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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 24-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE CULTURE, MEDIA AND SPORT COMMITTEE
COMMERCIAL OPERATIONS OF THE BBC
LORD CARTER OF BARNES CBE Evidence heard in Public Questions 1 - 77
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Culture, Media and Sport Committee on Members present Mr John Whittingdale, in the Chair Janet Anderson Philip Davies Mr Nigel Evans Paul Farrelly Mr Mike Hall Rosemary McKenna Mr Adrian Sanders Helen Southworth ________________ Witness: Lord Carter of Barnes CBE, a Member of the House of Lords, Minister for Communications, Technology and Broadcasting, gave evidence.
Chairman: Good afternoon. This afternoon is the concluding session of the Committee's inquiry into the commercial operations of the BBC and we are extremely pleased to welcome the new Minister for Broadcasting and Communications, Lord Carter. However, the Committee also felt that it was an opportunity to explore one or two other issues falling within the Minister's brief, so we will commence with the session concentrating on BBC Worldwide and the commercial operations, but then perhaps looking to one or two other issues more generally, but to begin this afternoon can I invite Paul Farrelly to start. Q1 Paul Farrelly: Lord Carter, we commenced the inquiry into BBC Worldwide in part because there was a feeling in certain instances, not least the acquisition of Lonely Planet, that BBC Worldwide had overstepped the mark. These cries come from time to time, but there does have to be a balance between revenue maximisation, does there not, and the BBC not for ever and a day being the elephant in the room in its mainstream or commercial operations, simply crowding out the legitimate activities of the private sector? Could I just ask you first of all, philosophically, what is the Government's view of the BBC exploiting its intellectual property and where should the boundaries to its activities lie? Lord Carter of Barnes: You use, I think, a very timely phrase in part of your question around the exploitation of intellectual property. I think if you look at the broadcasting industries generally - in fact if you look at the creative industries, but we will keep it to broadcasting for now - relatively recently, I would say even arguably within the last two or three years, we have seen a significant turning point where the exploitation of rights and the exploitation of the intellectual property has become an ever more important of the business. This has been true for some time, for sure, but as the world has gone more global and as more and more platforms for distribution have gone to scale, the value in the rights, the value in the exploitation of the intellectual property has gone up and up, and up, and that is a really significant reality for the entire sector, which I suspect we will come back to in other questions. As it relates to your central philosophical question, I am not sure I can speak for the entire Government on this question, but my view of where the BBC is on this is that I think it is on the horns of a dilemma because on the one hand we legitimately want to maximise the returns, if you like, to the BBC Exchequer, particularly for assets which have already been paid for by the licence fee take, but on the other hand we do not want them to go so far that it is market distorting or chills competition, or chills innovation. So there is a degree of encouragement and constraint, and that is quite a tricky wicket to play on. My own view is that at a simplistic level it is not particularly helped by being called BBC Worldwide, which is not just an issue of optics or nomenclature. If you actually look at the anatomy of their business, a lot of their business is not the exploitation of BBC-owned properties. So if you ask the question in a slightly different way, if I am allowed to do that, and say, "Do I think there is a value to the UK creative industries and to the broadcasting market in having a highly successful business which exploits the rights from UK-originated content around the world, from public service broadcasters in the broad, including the BBC?" I absolutely do. Q2 Mr Sanders: The executives of BBC Worldwide have quite fairly said to us, "We have been told to go out and do as much as possible for the British creative industry and make as much return as possible, and we are doing it and now we are being criticised for it." Do you think that in order to try and resolve the horns of the dilemma on which they are placed they should be given firmer guidelines? For instance, should there be a principle that there must be a strong link between the BBC's commercial activities and its own programming? Lord Carter of Barnes: I do not know is the honest answer to that. Take me a little further before you go on with the questioning, if you will. Q3 Paul Farrelly: Let me help you with the Lonely Planet acquisition. It raised considerably disquiet because here is the BBC not buying a small name which it could exploit and put its programming behind, and launch magazines with, but taking a really well-established brand name out there, which clearly had competitors, putting its resources behind the Lonely Planet brand, and there was considerably disquiet because the BBC had not grown that brand. There was a perception that it may have been paying dotcom boom-type prices with a business model which is different for the BBC from other people, particularly when finance is tight, which allowed it to buy that for a large amount of money. Is that the sort of instance which would make you feel uncomfortable where the BBC may have stepped over the line? Lord Carter of Barnes: I am sorry if I restate the same answer to a different question, but I think we legitimately have to try and do two things, but I suspect we cannot do the two things with the same set of rules. We have to have a necessary set of protections, Fair Trading guidelines, Competition Rules, whatever else it may be, around the activities of an organisation which is by its very nature distorting of the market, which is the BBC. We decide and support the BBC for good reasons, but we do that with the full recognition that it has consequences and we want, where possible, to control the negative consequences so that it does not stifle innovation and competition in other areas. But at the same time I am instinctively uncomfortable with taking an idea, which is rights exploitation of high quality UK content, and starting from the premise of how do we constrain it? I would rather start from the premise of how do we maximise it? But how do we maximise it without having the negative effects on the rest of the market? That is what I mean when I say I think we are on the horns of a dilemma and it could be that because of the shift in the structure of the market that dilemma is more stark now than perhaps it has been for some time. In its current form, I think in relation to some of the issues which you allude to, and other people have alluded to, it is written very starkly, but as a starter for ten I do not think it is beyond the wit of man for us to do both of those things, to have the protections and also to have the maximisation. That is where our thinking is at the moment. Q4 Paul Farrelly: Just a final question. On the issue of Lonely Planet, does the BBC's acquisition of Lonely Planet, rather than using its own BBC name to do what it is planning, leave you feeling that actually the BBC's judgment is correct or not correct? Has it overstepped the line or not overstepped the line? Are the concerns of the likes of Time Out justified or not? Lord Carter of Barnes: I am sure if I was sitting inside Time Out I would feel passionately that they were justified. I do not know enough about that particular acquisition, or indeed frankly that particular market, to know but as it relates to case by case acquisitions, I think you have got to leave that to the management and the governing structures they have got. What we have got to make sure we are happy with is, are we happy with the overall construct? At the moment, all aspects of the BBC have to deliver the BBC's public purposes and at the moment BBC Worldwide is making a contribution to that. What I think we are seeing at the moment is a kind of tension, a conflict between those two. If you and I were having this conversation in three or four years' time, the importance of rights exploitation is only going in one direction, as you know as well as I do, if not better. I think the question is, how do we set a set of rules around transparency, transfer pricing, first look arrangements, the commercial opportunities afforded to this entity in a way which makes other players in the market feel that they are competing fairly? I think if we can get to that we could have the necessary protections and the opportunity of this organisation to maximise its revenues and that, I think, could be good for everybody. Paul Farrelly: Chairman, that neatly moves on to the remaining questions, but I sympathise with the management of BBC Worldwide, who would probably think, listening to you, Lord Carter, "Well, thank you, Minister, you have not helped us off the horns of that dilemma!" Q5 Janet Anderson: Lord Carter, you have talked about the need perhaps for two sets of rules and the kind of dilemma where the BBC on the one hand wants to maximise returns to the BBC Exchequer, I think you described it as, but to avoid market distortion. Worldwide has exclusive first refusal of BBC programming, which has led Pact and Fremantle to argue that the true market value of BBC programmes may not be obtained. Do you think the interests of taxpayers could be better served by an open auction? Lord Carter of Barnes: I think first look obligations are relatively common practice across the world and there are arguments on both sides as to whether a kind of straightforward open auction or a first look - first look still requires the owner of the first look benefit to bid, so it does not necessarily have the effect of diminishing prices, in fact there are many people who would argue that the kind of notion of a favoured distributor means you have an institution or an entity which understands how best to exploit. So I do not necessarily accept the analysis which says that its existence has the effect of depressing value, which is what I think is behind your question. Q6 Janet Anderson: But we do not actually know how much they are paying? Lord Carter of Barnes: You would know better than I. I do not know what the level of transparency is on price paid or disclosure obligations on the internet. Q7 Janet Anderson: Pact has pointed out to us that BBC Worldwide does not make public how much its 29 UK and overseas channels pay for programmes acquired from the BBC, so we really have no way of knowing.? Lord Carter of Barnes: Then that is rightly a question which I am sure you already have put and probably should put again to the management of BBC Worldwide. On your principal question, as I say, I think you can argue the case either way, but slightly going back to Mr Farrelly's question, I do think we need to frame this question in a different way. In this country we are extremely good at high quality UK-originated content, extremely good at it. The BBC is very good at it, ITV is very good at it, lots of independent production companies are very good at it, Channel 4 is very good at commissioning it. It is something we are very good at. The global market for that content is growing and growing and growing, and how do we get the right balance between competitive protections and at the same time creating a British success story, or allowing a British success story to compete in the global markets? I am not sure the two are essentially at odds with each other. At the moment, you can see the conflict, but I think that is largely a function of current structures rather than necessarily the fundamentals. Janet Anderson: Thank you. Chairman: We are going to jump slightly because Helen Southworth is not able to stay because she has another meeting and there is a particular issue which she wants to raise. Q8 Helen Southworth: If I could ask you to focus some attention on the development of creative industries and the BBC's role within that and to ask what you are hoping for from the development of the Media City at Salford in terms of the development of creative industries within the UK and what opportunities that is going to give us for a global market position? Lord Carter of Barnes: I think there is an awful lot of evidence to show that the changes over the last - and it really has only been over the last five or six years, not just with the BBC but also with the independent production process more broadly, have, to use, I think, a previous Secretary of State's quote, "spread the venture capital for the UK creative industries more broadly" both in the ownership of it and in the geographical home of it. What does that do? It spreads employment opportunities and it spreads creative opportunities. I think there is a reasonable degree of evidence - and this slightly goes back to Janet's question - that it actually creates value, absolute value, because you get competition in the market and you get organisations and entities which can own their own assets, and they can grow scale and they can acquire and therefore they can invest themselves. So the strategy is, I think, one which has been borne out by evidence and the Salford move, the expansion of the BBC's capabilities in Scotland, the extension of the window of creative competition, the transfer of secondary rights, the extension of the regional quotas, these are all designed, I think, to create a greater level of competition and creativity, and the evidence so far is good. I think it is good. Q9 Helen Southworth: Are you hoping that the BBC is actually going to invest significantly in making that happen, because it is the big public service body which can make it develop? Lord Carter of Barnes: I have heard the siren voices which say, you know, as ever, it could be done quicker, there could be more of it and it could be more efficient, and it may well be that all of those things are true, but I certainly do not sense any lack of enthusiasm from the BBC senior management for these changes, and I think that is for the good. Q10 Rosemary McKenna: Minister, various organisations and individuals have argued that the BBC Trust is not a credible check on the BBC's commercial ambitions. Hs the record of the Trust so far lived up to your expectations? Lord Carter of Barnes: That is a nice googly there, Rosemary! Well, it is a relatively new innovation, is it not? If there is any place in which you can say these things, it is probably in this House. Creating institutions fast is a contradiction in terms because you need some time to do that and the BBC Trust is still relatively early days. Is it an improvement on the completely integrated governing structure that there was before? I think on balance, yes. Is it a forensically separate structure where accountability sits clearly in one place and regulatory responsibility sits clearly and singularly in another? No, it is not, but it never was. It was always designed to compromise and to balance the conflicting challenges of how do you provide the necessary degree of common guidance to a market whilst recognising that the BBC is different? And the BBC is different, on lots of levels, not least around this question about how do you have a player which is funded largely, in the vast, vast majority, by taxpayers' money through a licence fee whilst at the same time encouraging it to do commercial activities in order to put a ceiling on what that is. So there is an almost inevitable tension in there because you are asking it to stimulate it to do things which might of itself be in conflict with the market. I think the evidence so far is that the BBC Trust has by and large exercised its judgment on most of those things pretty well, but it is very early days. Rosemary McKenna: Thank you. Q11 Chairman: On some things the Trust has clearly taken quite a hard line against the BBC Executive, on others the Trust has seen its role to defend the BBC, and there is an inherent contradiction between those two roles. It is not a question of whether or not it is early days, it is obvious from the start as to whether or not there is a contradiction. Is this an issue, do you think, which bears re-examination in due course? Lord Carter of Barnes: Well, everything bears re-examination in due course. It depends on how long you mean by "due course". Is it on my agenda? Is it a burning issue? Do I sense that the collective and independent objective analysis of the judgments made which have been bad demand a re-think? No, I do not. I do not. Q12 Chairman: So until we come round to the next charter renewal period, the existing structure is likely to remain in place? Lord Carter of Barnes: I would say that is highly likely. Making big structural changes on governance no one does lightly. I know you do not mean this, Chairman, but it is always in a sense easy to have these discussions at a conceptual level. It is always worth bearing in mind the effect on the organisation, the people who work in it, the organisations which have businesses that depend upon the BBC, the knock-on effect in communities. Whilst these things are important and surely we would always want to get them 100% right, we also want to make them 100% operational, and I would say the Trust is operational as itself well. It is up and running. It has quality leadership. There are quality people involved in it. It has set out a framework and a set of guidance. It has created a reasonably effective - with some inherent constructive tension around the edges in its working relationship with Ofcom, the sector regulator, but it seems to be more than functional and actually having a bit of tension in that system is not all bad in a way. So would I rush to make a change in the near future? No, I do not think I would. Chairman: Thank you. I think we will now move slightly beyond the BBC to your more general responsibilities. Q13 Mr Sanders: Your appointment indicated the need for convergence at Ministerial level. Is it time for a converged Department of Communications as well? Lord Carter of Barnes: One of the many fascinating things about my sector is that it affects almost every aspect of what government does because it affects almost every aspect of what all of us do, so you might end up with a very big department. I think at the moment the remit is a remit to look at how best we maximise our position as a country. What does that mean in terms of citizens, consumers, viewers, listeners, the industry, infrastructure and investment? Machinery of government issues, I have to say, are not part of the brief. Q14 Mr Sanders: Are there not areas, though, where the two departments might be at odds? Lord Carter of Barnes: I am sure there are. I have to say, I have not seen it yet. As I say, what I have discovered in two months or so is that it involves more than just two departments. I sit in two departments because that is where, if you like, the centre of gravity of activities are, in the Department of Business and the Department for Culture, but there are significant issues which are relevant in the Department of Innovation, there are significant issues in relation to broadcasting in the devolved nations departments, there are significant issues in terms of education and skills and there are significant issues in terms of general public service delivery, in the efficiency of public service delivery using new technology, so trying to tidy it all up in one place, even if one tried to, I think might be trickier than it appears at first, but I have not found it an obstacle, let us put it that way. Q15 Mr Sanders: How do you view the job? If something came up which straddled both departments and required you to take two positions, say a leadership role which went down on one side or the other - or do you see yourself as a referee who just observes and approves one department over the other, or do you see yourself getting your hands dirty and actually setting one department against the other where there may be conflicting interests? Lord Carter of Barnes: Well, I see myself as a technocrat, to answer your question, rather than as a referee. I think at the moment we are at the stage of trying to frame the questions and the answers. If it comes to the point of adjudication and the ability to exercise the judgments of Solomon if there are conflicting departmental interests, I think that would be for other people rather than me. My job is to try and bring the analysis into one place, to try and build a common understanding of what our digital economy is going to look like in five or six years' time, to understand what that means for the big questions both in public policy and in commercial industrial policy and see how best we align them. If there are conflicts, we will take them as they come, but that is not where we are in the process right now. Q16 Mr Hall: You are probably in a very good position or place to deal with the relationship between Government and Ofcom. Both are charged with the requirements of policy planning, yet there is really a very strong potential for a dichotomy between the roles of Ofcom as a regulator and the Government as a policy maker. How do you see that and how would you resolve that dichotomy? Lord Carter of Barnes:
I used to
say when I was at Ofcom that one of the few mistakes I think were made, if I am
allowed to say so, in the passage of the Bill into an Act was calling it
Ofcom. It would have been better if it
had been called the Strategic Communications Authority, because actually that
is largely what it has become, but I think part of the reason why it has become
the Strategic Communications Authority is because this has not been an area
where government has been focused. There
was, I think, a degree to which the Communications Act was passed, Ofcom was
created and the sector was progressing and inevitable government has multiple
priorities. I think the reason why
government has returned to it with some degree of forensic focus is partly
because of what is happening in technology, partly what is happening in real
people's lives, partly what is happening in the macro-economy, that we need
other sectors which are going to grow and thrive and succeed. Look around the world. Look at how important the digital economy is
to President-elect Obama's plans. Look
at what the French Government is doing and what the German Government is doing,
or go to Asia and spend any time in Q17 Mr Hall: So you see this as a very healthy relationship without many pinch points at all and that both government and Ofcom are ostensibly working in tandem? Lord Carter of Barnes: Personally, I think it is a tripartite relationship between government, the Regulator and the industry. Q18 Mr Hall: Have you got any plans to change their name to the Strategic Communications Authority? Will that be primary legislation? Lord Carter of Barnes: I do not think we would be using valuable legislative time to effect a name change! It was more to illustrate a point. Mr Hall: Okay. Thank you. Q19 Philip Davies: Just in terms of some of these conflicts which you have not yet identified, if I could sort of throw one in to see what you think. The "nanny state" fanatics at the Department of Health appear to be more and more obsessed with banning so-called "junk food" advertising at every single second of the day, whereas historically the Department for Culture, Media and Sport has taken a much more sensible view about these matters, and Ofcom appear to be put in the position of referee in this particular dispute themselves. I just wondered where you stood on the existing restriction on advertising of so-called "junk food" and whether there are any plans to extend it, as the Department of Health seem so keen on? Lord Carter of Barnes: My sense is that those discussions have got to a sort of sensible working place where there is now an industry-funded initiative. It seems to have the support of the Department of Health as well as the Department for Culture, where there is a commitment to look at the codes and the self-regulatory rules and obligations placed on advertisers to sensibly promote, whilst at the same time having a kind of common participation in a communications exercise in the broader sense of the word to encourage people and inform people about healthy lifestyles. So my sense is that the flurry which you refer to has brought everyone together - you could take a view as to whether it was done as constructively as it could have been, but nevertheless it has brought everyone together in a way which has created a degree of common cause. So I do not sense there is the need for another government intervention in this area right now. Q20 Philip Davies: So on any proposal to extend the ban you, as the Minister for Broadcasting, would stick up for the broadcasters and point out what a devastating impact it would have on their revenues, would you? Lord Carter of Barnes: Well, any decision to ban, to use your words, or any decision to restrict advertising is a matter for Ofcom. It is not a matter for the Government, it is a matter for Ofcom. Q21 Philip Davies: So you would stand idly by and watch it happen even if you thought it was going to have a devastating effect on the industry of which you are the Minister? Lord Carter of Barnes: I do not think I would stand idly by, but it is just factually a matter for the Regulator to decide, as indeed it was factually a matter for the Regulator to decide the amendment to the rules they made, I think a couple of years ago, but I do not think it is an issue and I do not sense it is on the agenda. Q22 Philip Davies: Just linking back to the BBC bit, obviously you were the Chief Executive of Ofcom yet you seemed to be very happy for the BBC Trust to regulate the BBC when it strikes me that the obvious alternative to do it would be Ofcom. Given the widespread disquiet there has been about the BBC Trust's recent regulation of the BBC, what are the faults of Ofcom which either you identified when you were there, or with the current regime makes you think they were very good for regulating everybody else but not very good for regulating the BBC? Lord Carter of Barnes: I do not think that was the issue. The issue when the charter was being renewed was where should accountability for the BBC lie in the first instance, not actually regulatory responsibility but accountability, and the judgment was made by Parliament that that accountability should no longer lie with the governors, that you needed a new institution and that it would be wholly wrong for that level of public accountability to sit with the industry regulator. So the BBC Trust was created as a vehicle for that. The question then is whether or not accountability and regulatory responsibility overlap, and they do overlap in some areas. As you know, Ofcom has regulatory responsibility for the BBC in a whole range of areas already, but there are some specific aspects of the BBC's functions where Parliament decided that it wanted that to be held in a separate place. It wanted that to be held by the body which was also the body that was going to be publicly accountable to Parliament and to the people. As I said in answer to the Chairman's question, that is a compromise, it is not a pure forensic allocation of responsibilities, but the reasons for it were because of the underlying distinction of the BBC. I do not think it was to do with the view that there was a flaw in Ofcom or a flaw in the BBC Trust. Q23 Philip Davies: I am not really trying to get a history lesson on the background as to how we have arrived at where we are, I am trying to extract your bottom from the fence as to where you think, as a Minister - not what Parliament thought - these things should best be done! Many people think that if Ofcom is good enough to regulate other broadcasters, then it should be good enough to regulate the BBC and not just left to the BBC Trust, which rather than being a regulator is more of a cheerleader. Lord Carter of Barnes: Well, my bottom is not on the fence, it is on the facts, and the facts are that as a Minister I am doing what Parliament decided very recently, which is living with a structure where there is a very clear set of allocated responsibilities. Whilst I am sure there are many people who are unhappy with it, I am sure I could find many people who are very happy with it. Therefore, at the moment, what I am saying - Q24 Philip Davies: They probably work for the Trust, though? Lord Carter of Barnes: Listen, it is not my job to be a cheerleader for the Trust, but the structure is a new one and by and large it seems to be working, if you are asking my opinion. Q25 Mr Evans: Stephen, as the Minister for Broadcasting, have you taken a view as to whether a broadcast of an assisted suicide should be shown on television? Lord Carter of Barnes: I have not taken a view on that, although like, I suspect, many other people, I have read the newspapers and watched the coverage of it. I have not actually seen the programme because it has not yet been broadcast. Q26 Mr Evans: Have you taken a view on anything yet? Lord Carter of Barnes: Yes, but you have not asked me a question on any of the things that I have taken a view on! You have asked me questions on a lot of things which have already historically been decided! Q27 Mr Evans: You could have a view, Stephen, about the generality of whether an assisted suicide should be shown on British television? Lord Carter of Barnes: I could, but I will not. Q28 Mr Evans: You are the Minister for Broadcasting, Stephen! Lord Carter of Barnes: Okay, I am the Minister for Broadcasting. On this particular incident, I have not yet seen the programme, so it is very difficult to comment conceptually on a programme which has not yet been broadcast. Mr Evans: But you could take a view on the generality as to whether an execution should be shown on television. You probably would. Mr Hall: Oh, Chairman - Mr Evans: No, no, this is the Minister for Broadcasting and this is an issue which has come up - Mr Hall: You have had the answer. Mr Evans: I do not want it off you, Mike, I am asking the Minister! Mr Hall: Well, you have got to listen to what he says. You are badgering! Mr Evans: That is what we are here for, is it not? This is accountability, Mike. Chairman: You can ask another question. Q29 Mr Evans: So tell me, you have not taken a view, as the Minister for Broadcasting, as to whether an assisted suicide should be shown on British television? Lord Carter of Barnes: I have not taken a view on that. Q30 Mr Evans: Would you be surprised if a number of people thought that that is rather surprising? Lord Carter of Barnes: I would not be at all surprised because I think it is a deeply personal and very evocative issue. Therefore, I can understand why. Broadcasting also, by its very nature, is an activity which reaches into everybody's household in a very intimate and personal way. It is one of the reasons why it is so highly regulated. But given that it is highly regulated, there is quite a lot of rules around what you can and cannot do. Therefore, if we find ourselves in a situation where a programme is about to be broadcast - and I have not seen it - I am almost 100% sure that the broadcaster in question will have been very, very careful to make sure that they are going through the necessary processes to observe the rules. So if we find ourselves in a situation whereby we are about to see the broadcast of something which many people will find, both philosophically and in principle, challenging but happening in a sector and an environment which is highly regulated, so it is not happening by accident or in an uncontrolled way, that would lead me to the conclusion that the particular programme is likely to be being done in a particularly sensitive manner, as opposed to in a gratuitous manner. But I do not know, because I have not seen it. Four years as a regulator have taught me one thing: you never make a comment on a programme until it has been broadcast. Q31 Mr Evans: I know that this has clearly been in the newspapers today and I am just wondering at what point, do you think, particularly with your knowledge as former Chief Executive of Ofcom, would it be appropriate for Ofcom, for instance, where this is hugely controversial and highly emotive, and would you expect Ofcom to ask to see a preview of that programme, or do you think that would be irregular? Lord Carter of Barnes: I think that would be highly inappropriate. I think one of the lessons we have learnt in relatively recent history about broadcasting regulation is that you should follow due process, and there are very clear processes around how complaints are handled. We have ceased having the Regulator as the publisher/broadcaster a long time ago and we have certainly ceased having the Government as the publisher/broadcaster an even longer time ago, and those are both very good things. If the programme gets broadcast and it breaches the rules - an investigation is done and it is judged to have breached the rules - then Ofcom has significant powers as the regulator to both penalise the offending broadcaster, the involved production company and make sure the rules are tightened. I have every confidence that the system will produce the right result if that is the case. Q32 Chairman: I have not seen the programme either, but I have talked to the broadcaster and I have every confidence that it is fully within the rules and I think actually possibly in the public interest, but that is a personal view. Can I ask you about your position? You have very close links to the Prime Minister, given your previous role. Do you have a sort of direct line to him, or do you answer through the Secretary of State for Culture, Media and Sport, or do you answer through the Secretary of State for Business, Enterprise and Regulatory Reform? Lord Carter of Barnes: I answer through both of those Secretaries of State and my reporting line is equally divided between the two of them. Q33 Chairman: Therefore, the appointment as the sort of Minister straddling the two Departments, is that not rather undermined if you then have to go back to each of the individual Secretaries of State? Lord Carter of Barnes: No, I do not think so. Certainly the evidence - and it is relatively recent evidence - is that both the relevant Secretaries of State were supportive of the fact of the appointment and the individual in the role, so I have not had anything other than support from the two Secretaries of State. Going back to the question earlier, I think there is an increasing number of overlapping areas, so having a Minister who has converged responsibilities does actually make an enormous amount of sense. It will be interesting to see, when we get to the point of recommendations and conclusions, whether that common consensus continues, but as it stands at the moment I think the dual departmental structure seems to work. Q34 Chairman: There are going to be issues where the two Departments take different views. You have said you have not encountered any. Actually, I think there are one or two areas where perhaps it is emerging. We may come on to, for instance, the whole question of the protection of intellectual property against illegal file sharing, where there appears to be a certain difference of view. Do you have a right of appeal over the heads through the Prime Minister? Lord Carter of Barnes: I am a Parliamentary Under-Secretary, Chairman! Q35 Chairman: You are a Parliamentary Under-Secretary as the former Chief of Staff to the Prime Minister in Number 10 Downing Street and there are not many of those around! Lord Carter of Barnes: No, but people come and go through Number 10 Downing Street, as you yourself know, Chairman! Q36 Chairman: I do not have quite the direct link you have! Lord Carter of Barnes: So I would not put too much weight on that. Let us be clear. I think the Prime Minister was the driving force behind the idea of having a Communications, Technology and Broadcasting Minister. The Prime Minister commissioned the Report. I think the Prime Minister is passionately of the view that this is an increasingly important sector and shares the view that there is an opportunity for us, partly given where the economy is at the moment, to give it considerably more focus than it has had for a while. So it certainly comes with Prime Ministerial support, but I sit within two Departments and those Departments, as you and other colleagues around the table know, have very clear views about what the priorities for those Departments are, and rightly so. Q37 Chairman: You have set out your priorities in the Digital Britain Report, which is clearly the flagship. We have sort of been here before. We had the Creative Economy Programme, launched in 1995. We then had the Creative Industries Task Force two years later. We then had the convergent think tank, which came a few years after that. Is not the Digital Britain Report just another in a long line of grand sounding initiatives which actually do not really ever amount to very much? Lord Carter of Barnes: I sincerely hope not. Perhaps cometh the time, cometh the Report, but I think it is a very legitimate question: are we suffering from a kind of review ennui? A charitable way of looking at where we are is that what has been happening over the last five or six years is that we have been going through extraordinary technology change and service development. That is true. We all sit around these tables now and have these discussions and there is a set of assumptions that we now take for granted which six or seven years ago we did not, and that is a relatively short period of time. So my sense is that most or all of those reviews are part of what has led to the tipping point of getting government focus on it and where we are, but I am sure this Committee will be the first - and rightly so - if this Report fizzles and dies - to be able to level that very legitimate criticism. But I hope not. Not least I hope not, because if we do not do it there will be plenty of other countries around the world that will do it. Q38 Mr Evans: Looking at broadband, Stephen, what is your view as to the roll-out and the speeds available throughout the country? Lord Carter of Barnes: My view is that we have been through a period in the last couple of years where we have broadly been quite happy with where we have got to. I think we were rightly, and you yourself were rightly critical of where we were way back at the beginning of the decade. That created a mixture of operational focus, access to capital, regulatory change, and that created quite a competitive market. I think there is a sense that we are now at another turning point. We have not yet got universal coverage, and in my view we should have it. The speed rates are variable and in some cases becoming progressively uncompetitive, and that is an issue, and the level of competition varies significantly depending upon where people are. Then there is the slightly more macro question about kind of next generation technologies. So my sense is that we are another one of those points where we need to have another re-think and another re-look at how we are doing what we are doing and whether or not it is time for a fresh approach. That is my sense of where we are. Q39 Mr Evans: On the first one, coverage, not having universal coverage, I have certainly got pockets in my patch. Secondly, on the speeds at which it is being delivered, are we competitive with the rest of the world, particularly the countries we wish to compete with on IT stuff? Do you think there is any role for Government in trying to assist there? Lord Carter of Barnes:
I think
there is definitely a role for Government.
Whether or not that means is there a role for Government to write a
cheque is a different matter, but I think there is definitely a role for
Government. We do not have a universal
service obligation in this country, in fact we do not have a universal service
obligation in Q40 Mr Evans: Yes, particularly in rural areas where we are trying to get people to live and work at home, and the one block to that in many cases is not having access to the fastest range of broadband available? Lord Carter of Barnes: I agree. Q41 Mr Evans: Do you think the recession is going to have any impact on this whatsoever? Lord Carter of Barnes: I think the recession is going to have an impact in many ways in this market, not least in the access to capital for large-scale fibre deployment. It is also going to make, I suspect, increased price competitiveness hard to maintain, so I think it is definitely going to have an impact. Having said that, I think it is also an opportunity in a funny sort of way because it is going to put increasing pressure on people and businesses to find ever more efficient ways of doing things and broadband is a fantastic enabler for that. So I think it will have an impact in both ways. Q42 Mr Evans: Looking at the infrastructure which is going to be necessary to deliver universal coverage and the speeds, you mentioned money. Do you think there is any role the Government should play in actually assisting in the delivery of that in certain key areas? Lord Carter of Barnes: Public authorities have already done that, as I am sure you know. The Scottish Government has done it. There have been certain local authorities who have done it. So it is not the case that there has been no public money which has participated in the process to date. Q43 Mr Evans: I remember a former Prime Minister actually talking about Africa, trying to ensure that money was invested in Africa to give them broadband coverage as well, so there is a precedent, but I am just wondering what you think the hold up is to doing exactly the same thing in England? Lord Carter of Barnes: I think it is only relatively recently that we have put our shoulder against the door marked "Universal service of broadband" and it is not immediately evident to me that we necessarily require public money to do it. If we do require public money to do it, is that off the table? I do not see that it necessarily should be, but I do not think we need to start from the premise that the only solution is public money. I do not think so. Q44 Chairman: Can I turn to another of the challenges sitting on your desk, the radio industry, particularly the future of digital radio and very closely related to it the problems which commercial radio is now going through? To what extent do you think there may need to be intervention to help commercial radio survive? Lord Carter of Barnes: To help commercial radio survive, or commercial radio survive in digital? Q45 Chairman: Both. Lord Carter of Barnes: Well, radio and commercial radio is a highly regulated sector. It is probably on any objective measure one of the most regulated sectors of all of the communication sectors. I suspect that is going to have to change because the economics of it are both in absolute terms small and, secondarily, facing real challenges because the amount of advertising revenue to broadcast media generally is going down and to radio is going down at an accelerated rate because it is a lower priced medium in the first place. So I suspect we are going to have to take a fresh look at the regulation of the sector. As it relates to digital radio, that is a multi-layered question really because I suspect there is a number of colleagues sitting around this table who have mobile phones on which they can listen to radio. I suspect there is a number of colleagues sitting around the table who have digital satellite at home or Freeview where they listen to radio. I am sure some colleagues around the table listen to the radio on their laptops. So there are multiple forms of digital radio. The digital radio which most people refer to is digital audio broadcasting. Could you have digital radio without digital audio broadcasting? Yes, you could, but do we want to have a dedicated digital broadcast network for radio? Well, I think we do and up until now the policy decisions have said that we do and we are again at a point whereby if we do I think we need to push it along a bit, or else I think technology will drive faster. Q46 Chairman: Push it along? Lord Carter of Barnes: Improve its coverage. Q47 Chairman: The commercial sector is under enormous pressure, partially because of the regulatory burdens you describe, partially because we are going into a recession where advertising revenue is falling through the floor, partially because of the pressure from the BBC, which is now 56%, if not higher, in terms of market share. The commercial sector is seriously talking about pulling out. If you want DAB to continue, is that a case for Government intervention? Lord Carter of Barnes: I think there will have to be some form of Government intervention, even if it is only intervention to look at the regulatory burdens. If you mean by "Government intervention" money - Q48 Chairman: Yes. Lord Carter of Barnes: Again, I genuinely do not know enough yet to be able to answer that question, but there will definitely need to be further expenditure on transmission capability to get coverage of DAB national, if that is what we want to do. Q49 Chairman: Is that something which the Government might support? Lord Carter of Barnes: It is definitely something that we intend to have a view on by the end of January. Q50 Chairman: Right. So it is under active consideration? Lord Carter of Barnes: It is. Q51 Chairman: You would not like to go beyond "active consideration"? Lord Carter of Barnes: Not this afternoon! Chairman: I did not think you would! All right. That is helpful, thank you. Q52 Rosemary McKenna: Can we move on, Minister, to, I think, the important issue in your remit and that is harmful content on the internet and in video games, and ask you about the UK Council on Child Internet Safety? Has the Government met the timetable to date for implementing all the commitments in the Byron Review Action Plan published in June? Lord Carter of Barnes: I would not like to say categorically "Yes" because you inserted the word "all" into your question, Rosemary, and I am not sure I carry all of the recommendations, but my understanding is, broadly, yes. Tanya Byron is on the steering board of this project in order to make sure that we do (a) stay connected on these questions, because they are, as you rightly say, important, and (b) it is another way really of just underscoring the Government's enthusiasm for making sure the recommendations of the Byron Report are embraced and implemented. The Council is underway. It had its first meeting, I think, very recently. So my sense is that progress is being made on the agenda. I would not want to give you a personal undertaking that all of them have been met because I just do not know for a fact. Q53 Rosemary McKenna: One of the issues which concerned this Committee most during our investigation was the fact that Google and UTube, for example, were not prepared to undertake to actively monitor what was put on their sites and the industry in general seemed to think that a take-down time of 24 hours for the removal of child abuse was an acceptable standard. Would you like to develop what you think the industry ought to be doing and what we can do to make sure they do it? Lord Carter of Barnes: On that, I do think we are making a lot of progress, not necessarily on the specific take-down times but I think we are making significant progress, and here I think the UK Council has been a very effective mechanism for getting all of the material players in this around the table with a common sense of ownership and willingness to participate. As I am sure you will have heard during the Byron Review - and I think Dr Byron is very compelling on this - there are enormous issues of practicality around effective monitoring and companies are understandably nervous about signing up to delivering something which actually they do not believe is deliverable. Where we are at is a point where there is now, I think, a common understanding of shared responsibility amongst the ISPs and the other players and we are getting to common standards, and I think that is a good place for us to be. I will stop there, and we may go further. Q54 Rosemary McKenna: What about the coding on the video games? Is there progress on that issue? Lord Carter of Barnes: There was an outstanding question, I think, on that between the two different standards, about whether you were referring to the PEGI standard and the BBFC standard, and that is, I think, due to be resolved either this side of Christmas or early in the New Year because I think in the Byron Report it was left as a kind of question to be answered, whether or not you could look at the double standard. I have to say that my instinct on that is that I think clarity is better, to be honest. I am uncomfortable with dual systems and video games operate in a different market from films. Having said that, there are legitimate issues of recognition and clarity and those we are getting to the bottom of. So I think that will be a decision in early January, or perhaps even possibly before Christmas. Q55 Rosemary McKenna: But you are working with schools. That is important, is it not, that through the schools the parents understand that they have a responsibility? Lord Carter of Barnes: There has been a lot of work done by, I think, the PEGI standard since the Byron Review. One of the many good outcomes from the Byron Review has been to get the retailers, the games manufacturers, schools, parents together in one place to come up with the improvements necessary to give people the confidence to adopt that as a single system. Rosemary McKenna: Thank you. Q56 Janet Anderson: The video games industry is very important in this country, but they say they are being overtaken by other countries like Canada, where they get tax concessions, much in the same way we do with our film industry here. Is there anything going on in Government about possibly extending tax concessions to the video games industry? Lord Carter of Barnes: I have heard that argument from the industry, and indeed we have had representation in the context of the report, actually, and I certainly share the view that the games industry is a significant form of creativity as well as being an important industry. Most of their focus actually, certainly in conversation with me, and I can only tell it that way, has been around the classification issues rather than around commercial incentives or tax breaks. I think it is also related to technological capability, to go back to Nigel's question around broadband capability, speeds and take-up. The more that gets enhanced, the greater the opportunity to use on-line applications and games and it makes the market more attractive. So I have not heard the tax incentive argument as a primary argument from the industry. Janet Anderson: Thank you. Q57 Chairman: Can I move to another issue which I referred to briefly earlier which is on your desk, which is the need to try and support the creative industries by helping them deal with the problem of illegal file sharing. It appears that some progress was being made towards achieving an agreement between ISPs and content providers about measures to be taken to combat illegal file sharing, but now it appears there is still some gulf between the two different camps. Are you confident that you can achieve an agreement between the two? Lord Carter of Barnes: I am not sure I would characterise it as a gulf, but there are definitely significant issues between the different parties involved in that. As you know, there is a consultation which was put out on a signed and shared Memorandum of Understanding between the various parties and I am having a series of quite detailed discussions with all involved parties to see if we can find practical and operational common ground. Am I confident? Yes, reasonably confident. I think we need to be clear as Government as to what our priorities are, and the truth of the matter is that our priority in this is that it is another area where, like in many of these issues, you do have to balance conflicting interests. I personally do not think it is legitimate of the content owners to say, "This is a problem solely for the ISPs." I do not. But equally, the ISPs do have some shared responsibility here and if we are going to accelerate broadband take-up, if we are going to accelerate broadband provision, if we are going to get faster speed rates, if we are going to have mobile broadband with the sort of capacity we would like, we have to have an environment in which content creators can trade their intellectual property. We just do. It would be the Wild West without it! We would spend an enormous amount of money on infrastructure and then there would be no way of monetising the application's content. It would not make commercial sense, let alone cultural sense. So we do have to find it. This may seem like quite a technical issue, but it is a very important principle issue for where we are going more generally, I think, in a digital economy. So we are very focused on trying to find a workable solution. I have said to both parties, or all of the parties (it is not quite as similar as both parties because different people are in different places), "We very much see this as a shared responsibility so we want to see some common plans from everyone involved." Q58 Chairman: Let me try you on one specific potential problem. The content providers want the ISPs to take punitive action against their own customers on the basis of no absolute proof of them having done anything wrong. That raises potential legal problems. Would you consider providing some kind of indemnity for ISPs who do take action of that kind? Lord Carter of Barnes: I think the question is (if I can put it in a different way), can we find a mechanism for a system which provides for a clear and visible notification process for people who are clearly abusing the systems and abusing the content? Q59 Chairman: When you say "clearly", it is never going to be entirely clear, is it? Lord Carter of Barnes: No, it is never going to be entirely clear, but you can get pretty close to entirely clear and if the notification and advisory and warning system is done in the right way, I do not think that needs to get to the point of individual ISPs being responsible for turning off their own customers. If I was running an ISP business, I would find that a difficult thing to do, having spent all the money building the platform and acquiring the customers. But equally, as I say, there does need to be some shared responsibility for where people cross the line. Q60 Chairman: Are you still optimistic that this problem can be addressed and solved without legislation? Lord Carter of Barnes: I would much rather it was solved without legislation, but if we need to have legislation we have been very clear, I think, from the very beginning that we would consider that. Q61 Chairman: The content providers are quite plainly of the view that there does need to be legislation. Lord Carter of Barnes: I am sure they do say different things to you than they say to me, but it depends upon which content providers you talk to, on which day and on which business model they are in. They have different views. Legislation is a marvellous thing, but it is also a fixed thing and I am not sure in this market we necessarily think that however cleverly drafted, with however much foresight, we could devise a legislative solution which would be as perfect as a much more effective, commonly owned self-regulatory notification system shared by the content owners and the platform operators. Q62 Chairman: This is essentially a question of the protection of internet property. Why are you doing it and not the Minister responsible for intellectual property? Lord Carter of Barnes: Well, I am working intensely closely with the Minister for Intellectual Property, and indeed the gentleman who runs what is now, I think, called the UK IP, Ian Fletcher, sits on my steering board. It is slightly going back to the question earlier. It is not two departments. The Department for Innovation is a big part of this area. As for the historical reasons why this was done by BERR rather than DIUS, I just do not know, but it was taken as a commercial responsibility, I suspect. Q63 Chairman: Is it not the case that you should take on responsibility for this since it is so much part of the whole area for which you are responsible? It would make much more sense to put IP under you as well, would it not? Lord Carter of Barnes: I do not think that is necessary. I think what is required - and this is what we are doing - is making sure that any of the work we are doing around how do you create a safe environment in the digital economy, particularly for creative IP but also for other IP and does not conflict or undermine the broader IP rules and trading environment. As I am sure colleagues around the table know, intellectual property is not a domestic matter anyway, it is a regional and global issue. The current system, I think, of shared responsibility works and, as I say, David Lammy and Ian Fletcher are very, very closely involved in this particular technical question. Q64 Chairman: Can I just test you on another area within your Digital Britain Review? Obviously high up in the list of issues on your agenda is the future of public service broadcasting. Would it be right to say that the Digital Britain Review has now taken over from the Ofcom PSB Review? Lord Carter of Barnes: No, it would not. I think it slightly goes back to your comment about review ennui. The Ofcom PSB Review is a statutory requirement they are required to do once every five years by the Communications Act. I think they have had two phases of the latest review. I think there was a pretty clear sense in the first, let alone the second, and I am sure again in the third, that there was a need for Government to take this under its own wing because there is a limit on the Regulator's remit. The Regulator can update and advise, but cannot decide. So I think the Government taken responsibility is a natural next step. Q65 Chairman: Have you yet reached any views between the various options which have already been set out in the Ofcom Review? Lord Carter of Barnes: No, we have not, and I am not sure we would necessarily say that the options in the Ofcom Review are the only options. There are others. Where we are in process terms is that we are rightly paying attention to what Ofcom has done so far in terms of analysis. We are talking to all the parties involved. We are, I think, literally in the process of appointing our own advisers to look at what work has been done by the various parties involved and we will try and bring that together as a common piece of work. Q66 Chairman: What are the options you would like to look at which are not in the Ofcom Review? Lord Carter of Barnes: As I recall from the Ofcom Phase 2 Review, their options largely revolve around what you might describe as existing institutional structures as opposed to whether or not there is an opportunity for new structures and I think it would be odd to look at the question without looking at it with a blank sheet of paper as well as an existing sheet of paper. Q67 Chairman: What structures would you like to consider? Lord Carter of Barnes: I think we would like to know whether or not, if the evidence is there (and it would appear that the evidence from certainly Ofcom's analysis is there), there is public support for public service broadcasting (as currently described) being provided by other parties other than the BBC. Is it automatically the view that the best places for those are the two or two and a half existing public service broadcasts? Q68 Chairman: But that is part of the option Ofcom has come forward with, which is the competitive funding model, is it not? Lord Carter of Barnes: That is more of a funding model than a new institution, I would say, Chairman. Q69 Chairman: Okay. Specifically on Channel 4, there has been some speculation that you are considering various quite radical options for the future of Channel 4. Are you looking at privatisation? Lord Carter of Barnes: I guess "radical" is always a challenging word. At the moment we are looking at all of the options. That is what I mean when I say I am not sure we should be constrained by what has already been suggested. If you are trying to come up with a long-term solution, you have to come up with a solution which you feel confident will withstand the test of at least five years or so, and that is one of the reasons why we are appointing advisers to give us advice on that. Q70 Chairman: If we are to potentially consider really quite radical solutions, this may well require legislation. Do you anticipate a Communications Bill in the near future? Lord Carter of Barnes: Well, it clearly was not part of the Queen's Speech. Q71 Chairman: Not much was! Lord Carter of Barnes: I will assume that was not a question! At this stage we are looking to see if we can come up with answers which in the main do not require legislation on the grounds that it is quicker and more effective. Were legislation to be required in any of the areas of the Digital Britain Report, I just cannot speak for whether there would be legislative time, but I think if they are important enough one would hope they would be given due consideration. Q72 Chairman: But you are also going to be looking at options which may be possible to achieve through secondary legislation? Lord Carter of Barnes: Possibly. In lots of areas I think you can do some of where we are going to end up through secondary legislation. Q73 Mr Evans: I am just wondering, do you really think the TV Licence as we know it today has got much of a future? Lord Carter of Barnes: I do, actually. Q74 Mr Evans: Even after the current duration you can see it existing, solely funding the BBC? Lord Carter of Barnes: Yes, I can. I really can. Q75 Rosemary McKenna: Whilst we are on that, how is it going to be possible when people are able to use solely their computers to watch whatever they want on television? Is it possible to continue to collect a licence fee in those circumstances? Lord Carter of Barnes: If I may, I think that is a kind of collection question, or a technical question. An important technical question, but I was slightly answering Nigel's question on a more philosophical level, which was if you imagine a world post-2012, which I think is certainly the timeframe of the Digital Britain Report. Let us conceptualise it. We have had 100% digital switch-over on television. Let us also imagine we have also managed to get pretty close to full digital migration on radio. We have got diversified mobile services and we have got, let us say for the sake of this discussion, two megabytes plus as a universal broadband service for everyone - let us say for everyone - and we have got multiple distribution of content on multiple devices. Now that, I think, would be a great place to get to. If we could get there, I for one would be very happy. But I think what that world is going to highlight even more vividly than it does today is the disproportionate value of high-quality content. So my own view is that actually we will put an ever-increasing importance on the origination of high quality content. So I suspect you might not invent it in the way in which you describe, but will there be a clear need to fund it? I think there will be, and I think that will be even more evident when there are more and more platforms and more and more ways of distributing it. So the demand for high quality content, I think, is going to increase. It slightly goes back to the opening question about BBC Worldwide, which if I may say so is a relatively narrow question about how it is constructed in today's world. If you take a broader question about how do we maximise the returns through all this content from a global market, that is an enormous opportunity for UK plc, which we should embrace as much as we can. I think there will remain a societal willingness to pay for originated high quality public service content. I think there will be a real demand for it. How you technically do it, that is a different question, Rosemary, but do I think there will be a demand for it? I think there will. Q76 Mr Evans: And no top slicing of the licence fee to pay for public service broadcasting on other platforms or channels? Should a portion of it go towards public service broadcasting which may appear on channels other than the BBC? Lord Carter of Barnes: That one I am going to answer in a roundabout way. Different people have different views on this. I think there is strong evidence that there is both support and a case for a second provider of public service content. I have always believed that and I think the evidence is still there to justify it. The evidence is clearly there for the market. That will not be paid for by advertising revenues any more. That is as clear as the nose on your face. We have been playing regulatory withdrawal from ITV plc as a parlour game for too long. So we have to find a way of funding an alternative model, and you will forgive me if right here, right now, I do not step into the top slicing discussion because I think that serves to colour unnecessarily evocatively a debate which we need to come to some dispassionate recommendations on. I think there is clear evidence of a need for it and clear evidence of support for it, and there is clear evidence that advertising funding is not going to be the only way of doing it. Are there other options? There are lots of other options and we need to come to, I think, in the first instance within Government and then to Parliament with some recommendations on what those are, and we need to do it soon because if we do not, we will be in the world we have just talked about and we will look back and think, "Why didn't we sort that out before we got here?" Q77 Chairman: So you are talking about a second? So you would be content for there to be the BBC and one other? Lord Carter of Barnes: John, if we could get to the BBC and one other, robustly funded with a clear remit which was distinct and independent, had longevity and was designed in a way which could operate in a multi-platform world, that would be a triumph. Chairman: That is interesting. These are issues which we will undoubtedly return to again, but can I, on behalf of the Committee, thank you very much for coming this afternoon. |