Memorandum submitted by SMG plc
SMG plc is a successful and ambitious cross-media
business with interests in commercial television, radio, newspapers,
on-line, cinema and outdoor advertising. Headquartered in Glasgow,
the Group's interests include Scottish regional operations, and
UK national businesses. (See Appendix I.)
SMG has contributed to each stage of consultation
on the forthcoming Communications Act. We have twice given oral
evidence to the Culture, Media and Sport Select Committee, and
have submitted written evidence to the Government, both in response
to the initial White Paper and, subsequently, on the specific
consultation on media ownership. On each occasion, we have put
forward the case for the Government to take a deregulatory approach
to media ownership to allow UK media owners to grow, achieve sufficient
scale to compete with global players and to reinvest in UK media
content and infrastructure.
We welcome this opportunity to submit our views
to the Joint Committee on the draft Bill. With due regard to the
Committee's terms of reference, and SMG's specific areas of operation
and expertise, we have restricted our comments to those areas
of the draft Bill that relate to:
the place of the Nations and Regions
in the proposed framework;
the role and powers of OFCOM.
We intend to make a fuller written response
to the Government in due course, once we have reviewed the draft
Bill, and the very recently released clauses on media ownership,
2. MEDIA OWNERSHIP
In broad terms, we welcome the deregulatory
spirit of the draft Bill. We believe that at a national level,
and in the UK's larger metropolitan areas, it will have the effect
of freeing up media ownership regulation, allowing media owners
to grow, thereby enabling further investment in quality content
and infrastructure, to the advantage of viewers, listeners, readers
We recognise that a balance must be struck between
rules which are flexible and those that are sufficiently prescriptive
to provide certainty going forward. At a UK national level, we
believe the draft Bill has achieved a fair balance that provides
clarity and certainty for media owners while protecting plurality
and diversity. However, at a local level, in areas less
well-served by media, we believe some of the proposed media ownership
regulations embodied within the draft Bill's Policy Narrative
and could result in unfair restrictions and anomalies being imposed
on media owners. This is clearly contrary to the Government's
stated aims of simplifying and liberalising media ownership rules.
Furthermore, whilst the Government has stated that these proposals
are intended to encourage investment and innovation through the
provision of certainty for media owners, they are in fact in danger
of creating an environment of uncertainty into which local, indigenous
media owners may be reluctant to commit investment.
Such barriers to support and investment can
only be regarded as disadvantageous to viewers, listeners and/or
readers, who would not benefit from investment in new products
and platforms and the enhancement of existing media.
It should be noted too, that many media owners
operate at a national, regional and/or local level, and do not
restrict their operations to only one level of geographic penetration.
Specifically, there are four areas within the
proposed regulations that we believe should be re-examined. These
2.1 Three and One Ownership Rule (Policy Narrative:
This regulation states that in any one area
there should be three distinct media owners, in addition to the
BBC, for certain aspects of cross-media ownership to be permitted.
Whilst this regulation would have little impact in the principal
conurbations that are already well-served by local media, in more
rural areas, less well-served by local media, it would seriously
restrict the growth of local owners of radio or, to a lesser extent,
television. Such a set of circumstances is undesirable as it disincentivises
business investment and expansion which may need investment. It
is also unfair, as the ownership of local radio, or indeed of
regional television, by a local newspaper publisher with up to
49 per cent of the local market would be permitted. This
is particularly anomalous, given the close regulation of radio
and TV content, compared with newspapers.
2.2 Definitions (Policy Narrative: 9.4.2)
Some of the terminology contained within the
Policy Narrative, upon which the media ownership regulations are
effectively to be based, is open to interpretationand possible
misinterpretationthereby adding to the confusion created
by the proposed regulations, resulting in further uncertainty.
Such lack of clarity would be likely to discourage any meaningful
level of risk-taking by existing, and potential, investors and
could result in a chronic stifling of the development of products
"Local"it is unclear
whether this term is used to depict a specific pre-existing geographic
area (eg a town or city or local authority district); or to denote
the area served by a specific media business (eg the circulation
of a weekly newspaper; the coverage area of a local radio station).
it is unclear whether this refers to a local authority area (eg
a county council area) or the transmission footprint of what has
become known as a "regional" television or radio franchise.
We note that at some points in the Policy Narrative the two above
terms appear to be interchangeable.
Policy Narrative introduces this term for the first time, insisting
that there should be a specific number of "media voices"
in a local area. However, it is unclear whether this is simply
a synonym for "media owner" or whether it is accepted
that, for example, two newspapers targeting different readers,
each with its own editor, news agenda and political stanceyet
with common ownershipcan constitute separate media voices.
By way of illustration, SMG owns three regional newspapers, The
Herald, the Sunday Herald and the Evening Times which we run as
entirely separate entities and are clearly very different products.
Are these to be viewed as three distinct "media voices?"
Is it the case that the AM and FM services of a local radio station,
with separate content and aimed at different audiences, would
constitute two media voices? These are important points of principle
that require clarification.
2.3 Classifcation of "Editionised"
UK National Newspapers (Draft Bill: Sch 14, Part 1, Clause 3)
The most recently released clauses of the draft
Bill state that OFCOM will have the power to determine whether
national newspapers that produce different editions for different
parts of the UK, will be regarded as purely national; as national
and local; or as a number of purely local newspapers. This
is an important distinction in areas such as Scotland, where there
are indigenous "national" newspapers that circulate
across only Scotland, while most of the UK national titles produce
Scottish editionsmany with heavy Scottish content, created
in Scotland and printed in Scotland. This lack of clarity only
adds confusion and risks discouraging investment.
2.4 Radio Regulation (Policy Narrative: 9.6.2)
The Radio sector appears to have been subject
to a disproportionate level of regulation under the cross-media
ownership rules in that it has been used as the pivotal medium
in cross-media ownership regulationwith restrictions placed
on co-ownership of TV and radio; and on newspapers and radio.
We believe that this places undue focus on the radio sector and
risks discouraging investment in the medium. This is particularly
invidious, given that commercial radio is already subject to content
and format regulation and, in most cases, is principally music-based.
In addition, given that the BBC dominates this sector with over
50 per cent of listening hours, is this level of regulation justified
3.1 ITV Charter for Broadcasting in the Nations
and Regions (Draft Bill: 189-194)
We welcome the recently published ITV Charter
for Broadcasting in the Nations and Regions and believe that this,
along with the accompanying clauses in the Bill, secures the future
of regional broadcasting within the ITV regions. This will strengthen
and protect its unique service to viewers and local communities.
As a "national" broadcaster in Scotland, we are committed
to the production of programmes that reflect Scotland's different
cultural and political agendas and its educational and religious
As part of the ITV Network, we endorse and wholeheartedly
support the ITV submission to the Joint Committee and have been
involved in the creation of the submission. In particular we welcome
the clauses within the draft bill that relate to ITV's public
service broadcasting commitments in general and to regional programmes
3.2 "Must Carry" and "Universality
of Access" (Policy Narrative: 8.2.2)
Of significant importance to regional public
service broadcasters whose transmission areas include large rural
areas are the twin issues of "Must Carry" and "Universality
of Access" on all available platforms, including satellite.
We also welcome in Clause 49 of the Bill the proposal to extend
the Must Carry obligations to all electronic communication services
that are used by a significant number of people to watch television.
This is particularly relevant where topography creates technical
problems for terrestrial broadcasting. We note from the draft
Bill that Channel three licences are designated as a Must Carry
service, but in digital format only. This would appear to suggest
that the Must Carry status on Satellite will only apply after
switchover. Clarification is required on the proposed arrangements
for the existing analogue service and also on the charges levied
on PSBs to gain access to consumers via these electronic delivery
Furthermore, there is an obligation on Channel three
licence-holders to ensure Universality of Access for all viewers,
and to achieve Government targets on investment in regional services
and programmes, while also paying a licence fee. Placing "Must
Offer" obligations on Channel Three Services without setting
parameters for the cost of the Conditional Access risks placing
PSBs in an invidious position when it comes to negotiating with
the platform owners. We believe this should also be re-examined
4.1 Scottish Representation (Policy Narrative:
We welcome the inclusion of a Member for Scotland
on the Content Board of OFCOM and the establishment of an office
in Scotland. We believe that this is an appropriate level of regional
representation and that such a presence will enable OFCOM to pay
due regard to the Scotland-specific issues that are important
to Scottish viewers, listeners and readers.
4.2 Content Regulation (Policy Narrative:
126.96.36.199; 188.8.131.52; 9.10.1)
We are concerned about a range of new, apparently
far-reaching content regulatory powers proposed for OFCOM in the
Policy Narrative for both television and radio. It is our view
that there is already sufficient protection of the interests of
viewers and listeners embodied within the respective licences
that is in many cases also a commercial imperative ie the provision
of local news services.
4.3 Channel Three Networking Arrangements
(Draft Bill: Section 39 4a and 4b)
We recognise and welcome the continued support
for networking arrangements among Channel Three franchisees as
set out in the 1990 Broadcasting Act. However, in the light of
current consolidation within ITV and proposed changes to ownership
regulations contained elsewhere within the draft Bill, these networking
arrangements, and the voting structure within them, are now clearly
inappropriate. They vest de facto control with two ITV
companies currently, and potentially only one. We believe that
OFCOM should be empowered to review the networking arrangements
at such time as the draft Bill becomes law with a view to protecting
the interests of the minority companies.
4.4 The BBC (Policy Narrative: 5.4.4)
Notwithstanding the view expressed by Government
in the draft Bill and accompanying Policy Narrative, we are still
firmly of the view that the BBC should be fully regulated by OFCOM,
in order to ensure that its role as a public service broadcaster
is regulated in the same manner as commercial broadcasters, thereby
creating a level playing field for all UK media owners. Furthermore,
we strongly believe that the BBC's influential position in the
UK television and radio markets must be considered by OFCOM when
it is dealing with issues relating to concentration of ownership.