ITV, C4 and Five are given boost as regulator launches ad review

Ofcom scrutiny of sales of commercials marks split with Competition Commission
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The Independent Online

Ofcom has opened the door to scrap rules that force ITV, Channel 4 and Five to sell all their advertising airtime, potentially driving up profits. The move would be a welcome lift for broadcasters after a punishing recession and increased competition from digital rivals.

The communications regulator yesterday launched its consultation into the TV Airtime Sales Rules, which were last reviewed in 2003.

The regulation was designed to ensure fair and effective competition in the sales of TV adverts. Commercial public service broadcasters (PSBs) were governed by a "must sell" rule to ensure they did not limit advertising and consequently drive up the price.

Since then, however, Ofcom believes the market has significantly changed. The regulator said yesterday that the airtime rules "may no longer be appropriate as a result of significant developments in the TV sector". It believes that the substantial increase in the number of channels available over digital platfoms has led to "increasingly fragmented TV audiences across many channels and enabled media buyers to purchase airtime across an extensive range of channels". Industry insiders agreed, saying the rules were designed for the pre-digital age, when the five main channels secured almost 80 per cent of all viewing. One said even the advertisers would accept it as "they can see money is now coming out of the broadcaster's programming budgets, and that is not good for them either".

Ofcom believes that the commercial PSBs now have little incentive to withhold advertising airtime as the move would be unlikely to boost profits. As a starting point for its consultation it suggested scrapping the rule, bringing the commercial PSBs in line with other commercial stations in the UK.

Currently, broadcasters across Europe can show a maximum of 12 minutes of advertising an hour, the regulator said. In Britain, the non-PSBs can show nine minutes, and the commercial PSBs can show seven.

The consultation runs for 10 weeks, closing on 7 June, when Ofcom will publish its proposals. Ed Richards, the regulator's chief executive, said: "Underpinning all of our work this year on advertising is a commitment to reduce and simplify regulation whenever there is no clear evidence of a public interest which requires regulation."

Ofcom's belief that the market has shifted puts it in stark opposition to the Competition Commission. The Commission is currently reviewing the Contract Rights Renewal (CRR) regulation that governs ITV's right to sell advertising. ITV has long been campaigning to change the rules, with former head Michael Grade calling them a regulatory "straitjacket". The rules were introduced in 2003, when Carlton merged with Granada to form ITV. CRR, which governs the volume of advertising on ITV, was designed to guarantee that advertisers were no worse off after the merger, despite the growth in the broadcaster's market power.

ITV welcomed the start of Ofcom's review into advertising airtime rules, but sources close to the group said it did not mean much for the company as long as CRR remained in place. The Commission has already said it does not plan significant changes to CRR, saying ITV "is still in a strong position compared with everyone else".

Not appy: BBC plans put on hold

The BBC will have to delay the launch of its smartphone applications after its governing body decided to scrutinise the plan following objections from rivals.

Erik Huggers, the BBC's director of future media and technology, announced in February that the corporation would launch its news app in April, followed by apps for sports news and the iPlayer, the BBC's online catch-up service. The BBC Trust yesterday said it had written to the executive to put the launch on hold as it would be "carrying out an assessment of their plans". They said the move was prompted by complaints from commercial rivals.

The BBC said it had noted the trust's decision over its apps, which were initially due for release on the iPhone with versions planned for the BlackBerry and devices running Android software.