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Lord Carter of Barnes, Minister for Communications, Technology and Broadcasting (jointly with DCMS)
1 Wimpole Street, London, 28 November 2008
It’s a great pleasure to be back here at the Westminster Forum, and as someone once said, it’s great to see so many old faces, some new faces and a few new faces on some old faces.
This is, apart from a speech I gave last night in the House on default retirement ages, which given the state of the current markets, is looking like a further out reality than a near term reality, this is the first public engagement for me for this year. And I think I probably have to start by managing expectations a little – see you all look better already – managing expectations a little in that we are likely to publish the Interim Report at the end of this month, and therefore I am afraid I am somewhat limited in what I am going to be able to say today because Government clearance processes, quite appropriately, require me to exercise some caution. So I apologise in advance for those of you who are expecting a full reveal of what we are going to say at the end of the month. For that you will have to wait.
But it is, I think, an opportunity to talk in brief about why we are doing the Report and some of the key aspects of it.
When the Prime Minister asked me to take on this role of converged Minister last autumn and we announced the Digital Britain project, there were some voices, some who may even be here today, who rather cynically observed that this was just another Government Review, and indeed there were some other voices who said some considerably less pleasant things than that, and I would say, over the last three or four months it has become clearer to all concerned that the importance around this sector has never been clearer. Some of that, it has to be said, is thrown into sharp relief by contrast, as we see those sectors of the economy that have been powerhouse sectors of the British economy for the last 10 to 15 years, facing significant challenges. It is not surprising that Government looks to other areas of the economy to see where a growth story and future revenues may come from.
But let me start, I think, by giving you a few headline statistics, which I think are a useful sectoral backdrop, and I thought I would start with advertising. I have an unashamed soft spot for the creative industries, and a particular one for the advertising business for a number of reasons:
But I asked, yesterday, my officials to look at the current consensus forecasts on advertising for 2009 and I am sure that many of you will not be surprised by these findings. Total UK advertising spend is forecast to fall between 6-12% this year if you take the range of forecasts, which in hard cash is between £1 billion and £2 billion. Television advertising revenue is forecast to fall between 3 and 10%, although some of the television practitioners tell me that they think that will be nearer 15 to 20. Radio is predicted to fall between 6 and 8% which is between £30million and £40million in cash, and newspapers between 12 and 21%, which is £¾billion to £1¼billion in cash and that is the current set of forecasts at the beginning of the year, it will be interesting to see where we are by the middle of the year.
In contrast, internet advertising spend is predicted to grow, although it is tailing off and it is nowhere near as high a number as it has been for the last few years.
If you also look at market capitalisation figures - and we just did a quick comparison of where we were four years ago - BT share price, I am not picking on any companies here, has fallen by a quarter from where it was four years ago, its market cap by a third. BSkyB share price and market cap have both fallen by just over 40% and ITV’s share price has fallen by over 70% with its market cap falling by over a half in that period. Now all of those numbers, I think, are quite salutary statistics to bear in mind when you are making policy decisions about the sector, not least because they give you some proxy, I think, for the appetite of the capital markets, or at least the private capital markets, to provide capital for significant investment, or indeed how they are likely to price that capital or reward management who make long term investment decisions, or recommendations.
So as it relates to this particular project, my sense is that over the last few weeks, the expectation around this work has become greater, as I say borne in part because the extraordinary times we find ourselves in, and a growing realisation, not least from the conservative party last week, that the communications sector is a rare ray of light in an otherwise rather gloomy economic sky, but also in part because, as we all know, we don’t just live in the United Kingdom, although for those people who are students of the public service broadcasting debate, you would be forgiven for thinking that we did, that around the world this is a sector that people are focused on.
President Obama has made it clear, and it will be interesting to see what the substance of that is in inauguration week, that technology and communications infrastructure will be vital to the US economic recovery package. Before Christmas the French unveiled the first stage of their Plan Numerique; the Finns, the Irish and the Australians are moving forward with national broadband network programmes, in most instances involving either direct or subsidised public finance, and countries such as Portugal are bringing forward active investment programmes for fibre networks.
So today we have a choice. Either we believe that all of these countries are making a mistake, or we believe that we are already sufficiently ahead of the curve here in the United Kingdom that we do not need to do anything further.
Let’s all be clear about the importance of today’s opportunity. You get these chances rarely in life, I think, to look at a sector where it is at a turning point and this sector is at that turning point and when you are at a turning point there is an opportunity for a change in framework and that is what the Digital Britain Report is designed to do and that framework will, I hope, be built around five key objectives.
To talk about two of those objectives in slightly more detail, let's talk about a fresh ambition for digital infrastructure. It was interesting when I was in Australia to note their approach and that of the Pan Asian economies to infrastructure roll out and to see again the contrast between their approach and our own. That is not to say that I think theirs is right or ours, so far, is wrong, but for any of us who have travelled in that part of the world, or indeed in many parts of the world, it is clear that there are many other countries in the world that take a completely different view of the role of infrastructure as an essential part of an economy and the role of Government in the commissioning of that infrastructure. I think everybody here today is clear that digital infrastructure is important for our economic development, whatever the arcane economic predictions are about economic productivity. I don’t think anyone is arguing that in the world that we are moving into we can afford to stay behind where the world is moving, the debate is only about how you get there.
I was glad to see last week’s comments on fibre deployment which underscore that these issues have moved from technocratic debate to the centre of public and political policy thinking, and today I think we are way beyond the view that broadband is a niche serviced for the technologically keen. It is an enabling and transformatory service and therefore we have to look at how we universalise it and how we ensure it stays current.
For some, next generation fibre is seen as the only answer, for me I think the reality will be a richer mix a more dynamic mix of both fixed and wireless provision, coupled with a new approach to universality, delivered by both current and next generation networks. In our fixed networks I think we are going to get to a point where we will require an acceptable minimum standard of service to everyone, achieved alongside working towards the provision of next generation high speed capacity for the UK, and in wireless mobile networks we have to foster a climate in which the operators, many of whom are international and have many other market where they can deploy their capital, want and need to invest in broadband in the United Kingdom and in new services, and where the exponential take up of mobile broadband is encouraged, where spectrum capacity and access and future auctions and licence structures are as supportive of this objective as possible.
And in combination, we need to move forward our existing digital broadcast television and radio networks, in particular by ensuring the successful completion of the digital switchover process in television. And we need to examine what more we can get out of that national communications digital service and education programme, beyond just digital terrestrial television, and in radio by providing clarity and a clear future for the sector in relation to which I particularly welcome the pre-Christmas Report from the DRWG whose recommendations we will return to in quite some detail in the Interim Report. But I think there is now a very clear imperative that the Government needs to provide an answer and a case for whether there is a migration plan to digital audio broadcasting and radio.
UK content for UK consumers, which has unfortunate echoes of British jobs for British workers. Ofcom will publish their final Public Service Review document next week and it would be inappropriate for me, of all people, to try and pre-empt that report, so I will limit myself to just three observations from solely my own perspective, so I am off-piste here.
I believe it is now unarguable that both structural and cyclical pressures mean that our current free to air broadcasting PSB system is not viable in the medium term, let along the long term and arguably the short term. Given that, and in the context of the overall framework that I have set out today, the question you have to ask is do we care? If the answer to that is we do and our answer as a Government is, we do. You then have to come up with some answers as to how you provide alternative provision and how you maintain a sector which has enormous cultural and economic benefits. And it is that combination of economic and social benefits which deliver, I think, the creative industries into a separate place from many other industrial sectors.
So what are, or should, our priorities be? Well firstly, and I think always, they should start with a strong fully funded and efficient BBC acting as an enabler for the rest of the sector in a real sense and as a cornerstone for a system, but that means there needs to be more than the BBC. I think the recent moves from the BBC on quotas, on locations and on partnership proposals, have been both politically astute and welcome.
Secondly, however, we need a strong alternative to the BBC which is viable in the long term. I think the issue of whether public service competition beyond the BBC is desirable is now universally agreed, if rather technocratically described. The issue is how do you form that competition and what institutions and structures do you use to deliver it?
If I am allowed one very personal observation, it is that given that this is supposed to be one of our most creative sectors, it is often one of the most conservative sectors when it comes to looking at future solutions.
And thirdly there is the critical question around the plural provision of news, an absolute priority. For me, and I would say for anyone living in this country, we take this point too lightly at our peril. Alternative, independently funded, impartial news provision is an essential part of a healthy democratic society. The internet and the multiple provisions of information and source, open source, self generated content, is highly useful, but a fully funded alternative news provider alongside the BBC will, I think, be something that future generations will thank us for looking at how we provide, both in broadcast and in online, and to look in some detail at what is happening to our newspaper markets.
Finally fairness and access for all. It sounds like something lifted out of the manifesto and that doesn’t make it wrong. In Digital Britain I think it is true we have to ensure that fairness and access for all is more than a sound bite in a manifesto. Around 22 million of us use computers for tasks of varying sophistication in our work every day. If we are to maximise the digital opportunity we will need to ensure a population which is confident and empowered to access using create digital media, we have to put our shoulder against the door, and that will require a material step change in how we approach digital education, skills and so called media and digital literacy. At a minimum, as Sir Jim Rose recognised towards the end of last year, we need to effectively engage an entire generation growing up with the internet, multimedia and broadband, but we need to go even further, we need to ensure that every section of society is capable of reaping the benefits of being digital and at the heart of that will be our approach to media literacy and tackling the question of why 40% of people today who could get broadband do not choose to take it.
Finally enabling the widespread online delivery of public services and that is, of course, linked to both the prospect of universality of availability and the universality of participation. In this country, take-up of e-government services by individuals is only slightly above the average across the whole of Europe, and interestingly, take-up by businesses, particularly small to medium sized businesses, is slightly below the average. The potential benefits for e-government are enormous and anyone who has spent any time studying the public finances will recognise that the case for savings and efficiency in public service delivery need little encouragement.
So in conclusion, I have always had an appropriate level of scepticism, I think, about the role of Government and the role of public policy and I have some practical experience about the motivations and incentives of private and public capital. Most of what can be done will end up being done by creative people working in commercially funded businesses. But there is, I think today, a convergence; a convergence of need and opportunity that calls on Government to make its contribution to do more than attach itself to good news stories. The Digital Britain project will seek, by May or June of this year, to bring that Government contribution together in one place. If we do even a half decent job, it will be worth doing, but to do that we will only get it right if those people sitting in this room and the companies they represent give us of their knowledge and of their smarts.