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Lord Colwyn: If accepted, the amendment will mean that non-domestic satellite services, of which the ITC has licensed about 90, will have to pay a percentage of their qualifying revenue for their licences. I believe that that is unfair. To suggest that non-domestic satellite broadcasters should be brought into line or equalised with other domestic terrestrial broadcasters who already pay a percentage of their qualifying revenue is wholly disingenuous. It is also potentially damaging to the satellite broadcasting industry.

I say that it is disingenuous because it ignores the fundamental distinction between domestic terrestrial broadcasters and non-domestic satellite broadcasters; that is, that the former have guaranteed and exclusive access to the whole of the UK's regional or national populations while the latter do not. I wish to remind the Committee that the regulations on the non-domestic satellite channels are deliberately and rightly different from that in respect of domestic terrestrial broadcasters. Unlike domestic terrestrial operators, non-domestic satellite channels have no guaranteed access to scarce government-controlled domestic frequencies; nor do they have a licence fee income, subsidy or special protection. They have no automatic or monopoly access to regional and national audiences.

The qualifying revenue charge levied on terrestrial domestic licences is a recognition that terrestrial TV frequencies are a scarce yet highly sought after commodity for which the Government's grant of privileged access requires payment. Indeed, I am sure that many satellite broadcasters would welcome the opportunity to have access to such a wide distribution network. However, that option remains out of reach to many. In fact, due to restrictions proposed in this Bill, BSkyB will be the only satellite broadcaster prevented from owning any Channel 3 or Channel 5 licences.

Of course, terrestrial companies are also perfectly free to invest their money in non-domestic satellite broadcasting with no qualifying revenue payments, but no privileged access either. The BBC has stakes in two non-domestic satellite channels--UK Gold and UK Living--and Granada is linking up with BSkyB on several new channels. Beyond those relatively minor involvements, however, terrestrial broadcasters have chosen not to invest in the non-domestic satellite sector.

That is why I believe that talk of a level playing field or fairness on licence payments is disingenuous. The field is already tilted sharply in favour of terrestrial broadcasters which have first refusal on the purchase of licences which guarantee privileged access to the entire UK population.

I am also concerned that the amendment could threaten the existence of many non-domestic satellite companies. As transmission costs fall, the number of specialist, thematic and minority interest non-domestic satellite channels continues to grow rapidly. For such channels, which often work to tight budgets, additional payments will seriously affect their viability and discourage the emergence of new services. Furthermore,

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the UK is the international uplink base for non-domestic satellite broadcasters. New additional costs will inevitably discourage potential investors from abroad or will encourage those already established here to relocate.

Finally, I wish to point out that the amendment discriminates in favour of the cable operators. While programme services which distribute exclusively on cable do not pay a percentage of their qualifying revenue, those on non-domestic satellite would. In summary, I do not believe that it is right to place these additional financial burdens on to UK non-domestic satellite broadcasting companies. There is no credibility in the argument that they should be taxed in the same way as domestic terrestrial broadcasters for the key reason that they do not operate within the same privileged context.

Lord Donoughue: I wish to speak wholly in favour of the amendment tabled by the noble Lord, Lord Thomson of Monifieth. The basic problem is that the fiscal levy regime is patchy. In my view, it is unfair to the ITV/Channel 3 companies which carry such a huge burden of paying almost £400 million a year.

If the tax problem were resolved the problem of the Channel 4 funding formula and that in respect of Channel 3 would appear much less acute because I suspect that the Channel 3 companies would be more relaxed about losing the Channel 4 subsidy if they felt that the tax burden were more fairly distributed. We support bringing them all fairly into the net and the amendment brings in the non-domestic satellite broadcasters.

It is always helpful to hear the noble Lord, Lord Colwyn, speaking so fully from the Sky brief because it means that I do not have to do so. The issue is complex because there are problems in relation to whose spectra are being used by Astra, for instance. I am sure that the noble Lord, Lord Thomson, in moving the amendment accepts the complexity but we would like the Minister in answering to address the basic problem of the fairness of taxation in this field. A separate fiscal approach may be required.

I wish to point out to the Minister and to the Committee that other countries are finding a similar problem. Canada has the same difficulty of some companies being in the tax net and others not. Its Government are currently proposing what they call a "communications distribution tax" on all broadcasters; that is, on domestic satellite, non-domestic satellite, cable and some telephony services. That would generate considerable revenue and leave no one feeling, as I believe ITV feels, that there is unfair treatment. Therefore, I should very much like to support the amendment.

6.30 p.m.

Lord Inglewood: The noble Lord, Lord Thomson, set out clearly the purpose of his amendment and his reasoning for it. While I understand the arguments behind much of what the noble Lord said, I must respectfully disagree with his approach.

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I remind Members of the Committee that this amendment applies to those satellite services which operate on a frequency which is not allocated, by international agreement, to UK control. We have 10 such frequencies none of which is currently used; British Satellite Broadcasting Ltd. being the last such operator, prior to its merger with Sky to form BSkyB.

The 1990 Act's broadcast licensing system recognised that the broadcast spectrum was a scarce resource and that it was of significant commercial value. The Government therefore instituted the bidding system for both domestic terrestrial and satellite licences locked to a levy on successful applicants' television revenues. As my noble friend Lord Colwyn said, all these moneys go to the Exchequer not as taxation but in recognition of the worth of the scarce UK resource that the broadcast spectrum represents and which these broadcasters are using. That argument does not and cannot be extended to a foreign government's spectrum as it is for those countries to decide how they allocate what is allocated to them.

Mention has been made this afternoon of BSkyB. I note the concerns of those members of the Committee who have contrasted the payments made by Channel 3 licensees to the Exchequer with BSkyB's smaller payments to the ITC. As I have already indicated, the Exchequer payments are based on the use of the UK spectrum. Extending such payments to those broadcasters operating on non-UK frequencies would neither be rational nor fair. It should be remembered that those broadcasters operating on frequencies controlled by foreign governments may make payments to the government concerned for the use of that spectrum. I understand that the owners of the Astra satellite pay a significant fee for their franchise to the Luxembourg Government. The scale of BSkyB's payments for the use of the Astra satellite will, no doubt, reflect those franchise fees. The Government do not think it right to impose arbitrary and punitive levies to a broadcaster operating fairly within the rules of international law and the single market. Nor would it be in the UK's interests to take such action against broadcasters who can simply move operations to another European country to circumvent any payments to the Exchequer with the consequent loss of jobs, possibilities for creativity and opportunities for training in the broadcasting industry.

I have tried to explain that the Government are opposed to this amendment for the reasons I have outlined.

Lord Thomson of Monifieth: I cannot say that I am disappointed by the Minister's reply because I would have been surprised had he been more forthcoming. I moved the amendment because I thought it right that the case for it should be raised rather than in the hope that the Government were likely to accept it.

I am bound to say to the Minister that I found his defence of the present situation intellectually more persuasive than the defence put forward by the noble Lord, Lord Colwyn. I do not wish to prolong matters at this stage but the noble Lord used a number of propositions--I know from where they come--which are not very tenable. It is not true to say that the ITV

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companies have a privileged access in the sense that BSkyB does not. The ITV companies have had to compete very severely for the franchises that they have under the rather ridiculous bidding system to which the Minister referred.

In my view, the real difference now between BSkyB and comparable operators on the one side and ITV on the other is not really the premise on which the Minister has built his intellectual case; that is, the difference between domestic and non-domestic frequencies. That is a very fortunate accident of geography of which BSkyB and the Murdoch interests in particular have taken ingenious advantage; and I do not deny that at all. But I start from the other premise that we now have businesses which are entirely domestic businesses. ITV companies cater entirely for a domestic ITV audience and BSkyB caters entirely for a domestic British television audience. They are competitors in the same domestic economic field of providing a particular product. I believe that they should now be treated on the same basis.

Whether it is called taxation or a royalty from the use of frequencies is a secondary issue. The real distinction between domestic television companies and the non-domestic satellite companies is not to do with frequencies. It is just that one pays taxation and the other does not. That is extremely unfair and should be ended at some time by a government; but that will obviously not happen this evening and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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