Joint Committee on The Draft Communications Bill Minutes of Evidence

Examination of Witnesses (Questions 899-919)




  899. You heard my last question on self-regulation. It has cropped up and seized everyone's imagination quite a lot. Are there any thoughts you might have as a group on how we can move in that direction?
  (Mr Graf) Sir, having just heard this for the first time this morning, I would be very happy to go away and consider the implications of that.

  (Ms Clark) Can we ask for a little bit more clarification? Are you talking about self-regulation of content, or ownership issues, or in general?

  Chairman: Basically there are two options, one is increasing regulation and the other is increasing self-regulation and Mr Kass made the point that a lot of it is to do with perception. How do you create a self-regulatory framework which is sufficiently credible that the public developments and, indeed, Parliament, appeal to the faithful? We feel at the moment that we are in no man's land. They know that they can do the job; they have the capacity and the will to self-regulate but how do we create the framework where that achieves credibility? Perhaps you could get back to us on that.

Paul Farrelly

  900. We have all had this memorandum on newspaper mergers. In your preliminary views on a new regime you both question the expertise of OFCOM even to participate in an advisory capacity regarding newspaper mergers, yet OFCOM has a brief that covers the media sector and has an overriding duty to look at plurality and diversity. Does OFCOM's role and duty not make it very well placed to offer informed advice to the OFT on newspaper ownership issues?
  (Mr Hinton) First of all, we do not recognise that the regime of OFCOM does and should encompass newspapers. The basis of newspapers is that there is no scarcity of the spectrum. There is wide availability, enormous diversity and great plurality, and no basis upon which OFCOM can reasonably have either the expertise or the right to encompass it. We believe that newspapers, as part of a free press generating free discussion and free debate, should not be subject to its scrutiny.
  (Mr Graf) I absolutely share those views completely. I think the nature of OFCOM, the nature of its constituents and its background make it completely unsuitable for this. I would also add to the general point made by Mr Kass: that this document last night simply reinforces the view that, whilst the intentions are deregulatory, the complexity of the process that is now being introduced is considerable where we have three or four different regulators, and I am not at all clear even from this document what is envisaged for OFCOM. We discovered last night that in this document it has a competition role which I must say slightly surprised us as well in terms of advising on competition. I am not quite sure what its role should be on that front, never mind the content role which is there.

  901. What are you afraid of in OFCOM giving the benefit of its wisdom to competition regulators?
  (Mr Hinton) "Afraid" is an interesting word you should deduce from what we have said. Why should it be necessary for a government regulator to need to pay attention to the content of newspapers, is my question in reply to you. What would be the benefit to the consumer?
  (Mr Graf) Absolutely. If you like, the question is almost the opposite. What benefit do you believe that OFCOM from its background as a government regulator can bring to a newspaper regime which is a very different type of regime, operating a very different culture, a very different history and a very different competitive set to that which the broadcast media operate in.

Lord McNally

  902. But you both represent companies that, in other circumstances, are arguing the rationale of convergence, and one of the rationales for creating OFCOM is the convergence of both technologies and, indeed, of ownership. How can OFCOM do its job in newspapers? Well, it is a communications organisation and newspapers are part of the, to use the word, communications ecology, and it would seem extraordinary to set up a communications regulator and then say, "Newspapers are left outside its remit", particularly when on your side of the fence you are converging like mad and making judgments across the same landscape that OFCOM has responsibility for.
  (Ms Clark) The point now is that we have argued consistently for normal competition law to be applied to all media and to mergers in the media sector, and when it comes to the role of OFCOM and its role in content, that is in a very different circumstance to newspapers. In a licensed broadcasting area, where there is a restricted access because of spectrum scarcity, there may well be a role for a government regulator but that is not the case for newspapers. This is not contradictory. We see the role of OFCOM withering away as spectrum scarcity moves.

Lord Crickhowell

  903. The Bill team will be extremely flattered by the remarks of Trinity Mirror on the rigour and sophistication of the Civil Service approach which will be more of educated and helpful advice for the Secretary of State than advice from a body such as OFCOM. However, at the moment when you are really both arguing for deregulation and leaving it to the operation of the market regulator, it is rather curious to find Trinity arguing so passionately for an active role for the Secretary of State in all this. With the new Enterprise Bill and so on here is the Secretary of State I think trying to disengage from a lot of these activities and I am not sure she will be entirely pleased to discover you want her so deeply and actively involved in all these decisions. Why this sudden surprising love-in with the Secretary of State? Are you trying to get something out of it? What is it all about?
  (Mr Graf) Of course we are not. I think our point has been very clear. As with Associated Newspapers, DMGT and with News International, we are of the view that this whole process should be better left to competition law. We accept, however, that this is not likely to happen: we are simply therefore looking, within this context, for the best process we can get and we believe it is much more preferable, clearer, and simpler. Again I draw your attention to the diagram in the appendices which I think illustrates it beautifully—one page presently, two pages in future. So much for deregulation. Therefore, you know, from that point of view we see a clarity, a simplicity, a direct line. If this is going to be a matter of public interest then there is a direct accountable line to the Secretary of State. We do not always agree, dare I say it, with what we find from the DTI civil servants but we respect their knowledge, their rigour and approach, and their impartiality.

  904. Perhaps you are better able to bully and chase the Secretary of State than the independent commission?
  (Mr Graf) I think that that overstates our ability and understates the rigour of the Civil Service in this particular matter and I have to say that this process we know, because we have been through it a number of times, is a process which is a very much a process conducted in a regulatory environment within the Civil Service and operates in that manner.

Paul Farrelly

  905. From Miss Clark's comments on competition law and your own references to competition law, can the Committee take it you are both against, even in principle, the Secretary of State having the power to apply an extended public interest test to newspaper mergers?
  (Ms Clark) I think our comments on this latest document that came out last night we will have to come back in more detail to you on. I was interested to see that this was published at the request of the Committee. We still do not have the clauses, as you pointed out earlier. This is a very technical, detailed area and we are very grateful the Committee requested it because there is some concern about when we were going to see this, and as soon as we have digested it we will come back in writing with some comments, if that is okay with you.
  (Mr Graf) Again, we have made our position clear: that we would prefer not to be involved but we probably accept there is involvement. In the context of the particular involvement that is laid out in the document, News International and others would like to come back to you on that when we have had a chance to really digest its implications.


  906. As long as it is fairly promptly.
  (Mr Graf) Absolutely.

Lord McNally

  907. In the meantime, have you thought of publishing this graph at the back in time for the Christmas games market, because anybody that can find their way through can make quite a killing!
  (Mr Graf) It is tempting!

Mr Grogan

  908. My question arises from Trinity Mirror's evidence on radio ownership rules because we have had a variety of advice from different organisations. The Commercial Radio Association, having initially endorsed the three plus one local radio rule wants to remove that now. We have had a small radio operator, Saga, saying that three plus one gives them a chance to get into the market, and your position is interesting and I would like you to expand upon it. You, I think, endorse two plus one. Is that pragmatic or, in principle, do you think there should be that additional safeguard? Does it depend, for example, on the different size of the market? I think three plus one in London would allow you to own seven FM stations but in a rural market might have very different effects.
  (Mr Graf) Our thoughts come from the position that at present, in effect, and this is more to do with cross media ownership than pure radio ownership, the environment is such that there is a two plus one in the commercial sector that applies to local newspapers, and we just again find it slightly odd that here we are going backwards in a situation. Reference has been made earlier today to the fact that local commercial radio is about entertainment; the news provision, the speech provision; in local radio is by and large fulfilled by BBC local radio which is vigorous and has expanded considerably, and therefore we believe that the cross media and the plurality side of this and the diversity can be maintained on the two plus one regime quite satisfactorily, and in the context of regulation we think this is a sufficient safeguard.

  909. You think three plus one would seriously restrict your chance to grow?
  (Mr Graf) Not "seriously restrict", but the question is almost the opposite: why should it not be more than two plus one?


  910. Personally I thought Lord Crickhowell made a good point this morning: that, irrespective of what this Committee feels, there are deep sensitivities within the House of Commons about the ownership of radio. I accept what you say, that it is essentially entertainment, but driving to the west country last week and listening to the guy putting the records on, in between the records it was the school of Richard Littlejohn; his remarks may have been entertaining but they certainly were not apolitical, and in an era of segregation politics it is perfectly reasonable for MPs of all parties to be very concerned about the impact of what ostensibly might be entertainment but which would have tremendous local impact.
  (Mr Graf) I take that point. The general point I would make which has been made in the context of groups such as ours, and it also refers to a question asked earlier of the DMGT about influence, is that nobody in their right mind would impose, if you like, common editorial policies across regional and local newspapers: indeed, within the context of the regulatory environment which is very different from radio anyway, nobody in their right mind would do that centrally. A radio station and a local newspaper will only work if they respond to what goes on in the local market place, and respond effectively and continuously to that and understand and relate and be part of that community, and it does not matter what any of us say—that is what happens in the real world.

Lord Crickhowell

  911. But you can respond to local need and demand and everything and still, as the Chairman has suggested, express very strong political views in between. I no longer have to win elections but I do tell you that very strong views have been expressed to this Committee by those who do that this is a really effective and strong threat to political positions in the locality, so I think the idea that, "Oh, yes, we are giving people the right music or the right programmes but at critical moments we suddenly start putting over a particular view" is a fear that I was not really aware of until quite recently, but it has come through very strongly to the Committee.
  (Mr Graf) I hear what you say. I come back I suppose in a general sense to the point that there is a radio regulatory environment which is different from the newspaper one, and I would be surprised if that has not been dealt with within that regulatory environment, but I am not an expert on the radio regulatory environment.

Baroness Cohen of Pimlico

  912. I would like to take on cross media ownership from a slightly different angle. News International argues that controls on cross media ownership are a blunt instrument and points to difficulties in measuring influence. Well, quite. What we are struggling with and what the whole system struggles with is, assuming that this is what is wanted, how do you regulate? Where do you go? We wondered whether the danger of a system that relied exclusively on Competition Act powers makes regulatory behaviour less rather than more predictable; more difficult for companies to judge which way the Competition Commission is going to come out than it would be if you built up experience which way OFCOM is going to come out.
  (Mr Hinton) First of all, our principal objection to the bluntness of the present instrument is it sets in place immutable threshold of ownership beyond which cross ownership is not possible, and that is wrong in a world where the media is changing, the nature of the media, and the number of outlets is changing. That is wrong and is inflexible. What is needed is a regime which can constantly review what is a rapidly changing climate in media and a rapidly increasing and altering means by which people are accessing information and entertainment. It is our view that properly constituted, flexible, continually updated competition regulation is by far the best way to achieve this.

Lord Crickhowell

  913. We have received repeated evidence from other sectors that the one thing it is not is rapid. We have had continual complaints about delays, sometimes very long ones, which we have been told crippled sectors of not only your business but others simply because the Competition Commission has not been able to respond speedily.
  (Ms Clark) That has not been our experience.
  (Mr Hinton) Certainly in cases when we have been face-to-face it has been handled very expeditiously, but nor are we experts in the process of accomplishing regulation, but we still believe that is an important principle.
  (Mr Graf) Our experience of the Competition Commission has been the same. There is a timetable: it is a timetable which works and which is held to. We are pleased that within the changes in here the way the process is going to work is that all people who may be involved in merger transactions are involved in that timetable. That is the word we have had. But again, when you look at the present Competition Commission structure and timetable and process and compare it to what is being proposed, you can see why we have an affection for the present one in relative terms.

Paul Farrelly

  914. Like it or not, the government has written in some very specific cross media ownership rules on the face of the Bill. The one area where it has not is in radio to give effect to the three plus one or, if you have your way, two plus one. What justification is there for that exceptional treatment of radio? Why should those rules not apply to other media as well?
  (Ms Clark) They should not apply to other media either. Radio rules are where they got it right.
  (Mr Graf) I have nothing to add to that.

Nick Harvey

  915. News International say they welcome the lifting of foreign ownership restrictions as "bold and forward thinking". I have to say that quite a lot of people we have had evidence from are rather more worried about it than that. We have been running an on-line forum and, if I may, I will quote a typical example of feedback we have had: Richard McBrien feels very strongly that ". . . the UK broadcast industry is unique in the world and we are about to destroy this by selling out to the highest bidder . . . why . . . change a system that works well in the first place? Secondly, why . . . open our industry to the US when they do not reciprocate?" News International say, "We do not know what developments will follow from the removal" of these. Is not precisely that uncertainty the main reason why the decision to lift those restrictions was perhaps so surprising?
  (Mr Hinton) That is quite a big question. We are a bit surprised by the almost xenophobic mood of some of the responses given that this is the country that is the European champion in encouraging inward investment, one of the great global champions of the free flow of capital markets, a country that has allowed satellite television to thrive through foreign investment, and cable to thrive through foreign investment—in fact, the most well established and very successful media industry being newspapers which have been largely created by foreigners, Canadians and one Australian I can think of. I cannot imagine why we would not extend that encouragement of foreign investment and foreign enterprise into this country. The issue of reciprocity and the Americans I think is not one that should handicap the decision. At the moment Vivendi Universal, which is kind of French and kind of American, Mediaset and Bertelsmann are all able to invest here, and I see no reason why we should not welcome as a confident culture the investment from countries such as the United States and Australia.

  916. That is pretty robust but you really think, as you put it, that there is no reason at all for anyone to have any concern?
  (Mr Hinton) Well, if you let your imagination run wild about which foreigners might possibly acquire British media, then clearly there have to be safeguards. I dare say if, through some quirk of freakiness, some offshoot of Al Quaeda plc were able to acquire Channel 3, first of all advertisers and viewers would abandon it by the millions and it would go broke pretty quickly, but I am sure there would be quite reasonable safeguards already in place to prevent that happening.

Paul Farrelly

  917. Do you not think in equal measure it is an absolute travesty that a certain Australian had to get an American passport to be able to invest over there?
  (Mr Hinton) I think he was happy to do it in the circumstances.

Lord Pilkington of Oxenford

  918. We cannot legislate against that anyhow!
  (Mr Hinton) I am not engaging in that discussion.


  919. I am not sure there is that much disagreement with you on ultimately foreign ownership but you are a pretty good negotiator in this area: would you not think it is a good idea to invite foreign ownership into that situation, to use it as some form of negotiating tool to seek the things that you do want for your domestic market place?
  (Mr Hinton) I think the benefit of allowing in particular American investment here can be good for consumers, and I think to make a condition of it an impediment of our reciprocity is wrong. It is also of course, as you know, possible for the US to make exemptions in foreign ownership matters and it may well be, having done what we seem to be about to do, that the Americans might well respond favourably, although in a practical way I am not sure that Granada or any other media company here is about to try and buy a US network.

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