House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Fourth Report

IV. PUBLIC STRUCTURES

138. When taking evidence from Dr Kim Howells, we asked him what lessons for the co-ordination of Government policy might be drawn from the fact that he was the fourth Minister from the fourth Department to appear before us. He replied:

"You have put your finger on a great weakness. I know almost nothing about what is going on in other Departments ... We ought to be knowing what is happening and it is a symptom, I think, of a general malaise which I have noticed as we have gone around the country ... It would be very nice if we had total confidence that there was a completely organised interface between every Department and we were all singing from the same hymnsheet".[378]

Dr Howells encapsulated with welcome candour a problem which became apparent to us during our inquiry.

139. Many submissions argued that it was important to maintain the division of responsibilities between the DTI and the DCMS to reflect the distinction between economic regulation and cultural content.[379] It is evident to us that the convergence of delivery platforms is rendering this division less and less coherent. It is for this very reason that we make recommendations concerning a modernised regulatory structure below. These issues are transcendentally important to the economic and social future of our country. It is both absurd and damaging that different Departments vie against each other for supremacy, with that vying conducted at numerous policy-making and administrative levels. Mr Cruickshank considered that "it would be helpful if there was one Secretary of State concentrating on a whole range of these rules".[380]

140. In evidence, the Government stated that "it does not consider that the convergence of the communications industries has yet reached the point where a single Departmental location is needed for its sponsorship and regulation".[381] Both Mr Smith and Mrs Roche claimed that effective co-operation existed between the two Departments.[382] Yet even the Government's own written evidence implies that changes in the machinery of Government resulting from technological convergence are only a matter of time. In our view, these are matters on which the structure of Government, like Government itself, must lead and not follow. The issues now facing the Government in this field stretch well beyond the responsibilities of the DCMS and the DTI; they concern the creation of a broadband infrastructure and the promotion of the Internet with its potential to transform the delivery of public services; these developments are intertwined with the promotion and regulation of communications infrastructures and content provision. The objectives and priorities which we have laid out in this Report are of sufficient importance to be the central responsibility of one Cabinet Minister. We recommend that a separate Department of Communications be established with its own Secretary of State, assuming the broadcasting and media responsibilities of the Department for Culture, Media and Sport, the telecommunications and Internet responsibilities of the Department of Trade and Industry, and the Cabinet Office's responsibilities for electronic delivery of Government services. The new Department's priorities should include:

the definition of universal access in the digital era and leadership of provision of universal broadband provision and its use for public services;

the active promotion and encouragement of British strength and leadership in broadcasting, communications and other media, including the Internet;

establishment of the new regulatory structure in the communications sector which we recommend below;

co-ordination of all Government activities in these areas, spread as they are across most Departments, by means of an inter-departmental Committee under the chairmanship of the Secretary of State for Communications.

Regulatory structures

(i) Introduction

141. In this Report we have considered changing technologies in the communications sector and the public policies required to harness their benefits while seeking to maintain the best characteristics of current provision. The main policy priorities we see as follows:

to promote the development of technologies, including the Internet, which have almost immeasurable potential to drive forward economic progress, social development and the effective delivery of public services to meet the needs of the citizen;

to promote a competitive British sector in the new media market, coupled with open access to delivery networks;

to support a strong and diverse British broadcasting production base, for both traditional and new media, including an enduring role for public service broadcasting;

to provide, insofar as it will continue to be possible, a regulatory framework for broadcast content geared to methods of access and sensitive to changing competitive pressures, not least the growth of the Internet (subject to self-regulation) as a broadcast medium;
to ensure a translation of the principle of universal access into the digital era with the objective of creating a universal broadband infrastructure.

We now examine the structures required under statute and within Government to deliver these policies.

142. At present, there are no less than 14 statutory and self-regulating bodies for media and communications in this country, termed by Mr Horsman "an alphabet soup of acronyms".[383] Of these, the statutory bodies most relevant to our consideration are:

the Independent Television Commission (ITC): established under the Broadcasting Act 1990 in succession to the Independent Broadcasting Authority and the Cable Authority, it is responsible for the licensing and regulation of all commercial television in the United Kingdom and has certain responsibilities relating to the regulation of the BBC's commercial activities;

the Office of Telecommunications (Oftel): established under the Telecommunications Act 1984 and headed by the Director General of Telecommunications, it is responsible for the licensing and regulation of telecommunications;

the Radio Authority: established under the Broadcasting Act 1990 in succession to the Independent Broadcasting Authority, it is responsible for the licensing and regulation of all commercial radio;

the Broadcasting Standards Commission (BSC): established under the Broadcasting Act 1996 in succession to the Broadcasting Standards Council and the Broadcasting Complaints Commission, it is responsible for research into standards of broadcasting and complaints about broadcast content on commercial television and radio and on the BBC;

Sianel Pedwar Cymru (S4C): established under the Broadcasting Act 1981, it is responsible for the regulation as well as the provision of commercial Welsh language programming, although additional digital commercial services will be regulated by the ITC;[384]

the Office of Fair Trading (OFT): established under the Fair Trading Act 1973, it has specific duties relating to independent production targets and other matters under the Broadcasting Acts 1990 and 1996 and general powers to investigate possible anti-competitive behaviour in the media sector.[385]

In addition, the British Broadcasting Corporation (BBC), which operates under a Royal Charter and an Agreement with the Secretary of State, is broadly responsible for the regulation of its own broadcast content and commercial activities.

(ii) The case for change

143. The overwhelming weight of evidence received by this Committee suggested that there was a strong case for change to these structures. First, it was argued that the regulatory structures and their legislative foundations had failed to keep pace with technological development, so that regulators either claimed powers to regulate matters (such as audio-visual content over the Internet) under powers not designed for such a purpose, or did not have any clear powers to regulate matters of growing importance (such as computer storage capacity in television sets and set-top boxes).[386] Regulatory institutions increasingly found themselves with overlapping and contested jurisdictions; EUTELSAT pointed out that the very areas of overlap were the most critical areas for regulatory action.[387] In particular, the gateways and access systems which, as noted earlier, are becoming so important to regulation in the light of platform convergence, were subject to regulation by both ITC and Oftel on the basis of different statutory powers.[388] Oftel warned that such cases of overlap were "set to increase" as interactive services

developed.[389] Live TV has claimed that powers claimed by ITC might be ultra vires.[390]

144. Not all possible cases of regulatory overlap to which attention was drawn in evidence arise from technological change. It was argued, for example, that there was inconsistency in content regulation between the BBC and the ITC. The latter body said that it would not have allowed the form of commercial involvement in one particular programme permitted by the BBC. Others believed that there were significant inconsistencies in regulation between the commercial and non-commercial sectors.[391] The ITC perceived a need for the competition rules observed by its licensees also to apply (and to be seen to apply) to the BBC's commercial activities.[392]

145. It was suggested that the ITC and the BSC often reached inconsistent decisions on broadcast content.[393] The Radio Authority also argued that the BSC was ineffective: its rulings came long after the Radio Authority had taken action to remove offending items and the BSC's decisions carried no significant sanctions. Sir Peter Gibbings, Chairman of the Radio Authority, thought that "the BSC could be described as a watchdog that can bark, but we are a guard dog which can bite".[394]

146. There were said to be a number of deleterious consequences from the proliferation of regulatory bodies. First, it created confusion for the consumer faced with an array of regulatory bodies, so that many complaints by viewers and listeners were misdirected.[395] Second, an immense amount of time and effort was devoted by broadcasters to responding to the demands of multiple regulators which could be better devoted to developing programmes and services.[396] Third, organisations in the communications industries were subject to "double jeopardy", with the same issues being subject to review and decisions by more than one regulator.[397] Finally, as the other side of the same coin, competitors could "forum shop", seeking to use multiple regulation to curb competition.[398] Oftel argued that these problems arose from the fundamental weakness of a structure based on the licensing of access to communications systems. This approach was breaking down because system operators were ceasing to control service characteristics. It was this outdated basis for regulation which had led to "a proliferation of regulatory bodies, overlapping jurisdictions, and conflicting duties and objectives".[399]

147. The Government has already broadly accepted a case for change. It recently stated that "there is an increasing risk of gaps and overlaps developing in the regulatory regimes for telecommunications and broadcasting as forms of delivery become increasingly interchangeable, particularly including the Internet".[400] Mr Smith thought it was "very much open to doubt" whether the present regulatory regime was absolutely the right one. The Government is awaiting this Report before issuing a Green Paper on the future regulation of the broadcasting and telecommunications industries in the summer.[401] Legislation to give effect to regulatory change appears likely in the next two years.[402] We recommend that legislation to provide for regulatory change be a priority for the Queen's Speech at the opening of the Parliamentary session in the autumn of this year.

(iii) Proposals for change

148. If there is near agreement on the need for change, there are many different views on the exact nature and extent of change. Some evidence favoured the creation of a single over-arching communications regulator, believing that the existing system was too compartmentalised for the world of media convergence and that converging media should have converging regulatory structures.[403] The Consumers' Association believed that such a body, merging the functions of the ITC, Oftel and the Radio Authority, and with a remit including the BBC, was the best way to ensure clarity and consistency in regulation, as well as effective liaison on international issues.[404] Dr Richard Collins argued that a single regulator for content and carriage was the only way to overcome "fuzzy boundaries" between access and content.[405]

149. In opposition to the case for a single regulator, it was suggested that it would lead to an undesirable concentration of power, creating what Mr Stephen Whittle, Director of the BSC, termed "a massive leviathan".[406] It was also argued that a single regulatory body would lead to an undervaluing of broadcasting and the distinctive approach to regulation which it required.[407]

150. Oftel proposed not one but two wholly new regulatory bodies reflecting the distinction of economic and content issues, dubbed the Electronic Communications Commission and the Electronic Communications Standards Authority. Mr Cruickshank emphasised that the division between these two bodies would be different from the current separation of responsibilities of Oftel and the ITC, since, unlike the latter, the Standards Authority would not be concerned with the wider economic and access issues affecting broadcast content. This structure provided the benefits of clarity while recognising that the skills required for content regulation and economic regulation were quite different.[408]

151. Both the Radio Authority and the ITC opposed such a structure, arguing that decisions on content regulation were inseparable from wider considerations of licensing, ownership and economic viability.[409] The ITC did, however, envisage a single content regulator emerging in due course.[410] The Radio Authority canvassed another model, with an over-arching structure of a "holding company" regulator and sectoral regulators as "operating companies", including, for example the BBC and the Radio Authority; this would offer a coherent strategy combined with flexibility.[411] Comparable proposals were also made by Ms Rosemary Stock, Chairman of the Satellite and Cable Broadcasters' Group, and Discovery Communications Europe.[412]

152. The commercial radio sector argued that the separate identity of the Radio Authority ought to be retained in some form. It was felt that, prior to its creation, commercial radio had been treated as a "second class citizen" by the IBA.[413] The Radio Authority believed that the smaller scale of commercial radio and the relatively long timescale for convergence to affect radio continued to justify a separate approach with separate expertise in a separate body.[414]

153. The rationale for the BSC is to provide a single body to cover all forms of broadcasting, which is independent of the licensing or management process and which can adjudicate on complaints in the sensitive areas of taste and decency and fairness and privacy. Lady Howe attached importance to a continuing role for a body combining independence and a broad perspective.[415] Other witnesses argued that the BSC was simply a source of unnecessary duplication and confusion, which ought to be abolished or merged with the ITC.[416] The ITC drew attention to the extent to which it relied on complaints from the public for its own content regulation, while acknowledging the distinctiveness of complaints from those believing they were maligned or improperly portrayed in a programme.[417] Both Oftel and the National Consumer Council drew attention to the case for distinct consumer representation in any new regulatory structure.[418]

154. A number of witnesses proposed that the regulatory position of the BBC ought to change in a new regulatory environment. First, it was argued that its increasing range of commercial activities should be subject to independent regulation. Some proposed independent oversight of the BBC's accounts in addition to a standard audit, with specific reference to commercial activities, for example by a regulator or the National Audit Office.[419] This Committee is concerned at the possibility of hidden cross-subsidisation of BBC commercial activities by the licence-funded material. The BBC's continuing role as a content regulator was also questioned. The BSC argued that the BBC's Governors had an important role in ensuring the best possible programmes and, therefore, "can have no separate standing in judging any subsequent controversy".[420] The ITVA and the Institute of Practitioners in Advertising both proposed that the BBC's content be subject to the same single television content regulator as the commercial sector.[421] The ITC believed that the BBC's existing regulatory approach lacked "transparency and accountability" and that the logical eventual solution was a single content regulator.[422]

155. The BBC itself considered that its existing role within the regulatory structure "remains as valid as ever in the multi-media age". Sir Christopher Bland said that the BBC's commercial activities were subject to fair trading supervision both internally and by the BBC's auditors which far exceeded "anything that our competitors have to go through". He thought that there was a continuing case for plurality in broadcasting content regulation.[423]

156. S4C saw advantages in it continuing its self-regulatory role. Its linguistic remit required a regulator with officers capable of understanding the Welsh language; a single Welsh-speaking member of a United Kingdom regulator was not in itself a satisfactory replacement. It nevertheless believed that there was merit in "a system of common guidelines", a system which did not have to be synonymous with the concept of a single regulator.[424]

(iv) Our recommendations

157. The current system for statutory regulation of audio-visual communications, composed as it is of numerous bodies with confusing and overlapping jurisdictions and powers often ill-fitted for digital technologies, is more reminiscent of a feudal State than a regulatory structure for the multi-media age. The case for change is unanswerable. Any new structure should have clarity and coherence, but recognise the distinctive nature of broadcasting provision. It is possible to establish a structure which combines these characteristics.

158. We recommend the absorption of all current regulatory bodies into one Communications Regulation Commission with overall responsibility for statutory regulation of broadcasting, telecommunications and the communications infrastructure. We recommend that its duties include:

regulation of access to communications platforms by both systems operators and service providers, including all issues relating to gateways, competition law, and cross-media ownership;

the compilation of information and the duty to report to Government on policy issues;

all regulatory actions in support of universal broadband provision;

strong encouragement of the development of self-regulation by Internet service providers; and

oversight, for all broadcasters, including the BBC, of broadcast content regulation and the commercial activities of broadcasters, with direct oversight of their implementation.

There shall be a Chairman of the Commission who is a member of the Commission and not a statutory regulator. There shall be two Deputy Chairmen responsible respectively for delivery and content. The Chairman and the Deputy Chairmen shall be appointed by the Secretary of State subject to consultation with the appropriate departmental Select Committee and a public hearing of that Select Committee. All appointments would be subject to the 'Nolan procedures'. There should be the power, as exists at present for the ITC and the Radio Authority, to fine broadcasters.

159. In order to ensure that all classes of broadcasters and narrowcasters are adequately administered—and we take cognisance of the evidence that radio was neglected when it was a division within the former Independent Broadcasting Authority—we believe a sub-commission structure should be created to ensure proper fulfilment of the Commission's several functions. Each sub-commission shall have its own small board. Each sub-commission shall have the power to publish its own reports and recommendations subject to approval of the Commission which shall not unreasonably be withheld. We further recommend that one or more members of the Communications Regulation Commission should have a duty to represent the interests of consumers, supported by appropriate research capacity within the staff of the Commission.

Parliament and public policy

160. The technology underpinning change in broadcasting and communications more generally is changing at an amazing rate. During this inquiry we have been considerably assisted by presentations of technological developments both in this country and in the USA. Without being transfixed by technology or making assumptions about the mass market appeal of particular developments, it is vital to be informed about their potentiality. This is of especial importance for legislators. For this reason, we expect that the relevant authorities of the House of Commons will wish to consider the extent to which such developments can be made available on a demonstration or operational basis for Members of Parliament. Prospects for discussions between Parliamentarians from different countries on issues relating to convergence should also be explored.

Conclusion

161. The United Kingdom has great strengths relevant to the new era of multi-media communications: it is the home of public service broadcasting; the English language is the dominant language of many new forms of communication; it has a highly competitive telecommunications sector; its people have the ingenuity and skills to adapt quickly to changing technologies. Given the necessary leadership by Government, the establishment of clear policy priorities and the creation of coherent regulatory structures, there is every reason to be confident that this country can both maintain its commitment to quality and values in audio-visual communications and harvest the gains from the immense opportunities created by the information revolution.

378 Q 1082. Back

379 Evidence, pp 254, 442, 450, 471, 511. Back

380 Q 972. Back

381 Evidence, p 375. Back

382 QQ 1003, 1010, 1038. Back

383 Evidence, p 332; Q 15. Back

384 Evidence, p 558. Back

385 Evidence, pp 533-535. Back