Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Broadcasting (Local Digital Television Programme Services and Independent Productions) (Amendment) Order 2012.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments.
My Lords, this instrument is part of a series of measures that have been introduced recently to help a new generation of local TV services emerge across the UK. The UK is more or less alone in Europe in not having a developed local TV sector. The Government are seeking to address this anomaly. Parliament has already provided the communications regulator, Ofcom, with fit-for-purpose regulatory powers to license local TV services. Ofcom will select a strong infrastructure provider to support individual local TV services, and media businesses now have the freedom to enter new markets at local level.
Local TV will provide communities with relevant and targeted content and contribute towards the local democratic process. With the launch of Ofcom’s licensing bidding process in May, an initial 21 localities across the UK are in the running to get a local TV station, the first of which we hope will be up and running from next year. While the Government have already taken significant steps towards making local TV a reality across the UK, there is more that can be done to ensure the sustainability of this new market.
The instrument before the Committee is a deregulatory one. It seeks to remove a regulatory burden on new local TV services while ensuring that there is a diverse range of applicants participating in the licensing bidding process. The existing regulatory framework in respect of independent producers is designed to encourage investment in production at the national level through a national quota system, mitigating the dominance which large-scale broadcasters previously had in the production sector. However, these rules do not need to apply to local TV. Indeed, imposing a quota on new local TV services starting up for the first time could pose cost and compliance burdens.
In addition to imposing a production quota, the existing rules prevent independent producers holding a majority stake in a new local TV enterprise, unless they forfeit their independent status. The measure before your Lordships deals with both matters. This instrument will result in two changes. First, it will exempt local TV broadcasters from the requirement under Section 309 of the Communications Act 2003 to source 10% of qualifying programme content from independent producers. The quota and its compliance requirements could be a significant burden on local TV services, which are likely to have small programme budgets. It might be difficult for a local TV broadcaster to find independent producers to deliver suitable programmes against the quota obligations without distorting its programming strategy and commercial decisions. Local TV is a market which has historically faced a number of barriers preventing its success, so the Government would like to keep the regulatory burdens to a minimum.
The UK’s independent production sector is, of course, a very successful part of our media market and its growth has been partly due to the 10% commissioning quota. Removing the quota will not prevent local TV providers sourcing content from independent producers but it does relieve the local TV services from the potentially significant cost obligation of having to source at least 10% of their scheduled output when they are just emerging in a new market. Local TV providers can look to independent producers to provide high-quality and diverse content. We are saying that there should not be a legal requirement for local TV broadcasters to ring-fence a specific amount of content for independent productions. The proposed measure will apply only at the local level. The quota system will remain in place for all national and regional broadcasters.
The legislation which imposes the 10% commissioning quota was designed in the absence of a local TV market in the UK. Given that the legislation was designed with national and regional television production in mind, it would not be appropriate for the quota and ownership cap regulations to be applied in this context.
Further, removing the quota obligation for local TV service providers is entirely consistent with the European audiovisual media services directive 2010, known as the AVMS, which also requires member states to adopt an independent production quota system. That quota system, which exists independently of our domestic independent production quota system, requires that member states ensure that broadcasters source 10% of qualifying content from,
“producers who are independent from broadcasters”.
However, the AVMS directive specifically permits member states to disapply that rule in relation to local TV. Under European law, local TV services are therefore considered to be a special case when it comes to the independent production and quota rules, and this is what we are now implementing in UK law.
The second change which this order will make relates to the Government’s desire to maximise the number of potential entrants into the local TV market, allowing as many interested parties as possible to compete in the process, thereby increasing the quality and output of local TV. This change eliminates a difficulty which, at present, could discourage independent producers from taking up ownership of a local TV licence. At present, independent producers are unable to bid for and hold local TV broadcast licences without forfeiting their independent status. If an independent producer holds more than a 25% stake in any broadcaster, including a local TV broadcaster, it can no longer be classed as “independent”. Loss of independent status is commercially undesirable because broadcasters will be less keen to commission work from a producer whose work will not count towards the national and regional quota. It is therefore clear that, as things stand, independent producers may be discouraged from bidding for or taking up a local TV licence. This instrument addresses that difficulty by amending the definition of independent producer in the Broadcasting (Independent Productions) Order 1991 so that an independent producer may hold up to 100% ownership in a local TV broadcaster without losing its independent status, as long as that producer’s “main activity” is not broadcasting.
It is right that independent producers should have the same opportunity to bid for and own local TV licences as other potential operators. This measure provides independent producers with a much greater opportunity to be involved in this new market than is available at present, while protecting the integrity of the overall production quota system.
The Government are removing the ownership ceiling so that producers can hold a local TV licence without losing their independent status. However, it is important that the distinction between broadcaster and independent producer remains clear to ensure that we continue to comply with the EU independent production quota obligation. That obligation, as I have already noted, requires that member states ensure that broadcasters source 10% of qualifying content from producers that are independent from broadcasters. Being able to ascertain whether a producer, whether or not it holds a local TV licence, is independent of broadcasters is therefore important because broadcasters must be satisfied that the work that they are commissioning is indeed independent and can thereby count towards both the domestic and EU production quotas. The instrument therefore enables Ofcom to obtain from local TV licence holders that are also producers such information as may be required to determine whether such licence holders are independent producers.
I hope that the Committee agrees that these deregulatory measures are proportionate and necessary. Without these changes, unnecessary regulatory and cost burdens remain on new local TV providers. It is essential that we help to create incentives for independent producers to invest in local TV and simultaneously reduce regulatory barriers. I assure the Committee that the order is compatible with convention rights. I beg to move.
My Lords, I am grateful to the Minister for giving us some context for the order. It is a pity that so few of our colleagues have turned up to debate and enjoy the discussion, because this is an interesting topic. I am even slightly surprised to see that the Minister has managed to lose her civil servants as well. They must have tremendous confidence in what she is proposing and I quail at the prospect of trying to put down a few points that she might consider. I apologise if my voice gives out; I have a sudden summer cold and I am struggling to get my points across.
As we have heard, the proposals are part of a package to get local TV up and running. These provisions remove the 10% independent production content quota from applying to local television services and remove the ownership ceiling for independent producers to have full ownership of local TV services without losing their independent status.
The UK independent production sector is a great economic and cultural success story. In less than 10 years it has grown from a cottage industry to the world’s biggest exporter of TV programme formats. Sector revenues have grown from £1.6 billion in 2004 to £2.3 billion in 2010, with companies of global scale emerging, and it is heartening that production companies can be found right across the UK, not just in London. The independent sector now makes around 50% of qualifying UK television programmes and employs more people than the combined TV divisions of the BBC, ITV, Channel 4 and channel Five. However, it would not be so successful—indeed, some people would argue that there would not be an independent sector at all—if it had not been for the 10% independent production quota. It is that simple.
The proposals that we are discussing today have been subject to a public consultation. However, we need to do a reality check here on several grounds. First, the consultation had a very limited reach. The DCMS confirms that a total of 12 responses to the consultation were received from a range of organisations, including potential local TV providers, independent producers, industry bodies and other interested parties. This is from one of the best resourced and most vibrant TV economies in the world. What, I wonder, does that tell us? Secondly, the limited number of responses received raises questions about what other parts of the industry think about these proposals. There was nothing from advertisers, nothing from ITV, nothing from Channel 4—although S4C responded—and nothing from regional newspapers or other media interests in localities. Scotland is represented, but what of Wales and Northern Ireland? Local government is not present, despite the ostensible impact that this will have on its initiatives.
Thirdly, although there are responses from the BBC, the trade union BECTU and PACT, which represents some 500 producers in the UK, the report does its best to reduce all responses to numerical equivalents across the 12 responses, with very little attempt to differentiate producer interest from public interest or potential licence holders from competitor interests at a regional or national level. I should be very grateful if the Minister would comment specifically on how she justifies basing her proposals in the order on this very flawed and inadequate consultation. Can she explain how the department considers it to have been a sufficient exercise? Can she also let us know whether it considered any other ways of getting a better sense of the industry’s views, which would have allowed it to draw meaningful conclusions about why these methods were rejected, if they were?
I thought that this Government accepted the need for evidence-based policy, but I struggle to see what compelling evidence exists on the 10% quota, for example, when I read:
“Of those who responded, three respondents supported removal of the quota, one suggested a quota increase, five did not comment and three were opposed to a change”.
The DCMS consultation response goes on:
“One industry body stated that there is a strong demand from independent producers to provide content for local TV services, so local TV licence holders should not have difficulties in finding independent producers willing to make content for them in order to meet the quota. However, other respondents (including potential local TV providers) suggested that a 10% quota would be a significant burden for any local operator, given the local TV station cost assumptions, and could present an administrative barrier to long term sustainability”.
One can, without much difficulty, assert that those bidding for a licence are likely to support the lifting of the quota as much as PACT, the independent film and TV-makers’ trade body, are likely to oppose it, but what evidence was produced to back up the Government’s assertion that a quota would indeed be a significant burden and should be refused? Perhaps the Minister could enlighten us later.
To be frank, this consultation was a complete failure. The fact is that there is nothing in the published responses to justify the decision that the Government want to take today. If you take the trouble to read the submissions made to the public consultation, as I have, you are left in no doubt that, despite the paucity of response, the general feeling is that there is no case for removing the 10% quota and there is a real danger in lifting the 25% ceiling on ownership by independent producers.
It is probably too late to revise this order, particularly as I understand that Ofcom is currently advertising local TV licences, so I will end by suggesting some things that the Government might wish to consider. There is strong evidence of a willingness by independent producers to provide local content for local TV services. The strength of the sector undoubtedly derives from the 10% quota applying elsewhere in the system and, if it ain’t broke, why fix it? I suggest that the Government should consider, as PACT rather generously, in my view, suggests, the introduction of a grace period of perhaps two or three years during which the quota would not be enforced at a local level.
Secondly, the Government should require Ofcom to publish the percentage of independent productions that has actually been transmitted by licensed local TV stations each year, so that we have an evidence base. The department should commit today to making local TV services compliant with the quota in, say, three years’ time.
There is concern in the production community that the removal of the quota in the case of local TV will be the thin end of the wedge as far as regional and national production is concerned. Therefore, I suggest that the Government confirm today that this is a truly exceptional case which is being considered only because the AVMS European directive permits member states to disapply the 10% quota in relation to television broadcasting intended for local audiences that does not form part of a national network. Also, in line with the AVMS directive, the Government should confirm that they have no intention of relaxing quotas for other broadcasters.
In relation to the proposal to remove the 25% ownership ceiling on independent producers owning a local TV licence, the Government should recognise and be sensitive to the fact that this will be seen as opening the door to pressure from other bodies to amend the definition of independent producer in other contexts. In particular, there is concern that this would reopen calls from Channel 3 licensees, such as STV, to qualify for independent producer status. We therefore suggest that the Government take this opportunity to confirm that they will not amend the current definition of independent producer more generally.
Finally, given that as a result of these and other changes one or more independent production companies would be able to own one or more local television stations, the Government should recognise that this undermines the fundamental rationale for the current distinction between independent production companies and broadcasters. These proposals, together with the Media Ownership (Radio and Cross-media) Order 2011, which removed all local cross-media ownership rules, would appear to suggest that a single media organisation will be able to run a majority of news services in a local area while at the same time potentially having a large interest in national news provision. I suggest that the Government take this opportunity to confirm that they are very concerned about media plurality and will require Ofcom to review the impact of these changes on that fundamental issue within three years of the first licence being awarded.
The Minister called this a deregulatory order and suggested that we should support it for that reason. However, I fear that it will cause quite a lot of damage to the independent production sector and will not be appropriate invigoration for local media activity. I apologise for my voice, which is just about to give out, and thank noble Lords.
I thank the noble Lord, Lord Stevenson. I am grateful that his voice did not give out—although, in the absence of any officials, if it had given out a little earlier it would have made my task slightly easier. However, I shall attempt to respond to some of the questions he raised.
The noble Lord commented on the small number of responses to the consultation and their limited range and he asked why that was. The consultation was widely publicised and therefore the replies that came in were from people who were interested in coming back to it. I like to assume that the small number of responses was due to the fact that the proposals were widely acceptable within the industry. The order has met with positive responses from the people who responded to the consultation and from other people who were aware that it was going on but chose not to respond.
I share the noble Lord’s enthusiasm for the independent sector and I am grateful for the positive comments that he made on that issue. We certainly have a very lively independent television sector and we would not wish to do anything to disadvantage it. Part of the purpose of the order is to ensure that it can continue as a lively and vibrant sector.
The noble Lord asked about the relaxing of the 10% quota. This is purely for local television stations; there is no intention of relaxing the quota more widely. We recognise that the quota has been a significant factor in ensuring that independent television remains as well supported as it is. He indicated his concern about media plurality and we share his concern. Media plurality is an extremely important aspect and we would not wish this order in any way to impact on it.
The noble Lord made a number of other points which we will take away for further consultation. This is an ongoing issue. We know that 21 stations will be involved in the first pilot and that there will be more developments in due course. We will have time to review and amend if any of the proposals within the order do not work out as the Government intend them to.
I reiterate that the legislation will support the long-term success of the local television market by reducing the regulatory burdens and creating commercial incentives to invest, particularly at a local level and for smaller providers.