§ 8.52 p.m.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Mclntosh of Haringey)
rose to move, That the draft order laid before the House on 13th November be approved [32nd Report, Session 2002–03, from the Joint Committee].
The noble Lord said: My Lords, I beg to move that the order be approved. It is mainly concerned with ownership of local analogue and digital radio broadcasting. The draft provisions are made under powers in Part 3 of Schedule 14 to the Communications Act for the Secretary of State to impose by order new ownership rules on holding local sound broadcasting licences and providing local digital sound programme services. In my view, the provisions of the draft order are compatible with the European Convention on Human Rights.
We believe that the ownership rules set out in the order represent a good balance between a plurality of ownership and the promotion of investment in the UK radio industry. In preparing the order, the Government held a long consultation with the Radio Authority and representatives of the radio industry, who are broadly content with the ownership rules in the order. The policy has remained the same as that announced in November last year. The order will replace the existing rules governing local radio ownership set out in Schedule 2 to the Broadcasting Act 1990.
Let me outline the provisions in the order. For analogue radio, the order introduces rules that ensure that there are at least two commercial radio operators, in addition to the BBC, in every area with a reasonable number of services. That is called the two plus one rule, the one being the BBC. In practice, that means that in every area where there are three or more commercial stations, there will be at least two commercial radio operators plus the BBC. The mechanism used to achieve that will be a local points scheme that the industry and the Radio Authority have developed together.
The effect of the rules is that an existing local sound broadcasting licence holder is prevented from acquiring a licence which overlaps with two or more overlapping licences that he already holds, if that acquisition would mean that he held licences whose points represented more than 55 per cent of the total points attributable to all the licences in the area of any 731 of his overlapping licences. I shall not go into the technical definition of points, if noble Lords will forgive me.
In summary, so far as analogue broadcasting is concerned, the order will ensure that in well developed markets there are at least two owners as well as the BBC.
Let me move on to cross-media ownership. A stricter points limit will apply to cross-media owners. Regional ITV licence-holders, or media owners who control more than 50 per cent of the local press in a radio station's covering area, will be allowed only 45 per cent of the points in that area. This rule will ensure that there are three local media owners in every well-developed market. It would apply only, however, to areas where there are three or more overlapping radio stations.
To prevent monopolies in the smallest markets, the order introduces a backstop rule that will prevent joint ownership of a radio licence, a regional ITV licence and more than 50 per cent of the newspaper market in the same local area, whatever the number of local licences. So in all cases, there will be at least two media owners in an area, plus the BBC.
A similar rule will prevent any operator providing services representing more than 55 per cent of points relating to the local digital programme services in an area. Again, this produces an outcome where there will generally be two owners in addition to the BBC in an area.
The method of calculating this rule has changed since we first announced our ownership proposals, and we have worked closely with the Commercial Radio Companies Association and the Radio Authority in developing a new solution. Whereas the original proposal calculated the 55 per cent limit for digital services per multiplex, this draft order now applies the same limit per market. In other words, where there are two or more overlapping multiplexes, the limit applies to the total number of services across that area, rather than on a multiplex-by-multiplex basis.
This method of calculating ownership limits will avoid the need for a multiplex operator to have to put his local digital sound programme services on a competitor's multiplex in the same area when there is capacity on his own multiplex. Ofcom will classify different types of service in the market depending on how regularly and for how long services are broadcast. Article 12 sets out definitions according to which Ofcom will do this.
The number of points in a market can change if significant services launch or go off air, but they will not be affected by intermittent services or minor services coming or going. The system allows for fluctuations in the market as a result of the more flexible nature of digital broadcasting. We believe that this approach will maintain standards of plurality while allowing more flexibility. It will help to support digital radio take-up, still in its early stages, and is agreed by the industry and the regulator.
732 It is important to see these changes to the radio ownership rules in the context of the overall regulatory regime. In radio, local stations will have to stick to the formats they agreed with the regulator. Whenever there is a change of ownership, Ofcom will be able to vary the licence as required to maintain the local character of the service.
Ofcom will also be given a new power to protect and promote the local nature of local radio. This strengthens the duty on Ofcom to secure that local radio stations include material that is of interest to listeners in that locality and that an appropriate amount of that material should be locally produced. It will ensure that local radio remains genuinely local.
Ofcom will review the ownership rules at least every three years and suggest further changes that it sees necessary. Ofcom will also be responsible for enforcing content regulation.
Let me briefly touch on Part 4 of the order. This part makes minor changes to the Communications Act's news provider provisions and as to the meaning of "potential audience" in the rules on holding local radio multiplex licences. These make minor amendments which do not relate to the primary topic of this order and do not represent policy changes in media ownership.
In summary, we believe that the draft order before the House still supports the principles that we set out in our media ownership consultation two years ago: that is, to retain a diversity of content from a plurality of sources; to promote competition; to provide regulatory certainty within a flexible legislative framework; to protect the localness of local radio; and to ensure that listeners get quality, creativity and innovation from those local services.
The local radio ownership rules set out in this draft order have been consulted on widely and over several years. We believe that we have put the listener at the heart of these rules and plurality of ownership and diversity of content have been central to our thinking. We want high-quality local radio and we want sufficient local news and content. At the same time, we want to allow for increased competition and investment for the UK radio industry. We believe that this order strikes the right balance. I commend it to the House.
Moved, That the draft order laid before the House on 13th November be approved [32nd Report, Session 2002–03, from the Joint Committee].—(Lord McIntosh of Haringey.)
§ 9 p.m.
§ Lord Luke
My Lords, first, I thank the Minister for his, as always, most coherent explanation of the provisions set out in this draft order.
While the introduction of a less restrictive regime for commercial radio companies should be welcomed, as they are on these Benches, I have one question which I should like the Minister to address. In the brief provided for this order by the Commercial Radio Companies Association—I thank the noble Lord, Lord Eatwell, for that—the members of that 733 organisation emphasise their disappointment that the order fails to address one of the key failings, as they see it, set out in paragraph 8(1) of Schedule 14 to the Communications Act, which imposes new and tighter restrictions on the ownership of local radio multiplexes.
Previous legislation did not impose such restrictions, and the CRCA is perplexed as to why there should be a requirement for greater plurality from multiplex owners than for programme providers. Is the Minister in a position to answer that question?
§ Lord Eatwell
My Lords, there seems to be excessive politesse this evening. I begin by declaring an interest as chairman of the Commercial Radio Companies Association. I heartily welcome the measures set out in the order. Taken together, they presage a significant step forward for the industry and provide a firm foundation for the future relationship between the radio industry and the new regulator, Ofcom.
In particular, in Part 2 I welcome the ownership provisions for local analogue radio—the two plus one provisions. They will preserve diversity and plurality while permitting some consolidation of ownership. The result will be more investment and livelier competition for the BBC.
In Part 3, I also welcome the framework that has been agreed on the ownership criteria to be applied to local digital-sound programme services. In particular, I thank the Government for their acceptance of the Commercial Radio Companies Association's argument for a market-based criterion.
However, I am rather disappointed that there is not to be found in Part 4 any modification of the position taken in the Act on the imposition of restrictions on multiplex ownership—a point referred to by the noble Lord opposite. As the noble Lord pointed out, the restrictions imposed in the Act are more severe than those which applied before the Act came into being, when commercial radio companies were being encouraged to invest in digital multiplexes. At Third Reading, the Minister promised a consultation on these matters. Sadly, it proved to be less a consultation and more a brick wall.
Be that as it may, the Minister will recall that there are two anomalies in Kent and in Ayrshire—that is, two patterns of multiplex investment made by heritage stations which at present would contravene the terms of the Act. Normally, it would be expected that those investments would be grandfathered. However, in a letter received today from the Secretary of State to the chief executive of the Commercial Radio Companies Association, it is made clear that that will not be the case. Instead, the two anomalies will be grandfathered only while in present ownership.
It should be clear to all noble Lords that that decision imposes a serious economic penalty on the current owners, who have invested in a way that the 734 Government encouraged them to do. It is rather as though a local planner said, "Okay, we won't build a motorway through the bottom of your garden. But once you try to sell your house, we will". In his reply, will the Minister outline the terms of the compensation to be offered to the current owners of the multiplexes in Kent and Ayrshire for the economic loss that the Secretary of State's decision has imposed on them?
Finally, despite the remaining difficulties, the radio industry looks forward to working under the new Act and with the new regulator. A good relationship has already been established with Ofcom and, together, we intend to build a diverse, creative and prosperous commercial radio industry.
§ Lord McNally
My Lords, I deferred to the chairman of the Commercial Radio Companies Association because I wanted to hear the general tenor of his remarks. I am very pleased that, in the main, they were positive. I, too, look forward to hearing the precise figure of compensation that is to be offered in the multiplex examples cited. However, having been a member of the Puttnam committee and a strong advocate of plurality in the sector, I do not think I would go very far down the road in support of the position that the Commercial Radio Companies Association advocated in its brief.
I think that the orders get it about right. I have read the excellent brief produced by the Commercial Radio Companies Association. Indeed, it answers some accusations that I would not even dream of making against commercial radio. However, it puts into context what we are doing in the whole of this sector. It is not just what happened here in Britain that we were concerned about; the examples we have seen in other parts of the world worried us. This sector was prone to rapid consolidation to the detriment of the consumer. When we prepared the Bill we heard from Pat Mitchell, president of public service broadcasting in the United States. Interestingly, he said:You know the story of the canary in the coalmines; before coalminers would go down into the mines, they would send a canary down on a string. If the canary sang, it was safe for the miners to go in. If not, they stayed above.
"In many ways what has happened with radio service in the States is the media canary. With deregulation of radio in 1996, one company has gone from owning a few hundred radio stations to owning more than 1,000 and the number is growing". Dennis Welch, a New Zealand media journalist commented on similar deregulation in New Zealand:given that one parent of The Radio Network, our largest radio company, is a Texas-based conglomerate with radio outlets all over the world, perhaps it's not surprising that tuning into a local station these days is the aural equivalent of eating a Big Mac".That was the background against which many of us argued during the passage of the Bill that we wanted both the legislation and Ofcom to have powers to protect the local nature of our radio, both BBC and commercial. Although the Commercial Radio Companies Association is, quite properly, defensive of its members, there are examples of blanding, hubbing 735 and centralised scheduling, all perfectly justifiable in commercial terms but not necessarily advantageous to the local nature of radio. That is why, again, a number of us have urged on the Government greater help for community radio to balance what has been lost to a certain extent in local radio.
In case my friends—they are friends—in the commercial radio industry think that everything I say is negative, I acknowledge the point made by the noble Lord, Lord Eatwell, that there has been some very brave investment in digital radio. Last night the Minister and I were both at the joint presentation by the BBC and the Commercial Radio Companies Association which showed just how exciting radio has now become as a sector. One only has to look at the advertising of goodies for Christmas to realise that digital radio has at long last made the breakthrough to become a "must have" in terms of Christmas presents.
In the McNally household it is a regular battle whether we have Karrang Radio or Xfm—the choice of my 13-year old son—or BBC Radio 7, which allows me to listen to "Round the Home" and "The Glums" once again, or Saga Radio. That is a kind of House of Lords for 1960s DJs but which plays some excellent pop music as I remember it. So I think that the mood and spirit around radio is extremely exciting.
Although I would not dream of accusing the commercial radio sector of half the accusations it defends in its brief, I do think that the Government have got the situation about right in both encouraging investment and safeguarding plurality in the order.
§ Lord McIntosh of Haringey
My Lords, the noble Lord, Lord McNally, is far too young for Saga Radio. I am grateful for the general support that has been expressed for the order. It has been unanimous on almost every part of the order. The only question which I have to answer is on the issue of multiplex ownership in Part 4 of the Bill.
I am sorry that my noble friend Lord Eatwell thinks that the consultation process was a brick wall rather than consultation. My understanding is that the consultation process was lengthy and well considered. It resulted in the total support of the Radio Authority and the support of the Commercial Radio Companies Association on all but one point. I would have thought that that was real consultation.
I turn to the substance of what my noble friend Lord Eatwell said. I agree with the noble Lord, Lord McNally. I think that there are issues for which we must stand up. It is not true that there was no previous regulation of multiplex licences. There was no effective regulation. The regulations were not clear. They were not actually observed because they were unclear and defective. But it has never been a secret that we thought that there should be regulation of multiplex licences, just as for any other comparable service. The comparison with programme providers is not a valid comparison. There we are talking really about chalk and cheese.
736 So, if we move on from my argument that there should be regulation, what is its correct form? It was not criticised specifically, except to say correctly that in two areas—Ayrshire and Kent—there are multiplex owners who conflict with the proposed rules. We propose grandfathering for that. Grandfathering means that the existing owners of these multiplexes will be protected from the rules imposed by this order. That is what grandfathering means everywhere. There is no change from its definition here to when it is used anywhere else in the Communications Act or indeed in any other Act. If there were any extension of it, that would no longer be grandfathering, it would be a permanent exemption for the successors.
Similarly, because the change has been clearly signalled and is proportionate to the issue, which is to protect plurality, the question of compensation does not, cannot and should not arise. That leads me to my final point about plurality. Everyone who took part in the proceedings on the Communications Bill, particularly at Third Reading, will recall that this House was very passionate about the need for maintaining plurality. The order maintains plurality. I commend the order to the House.
On Question, Motion agreed to.