Freeview Channels

George Howarth Excerpts

Wednesday 23rd November 2011 Westminster Hall

[Mr George Howarth (Knowsley) (Lab)]

I am last but not least, Mr Streeter. I am grateful for the opportunity to hold this debate. The mechanism for allocating channels is particularly important to the largest private sector company in my constituency, the shopping channel QVC, which employs more than 2,000 people nationwide, the majority of whom are based in Knowsley. Most of QVC’s work force are based in the UK, even though the company could move elsewhere given the nature of its business.

Although it sounds complicated and will involve a lot of acronyms, the issue under discussion is quite straightforward. QVC’s viewing figures and revenue are dependent on viewers being able to find it. As it stands, finding QVC is easy—as long as the channel remains the same—and it has 1.1 million loyal customers and many more viewers. Control of the channel number, however, rests in the hands of an organisation owned by its competitors. Such an arrangement could work with proper forward-facing regulation, but Ofcom does not actively regulate the process of channel allocation.

There have been three attempts to change the channel’s location in recent years, and another is imminent. We know that channel changes can lead to loss of revenue in excess of 35% per home. If Freeview channels were retail premises, it would be the equivalent of allowing major supermarkets to move the location of a smaller competitor at will. The issue, therefore, is about fair competition and appropriate regulation, to allow this thriving industry to create and sustain UK jobs.

[Mary Macleod (Brentford and Isleworth) (Con)]

I declare an interest in the debate because the headquarters of QVC will hopefully move to my constituency in the near future. My constituency is also the home of BSkyB, so I have an additional interest. On this issue, however, it seems that a group of companies is deciding the one thing that gives QVC its only competitive advantage and allows it to grow.

[Mr Howarth]

The hon. Lady made her point effectively and I will support her argument as my speech develops.

I have recently received helpful representations from the Interactive Media in Retail Group—IMRG—and the Electronic Retailing Association—ERA Europe. Both organisations support the case I am making today. The issue has a direct effect on QVC, but there is also a wider effect. Leaving aside QVC’s 1.1 million active customers, independent commercial broadcasters in the UK form a successful and growing sector that employs 22,000 people. Some of those broadcasters are now commercially vulnerable due to the unfair and unclear regulatory situation in respect of the Freeview platform. The allocation of Freeview channels is important to the whole of the independent commercial broadcasting industry.

According to a communications market report by Ofcom, non-public service broadcasters have a 28% share of the audience in UK multi-channel homes. That is a not insignificant number. Research undertaken by Deloitte shows that members of the Commercial Broadcasters Association—COBA—invested £432 million during 2009 in original UK content. Another survey, from 2008, showed that COBA members contributed more than £2.2 billion to the UK economy.

The Government recognise the importance of the sector and are currently undertaking a major review that is likely to lead to a new communications Bill. I welcome the rationale for that legislation, which I understand is to bring the UK’s regulatory regime into the digital age and to ensure a communications infrastructure that supports growth and innovation while protecting the public interest and consumer choice.

COBA told me that

“one of COBA’s fundamental principles is to support light touch regulation that benefits the whole market not just a few players.”

That is why handling the allocation of Freeview channels is so important. It will signal the Government’s intentions on fostering independent dynamic businesses in the communications industry and beyond.

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

My right hon. Friend is making extremely important points. Although I am not particularly familiar with the channel in question, I certainly believe that all regulation should work on the level playing field principle, and in the circumstances he has described, it clearly does not. That underlines a view that I have stated for many years and that I hope the Minister will think about when preparing his broadcasting legislation: Ofcom should have a much broader umbrella, covering all digitised services, so that at least there is a parent body that can deal with anomalies such as the one that my right hon. Friend describes.

[Mr Howarth]

I am grateful to my hon. Friend for that intervention. He is very knowledgeable on these matters, particularly on regulatory issues, wearing his hat as a Select Committee Chair. I hope that the Minister takes seriously the point that he made.

[The Minister for Sport and the Olympics (Hugh Robertson)]

indicated assent.

[Mr Howarth]

The Minister nods; I am pleased about that.

As well as being the largest private sector employer in my constituency, QVC employs more than 500 highly skilled people in Battersea. As the hon. Member for Brentford and Isleworth (Mary Macleod) said, the intention is to move to Chiswick Park in 2012. Therefore, this issue does not affect just my constituency. The objective must be a fair, reasonable and non-discriminatory system for channel allocation, so that independent commercial broadcasters are not unfairly damaged.

[Mike Weatherley (Hove) (Con)]

I thank the right hon. Gentleman for initiating the debate. Could he clarify the situation? Is he saying that the allocation of channels is driven by a commercial enterprise for its own vested interests, rather than being based on viewing figures for the likes of QVC, which may therefore be pushed down the list unfairly, as against those vested interests, in the allocation of the channels?

[Mr Howarth]

I am grateful to the hon. Gentleman. That is exactly the point that I want to make. I will come to it in a moment.

DMOL—Digital Television Multiplex Operators Ltd—which manages the Freeview platform and allocates channels, is owned and run by the public service broadcasters BBC, and ITV and Channel 4, as well as the infrastructure provider Arqiva. As mentioned previously, that is the equivalent of allowing a major retailer to decide where local independent competitors can site their operations.

[Steve Rotheram (Liverpool, Walton) (Lab)]

Further to the intervention by the hon. Member for Brentford and Isleworth (Mary Macleod), is my right hon. Friend aware that ITV recently launched its own shopping channel, which adds more force to the argument about potential unfairness, because DMOL is partly owned by ITV? Does that not call into question what our hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) mentioned—the level playing field?

[Mr Howarth]

Absolutely. I am grateful for that supportive intervention. I understand that not only has ITV moved into that market and put itself in direct competition with QVC and any other shopping provider by those means; it used QVC to pilot the operation of that new service. That adds force to the point that was made earlier.

The national and European trade associations share my concerns. They said in a submission to me:

“Businesses need certainty as well as fair competition. QVC’s business is threatened by the current regulatory uncertainty around channel allocation and we call on the government and on Ofcom, to give some clarity so that UK firms, like QVC,”

can continue to serve their customers and grow their businesses. ERA Europe stated:

“Our members’ future business in the UK is under threat from an uncertain regulatory environment regarding channel allocation on the Freeview platform and we urge the UK government and Ofcom to be more transparent in this most important area.”

At the heart of the issue is the ability of the dominant players to allocate valuable channel numbers to commercial competitors without independent adjudication and due process. QVC is currently positioned on Channel 16 on Freeview. I note that my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) said that he does not use QVC. If he takes the trouble to tune in to Channel 16, he might find some very useful bargains, but I will leave that up to him. He should remember that when he does so, he will be supporting jobs in Knowsley.

The issue is very important. Ofcom said in relation to DMOL that

“any regulatory issues would require consideration under the relevant multiplex licences. Pursuant to the Communications Act its activities are also subject to Ofcom’s concurrent competition law powers under the Competition Act 1998.”—[Official Report, 14 November 2011; Vol. 535, c. 497W.]

That quote is from a parliamentary written answer from the Minister.

Ofcom was in contact with me directly ahead of the debate. Its briefing sheds more light on the situation. It confirms:

“The multiplex operators are subject to regulatory requirements set out in the relevant multiplex licences, which include provisions to ensure fair and effective competition. Ofcom’s formal role in relation to DMOL’s listing policy is to”

consider “compatibility with our code” on electronic programme guides

“and consider complaints from interested parties (including DTT”—

digital terrestrial television—

“licensees such as QVC). Pursuant to the Communications Act, DMOL’s activities are also subject to Ofcom’s concurrent competition law powers under the Competition Act 1998.”

The problem is that those regulatory powers are in practice retrospective. They can apply only after the channel changes have been determined.

In relation to the electronic programme guide code, Ofcom informed me that it

“has considered from time to time whether it would be appropriate to review the Code, but has concluded on each occasion that there was no pressing need to do so. It is likely that there will be communications legislation within the next few years, and the government has indicated that it is minded to look at EPG regulation in this context. We would need to take this into account in considering the appropriate timing for any review of the Code…On behalf of multiplex operators, DMOL has initiated a detailed review of the DTT listings policies, including the criteria for how different types of channels should be listed in the EPG. It has completed a first round of consultation, and identified the need for a further consultation early next year, following detailed research it has commissioned into the views of consumers.”

Given the likely threat to jobs faced by QVC workers, the statement about there being “no pressing need” is of some concern. Saying that the regulation falls within individual multiplex licences overlooks the fact that with the exception of the utility Arqiva, the multiplex operators are also dominant channel operators and indirect competitors of independent broadcasters.

Fortunately, there is an easy to implement solution, which I am sure that the Minister will be happy to hear. DMOL should be regulated in the same way as any other broadcast television platform. For example, the equivalent operation at BSkyB, to which the hon. Member for Brentford and Isleworth referred and which reaches fewer homes, has been regulated since the late 1990s.

That is not an argument for special treatment, merely one for a level playing field, as my hon. Friend the Member for Ellesmere Port and Neston put it, so that independent broadcasters can compete fairly with all channels, including the public service broadcasters. I accept that public service channels should have special prominence with preferential channel numbers, but the current policy and practice for allocating logical channel numbers on Freeview unfairly disadvantages independent commercial broadcasters and disproportionately benefits the channels operated by DMOL shareholders.

We all want to ensure that the UK broadcast market remains dynamic and successful. Channel allocation on Freeview is about economic fairness, business certainty, jobs, encouragement of investment and legal principle. It is also about the importance of a broad and diverse UK television market.

In conclusion, I ask the Minister to consider carefully the full implications of the current DMOL channel allocation system and its lack of transparency. I am sure that with good will and an understanding of the problem, the Government and Ofcom will between them be able to resolve the situation. In practice, that means asking Ofcom to ensure that DMOL is regulated in the same way as other platforms.

--- Later in debate ---

[Hugh Robertson]

Absolutely. While the Government intend for the local television channel to be channel 8 in England and Northern Ireland, we are looking at what the appropriate channel is in Wales and Scotland, given exactly the issue that my hon. Friend has raised.

The right hon. Member for Knowsley is particularly concerned to see that Ofcom’s code requires that other, non-PSB channels are treated on a fair, reasonable and non-discriminatory basis. To guard against platform operators such as Freeview misusing their power in relation to broadcasters, Ofcom has the power to investigate potential breaches of competition law in the communications sector, such as exclusionary agreements and the abuse of a dominant position.

In summary, the listing of channels within EPGs is determined by individual platforms, exactly as the right hon. Gentleman said, such as Freeview, Sky, Virgin and Freesat, within the restrictions of Ofcom’s code and powers. It is not for the Government or Ofcom to specify exactly where every channel should be listed. It is important to note that anyone, including the broadcasters themselves, who is unhappy with how a platform operator has applied the EPG code has recourse to raise that with Ofcom as the appropriate regulator.

[Mr George Howarth]

I am grateful for the helpful way the Minister is responding to the debate. I would like to emphasise that the existing powers are retrospective, and that still creates uncertainty. I hope that he will feel able to address that aspect together with Ofcom.

[Hugh Robertson]

rose—