Examination of Witnesses (Questions 2100
- 2119)
WEDNESDAY 27 FEBRUARY 2008
Lord Puttnam
Q2100 Chairman:
You fear the 7.5%?
Lord Puttnam: It is messy. It is a classic British,
rather messy and, for me, unsatisfactory compromise.
Q2101 Chairman:
You are Deputy Chairman of Channel 4?
Lord Puttnam: Yes.
Q2102 Chairman:
You have vast experience in television and films. If you had a
7.5% shareholder in your company, would you regard that as being
a serious shareholder?
Lord Puttnam: I would. I would also regard it
as an inhibition because so much of television today is concerned
with rights acquisition and the idea that you have a shareholder
who is also attempting to acquire and is competing for the same
rights as you are is not an attractive proposition. Most of my
thinking was derived from 20 years as non-executive director of
Anglia Television. I learned a lot at Anglia during those 20 years.
Q2103 Chairman:
I think you were talking about the appeals system, the Competition
Appeals Tribunal. Do you think this process has dragged on for
too long?
Lord Puttnam: Yes, I do. It creates insecurity
in the market place and I do not think it benefits anybody. I
suspect some of it is driven by a kind of curmudgeonliness not
to be seen to have lost.
Q2104 Baroness McIntosh of Hudnall:
Can I go back to the Public Interest Test issue? You said you
thought it works pretty well and there is enough precedent now
to have a handle on what it is. When you were considering the
introduction of such a test, how much time did you spend thinking
about the way you created a test that was not too vulnerable to
different interpretation as to what the public interest might
be? In the end this is tied to the question of political decision
making and the values that you attach to any concept of public
interest which will vary from time to time, will they not? Did
you spend time thinking about that? What conclusions did you come
to as a pre-legislative group?
Lord Puttnam: Personally, I spent a lot of time
and took up a lot of his time, at no cost to the public purse
I hasten to add, with Lord Grabiner. I got Tony Grabiner to look
at how this case would come out in court. We did scenario planning
if Tony was either defending the public interest or attacking
it. He was very convincing and gave me a lot of confidence that
what we were pursuing was robust.
Q2105 Baroness McIntosh of Hudnall:
You feel confident that the Public Interest Test as it is currently
applied is—I hate the word "objective" because
I do not know what it means, but to the extent that we can say
any test of that sort is objective—is objective?
Lord Puttnam: I think it is. I was brought up
in a family where the word "fair" was used a lot. If
I had asked my dad to define "fair" he would have thought
I was bonkers because we had a pretty good idea of what "fair"
was and the word meant a lot to him. I would find it surprising
if, between us in this room, we could not agree broadly speaking
what the Public Interest Test was or what the public interest
was. I am looking forward to a time in the next three, four or
five years, if this is seen to work, when the Public Interest
Test is applied to other areas. There is no reason why it should
not be applied to energy pricing or land pricing. There are a
lot of areas of economic activity in which the Public Interest
Test would go a long way to rebalancing some of the assumptions
under which judgments and decisions are made. The more we can
make this work and make it robust, the more likely it is to be
picked up in other sectors.
Q2106 Lord Inglewood:
You told us a moment or two ago that you and Lord Grabiner had
worked out a series of scenarios about how this might work from
the perspective of a victim and a user of the Public Interest
Test. In terms of the technical, procedural side, you are obviously
happy with it in that sense but do you think it covers everything
that you think represents what the public is interested in, if
I can put it that way? An obvious example is quality, if the scope
of the test was enlarged. It does not really cover quality, does
it?
Lord Puttnam: In a sense we did. Once we had
the Public Interest Test as part of the debate, we moved into
the committee structure of Ofcom itself. In order to deal with
these issues the Content Board was created.. The original Bill
created a purely economically focused regulator called Ofcom which
was to make purely economic decisions. One of the achievements
of the Scrutiny Committee was to broaden this out and say, "No,
these are not just economic decisions; these are affecting people's
lives." The things that affect their lives most is the quality
and range of content. We forced this issue with 144 different
recommendations and, to their great credit, the government accepted
136 of them on day one. Most of the 136 they accepted were to
do with extending the Bill to include issues that covered plurality,
quality of content and range of content. We did manage to embrace
a lot of that. Could it be better? Probably.
Q2107 Lord Inglewood:
Do you not have a problem if you are starting the way you are
because once something has been approved there is nothing to stop
some of these other things such as quality, whether you are looking
at it from the citizenship perspective and you want to see a range
of different attitudes to public affairs reflected in the media,
that could change quite significantly. Equally, the quality of
what they are offering can go up or down market. You can, despite
this, end up with problems, can you not, which happen ex post
facto?
Lord Puttnam: In the media world you will always
have problems in the margins. It is to do with the sensitivity
of people running the major media organisations. I know that Mark
Thompson was looking very hard at the issue of balance. What is
balance? Do you interpret balance as the need to give a Holocaust
denyer an equal amount of airtime with those who believe the Holocaust
existed or not? His view, I think correctly, is that it is reasonable
to allow the views of a Holocaust denyer some airtime but to pretend
that that represents balance is absurd. We are at the moment having
the same issues at Channel 4 over climate change. Do you give
equal time to those who think there is no such thing as climate
change or do you try and allow the sceptics to have a view but
at the same time make it very clear that the vast majority of
scientific evidence is to the reverse? This issue of what is balance
is an interesting one. That will rumble on and on.
Q2108 Lord Inglewood:
In the context of public interest, it is commonplace to say that
men of goodwill can agree. The problem always is, is it not, that
that is nebulous? In any world there is always a certain number
of men who perhaps do not share the same definition of goodwill
as you do and therefore you do need some quite definite lines
of demarcation. Are we not moving here into a world where the
lines of demarcation may perhaps be sufficiently vague to enable
the unscrupulous to manoeuvre around them?
Lord Puttnam: It is a dangerous road to go down.
One of the reasons Channel 4 has an ethos is because of the enormous
amount of trust, correctly in my judgment, which is placed in
its director, Jeremy Isaacs. Essentially, Jeremy's ethos coming
off the BBC became the ethos of the channel. It has stood the
test of time. Channel 4 makes mistakes but broadly speaking its
core audience knows where it is coming from and is not always
but mostly prepared to forgive it. If you try to legislate for
taste you are in a lot of trouble. What we all do in public life
is try to seek people who broadly speaking represent the public
realm and the public interest. If you do not have those people
running those organisations, you immediately have a problem. I
have always believed that the most important decision within the
media is the integrity and the capacity for self-criticism of
those who make the decisions. There was a wonderful essay that
had enormous influence on me in Time Magazine in the early
seventies by Roger Rosenblatt. It was headed, "What shall
we lead with?" He made the point that the editor of the day
effectively decided what was important and in deciding what was
important told you what was important. That was why it was such
a fantastically important decision. Of course he would sometimes
get it wrong but any publication that consistently got it wrong
would probably fade away and die. This comes right back to your
question, Chairman: why is this a different business to any other
business? It is because the tone of society is set by the decisions
made by the messengers and the media are the messengers.
Q2109 Lord Maxton:
Can I come back to the Sky involvement with ITV? They bought the
shares to stop Virgin Media purchasing ITV. Why do you think a
15% shareholding by Sky is worse than a total ownership by largely
an American company that teeters on the verge of bankruptcy?
Lord Puttnam: There are two issues there. One
is that Sky has a dominant position in a lot of areas of rights
acquisition so it has become pretty hard to dislodge. The other
is, at the moment, the great failure of this entire process. We
recommended in the Joint Scrutiny Committee an urgent, cross-media
impact study. It has never happened. Without a proper cross-media
impact study it is almost impossible to make judgments and answer
your question. My clear, personal belief is that once we understood
the impact of cross-media ownership and the potential for distorting
the market place through cross-media ownership, people would be
a lot more worried and careful about who owned what because it
is enormously potent. We have only seen the beginnings of it as
yet but the idea that an organisation like Sky could end up with
a domination in ITV, the digital realm and the newspaper world,
the ability to bounce the promotion of each product around that
would be quite extraordinary.
Q2110 Baroness Bonham-Carter of Yarnbury:
Channel 4 in its recent submission to us said that it believes
that more specific requirements are needed in the Communications
Act relating to quantity and scheduling. Would you agree with
that?
Lord Puttnam: Yes. We looked at the provision
of news and current affairs and I was using a rather narrow focus
of my 20 years at Anglia. The high point was we had roughly ten
hours a week of current affairs and news. That is now down to
5.5 hours. It is reasonable for someone to make a judgment as
to whether ten hours were excessive or 5.5 hours just is not enough.
Unless Ofcom is able to make those judgments, it is extremely
hard to engage in an intelligent argument with Michael Grade over
what ITV's public interest commitments need to be. There is a
piece of information missing. What happens when you cross-promote
aggressively between dominant media? My belief is that the results
would be quite remarkable and you would see mighty mountains fall
and hillocks become very powerful very quickly.
Q2111 Baroness Bonham-Carter of Yarnbury:
In that sense you think the definition of public interest should
be expanded?
Lord Puttnam: Refined.
Q2112 Baroness Scott of Needham Market:
Lots of us would buy into this vision of the public interest being
more dominant and so on but, having been on the board of two regulators,
it feels to me as though it is flying in the face of where a lot
of regulation is going. Whether we like it or not, regulators
are quite cautious because they are always aware of legal challenge
to their decisions. Generically, regulators tend to look for tighter
frameworks so they have confidence in the decisions they are making
and whether they will hold up to legal challenge. What change
in thinking would be required by regulators to change the trend?
Lord Puttnam: You have to reflect on where regulation
came from. My clear understanding is that regulation was dreamed
up as a way of making denationalisation acceptable. The big problem
when you denationalised something was having to look at the consumer
interest. Hence the invention of the regulator. I doubt very much
if, the day when the notion of the regulator was first brought
to the then Prime Minister, what we have today was what she had
on her mind. The idea was that it would be a smoke screen and
rather nice people would take a clear, harsh, economic look at
things and it would have emerged as something different. You are
quite right. The present generation of regulators has hidden behind
the security blanket of the economics. If you buy my concept of
a different type of society, the notion of regulation could very
easily be moved into society's place. I come back to energy pricing.
Sooner or later the public interest component of energy pricing
will have to be taken into account and some people are going to
realise that it is about more than mergers and acquisitions. It
is about the ability of consolidated energy suppliers being able
to abuse their position. There would be very little opportunity
for regulators to do anything about it.
Q2113 Baroness McIntosh of Hudnall:
Moving that argument back to where you were about the ownership
of the media outlets, you hold the very strong view that consolidation
of ownership is a very big threat. What is it that you fear in
the event that we do not scrutinise these kinds of ownership issues
sufficiently rigorously, as you are suggesting we need to and
there is then the opportunity for this kind of aggressive cross-promotion?
You implied that the landscape would change very radically and
quite suddenly, by which I take it you mean that quite a lot of
players would disappear from the market and others would come
to dominate in a way which we have not yet begun to understand.
At the end of all that in your world view, so to speak, what is
the risk we run? What is the risk to our democratic integrity
that we run should that happen?
Lord Puttnam: I believe this absolutely sincerely.
I think we run a form of democracy in the UK which is almost uniquely
fragile. I have no real faith in the ability of the British democracy
to deal with real crises and it worries me terribly. I wake up
at night thinking about it. The nature of the threats we face
would not be just reruns of past historic threats; it would be
quite different. I have done a lot of reading and thinking about
the early part of the 20th century in the United States and the
trust busting exercise. The very admirable Theodore Roosevelt
was something of a hero in what he was prepared to take on. I
would put it to you that cartel behaviour is the natural instinct
of incumbent organisations. Sotheby's and Christie's heads would
not have gone and in America there was never a chance that they
would not go to jail which is why I believe the then chairman
of Christie's decided not to go to the United States. We have
very poor regulation in unravelling and dealing with and punishing
cartel behaviour. I am suggesting that that type of cartel behaviour,
to an extent, already does exist. I have very limited respect
for the Press Complaints Commission and the organisations that
surround it because I think essentially it is a cartel. It is
a self-regulatory organisation that will very seldom do anything
that will discomfit it or make its life difficult. I do not think
for one moment it conforms to a genuine scrutiny committee like
yourselves that looks objectively at what is going on and makes
objective decisions on the basis of what is best for the citizen
and customer.
Q2114 Chairman:
It probably never happened when there was not consolidation.
Lord Puttnam: The criticism I am making—and
it is purely personal—is that there is something in British
life which has always been extremely relaxed about what I can
only describe as cartel behaviour. We have never really bottomed
that out or fully looked at ourselves and I hear it defended almost
every morning on Radio 4.
Q2115 Chairman:
The concern you were really stating was not just consolidation
where that is obvious in everything we have seen; it was also
the cross-media part of it.
Lord Puttnam: And the day to day management
practices that occur as a result of consolidation. I worked for
a number of years in the film industry where two chains owned
the film industry. They were run by two extremely nice men who
phoned each other on Monday morning and carved the business up
between them. If they decided that your film was not one of the
ones that they had any interest in, that was that. There was no
process of appeal but everyone knew what was going on. All I am
trying to suggest is, in the absence of scrutiny, those behaviours
almost inevitably become dominant.
Q2116 Lord Inglewood:
You were talking about cartels and anti-trust legislation in America.
Surely one of the great differences between American history and
British history in the 20th century was that you did not have
the growth of—if I can use this word in an unemotive sense—socialism
in the United States so the problem that was dealt with in the
United States by Theodore Roosevelt and so on in terms of the
anti-trust legislation was dealt with here with what you touched
on, which was nationalisation. Surely the point about cartels
is that they are very much economic entities? The problem you
have in simply transferring the traditional, anti-trust approach
to the media is the point that you touched on earlier: that we
are dealing not only with economic matters but a lot of other
different, sometimes more slippery aspects of things than is the
case in the American model. I am just questioning quite whether
what we are talking about in terms of the public interest is exactly
analogous to the issues that arise particularly in American anti-trust
legislation which we have seen infiltrate here and on the continent.
Lord Puttnam: Certain nationalisations after
World War Two were done directly in response to what was perceived
at the time to be in the public interest. The instincts that drove
nationalisation have not diminished. The fact that in practice
nationalisation did not turn out to be the answer is not an excuse
for thinking that rampant privatisation is the answer.
Q2117 Lord Inglewood:
I do not think I said it was.
Lord Puttnam: I am not suggesting that. I believe
the answer is rigorous regulation, particularly when the impact
on the consumer is likely to be sharpest, heaviest and most long
term. The media ironically are the closest thing we have to a
referee. If the referee is corrupt and comes on to the field with
assumptions in favour of the incumbent or the owner, then it is
game over.
Q2118 Lord Inglewood:
Some people would say that the law has posed a lot of problems
in terms of this form of regulation.
Lord Puttnam: I think the law has problems with
this type of regulation. I suppose what I am seeking is a strengthening
of the role of the regulator because the regulator is an expert
and has access to expert information and advice. As long as the
regulator knows that the public interest is as much at his elbow
as the economic interest, he or she is likely to come up with
a reasonable response.
Q2119 Baroness Eccles of Moulton:
I suppose the role of Ofcom and the Competition Commission and
the BSkyB/ITV case has somehow almost ricocheted between the two
with the Secretary of State having a hand in it from time to time
and I am sure to the casual observer it is confusing and perhaps
very difficult to understand why these two regulators seem to
have overlapping but also different responsibilities when it comes
to this extremely complex case. What do you think about their
roles in any case really?
Lord Puttnam: We were dealing with the Competition
Commission's remit. We were not in a position to change that.
The Competition Commission's remit is relatively narrow. From
time to time I have to say I think they interpret it too narrowly,
almost as a defence mechanism. They do work hand in glove with
the government and the outturn for the most part is good. Where
for me this is going wrong is this recourse to the notion that
the law as an appeal process is going to change any of this. It
is very important, if I can whisper in the ear of the Competition
Appeals Tribunal where this is going to, not to make this any
more complex than it need be. Look at the evidence and create
a very clean decision and a very clear set of rules for the future.
There is no question that this was a spoiling investment. This
was not a rational investment in terms of wishing to own a piece
of what was likely to be an enormously profitable business. As
a spoiling investment, the management very quickly realised it
would make it all very possible for them to operate properly in
the open market. Frankly, that is what the judgment should be:
do we want a legal environment where spoiling shareholdings could
be achieved or do we want a legal environment in which they are
discouraged?
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