In the next few months we are likely to see the Digital Economy Bill hit the statute book. We are also likely to have a General Election. I hope it is the latter that will have more influence on the media industry.
So today I want to talk about both: the good and bad in the Digital Economy Bill, and the key things that would be different under any potential Conservative administration. First let me talk about the Bill.
<h3>Government’s only solution: more regulation</h3>
We remain in the worst recession for a generation. Yet the Government’s answer for our creative industries seems to be more regulation and more powers for the regulator. One is reminded of Ronald Reagan who said: "The Government's view of the economy could be summed up in a few short phrases: if it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it."
I have nothing against Ofcom, which has some extremely bright people working for it. But everything against the way the balance of power has shifted its way because we have a Government afraid to take responsibility for broadcasting policy. Ofcom is empowered by statute and has been able to interpret those statutory powers to step in to a vacuum created by the arrival and departure of four Culture Secretaries in as many years. And a Department that lacks firepower and capability.
The statutory duties proscribed under the Communications Act 2003 have singularly failed to keep pace with technological progress. Do we really need to see annual statements of programme policy? When consumers can switch medium and content with such increasing ease, couldn’t we live without annual PSB reports and five yearly reviews that simply generate more work for regulatory bureaucrats.
Ed Richards recently told a Parliamentary Select Committee session that there were areas of broadcasting regulation that he thought Ofcom could step back from. I completely agree. Sadly the Government thinks the exact opposite.
Not only does the Digital Economy Bill not remove some of these outdated regulatory burdens. But it adds to them. Amazingly Ofcom is mentioned 159 times in the Digital Economy Bill. 159 times in just 59 pages. 27 of its 49 clauses mention it on one or more occasions. The Bill creates eight new reporting requirements and two new duties. The Government even refused to accept our amendment suggesting the Secretary of State ask for these reports rather than have them churned out regardless. Labour’s love of regulation is far from over.
Channel 4, for example, is to produce Statements of Media Content Policy. This is along with their annual reports, statements of programme policy, and appearances in front of the House of Commons.
<h3>Negative impact on investment in infrastructure</h3>
But what does this mean for today’s media sector? I’m deeply worried that the Bill doesn’t just represent an increase in burdensome regulation and power for the regulator. But that many of Ofcom’s proposed new powers would have little or indeed a negative effect.
The new requirement on Ofcom to promote investment in electronic communications networks for instance, something that repeats a similar obligation under the Communications Act. Nobody denies the need for investment in digital infrastructure. But for this government the default way to solve a problem is another layer of regulation – not dealing with the fundamental issue, which is how to stimulate investment by the private sector in a next generation broadband network, something where the UK lags pitifully behind countries like the US, France, Japan and Korea.
We need to tackle the barriers to this investment head on. Barriers like the lack of access for other operators to BT’s ducts, dark fibre and other infrastructure; a failure to make any progress on allowing the use of telegraph poles for overhead delivery of fibre; and business rates anomalies that favour incumbent operators. And examples from other countries like Korea, which I visited earlier this month, shows that the government also has a vital role in stimulating demand: facilitating protocols with banks, for example, that allow payment by mobile phone; encouraging broadcasters to develop mobile offerings; and most fundamentally of all creating a sense that investment by the private sector will be rewarded and encouraged, not penalised at a later date by unexpected regulatory interventions.
Unfortunately this is exactly what the Government is doing with the introduction of their telephone tax. Rather than helping with the roll out of next generation broadband I am convinced that this will simply be another barrier to investment.
The Government themselves warn that there is a danger that “intervening too early would distort the market, or chill planned investment”. Why are they pressing ahead with this tax then? The more we find out about this tax the more their plans fall apart.
First it was a small levy on copper lines. 50 pence per household. Now it will be levied on every data line, including fibre ones; it will have VAT added on top of it; and it could cost businesses up to £1500 each. Families with different operators providing their phone, fax and broadband lines will pay three times what the Government would have us believe.
This is unacceptable. The telephone tax is ill-conceived, deeply unfair, and simply won’t do what the Government hopes it will.
<h3>Reduces investment in content</h3>
I have dealt with infrastructure but similar confusions exist over online content.
We all recognise the importance of developing new, innovative online content. And yes, there will be an important role for not-for-profit content which has public service objectives. But the government’s approach is once again to turn to regulatory levers, including a new duty on Ofcom to promote investment in online content and extending Channel 4’s remit to internet services as well.
This is fundamentally flawed for two reasons. Firstly, by directing the BBC and Channel 4 to invest in online content, you are sending a strong signal to anyone with a good idea for a product or service online: don’t bother. Why develop a website for motoring enthusiasts? You won’t stand a chance against the Top Gear site. Or a website with premium sports content? Forget about it, the BBC’s already done it. Or a website dispensing health advice? Channel 4’s on the case. With the massive leverage offered by access to TV audiences, you risk crowding out investment by anyone in the private sector.
Of course broadcast programmes need to be accessible on multiple platforms, including online. Which is why we welcome the extraordinary success of the iPlayer, which last month set a new record of 88 million video on demand requests. And of course there is a role for websites to provide additional information about topics raised on broadcast programmes, something that will become much more important with IPTV. But the development of online only services and tools by our public service broadcasters, as envisaged by the Digital Economy Bill, will be the biggest possible deterrent to private sector investment in innovation in the online space. The possibility of a British Google is killed stone dead.
But there is another reason why this is flawed. If our public service broadcasters are told to invest in online only content, what will happen to their investment in original British programming? This is the big unsung crisis in British media right now, rightly and frequently pointed out by Peter Bazalgette. Investment in all content by the five main PSB channels fallen from £3.1 billion in 2004 to £2.7bn in 2008. Within this investment in news has fallen by £39m and in factual programming by £17m. Even the BBC is investing less in public service content spending a third less on children’s programming over this period and less on BBC 1 and BBC 2 - despite generous increases in the licence fee. Investment in the internet with no eye on any kind of commercial return is a veritable black hole: we saw that with the dotcom bubble at the start of this century. But at least that was funded by venture capitalists who knowingly took risks with their own money: it cannot be right to ask taxpayers to do the same whilst at the same time starving British content of the investment that they value the most.
<h3>Props up failed regional media model</h3>
Finally the Digital Economy Bill sets in stone the Government policy of using public subsidy to prop up regional news on ITV. My opposition to such a measure is hopefully, well known. Using the licence fee to prop up regional news simply casts a failed regional TV model in aspic. It would actively prevent the emergence of new, local media models, making broadcasters focus their energies on satisfying politicians not reaching viewers.
I know that many organisations in this room are involved in bidding for the pilot schemes that this Bill would make permanent. And I don’t blame you: faced with the terrifying situation many of you are in, it is understandable you want to follow the money wherever it is, public or private.
So let me be clear. We do not support these provisions in the Digital Economy Bill. And we do not support the pilot schemes. The contracts are not due to be signed until May. Anyone looking to sign one should understand that we’ll do all we can to legally unpick them if David Cameron enters Number 10. And if they haven’t been signed, we won’t be doing so.
This is because we want to see the emergence of a radically different, improved and forward-looking local media sector. Not just local TV, where we are about the only major developed country not to have proper city-based TV franchises. But profitable, hungry and ambitious local radio, local newspapers and local websites as well.
We will do this by sweeping away the cross-media ownership rules at a local level. This will allow local media operators to follow viewers, as they increasingly switch platform at a moment’s notice, whether from TV to radio to mobile or to online. It will allow a consistent and strong new offering to advertisers: go with us and we will reach consumers in a defined geographical area whichever platform they use.
We will not stop there. The cost of TV news production has fallen dramatically thanks to changes in technology. But we will seek to lower the costs for new entrants to local TV even further by creating space for a new national network to provide prime time viewing for local TV affiliates. This means that local TV operators will only have to fund a few hours of local news daily, not expensive 24 hour news. It will also mean – critically – that as in America advertising on local TV franchises can be sold nationally as well as locally.
This will not be easy and no one is predicting the emergence of profitable local media organisations overnight. But only by putting in place the building blocks now, can we offer real hope for a sustainable future for independent media, something that I believe to be of profound democratic importance.
<h3>A Conservative Approach</h3>
So what should the Digital Economy Bill have said? It should have reformed the regulatory structure. And it should have dealt with the chronically slow progress we are making in investing in next generation broadband.
Our priority must be to make our media regulation fit for a new media age. This means moving to a light touch regulatory model that allows media companies to develop and test new business models. The Communications Act of 2003 forces Ofcom to micro-manage – and the Digital Economy Bill widens the remit of Ofcom beyond recognition. The Bill should have moved Ofcom in the other direction.
Ofcom shouldn’t be required to produce endless reports on countless different topics. Nor should it be making policy. The creative industries are becoming as important to our economy as financial services – any policies must be wholly accountable and made by Ministers.
The Bill could even have done something to update the competition regime that our media sector operates under. The recent announcement from the Competition Commission on Contract Rights Renewal reaffirms in my mind that the current system is simply not working in a digital age. When internet advertising is the only medium currently growing surely competition authorities should be able to take this into account more than they currently do?
<h3>Next generation access</h3>
So deregulation is critical. I have talked about the stifling cross-media ownership rules which are strangling our media operators by restricting them to one main platform.
But the same need to deregulate applies when it comes to the broadband infrastructure that is increasingly critical to our economic future.
The Digital Economy Bill fails to say anything about the desperate need to open up access to BT’s ducts in order to stimulate investment in the next generation of fibre optic networks. We simply will not get the investment necessary until we open up the market to new players.
It is an embarrassment that out of 30 OECD countries we are ranked just 21st for broadband speed – behind the likes of Greece and Portugal and streets behind Korea or Japan. In the UK we are talking about universal 2 Mg access by 2012. In Korea they are also have a target for 2012: to enable 1 gigabyte access to 1 million homes. That is speeds 500 times faster, with 95% of the investment coming from the private sector. Ask Koreans how they achieved it and they will tell you one word: competition. So as the country that pioneered privatisation and deregulation in telecoms in the 1980s it is time to relearn some of the lessons of that period and once again be bold in our technology policies.
The basis of our approach is optimism. Optimism based on the fact that when it comes to the creation of digital content, Britain is one of the best in the world. The world’s largest independent TV production sector. The second largest exporter of TV formats. The second largest exporter of music. The third largest film market. The third largest video games market. But to capitalise on this we need a modern regulatory environment and a modern technological infrastructure.
Conservative governments have been responsible for nearly all the major changes in broadcasting regulation, giving us one of the most competitive and admired broadcast sectors in the world. We want to do the same for the creative industries.