Feature

Face to face with the super regulator

Ed Richards faces a challenging agenda in the face of a suspicious commercial sector. Steve Barrett talks to the Ofcom chief about his performance so far and his strategy for the future of media regulation.

Urbane and unflappable, and looking younger than his 41 years, on the surface, communications regulator Ofcom's chief executive Ed Richards is the archetypal New Labour acolyte, in the mould of an Ed Balls or a David Miliband.

Many media types dismissed his move to Ofcom in 2003 as another job for "Tony's cronies", given that Richards was Blair's senior adviser on media and communications. He was the man behind the Communications Bill that spawned the new regulator in 2003. He was also once controller of corporate strategy at the BBC, provoking further suspicion from the commercial media sector.

A glance at the bookshelf in Richards' office heightens these suspicions, with a copy of former BBC director-general John Birt's The Harder Path catching the eye. To be fair though, he also has a copy of Virtual Murdoch by Neil Chenoweth to restore the balance.

Richards rose to the top job at Ofcom last autumn to replace the departing Stephen Carter and has been chief executive for nearly six months. He dismisses the "Tony's crony" aspersions with: "I knew it would happen, and I knew it would subside and that it was nonsense.

"I feel well prepared and well trained to do this job. Just because you advised a politician at some point, should you be banned from a job like this? That would be ridiculous. They should choose the best person."

He points out that politics of all hues co-exist at senior level within Ofcom. For example, two media experts from the Conservative era -Dominic Morris and Sean Williams - are also on the regulator's board. "For some reason, I'm the only one who ever gets mentioned," he says, adding that he hasn't spoken to the Prime Minister since he stopped working for him.

Richards doesn't have much time to worry about politics at the moment anyway, with the regulation of junk-food advertising, contract rights renewal, the future of radio, the financial review of Channel 4, the children's programming review, the second digital radio multiplex and the public service publisher, just some of the items on his agenda. Ofcom published a mammoth 980 documents in 2006.

"It's an endless list, isn't it?" he laughs. "You can't do this job and put your feet up. The breadth of what we do is enormous. But that's why I do the job."

He accepts that, like most Communications Acts, the 2003 legislation was "out of date almost as soon as it was enacted", but he contends that it has survived "tensions around the edges" to hold up pretty well. "There's no desperate need to reintroduce legislation for the fundamental tenets of the Act," says Richards. "And, generally, the sector agrees with that."

One thing in particular the broadcast media sector didn't take kindly to was Ofcom's decision last November to propose extending the ban on advertising junk food to young people up to the age of 16. It was widely expected that the ban would only apply to younger children.

The response of Michiel Bakker, chief executive of Viacom Networks UK, which represents TV channels such as Nickelodeon and music channel MTV, was typical. "Ofcom's surprising and unexpected decision to extend the ban on HFSS food and drink advertising to include 10 to 15-year-olds was done without consultation. In our view, (this age group) is completely different from under nine-year-olds," he said at the time of the announcement. Before Christmas, the regulator opened up a period of further consultation on the extension to under-16s, during which the likes of Isba suggested the proposal could be illegal.

"The extra consultation is nearly finished and our response should be published in the next few weeks," says Richards. "Implementation will then take place and we'll see whether we end up in court."

He rebuts allegations that the under-16 extension was a "curve ball" that couldn't have been foreseen by the media sector. "A number of people lulled themselves into the view that it could only be a lower age," he says. "They said the Government's focus was only primary schoolchildren, but that's just not true. I had a letter from health minister Caroline Flint saying that, of course, they're concerned about all children, and since when did children stop being children at 12?"

The funding of children's programming through advertising is clearly a thorny issue, but Richards says the general economic pressure on commercial broadcasters to move to digital switchover and their ability to fund high-quality children's programming is also crucial. "That's why we launched a review to look at the future of children's programming," he says.

"It's a serious issue, but I'm not sure we have any easy answers to it, because I'm not sure those answers exist. I would warn against the assumption that we're going to come up with any."

Richards accepts that, as the full digital switchover in 2012 approaches, Ofcom's ability to impose public sector broadcasting obligations on ITV and other commercial broadcasters, with costs associated with them, is going to wane. "We don't expect ITV to drop its obligations overnight, or say that it needs to, but by the time we get to 2012 - or before - it will be very difficult to impose (those) obligations," he says. "There is a 'glide path' down to a revised set of obligations for when we get to switchover."

He is less willing to publicly predict the future of commercial TV's CRR process, although reading between the lines it wouldn't be the greatest surprise if a review were to happen in the next 12 to 18 months.

"Whether a review happens is a decision for the Office of Fair Trading, because (the process) was an undertaking of the merger (of Carlton and Granada)," he demurs, while adding: "If there is a review, I'm sure we will be heavily involved."

In any case, he points out, these reviews don't happen overnight; they are long, complicated processes. "If there is a review, it will take a substantial period of time, and it should not be assumed there will be change and that CRR will disappear."

Richards says ITV's falling market share and the negative consequences for its revenue are proof that CRR is working on one level. "But is it working effectively without distorting other decisions or the market in ways that are undesirable? Is it distorting decisions by buyers, or decisions being made by ITV in terms of its schedule, and are those contrary to the consumer's interest?"

Many media observers point out that ITV only has itself to blame for CRR, as it was the broadcaster that recommended the system three years ago to help the merger of Carlton and Granada go through. "There were other proposals mooted, but some were not as effective as people claimed," says Richards. "So I would hesitate before saying ITV shot itself in the foot."

As he explains, ITV very much wanted the merger to happen, and the merger has delivered a lot of savings and, more or less, one ITV company. "In that sense, it was the right thing to do," adds Richards. "It's difficult to say whether there were other approaches that could have been superior."

There are big changes ahead for commercial TV, but Richards sees even bigger challenges for radio - especially in the short term.

The Future of Radio report, due in the first quarter of this year, can look at the issue of radio regulation, but only within the constraints of the Communications Act. "There is concern about radio," Richards admits. "We would like to modernise or update the approach to radio regulation. But the Act is very clear on that and it's quite challenging to change."

Andrew Harrison, newly installed head of the RadioCentre, welcomes the opportunity the regulator has ahead of it. "Ofcom has been very supportive of the radio sector since its formation," he says. "We are looking forward to the Future of Radio consultation as an opportunity for further deregulation of an over-regulated sector to enable commercial radio to thrive in the digital age."

Radio has suffered particularly from the rise of internet advertising, especially in the commercial sector. In addition, the BBC has a 55% share of the radio market, higher than its slice of any other media sector, and obviously has a lot more money to spend on content.

Richards sympathises: "The circumstances for commercial radio have been tough and still are tough. You have to regulate with the grain of what's happening in the market, and with sensitivity to the circumstances that are faced by the sector. If you don't do that, you're losing touch with reality."

The recent handing back of local licences by UKRD in Stroud and Kingdom Radio Group's River FM in West Lothian was a big indicator of the challenges that exist in trying to deliver economically viable commercial radio, although Richards is quick to point out: "We still get a lot of bids for FM licences."

"It's very competitive and that shows there's still demand and that you can still run a business successfully in many areas," he adds. "But as those licence returns demonstrate, in some areas it's more difficult to do."

Richards believes radio must go digital to survive. "In the future, there won't be a radio business that isn't also an online digital business," he argues. He's also intrigued by the relationship between radio and music sales, which is an area he sees as ripe for expansion. "A lot of people are thinking about selling music and there's a lot of people working to make sure that the brand proposition is a cross-media, cross-platform proposition," he says. He highlights Magic and Heart for special praise and, obviously, some of the BBC stuff, although "they have got a lot more resource to put into it".

"Capital has made progress and will make a lot more progress in the coming months with the changes there," he also concedes.

Richards reckons radio companies are grappling with the changing media environment more effectively than TV. "It's a more acute problem for them," he says. "The challenges are greater, and what you can do with convergence with audio is coming that much faster than with video."

Convergence is the latest challenge on a packed agenda for Richards. But despite doubts about nepotism and an anti-commercial bias when he joined, and the obvious displeasure over the junk food advertising extension, the consensus seems to be that he's actually doing a reasonable job. As one media insider says: "No one really has an issue with him. If he wasn't truly independent, he wouldn't last two minutes in the job."

ED RICHARDS CV

2006: Chief Executive, Ofcom. Richards took over from departing chief executive Stephen Carter in October last year. Richards' salary won't be disclosed until the summer, but his predecessor was paid more than £440,000. In 2005/06, Ofcom employed 776 staff. CRR adjudicator Robert Ditcham is independent, but has a "catch-up" meeting with Richards every month.

2003: Chief operating officer, Ofcom. Responsibilities included strategy, research, consumer policy, business planning, finance, human resources and Ofcom's functions in the nations and regions. His total remuneration in 2005/06 was £309,000, during which time he spent 10 weeks on a management programme at Harvard University in the US.

1999-2003: Senior policy adviser to the Prime Minister for media, telecoms, internet and e-Government

1996-1999: Controller of corporate strategy, BBC. Consulting at London Economics, as an adviser to Gordon Brown MP

1989-1990: Researcher, Diverse Production. He worked on programmes for Channel 4.

Richards is a non-executive member of the Donmar Warehouse Theatre.

RICHARDS ON ... ... Digital media

"Internet advertising is largely self-regulatory. It's not us (advertisers) should be worried about; it's the Government. It is a big social issue. I'd advise client marketers to honour the spirit of what's happening in broadcasting and respond to it sensibly. If they don't, they may be inviting the Government to take more draconian measures."

... the BBC

"The BBC distorts the market. It is intended to; that's what it does. It is a publicly funded organisation operating in a market. The decision we have made as a society, with which I agree, is that we should fund the BBC. We should fund it properly because it delivers a lot of value to the country."

... Channel 4

"I've no idea whether Channel 4 will be privatised, but I hope not. We're not looking at that in our (upcoming financial) review. The review is concerned with whether C4 can carry on meeting a public service broadcasting remit in the economic circumstances it's likely to face over the next few years."

... BBC iPlayer

"We can't insist that the BBC Trust opens up access to the BBC iPlayer to commercial operators. It shouldn't be regulated in the same way as Sky's electronic programme guide, because that exists on a dominant platform. The iPlayer might become the dominant player, but it is the on-demand version of BBC1."

... Sky taking a 17.9% stake in ITV

"We are looking at issues around this and it is far too sensitive to talk about at the moment."

... the public sector publisher

"If we want strong public sector broadcasting in this country we should capture what we can do with the internet, mobile delivery, on-demand capability, networked media and participation. There's a strong argument for a new organisation focusing on that new-media world and a healthy PSB system fit for the 21st century."

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