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The havoc commission slams U.K. TV in the cooler.

Ultimately, the ITC produced only four changes in the British television landscape but, nonetheless, caused havoc in a small, influential sector with international ramifications. With its October 1991 TV franchise award decisions, the Independent Television Commission, the UKTV regulatory body that in January 1991 replaced the IBA, managed to upset every sector of the U.K. TV industry.

The ITC decisions did not satisfy most of the 40 companies that applied for the 15 regional TV franchises and one national breakfast-time TV license.

The ITC was criticized by Margaret Thatcher, the former British prime minister who started the ITC process, and by John Major, the current prime minister.

For its decisions, the ITC has been blasted by Brian Marsh of the British TV, Cinema and Theater Union, while the U.K. media group of Coopers & Lybrand Deloitte has defined the ITC franchise process as "cumbersome and ludicrous."

The ITC license-awarding mess could be undone after 1994, when the franchises can be sold. However, it is possible that, if the Labor Party wins the upcoming general elections, ownership changes will be blocked. In a short 10-month period, the 10 ITC members managed to eliminate the U.K.'s major TV program exporter (Thames Television); punish the U.K. TV companies with extensive investments in the U.S. TV industry (TVS and Thames TV); create Britain's largest broadcast monolith (Carlton); possibly set up independent producers for failure; prize companies with poor TV financial performances (Granada TV and Scottish TV) and reward to the second lowest bidder, U.K.'s second largest TV market (Central TV). The ITC stated that it had rated pledged program "quality" above the size of the sealed cash bid for the franchises. But, in this case, one can hardly imagine Thames Television losing out along with TVS, TSW and Television Northern Ireland (TVNi). Indeed, all four companies are said to have passed the programming quality threshold.

Plus, TV personality David Frost, who lost his bid for the existing TV-AM on the "quality-threshold rating," to Sunrise Television, is someone who launched TV-AM and, previously, LWT.

Since the ITC never defined the concept of "program quality," one can only assume that the commissioners discovered quality when they saw it.

On the cash bid side, TVS pledged to the government 59.76 [pounds] million a year to operate the TV license, against the 36.52 [pounds] million winning bid by Meridian Broadcasting.

Similarly, current TV license TSW lost its 16.1 [pounds] million bid to West Country's 7.82 [pounds] million, and North West Television's 35 [pounds] million bid lost to Granada's 9 [pounds] million.

The ITC justification for losing to the government an equivalent of $100 million a year can only be speculated on, since its decisions are confidential.

East of England (Anglia) and South East England (TVS) were considered the most attractive franchises to bid for, thus explaining the highest bid by TVS for a two million TV household market, and the fourth-largest bid by Anglia (17.8 [pounds] million) for 1.6 million TVHH.

By challenging the ITC decision in court, TSW received the confidential reasons for losing the television franchise. It has been said that it was the first time in the regulatory body's 36-year history that it had been held to account for a licensing decision.

In addition, TSW's favorable court action has triggered similar challenges from North West Television (which lost to Granada), White Rose TV (which lost to Yorkshire), TVS and TVNi (which lost to Ulster TV).

In the case of TSW, it was said that the ITC failed it because of its "unrealistic" high ad growth projections of 5.3 per cent. But, the ITC also failed TVNi, which set its estimated ad growth at 2.1 per cent, compared to ITC's four per cent.

The ITC is also faulted for not having asked bidders specific questions about their applications.

For TSW, the Barclays Bank was not asked about a loan of 7 [pounds] million that the bank was reportedly prepared to make to TSW, but which the ITC found questionable.

Similarly, the ITC questioned the viability of TVS' bid even though it was supported by Time Warner and Canal +. At the same time, the ITC awarded the breakfast-time TV franchise to Sunrise, knowing that 30 per cent of its shares weren't placed. When all is said and done, Sunrise will be paying an estimated 52 per cent of its gross revenues to the government.

Finally, with the stroke of a pen, the ITC made Carlton Communications UK's largest broadcaster. Carlton's influence will also extend to news, which it will produce in-house. This in addition to owning 20 per cent of Meridian, Sunrise, Central (which, in turn, owns 20 per cent of Meridian), LWT (which owns 20 per cent of Sunrise), and full ownership of London Weekday (set to replace Thames TV).

If various future options will be exercised, possibly with the help of Carlton, Central will be acquiring other franchises. In London, Carlton will further strengthen the ties between its part-owned Sunrise and LWT with its London Weekday, by sharing facilities with LWT.

Carlton, a film and video service company whose profits dropped 30 per cent last year, compared to the previous period, will now have influence, directly and indirectly, on some 55 per cent share of the total U.K. TV ad revenues and 44 per cent of the UK's TVHH.

All this until, at least, 1994 when, according to TV-AM chairman Bruce Gyngell, Sunrise will go bankrupt. While, according to the ITC chairman George Russell, the new franchises' ratings [and thus the ad revenues] will drop against the BBC.
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Title Annotation:the Independent Television Commission causes havoc in the British television industry
Author:Serafini, Dom
Publication:Video Age International
Date:Feb 1, 1992
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