Select Committee on Culture, Media and Sport Minutes of Evidence



  The White Paper A New Future for Communications raises issues of far more significance than the details of the organisation of regulatory institutions and the precise nature of licensing. The underlying issue is how Government and society responds to the Internet. This is the focus of this note. The dangers of the Internet have frequently been explained but they must not be allowed to outweigh the enormous potential. The Internet has already given citizens greater choice of information and entertainment than any society has ever imagined. The Internet is generating a virtuous cycle of innovation, as each element of the delivery chain has to innovate to meet demand, reflecting the Industrial Revolution. Above all, the Internet is democratising communications, making it easier for creative work to be distributed to receptive audiences, unleashing a ferment of ideas similar to that experienced in renaissance Florence or England during the Commonwealth. The White Paper raises the crucial issue—will the UK establish a framework to fulfil this potential—or, for the best reasons, constrain it?

  This paper addresses the three key issues:

    —  consumer choice;

    —  fostering innovation on the Internet; and

    —  stimulating a creative renaissance.


  Consumers want freedom to choose—which breaks down into three areas:

    —  having genuine choice between valid alternatives which may be endangered not only by monopoly, but by circumstances where all major sources of content reflect the same attitudes, interests and opinions;

    —  being able to make informed choices through awareness of material that is available and the type of content it contains; and

    —  the availability of choices that reflect their own interests, tastes and preferences.

  Underlying all these, however, is a strong concern to ensure that parents and teachers can protect children from material that may be harmful to them.

  There is a clear difference between the Internet and traditional media in these areas. Broadcasting in the analogue age was characterised by scarce spectrum resources that limited the number of available channels. This meant that a few channels catered for the interests of mass audiences, exercising significant power and influence.

  In such an environment there was little room for diversity either in ownership or content. Special rules were appropriate to safeguard genuine choice by guarding against further concentration of ownership. Action was necessary to ensure availability of choices for consumers by rules guaranteeing national and regional content, and programmes catering for minority interests.

  The Internet is different. Traditional broadcasting is one-way communication from a single channel operator to many consumers. The Internet need not deal in such large volumes—the capacity available is so large it can support content for minority groups and enable small communities to share information with each other. As the barriers to providing information over the Internet are significantly lower than those for broadcasting, there are far more content providers. In short, the problems of ensuring consumers can make genuine choices, and the availability of material catering for a wide range of tastes are not a pressing issue for the Internet. The special broadcasting rules are simply unnecessary.

  There are, however, problems with the Internet. These are to do with illegal content and content that may offend current social norms. We support the main principle of the Communications White Paper that the appropriate way to deal with illegal content, such as child pornography and racist material, is through the Internet Watch Foundation. This provides a contact point for notifying illegal material detected on the web, and a process for requesting the authorities in the country where the server holding the material is located to have it removed.

  The protection of children from content that may offend the current norms is part of the wider issue of enabling consumers to exercise informed choices. We believe the solution is straightforward, but requires Government action. Providers of content for the Internet should be obliged to rate their material, so that users can specify the types of content they do and do not want to access.

  Internet Browsers include a facility enabling users to set limits to the range of content they may access. When a page is loading, the browser checks its rating—if it is not within the permitted range it will not be displayed. The browser may be set not to display pages that have no rating signal.

  This is where Government has a role. If a browser was currently set not to display pages that are not rated, few pages would be displayed as content providers have been slow to rate their material. Government can encourage content providers to rate pages through promoting self regulation, codes of conduct and similar initiatives. Beyond a minimum threshold, when more users feel able to reject unrated sites, there will be a natural incentive to rate. The Government can help the industry reach this position.

  Such a rating system will enable citizens to control the content they receive and to set limits for equipment used by children. It will enable customers to exercise informed choice. The conclusion is that the Internet brings with it significant extensions of consumer choice and that effective mechanisms to correct abuses can be established without intensive regulation.


  The Government has recognised the importance of the Internet for the prosperity of the UK. Its goal is for the UK to be the best place to transact e-commerce. The European Union has launched a similar programme. The success of an economy in realising the opportunities of the Internet is based on innovation and the investment that is required to fund it. This relates not only to the construction of infrastructure—such as ADSL services and 3G networks—but to smaller scale activities—commercial and not for profit—to exploit the potential of the new medium.

  BT believes the Communications White Paper represents an unrepeatable opportunity for the UK to set the right framework to encourage investment and innovation in the Internet. There are several key elements in this:

    —  The current approach to broadcasting and telecommunications is based on the assumption that unless a licence or other specific authorisation is available, one must be obtained before anything can be done. The pace of innovation in the Internet is such that this needs to be reversed—so that for all but the largest scale activities there is a "can do" presumption. If the UK is to lead in innovation, there must be a disposition to act, not to delay action until permissions have been obtained.

    —  There must be rewards for successful investment—as there will always be penalties for failure. Telecommunications rules, designed for fixed network carrying little other than voice telephony, require operators such as BT to share information about new services with competitors in time to enable all parties to launch at the same time. This denies innovators first mover advantages, and discourages innovation. The companies obliged to share ideas run the risks while being denied the reward, and the others have little incentive to run the risks of competitive innovation when they know they will be able to obtain the means to provide the new services. This is completely inappropriate for the Internet world.

    —  Regulation should be based on the Competition Act and address actual cases of anti-competitive behaviour. Regulators should not intervene unless there is a problem.

    —  Regulation should also be fair—a major failing of the Communications White Paper is that it does not provide a satisfactory appeals mechanism against regulatory decisions. Although full appeal rights are to be available if OFCOM exercises its concurrent Competition Act powers, no such rights are available against exercise of powers under communications legislation. There, the grounds for appeal are limited to procedure, fact and law—not merit. We can see no valid reason for this deficiency.

    —  The objectives of the regulatory system should be clear. Those set out in the Communications White Paper are capable of improvement. The first objective links the protection of consumers and the promotion of competitive markets. The first is desirable, the second will be required by European Union Directives, but their combination creates confusion—it is not clear which has priority or whether consumer benefit may only be pursued through promotion of competitive markets. It would be better for them to be separated and OFCOM required to explain decisions that involved conflict between objectives.

  These principles represent the basic features of a regulatory system that will promote rather than hold back the investment and innovation needed for the UK to succeed in the Internet age.


  In Section 2 (Consumer Choice) we discussed the crucial differences between the Internet and traditional broadcasting. The Internet is used by many small interest groups to communicate cheaply, quickly and effectively with members, and to promote their activities to others. It places good quality communications with near universal reach within the budget of small groups. This is what is meant by the democratisation of communications.

  As the capabilities of the Internet increase, further activities will be possible. Within a few years it will be commonplace for the following to happen:

    —  the school play is recorded and downloadable from the school's web site;

    —  the carol service is webcast live so the housebound and people in hospital can participate;

    —  school sports are webcast, so absent parents can see their children compete on the PC in the office—or over their 3G equipment on a train; and

    —  the choral society's latest concert is downloadable from its web site.

  All these ideas are well within the capabilities of current technology. The overall effect is to make small scale communication possible—which not only contributes to greater variety but promotes exchange of ideas—intellectual interactivity.

  There is, however, a real danger that this vision could be lost. One of the prices to be paid for regulation is the need for time and money to be spent dealing with it. This immediately raises barriers to entry. The fear of infringing rules frequently kills otherwise promising enterprises. The Internet has flourished with a minimum of regulation. If regulation is allowed to develop, the enterprise, initiative and creativity that have been its distinguishing characteristics will be lost.


  We believe that the Communications White Paper adopts a sensible overall policy towards the Internet. It recognises that unduly heavy regulation would stifle the enterprise and adventurousness that has characterised so many activities connected with the Internet. It proposes, through the Internet Watch Foundation, to build on the successful self regulatory practices that have characterised the on-line world rather than building a new tier of regulation. This approach, with the recommendations we make about ensuring fairness and clarity in the overall communications regulatory environment should enable the UK to be among the leaders in innovation and creativity in the twenty-first century.

January 2001

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Prepared 13 February 2001