Joint Committee on Draft Communications Bill Report


CHAPTER 7: SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS

—  Chapter 1: Introduction

1. We recommend that, in responding to our Report, the Government respond also to the points made by the Delegated Powers and Regulatory Reform Committee (paragraph 8).

2. We commend the way the Government consulted industry and consumers in the run up to publication of the draft Communications Bill and recommend that future Bills also follow this route (paragraph 11).

—  Chapter 2: The framework for the new regulator

(i) The general duties of OFCOM

3. We recommend that, in the general duties of OFCOM and elsewhere in the Bill where a specific commercial relationship between a customer and a service provider is not being referred to, the term "consumer" be used in preference to the term "customer" and that consumer be defined so as to encompass all those who benefit or might benefit from the provision of services and facilities in relation to which OFCOM has functions (paragraph 20).

4. We recommend that it be the principal duty of OFCOM, in carrying out its functions -

    (a)  to further the long-term interests of all citizens by -

      (i)  ensuring the availability of a diversity and plurality of high quality content in television and radio and

      (ii)  encouraging the optimal use for wireless telegraphy of the electro-magnetic spectrum; and

    (b)  to further the long-term interests of consumers by promoting the efficiency of electronic communications networks and services, and broadcasting

—  and to do so wherever possible by promoting effective competition in national, regional and local communications markets throughout the United Kingdom (paragraph 26).

5. We recommend that Clause 3(2) be amended to require OFCOM to have regard to the desirability of encouraging investment and innovation in communications markets (paragraph 27).

(ii) The structure and functions of OFCOM

(a) The main Board

6. We agree with the Government that it would be wrong to expand the main Board's membership for representative purposes that could well detract from its strategic role (paragraph 29).

7. We recommend that the Secretary of State make an order under section 1 of the Office of Communications Act 2002 to increase the maximum number of members of the Board to nine, and consult the incoming Chairman of OFCOM on the number of members of the Board to be appointed before OFCOM assumes its regulatory functions (paragraph 30).

(b) The Content Board and media literacy

8. We recommend that the final Bill endow the Content Board with executive and determinative responsibility for the functions of OFCOM relating to programme standards for television and radio services under Clauses 212 to 220, including all functions relating to individual complaints with respect to fairness and privacy under Clause 219. We further recommend that the Content Board be assigned the main day-to-day role in respect of the public service remit for television and OFCOM's specific functions in relation to licensed public service television broadcasters, but subject to the ultimate decision-making authority of the main Board (paragraph 34).

9. We recommend that Clause 17 be amended to require at least one non-executive member of the main Board in addition to the Chairman of the Content Board to be a member of the Content Board (paragraph 35).

10. Over and above its contribution to OFCOM's annual report, we recommend that the Content Board be given a right to publish its views when it considers it appropriate to do so (paragraph 36).

11. Provided that such a role remains distinct from the executive, regulatory functions of the Content Board in respect of standards on licensable content services, we support the proposed provisions for the Content Board to play a role in examining content transmitted by means of all electronic communications networks (paragraph 37).

12. We welcome and support the proposed function of OFCOM in relation to media literacy in Clause 10 of the draft Bill. We recommend that executive responsibility for this function be assigned to the Content Board (paragraph 38).

(c) The Consumer Panel

13. Our earlier recommendation about the merits of the term "consumer" rather than "customer" and the need for a broad understanding of the former term apply particularly in the context of the remit of the Consumer Panel. We recommend that Clause 96 be amended to enable the Consumer Panel to advise on matters relating to the interests of all consumers in the marketplace, rather than the customers of particular providers (paragraph 41).

14. We see no case for the creation of a separate small business panel. However, it is important that the interests of small businesses, as well as those of domestic customers, are reflected in the composition of the Consumer Panel (paragraph 42).

15. We welcome the Government's commitment to the role and independence of the Consumer Panel, but we do not consider that the current proposals provide sufficient safeguards for this independence. Although OFCOM itself must have consumer interests at the heart of its work, the Consumer Panel, within its defined remit, ought to be the conscience, not the creature of OFCOM. We recommend that Clause 97 be amended so that all appointments to the Panel and all removals from it are the responsibility of the Secretary of State, having regard to the advice of OFCOM. We further recommend that the Consumer Panel be able to elect its own Chairman and to determine any committees of the Panel (paragraph 47).

16. We support the current proposals in the draft Bill, whereby certain issues could be examined by the Consumer Panel at the instigation of OFCOM's main Board (paragraph 48).

(d) The economic dimension

17. We see no rationale for an economic or competition board with executive functions (paragraph 50).

18. Paragraph 14 of the Schedule to the Office of Communications Act 2002 gives OFCOM a general power to establish committees. It may wish to exercise this power to establish an industry or economic advisory panel, but we do not favour a further fettering of OFCOM's internal structures by placing such a requirement on the face of the Communications Bill (paragraph 51).

(e) Employment and training

19. We would prefer to see the powers granted under Clauses 11(6) and 224(8)(a) removed; if retained, we recommend that they be subject to affirmative resolution procedure (paragraph 54).

(f) Representation of nations and regions

20. We welcome the proposal for national and regional Councils reporting to the Content Board through the designated national members and we recommend that formal provision for their establishment be made on the face of the Bill. We further recommend that, in establishing such Councils, OFCOM be required to have regard to the views of relevant devolved institutions (paragraph 56).

21. We have already recommended that the Consumer Panel be granted a power to establish such committees as it considers appropriate. We expect that this power will be exercised to establish consumer committees for Scotland, Northern Ireland and Wales (paragraph 57).

22. We recommend that OFCOM be placed under a statutory duty to maintain offices in Scotland, Wales and Northern Ireland (paragraph 58).

23. We recommend that OFCOM be required to include in its annual report accounts of its activities in Scotland, in Wales and in Northern Ireland (paragraph 59).

(iii) Better Regulation?

(b) The level of regulation

24. We support the duty on OFCOM to have regard to the principles that regulatory activities should be "proportionate, consistent and targeted only at cases in which action is needed". We recommend that these principles, rather than an undefined commitment to "light touch" regulation, should govern the provisions of the final Bill regarding regulatory burdens (paragraph 67).

25. We recommend that Clause 5(1) be amended to require OFCOM to review its activities and functions to ensure that regulation is at the minimum level necessary to enable OFCOM to fulfil its general duties, and for the purpose of fulfilling Community obligations and its functions under competition law (paragraph 68).

(c) Self-regulation

26. We recommend that, in order to reinforce the duty to maintain the minimum regulation necessary under Clause 5, OFCOM be given a power to review and foster the development of effective and accredited self-regulatory bodies in the communications sector. Accreditation would depend upon those bodies meeting criteria relating, for example, to:

  • the policy objectives to be implemented;
  • the adequacy of funding available to the body;
  • the independence of the self-regulatory mechanism from the sector being regulated;
  • the transparency and accountability of the body, including a requirement to publish a full annual report on its activities, available to Parliament.

—  Accreditation would bring with it an expectation that the sector concerned would be subject to less statutory regulation. Withdrawal of accreditation similarly would imply the need for additional or re-imposed statutory regulation. Accreditation should also be able to extend to Codes of Practice as an alternative to statutory regulation, consistent with the general approach used in the Regulatory Reform Act 2001 (paragraph 71).

27. We consider that it should be an early priority for OFCOM to consult on the scope for creating a more coherent system of advertising regulation, with a greater element of self-regulation for broadcast media. We recommend that the Government seek to ensure that the final Bill does not erect unnecessary barriers to the evolution of accredited self-regulation in broadcast advertising (paragraph 73).

(d) Regulatory impact and charging

28. We recommend that OFCOM be required to conduct regulatory impact assessments, including competition assessments, for all of its regulatory activities that may have a significant effect not simply in terms of regulatory burdens but in terms of market behaviour and competition within markets (paragraph 74).

29. We agree that there should be some cost savings from combining five regulators as one, but we urge caution in seeking to apply too much pressure on OFCOM to secure cost reductions. This may lead to false economy and strike at the heart of the purposes of the Bill. Effective regulation does not come cheap, and the long-term costs to industry and to the public will be greater if OFCOM lacks the resources to undertake effective regulation (paragraph 77).

30. We recommend that the principles underpinning charges under Clause 29, namely that charges should be fixed in accordance with clear principles and related only to relevant functions, be extended to all administrative charges under the Communications Bill and the broadcasting legislation that it amends, except where incentive charging for wider purposes is intended (paragraph 79).

31. To ensure that OFCOM has adequate resources to undertake its competition law functions, we recommend that those functions be funded directly by the Exchequer. We would prefer to see OFCOM's central functions funded proportionately and transparently through a levy on all companies above a certain size in the regulated sectors. If this proves incompatible with the EC Directives, we recommend that such costs should also be met from the Exchequer (paragraph 80).

(e) Promptness standards

32. Clause 6 fails to impose necessary requirements on OFCOM to meet promptness standards. First, we recommend that time limits be specified on the face of the Bill, including a requirement for the completion of market analyses and market power determinations under Clause 64 within four months other than in exceptional circumstances of a kind to be specified in the Bill. Second, we recommend that promptness standards under Clause 6 be determined by the Secretary of State following consultation with OFCOM and other interested parties, rather than by OFCOM itself. Third, we recommend that OFCOM be placed under a statutory duty to account for all failures to meet time limits and promptness standards in its annual report. Fourth, we recommend that, by analogy with the relevant provisions of the Competition Act, a party aggrieved by a failure of OFCOM to determine a matter for decision in accordance with time limits or promptness standards be enabled to seek a direction by a court to OFCOM if the court is satisfied that there has been undue delay by OFCOM. Finally, we recommend that paragraph 7 of Schedule 5 and paragraph 7 of Schedule 6 to the Competition Act 1998 be brought into force at the earliest possible opportunity (paragraph 85).

(f) Transparency

33. We do not favour a formal statutory duty on OFCOM to meet in public. We nevertheless urge the main Board of OFCOM and its subsidiary bodies to give early and careful consideration to ways of ensuring wider public engagement with its work; this might include regular meetings at which Board members would listen to, and exchange views with, members of the public across the United Kingdom (paragraph 89).

34. We recommend that OFCOM be required to include in its annual report an interpretation of its principal duty and an account of the way in which that interpretation has informed its work during the period. We further recommend that OFCOM be required to make a statement on decisions that, in its opinion, give rise to significant issues relating to the interpretation of the principal duty and be encouraged to give reasons generally for its decisions wherever possible (paragraph 92).

(g) Accountability

35. In respect of the proposed use of order-making powers by OFCOM under Clause 82, we share the view of the House of Lords Select Committee on Delegated Powers and Regulatory Reform that the power in question (to vary the lower limit under the electronic communications code below which compensation is not payable) is more properly exercised by the Secretary of State than by OFCOM (paragraph 94).

36. We are in no doubt that the scope of OFCOM's regulatory activities is such that it will be incumbent on the two Houses to improve their effectiveness in holding regulators to account. The House of Lords Liaison Committee has already declared itself in favour in principle of the establishment of a House of Lords Communications Select Committee when the new legislation has come into force. This is a welcome development. As far as the House of Commons is concerned, Chris Smith has suggested that a special joint sub-committee of the Culture, Media and Sport and Trade and Industry Committees be established to monitor the work of OFCOM, receive reports from it on a regular basis and hold it to account. Although this is ultimately a matter for the House of Commons and its committees to determine, we consider that, given the breadth of OFCOM's remit, this proposal has very considerable merit (paragraph 95).

(iv) The transition to and culture of OFCOM

37. We recommend that OFCOM, under the general powers vested in it by section 2 of the Office of Communications Act 2002, publish for consultation initial statements of intention regarding the fulfilment of the regulatory functions it will assume under the Communications Bill. We further recommend that Clause 21 be amended to require the pre-commencement regulators to have regard to such statements in fulfilling their functions before they pass to OFCOM (paragraph 97).

38. If OFCOM becomes little more than an agglomeration of the existing regulators - badge engineering for five regulators under one roof - then the process of establishing OFCOM will have failed (paragraph 99).

39. We urge the Chairman of OFCOM, as an early priority upon appointment, to review the provisional arrangements put in place prior to that appointment, to ensure that his or her hands are not tied by assumptions made by existing regulators. The incoming Chairman needs a clean slate in order to create a new culture (paragraph 100).

(v) OFCOM and the Secretaries of State

40. The purposes prescribed under Clause 7(3) are wide indeed and we are unconvinced that the power in Clause 7(8) to add extra purposes is warranted. We recommend accordingly that Clause 7(8) and (9) be removed (paragraph 102).

41. We recommend that a requirement be placed on the Secretary of State to publish a direction under Clause 8 equivalent to the analogous obligation under Clause 7 (paragraph 103).

42. We recommend that the general duties in the final Bill be applied to the Secretaries of State in the exercise of their functions under that Bill as well as to OFCOM, except when the Secretaries of State are exercising powers for public interest purposes prescribed in relevant Clauses (paragraph 106).

43. We recommend that the Secretaries of State be required to lay before Parliament a joint annual report on the exercise of their functions under the Communications Bill, the Office of Communications Act 2002, the 1984, 1990 and 1996 Acts and the other enactments relating to the management of the radio spectrum (paragraph 107).

Chapter 3: Economic Regulation

(i) The importance of economic regulation

44. The success of OFCOM will not be assessed by its ability to re-fight past regulatory battles, but by its ability to deal with current and future concerns in a proportionate, targeted and prompt manner. To a considerable extent, this will depend on its capacity, armed with increased competition powers, to bring about a step change in the effectiveness of economic regulation in the communications sector as a whole, and the telecommunications sector in particular. It is with this objective in mind that we have framed many of the recommendations in this Chapter. Only if this objective is achieved will the new regulatory regime provide the contribution to the more dynamic and competitive communications and media markets that the Government is seeking (paragraph 113).

(ii) Regulation of networks and services

(a) Implementing the EC Directives

45. We recommend that an additional provision be inserted in Chapter 1 of Part 2 with the aim of ensuring that, so far as is possible (having regard to any relevant differences between the provisions concerned), relevant questions arising under that Chapter are dealt with in a manner which is consistent with the treatment of corresponding questions arising in community law, including in the relevant Directives (paragraph 117).

(b) The scope of networks, services and associated facilities

46. We recommend that, in its response to our Report, the Government reply to the concerns expressed and explain in more detail its reasoning for the way in which it has translated the provisions of Article 2 of the Framework Directive into domestic law in Clause 22 (paragraph 124).

(c) Designation, notification, condition-setting and enforcement

47. We recommend that the Government clarify whether its intention is that procedural safeguards for the enforcement of sector-specific powers under Chapter 1 of Part 2 should match those in the Competition Act and respond to the particular concerns in this regard raised in evidence (paragraph 131).

48. We share the view of the House of Lords Delegated Powers and Regulatory Reform Committee that the power to vary maximum penalties under Clauses 28 and 88 either ought to be explicitly confined to changes in the value of money or otherwise ought to be subject to affirmative resolution. We recommend accordingly. We further recommend that the power to vary the multiplier for the purpose of calculating the maximum penalty under Clause 32 be subject to affirmative resolution (paragraph 132).

49. We recommend that the order-making power in Clause 77(5) be removed; if it is retained despite our recommendation, it should most certainly be subject to affirmative resolution procedure (paragraph 134).

50. We recommend that OFCOM be placed under a statutory duty to prepare and publish guidance on the interpretation of appropriate and proportionate penalties in Part 2 of the Bill (paragraph 135).

51. We recommend that Clauses 98 and 99 be amended to provide protection against self-incrimination and for items subject to legal professional privilege (paragraph 137).

52. We find the absence of constraints on information-gathering under Clause 94 puzzling in view of the restrictions imposed by Clauses 99 and 104 on the other information-gathering powers under Clause 98. We recommend that information-gathering powers under Clause 94 be subject to restrictions analogous to those under Clauses 99 and 104 (paragraph 138).

53. We urge the Government to give the most careful consideration to the concerns of the Joint Committee on Human Rights about Clause 93 (paragraph 139).

54. We again urge the Government to give the most careful consideration to the concerns of the Joint Committee on Human Rights about Clause 106 (paragraph 140).

55. Before undertaking a technical revision of section 94 of the Telecommunications Act 1984, the Government should ask itself the prior question of whether such broad powers are either required or compatible with Convention rights. If the provision is retained in an amended form, we recommend that the Government, in its response to this Report, give an account of the use to which the provision has been put and an explanation of how it is envisaged it might be used in future (paragraph 141).


(d) "Must carry" / "must offer" / "must distribute"

56. We recommend that Clause 49(4) and (5) be amended to specify a requirement on the Secretary of State to consult OFCOM and affected parties in carrying out a review of the list of "must-carry" services and to have regard to the public service benefit of any service, to capacity constraints and to the principle of proportionality in coming to any decision leading to an order under subsection (5) (paragraph 145).

57. Tessa Jowell characterised the proposed provisions on "must carry"/ "must distribute"/ "must offer" as "a failsafe". We see no logic in the Government providing itself and OFCOM with a valuable failsafe and then circumscribing the time at which it can be used. We recommend that the final Bill seeks to give effect to the "must-carry"/ "must-offer"/ "must-distribute" arrangements on all platforms and the most effective solution to regional distribution, as determined by OFCOM, at the earliest possible opportunity (paragraph 152).

(e) Universal service conditions

58. We presume that the arrangements in Clause 50 are being made to enable the Secretary of State to give effect to any revision of universal service obligations arising from a review by the European Commission under Article 15 of the Universal Service Directive, although we consider both the Bill and the Explanatory Notes could be clearer on the linkage between the definition in that Directive and the Secretary of State's powers under Clause 50 (paragraph 154).

59. We consider that, given the wide political and social significance of pricing for universal services, the Secretary of State should play a more direct and politically accountable role in the matter. We recommend that this aim be secured by amendments along the following lines: the Secretary of State should be required under Clause 50(3) to give guidance about relative pricing for the same service among different customers; OFCOM should then be obliged to publish proposals relating to pricing in respect of universal service conditions, including the anticipated effects on the market of the universal service in question and the arrangements (if any) proposed for recovering the relevant costs; the Secretary of State should then make a final determination (paragraph 156).

60. We recommend that, in its response to this Report, the Government clarify whether it considers that public funding of the kind permitted under Article 13(1)(a) of the Universal Service Directive could be made available without explicit legislative provision. We also note that the Government has not made direct provision for the exemption of undertakings with limited turnover, as permitted by Article 13(3). We recommend that the Government should either confirm that such exemption would be possible under Clause 56 as drafted or, if not, make such provision in the final Bill (paragraph 157).

(f) Access-related conditions

61. The provisions of Clauses 59, 209 and 210, taken together, appear to us to provide ample provision to enable OFCOM to secure appropriate prominence for public service radio channels if it is satisfied that there is evidence that such regulatory action is proportionate and necessary. It is important that OFCOM, in preparing the Code, should have regard not only to the interests of public service broadcasters, but also to the interests of commercial broadcasters, whose classification by genre, listing and degree of prominence in programme guides may be instrumental to their business and who will need transparency in determining these matters; and, if they are dealt with unfairly, a right to appeal for independent determination by OFCOM (paragraph 163).

(g) Significant market power conditions

62. We recommend that the Government consider whether it is satisfied that the current drafting of Clause 64 fully reflects the spirit of OFCOM's obligations in respect of European Commission recommendations and guidelines (paragraph 168).

63. We recommend that Clause 67 be amended to place it beyond doubt that the aim of market analyses is to determine whether a specific market is "effectively competitive" and to ensure that SMP conditions are only imposed where there is not effective competition. We further recommend that other provisions on SMP and sector-specific regulation more generally be reviewed to ensure that they reflect the same principle (paragraph 170).

64. We recommend that Clause 67 be amended to make clear the mandatory character of periodic market analyses (paragraph 171).

65. We recommend that the Government clarify the proposed role of competition authorities in market analysis in its response to our Report and ensure that the main terms of any secondary legislation giving effect to the relevant provision are made known to Parliament at an early stage of the Bill's passage (paragraph 172).

66. We recommend that the Government (a) consider whether it would be compatible with the terms of the Access Directive to enable OFCOM to have regard to the costs of provision of the proposed network access, as an explicit aspect of feasibility under the terms of Clause 68(4), (b) report on the outcome of that consideration in its response to this Report, and (c) reflect that factor in the final Bill if it considers it possible and appropriate to do so (paragraph 173).

(iii) Spectrum use and management

67. We recommend that the Government ensure that the final Bill, including amendments to the Wireless Telegraphy Acts, provides OFCOM with a set of harmonised objectives, consistent with the general duty and incorporating the factors under section 2 of the 1998 Act, in undertaking its functions relating to spectrum management and use (paragraph 176).

68. There is a wider public interest in the allocation, assignment and management of spectrum that OFCOM, even with its duty to further the interests of all citizens in its optimal use, may not be best placed to judge. It is important, however, that directions under Clause 112 concentrate on the purposes to be achieved, rather than the details of the means of achieving those purposes, and we recommend that the Government consider carefully whether Clause 112 could be amended to reflect this. We further recommend that any order containing a direction under Clause 112 be laid before Parliament in draft for approval by both Houses before coming into force unless the Secretary of State is satisfied, on grounds such as commercial confidentiality, that the procedure set out in subsection (6) for retrospective approval of such orders needs to be followed (paragraph 179).

69. We recommend that the Government ensure, by means of amendment to Clause 119 if necessary, that there is transparency about the means by which spectrum payments by Government departments are calculated (paragraph 184).

70. We recommend that no incentive-based spectrum charges be imposed on the BBC, Channel 4 and S4C in respect of spectrum use for analogue transmissions, until at least shortly before digital switchover (paragraph 188).

71. We believe that the Government's developing plans for spectrum trading and spectrum management more generally would repay closer parliamentary scrutiny than it has been possible for us to undertake given the limited time available to us and the uncertainty surrounding the Government's policy prior to publication of its response to the Cave review. We envisage that this scrutiny might be undertaken by the Trade and Industry Committee of the House of Commons (paragraph 192).

(iv) Appeals

72. The new framework of sector specific powers established in Part 2 of the draft Bill will require the body or bodies hearing appeals to secure appropriate expertise and bear in mind the specific characteristics of the powers being exercised. Provided that it would not entail a further appeal on merits, we see a case for price control appeals to be heard by the Competition Commission (paragraph 196).

73. We recommend that the final Bill establish a general time limit of four months for appeals under Part 2, subject to extension only in specified and exceptional circumstances. We further recommend that, in its response to this Report, the Government sets out its opinion on whether it would be compatible with the EC Directives and Convention rights either to introduce a "leave to appeal" mechanism or to give the appeal body powers to increase penalties in cases relating to enforcement where that body considers the appeal to have been an abuse of process (paragraph 198).

(v) Competition law

(b) The balance of sector-specific and competition law powers

74. We recommend that, before setting conditions of a discretionary character under Clause 35, OFCOM be required to decide whether the more appropriate way of proceeding would be under the Competition Act or Enterprise Act and to give reasons for their decision (paragraph 207).

75. We have seen no convincing evidence to indicate that there will be a problem for the regulators or those in the market with regard to the division of labour between OFCOM and the OFT and we see no need for further provision in the Bill on this matter (paragraph 208).

76. The establishment at the very heart of OFCOM's structure of a properly resourced competition unit, with the full complement of skills and the will to use competition law functions effectively, will be crucial to the new regulator's success. If the Government's aim for less regulation is to be achieved, there must be swifter and better regulation under competition law. If OFCOM lacks the expertise to use competition law optimally, it will fall back on the devil it knows in the form of sector-specific powers, whether or not it is appropriate to do so (paragraph 209).

(c) Competition law and broadcasting

77. Insofar as the purpose of the BBC Fair Trading Commitment is to reflect how the BBC complies with Competition and State Aid requirements, we believe that, in future, it will be directly relevant to consideration by OFCOM of complaints of anti-competitive effects resulting from BBC activities and will therefore, to that extent, be enforced by OFCOM in applying its concurrent powers (paragraph 215).

78. We recommend that Clause 246 be amended to provide OFCOM with appropriate discretion in interpreting the scope of its competition law functions in broadcasting and related matters, including the creation and distribution of broadcast content (paragraph 216).

Chapter 4: Media Ownership

(i) Media ownership controls and competition law

79. We recommend that the general merger regime, as introduced by the Enterprise Bill, be amended by the Communications Bill to permit the OFT and the Competition Commission to have regard to plurality, as well as the issue of substantial lessening of competition, in reaching decisions on media mergers. For these purposes, we recommend that plurality be specified as a consideration in respect of which the Secretary of State may serve a public interest intervention notice and that plurality be defined as:

"The public interest in - (i) the maintenance of a range of broadcast media owners and voices sufficient to satisfy a variety of tastes and interests; (ii) the promotion and maintenance of a plurality of TV, radio and other broadcast media owners, each of whom demonstrates a commitment to the impartial presentation of news and factual broadcast programming; and (iii) the promotion and maintenance, in all media including newspapers, of a balanced and accurate presentation of news, the free expression of opinion and a clear differentiation between the two" (paragraph 224).

80. We welcome the proposal to give OFCOM a duty to review media ownership laws including those relating to newspaper ownership on a periodic basis. We consider that the first such review, three years after the coming into force of the Act, could be of crucial importance, given the knowledge of media markets and their regulation that OFCOM will by then have acquired (paragraph 225).

81. In giving effect to OFCOM's reviews, we recommend that the plurality test, as specified above, should be a specified public interest consideration in relation to the powers to refer for a market investigation under Part 4 of the Enterprise Bill (paragraph 226).

(ii) Specific restrictions on ownership

82. It is important that the Government clarify, before detailed consideration of the final Bill, how it envisages the broadcasting licensing enforcement regime and the governance systems relating to local government working together in order to ensure proper oversight of broadcasting services provided by local authorities (paragraph 228).

83. We recommend that the prohibition on the holding of broadcast licences by advertising agencies or groups which own advertising agencies be retained (paragraph 229).

(iii) Restrictions on religious ownership

84. The case for retention of the general prohibition on religious ownership of national digital radio licences, and for the compatibility of that prohibition with Convention rights, has not been established by the Government to our satisfaction. We recommend that the Government give these matters further consideration before presentation of the final Bill (paragraph 237).

85. We recommend that the Government consider the case for permitting OFCOM, in consultation with religious organisations, to impose licence conditions on religious owners of a kind not applying to other licences, as an additional assurance against breach of licence conditions. We further recommend that the Government include on the face of the Bill criteria against which decisions by OFCOM about the appropriateness of religious ownership would be judged. One advantage of this proposal is that it would allow Parliament an opportunity to debate more fully the circumstances in which religious ownership of certain television and radio licences is appropriate (paragraph 238).

(iv) Restrictions on nationality of ownership

86. The lifting of existing restrictions on non-EEA ownership of broadcasting licences should not take place until after a review by OFCOM, and the competition authorities if appropriate, of the programme supply market in British broadcasting (a matter to which we return) and until OFCOM has established itself as an authoritative regulator of, and commentator on, commercial public service broadcasting in the United Kingdom. In the light of its experience, OFCOM would be able to facilitate a decision by Parliament based on evidence, rather than a decision based on largely unproven expectations as would be the case at present. Accordingly, we recommend that primary legislation to lift existing restrictions on non-EEA ownership of certain broadcasting licences should not be brought forward until OFCOM recommends such a change, should it do so following any of its formal, periodic reviews of media ownership (paragraph 249).

(v) Ownership of Channel 3 licences and Channel 5

87. 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 (paragraph 252).

88. 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 (paragraph 255).

89. 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 (paragraph 258).

90. 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 (paragraph 259).

(vi) Radio ownership and regional cross-media ownership

91. We recommend that, if the "three plus one" scheme for radio ownership is adopted, the Government amend Part 3 of Schedule 14 to place both an objective and measurable definition of a "mature" or "well-developed" local commercial radio market to which the "three plus one" scheme applies and the broad parameters of the proposed scheme on the face of the Bill (paragraph 262).

92. We recommend that the "three plus one" rule applying to local radio ownership in well-developed local commercial radio markets be incorporated in legislation, but be subject to a "sunset" provision enabling the rule to be disapplied if OFCOM identifies that there is no further need for the rule in the light of a review of media ownership conducted under Clause 268 (paragraph 266).

93. We welcome and support the concept of three distinct media voices in the commercial sector as a benchmark for cross-media plurality at a sub-United Kingdom level, but we consider it essential, as parliamentary scrutiny progresses, for the Government to clarify how this system will operate in Scotland, Wales and Northern Ireland and in the regions and localities of the United Kingdom (paragraph 267).

(vii) Newspaper mergers

94. While we have not been presented with the specific draft Clauses for the newspaper merger regime, we agree that the issue of newspaper ownership is sufficiently important to warrant extended jurisdiction beyond the de minimis limits contained under competition law. However, in doing so, we would wish the Government to have full regard to the need for a substantial deregulatory outcome for the newspaper industry, especially as regards local newspapers (paragraph 279).

95. We support the Government's proposal to give OFCOM a defined advisory role in respect of plurality considerations in the newspaper merger regime (paragraph 280).

(viii) Parliamentary control over legislative change

96. We recommend that the provisions of the final Bill on media ownership should not include any powers for the Secretary of State to revise primary legislation by means of secondary legislation other than in the limited case of the nominated news provider for Channel 3 (paragraph 283).

Chapter 5: Content regulation

(i) The scope of the licensed sector

97. If the Government does decide that it is appropriate to include video-on-demand services within the scope of the licensed sector, we recommend that it propose to do so by means of provision in the final Bill subject to full parliamentary scrutiny, rather than by means of subsequent secondary legislation (paragraph 298).

98. More generally, we support the powers for the Secretary of State to amend the definitions of licensable content services by means of secondary legislation subject to affirmative resolution procedure as an important means of "future-proofing", but remain to be convinced the Government should not go further at this stage. In particular, we recommend that the Government consider, and in its reply to this Report respond to, the cases for removing the condition in Clause 238(5) and for granting OFCOM discretion in choosing whether to license all services falling within the definition of licensable content services (paragraph 299).

(ii) Standards codes and complaints procedures

99. In the expectation that, in carrying out its tasks under Clause 212, OFCOM would be required to have the most careful regard to its duties under Clause 3(1)(f) and (g), we have concluded that Clause 212 as drafted provides an appropriate framework for the preparation of standards codes by OFCOM (paragraph 300).

100. We support the principles underlying the proposed ban on political advertising contained in Clause 214(2) and urge the Government to give careful consideration to methods of carrying forward that ban in ways which are not susceptible to challenge as being incompatible with Convention rights (paragraph 301).

101. We agree that it will usually be in the best interests of broadcasters and viewers and listeners for complaints about standards to be directed in the first instance to the broadcaster concerned, but we view it as an unnecessary restriction upon the viewer or listener to make such a route mandatory, and we support the Government's proposals accordingly (paragraph 303).

102. While we accept that it may be inappropriate to be too prescriptive on the face of the Bill, we consider it to be of the utmost importance that OFCOM establishes specific structures for handling complaints relating to fairness and privacy and ensures that adjudication of such complaints is made only by those who have heard and considered the case in full (paragraph 304).

(iii) The regulation of commercial radio

103. We recommend that the Government align the provisions for penalties for contravention of licence conditions between television and radio. Should it not propose to do so, it should, in its response to this Report, provide a full account of the rationale for the differences (paragraph 306).

104. Local content and character must be integral and central characteristics of local commercial radio, as fundamental obligations in return for which licensees are granted spectrum access. In principle, we support the concept of additional duties and powers to maintain such obligations. We recommend that these incorporate a duty on OFCOM to award and review radio licences in such a way as to ensure that the broadest possible range of tastes and interests is catered for within each local radio area (paragraph 309).

(iv) Access radio and local television

105. We welcome the provisions in the draft Bill to enable the structured development of a not-for-profit access radio sector, which has the potential to enrich both broadcasting and community development. It will be of paramount importance for OFCOM and the Secretary of State to ensure that these powers are exercised in a way that ensures the development of access radio that serves parts of society that commercial radio fails presently to address (paragraph 311).

106. Although we welcome the provision in Clause 167 to support the development of local digital terrestrial television services, we recommend that the Government and the existing regulators give early consideration to means of fostering the development of local television services before analogue switch-off, in order that further provision may be made in the final Communications Bill if necessary (paragraph 312).

(v) Television services for the deaf and visually impaired

107. Improved provision for sub-titling, audio-description and signing is a necessity not a luxury. We welcome Clauses 203 to 207 which provide a sound framework to extend such provision across all licensed services in coming years (paragraph 313).

(vi) Government powers in relation to broadcast content

108. We recommend that Clause 223 be amended to specify the circumstances in which the powers available to the Secretary of State under subsection (5) may be exercised (paragraph 314).

(vii) The economics and regulation of content production

109. We recommend that Clause 224 be amended to enable licence conditions relating to training to be applied to broadcasters both in relation to their own employees and more generally in respect of the creative advancement of the sector as a whole (paragraph 317).

110. We recommend that the Government, the ITC and the Film Council explore with broadcasters the current relationship between the broadcasting and film industries and the role that OFCOM might play in fostering and furthering the contribution of broadcasters to that relationship (paragraph 318).

111. We recommend that Clause 189 and paragraphs 1 and 5 of Schedule 8 be amended to provide that OFCOM should monitor levels both for the time allocated to independent productions and for the value of such independent productions in line with the Secretary of State's declared intention in evidence to us that the licence fee should be "venture capital for the nation's creativity" (paragraph 324).

112. We recommend that the Government, in its response to this Report, set out its views on the merits of defining independent productions to include all programmes commissioned by a broadcaster from whom the producer is independent in ownership terms (paragraph 325).

113. We recommend that Clause 189 and paragraphs 1 and 5 of Schedule 8 be amended so as to require OFCOM periodically to review the whole of the programme supply market, together with its associated intellectual property and other rights, including the role of the BBC in that market, with a view to determining whether the market is operating in a fair, transparent and non-discriminatory manner. We further recommend that OFCOM be required under the terms of the final Bill to undertake the first such review immediately after the coming into force of the Act. Finally, we recommend that, having undertaken the first such review, OFCOM consider whether it would be appropriate to refer the operation of the programme supply market to the Competition Commission for market investigation under the terms of the Enterprise Bill (paragraph 326).

114. We recommend that Clause 190 be amended to define original productions as programmes commissioned with a view to their first showing in the United Kingdom on the relevant channel and which were also either produced in the European Economic Area or were a co-production in which a significant element of the production was within the European Economic Area. We further recommend that the same Clause be amended to permit OFCOM to establish specified levels for original productions in peak viewing times (paragraph 328).

115. We recommend that OFCOM be empowered to review production commitments of public service channels and Channel 3 licensees in response to any significant change in the revenue or audience share of the relevant channel. We further recommend that OFCOM be required to issue guidance on the changes that would trigger such reviews and give an indication of likely alterations to requirements for original production arising from such changes (paragraph 329).

116. We welcome the Government's decision to give OFCOM responsibility for United Kingdom compliance with obligations under the EC "Television without Frontiers" Directive and support the provision for licence conditions to secure such compliance in Clause 222. We believe that these powers provide OFCOM with a valuable tool for strengthening the contribution of all licensed broadcasters to the European production base (paragraph 330).

117. We recommend that the word "suitable", where it appears in Clause 193, be altered to "substantial". We also recommend that the same Clause be amended to make it clear that Channel 3's regional production requirements apply equally to network and regional programmes. We further recommend that OFCOM be granted a power to include conditions relating to regional programme-making in the regulatory regime for Channel 5. Finally, we recommend that the review provisions linked to audience and revenue changes that we have earlier recommended in respect of original production levels apply also to regional production levels (paragraph 332).

(viii) The public service broadcasting remit and the remits and regulation of commercial public service broadcasters

118. In general terms, we consider that the Government has struck the right balance in its definition of the public service remit. We agree with the proposition that the term "objectives" more accurately reflects the nature of the commitments involved than "requirements" and we recommend that Clause 181 be amended accordingly. We also consider that it is right that a set of objectives for all public service broadcasters should be more detailed than is necessary for the BBC with its long tradition of public service broadcasting and we therefore recommend that the Government gives careful and sympathetic consideration to the case for including fuller descriptions of topics for programming in Clause 181(5) (paragraph 338).

119. We recommend that Clause 181(1) be amended to provide that OFCOM reports on the fulfilment of the public service remit are to be published every two years (paragraph 340).

120. We have rejected the proposition that reviews of the public service remit be undertaken annually in part because we are keen to see the reports arising from the reviews as major events that play a central role in public debate on public service broadcasting. We make further recommendations with this aim in mind. First, we recommend that OFCOM be required to conduct its review with the purpose of sustaining and strengthening public service broadcasting in the United Kingdom. Second, we recommend that OFCOM be required to review the ecology of public service broadcasting, including the costs and financing of public service broadcasting. Third, we recommend that OFCOM be required to report on the contribution to public service broadcasting made by broadcasters other than the BBC, S4C and holders of licences for public service channels (paragraph 341).

121. We recommend that Clause 188 be amended to provide that an order to amend the public service remit in Clause 181 can only be made by the Secretary of State in response to a recommendation made by OFCOM in the reports arising from its periodic reviews of the public service remit and even then only after a full public consultation on that recommendation (paragraph 342).

122. We recommend that the public service remit for every Channel 3 service in Clause 182 be amended to require the provision of a wide range of high quality and diverse programming which, in particular, includes a substantial range of high quality original production and satisfies the tastes and interests of the part of the United Kingdom for which that service is licensed (paragraph 343).

123. We welcome and support Channel 4's public service remit as set out in Clause 182(3). We recommend that the Government consider the case for inclusion of Channel 4's educational role in that remit (paragraph 344).

124. We oppose the power to amend the public service remits of licensed public service channels by means of secondary legislation and recommend accordingly that this provision in Clause 188(1)(a) be removed (paragraph 346).

125. We recommend that Clause 191 be amended to retain the existing legal obligation on Channel 3 licensees to devote a sufficient amount of time throughout the day and in peak viewing hours to news and current affairs programming (paragraph 347).

126. We recommend that the provisions for prior consultation with OFCOM on changes of programme policy as set out in Clause 184 be superseded by a system of annual reports by OFCOM on the performance of each licensee in relation to the relevant statement of programme policy (paragraph 351).

127. We recommend that OFCOM be given a power to review the financial terms of Channel 3 and Channel 5 licences at the mid-point of any licence and to vary licence payments for the remainder of that licence period. In view of this added flexibility to ensure the correct balance between the benefits of spectrum access and the burden of public service obligations, we further recommend that the possibility for exemption from detailed regulation under Clause 187(2)(a) as a result of failure to fulfil public service remits when such failure is due to economic or market conditions be removed (paragraph 352).

128. Twelve years is a long time in broadcasting. We have concluded that the Government is right in principle to establish mechanisms for measuring the overall value of Channel 3 and Channel 5 licences beyond analogue switch-off. An explicit process of licence allocation for the years after 2014 has advantages, including as a safeguard for the regional character of ITV licences. However, there is a danger that the process may serve as a disincentive to invest in the years before then. We recommend that, in its response to our Report, the Government set out its views on the proposal by the ITC for separate spectrum charging as the best way of capturing changes in licence value before and after digital switchover and clarify how it envisages the new allocations being made for the years after 2014 (paragraph 355).

(ix) The remit and regulation of S4C

129. We recommend that paragraph 3 of Schedule 8 be amended to provide that an order to amend S4C's public service remit may only be made as a result of a review conducted under Clause 226 (paragraph 357).

130. It appears at odds with the concept of future-proofing for legislation to contain a barrier to increased funding for S4C, should the Secretary of State decide that such an increase is appropriate. We recommend that the final Bill seek to amend section 61(4) of the Broadcasting Act 1990 to enable additional payments to be made to S4C to support the development of digital services (paragraph 358).

(x) Gaelic broadcasting

131. If the forthcoming Communications Bill is to be future-proof in the way the Government hopes, we consider that there is a compelling case for ensuring that the relevant provisions facilitate rather than inhibit the future development of a Gaelic television service (paragraph 362).

(xi) OFCOM and the BBC

132. We recommend that, for the avoidance of doubt, Clause 144 be amended to state that OFCOM has functions in relation to the BBC under Part 5 of the Bill in respect of competition law (paragraph 366).

133. We recommend that the Government, in its response to this Report, confirm its intention to ensure that the provisions of the revised Agreement with the BBC mirror those of the Communications Bill as enacted. We further recommend that the Government publish an initial text of the proposed revised Agreement at the same time as the Communications Bill (paragraph 369).

134. We recommend that the revised Agreement require the BBC to publish annually a statement of programme policy in respect of each of its public service television channels and report on performance against each policy (paragraph 370).

135. We recommend that the revised Agreement require the BBC to agree original production conditions with OFCOM for each of its public service television channels (paragraph 371).

136. We recommend that the Government set out in its response to our Report the proposed mechanism for determining payments of charges by the BBC to OFCOM and ensure that the final Bill or the Agreement as necessary give effect to these arrangements (paragraph 372).

137. We recommend that, in its response to our Report, the Government set out its intentions for the role of OFCOM in respect of BBC radio services. We recommend that the revised Agreement require the BBC to publish annually a statement of programme policy in respect of each of its radio channels and report on performance against each policy (paragraph 373).

138. We recommend that the proposed Agreement require the BBC to provide OFCOM with such information as OFCOM may reasonably request for the purpose of carrying out its functions under Clauses 144 and 181 and Part 1 of Schedule 8 (paragraph 374).

139. Extensive and repeated payment of fines by the BBC would be a waste of licence payers money, for which the BBC and its Governors would be held publicly accountable. This seems to us a reason for the BBC to so arrange its activities as to ensure that it does not incur such penalties, and not an argument for immunity from such penalties. We recommend that the proposed Agreement empower OFCOM to fine the BBC in respect of breaches of tier one and tier two obligations (other than those relating to impartiality) in the same way and to the same extent as other broadcasters (paragraph 375).

140. The potential tension between the desirability of the BBC expanding its commercial activities to support its primary public service role and the market impact of the BBC's activities must be borne in mind by the Government and OFCOM in consideration of the BBC's future (paragraph 376).

141. We recommend that the Government, in its response to this Report, set out its initial proposals on the manner in which it envisages review of the BBC Charter being conducted (paragraph 379).

Chapter 6: Further Conclusions

(i) The resilience and adaptability of the proposed legislation

142. Our central task has been providing means to enable the Government or Parliament to make a good Bill better (paragraph 380).

143. We make points in paragraph 384 not with the aim of questioning the rationale for the five pillars. Rather, we wish to emphasise that it would be mistaken to assume that each and every aspect of the new framework will prove enduring. In legislating this year and next, Parliament should not imagine that it will be absolved of the duty both to examine the implementation of the new framework with great care and to be prepared to return to the process of legislating again should the need arise (paragraph 385).

144. In view of the considerable likelihood that new primary legislation may well become necessary in the medium term, we urge the Government to re-examine the general scope of, and particular proposals for, seeking power to amend the new primary legislation by means of subsequent secondary legislation (paragraph 386).

(ii) The merits, limits and future of pre-legislative scrutiny

145. We welcome the Government's decision to enable the draft Communications Bill to be considered by an ad hoc Joint Committee and the positive spirit in which the Ministers have so far responded to our work (paragraph 387).

146. We have interpreted our orders of reference as requiring us to focus first and foremost on the proposed provisions of the draft Bill, from their wording to their likely practical effect. The terms of the Government's own invitation for consultation have made this process harder, not easier (paragraph 392).

147. We recommend that the Government give an undertaking that it will provide an opportunity for both Houses to debate and come to a decision on the establishment of any future Joint Committee proposed to be appointed to consider a draft Bill at least two sitting weeks before the publication of the relevant draft Bill, and further in advance if possible (paragraph 393).

148. We recommend that, as a general rule, the Government should propose to the Houses that the deadline for a Report by a Joint Committee established to examine a draft Bill be set at least one month after the deadline for submissions to Government consultation exercises on the relevant draft Bill (paragraph 397).


 
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