Joint Committee on The Draft Communications Bill Minutes of Evidence


Memorandum submitted by News International

  This letter represents News International's written evidence to the Joint Committee on the Draft Communications Bill.

  Our comments focus on the proposals relating to media ownership as set out in the policy document that accompanied the publication of the draft bill. We have not included a detailed response to the clauses of the draft bill as the clauses most relevant to us (those relating to media ownership) have only recently become available and, given the tight deadline for written submissions to the Joint Committee, we have not yet had the opportunity to examine these clauses in detail.

  News International will make a detailed response to the full draft bill in its representation to the Government, a copy of which will be forwarded to the Joint Committee.

1.  INTRODUCTION

  1.1  News International welcomes the broadly deregulatory approach of the Government's proposals. The proposals set out in the policy document are a big step in the right direction. The Government has stated its intention to remove many of the most anachronistic, inflexible and inconsistent media ownership rules.

  1.2  We believe the Government is right to recognise the significant and ongoing changes in the way that the media are produced, distributed and consumed in this country, but we believe that the Government can go further while still achieving the objectives it has set forth in its policy statement.

  1.3  We have argued consistently that foreign and cross-media ownership rules should be removed and that the industry should be regulated like any other—through the rigorous application of competition rules. We believe that this is the best way for the Government to achieve its policy objective of creating the most dynamic competitive communication industry in the world.

  1.4  With respect to the ongoing review process, we are pleased that OFCOM will be required to ensure that regulation is kept to the minimum and to identify any areas where regulation is no longer necessary. The Bill should make clear that regulation cannot be increased without first returning to Parliament.

2.  FOREIGN OWNERSHIP RESTRICTIONS

  2.1  The UK Government has been bold and forward-thinking in proposing to remove the prohibition that prevents non-European individuals and companies from holding broadcasting licences.

  2.2  It has recognised that there are no good arguments for retaining this protectionist rule; it is unnecessary, anachronistic and discriminatory. Its removal, on the other hand, will open up the UK media industry to fresh ideas and investment from around the world and UK consumers will be offered greater choice from a more competitive market.

  2.3  There has been some scare mongering in the press since the publication of the draft bill that the removal of foreign ownership restrictions will result in the UK's media being bought up by foreigners who will foist their own agenda on the British public. This kind of reaction is hysterical, if not xenophobic. First, under existing law foreign European companies such as Bertelsmann and Mediaset may already own broadcasting assets like the ITV companies or Channel 5. Second, any foreign owner has to meet the relevant licensing requirements and, as international experience has shown, has to deliver content that appeals to the local market in order to succeed. It is consumer demand that drives content, not ownership. Foreign ownership of newspapers is not prohibited and, as a result, Fleet Street has a long history of foreigners bringing investment and innovation to the UK industry and successfully delivering the content that UK consumers want. What, after all, could be more British than The Times or the News of the World? Furthermore, it is only because the rule has never applied to new media that this company has been able to invest in satellite TV and, through BskyB's successes, Britain now leads the world in this area.

  2.4  Despite recent headlines about the ambitions of various companies, the fact is that we do not know what developments will follow from the removal of these restrictions—whether a non-EEA company will show interest in ITV or Channel 5, or whether indeed they are even up for sale.


3.  CROSS-MEDIA OWNERSHIP RULES

  3.1  The proposed relaxation of cross-media ownership rules is a step in the right direction. However, having accepted the market principle the Government should go further. It should have faith in the competitive system and its ability to deliver the outcomes the Government desires. Competition rules are a flexible and sophisticated tool that can be used to define and analyse the relevant market on a case-by-case basis, assessing the number of voices in a market before reaching a decision on any proposed merger or acquisition. Ownership thresholds, by contrast, are a blunt instrument that creates arbitrary barriers to investment and growth, preventing skills and capital acquired in one sector from being deployed in others—to the ultimate loss of the consumer. Their inflexibility means that whatever threshold is set, it will quickly be out-of-date in a dynamic and changing market—probably before the legislation is even passed.

  3.2  The Government justifies the retention of the rule limiting the joint-ownership of national newspapers and Channel 3, and similar rules at the local level, on the basis that these combinations would represent an unacceptable concentration of influence. Measuring and pinpointing influence is difficult; individuals form their views in different ways and from different sources. Determining which source is more influential overall is therefore impossible. The Government should not base public policy on such a vague and subjective concept.

  3.3  As the policy document acknowledges, competition law can address issues of concentration, efficiency and choice, and will assure dispersed ownership and new market entry. The UK media sector is already very competitive, offering consumers a wide choice of news and entertainment, delivered in an increasing variety of ways. With the exception of the BBC, control of the media in the UK is highly diffused. Competition rules can ensure that the market remains competitive and that, driven by consumer demand, it delivers diverse content and responds to different tastes and points of view.

  3.4  The Government wants the UK media sector to be the most competitive and vibrant in the world. But it will be prevented from achieving this goal if business decisions continue to be distorted by a set of inflexible roadblocks.

4.  NEWSPAPER MERGERS

  4.1  News International welcomes the proposal that newspaper transfers will be treated, as far as possible, like any other merger. We are also pleased with the removal of the requirement for the Secretary of State's prior consent to newspaper transfers, and of the criminal sanctions against purporting to transfer a title without consent. We are concerned, however, by the proposals for referring newspaper transfers for wider investigation.

  4.2  The document states that newspaper transfers that potentially raise plurality concerns will require wider regulatory scrutiny and that such investigations "will be directed at those cases that involve the public interest in accurate presentation of the news, free expression of opinion and plurality of views in the Press" (9.7.4). Not only would this represent an additional and, in our view, unnecessary hurdle to Competition Act clearance, but we are also very concerned by the suggestion that OFCOM would have a role in advising the Secretary of State on such issues. OFCOM, as a television, radio and telecommunications regulator, will have no relevant expertise in newspaper matters. Furthermore, to give a Government agency power to decide what it considers to be the "accurate presentation of the news" is surely contrary to the Government's desire to preserve "free expression of opinion and plurality of views". In a free and competitive newspaper market such as the one we have in Britain there is no role for a state regulator. In the newspaper markets we are not dealing with spectrum scarcity or market failure, features that Governments say justifies content regulation. We are dealing with a media sector that is feisty, competitive, and represents a wide range of views—as it must in order to attract readers.

5.  CONCLUSION

  The Government has taken a bold first step in the right direction. We applaud its courage and vision, and urge it to pursue its vision of vibrant, competitive, innovative media markets that serve viewers, listeners and readers by eliminating those arbitrary ownership restrictions that it has thus far chosen to leave in place.

June 2002


 
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