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Lord Thomson of Monifieth: My Lords, before the noble Lord passes to that, will he respond to what was said by his noble friend Lord Astor as to whether the Government have any intention of dealing now with the existing problem of conditional access with analogue, satellite and cable broadcasters?

Lord Inglewood: My Lords, that matter is currently being looked at by the competition authorities. It would be premature to take any steps until we have the outcome of that investigation.

To turn to the question of set-top boxes, initially it would seem that all digital television sets are likely at first to be limited to wide-screen models at four-figure

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prices and set-top boxes may be between £300 and £500. A European standard has been drawn up with a guideline price of £375 and prices will come down as production increases, as they did for colour television, CD players and microwaves. But the Government's proposals encourage measures to reduce that cost even further. In relation to digital radio, current cost is in the region of £1,500. We believe that that will be reduced to something like the price of a top-of-the-range analogue receiver once mass production gets under way.

The noble Viscount, Lord Astor, on a similar topic asked about the BBC and set-top boxes. The BBC will be required by the Government to contribute to both the roll-out of digital transmission and to the promotion of the take-up of digital receivers. We shall expect a contribution broadly equivalent to that required by the ITC from Channels 3 and 4. The contribution the BBC makes to encouraging take-up may be, in part at least, through promotion rather than through subsidy as such. In any event, it will be free to use resources derived from any source for that purpose.

The noble Lord also raised the matter of the relationship between Oftel and the ITC. As your Lordships will know, Oftel was set up under the Telecommunications Act 1984 and has responsibility for the monitoring and enforcing of telecommunications licences and the enforcement of competition policy legislation that affects telecommunications, while the Broadcasting Act 1990 established the ITC to licence and regulate all commercial television services. Those arrangements have worked well for both the broadcasting industry and viewers and have co-existed quite happily in practice with Oftel's related but distinct powers and concerns. The Government consider that there is a continuing need for special regulation in the broadcasting sector over and above the Telecommunications Act and general competition law.

The noble Lord, Lord Ashley, and the noble Baroness, Lady Dean, referred to the problems of viewers with impaired vision and hearing. I acknowledge the concern which many noble Lords expressed that the potential of digital technology be used to improve facilities for viewers with sight or hearing difficulties. We shall reflect further on that and wish to ensure that the new technology extends choice and serves worthwhile purposes. We also wish to restrict digital terrestrial broadcasters as little as possible in the difficult initial phase of launching the new service in a competitive environment.

We have spent in the order of half an hour debating sports rights this evening, which is not a matter contained in the Bill at all. I took careful note of the worries expressed about broadcasting sports rights and the need for a new framework of controls to prevent certain events being shown exclusively on subscription television services. The Government's position is that sporting bodies should, in general, be free to dispose of their broadcasting rights in the interests of sport. But we are aware of public debate on the issue and are keeping it under close review.

Perhaps I may say at this stage that we should not forget, as my noble friend Lord Pearson of Rannoch pointed out, that in addition to free market principles

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there are a number of sound arguments in favour of retaining the status quo. For example, there has been increased coverage of sport on television. There are rights holders who are acting responsibly in ensuring the long-term well-being of sport and there have been significant benefits to sport itself. There still is a considerable amount of sport available on terrestrial television.

There have been various suggestions to extend the 1990 Act controls to subscription services, to unbundle primary and secondary rights and to extend the number of listed events. The one thing that all these ideas have in common is that they raise difficult issues of principle and practicality and they would all affect the interests of sports rights holders. The Government are keeping all options under review. While one is reviewing all the options, it hardly suggests an open-minded process to come rushing forward with all kinds of ideas before listening to the arguments, not least of all in your Lordships' House, which is what I have been doing this evening.

I was interested in the suggestion by the noble Lord, Lord Desai, of a particular type of auction. But since, as I understand it, the really valuable asset is the right simultaneously to broadcast the event in question, I have a feeling that his idea may be to promote an auction where it is in one's best interests to lose.

I should now like to move on to consider a number of other topics which are related and which concern regional diversity in the United Kingdom, which obviously, in turn, is by definition an integral characteristic of our country. I shall begin with Wales, which was brought to the forefront by a number of distinguished Welsh Members of your Lordships' House.

As I have said, our proposals mean that S4C will no longer be required to show Channel 4 programmes on its digital channel but will be able to expand its Welsh language service for Welsh viewers. S4C will be required to simulcast its peak-hour Welsh language service and Channel 4 will be able to broadcast on digital its existing analogue service in full and with the same scheduling as the rest of the United Kingdom. Taken together, these advances represent a significant benefit for all Welsh viewers and I believe they represent the best solution currently available. But I should like to assure Welsh viewers that the Government will not fail to take any future opportunity to increase the capacity available to S4C and Channel 4 in Wales should a practical possibility present itself.

The change in the funding formula makes S4C's income more predictable and reliable and so will facilitate planning on a much firmer basis than is possible at present. The formula, like the existing one, allows the Secretary of State to take account of the costs of transmission. Moreover, it takes as its starting point the 1997 figure, arrived at by applying the existing formula.

I have explained the purpose of the proposals for S4C and I should just like to reassure your Lordships that, as far as concerns the funding formula, it will first take effect only in 1998. There is no intention that S4C

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should find itself in some way beholden to the Government. We are currently in the process of dialogue with the Welsh authority about other funding streams. Indeed, I discussed the Bill's proposals with the chairman and chief executive of S4C yesterday.

It is not only the Welsh who have regional concerns, and they were vigorously articulated by a number of your Lordships, not least the noble Lords, Lord Kirkhill and Lord Blease, and my noble friend Lord Arran, whom, if I did not know was excluded, I would have supposed was standing for Parliament. I am pleased that your Lordships recognise the significance of Clause 63 and appreciate that it represents evidence of our commitment. I cannot fully agree with my noble friend Lord Arran that it is ownership which is the key to ensuring regional character in broadcasting. Nor, indeed, is there anything to prevent anyone from anywhere in the European Union owning a regional Channel 3 licence now. We thought it best, through Clause 63 of the Bill, to provide safeguards for the level of regional programming as currently achieved directly.

My noble friend questioned what benefits accrue from the increased concentration of ownership. We contend that allowing more concentration allows a stronger and more concentrated Channel 3 response to the substantial investment needs of new digital media competition. We want Channel 3 to have a fair chance to sustain its current good health and leading place in viewers' affections into the digital future, with the increased domestic and international competition that will imply.

Nor does concentrated ownership and access to increased funding in any way preclude the continued development of regional programming diversity within that framework, particularly when that regional element is underpinned by specific licence requirements, which I know the ITC is keen to ensure.

I assure the noble Lord, Lord Kirkhill, that subsection (5) of Clause 63 allows the ITC to introduce new licence conditions which consolidate not merely existing licensing requirements but also existing actual levels of performance by the current Channel 3 licence holder. He further suggested that the ITC's powers to specify conditions on the level of regional employment and facilities should be mandatory rather than compulsory. Our feeling was that this might undesirably tie the hands of the ITC because it is no part of the continuing health of regional programming, a goal which the Government share, to lock existing detailed means of programme delivery indefinitely in place.

I would like to mention the point raised by my noble friend Lady O'Cathain and the noble Lord, Lord Dubs, that there should be a "must carry, must offer" requirement. It is of course the case that it is only after an eventual switch-off of analogue that it is possible, even in theory, that households with television sets would be unable to receive the services of existing terrestrial broadcasters. That would happen only if they had access to digital cable or satellite receivers but not to digital terrestrial ones and if the cable and satellite companies chose not to carry their services. There is no indication at this stage that such a situation arises, particularly because the Government have made it clear

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that analogue will not be switched off until the vast majority of the population has changed to digital. In addition, there is a strong possibility that by the time analogue switch-off becomes possible the industry will have developed television sets or set-top boxes able to receive all three modes of transmission. The Government will of course monitor the situation as it develops.

The noble Baroness also mentioned electronic programme guides. At present there is no conclusive evidence that extra regulation is necessary, but we are conscious of the potential importance of these guides and will research and monitor the position closely. We shall certainly take full account of any issues which arise as the nature of the systems becomes clearer.

The noble Baroness, Lady Wharton, referred to Teletext. The public service teletext licence was awarded on a competitive basis and the holder must adhere to positive programme requirements just like independent television. The Government therefore decided that Teletext should be offered an opportunity to duplicate its service on digital television. Channels 3 and 4 and S4C will be required to make capacity available on their multiplex to Teletext to provide their existing service on digital with picture quality at least equal to that currently available, and the broadcasters and Teletext will be free to come to arrangements to increase capacity and to provide an enhanced service if they wish.

I now turn to the new BSC, which I am glad is generally welcomed. Much of our thinking was indicated in the debate on the draft BBC Charter and Agreement last week, but I would like to repeat the outline of our position. I begin by saying that it is not our intention that the new BSC should be able not to have to make an adjudication/finding in respect of each matter of complaint. We believe that the Bill's wording does achieve that, but we shall look at it and check.

The responsibility for what is broadcast on television and radio rests with the broadcasters and the broadcasting regulatory bodies, the governors of the BBC, the Independent Television Commission and the Radio Authority. They are independent of government and are responsible to Parliament for safeguarding the public interest. They each have a statutory duty to draw up a code of practice on impartiality and other programme matters. Similarly, the BBC's producer guidelines include guidance on achieving accuracy and the importance of avoiding prejudicial or pejorative reporting.

A major characteristic of the new Charter and Agreement is clarification of the BBC's responsibilities for impartiality, taste and decency, placing the BBC under obligations equivalent to those applying to the commercial sector. Some have argued that the Broadcasting Complaints Commission and the Broadcasting Standards Council should take on this role once they have been merged, but we are not convinced that it would be appropriate for this wider role to be assumed by bodies that were set up to deal

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with standards in relation to violence, sex, taste and decency and issues of personal privacy or injustice, which frequently in fact involve wider matters of more general impartiality.

The Government do not accept that there are gaps in the present arrangements which need to be filled. Some of the perceived gaps are intentional. For example, the Government do not consider it necessary for BSC's remit to extend to all issues relating to programme content and scheduling. Most of these, including questions of maintaining due impartiality, can be properly left to broadcasters and regulators. I am glad that the noble Lord, Lord Dubs, agrees with us in that regard.

The ITC licenses all commercial television services in the United Kingdom, whether delivered terrestrially or by cable or satellite. Before the ITC can award any licence it has to be satisfied that the applicant is a fit and proper person to hold a licence and is not disqualified from doing so. Disqualification applies to any body whose objects are wholly or mainly of a political nature. Once any licence is awarded the licensee has to comply with the ITC's published codes and guidelines which flow from the Broadcasting Act and European legislation.

There are two codes which affect this issue: the programme code, which gives guidance as to the rules to be observed, and the advertising code, which ensures that licensed services do not include certain forbidden classes of advertising. Compliance with these codes is a condition of all licences to broadcast. In order to ensure compliance, the ITC regularly monitors programmes, considers viewers' complaints, carries out audience research and seeks opinions from the ITC's 10-viewer consultative councils. The commission has a range of sanctions to enforce licence and code requirements, including issuing formal warnings, requiring on-screen apologies, imposing financial penalties or shortening or revoking licences. Broadcasting legislation therefore provides the regulator with significant powers both to refuse and to revoke licences.

In conclusion on this topic, we feel that considerable powers are available both through the Broadcasting Act and the BBC's Charter and Agreement, and we therefore see no reason to extend the remit of the Broadcasting Standards Commission which should run in parallel with the regulator, not substitute for it. It is for the regulator to punish where punishment is appropriate.

Finally, I turn to the question of Channel 4's funding formula to spell out our attitude towards it and to explain our reasons for that view. This matter was vigorously raised by my noble friends Lord Blake and Lord Stockton and by the noble Lord, Lord Birkett. We commend the recent successes at Channel 4 and hope that it will go from strength to strength in the new digital era. The Government expected, when framing the 1990 Act, that Channel 4's advertising revenue would remain buoyant for a number of years after enactment. It was never envisaged that Channel 4 would need to make use of

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the safety net provisions in the immediate wake of the 1990 Act. We want to recognise Channel 4's recent success by using powers in the Bill to alter the distribution of payments of the channel's income above the 14 per cent. threshold in Channel 4's favour.

I understand that Channel 4 wants the formula abolished, but, as my noble friend Lady Flather pointed out, there is another side to the coin. It would be imprudent of the Government to leave a quality public service broadcaster such as Channel 4 to face an uncertain future with no safety net provision. Those advocating change base that view on a very confident analysis of a very uncertain future. Indeed, there seems to be a direct correlation between a recognition that this was got badly wrong in the past with the fact that people are very certain about what will happen in the future. The Government remain committed to public service broadcasting and we believe that it is only right to retain Channel 4's safety net as a guarantee of its future. I emphasise that we do not expect there to be annual negotiations such as those described by one or two contributors to the debate.

My noble friend Lord Dixon-Smith and the noble Lord, Lord Desai, mentioned proposals for changing the rules on radio ownership in relation to analogue. They asked whether it would be possible to have more than one FM licence. We do not want the most commercially attractive frequencies to be seized by the most profitable and aggressive broadcasters. That would be a case where market dominance--even where, as in London, there is a choice of other stations--can serve to inhibit plurality and competition, so I remain unpersuaded of the case for change.

As I said at the outset, this is a complicated and important Bill which will have far-reaching consequences for the future of broadcasting in this country. As I also said, digital radio broadcasting has just begun and the era of digital television is fast approaching. The proposals that we have debated today will give the United Kingdom a world lead in the development of digital broadcasting technology and services. They will free the industry of unnecessary controls to enable it to compete most effectively with the best in an expanding global media market. They will ensure that the new freedoms do not damage the essential qualities which have contributed to the success of our broadcasters--diversity and plurality reflecting national and regional characteristics. The Bill will ensure that the power of broadcasting is always exercised with responsibility. Broadcasting standards will be maintained.

I have no doubt that the debate that we have started this evening will continue both within the Palace of Westminster and among all those who care about broadcasting in Britain. I look forward to playing my part constructively in that debate while taking the Bill forward in your Lordships' House. I commend the Bill to the House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

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