The Man From Ofcom

Stephen Carter's appointment as Ofcom chief was applauded by the industry but how is he performing in the role so far? Ian Darby finds out. Running a regulator could never be described as a young man's dream job. In fact, it would be pushing it to describe it as a young man's job at all.

The corridors of semi-power are so often crept by grandees dustier than Miss Haversham's wedding dress.

So it is easy to understand the media industry's positive outlook when Stephen Carter took the chief executive role at Ofcom early last year.

And while it might be pushing it to describe Carter, at 40, as a young man, he has the necessary credentials and spinal rectitude for the role.

We meet at Ofcom's shiny new offices on the south bank of the Thames, nudging Southwark Bridge. It is a bright afternoon but there's no time for basking in the sun because Carter must leave for an evening engagement within the hour.

Given the time constraints - and Carter's reputation for being rather abrupt, even to the point of rudeness, during his days as J. Walter Thompson's chief executive - it is a relief to find him open about the challenges he faces.

Carter's CV shows he has the background required to lead Ofcom. After training as a lawyer, he spent 13 years at JWT (rising to chief executive by the age of 33) before moving to ntl in 2000 as its chief operating officer. Two years and a reported £1.6 million payoff later, he was searching for a job and unsuccessful interviews for the top jobs at Emap and Trinity Mirror are said to have followed.

So why did he take the Ofcom job? "It's a creative job at a critical point," Carter says. "Creative in the sense that it's new and a blank sheet of paper. Outside of doing a start-up, you don't often get the chance to build something from scratch. And the timing was a factor. You could see we were beginning to come out of a very tough period and a lot of the innovation and technology changes were starting to be more possible. And the subject matter is what I know."

Carter was on the Ofcom board from the start, working on merging five regulatory bodies (the Broadcasting Standards Commission, the Independent Television Commission, Oftel, the Radio Authority and the Radio Communications Agency) with the minimum of disruption. Since Ofcom got into its stride in January, it has faced dozens of issues; among them, overseeing the aftermath of the ITV merger and appointing the adjudicator, launching its public service broadcasting review, announcing a review of the telecoms market and proposing to contract out the regulation of broadcast advertising to an enlarged Advertising Standards Authority.

There has already been one notable slip-up. Ofcom issued a consultation document on media mergers in January that outlined the details of its plans, including the intention to apply a "public interest test" to newspaper mergers if called upon by the Department for Trade and Industry. Newspaper groups, News International and Trinity Mirror included, saw the consultation document as an indication that Ofcom would be taking on wider regulation of the newspaper industry.

Carter says: "Why did that go wrong? For two reasons - nobody had really registered that the responsibility had transferred from the DTI to Ofcom. The public interest test wasn't new; it used to be done somewhere else. The second reason it went wrong was, when we put the consultation out in the public domain, we didn't explain what our role was. So it looked like this new thing called Ofcom arrived from nowhere and was going to be regulating the entirety of the newspaper industry. Nothing could be further from the truth - we have a very narrow responsibility."

Ofcom also rode a publicity storm last December, when it announced its structure and running costs. Although like-for-like running costs would fall by 5 per cent, there would be an initial restructuring cost, funded by companies regulated by Ofcom, that would bring first-year operating costs in at 27 per cent higher than the combined costs of the old regulators.

"The running costs are between 5 and 10 per cent lower than they were this time last year," Carter says. "If you look at Ofcom and what it does - the additional things we're asked to do - we are significantly cheaper to run than the previous five regulators. A restructuring cost must be paid by the industry because Parliament decided it was not going to be a call on the public purse."

Ofcom's involvement in the merger of Carlton and Granada and the subsequent effectiveness of the Contract Rights Renewal remedy, together with the appointment of David Connolly as the adjudicator on any trading disputes with ITV, are the issues that have most engaged advertisers and agencies.

So what is their view of Carter and Ofcom so far? Jim Marshall, the chairman of Starcom Group and the chairman of the IPA media futures group, says: "Ofcom has been approachable, consultative and helpful in terms of advice and direction given to us. I made a report to Ofcom on the role of the adjudicator that was very positive."

Of Carter, Marshall says: "He's seen as being an interesting and positive appointment because he's from a commercial background and has real experience of our industry, and that's very unusual."

The market at the start of the year was divided on how busy Connolly would be in fielding complaints. In the event, there were just three - all from media agencies, with Ofcom finding against ITV each time - so has it been a relatively easy process for Ofcom to administer?

"It's early days but the merger was a good thing. On balance, it should make for a better schedule with more investment in programmes; better for viewers, better for advertisers, better for the creative fraternity," Carter says. "It needed some controlling and for ITV to play by the rules of the game and, broadly, it has. But it also needs advertisers and agencies to really understand the remedy and I think there's more work that can be done by everybody there, including us. And we need the other broadcasters to make their views known."

Carter says the true worth of the remedy and the impact of the merger on other broadcasters will not be known fully until the second deal season is concluded in 2005. The Competition Commission, in its findings on the ITV merger, suggested that Ofcom conduct a wider review of the TV airtime market.

Carter responds: "My own view is I don't see any value in doing that until after the second deal season. I think in 2005, after we've had the 2004 and 2005 deal seasons, it will be a sensible time to look at the market review because you will have some evidence you can interpret and some market consequences that are readable."

So with an investigation into the airtime market seemingly on hold, Ofcom is pressing ahead with larger reviews, including its massive task of examining the telecoms market, which is due to conclude later this year. It recently published its findings on PSB, with many observers taking the line that one of Ofcom's recommendations is "top-slicing" the licence fee for distribution among other broadcasters.

"We didn't say that. That was a conclusion drawn by people commenting on what we said. We said there was a hypothesis called 'contestable funding'," Carter says. "CF is a different concept from sharing the licence fee ... Do you put all the initial public funding into the BBC or is that a contestable pot that other people can use? It's been interpreted as 'why don't we top-slice the BBC' but that is not the only way CF could work."

Ofcom wants there to be a debate over how the licence fee is spent. Carter would not comment on whether the BBC is making effective use of the licence fee on extensions such as its digital TV brands. He's also cagey about Ofcom's role in the future governance of the corporation. "That's a matter for Parliament to decide," Carter says. "We have a regulatory responsibility over the BBC that is a change over the previous situation, the governors also have a regulatory responsibility over the BBC. Our PSB review is designed to look at the context so the people taking decisions about the BBC can see where it lies in the overall picture."

Ofcom has also been involved in the debate on digital switchover (the Government is hoping to switch off the analogue signal by 2010 but, first, more than 98 per cent of homes must be able to receive digital). Ofcom recently published a series of 26 recommendations to be followed if switchover is to happen.

So how realistic is the 2010 target? "It's do-able," Carter says. "The broadcasters have to do certain things, the manufacturers have to do certain things, the retailers have to, we as the regulator have to do certain things, and the BBC will have to do certain things."

Carter outlines an elaborate "choreography" that must happen if the target is to be met. It sounds pretty daunting, given that it is unlikely to come off if any of the players make a mistake or show reluctance. A key part of this process is the launch of a free digital satellite offering and there are encouraging signs that the BBC will back this. However, it also wants to get Sky on board.

"There is going to be a need for a 'freesat' product. It's one of the things that has to happen ... somebody has to find a way of structuring it, somebody's got to deliver it, somebody's got to fund it. Whether it's the BBC or Sky is a matter for debate," Carter says.

The debate looks set to take some time but, on the issue of advertising regulation, Ofcom has already moved towards creating one body by contracting out supervision of broadcast advertising to the ASA. Unlike a recent Parliamentary select committee, which said it was "disturbed by the ineffectiveness of the ASA", Carter is a supporter.

"You have this highly reputable model called the ASA that seems to work well and has a high degree of support. Then broadcast advertising is treated differently," he says. "Why don't you create a subset, a co-regulatory model to combine all of the expertise in one area? We can't say 'we want it to be self-regulatory' because we have a statutory responsibility written into law. But the law also says that, where possible, we should seek to co-regulate and deregulate."

It sounds like one of Ofcom's more straightforward tasks. Most observers are pleased with the progress it has made but feel the real tests still lie ahead. The outcome of the telecoms investigation will be awaited anxiously by BT and its rivals and Ofcom's first involvement in a media merger, most likely involving the Telegraph Group, will reveal much about its approach.

But is the job what Carter expected? "It's been a lot harder. The logistics of taking five organisations, winding them down, establishing a new one, creating it from scratch, working out how to size and scope it, and how to absorb 163 additional responsibilities, then make all the transfer happen, handling 300 or 400 departures and do all that in the public glare without dropping a ball is hard." No task for a dusty old civil servant, then.

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