Three-D Issue 18: Market fundamentalism and new communications regulation

Damian Tambini
London School of Economics

Media regulation is one of those things, like puddings, that the British think they do rather well. This helps explain the spasms of introspection that phone hacking and the failure of press self-regulation have triggered. Might we, after all, have been kidding ourselves? Is something broken in the institutional framework for the British media?

UK communications regulation is up for grabs in 2012: in addition to the Leveson Inquiry picking over the salacious details of the way journalists pick over salacious details, there are at total of 3 parliamentary committee inquiries on the media, an Ofcom Consultation on media plurality and ownership, and a full scale government Green paper, doubtless with more consultation, expected any moment now. With momentum building for a new Communications Act there is a chance to review the whole framework, and in particular the rather tense settlement established by the Enterprise Act as amended by the Communications Act 2003. The latter established a public interest test for media mergers, the procedure which Vince Cable ill-advisedly chose to describe as a battlefield in his ‘war on Murdoch’ last December. Ministers will be keen to avoid such embarrassing spectacles as they propose reforms. Fundamentally the question is how, and to what extent competition should be encouraged to mediate between consumers and media providers – and to what extent regulation for specific consumer protections is necessary. In Britain previously separate frameworks for broadcasting and telecoms were integrated in the 2003 legislation. Could it be that the current policy cycle draws the press into the fold?

We have always relied on intense competition to deliver our robust press. But in telecoms and broadcasting, competition is a relatively new phenomenon. The majority of the population probably made their first phone-calls on handsets and wires that were owned and operated by a nationalised monopoly, and were distracted in their infancy by a closed ecology of 2 or 3 paternalistic, heavily regulated public service TV channels.  In the space of a few decades, television has been opened up to real, competitive commercial pressure and telecommunications has become a complex layered ecology of private services. It is not centralised planning but competitive pressure that we have banked on delivering benefits to consumers. But as we look forward to a new framework, the limits of competition- and competition regulation as our chief intervention – are coming into view.

Media regulation is a game of complex balances, and the globe is littered with the wreckage of failed experiments of media reform. Whilst in some countries such as New Zealand, competition in broadcasting has gone too far and had to be reversed, in most countries the balance is tipped in the favour of the state and at the expense of the public interest communications media. Even where there is a relatively healthy broadcast advertising market and enough channels to deliver competition for audiences as in Russia for example, licences to broadcast tend to be given out to friends of the ruling party in exchange for favourable coverage. There are no independent television news services in Russia or China.   But if state capture of media is the problem for most of the world’s media, the News International saga seems to suggest that the UK has the inverse problem: capture of the state by the media.

This, together with the clear failure of the market and self-regulation to protect press ethics, puts a fresh complexion on the drive for competition in media. Simply proposing more competition to serve consumer interests will not be the mantra of this government. Paradoxically a government arguably more devoted to liberal laissez faire will do more re-regulation than de-regulation of media.

If anything is broken in the institutional framework it is the lazy view that as long as markets are competitive, that is all we need worry about. As the new UK framework is designed, policymakers will have a long list of issues to address, but how about starting here:

  • Networks: all media and telecoms businesses know their future is on a common distribution platform but there is huge doubt about the speed of rollout over the coming decade. In an attempt to address the crippling uncertainty that results, both the last government and this have committed to universal access to rather slow broadband. But there will be growing pressure to deploy the next generation of superfast, super reliable networks. The countries with the most successful rollout such as Australia, South Korea and Singapore, have had highly interventionist government-led policies. With the Government’s regional experiments in fibre optics floundering, what precisely is to be the model of competition to drive investment in the new technology and what is the role for public investment? The research behind current government policy is based on is based on pre-crisis projections of demand and private investment and needs to be revisited.
  • Network neutrality. A techy issue but one that will continue to confound the sector. Should network operators be able to control traffic on their networks, perhaps as a reward for investment in fibre? The Netherlands became the first EU country to pass a law preventing it. Will others follow or should we rely on consumer transparency and competition?
  • Content regulation. Fundamentally should consumers or regulators decide what goes on our screens? If there are market failures, or a general descent into mediocrity, who should be responsible for identifying the problems, and what should they do? In broadcasting the Public Value framework for holding the BBC to account has now been exported all over the European Union. But is this framework the way that society should decide on the overall balance between state, private and other forms of media provider?
  • Media mergers: a consensus is emerging around the need to beef up the Public Interest Test and impose a proper system of continuous market reviews to cover competition and plurality. The Campaign for Media Reform – perhaps the most active voice calling for reform of the competition framework is supported by most of the more serious academics operating in this field and also by the Hacked Off campaign, the group which along with the Guardian newspaper uncovered all this mess in the first place. This group call for reform and strengthening of the public interest test.
  • Support Ofcom and take it off probation. Ofcom’s position in all this as a hybrid, both a competition regulator and a content regulator, has been an uneasy one. The 2003 Act rightly set up the regulator as a way of simplifying and saving money. The government is to be commended for refraining from further eroding regulator independence and should do more to protect the independence of the regulator.

In European terms, the ‘mixed ecology’ of broadcasting is standing up rather well to the storm of digital change. The main threats to the media come from private interest capture on the one hand and state capture on the other. There should be a longer term plan and design for media systems that maintain an appropriate balance between state private and voluntary provision so that we always have a choice between public, private and third sector media, and the different models keep one another honest.

So is something rotten in the centre of the British media? It depends on what you measure it against. From the point of view of an Egypt, or a Russia or China, Britain has the media of dreams. Independent for the most part, and free from direct interference by politicians or other interests, there is now a long established expectation that they will serve the public.

Journalists everywhere – like all centres of power in society – have temptations to become corrupt or captured by other interests. Strengthening choice, pluralism and competition can be a way of ensuring that they do not become too corrupt or complacent, as long as consumers trust the right media. But too much competition, and too much pluralism, can lead to corruption too, particularly as paying news audiences decline: if newspaper readership is too low, journalists may be tempted to accept bribes or find other more palatable ways of blurring the distinction between editorial and advertising. The sad fact is that it is entirely normal to do so in by far the large majority of the world and with the rise of China a genuinely independent media is not the norm but the global exception. Rapid commercialisation of Indian television has led to more than 100 news channels being set up, but quality, independence and ethics remain in question.

Whilst it is important not to exaggerate the extent, it is true that newspaper sales are experiencing a particularly precipitous drop during a gradual long term decline over the past half century in the UK. And broadcasters exist in a world of fragmenting and declining audiences. In this context, regulation will continue to be a complex balancing act.

Mark Fowler, when Chairman of the FCC, the USA’s Ofcom in 1984 described television as ‘a toaster with pictures’. Before readers try inserting bread in their dvd slots, the point he was making was that we should stop being hung up on the democratic and cultural significance of broadcasting and start to treat it like any other product in which consumers are king. In the current context in which television is now part of an interconnected information infrastructure, and the limits of competition are being reached in both networks and content, such a view is hopelessly outdated. Whatever comes out of this next policy cycle, it is the market fundamentalist view that is toast.

This is an extract from an article written for the New Statesman, which was published in a supplement its 30 January 2012 issue. You can read the full article at: 
http://www.newstatesman.com/pdf/20120130regulation.pdf

i Throughout this article I refer to findings of a new series of reports by the Open Society Institute Mapping Digital Media Project which studies media regulation in more than 50 countries around the world.

Posted by Einar Thorsen