APPENDIX 34
Memorandum submitted by the British Internet
Publishers' Alliance (BIPA)
The British Internet Publishers' Alliance welcomes
the opportunity to make a further submission to the Select Committee.
BIPA's concerns are chiefly focussed on the lack of a transparent
and effective regulatory regime to govern the BBC's provision
of services on the Internet. This gap in regulation has led to
considerable distortion of the market, and the crowding out of
numerous potential suppliers.
The Communications Bill offers the opportunity
to address these and similar issues of unfair competition and
crowding out, and to put in place the foundations for a more balanced
competitive environment. New regulation in this area is entirely
consonant with the goal of "lighter-touch" controls:
it would seek simply to ensure fairness between the interests
of the BBC and commercial Internet publishers. Above all, this
would serve the wider public interest by ensuring the provision
of a full range of choice of British material on the Internet.
BIPA set out the case for action on these issues
in its earlier written submission and oral evidence to the Select
Committee (January 2001). This submission addresses directly the
five questions raised by the Committee in respect of its current
inquiry, but first outlines a current area of concern which exemplifies
the ongoing problems in Internet publishing.
EDUCATIONAL PUBLISHING:
A CURRENT INTERNET
ISSUE
Since the last BIPA submission to the Committee,
serious problems have arisen in the educational publishing sector.
Through a series of co-ordinated initiatives the BBC now threatens
to dominate the market for the online delivery of curriculum related
material, an area already well served by a highly competitive
private sector.
The BBC plans to use licence fee money over
a number of years to fund both the development of a learning management
system and the development of educational content. The content
will be governed by the management system and distributed through
both the BBC's portal and the DfES' portal. The BBC will therefore
have significant influence over the content itself, and also and
its management. The BBC will develop and own most of the content,
even where it commissions work from third parties.
Once developed, both the management system and
the content will be available free of charge to schools, thereby
severely undermining the private sector which must continue to
charge for content. If the Government gives final approval, all
other content developers risk becoming wholly dependent on the
BBC for access.
Because the BBC content will be produced with
licence fee money and delivered free of charge, commercial providers
are severely disadvantaged on price: their recourse is to compete
against the free BBC content on quality. The establishment of
a BBC-controlled monopoly gateway will severely restrict access
to the market, and will impede competitors' ability to address
potential customers. The result will be not only commercial damage,
but also a diminution of real choice for schools.
The management system at the very least should
be regulated. Ideally it should be controlled by a third party,
to ensure that commercial providers have fair access to schools
and also to ensure that their content is readily distinguishable
from that of the BBC.
BIPA notes that the BBC is deploying around
£135 million of licence fee revenue for the Digital Curriculum.
We believe that this will distort or threaten competition in violation
of Article 87(1) of the Treaty.
THE COMMITTEE'S
FIVE QUESTIONS
(i) The implications of the delay to the
expected legislation establishing OFCOM.
The passage of time amplifies and aggregates
the commercial damage to commercial Internet publishers created
by the failure to create and maintain a fair competitive environment.
In addition to the problems of educational publishing outlined
above, we are concerned by the recent BBC announcement of an annual
promotional budget of £20 million for their digital services.
This is a vast sum, larger than that of, say,
Coca-Cola (which spends approximately £15 million in the
UK). If even a small proportion of it is devoted to the promotion
of BBC Internet sites, it will massively outstrip the promotional
budgets of the BBC's many commercial competitors. In the context
of the Internet it threatens to be a disproportionate and highly
damaging use of public money. It should be noted that this £20
million is additional to the significant value of the BBC's self-promotional
opportunities through its existing broadcast media.
BIPA also recognises that it is essential to
get the structure, powers and staffing of OFCOM right. In that
respect we hope that the delay will allow more time for consideration
of the case for bringing the BBC under the scrutiny of OFCOM (by
the end of the current Royal Charter in 2006 at the latest). We
believe that this will create the most effective means of balancing
the BBC's expanding ambitions on the Internet with their commercial
effect and their impact on consumer choice.
(ii) Developments in policy since the previous
Committee's report on these issues with regard to:
— The Government's overall objectives
on the UK communications and media market access to high quality
diverse services; and the safeguarding of the citizens and consumers.
The key ambition of the White Paper remains the
creation of dynamic and competitive communications and media markets.
In its own words:
"We want to make sure that the UK is home
to the most dynamic and competitive communications market in the
world. ... We want to maintain the UK's competitive advantage
in the rapidly changing international marketplace."
BIPA does not believe that this can be achieved
if a state-funded body, (not subject to market disciplines, but
enjoying enviable cross-promotional opportunities based on a peerless
UK media brand) continues to dominate and distort the market for
competitive commercial Internet provision by UK publishers.
The UK stands out from all other advanced democratic
economies in allowing this level of market domination and distortion.
No other country has found the need for a national champion in
serious Internet provision. No other country, in consequence,
has placed such disadvantages on its indigenous Internet publishing
industry.
As argued below, BIPA believes that consideration
of these overall objectives requires a necessary distinction to
be made between the nature of the broadcasting market and that
of Internet publishing.
BIPA also believes that industry self-regulation
of content must continue to play a leading role under OFCOM. All
non-broadcast advertising content is currently covered by the
industry's self-regulatory codes of practice, administered and
enforced by the Advertising Standards Authority. This includes
Internet advertising. BIPA would not wish to see any change to
this remit, nor the ASA's independent role undermined by the new
regulatory powers of OFCOM.
Equally, BIPA supports the continuation of the
Press Complaints Commission's remit over its members' content
delivered through the Internet. It is essential that Internet
content remain free of broadcasting-style regulation. As argued
in the section of our previous submission which addressed Content
Regulation, BIPA strongly believes that freedom of expression
on the Internet must remain free of regulatory interference, and
be subject only to the general laws that cover print publishing.
— Defining and providing public service
broadcasting.
BIPA is content with a definition of public service
broadcasting that goes beyond a "market failure" remit
that might consign it to a small ghetto. Its income privileges
must nonetheless be justified by the overall range and quality
of the material broadcast, and tempered by its impact on the development
of the wider market.
BIPA argues however that it is entirely inappropriate
to apply the values and imperatives of broadcasting to the newer
area of Internet publishing, without adjusting them to what is
a quite different economic and cultural model. While the BBC has
a right and duty to make its existing provision available on new
platforms like the Internet, it calls for a different approach,
and different safeguards.
The differences are fundamental: broadcasting
remains a medium with a high cost of entry, and high ongoing production
costs. The bulk of viewing is attracted to a very few channels,
which are licensed and regulated. Although the BBC is the biggest
single broadcaster, it faces strong competition for audiences
from well-funded and highly-visible rivals (such as ITV) who enjoy
significant market share.
On the Internet market the reverse is true: it
is a market more analogous to print. Lower entry costs create
the potential for a multiplicity of suppliers, which need not
be licensed and regulated like broadcasters. In this evolving
market, however, the BBC's dominant position directly inhibits
the entry of competitors who are much smaller, lack the Corporation's
ample and secure funding, and lack the power of its branding its
cross-promotional advantages, and its now considerable promotional
budgets.
In short, the BBC dominates serious Internet
publishing in a way that it has never dominated the broadcasting
market since the introduction of commercial television in 1955.
For this reason the public service argument in respect of the
Internet is quite different. The public interest calls for a regulatory
regime which can consider the impact of BBC Internet activities
on the wider provision of choice. The UK has no need of a British
Publishing Corporation, in print or on the Internet.
In short, a new framework is needed to determine
the right balance for the Corporation's public service activities
on the Internet.
— Progress towards analogue TV switch-off.
Although BIPA has no direct interest in broadcasting,
it welcomes progress toward analogue switch-off as a development
which will ultimately benefit the public by increasing choice.
We are nonetheless concerned that the failure
(noted above) to make essential distinctions between the different
dynamics of the broadcasting and Internet markets allows the BBC
to characterise all its digital services—broadcasting and
Internet—as equally beneficial.
While BBC digital television services may hasten
the take up of digital broadcasting, BIPA believes that the Corporation's
rapid and often unregulated expansion into Internet publishing
is having the opposite result of restricting rather than enhancing
real choice. The BBC may be seen as an important cheerleader and
enabler in digital broadcasting: on the internet however, which
has no "switch-over" issue, the BBC is stifling rather
than stimulating the market.
— Progress towards universal Internet
access in the UK
BIPA is clearly in favour of rapid progress toward
universal Internet access in the UK. That will undoubtedly benefit
citizens and consumers as a whole.
The question of access leads directly back to
questions of plurality provision, and diversity of choice. BIPA
remains concerned that the Government has not yet apparently made
any meaningful distinction between:
— the use of the Internet by the BBC
to extend its existing services (and offering new interactive
services); and
— the much wider use of the Internet
as a publishing medium by a much great variety of commercial bodies,
large and small.
The White Paper statement that:
"public service broadcasting will continue
to have a key role in the digital future, potentially even more
important than it has now" fails to distinguish between digital
broadcasting and the Internet, or between the two different activities
described above. Action is needed to ensure that Internet publishing
is not swamped by unregulated BBC expansion.
(iii) Progress towards effective broadband,
and higher bandwidth networks.
BIPA welcomes the Government's commitment to
a broadband strategy, subject again to appropriate mechanisms
to ensure plurality of provision and diversity of choice but is
disappointed by the slow roll out. The UK's performance, hindered
by the delay to unbundling of the local loop, has placed it towards
the bottom of the broadband league which is deplorable.
(iv) The impact of technological developments
on the protection of privacy; and on the balance struck between
the protection of intellectual property rights and individual
fair use of broadcast, or Internet, material
Privacy: Technological developments bring ever
more sophisticated methods of communication between website owners
and their users, including commercial communication through advertising
or direct marketing. BIPA supports the combination of Data Protection
Regulation—to establish the principles of processing of
personal data fairly, with effective self-regulation by the industry
to ensure dynamic and flexible protection of users' interests
and privacy on the internet. Industry codes of practice are being
regularly reviewed to take into account new Internet software
tools such as "cookies" to ensure high levels of data
privacy. Self-regulation is well suited to act quickly to deliver
high standards.
Intellectual Property Rights and Fair Use: BIPA
supports the latest EU Copyright Directive (currently being transposed
into national law) which harmonises the reproduction right and
communication to the public right to take account of the challenges
posed by digital content. BIPA also supports the Directive's approach
to the legal protection of technological systems which protect
digital content from piracy. It is essential that copyright owners
can develop systems to encrypt their content in order to track
its use and prevent piracy. In addition, BIPA supports the approach
of the Directive to exceptions to copyright which have been drawn
up precisely to reflect the need to safeguard the investments
made by content producers with those of the users who seek to
access such content. The Directive establishes only one mandatory
exemption: that for temporary and transient copies which are made
as a necessary part of transmission of digital content from source
to user. BIPA supports this exception so long as, when put on
notice, "mere conduit" beneficiaries of this exception,
co-operate with copyright owners to remove all traces of infringing
material. BIPA does not support additional exceptions to those
already enshrined in UK law such as the "fair use" exception.
SUMMARY
BIPA hopes that the forthcoming Communications
Bill will provide a practical opportunity to address and remedy
the issues outlined in this submission.
While there is much to admire in the BBC's Internet
provision (and it would be remarkable were it not so, given the
budgets deployed), the healthy development of British Internet
publishing requires a fair, transparent and predictable commercial
framework. In particular:
— There is an urgent need for the BBC's
Internet activities to be more rigorously scrutinised to ensure
fair competition (for example the digital curriculum plans; the
distortions created and amplified by high levels of marketing
with licence fee money; and continuous cross-promotion across
all media).
— All BBC Internet services should
henceforth be subject to prior scrutiny and ongoing assessment
in the same way as new BBC digital television services.
— In the longer-term and by 2006 at
the latest, the BBC should be fully under OFCOM in common with
its competitors across the media landscape.
— With regard to Internet content,
it should be made explicit in legislation that there is a clear
role for self-regulation of advertising and editorial material
which safeguards the freedom of expression, including commercial
communication.
11 January 2002
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