Joint Committee on The Draft Communications Bill Minutes of Evidence


Examination of Witnesses (Questions 880-898)

MR ROGER GILBERT, DR MIKE STEWART AND MR HARVEY KASS

THURSDAY 4 JULY 2002

Lord Hussey of North Bradley

  880. I think I had better declare an interest because I am in receipt of a pension from the Daily Mail. You criticise the restrictions on national newspapers owning local radio stations unless there are at least two other separately owned local radio stations. Is there any editorial cross-fertilisation between national newspapers and local radio and, if not, what do you see as the rationale for controls on such forms of cross-media ownership?

  (Mr Gilbert) I do not think there is a rationale for preventing national newspapers from owning local radio. There is no editorial cross-fertilisation between them. They address different markets, they take different approaches, have different policies, and in fact, you heard from the previous team that local radio is much more about entertainment than about news and whilst news is important for it, it is not its primary driving force. So I do not think there is a significant cross-fertilisation.

  881. I would not actually agree that news is not a driving force. In many areas the local radio is extremely strong on news and that is the driving force. Is there any advertising-cross-fertilisation? I know how these things can be arranged. It is quite easy to have large receipts from advertising in one part of your organisation which automatically flow into other parts of the organisation.
  (Mr Gilbert) I think at the end of the day you have to serve your customer, and that is what our group attempts to do in every market we address, and if the advertiser wishes to be advertising both in the newspaper and on the radio, that service could be offered, but I think the opportunity to force advertisers, if that is at the root of your question, to take both would soon rebound against the media owner that was trying to achieve that.

  882. I think that might well be the case, but that would not stop you trying. Not yourself, of course.
  (Mr Gilbert) In the end, the market will punish those who try to do it.

Lord McNally

  883. Just before we leave that, you could not imagine in any circumstances a kind of general directive going out to local radio stations saying, "You will notice that the Daily Mail is campaigning on issue X. We would like to see this also reflected in your news coverage."
  (Mr Gilbert) I could not imagine that in our group, no, I really could not, and again, the reason is that people who listen to radio listen to it because they want a particular service, and those who provide radio services should listen to what their listeners want and provide that service. Otherwise, their service will decline and listeners will very quickly turn off if what they get is a message they think is being pumped at them and not something which is reflecting local views.

  884. You could not imagine it in your group; you think we should ask other groups then, do you?
  (Mr Gilbert) I would not like to comment.

  885. ITN has for many of us been one of the great achievements of ITV, yet you, or certainly Teletext, which you have just said is one of your companies, has argued that general licensing conditions could cover the news provider for ITV. How do you think that will be affected by consolidation in ITV? Could that still be the case? Would you be relaxed at a consolidated ITV owning its own news provider?
  (Dr Stewart) We would absolutely agree that ITN has been a terrific success. I think by any analysis, the diversity and consistency of quality of output of ITN is to be applauded. The particular thing we are concerned about is that it is necessary for the prospering and continued development of ITN to invest very heavily in its content, the quality of its people and the technology that it has at its disposal. The current ownership restrictions impede that. They make it that much more difficult, because what you are looking for and what you require is collaborative investment, and that is a very difficult thing to encourage. In relation to your question about a consolidated ITV, I think the market will determine whether or not that is a necessary development. I think the output of ITN is regulated by licence and they are two entirely separate issues.

  886. Is it not an anachronism that we have BBC news, Sky news—why should it not be ITV news which is simply part of the ITV station?
  (Dr Stewart) That may well be an appropriate end point. The point I am making is that there is a tendency to bring together the ownership of ITN and its remit as a nominated news supplier. The point I am making is that they are two entirely separate matters. It is noted in the draft Bill that the standard and quality of news in the UK is very high. The BBC and ITN have played a very significant role in bench-marking the quality of news that is required.

  887. Are you satisfied with how news is covered in the Bill or do you have in mind a specific change to the draft Bill that would give that greater flexibility to ITN?
  (Dr Stewart) I think the continued restriction on ownership of ITN is ultimately a mistake. That is something that should be corrected. The ownership issue is an entirely separate matter from the content and editorial independence of ITN, which is governed by the licence conditions.

Paul Farrelly

  888. We received yesterday the memorandum on the policy detail of the newspaper part of the Bill but we still have not received the clauses, so that is not terribly satisfactory. Have you seen this as well?
  (Mr Kass) I had an opportunity last night to give it a quick read.

  889. I want to ask a question regarding the newspaper regime specifically of Associated given some of the things you have already said in evidence, but I would be very interested in the views of Daily Mail and General Trust as well. For Associated, Mr Kass, can I observe that you object to the complexity of the proposed new regime and also the vagueness of the concept of plurality and also to some of the discretions that have been granted to the Secretary of State. Is your argument that these matters should be left to the Competition Commission or should this Bill contain a quantitative and as far as possible objective definition of plurality? The second part of the question is: how do you view the public interest consideration as a test for assessing newspaper mergers?
  (Mr Kass) First, by way of background, because it affects all my answers, I would just like to mention one or two statistics. Over the last ten years national newspaper circulation has declined by 13 per cent, despite Associated Newspaper circulation going up by 24 per cent. Over the same ten-year period the worst performing five papers in percentage terms have gone down from 37 per cent to 50 per cent. We share the diversity and plurality objectives. We have a grave concern that the search for the perfect plurality approach will lead to seriously damaging consequences for diversity. In answer to your question, our first position as set out in our first consultation paper was that we believe that general competition law under the Enterprise Bill with the "substantial lessening of competition" test would suffice. We recognise that the Government is very keen to move forward with a special test. We want to contribute to that debate and we have some very firm views on the correct way forward. The Government set out to introduce a more streamlined, light-touch approach. What we are faced with is potentially four regulators: the OFT, the Competition Commission, OFCOM and the Secretary of State. We feel the objectives are correct but we feel this Committee should ask itself very clearly what each extra level of regulation—you only have to look at the table at the back of the Memorandum to see that it becomes very complex—gives. We start off with the OFT as the initial vetting process. We believe the Competition Commission provides a world-class regulatory body. The Memorandum that came through last night serves as a tribute to the work of the Competition Commission, and I would urge the members of this Committee to ask for copies of two or three of the decisions—maybe Trinity/ Johnston Press and the Trinity/ Mirror decisions-, and see the approach, see how thorough it is, see the extent of consultation, see the extent of public involvement, and then ask: what has OFCOM got to offer here? OFCOM has been set up under the Communications Bill. I know newspapers communicate, but really you are talking about telecoms and the media that have statutory duties of impartiality. The whole mind-set of OFCOM will be completely different, and the question has to be asked: what will OFCOM add? In our view, it will not add anything at all in the way that is proposed. We believe that the Competition Commission is the ideal body to decide these things. That is not to say that OFCOM cannot have a role. OFCOM can fully consult as part of any competition investigation, transparently and publicly, instead of, what appears to be the case, advising the Secretary of State in an untransparent way, which we think is wholly unsatisfactory. I ask this Committee to ask what has OFCOM to offer to this debate? What are the problems it poses? First of all, it creates uncertainty, as does—this is my second point—the Secretary of State's role. We feel that one of the overall objectives here is to ensure some sort of political balance in this process. We think it puts the Secretary of State in a somewhat invidious position to be the ultimate arbiter, notwithstanding the fact that there is a Competition Commission in place with an excellent record of sound analysis that stands up to great scrutiny. We think whether a Secretary of State might in the future be politically motivated is only one point. From the public interest point of view, we cannot see any extra public interest being served, and the perception is not right. We feel if it ain't broke, don't fix it. The Competition Commission coupled with the initial screening process by the OFT we think can do an excellent job. That brings me to the last point: what about the test? Although we mentioned in our paper that plurality, this vague notion that three different bodies and the Secretary of State would be considering without any point of reference, we looked at the Memorandum last night and that is still very much the case. We think that is going to inhibit commercial decisions, we think it is unnecessarily vague if there is going to be something, and we have a suggestion for what the test should be. We suggest these, in very brief terms, should be the relevant elements of an EPI test, and I will leave a copy with the Secretary. First of all, all relevant matters should be considered. Secondly, the question should be asked whether any individual or company is likely to exercise an excessive level of influence over the views expressed in all media—stress all media—available to citizens of the UK. We think it is perverse to have a situation where we recognise that some newspapers over 20 years have lost up to 70 per cent of their circulation because of the introduction of new, competing media, and then when it comes to the ownership test, the destination of at least some of that influence is not taken into account as part of this test. But, most importantly, we are spoiled in this country. We have a broad spectrum of diverse newspapers like nowhere else in the world. We feel very strongly that we should strive to preserve that diversity. We share the plurality objective, but over-focusing on plurality is a major threat to diversity. By that I mean struggling papers, of which there are quite a few, turn into doomed papers. If an existing owner is going to be prevented, because of an overly strong plurality test, from taking over a struggling paper and turning it round using its synergism and expertise with editorial independence, we think there is a major threat. The next part of the test is to take particular account of the need for accurate presentation of news and free expression of opinion. That comes from the existing rules. Finally—and we think this is very important- the likelihood of the purchaser maintaining standards in those respects. People buy newspapers for different reasons. People might buy a trophy asset of a newspaper because of the entre«es and influence in the short to medium term and the relative advantages they think that might give. We think that if there is going to be an EPI test, the question should be asked and an assessment should be made: is the proposal in the long-term interest of the paper? If not, if the paper falls into the wrong hands, the paper may cease to exist three or four years down the line, a few Downing Street dinners later.

  890. I think many people will be heartened to hear that in principle you think there is sufficient public interest in this, that there is a case to be made for a public interest test. It is just a question of what form it takes.
  (Mr Kass) It is not our first position but we understand the argument. It is a valid argument, and we want to contribute to that debate. We feel opening up the comparison to influence in all media and looking at the likelihood of the purchaser making the paper are critical.

  Paul Farrelly: I would love to hear the voice of Middle England.

Baroness Cohen of Pimlico

  891. We were a little startled to hear you sweep OFCOM aside with such speed. It has a brief that covers electronic literacy, relations with self-regulated electronic media like the Internet, as well as cross-media ownership. In a rapidly developing environment where methods of delivering content are changing all the time, do you not think it makes OFCOM reasonably well placed to offer informed advice on newspaper ownership?
  (Mr Kass) No, I do not. The OFCOM areas of regulation are a completely different culture to newspapers. There are statutory duties of impartiality but I am not for a moment saying OFCOM should not have its full say, in a transparent way, by however detailed submissions it cares to make to the Competition Commission, which in turn will consider those and make its decision and give its reasons in a fully transparent way. We are not suggesting OFCOM should be excluded from this consulting. We are not suggesting the Secretary of State should be excluded from consulting. But we do not think either OFCOM or the Secretary State should have a formal regulatory role in this process.

Mr Grogan

  892. You do not make reference in your evidence to the proposal to lift restrictions on foreign ownership, neither did the Scottish Media Group, and Mr Cruickshank turned out to have quite trenchant views nevertheless. I would invite you to give your views on this particular aspect.
  (Mr Gilbert) We have been the beneficiary ourselves of a very liberal regime in Australia, where in the radio sector foreign ownership is allowed, and we have established a very substantial and successful radio group in the last few years. It would therefore be somewhat churlish of us to deny that opportunity to others investing in the UK. We believe it can bring benefits, and in fact, the Minister for Communications in Australia has said to us that he believes we have been a very good example of the way foreign ownership can bring benefits to a country. But having said that, I think it would be a great shame if our country was not allowed to invest in others on a reciprocal basis. We do believe that the Government should pursue that as an objective, not to prevent ownership here but to pursue ownership in other countries, to achieve reciprocity if it can be achieved. I think the balance question really is this: it is all very well to look at the benefit to come to the UK, but we also want our own UK companies to be able to grow and flourish and stand up as equivalent on the world scene.

  893. Could you see a stage if that were allowed where your group might be wanting to buy American radio stations or whatever?
  (Mr Gilbert) If we were allowed to, we would certainly be interested, because I am sure we could improve some of the content.

Lord McNally

  894. Would you see reciprocity being such an issue that you would rather deny the British industry inward investment if it were not forthcoming?
  (Mr Gilbert) Not at all. I do not think I said that. It is something where we would believe benefits could accrue to the UK. I would just like to have as an objective the reciprocal arrangements with countries which can invest here; not to preclude them from investing but simply to pursue that objective.
  (Mr Kass) We think it should be a very high priority for the Government to prioritise ensuring reciprocity. We do not think the shutters should be put down. We do think it should be a high priority for the Government to prioritise that and that there should be a review process periodically to see how that is going.

Lord Pilkington of Oxenford

  895. You know as well as I do that there is no possibility of America allowing reciprocity. Do you really think America would allow a reciprocal arrangement? I agree with your ideals, but as a practical man of affairs, do you think the British Government is going to persuade President Bush and the party in power to do that?
  (Mr Gilbert) I think it unlikely.

Paul Farrelly

  896. When I said I wanted to hear the voice of Middle England, I meant the Daily Mail. Very briefly, we would be interested in your comments on the newspaper merger issue and reform in general, and the principle and substance of the public interest test.
  (Mr Gilbert) You have heard at length from my colleague, who works with an organisation that owns the Daily Mail. I do not think I could add to what he said. He has made all the points that we would wish to make.

Chairman

  897. The overall thrust of the Bill is deregulatory, and I think the Committee has largely brought it into the spirit here. Regulation does not remain static; it tends to either suffer from regulatory creep or you begin to back off, which brings in the whole issue of self-regulation. We had an interesting and productive discussion with ISPA about self-regulation in the advertising industry. Mr Kass in his evidence talked about perception being a big thing. Do you have any suggestions as to how we could create a credible self-regulatory framework, one that one could say "By what test is natural justice being served?" This seems to me a very important issue and something which, if we could develop it, we would all be much better off. Do you have any suggestions as to how to create a self-regulatory framework that people can really believe in, which has some transparency attached to it?
  (Mr Gilbert) For cross media ownership?

  898. Generally.
  (Mr Kass) It is a very interesting concept and one that is appealing. We would like the opportunity to give it some thought and drop the Committee a note if that is possible.

  Chairman: We would be very grateful because it has raised its head and we are all tremendously attracted to it if we can find a mechanism that gives it some kind of quality stamp. Thank you very much indeed.





 
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