Annual Keynote Lecture
Patricia Hodgson, CBE
Chief Executive, ITC
Miners' Institute, Newcastle Upon Tyne, 7/11/2001

Many people, since 11th September, feel they are living through a turning point - both in their own lives as they face a more dangerous world, and certainly in world affairs.

Communications have a key role to play in determining our future, for obvious reasons:

• because new technology like the Internet is being used to co-ordinate international terror,
• and because the propaganda war will now be conducted via global satellite links; (as the Gulf War 'made' CNN, so we see Al-Jazeera, the Qatar-based Channel uplinked from Paris, at the eye of global megaphone diplomacy)

But there are other more deep-seated reasons; TV and Radio are at the forefront of national debate about who we are and how we respond to physical and cultural tensions, around the world. Recent events have demonstrated the role of television and radio as the main arena for national debate, not only about terrorism and international affairs but also cultural differences tested by the current conflict. Aside from rolling news, television has given us the considered analysis of programmes like Channel 4's The Day That Changed the World, as well as thought-provoking debate like the excellent Dimbleby Special on Understanding Islam. Programmes made before 11th September, like the BBC's Islam series, have taken on a new resonance. At the regional level, Tyne Tees covered a joint service from the Newcastle Mosque, and the weekly news magazine North East Tonight paid close attention to the plight of Yvonne Ridley, the journalist from Co Durham, while also focusing on more indirect issues like the impact on tourism.

And, of course, there are underlying economic issues; our whole communications infrastructure is so important to the functioning of our economy and to our ability to cope with the downturn that was already apparent but made worse by the economic aftershocks of 11th September.

Within this vast but uncertain communications world, there can be no doubt that broadcasting is a British success story. For two reasons:
- we've got the structures and funding right, and
- we've remembered the key; it's the programmes, stupid!

* Broadcasting is the UK's biggest investor in drama, performance and the arts.
* BBC TV and Channels 3, 4 and 5 spend over £3bn on programme making in the UK; all other channels spend around £800m.
* Over 1000 independent companies produce programmes for the networks.
* 13% of exported TV programmes shown anywhere in the world in peak time come from the UK.
* Broadcast news in the UK is impartial and trusted (a MORI poll this year showed that 61% of the public regarded broadcast news as their most trusted source of accurate and impartial information, against 15% for newspapers and 1% for the Internet)

So how does British broadcasting manage to punch so far above its weight? With a ground-breaking mix of public and private investment - up to £5bn of commercial spend via advertising and subscription, rooted in a foundation of public investment via the BBC and the public/private "deal" which gives Channels 3, 4 and 5, spectrum privileges in return for public service obligations.

As a result, Britain spends more per head on television than equivalent economies, so it's not surprising we support one of the most flourishing production industries in the world. Success in broadcasting is demonstrated by high quality programmes across a range of genres, from EastEnders to News at Ten; from Big Brother to David Starkey's Elizabeth.

Diversity is one of the keys to this success. Programming and production from the nations and regions is an important feature of the television landscape, and the regional character of ITV is a critical distinguishing feature of the channel. Each ITV licensee must provide high quality regional news and current affairs, and a diverse range of other programmes designed to reflect life within the nations and regions. In 2000, this accounted in total for nearly 12,000 hours of programming, and an investment of around £170 million. (The BBC's output for the regions in comparison was over 5,000 hours at a cost of £137 million last year.)

In the North East, Tyne Tees' regional output has been the company's enduring strength, mirroring the rich culture of this region. Serving nearly 3 million viewers from the Scottish border to Selby in North Yorkshire, Tyne Tees provides over 13 hours of regional and sub-regional news, current affairs and other programmes each week. North East Tonight achieves a 30 per cent audience share, and other non-news regional programmes - When We Were Kids (history) or Grundy's Wonders (architecture), for example - regularly perform ahead of the network average in their peaktime slots.

Border Television is unique as a regional ITV company because it embraces three separate and distinct cultures - English, Scottish and Manx. Border's regional output appeals to all age groups and there is a balanced geographical coverage of each region epitomised in Lookaround, which commands the highest ratings of any regional news magazine, including the BBC, on mainland Britain.

Of course, the public service broadcasters also commission a significant amount of network production outside the London 'factory'. Taking local and network output together, around half of ITV's programme investment is spent in the Nations and Regions; a third of the BBC's; around a quarter of Channel 4's, and the new kid on the block, Channel 5, is well on the way to achieving 10% of outside London spend. This is good for local communities, and means more generally that UK networks reflect the range and diversity, the warp and the weft, of UK society back to the nation as a whole. And it's not just Coronation Street and Brookside but Heartbeat, Peak Practice, Tonight With Trevor McDonald and many others.

I began with the role of TV and Radio in our consideration of who we are; in the nation talking to itself. The ITC conducts regular research into audience priorities. A questionnaire placed on the BARB panel over 4 weeks earlier this year, revealed that, of 3,500 viewers:
- only one in ten said they were not interested in regional programming;
- 77% said it is important that BBC1 and ITV programmes reflect the regional diversity of the country; and
- 89% think ITV should have to provide regional programming.

Similarly, in this year's report on Public Service Broadcasting: What Viewers Want, audiences from different ends of the country showed strong support for programmes made in, and about, their area, and felt it important that television used local talent and fed the local economy.

We are now conducting a new round of citizens' juries, taking 2 or 3 days with representative groups around the country, to tease out what they want from television both as citizens and consumers. The distinction is important. Over the years, those surveyed regularly stress the need for diversity and for a wide range of regional programmes, even if they don't themselves choose very often to watch them. And there's the rub.

In September we held a citizens' jury in Leeds. The output was interesting. Nearly all the group, over 90%, watched regional news. The next highest score, in terms of interest, was factual programmes, watched by half the panel. Other genres had relatively low scores.

The group concluded that:
- regional output was important for regional identity, even if they didn't always watch it themselves.
- they criticised stereotyped regional output - poverty in Leeds, walking in Cumbria, and so on
- they would like, in an ideal world, quantity to be sustained but, looking at the pressures, said quality was more important than hours.

This chimed with work Robin Foster has done for the ITC, published in 'Culture and Communications' in September. He asked David Graham & Associates to plot production across the UK and identified, not surprisingly, the importance of critical mass; where the BBC and ITV have centres and clusters of Indies grow up round them. The question is, how many of these centres can the UK sustain? And will they move in response to changing markets?

The BBC's investment in a new broadcasting operation in Hull shows how new hubs can emerge. Aside from creating a base for the regional TV service and BBC Radio Humberside, money is being invested in BBC Hull Interactive, offering television on demand plus broadband in partnership with Kingston Communications, the local telecoms operator. Kingston's 10,000 ADSL customers will be offered all the networks, video-on-demand, local features and an interactive local news service from a dedicated team.

These developments must be seen within the wider question about the health of the sector. I'd like to take some time to talk about that and come back to the idea of a new settlement for public service, including a Charter for the Nations and Regions.

I've said that broadcasting in the UK has been, and still is, a success story due to past policy choices and a funding structure which has created a balanced ecology. But we are witnessing a new chapter in that evolution, with fresh challenges from convergence and the as-yet-unanswered questions about a new Communications Bill.

The UK is switching to digital faster than any other nation, with over 30% of homes now taking digital television services, and almost two thirds of those exploring the access they offer to interactive or online services delivered through the TV.

With the Lords in discussion about a Paving Bill to set up a kind of pre-OFCOM to prepare for change and merge the existing regulators - we need to be clear about some important questions:
- How do we maximise UK success in global communications?
- What do customers at home want and need from services delivered by new technology?
- What are our social, political and cultural expectations of the Information Society?

The White Paper was a good start. But pre-election aspirations must now become hard policy in a very different economic climate.

I'd like to suggest three priorities for regulation in this sector. They should always be priorities. But given the business cycle and the economic aftershocks of the recent atrocities, they are vital. One, as I've suggested, is a new settlement for public service broadcasting and a new solution to ensure regional output is central to it.

But before I come on to that I'd like to apply some context and look at, first, investment friendly policies and, second, competition.

First Britain must set the standard for investment friendly regulation.

Broadcasting does well. Regulation based on competition for audiences, not revenues, grew ad-based services to complement the publicly funded BBC and, more recently, a dynamic subscription sector. Of course advertising is cyclical, like the economy. There will be further pressure from recent events and I don't underestimate the downturn. But UK television has several sources of revenue and will come through.

That doesn't mean it isn't burdened with the costs of the switch to digital. There is a debt problem for individual firms and we may see some consolidation. But the switch is now largely made - for the broadcasters, if not all viewers - and digital TV is a success.

The Internet has taken off. But broadband faces a bigger challenge. Businesses will pay for speed and more capacity. But, so far, we've seen no killer 'ap' to drive consumer take-up.

What to do? First of all, be realistic about the market. Broaden our definition of broadband and focus on the supply side. DSL may be a slow starter in the consumer market. But cable passes half of all homes and combines broadband capacity with a key driver in that market - entertainment. DTT can combine broadcast TV with full Internet access. DSat mimics broadband with hundreds of broadcast streams, a smart set-top box, now with memory, and a return path.

It will be content and services that grow broadband and, in the consumer market, these are likely to attach themselves first to digital TV, where there's clear demand for a service which will soon reach 50% take-up. Broadcasters are now versioning interactive services for the different capabilities of different platforms. Anyone who wants to see the Information Society take shape early in Britain should look at how Government, education and public services can do the same.

Combine access to digital TV with the numbers of broadband pc connections and you see a "quotes" broadband roll-out able to reach most people within 5-7 years. It could take 20 years to make true broadband universally available, reaching the information poor. Proxy broadband can do it in 5; a patchwork quilt of services, with cable and DSL offering full functionality, but satellite TV and DTT, - combined with smart set-top boxes and a return path - offering services hard to distinguish from the real thing; creating a truly national market for information services, a genuinely inclusive information society and a growing demand that will eventually benefit all operators.

So, we should be focusing on investment in content, and not just infrastructure.
- encouraging the free flow of capital, with simpler ownership rules and regulation only where necessary;
- protecting intellectual property rights, particularly for Independents, and
- ensuring the most protected broadcasters, the BBC & Ch 4, focus their spend on real quality and innovation.

Second, competition.

The aim, of course, is to use competition rather than regulation to deliver what customers want. Regulatory structures should never impose unnecessary burdens. We have an opportunity to review current practice. Any new framework for communications should be lean and mean. Lean, because we need to roll back regulation and mean, because - when regulation is necessary - it must be tough. Competition doesn't just happen.

Communications has its natural monopolies and the cost of broadband and digital may mean consolidation and a few dominant networks. We must be realistic. Recognise where investment duplicated is investment wasted. Don't fear the global players. We need inward investment. But keep the networks open:
- we've long required common carriage on natural monopolies
- fair, reasonable and non-discriminatory access to systems with significant market power is established in EU Directives and
- we should encourage non-exclusivity on other key systems, to extend the range of services available to customers and grow the market.

Third, this will only deliver what we want if there's a new settlement for public service broadcasting, to underpin investment in content and drive demand.

Broadcasting is pretty good in this country, but it's under strain. Many believe - with a sense of inevitability - that competition will destroy the range and creativity our generation enjoyed. It will create commodity television; popular, good of its kind, but failing to offer real mental nourishment.

That's why the ITC's agenda for this Autumn has been largely focused on issues of content - putting the programmes and services back centre stage. The sector needs content for growth, and audiences want quality. This was a central theme of "Culture and Communications", a volume I commend to you.

Our authors were pretty clear about investment friendly policies and competition. They also stressed what we called "Cultural Citizenship".

We want to make new networks and services available to all. Why? Well, economic growth of course, but what else? What should they offer? More than commodity content is the answer. Most of our authors urge us to have ambition for what broadcasting and new media can contribute. "It should be the arena", says the Chief Rabbi, "of our shared public conversation on who we are and what kind of world we want to hand on to future generations...(on this) much depends, not least the future of Britain as a free and gracious society". His thoughts have fresh resonance in the light of the terrible recent events.

Tim Gardam thinks these issues "go to the heart of the challenge to modern Government: can a modern democracy in a global market economy", he asks, "retain the necessary cohesion still to work as a civil society?"

That's a pretty stark question and most of our writers believe part of the answer lies in the electronic media. So there's a public interest in what it purveys. Sabrina Guinness writes of her work with young people. The impact of new services and the growth of the sector, she says, make it the biggest single influence on many youngsters - certainly bigger than schooling. Wilf Stevenson, Samir Shah and Keith Khan worry about a failure to serve properly some of the very diverse communities in our society. Without a meaningful shared experience, can that society work?

Their conclusion is not to give up, but to focus on the public interest as well as the market. We mustn't sleepwalk into the kind of crisis of quality that challenges some other public services and divides the nation into haves and have-nots. We can and must make the most of a broadcasting market that's flourishing and of public service within it, guaranteeing a certain range and quality available to all. We can combine demanding remits for the lead players, with fresh offerings from new ones. Our authors are feeling towards a new settlement for public service within a growing commercial sector.

* My own view is that we can combine realistically demanding remits for public service broadcasters, with fresh offerings from new players in new 'public spaces' made possible by technology. Britain's creative industries, not to mention audiences, depend on the programme and related investment of the four main players. We want them to continue.

* The BBC and Ch 4 are the most privileged providers and the best protected against market pressures. They need the strongest remits.

* ITV and Ch 5, the commercial psbs, can give us investment commitments in return for the privileges that make them viable. And here I return to the issue of regionalism, because these commitments should of course include original production and output from and in the Nations and Regions.

But the deal must be realistic. In the book, Robin Foster argues the case for the importance of regional production - to viewers, to regional economies, and for its wider social value - but he shows the significant costs involved. And we know that current structures and activities may be at risk as competition in the television market increases.

The status quo is not an option - the current obligations on ITV remain too detailed and focus too heavily on quantity of regional output rather than quality, investment and prominence in the schedule. So we need a debate about hours, investment targets and the accessibility of the regional schedule, together with a sensible flexibility of resources in response to technological and market change. It doesn't make sense to spend money on bricks and mortar when it should be focused on programmes.

Acknowledging this challenge, the ITC is in discussion with ITV about a Charter for the Nations and Regions, which will aim to simplify current regulations whilst buttressing the underlying investment commitment.

We believe ITV can commit to public targets for investment outside London, whether in programmes made for the network or for specific nations and regions. A new settlement can be reached to deliver real benefits for the future if, in exchange for stretching targets, there is more flexibility to manage that commitment within a robust framework of accountability.

Underpinning this is a real need to encourage investment in content - because, in our converging world, it will be this that drives new networks and systems. So we must ensue that broadcasters focus their spend on real quality and innovation. This in turn will have lessons for the wider sector.

Many in the nation, industry and government want content put back centre stage as the parliamentary draftsmen polish the Communications Bill. Economic success, not to mention a decent society for our children, depends upon it.

A Question & Answer session then followed:

Neil Robinson - Border Television.
Q. It's a two-part question. Here in the north we are quite close to our audiences and we are also close to our politicians and we, in conversations that we often have with them, they say to us that they want more regional television and not less. I wondered what political backing you felt you had for the changes that you are proposing and, secondly, I'm not sure how you will measure quality.

A. Of course, MPs are our strongest allies, but I would be concerned if we allowed our lobby of MPs to fail to grasp these issues because the easiest thing in the world is to deliver more commitment by the yard. I could quote to you hours and hours of regional output that goes out after midnight, or in slots that don't command audiences. It seems to me that what we are trying to achieve is access to programmes in the nations and regions, programmes that are available when their audiences are available to watch. Now, this is a really difficult topic. By raising it at all, you may find yourself in a position where there is only down side because the easiest thing in the world is just don't touch it, this is too controversial. Yet if we look at the pressures on our major broadcasters for the next ten years, it would be all too easy, with the requirement, the obligations on them in current legislation, for them to take more and more refuge into tick box, number of hours, but where do they go out, who is watching them?
So, somehow, we have got to combine more bankable targets that we believe can survive the next ten years, develop those, win political backing for them, and deliver that political support.
The quality question, well, that is the 64,000 dollar question for all television and any definition of public service, isn't it? We know that you can't define it by ratings, we know that there is a subjective element, but we also know that innovation and ambition has a lot to do with it, and we also know that there are some programmes that we all agree have those defining factors, so I think we have to try and be rigorous about it, but the most important thing must be ambition.

Q. It's a 64,000-dollar question and you seem to be trading one off for the other, yet we don't know what the other is yet.

A. No, but that is the nature of all broadcasting, isn't it? How do you prove my thesis that there is a danger of commodified television? I suspect that in a debate with Greg Dyke, or Charles Allen, if they were here tonight, they would trade blow for blow in public with me and they would list a whole series of programmes which they would say is not commodity television, and no doubt some of them I would say no, terrific. Some wonderful things in the schedule at the moment - Blue Planet, some marvellous stuff on Channel 4, David Starkey's history series.
We all know the programmes of ambition and real innovation when we see them. I can't prove that there is a danger of commodity television, but I am pretty certain it is true and I suspect there are some people here in the hall who know it is true and all you can do is to do your best to - you can look at, as I have done, I have analysed the schedule, I did an exercise analysing the schedules for the five terrestrial broadcasters for a month's output in November of 1975, '80, '85, '90, '95 and last November and measure the number of genres, the number of hours of soaps, the number of hours of quizzes and game shows.
Now, it doesn't prove ultimately because you get a terrifically challenging quiz show like Have I Got News for You, but you can see some trends there that cause you to have concern, so you use whatever quantity of measures but in the end it comes back to judgement and that is the nature of the business we are in.

Paul Atkinson from BECTU.
Q. It was interesting what you had to say about regional programmes and regional production. My question is phrased around the move towards a single ITV company and how will the ITC seek to ensure that network regional identities remain in sharp focus, and also how will the present numbers employed in regional production be maintained?

A. I think I was making pretty clear we must allow - and I know BECTU is committed to this - we must allow our industry to evolve. So I can't give you an answer for all time. I can't say that in ten years' time every single licensee will be precisely the right regional arrangement for the world in 2011. What I hope we will come up with, as I said, talking about a Charter for the Nations and Regions, I would like to get, not in primary legislation, but powers for Ofcom to set investment targets, allied to percentages of programmes made in regions for regions. I suspect there will probably have to be some flexibility about how you define a region. Certainly my experience, working for the BBC, was that they were forever trying redefinition, sub regions, you never get it precisely right. You need I think in primary legislation a strong and defined set of responsibilities for Ofcom. I don't think that you can put staff numbers, or, as I indicated in my remarks, particular bricks and mortar into legislation, but I think you can find phrases and targets about diversity, about meeting audience need, that give the basis for a powerful regulator to exercise that power, consistent with commonsense in terms of the way the sector is evolving. That is not as bankable an answer as you might wish to get from me, but I don't think there are any precise numbers you can give over a ten year span, that you would want to see in primary legislation.

Garth Jeffrey, RTS Vice Chair.
Q. You touched on methods of delivery to include digital cable, digital satellite and digital terrestrial and you also commented on not putting your money into bricks and mortar and draining programme production. However, the money that is going out of Carlton Granada to keep the digital terrestrial network running is significant. The public is confused about digital television and the Government - and I read in the papers today - is talking about turning off analogue some time between 2006 and 2010. I find this all rather strange that they can lay this down because broadcasters didn't want to in the first place, in reality, and yet the Government is making all these statements, with no substance or support, and is draining what is quite a difficult market any way in terms of finance, particularly on digital terrestrial television. I would be interested to hear your views.

A. It is certainly the case that Government very cleverly used the competitive fears of the main broadcasters to get them all to commit to digital when they didn't want to. All the incumbents in the mid-'90s would have been quite happy to see the analogue world go on forever. SKY had got a very profitable analogue business that it had taken great risks with and was breaking even and the terrestrial broadcasters certainly didn't want to shift away from analogue broadcasting, and cable was struggling with having laid its analogue service, but all of them knew that you can't uninvent the atom bomb as it were, you can't uninvent the capability of this technology and there they all were watching each other, terrified that each would move before the other. Government played on that. I was quite closely involved, I watched them do it, I watched Virginia Bottomley invite the moguls to dinner at Hampton Court and walk round the garden with them, one after the other, stoking up mutual suspicions and it was that night that Michael Green committed to digital terrestrial. It would have happened any way, it might have taken another year, but as Rupert Murdoch saw the possibilities of the Internet, he would have thought I have got to beat them to it with more on my platform. The BBC couldn't afford to allow satellite to go digital if it didn't go digital, then ITV etc., so, sooner or it later, it was inevitable.
Why is DTT important? Clearly, it, in terms of a pay platform, has less to offer than cable or satellite. On the other hand, if the terrestrial broadcasters hadn't made that commitment, we would be in a world that would have seen an inevitable switch from free-to-air television to pay television. Not just to rebalancing with 40% of the population choosing to take pay as well as free-to-air, and possibly 50-60% in time, but a sense that the future of television is only pay, whereas DTT could be, we don't know yet, but has all the potential to be the path of choice for those who wish to continue a free-to-air service and not to feel that they are dependent on getting locked in to a subscription forever more.
If it were to go down the tubes next year, and you were facing a world in which the future of television was delivered only on cable, or only on satellite, I think the share of the main broadcast, the current main networks would be in for a very substantial dive. If, however, DTT continues, there is this natural migration, not only for the late adopters for the analogue viewers into an easy route into the New World - plug in their aerial - but also there is still the natural platform of choice for free-to-air public service. My own guess is that they will have to be - and I read in the newspapers as you do - that there will have to be some kind of restructuring, but that it will happen, whether it will be the variety that we have seen in the press this morning, or some other variety I don't know, but the investment is made, the transmitters have been built, that is not going to be wiped out, so one way or the other we are going to see three competitive platforms and I think that will be good for viewers.

Q. I agree. I just worry - nothing to do with Carlton Granada - that they can afford the drain on their resources. There is going to be a crunch time and then you may end up just left with free-to-air services and no pay because the public is quite confused and you have to pay to get a digital service if you want it.

A. The problem is, of course, it's Canute, you can't stand in the way of the waves, but it's extraordinary how vital our industry is. You never know whether there are going to be casualties, but the most important thing is that the platform, the installed base is there, the fundamental switch, as I said in my speech, has been made, and however difficult it is in the immediate short-term, we have a success in Britain in digital television.

Q. Can I take up an issue in relation to the quality question, phrases like lowest common denominator and your comments about risk and innovation, how far do you see quality linked to audience share?

A. There is no answer to that question, is there? There are the old wisdoms that you can't just go for audience share because, to do so, is to betray your own creativity, the audience finds you out. If you are being cynical, and creating a cynical schedule, it starts to lose share actually as you go for share. It's no good having the most wonderful programmes in the world if people aren't watching them. So somewhere between sensible scheduling and ambition - and it is an art I think, but I think it requires an act of faith. Over the last 15 years of my experience, which started - I came into the centre of the BBC at the height of the scandal about Thornbirds being put on instead of Panorama and the sense that the BBC in the mid-'80s had lost its ambition. And all my observation and experience has been when you have had controllers, director-generals, heads of Channel 4, who have had the courage of their convictions - and it brings you back to ambition and courage - who have taken a risk, who have not always put sheer numbers first, that interestingly that has tended to deliver numbers and that is something to do with the integrity of the product. I can't prove it.