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Hunt's plan to put the local back into TV

The Culture Secretary wants to encourage regional programming but is it economically viable?

Jeremy Hunt is a passionate believer in local media. Yesterday, he outlined proposals to foster a new generation of regional broadcasting in an attempt to help reverse an increasingly "atomised" society. Yet critics complained the plan leaves too many questions unanswered.

The Culture Secretary told members of the Royal Television Society that the TV industry was "deeply, desperately centralised".

He called the regional news broadcasts "token" and said they had been increasingly stretched across vast geographical areas. The Government wants this to change.

"The idea that somehow the UK can't sustain local TV will seem very quaint when compared to other countries," he said. The US has six local channels even in small cities, There are 100 such broadcasters in France and 80 in Sweden.

Mr Hunt outlined his vision as a "landscape of local TV services", which would broadcast for as little as one hour a day.

Industry insiders were sceptical. One said: "Many media companies are very reluctant to embrace the digital era, and now they are being asked to do something where the economics are severely in question."

The Government is to bring forward plans removing the remaining bars governing local cross-media ownership, "paving the way for local newspaper and commercial radio groups to develop new business models that allow them to move freely from platform to platform", he said. He hopes this will create independent broadcasters prepared to focus on local content.

Mr Hunt said he plans to redefine public service broadcasting for the digital age, asking Ofcom how to ensure enough emphasis is given to the delivery of local content. This could see the BBC, ITV, Channel 4 and Channel 5 lose their guaranteed position on the first page of the electronic programme guide (EPG), should they fail to do so. Ofcom recently estimated the prominence on the EPG was worth a combined £30m to the public service broadcasters.

"This is likely to become the principle intervention through which we repay broadcasters who invest in content with a social or cultural benefit," Mr Hunt said.

Dan Sabbagh, co-founder of media news website Beehive City, said Mr Hunt's speech left "far too many question marks. It's not an obviously coherent policy." He said that the content provided by a local commercial station was unlikely to sit on the BBC, and the economics would not be viable for Channel 5. "It could do a deal with ITV in return for a favour, such as the EPG, or possibly with Channel 4," he added.

Mr Hunt has torn up the plans implemented by the previous government. Labour said it would lift the burden for regional news on ITV, which could instead be provided by subsidised regional news consortiums. Mr Hunt scrapped it this summer, favouring the US model of city local TV stations instead. He has previously said that Birmingham, Alabama has eight local stations, while Birmingham in the UK, which is larger, "doesn't even have one".

The minister called on the television industry to reinvent itself "and not leave the country behind".

He pointed to 8tv in Catalonia, which is profitable as a standalone commercial operation. LCM in Marseille uses other TV businesses to support its local broadcasting model, while in Sweden four of the six local stations are run by local newspaper groups.

The Government believes up to40 new media companies could emerge across the UK to make local programming.

One media company adviser said: "I find it hard to understand Jeremy Hunt's fixation on local media. He believes in the American model, but local TV hasn't worked in the UK because you don't have massive conglomerations of population to view it. And it is more expensive over here."

Markets including North America and Germany already have widespread cable infrastructure, which keeps costs down for local TV companies. Mr Hunt has also shied away from subsidies such as in Spain and France. The source added that the only way he could see local news working was with user generated content online.

Mr Hunt has called in Nicholas Schott, the head of investment banking for Lazard in the UK, to advise on creating a commercially viable local TV industry. Mr Schott's panel will produce a full report later this year, but several preliminary findings were released yesterday, which asked: "If alternative sources of revenue such as subscription, carriage fees, product placement and sponsored programming can work for national TV, why can't they do so for local stations?"

Mr Schott admitted local television would not work on Freeview in remote regional areas because of the transmission costs and weak advertiser demand. And despite a better chance of success in cities an advertising model "would still be challenging" because of the structural decline in the local and regional ad market.

Mr Schott believed companies should look "exhaustively" at other revenue streams. This could include selling local news content to other broadcasters, as well as corporate sponsorship for local TV, as Barclays have done with London's bicycle scheme. He added that further rules may need to be relaxed. "Having a channel number for local TV, which is common to all such services and which is in a prominent position on the electronic programme guide is highly desirable," Mr Schott said.

Yet some support would still be needed from existing networks, he said. Whether through an existing national channel acting as a "host" or pop-up prompts emerging on public service broadcasters. The panel is also looking at emerging technologies such as mobile platforms and the forthcoming YouView.

Mr Schott concluded that it had been "difficult to see a clear path to commercial viability for local TV," adding more work was needed before the panel could say it was commercially viable.

Mr Sabbagh said: "Nick Schott is saying: 'We barely see this as viable.' He has taken a woolly proposal, which was not financially viable into something that might work. He has injected some realism."