Outlook: Media bill amounts to a slap in the face for Mr Murdoch

easyJet/Deutsche BA
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The Independent Online

Tessa Jowell, Secretary of State for Culture, Media and Sport, predictably got it in the neck yesterday from many sections of the UK press and media for a Communications Bill which in theory allows Rupert Murdoch to acquire Channel 5. But leaving aside the suspicion that this sop to Mr Murdoch's ambition was added at the last moment to ensure his newspapers remain on message, it's actually quite a good bill that may damage Mr Murdoch more than it helps him.

The decision to open up ITV to foreign ownership, whether it comes from Europe or the US, is a brave and inspired move that promises to bring about swift and dramatic change in Britain's TV landscape. Heaven knows, ITV needs it. The reforms are mirrored in radio, which though not obviously as glamourous an industry as TV, is none the less ripe with opportunity for consolidation and takeovers.

The only real puzzle is that there is no apparent quid pro quo for the removal of barriers preventing the British media industry being mopped up by the giants of America. Few if any British players have either the size or the wherewithal to go shopping in the US, though that is less true of the fragmented radio industry than TV. Even so, that's not the point. British media companies are barred from acquiring like businesses in the US not because they aren't big or good enough, but because the rules don't allow it. It's odd that the British government should open up its own markets without so much as even a statement of intent from the US that it will do the same. What's going on here?

Deregulation none the less always requires someone to take the first steps and it should perhaps be counted as excellent news that Britain is showing the way. Britain's reward ought to be in a mass of inward investment that would confirm its position as an international centre for English speaking media of real importance. The end result will be more choice, more jobs, more creativity, more wealth.

The parallels with the City, which has thrived under foreign ownership since deregulation in the mid 1980s, should not be over egged, but they are there none the less. Getting taken over by Americans is the best thing that could happen to Britain's moribund ITV. Britain has always done best economically when it is open to the rest of the world, rather than closed to it, and there is no reason why the media should be any difference.

Michael Green's Carlton should abandon all thought of a defensive merger with Granada, and put his company up for sale to the highest bidder. He might even take some pleasure in finally thwarting Charles Allen's plans for a single ITV under Granada's stewardship. These reforms open up a myriad of alternative possibilities. A mischievous thought is that this is the Government punishing ITV for its failure to deliver Britain's digital future. In a leaked letter to the Prime Minister last year, Charles Allen, chairman of Granada, warned that ITV could be taken over by foreigners unless the Government moved with dispatch to allow the creation of a single ITV. Well, now he's had his answer.

If there is a criticism of the bill, it is that it does not go far enough. It is absurd that separate media law should in principle allow Mr Murdoch to acquire Channel 5 but not ITV. An adequately administered competition policy would be easily equal to the task of reining in Mr Murdoch's pursuit of monopoly, if that is what is required, without the need for this ill-constructed shanty town of extra regulations. The whole lot should have been swept away. The same is true of radio where the idea that there should be three separate owners of radio in each region regardless of competition issues makes little sense.

Speculation is rife that the Channel 5 concession must have been the result of a secret deal between Mr Murdoch and the Prime Minister, and certainly it does seem to be true that both surprise elements in the bill – the change in foreign ownership rules and the Channel 5 concession – didn't enter the draft until Number 10 had been through it with a fine-tooth comb. Who knows what was agreed behind closed doors? Anything is possible with this lot.

But whether Mr Murdoch has in practice actually done that well from the bill is questionable. There's no reason why RTL, whose ultimate paymaster is Bertelsmann's Thomas Middelhoff, should sell Mr Murdoch Channel 5. Indeed, Mr Middelhoff might think it better to keep Channel 5 and buy one of the ITV companies as well, which he could do under the new rules. Mr Murdoch would end up with nothing. And even if Mr Murdoch eventually gets his hands on Channel 5, he's hardly going to relish the competition of ITV newly empowered by a Disney, Viacom or AOL Time Warner takeover. Much better for him that ITV should remain in its present enfeebled state. Perhaps Mr Murdoch's newspapers will be reconsidering their support for the Blair government after all.

easyJet/Deutsche BA

This is your captain, Ray Webster, speaking. There has been a disturbance in the cockpit but do not be alarmed. My first officer Barbara Cassani has now been restrained by members of the cabin staff and locked up in the galley. She will be removed from the aircraft at the first available opportunity and given £18m to go away. In the meantime, relax and enjoy the flight to Frankfurt.

The emotion of surrendering the joystick at Go finally became too much yesterday for its chief executive. After biting her lip for five days, Ms Cassani finally came out of the closet and criticised easyJet in public, saying she would not accept a job from Mr Webster even if he so much as begged her to stay on. What's more, the rest of the Go management were 100 per cent behind her in backing a flotation of the business in preference to being taken over by Stelios and Co.

Barring a spectacular but unlikely mid-air U-turn by 3I, easyJet's majority shareholder, the spat between Ms Cassani and Mr Webster, will very soon be academic even if it means that easyJet may find itself having to integrate the two airlines without the help of Go's top managers. In any case, Mr Webster's bigger challenge concerns yesterday's other announcement – that easyJet plans to take on Lufthansa in the German carrier's own back yard. It's a deal a day around at easyJet's big orange headquarters but the proposed takeover of BA's loss-making German operation looks even harder to fathom than the acquisition of Go.

Germany is the biggest domestic airline market in Europe, which is why Ryanair is also trying to muscle its way in. BA found the local cartel office strangely unsupportive of its attempts to break the Lufthansa monopoly with the result that it ended up losing its shirt. Why Mr Webster thinks he'll fare any better is anyone's guess. He also faces the far from simple task of stripping Deutsche BA down to its bare essentials and rebuilding it as a genuine low-cost alternative while keeping the unions on board.

Still, at this stage all he has spent is €5m to buy the option to acquire Deutsche BA sometime in the next 14 months. Mr Webster may already have bitten off more than he can chew with the acquisition of Go. Best leave the conquest of Europe for another day.

jeremy.warner@independent.co.uk

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