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Ofcom issues consultation on removal of airtime sales rules

MUMBAI: UK media watchdog Ofcom has published a consultation on possible removal of the Airtime Sales Rules (ASR).


The consultation relates to how broadcasters sell TV advertising to media buyers and advertisers. Specifically, it is consulting on whether commercial Public Service Broadcasters (PSBs) must sell all of their available advertising airtime and also whether the prohibition that applies to all commercial broadcasters relating to conditional selling is still appropriate.


The consultation closes on 7 June.
 
Ofocm is consulting on the possible removal of the Airtime Sales Rules - two rules, which relate to how broadcasters sell TV advertising to media buyers and advertisers, referred to as the ‘withholding rule‘ and the ‘conditional selling rule‘.


The withholding rule means all of the airtime available on the commercial analogue channels - ITV1, C4 and Five - must be sold. In contrast, the conditional selling rule applies to all broadcasters, prohibiting them from ‘forcing‘ media buyers - who want to buy airtime on one channel - to purchase airtime on additional channels.


The rules were intended to ensure fair and effective competition in relation to broadcasting and connected services and we have an obligation to review them periodically, to check whether they are still appropriate and fit for purpose. The rules were last reviewed in 2003 and we think it is now appropriate to assess whether they are still necessary.
 
Ofcom believes that the rules need to be considered in light of key changes in the TV sector which we believe are likely to have enhanced competition in the supply of TV advertising airtime. The large increase in the number of TV channels and in digital TV take-up, along with a shift in viewing from PSBs toward digital channels, has provided more opportunities for buyers to secure advertising from non-PSBs. This trend towards greater competition is expected to continue with future sector developments.


Ofcom has also considered whether there are incentives for broadcasters to engage in behaviour prohibited by the rules. We believe there are limited incentives for withholding airtime, given evidence that, in the short run, it is unlikely to be a profitable strategy for C4 or Five and it would provide very little uplift for ITV1‘s revenues. Moreover, Ofcom believes that the way TV advertising is traded incentivises broadcasters to sell all their airtime in the long run. 
 
Conditional selling is a form of bundling and bundling can yield benefits such as reduced costs. For bundling to have anti-competitive effects (for example reduced choice or higher prices), a sales house would need to have market power - and even then, any negative outcomes might be outweighed by beneficial welfare effects. Ofcom, therefore, believes that it is more appropriate to treat possible conditional selling by broadcasters on a case by case basis, rather than through an industry-wide rule to prevent this behaviour.


Given these considerations, Ofcom‘s preliminary view is that the ASRs are no longer appropriate for ensuring fair and effective competition. Removing unnecessary regulation is important to enable sectors to develop and to give players more flexibility to run their businesses. This may then have positive impacts on innovation or investment.


If Ofcom concludes that it is appropriate to remove the rules, then it will continue to monitor the development of the TV advertising sector and any effects of the removal. Continuing engagement from industry stakeholders will form an integral part of its ability to review the effects of lifting the rules.
 

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