Ofcom Advises on Abolition of Local Cross-Media Ownership Controls

As requested by Culture Secretary Jeremy Hunt, Ofcom has now reported on the feasibility and implications of the full removal of all local cross-media ownership rules. Saying that the decision whether to do so has to be a matter for Government and Parliament, Ofcom advances the arguments for abolition of local cross-media ownership controls, in counterbalance to any fears about concentration of control over local news which might result.

Factors in favour of abolition include the benefits of consolidation to the regional media, in the face of current economic pressure; the growing diversity of alternative sources of local news, plus the prospect of local TV; the regional presence of the BBC; and the merger regimes, including the role of both the competition authorities and Ministerial intervention by way of the media public interest test. In any event, Ofcom suggested that in practice there seemed to be limited interest and so little risk of such consolidation, even if the rule was removed. Ofcom also concluded that there were no significant regulatory barriers to entry in the local media market.

The Government already intends to follow Ofcom’s 2009 recommendation to liberalise the local cross-media ownership rules, so Ofcom was asked to consider the consequences of abolition of what would be the one remaining prohibition, i.e that one person could not own in a local radio coverage area:

a local analogue radio licence; and
a regional Channel 3 licence whose potential audience includes at least 50% of that radio stations potential audience; and
one or more local newspapers which have a local market share of 50% or more in the coverage area

On the basis of updated evidence, Ofcom identified two relevant developments. Firstly, a significant deterioration in the revenues available for local/regional newspapers between 2008 and 2009, accompanied by continued structural pressure on television and radio as the internet increased its share in a total advertising market that had been under pressure from broader economic circumstances. While there were signs of a recovery in the general advertising market this year, these structural challenges were unlikely to ease. Secondly, a significant change in Government policy in relation to local media. The Government had placed emphasis on local media, in particular making proposals for local television, albeit in development and therefore speculative, but which had the potential to have a positive impact on both the diversity and plurality of news and information at the local level.

Ofcom’s earlier 2009 advice had highlighted that combined ownership of the channel 3 television licence, a local commercial radio station and the main local newspaper(s) might confer too much control over the local news agenda into the hands of one person or company. Limited plurality of news and opinion in a local area could restrict local debate and accountability, and this would remain a serious consideration, which needed to be weighed against the arguments for further relaxation. But three existing safeguards would also remain: the combination of the BBC and the commercial sector as a corner stone of plurality in this context -with a BBC service (‘television at the regional level, radio and web based services more locally’) there is a guarantee of a minimum of at least two providers of local news; competition policy, in that the competition authorities prevent concentrations in local media through the merger regime; and the BIS Secretary of State also has the right to intervene in cross-media mergers, where he considers that it raises public interest considerations, including sufficient plurality.

Ultimately, Ofcom considered that abolition of the last remaining restrictions would be a matter of judgement by Government and Parliament. In making this judgement the risk of the concentration of control over local commercial news provision would need to be balanced against the arguments and factors which tend towards removal:

Local media was facing significant economic pressure which the most recent evidence suggested was becoming more acute, so removing the remaining rule could allow local media greater options to consolidate to respond to these pressures.
While only a limited group of consumers (5%) considered the internet their main source of local news, there was a growing diversity of local news available through non-traditional media. There were therefore increasingly alternative sources of plurality..
As noted, there were protections for plurality which would continue to operate the combination of the BBC and the commercial sector, the public interest test operated by the Secretary of State and the merger regime would all continue to operate in parallel
In addition, there were ‘the potential benefits to diversity and plurality that may emerge in the coming years from the Government’s policy on local television’.

Finally, Ofcom felt that there was probably a reasonably low risk of the kind of consolidation that the remaining cross-media ownership rule protects against actually occurring even if the rule was removed. ‘At present the evidence suggests there is very limited interest in this form of consolidation.’ It also concluded that there were no significant possible regulatory barriers to entry in local media .