§ 9.6 p.m.
§ Lord Reay rose to move, That the draft order laid before the House on 28th March be approved [16th Report from the Joint Committee].
§ Baroness Birk
My Lords, before the noble Lord begins the next business, I am sure that we are all aware that he has been sitting through the previous debate and that he also made a long speech in reply. If he requires a couple of minutes in which to have a drink of water, or something stronger, I shall be quite happy.
§ Lord Reay
My Lords, I am extremely grateful to the noble Baroness for her kind and thoughtful suggestion. I expected this moment and I am quite happy to continue. I suggest that I do so if she has no objection.
The order sets out supplementary ownership rules in accordance with the powers vested in the Secretary of State under Schedule 2 to the Broadcasting Act 1990. Noble Lords may recall from our debates on the Broadcasting Bill that, given the rapid pace of change in the broadcasting industry, we decided that it would be sensible to provide the necessary framework of control of media concentrations and cross-media ownership partly in the Act itself and partly through subordinate legislation, subject to affirmative resolution. In this way we could readily adapt the ownership 1179 controls in future to changing circumstances. The present order therefore completes the detailed pattern of ownership controls by building on and refining the broad framework contained in the Broadcasting Act itself.
In summarising the broad content of the order I shall begin with Channel 3. When the Government first announced their decisions on the ownership of Channel 3 licences on 19th May 1989, the then Home Secretary indicated that it would be permissible for one person or company to own two Channel 3 licences as long as these were not both large or adjacent to one another. Those initial proposals were based on the assumption—which has recently been confirmed by the ITC—that the ITC would retain the existing ITV map in terms of the number and geographical shape of the Channel 3 regions. Our thinking in making this general provision for one person to hold two Channel 3 licences was that such an arrangement could facilitate useful economies of scale without threatening regional identity.
We remain particularly anxious to avoid circumstances in which one owner could hold licences covering an unacceptably large part of the country. That is why we subsequently decided to move from our initial designation of six of the 15 areas as large—which therefore could not be owned in conjunction with another large area by the same person or company—and have increased this in the order to nine of the 15 areas. We consider that this should prevent combinations of ownership which could have given an unhealthy dominance to a single company.
The order also prevents a Channel 3 licence bidder from winning licences for two adjacent Channel 3 regions. However, that restriction will be lifted once the Channel 3 licences have been granted at the end of this year or at the beginning of 1992. From then on there will be no specific restriction on co-ownership of adjacent areas acquired through takeover as long as they are not both large areas, but takeovers of all kinds will be subject to the provisions of Section 21 of the new Broadcasting Act. This makes clear that no takeover can take place before the end of 1993 without the prior approval of the ITC. It is entirely a matter for the ITC to decide whether or not to consent to a takeover during that moratorium period. In practice we believe that the ITC will normally give their approval only in circumstances where one of the licensees is in serious financial difficulties, or where both licensees favour a planned merger. It is most unlikely to look favourably on a hostile takeover.
We have decided not to impose a ban on contiguous ownership for the full 10-year period of the licence, as we earlier envisaged, because it seemed to us—and indeed to the ITC—that in practice such a rule would be unhelpfully rigid. It could, for example, prevent combinations of ownership which offered the greatest scope for economies of scale and were thus particularly attractive in commercial terms. In our view it would not be practicable to rule out for all time the possibility of contiguous mergers, particularly given the uncertainties of the broadcasting environment in the 1990s. Under some circumstances 1180 co-ownership of adjacent areas might be in the best interests of all concerned. For example, an area might become non-viable in its own right but sustainable if owned by a contiguous licensee who could provide sensible economies of scale. The Government do not therefore believe that it would be right to put a permanent block on such co-ownership. However, we have accepted that initially it is right to provide smaller companies with the safeguard that they cannot be the subject of a takeover bid by a neighbour before they have had the chance to establish themselves. Even if a small licence area were taken over by a contiguous neighbour after 1993, the new owners would be fully bound to continue to honour the licence conditions and to provide the separate regional programming service which had been a feature of the original company's bid. However, ownership of two or more large areas, that is to say, nine out of the 15 areas whether or not contiguous, would remain prohibited indefinitely.
These provisions are in line with the spirit of the undertakings given by the Government during the passage of the Broadcasting Bill. Our underlying policy objectives have always been that a separate regional identity should be preserved for each licence area and that the important regional programming obligations should be fully discharged.
However, I should emphasise that the fact that we have made co-ownership possible in some circumstances does not necessarily mean that all or any of the smaller licence areas will be co-owned by companies holding larger regions. Even if some of them are, the provisions of the Broadcasting Act require that the full regional commitments must be met for each region. We are satisfied that our rules for co-ownership as set out in this order offer a flexibility of approach, yet are sufficient to protect smaller regions from loss of identity. The chairman of the ITC has also indicated that he considers the commission will have no difficulty in ensuring that where licence areas are co-owned the licensee provides distinctive local programming for each region. Our aim in all our deliberations on this matter has been to ensure that the separate identity of each region is preserved.
As noble Lords may recall, the new Broadcasting Act itself contains substantial safeguards for regional identity. These make it unnecessary to look to the supplementary ownership rules to provide further protection. The Act, for example, stipulates that each regional Channel 3 licensee must give a sufficient amount of time to a range of regional programmes of particular interest to those living in the area. It also requires that a suitable proportion of these regional programmes should be made in the region. It therefore follows that even if one owner held the licences of two contiguous areas he would not be able to treat them as a single jumbo region and transmit identical programmes to both areas. That point is reinforced by the fact that the ITC has recently indicated that it would expect 80 per cent. of regional programmes to be made in each region to comply with the Act's provisions.
All in all the arrangements set out in the order, read alongside the provisions of the new Act, represent a 1181 combination of measures well able, in our view, to guarantee the continuance of the distinctive regional identity of each area while still allowing an essential flexibility of approach.
I turn briefly to the other provisions of the order, beginning with the measures designed to regulate the number of Channel 3 licences in which any one person may have an interest. The order provides that once a person has the maximum ownership allowed in two regional Channel 3 licences—that is a controlling interest in both unless they are large and contiguous, in which case a controlling interest in one and up to but not including a controlling interest in the other—he may then have up to a 20 per cent. holding in a third regional Channel 3 licence and thereafter a maximum of 5 per cent. shareholding in further such licences. Similar rules apply in relation to national Channel 3 licences and Channel 5 licences.
The draft order also provides that national newspaper owners may not have more than a 20 per cent. interest in a local radio licence and that neither national nor local newspaper proprietors may have more than a 20 per cent. interest in a Channel 3, Channel 5 or domestic satellite licence. I should make it clear that there is currently no domestic satellite licensee in existence. BSkyB is operating on domestic satellite frequencies under the terms of the transitional arrangements in the Broadcasting Act 1990 and is subject to the ownership requirements in the Broadcasting Act 1981 which do not contain any specific numeric restrictions on newspaper investment. These arrangements will come to an end on 1st January 1993, but the ITC has already indicated that by that date BskyB's contract to provide a domestic satellite service will have been terminated.
During the passage of the Broadcasting Bill, there was much debate in this House and in another place as to whether a restriction on newspaper investment should apply also to non-domestic satellite services. Our view, now—as then—is that it should not. Domestic satellite services, in relation to which the 20 per cent. rule will apply, are allocated by international agreement and only a limited number are available to any one. country. The United Kingdom at present disposes of only five such services. Non-domestic satellite operators, on the other hand, face virtually open-ended scope for competition from a variety of different channels, in different hands, being transmitted from satellites such as Astra which use telecommunications rather than broadcasting frequencies.
Because of the opportunities to set up new competitive non-domestic satellite services, we see no reason to limit newspaper investment in them. BSkyB has no monopoly in this area, and it is inconceivable that any single operator could ever acquire such a monopoly. The same cannot however be said for a domestic satellite service licensee who could easily control all of the United Kingdom's DBS channels, as was the case with the former BSB.
If, despite these considerations, we were to go along with the demands of those who would wish to restrict newspaper investment in non-domestic satellite services, that would mean that News International 1182 would be required to divest its shareholding in BSkyB from the current level of 48 per cent. to 20 per cent. This presupposes that it could find a ready buyer for the remaining shareholding. It is by no means apparent that someone else would be prepared to take on the extensive financial commitment which the current shareholders of BSkyB have already undertaken. It could very possibly mean, therefore, that the BSkyB enterprise would fail, resulting in a reduction of services available to viewers, and particularly to those who have acquired "squarials" or dish aerials with which to receive these services. Furthermore, this would jeopardise the 1,000 or so jobs which BSkyB has already created in this country. We cannot believe that this would be a remotely sensible outcome; and I cannot see whose interests would thereby be served.
My noble friend Lord Stockton advanced an argument during the passage of the Broadcasting Bill—and he may be intending to do so again this evening—that ownership restrictions should apply to BSkyB if it achieves a certain number of viewers. But this, it seems to me, would be to penalise success. What would we be saying? It would be that if the channel continues to lose money, we do not care who owns it, but if it were to become successful, then it could not continue with its current ownership structure. What incentive would there be in such circumstances for the current owners to continue with the enterprise?
The order covers two other areas. It provides that public telecommunications operators like BT will not be permitted to have a controlling interest in Channel 3 or 5 licences nor in national radio or domestic satellite licences. I think it is generally accepted that BT, with its dominant position in the telecommunications market, should not also have the ability to provide these services. Finally, the order regulates the ownership of radio stations through a points scheme. All stations, with their associated channels, will be awarded points on the basis of their audience reach. No one may own stations which correspond to more than 15 per cent. of the total number of points in the system, subject to the overriding limit of 20 such channels contained in the Broadcasting Act itself.
The provisions in the order represent a sensible and practicable framework for regulatory control over the services for which the ITC and Radio Authority will have responsibility. They were approved in another place on 24th April. I commend them to your Lordships.
§ Moved, That the draft order laid before the House on 28th March be approved. [16th Report from the Joint Committee]—(Lord Reay.)
§ Baroness Birk
My Lords, we are grateful to the Minister for outlining the main effects of the order. Last year the Broadcasting Bill occupied a great deal of time in both Houses of Parliament. It was then a bad Bill and it is now a bad Act. Noble Lords will recall that when it came to this House many amendments, mainly government amendments, were passed. More than 1,000 amendments were brought forward while the Bill was passing through this House. The reason why there were so many government amendments is that Ministers realised, and were forced to realise, just how seriously flawed their initial 1183 concept of the Bill was. The established view is that the Bill was rather better by the time it was enacted and had been through this House than it was at the beginning.
Perhaps I shall be forgiven for digressing for a moment to say that a blot on the Bill was firmly installed in this House. I refer to the ridiculous, unnecessary, clumsy and unhealthy additions on impartiality, a subject that was already covered in the Bill. I can understand why the Government accepted the provision but I think that it was quite crazy. If there had been a vote there is no doubt that those who put forward those rather silly ideas would have been defeated and they would not now be part of legislation.
The Act remains flawed for the reasons that were debated last year both here and in another place. Now we are discussing an order to cross the "t"s and dot the "i"s on part of the Act. The Minister has explained the order so clearly that I do not think it is necessary to go over the ground again. That would be most tedious. However, I should like to comment on one or two of the points arising from the order.
The first concerns the Channel 3 ownership rules and the dangers of concentration of ownership and threats to regional identity and production. Secondly, there is the whole issue of cross-media ownership; that is, Sky Broadcasting. Many of us who may not normally be of a suspicious turn of mind found that the timing of that takeover was miraculously apt for News International. It occurred after the Bill had passed through Parliament. If it had taken place during the passage of the Bill, there would certainly have been, if not a different outcome, a great deal more fuss and opposition to it.
During the Committee stage of the Broadcasting Bill on 11 th July 1990 (Hansardco1.302), the noble Earl, Lord Ferrers, said that the Government accepted that no one should be allowed to own two regional Channel 3 franchises which are contiguous, where both were large, and they proposed to implement those supplementary rules in subordinate legislation at the same time as implementing the "no contiguity" and "no two large regional Channel 3 franchise" rules. However, under the order the contiguity rule will apply only during the bidding process for Channel 3 licences. We have now been informed, but had already read, that after the bidding that rule will not apply. To compensate for the loss of that rule, the number of areas defined as large has been increased from the Government's originally suggested six to nine. Nothing of that nature was discussed during the Bill's passage. Neither House had a chance to discuss questions which are of great importance: contiguity and the change in the number and size of areas of the franchises.
The Government's argument, as we have heard, is that the contiguity rule might be counterproductive as it could prevent combinations of ownership which could offer scope for sensible economies of scale. It was precisely the dangers inherent in companies imposing economies of scale to the detriment of quality and regional identity to which we objected in 1184 Committee. Objections came from the noble Lord, Lord Thomson of Monifieth, whose experience in the field is well known, from myself and from other noble Lords throughout the House.
Your Lordships will recall that in Committee I supported the amendment to limit ownership to one licence per person. I said:Owning more than one licence completely dilutes the concept of Channel 3 as a regionally based system, with each company having its roots in its own region".—[Official Report,11/7/90; col. 299.]That concept could be severely undermined by the company which, after the auction round, obtained a non-controlling interest in a second franchise, followed by a 20 per cent. interest in a third company and a 5 per cent. interest in a fourth.
Will the Minister tell us why the Government have reneged on the original version of their contiguity rule and what action they plan to take if their "penny-farthing system", as it is known, of ownership threatens the regional identity of smaller licensed areas? At the moment there is a great danger that, apart from news and current affairs programmes, the regional ingredient could be tiny.
The rules on cross-media ownership—the second area upon which I wish to comment—contained in the order are flawed by the Government's original failure to include British Sky Broadcasting under the provisions. In Committee I moved an amendment to include non-domestic satellite services within the cross-media rules laid down under the Act. I said:In a genuine democracy it cannot be right for the same individual to own both a substantial number of national newspapers and national televisions channels which can influence the same people"—they are at least beamed at them. I quoted paragraph 6.48 on page 31 of the White Paper, and said:clear rules will also be needed which impose limits on concentration of ownership and on excessive cross-media ownership, in order to keep the market open for newcomers and to prevent any tendency towards editorial uniformity or domination by a few groups".—[Official Report,11/7/90; col. 306.]Cross-media ownership makes it impossible to carry that out. It is known that the Independent Television Commission wanted the Government to consider more carefully whether Mr. Murdoch's News International should be required to reduce its 50 per cent. holding in British Sky Broadcasting to 20 per cent. in line with non-EC and cross-media ownership rules for terrestrial and domestic satellite television. The Minister has acknowledged that. Perhaps the noble Lord would like to inform the House why the ITC's original advice was ignored.
Figures published this week show that clearly BSkyB is winning a 26 per cent. share of viewing in those homes with both satellite and terrestrial television. This proportion will inevitably increase as more homes acquire satellite television. Yet with non-domestic satellite television that is not possible; it is not subject even to the lightest of regulatory touches. Regional production does not enter into it at all. We are not convinced of the safeguards for regional production and feel that they are likely to be far less than the great promises that were made.
The Labour Party's position is clear. It is that the Monopolies and Mergers Commission should be 1185 asked to report on all aspects of media and cross-media ownership. The next Labour Government will consult the Monopolies and Mergers Commission and will legislate on the basis of its proposals well before the new Channel 3 regional and national licences become due for renewal. We shall insist that licences are bid for again in open competition, with more stringent quality and stricter regional programme commitments.
I conclude by referring to radio. Will the Minister advise the House on how many companies the Government expect will acquire a maximum of 20 local radio stations? We on our side suspect that this is the pattern that will develop with costs and programming being shared. If that happens, we are afraid that the local identity of many radio stations will be lost.
We remain opposed to the philosophy of this legislation and the order which is part of it. However, another place has voted for it and so, reluctantly and sadly, I shall not divide the House.
§ 9.30 p.m.
§ Lord Bonham-Carter
My Lords, I am grateful to the noble Lord for introducing the order and for explaining its implications and the arguments in favour of its provisions. I find myself in broad agreement with what has been said by the noble Baroness in her response. In particular, I agree that the whole question of cross-media ownership and ownership in general should be put before the Monopolies and Mergers Commission for its consideration.
The debate on which we are engaged is a postscript to those long discussions we have had ever since the White Paper was published. It is also indeed an obsequy to the whole Bill since we shall not vote on it. All we are doing is to express either our appreciation or our disappointment at the order before your Lordships' House.
Noble Lords will remember that the premise and the promise which the White Paper offered was that the new broadcasting system would afford greater variety and would operate with a lighter touch in connection with the regulation of broadcasting. In fact as a result of the Broadcasting Bill we shall obtain lower standards, and there is not the slightest chance that a lighter touch in regulation will come about.
On the contrary, a whole battery of regulatory bodies, the like of which we have not seen before, has been created, including the expensive, bureaucratic, unnecessary and censorious Broadcasting Standards Council for which there is no justification. This battery of regulation which is the visible symbol of the lighter touch will cost, according to Liz Forgan, no less than£21 million a year. It must be said that a proliferation of competing and overlapping agencies is a formula for extravagant maladministration. The Government have presented us at the end of these years of discussion with the Broadcasting Bill, of which this order is the culmination.
Meanwhile I was interested to hear the noble Lord, Lord Reay, devote three sentences to radio—at least I calculated that he devoted three sentences to that 1186 subject. Is that an indication of the importance which the Government attach to radio? If that is the case, it is a sad commentary on their values. As a first response to what he said, I believe the proposals which the Government have set out for radio will result in the control of local radio being handed over to large units and the disappearance of community radio, as has happened in France.
I now turn, as the noble Baroness did, to the central element of the Bill, which is the Government's interpretation of the contiguity rule. I repeat that both in this Chamber and in another place our discussions concentrated on the important contribution which Channel 3 could make to regional television. The response to that concern by the then Minister in another place and by the noble Earl, Lord Ferrers, in this Chamber was to give a clear undertaking that the contiguity rule would be maintained. Now today we have before us an order which is nothing other than a reversal of that undertaking. What the Government have provided is a way round the contiguity rule after three years. That is an extraordinary state of affairs. It is a situation which we have not been able to debate before. I ask myself and your Lordships whether we would have passed the Bill unamended if these rules had been in front of us at the time. I cannot believe that we would have done so.
But if the arrangements for ensuring the diversity of ownership of television seem to us inadequate, those which apply to radio are far worse, and the prospects of concentration of ownership are far greater where the allocation is left almost entirely to the market and to the tender mercies of the noble Lord, Lord Chalfont. The proposal that one company should be allowed to own up to 20 local stations will mean that the prospect of a wide diversity of ownership in radio will be sharply reduced. The ownership of 20 stations will, I suspect, become the pattern. Viable local radio stations will be snapped up and community radio—which is a totally different matter—will have small chance of survival.
Let us take the example of Radio Borders which has just won the Sony award for the best local radio station of the year. It is run on a shoestring from premises which have in effect been provided by the local authority. It has a 68 per cent. audience penetration and because of its success it will be vulnerable to takeover. That is characteristic.
Finally, I come to the question, which we cannot avoid, of BSkyB. First, there is a small matter which I should like to raise with the noble Lord, and I shall be interested in his response. As the noble Baroness pointed out, within 48 hours of the Bill having received Royal Assent the deal between Sky and BSB was put together—a very effective way of cocking a snook at Parliament. On 20th December the IBA agreed that BSB's licence to broadcast would not be revoked until an alternative use of Marco Polo had been found.
As communicated to consumers by the media, it was suggested that there would be no material change to the BSB service for another two years. That was not the reality. BSB's licence could be terminated at any time up to the end of 1992. Furthermore, Sky wrote to 1187 the retail trade requesting that BSB equipment should be put back on sale. That equipment, if sold after 20th December, would not be covered by Sky's offer to exchange reception free of charge. As one retailer remarked, "It is like persuading someone to buy a television without telling them that it is likely to blow up within six months".
I feel that consumers should have better protection than they have received and it is the Government's duty to provide that protection. That is deeply and profoundly unsatisfactory behaviour by an organisation which sought and received substantial broadcasting concessions from the Government in the Broadcasting Act. I hope that the Minister will respond to that query, which is an important one.
In the order another opportunity has been missed to deal with the anomaly of BSkyB. As the noble Baroness pointed out, it was an opportunity to make Mr. Murdoch reduce his holding in the whole operation.
In the course of the debate on the order in another place the Parliamentary Under-Secretary of State, Mr. Peter Lloyd, said (at col. 1149 of CommonsHansardfor 24th April):We were, however, anxious to avoid circumstances in which licences covering an unacceptably large part of the country were held in common ownership".Later in the debate, in the same column, he said:Simply to have dropped the contiguity rule while retaining six large areas would, however, have left the way open for combinations of ownership which could give an unhealthy dominance to a single company".In opening this debate the noble Lord used much the same language.
I understand the Under-Secretary and the noble Lord to have been speaking about the undesirability not of monopolies—that is not the word that has been used—but of undue concentrations of ownership. We on these Benches agree that undue concentrations of ownership, be they in television, radio or newspapers, are highly undesirable. That, I understood, was what lay behind the series of stipulations in the Act and in the order. We may not think that they go far enough but they are aimed at preventing concentrations of ownership which could give undue dominance. The fact that non-domestic satellite services have, in the words of the Under-Secretary, "developed under different rules" does not alter the fact that undue concentration of ownership in the media, both in television and in the press, is undesirable. It does not reduce the undesirability of the prospect of undue dominance, except apparently in the view of Her Majesty's Government.
When we come to BSkyB and what is unquestionably a concentration of ownership, the prospect of undue dominance apparently ceases to matter. When he answers the debate, the noble Lord must address the question of whether the principle of a concentration of ownership is more important than the fact that a system grew up under slightly different rules. That response makes no sense and it can be made to make sense only if Mr. Murdoch is treated as 1188 a special case and a special friend who has received special treatment. That is what has happened, and it is little short of a scandal.
§ 9.45 p.m.
The Earl of Stockton
My Lords, perhaps I may direct your Lordships' attention to Part IV, Article 15(1) and 15(3) of the order. When we last addressed the subject of cross-media ownership I spoke, perhaps at too great length and certainly not to the pleasure of a number of Members of your Lordships' House. Indeed, when I was faced with the combined forces of my noble friends Lord Whitelaw, Lord St. John of Fawsley, Lord Boyd-Carpenter, Lord Beloff and Lord Colwyn—who alone is in his place tonight—to say nothing of the noble Lord, Lord Willis, I began to wonder whether I had got the wrong end of the aerial. However, the presence in their ranks of the noble Lord, Lord Wyatt of Weeford, reassured me that, even if I was not on the side of the big battalions, I was and remain on the side of the angels.
I should resist the temptation to say, "I told you so", but I have seldom been able to resist temptation, particularly when it is also a case of succumbing to both justice and personal satisfaction. It is quite clear that, even as we debated the issue on Report, a deal was being done to remove the only licensed domestic satellite operator from the control of the law. I am sure that my noble friend Lord Ferrers, the Minister, was as much in the dark over that deal, or double deal, as your Lordships' House, but, when the announcement of the merger of Sky and BSB was disclosed before the ink on the Royal Assent to the Bill was dry, I could not help wondering whether the remarks of the noble Lords whom I mentioned should have been couched in quite such generous terms.
When someone from my office inquired this afternoon of the licensing department of the ITC why it was that News International, (de facto,if notde jure) with a 48 per cent. holding in BSkyB, falls outside the scope of Part IV of the order, the reply, which may be of interest to noble and learned Lords, was that the Act refers to licences and BSB—the domestic satellite service—only had a contract with the IBA at the time. I hope that my noble friend the Minister will be able to shed some legal light on that murky distinction when he replies.
This time I do not intend to run the risk of being accused by my noble friend Lord Whitelaw or any spokesperson for News International of being the front for a witch-hunt on Sky. I reiterate what I said in earlier debates: I am second to none in my admiration for Mr. Murdoch and his achievements as an entrepreneur and businessman. However, admiration for achievement and success in the past does not bring with it automatic and uncritical support for the present nor unqualified support for the future.
I do not believe that the position of Mr. Murdoch as a major cross-media owner, whatever the legal niceties of shareholdings or the location of his multifarious enterprises, is in the long-term interests of the British press, British broadcasting or the British people. I do not blame Mr. Murdoch for setting out to achieve such a position of pre-eminence in the mass 1189 media. Nor do I criticise him for his success in going so far in achieving that ambition. Given the same opportunity, every businessman would seize it. But I criticise the Government for wilfully failing to recognise the national interest and neglecting their responsibility to protect that interest. I know that those are strong sentiments, but I feel strongly and I feel equally strongly that it is my duty to express my feelings.
We should also spare some consideration for the many independent producers who were looking to 10 or so satellite channels as outlets for their creative talents as an alternative to the BBC and Channel 4. These providers employ quite as many people as BSkyB. I quite understand that, with eventually only five BSkyB channels and the difficulties facing that company (still running at a loss of £6 million a week), commercial considerations must be paramount. But where is the diversity of 108 channels so much vaunted by noble, Lords during the Committee stage of the Bill?
Nowhere has the need for stricter sanction over non-domestic satellites been more apparent than in the conduct of BSB and Sky following their merger. I can understand the need to rationalise the number of loss-making channels. However, the lack of cross-media control over Astra services and their non-domestic controllers has restricted the weapons available to the IBA and ITC in responding to BSB's breach of contract. It may also have contributed to a cynical attitude taken by BSkyB toward consumers, retailers and manufacturers, an attitude that falls well short of the conduct that we should expect as the price of being granted such a valuable piece of legislative exemption.
There are two points of which the House should be aware. First, retailers, including those under contract to BSB, only found out about the merger from the 9 o'clock news. The first communication that they received from BSB or Sky came six days (five retailing days) later. Secondly, while the media were announcing shortly before last Christmas that BSkyB and the IBA had agreed to a two-year maintenance of Marco Polo services, there were other developments that were not mentioned. On the same day, retailers who shortly after the merger were told to withdraw BSB reception equipment from sale—rightly, following the announcement that BSB channels would be transferred to Astra—were told by BSkyB to put them back in their shop windows. Not only that—no sales made after that date, as the noble Lord, Lord Bonham-Carter, pointed out, would be subject to the exchange offer available to other BSB subscribers. The public PR did not mention that two years was the most than. BSB system owners could expect. The ITC can revoke the BSB's Marco Polo rights by giving three months' notice at any time from next month.
The conduct of BSkyB has fallen short. Near redundant equipment should only have been put back on sale if it could be exchanged like other BSB systems when Marco Polo services ceased. In any event, the request to resume sales, which has a strong flavour of BSkyB lawyers seeking to impose pressure on retailers to clear their stockrooms, should not have been made 1190 since it has exposed them to substantial loss of goodwill from customers. It is scarcely surprising that most retailers have refused to fleece the customer as would have been wished and have kept BSB systems in their boxes.
I hope that we shall now accept that we are paying the price for granting such special concessions. It is with that one great reservation that I welcome to an extent the provisions of this order, as I did the broad thrust of the Bill.
My Lords, I understand that the issue with regard to the retailers and what is now BSkyB is a matter of legal proceedings and should not be discussed as it is sub judice. The noble Lord, Lord Bonham-Carter, and the noble Earl, Lord Stockton, took a somewhat apocalyptic view with regard to safeguards for the retailers. They ought to know that the protection under the sale of goods law is more than enough protection for consumers. If a retailer sells goods that are not fit for the purpose, they have perfectly good recourse against him. That is why the retailers are keeping the goods in boxes. It is not because of any instructions from interested parties.
The first argument against the order took us on a long trip down memory lane, escorted charmingly by the noble Baroness, Lady Birk. It was based on the claim that the law should be consistent with regard to non-domestic satellite broadcasting. Since newspaper cross-ownership of Channel 3 ITV companies—strangely called terrestrial ITV companies—is limited to 20 per cent., it should similarly be limited to 20 per cent. for satellite channels. It is often referred to as the level playing field argument. I do not consider it a good argument.
There is a substantial difference between Channel 3 licences and satellite licences. Channel 3 licences were once described by the late Lord Thomson of Fleet as a licence to print money. That is because those who hold the ITV franchise are able to gain immediate access to the totality of the viewing audience, using scarce terrestrial channels.
§ Baroness Birk
My Lords, will the noble Lord give way? I apologise for interrupting. I speak from recollection. I believe that there is nothing in the Act which gives the freedom which the noble Lord has been advocating to any other non-domestic satellite. The only exception is News International.
§ Baroness Birk
My Lords, there could be in the future. Usually Acts of Parliament lay down certain rules taking into account what may happen. But the Government have not done that. The exception is a personal exception.
My Lords, with respect, that argument is wrong. If another operator decided to set up a satellite broadcasting system beamed into this country in competition with the present providers, it would be monstrous to suggest that any government would have a different rule for the new entrant from that for the old entrant. I would argue against that 1191 very strongly. There is an apparent difference between the treatment of the terrestrial services—the ITV licensees and the non-domestic satellite licensees. With respect, that is a completely different issue.
As my noble friend Lord Stockton rightly said, the new satellite channels may with merit be described as a licence to lose money. These new channels must build their audience in a manner akin to the Chinese water torture; namely, drip by drip, customer by customer. They enjoy no immediate access to the viewing audience but must build up their networks one household at a time. That is no level playing field for competition between the new channels and the ITV channels. It cannot be right to impose the same ownership rules on the two types of broadcasting. The only way that satellite services will build themselves up is through the patient investment by those who believe that one day they may profit from such investment. Frankly, there are not yet many who have been willing to place such bets.
The real power in broadcasting does not lie with Mr. Murdoch but with the BBC. Measured by revenue, the BBC is the largest medium enterprise in Europe. It enjoys monopoly access to the licence fee. It has half of all the terrestrial television broadcasting spectrum at its disposal and it has the lion's share of radio frequencies. It employs 27,000 people.
The Earl of Stockton
My Lords, will the noble Lord give way? I was unaware that this order affects the BBC.
My Lords, I am simply comparing the position with regard to the soi-disant monopoly of the BBC and the so-called monopoly of one satellite broadcasting provider.
My Lords, if one calls the Radio Times a newspaper, it owns one. I would not call it that. The BBC is one of the largest publishers of consumer magazines in Britain, but that is a narrow argument.
The other major theme related to the question of monopoly. If Mr. Murdoch has a monopoly it is of a curious character. His satellite services have reached only 10 per cent. of the population and face vigorous competition from ITV, Channel 4 and the BBC in addition to competition on the same satellite from others who are riding on his coat tails. The merger of Sky and BSB has not changed the situation. Indeed, the merger was necessary because the main satellite contenders were bearing losses on an unbearable scale.
The Earl of Stockton
My Lords, I am prepared to see the validity of the argument that holding 10 per cent. of a total market cannot be construed as a monopoly. However, if British Rail had 10 per cent. of the transport market it would still have a monopoly of the railway market.
My Lords, I ought to deliver the noble Earl a copy of the competition law and the Fair Trading Act. He will find that the standards imposed 1192 on the Monopolies and Mergers Commission and on the Office of Fair Trading bear no relation to his understanding of the law on this matter. Indeed, the noble Earl's interest—apparently it is a devotion—to the conspiracy theory is charmingly naive and totally fanciful.
Neither BSB courted Sky—they would not speak to each other—nor did Sky court BSB. The merger was the result of a highly intelligent, independent analyst who made it plain severally and not jointly that it was in the national interest. That was the initiative and the nonsensical conspiracy theory is a figment of politicians' imaginations.
We must be careful when throwing around terms such as "monopoly" without being certain of the facts. All responsible economists—and I am certainly not one—will agree that the relevant market is a broadcasting market. There is no such thing as a monopoly of the satellite market which is just a part of the broader television market.
As regards television, I cannot see anything malign about Mr. Murdoch's works. On the contrary, the spectre of a malevolent media mogul—noble Lords will ignore the alliteration—manipulating public opinion ignores all the evidence of Sky's behaviour and the safeguards in the Broadcasting Act itself. Recently, Sky has demonstrated only too clearly the excellence of its news coverage. I considered that its reporting of the Gulf conflict was exceptionally good. We have been down this road before and it is too late tonight to further the argument. I support the order with enthusiasm.
§ 10 p.m.
§ Lord Colwyn
My Lords, I am reluctant to elongate the debate but I must take a few minutes to welcome the order. This is the eighth occasion on which the efforts of Mr. Rupert Murdoch to establish a satellite broadcasting network have been debated in your Lordships' House and in the other place. I wish to comment briefly on the order in support of News International.
There are those who say that some noble Lords are out of touch with the realities of the broadcasting industry. However, the speeches made by the noble Baroness, Lady Birk, the noble Lord, Lord Bonham-Carter, and my noble friend Lord Stockton put the lie to any such allegation. It is clear to me that the noble Baroness and her noble friends are fully in tune with the practices of the broadcasting industry. When in the real world of broadcasting there is nothing fresh to offer the viewer or the listener it is time to schedule the repeat of a programme from the past.
Having nothing new to say about the new Broadcasting Act, satellite television generally or Mr. Murdoch in particular, the noble Baroness and other speakers have offered us a re-run of their previous arguments. The passage of time has not been kind to those arguments. Throughout the protracted debates about the rights and wrongs of allowing Mr. Murdoch to invest in satellite television, one important point 1193 has remained stubbornly obscure. Are there any alternative suggestions? Do noble Lords have any new ideas?
We keep hearing how awful it is that Mr. Murdoch is allowed to invest his money in establishing Sky Television. However, we have not been offered any alternative proposition. If Mr. Murdoch is deemed not to be a fit and proper person to risk his money in that venture, who should take his place?
If satellite television is cut off from its main source of finance and management expertise, there will be no further investment in satellite services. The viewer will have less choice. There will be fewer jobs in broadcasting. Attractive new programme services such as "Sky News" will perish. The development of subscription television will be halted and the UK will be left behind in the broader European development of innovative television services. Those results will be achieved by following the advice given by some noble Lords who have spoken this evening.
§ Baroness Birk
My Lords, the point about a monopoly in cross-media ownership is that it is a combination of newspapers and satellite television. Mr. Murdoch could divest himself of his newspaper interests and still retain his television interests.
§ Lord Colwyn
My Lords, I believe that the order is specific in that it deals with a non-terrestrial service coming from outside this country.
The order before us this evening is good. It recognises that satellite television is a high risk business. It makes it possible for brave entrepreneurs to risk their fortunes to establish the business. I support the order.
§ Lord Reay
My Lords, I have been asked questions which I shall do my best to answer. The noble Baroness, Lady Birk, asked why the Government have changed their original approach on contiguity. My right honourable friend the former Home Secretary announced on 13th June 1989 that it would be possible for one person to own two regional Channel 3 licence areas provided that they were not both large or contiguous.
Our underlying policy objective was to ensure that separate regional identity was preserved and that regional programming obligations should be fully discharged while allowing for sensible economies of scale. I explained that in my speech. During the passage of the Broadcasting Bill, regional requirements were considerably enhanced. Since the Bill received Royal Assent, the ITC announced that it would expect 80 per cent. of all regional programmes to be made in the respective licence area. On that basis, my right honourable friend concluded that the contiguity rule was unnecessary in order to preserve separate regional identity. However, upon considering the representations which he received on his announcement on 4th December, my right honourable friend concluded that it would be in the best interests of regional identity if ownership of contiguous licence areas were prevented during the bidding stage but permitted thereafter, albeit for the first two years at the discretion of the ITC.
1194 The noble Baroness asked me how many companies will acquire 20 radio stations. That is a matter to be determined by the market and not by the Government. I should not wish to offer a view on that.
The noble Lord, Lord Bonham-Carter, asked me about the radio ownership rules. I did not intend to give the impression that we underrate the importance of radio. I was merely trying to save the time of your Lordships' House. Perhaps I should not have been so considerate.
I cannot agree with the noble Lord that the point scheme in the order will encourage large holdings of radio stations. On the contrary, the rule that no one can own stations whose total points value exceeds 15 per cent. of the number of points in the system as a whole will ensure that dominant radio groups cannot develop.
The noble Lord also asked a question with regard to BSB's equipment. I am given to understand that the suggestion that BSB equipment be put back on sale following the merger was subsequently overtaken by the later undertaking by BSkyB that any equipment acquired by 20th December 1990 would be replaced. By then it was clear that the former BSB contract was to be terminated by the ITC. We do not believe that anyone would have acquired a squarial after that date in ignorance of that fact.
§ Lord Bonham-Carter
My Lords, I am grateful to the noble Lord for giving way. However, I am informed that BSkyB were attempting to persuade retailers to restock with BSB equipment after 20th December. That is the issue.
§ Lord Reay
My Lords, I have nothing to add to what I said. By that time it was clear that the former contract was to be terminated and everyone should have been aware of that fact.
The noble Lord made play with what he considered to be an inconsistency in our policy towards concentration of ownership. There is a substantial difference between co-ownership of, on the one hand, two large Channel 3 areas which in their respective areas would be the dominant independent television broadcaster for many years to come, and on the other, News International's cross-holding interest, particularly in connection with its shareholding in BSkyB, which is certainly not a dominant independent television broadcaster.
News International holds a 45 per cent. shareholding in five Astra channels. There are already 32 Astra channels available and the potential for many more. That is quite different from the situation in which two independent terrestrial channels—ITV and Channel 4—are available.
That takes me on to one more point raised by the noble Baroness—that the Act contains a personal exception for News International. That is not so. There are other non-domestic satellite licensees already in existence; for example, W. H. Smith. All benefit in exactly the same way from the ownership provisions in the Act and the order and are subject to the same restrictions. I have nothing further to add.
§ On Question, Motion agreed to.