Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


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.


  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.


  (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.


  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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