Media: Carter maps out the digital future of Britain

With the release of Stephen Carter's interim report on Digital Britain, Andrew Grice asks the Lords minister what it all will mean for advertising.

Stephen Carter joined a group of old friends from the advertising industry in the country last weekend, a timely pause for breath after producing his long-awaited Interim Report on Digital Britain. He always gives up drink for January and so it was a good moment to restart.

As the Government ponders how the creative industries can play a bigger role in a post-recession Britain, the ad business undoubtedly has a friend at the top table. Sitting in his eighth-floor office at the Department for Business in Victoria Street in a sweater and open-necked shirt, the former JWT graduate trainee who rose to be the chief executive looks more like an ad executive than a minister for communications, technology and broadcasting.

Lord Carter of Barnes recalls his advertising days fondly, and speaks of a possible return to the industry. He is less happy about the rather cool response to his blueprint from his old world. For some, his 80-page report did not live up to its advance billing. "Not much in it for us," was the verdict of one industry source. In public, its spokesmen hope for more when Carter delivers his final report in June. Baroness Peta Buscombe, the Tory peer who is the chief executive of the Advertising Association, says: "We welcome Lord Carter's recognition of the importance of online advertising to the UK economy. We hope that the key role online advertising - as with offline advertising - plays in funding media and creative content is made more explicit in the final report."

Carter is "surprised" by the industry criticism. "There is an enormous amount in there for the creative industries," he insists. He rattles off, at machine-gun speed, the proposals, including his flagship pledge for broadband in all homes by 2012, that he ambitiously hopes will make the creative sector as powerful as financial services were in the past ten years or so.

How will the Government help advertiser-funded broadcasts cope with the "double whammy" of falling ad revenues in the recession and structural changes caused by the economics of digital? Carter sounds keener than Andy Burnham, the culture secretary, to approve "product placement", still outlawed on British television, even though a European Union directive permits member states to allow it during drama, sport and entertainment. There is already plenty of it on British screens in programmes made in America, where it accounts for about 5 per cent of the TV advertising market.

Carter is diplomatic because the Government is reviewing its policy. "There are very live issues around what I call advertising innovation and other people describe as product placement," he says. "There is genuine recognition that there is a need to allow creative legacy businesses more freedom to be able to commercialise what they do on sensible terms."

In a rather throwaway line, Digital Britain calls for "better regulation of online advertising". What does Carter mean? "We don't know, to be honest," he admits. It's a good thing, he argues, to ask open questions. "If we are going to have mass distribution and easy access, do we require any form of framework? Our starting point is that we probably do. I suspect the industry would agree with that."

The good news for the advertising world is that he is on the side of the angels. He is a big fan of its self-regulatory system. "One of the great things about the ad industry when I worked in it was that it happily existed outwith the reaches of government and operated a very effective self-regulatory structure," he says.

Carter is proud that, as the chief executive of Ofcom, he accelerated the process by moving the regulation of broadcast ads into the Advertising Standards Authority's remit. "I've always taken the view that within the bounds of sensible behaviour, the ad industry is best left to its own devices," he says.

That means the Government is likely to take seriously the proposals that will emerge from the Digital Media Group set up by the AA rather than impose a raft of new rules about online ads from on high.

"The primary issue is less about advertising regulation. It is more about the media literacy skills and safeguards for content," he says. The trickiest issue, he believes, is material that could be offensive to some people or groups, but he thinks it can be dealt with by signposting.

Of course, any talk of regulating the internet provokes howls of protest on the grounds that it would infringe freedom of expression. But Carter dismisses inevitable charges that the Government is adopting a "Big Brother" approach.

He also shrugs off criticism from the media consultant Peter Bazalgette, the man who brought the other Big Brother to Britain, that he did not sketch out how people would hand over their personal details in return for free online content and a 20-second ad hit. Carter insists he was not aware of any demand for him to analyse this, and thinks there is nothing to stop it happening anyway.

Carter is passionate about the creative industries, and sniffy about the whingeing that, on the growth of broadband, Britain is falling behind its competitors. "It is very British," he groans. "I have worked in this industry most of my life. We are good at this stuff. We are world-leading in most of it."

In January last year, Carter was headhunted from the City PR agency Brunswick to become Gordon Brown's chief of strategy. But some members of Brown's old guard did not welcome the new broom, and there were poisonous briefings between the rival camps. He left in October, and was given a peerage so he could take on the job of gearing up Britain for the digital age as a Lords minister.

"My primary reason for being in government is this piece of work," he says. "I can't ever imagine being the minister for health or minister for work and pensions. I am not sure I would bring much to it. I am not a professional politician."

Does he enjoy his current brief more than fire-fighting and juggling 25 balls at once at Downing Street?" He won't say. "Different jobs. Number 10 was one role, this is a different one."

He appears more at home in his current brief, a round peg in a round hole. But he is already thinking about a return to his advertising roots. "I still see loads of friends in the advertising business. And indeed might well go back into it. I have often thought, when I have done this. It's a great business."

WHAT DIGITAL BRITAIN MEANS FOR ...

GOVERNMENT

- This gravy train, already a popular attraction for public servants of all persuasions, will continue to gain momentum, providing employment for many right through the summer and beyond.

CONSUMERS

- If the report's proposals are taken to their logical conclusions, they will lead to the provision of broadband connectivity as a public utility, free for lower income groups at the point of delivery, subsidised by the taxpayer. But even if this were desirable or feasible, it would not happen overnight.

MEDIA OWNERS

- The report's proposals would leave DAB, as a commercial proposition, in limbo. Media owners, however, tend to see limbo as not the worst place to be currently. Andrew Harrison, the chief executive of the RadioCentre, says: "The report offers a real opportunity to secure a viable digital plan for radio. In particular, we welcome the report's recognition of the importance of extending digital radio coverage."

THE ADVERTISING INDUSTRY

- The underlying danger is that it will extend the dominance of the BBC - which would be the Government's primary agent for change where content delivery is concerned. There has already been talk in government circles of the BBC being asked to use its £130 million digital switchover war chest to support any future DCMS-backed programme. The corporation would, therefore, be enshrined as the UK's dominant media player for at least another generation. That prospect is not necessarily in advertisers' interests.

- And Jim Marshall, the chairman of the IPA's Media Futures Group, worries the report's emphasis is all wrong. He says: "The danger, where this sort of government exercise is concerned, is that everyone spends too much time taking about technology and not enough thinking about content. I think we all know from the example of radio that if you're going to make progress with digital take-up, you have to find the right content to drive it."

ALL ABOUT ... DIGITAL BRITAIN

1. Digital Britain: The Interim Report outlines 22 recommendations that the Government hopes will "bring both focus and stimulus" to what it terms "the Digital Economy". The Department for Culture, Media and Sport is now inviting interested parties to respond with feedback and comments by 12 March 2009. In April, there will be a Digital Britain Summit in London followed by a roadshow of regional events taking place in Northern Ireland, Scotland and Wales during April and May. This will be followed by the publication of Digital Britain: The Final Report in the early summer.

2. The evolution of this report will dovetail with the work of the Cabinet Committee on Digital Inclusion headed by the Right Honourable Paul Murphy MP, who was appointed by Prime Minister Gordon Brown as the UK's first minister for digital inclusion last year. Murphy has set up a cross-government digital inclusion team, which will aim to bring "coherence to and synergy between digital inclusion and related initiatives across all sectors". Key proposals include universal access to broadband for all by 2012, connecting the remaining 40 per cent of the population. In broadcasting, the report indicates that there needs to be a reformed Channel 4, most likely achieved through support from BBC Worldwide and other joint ventures. The full report will eventually outline the move of radio from analogue to digital.

3. The Government hopes that Digital Britain: The Final Report will show how new legislation (or amended regulation) should be introduced. Or on whether there are alternatives to either regulation or legislation. New legislation or amendments to regulations would be brought forward following government consultation on a separate timescale.

4. Digital Britain: The Interim Report acknowledges the growing importance of new communications technologies to the economic health of the nation and notes with concern that the UK has slipped to 12th place in the European Commission's global league table of digital adoption. It states: "This makes the need for an active strategic approach from government indispensable if we are to close the gap. We need to plan now, identify the market failures that are standing in the way of a full roll out of digital infrastructure in the UK, and act swiftly in Government to help the market in the timely delivery of the high-capability infrastructure we will need. This industrial activism from government will be critical to ensuring that the UK gets the most out of the digital economy."

5. The 22 recommendations have been drawn up to meet five underlying objectives: first, to make sure the UK digital distribution networks (wired, wireless and broadcast) are as modern as they can possibly be; second, that there's a dynamic investment climate for UK digital content producers; leading to point three, which is that, ideally, there should be a range of UK content producers producing UK content (particularly in news, comment and analysis) for UK people. The fourth objective will be to ensure that everyone in the UK has sufficient levels of "digital literacy" to participate in the digital economy; which in turn will enable the widespread online delivery of public services and ensure that businesses are able to interface more directly with the Government.

6. At this stage, concrete proposals affecting media owners are rather thin on the ground. However, the radio industry will note with interest the proposal outlined in action point number nine. This states that the Government might seek to create a plan for the digital migration of radio - in other words, settle on a timetable for analogue switch off. But it could not countenance creating such a timetable until two criteria can be met: digital radio listening has to reach 50 per cent; and, second, national DAB coverage has to reach levels comparable to current FM coverage, with DAB available to 90 per cent of the population, including the users of all major roads.

7. The report also recommends the creation of a Digital Radio Delivery Group, which would include equipment manufacturers and retailers, the transmission networks, the BBC, commercial radio companies and car manufacturers. The role of this body would be to devise proposals to increase the attractiveness, availability and affordability of DAB and to advise on the feasibility of a radio digital migration plan.

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Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).