State meddling in the media is bad for us all
The following piece written by Martin Le Jeune and Russ Taylor appeared in the Financial Times on the 17th January 2007
http://www.ft.com/cms/s/0/91df1b7a-c451-11dc-a474-0000779fd2ac.html
Thursday’s media industry gathering, the Oxford Media Convention, is subtitled “Communications – the next decade”. There will be much talk of convergence and consumer power. There may even be a cameo role for the free market. But there should also be concern that the next 10 years may not be that great unless the UK government and its regulator, Ofcom, mend their increasingly interventionist ways.
The UK creative industries, broadly defined, are economically significant. They are estimated by the culture department to contribute 1.8m jobs and be worth £56bn – about 8 per cent of UK gross value added, which measures the sector’s contribution to the economy. James Purnell, its secretary of state, has assembled a media convergence think-tank to advise him on how to continue this success. Encouragingly, its first theme is “free markets” (the other two are much less positive).
Both the Communications Act of 2003 and the super-regulator it created in Ofcom at least purported to be deregulatory in intent. Ofcom has made much since of its “bias against intervention” and its evidence-based policymaking.
In its early years Ofcom lived up to its principles – at least some of the time. Its telecommunications team inherited the free-market approach of its predecessor, Oftel, and opened the door to stiffer competition than BT had expected or wanted. The record in broadcasting has been much less positive. Here, where there are powerful and politically savvy vested interests and a tradition of state intervention, Ofcom has had a much less happy record: competition has taken a back seat to management by regulation.
Last year, battered by ferocious lobbying from public service broadcasters (BBC, ITV, Channel 4) to be given additional radio spectrum to transmit high-definition services, Ofcom and the department could see them off only by refashioning the whole of Freeview (the UK’s digital terrestrial platform) to find some more room for its greedy clients. The solution did at least preserve the principle of a free-market auction for the rest of the newly available spectrum, but at a policy price.
Nor is Ofcom consistent. Having announced in 2006 that it would permit pay-television services on the same terrestrial platform (a welcome deregulatory move), it has responded to BSkyB’s proposal to take up that option with an extended comedy of foot-dragging and legalism. It is difficult to escape the conclusion that this has more to do with who was doing the applying than with genuine regulatory concerns.
Worse still is Ofcom’s decision to push ahead with what it calls a “public service publisher ”. It will use millions of taxpayers’ money to fund new media ideas delivering content of so-called “public value”. The initiative has been singled out by an influential committee of MPs as wasteful. Given the low barriers to entry in the new media world, and the abundance of public value already available, the PSP is almost magnificent in its pointlessness.
These examples reveal a subtle but potentially damaging shift in Ofcom’s mind away from the proper justifications for intervention in media markets – the scarcity of analogue radio spectrum and market failure – towards a desire to maintain control of the fast-moving converged media world by pre-emptive action. In effect, it is the replacement of a bias against intervention with activist social/cultural regulation on the European model.
The freedom of choice that the media now offer is certainly frightening to a tidy-minded regulator, which will never be able to keep up with it – even though consumers seem much more relaxed. It is, of course, even more terrifying to a media establishment that has grown comfortable with nearly 80 years of state intervention and support in the UK and has no wish for it to end.
To be fair, Ofcom is hardly helped by a government too fond of talking about free markets then hindering them with well-intentioned meddling. Political pressure compelled the regulator to impose restrictions on food and drink advertising to children in 2007, which has achieved nothing except for possibly en- dangering good quality children’s television. A new government inquiry into the internet and video games led by a children’s expert (the Byron review) is now under way. It will presumably come up with recommendations to control or ban this or that; such inquiries always do. This is regulation led by pressure group and tabloid newspaper.
It is not too late to make a fresh start. Ofcom could remember its own principles and return to its early deregulatory best; it could recognise that it should tackle real harm, not manage the market; and the government might make a resolution to step back and let creative industries get on with generating wealth. Those ought to be the main themes at Oxford on Thursday.