Select Committee on Communications Minutes of Evidence


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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