Sixth Standing Committee
on Delegated Legislation
Wednesday 24 March 1999
[Mr. Bill O'Brien in the Chair]
Draft Limit in Relation to Licences to Provide Radio Multiplex Services Order 1999
10.30 am
The Minister for Tourism, Film and Broadcasting (Janet Anderson): I beg to move,
That the Committee has considered the draft Limit in Relation to Licences to Provide Radio Multiplex Services Order 1999.
The Government are committed to the success of digital broadcasting, and we shall always respond to the industry's concerns where there is a genuine case for change. The measure that we are discussing today reflects changes in the digital broadcasting market since 1996.
The draft order revises the limits in relation to licences to provide radio multiplex services set out in paragraph 11(4) of part III of schedule 2 to the Broadcasting Act 1990, as amended. Multiplexing—the management of a range of digital programmes which compression techniques allow to be transmitted on a single frequency block—is an essential function in digital radio. There is only one national multiplex licence, which the Radio Authority awarded last year to Digital One, the sole bidder. The order effectively deals only with local multiplex licences.
The Radio Authority began to advertise the 26 local licences last year. It will continue to advertise the licences at the rate of one a month over the next two years. The Government are committed to the success of digital radio, both nationally and locally. We agree with the industry and the Radio Authority that the current restrictions on ownership may harm its development.
The current restrictions are as follows: first, no company may hold more than one licence to provide a national radio multiplex service. A company that is a participant with more than a 20 per cent. interest in a company that holds a licence to provide a radio multiplex service but does not control that company will be treated as holding the licence held by that company. Secondly, no company may hold a licence to provide a radio multiplex service and be a participant with more than a 10 per cent. interest in more than one company that holds any other such licence. Thirdly, no company may have shareholdings of more than 10 per cent. in each of three or more companies that hold such licences.
The effect of the ownership restrictions included in paragraph 11 is that, in theory, a single company or consortium could apply for, and be awarded most or even all of, the local multiplex licences. However, that should not happen as the Radio Authority has a duty to ensure fair competition in awarding licences.
Paragraph 11 prevents companies from hiding their interests by controlling a range of consortia applying for multiplex licences—or trying to circumvent the licensing process by acquiring controlling interests in companies or in consortia after the licences have been awarded by the Radio Authority. The control of ownership in that way was one way of achieving the objective of plurality of ownership without making digital radio unattractive to potential participants and investors.
The amended limits correct certain assumptions made in 1996 about the shape of investment in digital radio. We now know more about the extent of interest in local multiplex licences and the scale of the necessary investment. It is clear that, in the early stages of digital radio, companies will have to form consortia to run multiplexes, and the present restrictions will severely constrain the formation of such partnerships. Without some amendment, we may see one or two powerful consortia bidding for local licences across the country. It could be argued that the current limits would have the effect of forcing the big players into a very small number of bidding consortia. Smaller, more locally based radio companies may be excluded from participation. If even the large groups find themselves obliged to form consortia, the smaller companies can be expected to find it almost impossible to fund and run a local multiplex alone.
We believe that that is the opposite of the original intention of the legislation, which was to encourage plurality of ownership and diversity of content. It is therefore sensible to revise the limits now. There is a greater likelihood of local interests and tastes being adequately served if regional radio groups and local stations are encouraged to joint consortia bidding for multiplex licences. However, some restriction on shareholdings in consortia holding licences is still needed. It would not be desirable to have a very small number of companies controlling most or all of the local multiplexes through networks of consortia.
Following extensive consultation, we propose a cautious measure of relaxation. The order revises the limits so that, first, no company may hold a licence to provide a radio multiplex service and be a participant with more than a 20 per cent. interest in more than four companies that hold any such licences and, secondly, no company may be a participant with more than a 20 per cent. interest in each of six or more companies that hold such licences.
Raising the limit on the number of consortia in which companies may have controlling investments will give all parts of the industry the opportunity to get involved in partnerships to bid for local licences. Furthermore, raising the maximum investment allowed in companies or consortia above that limit, from 10 per cent. to 20 per cent., should allow smaller radio groups the opportunity to make a number of meaningful investments in several local multiplexes.
We are confident that digital radio will become an important communications medium in years to come. We want to see a financially healthy digital radio industry, with a diverse output that reflects local tastes and interests. The Radio Authority shares our belief that multiplex consortia between larger radio groups and local firms should work for the benefit of the digital radio listener. Such partnerships are not guaranteed, but the new limits allow the opportunity for their formation while continuing to guard against undue concentration of ownership.
I invite the Committee to support the order.
10.37 am
Mr. Richard Spring (West Suffolk): I thank the Minister for clearly setting out the order. We are, of course, happy to support it.
The current arrangements were drawn up when the degree of interest in digital radio was unknown. We understand why it has been decided to revise the restrictions. That decision is due particularly to representations from relevant bodies. Representations from the industry and the Radio Authority suggest that the current arrangements are ``overly prescriptive'' and likely to act as a significant disincentive to investment in commercial digital radio.
The Radio Authority also believes that investment in digital radio will primarily be consortium based. The Radio Authority is concerned that present arrangements will severely constrain such partnerships across the country.
The strength of analogue commercial radio is its local nature. It is desirable to expand that strength into digital radio. However, the Radio Authority believes that the current restrictions act against local radio stations investing in digital radio. The current legislation encourages direct holdings of licences. Holdings in further bodies are limited to a very small stake of less than 10 per cent. As the Minister implied, that creates a risk that all major investors in digital radio could be led by the statutory provision to combine in a single consortium to dominate the digital industry, with the result that any group or company may obtain a dominant position. The current legislation never intended to discourage plurality of ownership.
It is therefore necessary to relax the current restrictions, which will encourage major investors in digital radio. We are anxious to ensure that digital radio is a success and that large groups have more investment freedom. We are therefore happy to support the order.
10.39 am
Janet Anderson: I thank the hon. Gentleman for his support for this order. As he said, it was never the intention of the legislation, which was introduced when his party was in power in 1996, to discourage plurality of ownership. It is fair to say that we could not at that time have predicted exactly what the investment in digital radio would turn out to be. I welcome his support for the order, and invite the Committee to do the same.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Limit in Relation to Licences to Provide Radio Multiplex Services Order 1999.
Committee rose at twenty minutes to Eleven o'clock.
The following Members attended the Committee:
O'Brien, Mr. Bill (Chairman)
Anderson, Janet
Casale, Mr.
Cousins, Mr.
Day, Mr.
Dowd, Mr.
Grogan, Mr.
Horam, Mr.
Jones, Mr. Nigel
Love, Mr.
Lock, Mr.
Mahon, Mrs.
Simpson, Mr. Alan
Spring, Mr.
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