blunt statement about
discrimination in the radio industry and nowhere are your comments
in evidence stronger than on the subject of radio ownership, yet
the Government has stated that its proposals for radio ownership
"broadly follow the proposals made by yourselves and the
Radio Authority". All the evidence that we have received
from you is that you are critical of the proposals. Have your
views changed or has the Government simply got it wrong and misread
(Mr Mansfield) I think our views have changed. Those
views were formulated in discussion with the Radio Authority around
a year ago and at that time we did not anticipate the amount of
consolidation that was likely to be permitted under the draft
Bill, and I think principally that is the difference between where
we were and where we are today. The CRCA were, in fact, invited
along with everybody else when the draft consultation document
was published, and we at that time submitted another proposal
saying that we felt that, in the light of the way the market had
moved on, the ownership rules in radio ought to be further relaxed
but that was not taken into account in the draft Bill. We think
really that, if you go through what is being proposed, radio looks
like the last area which is going to enjoywhich is the
wrong wordquite a lot of microscopic regulation, and our
view really going forward is that, if we are going to have a healthy
and vibrant commercial radio industry, something we have enjoyed
for the last decade, radio consolidation ought to be allowed in
line with other media. For us it seems strange that ITV and Channel
5, for example, could become one company and yet within a local
area we need three different owners. So we believe that diversity
can be met by format regulation, which is proposed and which we
support; diversity is not in our view to do with ownership, although
often under common ownership diversity increases. If you take
Capital's position in London, we own three radio stationsXFM,
Capital Gold, and capital FMand we quite deliberately make
sure that those audiences do not really exchange listening and
we have an interest in doing that. So we think diversity can be
managed by format control, and common ownership is a positive
not a negative, and we support the suggestion in the draft Bill
that having separate ownership for TV and local press and local
radio to ensure a plurality of voices within a local market place
is good and we have a mechanic for that which we would happily
put in writing to you tomorrow as our suggestion as to how that
situation might be managed. Thirdly, the competition authority
is there. We welcome the fact that OFCOM will have competition
powers because it will enable it to take an overview, and we think
if you take those three thingsie format control, separate
ownership of strong local media across media in competitionthere
is absolutely no need to have three separate owners of local radio
stations within any market place.
732. It is very interesting that you started
by saying you have changed your view because of consolidation,
so that this is an area where perhaps we particularly need to
come back and look again at drafting and so on and have discussion.
In your evidence you, Capital Radio, are very firm that you believe
that radio ownership, like television, should be governed by competition
law coupled with a content-based licensing system and local cross
media ownership rules rather than sector specific over regulation.
It is illogical to argue that the ownership of such a powerful
media asset as ITV can be decided by competition law but that
the control of much smaller local radio stations requires prescriptive
regulation, and you go on to elaborate. So this is the area where
you really do see a need for some change because of a change that
has happened in the whole structure of the industry, is it?
(Mr Mansfield) Absolutely. It is very important.
(Lord Eatwell) I think the other point is that the
proposal for the three local media voices across media, when combined
with the requirement of three radio owners, will create some extraordinary
anomalies. We have charted a number of anomalies which we are
very happy to put before you. The two do not fit together in a
way which achieves the goals which the Bill would seem to want
Lord Crickhowell: I think this is such an important
point that it would be very helpful to have a specific piece of
evidence perhaps identifying the key areas that have changed and
the points you are making picked out from the much wider evidence.
It seems to me you have made quite an important statement.
733. I have a question the Committee would like
me to put to you but, firstly, I think I really should address
the Bill team, because on the face of this Bill, and correct me
if I am wrong, in the cross-media ownership clauses that we have
seen there is nothing, unlike the TV industry, that gives effect
to the policy and the document nor to the statements such as the
three local voices, reference to which was made by the Secretary
of State in an announcement. I find it such a huge omission I
wonder, firstly, why these cross-media rules of radio are not
on the face of the Bill and, secondly, having seen just that very
broad power by the Secretary of State to impose requirements,
I find that such a broad power that it may possibly be open to
challenge in the future because, as the argument changes, it may
open the door to certain companies challenging in the courts that
orders may be oppressive and not what Parliament intended when
it originally discussed the primary legislation. So I think there
is a big black hole on radio ownership and I would be grateful
if you would explain why it is not in there.
(Mr Brand) Certainly. You are quite right, there is
an order in the Bill which does not specify three local voices
or anything else. It was the intention to set it out in the policy
document. It was a deliberate intention to withhold it simply
because it is very likely that these will change at some point
in the future. OFCOM will have a duty to review this every three
years and we felt we needed the flexibility to change the scheme
if necessary. I think it is also a technical question; what is
a potentially technical difficult complex scheme, if you had it
set out on the face of the legislation, any change would have
to be made on the primary legislation, and we did not think it
734. I find that odd given that there are rules
relating to other media. I am sure with the policy in its present
form, the radio owners will be delighted that they are not in
there but, whilst hopeful for relaxation in the future, it still
leaves you with absolutely no certainty of what is going to be
decided in the future.
(Mr Brand) I appreciate this is not agreed but it
was a scheme which is very complicated in detail, and that would
be in the mechanic, and that can still be adjusted in the future.
It is a complicated scheme so there needs to be clarity about
how it would operate and there clearly would have to be a draft
order in Parliament so people could see what the intention was.
735. I have a supplementary to that. I am very
glad, Mr Mansfield, that you said that you are happy to put in
a memorandum regarding cross-media ownership because I think it
is recognised that most MPs are at the sharp end of this; in my
area the only effective competition to my local newspaper group
is radio, and unfortunately the independent section news is not
as strong as it is on the BBC, but nonetheless we would not like
to see further concentration in local media ownership for obvious
(Mr Carnegy) Could I come in on that point? I think
we understand the plurality issue that lies behind this, but the
mechanism does not deliver plurality. Under the current system
there is nothing to stop your local radio station outsourcing
its news from an agency which happens to be shared with a newspaper.
Within the content regulation that can deliver the plurality,
and keeping radio companies weaker than other media entities does
736. Before David decapitates me I will move
on to my next question! If your wishes were met and precise rules
related to single medium ownership were not imposed on radio but
instead OFCOM had a power to judge each individual situation against
plurality issues and diversity issues which were more subjective,
would that not lead to greater uncertainty for you?
(Mr Mansfield) We do not really want uncertaintyyou
are absolutely right. What we want to be able to do in running
our businesses is be able to predict as far as possible what is
possible; so we want to be able to anticipate the result of looking
to move forward in a world of future consolidation. We do not
want too much flexibility built into the system but what we intend
to suggest to you is that you can manage diversity by very tight
format control, and it is very tight format control. The Radio
Authority do an excellent job in managing format control, and
we are not suggesting that OFCOM should not do that. Having separate
owners within local media I think provides the plurality of voices
and then you have a fallback, particularly as far as the advertiser
is concerned and the local advertiser, competition powers which
would stop abuse
737. This may be something you want to cover
a bit more when you send us an explanation of how you see this
working as distinct from what is previously put forward by the
Radio Authority, but I just want to be clear of the essential
principle of what you are saying. Diversity is governed by format
controls. Plurality is the issue governed by ownership controls,
and you do not want to arrive at a situation where there are no
ownership controls but on the basis of three media voices. Are
you talking about three media voices other than the BBC in any
(Mr Mansfield) Yes.
738. Why is it that you seem to be thinking
in terms of no cross-media ownership? If there happen to be three
local newspapers in a particular city, why not have cross-media
ownership between newspapers and radio? The issue is three distinct
voices, not trying to have, as it were, a newspaper voice, a television
voice and a radio voice, am I right?
(Mr Mansfield) What we are saying is that plurality
should be delivered by having a strong local newspaper, a strong
local regional television operator and a strong local radio station.
We are saying that those three media could not come under common
ownership because then plurality would be threatened.
739. But the very nature of this Bill is trying
to deal with converged markets and, in a locality, television
and radio and newspapers are a converged market, particularly
where news is concerned. Very often news gathering can operate
between those markets. So is it not better to deal with three
distinct media voices, not trying to pin them down to radio, television
and newspapers rather than, say, to try and manage each local
market and say we have to have a television voice, a radio voice,
etc, as if they were three distinct and separate beasts?
(Mr Mansfield) That is a good point; it may be too
prescriptive, as you say. The important issue here is maintaining
plurality and making sure that those broadcasters, particularly
in radio and television, are governed by rules regarding impartialitywhich
both of us are. We are absolutely strictly controlled and if we
step outside that particular area then the regulator comes down
on us, and the proposals in the Bill are that that should continue.
(Mr Carnegy) The policy document also makes it clear
that the view of the legislators at this stage is that, because
regional TV and regional/local newspapers are the two most important
regional media at city level, therefore at 184.108.40.206 there is already
a rule stopping local ITV owning the local paper, so to an extent
some of that cross-media plurality is already delivered by that
740. Do the Bill team want to clarify anything
in addition to that?
(Mr Brand) No, thank you.
741. You have made very good points indeed,
and maybe the whole thing was done on Friday afternoon but, in
writing to us, because I am genuinely lost by your reciprocity
argument, could you clarify all of that, and please write with
a unified voice as opposed to separate entities on all issues?
(Lord Eatwell) Yes. We will provide a response on
behalf of the Commercial Radio Companies Association.
Chairman: Thank you.