Select Committee on Culture, Media and Sport Minutes of Evidence


Memorandum submitted by ntl

INTRODUCTION

  ntl is pleased to have the opportunity of commenting on the joint DCMS/DTI White Paper A New Future for Communications (Cm 5010) as part of the Culture, Media and Sport Select Committee's inquiry on the White Paper.

  ntl is a communications company providing affordable access to TV, radio, telephone, Internet and other services throughout the UK. We are the largest company in our market, with over three million customers. In addition, our broadcast transmission division (whose origins lie in the Independent Broadcasting Authority's engineering arm) is a major provider of transmission and other services to TV and radio broadcasters.

  These written observations set out ntl's overall reaction to the main issues raised in the White Paper. We recognise that the Committee has expressed a particular interest in four aspects of the White Paper, and would be pleased to expand on our views on these four aspects (and any other of interest to the Committee) when we give oral evidence.

THE WHITE PAPER

  ntl sees the White Paper as a sensible, competent and pragmatic document which identifies and addresses a wide range of significant issues in relation to broadcasting and telecommunications policy. We are strongly supportive of many of its individual conclusions including the creation of a single coherent system of regulation focused on consumers.

  However, the White Paper as it stands is an incomplete document. Before the new communications policy it sets out is enshrined in legislation, ntl believes there needs to be a further substantial input of radicalism. The essence of consumer benefit in this area is the willingness to take risks. Risk-taking underpins the huge investment in new networks and technologies which has characterised recent years, and which needs to continue. Risk-taking also underpins the creation of genuinely high quality TV and radio programming (whether public service broadcasting or commercial). Any retreat from the radical and brave tradition of British policymaking both in telecommunications (where we were the first country to liberalise most telecoms services) or broadcasting (such as the creation of Channel 4 and the licensing of digital terrestrial TV services) would be to the detriment of consumers. There are plenty of interests, commercial and otherwise, lined up on the side of caution and tradition. ntl would urge the Committee to put the case to the Government for a more radical policy, as ntl intends to do directly.

THE KEY POLICY AREAS

  The White Paper seeks a synthesis of policy in three areas: commercial; cultural and general public policy. ntl agrees that there is no simple one-to-one correlation between the commercial and cultural dimensions and telecommunications and broadcasting respectively. Telecommunications is vital to the healthy cultural life of the UK, just as broadcasting is an increasingly important commercial sector of the economy. Hence we support the creation of a single coherent policy to encompass these two areas. We also recognise and support the Government's commitment to ensuring that this new policy is not at the unreasonable expense of other public policy objectives, including public safety, the environment and the rights of the disabled. Interconnected as these policy areas are, it is nevertheless convenient to divide our remarks on the White Paper under those three headings. In each case, we believe there is scope for a more radical vision on the Government's part.

THE COMMERCIAL VISION

  The UK has long been seen as a leader internationally in terms of encouraging broad-based competition in telecommunications, broadcasting and the use of radio spectrum. Notable achievements included the early privatisation of BT and subsequent licensing of infrastructure-based competitors such as ntl itself; championing of the PCN (second-generation) mobile standard; and introducing the world's first digital TV and radio services. Each of these has brought great benefits to UK citizens as well as strengthening the UK's competitive advantage abroad.

  ntl believes there is a compelling argument for making the promotion of competition the foremost tool of the new regulatory system. The key argument for competition, of course, is consumer benefit (with consumer defined in the broad sense of all actual or potential customers) rather than competition for its own sake. But unless very carefully defined, putting consumer benefit as the primary objective of OFCOM risks undermining competition, because short-term policies which purport to deliver benefits to consumers may be placed above long-term solutions building on the strengths of open and competitive markets. Identifying long-term consumer benefit, with competition as the key component of delivering that, will, in ntl's view, guarantee both.

  This conclusion is strengthened by reading paragraph 8.5.1 of the White Paper, which reveals that the Government envisages that OFCOM should have three central regulatory objectives: protecting consumers; maintaining high quality of content, and protecting the interests of citizens. There is no indication of how OFCOM should attempt to balance these objectives, which risks lack of clarity, inconsistency of rules and compromising all three objectives. ntl believes that the promotion of open and competitive markets, which currently appears only as a subsidiary objective to protecting consumers, would be capable of delivering all the objectives, and allowing OFCOM to do so in a coherent and consistent way.

  Competition should be actively embraced, not merely endured. As it stands, the White Paper pays lip service to open and competitive markets, but relegates them in the overall scheme of regulation.

  ntl does not believe truly effective competition will happen in these markets without vigilance. The White Paper is right to propose underpinning the whole system of economic regulation with standard competition laws and giving OFCOM concurrent powers with the OFT. However, there is also a need to maintain certain well-established elements of sector-specific regulation—such as geographic averaging of BT's prices—where a dominant player already exists. In contrast, ntl believes there will be a premium on avoiding interference in emerging markets unless significant consumer detriment is apparent and no credible route for the market itself to deal with such problems is in sight. Much discussion of communications markets involves vague references to "gatekeepers" and "bottlenecks". In ntl's view, enduring as opposed to temporary concentrations of power are actually quite rare in emerging markets, and can be dealt with quite effectively using established competition law principles and tools.

  ntl's key focus is on providing affordable access to a wide range of communications services, from TV to telephone, the Internet, interactive services of all kinds and pure speed or "bandwidth". Building and operating the networks which can deliver these services is highly capital-intensive and therefore inherently risky. We have been fortunate to have had—so far—a consistent and supportive policy environment in the UK, and long-term dedicated investors. The success of the UK's policy approach so far should not be taken lightly. Confidence is more easily lost than won. The new policy environment needs to intensify support of the investment in access infrastructure which ntl embodies, and recognise that this is a vital economic activity in its own right. Broadband access is more than just a passive enabler of content services; it is a fundamental building block of the UK's national infrastructure and key contributor to our international competitiveness.

  This approach does, of course, rely on OFCOM being genuinely independent from Government, adequately staffed with top-quality people, and led with courage and clear-sightedness. OFCOM should be powerful enough both to act swiftly and effectively when action is needed, and to be able to refrain from interfering unless and until action is really necessary.

THE CULTURAL VISION

  The White Paper attempts to strike a balance between public service broadcasting and the commercial sector. ntl agrees with this objective. PSB will continue to have an important place at the heart of British broadcasting, and indeed our national cultural life. ntl's provision of affordable access will enable millions of citizens to have full access to new PSB services in the digital age.

  To be effective, however, public sector broadcasters need to be focused. In ntl's view, PSB is more about institutions (the BBC is more than just a collection of rights and duties) and about specific programmes (such as the broadcasting of Parliamentary debates) than it is about channels. It should not be a test of a public sector broadcaster's strength that it produces progressively more and more channels—particularly if the quality of individual programmes on them suffers as a result. Better than such broadcasters are judged on the quality of the programming they create or commission.

  The traditional scarcity of radio spectrum for broadcasting has been a central feature of the development of an admirable tradition of Public Service Broadcasting in the UK. If the BBC had had access to 20 channels of spectrum from the outset, it is highly unlikely that it would have developed into the institution we see today, with a worldwide reputation for quality and originality. BBC20 is never likely to match BBC1.

  In ntl's view, risk-taking is at the centre of such a search for quality. Not all PSB programmes will be successful (even in their own terms, let alone in viewer numbers). Nor should they be. But a measured programme of risk-taking will nevertheless deliver the goods over a reasonable spread of activity—and higher quality goods than a pursuit of ratings and safety. Hence the importance, in ntl's view, of nurturing our PSB institutions as institutions.

  One important implication of this approach for ntl is the handling of the must carry arrangements. ntl does not have any difficulty with these so long as they assume manageable proportions, though we believe they are not strictly necessary given our desire to provide a full range of services to our customers anyway. However, they should not be used to remove any risk from the public service broadcasters—this would simply lead to substandard channels, such as BBC20.

  There are three key components to a must carry regime. First, the must carry obligations should be restricted to a small number of genuinely public service channels. Second, the obligations should also be entirely platform neutral—applying equally to satellite, terrestrial and new technology platforms such as DSL as well as cable. Third, the costs associated with must carry obligations must be recognised. An access provider like ntl can either spread these over its other activities or find some way of recovering them more directly. The White Paper should not rule out any reasonable resolution of this dilemma.

  Risk-taking is also a key component of commercial broadcasting, but in this case a combination of cultural and commercial risk-taking. ntl finds it disappointing that the White Paper takes an overly-restrictive approach in this regard. On the one hand, it insists that no matter how great the proliferation of services, each should remain "impartial", politically and otherwise. On the other hand, it includes a statement to the effect that all TV broadcasters should behave in other media than traditional television as if the same regulatory framework applies. It does not and should not. The White Paper is pragmatic enough to recognise that the Internet, as an open and international system, is simply not amenable to the same regulatory and policy tools as traditional media. The only effect of a policy of differential regulatory expectations would be to marginalise some of the most capable and responsible companies in exploiting the new media to the full. Attempting to regulate only those you happen to be able to reach for other reasons is short-sighted and will ultimately prove counter productive.

THE WIDER PUBLIC POLICY VISION

  The White Paper touches on a range of other public policy issues. These are, in many cases, not easily reconcilable. As a major provider of transmission masts and services to broadcasters, mobile operators and others, ntl is acutely aware of the environment and public safety debates around these installations. We recognise that OFCOM will need powers to ensure that they are both environmentally justified and safe, although we ourselves are confident that they are. At the same time, it is vital that the benefits that these and other aspects of communications bring to the UK population as a whole are fully recognised. We believe a focus on competition will maximise these direct benefits and so make the overall judgements as comprehensive as possible.

  Not all additional public policy issues are potentially negative. We applaud the Government's ambition to ensure the entire country has access to the Internet by 2005. Its commitment to putting its own services online should both validate and bolster this ambition. The benefits of, first, access and, second, broadband access are multifarious and substantial, ranging from specifics like educational opportunities through to the most general, like addressing social exclusion. ntl's vision of providing affordable access means we should be able to provide substantial assistance with these ambitions.

  One specific public policy issue which receives surprisingly little attention in the White Paper is the question of when analogue TV services could reasonably be switched off. ntl is no more able than other commentators to offer precise assurances on this, but our belief is that pursuing a more ambitious vision both of commercial and cultural policy will help underpin an earlier switchover to digital than would otherwise be possible. The greatest threat to early switchover is that the digital environment looks essentially similar to the analogue environment. ntl believes this need not be the case. Both public sector and commercial broadcasters have a vital role to play in creating compelling digital services. And access providers like ntl can help ensure widespread availability of affordable digital services—not just TV, but also Internet and others—if we are allowed and encouraged to do so.

CONCLUSIONS

  Important questions remain to be answered, although the White Paper makes a good start. ntl is particularly concerned to ensure that the gains for consumers from past policies are continued in the future. For instance, a very major issue still to be resolved in the telecoms sector is the regulatory reaction to BT's decision to break itself into semi-autonomous parts. This is a brave decision by BT—which is to be applauded for taking such a risk—but needs a carefully-considered and comprehensive response from the regulator to ensure the result is better, not worse, for competition and consumers.

  ntl therefore urges the Committee to consider whether the White Paper, while pointing in generally the right direction, could and should be more radical, in particular by putting encouragement of reasonable risk and competitive markets at the heart of the new framework.

January 2001


 
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