Memorandum submitted by Video Networks
Video Networks Limited welcomes the opportunity
to submit evidence to the Select Committee's Inquiry into the
prospects for a new Communications Bill. The issues we wish to
raise are relevant to a number of themes set out by the Committee
in relation to this Inquiry:
the Government's overall objectives
on: the UK communications & media market; access to high quality
diverse services; and the safeguarding of citizens and consumers;
defining and providing public service
the development and promotion of
digital broadcasting, including local/community services and radio;
progress towards analogue TV switch-off;
progress towards universal Internet
access in the UK;
progress towards effective broadband,
and higher bandwidth, networks;
and on the balance to be struck between the protection
of intellectual property rights and individual fair use of broadcast,
or Internet, material.
Video Networks has previously given evidence
to the Select Committee on the Communications industry. We were
pleased that in its previous report, the Committee noted: if 60
per cent of current customers for higher bandwidth services provided
through the local loop are customers in the home "this is
almost wholly due to the ground-breaking use of local telephone
lines for delivering video-on-demand and interactive television
services by Video Networks Limited, which has launched a service
under the brand name `Home Choice'".
Video Networks Limited
Video Networks Limited is an infrastructure-based
provider of interactive broadcast entertainment and content to
all market sectors, but principally residential customers. It
is investing in high-speed transmission with full geographic reach.
Video Networks' business is based on convergence between telecommunications
and broadcasting. It is the type of business which will benefit
most from the Government's proposals in the Communications White
Paper and is strongly supportive of the Government's initiative
in preparing and bringing into force the Communications Act. To
the best of our knowledge, we make more use of DSL technology
than any other company in the UK, and have been using DSL technology
longer than anyone else in the UK.
Our HomeChoice service offers consumers both
high speed Internet access and high-quality, diverse Video-on-Demand
services, based on a wide range of quality content. Video-on-demand
gives consumers complete control over their viewing, allowing
them to watch what they want, when they want. Programmes can be
accessed using a remote control device in conjunction with an
onscreen menu and viewers are able to start, stop, pause, rewind
and fast-forward each programme, in the same way that they would
if they were watching a video or DVD.
HomeChoice provides customers with access to
over 1,000 pay-per-view film titles, 1,000 music videos and 2,000
TV programmes including drama, comedy, soaps, children's, news,
sports and music programmes via individual subscription services
which can be purchased separately or as a complete package. 150
hours of new content is added every month. In autumn 2001 for
example, we signed an exclusive Video-on-Demand deal with the
FA Premier League giving us access to the 106 games that will
be televised live in each of the seasons 2001-02, 2002-03 and
2003-04, as well as exclusive Video-on-Demand access to the Premier
League archive for the previous nine years.
HomeChoice also offers a Fast Internet service
to PC and Mac users for a fixed monthly subscription fee and no
additional call charges.
Video Networks welcomed the Government's White
Paper, particularly its main objective of fostering a dynamic
and competitive communications and media market. Video Networks
also fully shares the Government's priorities of extending choice,
enriching entertainment and enabling learning matched by a strong
and firm commitment to secure the highest quality content and
value for consumers.
Video Networks is also pleased to see that the
Government is prepared to embrace the changes brought about by
new interactive television companies and to sustain their potential
developments. New opportunities are opening up to use broadcasting
and related interactive media, for example in delivering education
in flexible ways to institutions and to independent learners alike.
The Government clearly recognises the important
role which innovative interactive media companies like Video Networks
can play in establishing a sophisticated, diverse, pluralistic,
multimedia environment in which viewers have full control of what,
when and where to watch. VOD is a worldwide development and Britain
is at its head because of its leadership in the development of
digital television. The regulatory environment needs to reflect
that worldwide leadership position. The nature of regulation can
influence Britain's lead in either a positive or negative direction.
Our submission will touch upon the key issues
identified by the Committee and that we believe are central to
the future development of the media industry. Broadly speaking,
our interests fall into the areas of network infrastructure on
the one hand, and content issues on the other.
Under the theme of network issues we group questions
such as the promotion of digital, analogue switch-off, universal
internet access, and effective broadband/higher bandwidth.
Investment in high speed networks is following
the same cycle as competition and investment in other forms of
electronic communications services. The first beneficiaries are
the most profitable business users, followed by the SME market,
the biggest by volume. The residential market is the third wave,
involving the greatest numbers of citizens but it is historically
the most difficult to break into because of the need for scale
to make roll-out economic. In the White Paper, the Government
discussed ways to bring high bandwidth to this mass market, through
public subsidy. It expressly acknowledged that high bandwidth
should be available to all but took the view that this is unlikely
to happen within a reasonable timescale through competition alone.
The Government should ensure that regulation
for exploitation of BT's local loop infrastructure encourages
development of innovative services for the benefit of UK consumers.
BT itself has little or no commercial incentive to develop the
required infrastructure in a timely and economically-effective
manner because development of digital services could increase
competitive pressure on its retail business.
The regulations put in place so far to unbundle
BT's local loop have not yet had the desired effect. This is partly
because the process of putting the regulations into practical
use has made slow progress, and partly because there are barriers
to entry for infrastructure suppliers competing with BT which
go beyond the local loop itself. To achieve its goal, the Government
should ensure that telecommunications regulation does not limit
itself to policing abuse of dominance, but should systematically
and vigorously break down the barriers to effective competition
at all points of the national network.
We have a concern that Government thinking on
broadband is proceeding separately from the development of specific
actions to promote digital television and hasten analogue switch-off.
In our response to the Government's Digital Action Plan in November
2001, we pointed out that "other than in the case of one
oblique reference, the existence, reach and benefits of DSL to
Britain's digital future have been ignored by the Action Plan.
As a result, the Action Plan fails to suggest steps to capitalise
on the assistance the DSL platform can deliver to Digital switch-over
and secure the digital future."
Video Networks believes that DSL can supply
the "fourth platform" for digital delivery. Unlike the
other platforms, DTT, DSat or digital cable, DSL has the capability
to reach 90 per cent of homes and possibly 100 per cent in due
course. A nationwide broadband platform incorporating DSL could
be built at a cost of hundreds of millions rather than billions
of pounds, offering attractive returns on their investment. DSL
offers greater flexibility and functionality andas Video
Networks will demonstrate when it adds broadcast television to
its HomeChoice service in mid-2002can provide the full
range of free-to-air and Pay TV services currently available on
competing platforms, as well as a more diverse range of services
and functionalities capable of driving consumer demand, including
on-demand services, seamless interactivity, on-line multi-user
applications such as games and personal video recording capability.
DSL does not require new cable to be laid, and new services could
be supplied via a simple plug-and-play box. DSL can provide new
kinds of government information services such as those we have
piloted in conjunction with the London Borough of Newham.
In short, we are concerned that the Government's
Digital Action Plan was product-led (ie biased to DTT) rather
than demand-led. As a result, the plan gives insufficient consideration
to meeting the real interests of consumers that DSL can deliver.
Content issues are central to stimulating consumer
demand for new services. In this submission, we wish to address
intellectual propertybased issues, commercial content regulation
and also negative content issues.
In terms of intellectual property issues, we
are particularly concerned about the warehousing of programmes
by broadcasters who have public service broadcasting obligations.
We welcome the view taken by the Government which sees a key role
for PSB in the digital future and "potentially an even more
important role than it has now" (para 5.3. of the White Paper).
Interactive television opens new opportunities to deliver the
public service remit tailored to different audiences and it can
thus play a great role in increasing the reach of public service
VOD has the potential to increase the value
of every publicly funded programme made for television by making
it available whenever a viewer wishes to see it. It is important
that the licensing arrangements which content suppliers make for
these programmes are fair and reasonable given the level of public
subsidy the programmes already receive.
Furthermore, to fulfil their role, companies
like Video Networks need to be granted access to archives and
content at a price that is non-discriminatory.
Other channels also have public service broadcasting
privileges and obligations. We believe it is essential that the
public service privileges and obligations that certain channels
enjoy mean that they should continue to make their archives available
on a fair, reasonable and non-discriminatory basis to new service
providers who wish to develop new products and services on a commercial
It is not only public service broadcasters who
may operate practices which restrict the development of new services.
We are concerned by the acquisition of Video on Demand rights
by operators who have no intention of offering VOD services, simply
to keep operators like ourselves from acquiring the rights. We
are also concerned about the restrictive ways in which certain
channels are made available to competing suppliers, and welcome
the OFT's recent findings in respect of BSkyB.
In terms of commercial content, we fully share
the view expressed by the Government in the White Paper (see para
1.3.9.) of keeping regulation at the minimum necessary level in
order to ensure that the interests of citizens and consumers are
fully safeguarded. It is in this respect that we believe that
the regulatory regimes to be applied to advertising and sponsorship
in new interactive services should be limited to the minimum.
Advertising and sponsorship provide significant revenue opportunities
for VOD and interactive services as well as programme-makers.
It will be very important to ensure that these revenue sources
are not choked off by heavy-handed regulation that was more relevant
to the age of spectrum scarcity.
The regulatory regime that needs to apply to
interactive services such as HomeChoice must parallel that of
the liberal environment of the Internet rather than the more restrictive
regime traditionally applied to television advertising. In particular,
we are concerned that regulations such as the ITC's two-click
rules are in danger of inhibiting commercial developments, and
consequently our ability to invest further in our services and
our commitments to public service broadcasting. Simplification
of the regulatory environment in which we operate would allow
us to concentrate on customer service and constant improvement
of our offerings.
As far as consumer protection or negative content
issues are concerned, Video Networks recognises the place for
continuing controls on taste and decency. However, Video Networks
believes that its PIN system of content control satisfies the
concerns of those who are worried about the dangers of unrestricted
access to certain content and services. All our users benefit
from our PIN system and are able to determine at the point of
taking our service whether to have one PIN-code for the entire
family or separate codes for different members of the family which
allow different levels of access as determined by the householder.
The HomeChoice service can be configured by the householder to
require confirmation of PIN at the point of entry to the service
or, in the alternative, prior to our delivery of any classified
content or service thereafter. Video Networks' PIN system therefore
empowers the householder to the maximum extent possible and creates
an environment and user expectations quite unlike any other service.
Video Networks' relationship with its users should be reflected
by its regulatory regime.
Video Networks Limited believes that the Government's
focus needs to shift more actively to the stimulation of demand
for broadband services, and encourage the active development of
DSL as a fourth platform. Policies should be focused on encouraging
the utilisation of DSL as a means of achieving the government's
goals for the roll-out of digital and analogue switch-off, preventing
anti-competitive behaviour by network-owners and content-owners
and ensuring that the regulatory regime for innovative interactive
services such as Video Network's HomeChoice is consistent with
and reflective of the evolving relationship between those services
and their users.
11 January 2002