Joint Committee on The Draft Communications Bill Minutes of Evidence


Memorandum submitted by ITV Network Ltd

EXECUTIVE SUMMARY

Overview

  i.  ITV broadly welcomes the draft Bill. In general we believe it strikes a fair balance between the need to modernise the regulatory framework for UK media in order to improve its competitiveness and the desire to sustain the best elements of the broadcasting ecology that has served the UK's viewers and citizens so well. Inevitably, however, we do wish to explore in more detail particular aspects of the draft Bill and the Policy Narrative as they apply directly to ITV.

  ii.  The paragraph numbers highlighted in the Executive Summary refer to the relevant sections in the accompanying ITV submission.

Must Carry (Paragraphs 11-16)

  iii.  The Policy reiterates the Government's "strong commitment to ensuring that PSBs are available on all the main platforms both before and after digital switchover". ITV supports this objective and we welcome the fact that the draft Bill provides for the continuation of ``must carry'' status for public service broadcasters on cable. On satellite, achievement of this public policy goal is less clear cut. In The Policy the Government is proposing to introduce must carry-type provisions for satellite (as well as a ``must offer'' obligation on the PSBs) but only at digital switchover.

  iv.  Must carry on satellite needs to be introduced well in advance of switchover, preferably at the point at which the Act comes into force, if the Government's policy of universal access to the public service channels in the digital future is to be secured. The absence of ``must carry'' rules for satellite at present provides the satellite platform with an unfair competitive advantage over competing platforms and diverts money that could be better invested by the public service broadcasters in programming.

  v.  Under the current access pricing regime for satellite, which is regulated by OFTEL, BSkyB is able to charge the public service broadcasters for a contribution to its set top box costs as well as for use of the conditional access facilities that provide access to viewers. As a result of BSkyB's unilateral decision to give away its boxes these costs are extremely high. If must carry is not introduced until switchover the public service broadcasters will have subsidised the set-top-box costs of BSkyB by hundreds of millions of pounds.

Channel 3 and Channel 5 licence renewal (Paragraphs 27-30)

  vi.  At present Channel 3 licensees and Channel 5 go through a detailed and rigorous licence renewal process in order to ensure that licensees are delivering value for money and meeting their licence conditions satisfactorily. Under the draft Bill this system will be revoked and there will be no right of renewal after 2014. We believe that this will introduce an unnecessary degree of uncertainty into the licensing process at a point in time when the opposite is required in order to underpin investment and ensure that the terrestrial broadcasters are equipped to compete with increased competition from cable and satellite. There is the additional risk for ITV that, in the event that it is permitted to complete the process of consolidation, individual licences might not be retained beyond 2014. This would fundamentally undermine the process of consolidation within ITV.

OFCOM and the BBC (Paragraphs 22-26)

  vii.  ITV continues to believe that the BBC should be included within Tier Three as well as Tiers One and Two. It is in the best interests of the long-term health of the public service broadcasting ecology of the UK for all public service broadcasters to operate within a single, coherent regulatory framework. In the modern media environment there should be no place for the BBC to operate as both broadcaster and regulator.

  viii.  The Proposed Changes to the BBC's Agreement, which were only recently published and are designed to enshrine the statutory obligations on the BBC contained in the draft Bill, do not satisfactorily reflect the level of detailed regulation that will apply to other PSBs through the Bill. The BBC proposes that it set its own targets for original and regional production (requirements under Tier Two), whereas ITV's targets will be set by OFCOM. It further proposes that it should be allowed to deliver these targets jointly across BBC1 and BBC2. In order to ensure a level playing field at Tier Two the BBC's targets need to be set by OFCOM and apply to its individual channels.

The Nominated News Provider (Paragraphs 41-46)

  ix.  ITV believes that retention of the NNP system is anomalous and likely to damage the prospects for the maintenance of an independent third force in television news provision. ITV believes that permitting Channel 3 to own its own news supplier offers the best route to ensuring the retention of at least three major suppliers of TV news in the UK.

Spectrum pricing (Paragraphs 17-21)

  x.  ITV understands and accepts the economic rationale for spectrum pricing presented in the Cave Review of ensuring that all parties involved in the allocation or use of spectrum are aware of its true value and have an incentive to use it efficiently. The Government too needs to know the cost to the nation of its public policy objectives. ITV companies are already subject to an implicit spectrum charge in the form of considerable licence payments and we have long argued that the current regime is inequitable, as the same principle is not extended to the other PSBs. Channel 4 and the BBC should be subject to spectrum pricing, as well as Channels 3 and 5.

  xi.  However, we would stress that efficient use of spectrum to deliver public policy outcomes and value to the public in broadcasting terms is unlikely to be consistent with maximising proceeds to the Exchequer. ITV therefore considers that the level of any spectrum fee that is introduced must take account of the special role of public service broadcasting in the economy and society and the Government's wish to preserve this role in the digital multi-channel era.

The Content Board (Paragraphs 9-10)

  xii.  ITV supports the establishment of a Content Board within OFCOM. The Board will ensure that content matters and the contribution of public service broadcasting to the UK's media ecology are given due weight and consideration within OFCOM. However, we are concerned that the Content Board should not act in isolation from the main OFCOM Board. If the benefits of having a converged regulator are to be realised then the Content Board must consider developments taking place across the whole of the communications sector in reaching decisions about content regulation. Major decisions should require the express approval of the main OFCOM Board.

Content regulation (Paragraphs 31-40)

  xiii.  The Bill contains extensive provisions regarding TV content regulation, the vast bulk of which apply to ITV. Whilst we broadly welcome the new approach to content regulation espoused in the Bill, we do have some concerns about the overly prescriptive nature of some of the statutory requirements and the potential for the regulator to interfere in matters such as scheduling. In a number of respects the provisions in the Bill do not match the rhetoric of light touch regulation.

  xiv.  In its evidence to the Committee the ITC expressed concern about the PSB remits as currently set out in the Bill and the provision that OFCOM's overview of the PSB ecology will take place every three years rather than annually. We are inclined to support the ITC on these points and are currently in discussion with them about their proposals.

Cross-media ownership (Paragraph 51)

  xv.  ITV is concerned about the implications of lifting the 20:20 rule for Channel 5, whilst it is retained for Channel 3. This piecemeal approach could have significant implications for the long-term health of the mixed ecology of public service broadcasting in the UK that the Government is keen to sustain. The draft Bill is broadly intended to create a more level regulatory playing field and yet this proposal introduces an additional regulatory disparity between two terrestrial broadcasters.

INTRODUCTION

  1.  ITV Network Ltd makes this submission on behalf of its shareholder companies (Granada Media, Carlton Communications, SMG, Ulster Television and Channel Television) which together own the 15 regional licences that make up the ITV Network (Channel 3).

  2.  ITV Network is responsible for the commissioning and scheduling of programmes for the ITV1 network schedule and ITV2. ITV1 is an advertising-funded public service broadcaster with extensive public service obligations to deliver a wide range of programming and regional broadcasting commitments. ITV1 broadcasts bespoke regional broadcasting services in 14 regions and provides 27 sub-regional news services, serving the needs of local communities across the UK.

  3.  ITV Network and the ITV regional companies collectively spend approximately £1 billion on programming annually. This figure is the highest investment in programming made by any single commercially funded channel in Europe.

  4.  As requested we have sought to keep this submission as short as possible. As the most extensively regulated broadcaster in the UK there is a wide range of matters in the draft Bill that impact directly on ITV. However, we have sought to focus on those issues that on first reading appear to be most significant for ITV. This submission is, therefore, not exhaustive.

  5.  We have dealt with the key issues affecting ITV in the order that they appear in the draft Bill, cross-referencing as necessary to the accompanying Policy Narrative. In the event that the Committee wish to receive further detail on any of these points we are, of course, happy to provide supplementary information.

OVERVIEW

  5.  ITV broadly welcomes the draft Bill. In general we believe it strikes a fair balance between the need to modernise the regulatory framework for UK media in order to improve its competitiveness and the desire to sustain the best elements of the broadcasting ecology that has served the UK's viewers and citizens so well. Inevitably, however, we do wish to explore in more detail particular aspects of the draft Bill and the Policy Narrative as they apply directly to ITV.

PART 1—FUNCTIONS OF OFCOM

Clause 3—General Duties of OFCOM

  6.  ITV broadly supports this clause and agrees that no single OFCOM duty should be elevated above all others. However, we note that whilst OFCOM has a general duty to "secure, so far as practicable, that the range of television and radio services . . . are both of high quality and calculated to appeal to a variety of tastes and interests" no specific reference is made to public service broadcasting. In light of the fact that the Bill continues to place extensive obligations on the public service broadcasters we would like to see OFCOM given a specific duty, alongside or within its other duties, to "promote and secure, as far as practicable, public service broadcasting in the UK."

Clause 5—Duties to secure light touch regulation

  7.  We welcome this explicit commitment within the legislation to keep regulation under review and ensure it remains necessary and proportionate in light of the rapid pace of change in the industry. Given the wide range of regulatory powers granted to the Content Board, and its statutory status, we believe this clause would be strengthened if the Content Board were specifically required to report annually to the main OFCOM Board on its plans and timetable for minimising content regulation and ensuring its proportionality.

  8.  The Draft Communications Bill Regulatory Impact Assessment states at paragraph A28 that as regulatory challenges increase the running costs of the new single regulator may increase significantly. We are concerned that the running costs of this new, converged regulator are expected to exceed those of the existing five regulators. We are also concerned to know what mechanisms will be in place to ensure that the contribution of individual regulatees is proportionate. We are seeking to explore these issues further with officials but in the meantime would suggest that in addition to the obligation to 'secure light touch regulation' the regulator should also be required to ensure that the costs of regulation are proportionate and wherever possible reduced. OFCOM should be required to report annually on inroads made into cutting its costs and also on its forthcoming budgetary plans.

Clauses 17 and 18—Establishment and functions of the Content Board

  9.  ITV supports the establishment of a Content Board within OFCOM. The Board will ensure that content matters and the contribution of public service broadcasting to the UK's media ecology are given due weight and consideration within OFCOM. We also agree that it is the effective place to ensure that national and regional interests are represented.

  10.  However, it is vitally important that the Content Board is required to operate within the context of OFCOM's wider responsibilities. Decisions made by the Content Board should be informed by changes occurring in the wider market that may impact on the ability of the commercially funded public service broadcasters to deliver their content obligations. The Content Board must not be established as a silo operating independently of the main OFCOM Board. To avoid this we would welcome clarification in the Bill that major decisions made by the Content Board on substantive issues will require the express approval of the main OFCOM Board.

PART 2—NETWORKS, SERVICES AND THE RADIO SPECTRUM

Clause 49 of the draft Bill—Must-carry obligations Paragraph 8.2.2 of The Policy—Distribution of public service broadcaster channels (Must Offer/Must Carry)

  11.  The Policy reiterates the Government's "strong commitment to ensuring that PSBs are available on all the main platforms both before and after digital switchover". ITV supports this objective and to this end we welcome the fact that the draft Bill provides for the continuation of ``must carry'' status for public service broadcasters on cable. Under the current arrangements for cable the public service broadcasters provide their channels free of charge and copyright-cleared and in return the cable operators do not charge for their carriage. Carriage of the PSBs on the DTT platform is guaranteed by allocating these broadcasters their own capacity.

  12.  On satellite, achievement of this public policy goal is less clear cut. In The Policy the Government is proposing to introduce must carry-type provisions for satellite (as well as a ``must offer'' obligation on the PSBs) only at digital switchover. In the meantime the public service broadcasters will continue to rely on the conditional access pricing regime, which regulates the terms of access to the satellite platform and is overseen by OFTEL.

  13.  We welcome the Government's statement of intent to extend must carry to satellite. However, without an explicit guarantee that public service broadcasters will be available on the satellite platform in the run up to switchover, it seems unlikely we will ever get to the point where analogue can be switched off. This is not an academic argument when one considers that the existing contracts the PSBs have with BSkyB for access to the satellite platform will all be up for renegotiation well before switchover.

  14.  Under the Government's proposal, the problems that the public service broadcasters currently face on the satellite platform would continue until switchover:

    —  PSBs are currently required to pay huge amounts to access the satellite platform—some £17m per annum in the case of ITV1. This is despite the fact that the PSBs need conditional access (CA) in order to meet their public service obligations of delivering the correct regional service to viewers (not to raise revenue as in the case of Pay channels) and to stop the overspill of rights into other territories.

    —  The cost to BSkyB, on an incremental basis, of supplying CA is estimated to be virtually zero. However, the charges levied by BSkyB for CA include a contribution to the costs of its set-top-boxes. These costs are huge because BSkyB chooses to give the boxes away for free. The public service broadcasters have no control over this marketing decision by BSkyB yet are currently subsidising its set-top-box giveaway to the tune of tens of millions of pounds each year. No other digital platform benefits from such a subsidy from the PSBs.

    —  If the Government waits until switchover to address this issue, the PSBs will have subsidised BSkyB's costs by hundreds of million of pounds. This is bad for public service broadcasting, diverting money away from investment in programming.

  15.  We believe this inequitable situation arises from a regulatory regime that is not designed to take account of the public policy objectives associated with broadcasting. OFTEL argues that:

    —  It cannot consider the special role of public service broadcasting. When assessing what is a fair price for access it therefore treats all channels the same, regardless of content.

    —  It cannot consider the effects of inter-platform competition—ie whether it is right that PSBs pay huge sums to access one platform when no payment is required on the other platforms.

  16.  For all these reasons, ITV believes that this regime should be replaced by a must carry rule on satellite that comes into force as soon as the Act is passed and not at digital switchover.

Paragraph 7.1 of The Policy—Spectrum pricing

  17.  The draft Bill does not contain clauses on this, as the Government is yet to issue its official response to the Cave Review on spectrum management.

  18.  ITV understands and accepts the economic rationale for spectrum pricing presented in the Cave Review of ensuring that all parties involved in the allocation or use of spectrum are aware of its true value and have an incentive to use it efficiently. The Government too needs to know the cost to the nation of its public policy objectives. However, we would stress that efficient use of spectrum to deliver public policy outcomes and value to the public in broadcasting terms is unlikely to be consistent with maximising proceeds to the Exchequer.

  19.  This is why we welcome the Government's proposal in The Policy that Ministers should continue to determine how spectrum is allocated between different classes of use, for example broadcasting, and that OFCOM can be required to reserve specific frequencies for public service broadcasters to meet their obligations.

  20.  Once spectrum is allocated to public service broadcasting, the suitability of the concept of opportunity cost as a yardstick for charging the PSBs for the use of that spectrum is extremely limited. Nevertheless, the principle of spectrum pricing is still a valid one. ITV companies are already subject to an implicit spectrum charge in the form of considerable licence payments. We have long argued that the current regime is inequitable, as the same principle is not extended to the other PSBs. Channel 4, for example, enjoys similar privileged access to advertising revenue yet makes no explicit financial contribution for this. We would strongly support proposals to address the current disparity between the public service broadcasters.

  21.  ITV therefore considers that any spectrum pricing regime which is introduced must take account of:

    —  the special role of public service broadcasting in the economy and society and the Government's wish to preserve this role in the digital multi-channel era;

    —  the public policy objectives that the PSBs are obliged to meet;

    —  all investment (past and future) needed to build out the terrestrial network in order to maintain universal access post switchover;

    —  the need to deliver parity between the PSBs in terms of licence payments.

PART 3—TELEVISION AND RADIO SERVICES

Clause 144—Functions of OFCOM in relation to the BBC

  22.  We welcome the fact that many of the provisions of the draft Bill with regard to the regulation of public service broadcasting will apply to the BBC. However, we continue to be of the view that the BBC should be included within Tier Three as well as Tiers One and Two[1]. It is in the best interests of the long-term health of the public service broadcasting ecology of the UK for all public service broadcasters to operate within a single, coherent regulatory framework. In the modern media environment there should be no place for the BBC to operate as both broadcaster and regulator.

  23.  The Government and the BBC have now jointly published the Proposed Amendments to the BBC Agreement that are supposed to take account of the new obligations required of the BBC under the Communications Bill. We have only had a limited amount of time to consider these proposals but on first reading they do not appear to bring the BBC satisfactorily within the OFCOM regime, even at Tier Two where we have been consistently told that the BBC will face the same level of external regulation as the commercial PSBs.

  24.  For example, whilst the proposed changes in the Agreement reflect the fact that the BBC will be under a statutory obligation to meet original and regional production quotas, the Agreement proposes that it will be for the BBC and not OFCOM to set the level of these targets. ITV's targets will be set by OFCOM. Furthermore the BBC proposes to achieve these targets across BBC1 and BBC2 together and not individually. Under the Agreement as drafted the BBC could meet its targets entirely on BBC2, leaving BBC1 free to abandon high levels of regional and original production.

  25.  This approach is inequitable, as the other PSBs will have to meet their targets on single channels. The same should be required of the BBC.

  26.  The Agreement also proposes that the BBC should voluntarily produce a Statement of Programme Policy. However it is unclear whether this will be for the BBC's services taken as a whole or for each individual channel. If this is to be of value it must make clear that Statements will be produced for individual BBC channels.

Clause 150—Digital Channel 3 and Channel 5 licences

  27.  At present Channel 3 licensees and Channel 5 go through a detailed licence renewal process periodically. At licence renewal the holding of each licence by the incumbent is not simply rubber-stamped by the regulator. Firstly, the licensee must demonstrate that they have met all of the extensive public service and other conditions attached to the licence. If a licensee is found to be in breach the licence can be withdrawn. Secondly, a complicated process is undertaken at licence renewal to ensure that licensees are paying an adequate and appropriate amount for holding the licence, taking into account factors such as predicted advertising revenues.

  28.  This system works well. It gives the licence holder confidence to invest in the business on a long-term basis, safe in the knowledge that as long as the licence requirements are met there is no prospect of the licence suddenly being withdrawn (this does not, of course, preclude others from acquiring the licence through a company takeover). It also gives the regulator and the public confidence that obligations required of the licensee will be delivered and that the licensee is delivering value for money.

  29.  The draft Bill proposes to revoke this system and states that there will be no right of renewal after 2014. ITV believes this introduces an unnecessary and potentially damaging degree of uncertainty and insecurity for the owners of these licences, which could threaten investment and prove a major distraction from the business of making and commissioning programmes.

  30.  There is the additional risk for ITV that, in the event that it is permitted to complete the process of consolidation, individual licences might not be retained beyond 2014. This would fundamentally undermine the process of consolidation within ITV.

Clauses 181-198—Content regulation of public service broadcasters

  31.  Before turning to some of the specific content measures contained in the draft Bill we would observe that those sections dealing with the content regulation of the public service broadcasters are not, at present, particularly deregulatory—in spite of the Government's stated intent to give broadcasters greater self-regulatory responsibility. Indeed the Bill contains a number of new, additional statutory provisions for ITV[2] and it is important that the debate about content regulation takes place within this context.

Clause 181—OFCOM reports on the fulfilment of the public service remit

  32.  ITV has long argued that the contribution of individual public service channels should not be viewed in isolation but considered within the context of the wider public service ecology. We welcome, therefore, the fact that OFCOM will regularly examine the state of the PSB ecology, including the BBC. However, we are not sure that review every three years will provide sufficient opportunity for the regulator to examine how the ecology is evolving. The Government should consider whether it would be better for this review to take place annually.

  33.  We are also concerned about paragraph 3(a) of clause 181. The requirement that OFCOM, in making its assessment, shall have "regard to the days on which they [programmes] are shown and the times of day at which they are shown", suggests that OFCOM will have the authority to interfere in scheduling matters. We believe this would be a retrograde step. The draft Bill already specifies that news and current affairs, the two key public service genres, must feature in peak viewing times (a new requirement for current affairs). ITV also has a new statutory requirement to broadcast non-news regional programming in and near peaktime. Beyond these specific obligations the regulator should have no locus on scheduling matters, which are best left to the judgement of the broadcaster.

Clause 182—Public service remits of licensed providers

  34.  The proposed statutory remits for Channels 3 and 5 have the benefit of being both broad and succinct. However, we are currently discussing with the ITC whether the Channel 3 remit as presently articulated is sufficiently distinctive and whether further improvements can be made with regard to the drafting of the Bill as it applies to PSB remits.

  35.  Channel 4's remit is somewhat reduced from its original, very successful, formulation. We believe the key remit responsibility to cater for tastes and interests not generally catered for by other channels is still valid in a multi-channel environment and should remain a part of its statutory remit. We would also suggest that Channel 4's particular responsibility to show a diverse range of educational programmes for a general adult audience, as well as for schools, is a valuable part of its remit and should be included.

Clause 184—Changes of programme policy

  36.  We are concerned at the wide-ranging powers granted to OFCOM under this clause to interfere in the drafting of Statements of Programme Policy. As drafted this clause could undermine the attempted introduction of some element of ``self-regulation''. We are inclined to support the ITC's view that clause 184 be deleted and replaced with alternative backstop measures to ensure the commercial PSBs are properly held to account.

Clauses 189-194—specific obligations for public service broadcasters

  37.  The draft Bill contains a wide range of very specific public service requirements, the bulk of which apply to Channel 3 and some of which are new statutory obligations[3]. In particular there are extensive obligations with regard to Channel 3's regional services. We broadly welcome the way in which these obligations are set out and look forward to discussing in detail with officials how they will be applied.

  38.  Clause 193 of the draft Bill grants OFCOM the power to ensure that what it considers to be a ``suitable proportion'' of Channel 3 programmes made in the UK are made outside the M25—that is programmes for the ITV Network, over and above the bespoke programmes for each individual region, 90 per cent of which must be made in that region. ITV currently commissions over 50 per cent of its network programming from outside metropolitan London and has repeatedly committed to maintaining a strong network production presence in the regions. However, we consider the proposal in clause 193 (1) (c) that OFCOM will have the power to ensure there is an appropriate level of network programme investment in "a range of production centres in different parts of the UK" to be overly prescriptive. It risks compromising commissioning on merit and is, therefore, directly in contravention of the current networking arrangements for Channel 3.

  39.  ITV is making a significant commitment to commissioning and producing programmes outside the M25 but beyond that the future viability of particular production centres across the UK should be driven by the quality of their individual programme ideas and productions. The regulator should not seek to artificially support network production centres in particular locations. The retention of extensive regional services by Channel 3 across the UK, providing regional news and non-news programming for each region made in each region, provides a clear safeguard against the disappearance of local media operations across the UK.

  40.  We note that whilst provision is also made to require Channel 4 to commission a suitable proportion of programmes made ``outside the M25'' area, Channel 5 appears to be exempted. As Channel 5 is now an established player in the UK's broadcasting ecology and it already has a voluntary 10 per cent target for regional production, it is unclear why the Bill does not provide OFCOM with the power to require it to commission a ``suitable proportion'' of programmes from the UK's regions.

Paragraph 8.2.9 of The Policy/Clauses 260-262 & 267-268—Provision of news by public service broadcasters

  41.  ITV is happy to accept the continuation of its statutory obligation to provide national and international news of high quality in peaktime. However, we are concerned at the Government's insistence on retaining the Nominated News Provider system and at the proposal to introduce a "new requirement for Channel 3 licensees: to provide adequate financial support to the news provider to make sure the service is of high quality."

  42.  We believe the proposal to require ITV to provide an adequate level of financial support for its news is an unnecessary intervention. There is no evidence that the quality of ITV's news coverage is in decline. The professionalism and dedication of the ITN news crews currently covering, for instance, events in Afghanistan, the Middle East and Westminster, is testament to this fact. The ITC is already empowered to ensure there is no diminution in quality. At recent reviews the ITC has made no complaint about the quality of ITV News and has, in fact, recently praised ITV's coverage of the events on September 11th and the death of the Queen Mother.

  43.  The contract agreed with ITN for the period 2003 to 2008 is inflation-linked and is worth a minimum of £218 million. This is a massive commitment to news on Channel 3 and we are not aware of any other production company in the UK, nor any independent news supplier in Europe, with six years' worth of guaranteed production, protected by RPI.

  44.  We are strongly of the view that the Nominated News Provider system is anachronistic. It undermines the prospects for the maintenance of a strong and independent third force in the supply of news in the UK (alongside the BBC and Sky) as it runs the risk that at some point in the future ITN might lose the Channel 3 news contract. This could effectively sound the death knell for ITN and leave the UK with only two significant TV news suppliers. We hope therefore that the Government will reconsider its proposals and remove the NNP provisions.

  45.  Allowing ITV to own its own news supplier would be far more likely to secure the future of a third force in UK news supply. Allied with the clear obligations in the Bill on Channel 3 to provide national and international news of high quality in peaktime and on OFCOM to guarantee its quality this would underwrite the future plurality of news supply. ITV would also have an incentive to maximise the efficiency of its news operation by continuing existing ITN news contracts with other broadcasters such as Channel 4.

  46.  However, this proposition is prevented in the draft Bill as a result of the provisions limiting the ITV companies collectively to owning 40 per cent of ITN. We assume that this ownership restriction is in place to protect the editorial integrity of news on Channel 3. However, given the extensive content regulation of news on ITV contained in the Bill this additional ownership restriction is unnecessary and sits uneasily in a Bill that is generally deregulatory on matters of ownership. There is currently no limit on ITV companies' collective ownership of ITN; until two years ago ITV companies collectively owned 60 per cent of ITN and for 35 years of its existence owned it outright. The proposed ownership restriction should be removed.

Clause 196—Networking arrangements

  47.  The draft Bill proposes maintaining the requirement on ITV companies to agree networking arrangements consistent with proposals submitted by the original applicants for the licences in the early 1990s. These arrangements required approval by the ITC and the OFT. In the event, a full MMC referral occurred before the regulator approved the arrangements.

  48.  Under the 1990 Act, any significant change to the arrangements requires the approval of the regulators—both the ITC and the OFT. The draft Bill effectively maintains the requirement on ITV to seek prior regulatory approval for any changes to the arrangements. In practice, this complex and cumbersome process has prevented the networking arrangements being updated to reflect the significant evolution of the channel since 1993.

  49.  In light of the fact that the Bill provides for the single ownership of ITV it is important that it also makes provision to enable the amendment of the networking arrangements in order to also allow ITV to operate as a single entity by taking into account any future structural changes, whilst also ensuring the protection of any remaining minority interests in ITV. This is a complex area and further detailed consideration needs to be given to the implications of this proposal to simply carry over the existing regime.

CHAPTER 5—MEDIA OWNERSHIP AND CONTOL

Paragraph 9.5.1 of The Policy—Television ownership

  50.  ITV welcomes the proposed revocation of the two rules that specifically prohibit the creation of a single ITV company. Further consolidation will enable ITV to better adapt to changes taking place in the market and sustain the channel's ability to compete and, therefore, deliver its significant public service obligations. The Bill contains extensive provisions to ensure that final consolidation of ownership does not undermine the uniquely regional character of the ITV service.

Paragraph 9.4/Clause 266—Cross-media ownership

  51.  ITV is still considering the full implications of the proposed changes and may wish to come back to the Committee in more detail at a later date. In the meantime we wish to register initial concern at the proposal to lift the 20:20 rule for ownership of Channel 5, whilst it is retained for Channel 3. This piecemeal approach could have significant implications for the long-term health of the mixed ecology of public service broadcasting in the UK that the Government is keen to sustain. The draft Bill is broadly intended to create a more level regulatory playing field and yet this proposal introduces an additional regulatory disparity between two terrestrial broadcasters.

June 2002


1   We also note that S4C sits outside Tier Three of the new framework for content regulation. This anomaly should also be addressed. Back

2   See Appendix One Back

3   See Appendix One Back


 
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