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Freeview Channels

Volume 536: debated on Wednesday 23 November 2011

I am last but not least, Mr Streeter. I am grateful for the opportunity to hold this debate. The mechanism for allocating channels is particularly important to the largest private sector company in my constituency, the shopping channel QVC, which employs more than 2,000 people nationwide, the majority of whom are based in Knowsley. Most of QVC’s work force are based in the UK, even though the company could move elsewhere given the nature of its business.

Although it sounds complicated and will involve a lot of acronyms, the issue under discussion is quite straightforward. QVC’s viewing figures and revenue are dependent on viewers being able to find it. As it stands, finding QVC is easy—as long as the channel remains the same—and it has 1.1 million loyal customers and many more viewers. Control of the channel number, however, rests in the hands of an organisation owned by its competitors. Such an arrangement could work with proper forward-facing regulation, but Ofcom does not actively regulate the process of channel allocation.

There have been three attempts to change the channel’s location in recent years, and another is imminent. We know that channel changes can lead to loss of revenue in excess of 35% per home. If Freeview channels were retail premises, it would be the equivalent of allowing major supermarkets to move the location of a smaller competitor at will. The issue, therefore, is about fair competition and appropriate regulation, to allow this thriving industry to create and sustain UK jobs.

I declare an interest in the debate because the headquarters of QVC will hopefully move to my constituency in the near future. My constituency is also the home of BSkyB, so I have an additional interest. On this issue, however, it seems that a group of companies is deciding the one thing that gives QVC its only competitive advantage and allows it to grow.

The hon. Lady made her point effectively and I will support her argument as my speech develops.

I have recently received helpful representations from the Interactive Media in Retail Group—IMRG—and the Electronic Retailing Association—ERA Europe. Both organisations support the case I am making today. The issue has a direct effect on QVC, but there is also a wider effect. Leaving aside QVC’s 1.1 million active customers, independent commercial broadcasters in the UK form a successful and growing sector that employs 22,000 people. Some of those broadcasters are now commercially vulnerable due to the unfair and unclear regulatory situation in respect of the Freeview platform. The allocation of Freeview channels is important to the whole of the independent commercial broadcasting industry.

According to a communications market report by Ofcom, non-public service broadcasters have a 28% share of the audience in UK multi-channel homes. That is a not insignificant number. Research undertaken by Deloitte shows that members of the Commercial Broadcasters Association—COBA—invested £432 million during 2009 in original UK content. Another survey, from 2008, showed that COBA members contributed more than £2.2 billion to the UK economy.

The Government recognise the importance of the sector and are currently undertaking a major review that is likely to lead to a new communications Bill. I welcome the rationale for that legislation, which I understand is to bring the UK’s regulatory regime into the digital age and to ensure a communications infrastructure that supports growth and innovation while protecting the public interest and consumer choice.

COBA told me that

“one of COBA’s fundamental principles is to support light touch regulation that benefits the whole market not just a few players.”

That is why handling the allocation of Freeview channels is so important. It will signal the Government’s intentions on fostering independent dynamic businesses in the communications industry and beyond.

My right hon. Friend is making extremely important points. Although I am not particularly familiar with the channel in question, I certainly believe that all regulation should work on the level playing field principle, and in the circumstances he has described, it clearly does not. That underlines a view that I have stated for many years and that I hope the Minister will think about when preparing his broadcasting legislation: Ofcom should have a much broader umbrella, covering all digitised services, so that at least there is a parent body that can deal with anomalies such as the one that my right hon. Friend describes.

I am grateful to my hon. Friend for that intervention. He is very knowledgeable on these matters, particularly on regulatory issues, wearing his hat as a Select Committee Chair. I hope that the Minister takes seriously the point that he made.

The Minister nods; I am pleased about that.

As well as being the largest private sector employer in my constituency, QVC employs more than 500 highly skilled people in Battersea. As the hon. Member for Brentford and Isleworth (Mary Macleod) said, the intention is to move to Chiswick Park in 2012. Therefore, this issue does not affect just my constituency. The objective must be a fair, reasonable and non-discriminatory system for channel allocation, so that independent commercial broadcasters are not unfairly damaged.

I thank the right hon. Gentleman for initiating the debate. Could he clarify the situation? Is he saying that the allocation of channels is driven by a commercial enterprise for its own vested interests, rather than being based on viewing figures for the likes of QVC, which may therefore be pushed down the list unfairly, as against those vested interests, in the allocation of the channels?

I am grateful to the hon. Gentleman. That is exactly the point that I want to make. I will come to it in a moment.

DMOL—Digital Television Multiplex Operators Ltd—which manages the Freeview platform and allocates channels, is owned and run by the public service broadcasters BBC, and ITV and Channel 4, as well as the infrastructure provider Arqiva. As mentioned previously, that is the equivalent of allowing a major retailer to decide where local independent competitors can site their operations.

Further to the intervention by the hon. Member for Brentford and Isleworth (Mary Macleod), is my right hon. Friend aware that ITV recently launched its own shopping channel, which adds more force to the argument about potential unfairness, because DMOL is partly owned by ITV? Does that not call into question what our hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) mentioned—the level playing field?

Absolutely. I am grateful for that supportive intervention. I understand that not only has ITV moved into that market and put itself in direct competition with QVC and any other shopping provider by those means; it used QVC to pilot the operation of that new service. That adds force to the point that was made earlier.

The national and European trade associations share my concerns. They said in a submission to me:

“Businesses need certainty as well as fair competition. QVC’s business is threatened by the current regulatory uncertainty around channel allocation and we call on the government and on Ofcom, to give some clarity so that UK firms, like QVC,”

can continue to serve their customers and grow their businesses. ERA Europe stated:

“Our members’ future business in the UK is under threat from an uncertain regulatory environment regarding channel allocation on the Freeview platform and we urge the UK government and Ofcom to be more transparent in this most important area.”

At the heart of the issue is the ability of the dominant players to allocate valuable channel numbers to commercial competitors without independent adjudication and due process. QVC is currently positioned on Channel 16 on Freeview. I note that my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) said that he does not use QVC. If he takes the trouble to tune in to Channel 16, he might find some very useful bargains, but I will leave that up to him. He should remember that when he does so, he will be supporting jobs in Knowsley.

The issue is very important. Ofcom said in relation to DMOL that

“any regulatory issues would require consideration under the relevant multiplex licences. Pursuant to the Communications Act its activities are also subject to Ofcom’s concurrent competition law powers under the Competition Act 1998.”—[Official Report, 14 November 2011; Vol. 535, c. 497W.]

That quote is from a parliamentary written answer from the Minister.

Ofcom was in contact with me directly ahead of the debate. Its briefing sheds more light on the situation. It confirms:

“The multiplex operators are subject to regulatory requirements set out in the relevant multiplex licences, which include provisions to ensure fair and effective competition. Ofcom’s formal role in relation to DMOL’s listing policy is to”

consider “compatibility with our code” on electronic programme guides

“and consider complaints from interested parties (including DTT”—

digital terrestrial television—

“licensees such as QVC). Pursuant to the Communications Act, DMOL’s activities are also subject to Ofcom’s concurrent competition law powers under the Competition Act 1998.”

The problem is that those regulatory powers are in practice retrospective. They can apply only after the channel changes have been determined.

In relation to the electronic programme guide code, Ofcom informed me that it

“has considered from time to time whether it would be appropriate to review the Code, but has concluded on each occasion that there was no pressing need to do so. It is likely that there will be communications legislation within the next few years, and the government has indicated that it is minded to look at EPG regulation in this context. We would need to take this into account in considering the appropriate timing for any review of the Code…On behalf of multiplex operators, DMOL has initiated a detailed review of the DTT listings policies, including the criteria for how different types of channels should be listed in the EPG. It has completed a first round of consultation, and identified the need for a further consultation early next year, following detailed research it has commissioned into the views of consumers.”

Given the likely threat to jobs faced by QVC workers, the statement about there being “no pressing need” is of some concern. Saying that the regulation falls within individual multiplex licences overlooks the fact that with the exception of the utility Arqiva, the multiplex operators are also dominant channel operators and indirect competitors of independent broadcasters.

Fortunately, there is an easy to implement solution, which I am sure that the Minister will be happy to hear. DMOL should be regulated in the same way as any other broadcast television platform. For example, the equivalent operation at BSkyB, to which the hon. Member for Brentford and Isleworth referred and which reaches fewer homes, has been regulated since the late 1990s.

That is not an argument for special treatment, merely one for a level playing field, as my hon. Friend the Member for Ellesmere Port and Neston put it, so that independent broadcasters can compete fairly with all channels, including the public service broadcasters. I accept that public service channels should have special prominence with preferential channel numbers, but the current policy and practice for allocating logical channel numbers on Freeview unfairly disadvantages independent commercial broadcasters and disproportionately benefits the channels operated by DMOL shareholders.

We all want to ensure that the UK broadcast market remains dynamic and successful. Channel allocation on Freeview is about economic fairness, business certainty, jobs, encouragement of investment and legal principle. It is also about the importance of a broad and diverse UK television market.

In conclusion, I ask the Minister to consider carefully the full implications of the current DMOL channel allocation system and its lack of transparency. I am sure that with good will and an understanding of the problem, the Government and Ofcom will between them be able to resolve the situation. In practice, that means asking Ofcom to ensure that DMOL is regulated in the same way as other platforms.

First, may I say what a pleasure it is to be here under your chairmanship, Mr Streeter? Secondly, I thank the right hon. Member for Knowsley (Mr Howarth) for securing the debate and for the way he presented his concerns, which I absolutely understand. Thirdly, and in some ways most surprisingly, I apologise for not being the Under-Secretary of State for Culture, Olympics, Media and Sport, my hon. Friend the Member for Wantage (Mr Vaizey). I hope that this is the last time I have to do so. He is, of course, the Minister for the arts and the media, but he is away on ministerial business, and on his behalf, I apologise.

I welcome the opportunity to debate the issues regarding Freeview and the allocation of channels. The debate is particularly timely, because my Department is considering the regulation on electronic programme guides as part of our communications review.

The right hon. Gentleman talked about the importance of slots and the high-level listings on EPGs, and how that might impact on viewing numbers, and therefore indirectly on businesses, such as those in his constituency and the constituency of my hon. Friend the Member for Brentford and Isleworth (Mary Macleod). I absolutely understand QVC’s position and the possible impact that any decision by Digital Multiplex Operators Ltd may have on that established company. QVC is a great British company. In 18 years, it has revolutionised home shopping in the UK and grown to have about 1,500 employees in the right hon. Gentleman’s constituency and at least another 500 elsewhere.

The regulation of EPGs is, as the right hon. Gentleman correctly said, a matter for the independent regulator, Ofcom, and not directly for Ministers. While I have no powers to intervene in this case, I would like to set out the regulatory framework and what we are considering as part of the communications review. At the outset, I will give him a straightforward undertaking that I will take back what he has said today and ensure that my hon. Friend the Minister, who has responsibility for the arts and the media, is aware of his concerns.

Will the Minister add another aspect to that? While my right hon. Friend the Member for Knowsley (Mr Howarth) teased me about not being a shopper on QVC, my mother, who often gets into such debates, found it to be of invaluable service when she was at home as a disabled person. A lot of older people who are not experts on the internet, although my mother used the internet in her 90s, find television shopping a valuable tool. It would be grossly unfair to put people such as the disabled at a competitive disadvantage because of the competitive advantage of giant broadcasters.

I can certainly give the hon. Gentleman the undertaking that I will ensure that his comments are also relayed to my ministerial colleague.

The Communications Act 2003 sets out the fact that it is Ofcom’s duty to draw up, and from time to time review and revise, a code to give guidance to platform operators about the provision of EPGs. Ofcom’s code of practice on EPGs is non-prescriptive about the order in which channels are placed, except for the public service broadcasting channels, which include the BBC’s digital services, channels 3, 4 and 5, and S4C in Wales.

I congratulate the right hon. Member for Knowsley on securing the debate. The Minister mentioned S4C. There is an exciting prospect that EPG has to provide for local television. There is some consideration being given to using channel 8 for local television, on which Channel 4 is broadcast in Wales because of the presence of S4C on channel 4 on the EPG. Does he recognise that that issue also needs to be considered in the debate?

Absolutely. While the Government intend for the local television channel to be channel 8 in England and Northern Ireland, we are looking at what the appropriate channel is in Wales and Scotland, given exactly the issue that my hon. Friend has raised.

The right hon. Member for Knowsley is particularly concerned to see that Ofcom’s code requires that other, non-PSB channels are treated on a fair, reasonable and non-discriminatory basis. To guard against platform operators such as Freeview misusing their power in relation to broadcasters, Ofcom has the power to investigate potential breaches of competition law in the communications sector, such as exclusionary agreements and the abuse of a dominant position.

In summary, the listing of channels within EPGs is determined by individual platforms, exactly as the right hon. Gentleman said, such as Freeview, Sky, Virgin and Freesat, within the restrictions of Ofcom’s code and powers. It is not for the Government or Ofcom to specify exactly where every channel should be listed. It is important to note that anyone, including the broadcasters themselves, who is unhappy with how a platform operator has applied the EPG code has recourse to raise that with Ofcom as the appropriate regulator.

I am grateful for the helpful way the Minister is responding to the debate. I would like to emphasise that the existing powers are retrospective, and that still creates uncertainty. I hope that he will feel able to address that aspect together with Ofcom.

Thank you for that gentle warning, Mr Streeter, and I thank the right hon. Gentleman for his comments. I absolutely understand that and I will ensure that his point is fed into the Department’s wider review of the 2003 Act.

The right hon. Gentleman’s concerns relate specifically to Freeview, so I shall discuss the background and the set-up of the Freeview platform. The Freeview service comprises approximately 50 TV channels broadcast on digital terrestrial television, or DTT, and is free to air. A company called DTV Services Ltd, owned and run, as he said, by its shareholders—the BBC, BSkyB, Channel 4, ITV and Arqiva—is responsible for the Freeview brand.

DMOL, which is a limited company owned by the digital multiplex operators, was set up in 2007 to co-ordinate the functions of the DTT platform. Within its remit is responsibility for setting the channel numbers on Freeview. The good news is that DMOL has initiated a detailed review of the DTT listings policies, including the criteria for how different types of channel should be listed in the EPG. It has also commissioned in-depth research on the views of consumers. Once again, I will ensure, through the Department, that the views of the right hon. Gentleman are brought to the attention of DMOL as part of that review.

DMOL proposes to launch a consultation in February. It is asking for comments on the ordering of channels within the general entertainment genre, the creation of a transactional genre, and the ordering and location of all genres beyond general entertainment. That consultation will presumably include, among others, the mother of the hon. Member for Ellesmere Port and Neston (Andrew Miller). It is therefore essential that everyone with views about the allocation of channels responds to that consultation. I strongly encourage the right hon. Member for Knowsley and his constituents to do exactly that.

As the right hon. Gentleman does not feel that there is a level playing field between Freeview and other platforms, let me turn briefly to the way Ofcom regulates EPGs with particular reference to Freeview. The platform operators decide EPG lists. DMOL is a body formed by the multiplex licensees to co-ordinate the operation of the DTT platform and the organisation of the EPG. I must stress that EPGs on the DTT platform are regulated by Ofcom, albeit in the circumstances intimated by the right hon. Gentleman, in the same way as other platforms.

The EPG code on DTT applies to the multiplex licensees, rather than to DMOL. That means that in the event of a complaint against Freeview over its compliance with the EPG code, Ofcom would take it up with the multiplex licensees through DMOL. Ofcom would have the regulatory power to intervene, just as it could in the event of a complaint about the EPG of any other platform. In this case, it does not make sense for Ofcom to intervene even before DMOL has held its consultation and reached a final decision on its proposed changes, which is why I am encouraging the right hon. Gentleman to respond to the forthcoming DMOL consultation with as much evidence as possible.

As hon. Members will be aware, my Department is undertaking a review of the communications sector. We are looking at a broad range of areas from television and radio to broadband and spectrum issues. I should stress that the aim of that review is to stimulate growth and create opportunities in the communications sectors, and not in any way to dictate or limit the development of markets and technologies in broadcasting or other industries.

The importance of EPGs is an area to which we have started to give detailed consideration. The Secretary of State has reflected that interest:

“Position on the EPG will probably be the Government’s single most important lever in protecting our tradition of public service broadcasting. We are actively looking at how to make that situation better, if necessary using legislation.”—[Official Report, 8 September 2011; Vol. 532, c. 543.]

That is absolutely a key area in this review. I should add that not only are we interested in looking at the issue of the EPG from the perspective of public service broadcasters, but we are aware of the immense value that many of the commercial, non-PSB channels bring in providing a wide range of viewing choices and investing in more UK content. We would like to understand more about the importance that companies place on the EPG.

There is some evidence that the position on the EPG can affect the viewing figures of a particular channel, and that may have some indirect commercial impact. For example, MTV’s slot was moved up 150 channel places on the Sky platform, from the top of the music section to the middle of the third page general entertainment section. Research published by the media consultancy Attentional suggests that the Sky audience for MTV increased by as much as 150%.

The communications review is already under way, having been kicked off by a letter from the Secretary of State in June. We have already received more than 160 responses to that letter, many of which touched on the issue of EPG and channel prominence. We are very much in listening mode ahead of the publication of the Green Paper early next year and are grateful for the opportunity to hear some of the issues today. As I said to the right hon. Member for Knowsley, I will ensure that his contribution is fed into that review.

It is important that interested parties continue to feed in their views. I am pleased that QVC was among those that responded to the open letter from the Government and I encourage it to continue to engage with that process as it moves forward.

Let me finish by expressing my thanks to the right hon. Gentleman for his contribution. Although the Government do not have a direct role in allocating EPG places, and I do not think that anybody in this Chamber would encourage us so to do, I promise him that I will take on board what he has said today and ensure that it is fed into the review. I encourage him and his constituents to continue to engage with the review as it moves forward.

Question put and agreed to.

Sitting adjourned.