House of Lords - Media Plurality - Communications Committee

Media Plurality - Communications Committee Contents

Chapter 3: approach

64. Across the evidence we received, five broad models of procedures and interventions were put forward as candidates for new approaches to media plurality policy; these are captured roughly in the diagram below.

Figure 1

Approaches

65. The purpose of this chapter is to present our analysis of these different approaches to media plurality policy: their motivating concerns, their pros and cons, and other relevant questions. Our hope is that our presentation of these issues will help to clarify, for expert and uninitiated audiences alike, the merits and demerits of these different approaches as compared to each other.

66. However, making clear comparisons between different policy approaches to media plurality is not straightforward. This is not only because they do not elicit consensus, but because the different perspectives—at least those we have heard—tend to enter the debate on such different terms: technocratic, polemic, and pragmatic. Each of these ways into the plurality debate is likely to get some parts right and to miss others.

67. Against that background, we will make concluding remarks on each of the possible approaches put to us and we try to give understandable and balanced reasons for reaching these conclusions. To be clear, our conclusions are also informed by certain principles which we arrived at in the course of our analysis. A summary of these is set out in chapter 5, but as two of these principles, in particular, shed light on our thinking in this chapter, we include them here first:

68. The framework of plurality assessment and intervention must strike a balance between providing certainty to the market and flexibility to the regulator—both are important.

69. The assessment of plurality should drive the decision about which remedy or intervention is appropriate, not the other way around.

70. Finally, we note that the background to all of these approaches is a fairly common set of criticisms about the current arrangements for media plurality, including that they fail to address digital media enterprises or the impact on plurality of organic change. These points are well documented, so we do not comment on them further, other than briefly to address the "20/20" rule about which we did take some evidence.

71. The "20/20" rule applies to cross-media ownership at a national level and consists in the following:[73]

· No one can own more than 20% of a Channel 3 licence[74] and at the same time own national newspapers with more than 20% market share.

· The same restriction applies to anyone who is more than 20% owned by someone who has more than 20% of the national newspaper market.

72. For some, the argument for retaining the "20/20" rule is weakening because they claim that the relative importance of the media to which it applies has waned. For example, David Elstein questioned "whether the famous 20/20 rule … any longer makes sense, given that the first of these "20"s (ownership of more than 20% of the national newspaper market) related to daily sales of 16 million newspapers when the clause was enacted, but now relates to daily sales below 9 million."[75] Others, such as Professor Barnett, still see the Channel 3 licence and the national newspaper market as particularly important in the context of plurality: "The notion of separating what are still the most powerful forms of mass communication is entirely appropriate. I would keep that rule."[76]

73. The balance of the evidence about whether to retain or remove the "20/20" rule did not point heavily in one direction or the other. The important point was made by Dr Tambini: "the answer to all of these questions depends on what is replacing it"[77] which chimes with Ofcom's argument in its supplementary advice to the Secretary of State: "the main factor that might inform … whether the 20/20 rule is the most effective way of addressing the original policy aims—is the extent to which a new regulatory regime … might address these same aims."[78] This can only be decided with any certainty once it is clear what that new regulatory regime should be, and perhaps even only when it is in place. We, therefore, leave our conclusion on this point to chapter 5 in which we set out our proposal on media plurality, having first considered in this chapter the range of approaches put to us in the evidence we received.

Conceptual Shift (Positive Intervention)

WHAT ARE THE MOTIVATING CONCERNS FOR PROPONENTS OF THIS APPROACH?

74. Proponents of a 'conceptual shift' towards positive intervention generally have serious concerns about measures designed to prevent media enterprises from growing, such as media ownership caps. Indeed their call for a conceptual shift is often triggered by a fear that such proposals and the analysis behind them are barking up the wrong tree, focussing too heavily on abuses of concentrated media power and not enough on the growing fragmentation of the media and the decline in its commercial sustainability. Professor Collins told us that "there is a significant structural change going on in the media sector, notably, the migration of advertising revenue to the internet, which is undermining a business model that has sustained relatively high quality and relatively pluralistic media in the UK and elsewhere for a long time."[79] Accordingly, he added that "changing the regulatory order is going to have relatively little bite on this structural problem. Focusing on changing media ownership regulation is taking attention away from looking at what the main issue is."[80]

75. As a result they call for a new focus within plurality policy on positive interventions to promote diversity, either as a principal recommendation in and of itself—as is suggested by Professors Collins and Cave—or as part of a wider package of measures—as is suggested by Professor Picard and Mr Foster. The premise of this approach is that, ultimately, "media plurality depends largely on commercial organisations investing in news and journalism."[81] Accordingly, it is argued that "a conceptual shift is needed … Rather than conceiving of media pluralism as an objective to be realised by prohibiting mergers, it should be thought of as pointing towards intervention designed to facilitate and encourage entry."[82]

76. This case is made with particular reference to newer, smaller online providers of news and current affairs content, 'minnows' as some have called them:

77. Proponents of this view also point out that positive interventions are not unprecedented. Accordingly, the conceptual shift they call for may simply involve thinking more widely and imaginatively about the purpose of existing public intervention in the media.

WHAT MIGHT PUBLIC INTERVENTION FOR MEDIA DIVERSITY LOOK LIKE IN PRACTICE?

78. There has been no definitive answer to this question. Indeed responses have generally suggested that it is a vast and complex question to consider in its own right and would deserve its own inquiry:

79. Nonetheless a number of tentative early thoughts on what positive intervention might look like were mentioned. Professor Collins told us that "There are two past papers of Ofcom that really bear on this issue very interestingly. The first is the one in which they advocated the establishment of a public service publisher. Secondly, I think it is 2007 and I am pretty sure the reference is in our evidence to you: New News, Future News. This paints a rather gloomy picture of how this sector is going to develop."[86] Professor Barnett also put forward as a model:

80. Even these tentative early suggestions, however, raise difficult challenges. One of the criticisms which the newspaper industry regularly makes is, of course, that the BBC is in receipt of public money and it is a competitor. There can be little doubt that any case for additional public money to be spent on public interest media would attract understandable criticism from a range of players currently in the marketplace who are suffering difficult economic times.

HOW WOULD POSITIVE INTERVENTION TO PROMOTE MEDIA DIVERSITY FIT IN WITH EXISTING PUBLIC FUNDING OF THE MEDIA?

81. While views we heard about the specific manifestations of public intervention to support diversity were overwhelmingly tentative, debate over how any such idea might interact with existing forms of public support for the media (such as funding of the BBC) was, by contrast, relatively firm and occasionally heated.

82. A very clear divide, for example, exists between those who believe that the question of public intervention merits a reconsideration of licence fee funding, particularly in light of existing precedents for this money being used for non-BBC purposes such as S4C, and those who do not, and instead believe that additional public funding to support media diversity should come from new sources such as a levy on digital intermediaries. For example, on one side there are those like Professor Collins who told us that "if one … ask[s] … Where would the money come from?" … the only obvious candidate for that funding is the licence fee. We have had a number of precedents where very small amounts of the licence fee have been directed to … supporting new media entrants. We think that might not be a bad way to go in future."[88] On the other side there are those like Professor Barnett who put it to us that:

83. The evidence we have heard also featured discussion not simply about allocation of public funds for media diversity but about the—perhaps slightly softer—matter of what the BBC's responsibilities towards fostering plurality should be. On internal plurality, the BBC agreed that it did not have a specific duty to promote internal plurality, but equally did not believe that introducing such a duty would necessarily be helpful:

84. Whether or not the BBC should have a specific duty to foster internal plurality, others suggested there is a strong case for the BBC to adapt more generally with a view to creating greater internal plurality. In his oral evidence to the Committee, David Elstein accused the BBC of being a 'unitary organisation' and suggested that BBC radio, News channel, World Service and Online are insufficiently independent from each other editorially.

85. The BBC Trust rejected this view and indeed it is overstated. As Diane Coyle, Vice Chairman of the BBC Trust told us: "I do not recognise that monolithic BBC that he is describing. Nobody dictates an editorial line to BBC journalists … The services and programmes serve different audiences and they are very different in character."[92]

86. In addition, while recognising the importance of presenting a diverse range of views on any one topic within its individual services, the BBC argue that in the context of Delivering Quality First, the BBC's programme of cuts, the organisation needs to find efficient ways of working which may not be compatible with the establishment of competing centres of editorial control. The cuts being made, they claim, are being implemented with the goal in mind, as far as possible, to maintain investment in public interest journalism, locally and internationally:

87. Moreover, the BBC put it to us that there is clearly an important role for a diversity of views to be presented in any one service, but that the idea of delivering internal plurality through a system of alternative and competing news agendas did not necessarily reflect audience demands. These tend to rate more highly than internal plurality the importance of finding, across any service from the BBC, a news offer which is trusted, impartial, accurate and up-to-date:

88. By contrast, when it came to external plurality, the BBC itself appeared to be more open to the potential of developing its activities and responsibilities further:

THE COMMITTEE'S VIEW

89. As a Committee we have looked at the idea of new exercises in public and charitable funding of the media before in our Report on The Future of Investigative Journalism.[96] We recognise there may be some potential merit in these ideas. We support those working in this area.

90. On the BBC, we think that the proper place to consider its responsibilities, including with regard to matters such as internal or external plurality, is within the Charter Review framework.

91. On internal plurality, David Elstein's idea of rerouting the internal wiring of BBC news services to establish different editorial centres of control is certainly, in some respects, an attractive intellectual proposal. We are persuaded, however, that there are practical pressures and other priorities in the BBC which compete with this, which argue against the idea of establishing—now, at any rate—a distributed system of editorial centres creating competing news agendas available across BBC's services. However, in light of the foregoing discussion about external plurality and the potential for the BBC to act not only as a trusted provider of its own news and current affairs content but also as a gateway to external sources of diverse opinion on news and current affairs, at least in its online incarnation, we make the following recommendation:

92. We encourage the Government and the BBC in negotiating Charter Renewal to consider whether the BBC might be given a more explicit responsibility—with respect to its online offer for news and current affairs content—to stimulate consumption of diverse viewpoints from different external sources.

93. As a separate matter, we also note that licence fee money is already being allocated, as far as we can tell at the Government's request, to projects external to the BBC such as S4C with—if not explicit—tacit approval of the BBC Trust. It is not out of place, therefore to make the following recommendation:

94. We recommend that the Charter Review process makes clear what licence fee funding is for, and that, as long as it is conceivably available for projects external to the BBC, it is also made clear what strategic role, if any, this funding might play in positively promoting external plurality in the wider UK media.

95. For our part, we urge the Government to support our view that the licence fee should be for the BBC alone, though we do not argue that funding to S4C should now be removed.

96. Our sense is that if this principle is not observed, people can too easily look to the licence fee as a source of funding for other projects, and the Government of the day can too easily blur the issue, indeed as it is doing at present. Clarity and transparency are important and required in this.

No Intervention

WHAT MOTIVATES THE PROPONENTS OF THIS IDEA?

97. In reality, there have been no proponents of this idea across the evidence submitted to the Committee. Only one witness, Professor Collins, has appeared to come close: "In our bolder moments, we do flirt with that idea, my Lord Chairman."[97]

98. While no one has argued for this approach, it has, however, arisen a number of times in our evidence sessions. This is because it has provided witnesses with a way of discussing the value of having a media plurality policy over having none, or perhaps more accurately, the value of having a media plurality policy over allowing decisions on media ownership to be made strictly on competition grounds or only by competition authorities, as described in chapter 1.

99. As noted there, those who have made a point of opposing this idea highlight the differences between competition policy and plurality policy, underlining that plurality policy is not secondary to competition policy but that there are good arguments for considering it to exist in parallel with it.

100. Not disconnected from this, others have also argued that, institutionally, competition authorities are not the appropriate bodies to carry out the thinking required by a media plurality assessment. Professor Picard, for example, told us that "regulators … are very often very tightly focused in their competencies to deal with things, or in the methods that they can use to analyse things, or in the remedies they have. If [a plurality assessment] gets thrown to a competition authority, they are going to deal with it as a competition issue."[98] He added that:

THE COMMITTEE'S VIEW

101. As indicated in chapter 1, we believe that determining clear demarcation lines between plurality and competition policy is crucial. We will not repeat those arguments here. We only note that the current overlap between the two seems partly responsible for the fact that at play in the political discussion of this subject are a number of matters which in reality run parallel to media plurality policy.

Caps

102. A cap has been proposed in two contexts: first, as a stand-alone measure, and second, as a single element within a package of hybrid measures. The latter will be considered later under 'hybrids'. For now, a number of questions arise in relation to a cap as an approach in its own right.

WHAT PROPOSALS HAVE BEEN MADE FOR A CAP AS AN APPROACH IN ITS OWN RIGHT?

103. Across the evidence the principal witness to have proposed introducing a cap as a stand-alone measure is Enders Analysis. Their specific proposal is for a cap of 15% on the revenues any enterprise can earn across the 'total media market'. They argue that "the most effective way of ensuring plurality is to introduce a cap on the share of the revenues of the total media market controlled by any company … a cap of, say, 15% would ensure that no one company could completely dominate the UK media industry"[100]

104. The 'total media market' includes: "national newspapers; Regional newspapers; Consumer magazines; Video games; Television advertising; Television subscription fees; Books both in physical and digital form; Recorded music both in physical and digital form; Cinema; Video/DVD rental and purchase; Internet subscriptions; Internet advertising; [and] Radio advertising."[101]

WHAT MOTIVATES PROPONENTS OF THE ENDERS CAP?

105. Proponents of this approach are clearly motivated by a range of concerns relating to media plurality policy. Still, given its distinctive features it is probably fair to say that chief among these is a concern with market power—and stopping any one entity having too much of it. This was made clear by Mr Goodall from Enders Analysis in his oral evidence: "I absolutely believe that if we think plurality and diversity are important, we have to stop one dog in the industry becoming too powerful."[102] He added that:

103

MORE SPECIFICALLY, WHY DO ITS PROPONENTS SET THE REVENUE CAP AT 15%?

106. There appear to be three main reasons why the cap's proponents believe it would be an effective measure. First, as long as the market can sustain them, it provides the closest thing to a guaranteed 'floor-level' of media players across the whole media market. As Professor Barnett told us, "The Enders notion of a 15% cap, which gives you six or seven major players … The rationale behind it seems to me to be entirely appropriate."[104]

107. Secondly, it draws a symbolically significant line in the sand for UK democracy. Again, Professor Barnett told us that a cap is a "bright white line that says 'thus far and no further'. At that point it is becoming too uncomfortable for democracy to allow someone with that much circulation of national newspapers or that much share of the national television audience to be in one person's hands or one private company's hands. At that point we are saying, 'We are going to have to ask you to divest'. It is important to have that rule and that cap."[105]

108. Thirdly, it gives certainty to the market and removes discretion from either the regulator or Government in implementing media plurality policy. It is argued that this has a number of benefits. It makes the policy more workable from the perspective of a regulator responsible for it; indeed it is argued that a policy may be entirely unworkable without removing discretion from the process. Mr Goodall explained that "we have gone for a relatively simple, extremely arbitrary rule—and I use that word carefully because to me that is a good thing—because it is then very much easier for regulators to maintain control and to make sure that the rules are well understood by every participant."[106] This point was underlined by Dr Craufurd Smith:

107

109. One further reason alleged by some witnesses to be behind support for setting this cap at 15% is that it would meet a desire on the part of some to accommodate the BBC's share of 'revenues' while blocking the growth in revenue-share of Murdoch-owned media enterprises, if, for example News Corp (as was) were to have tried once more to acquire the remaining shares in BSkyB. Mr Elstein claimed that "it is designed for a purpose, which is to limit the influence of Murdoch or Sky or whatever … I think Claire is very open as to why she is recommending it … It is just another way of dealing with Murdoch."[108]

WHY DO ITS PROPONENTS SET THE CAP ACROSS THE 'TOTAL MEDIA MARKET'?

110. To some extent, this point is addressed in the previous chapter on Scope. A 'total media market' cap appeals to those in favour of a broader scope for media plurality policy for the following reason:

109

111. Separately, the use of a cap across media markets appears to be driven by an apparent dissatisfaction among some with the competition authorities in the way they take cross-media market power into account:

110

112. As noted above, our view is that issues such as this have been unhelpfully blurred with the debate over media plurality when in fact they are matters running parallel to it, reflecting perhaps a frustration with the way the competition authorities have conducted recent assessments of the media market.

WHICH ARGUMENTS ARE USED BY OPPONENTS OF THE ENDERS PROPOSAL?

113. A range of objections to the Enders approach have been put to us. Firstly, the breadth of the market to which the Enders cap would apply is reasonably large and some have argued that it would, contrary to its own aims, permit alarming concentrations of power. Taking the 2010 data which Enders cite in their written evidence, a 15% cross-sector revenue cap would not be crossed even if a merger were to take place between all of the following: all Non-News International national newspapers, all of the UK's regional newspapers, and 50% of radio services. Similarly, taking the 2015 (projected) data they cite, the cap would not be crossed if a merger were to take place between all of the following: all non-News International national newspapers, all regional newspapers and one of either a) all consumer magazines or b) all radio services). Concern with this aspect of the Enders proposal was expressed by a number of witnesses. Dr Craufurd Smith told us that the Enders approach "is not in itself sufficient, because you could have one company that completely dominates news and the newspaper sector and the Enders approach does not pick that up."[111] Similarly Dr Hardy of the Campaign for Press and Broadcasting Freedom told us that a "central concern is that if you include in the calculation book publishing and video games, the market is defined so broadly the net impact would be too liberalising."[112]

114. Second, others have argued that the use of a single metric across the total market assumes equivalence between genres which is not necessarily reasonable from the perspective of plurality. It is implicitly the case in the Enders approach that different genres of media are like for like, such that £1 of revenue from video games is seen as equivalent, for example, to £1 gained from news and current affairs. This does not reflect the special nature of news and current affairs in the context of media plurality policy as explained in the chapter on Scope. Asked whether the Enders proposal assumes equivalence between genres in this way, Chris Goodall of Enders told us himself that: "In terms of ability to dominate a market and act as the gatekeeper, approximately, yes."[113]

115. Third, others have highlighted potential problems associated with a cap in general terms, particularly one that applies to revenues gained beyond NCA:

114

116. Fourth, caps are also argued by some to be too inflexible:

115

117. Fifth, implementing a revenue cap would also confront practical challenges. Neither determining relevant revenues (eg. of international companies providing services in the UK) nor extracting them from those beyond UK jurisdiction would necessarily be straightforward.

116

118. Additionally, some have argued that revenues, technically speaking, are an inappropriate metric for assessing the diversity of the media market:

117

119. Finally, as noted before, much of the case put for a conceptual shift towards positive intervention to promote media diversity is triggered as a reaction against the arguments used for caps, and therefore against proposals such as that made by Enders. Professor Richard Collins and Martin Cave, for example, claimed that "Rather than conceiving of media pluralism as an objective to be realised by prohibiting mergers, it should be thought of as pointing towards intervention designed to facilitate and encourage entry."[118]

THE COMMITTEE'S VIEW

120. Certainly, we have no disagreement with the motivation to find a simple, user-friendly way accurately to measure and bring about plurality in our media. We must admit, however, to remaining somewhat sceptical that the Enders model would achieve it. In particular, while 166 ways of measuring plurality (as recommended by the European Commission's report, authored by Peggy Valcke)[119] is surely overkill, we are not entirely persuaded that a concept as complex as plurality can legitimately be reduced down to one.

121. Following on from that, it may be clarifying to say that it was the Enders proposal—and others like it—which prompted our arrival at the principle stated at the beginning of this chapter: that the assessment of plurality should drive the decision about which remedy or intervention is appropriate, not the other way around. It is inherent to an approach based on statutory caps that the decision about which remedy or intervention is appropriate (for its proponents, a cap) drives the way in which plurality should be assessed (an arbitrary and potentially misleading single metric in whose terms the level of the cap has to be set). Plurality is unfortunately a more complex concept than that; it cannot be reduced down to a single figure. For example, beyond a simple numerical assessment of the share of the market accounted for a media enterprise, a plurality assessment might also consider the diversity and range of independent news voices; overall reach and consumption and propensity of consumers actively to multi-source; barriers to entry and competition to spur innovation; economic sustainability and so on.

122. In addition, the Enders approach appears to be motivated by a frustration with the way the competition authorities do their business when it comes to the media—which may or may not be a legitimate gripe—but competition policy and plurality policy are not the same thing as we have already explained, and therefore the sorts of arguments put forward do not form, we think, a sensible basis for constructing a plurality policy. In a nutshell, the counter-arguments seem to us to outweigh those in its favour.

Hybrids

123. As noted above, a cap has been proposed both as a stand-alone measure, as in the Enders model, and as a single element within a hybrid package of measures. Below are a number of questions which arise in relation to hybrid approaches which have been put to the Committee.

WHAT IS A HYBRID APPROACH?

124. A hybrid approach is one which incorporates structural and behavioural remedies. Structural remedies involve absolute "bright line" limits, also known as caps; behavioural remedies oblige media enterprises to introduce certain practices or controls to their operations.[120]

125. More specifically, the standard hybrid approach sets two quantitative thresholds in terms of market share: companies breaching the lower % may be subject to certain behavioural remedies, while companies breaching the higher % will be subject to structural remedies.

121

WHICH HYBRID PROPOSALS HAVE BEEN PUT TO THE COMMITTEE?

126. Three hybrid approaches have been put to the Committee: one by the Media Reform Coalition (MRC); one by the Campaign for Press and Broadcasting Freedom (CPBF); and one by Avaaz. Rt Hon Harriet Harman QC MP has appeared to support something akin to these approaches in her recent public statements as well.[122]

127. The three proposals have distinctive features but share much in common. An important distinction lies in the percentage at which they set their thresholds. For the MRC they are set at 15% and 20% of audience share; for the CPBF at 15% and 30% of market share; and for Avaaz at 20% of either audience size or revenue. Unlike the Enders proposal whose 'bright line' limit applies to the 'total media market', the MRC, CPBF and Avaaz models set their thresholds within specific sectors or 'designated media markets.' Dr Hardy of CPBF set out that "we favour an approach that identifies designated markets, such as news and television services, rather than a total market approach such as Enders has proposed."[123] He explained his view that:

124

Similarly the MRC told us that "the key sectors for news and current affairs include newspapers, television, radio and online news. Plurality should be measured based on standard audience share indicators."[125] Avaaz made a similar point, arguing that "the key sectors for applying these limits are those through which news and current events are most commonly consumed: newspapers, online news, television and radio."[126]

128. However, both the CPBF and MRC proposals do see merit in the Enders model (or a refinement of it focussing on the total news market) as a cross-media measure to sit alongside their hybrid approach which focuses on designated markets. The MRC explain in written evidence that:

127

Amending this, Dr Hardy of CPBF told us that "we would not suggest a total market measure along the lines Enders has suggested. There is a suggestion floated, for example, to define a total market in news across all platforms and set a cap there of 15%. I am much more sympathetic to that approach."[128]

UNDER THESE HYBRID MODELS, WHAT WOULD HAPPEN WHEN A DESIGNATED MARKET THRESHOLD IS BREACHED?

129. While the MRC, CPBF and Avaaz proposals place their thresholds at different levels—and indeed the Avaaz proposal is different in only having one threshold—they recommend similar remedies and interventions at the point at which they are breached.

130. For the CPBF, at a lower threshold,

129

131. Similarly the MRC told us that:

130

132. At the higher threshold, both talk about transfers in ownership. The MRC told us that:

"where a single outlet or group of outlets breach a given threshold of 20 percent, steps should be undertaken to ensure that no single entity or individual has a controlling share of that title or group of titles. The particular advantage of this approach is that it is aimed specifically at limiting the influence of powerful interests … shareholder dilution or equity carve out could genuinely increase internal plurality, as civil society groups and socially-oriented investors (such as pension funds) may well take up the opportunity to buy released shares in order to hold media companies to account."[131]

133. Similarly, Dr Hardy of CPBF told us that "At the top end, we believe that private operators should not have greater control than 30% as an absolute maximum. At that point, firms would need to be reconfigured into public trusts, co-operative ventures and so on, so that a private entity stayed within a 30% threshold."[132]

134. With only one threshold, the Avaaz proposal envisages a slightly different process. In this, "any entity that already has now or in the future achieved more than 20 per cent of a sector would undergo a public interest test that could result in either forced divestment or special regulatory measures to ensure it operated in ways that promote rather than undermine democracy."[133] In other words, there is no lower and upper threshold to trigger consideration of behavioural and structural remedies separately. Instead, the single threshold is used to trigger a consideration of whichever remedies—either behavioural or structural—are most appropriate in that case. The implication of their evidence, however, is that the default intervention to be imposed on a media enterprise breaching the 20% threshold would be a structural divestment—not least because they describe their threshold as a market 'cap'—and that in a case of breach, "it is up to media companies to make a compelling case if they disagree [with blocks on consolidation]."[134]

135. All three groups argue that while the BBC could breach the designated market thresholds, the mechanisms through which the BBC and its role are considered should be entirely separate, as noted previously in the chapter on Scope. For them, this is because the BBC is already obliged to commit to a significant degree of public service regulation and the provision of some level of internal plurality. The thresholds are intended only to apply to media enterprises not subject to such regulation. As Dr Hardy of CPBF explained, "we believe that the mechanism to deal with the BBC's market presence and any problems that arise from that should be handled elsewhere … So the market thresholds that should apply to other market actors should not include the BBC"[135]

136. Similarly the MRC told us that "There is a need to ensure that dominant media voices which are not subject to public service regulation are nevertheless committed to maintaining a degree of internal plurality and accountability."[136]

137. It is also clear that the hybrid approach is intended to target the national media rather than local or regional enterprises, where its proponents suggest a different set of criteria and a different model would be required.

137

WHAT MOTIVATES PROPONENTS OF A HYBRID APPROACH?

138. Proponents of a hybrid model are clearly motivated by a range of concerns relating to media plurality policy. Some of these are inevitably shared with those favouring a pure cap-based model (see above), e.g. to remove discretion from the Government and regulators when it comes to measuring media plurality and to draw a symbolically significant line in the sand for UK democracy. In addition, they believe in the need for flexibility in the interventions imposed on those with a share of the market growing between the fixed thresholds, as these should, in their view, be targeted at demonstrating a principle: that with increasing share of media markets comes increased public responsibility.

139. First, it is clear that 'hybridists' share some of the same motivations as proponents of a cap-based model. As the MRC put to us:

138

140. In addition, their approach purposefully builds in a degree of flexibility in order that public interest obligations can be targeted at ensuring the principle is met: that with greater media market share comes greater public responsibility. Dr Hardy of CPBF told us that "the guiding principle of our approach is that with size and reach comes responsibilities. Those providing media content or public communication services are providing services that matter for democracy, for social and cultural life, for the creative economy."[139] He added that between the two thresholds "the key point … is the degree of flexibility. All of these measures have to trade off viability with ensuring public interest standards. We think some flexibility there about what measures are used is the right approach."[140] This flexibility is evident in the Avaaz approach too where they contemplate that it should be possible for a media enterprise to breach its 20% threshold as long as it were possible to demonstrate that a "breach [of] the 20 per cent limit was in the public interest."[141]

WHICH ARGUMENTS ARE USED BY OPPONENTS OF HYBRID APPROACHES TO MEDIA PLURALITY POLICY?

141. While the cap envisaged by 'hybridists' applies only to designated markets rather than to a total media market, many of the arguments made against a pure cap-based model apply to the upper "bright line" limit in the hybrid model. These were rehearsed above. A number of additional challenges to hybrid approaches have been put to us, arising specifically from the distinctive features of their proposals.

142. For example, it has been put to us by a number of witnesses that fixed thresholds are unsuitable for markets as dynamic as the media. The exit or decline of one company is inextricably linked to the increasing share of others. Under a system of fixed thresholds, it seems possible that relatively arbitrary conclusions could be reached about the plurality concerns raised by a media enterprise between one day and the next; whether this were to lead a regulator to intervene or simply to undertake an investigation, the unpredictable and arbitrary nature of the trigger would have inevitable consequences for innovation and investment.

142

143. Some argued, from a purely practical perspective, that the implementation of behavioural remedies may be an appealing idea in principle, softer than the structural options to impose divestment, but would be extremely hard in practice to agree, monitor or enforce.

143

144. Others have argued that setting a share of designated markets above which obligations begin to be introduced struck some as implying that plurality policy would be driven by a decision on the part of the Government or regulator about what citizens' and consumers' choices should be rather than leaving such decisions to citizens and consumers themselves:

144

145. In addition, not all witnesses were persuaded of the fairness of allowing the BBC to breach such thresholds while others cannot.

145

THE COMMITTEE'S VIEW

146. In their favour, the hybrid approaches seem designed to avoid the undisguised arbitrariness of the Enders model. We must admit, however, to finding a good number of the challenges we have heard raised against them difficult to overcome. In particular, some of the arguments used against a cap-based approach seem to apply here too: in assessment, the relatively arbitrary and potentially misleading reduction of the concept of plurality down to one metric in whose terms the thresholds must be set. This breaches the principle which we consider to be important that the assessment of plurality has to be free to drive the decision about which remedy or intervention is appropriate, not the other way around. It is inherent to an approach incorporating statutory caps that the decision about which remedy or intervention is appropriate drives the way in which plurality has to be assessed. In our view, only drawing on one single metric to assess plurality is insufficient. As we noted above, beyond a simple numerical assessment of the share of the market accounted for a media enterprise, a plurality assessment might also consider the diversity and range of independent news voices; overall reach and consumption and propensity of consumers actively to multi-source; barriers to entry and competition to spur innovation; economic sustainability and so on.

147. Moreover, we cannot help but think that for a framework of plurality interventions to work in the real world, it will have to find some mechanism for taking the dramatically different traditions of each medium into account, and unfortunately, we are unable to see that these approaches would garner very wide acceptance. We can see the arguments in favour of behavioural remedies being in the armoury of the regulator when considering how to intervene in the interests of plurality. However, taking into account the need to find a way to enforce them and to monitor their effectiveness, an approach which places them front and centre is likely to create more problems than it solves.

Ofcom's Proposal

WHAT IS OFCOM'S PROPOSAL?

148. Ofcom's proposal can be found in two documents submitted in response to specific questions and requests for advice on the question of media plurality from the Secretary of State.[146] One of these questions was: "What could trigger a review of plurality in the absence of a merger?" Ofcom considered the merits of different triggers and concluded that there was a good argument for the introduction of a new plurality review to be conducted on a periodic basis—not triggered by a particular event but by the regular lapse of time.

149. A point of clarification may be helpful. Ofcom envisaged "a periodic review of media plurality (undertaken every four or five years), operating alongside the provisions of the existing merger-based public interest test."[147] Having only been asked a limited set of questions about non-transactional triggers for review, Ofcom did not go so far as to contemplate any changes to the existing arrangements for the Public Interest Test.[148] Ofcom recognised, however, that the establishment of a periodic review would raise questions about how two different reviews, one periodic and one transactional (under the current arrangements, the Public Interest Test), would influence and potentially risk overlapping each other. As it wrote in its supplementary advice to the Secretary of State, these considerations would merit further consideration, although Ofcom—rightly—considers these to be matters for Parliament and the Government:

149

150. Accordingly, Ofcom's proposal should not be taken as a wholesale redesign of media plurality policy where some other proposals put to this Committee have been. Instead, it should be seen as the response to some specific questions from the Secretary of State. The standout features of this response are the introduction of a new periodic plurality review to be undertaken every four or five years and beyond this, aspects of the specification for this review, some of which we consider below.

WHY DOES OFCOM ARGUE FOR THE INTRODUCTION OF PERIODIC REVIEWS?

151. In response to the Secretary of State's question noted above, Ofcom analysed four options for triggering a review:

· a metric-based trigger, which would require a plurality review to be carried out if organic growth resulted in a specific metric being breached;

· a time-based trigger, which would require a plurality review to be carried out automatically on a periodic basis;

· an event-based trigger, which would require a plurality review to be carried out at the time of a specific event; the current arrangements for the Public Interest Test fit into this latter category; and

· discretion, which would require a plurality review to be carried out at discretion of an appropriate authority.

152. They provide a thorough analysis of the pros and cons of these options in their advice to the Secretary of State[150] and ultimately argue that the most suitable of these is a time-based review. Their reasoning is two-fold. First, this avoids many pitfalls of the alternatives which we do not rehearse here; they are articulated clearly and in some depth in Ofcom's report. Second, a time-based review also provides a positive mechanism by which the impact of organic change can be captured while still ensuring that a measure of certainty, simplicity and transparency can be provided to all stakeholders. We heard no evidence to dispute these specific points other than the general countervailing views we address below.

HOW OFTEN WOULD A PERIODIC REVIEW NEED TO BE UNDERTAKEN?

153. There is at least one risk associated with a time-based trigger for a plurality review identified by Ofcom in their advice to the Secretary of State: the capacity of a periodic review to deal with the impact on plurality of rapid organic change.

151

154. In light of the potential for rapid organic change, Ofcom suggests that the key question which follows is the length of time between periodic reviews.

152

155. We did not receive any evidence, suggesting an alternative time interval.

WHO WOULD BE INCLUDED IN A PERIODIC PLURALITY REVIEW?

156. Ofcom is in agreement with some of the substantial conclusions we reached in the previous chapter on Scope: that plurality policy should focus on news and current affairs and be open to assessing the impact of online media:

153

154

HOW WOULD PERIODIC REVIEWS MEASURE PLURALITY?

157. Before an answer to this can be given, a preliminary question has to be addressed: to what extent should the measurement framework including the metrics to be used in a plurality review be prescribed to the body conducting that review? There are two broad approaches:

· either, to set down in statute the designated metrics to be used as part of any plurality review assessment;

· or alternatively, to set down guidance in statute for which principles and considerations should be taken into account in determining the metrics to use for a plurality review, and to instruct the reviewing body, as part of its reviews, to take this guidance into account alongside the market context in determining which metrics are most relevant and useful for the purposes of any individual assessment at the time.

Box 1

What is a metric?

In the context of this Report, metrics refer to measures relevant to quantifying a news media market's plurality. In summary, the range of metrics generally considered fall into three categories: availability; consumption; and impact.

Availability metrics capture the number of providers available at the point of Consumption. Consumption metrics capture the number of people using news media, and the frequency or the time they spend consuming it. Impact metrics need to capture the influence of news content consumption on how people's opinions are formed.

As Dr Craufurd Smith told us, "Ofcom identified … a number of different [metrics]. One is availability—the number of individual sources—which is relatively easy to count, but in itself will not tell you what the share or the potential power and influence is of each of those particular sources. They also talked about consumption, which in my view is probably a rather more helpful metric if you are talking about influence. That focuses on a number of potential features of a particular market … and impact is the third one that they mention,"[155] which, could provide very useful insight but, as Ofcom notes, is challenging: "Our attempts to measure impact through quantitative research have revealed complexity in how people's opinions are formed."[156] Accordingly, when it comes to impact, Ofcom concludes that "one needs to assess a range of sources in the round and apply a degree of judgement."[157]

158. In their advice to the Secretary of State, Ofcom makes the case for the latter approach: that there are good reasons for the precise set of metrics to be used in a plurality review to be open to re-evaluation as part of each review itself, taking into account their usefulness and relevance at the time.

158

159. As a result, Ofcom does not specify the precise nature of the measurement framework for their periodic review proposal. They suggest that determining this framework would be an important task at the time of each review and that this task would be likely to be most onerous at the time of the first review. We note that in their recent consultation on Media Ownership and Plurality, the Government mention their intention to "commission the development of a clear measurement framework, to be worked up in partnership with industry."[159]

160. Ofcom does, however, identify some characteristics of the nature and number of metrics to be used. On the number, Ofcom identifies a clear tension between economy and capturing complexity. In other words, the choice of the number of metrics is about finding the right balance between ensuring that they are manageable and that they sufficiently reflect the complexity of the state of media plurality. Across the evidence we received, there appears to be a consensus that the appropriate number falls somewhere between 5 and 15. Steve Unger, Director of Strategy, International, Technologists and Economists, Ofcom told us that "when you get to 100 you are doomed because you can no longer explain what you have done. I think one or two is too few to capture the complexity."[160] Professor Picard gave a similar warning based on his experience:

161

161. Similarly, Mr Foster told us that:

162

162. On the nature of the metrics to be used, it is broadly accepted that there are three families of metric available for the purposes of conducting a plurality review each suited to measuring separately consumption, availability impact metrics. For the meaning of metrics, see Box 1 above.

163. In their advice to the Secretary of State, Ofcom argues that a plurality review will need to draw on a basket of measures, including some from each of these families. In addition, Ofcom suggests that limiting a plurality assessment to quantitative measures would underplay the importance of contextual factors, and for that reason the measurement framework of a periodic plurality reviews would, they suggest, include a qualitative assessment of factors such as "regulation and oversight, the potential power or editorial control exercised by owners/proprietors within commercial organisations, governance models, and internal plurality."[163]

HOW WOULD THE PERIODIC REVIEW DETERMINE WHETHER THERE IS A PLURALITY CONCERN?

164. Ofcom's answer to this is clear: in order to undertake a periodic review, it would require guidance from Parliament on the definition of sufficient plurality. There are two options: first, Parliament can lay down a tight definition of sufficiency in legislation; or second, Parliament can lay down general guidance and a narrative description of sufficiency, which Ofcom can interpret and use as a qualitative benchmark against which to assess the state of plurality at the time of each review.

165. We have not received a great deal of evidence arguing strongly either case. However, some witnesses did underline the basic point that it would be critical to provide some guidance on the definition of media plurality for Ofcom to use in reaching its conclusions.

164

166. Were a narrative description considered most appropriate, Ofcom's own view is that any such description would need to include a number of different features, including: "a diverse range of independent news voices; high overall reach and consumption with consumers actively multi-sourcing; sufficiently low barriers to entry and competition to spur innovation; economic sustainability and no single organisation accounting for too large a share of the market."[165]

WHAT WOULD HAPPEN IF A REVIEW DISCOVERED INSUFFICIENT PLURALITY?

167. Ofcom suggests that a range of remedies might be relevant to address plurality concerns identified as part of a review process.

166

168. However, they are clear that "It is firstly for Parliament to consider the set of remedies which should be available in principle within a new framework, and it is then for the decision-maker tasked with selecting and implementing remedies to determine which of these is best suited to a specific set of circumstances" on a case-by-case basis.[167] An important aspect of these considerations is whether there any circumstances outside a transaction which could justify intervention. Further, as noted above, it would remain to be determined how interventions imposed through the mechanism of a periodic review would stand in relation to any future transactional review. We consider both of these points point in chapter 5, Our proposal for a media plurality policy.

WHO SHOULD CONDUCT A PERIODIC PLURALITY REVIEW?

169. Two options have been suggested to us; plurality reviews could be conducted either by the competition authorities or by Ofcom. The Competition Commission itself suggested that:

168

170. By contrast, others have argued that, institutionally, the competition authorities are not the appropriate bodies to carry out the thinking required by a media plurality policy. Professor Picard told us that:

169

171. The argument has also been made that: "regulators … while they do have independence, are very often very tightly focused in their competencies to deal with things, or in the methods that they can use to analyse things, or in the remedies they have. If it gets thrown to a competition authority, they are going to deal with it as a competition issue."[170]

172. On the other hand, others made the argument that media plurality is a specific concern of media policy and requires expertise in the communications sector.

171

WHICH ARGUMENTS ARE USED BY OPPONENTS OF OFCOM'S PROPOSAL?

173. The opponents of this overall approach tend to argue that (what they see as) important principles of their own approach are ignored by it. Ofcom's proposal, for example, gives a degree of responsibility to the regulator to devise at each periodic review the details of the process to take. This would appear to be unappealing to proponents of the Enders approach; Chris Goodall, for example told us: "Whatever you decide to propose, I hope you leave no discretion to anybody."[172]

174. Others have suggested that there is a risk of periodic review being toothless; without clearly specified thresholds at which intervention is automatic, a regulator may be unlikely to act; as some have put it: "measuring media plurality isn't enough."[173]

THE COMMITTEE'S VIEW

175. Our view is that Ofcom's proposal for the introduction of periodic plurality reviews raises a number of important questions about how such a system of reviews would interact and avoid overlap with a system of transactional reviews. As such, it also prompts the question: what would be the relationship between periodic plurality reviews and competition processes which are engaged in the current arrangements for a transactional review, the Public Interest Test. However, the idea of the periodic review itself has a number of features in its favour which make it preferable to the alternatives which have been put to us. One feature in particular stands out.

176. By placing at its core an assessment of plurality, able to draw on a measurement framework incorporating a limited number of different metrics as well as a qualitative dimension, Ofcom's proposal is unique among the approaches put to us in this inquiry. It is the only one able to live up to the principle we set out at the start of this chapter: that the assessment of plurality should drive the decision about which remedy or intervention is appropriate, not the other way around. It provides a mechanism whereby plurality can be assessed unencumbered by an arbitrary commitment to a specific metric or intervention.

177. As noted above, some argue that this discretion is its demerit. Our view, however, is that the flexibility required for an assessment to do justice to the concept of plurality is a more legitimate concern than a fear of regulatory discretion. Of course, there may be merit in developing Ofcom's proposal further to ensure that its discretion is exercised with good judgement and under appropriate oversight.

178. Indeed, Ofcom's proposal is by no means a complete one, as noted above. There remain a number of open-ended questions to be thought through, some of which Ofcom has identified itself:

· What should be the relationship between periodic reviews and transactional reviews?

· What remedies should be available at the conclusion of a periodic plurality review?

· What circumstances outwith the context of a transaction could justify intervention?

· In all of this, how should the relationship between competition and plurality policy be clarified?

We will set out the way we believe these questions can be answered in chapter 5, Our proposal on media plurality policy. In addition, we leave to that chapter our assessment of other aspects of Ofcom's proposal, including the role for statutory guidance on the meaning of sufficiency of plurality and on the design of the measurement framework.

73 A useful summary of the "20/20 rule" is provided in the DCMS submission to the Leveson inquiry: Narrative on media ownership. Available online:

http://www.levesoninquiry.org.uk/wp-content/uploads/2012/07/DCMS-submission_Narrative-on-media-ownership.pdf Back

74 There are 15 regional Channel 3 licensees and one licensee providing the national breakfast-time service. Back

75 David Elstein. Back

76 Q 94. Back

77 Q 14. Back

78 Ofcom, 5 October 2012, Op. Cit.

Back

79 Q 29. Back

80 Q 33. Back

81 Q 15 (Robin Foster). Back

82 Professor Richard Collins and Professor Martin Cave. Back