Joint Committee on The Draft Communications Bill Minutes of Evidence

Examination of Witnesses (Questions 840-859)



  840. What are you aiming for?
  (Mr McGarry) I do not think it would be reasonable to make such a provision giving such a power. At the moment when ownerships of licences in ITV change, the ITC insists, or attempts to insist, that the licence obligations are honoured by whoever now owns them.

  841. But they will be able to do exactly that even if the partial owner is foreign, will they not?
  (Mr McGarry) Yes.

  842. There will be no change in that, will there?
  (Mr McGarry) No, but I believe that there is a reason or a justification for saying that if a foreign owner takes over one of our channels, they should be required to meet the more specific targets and obligations in terms of having to honour them.

  843. What I am trying to get out of you is that you are going further than the licence obligations. What kind of more specific requirements are you asking for?
  (Mr McGarry) Some of the things that are missing from the proposals as they stand, like specific quotas for genre of programmes, for example, which I think should be there in relation to that, and quotas of that kind.
  (Mr Lennon) Can I reinforce the point I made earlier about the changed nature of relationships should certain foreign owners break into the market. Although they grit their teeth, the current Channel 3 and Channel 5 operators do accept that there is a legitimate social purpose in having regulation of content. Despite this, they have come up against economic problems which have taken them back to the regulator and caused them to argue for consolidation within the industry. The nature of that discussion—for example, were a large American network to be in dialogue with OFCOM about their economic problems—I suggest would be completely different, and OFCOM would find itself dealing with companies who do not share that culture of accepting, somewhat reluctantly sometimes, that there is a public service obligation on broadcasters in this country.

  844. I am sorry to pursue it, but I am making the point that the public sector obligation is a very specific licence obligation which can be enforced, though I think what Mr McGarry is arguing is for something beyond the licence obligation. I do not think there is any doubt when you press the matter later about the enforcement of the licence obligation, but I think the argument has been put that there is going to be a need for it to go beyond the licence obligation. I think that if you are going to argue that, you have to be very clear. I am not arguing that you should come out with details today, or we shall probably be here all afternoon, but if you do have some thoughts then I think you have to get together and tell us what the change in the Bill—coming back to my point—ought to be on this. It is a pretty big step to go beyond the licence obligations and say that because the owner is foreign, you are going to impose some rules which would not apply if the owner was British, which is what you are actually saying. You cannot do it in a European context anyway, can you?
  (Mr McGarry) Not in a European context, no.


  845. Can I pick the bones out of this? As I understand it, Ian and Tony's submissions are quite clear. You would seek changes in public service remits to be made by primary legislation not by secondary legislation?
  (Mr Lennon) Yes.


  I think that covers your point?
  (Mr McGarry) Yes.
  (Mr Lennon) In a sense, I do not think we would necessarily differentiate between the rules that ought to be applied to a non-EU owner and the rules that are applied to the EU owner. The point we are making is that any remit is open to interpretation by the regulator, and our experience with the ITC is that the operators are remarkably successful in seeking a general relaxation of the ownership controls and to some extent the remit on the grounds of economic necessity. The economic imperatives for a vast global multinational will be rather different from those that we have seen from operators in our country already. Can I give a specific example. The ITC has, within the last fortnight, relaxed the requirement for regional programming on Channel 3. They have called it "standardisation". The net effect of this, as you heard from PACT, is that hundreds and possibly thousands of hours of regional programming will now cease. That is an example of interpretation of a remit which we feel OFCOM would be just as capable of doing as the ITC has been in the past.

  847. Without putting words into your mouth at all, as I understand it, the position you are taking is that the type of pressures the Secretary of State or indeed OFCOM might come under—economic pressures—from a new owner are such that a government at any given moment might be prepared to pull the plug, but in fact changing the public service obligations, which are in the public interest, goes deeper than that, therefore that is why I think you are suggesting that there should be primary legislation and not secondary legislation, in order to get the issue very adequately debated?
  (Mr Lennon) Yes. The social interests of listeners and viewers sometimes have to be put before the economic interests of the owners.

  848. That is as I understood where you were coming from. Peter, do you have any comment on that at all?
  (Mr De Val) No.

  Baroness Cohen of Pimlico: Clearly it is the rest of the nation we are thinking of, is it not?

  Chairman: Yes. Of course, any individual company can make a tremendously compelling case, but the real issue is making sure that the public interest is not necessarily thereby bailing it out.

Lord Hussey of North Bradley

  849. To some extent we have talked around my question already, but I shall read it out anyway. What effects would you expect the proposed new regulatory structure for public service broadcasting to have? They obviously have a certain considerable degree of power. Will they exercise it, how will they exercise it and how would you like them to exercise it?
  (Mr Lennon) How will they exercise it is probably a question to ask me in about five years' time, because it is simply impossible to predict. The way we would like to see it exercised is to stick as closely as possible to the principles of public service broadcasting and the need for content regulation to deliver that type of programming, in an increasingly commercial environment, up against competition. OFCOM will have extensive powers. Whether it is in their powers or in the primary legislation, I think one of the things we would like to see is that the broadcasters who are not in tier 2 or tier 3 also are under some obligation to carry programming of a public service nature which is socially useful. At the moment there is a pretty uneven playing field if you look across the spectrum of broadcasters. Leaving out the publicly-funded ones, at one end you have—

  850. That is kind of you. Very few people have.
  (Mr Lennon) I think you cannot have any debate without mentioning the BBC when you are talking about communications and broadcasting. At one end of the spectrum you have very heavily regulated Channel 3, struggling in a lot of cases to deliver its public service remit because of economic problems, but they are clearly under an obligation, they pay licence fees in many cases running into tens of millions of pounds. At the other end of the spectrum you have, for example, satellite broadcasting in this country, under no real public service obligations whatsoever, competing very directly with the regulated sector, not paying very much for access, which is where the question with respect to charging comes in. I think ideally what we would like to see, amongst other things, is OFCOM levelling that playing field so the public service commercial operators can actually stand a chance of surviving and continuing with their tradition of programme production.

  851. That is a very clear answer. Thank you very much for that. The second part of my question is, can you suggest any changes to the proposed general public service remit in Clause 181? If you look at Clause 181 it includes practically everything, but I thought, just to keep you going, what about "facilitating fair and well-informed debate on news and current affairs"?
  (Mr Lennon) It was interesting to see that the oldest definition around actually creeps into that long shopping list in the form of education, information and entertainment. I think all of us have struggled with the definition of PSB.

  852. I have struggled with it all my life!
  (Mr Lennon) You know what it is when you see it. In terms of those clauses certainly the view of my union is that there probably is not much point just adding to the shopping list, because the phraseology there captures what we all understand to be public service broadcasting in a UK sense. The key to it is actually putting into OFCOM's terms of reference the ability to force broadcasters to deliver what they think public service broadcasting is. So we would not want to make any specific alterations which lengthened that shopping list into a rather ham-fisted recipe for what we call public service broadcasting.

  853. So you get out there and ask them to justify their position? You go to the public service broadcasters and ask them to justify their position or alternatively their material?
  (Mr Lennon) I do not know that it is a question of justification.

  854. "Explain" is perhaps a better word.
  (Mr Lennon) Yes.

  Chairman: One last question, and then I must go.

Lord Crickhowell

  855. Can I ask a supplementary on that. You have said you all understand what is public sector broadcasting. I rather pursued the Chairman of the BBC the other day to ask him whether he thought that all of his output was public sector broadcasting. I think he tried to tell me that it was, because all the entertainment was. As the previous chairman of a Channel 3 company, we were not allowed to think that all our output was public sector broadcasting. On the same basis, then, a lot of BSkyB coming over the satellite is public sector broadcasting—films and so on. Do you agree that all the BBC's output is public sector broadcasting, or do you think that actually a lot of it is, in effect, general entertainment broadcasting that might be coming from anywhere?
  (Mr Lennon) I am not sure there is a compelling reason to answer that really. I think the justification for the licence fee is that the BBC does broadcast across all ranges of programmes and meets all the needs of public service broadcasting. Whether you actually define it within that total broadcasting output as a specific programme being public service broadcasters or not, I do not know. I think the BBC has to provide programmes which are distinctive. One of my worries about the purpose of this draft is that it does refer to "entertainment". It does not anywhere talk about drama in terms of the importance of that within the overall requirements of the regulated channels, and I think that is a mistake. When you were operating HTV you were required by the ITC to provide a range of programmes, it was the justification for your having the licence and the advertising revenue and so on, and that range of programmes had to include drama that was hopefully relevant to your region but also hopefully of a kind which was going to go onto the network and would attract viewers in that way. I am not sure whether there is a deliberate thought in the drafting of the Bill that somehow or other the word "entertainment" has come in, without any encouragement, as far as I can see it, for the necessity of producing high-quality tragedy and drama which is the best really that British television produces and is unique.

  In the absence of the Chairman, Lord Crickhowell was called to the Chair

  Chairman: I think you very well brought out the point I was seeking. I agree with you about the importance of drama. I am just questioning whether "entertainment" is an adequate definition in terms of public sector broadcasting.

Mr Grogan

  856. Coming on to the theme of high-quality entertainment and drama, I would be interested in your comments on the first evidence we heard this morning—you referred to it yourself—from PACT and so on. Do you think that if we have high-quality content, in whatever field, should an independent production sector be one we should be further seeking to encourage in this Bill? What do you think would be your first stab at the sort of proposals that they put before us?
  (Mr Prodger) I think the answer to that is yet, but it goes a bit further than them in that. I think one of the points that Tony and Ian made is about British production per se, and the point that are regulated and non-regulated areas of broadcast in this country showing a very distinct difference between the amount of British production. It comes to the point about does Sky produce public service broadcasting, or does any of the secondary market who certainly provide entertainment. There is very little British or European entertainment to be found, certainly in new production. There is a certain amount of old production that is re-run time and time again. I think that the Bill in general should be seeking to promote production, whether it be independent or not. That comes to the point about where does the regulation stop, should it go beyond the channels that currently exist and should it actually have some remit on the rafter of channels that now exist, because there is a pressure there, and the pressure that has been seen time and time again. Every time the licensees have gone to the ITC to seek a reduction in their licence, then they have been granted it for economic reasons. We believe that that is against the public interest, but we understand why, because they are having to compete with an industry that does not have the same restrictions on them. There is no requirement in the Hallmark Channel to produce anything at all, it simply brings across cheap imports. That unfortunately is what the majority of competitors are currently doing. So if the question is, should we seek to promote, then yes, we should, but we need to look beyond the current remit and the current channels that are regulated, because if we do not do that we can only stifle the actual production, whether it be independent or otherwise, in this country.
  (Mr McGarry) Very briefly, my understanding of PACT's principle is that it is not that they cannot get access under the quota arrangements, it is the terms under which they get that access and the rights they have to deliver to the broadcaster who is funding it. That is a point I have heard made often before and with which one has some sympathy, but I think there has to be a balance. I certainly think it is right that there should be independent production. I think it is a way of bringing in new ideas, it challenges the in-house production. Also I am equally convinced that one of the best things about British television in this country is the strength of its production base, and without the BBC that would simply not exist. Therefore, I think in-house BBC production has got to be there for the future. The independants have a leading role to play in that. They certainly have done in drama productions. A very large number of drama productions which are commissioned by the BBC, ITV and Channel 4 are from independants. I think there is a balance that has to be struck.
  (Mr Lennon) I think ten years ago your question would have prompted a much more hostile reaction from trade unionists in the industry. We must acknowledge that the independent production sector is now a fact of life. To give them credit, I think they have demonstrated, as they said when they first started, that the main-course broadcasters do not have a monopoly on ideas, and their output is often creditable. The thing you need to consider in weighing up an expansion of that sector is the effect it will have on the rest of the established production base in this country. There I think the question of critical mass arises. There is no doubt, despite the effects of the independent quota on the BBC, the BBC still has critical mass and is a major programme maker. However, if I can, for example, just quote from a number of ITV companies which Lord Crickhowell will know well, since independent production arrived the staffing at Anglia Television has dropped from 750 to 200, which is a reduction of a third; the staff of Yorkshire Television has dropped from 3,600 to 600, which is a reduction of five-sixths. Most of these are programme-making people. Part of this is the impact of the independent quota—not all of it by any means. We certainly argue that where you see such significant reductions in the programme-making staff of Channel 3 companies, you are looking at a situation where some of them are at critical mass or below, and it is worth pointing out that many individual ITV companies are actually now smaller than the biggest of the independent producers.


  857. Clauses 190, 193 and 194 provide for quotas for original production by all commercial public sector broadcasters, and for regional programming and production by Channel 3 licensees. What changes do you want in these clauses, and why?
  (Mr Lennon) Much stronger language. We would like to see words like "substantial", "significant", and indications that there has to be an identifiable and worthwhile contribution in terms of regional output. So much stronger language. We think that the way it is worded it looks almost optional for OFCOM to be setting quotas for regional production.
  (Mr Prodger) I think you have to add to that significant quality as well, which is always a concern. If you look at the significant amount of production that currently takes place in this country, it employs very few people, and there is very little questionable quality in relation to public service. There are an awful lot of fly-on-the-wall programmes, there are a lot of Big Brothers, Popstars, Soapstars, Pop Idol. All of that is original production. None of it is drama or challenging, and so there is a question of strengthening the actual content of original production. In the latest ITC report, where they for the first time look at the so called light-of-touch regulation, there is no question whatsoever taken on quality, this is purely a quantity report. That was an instruction that they gave in order to identify supposedly light-of-touch working, but it must be a concern in relation to the actual quality of production and the type and the range of production, as much as simply how much production is made.

  Chairman: We must be drawing to a close. Brian, do you want to put something to the Bill team?

Brian White

  858. Can I ask a question generally first, which is this. It is a very fast-moving market, and times have changed very quickly. The Bill does actually say, in relation to broadcasting, that training, equal opportunities and disability is right, but it only talks about it in terms of broadcasting. Is that a problem in terms of the whole nature of convergence?
  (Mr McGarry) Yes.
  (Mr Lennon) Yes. Even within the broadcasting sector there is a difficulty with this. We thoroughly welcome the commitment OFCOM will have to promote training and equal opportunities. Although it may not be strictly necessary, we are grateful that that is now going to be written into the licence between the BBC and the Secretary of State as well. The problem in the industry is partly to do with the impermanent centres of employment, the massive downsizing we have seen over the last decade. When you are getting rid of people you are by definition not bringing new people in. In terms of equal opportunity, and to some extent training, if you are not bringing new people in you cannot either begin to change the balance of your workforce to reflect the community around you, nor have you the flesh and blood, the new recruits, who need to be trained up. So even inside the broadcasting sector there is a problem. Outside the broadcasting sector, in the film industry, for example, there is a different kind of problem. It is a predominantly freelance sector. There is very little permanent employment out there. The effect of this is that the engagement and selection processes are either very often not up to the standards I suspect that larger employers would expect; it is often word of mouth, done on a basis of who knows whom. There is the potential for inbuilt discrimination in that in all sorts of senses, so that equal opportunities are hard to deliver out there in the freelance sector. Equally on training, the big battle in the freelance sector these days is raising money for training. We are involved in a number of schemes which, if you add them up, are worth about £1Ö million a year for free training of freelancers. That is a drop in the ocean compared to what is actually needed. You have the additional problem for freelancers that a day spent training, even if the training is free, is a day when they have lost the opportunity to go and work for somebody. So whilst we welcome the existence of those clauses, we will be looking to OFCOM to go much further than the basic wording, to try to do something proactive in the Bill.
  (Mr McGarry) Training has always been a problem in the industry, particularly for the casual employee. The 36,000 people I represent are almost exclusively casually employed, going from one location to another. I do hope that the Bill will be read in such a way that it means that the broadcasters will have a responsibility for those casually employed people on whom they are now very dependent. Whilst there is some training in certainly the BBC and the independent sector for technicians and others working in the industry, virtually nobody is taking any responsibility for the specific training of actors in the audio-visual industry. You mentioned convergence of new technologies. Some of the things that actors are now being required to do they are not learning at drama school, I can assure you, in terms of working on their own blue screen or animated characters screen. There are techniques which are very special to audio-visual performance, and we would argue very strongly—forgive me for making a special vested-interest point—that the broadcasters should include in that training responsibility the special training of the casual performers on whom they are so dependent.
  (Mr Darlington) Can I add that obviously as a telecommunications union, we think that if you are going to have convergence, and that is why you are having OFCOM, you should be looking for the promotion of good-quality training right across the board of the people who work in the converging broadcasting and telecommunications sector. The second thing I want to say is that the Secretaries of State, in their introduction to the Policy Statement, referred to a high level of employment as being one of their policy objectives, and yet the Bill barely talks of the workforce behind the industries which are being regulated. We would like to see Clauses 3(1) and 3(2) specifically require OFCOM to take account of the employment consequences of its decisions and, indeed, to be required actively to promote high levels of good-quality employment in the sector.

  859. So can I ask the Bill team why was it so narrowly defined?
  (Mr Suter) I think we shall have to come back to you with a note on that.

  Chairman: We are promised a note to come back on that very final point. I think I must wind things up. Thank you very much indeed.

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