The recent visit of Chancellor George Osborne to China was a timely reminder of one area in which our struggling economy must excel if we are to remain competitive in the 21st century. I believe we must sell both our advanced products and our creative expertise (such as broadcasting) to Asia as its appetite for them grows.
Government statistics published in December 2011 show that 1.5 million people are employed in the creative industries (5.1% of the UK's employment). Exports by these industries accounted for 10.6% of the UK's export of services. London's creative industry alone is worth $32 billion per annum. I recognise that a diverse British broadcast sector, particularly the unsung independents (the non-Public Service Broadcasters), is one of the jewels in our crown.
We are all aware of the excellence, reputation and economic breadth of the BBC but I hadn't realised just how important the independent broadcast sector also was. Independent commercial broadcasters are successful and a growing sector, employing 22,000 people in the UK. In fact, these non-Public Sector Broadcasters have a 28% of audience share in UK multi-channel homes (according to Ofcom's 2010 Communications Market Report). Furthermore, data from Deloitte shows that members of CoBA (the Commercial Broadcasters Association) contributed over £2.2 billion to the UK economy overall (2008) while £432 million was invested in original UK content (2009). I want to see continued success for broadcasters like Sky, UKTV, Discovery and QVC who employ thousands and who are enjoyed by millions.
Despite this success some of these broadcasters are now commercially vulnerable due to the unfair and unclear regulatory system regarding channel allocation on the Freeview platform and I want to explain why? The Freeview platform is the 'Best British TV for free' and, after switchover, the default way the British public watch television. However I am concerned that its management of channel allocation (where a TV channel is positioned - the lower and closest to channel 1 the better) is both opaque and not properly overseen by Ofcom.
Channel placements on Freeview are decided by DMOL (the Digital Multiplex Operators) rather than Ofcom. DMOL is a body owned and run by the PSBs (BBC, ITV and Channel 4) as well as the infrastructure provider Arqiva. This means the big players allocate valuable channel numbers for their commercial competitors, without transparent, independent adjudication and due process.
This is not an issue that is widely appreciated but it is becoming increasingly important.
Let me illustrate this. If Freeview channels were a physical retail asset, this would be the equivalent of allowing the major supermarkets to move the location of a smaller competitor, at will.
Ofcom, the government and the industry recognise that a channel number has an economic value and will impact a broadcaster's business, but seem unable to deal with the consequences that follow.
Whatever people think about the unusual method of channel allocation the major problem is the lack of a review mechanism under the present system for independent broadcasters who feel aggrieved. If treated unfairly in the matter of channel number allocation, independent channels appear to have no recourse, except for an expensive competition law complaint. And, worryingly, this complaint can only come after the damage has already occurred.
QVC, its trade association CoBA and I would ideally like to see independent broadcasters have a fair level of engagement in the decision-making process around channel allocation, before any decisions are made.
I have a particular interest in the mechanism for allocating channels, as this issue impacts the largest private sector employer in my constituency, the shopping channel QVC. With a turnover nearing £400 million and showing consistent growth over the years, QVC now employs over 2,000 people in the UK, the vast majority based in Knowsley.
It is worth noting that QVC has never shipped any jobs overseas even when it might have made economic sense to do so. Instead they made a public commitment to keep the jobs in Merseyside. By way of comparison Channel 5 has only about 220 employees.
QVC's viewing figures, and its subsequent revenue, are dependent on its viewers being able to find it. Finding QVC is easy - as long as its channel (16) remains the same - and it has over one million loyal customers and many more viewers.
But the possibility of being moved without recourse leads to considerable uncertainty. Any forced move through this unfair system could significantly jeopardise QVC's revenue as well as creating unnecessary confusion and inconvenience to millions of viewers. And I am told there is good reason to be concerned about the financial impact and direct consequences for UK jobs. A similar channel move a decade ago on the Sky platform precipitated a loss in excess of 35% of sales per home.
As well as talking to QVC, I have had dialogues with the Interactive Media in Retail Group (IMRG) and the Electronic Retailing Association (ERA Europe), who support the argument I am making. IMRG notes that: "Businesses need certainty as well as fair competition" and ERA Europe comments: "Our members' future business in the UK is under threat from an uncertain[ty]... we urge the UK government and Ofcom to be more transparent".
To be fair, I am aware that the government recognises the importance of the independent broadcast sector and that it is currently undertaking a major review. We hope the issue will be looked at in the upcoming DCMS Green Paper on Communications. I welcome the rationale for that legislation which I understand is to bring the UK's regulatory regime into the digital age and ensure a communications infrastructure that supports growth and innovation while protecting the public interest and consumer choice.
The handling of the allocation of Freeview channels is important. It will act as a weather vane for the government's intentions towards fostering independent, dynamic businesses in the communications industry and beyond. Therefore I am supporting the need for a fair, reasonable and non-discriminatory system for channel allocation, so that independent commercial broadcasters are not unfairly or unnecessarily damaged. It is only fair that some form of review must be available to businesses whose channels are being forcibly moved. It is unacceptable that complaints can only be considered after the damage has been done.
It is important to ensure the UK broadcast market remains amongst the most dynamic and successful in the world.