Shaping the future of television

Raymond Snoddy asks the men from Ofcom why they think their first year has been a success. They reveal their views on public-service programmes, digital, broadband - and more

Ofcom, the communications regulator, is very pleased with itself at the moment. After the first year of the new era of converged regulation, its chairman, Lord Currie, and his chief executive, Stephen Carter, are happy to survey what they have created and pronounce it good.

Their sense of satisfaction runs from the review of public-service broadcasting to the introduction of charging for the radio spectrum and the creation of a new framework for telecommunications regulation.

"I would be lying if I didn't say we were pleased with what we have done there," says Carter, who finally assumed his extensive powers from the "legacy" regulatory bodies on December 29, 2003. But there is much more to be pleased about than a mere three triumphs.

"What the concentration on those three things misses is all the day- to-day work that goes on," explains Carter. Other things that went well include the "contracts rights renewal scheme" for the ITV merger, pilloried at the time but now seen as a success, and the new terms of trade for independent producers. Then, lest anyone forget, there were also the price reductions on data streaming and local-loop unbundling (which lets other players compete with BT), quite apart from call-termination pricing.

Lord Currie is in complete agreement with his chief executive in this judgement on Ofcom's achievement, and adds a few positives of his own.

"The first high spot is the things that haven't happened. Things have generally gone well. We haven't fallen over on any of the operational plumbing things, and I think we made a big impact in terms of policy development," his lordship purrs.

But surely there must be something that Ofcom could have done differently or better? The question causes difficulty and there is a pause and an intake of breath before Lord Currie manages to come up with something.

"I suppose the issue we did have some slight difficulty with was when we put out the public-interest test for media mergers. We did not prepare the ground well for that," the Ofcom chairman concedes. Indeed they didn't, and newspaper groups were outraged at the extensive range of information that Ofcom proposed to require in the event of any newspaper merger, however small. As a result, Ofcom, which was supposed to be providing lighter regulation than before, was accused of blundering about in a more heavy-handed way than even the derided legacy regulators.

"The newspaper industry reacted and we managed it subsequently. We didn't change our minds. Consultation you might call it - responding to consultation," explains Lord Currie.

In fact, Ofcom decided in the light of widespread anger that smaller newspaper groups would be spared some of the burden of submitting detailed information. The regulator insisted it was mainly making explicit and transparent requirements that had existed for years.

What about the annoyance caused, particularly to local politicians, by Ofcom's decision to reduce the obligation on ITV to produce non-news regional programmes?

"I am disappointed if people are disappointed in our approach to ITV," says Carter, looking momentarily hurt before launching into the remorseless logic that lay behind the decision. Ofcom, he explains, is trying to create a model for the future of broadcasting. Over the next five or seven years, he believes, the big picture will be about fragmentation of audiences and the drive to digital.

"Our ability to impose costly regulatory obligations on ITV is only going in one direction," Carter concludes, in agreement with ITV executives.

The Ofcom chief executive is prepared to entertain a chink of a doubt on "how far and how fast" the changes are travelling, and naturally there is a consultation about it.

Despite the easing of regional obligations, and redundancies that have flowed with almost indecent haste, it would be wrong to conclude that Ofcom will be an easy touch when faced with free market forces. Instead the approach has been to say: "here are the facts and this is what the regulator values about ITV's contribution".

"We value news, regional news, originated high quality drama, originated production and we are prepared to intervene on all of those issues and, indeed, intervene more significantly," Carter promises. In return, Ofcom is prepared to lay off on programme genres that the public appear not to value greatly, such as non-news regional programmes. Of course, ITV is perfectly free to change its mind and make as many of these programmes as it wants to.

But Ofcom's big thoughts go further and deeper than regional ITV programmes, and include the effects of switching the entire UK over to digital television - a process the regulator believes can be completed by 2012 as long as essential decisions are taken this year.

"In 2005 decisions have to be made. You have to see Switchco (a company designed to drive the analogue switch-off) come into the full light of day and you need to resolve the funding questions," the Ofcom chief executive warns. He also believes there is a need to have clarity on the schedule of the proposed region by region roll-out of digital services.

For Lord Currie, the interesting question is what happens to public-service broadcasting once you start heading towards the analogue switch-off in the years following 2010.

"People value the public-service content of what they see on television. They recognise it and are prepared to pay a bit more than the licence fee to get the range of public-service broadcasting," Lord Currie explains.

But what do you do in future when at least some of the current programmes on offer start to unwind? You could ask the BBC to do more, but surely competition is desirable. Channel 4 might fit the bill, but because it is funded by advertising some of its richer public-service programmes could eventually be forced to the margins of the schedule, Ofcom fears.

And then again, by 2012 between 10 and 12 million UK homes could have high-capacity broadband connections capable of carrying video, which could lead to a collision between broadband and broadcast - so what about putting public-service content on other forms of distribution?

So it was that by a mixture of deduction and imagination Ofcom came up with the idea of a Public Service Publisher - a body that need not be an incumbent broadcaster but would have around £300 million a year to spend on public-service programmes that otherwise might not be made in this new world.

Ofcom is very pleased at where its deduction and imagination have led it, although eyebrows have certainly been raised elsewhere.

"This collision between broadband and broadcast... we want to encourage the thought that there will be many players in the space and we wanted people to think around these issues rather than simply taking the current architecture as given," the Ofcom chairman says.

Whatever the ultimate verdict on Ofcom's first year, no one can fault its work rate. More than 20 major consultations have been launched as well as many dozen smaller ones, and vast quantities of information have been assembled about the UK's communication industries.

In little more than week before Christmas Ofcom produced a blueprint for the future of commercial radio that suggested boosts for digital radio and less intrusive regulation for existing and local stations; awarded new radio licences for Edinburgh and Blackburn; and played its part in the Ofcom/Office of Fair Trading decision to clear the £700 million merger of GWR and Capital.

This year there is also the option that Ofcom could take on even more work, by getting its hands on some more of the responsibilities for the regulation of the BBC.

Lord Currie is also patently pleased that such prodigious effort has been combined with a five per cent fall in costs in cash terms, with a further five per cent reduction targeted for this year. By comparison, between 2000 and 2003, he notes pointedly, the costs of the legacy regulators went up by eight per cent a year.

The two men from the regulator are happiest of all about one of their more obscure achievements - the launch last month of the first trading in the spectrum that all broadcasters must use to carry their signal - a move away from the command-and-control economy which has governed the use of the spectrum for 100 years.

"It's the least commented-on thing, but the move to a market system for the spectrum could be the really radical bit of what we've done," says the very pleased Stephen Carter.