Eric Schmidt at Edinburgh

 I  was fortunate to hear Eric Schmidt, Chairman of Google, speak at the Edinburgh Television Festival and to attend the Question and Answer session the following morning.

Schmidt posed one big question -- in my view a massively important one: why hasn’t a country like the UK built large technology companies? (He reminded us that the first commercial use of a computer was at the headquarters of J.  Lyons, once famous for its tea shops, in West London).

For the audience of British TV Executives the question took a more specific form: why doesn’t British broadcasting do better globally, lead in Europe? After all, the British speak a global language -- and other Europeans, like many nationalities, are used to watching dubbed or subtitled content.

His answer was: first, we don’t teach computer science enough in schools or encourage it enough at universities; second, we are over-regulated.

In his brief tribute to Steve Jobs, who had announced that he was stepping down the day before, Eric Schmidt reminded us that Apple makes sure its technology is beautiful.

It’s hard not to agree that our education system could give a much more positive message about science, innovation and entrepreneurship. (What is the point of media departments teaching Marxist or post-modernist theory to people who want to work in advertising or TV?)

But his regulation argument aroused little comment. Why?

To be blunt, British broadcasters and producers are deeply attached to their regulations. I expect they would fight like cats and dogs to keep them.

The BBC is regulated from top to bottom, and funded by a mandatory levy. It totally resists any change.

The public services broadcasters (PSBs), BBC, ITV, C4 and Five, get mandatory “prominence” on all guides. They would hate to lose that.

British producers are entitled to keep rights in programmes even if they have been funded largely by public broadcasters.

Yet Schmidt is right. Regulation does hold back innovation and entrepreneurship. Regulation, as he delicately put it, usually favours the regulated. It deters innovation and entrepreneurship by newcomers, putting the emphasis on continuity and risk avoidance by the current players.

Schmidt proclaims himself a Capitalist and a Technologist. California invents the future in a cultural and political landscape utterly different from Europe, with its high public spending and tax rates and extensive social policies.

But that’s why Europe needs to be very smart about the impact of regulation and the danger of decline. If it cannot support entrepreneurs and build large companies in key emerging sectors, we have a big, big problem.

I have two recommendations which I think are worth exploring by people who are ready  to be fearlessly objective.

One, national regulators should switch their thinking to a European rather than a national scale: Schmidt’s critique of the suppression of the Kangaroo project by British competition authorities got a round of applause.  (I am not an expert in competition law so I am going to return to this when I have taken advice.)

Two, the UK should ask tough questions about the costs and benefits of every piece of regulation, with a strong bias towards abolition.

The UK could start with some like these:

Quotas for original production: the PSB’s have detailed commitments to original production, even though there is a 50% EU rule for European content. Nearly all major channels in Europe exceed the 50% quota of European content, the vast majority of which is domestic. This is because there is a very strong preference for domestic content in every Member State. Are these UK rules really  serving a useful purpose? (If Governments want to be very specific, say about Children’s’ content, they should contract for that directly.)

Guide prominence: it’s actually getting a bit silly. The public broadcasters want to keep their prominence at the top of the guides but now want to charge Sky, for example,  retransmission fees. Sky, I guess, would like to get the revenue for its top slots. Why not take out the regulation and let them sort it out?

A proper assessment might keep some rules but modify them in the interests of a more open market and more competition. For instance, the independent terms of trade have helped to build the UK’s format industry worldwide, but they also act to keep large independents and public broadcasters in an exclusive ritual dance.

Eric Schmidt himself mentioned Contract Rights Renewal (CRR) by which, following the mergers that created what is now ITV, the price of advertising is held at a given level.

There is a job to be done here. Perhaps Eric Schmidt has provided the driver. Anyone agree?