Joint Committee on The Draft Communications Bill Minutes of Evidence

Examination of Witnesses (Questions 720-741)



  720. Have they said why?
  (Lord Eatwell) I think the main arguments have been with respect to issues of content, where we feel that existing content regulation and indeed the regulations which apply to news on radio, are sufficient, are strong, are replicated in television, and that other measures, such as the ownership rules proposed, are not needed to secure balance and fairness.
  (Mr Carnegy) I think the reason we have had as to why is that in radio it is architecturally possible to regulate it more thoroughly and vigorously than it is in television and newspapers, so that is where we stand. A little emblematic nugget from the Bill is that for a first offence the maximum you can fine a television company is £100,000, the maximum you can fine a radio company is £ million. We cannot explain that.

  721. To echo a question often asked by Lord Crickhowell, are there specific sections in the Bill that you would want out or dramatically amended?
  (Mr Carnegy) I think that clarification is crucial. We are talking about content regulation here. We see the Content Board as having an absolutely vital role to play and a very positive role to play, particularly at the licensing stage. We think it would be helpful also to take on board what we think would be a duty to promote local content, if it were clarified that that is a duty that is discharged at licensing, and then the deal is that the Content Board must keep us to our licence promises. At the moment we are a little nervous, because of their vagueness, that that duty might hop back in in mid-licence and I might be told that because my radio station is in Southampton I cannot put out a play by a Welshman. Tom Jones's career would take a nosedive! It is not beyond the wit of regulators to create odd rules. We think they should be charged with giving regulatory clarity once the regulation has been made and once we are held to those promises.

Mr Grogan

  722. To follow on that theme, I think you quote in the evidence that "it is illogical to suggest that a regulator is better placed to determine what comprises local content and character than those working daily in the community". That is the quote. From what you have said, you are not arguing from that point of view. You could argue logically that broadcast content should not be regulated at all in that case, but you are not saying that. To make it very clear, I think you are saying that the additional powers that are given in Clause 211 regarding local content and character should just be allowed at licence time. It is not just news, is it? If a radio station starts producing all of its programmes from 100 miles away or whatever, presumably the regulator would be able to say something?
  (Mr Carnegy) Especially if you were in Australia and it came from America, yes. The deal is not like that in this country, and we feel very strongly that that needs to be understood. We support the content regulation, we support the idea of formats. We think that competitive bidding of content as the driver for licensing delivers the social objective in radio regulation. We must never forget that at all times when we are putting forward promises on a licence, we can be held to those promises. It is as simple as that.

  723. Thank you. I have just one other question. We have heard about reciprocity and so on. I notice that Capital support reciprocity regarding foreign ownership, in their submission. Is that a view shared across the radio sector? We have all heard that there is not much chance, so we are told, of the British buying anything American. Would that be true in radio? Would some of your members possibly want to buy American radio stations at some stage?
  (Mr Mansfield) I think we would like the opportunity to be able to consider it.


  724. That is not the most helpful answer, because it is a quite crucial issue. We are looking at a situation where literally no one around this table could buy a 20 per cent stake in Radio Cincinnati. It would help us if you were rather more concrete, because this is one area where I think it is open to Capital to make serious inroads into a US purchase.
  (Mr Mansfield) Are you asking me as Capital or as CRCA?

  Mr Grogan: Whichever you choose to answer as.

Paul Farrelly

  725. As David Mansfield!
  (Mr Mansfield) No, I do not represent him tonight! I think that as far as Capital is concerned, we would be happy if reciprocity did not exist, so we support it in our submission, but it is not a point that we feel that strongly about. I think that it is difficult for companies, particularly as has been mentioned earlier, to make major purchases in marketplaces such as the United States. That is a very difficult situation. I do not think you would find very many that could do that.

Nick Harvey

  726. Could we put the same question to GWR who do have holdings in Australia, for example? What is your view about reciprocity?
  (Mr Bernard) It is a very difficult question to answer, in the sense that one does not want to take away the fact that these are businesses which are run by people on behalf of shareholders, and it is clearly in shareholders' interests to think about reciprocity as something which is not necessarily in their own interests. What we have said to date is that reciprocity was something we would like to have in respect of the UK, because we were allowed to buy radio stations in Australia. Frankly, we did not ever think we would get the opportunity to buy radio stations in America, and it was something of a surprise to see the Bill drafted as it was.


  727. I am sorry to push you on this. There is a real danger here that you could be accused of trying to play both ends against the middle. That is to say, yes, you are attracted to the idea of an American company coming in, which could have the effect of pushing your share price up or indeed your sale price up, but if the price of achieving that is the UK holding out for reciprocity, then that presents a problem. Where does schedule value lie in this? Does it only lie in the ability to enlarge the potential investment put into UK radio?
  (Mr Bernard) I do not think that is necessarily the case. What we are talking about is radio in the UK requiring investment. It requires a lot of investment at the moment, because it is fighting almost single-handedly the battle for digital radio, it is fighting almost single-handedly as far as the world is concerned. If we had the opportunity to have investment from America to support our efforts in digital radio in particular, that would serve the shareholders' interests, but it would also serve—very much so—listeners' interests.

  728. Does it not smack of a banana republic?
  (Mr Bernard) I do not think that is so. Why would that smack of a banana republic?
  (Mr Mansfield) The opportunity already exists for companies outside the EU to invest in digital radio—the rules are different, as you know, for digital and analogue radio—but so far there is no evidence of anyone doing it.

Anne Picking

  729. My question is about access to radio. The Community Media Association have told us that they "have found no evidence from other countries that allowing community media organisations to access advertising and local sponsorship has had any detrimental effect on local commercial media companies and it may have the opposite effect in bringing new smaller enterprises into the broadcasting advertising market". Is there any firm foundation for the view that commercial funding of a distinct community sector will undermine commercial radio?

  (Mr Carnegy) We do not take that view. What is different potentially about the UK market—I am not sure what are the markets you are referring to—is that we already have a pretty thriving community radio sector within the commercial radio umbrella. I own a radio station where the entry-point advertising deal costs £50 a week. I do not think there are many stations like that in some of the more free-market markets elsewhere in the world that perhaps we are comparing with. There are radio stations, under the current licensing regime, which serve universities, relatively small ethnic groups, serve very small populations. I ran the radio station for Shaftesbury in Dorset, population 8,000, the hinterland a bit bigger than that. So we already have a good chunk of community radio in the current setup. I think that is the important thing, and that is potentially what makes us different. I think we share as an Association, with the Radio Authority, a little bit of mystification that more community groups have not applied for the small licences that have been made available over the last ten years. What we are most concerned about is that there may be out there a bunch of people who do not want to deliver the stable audience delivery promise that you have to conjure at the moment to win a licence, but do want to take public subsidy to come in and distort the small local market already in. I hope that is not the case.

  730. What would you do about that?
  (Mr Carnegy) I would say that access radio is potentially a great new tier, but it should be defined as that which cannot be supported under the current system. There is a little nugget in the old legislation that says that on day one you have to effectively prove that you can support your service for the full licence term, and that has obstructed the Radio Authority broadly from licensing some community groups who otherwise would be looked at. If maybe that will change in the legislation, that might help. Given a sufficiently clear definition, the kind of community public service radio stations which would not be supported under any fully commercial model, then why not create a new publicly funded access radio tier?

Lord Crickhowell

  731. You opened with a blunt statement about discrimination in the radio industry and nowhere are your comments in evidence stronger than on the subject of radio ownership, yet the Government has stated that its proposals for radio ownership "broadly follow the proposals made by yourselves and the Radio Authority". All the evidence that we have received from you is that you are critical of the proposals. Have your views changed or has the Government simply got it wrong and misread your proposals?
  (Mr Mansfield) I think our views have changed. Those views were formulated in discussion with the Radio Authority around a year ago and at that time we did not anticipate the amount of consolidation that was likely to be permitted under the draft Bill, and I think principally that is the difference between where we were and where we are today. The CRCA were, in fact, invited along with everybody else when the draft consultation document was published, and we at that time submitted another proposal saying that we felt that, in the light of the way the market had moved on, the ownership rules in radio ought to be further relaxed but that was not taken into account in the draft Bill. We think really that, if you go through what is being proposed, radio looks like the last area which is going to enjoy—which is the wrong word—quite a lot of microscopic regulation, and our view really going forward is that, if we are going to have a healthy and vibrant commercial radio industry, something we have enjoyed for the last decade, radio consolidation ought to be allowed in line with other media. For us it seems strange that ITV and Channel 5, for example, could become one company and yet within a local area we need three different owners. So we believe that diversity can be met by format regulation, which is proposed and which we support; diversity is not in our view to do with ownership, although often under common ownership diversity increases. If you take Capital's position in London, we own three radio stations—XFM, Capital Gold, and capital FM—and we quite deliberately make sure that those audiences do not really exchange listening and we have an interest in doing that. So we think diversity can be managed by format control, and common ownership is a positive not a negative, and we support the suggestion in the draft Bill that having separate ownership for TV and local press and local radio to ensure a plurality of voices within a local market place is good and we have a mechanic for that which we would happily put in writing to you tomorrow as our suggestion as to how that situation might be managed. Thirdly, the competition authority is there. We welcome the fact that OFCOM will have competition powers because it will enable it to take an overview, and we think if you take those three things—ie format control, separate ownership of strong local media across media in competition—there is absolutely no need to have three separate owners of local radio stations within any market place.

  732. It is very interesting that you started by saying you have changed your view because of consolidation, so that this is an area where perhaps we particularly need to come back and look again at drafting and so on and have discussion. In your evidence you, Capital Radio, are very firm that you believe that radio ownership, like television, should be governed by competition law coupled with a content-based licensing system and local cross media ownership rules rather than sector specific over regulation. It is illogical to argue that the ownership of such a powerful media asset as ITV can be decided by competition law but that the control of much smaller local radio stations requires prescriptive regulation, and you go on to elaborate. So this is the area where you really do see a need for some change because of a change that has happened in the whole structure of the industry, is it?
  (Mr Mansfield) Absolutely. It is very important.
  (Lord Eatwell) I think the other point is that the proposal for the three local media voices across media, when combined with the requirement of three radio owners, will create some extraordinary anomalies. We have charted a number of anomalies which we are very happy to put before you. The two do not fit together in a way which achieves the goals which the Bill would seem to want to achieve.

  Lord Crickhowell: I think this is such an important point that it would be very helpful to have a specific piece of evidence perhaps identifying the key areas that have changed and the points you are making picked out from the much wider evidence. It seems to me you have made quite an important statement.

Paul Farrelly

  733. I have a question the Committee would like me to put to you but, firstly, I think I really should address the Bill team, because on the face of this Bill, and correct me if I am wrong, in the cross-media ownership clauses that we have seen there is nothing, unlike the TV industry, that gives effect to the policy and the document nor to the statements such as the three local voices, reference to which was made by the Secretary of State in an announcement. I find it such a huge omission I wonder, firstly, why these cross-media rules of radio are not on the face of the Bill and, secondly, having seen just that very broad power by the Secretary of State to impose requirements, I find that such a broad power that it may possibly be open to challenge in the future because, as the argument changes, it may open the door to certain companies challenging in the courts that orders may be oppressive and not what Parliament intended when it originally discussed the primary legislation. So I think there is a big black hole on radio ownership and I would be grateful if you would explain why it is not in there.
  (Mr Brand) Certainly. You are quite right, there is an order in the Bill which does not specify three local voices or anything else. It was the intention to set it out in the policy document. It was a deliberate intention to withhold it simply because it is very likely that these will change at some point in the future. OFCOM will have a duty to review this every three years and we felt we needed the flexibility to change the scheme if necessary. I think it is also a technical question; what is a potentially technical difficult complex scheme, if you had it set out on the face of the legislation, any change would have to be made on the primary legislation, and we did not think it was practical.

  734. I find that odd given that there are rules relating to other media. I am sure with the policy in its present form, the radio owners will be delighted that they are not in there but, whilst hopeful for relaxation in the future, it still leaves you with absolutely no certainty of what is going to be decided in the future.
  (Mr Brand) I appreciate this is not agreed but it was a scheme which is very complicated in detail, and that would be in the mechanic, and that can still be adjusted in the future. It is a complicated scheme so there needs to be clarity about how it would operate and there clearly would have to be a draft order in Parliament so people could see what the intention was.

  735. I have a supplementary to that. I am very glad, Mr Mansfield, that you said that you are happy to put in a memorandum regarding cross-media ownership because I think it is recognised that most MPs are at the sharp end of this; in my area the only effective competition to my local newspaper group is radio, and unfortunately the independent section news is not as strong as it is on the BBC, but nonetheless we would not like to see further concentration in local media ownership for obvious reasons so—
  (Mr Carnegy) Could I come in on that point? I think we understand the plurality issue that lies behind this, but the mechanism does not deliver plurality. Under the current system there is nothing to stop your local radio station outsourcing its news from an agency which happens to be shared with a newspaper. Within the content regulation that can deliver the plurality, and keeping radio companies weaker than other media entities does not help.

  736. Before David decapitates me I will move on to my next question! If your wishes were met and precise rules related to single medium ownership were not imposed on radio but instead OFCOM had a power to judge each individual situation against plurality issues and diversity issues which were more subjective, would that not lead to greater uncertainty for you?
  (Mr Mansfield) We do not really want uncertainty—you are absolutely right. What we want to be able to do in running our businesses is be able to predict as far as possible what is possible; so we want to be able to anticipate the result of looking to move forward in a world of future consolidation. We do not want too much flexibility built into the system but what we intend to suggest to you is that you can manage diversity by very tight format control, and it is very tight format control. The Radio Authority do an excellent job in managing format control, and we are not suggesting that OFCOM should not do that. Having separate owners within local media I think provides the plurality of voices and then you have a fallback, particularly as far as the advertiser is concerned and the local advertiser, competition powers which would stop abuse

Mr Lansley

  737. This may be something you want to cover a bit more when you send us an explanation of how you see this working as distinct from what is previously put forward by the Radio Authority, but I just want to be clear of the essential principle of what you are saying. Diversity is governed by format controls. Plurality is the issue governed by ownership controls, and you do not want to arrive at a situation where there are no ownership controls but on the basis of three media voices. Are you talking about three media voices other than the BBC in any locality?
  (Mr Mansfield) Yes.

  738. Why is it that you seem to be thinking in terms of no cross-media ownership? If there happen to be three local newspapers in a particular city, why not have cross-media ownership between newspapers and radio? The issue is three distinct voices, not trying to have, as it were, a newspaper voice, a television voice and a radio voice, am I right?
  (Mr Mansfield) What we are saying is that plurality should be delivered by having a strong local newspaper, a strong local regional television operator and a strong local radio station. We are saying that those three media could not come under common ownership because then plurality would be threatened.

  739. But the very nature of this Bill is trying to deal with converged markets and, in a locality, television and radio and newspapers are a converged market, particularly where news is concerned. Very often news gathering can operate between those markets. So is it not better to deal with three distinct media voices, not trying to pin them down to radio, television and newspapers rather than, say, to try and manage each local market and say we have to have a television voice, a radio voice, etc, as if they were three distinct and separate beasts?
  (Mr Mansfield) That is a good point; it may be too prescriptive, as you say. The important issue here is maintaining plurality and making sure that those broadcasters, particularly in radio and television, are governed by rules regarding impartiality—which both of us are. We are absolutely strictly controlled and if we step outside that particular area then the regulator comes down on us, and the proposals in the Bill are that that should continue.
  (Mr Carnegy) The policy document also makes it clear that the view of the legislators at this stage is that, because regional TV and regional/local newspapers are the two most important regional media at city level, therefore at there is already a rule stopping local ITV owning the local paper, so to an extent some of that cross-media plurality is already delivered by that other rule.


  740. Do the Bill team want to clarify anything in addition to that?
  (Mr Brand) No, thank you.

  741. You have made very good points indeed, and maybe the whole thing was done on Friday afternoon but, in writing to us, because I am genuinely lost by your reciprocity argument, could you clarify all of that, and please write with a unified voice as opposed to separate entities on all issues?
  (Lord Eatwell) Yes. We will provide a response on behalf of the Commercial Radio Companies Association.

  Chairman: Thank you.

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