Local TV is happening, but it bears no relation to Jeremy Hunt’s big vision

This article titled "Local TV is happening, but it bears no relation to Jeremy Hunt's big vision" was written by Steve Hewlett, for The Guardian on Sunday 21st August 2011 18.29 UTC

As ministerial tenures go, Jeremy Hunt's is starting to look pretty successful – although mostly for reasons beyond his control. I don't mean he hasn't acquitted himself well – because most observers think he has – but it is mainly in relation to the BBC licence fee deal stitched together at the very end of the comprehensive spending review, and for his handling of News Corp's bid for the whole of BSkyB (which was never supposed to have been his issue at all) that he gets most credit. And many would say deservedly so.

Take a look, however, at his own policy priority, local TV, and it really isn't quite so successful a story. Last week saw the start of a nationwide series of events to promote the latest version of Hunt's vision for a new generation of local TV services. On the upside there is no doubting his sincerity – or his commitment in the face of considerable industry scepticism – about such services, which he sees as potentially transformative for UK media and politics. The problem lies with the practicalities – organisational and, more seriously, financial – and it is what many stakeholders (and potential stakeholders) perceive as his failure to fix some of those key issues that lead them to believe that Hunt's original vision is most unlikely to be realised.

In the beginning it was a very bold vision indeed. A new generation of commercially sustainable local TV services (more local than ITV's traditional – and now dwindling – offerings), with the capacity to provide innovative new competition to the BBC. "If Birmingham, Alabama can have eight local TV stations, why not Birmingham, England?" was the mantra. Arguments from the industry and analysts that the US and UK advertising markets were fundamentally different with the vast majority of airtime in the UK (unlike the US) sold nationally, thus rendering the Brummie comparison pretty unhelpful, were brushed aside.

So sure was he that his new local TV services represented a genuine commercial opportunity that Hunt invited a merchant banker, Nicholas Shott, to conduct a review into their prospects as an investable proposition. Unfortunately, Shott's review didn't produce the right answer. Try as he might, he could only see financial viability in the short to medium term for 10 to 12 TV stations based around big city conurbations which would need free guaranteed spectrum, a guaranteed front page EPG spot, financial support from the BBC, a new national network to hang off – so as share general programming costs and provide a vehicle for selling national advertising – and which even then could only be expected to broadcast up to two hours a day of local content. There was plenty of potential, he said, for new TV-like services delivered over the internet, but that was some years off.

The promise of a new national network with free spectrum did excite some interest from potential commercial players and might also have solved another long-term problem for commercially financed local TV – the absence of reliable enough local audience data (or "currency" in the jargon) to attract national advertisers. But another aspect of the "network spine" idea (in fairness one identified by Shott) – that the network's interests would in time supersede those of the local operators, as had happened with ITV – proved fatal. Many existing and would-be local TV operators saw the danger and convinced Hunt to drop the idea, and to opt instead for a scheme that would license local operators first and let them create a network should they so choose. Unfortunately, that meant losing any short-term hope of commercial viability.

Which brings us to the current plan. Sixty-five areas of the country identified as having the technical capacity to broadcast a new local service on Freeview, with 20 to be licensed in the first round next year. So far so good. But based on the following assumptions: all technical transmission costs paid for by the BBC, six staff, and £500,000 total operating budget per station, broadcasting just 1.5 hours a day (which means very limited impact), to be funded by imagined advertising revenues of £10,000 per week – on the basis of no reliable measure of audiences and which would most likely have to come from other local media that are already struggling.

Wherever he goes in the country Hunt finds enthusiastic people keen to develop local TV for their communities, towns and cities. And with the availability of relatively cheap kit and internet distribution, lots of them are already doing it. But whether any of them will ever achieve the scale and impact – or commercial viability - necessary to supersede the old declining ITV services, provide much-needed competition for the BBC, and play the key role in local democracy Hunt envisages must at best seem doubtful.

• Steve Hewlett presents Radio 4's The Media Show

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