Memorandum by the Department for Culture,
Media and Sport and the Department for Business, Enterprise and
Regulatory Reform
SECOND CALL FOR EVIDENCE
SUMMARY OF
EVIDENCE
The following memorandum provides written evidence
from the Department for Culture, Media and Sport (DCMS) and the
Department for Business, Enterprise and Regulatory Reform (BERR).
In its submission of 3 September 2007 to the
Committee, DCMS set out an overview of the development and regulation
of news provision in the United Kingdom, including media ownership.
This second submission seeks to address the specific questions
raised by the Committee in relation to media ownership and news
provision.
MEDIA OWNERSHIP
AND PUBLIC
INTEREST PROVISIONS
IN THE
UK
Scope of submission
1. Our submission of 3 September 2007 set
out the general rationale for the existing and historic rules
governing media plurality.
2. This second submission aims to address
the questions that the Committee highlighted in its call for evidence.
1. Are the requirements in the Communications
Act 2003 relating to quality, quantity, scheduling and impartiality
of national and regional broadcast news appropriate? Are they
sufficient? Will they be sufficient after digital switchover?
2. 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?
3. 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 organisations are moving towards multi-platform
operations, have these rules outlived there usefulness and relevance?
In this context are their effective actions that can be adopted
by news organisations to protect public interest.
4. 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?
5. 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 in stand to benefit in the
future?
3. Departmental responsibilities for these
matters is shared between DCMS and BERR, hence this joint memorandum.
Question 1
4. The Communications Act 2003 (hereafter
referred to as CA 2003) reduced the sector-specific media ownership
rules; it was designed to last 10 years and we believe that it
remains relevant and appropriate to today's communications market.
In recognition of the fact that the communications industry has
the potential to change at a fairly rapid pace, often lead by
technological change, the CA 2003 made specific provision for
Ofcom to review the media ownership rules to ensure that they
remained relevant. Under section 391 of the CA 2003, Ofcom are
required to carry out a review of the media ownership rules at
least three years after the commencement of the CA 2003 and conduct
subsequent reviews at intervals of no more than three years. As
a result of these reviews Ofcom makes recommendations to the Secretary
of State if, in their view, changes to the media ownership rules
are needed. The first of these reviews was published on the 14
November 2006.
5. In general, Ofcom's first review concluded
that there had not been such significant consolidation in any
single market since 2003 to recommend changes to the existing
rules.
6. The advent of digital TV has brought
with it a greater choice in the number of services which are available
to viewers. Over 80% of households can now receive digital TV
compared to 50% in 2003. This increase in choice has brought greater
diversity but not necessarily plurality in the provision of news;
the BBC, ITN and SKY are still by far the largest news providers.
It does not necessarily follow that greater choice erodes the
share and importance of the traditional broadcasters. To date
they have been able to maintain their overall audience by developing
a portfolio of channels.
7. Furthermore, Ofcom's research into news
consumption (New News, Future News June 2007) indicated
that, despite the increase in the use of the internet to access
news, television, radio and newspapers remain overwhelmingly the
main source of people's news. In the light of this we do not yet
see a compelling case to change the CA 2003 provisions either
now or after the completion of digital switchover in 2012.
Question 2
8. On 26 February 2007, the Secretary of
State used the media public interest intervention powers provided
under Section 58 of the Enterprise Act 2002 for the first time.
This was to intervene in the case of BSkyB's acquisition of shares
in ITV plc on the basis of the consideration specified in Section
58(2C)(a) of the Enterprise Act. This relates to the need to ensure
a sufficient plurality of persons with control of media enterprises.
The Government believes that, in light of the first practical
application of the powers, the public interest consideration for
media mergers remain appropriate.
Question 3
9. The national and local single and cross
media rules are set out in the CA 2003 and the subsequent Media
Ownership (Local Radio and Appointed News Provider) Order 2003.
These rules were designed to secure a plurality of provision of
national and local media in all but the smallest markets.
10. Ofcom's review of the media ownership
rules in 2004, as detailed above, concluded:
"Some consolidation has taken place since
2003 but not as much as there could have been given the 2003 regulatory
reform. No substantial problems have arisen in applying the rules;
and while the media landscape is changing rapidly, such as growing
use of alternative news sources on the internet, the assumptions
about the influence of the traditional media and spectrum scarcity,
which underpin the current rules, remain valid and justify continuation
of the existing rules".
11. The only significant area where Ofcom
highlighted potential concerns was the local radio rules, or "2+1
rules" as they are commonly called. These rules require that,
in any analogue and digital market which can support it, there
are at least two commercial radio providers as well as the BBC,
which would in practice allow the commercial radio industry to
consolidate into just two large companies. Indeed without the
introduction of the 2+1 rules in 2003 the merger of GWR and Capital,
to produce GCap, would not have been possible. However, Ofcom
have noted that in a few occasions implementing the 2+1 rules
had actually resulted in the lessening of choice. They cited the
merger of Scottish Radio Holdings and Emap in 2005 which resulted
in the requirement to remove a service from three local multiplexes
even though no new services could be found to replace them. Ofcom
deferred further consideration of the radio specific rules to
their "Future of Radio" review.
12. Ofcom's "Future of Radio—The
Next Steps" was published in November 2007 following
consultation on a number of issues including the radio specific
and cross-media rules. The consultation report noted that many
respondents had called for the removal of all radio-specific rules,
stating that whilst radio is the smallest of the media industries
it is subject to the tightest ownership rules. However, the Government
notes that the radio industry has always been the smallest media
industry in terms of revenues and does not believe that this is
the decisive factor in determining whether ownership rules are
necessary.
13. In the consideration of the consultation
Ofcom concluded:
"that there is a case for Government to
consider simplifying the local analogue and digital services rules,
at the appropriate time, allowing further consolidation while
protecting plurality. This could take the form of bringing together
the local analogue and DAB rules into a single set of rules, although
other options are available".
In addition, Ofcom concluded that Government
should retain the cross media rules but again consider how to
take account of digital radio services.
14. The Government in principle accepts
Ofcom's recommendations and will work closely with them to see
where there may be a case for change to the existing rules.
15. Whilst we believe that existing rules
are still broadly appropriate to the current landscape we acknowledge
that competition in news provision has grown considerably. In
his speech to the Royal Television Society the then Secretary
of State for Culture, Media and Sport, James Purnell, set out
proposals for a Convergence Think Tank to consider the opportunities
and challenges presented by the converging media and telecommunications
markets. In his speech he set out the three key objectives to
guide the Think Tank; these including Open Markets. The Think
Tank held its first public seminar on 7 February and we shall
take account of its work in considering future policy in relation
to media specific rules.
Question 4
16. The BSkyB/ITV case appeared to demonstrate
that the respective roles of the Secretary of State, the OFT,
Ofcom and the Competition Commission in the regulation of media
mergers are sufficiently clear and distinct at all stages of the
process.
Question 5
17. The Communications Act 2003 removed
the rules which prevented ownership of a Broadcasting Act licence
by a non-EEA (European Economic Area) person or organisation.
We are not aware of there ever being restrictions on foreign ownership
of UK newspapers.
18. Since the changes in 2003 we are not
aware of any significant acquisition of media organisations or
services which would have been prevented under the previous rules
relating to non-EEA acquisitions. The Government believed, as
explained at the time, that the previous rules were inconsistent
and outdated. There was nothing preventing individuals from other
EEA states from holding UK licences and there were also a number
of licences which non-EEA individuals could already own, most
notably cable, satellite television and digital licences. American
companies already have a presence in UK media markets—they
have helped build UK satellite, cable, newspaper and magazine
industries.
19. The UK Government believe that opening
up the UK broadcasting industry to foreign ownership still has
the potential to increase productivity and efficiency, offering
access to capital and to new management skills and ideas. At the
same time the Act includes content regulation which ensures that
the quality of programming is not threatened. These content rules
apply equally strongly to foreign owners.
February 2008
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