Carter ups the digital media ante

Lord Stephen Carter, Minister for Communications, Technology and Broadcasting, talks to Steve Barrett about his vision for Digital Britain.

Lord Stephen Carter, Minister for Communications, Technology and Broadcasting
Lord Stephen Carter, Minister for Communications, Technology and Broadcasting

Tie-less, businesslike and with Sky News on mute in the background of the second of his two departmental offices, Stephen Carter is not your average new Labour government minister.

Lord Carter, if you prefer, is an unelected politician appointed to the House of Lords by the Prime Minister himself. He has had several high-profile "proper" jobs in a distinguished career, all of which have informed his departments' release last week of the interim Digital Britain report that will shape the future of the media landscape. Digital Britain follows hard on the heels of media regulator Ofcom's public service broadcasting review and the Office of Fair Trading's proposed easing of the contract rights renewal mechanism that reins in the UK's largest commercial broadcaster, ITV.

It's fair to say the average media exec's eyes glaze over when government and regulation hit the agenda, but serious issues are being debated that will be crucial to the future of the entire industry - and the media owners, agencies and advertisers within it.

A former boss of ad agency JWT, PR firm Brunswick, ill-fated cable firm NTL - a low point in his career, although it netted him a £1.5m payoff - and founding chief executive of Ofcom, Carter is that rare animal: he understands media, but is at the heart of government.

An avid Media Week reader - he knows last week's cover star Neil Jones from way back and is intrigued by the Carat managing director's move to News International - the consensus is that Carter's presence at Westminster is a good thing.

He has arrived at his dual communications minister role, split equally between the Department for Culture, Media and Sport (DCMS) and the Department for Business, Enterprise and Regulatory Reform (BERR), via a stint as Gordon Brown's chief strategy adviser at Number 10. His brief - and the reason his new position exists - is to oversee Digital Britain, which is out for consultation until March before a final version is published in June.

"The PM took the view that the communications sector in its new converged reality has been under-considered by government," says Carter. "It's a real opportunity to do something across the piece, from the pipes to the poetry."

He claims to be an optimist by nature and, despite the "analogue pounds to digital pennies" argument highlighted in Digital Britain (the fact that "traditional" ad revenues are not being replaced by the "new" digital media superseding them), he believes the communications industry is in great shape.

New digital age
"We didn't have a broadband market 10 years ago, we didn't have a mobile market of the scale we have now, we didn't have a digital satellite or digital terrestrial market and we didn't have iPlayer two years ago," he points out. "These are new markets, distribution and revenue opportunities for brands, companies and people in the manufacturing and supply chain of those services. These are phenomenal growth success stories from a standing start."

But they and their traditional forerunners are also industries at a turning point as they address the challenge of new media, especially when most large commercial digital media owners are American and not inclined to reinvest in British content. Fifteen per cent of UK advertising is already digital and about 80% of that is down to search, which essentially means Google - and most of that revenue siphons straight back to California.

However, the minister doesn't believe government should intervene, and that the market should dictate success or failure. "I'm instinctively nervous about protectionism," says Carter. "Liberalised markets bring innovation, opportunity and wealth. The search market didn't exist. It was up to a British company to invent it - they didn't. Digital satellite didn't exist. A British company tried to invent it - they weren't very good at it. They got taken over by News International."

But Carter accepts the concept of "British content for British users" is still important. "There is a difference between content and, for example, dishwashers," he argues. "We're all agnostic about where manufactured goods come from in social terms, but we do care about British news, drama, education, culture and history. And, as the world becomes more global, they become more real. The funding of British content is a real open question."

That's one reason Carter believes there is a long-term case for a second provider of public service TV content, in the face of others who want less BBC and think the market should provide. He wants to examine broader questions around the funding of content and will seek the industry's opinions over the next six weeks. For example, he believes the OFT and Ofcom should look at the media mergers regime to see if current rules prevent economically sustainable local news and newspaper business models from continuing.

Carter cites this as one element of Digital Britain with firm proposals and rejects accusations the document is nothing more than a round up of theories and a precursor to several new reports.

"Some people obviously haven't read the title - it's labelled interim," he points out. "We've only been working on it for three months. If we put out a final report after such a short time, we'd be subject to all sorts of accusations."

But for some, such as Trinity Mirror chief executive Sly Bailey, time is running out and the merger regulations need to change now - not in 18 months. And even Ofcom's PSB review is adamant that action is required on TV broadcasting in the next 12 months, as the current model is "unsustainable".

"There's too much cost and not enough revenue (in local media)," admits Carter. "That leads you to consolidation. But consolidation can't happen, either because the commercial case doesn't add up, managements aren't interested or the merger and market rules are wrong. The primary thing we can do is ease merger rules and we're looking at it."

He also believes universal broadband could help guarantee access to local news, but that can't happen because four out of 10 people still aren't online, so Digital Britain proposes guaranteed broadband in every home by 2012, albeit initially at just 2Mb per second. And Carter is floating the idea of alternative funding similar to other countries, such as device or cultural levies and cultural lotteries. "Right now I'm unconvinced, although lots of people say we need to create a central pool," he says.

As well as the mergers review and changing universal service obligation from old-fashioned telephony to broadband connectivity, Carter highlights proposals such as committing to DAB as a network, establishing a second public service broadcaster, liberalising mobile spectrum for broadband development, public incentives for the deployment of next-generation networks, legislating to protect content owners from piracy, and a framework for a rights agency to share encryption and protection best practice.

Design and build
"The next stage is how you design that, what does it look like, what's the range and the incentive and what's the scale," says Carter. "There's real design and build to be done now."

While he is in regular contact with Ofcom chief executive Ed Richards, because there is an overlap, Carter is quick to distance Digital Britain from the regulator's PSB report. "(The Ofcom report) doesn't include radio; it certainly doesn't include online," he explains. "Ofcom has a strangely narrowcast brief - and it's casting an opinion rather than making a decision. We offer a broader interpretation of what public service content might be in what is now the media world, not the television world." In his view, the regulator has taken it as far as it can and handed over to government to make some decisions.

The radio sector has reacted well to Carter's interim Digital Britain proposals, with its commitment to DAB as the main future radio platform, despite a belief in some quarters it is just a stepping stone to internet radio.

"I'm always loath to make technology forecasts, but my sense is radio will be multiply distributed digitally," he says. "There is a case for a dedicated DAB platform, but it doesn't have to be exclusive. Exclusivity of digital distribution isn't an issue. Nobody's asking if digital satellite TV will be overtaken by IP."

He even believes Channel 4's abortive launch of its 4Digital radio venture could have some positive fallout. "C4 took a long view and its plans were an interesting contribution to what could have driven DAB," he says. "But it had to decide between its core remit and short-term needs or the extension of its remit and longer-term opportunities. I can understand why C4 ended up making the decision it did. You wouldn't wish for it, but it may have triggered greater clarity around what needs to be done about DAB - sometimes these things sharpen people's minds."

Carter also hopes Digital Britain's commitment to DAB will persuade the automotive industry to buy in to it. "The manufacturing supply chain doesn't like uncertainty," he says. "What's the point in backing something if it's going to disappear the following day, especially in today's car market?"

Carter is writing to manufacturers to make the Government's position clear. "We have to get them on board," he argues. "There are already models where you can get DAB fitted as standard and some are bringing it in as an option. Other countries coming on stream will help. The global supply chain is important as we import most of our cars."

As well as reading Media Week religiously, Carter devours The Economist, Spectator, New Statesman and New Scientist. He bounces between GMTV and BBC News in the morning and reads most newspapers - physically and electronically. He's a believer in the future of print, but goes online for immediate updates or deeper research. He has every form of TV at home, but his lifestyle doesn't match the concept of "regular" viewing habits. Most of all, he lives on his mobile phone.

"If you distil the endless writings about new technology down to two things, it would be mobility and access," he says. "You can get what you want on the move, when you're doing other stuff. You can double, triple and multi-task - and you can get access that allows you to cut through layers, procedures and slowness. Those are fantastically liberating individually, and fantastically improving of corporate efficiency." That, possibly more than anything, goes a long way to explaining the direction of travel set out in Carter's Digital Britain report.

DIGITAL BRITAIN: FIVE MAIN STRANDS

Overall theme - the digital economy and creative industries must be a central driving force of the UK economy and unarguably planted in government and government policy in a converged, coherent way.

Sub-themes - DAB roll-out, digital TV switchover, skills, literacy and competition regimes for areas such as local and regional media merger regulations.

1. How to define and fund universality and deliver it
Encourage development of public service champions of universal take-up, including the BBC. Produce a public service delivery plan to introduce universal access to broadband of at least 2Mb per second by 2012.

2. The case for public incentives on next-generation networks and how to get the scale of connectivity needed for a competitive economy
Establish a strategy group to determine how far market-led investment by Virgin Media, BT Group and new network enterprises will take the UK in terms of roll-out. Remove barriers to a wider wholesale market. Consider the case for public incentives for next-generation broadband.

3. How to liberalise spectrum to facilitate next-generation wireless networks
A modernisation programme will resolve the future of 2G spectrum, make available more radio spectrum suitable for next-generation mobile services, and provide greater investment certainty for existing 3G operators, greater network sharing, and commitments by mobile operators to push out mobile broadband.

4. Define the operating structure of the second public service TV broadcaster
Create a second public service TV provider of scale, with a tie-up between Channel 4 and BBC Worldwide as one of the first options that will be looked at.

5. Produce a legal structure around rights protection and content protection
Explore the potential for a rights agency, the willingness to fund a new approach to civil enforcement of copyright and consult on peer-to-peer file sharing.

Opinions are sought from interested parties by 12 March, prior to publication in June of the final Digital Britain report and its conclusions.

THE INDUSTRY'S VIEWS

Sly Bailey, chief executive, Trinity Mirror
The thud made by the 80-page interim report on Digital Britain as it fell on our desks today was matched only by our hearts sinking as we took stock of its content. We are bitterly disappointed the report makes only passing reference to newspapers - the word "newspaper" is used just four times - and the crushing lack of understanding of the urgency required for changes to merger regulations in the local and regional media sector. Of course, we welcome the commitment to investigating the potential for changes to merger regulations in the sector. But how long will the process take, following the full report in June? One or two years?

Sir Michael Lyons, BBC Trust chairman
BBC Worldwide is not a self-standing communications company. It is the commercial wing of the BBC. All its value depends upon programmes - programme ideas created by the BBC. Separating that, breaking off that lifeline in some way, severely risks its commercial future. What I have particularly sought to underline in this debate is that, as far as I'm concerned, BBC Worldwide is owned not by the Government or Ofcom, but by the licence-fee payers.

Carolyn McCall, chief executive, Guardian Media Group
We are pleased the culture secretary and now Stephen Carter's interim Digital Britain report have acknowledged the importance of and pressures faced by local and regional publishers. This issue has rightly moved up the Government's agenda. It is encouraging that Digital Britain recognises the need to investigate the regulatory barriers to the future viability of the regional press and we look forward to contributing to the OFT's review of the sector. GMG also welcomes the focus on respect for IP and copyright, and we will continue to push for closer scrutiny of the impact of aggregators on UK content providers.

Andrew Harrison, chief executive, RadioCentre
It is all to play for now for digital radio, in light of Lord Carter's report. The next three months are critical for the evolution of commercial radio in the UK. Small stations are under real financial pressure to survive right now. The industry is under pressure to come up with a plan that shapes the future of digital radio. This report is a final chance for government, Ofcom and the industry to secure a viable sustainable future for small local FM stations and an exciting future pathway to digital for national, regional and larger stations. This plan requires investment in coverage and legislative reform from government as an urgent priority.

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