Chapter 5: Media Ownership and Control
Section 348: Modification of disqualification provisions
720.This section amends Part 2 of Schedule 2 to the Broadcasting Act 1990. Under subsection (1) persons not resident or established in the EEA are no longer disqualified from holding Broadcasting Act licences. Subsections (2) and (3) amend paragraph 2 of that Part, disqualifying religious bodies from holding the following licences granted under the Broadcasting Acts 1990 and 1996:
A Channel 3 licence;
A Channel 5 licence;
A national sound broadcasting licence;
A public teletext licence;
An additional television service licence;
A television multiplex licence; and
A radio multiplex licence.
This needs to be read with paragraph 15 in Part 4 of Schedule 14 to the Act. In the case of licences that are not in this list, a religious body may apply for a licence and OFCOM may grant the licence if they make a determination in the case of that organisation; and they may make such a determination if (and only if) they consider it appropriate for that body to hold a licence of that description. This applies to-
restricted service licences;
digital television programme licences;
digital additional television services licences;
licences to provide television licensable content services;
licences under Part 3 of the 1990 Act (other than a national licence) - meaning local analogue radio licences, licences to provide radio licensable content services, and licences to provide (analogue) additional services;
national and local digital sound programme licences;
digital additional sound services licences.
721.OFCOM are required to publish guidance for persons wishing to make such applications.
722.Subsections (5), (6) and (7) allow the Secretary of State, following consultation with OFCOM and with Parliament’s approval, to make an order amending or repealing the provisions of paragraph 2 of Part 2 of Schedule 2 to the 1990 Act . Paragraph 16 of Schedule 14 gives a similar power to repeal or otherwise modify the restrictions set out in Part 4 of that Schedule.
Section 349: Licence holding by local authorities
723.This section inserts a new provision into Part 2 of Schedule 2 to the Broadcasting Act 1990, the effect of which is that local authorities will no longer be disqualified from holding a licence where the service in question is provided solely in pursuance of the functions of local authorities under section 142 of the Local Government Act 1972.
724.Section 142 relates to the provision by a local authority of information concerning their functions and the services available within their area.. Subsection (2) of section 349 inserts into section 142 provisions allowing a local authority to provide an electronic communications network or electronic communications service for the purpose of broadcasting or distributing information generally relating to the functions of the authority or about services available within their area that are provided by them or by another local authority or by an authority, board or committee with similar functions, or to arrange for the broadcasting or distribution of such information by means of an electronic communications network or electronic communications service provided by someone else.
*“electronic communications network” and “electronic communications service” are defined in section 32.
725.Subsection (3) amends section 2(1) of the Local Government Act 1986 in order to widen the prohibition on a local authority from publishing any material which appears to be designed to affect public support for a political party, to a local authority arranging for such a publication.
Section 350: Relaxation of licence-holding restrictions
726.Subsection (1) repeals the rules in Parts 3, 4 and 5 of Schedule 2 to the Broadcasting Act 1990 relating to restrictions on accumulations of interests and on licence holding by newspapers and telecommunications providers, some of which are replaced by Schedule 14 to this Act. Rules relating to licences for local sound broadcasting and local digital sound programme service licences are to be replaced by provision made by order under paragraphs 11 and 12 of Schedule 14. Subsections (4), (5) and (6) ensure that these rules will not lapse before the relevant orders come into force.
727.Part 1 of Schedule 14 establishes the new rules relating to the ownership of television services, replacing the rules repealed by section 350. These apply only to Channel 3 services and not, as before, to Channel 5.
728.Paragraph 1 sets out the circumstances in which a person may not hold a licence for a Channel 3 service. A person may not hold any such licence if he runs national newspapers with more than 20 per cent of the total national market. No one may own a regional Channel 3 licence if he runs local newspapers which together have more than 20 per cent of the local market in the coverage area of the service. For these purposes, a licence to provide a Channel 3 service is to be treated as held by the actual licence holder and every person connected with him.
*the expression “connected person” is defined for these purposes by paragraph 3 of Part 1 of Schedule 2 to the 1990 Act. For example, a company (“A”) is connected with any person that controls A (e.g. a holding company), with any company controlled by A, and with another company (“B”) if someone else controls both A and B. Separate rules apply for determining who is “connected with” an individual. For example, an individual is connected with certain of his relations, with business partners and with companies of which he is a director.
729.Paragraph 2 establishes further restrictions on participation in companies holding Channel 3 licences. No one may hold more than a 20 per cent share in such a company if he is the proprietor of national newspapers with more than a 20 per cent share of the total national market. No licence-holder may own more than a 20 per cent share of any such national newspaper proprietor. A company in which such a newspaper proprietor holds more than a 20 per cent share cannot be a participant with more than a 20 per cent share of a company that holds a licence. These rules apply as much to participation in a company that controls the holder of a Channel 3 licence as they do to participation in the actual holder of the licence, and restrictions applicable to a proprietor or licence holder apply as if he and every person connected with him were one person.
*“control” is defined in paragraph 1(3) of Part 1 of Schedule 2 to the 1990 Act, as amended by section 357 of this Act.
730.Paragraph 3 explains how ‘national newspaper’, ‘local newspaper’ and ‘market share’ are to be defined for the purposes of the above rules. References to national or local newspapers are references to newspapers that circulate wholly or mainly in the United Kingdom (national) or in a part of the United Kingdom (local). Where there is any difficulty with this definition (for example if a newspaper is published in different regional editions) OFCOM have the power to define whether the newspaper in question is national, local or both. Market share is defined as the percentage of total newspaper sales in the relevant area (either the UK or a Channel 3 licence region) represented by sales of the newspaper in question over the previous six months. If a newspaper is distributed free of charge, ‘sales’ are taken to include the number of copies distributed.
731.Paragraph 4 identifies a person as running a newspaper if he is either the proprietor of the newspaper or controls a body which is the proprietor. The definition of ‘control’ is that in the Broadcasting Act 1990, Schedule 2, Part 1, paragraph 1(3).
732.Paragraph 6 gives the Secretary of State power to repeal or modify any of the rules in Part 1 by order. Before making any such order (unless it is confined to giving effect to recommendations made by OFCOM under section 391), the Secretary of State must consult OFCOM; and no such order may be made unless it has been approved in draft by both Houses of Parliament: see paragraph 17.
733.Part 2 of Schedule 14 establishes the rules relating to the ownership of radio multiplex licences, again replacing the rules repealed by section 350. Paragraph 7 prevents one person from owning more than one national radio multiplex licence at the same time.
734.Paragraph 8 deals with the ownership of local radio multiplex licences. It establishes a limit of one multiplex licence per owner in areas where there is overlap of services so that the potential audience of one service includes at least half the potential audience of another. OFCOM are to lay down the technical standards by which ‘coverage area’ can be determined. If a person is in contravention of this rule when it is enacted, but is not in contravention of the existing rules on multiplex ownership, the contravention will be ignored and no divestment will be required until another person becomes the holder of the licences in question.
735.Paragraph 9 provides that a radio multiplex licence is to be treated for the purposes of this Part of this Schedule as if it were held by the actual licence holder and any person connected with him.
736.Under paragraph 10, the Secretary of State is given power to repeal or modify any of the rules in Part 2 by order.
737.Part 3 of Schedule 14 contains a power for the Secretary of State to impose by order new rules on the holding of local sound broadcasting licences and the provision of local digital sound programme services. Such rules would replace those repealed by section 350.
738.That Part allows the Secretary of State to impose limits on the number of licences that any person owns, or to prevent a person owning any licences at all in certain circumstances. The circumstances that could be specified in establishing rules of this sort include:
the degree of overlap of the different services involved;
the size of the potential audience for those services and the times when they would be made available;
the extent to which there would be other persons with licences to broadcast to the same potential audience, the number of those persons and the audience size and coverage area of their stations;
whether the person who holds (or wants to hold) the licence runs national newspapers, and the national market share of those newspapers;
whether that person runs local newspapers that serve any part of the coverage area for which they would hold a radio licence, and the newspapers’ local market share;
whether and to what extent the coverage area of the licence in question overlaps with the coverage area of a regional Channel 3 service for which he also owns the licence.
739.Paragraph 12 gives the Secretary of State similar powers to impose limits on the provision of local digital sound programme services, with the exception that the newspaper and Channel 3 assets held by a person are not included in the list of factors that may be considered when establishing rules.
740.Paragraph 13 explains that definitions of the different forms of licence-holding, and of national and local newspapers and their market share, may be made under the order-making powers in paragraphs 11 and 12, and makes other supplemental provision. Paragraph 14 contains transitional provisions for orders made under paragraphs 11 and 12. If a person is in contravention of any rule established by such an order when it is enacted, but is not in contravention of the rules that preceded it, then the contravention will be ignored and no divestment will be required until there is a relevant change of circumstances in the licence-holding arrangements.
741.Part 4 of this Schedule is concerned with the ownership of broadcasting licences by religious bodies, and the details are covered under section 348 above.
742.Part 5 of Schedule 14 contains supplementary provisions relating to its implementation and interpretation. There is a requirement for the Secretary of State to consult OFCOM before making an order under any provision in the Schedule. There is also a stipulation that Part 1 of Schedule 2 to the 1990 Act should apply to Schedule 14 in the same way as it does to Part 2 of that Schedule. An overlapping area is defined as including any area that is the same as, or lies wholly inside, another area.
Section 351: Changes of control of Channel 3 services
743.OFCOM are to include in the licence for every Channel 3 service conditions to ensure that any body corporate holding such a licence notifies OFCOM in advance of any proposals that may result in a change of control of the licensee, or of a person connected with the licensee who is, actually or potentially, involved to a substantial extent in providing programmes for inclusion in the licensed service.
744.Where such a change of control may result, or has resulted, over a body corporate holding a Channel 3 licence, OFCOM must review and publish a report on the effects or likely effects, and their proposed response. OFCOM must review the impact of the change of control on the quality and range of regional programmes and the effect on the regional character of the service (subsection (6)), as well as the amount of time given in the service to regional programmes, the proportion of regional programmes made in the relevant region and the extent to which persons are employed in and decisions are made in the relevant region in connection with the service (subsection (7)). They must also review the effect on the time allocated in the service to original productions and news and current affairs programmes (subsection (4)); and the extent to which Channel 3 programmes in the service are made in the UK outside the M25 area, the range of such programmes, the extent to which expenditure by the Channel 3 provider on Channel 3 programmes is referable to programme production at different production centres outside the M25, and the range of such production centres to which the expenditure is referable (subsection (5)).
745.In the case of a national Channel 3 service, OFCOM will only review the effect on programme production and production expenditure outside the M25 area where a national Channel 3 service is subject to relevant conditions under section 286 (programme production) or OFCOM otherwise consider it would be appropriate.
Section 352: Action following review under s. 351
746.If, following a review under section 351, OFCOM consider that the effect of the change of control is prejudicial to any of the matters they have reviewed, then under section 352 they must vary the licence, the only exception being where the matter in issue relates to subsection (7) of section 351, in which case they have a discretion whether to vary the licence. Any such variation may lead to the inclusion in the licence of conditions that are more burdensome than those included prior to the variation. However, they must be conditions that would have been fulfilled throughout the twelve months immediately before the relevant change of control.
747.The licensee must be given a reasonable opportunity to comment on the report before OFCOM vary the licence. The variation shall not be effective until the change of control actually occurs.
Section 353: Changes of control of Channel 5
748.OFCOM are to include in the licence for Channel 5 conditions to ensure that any body corporate holding such a licence notifies OFCOM in advance of any proposals that may result in a change of control of the licensee, or of a person connected with the licensee who is, actually or potentially, involved to a substantial extent in providing programmes for inclusion in the licensed service.
749.Where such a change of control may result, or has resulted, over a body corporate holding the Channel 5 licence, OFCOM shall review and publish a report on the effects or likely effects, and their proposed response. OFCOM must review the effect of the change of control on the time allocated in the service to original productions and news and current affairs programmes; and the extent to which Channel 5 programmes in the service are made in the UK outside the M25 area, the range of such programmes, the extent to which expenditure by the Channel 5 provider on Channel 5 programmes is referable to programme production at different production centres outside the M25, and the range of such production centres to which the expenditure is referable.
Section 354: Action following review under s. 353
750.If, following a review under section 353, OFCOM consider that the effect of the change of control is prejudicial to any of the matters they have reviewed, then under section 354 they must vary the licence. Any such variation may lead to the inclusion in the licence of conditions that are more burdensome than those included prior to the variation. However, they must be conditions that would have been fulfilled throughout the twelve months immediately before the relevant change of control.
751.The licensee must be given a reasonable opportunity to comment on the report before OFCOM vary the licence. The variation shall not be effective until the change of control actually occurs.
Section 355: Variation of local licence following change of control
752.OFCOM are to include in the licence for every local sound broadcasting service conditions to ensure that any body corporate holding such a licence notifies OFCOM in advance of any proposals that may result in a change of control of the licensee, or of a person connected with the licensee who is, actually or potentially, involved to a substantial extent in providing programmes for inclusion in the licensed service. Where such a change of control may result, or has resulted, over a body corporate holding a relevant licence, OFCOM shall review the effects, or likely effects, of the change. The review will consider the possible impact of such a change on: the quality and range of programmes; the character of the service; OFCOM's duty in respect of the local content and character of services (set out in section 314). The character of the service includes the music and spoken material selected for inclusion on that service. OFCOM must publish a report of their review setting out its conclusions and any proposed action.
Section 356: Action following review under section 353
753.If, following a review under section 353, OFCOM consider that the effect of the relevant change of control is prejudicial to the matters set out in section 353(4), they must vary the relevant licence. Any such variation may lead to the inclusion in the licence of conditions that are more burdensome than those included prior to the variation. However, they must be conditions that would have been fulfilled during the three months prior to the change of control or, if those three months were atypical of the licensee’s performance during the previous year, another three-month period during the preceding year. The licensee must always be given the opportunity to comment on the report before OFCOM vary the licence. The variation shall not be effective until the change of control actually occurs.
Section 357: Meaning of “control”
754.This section amends the provisions relating to the control of a body corporate set out in paragraph 1 of Schedule 2 to the Broadcasting Act 1990 (circumstances where there is deemed to be control even though the person in question does not have a 50 per cent, or greater, interest in a company):
It provides that a person will be treated as having de facto control of such a body if he would (if he chose to) be able in most cases or in significant respects to ensure that affairs of the company are conducted in accordance with his wishes.
OFCOM will be required to publish and update guidance on some, but not necessarily all, of the factors they will take into account when determining whether a person has “control” of a body, within the meaning of paragraph 1(3)(b) of Part 1 of Schedule 2 to the 1990 Act.
