162. Our principal conclusions and recommendations are as follows:

  (i)  Public policy must not be transfixed by technology, but it must be informed by it and might be transformed by it. (paragraph 8)

  (ii)  The conversion of the television signal from analogue to digital is a necessary prerequisite for television's participation in the market opportunities created by convergence. Digital television will represent an important change in the nature of the British broadcasting market, ending forever the distinction between terrestrial television as necessarily free-to-air and satellite television as necessarily pay-TV. Although regulatory decisions will affect their prospects, the consumer will determine the success of the different systems and of digital television as a whole. The overall success of digital television will not be determined solely by the issues of channel choice which have hitherto dominated the television market and are the main focus of much discussion about digital television's prospects. It could be determined by the capacity of the different delivery systems, and broadcasters as a whole, to adapt to the implications of convergence and, in particular, to the transforming power of interactivity. We are deeply concerned that these implications are insufficiently grasped in this country, and that potential to profit from them in terms of employment and trade is therefore being jeopardised. (paragraph 24)

  (iii)  We were deeply impressed by the quality of the oral evidence of Dr David Clark, Chancellor of the Duchy of Lancaster, on the electronic delivery of Government services and by the quality of the work he is doing that the evidence demonstrated. He has adopted, on behalf of the Government, a multi-faceted approach to the dissemination of information, developing information for touch screens and digital television as well as the Internet so as not to anticipate market determination of platform success. (paragraph 37).

  (iv)  Dr Clark held out the prospect of public services and accompanying information which were citizen-led rather than provider-led; many experiments were grounded in the realisation that "we do need to seek ways of empowering people". To this Committee, this meant the potential for a simpler, more efficient, more consumer-friendly provision of government services to the public, including a more cost-effective benefits system. (paragraph 37)

  (v)  This Committee is concerned that there is no commitment by the Government to ensure a computer on every child's desk in every secondary school within a specific timetable. (paragraph 38)

  (vi)  We support the recommendation of the Film Policy Review Group for a separate Government/Industry group to examine the training needs of broadcast production. It is of particular importance that the group involves representatives of the new as well as the well-established organisations in audio-visual communications and considers broadcasting not in isolation but as part of a wider communications sector affected by convergence. (paragraph 68)

  (vii)  We believe that it is in the overwhelming interest of consumers that there should be a fully open set-top box available at an acceptable price. We deplore the failure of broadcasters and manufacturers to co-operate on producing such a box and regret that the Government has not taken action to bring about such co-operation. We recommend that the Government presses these interests, by every means at its disposal, to work together even at this belated stage. (paragraph 75)

  (viii)  Competition policy will need to balance the dangers of oligopoly on the one hand with the prospect on the other that excessive concern over ownership and size in a domestic context might create a market so fragmented that the United Kingdom lacks organisations with the range of skills and the investment capital to compete effectively in increasingly global markets. Dominant positions are often beneficial viewed in an international context; they are also often a legitimate reward for risk and innovation. The aim of regulation should be to reduce the possibilities for the abuse of a dominant position, not to reduce dominance. This will depend greatly on swift, coherent and effective regulation of infrastructure and gateways. This regulation will require sector-specific skills and focus. (paragraph 81)

  (ix)  Competition law and regulation for the media and communications sectors are necessary, but not sufficient. There is still a role for specific media regulation. Economic regulation with economic goals does not provide for two priorities which have been central to public policy and should remain so: cultural objectives regarding content and its provision; and social objectives in relation to the universal availability of certain services. (paragraph 82)

  (x)  We note, with a certain degree of scepticism, that commercial terrestrial broadcasters remain optimistic about their prospects. Viewing of traditional commercial mainstream services and of the BBC is certain to fall as a proportion of television viewing. Although the fall is unlikely to be precipitate, it is eventually likely to be substantial. In any case, television viewing in the traditional sense is likely to fall as more and more households gain access to the Internet, which itself will become a new mode of entertainment. (paragraph 103)

  (xi)  We agree with the view expressed by almost all those in the sector that investment in production is essential. Nevertheless, despite their investment in new media, we were concerned at a prevailing and somewhat complacent view that the impact of the Internet on broadcasting will be gradual, perhaps even marginal. There are already clear indications from the USA and this country that the Internet is having an impact on the size of the television audience, particularly amongst young people. This is at a time when the Internet is only just beginning to tap its vast potential as an audio-visual and advertising medium. The Internet is global by its very nature and its growth will expose the whole of British broadcasting to global competition. Broadcasters may find it an increasing problem to sell their programmes abroad as global access becomes commonplace. (paragraph 104)

  (xii)  Other technological developments might make it increasingly possible to order television programmes on an individual basis, potentially reducing the brand identity of channels by which those channels understandably set such store. British broadcasting is of a quality admired throughout the world; that quality ought to be maintained and enhanced for a new and more diverse market; British broadcasters, especially the terrestrial commercial broadcasters, have not yet done enough to realise their potential in the global market-place. (paragraph 105)

  (xiii)  The question is whether attempts at international regulation of the Internet can be anything more than optimistically indicative rather than genuinely effective. (paragraph 108)

  (xiv)  We recommend that the Government pursues a strategy for the Internet on the basic principles of: (i) active and accelerated promotion of the Internet as a vital engine of social and economic development; (ii) promotion of self-regulation within a framework of existing general legal provisions; (iii) absence of licensing or restrictions on freedom of individual access as producer or consumer; (iv) support for an agreed global framework for the Internet. (paragraph 114)

  (xv)  Notwithstanding the justifiably different approach to the Internet and a growing emphasis on control within the home, the case for retaining content regulation on broadcasting remains, so long as this continues to be feasible. Technology will not have any immediate impact on popular expectations about the maintenance of certain standards in broadcasting, particularly in order to protect children. Within a basic framework of standards and decency, we would expect content regulation to fall into four main tiers:

• transaction or non-scheduled services, subject to requirements for rating and compliance with filtering standards, but otherwise subject to limited content regulation;

• scheduled non-terrestrial services provided as part of subscription television subject to minimal positive programming requirements;

• scheduled, free-to-air services of a predominantly commercial nature subject to broad programming requirements;

• scheduled, free-to-air services of a predominantly public service nature subject to detailed programming requirements.

This tiering system is necessarily simplified, perhaps over-simplified. The development of many free-to-air services on all digital platforms will increasingly blur the distinction of terrestrial and non-terrestrial services which underpins much of the current regulatory approach. This makes it all the more important for content regulation to be based on clearly enunciated principles, for distinctions between different levels of regulation to be transparent and for the precise level of content requirements to be adaptable. (paragraph 116)

  (xvi)  The capacity for comprehensive negative regulation will slip away, but the desirability of positive regulation will still remain. (paragraph 117)

  (xvii)  We consider that the issue of analogue switch-off should be taken forward not in isolation but in the wider context of the future of universal access. (paragraph 128)

  (xviii)  We welcome the Government's commitment to encouraging the rapid development of broadband networks, but believe that this should be bolstered by a clear target. Accordingly we recommend that, without commitment to any one delivery system, the Government establish as a strategic objective for the first decade of the new millennium the development of a universal broadband infrastructure (including an adequate return path capacity) available to every home in the United Kingdom. We expect there to be several important staging posts in the pursuit of this objective, including,

• the delivery of the Internet to all schools, libraries, hospitals and GPs' surgeries by 2002;

• the evolution of a policy for the availability of the Internet in every home, perhaps initially on the basis of a flat rate charge for a narrowband service for a limited period of time each week;

• the development of a secure card for the citizen's transactions with Government;

• and measures to ensure the widest possible availability of the necessary receiving equipment.

Achievement of this objective should be a priority not only for the Government, but for communications infrastructure regulators. Its achievement should make possible analogue switch-off, with its consequent economic benefits, and we recommend that the same date should be set for both meeting the strategic objective and analogue switch-off. We envisage this date being no later than 2010. This date should be announced before the end of 1998, as delay in the announcement causes uncertainty. (paragraph 137)

  (xix)  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. (paragraph 140)

  (xx)  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. (paragraph 147)

  (xxi)  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. (paragraph 158)

  (xxii)  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. (paragraph 159)

  (xxiii)  We expect that the relevant authorities of the House of Commons will wish to consider the extent to which developments in communications technology 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. (paragraph 160)