RTS Cambridge Convention
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“Boldness be my friend”
1. Boldness reduces risk
The theme of my comments this evening is boldness and I’ve taken as the title for the speech Shakespeare’s phrase from Cymbeline: “boldness be my friend”. I have been reflecting in the last year on what boldness is all about, and in particular I’ve been thinking about when I was running my own business before I went into politics, and how, in certain situations, the bold course of action is actually the lowest risk course of action. There are times when if you take the cautious route you actually increase rather than decrease the chances of failure.
And I particularly thought about this a year ago when I had lunch in California with Jony Ive, the Apple Chief Designer. And he made this very striking comment to me. He said: “My job is a lot easier because I only have to think about seven products.” If you think about Apple, one of the biggest companies in the world - in fact this year, briefly, the biggest company in the world - under huge pressure from its shareholders and investors to increase its revenues, increase its profits, the pressure to diversify, to put on more product lines, to get those numbers up, must be absolutely immense.
Instead of which, they took the bold decision to go in totally the opposite direction. They, for example, stopped doing printers, which was one of their lines. And they did that because they knew that if they reduced the number of products that they did, they would increase the chances of people like Jony Ive and his team of designers being able to give microscopic attention to detail and to make sure that those products really were world-beaters.
He gave me a good example of this. He was talking about the early prototype of the iPhone and he said they had this problem that on the iPhone, when you held it up to your ear to use it as a receiver, your ear would sometimes activate the touchscreen and turn the phone off. This was a really big problem for the use of the phone and it took them six months to work out how to deal with that and basically find a way of desensitising the touchscreen when you hold it near to your ear. Now the question I ask is would he and his team have been able to devote six months to that problem and to devote all the attention that they did to that problem if, instead of seven products, he’d had 107 products to think about.
And so in that case the bold course of action was the right course of action and I think has been at the heart of Apple’s success. What I want to suggest today is that we are at a moment in UK communications policy which equally calls for boldness.
2. Boldness in local TV
I’ve been doing this job for just over a year. I have tried to practice what I preach in a couple of areas. Let me just talk about one of them, which is local TV. When I first came up with this idea I don’t think people considered it bold so much as mad.
People said it’s not going to be financially viable, people aren’t going to watch it, it’s been tried before and failed, spectrum is not available. Most patronisingly of all, some people said we shouldn’t even want people to watch it, even if they did want to watch it. That was David Mitchell. I think you’re going to be seeing him tomorrow so you might ask him about that.
But, when in August I announced 65 potential locations for pioneer local TV stations and the fact that next summer Ofcom is going to license the first 20, we had the most extraordinary response. We had packed meetings. I’ve just been around the country - we had standing room only in meetings that we had in Manchester and Newcastle, in London; we had busy meetings in Birmingham, Belfast, Newport and Glasgow.
There’s been a huge response and I think the reason is because the biggest concern people had about local TV was the financial viability. Thanks to some very detailed work by Ofcom we have found a model that brings down the cost of running a local TV station to potentially less than running a local newspaper. And as a result I am very confident that within the next four years at least half the UK population will have access to a good quality local TV service. So I think boldness paid off there.
3. Boldness in broadband
The other area that I’ve been really focusing on in communications policy has been superfast broadband. When I came to office we had one of the slowest broadband speeds in Europe. One of the first things my broadband officials told me was that the amount of money allocated for universal roll-out of 2MB broadband was only half of what was needed. We were facing a Comprehensive Spending Review in which we knew budgets were going to be cut. So, quite a lot of challenges on the table.
But I announced within a month that I wanted Britain not just to have universal broadband coverage by 2015 but the best superfast broadband in Europe by 2015. And again we have had an incredible response. We’ve got projects now up and running in the Highlands and Islands, Herefordshire, we’ve got Devon and Somerset, Norfolk, we’ve got North Yorkshire, and today I can announce a couple more - Rutland and Suffolk. And all of those are going to deliver not just universal access to 2 Mbps but 90 per cent access to superfast, as defined by Ofcom as more than 24Mbps. And so I think we’ve also made a major step forward.
4. Bold thinking with respect to the new Communications Act
But today the boldness I want to talk about is broader than that. The Government is committed to introducing during a new Communication Bill this Parliament. I want for the first time to outline the three radical areas that I want the Bill to contain: growth; plurality and freedom of expression; offensive and unlawful content.
5. Promoting growth: the opportunity for the UK
The very first is to take a series of very important measures to turbo-charge the growth of our digital and creative industries. This week Philipp Schindler, the European CEO of Google, said that in this country they could generate 350,000 jobs. I would go further than that. I think that the digital and creative industries present an opportunity for this country that is greater than for any country in the world except America. And that is because we are the second largest creator of digital content in the world, and what that means is that the internet acts as the opening of a new global trade route with virtually free distribution to any corner of the world.
This is an absolutely massive opportunity for our small island, which can boast, the largest independent television production sector in the world, and is the second largest music exporter in the world. We are the only country in the world with five PSBs, including two that are publicly-owned. If you look at top-grossing films worldwide, UK-originated story content is second only to America. We also get the second largest number of Oscars as well as America. If you look at e-commerce, we are per capita the largest spenders on e-commerce of any major economy. The value of our e-commerce market is 60 per cent that of the US despite having only 20 per cent of the population. And then if you look at the concentration of technology clusters, we are third in the world after Silicon Valley and Boston.
And finally I do want to say - in what has been an annus horribilis in many ways for British journalism - that if phone hacking turns out to be as widespread in British journalism as some people fear, we must also remember that it is British journalists who uncovered it in an operation that some have compared to Watergate in its importance. So I think we have a huge amount to be proud of and the question is how we capitalise on it.
6. Basic principles behind the new Comms Act
Now you can start thinking, okay, this is a huge area - what are our principles? And, I could say as a businessman, I want to have a light touch regulation, regulatory certainty. As a parent, I want security and safety online for my children. As a consumer I want choice and fair prices. As a citizen I want proper protection for media plurality. The trouble with all these principles is that they sometimes collide and the danger is that if you try to square everything off you end up not being bold and not taking the radical steps that are necessary.
7. Growth-promoting measures
a. Superfast broadband
So let me just talk about where I do think we need to make radical progress. The first is on this business of the broadband infrastructure. I am very proud of the progress we are making to being the best superfast broadband network in Europe. But, candidly, I have to tell you that that isn’t enough. If you look at our average broadband speeds at the moment - about seven and a half Mbps - and consumer demand for that bandwidth is growing by about 60 per cent a year. On that basis we will need speeds of 1Gbps by 2020 and we aren’t investing anything like enough at the moment to deliver that.
And we have to be really careful that we don’t fall into the same trap that we fell into with high-speed rail, where we’re going to end up building our high-speed rail network 45 years after the French built theirs and 62 years after the Japanese built theirs. I think the key to stimulating investment in that network is competition. I don’t believe that competition in the market is working as well as it should. I think it’s taking too long, for example, to get PIA prices for other people wanting to use BT’s ducts and poles. I don’t think we yet have a properly competitive market in retail fibre products and I will be talking to Ofcom about any necessary steps to make this happen more quickly.
I also want to start a debate as to whether superfast broadband is enough. I’ve always thought that today’s superfast broadband is tomorrow’s super-slow broadband. I think we need to look at whether we should be looking at ultrafast broadband - not download speeds of 20Mbps but download speeds of 100Mbps plus if we’re going to be truly competitive. So, progress is necessary there.
b. Superfast mobile
But it isn’t just superfast broadband on our digital infrastructure. It’s also superfast mobile. The demand for mobile data is now tripling every year. It’s likely to be 26 times what it is now by 2015. And that is a huge, huge change. We have to assume from now on that when people are accessing the internet they are going to be accessing it on some sort of mobile device. We need to be competitive in that area because the next big development in the internet is what people like Professor David Gann at Imperial College call the “internet of things” and it’s the connectivity in ordinary, everyday devices. The ability, for example, to book your parking meter before you drive into town so that you don’t have to use emissions driving around looking for a parking spot. But that will need connectivity in parking meters. That means little chips which have internet connectivity. That means high-speed mobile connectivity.
And we need, therefore, to proceed much more quickly than it feels like we are at the moment with our 4G spectrum auction. Sweden did theirs in 2009, Germany did theirs last year, Italy is doing theirs this week, France is doing theirs later on this year. Do we really want to be the last country in Europe that does this very important auctioning of the spectrum? And I say to the mobile operators: this is the time to put aside your desire to get marginal competitive advantage and think about your common advantage in getting this auction off the ground and the national advantage in getting this off the ground.
And when we look at spectrum I think we also need to look at how we can make it easier for smaller companies to access spectrum, how we can improve spectrum trading and also how we can maximise the benefits of license-exempt spectrum so that technologies like Wi-Fi and Bluetooth are available for as many people as easily as possible. So, important work on our superfast broadband infrastructure and our superfast mobile infrastructure.
c. Strengthening e-commerce
I mentioned e-commerce. E-commerce is something where we are a leader at the moment. But again there are blockages that are stopping us exploiting the full potential that we have. And one of those is the fact that only 5 per cent of EU consumers are currently doing online shopping across borders - one in 20. Now, for the UK, if we can unblock the single market in e-commerce it represents an extraordinary opportunity because, as McKinsey report, for every £1 in imports generated by e-commerce for the UK, we have £3 in exports. So it’s a big advantage and there is a review going on of the E-commerce Directive and we need to press for robust implementation of single market measures. I also think it isn’t just e-commerce - it’s m-commerce. We need to ask ourselves why it is that countries like Kenya have developed mobile phone payment systems like M-PESA and we are still lagging behind.
So when I talk to the mobile phone operators shortly I’m going to be asking them about the 4G spectrum auction, I’m going to be asking them about mobile phone payment. I’m also going to be asking them about why it’s taking us so long to get a competitive, cheap mobile TV service, which again they have in countries all over South America and Japan but it seems to be taking a very, very long time here.
d. Public Service Broadcasting
Finally, it wouldn’t be RTS if we weren’t talking about PSB and the future of public service broadcasting. So in my look at growth measures I want to do what I can to help companies like ITV, our traditional PSBs, become more competitive. Let me say this: it’s extraordinarily popular, PSB, with the public - 70 per cent market share despite huge proliferation of channels. I am a big supporter of PSB. I think the principles behind it, the principle of trying to make sure we have plurality of news provision, the principle of trying to boost and encourage UK-originated content, are as important in the digital age as they were in the analogue age.
But I do think we have to recognise that the deal for PSB has changed considerably from when it was originally set up. The idea that in return for access to scarce spectrum, PSBs would then have broadcasting obligations is changing. I think probably now our biggest lever is access to a good position on the EPG. That may need to be reflected in legislation. But we will need a lighter-touch model which, in particular, means that ministers and regulators will have to move away from micromanaging programme outcomes.
So, that is my package of measures on growth and in particular I want to focus on our physical infrastructure because I think that is likely to be the biggest hindrance to our digital and creative industries going forward.
8. Measures to protect freedom of expression and media plurality
a. A cross-media approach**
If growth is essential for our economy, then plurality of news provision and freedom of expression is essential for our democracy. And this is something that, obviously, we have all been thinking about a great deal this year. Let me just make some observations. Some people say: “Why do we need special laws on media plurality when we already have competition law?” I believe we do, because the media industry is different. Not a difficult message to sell at RTS, but I think the media industry is different because of the special influence that it has on our national culture, on our identity and on the way that we view ourselves. So I think it is incredibly important that we have a structure that makes sure that in a vibrant, open democracy - such as we are proud to have - no one person or organisation has undue control of our media.
And the truth is that, as technology has changed, the laws on media plurality have not. Sometimes they’ve been too heavy-handed, preventing companies from developing new business models and being nimble. Sometimes they haven’t been heavy-handed enough, particularly in understanding the importance of cross-media influence. But I would draw your attention to an important point - one that Peter Bazalgette made in an article during the summer - that one of the reasons that we have such a proliferation of news choice in this country is because of subsidy. We have subsidy of the BBC through the Licence Fee, subsidy of ITN through ITV and Channel 4’s PSB obligations, subsidy of Sky News by Sky, subsidy of The Times by The Sun, subsidy of The Independent and The Evening Standard by the Lebedevs.
There is a lot of subsidy in the system at the moment and some of that subsidy comes from outside investors. And although it is incredibly important to make sure that no-one has undue influence in our media, we should also remember that if we put off outside investors from investing in the UK, we risk reducing and not increasing plurality.
So having been through the News Corp/BSkyB merger, what are the things that I think we need to look at? Well the first thing is we need to recognise that we are in a multimedia world in which successful media operators will want to follow their customers from iPad to iPhone to internet to TV. They’ll want to do it seamlessly and we mustn’t stop them doing it because, this is the model for media companies in the future. But by the same merit, as we make it easy for people to operate across platforms, we need to find a way of measuring their influence across platforms and aggregating influence in a way that hasn’t happened before.
Ofcom made a start with the concept of measuring cross-media influence in their report for the BSkyB bid. But I think we need to go further and develop a robust methodology, so I have written to Ofcom to ask it to think about this some more. In particular, to look at: the difficult questions, such as the extent to which you take into account third party contracts and the contract Sky has with Independent Radio News; the extent to which we include the BBC in this discussion; and the issue about websites, whether you include all websites, whether you include subscription websites, what you do about free websites. When you’re thinking about something as complex as media plurality, we you to think these things through very carefully and I’ve asked Ofcom to think about this and to submit their report as evidence to the Leveson Inquiry.
And incidentally, none of the things that I’m saying today are intended to pre-empt that Inquiry, nor indeed are they intended to pre-empt my own department’s Green Paper. But I do think it’s important that we don’t just put everything on hold until we wait for those, and that we start doing some thinking ourselves as to the right direction of travel.
b. Timing of public interest interventions
A couple of other things from the News Corp bid: at the moment it’s only possible for a public interest intervention when there is a corporate transaction. This is different to competition law, where the Office of Fair Trading can order an inquiry by the Competition Commission at any stage, for example if they think someone has grown too big organically. That isn’t the case for media plurality and I think there is an argument for extending the similar protection that we have in competition law to media plurality law.
c. Politicians having the final say
I also think we need to look at whether it’s appropriate for a politician to have the final say in a highly contentious decision such as the one I nearly had to take on News Corp/BSkyB. Now I am perfectly aware that when it comes to dealings between politicians and media barons, the public are not going to give politicians the benefit of the doubt. And when I was handling this process I tried very hard to gain the confidence of the public by asking for independent reports from Ofcom, which I didn’t have to do, and publishing those reports at every stage in the process so that people could see that I was looking at independent advice.
But in competition law we removed the final decision on big mergers - such as whether BAA has to sell off Gatwick - from politicians. And we did so because we thought those kinds of decisions are perhaps better taken by someone who is out of the political fray. So I think it is a legitimate question to ask; if we think that for competition law, should have the same approach on media plurality law?
9. Reforms to protect standards in the press
**But freedom of expression is not just about media plurality and one of the things that we have to think very hard about is how we uphold journalistic standards across the media industry. And in particular, I think we need to do some serious thinking about the regulatory framework under which newspapers operate. I’m a supporter of independent, industry-led regulation. I think it’s very important, as the Prime Minister said to the Liaison Committee in the House of Commons, that in our response to phone hacking the pendulum doesn’t swing too far in the other direction, and we don’t forget the benefits that we have had from our free press over very many years.
a. Independent regulation
I think it is possible to find a model that is both independent of politicians but also sufficiently independent of editors and proprietors for the public to have confidence that it does really have teeth and the ability to address and stop wrongdoing. And I would encourage the newspaper industry to look at other models in other professions, such as the medical profession and the legal profession, where they have been able to do this. So that’s the first point.
b. Regulatory convergence
The second point is, if we are going to change the way the press are regulated, let’s try and solve a problem that we would have had to face anyway, as well as looking back and addressing the issues around phone hacking. That problem is the increasing reality that newspaper proprietors are not just producing content for newspapers, they’re producing content that is being consumed on many different platforms. It cannot be sensible that at the moment newspaper operators find that their newsprint is regulated by the PCC, their video-on-demand is regulated by ATVOD and any TV content they do is regulated by Ofcom.
If we want newspapers to develop truly cross-platform, forward-looking, multimedia offerings in the future, then we need to start thinking about the possibility of a one-stop regulator. So my challenge to the newspaper industry is this: if you can come up with an industry-led model for press regulation that is sufficiently robust to have the confidence of the public, then I will support that as being the one-stop regulator for all the content that you produce, so that you won’t end up finding, as you move towards IPTV, that you are being backdoor-regulated by Ofcom.
Let me be clear that for traditional broadcast media, Ofcom regulation is here to stay. It has the confidence of the public and I think has shown its worth over very many years. But for the newspaper industry, I think it’s worth asking whether there is a different model. But the onus is on the industry to come up with a model that has the confidence of the public and is more robust than what we’ve had with the PCC.
So, measures to promote growth, improvement in the physical digital infrastructure, and measures to protect freedom of expression and media plurality.
10. Protecting consumers and companies from offensive and unlawful content.
The final area in which I want our Communications Act to be bold is the question of how we deal with offensive and unlawful content. And here I make a distinction between offensive content and unlawful content.
a. Offensive content
Offensive content - that is necessarily more subjective and is something about which your opinion can change over time. But I note, as the father of a young child, that 74 per cent of children access the internet unaccompanied, and 800,000 children have access to adult content online, including 14 per cent of under-10s. This is an issue of huge concern to parents.
I believe the way to address this is to put consumers firmly in the driving seat. I welcome the excellent work that has been done by the Council for Child Internet Safety and the fact that the ISPs have been working together to agree a joint draft protocol on parental controls. But I think we may need to go further in the Communications Act and make it a requirement that all ISPs get all their customers to make an active decision about the level of filtering and the level of parental controls that they wish to have. So that, I think, would be the best way to deal with the issue of offensive content.
b. Unlawfully distributed content
But when it comes to unlawful content, I think we need to take a different tack. And I think here we’re talking about not just unlawful content but unlawful distribution of content. And we need to nail right on the head this idea that tackling this problem is somehow an attack on internet freedom. J. S. Mill’s definition of freedom was that we should be free to do anything we like as long as it doesn’t impinge on the freedom of others. Well, stealing someone else’s digital content is impinging on their right to earn a living from their work, and we need to recognise this. A fundamental principle of the law is that it should be applied equally, that means that it should apply to the virtual world as much as it applies to the physical world.
Of course, we need to be realistic - we are not going to stamp out all crime in the virtual world just as we’re not going to stamp out all crime in the physical world. But it must be right to take action and it must be particularly right for the UK, as the second largest content creator in the world, to take action to make sure that we protect our content industries.
And with all these things, the devil is in the detail. But I think we are working towards a consensus in the industry as to the best solution. I think we should look at an industry-led body that could come together and agree what the offending websites are. I think we need a streamlined legal process so that the courts can make a quick decision. I think we need a responsibility on search engines to cooperate in making it more difficult for people to access sites that facilitate unlawful sharing of content. And also we need responsibility on banks and credit card companies to do their bit in trying to make payment processes more difficult for people who are involved in this.
And there are lots of questions to answer, including compliance with the E-commerce Directive, indemnification, and who’s going to pay at different stages. But we are making very good progress and I hope that we can get a consensus on this before we come to draft the wording for the new Communications Bill, so that we include any necessary legislation.
So those are my three areas: measures to turbo-charge growth in our digital and creative industries and make sure we have the digital infrastructure that we need; measures to protect plurality and freedom of expression online; measures to protect consumers from offensive content but also protect businesses from the unlawful distribution of IP.
None of those are easy, but we have to make progress in all of those areas. We will never gain competitive advantage as a country by sitting on the sidelines. It’s going to take determination, imagination and vision.
Boldness be my friend.