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19|09|03

Royal Television Society Cambridge Convention, Friday 19 September 2003

Stephen Carter
Chief Executive, Ofcom

Thank you very much for inviting me to speak today.

Over the next 15 - 20 minutes I will set out our three major policy programmes for 2004, give you a clear sense of how Ofcom will approach its tasks and its early priorities and describe the sort of regulatory regime we will aspire to create.

But let me start by saying three things about the new regulator, that will hopefully stay in your minds.

Firstly, Ofcom exists to represent the interests of the viewer and the listener. The citizen-consumer in Parliamentary language.

Secondly, Ofcom wishes to see a broadcasting industry that flourishes, economically and creatively, able to provide audiences what they want, when they want it. More television, more innovation, more channels, more choice.

Thirdly, in style and approach, Ofcom will want to help make things happen. To try to say “how to…?” rather than “no, you can’t”.

Or to put these three things another way, if this industry succeeds then we as a regulator will succeed.

Ofcom

Up until now, if you have heard anything from Ofcom, you have heard mostly difficult to disagree with aspiration, and difficult to be interested in organisation. This has been, and will for sometime be, a case of doing things carefully, methodically and in the right order.

We are coming through the plumbing phase and Ofcom is moving on to policy.

As regards the plumbing, the five existing regulators employ approximately 1200 people. Ofcom will have 20% fewer; and, on a like for like basis will cost, excluding the exceptional restructuring costs, around 5% less.

As to philosophy, throughout the passage of the Bill, there was much discussion about how to balance the citizen interest with the consumer interest, and some debate as to whether that there should be an explicit hierarchy. In truth the two are inextricably linked, for example: when I watch digital television, I have made a consumer choice, but I am also a citizen, being informed, educated or entertained.

We are all citizen-consumers. In some aspects of our lives we are more one than the other, but to separate them or rank them is an increasingly artificial process. It is this interlinked interest of the citizen-consumer, that will be the benchmark against which Ofcom’s decisions will be checked.

And of course today our viewers and listeners are far more empowered. Digital television, the internet and increasingly broadband is putting more choice in the hands of the user.

As a regulator, we will reflect that, welcome and encourage it. There can no longer be a place for a regulator, which is twelve of the great and the good, determining what people ‘ought’ to have.

Additionally, Ofcom is a different structural being from the previous regulators. We will have a relationship with two significant industries – broadcasting and telecommunications and importantly the underlying point of commonality, spectrum. The Regulator’s governance has been structured to be like the industry it regulates, with a unitary Board, a Chairman and a Chief Executive. At the end of the year, gone will be the staff/Members divide. Gone will be a single Director General. Gone will be a cadre of Commissioners.

That different structure will lead to a different style of decision-taking. Several colleagues and members of the Board are here today – including Richard Hooper our Deputy Chairman, Sara Nathan and Ian Hargreaves, not to mention my executive board colleagues, Kip Meek and Ed Richards and others. I am the Chief Executive, but I am also only one of 9 members of what will be a collective, supportive and indivisible board.

Our ambition is that over the next few years the UK is recognised as a world leader in communications. In much the same way as this country is in financial services. And across a whole range of indicators; not just investment and growth; but also in terms of the ‘softer’ cultural wins:

Now, a regulator cannot make that happen, but it can help it along or it can hold it back. I and my colleagues are determined that it be the former not the latter.

It is against the backdrop of this macro objective that we will be a light touch regulator, that will seek the least intrusive regulatory mechanisms necessary to serve the viewers and listeners that will ultimately hold us to account.

But the world will not suddenly change on the 29th December, our Vesting day. The Communications Act is not the product of an industry or regulatory crisis, unlike say banking supervision in the 90s. It is a result of a remarkable degree of political and commercial consensus.

At Edinburgh, Greg Dyke and Tony Ball made some powerful points about the world today. For Greg the revolution was television. For me it was and is the digital revolution, a fundamentally democratising one; bringing constructive disruption by lowering the cost of access, and the cost of production, and increasing the reality of viewer and listener control and personal choice. Whilst policy makers, politicians, and regulators debate these things, it has been producers, broadcasters, and business men and women who have made this happen.

Convergence

But this is Cambridge 2003, not Cambridge 1999. We have had some hiccups on the path to the projected utopia of 100% digital take-up. Ofcom was conceived in the heady days of the late 1990’s, and after an elephantine gestation period has been born in an altogether more cautious world and a topsy-turvy one at that. In broadcasting, digital has so far proved to be predominantly a platform, infrastructure and packaging business. So, many of the critical questions have been technology and competition ones around digital take up, multiplex allocation and capacity, PVR penetration and its impact on advertising revenue and EPGs.

But the one thing that we all know for certain, is that the State does not, will not and cannot pay, for the sort of digital infrastructure that we all aspire to in both broadcasting and telecommunications. Digital has been, in broadcasting, a private sector revolution, a market led investment, a risk for which BSkyB, to date, rightly takes much of the credit, and ITV, and the Cable Industry, wrongly in my view, are allocated much of the blame.

The truth of competitive markets is that in order for someone to succeed, it is often the case that others have to fail, or do less well – for a while.

But whether we get to 80%, 90% or 100% digital penetration, without government or regulatory intervention, switchover will, as the Secretary of State said yesterday, need to be planned, phased and managed. Switchover was originally envisaged as a ‘big bang’. But we know now it will have to be more gradual – area by area, as the issues around digital switchover vary from area to area.

Most importantly switchover has to be communicated and explained so that it becomes a welcome universality rather than an imposed and expensive confusion, largely on older and poorer citizen-consumers. That will cost money. But if it is done well that will for me be a meaningful example of media literacy.

So given all this. What will Ofcom be up to?

Well, firstly, on Monday of next week, we will set out how we will consult and take into account views on what we do and the decisions we take, The Ofcom Consultation Process.

Secondly, we have some regulatory plumbing to do in order to implement many of the requirements of the Communications Act.

Thirdly, there is a group of changes in which even Directors of Programmes, or Chief Executives and Director Generals will I hope take a passing interest:

Lastly, under this heading of changes, there is the issue of ownership and the plurality test.

The Government will set out guidelines on how the public interest criteria will operate later this year. Once those guidelines are available, we at Ofcom will want to give buyers and sellers greater predictability about how we will carry out our statutory duties under the plurality test.

Let me now come to the three big ticket items for 2004 - the first is Public Service Television Broadcasting (to which I will return in a moment).

The second big ticket item is spectrum trading. We will consult on the introduction of a traded market in wireless spectrum. Historically not an area that broadcasters have been overly interested in. But at Ofcom we have a clear responsibility to create a register of all the nation’s spectrum assets and their capabilities, define what rights could and should be traded and devise the mechanisms for such a market

The third big ticket item, is in telecommunications and importantly broadband. Oftel has been busy implementing the major Brussels reforms of telecoms regulation. Several of these individual market reviews will straddle the transfer between Oftel and Ofcom. We will conclude them, and stand behind the conclusions of Oftel’s work throughout 2004; although we will clearly want to bring our own strategic perspective to this market in due course. There will be more on this subject later in this year.

Now, what about broadcasting, its key players and the audience?

In the analogue era, where television created the ‘gather by the coffee machine moments’, our proud boast was that British television was the envy of the world, if not the best in the world.

Actually, British television is pretty good today. The range of the best is probably both higher and wider and most of us, myself included, like a mixed broadcasting diet that encompasses intellectual “meat” along with “not-so-intellectual veg”.

Range and choice are hallmarks of effective markets.

Will this continue to develop?

The stresses that market and global pressures are imposing are beginning to show. As the debate on media ownership liberalisation in the US shows, there are natural limits. Democrats, moderate Republicans, and (even) the socially conservative right are uniting in worrying that the American nation is becoming – in the words of one of the Commissioners of the FCC – ‘un-moored in its social relationship with the television media’. Surely, this is one lesson we should not import from across the Pond.

So the challenge for us all is to have a flourishing broadcasting industry that delivers for the audience, in a totally different and much less cocooned digital environment.

PSB Review: The Market Context And Audience Behaviour

Which brings me to Ofcom’s statutory review of public service broadcasting, our first big ticket item.

People have been trying to define public service broadcasting since God was a boy. It has been a highly enjoyable if so far wholly inconclusive parlour game. It is one on which Parliament has given ambitious – though, let’s be honest – not defining guidance:

All human life is here, or certainly most of it. Clearly what we have to do is to provide a definition that encompasses this Parliamentary guidance, but makes it both more measurable and more useable.

For the first time, this Act of Parliament requires an independent regulator – not the Government, not the BBC – but an independent regulator to take a holistic view across all the Public Service Broadcasters including the BBC. So therefore must our definition.

Also, for the first time, it is the delivery of public service broadcasting by ITV, Channel Four, Five and the BBC “taken together”. The significance of those words in the Act, is that which of the broadcasters, delivers how much, of what in the mix is explicitly up for grabs.

Our review will also cover media services which are linked to television, such as interactivity and television related on line content. Indeed with broadband take up still running at over 30,000 new customers a week, there is an interesting question to pose. Namely where Public Service television ends and Public Service Internet begins, and indeed if it should. As we head towards a digital broadband world, television will increasingly be more and more a part of a freer and less intermediated market. Our job is to ensure that the successful process of getting there does not eliminate what we value.

The main elements of our proposed approach will be a 12 month review, conducted in 3 phases, beginning at the start of October. Reports will be provided at the end of all phases, with significant public consultations after the end of Phases 1 and 2. There will be full involvement of the Ofcom main Board and the Content Board, and within Ofcom this critical project will be chaired by Ed Richards.

The Review has to look ahead for the next 5 years, to the end of 2008. A date that sits neatly within the End Game time frame.

I know there are some who fear that, in our Review, the bean counters will triumph and some indeed who wish they would. Neither outcome will be the case. We will use a mixture of qualitative and quantitative measures to inform.

But surely we can all agree now that we can no longer continue with a “we’ll know what it is when we see it” approach to this important and expensive public investment; I don’t want to sound like a bean counter, but £4 billion is a lot of money.

And if I am allowed a personal observation. As a country we have a cultural preference for opacity and vagueness. Some call this the cult of the professional amateur, others say it derives from the lack of a written constitution. If PSB is to survive and thrive, over the next 10 years and beyond, all of it needs a written constitution. Surely sound bites from the 1930’s will no longer suffice.

Now, however well researched our PSB review will be, our report would count for little, if we simply willed the means but not the ends, simply asking the Public Service Broadcasters to carry on pushing against the tide of audience and market behaviour.

There is a trade-off in the price of the spectrum and the social benefits from the delivery of Public Service Broadcasting. Our review will make this trade-off much more explicit and enable it to feature in the cost of Channel 3 and Channel 5’s Licences, and in what Channel 4 currently gets for free. And, of course, the Review will, as the Secretary of State said yesterday, set the context for the BBC Charter – what they are expected to deliver in television and the means they are given to do so.

There has been some debate today about the notion that Channel 3 licences would simply be handed back by the current or new owners heading for the cheaper and the more commercially viable hills and thrills of Freeview, DSat, and Cable Digital. This is I think either a simplistic or a previous analysis, which ignores:

And most importantly, it ignores the fact that good PSB television is both popular and commercially rewarding. Having spent years in the advertising business, I never met an advertiser who wished to seek a lower demographic-rated programme or conversely one that was not willing to pay a premium where quality was inherent in the audience delivery.

PSB is here and here to stay. Commercial PSB is here and we have a clear statutory remit to strengthen, protect and define it.

The review will for the first time look across this historically opaque area and bring some objective clarity, uncluttered by the pressures of justifying a funding formula (like the BBC), meeting the demands of aggressive advertisers (like ITV, Channel 4 and Five), or pandering to the received wisdoms about what the public wants but never actually watches.

PSB Review: the broadcasters

The last element in this jigsaw is the broadcasters themselves. It would be presumptuous for me to opine on how they are planning for the next four or five years. They can – and do – speak for themselves, and better than I. But each of the individual PSB’s face their own challenges.

The debate for the last year or so has been all about ownership, structure and management. And clearly these are important issues but there are other critical questions as well that we will need to answer, in part together:

These and many other things, I know will be in people’s minds and are certainly in ours.

And then of course there is the question, but what about those pesky characters from Ofcom? I think that deserves an answer.

Ofcom’s style

In Tessa Jowell’s speech at Edinburgh, she said “the time has now come for Ofcom to take centre stage”. With the greatest of respect to the Secretary of State, neither I nor David Currie wish personally or corporately to take centre stage.

In broadcasting, we will seek to umpire or police where necessary or required, but to facilitate where possible. Despite the nonsense in some of the press about fat cat salaries, nobody, least of all myself, is in this line of work to make money. We are in it to make a difference, because it matters.

We want a strategic relationship with licensees and operators. Not micro-management, nor the paternalism which still echoes faintly from the old IBA days. But there are obligations that go with this: zero tolerance of abuses of competition and zero tolerance of regulatory arbitrage or gaming.

Regulation in broadcasting has historically been to stop things going wrong and no doubt there will still be some policing to be done. But Ofcom should be the oxygen rather than the fire extinguisher. Importantly, independent of Government, our aim will be to serve the audience’s interest and to help secure a flourishing communications industry.

Thank you.


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