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15|11|05

Speech to the All-Party Group on the Creative Industries

By David Currie, Chairman, Ofcom

The National Assembly for Wales
Tuesday 15 November 2005 6.00pm

Thank you very much for inviting me here this evening. As I’ve said on a previous visit to Cardiff, Ofcom is determined to fulfil its obligations to the Nations of the UK and although many of the issues with which we are concerned on a day to day basis are reserved to the Westminster Parliament, we regard having high quality contact with representatives of the devolved institutions as essential.

That is why we have National offices in Cardiff, Belfast and Glasgow and I know that Rhodri Williams and his team, along with Sue Balsom, who represents Wales on the Content Board, and Simon Gibson, who represents Wales on the Consumer Panel, not only represent Ofcom here in Wales, but represent Wales within Ofcom. Ofcom also has Advisory Committees for the Nations, and the Advisory Committee for Wales is chaired by Evan Jones.

And on the Board, of course, Wales’ interests are always close to the hearts and minds of my colleagues Ian Hargreaves and Ed Richards, who, since July, has moved to the new post of Chief Operating Officer, where he has overall responsibility for Ofcom’s operations in the Nations and in the regions of England.

I very much hope therefore that you feel that issues that are of specific interest to Wales – whether in the field of broadcasting, telecoms or spectrum policy – are getting the attention that they deserve from Ofcom.

Much of Ofcom’s time and energy during the past two years has been devoted to major strategic reviews which are now almost all complete:

• In public service television broadcasting: we have a new settlement for commercial broadcasters as we prepare further for the fully digital age.
• In radio: a transition from input to output regulation and proposals to increase the scope of radio services both in analogue and digital form. We have recently announced that spectrum will be made available to enable Digital Audio Broadcast – DAB – services to be available in all parts of the United Kingdom.
• In spectrum: a clear move towards a comprehensive liberalisation and trading regime, away from a more command and control model to one in which companies and ultimately consumers will determine the most valuable uses of spectrum.
• And in telecommunications a real focus on enduring economic bottlenecks, with equality of access for competitors, backed by organisational and behavioural incentives for BT to underpin that equality of access. For consumers this will mean lower prices, more choice, more innovation and better services.

There have been several consultations during this time and I would like to take this opportunity to thank all of you here who have participated in those consultations, either by attending meetings – some of which I understand were quite lively, to say the least – or by submitting written evidence. There is little doubt in my mind that the voice of Wales is heard very clearly within Ofcom.

The proof of the pudding is, of course, in the eating, and looking back at almost two years of operations I hope that you will agree that there is evidence of success. One of Ofcom’s earliest regulatory interventions in the television production market was the approval of new codes of practice drawn up by the public service broadcasters for commissioning programmes from independent producers.

The new codes were designed to provide the independents with greater opportunities to retain the rights in the programmes which they produce and, if they wish, to exploit those rights for their own purposes . Our intention was that their operation would create a new framework that would serve both the broadcasters and the producers and enhance the creative and economic potential of the UK television industry.

I believe that the intervention has been successful and there are numerous signs that production companies in all parts of the United Kingdom are benefiting from owning the rights to what they produce.

As the Welsh Assembly Government’s own Creative Industries Strategy makes clear, the ownership of intellectual property rights is a key component in building a strong and competitive creative sector. With the help of the broadcasters, who have been willing partners in implementing this fundamental change in the way in which the market operates, independent producers are now able to realise the value of their assets and grow their businesses.

It was good to see that one of Iona Jones’ first announcements since taking the reins as the Chief Executive of S4C, was on the subject of the re-assignation of rights in all its programmes made before the introduction of the current terms of trade with the independent sector came into effect. It will mean that potentially more than twenty years of archive material will be at the disposal of independents.

When the Ofcom Board met here in March I visited Boomerang who had just announced their acquisition of Alfresco and Fflic, and most recently they have secured the biggest ever investment made by Finance Wales which will allow will allow them to make their mark on a global level and develop new programme ideas. During this last month I have been reading with great interest the news of Tinopolis’ bid for the Television Corporation. These are clear indications that the production sector in Wales is well on its way to making the transition from cottage industry focussed almost exclusively on servicing a local market to a vibrant and outward-looking sector intent on making its mark on the wider stage.

This process of building capacity within the independent sector in Wales has clearly been assisted by the Assembly Government, whose seven million pound Wales Creative IP Fund has recently made its first investment of £250,000 in an animation series called Holly’s Helpline produced by Calon, which is based here in Cardiff. And there is another six and three quarter million pounds to be invested over the next three years, which must be very good news for companies based here in Wales.

When the new Codes of Practice were announced in March 2004 we said that we would revisit the issue and review progress and that is exactly what we are doing at present. Some of you may have heard Kate Stross, Ofcom’s Director of Content, address the Royal Television Society’s recent conference at the Wales Millennium Centre and report on the progress of the Television Production Sector Review. As the first phase of the project draws to a close the consultation document will be published at the end of this month and we look forward to hearing the response of the industry, stakeholders and elected politicians alike.

Another issue that we paid attention to throughout the Review of Public Service Broadcasting and one that will feature again in the Production Sector Review is the whole question of out-of-London production and access to the networks. I know that this is an issue that has concerned many of you here and many of Wales’s leading independents and the broadcasters themselves.

Perhaps the first thing to say is that there has been some recent success in Wales that deserves to be noted and celebrated. Dr Who, produced by BBC Wales, returned to BBC1 to critical and popular acclaim, and demonstrates that production staff in Wales are clearly capable of producing high quality programming for the UK-wide networks. In a very different vein Presentable’s Late Night Poker has also met with success on Channel 4 and beyond.

Our review of Public Service Broadcasting made it clear that producing network television from all parts of the UK is an important characteristic of the industry and that efforts should be made to facilitate and encourage a greater level of output from the Nations. That is why we increased ITV1’s quota for out-of-London production for the network to 50% by value and volume – this represents £40m additional spend in real terms outside London in 2006.

This means producing programmes such as Dr Who or Late Night Poker that have no particular relevance to Wales, but do bring benefits to the production sector, as well as producing programmes that reflect the Nations to the remainder of the UK.

The broadcasters are also playing their part in this.

Channel Four’s Creative Cities Fund supports a range of programme making activities centred on key cities throughout the UK by forming strategic partnerships with public bodies involved in economic development. Two years ago, Channel 4, in partnership with the WDA, selected Presentable Productions to take part in a pilot scheme to test the broadcaster's business support model before the scheme was rolled out to other companies in the UK.

The BBC has established a Network Development Fund, targeted at the nations and regions, which focuses on structural development and last year Boomerang benefited from this scheme. During the course of our review of PSB ITV offered to establish a Regional Development Fund to encourage out-of-London production and we await to see this welcome initiative bare fruit.

Earlier in the year S4C announced the results of its competitive tender for £1m of development money and Channel Four, through its Creative Cities initiative invested £125,000 in Boomerang and Green Bay with the express intent of assisting both companies to sell programmes to Channel Four. The two companies have also secured £100,000 of match funding from the WDA and Green Bay also attracted £300,000 of investment from Finance Wales. Both companies will also be given additional support, through the Research Centre's International Development Programme (funded by Channel 4). This package of support will enable Boomerang and Green Bay to appoint new staff who can concentrate on developing and pitching programme ideas to broadcasters. In addition, last year, researchers working for Green Bay and Boomerang graduated from Channel 4's Researcher Development Programme and this year both Tinopolis and Aspect TV have staff being trained through the scheme.

It is important to remember that these initiatives are competitive and based on merit. They are not hand outs to support failing businesses, but incentives to reward the best that the sector has to offer.

During the course of our review of PSB strong views were also expressed on the subject of the future of ITV’s output in the Nations and Regions. Many of you here made your views very clear to us. The eventual outcome of our review was significantly different in Wales, Scotland and Northern Ireland to that in the English regions. ITV 1 Wales’s non-news programming has only been reduced by 30 minutes a week and this settlement will remain in place until the first ITV region becomes digital in 2008. At that point we will review the position again.

ITV has of course been given considerable encouragement and assistance to maintain its PSB programming obligations. Following a review of its licences the amount payable in respect of Wales and the West of England was reduced to zero and regulations relating to co-productions have also been relaxed to allow ITV1 West to co-produce more non-news programmes with ITV1 Westcountry which will help reduce costs for the HTV licence as a whole.

At the same time we also said that we would allow National licensees to show current affairs for their nation in peak time in place of some network current affairs (mainly Tonight with Trevor McDonald) provided that those network current affairs programmes are shown somewhere else in the schedule.

We have also been busy in the field of radio. We have licensed 54 community radio licences to date, including in Wales, GTFM (one of the original Access pilot stations which is already on air) Afan FM and most recently Toradio in Pontypool. Ofcom's Radio Licensing Committee has also awarded a new FM licence for Swansea to Swansea Bay Radio Ltd who’s owners Town and Country Broadcasting and Haven FM have had great success with Radio Pembrokeshire, and last month we published the second phase of our Radio Review, entitled Preparing for the Future.

Significantly for Wales, this report sets out how, through the advertising of additional commercial multiplexes in the north and west, coverage of Digital Audio Broadcasting or DAB services aimed specifically at listeners in Wales could be extended to the whole of the country. It also considers the impact of other emerging technologies, such as DRM (Digital Radio Mondiale) which could provide an alternative method of providing reliable digital radio coverage in rural areas, via the medium and long wave bands with significantly improved audio quality compared with AM broadcasts.

Commercial Radio in the UK has expanded its output with 17 new FM stations licensed since Ofcom took up its powers. We have also seen some consolidation within the industry that has affected some of the stations in Wales – Champion FM, Coast FM, MFM and Classic Gold Marcher join Red Dragon and Capital Gold in the GCap family and The Wave and Swansea Sound join Ulster TV’s growing radio interest.

Commercial Radio is a hard and competitive market place and for many small stations the line that divides failure and success can be a very thin one. We hope that being a part of a larger group will secure the future of smaller stations without detracting from local nature of the services that they offer.

A notable success within the radio sector in Wales has been Real Radio. Five years ago it was Guardian Media Group’s first investment in radio and since then the group has gone from strength to strength. It now operates a total of five stations under the Real Radio brand in Wales, Scotland, Yorkshire, the north West of England and London along with the music radio service, Smooth FM. The group recently reported pre-tax profits of £22.9 million on a turnover of £707.8 million, 36% up on the previous year. An excellent result by any standards in what is a challenging environment.

So far I have been talking about what Ofcom has been doing, but before I conclude and take your questions, I’d like to turn briefly to the present and the future. When the Communications Bill was being drafted, convergence was talked about in the future tense - it was something that was going to happen at some stage in the future.

That is no longer the case – convergence is happening and we now inhabit a media environment that is predominantly digital whereby services which were once unique to their own delivery platform – radio on radio, television on television and telephony on fixed copper lines – are now becoming available on an ever-increasing variety of platforms. And as that happens, new services are emerging and are being enthusiastically embraced by consumers:

• Digital television uptake is growing at the rate of 200,000 per month.
• Now, for the first time ever, more people are accessing the internet through broadband than narrowband.
• Consumers are spending more on mobile telephony, more on TV, and especially more on the internet.
• They are actually spending slightly less time on TV or radio, but more on the internet and mobile services.

Digital television and the process of digital switchover is obviously of great interest here in Wales. Tessa Jowell, the Secretary of State at the Department of Culture, Media and Sport confirmed in September that Wales would be amongst the first areas to go fully digital in early 2009 and has tasked Digital UK (formerly known as SwitchCo) with overseeing digital switchover throughout the UK.

This will involve two complex, but quite different tasks:

• firstly, planning and implementing the complex task of updating the 200 relay transmitters in Wales that have not yet been converted to digital and
• secondly, informing viewers and a wide variety of organisations within Wales about what is going to happen, when it’s going to happen, how it it’s going to happen and what they need to do about it.

In one sense, at least, the task is somewhat easier here than elsewhere. The take up of digital television in Wales is higher than in any other part of the UK, with approximately 75% households already accessing digital television on one platform or another, compared to 63% in the rest of the UK. This is also helped by the fact that the price of converting to digital is falling, with the cost of a set-top box now starting from as little as £29.

Most of you here will no doubt be familiar with the results of the recent trial in Llansteffan and Ferryside which proved remarkably successful. 500 homes have been converted to a digital signal since March and viewers there have been enjoying the benefits of digital television.

There is no doubt in our view that the move to digital television brings considerable benefits to all concerned. For viewers there is better choice, access to more channels including S4C 2, Channel 4 and five, digital radio services and more interactive services. It also means more efficient use of the UK’s electromagnetic spectrum, which will, in turn, deliver significant economic gains for the whole of the UK.

Ofcom is already working closely with Digital UK and will continue to support and actively work with them in communicating information to stakeholders on digital switchover, particularly in the nations and regions of the UK.

I know that this work has already begun in Wales. Ofcom and Digital UK has held public awareness events in Bridgend and Caernarfon on the impact of digital switchover and addressed members here at the National Assembly last summer. Many of you have also spoken to us directly regarding particular constituency-related concerns. We welcome this dialogue and hope that you will continue to correspond with us on this or indeed other issues.

The challenge for Ofcom as the regulator of this fast-moving and dynamic market place in the United Kingdom is

• Firstly, to understand what is going on and to keep up with the pace of change
• Secondly, to use our regulatory powers in a balanced and proportionate manner so that innovation and enterprise are encouraged, and
• Thirdly, to ensure that the needs and interests of consumers are not being ignored and forgotten - and that must happen in Wales as well as in the UK at large.

How we go about this is set out annually in Ofcom’s Annual Plan. The draft plan for 2006-07 will be published in about a month’s time and we will, as usual, be consulting with you on about its content. You will be sent copies and there will be a consultation event here in Cardiff on January 20 th where some of the key issues will be highlighted and where you will get an opportunity to ask a panel of Ofcom representatives about the strategic priorities included in the Annual Plan. I very much hope that you’ll help us make the consultation a meaningful one.

I’d like to draw my comments to a close there and invite you to ask any questions that you’d like me to answer.

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