City & business: It's time Blair showed he's a real moderniser

TONY BLAIR appeals to businessmen because, even though he is Labour, he is a moderniser. So it seems fair, after 16 months in Downing Street, to ask how much the Prime Minister and his cabinet have modernised the economy.

The answer, sadly, is less than meets the eye. We have independence for the Bank of England and three-year planning for the Treasury. But as for constitutional reform, we have nothing. The Government is delaying a freedom of information Bill, even though the more information an economy has, the better it performs. Blair and his spin-doctors control the flow of information as tightly as Margaret Thatcher and Bernard Ingham ever did.

In lieu of more freedom of information, the Cabinet agreed last week to present a Bill to strip hereditary peers of their speaking and voting rights in the House of Lords. It seems unlikely this will promote the cause of social justice which was supposed to be a foundation stone of the Third Way, the Blair government's programme to boost the economy by making better use of human capital.

All this is overshadowed by the big news of last week - the proposed takeover of Manchester United by Rupert Murdoch's BSkyB - and what it tells us about Blair as a moderniser. Labour criticised the Conservatives for their cosy dealings with Murdoch. What are we to make of a government that engages in the same thing while desperately pretending otherwise?

For Murdoch and Man U, the proposed deal makes perfect sense. Look at the talks between Arsenal and Carlton, and the other copycat deals. Sports and broadcasting have been converging since well before 1995 when Murdoch bought a big slice of world rugby. Ted Turner's rise to billionaire status in the US (with Jane Fonda on his arm) owes a lot to his mating of America's first satellite television channel, the Super Channel, with ownership of the Atlanta Braves baseball team.

In making his move on Man U, Murdoch was simply staying in character, being the deeply cynical, quasi-piratical, sneakily admirable tycoon he has always been. But he may have got it wrong this time. If the global financial crisis deepens, and if he has failed to learn from his brush with bankruptcy in 1990, his creditors may not prove so flexible in giving him extra time to pay his debts. If News Corp were to suffer cash- flow problems again, its bankers would be obliged to bet on Murdoch's offspring rather than the man himself. If they were to grant, say, a three- year workout, they might bet differently.

But Murdoch is not the point. The point is Blair and how, in spite of his reputation as a moderniser, he has landed himself in a classic Tory 1980s mess or even an old Labour 1970s mess. There was never any way Blair was going to stop Murdoch. Hence Blair was right to try to work with the tycoon. Politics is about power, after all, and Murdoch is a power broker.

Nor was there any way Blair was going to stop Murdoch from bidding for Man U. The romantic dream of football as a redoubt against materialism is an attractive one, but it is a dream. As one television executive recently put it: "Sport is the perfect television content. It offers a satisfying structure, and genuine drama. The outcome is always unpredictable." What football fanzine reader can muster a riposte to that economic logic?

Blair could, at least, have seen what was coming. It is tempting to say BSkyB's bid for Man U was inevitable. Besides the rugby three years ago, there was the acquisition of the Los Angeles Dodgers baseball team this spring.

If Blair had lived up to his rhetoric as a moderniser, his government would have had a framework in place to make Murdoch's move on Man U one business move among many, not the business move that is now going to force everyone to rethink the convergence of broadcasting and sport as businesses.

It is not as if convergence is a secret. City analysts have been writing about the convergence of broadcasting, the telecommunications, and information technology businesses for 15 years.

Perhaps Blair will yet rise to the occasion. The odds are no more than one in 10 that the Office of Fair Trading, the Monopolies and Merger Commission, or the Secretary of State for Trade and Industry, Peter Mandelson, will block the deal. There seem no strong legal grounds for doing so. It seems unlikely the deal will be blocked in Brussels, either, although Karel van Miert's competition directorate has taken a tough line on the competitive implications of Bernie Ecclestone's efforts to float the business of broadcasting Formula One racing.

Still, Blair could use the occasion of the BSkyB-Man U bid to follow through on his moderniser rhetoric and put in place a framework for what will happen as broadcasting, telecoms, and computers continue to converge in future.

This area is a rat's nest. The actual way the three industries intersect is arcane in the extreme. The intertwined corporate interests overlaying these three industries are mind-boggling. The existing regulatory picture - the Independent Television Commission, Oftel, etc - offer up a third mental stew.

But if Blair could marshal the political imagination and will to articulate his vision of how Britain might prosper in the global broadcasting, telecoms, and IT markets in the future, that would be a sufficient start.

Here are two ideas toward that end:

1) Let British Telecom compete against Rupert Murdoch. It is engaging to

watch the various second-rank UK media companies go up against News Corp. But why not let somebody Murdoch's size go up against him?

BT has been kept out of broadcasting because it was seen as a giant that would squash the fledgling cable television industry. But cable is now 15 years old. Many of the competitors here are backed by US giants. It is time to untie BT's hands, especially as the $7bn cheque it received for selling its stake in US phone company MCI has just cleared.

2) Help the BBC compete against Murdoch by saving the public service

broadcaster from further marginalisation in global media markets. This will not be easy. It will mean convincing BBC licence-fee payers they are shareholders in the broadcaster, not subscribers. The "return on capital" earned by licence-fee payers will be a hard concept to explain. But it's there. The better the BBC does as a business, the easier it will be to check future licence-fee increases, and the better its programming will be.

Murdoch would be the first to cry foul if Blair allowed the Beeb to compete as a business. Let him.