Hewitt Outlines Aims For The Communications Bill

Speaking at the recent Royal Television Society conference in London, Secretary of State for Trade and Industry, Patricia Hewitt, responds to Lord Puttnam’s Joint Scrutiny Committee by outlining the Government’s aims for the pending Communications Bill.

The aim of the [Communications] Bill is to make Britain the most dynamic and competitive, innovative and exciting broadcasting market in the world. And at the heart of it lie our measures to promote competition.

Because we’re clear, right across the economy, that competition drives the qualities you have – enterprise, innovation, investment and skills – but need more than ever in the modern global economy.

We’ve seen in industry after industry the benefits competition can bring. Better value, wider choice and better quality for the consumer. Higher productivity and growth for the industry. The more competition there is, the easier it is for new entrants, the more entrepreneurs there are – introducing new methods, new products, new ideas, new programme formats to the market. Bringing downward pressure on prices – upward pressure on quality and variety.

Creating industries which, disciplined by the challenge of a lively domestic market, are better equipped to win in the global marketplace. In TV we’ve already seen the power of competition. How it’s improved diversity, choice and standards. Take the introduction of Channel 4, Channel 5, the independent production quota, or the way Sky shook up sports broadcasting.

So we know competition is good. But dynamic competitive markets don’t just spring up from nowhere. They have to be shaped and created. They are products, to some respects of national histories, but also they are products of Government decisions – and regulatory frameworks set by Governments.

Competition is essential. But on it’s own its not enough. Our aim is to create a framework of law and regulation that promotes competition – but guarantees diversity and plurality.

And there’s been a lot of agreement behind that goal, and the principles underpinning it. As there has been behind the creation of “shadow” Ofcom – bringing together all the existing sector regulators in one new body. We’ve appointed David Currie – a leading economist – not just in the theory of economics, but in the practice of regulation as well. An appointment I know has been widely supported throughout the industry. We will appoint the non-executive members of the Board shortly. We want the Board to remain tightly focussed on providing strategic direction across the industry as a whole.

The pre-legislative scrutiny (PLS) committee’s report showed us in agreement on a vast number of other areas. They welcomed our proposals on newspaper mergers. And the fact that Ofcom would have an advisory role in respect of plurality considerations. They agreed that regulatory barriers to the consolidation of ITV should be removed, but safeguards should be retained in the form of cross-media ownership rules. They welcomed our proposal to retain the nominated news provider system, and to improve it by loosening ownership rules, which I hope will open the door to more investment and backing.

And where our views didn’t co-incide, we have listened – and taken a long, hard look at our position.

On Ofcom’s duties, the Committee made some sensible comments. And, personally, I agree we need a more elegant form of wording, picking up on the Committee’s recommendations. Although we do have to bear in mind that the duties are not just for the industry. They’re for the judges and courts as well. And will draft with that in mind.

As well as the PLS, we are also listening to the people we consulted. Take “3+1”, which people in the radio industry expressed concern about – we are looking carefully at what options there might be to preserve plurality and diversity of listener choice – without stifling the commercial development of the sector.

We also listened on how broadcasters work with independent producers. Our broadcasters are in a powerful position. Their relationship with the independents is really crucial. It has the potential to nurture creativity and strengthen the whole supply chain. It provides training grounds that sustain the whole sector.

We need to make sure that partnership fulfils that role responsibly. Which is why we have asked the ITC to carry out a review of the television programme supply market and to report back with its findings in late autumn 2002. This will be a critical report. It aims to establish the overall economic health of the programme supply market, its likely future growth, and make an initial assessment of any structural or competition issues that might adversely affect the sector’s long-term development.

So, in most areas, we agreed. And were clearly in agreement on the general approach. But one place where we didn’t agree was on our proposals on ownership.A lot has been written about this. As ever, some of the commentators have got it wrong. Let me put the record straight.

There is little or no difference between what the Committee wants and what Government wants. We both want a competitive, investment friendly environment. We both want to secure diversity and plurality – including safeguarding original British television production.

I’ll start with foreign ownership. Enabling foreign ownership means a wider investment pool and more competition. The existing distinction between European and non-European investment in UK television inhibits competition. No such distinction is made in other parts of the economy. Or even in other parts of the media.

There is no reason to make one in television. Not when we have strong protections in place to uphold quality, diversity and impartiality in programming. And we will have protection in place to prevent any US companies simply dumping low quality programmes on our screens.

I remember growing up in Australia to endless repeats so, believe me, there is personal interest here. We have seen the enormous value – in terms of talent and investment – that both European and non-European companies can bring to our television.

Take RTL and Bertelsmann’s commitment to Channel 5. Or the American, investment that helped to build our satellite and cable networks. Or the American investment that played a vital part in getting Classic FM off the ground – when UK investment wouldn’t touch it. Had it been left to UK investors, we wouldn’t have had any Classic FM, and 6.7 million listeners a week (of which I’m one) would have been worse off.

AOL Time Warner, as US company, are excluded. Even though they’ve got 6,000 employees in London. And London’s their non-US international HQ. Yet European multinationals who actually have operations in the US – like Bertelsmann, or Vivendi – are not covered.

Lord Puttnam’s Committee did not argue with any of this. They didn’t object to the principle of foreign ownership. Nor did they say that we should only open our market on a reciprocal basis. Rather, they argued we should leave the decision for Ofcom to take at a later date.

So the distance between the Committee and the Government is not great. And our concerns are similar. That’s why we are considering whether Ofocm’s powers are precise enough to meet our objectives. We’re going to retain strict controls. But the point of pre-legislative scrutiny is not to reconsider your core principles.

And the proposal to remove foreign ownership rules is a key component of our strategy for promoting competition and investment. US companies make some of the best programmes in the world, and there’s no reason why they can’t bring the benefits of their expertise to British broadcasting. Forcing everyone to up their game.

The one major disagreement concerned Channel 5. The Committee suggested that major national newspaper groups should be prevented from owning Channel 5, in the same way that they are prevented from owning Channel 3 licences.

We consider that ITV and Channel 5 are very different services – and need to be approached differently. ITV is the nation’s only commercially owned mass-audience channel, with universal access. It has huge influence. Whereas Channel 5 covers only 80% of the UK and has a 6% audience share. So we disagree. And by removing all restrictions on Channel 5’s ownership, we are giving it the best possible opportunity to grow.

The legislation will be flexible enough to respond to the dynamics of the market. If Channel 5 emerges as a serious competitor to ITV, the Bill allows us to alter the scope of their public service obligations, as well as the shape of the ownership rules.

Some may think it a bit rich for me to talk about the value of competition and competitive marketplaces whilst there is a perception the BBC has an unfair advantage. Let me make clear – although many in the industry believe the BBC is a law unto itself and that there are no limits to the Governor’s levels of self-regulation, even in their commercial dealings – the BBC is subject to general competition law. And will be subject to its full force should it abuse its position.

To conclude, over the last few years, we have seen the development of an increasingly robust partnership. A partnership between Government and industry. We are all joined together in our aim to make sure Britain can benefit from the best in the world – in both programmes and management skill and innovation – and keep our place as producer of the best quality television in the world.

We don’t always agree. Genuine partnerships never do. But we are committed to an honest and open dialogue. And I’m here to listen to you and to take your questions.

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