Memorandum by Channel 4
SECOND CALL FOR EVIDENCE
INTRODUCTION
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 www.channel4.com/news.
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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