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Steve Hewlett:

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It’s frequently said that British Television is partly as good as it is because of the miracle of enlightened public intervention and regulation. Actually, you can look at the ITV story as precisely the opposite, and not perhaps for the reasons that are immediately obvious.

The fact is that ITV was prevented from consolidating for a very long time which has resulted in ITV being in commercial terms a much weaker company than it otherwise could have been. At a time when multi-channel television was arriving first analogue and then digital and when ITV was facing more competition for its advertising pounds than it ever had before and when the global market place was changing, ITV was hobbled by an ownership structure that reflected the unwillingness of regulators to let it consolidate.

As it happens you can fairly look at local news, and ITV has a starring role in local news, as a casualty of that failure. This is purely hypothetical of course, but had consolidation been allowed at a much earlier stage at a network level then it would have been possible to extract very significant concessions in terms of regional and local conditions which I think would have stood the test of time.

The ITV story is of progressive but slow consolidation. As ITV consolidated regional programming and regional and local news came to be seen by a London based company as a cost, no amount of argument about how valuable this programming might be in commercial terms was ever put. So the direction of travel at ITV has been against regional or local for a very long time in direct proportion to the degree to which it has consolidated.

The value of the spectrum that ITV occupies is declining as we get closer to digital switchover and analogue switch off. As the TV market gets more competitive and as the underlying spectrum ITV occupies becomes less valuable ITV have sought relaxation of all of its public service obligations. Which over time have been granted.

That’s the context for the emergence of the IFNC idea. So you have an ITV that has its corporate face absolutely set against regional and local, that sees it as a cost to be reduced at all costs. That sees it as a license obligation that is beyond the scope of the benefits.

The origins of the IFNC idea are not entirely clear. Ofcom have claimed credit for it and I’ve seen it in some early Ofcom thinking, but it really took off when Michael Grade, the last Executive Chairman for ITV, addressed a meeting a couple of years ago and said ‘tell you what we’ll give you the slots but you will pay’, that’s us, ‘to put the news programs in there’. At that point the IFNC idea really started to gain some traction.

On the face of it the idea is really attractive. First of all if you allow cross media ownership to happen at a local level then it begins to get to the problems with convergence. It also offered the real prospect that local and regional news and information programming might be made by people who really wanted to do local news and information programming. The other great advantage is that it is on button three, and the great advantage of being on button three is that ITV has unrivaled regional impact. No one has got anything like it. In some cases not even the BBC has anything like it. So if you want news that’s not the BBC, or rather in addition to what the BBC provides, if that’s a democratic imperative, and it seems to me it is obviously so, than there’s no better place than ITV.

So is it going to happen? The first question is how is it going to be paid for? Ofcom are always keen that it should be paid for by some part of the license fee that currently goes to the BBC. The pilots if they happen at all are due to be paid for from the so-called digital switchover surplus, that is money that’s in the current license fee that is over and above the current requirements for helping older people switch to digital. So there is money there for now. In the long-term Ofcom’s view was that it would be paid for out of that portion of the license fee currently allotted to digital switchover costs which would be rolled forward in subsequent licenses. There are lots of questions that come with that. But there was always another option which is that the IFNC’s are commercially sustainable. That is provided you were able to use your spot on ITV to market and launch your new multi-media and cross platform local news operation, which could be non-profit, it could be commercial, it could be a mixture, it could be local groups, it could be you name it. The point is if you were able to use your position on ITV to build a new local brand that brings commercial possibilities. The second thing is if you were able to sell airtime, imagine that. And estimates have put the amount that could be generated somewhere between £30 and £40 million a year. Which at the cost levels these organizations would work at is possibly enough to sustain them. Secondly, you do the thing regulators always dream of which is breaking up ITV’s monopoly.

ITV have now foreseen what this could mean and have changed their mind. The new regime at ITV have decided that they don’t want to get to the end of this current license at 2013 and find themselves stuffed up by having all of these things hanging around their necks for the foreseeable future. They want to get to 2013 with the option of a completely clean break. So what that means is that ITV are now moving against the idea, although it’s tricky for them because they promoted it for so long. They have lots of capacity to stuff it up in contract negotiations that won’t happen until the leading bidders are decided. Secondly the Tories are saying if the contracts are signed they will do their best to undo them. So ITV now see these things as a potential risk to their business. They don’t want people on their end trying to promote their own brands. They are petrified of anybody else selling the air time to advertisers. So ITV are now quite likely to say, my guess is ‘tell you what we’ll keep doing things for awhile’. This won’t solve the problem post-2013.

So would IFNC’s be a good idea? Yes. Is it exciting? Fantastically exciting, really the best thing to come out of the broadcasting regulatory soup for absolutely ages. Will it happen? Certainly not.