The next instalment

The Government may be forced to compromise on the Communications Bill. If it is, what will that mean for British television? Saeed Shah reports

When Lord Puttnam published his critical report on the Communications Bill, government aides were on the phone to journalists within minutes, rubbishing its 149 recommendations for improvements. Ministers insisted they would press ahead anyway; claim and counter-claim followed. Lord Crickhowell, a former Conservative minister and member of the scrutiny committee, says it was all extraordinarily ill-judged. "There were such barmy comments made, one could scarcely believe that grown men and women were behind them."

But having initially trashed the report – written by Lord Puttnam, the film director and Labour peer, and a special committee of both Houses of Parliament at the Government's own request – the Government has concluded it must show flexibility. Otherwise, the Bill is in danger of being seriously delayed in its passage through Parliament. It has decided to give in to many of the demands of the Bill's parliamentary opponents in order to save its favourite measures – and most especially the clause that allows Rupert Murdoch to buy Channel 5.

The Communications Bill is treasured by the media-obsessed New Labour. Its key measures were crafted in Downing Street, not by its joint ministerial sponsors at the Department of Culture, Media and Sport and the Department of Trade and Industry. The Bill contains two hugely contentious measures. The first allows a major newspaper owner (ie, Mr Murdoch) to buy into terrestrial television for the first time (but not ITV); the other permits US companies to buy British TV businesses.

Lord Puttnam's committee came out against both, as has a body of opinion inside and outside Parliament. At the least, the committee said, these seismic reforms should be put on hold until Ofcom, the new super-regulator for the media sector now being set up, can study their implications.

Murdoch's influence over this nation's media, and therefore its politics, already appears overbearing to many. To allow him to buy Channel 5 would extend that power. British companies are not allowed to buy American broadcasters, so why are Americans being handed a chance to buy ITV? The fear is that local production and British content would lose out to US programmes.

What concerns the scrutiny committee, and the industry, is the lack of power given to Ofcom to police the sector and keep in check, say, a Murdoch-owned Channel 5. Lord Puttnam says: "The draft Bill was a prescription for a weak regulator. Any attempt to weaken or undermine the powers of Ofcom will be resisted. This is where the Government could be defeated."

Labour has a large majority in the Commons, so it is in the Lords that the Bill will face trouble. Lord Puttnam has promised to give the Government a hard time, and delay the legislation, unless the Bill is revised. The Government could be defeated in the Lords, pushing the Bill into the next session of Parliament. Yet it wants Royal Assent by next summer. One victim would be a planned merger of Carlton and Granada, which requires measures in the Bill.

Having dismissed Puttnam initially, the Government will now have to cosy up to him. It will not sacrifice the two most controversial ideas and the ones that came straight out of Downing Street. As a consequence, Lord Puttnam is feeling hopeful. The Government is preparing a detailed, written, point-by-point response to the Puttnam report. As many as 130 recommendations may be met. What is done to beef up Ofcom will be carefully watched; it might persuade the Government's critics that British terrestrial television will be safe, with Ofcom given clear powers to enforce regional programming commitments and the use of locally produced content.

British competition and media regulators have shown themselves to be wholly inept at reining in Murdoch's TV and newspaper operations in this country. With regards to Ofcom, there may be a split between the DCMS and the DTI, some suggesting that Patricia Hewitt's empire is resisting giving more of its powers to the new watchdog. A strengthened Ofcom may also go against the Bill's promise of "light touch" regulation. Lord Crickhowell says: "Our fear is that the big companies will run rings around Ofcom in the difficult early phase."

One possible beneficiary of the Government's desire to appear flexible could be the radio industry. The sector is lobbying to be allowed to consolidate down to two commercial operators in any given area, rather than three, as proposed in the draft Bill.

The Communications Bill and the response to Puttnam will be published by early December. We will then know for sure how accommodating the Government is prepared to be in order to save the business opportunities open to Rupert Murdoch.