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Lord Crickhowell moved Amendment No. 284:

(1) For paragraph 1(2) and (3) of Part 2 of Schedule 2 to the 1990 Act, there shall be substituted—
"(2) Sub-paragraph (1) shall apply in relation to any Broadcasting Act licence other than a licence to provide a Channel 3 service and a Channel 5 licence as if paragraphs (a) and (b) (and the reference to those paragraphs in paragraph (i)) were omitted."
(2) OFCOM shall, within a year of the coming into force of this section and from time to time thereafter, carry out a review for the purposes of this section.

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(3) Such a review shall consider whether, in the opinion of OFCOM—
(a) the provisions of sections 273, 274 and 280 to 284 are operating in such a manner as to provide for a fair and transparent programme supply market with respect to Channels 3 and 5;
(b) the relevant provisions of Chapter 4 of this Part are operating in such a manner as to provide for effective content regulation of Channel 3 and Channel 5 services;
(c) the provisions of sections 260 to 267 are operating in such a manner as to provide for a continuing significant contribution by Channel 3 and Channel 5 services towards the achievement of the purposes of public service television broadcasting in the United Kingdom specified in section 260;
(d) the provisions of sections 344 to 349 provide adequate additional safeguards in case of change of control of Channel 3 services or Channel 5; and
(e) the powers available to OFCOM under the Competition Act 1998 (c. 41), Part 4 of the Enterprise Act 2002 (c. 40) and sections 309 to 311 of this Act are adequate to promote effective competition in the broadcasting market in the United Kingdom.
(4) When, as a result of a review carried out in accordance with subsection (2), OFCOM considers that each condition specified in subsection (3) has been met, it shall make a report to that effect to the Secretary of State, giving reasons.
(5) The Secretary of State shall lay any report made to him under subsection (4) before Parliament.
(6) When a report has been laid before Parliament in accordance with subsection (5), the Secretary of State may by order repeal paragraph 1(1)(a) and (b) of Part 2 of Schedule 2 to the 1990 Act and make such consequential amendments to that Part of that Schedule and to this Act as he thinks fit.
(7) No order is to be made containing provision authorised by subsection (6) unless a draft of the order has been laid before Parliament and approved by a resolution of each House."

The noble Lord said: The purpose of this group of amendments is to provide an opportunity to debate Recommendation 86 of the Joint Committee, relating to non-EEA ownership of certain broadcast licences. Amendments Nos. 308, 322A and 322B remove the existing provisions to repeal such ownership restrictions. Amendment No. 284 permits removal of those restrictions by means of secondary legislation, but makes such removal contingent upon Ofcom expressing satisfaction with the effectiveness of the controls introduced under the Bill. The amendment therefore seeks to reflect the additional controls proposed in the Bill compared with the draft Bill, and the Government's desire for flexibility, while reflecting the Joint Committee's concern about the timing of the removal of the restrictions.

I have to say to those who favour the opening up of the market in certain broadcast licences to non-EEA ownership—they include my own Front Bench—that they sometimes display charming innocence and naivety in which the splendid principles that they espouse of open competitive markets and free trade, bear little relationship with the real and sometimes nasty world

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outside described in evidence given to the Joint Scrutiny Committee by, among others, Mark Thompson, the chief executive—

Baroness Buscombe: I take great exception to being referred to as naive and innocent. I hope that my noble friend will withdraw that remark.

Lord Crickhowell: I hate to upset my noble friend, but I am going to continue with my speech. Innocence is perhaps the word. I believe that the evidence I shall put to the Committee rather justifies the comments that I make. But I was going much wider than my own Front Bench. I was addressing my remarks to a far wider group of people and indeed to some of the Ministers who take this view.

I turn to the evidence given to the Joint Scrutiny Committee by, among others, Mark Thompson, the chief executive at Channel 4, and Greg Dyke. Mark Thompson did not think that there would be new factories of British production paid for by US majors. He thought it much more likely that they would see ways of exploiting US-created, globally valuable intellectual content in this market. In its written evidence Channel 4 told us:

    "It is difficult to imagine a scenario in which consolidation and foreign ownership would not lead to a reduction in employment in the production industry unless there were specific safeguards with regard to content originated by UK producers".

The trouble is that at best quotas will only give partial protection. I again quote from the Channel 4 evidence:

    "The UK production focus of US parents is also likely to change, with greater priority being placed on formats which can be exploited globally, rather than simply in the UK. The potential loss of content with local relevance and diversity, let alone the loss of minority interest programmes, is therefore also of real concern".

Greg Dyke said that he failed,

    "to understand why Britain would want to allow American media companies to own our largest commercial broadcasters, while no European one is going to own a station in Cincinnati".

Referring to his own experience at Pearson, building up what was probably the biggest independent production company in the world, he found that,

    "there are only two sorts of television products around the world, American and indigenous, and American dominates the world, and what you were always trying to do in America was to find some guaranteed markets because the deposits on production in America being sold to NBC or ABC are so large that what you wanted was some guaranteed markets, and therefore the real danger is that you will get a significant amount of dumping if you allow large American broadcasters who are also production companies having a studio . . . So I am not at all convinced of the arguments for changing the ownership rules in the way that is proposed".

Nor am I.

All this evidence demolishes, if I may use the phrase without causing offence, another naivety that because European companies do not move into our markets in this way, there is no reason to believe that Americans will. The Europeans do not have the American product so easily sold around the world; they do not have the very substantial libraries of audio visual content in English which they can place in the UK to drive down

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costs as well as increasing their value in secondary markets such as video, DVD, merchandising and publishing.

During a discussion meeting held by the Joint Committee on 4th July—covered in Annex 4—one witness who had been employed for many years by Disney confirmed the Greg Dyke view that the economics of the television business in the US necessitates the exploitation of content across as many international distribution points as possible. Where distribution points are owned and operated by a US major, the pattern is for an increasing percentage of content to be sourced in-house. Production quotas would be an inadequate protection because they would safeguard the quantity of independent productions shown but not the quality of them. There was a strong probability that independents would be granted access for cheaper programme slots, but would lose access relating to more valuable forms of programming, with these slots being preserved for in-house productions from a US studio.

The US majors have to be seen as huge international production and distribution machines in which the US market is critical and all other markets are peripheral. In the face of the argument that US investors would bring inward investment, expansion and job creation, we heard how when Disney brought ABC it quickly cut costs and merged operations. ABC's international programme sales operation was quickly reduced from 200 to two. The same would happen, I suggest, to the sales operations of UK companies.

We summed up much of this evidence in paragraph 243 of our report, and in particular we drew attention to the,

    "cultural loss, with greater priority given to American programmes and less regard being had to the genuine commitment to public service broadcasting that had informed content production and made effective content regulation possible".

It is argued that the system of regulation being established by this Bill and the regulatory measures that have already been put in place will prevent all this. I have to say that my confidence that this might be so was considerably undermined by some agreeable homework that I gave myself while we were gathering our evidence. I read the remarkable history of the film industry by the noble Lord, Lord Puttnam. There is one overwhelming message that emerges from that history which is that for almost 100 years the countries of Europe have attempted by regulation to protect and preserve their own film industries from domination or, worse, destruction by the American giants and they have completely failed.

I have spoken of naivety and I am sorry that it has caused offence. I believe that there is naivety in the oft-repeated claim that there is no need to worry because British audiences, particularly regional audiences, will want familiar British programmes and American owners will not risk losing their advertising revenue by changing the character of what they place in the British market. The claim is made that they will maintain UK production and regional production, not because they are told to, but in their own self-interest.

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I admit that I would never call my friend and former colleague, Clive Jones of Carlton, naive about anything, but in perfectly properly considering the commercial interests of his company, I think that, like others before him in similar situations, he may have misjudged what is the likely outcome. In his evidence he said that he was relaxed about possible take-over, that regulation would be safeguard enough and that American companies would not come and destroy the business that they had just bought. His co-witness, Mr Mick Desmond, added:

    "I think anyone coming in and fundamentally changing that shape and mix of programming would have a huge financial horror show".

As they gave their evidence, I was reminded of so many who were employed in the City at the time of the "Big Bang" who made very similar comments and whose complacency was quickly dissipated. In many cases they were very soon out of their jobs.

Paul Farrelly MP put it to Clive Jones that perhaps he was relaxed because the owners of existing companies could see an opportunity to realise their investments. Certainly, there are owners and those holding underwater options who might welcome a foreign take-over in current conditions. For my part I simply ask the question: would a US company buy with the object of acquiring declining advertising revenue or might it not be that the real motives would be those described by Channel 4 and by Greg Dyke to which I have already referred?

I am deeply sceptical of the view that audiences would fade away confronted by more US material. The American experience provides a stark warning. I suggest that those members who have not yet done so to read two recent contributions to the debate: the first was published on 1st February this year by Professor Michael Tracey; the second is Barry Diller's keynote speech to the National Association of Broadcasters in Las Vegas on 7th April.

Barry Diller is one of the great pros of the industry. He argues that what happened in America was an unintended consequence of the US Administration's programme of deregulation:

    "Five corporations, with their broadcast and cable networks, are now on the verge of controlling the same number of households as the big three did 40 years ago. We didn't think that was such a healthy situation back then, but back then there was this real, scary regulation—they may have controlled 90% of what people saw, but they operated with a sense of public responsibility that simply doesn't exist for these vertically integrated giant media conglomerates, driven only to fit the next piece in their puzzle for world media dominance".

He asks, "Why should we care?" and answers that we should care for the same three reasons that the head of the federal communication commission cares. He quotes the chairman:

    "the public interest is about promoting diversity, localism and competition".

Should we not care about the risk involved in selling control of British companies with a sense of public responsibility to those seeking world media dominance and in the process losing diversity, localism and competition? I suppose I shall be told that that is all in

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America, but it is the American conglomerates and practices that the Government seem to be eager to have here.

Professor Tracey is British, but he has lived for many years in America. Since 1988 he has been professor at the University of Colorado, where he is director of the Centre for Mass Media Research. He makes an eloquent plea for the values of public sector broadcasting: quality, integrity, democratic purpose, creativity, education and diversity. He believes that the legislation we are discussing threatens all of them. So back to the naive belief that the British public will reject what is put before them or that American owners of British television will not risk putting it before them for fear of losing advertising or respect from the regulators.

Fear of losing advertising! It is the demand of the advertisers always to maximise audiences that is driving what is happening in the US with a huge reduction in real news broadcasting, the decimation of children's broadcasting, the extraordinary success of reality TV and the inexorable conclusion reached by executives that the audience is never wrong.

The remarkable collapse of quality news and comment programmes in the US, which Professor Tracey analyses in much detail, with its uncomfortable implications for democracy, is leading, he says, to,

    "a crisis of journalism, nurtured and sustained by the dominance of the market".

He suggests that,

    "the basic problem lies in treating communications as commerce rather than as an essential and necessary aspect of the public realm, that space in which exists public discourse, civic and democratic values, and in seeing audiences as consumers rather than citizens".

We have a situation where it is proposed that casually we should open up our industry to that quantitative change with just a few huge players that now co-direct all of America's media, which has brought about enormous qualitative changes. It has led Ted Turner, the legendary founder of CNN and former deputy chairman of AOL Time Warner to say,

    "It's sad we're losing so much diversity of thought".

Professor Tracey observes,

    "The assumption inside the Blair Government's proposals for, in effect, a free market in ownership should therefore be troubling because of the delusion, or is it a lie, that lurks at the heart of the policy".

He suggests that the policy does not adequately allow for,

    "the fact that it is the natural instinct of corporate capital, left to its own devices, to control the market . . . and to cut costs whatever the price".

Against those warnings and the background of the American experience, the question that confronts us as we consider the amendments is: first, can we be confident that we can protect the crown jewels of British television by regulation? Secondly, is there any need to endanger the crown jewels by rushing the decision? In moving the amendment I am not taking a final and irrevocable stand on the arguments any more than we did in the Joint Committee. Our stance then and my stance now is rational and reasonable. It is

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based on the one unarguable fact: if we are to protect what is best in British commercial television there has to be effective regulation.

The Joint Scrutiny Committee was worried about the enormous range of challenges that Ofcom will face after it assumes its regulatory functions. We thought that it should be allowed to establish itself as an authoritative regulator of commercial public sector broadcasting before taking on the tasks that would arise from the lifting of restrictions on non-EEA ownership. Ofcom would then be able to facilitate a decision by Parliament based on evidence rather than on expectations.

The Joint Committee recommended that legislation to lift the restrictions on non-EEA ownership should not be brought forward until Ofcom recommended such a change, should it do so, following any of its formal periodic reviews of media ownership. Our parallel recommendation that there should be a review of the programme supply market in British broadcasting produced a two-and-a-half month review carried out by the ITC. That goes some way to giving comfort to those who support the change now proposed in that it notes majority support among the submissions received for it and recommends further regulations to provide what it calls an "insurance policy" to cover the supply risks associated with the change.

It also mentions the downside that I have addressed. By no means does it represent the comprehensive analysis that is surely needed of the likely impact on the strength and quality of public sector broadcasting in this country—what I referred to as the crown jewels. Some new investment and skills and additional worldwide sales of some types of production will be no substitute if the price is the destruction of one of the great glories of British television. I do not in that respect want to follow the American example because British public sector broadcasting must be defended. I beg to move.

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