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Digital, Interactive and Web TV

Controversy 2001

• July 2001: European Commission investigates BSkyB for suspected anti-competitive behaviour.
  • Following complaints from rival ITV Digital, the EC is investigating the 1998 agreement between BSkyB and the Discovery and Disney that prohibited both these companies from offering their channels to ITV Digital. Currently Sky and Discovery channels are being shown on ITV Digital but the Disney exclusion runs until 2006. The agreement did not prohibit the channels being offered to the cable networks though they are obliged to also take these channels with 2 movie channels as well. BSkyB is also being investigated by the UK's Office of Fair Trading (OFT) for possibly abusing its dominant position in respect to how easy it is for customers to switch suppliers.
• June 2001: Year 2003 likely to be a battle ground for Media and the Euro with Murdoch a key figure.
  • Legislation was expected to be placed before the 2001-2 session of Parliament for a new Communications Bill that would relax the controls on cross media ownership. This is something Rupert Murdoch, owner of News Corp that owns BSkyB, is known to want. But the election change all that so it will be at least 2002-3 before the bill is presented and enacted. In the same year the country is likely to have a referendum on the Euro and the mass market media will have a crucial role to play in convincing the country to accept the currency. In particular the Sun with its 11m readership and the News of the World, The Times and the Sunday Times are bound to influence many people and these titles are owned by News Corp.
  • Rupert Murdoch, who is Australian, is a frequent visitor to the Prime Minister and many have commentated that he seems to have much influence.
• June 2001: BT slow to open exchanges to broadband rivals. Critics call for local loop unbundling.
  • From 1 July 2001 BT is obliged to open its local exchanges to competitors who can then offer ADSL broadband services. In return, BT will be free to offer interactive services such as video-on-demand. With a week before the deadline only 109 ADSL broadband lines had been installed by BT's competitors in the whole of the UK!
  • Competitors wanting access to the local exchanges found BT imposing all sorts of barriers. The first available exchanges were in rather remote areas. Then BT said it would have to build secure areas before other companies could have access to the exchange, or that the companies would need to build their own premises next to BT exchanges. Finally, BT charged the companies a £600 connection and £60 per month per line. Costs the companies need to recoup from customers in either rental or e-commerce.
  • Critics said that BT was holding the country back from the information revolution. The cited Deutsche telekom who had installed 500,000 broadband connections. They called for BT's local loop to be unbundled from the rest of the network.
• June 2001: 'Eyebrows raised' as deputy chair of Competition Commission is appointed to Telewest board.
  • Denise Kingsmill, who is deputy chair of the Competition Commission, was appointed as a non-executive director of Telewest. Given the pressures for consolidation in telecommunications, internet and television, then it is very likely that at some time in the future the Competition Commission could well be investigating a merger proposal or business initiative of Telewest.
  • Currently BSkyB (a Telewest rival) is being investigated by the Office of Fair Trading (OFT) for possibly abusing its dominent position. The OFT can refer matters to the Competition Commission. Last year Denise Kingsmill chaired the inquiry into NTL's (Telewest's main rival) takeover of Cable and Wireless, where she was criticised because she sought opinion from several national newspapers, Many of them owned by media barons who are competitors to NTL. Also last year the Competition Commission advised against a merger of any 2 of the major ITV franchises. A Competition Commission spokesperson was reported as saying it wasn't such an issue as Denise Kingsmill is only part time at the Commission.
• June 2001: Head of ITV calls for level playing field for promotion of digital TV.
  • Television companies are of course allowed to freely promote their other channels. It happens all the time on the BBC. Originally it was just the 2 analogue channels BBC1 and BBC2 but now the BBC is promoting its 2 digital channels BBC Choice and BBC Knowledge (soon to been renamed BBC3 and BBC4). And if the BBC gets its way, it will have a Childrens' channel on digital as well.
  • However, for the commercial independent television (ITV) companies they are separate legal entities and have no other channels other than digital ITV2. From 17 separate companies the ITV network is now reduced to 2 major companies: Carlton Communications and Granada Media. These 2 companies have a joint 50-50 stake in ITV Digital, the ITV digital company. But because ITV Digital is subscription based and an independent company then ITV is not allowed to cross promote it on its analogue channels. On course, ITV Digital could pay to advertise on ITV but the company is not expected to break even for some years to come.
  • Stuart Prebble, the new head of ITV, believes this restriction should be relaxed so that take up of digital TV can be accelerated. The Government could then sell off the analogue frequencies earlier. And anyway, it is argued, everyone knows it is just a matter of time before the two companies merge and then they will be free to incorporate ITV Digital and freely promote it. It is doubtful, however if BSkyB, the cable companies and Channels 4 and 5 would go along with this argument! But they do argue that the BBC is unfairly using public money (the licence fee) to set up additional channels that complete against themselves.
  • In August 2001 were putting together a request for a judicial review of the government's expected permission for BBC to launch 2 new digital channels. The BBC has an obligation not to replicate any existing commercial channels.
• June 2001: Carlton's chief executive rebukes Granada's Chairman for scaremongering.
  • In a letter leaked to the press, Granada Media's Chairman Charles Allen wrote to the Prime Minister Tony Blair asking that legislation be passed to allow the 2 remaining independent television companies to merge. Currently there is talk about legislation in 2003 that would allow such a merger, However, Allen believes that to wait that long risks being acquired by a foreign company - almost certainly a reference to Rupert Murdoch's New Corp or its subsidiary BSkyB. With the downturn in advertising revenue, partly due to hiking up prices, partly due to the telecoms recession and also due to losing audience share, the share price is depressed. Allen also said that prospective purchases would have no interest in continuing to invest in the loss making ITV Digital, a joint 50-50 venture with the other ITV company Carlton Communication.
  • Carlton Communication's chief executive Gerry Murphy issued a rebuttal, saying "hysterical scaremongering is really not helpful". Murphy also said that a few months delay in the Communications Bill was neither here nor there. He also reminded Granada that lasts year's review by the Competition Commission had ruled out the two companies merging. See Biggest Shake up in ITV History. Murphy did urge the Government to set a specific date for the analogue switch-off.
• April 2001: US Regulators relax same media ownership rules and to review cross media rules.
  • With a change of Administration from Clinton's Democrats to Bush's Republicans, the US Regulators, Federal Communications Commission (FCC) began to relax the cross media ownership rules.  The previous rule that a single [terrestrial] TV company could not own 2 or more television stations was relaxed. However, some restrictions still remain: none of the big 4 (ABC, CBS, NBC or Fox) can merge, and neither can a company own two stations in the same geographic area. The rules were relaxed due to the additional choice provided via cable and satellite.
  • Other rules remain but will be reviewed. One rule bars a TV company from owning a newspaper in the New York market. However, previously the FCC has made an exception and allowed Murdoch's News Corp to "rescue" the New York Post even though owning a local TV station. Now Murdoch wants the FCC to allow News Corp to acquire the Chris-Craft company that owns 10 TV stations including one in the New York market area. Another rule limits television groups from reaching more than 35% of the population.
  • Critics are concerned that major companies will dominate the media and inhibit diversity of opinion and free speech. For example, Murdoch's media companies have a reputation for not criticising their owner or the companies in the News Corp group.
  • In July 2001, News Corp announced that the FCC will allow it to acquire Chris-Craft without the need, for at least 2 years, to divest either the New York Post or one of its 2 New York television stations. News Corp will pay $5.35bn (£3.8bn) for Chris-Craft.
• April 2001: Former Channel 5 boss attacks Channel 4's excesses and then retracts.
  • David Elstein, the former chief executive of Channel 5, was reported to have said in an address to the Royal Television Society's dinner that Channel 4 was a "runaway train", bloated with staff and paying excess wages and perks. Channel 4 was set up by the government but run as a commercial channel. Elstein thought the company should return profits to the Treasury for investment in schools, hospitals and the arts. Channel 4 executives were present at the dinner and the company's financial results were due to be published a few days later. Next day Elstein was keen to make up and tried to block publication of the actual speech, instead issuing a revised edited version. Channel 4 said they produced much better quality than Channel 5. Channel 5 has gained a reputation for broadcasting tacky programmes and soft-porn.
• April 2001: Dyke again courts controversy over share holdings.
  • Not for the first time has the BBC's Director General evoked controversy over his investments. This time it is due to his £1m investment in the Ambassador Theatre Group (ATG). Carlton Communications, a major ITV broadcaster and therefore competitor to the BBC, has a stake in ATG and the company is producing stage shows for the company. Political figures said there was a potential conflict of interest and others said that people might have the wrong perception. The BBC said the shareholding had been disclosed, it only amounted to 3.67%, that Dyke was a passive investor, and that Carlton had made its investment only that week. It was also disclosed that another BBC executive also has a small £50,000 stake in ATG and that he is a non executive director.
• March 2000: Will all consumers switch to digital by 2010?
  • As soon as 99.4% can receive digital TV and when 95% of the population actually switches, then the analogue system will be closed and the government can auction off the spectrum. It expects this to be achieved sometime between 2006 and 2010. However, a third of consumers say they have no intention of moving to digital. Some are quite content with the programmes on offer from the existing analogue stations, and others say the move will be costly believing that they would have to sign-up to a subscription service. The digital providers have been accused of not mentioning the fact that the free-to-air channels are also available on digital (though consumers will need to buy their own set-top box for about £200), but instead pushing their multi-channel subscription services. These cost from £10 to £40 per month. Another factor is the scarcity and expense of televisions with integrated digital tuners. These are an alternative to the set-top box but cost an additional £300 or so over an analogue TV. Meanwhile, millions of analogue TVs continue to be purchased each year.
  • Another problem is in rural areas. Cable is only viable in towns and cities. Telephony broadband such as ADSL only works up to 5km from an exchange, its very expensive (£40 per month), only runs at 512K/s, and BT is dragging its feet upgrading its exchanges. Wide availability of the very high speed (Mb/s) needed for video is many years off. Satellite can reach but requires a dish and a set-top box and currently does not broadcast the free-to-air ITV channels. Finally terrestrial is suffering from poor signal coverage. The government is trying to persuade digital terrestrial broadcasters (BBC and ITVdigital) to increase the power of its transmitters even at the expense of reducing the power of the analogue signal.
  • See previous controversy in September 1999.
• February 2000: BBC to show advertising on new BBCNews.com
  • The BBC News intends to launch an advertising based internet site called BBCNews.com that would be a competitor to ITN, Reuters, and other UK news sites. Critics complained that whereas other news sites are supported by advertising the BBC one may be subsidised by the licence fee and could therefore have lower advertising rates. The BBC does have a stand-alone commercial arm, BBC Worldwide but that is not associated with this new web site. The British Internet Publishers Alliance (Bipa) thought that BBCNews.com may well get free news feeds from BBC News. One Labour MP thought the web site should be under the control of proposed new regulatory body Ofcom.
• January 2001: Broadband internet may usurp sport television broadcasting.
  • Sport broadcasting rights are often set for a period of 5 to 10 years ahead but in that time broadband internet technology may well be developed to broadcast quality television pictures. For example, the TV rights for the next two Olympic Games have already been sold. Whilst the TV rights that are now coming up for renewal will specifically include or exclude internet rights, many of the old agreements make no references to internet broadcasting. Should the sporting bodies automatically include internet broadcasting rights or should they auction them separately and thereby upset the companies with the TV rights? Many believe that there will be potentially large audiences for internet broadcasting. Events in other time zones are suitable for delayed downloading at a later time and events with minor teams are unlikely to be broadcast on prime time television or even minor cable channels.
• January 2001: Is ITV subsidising ITN? BSkyB bids to replace ITN.
  • In 2001 ITN faces a major challenge when it has to bid to renewal its £42m contract to supply news programmes to ITV from the end of 2002. The ITV contract accounts for 40% of ITN's turnover. Some think that the company will collapse if it fails to win even though the company has diversified into providing news to mobile phone and commercial [radio?] stations. On the other hand, with 40% of ITN owned by 2 of the major ITV companies (Carlton Communications and Granada Media) would they vote for something that will ultimately hurt their own pocket? Some think that the auction is a way to get ITN to cut its costs and to look elsewhere for revenues. For whilst ITV pays £42m, Channel 4 pays £17m and Channel 5 pays just £3.5m. Channel 5 originally paid £10m but it was reduced by over half when the channel received a much lower quote from BSkyB. Long term, with a consolidated ITV, it may be sensible for ITV to completely take over ITN. In fact for sometime there was talk by the ITV companies of floating ITN but now that the companies have consolidated to where Carlton and Granada own most of the franchises, they are lobbying to take full control of ITN. At the moment no company may hold more than 20% of ITN. The other owners are United Business Media (formally United News and Media), Reuters and the Daily Mail & General Trust.
  • Meanwhile, the Channel 3 News consortium led by BSkyB along with the US news group CBS, Bloomberg, Chrysalis Group and Ulster TV will be bidding so they must believe its a real auction with a real chance. In July it was reported that Channel 3 News was reported to be bidding at 25% lower than ITN's current fee. The report also suggested that Carlton and Granada, as the major users of ITV news, would be better off with the contract going to another party even though they each own 20% of ITN. ITN could then be sold off to say a European media company keen to have a UK licence and the company's archive that dates back to 1897. Reports suggested Channel 3 News would bid £31m against ITN's current fee of £42m and expected bid of £36m.
  • In August 2001, ITN filed a complaint with the Office of Fair Trading (OFT) against BSkyB and its 24 News channel. The OFT is already investigating the fees BSkyB charges rival channels for access to its network, access it is obliged to provide under the terms of its licence.
• January 2001: Bertelsmann hits same EC problems as EMI
  • After the European Commission competition authorities (EC) refused to allow the EMI - Time Warner merger, some thought Bertelsmann would be a better suitor for EMI, but together they would control 25% of the global music market - hardly any less than the EMI-Time Warner proposal. But many agree that on its own EMI is too small for the world stage. By November it was official: Bertelsmann had approached the company with a view merger. Meanwhile the rest of the music industry is fuming because Bertelsmann made a deal with Napster, the internet service that allows surfers to swap music for free. Co-incidentally 2 senior executives resigned from the company. Bertelsmann said it would introduce a subscription fee for Napster users but many thought that this was unachievable.
  • By January 2001 it was clear that the EC had equal misgivings about the scale and dominance of an EMI - Bertelsmann merger and would require any merged company to dispose of some of their assets.

Back Up to Controversy Contents

JS

External Resources

1. See the Controversy Content page for a list of resources prior to 30 July 2000
2. Garrett, Jade, 2001, Elstein in attack on 'runaway' C4 finances, The Independent, 28 April 2001.
3. Goodman, Matthew, 2001, Sports tackle internet rights, Sunday Business, 28 January 2001.
4. Hayes, Dawn, 2001, ITN float could be revived, Sunday Business, 29 July 2001.
5. Hughes, Duncan, 2001, Murdoch to gain from change in FCC rules, Sunday Business, 22 April 2001.
6. McIntosh, Bill, 2001, Granada's call for a single ITV prompts fresh rift with Carlton, The Independent, 26 June 2001.
7. McIntosh, Bill, 2001, Carlton calls for deadline to switch of analogue, The Independent, 28 June 2001.
8. McIntosh, Bill, 2001, 'Eyebrows raised' at Kingsmill's appointment to Telewest board, The Independent, 21 June 2001.
9. Porter, Andrew, 2001, Legal threat to BC digital, Sunday Business, 12 August 2001.
10. Prebble, Stuart, 2001, A revolution still waiting to happen, The Independent, 26 June 2001.
11. Rees, Jon, 2001, Granada and Carlton seek ITN buyout, Sunday Business, 17 June 2001.
12. Rees, Jon, & Porter, Andrew, 2001, EC probes BSkyB contracts, Sunday Business, 22 July 2001.
13. Rees, Jon, 2001, D-day nears for ITV news bids, Sunday Business, 2 September 2001.
14. Robins, Jane, 2001, How Sky could fall in on ITN, The Independent, 30 January 2001.
15. Simmons, Lisa, 2001, BBC's shaky start to an international adventure, The Independent, 5 February 2001.
16. See the full list of resources for this web site for other related resources.

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