Will The Communications Act Really Attract Foreign Investors?

Daniel Sandelson, head of the communications, media and technology group at Clifford Chance, thinks the Communications Act 2003 might deter rather than attract foreign investors. In a terrific roundup in The Lawyer magazine this week he suggests that the new legislation has too many hoops for serious, perhaps time sensitive, non-EU investors to bother jumping through.

Lawyers have now had a chance to look over the new legislation in full, late amendments and all, and some of them have been left a little bemused. The final result is certainly less deregulatory than the government had promised.

Sandelson states, �For the cynical among us, there is little about the act that simplifies life for media and investors.�

Of particular note are the complications facing non-EU bidders for analogue licences � ITV, Five or the AM and FM radio stations.

The government�s original aim was to relax media ownership restrictions in the hope of attracting foreign investment. But things got a little muddied in the parliamentary wash and the new rules, which could lead to mergers being adjudicated by four separate regulators - the Secretary of State, the OFT, the Competition Commission and Ofcom � will potentially deter investors not wanting to become lost in a bureaucratic maze.

Sandelson states, �This multiplicity of regulators will certainly make the operation of media mergers more complex, and this runs counter to the Government’s aim of simplifying many of the media ownership rules.�

The sheer size and scale of Ofcom is also a concern to lawyers. How does Ofcom balance all of its objectives? How does it prioritise? Even Ofcom�s Chairman Lord Currie is concerned � he has compared the new regulator to a Christmas tree onto which legislators have each put their favourite baubles.

The Act is very large and full of discretion. Certainly much of the real content is yet to be hammered out and the process shaped. Sandelson points out, �we are bracing ourselves for the torrent of subordinate legislation, rules, codes and guidelines that will inevitably follow, in which much of the meat of the law will be found.�

Lord Currie and CEO Stephen Carter have both touted the mantra of �light touch regulation� as a guiding principle in the establishment of Ofcom. Of course this is an imprecise, rhetorical phrase - it means all things to all people � and may soon come back to haunt them. There is nothing light about the Communications Act 2003, which runs to 590 pages and hundreds of new stipulations.

In Sandelson�s words, �It remains to be seen how much success Ofcom will have in facilitating business in what is still a highly regulated market.�