Joint Committee on The Draft Communications Bill Minutes of Evidence

Examination of Witnesses (Questions 780-792)



Lord Crickhowell

  780. Can I bring you back to the Bill and ask you what powers you think ought to be written into the Bill to achieve what you want? Can I put to you a specific question which relates to something that Channel 4 put to us? What would you say to a ratchet on independent production quotas based on revenues and/or audience share? Or, if the independence of the ITV network centre would make that unworkable, would a power for OFCOM to vary the individual remits of the commercial public sector broadcasters in response to movements in audience or revenue share give you what you want? That is a specific question about a ratchet and a general question about what do you actually want altered to get what you want to achieve. This is specifically about the Bill.
  (Mr McVay) We actually have some amendments drafted for specific clauses. In clause 3 on general duties we would like to see that extended further so it was not just to promote competition and make available services and facilities.

  781. Perhaps you can let us have those.
  (Mr McVay) We will let you have them but we have detailed amendments which we have provided to government advisers and government departments. We would like to see some more power put into the general duties in terms of competition issues for OFCOM and we would also like a specific code of practice to be included in clause 189 which is the independent production sector, which is really to outline OFCOM's powers to develop a code of practice. We must stress the code of practice is not a detailed proposal just now. It will be worked up and it will be a co-regulated code of practice for the industry. We have looked at this carefully and we want to have something which is flexible, light touch and that reacts to market conditions in the future. What we do not want is something that is not flexible.
  (Mr Bazalgette) In a sentence, we think the danger of the Bill as currently drafted is that it is almost exclusively about broadcasting, distribution, about brokering between spectrum owners and is not really about how do you get the best content into people's homes. We think the viewers care about content and that is in fact what drives the new technology like broadband and digital television. It is content and ideas. The Bill as currently drafted appears broadly to overlook that in its spirit and philosophy.

  782. And a power for OFCOM to vary the individual remits to the public sector broadcasters?
  (Mr McVay) I think TO2 seems to have that power anyway in negotiation with the broadcasters. It can vary the quota.

  783. Are you satisfied with the existing power?
  (Mr McVay) We are very happy that we have that security in the Bill but we think it does not really take us to where we want to get with our companies. We would like something which specifically laid out a competition test and specific powers for OFCOM so that we would have something which has a transparent and open market concept for the future.

Mr Lansley

  784. Correct me if I am wrong, but in effect what you are saying is that you are content that the Bill has powers to set a continuing floor for independent production and other matters but past legislation, as you described the floor has become a ceiling, and that is what tends to happen where you have an intervention but not a market. The intervention becomes normative in the market place. How do we get above the ceiling is the question now. What I do not understand is why you want the Bill specifically to make provision for a code whereas all the things you are asking for and the argument you are presenting is that if there were a fully competitive market these things which you seek would be available anyway and the code would be unnecessary. We can come on to the constraints on that but why precisely does the Bill need a code rather than strengthening further the ability of OFCOM to use competition powers to deliver a competitive market in supply and content?
  (Mr Bazalgette) Our first point would be that the quota, as you rightly say, was brought in in 1988 and created a ceiling. We believe we are economically and in terms of influence a small part of the sector. We really would like to see stated fairly specifically the direction OFCOM ought to go in to create a competitive market place for programme supply. We would be concerned were it merely given broad competition powers. We have seen competition authorities before which we feel have not listened that sympathetically to our arguments in the last 14 years so we are seeking something more specific so that the Bill can lay down a specific direction that everybody agrees the market ought to go in.
  (Mr McVay) We welcome the competition powers that have been given to OFCOM. We would like to see that go a little bit further. We understand from the Enterprise Bill that there will be more powers given to OFCOM. The reason we want a code is that we have a range of voluntary agreements with various broadcasters, most of which vary in terms of how transparently they are dealt with and how fairly they are dealt with. We would like to have something which would mean we had a legitimate area of appeals so that you can go to OFCOM and discuss our concerns and also be able to refer back to the competition authorities. We feel that the code in legislation will give us an environment which will be flexible which can react to market conditions but which gives us some basic principles for our businesses to go forward on rather than continually fighting vertically integrated broadcasters in trying to extract some value from the system.

  785. Can I put to you that in effect what you are saying is that you want to have a competitive market but you just do not think that OFCOM is going to take that up and that you want the Bill to do something less than that by way of the code. Let us face it: the analogy you have drawn at various points is with the code drawn up by supermarkets after the OFT investigation. Essentially what you are asking for is a market investigation into competition in the supply of programme material to broadcasters and arising from a market investigation a set of undertakings entered into by dominant purchasers in that market. Why should we write into the Bill those undertakings rather than have those undertakings springing from a proper market investigation? Yes, you have had independent economies but surely that is the job of the Competition Commission to undertake that market investigation and the responsibility of OFCOM to initiate it if there is, as you assert, a lack of competition in this market?
  (Mr McVay) We have a long standing complaint in the OFT about the BBC's position in the market which has been at the OFT for three years.

  786. That is the past. We are talking now about OFCOM and what OFCOM will do. There is nothing legislatively speaking which prevents OFCOM doing the thing you want it to do.
  (Mr McVay) No, there is not. What we are concerned about are all the other issues that may arise as OFCOM—

  787. You are moving to a Christmas tree argument, that all the things you want OFCOM to do in using the powers, we have got to write into the Bill now rather than OFCOM actually using its powers and moving towards competitive markets applying competition powers. Why should we write into the Bill some prior assumption that OFCOM will not do its job properly?
  (Mr Bazalgette) I understand the question. If you have been fighting the battles we have been fighting for as long as we have been fighting them we would be sitting here and saying to you please lay down a framework that recognises that there are things here to be addressed. That does not say we do not trust OFCOM. It merely gives it guidance and sets it in the direction. We are not asking for a tablet of stone. We are asking for a framework and direction. We have not had it up to now and we are seeking it because the Bill is if you like a significant watershed.

  788. Can I ask you something which I thought would be part of your answer to my question, which is that it is all very well talking about what OFCOM can do but actually the way the BBC works is that it has this public service remit which gives it a degree of protection and whether it is an accurate representation of what the BBC does to deliver its objectives or not, it uses the cover of the licence fee, charter and all the rest of it to embrace its in-house production. In effect you gave them that argument. You said that the BBC has to have its strong in-house production. Why? Its job is to deliver public service broadcasting and channels and programme content in order to do that. There is nothing in logic that says it has to do it by in-house production.
  (Mr Zein) But the market is inefficient at a commercial level. Public service remits are commercially inefficient, so that is why we are supportive of the BBC having an in-house production arm because it will make public service decisions based on the public service agreement rather than economically. The two issues, our concern and how we want the Bill to deal with them, are similar to the way the broadcasters have asked you for protection to ensure access to platforms. OFCOM will have the capability to do it but everybody wants to know that it is a consideration that has been looked at and a direct obligation of that. The arguments about fair and transparent dealing and the openness to platforms are very similar to the ones that the BBC and ITV have already put.

  789. It would be reasonable to say that in so far as the BBC is exposed to competition regulation directly you do not need the BBC to be required to have a separate—
  (Mr Zein) Regulators have consistently failed to extend the BBC's expansion—

  790. Regulators hitherto have not achieved the objective but in so far as the BBC is protected from competition it should have been the subject of what in the front part of the Bill we would call conditional access, access for you to the BBC as a substantial part of the market place for your product: yes?
  (Mr Zein) Yes, and not just our access to it but also the way it acts in the market place and whether that is distorting the children's market, the video market or the magazine market. All these things should be looked at by the regulator.


  791. John, you can help us if you would write to the Committee setting out the past history of dealing through the present regulatory process. The one absolutely consistent theme in the last several weeks has been the failure of existing regulators to deal with dominant players in the market. I think that is what you are suggesting and it would help us a lot because we are looking for exemplars and we are making damn sure that the new regulatory body does not fail in the same way.
  (Mr McVay) We will be delighted to.

  792. Thank you very much. On the code of practice, the Secretary of State has had an opportunity to look at this. I cannot ask you to comment on her behalf but in principle are you attracted to the code of practice because it would be quite easy for us to suggest that it does get written in to the Bill's framework?
  (Ms Ager) I do not think I can go as far as to say yes or no to that. I will say that I think PACT have made some interesting proposals and we want to give them proper consideration. In particular we will want to look at whether ex-ante regulation is necessary in this area in view of OFCOM's existing competition powers and we will want to be sure that any new measures will be in the public interest. I am not sure there is much more I can say at this stage because the Minister has not made any decisions.

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2002
Prepared 5 August 2002