Select Committee on Communications Minutes of Evidence

Memorandum by Channel 4



  Channel 4 welcomes the opportunity to respond to this second phase of the Committee's inquiry into media ownership. A number of the points made in the first stage of the inquiry are also relevant here. This submission reiterates some of those arguments, together with more detailed thinking on media ownership and the associated potential public interest issues.

  Channel 4 plays an important role in ensuring there is a plurality of high quality news provision available to all. Channel 4 is required by statute to provide a high quality news service. In line with our licence requirements, this includes coverage throughout the day and at peak time. Channel 4's highly regarded flagship programme is broadcast at 7.00 pm on weekdays. There is also a half hour programme on weekdays at midday and comprehensive programmes on weekends. More 4, one of Channel 4's digital channels, also broadcasts a 30-minute news programme on weekdays at 8.00 pm. Channel 4 News is also offered on a range of new media platforms, including at

  The Channel 4 News weekday bulletin is the UK's only hour long peak time news programme. The programme offers significantly greater depth of coverage than any other peak time news programme and covers a broader range of stories, with a strong emphasis on international coverage.

  Channel 4 News is produced for Channel 4 by ITN and has been since the Channel's inception in 1982. The current news contract with ITN began in 2006 and runs until 2010. As the Committee will be aware ITN also supplies news to ITV, with the current news contract due to run until the end of 2012. ITN is 40% owned by ITV Plc. The other shareholders in ITN are Reuters, Daily Mail and General Trust and United Business Media (each with 20%).

  UK viewers benefit from having a plurality of news services provided universally by the main public service broadcasters, as well as a number of other dedicated digital news channels. Competition between a range of suppliers has also helped drive up quality standards across the board. There are three main UK-based news suppliers—BBC News, ITN and Sky News offering not only institutional plurality but—importantly—plurality of news "voice", with each offering distinct news services.

  Channel 4 believes that up to and beyond digital switchover it is critically important that plurality of news should be maintained. A core element of safeguarding that plurality and the quality of news services lies in there continuing to be a range of separately owned and independent news providers. The media ownership framework therefore has an important ongoing role to play in ensuring quality and plurality are maintained.

Question 1:  Are the requirements in the Communications Act 2003 relating to the quality, quantity, scheduling and impartiality of national and regional broadcast news appropriate? Are they sufficient? Will they be appropriate and sufficient after digital switchover?

Are they appropriate?

  Channel 4 believes there is a continuing significant public interest in ensuring that there is a range of high quality, trusted television news providers and that, as such, the requirements of the Communications Act remain appropriate and necessary now and beyond digital switchover.

  The statutory requirements relating to due impartiality, accuracy and fairness in the Communications Act relate to all forms of broadcast news (TV and radio; terrestrial and digital channels). The same requirements do not apply to other sources of news, such as newspapers or the internet.

  These standards (enforced through broadcast licences and the Ofcom Broadcasting Code) reflect the special role of TV news as a guaranteed source of trustworthy news; this translates into television news being more highly valued by the public than other news sources. Ofcom's research for New News, Future News found that three-quarters of viewers say that news coverage on the main PSB channels is important; even in a crowded news market, some 94% of adults cite television as a source of news; many fewer cite the internet.

  Channel 4 believes that these requirements remain relevant and appropriate for all broadcast news services to maintain the overall quality of broadcast news in the UK and to ensure that everyone has access to a range of trustworthy and high quality news. We would not support any dilution of the impartiality or accuracy requirements as this would largely affect just one major news provider, Sky News. Furthermore, it would risk eroding the high levels of trust in broadcast news as a whole by effectively creating two "tiers" of television news.

  Channel 4 also believes that the more specific requirements in the Communications Act relating to quantity and scheduling remain crucial.

  These more specific provisions relate only to the commercial public service broadcasters (ITV, Channel 4 and Five). The PSB channels are required to ensure that news (and current affairs) programmes meet a number of more specific quality criteria, such as dealing with national and international matters; and that programmes are shown throughout the day, including at peak times.

  These regulations are also important in ensuring that there is sufficient plurality of news, including at times when large numbers of people are likely to be watching television.

  Both aspects of this more detailed regulation remain important now and after digital switchover, to ensure that viewers will continue to be guaranteed access to a range of high quality and accessible news services. Arguably, these provisions become more important to safeguard the availability of trustworthy and well resourced news post digital switchover as the market offers more and more "unregulated" services.

Are they sufficient?

  While these provisions are important to maintain the quality and availability of news services, they do not in themselves guarantee the actual level of supply of news services. While statute contains requirements for the PSB channels to provide news throughout the day and at peak times, there is a degree of flexibility about the overall amount of news supply. For example, in recent years Five has scaled back the amount of news it supplies and ITV Plc is currently seeking to reduce the number of dedicated regional news services it supplies. While Sky is often recognised as providing valuable plurality it should not be overlooked that Sky News is offered on a purely commercial basis; nothing in statute protects its ongoing presence, nor is it universally available with Sky having recently removed the channel from the cable platform.

  Regional news presents an interesting case study of the impact of a reduction in quantity of news supply on the wider television news market. Dedicated broadcasting in the nations and regions is provided by only the BBC and ITV. As the Committee will be aware, ITV is arguing that the economic model for providing dedicated programming in the nations and regions is under severe pressure and has put forward a number of proposals to reduce the associated costs. Regional non-news programming is already set to fall in the run up to digital switchover and ITV is proposing to reduce the number of individual regional news services from 17 to nine before digital switchover; it remains unclear whether ITV would propose to offer any regional news after switchover.

  Clearly, if ITV were to cease to provide this form of news entirely, this would lead to a loss of plurality in television news for the Nations and regions, leaving the BBC as the sole provider. However, even a reduction in the overall number of regional news services raises concerns about whether the statutory quality requirements alone are sufficient to guarantee plurality. ITN—the main competitor in news provision to the BBC—provides news for Channel 4 and ITV. Both broadcasters benefit from the shared efficiencies of sourcing news from a single supplier. ITV's presence in the Nations and regions provides Channel 4 with access to newsgathering resource around the UK, which in turn enhances the quality and range of the Channel 4 news service as a whole. A retreat in terms of the amount of newsgathering in the Nations and regions by ITV would therefore have a knock-on impact on the quality and range of newsgathering resource available to ITN's other customers including Channel 4 News.

  In light of these pressures, it may be appropriate to give some thought to additional measures to ensure that a plurality of sustainable, high quality and well resourced news services exists post digital switchover, in particular in relation to maintaining adequate levels of newsgathering. Future policy might consider how additional forms of support, whether direct or indirect, might be given to establish a framework that continues to safeguard the provision of a plurality of high quality news services.

Are the public interest considerations for media mergers set down in section 58 of the Enterprise Act 2002 strong and clear enough to protect a diverse and high quality news media? Are the conditions under which the Secretary of State can order a public interest investigation appropriate?

  Section 58 of the Enterprise Act, incorporating the public interest test in the Communications Act,[5] stipulates that the public interest test in relation to media mergers will take into consideration the impact on plurality of media supply. Legislation requires public interest considerations to take into account:

    —  "the need, in relation to every different audience in the United Kingdom or in a particular area or locality in the United Kingdom, for there to be a sufficient plurality of persons with control of the media enterprises serving that audience"; and

    —  "the need for the availability throughout the United Kingdom of a wide range of broadcasting which (taken as a whole) is both of high quality and calculated to appeal to a wide variety of tastes and interests".

  The public interest test has recently been put to the test for the first time, following the referral of BSkyB's acquisition of 17.9% shareholding in ITV plc to the Competition Commission. On 29 January the Secretary of State ruled that BSkyB should be required to sell down its shareholding to below 7.5% in line with the Competition Commission's recommendations that the acquisition of the shares in ITV were represented a lessening of competition. The decision ultimately found that the shareholding did not represent public interest concerns in terms of a lessening of plurality.

  The case provides an interesting narrative on the functioning of the public interest test, entailing detailed scrutiny, including by Ofcom, the OFT and the Competition Commission, of the potential impact on plurality.

  During the inquiry, Channel 4 argued that the acquisition posed a threat to plurality of news supply. We were concerned that as a combined result of ITV's 40% ownership of ITN and Sky's shareholding in ITV there was a risk of closer collaboration between ITN and Sky which could have had an influence on the core newsgathering operation at ITN. We were concerned that Sky's shareholding could change the nature of the relationship between ITV and Sky, potentially making it more likely for a future ITV news contract to be placed with Sky. This would have risked reducing the plurality of independent news suppliers in the UK, potentially altered the nature of ITN's newsgathering base and over time lessened the choices available to Channel 4 next time the news contract comes up for renewal.

  In the end, the Competition Commission did not find that the case raised public interest concerns in terms of plurality of news. However, significantly, this was based on the perceived robustness of the requirements relating to impartiality, quality and scheduling in the Communications Act:

    "As far as the media public interest consideration is concerned, we do not think there is sufficient evidence that the acquisition will have an adverse effect, given the degree of influence that BSkyB has acquired over ITV, and ITN as its news provider, the regulatory requirements for impartiality and a strong culture of editorial independence in TV news".[6]

  In short, ITV's strong tradition of editorial independence, underpinned by the quality provisions in the Communications Act were in this instance sufficient to reassure the Competition Commission that a plurality of high quality and independent news suppliers would be maintained.

  Channel 4 believes that this serves to underline the continued and central importance of the requirements of the Communications Act in maintaining a plurality of high quality news providers in the UK, as argued above. However, it is also worth noting that the Competition Commission made clear that this case should not be considered precedent-setting. In the event of a similar case arising at a time nearer to the end of the contract period or in different market conditions, it is the Competition Commission could reach a different view about the potential issues concerning plurality. In summary, Channel 4 believes that the case suggests that the public interest test, coupled with the impartiality and quality provisions, provides a `belt and braces' framework that provides a double check on plurality of news provision, which is welcome given the significant public value attached to television news.

Do current national and local cross-media and single sector media ownership rules set out in UK legislation do enough to ensure a high quality and diverse news media? Or now that most news organizations are moving towards multi-platform operations, have these rules outlived their usefulness and relevance? In this context are there effective actions that can be adopted by news organizations to protect the public interest?

  Channel 4 will focus its response to this question on the rules relating to the ownership of our current news provider, ITN. Under the so-called 20/20 rule in the Communications Act newspaper owners with more than 20% share of the newspaper market are restricted from holding more than a 20% share in ITV or its news provider. In effect this means that Sky is not able to own more than 20% of ITN. When ITV put its news contract out to tender in 2001 a bidding consortium was formed involving Sky and four other partners.

  While the current ITV news contract with ITN is due to run until 2012, in theory if a consortium involving Sky were to win the ITV news contract Channel 4 would be concerned that it would reduce plurality of news supply because:

    —  ITN would in all likelihood cease to be a viable news supplier to Channel 4 because ITN would not be able to provide sufficient newsgathering base as a result of the loss of shared efficiencies.

    —  Channel 4's options in seeking an alternative news supplier would be extremely limited.

    —  Sky News is the only viable existing alternative supplier; the set-up costs to establish a new news organisation with the necessary expertise are likely to be very expensive.

    —  While Channel could look to set up a separate news service there is no existing provider in place; therefore there is no automatic alternative available to Channel 4. In these circumstances it is therefore possible that the overall choice of news `voice' available to the viewer might be reduced. Furthermore, such a reduction would risk a stifling of innovation and the drive to improve quality. Television news has traditionally benefited from news services acting competitively striving to improve quality.

  However, notwithstanding these concerns, the 20% limit on Sky's shareholding does provide some safeguards. It ensures that Sky—as a newspaper owner and major competitor provider of broadcast news—is not in a position to take sole control of ITV News provision, thereby ensuring that sole news provision is not reduced to the BBC and Sky. ITV's present management has indicated that it envisages continuing to provide a national and international news service up to and beyond digital switchover. Channel 4 believes that these ownership restrictions remain valid as a means of ensuring that there is an alternative independent news provider to the BBC and to sole provision by a major newspaper owner. It is also important that the editorial independence of ITV's news service is safeguarded.

  However, as Channel 4 increasingly becomes the main source of plurality and competition to the BBC, consideration might also be given to how future legislation might safeguard the editorial independence of Channel 4 News and ensure that there remains plurality of news supply alongside BBC News without there being undue concentration of TV and newspaper providers.

Do any problems arise from having four bodies involved in the regulation of media markets (the OFT, Ofcom, the Competition Commission and the Secretary of State)? Are there any desirable reforms that would improve the effectiveness of the regulatory regime?

  The rigour of the investigation into BSkyB's shareholding in ITV, in which the public interest test was assessed in detail by a number of separate regulatory bodies, was beneficial to the public. While the findings did not deem there to be plurality concerns, it did so on the basis of a careful examination of all aspects of relevant legislation. Channel 4 believes that this "belt and braces" approach involving a number of expert bodies shows that the legislation did what it was designed to do, with attention given to the issues around news plurality. It is important to note that the findings are non-precedent setting and that any future similar case would be assessed on its own merits.

  Channel 4 also believes that the involvement of a number of regulatory bodies provided welcome checks and balances throughout the process to ensure that all relevant issues were taken fully in to account. For example, one of the reasons cited by the Competition Commission in relation to news plurality was the longevity of the news contract ITV has in place with ITN.

Has the lifting of all restrictions on foreign ownership of UK media affected the quality and independence of the UK news media, or will it affect it in the future? Has the UK industry benefited, or does it stand to benefit in the future?

  As the Committee will be aware there has not yet been an instance of the foreign ownership rules being put to the test and consequently it is unclear the extent to which any such takeover would impact on the quality and independence of news in the UK.

  In terms of any potential impact on television news, it would be essential for the public interest test to be applied rigorously in terms of any plurality concerns and in terms of the owner's commitment to meeting the standards objectives in the Communications Act.[7] Under the public interest test any potential owner would be required to meet the terms of the Broadcasting Code, including editorial standards and levels of quality set out in broadcast licences.

  Again, this underlines the importance of the requirements of the Communications Act in relation to the quality, standards and amount of news in safeguarding the future of a plurality of high quality trustworthy and widely available television news services in the UK.

February 2008

5   Communications Act 2003, s 375. Back

6   Competition Commission provisional findings s 5.57 4.10.07. Back

7   Communications Act s375 (2C(c)). Back

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