Memorandum submitted by the Mobile Broadband
Group
The Mobile Broadband Group ("MBG",
whose members are O2, Orange, T-Mobile, Virgin Mobile, Vodafone
and 3) welcomes both the Committee's timely inquiry into new media
and the creative industries and the opportunity to submit written
evidence.
SUMMARY
— The creative industries today already
derive a significant amount of revenue from content delivered
to mobile phones. In recent years the market has grown strongly,
to the point where the retail value of mobile content services
in the UK is approximately £1 billion.
— The mobile operators have invested
heavily, through handset subsidies and very competitive pricing,
to ensure that their services are available to all social groups.
There is no "digital divide" in mobile.
— Furthermore, looking forward, as
mobile networks and handset capabilities increase—so too
is the likely breadth of content that consumers will be able to
choose from whilst they are on the move. For example, initial
trials for broadcast mobile TV have been successful. Early indications
are that this service will be very popular with consumers and
that it will be principally complementary to existing broadcast
services. The mobile environment is potentially a very exciting
source of new revenue and opportunity for the creative industries.
— With respect to content "regulation"
and protection of rights on the mobile platform and new media
platforms generally, much work has already been done. For example:
— On content regulation, the industry
has established the self-regulatory Independent Mobile Classification
Body that sets a framework for adult content. This has been established
for over a year and functions well.
— The mobile operators, in co-operation
with ICSTIS, have developed self/co-regulatory codes to stamp
out misuse of premium rate services and all mobile operators block
access to illegal child abuse content, based on the list supplied
by the Internet Watch Foundation.
— On copyright protection, operators
have every incentive to ensure that content delivered to mobiles
cannot be illegally copied. All operators have a comprehensive
strategy for digital rights management based upon open standards
agreed within the Open Mobile Alliance (OMA).
— However, a number of issues remain:
— There are issues with the review
of the Television without Frontiers Directive (TVwF), availability
of spectrum for mobile TV and "new media rights" for
the distribution of television programmes on non traditional platforms.
— On TVwF, the mobile operators support
the Commission's intention to relax some of the rules on broadcasting.
This is realistic and practical. However, we share the concerns
of industry participants, Ofcom and the UK Government that the
proposed approach to the regulation of new media platforms is
misguided.
— On spectrum, there is considerable
uncertainty as to whether adequate spectrum will be made available
for mobile TV. Other European Member States have allocated spectrum
now for mobile broadcast TV. There is a danger that UK plc will
suffer if Ofcom cannot accelerate the availability of suitable
UHF frequencies before 2013. Many other member states will have
thriving mobile broadcasting sectors. Indeed, the UK may be the
one place in Europe where the London Olympics might not be viewable
on a DVB-H or similar device. Availability of spectrum must be
accelerated and allocated on an equitable basis.
— There needs to be greater clarity
over who holds the primary rights for TV content, commissioned
by public service broadcasters, that is to be distributed over
new media platforms such as mobile networks.
— In summary, with respect to regulation
of new content and the protection of intellectual property much
has already been done in the mobile industry to take account of
the changing circumstances. Nevertheless, industry, regulators,
the Government and Parliament still have work to do to ensure
that there is an appropriate regulatory regime across all the
new media platforms that meets consumer needs and at the same
time promotes creativity and innovation in the UK. We look forward
to working with all stakeholders to achieve the right regulatory
regime.
BACKGROUND
1. The first cellular mobile networks were
launched by Vodafone and Cellnet (now O2) just over 20 years ago.
At that time, it was expected that a fully mature network would
have approximately 250,000 [mostly business] customers. The only
use that could be made of the network was to make a basic voice
call and the telephones cost about £2,000. At first, there
was not even a voicemail facility.
2. Since that early mis-forecast, the mobile
sector has continuously exceeded expectations many, many times
over.
3. Today there are more than 60 million
mobile devices in use in the UK. Over 80% of the population carry
at least one and an increasing number have two or even three.
Mobile telephony accounts for 2.3% of GDP in the UK, the third
largest market sector (after Constructions and Hotels/restaurants).
4. The mobile operators have invested heavily,
through handset subsidies and very competitive pricing, to ensure
that their services are available to all social groups. There
is no "digital divide" in mobile.
5. The UK is the birth place of the text
message. The first commercial transmission occurred in 1992 and
in 2005, British customers sent more than 32 billion text messages.
6. As well as the mobile networks and the
mobile phone retailers, the UK is host to a vast array of companies
creating value added services for the mobile market. It is a very
important segment for the UK both domestically and for UK plc's
place as one of the leading economies in the world.
7. In recent years, the amount of content
purchased for mobiles (eg games, music and information and entertainment
services) has grown very strongly. The mobile has also played
a key role in the growth of interactive television, where text
messaging has been used extensively in association with new TV
shows (to answer questions, register votes, submit views etc.)
In less than five years the mobile Premium Rate industry (currently
the most popular method of paying for mobile content) has grown
to £1 billion.
8. In the future, as 3G high speed mobile
networks are more widely deployed and handsets achieve longer
battery life, mobile content is expected to become even more sophisticated.
Mobile will be used more extensively to browse the Internet while
on the move (for example, to book theatre and travel tickets,
to get maps and directions, to find information about the immediate
locality), to take part in multi-player games and to pull down
all sorts of audio visual content such as sports highlights, music
videos and short audio visual clips.
9. In addition to "pull" type
content, where the customer determines the time at which content
is viewed, mobile is increasingly entering the more traditional
"push" type broadcast content. At present this is delivered
over 3G networks and live content is streamed directly to the
customer's handset. However, this approach takes up a lot of network
capacity and is not particularly efficient.
10. In the future, it is expected that TV
content will be broadcast to mobile devices in the same way that
terrestrial television is now delivered to domestic TVs through
a network of transmitters. Regional trials are currently being
undertaken by Orange in France, BT & Virgin Mobile in London
and O2 in Oxford. Initial indications are that this type of service
will be very popular with consumers.
11. This is intuitively logical. Consumers
are increasingly using portable entertainment devices (e.g. mobile
phones, iPods, portable Playstations, digital FM radios) to consume
audio and audio-visual content. The main blockage to all these
being combined into one are memory and battery life. But battery
power has tended to follow its own version of Moore's law (computer
processing power doubling every 24 months) and these problems
will be overcome. The mobile phone is well placed, yet again,
to exceed expectations.
12. All in all, with a 60m customer base
in the UK, sophisticated connected devices, portability, location
awareness and untapped potential—the mobile phone sector
offers the most exciting prospects to the creative industries
for new sources of revenue.
13. Moreover, those creative industries
that make a success of developing compelling new content for the
UK mobile market will be very well placed to take advantage of
similar opportunities arising in overseas markets and thus reinforce
the UK's position as a leader in the field.
14. With respect to regulation of new content
and the protection of intellectual property much has already been
done in the mobile industry to take account of the changing circumstances.
Nevertheless, industry, regulators, the Government and Parliament
still have work to do to ensure that there is an appropriate regulatory
regime across all the new media platforms that meets consumer
needs and at the same time promotes creativity and innovation
in the UK.
COPYRIGHT PROTECTION
ON MOBILES
15. Mobile operators are generally happy
with the policy framework that has been developed for copyright
protection on mobile phones.
16. The operators have every incentive to
ensure that content is properly protected. It is not possible
to sustain a business model for the distribution of commercial
content on mobiles, unless it is.
17. The European Commission has sensibly
allowed operators some flexibility in the format to be used for
copyright protection and the Open Mobile Alliance (OMA), a coalition
of the world's largest operators has created effective open standards
for Digital Rights Management (DRM).
18. Commercial companies have developed
products based on the open specifications that allow operators
to distribute securely multiple content formats such as music
tracks and videos. Operators also work with handset manufacturers
to ensure end to end compatibility of the DRM systems.
19. Analysts expect data traffic and premium
content revenues on mobiles to grow to $40 billion world wide
in 2007, based on viable DRM infrastructures. The UK can expect
to create and consume a significant portion of this total.
DEALING WITH
THE "NEW
MEDIA RIGHTS"
FOR TV CONTENT
ORIGINALLY COMMISSIONED
BY BROADCASTERS
20. One area of uncertainty that is holding
back the development of the content industry in the UK, is the
issue of who owns the rights to content originally commissioned
for TV broadcast and who can sell those rights for distribution
over the new platforms such as the Internet and mobile phones.
21. At present, there is rather a patchwork
matrix of TV rights structures and arrangements that does not
generally explicitly deal with rights over new distribution platforms.
This frustrates delivering content over new platforms, for example,
a mobile operator may find that in seeking to simulcast a particular
channel, some of the programmes are not cleared for mobile transmission—hence
leading to individual programmes being blocked out. We need to
move to a rights framework which delivers a clear, consistent
and timely rights regime for all platforms. New media rights must
be "business as usual" rather than remain an afterthought.
22. Ofcom is currently undertaking a consultation
on the public service television production sector. The mobile
operators are very pleased to see the Codes of Practice, which
govern the relationships between the broadcasters and the independent
producers, are to be reviewed.
23. A major objective for Ofcom is to achieve
greater consistency and clarity in the approach and ownership
and control of the rights for the distribution of TV programmes
on the mobile and other new media platforms.
24. The relevant rights categories might
include: simulcast distribution, time shifted distribution, on-demand
services (pay per view) for short clips and re-purposed content
(ie adapted for consumption on a different platform), including
looped content and ancillary products such as games and ring tones.
25. Evidence from trials of mobile TV and
studies carried out by competition authorities have strongly indicated
that content consumption on mobile and consumption on traditional
TV are not close substitutes. For both social and technical reasons,
subscribers use the services in completely different ways—for
filling in brief moments of vacant time or quickly catching up
on news; Mobile TV is a complementary service. As a consequence,
mobile rights represent the potential for significant additional
sources of revenue to the rights owners.
26. Mobile operators are very keen to see
some strong principles emerge from the review:
— that there is clarity and transparency
over who owns what rights and who has a say in how they are exploited
(which can be different to ownership)
— that the market for alternative platforms
is not foreclosed by rights holders being able to negotiate excessive
"holdback" periods (ie, the duration of the primary
rights package before the producer can sell any secondary exploitation
of a programme)
— holdback periods for mobile content
should be set at a minimum.
— there should be plenty of scope for
producers to find new ways of exploiting rights and expanding
the market where possible.
SPECTRUM FOR
MOBILE TV
27. As explained above, the mobile sector
is already delivering significant revenues to the creative industries.
A further potential source for high growth is from mobile TV.
28. The revenue derived will be mostly additional
to rather than a substitute for revenue derived from traditional
TV. The trials have shown that customers use their phones to watch
mobile TV in all sorts of different situations where normal TV
is not available. They also consume content that is "re-purposed"
(ie specially adapted for mobile)—shorter programming, different
camera angles etc—thus deriving added value from the same
material.
29. A significant inhibitor of market development
in the UK is the availability of radio spectrum.
30. It is essential that in the next few
years, we can see a clear path to obtaining more spectrum for
this service. Ofcom must give this matter a high priority.
31. Other European Member States have allocated
spectrum now for mobile broadcast TV. There is a danger that UK
plc will suffer if Ofcom cannot accelerate the availability of
suitable UHF frequencies before 2013. Many other member states
will have thriving mobile broadcasting sectors. Indeed, the UK
may be the one place in Europe where the London Olympics might
not be viewable on a DVB-H or similar device. Availability of
spectrum must be accelerated and allocated on an equitable basis.
32. In the 2008-2012 time frame, the analogue
TV service will be switched off and 46 new channels in Band IV
& V will be freed up. 32 of these are committed to digital
terrestrial television, to improve coverage and signal quality.
33. In allocating the remainder, Ofcom,
in respecting its move to liberalise spectrum markets, must ensure
that the mobile sector is given fair access to the spectrum that
becomes available.
CONTENT IN
THE MOBILE
SECTOR
34. Content delivered to mobile devices
is regulated through a combination of self-regulation and formal
regulation by Ofcom and co-regulation with the premium rate regulator
(ICSTIS).
35. In January 2004, the mobile operators
published a Code of Practice for the self-regulation of commercial
visual and audio-visual content on mobiles. In outline, an independent
body has been appointed (The Independent Mobile Classification
Body—IMCB) to provide a classification framework against
which content providers can self-classify their content as either
18 or unrestricted.
36. The framework is broadly consistent
with standards used in other media and treats as 18, content that
would receive a similar classification for the equivalent material
in, for example, magazines, films, videos and computer games.
37. Content that is classified as 18 is
only made available to those customers that have satisfied the
mobile operators, through a process of age verification, that
they are at least 18.
38. The IMCB is able to resolve disputes
as to whether an item of content should be classified as 18 or
not.
39. In addition to the measures taken for
commercial content (ie that content where the mobile operator
has some editorial control over what is delivered to the customer),
the mobile operators provide filters for content accessible from
a mobile over the Internet. In this way, parents can have some
measure of control over what content children get access to.
40. All the mobile networks also block access
to sites that the Internet Watch Foundation has identified as
carrying images of child abuse and child pornography.
41. Since the operator's Content Code has
been in force, despite reasonable growth in the availability of
adult type material, the age verification and content blocking
mechanisms have worked well to keep adult content out of the hands
of children.
Proposed amendments to the Television Without
Frontiers Directive
42. The new media landscape will offer consumers
increasing choice of content and control over how, where and when
they watch and consume content. It is essential that the regulatory
regime is fit for purpose for this age—and the MBG agrees
that existing TV rules on such matters as production quotas, advertising
and product placement all need changing to reflect the realities
of the new media landscape.
43. We anticipate that this landscape will
drive a fundamental change in the way that content is "regulated"
in the UK—away from a tendency for the "command and
control" model where the content consumed is determined by
broadcaster and regulator, towards an environment of personal
preference, where the consumer decides what to view based on informed
choice—coupled of course with appropriate tools and measures
to protect children from inappropriate content.
44. Ofcom, ahead of its European counterparts
(and many people in the UK), is thinking along these lines. The
mobile operators have taken significant steps to introduce self-regulatory
measures for the new environment (as described above). However,
we are very concerned with the European Commission's proposals
to amend the TVwF Directive.
45. We agree that amendment of the Directive
is required. However, we believe that in a number of areas, the
proposed changes to the Directive are ill conceived, impractical
and likely to have counter productive effects.
46. With respect to what is defined in the
Directive as "Linear" (ie real time broadcasting), the
Directive is seeking to impose quotas for European works, independent
productions and advertising spots across all linear [broadcast]
platforms without any real assessment as to whether the public
policy concerns of the past are really any longer relevant to
the new media age.
47. We are not seeking to avoid regulation
on new platforms but we are seeking to ensure that any rules are
flexible and proportionate for the emerging and innovative markets
such as mobile TV. It is disproportionate that the same rules
should be applied to new, complementary, markets as to those that
have been established for many years.
48. Accordingly there must be flexibility
to defer extending any traditional TV regulation until there is
greater clarity over which business models are successful and
commercially viable services are established—and whether
new services are substitutes for traditional TV or rather complementary
(as trials indicate to date). Otherwise innovative and nascent
markets could be strangled. The principles of "Better Regulation"
must be followed before any new regulation is introduced.
49. Such an approach would also be equitable,
as quotas were, for example, originally phased in for traditional
broadcasters when the TVwF Directive was first introduced.
50. With respect to non-linear services,
the MBG, along with the UK Government and Ofcom, does not agree
with the European Commission's proposal to extend the scope of
the Directive to content that is consumed on demand, such as that
delivered over the Internet, through video-on-demand or the mobile
phone.
51. The Commission proposals are not well
thought through and a Directive is not an appropriate vehicle
for tackling the problems they are seeking to address.
52. First of all, there is no logic in applying
a Directive which seeks to promote a single European market to
a market that is already global and where there are virtually
no barriers to entry.
53. Secondly, the Commission is seeking
to impose regulation on all "media service providers"
within their jurisdiction and to require the national regulatory
authority to enforce the rules. There is no attempt by the Commission
to assess what this might involve. Ofcom believes that a regulator
ten times its present size would be overwhelmed by the task.
54. In the Internet age, a "media service
provider" can be anything from a multi-national company to
a single person operating from home with a web-cam. It is not
at all clear what Ofcom is expected to do to regulate this diverse
producer group.
55. There are also considerable difficulties
involved in defining an "audio visual media service",
which is intended to cover all [economic] audio-visual
mass-media services. It is not intended to cover "purely
private websites". A private website, unless password protected,
is a contradiction in terms and private individuals are becoming
increasingly sophisticated at commercialising (and building audiences
for) their websites, with advertising and pay per view content
(often of an "adult" nature). In any event, non-commercial
web sites may present an equal risk profile and so it is not clear
as to what end the Commission makes this distinction.
56. The MBG does not disagree with the Commission's
motives—to promote European culture and to protect minors;
nobody is against the protection of children. But we do disagree
with their methods. We share Ofcom's view that what the Commission
is attempting (which amounts to trying to regulate content providers
on the Internet) is futile, expensive and counter-productive.
57. Regulation of content providers within
the EU could drive economic activity outside its jurisdiction
and thus reduce the prevalence of European content.
58. And even if Ofcom were successful in
regulating all UK "media service providers", it would
only account for content produced within the EU. Anything produced
outside the EU, which is equally available to consumers, would
be unaffected.
59. The MBG argues Ofcom should not be forced
to waste resources in this way. Money would be much better spent
in educating consumers how best to protect themselves on the new
media platforms and to work in partnership with internet service
providers, mobile operators, advertisers and other interested
parties to develop appropriate self-regulatory models.
60. The mobile operators with their package
(content controls for commercial content, filters for Internet
browsing and blocking of illegal sites) have shown that self regulation
can offer a much swifter and more effective approach.
March 2006
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