British Media Shake Up

Rupert Murdoch's long held ambition of buying into the UK’s lucrative terrestrial television market was a step closer last night as the British government announced plans to lift the rule that bars him from owning Channel 5, the fifth terrestrial channel in the country. But the media mogul was frustrated at the same turn: ministers also revealed their intention to allow foreign broadcasters such as Disney or Viacom to take a controlling stake in ITV, a prize he is still denied. In a draft communications bill, the biggest overhaul of media and telecommunications regulation since Margaret Thatcher permitted the auction of ITV franchises in 1990, new rules will allow a single company to control ITV and bring the BBC under external regulation for the first time. “For too long the UK's media have been over-regulated and over-protected from competition,” Ms Jowell told the Commons yesterday. “The draft bill we have published today will liberalise the market, so removing unnecessary regulatory burdens and cutting red tape, but at the same time retain some key safeguards that will protect the diversity and plurality of our media.” Under the proposals, global media giants would be allowed to buy British television and radio broadcasters. Ms Jowell said this would eliminate the anomaly that allows the Italian prime minister Silvio Berlusconi to buy into ITV, but bans AOL Time Warner from making a similar move. However, the rule preventing newspaper tycoons from buying more than twenty percent of an ITV licence will be kept, meaning that Mr Murdoch's ambitions are capped. His empire was quick to pour scorn on the government's claim that its bill was "proprietor neutral". An insider form BSkyB, the British satellite broadcaster that is forty percent controlled by Murdoch’s News Corporation said "They seem to be actively encouraging the world's media magnates to get into ITV apart from one. All this stuff about legislation not being designed to influence one proprietor seems to be rubbish.” Yet the lifting of restrictions that barred Mr Murdoch from owning Channel 5 led to speculation of a last minute deal. The News Corporation chairman is known to have been in London last week. "This goes well beyond what anyone expected, particularly given the signals that government has been making about safeguarding plurality," said Mathew Horsman, media analyst at Investec Securities. "There is huge commercial logic to this but it is surprising it has come from a Labour government.” The draft bill, published jointly by the Department for Culture, Media and Sport and the Department of Trade and Industry, will now be scrutinised by a joint committee of both houses of parliament. It will then form part of the Queen's Speech in the autumn, after which it will go through the Commons. It is not expected to reach the statute book much before the start of next year. The bill lifts the two barriers that have prevented one company from owning ITV - the rule that prevents one company from owning the two London franchises and the bar on any one company controlling more than fifteen percent of the advertising market. Merger talks between Carlton and Granada, the two biggest ITV operators, are now expected to begin in earnest. A single ITV could then become a target for predators such as Bertelsmann, which currently controls Channel 5; in another move, the rule that bars the Channel 5 owner from holding an ITV licence is scrapped. The government also lifted the restrictions on joint ownership of TV and radio stations, and the ban on owning more than one national commercial radio licence. The BBC will be brought partially under the umbrella of the new super-regulator, Ofcom. Although ministers claimed the bill would bring a greater level of scrutiny to bear on the BBC, the details of how the corporation will be regulated will not be published for some weeks. Ofcom will regulate broadcasting standards, but the BBC governors are certain to remain the guardians of the corporation's public service remit and its political impartiality. Tim Yeo, the shadow culture secretary, urged the government to go further. “I remain disappointed that Tessa Jowell has not followed her own logic and fully deregulated media ownership. The acid tests for these proposals will clearly be whether they represent a light touch or a heavy hand.” The City was last night braced for a flurry of mergers and takeovers off the back of the regulatory changes. One investment banker said: “This is going to be a great couple of years to be a deal maker.”

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