(V) OWNERSHIP OF CHANNEL 3 LICENCES AND
250. At present, there are a number of restrictions
on ownership affecting holders and potential holders of Channel
3 licences and the Channel 5 licence. The main ones are as follows:
(i) no-one may hold both
a Channel 3 licence and the Channel 5 licence;
(ii) no-one may hold the two London ITV licences;
(iii) no-one may hold two or more television
licences where the licensee exceeds 15 per cent of total television
(iv) no-one may own more than 20 per cent of
the ITV nominated news provider;
(v) no-one may hold a licence to provide a national
Channel 3 service or Channel 5 and a licence to provide a national
(vi) no-one may hold a licence to provide a local
radio service or local digital sound programme service and a licence
to provide a regional Channel 3 service whose coverage area is
to a significant extent the same;
(vii) no person who runs one or more national
newspapers with combined market share of 20 per cent or more may
hold a licence to provide a regional or national Channel 3 service
or Channel 5;
(viii) no person who runs one or more local newspaper
with a combined local market share of 20 per cent or more in a
Channel 3 region may hold a licence to provide that regional Channel
3 service; and
(ix) no proprietor of national newspapers with
a national market share of 20 per cent or more may have more than
a 20 per cent share in a regional or national Channel 3 service
or Channel 5.
In addition, there is a public interest
test to which applications to hold Channel 3 licences or the Channel
5 licence by certain newspaper owners are subject.
251. The Government proposes quite radical changes
to this framework. Restrictions (ii) and (iii) are to be removed,
thus lifting all specific legislative barriers to the creation
of a single ITV.
This policy has been consistent since the Communications White
Paper. In that
document, the Government also envisaged maintaining restriction
(i), but it is now proposed that this be lifted, allowing potentially
for a single owner of ITV and Channel 5.
Restriction (iv) is to be amended to allow a single shareholder
to own 40 per cent of ITV's nominated news provider.
Restrictions (v) and (vi) are to be lifted in their current form.
Restrictions (vii) and (ix) are to be lifted with respect to Channel
5, but maintained for ITV companies. Restriction (viii) is to
be retained. The
public interest tests, which have been criticised for being "subjective
and opaque", are to be abolished.
252. The measures to lift specific legislative barriers
to single ownership of ITV were, unsurprisingly, welcomed by ITV
itself, which argued that further consolidation would "sustain
the channel's ability to compete and, therefore, deliver its significant
public service obligations".
There remains concern about ITV consolidation, which is focused
on, but not confined to, issues relating to advertising sales
and regional programming commitments.
The Government has already responded to some of these points as
"Some respondents to
the White Paper expressed concern that consolidation could lead
to a dominant market position for ITV and hence drive up the cost
of TV advertising. However, this is solely a market issue: the
competition authorities would have to consider such matters and
competition law should provide sufficient protection."
The Institute of Practitioners in Advertising
argued that advertisers would be constrained in making complaints
to competition authorities against their main media outlet, and
therefore proposed a range of restrictions on advertising sales
by a single ITV as a prerequisite for consolidation.
The sheer complexity of the controls proposed reinforces the value
of an examination of such matters, and the imposition of any appropriate
measures, by the competition authorities. We agree with the
Government that the economic considerations relating to single
ownership of ITV will be best determined by the operation of competition
law, which would be significantly strengthened by the plurality
test we have recommended. We also consider that matters relating
to the consolidation of ITV and Channel 5 could properly be decided
through competition law, strengthened by the plurality test.
253. It is not proposed by the Government that the
process of ITV consolidation can, in the near future, extend to
its own news provider. Although a single shareholder will in future
be able to own 40 per cent of the ITV nominated news provider,
that system itself is to be retained. The aim of this system is
to ensure that the licensees network their news service and appoint
as provider an organisation approved by OFCOM as able to provide
a high quality, competitive news service.
ITV, Teletext and BSkyB all criticised the retention of this system.
ITV argued that it undermined investment in Channel 3 news, both
because of the competitive tendering process and the general lack
of an overwhelming ITV interest in its own news provider.
Teletext took the same view, and thought that concerns about independence
could be dealt with through licensing conditions.
254. Mark Thompson of Channel 4 disagreed, seeing
the ownership separation as an important protection for plurality
in news provision.
ITN itself, having previously advocated abolition of the nominated
news provider system, acknowledged that proposals for liberalisation
of ITV ownership might help to explain the Government's decision
to retain the system.
The Government proposes to obtain a power to repeal the provisions
should it consider such a move appropriate.
The Government is also seeking to create a framework in primary
legislation to allow for the imposition in future of a nominated
news provider system for Channel 5 by means of secondary legislation.
It is intended that this power would be available if Channel 5
gained a significant share of the free-to-air television audience.
255. We are not convinced that the retention of the
nominated news provider provisions for Channel 3 provides a safeguard
for the quality and impartiality of news on ITV that could not
be provided by licensing and networking arrangements. However,
given the current uncertainty surrounding the ownership structure
of ITV and its commitment to investment in news, we have concluded
that the Government is right to include a nominated news provider
Clause in the Bill, with a power to repeal that requirement. We
recommend that OFCOM hold an early review of the restriction on
the proportion of the Channel 3 nominated news provider that may
be owned by any one organisation to determine whether it is the
best way of ensuring that there is a strong news provider to compete
with the BBC and BSkyB.
256. The most significant divergence in the treatment
of ITV and Channel 5 in the Government's proposals is that the
latter may be owned in future by a large newspaper group - and
thus potentially also by the dominant operator in the satellite
television market - while such an organisation would remain unable
to acquire a Channel 3 licence. This difference in treatment is
explained by the Government as follows:
"Joint ownership of
a substantial share of the national newspaper market and a substantial
part of Channel 3, the only commercial public service broadcaster
that currently has access to a mass audience, would represent
an unacceptable concentration of influence in the current circumstances."
News International argued that this distinction
in treatment was based on a "vague and subjective concept"
BSkyB also found the difference in approach "curious",
while admitting that it was unlikely that a major player in the
newspaper market and in satellite television would be permitted
to obtain a controlling influence in ITV under competition law.
257. Others argued for consistency in the other direction,
namely the retention of the prohibition on ownership of Channel
5 by a major newspaper group. Professors Steven Barnett and Jean
Seaton warned that joint ownership "offers significant opportunities
for cross-promotion of media products and exploitation of editorial
space to denigrate any regulatory attempts to impose fines or
onerous public service obligations".
Both ITV and Channel 4 were concerned at the potential for joint
ownership of Channel 5 and the major satellite provider, in terms
of the impact on acquisition of pay-to-view and free-to-air rights
John Clark of the Voice of the Listener and Viewer and Lara Celini
of the Edinburgh Media Policy Group expressed similar concerns
in our online forum.
258. Tessa Jowell maintained that different approaches
were justified for "a mature universal broadcaster"
and for "a much smaller enterprise". She claimed that
the proposals combined an important safeguard with respect to
ITV while that channel remained the dominant commercial player
with flexibility should the balance of power between ITV and Channel
5 change. We are
not convinced by this argument. The Government suggests that special
protection is justified for ITV because it is a major terrestrial
broadcaster, but not justified for Channel 5 because it only has
the potential to become a major terrestrial broadcaster. This
potential, indeed, is recognised by the Government in its provisions
potentially to include a growing Channel 5 in the nominated news
provider scheme. If the Government believes that it is unacceptable
for a major terrestrial channel, a major newspaper group and the
dominant satellite network to be open to shared ownership, then
the clearest and most straightforward way to achieve this is to
maintain the prohibition on ownership of Channel 5. Subsequent
enforcement of such a rule if Channel 5 grew in audience and market
share, with possible requirements for disinvestment, would be
much more problematic. In advance of the first review by OFCOM
of media ownership, in or around 2006, we consider that the case
for lifting the prohibition on joint ownership of Channel 5 and
a major national newspaper group has yet to be made. We recommend
accordingly that the prohibitions in Part 1 of Schedule 14 be
extended to Channel 5.
259. We have one further recommendation to make in
this context. Much of the persuasive evidence we heard in this
area concentrated on the potential detrimental effects of shared
ownership between a public service broadcaster and a major satellite
packager, in terms of shared rights acquisition and cross-promotion,
for example. Channel 4, for example, argued forcefully that regulators
should recognise "platform ownership" as a distinct
form of media ownership with respect to drawing up cross-media
ownership rules. As it happens, due to current ownership structures
and regulatory classification of forms of media ownership, the
rules regarding newspaper groups have the side effect of encompassing
the major satellite packager. Ownership structures can change.
Accordingly, we recommend that, as part of its first review
of media ownership rules, OFCOM consider the case for specific
controls relating to ownership of a major satellite packager and
of certain other broadcasting licences.
465 Cm 5010, pp 98-101. Back
Policy, para 9.5.1. Back
Cm 5010, para 4.6.1. Back
Cm 5010, para 4.6.2; Policy, para 9.5.2. Back
Policy, para 9.5.4. Back
Policy, para 9.4.5. Back
Policy, paras 9.4.2-9.4.5. Back
Ev 349, para 2.1.3; Policy, para 9.4.7. Back
Ev 194, para 50. Back
Ev 177, para 6.2; Ev 204, para 4.32. Back
Media Ownership Rules, para 6.2.4. Back
Ev 495, section 5. Back
Clause 261; Policy, para 220.127.116.11. Back
Ev 193, paras 44-46; Ev 351; QQ 660-663. Back
QQ 562-566. Back
Q 885. Back
Q 596. Back
Ev 599, para 2.10, 2.16. Back
Clause 262; Policy, para 9.5.6. Back
Clause 263. Back
Policy, para 18.104.22.168, 9.5.5. Back
Policy, para 9.4.3; Schedule 14, paras 1-6. Back
Ev 362, para 3.2. Back
QQ 657, 664-674. Back
Ev 439, para 2 iv. Back
Ev 194, para 51; QQ 567, 589. Back
Q 994. Back