All you ever wanted to know about the communications bill

The Communications Bill will change the face of advertising and media in the UK when it is made law next year. Ian Darby investigates what practical difference the Bill will make to the media industry.

What is the Communications Bill?

A 543-page document which sets out to establish a new policy framework for the running of a communications and media landscape that has changed rapidly since the Broadcasting Act of 1996.

Who created it?

The Bill was jointly created by the Department for Trade and Industry and the Department for Culture, Media and Sport. A joint Parliamentary committee, chaired by Lord Puttnam, then recommended 148 changes to the draft version of the Bill. Tessa Jowell, the secretary of state for culture, media and sport, has said that more than 120 of these recommendations will be adopted in the final Bill that will go before Parliament.

Why did they create it?

In a joint statement, Jowell and Patricia Hewitt, the secretary of state for the DTI, said they want to create a more dynamic, competitive communications industry offering consumers universal access to diverse services while safeguarding their interests. They made it clear that the globalisation of the communications sector was a key influence on the Bill, with media companies increasingly investing in international services. The amount of unnecessary regulation governing media companies was also cited as a reason for the Bill.

Why should I care?

The Bill has enormous implications for the structure of the media industry, especially in changing regulations that govern the ownership of media companies and the self-regulation of the advertising industry. In one way or another, it will affect anyone working in advertising, marketing or media in the UK.

When does it come into effect?

The final Bill, unveiled last week, is scheduled to become an Act of Parliament in this Parliamentary session. It is likely to become law by next autumn at the latest, subject to royal assent, following its passage through the House of Commons and House of Lords.

What are its main points?

1. The simplification of the regulatory framework. This will see the replacement of five existing industry bodies (The Independent Television Commission, the Broadcasting Standards Commission, the Radio Authority, the Radio Communications Agency and the Office of Telecommunications) with a so-called "super-regulator" called the Office of Communications (Ofcom).

2. A simplification and liberalisation of the rules on media ownership. According to the draft Bill, the powers proposed for Ofcom will "tend to encourage dispersed ownership and new market entry". There will be a reduction in levels of cross-media regulation to three core rules that limit joint ownership of newspaper groups and ITV and also encourage varied ownership in local media.

3. Ensure that Public Service Broadcasting has a key role to play. The draft Bill said the BBC Board of Governors will continue to protect its unique status, while Ofcom would supervise standards in commercial PSB channels. However, following the Puttnam committee's report the Government accepted its points for greater control of the BBC. Also, a late clause appeared in the Bill that will allow the Government to enforce the carriage of the five main terrestrial channels on BSkyB in case of the satellite broadcaster trying to remove them.

4. To clarify regulations for telecommunications and use of the spectrum. Removal of the requirement for licensing of communications systems while also introducing a new system for managing the radio spectrum and spectrum trad-ing to lead to better use of the radio spectrum.

What would Ofcom's role be?

The body's main role is to prevent unfair competition while promoting the consumer's interest. Hewitt and Jowell said: "For the first time, the media industry will have a regulator with a precise and powerful role in ensuring fair competition." Many of its powers will relate to the provision of content and ensuring regulatory good practice.

And what about its powers relating to media ownership?

The Bill will propose that Ofcom shares powers with the Office of Fair Trading to address the issue of media monopolies. The Bill makes it clear that the two bodies will consult in the event of a new case arising but that, in practice, competition powers in the media sector will fall to Ofcom. "This will mean that competition issues in broadcasting, which are at present dealt with by the OFT, will normally fall to Ofcom," it says.

What does it mean for foreign companies wanting to acquire UK media companies?

It will abolish all rules preventing companies from non-EU countries from buying a UK TV or radio licence. At present European companies are able to do so while, for instance, US, Australian or Canadian companies are prevented. Media mergers and acquisitions will be judged in a way that is indifferent to the nationality of the companies in question.

What are the implications for cross-media ownership?

The Bill is likely to encourage more cross-media ownership. It will allow national newspaper groups to buy into national and local radio and into Channel 5. However, a rule will remain to limit joint ownership of national newspapers and Channel 3 (ITV). So no company controlling more than 20 per cent of the national newspaper market may have more than a 20 per cent stake in any Channel 3 service. Also, no company owning a regional Channel 3 licence may own more than 20 per cent of the region's local and regional newspaper market.

What does it say about a merger of the ITV companies?

The Bill will remove the two rules that prevent the formation of a single ITV company (the ban on joint ownership of the two London Channel 3 licences and the rule that imposes a limit of 15 per cent on any company's share of total TV audience). However, it passes the buck to the competition authorities on assessing the effect of a merger on the advertising market and makes it clear that these authorities "may well prevent the formation of a single ITV company for the time being on these grounds".

Which TV companies are likely to be takeover targets?

Five and a post-merger ITV (if this is granted the go-ahead by competition authorities).

Are there any implications for Channel 4?

Channel 4's present structure will be maintained but there will be an emphasis on ensuring that its new ventures fit within its remit and are not unfairly subsidised. It will be required to gain Ofcom approval for new ventures.

How does it propose the BBC be regulated?

The draft Bill stated that the BBC would come under "new external requirements monitored and enforced by Ofcom". Recent developments state the BBC will have to comply with specific programme standards issued by Ofcom, have the same obligations as other public service broadcasters on programming and news in peaktime and commit to comply with a system of broadcast apologies and corrections. Ofcom will be able to fine the BBC for failing to meet taste and decency standards in programming.

What are the implications for radio?

Greater consolidation of radio groups will be allowed. The Bill will allow two commercial radio companies to operate in each region alongside one BBC company. The largest operator in each region will not be allowed to exceed 55 per cent of available points. Cross-media owners will not be allowed more than 45 per cent in each region.

Isn't this a change from the initial proposals in the draft Bill?

Yes. The Government was originally proposing that there would have to be at least three commercial companies plus a BBC station in each region.

However, Jowell has listened to lobbying from the Commercial Radio Companies Association and will allow for greater liberalisation.

What does the Bill mean for media buyers?

The greater consolidation on the media owner side that the Bill is likely to create will bring new, streamlined sales points for agencies to deal with. Many are already in the process of consolidating their buying operations on a group basis and this trend is likely to be accelerated. This may lead to more tightly run buying departments with fewer sales points.

The removal of barriers for an ITV merger is of great concern to many media agencies, keen on behalf of advertisers to prevent unfair competition.

How will the Bill affect advertisers?

ISBA has welcomed the opening of UK media ownership to companies not based in the EU, arguing that this will lead to further investment and increased competition. It argues this is good news for advertisers, as the commercial sector needs to compete with an aggressive drive by the BBC to build audiences.

The exact nature of Ofcom's relationship with the BBC is also of great concern to advertisers and they argue that the Bill does not go far enough.

Advertisers will continue to push for the removal of the BBC's self-governing structure.

Advertisers also welcomed provision in the Bill for the competition authorities to examine any further consolidation of ITV because they want to see continued fair competition between media owners for advertising budgets.

However, the lack of a commitment in black and white terms to self-regulation of broadcast advertising is a blow.

What does it say about self-regulation of advertising?

It states that one of the general duties of Ofcom will be "where it appears to (Ofcom) to be relevant ... to have regard to the desirability of promoting and facilitating the development and use of effective forms of self regulation". In making no specific reference to broadcast advertising, this is more vague than the industry might have hoped. It means that the burden is still on the industry (ie. broadcasters and agencies) to deliver a workable system of broadcast self regulation, rather than making it the Government's duty to enshrine such a system in law. Will the two sides ever reach a workable agreement? The jury's out ...

Any predictions, then?

ITV will merge after fudging its sale house arrangements through the competition enquiry. Viacom will buy ITV - MTV presenters take over from Davina McCall, Des Lynam and Ant & Dec.

Despite all denials, Rupert Murdoch's BSkyB will buy Five as its first UK terrestrial channel.

Clear Channel will acquire both Capital and GWR before selling off Classic FM to Associated Newspapers. Henry Kelly will then swap jobs with Chris Tarrant in an attempt to bring younger audiences to Capital.

An unopposed BBC will continue to launch spurious TV and radio channels purely to aggravate their commercial rivals and annoy media agencies.

FOUR VIEWS ON THE DRAFT BILL

Tessa Jowell, the secretary of state for culture, media and sport, said:"For too long UK media has been over-regulated and over-protected from competition. Despite this, the past ten years have seen a dramatic increase in the range of voices in the marketplace. The draft Bill we have published will liberalise the market, so removing unnecessary regulatory burdens and cutting red tape, but at the same time retain some key safeguards that will protect the diversity and plurality of our media.

"The policies in this draft Bill aim to secure the Government's objectives: creating the most dynamic, competitive communications industry in the world; ensuring universal access to a choice of diverse services of the highest quality; and ensuring that citizens and consumers are safeguarded."

Lord Puttnam, the chairman of the joint committee on the Communications Bill, said: "The draft Bill, while in so many ways welcome, has given rise to unease on several grounds. Does it provide a framework for effective competition and economic regulation wherever appropriate? Does it protect the unique strengths and vitality of British broadcasting? Does it strike the right balance between fostering the development of a dynamic market and the protection of plurality in the media? We have concluded that the draft Bill goes a long way in the right direction. Our main purpose has thus been to make a good Bill better.

"The effective use of the new competition law, the statutory framework to be established by the Competition Act 1998 and the Enterprise Bill when it is enacted later this year is crucial to Ofcom's success. This pivotal role must be reflected in the statutory framework for Ofcom, in its funding and in its internal structure. At the heart of our conclusions and recommendations about media ownership is the proposal for a new plurality test to be used in connection with mergers and takeovers across all media. We hope that this recommendation will stimulate an important and timely debate."

Hamish Pringle, the IPA director-general, was pleased with apparent Government concessions on self-regulation of broadcast advertising. "The IPA has played its part in achieving this successful outcome, in particular by helping to articulate the challenges presented by digital media, the importance of brands maintaining the confidence of their consumers and the need to avoid different regulatory bodies taking different views of essentially the same brand communications in different media channels. The IPA is totally committed to the concept of accredited self-regulation and like others involved is grateful to the Puttnam Committee for finally defining these terms which accurately reflect what we all believe is the right way forward both in the UK and Europe," he said.

Malcolm Earnshaw, ISBA's director-general, said: "Advertisers and advertising play an absolutely fundamental role in UK media, in the health of the UK economy and in ensuring well-informed and well-served consumers. Further recognition of this would not only be fair and realistic, it would provide the most solid basis for the development of the UK to become home to perhaps the most dynamic and competitive media environment in the world."

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