Digital Economy Bill [HL] - continued          House of Commons

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Topic 7: Regulation of television and radio services

Clause 38: Application of regulatory regimes to broadcasters

166.     Section 263(4) of the Communications Act 2003 (“the 2003 Act”) gives the Secretary of State the power to cease to include certain obligations in the licence of any service. However, this power does not include any flexibility to remove obligations for a limited period or to reintroduce those if it is appropriate so to do.

167.     The clause amends section 263(4) to allow greater flexibility in response to market changes. The clause provides for the Secretary of State to alter the conditions of public service provision that OFCOM must include in Channel 3 and 5 licences, and then to change the conditions back at a later date. The Secretary of State may only make these alterations by affirmative order, which would require approval by Parliament before it could take effect.

Topic 8: Access to electromagnetic spectrum


168.     Availability of next generation mobile broadband services requires the availability of spectrum. There are suitable blocks of spectrum either ready for allocation, or about to become available, namely spectrum at 2.6 Gigahertz (GHz) and 800 Megahertz (MHz) otherwise known as the Digital Dividend, available as a result of digital switchover. Attempts by OFCOM to bring this spectrum to market have, however, been subject to delay due to issues around spectrum used for delivery of second generation (2G) mobile services.

169.     These issues are complex and revolve around the change of use of spectrum at 900MHz and 1800MHz, known as spectrum liberalisation. To date, the use of 900MHz spectrum has been constrained to providing 2G services because of the terms of Directive 87/372/EEC (on the frequency bands to be reserved for the co-ordinated introduction of public pan-European cellular digital land-based mobile communications). This Directive has now been amended by Directive 2009/114/EC to allow these spectrum holdings to be used for Universal Mobile Telecommunications Systems (UMTS, a 3G mobile technology). The UK is required to implement this change by May 2010. The revised Directive requires Member States to look at whether competitive distortion results from these changes. OFCOM’s view was that there was an issue and they proposed the reallocation of some spectrum. But OFCOM have been unable to agree with operators how this will be achieved. In parallel, the UK also has to implement a Radio Spectrum Committee Decision that allows the use of 1800MHz spectrum for UMTS.

170.     With little certainty on when this would be resolved, the government announced in the Digital Britain: Interim Report 6 that it was seeking a solution, either through a voluntary industry consensus or an imposed government solution. An Independent Spectrum Broker was appointed to take this work forward.

171.     The Independent Spectrum Broker’s initial set of proposals were published on 13 May 7, and the government responded to these in the Digital Britain: Final Report 8. Although the government stated that it was minded to implement the proposals, further work by the Independent Spectrum Broker was required. This work has now been completed, following extensive engagement with the mobile operators and other interested parties.

172.     It has become clearer during the latter phase of the Independent Spectrum Broker’s work that certain aspects of the Wireless Telegraphy Act 2006 (“the 2006 Act”) would need amending to implement some of the recommendations of the Independent Spectrum Broker.

173.     The proposals put forward by the Independent Spectrum Broker require the application in certain cases of annual licence fees, including what is known as Administered Incentive Pricing, to spectrum that has been auctioned, including spectrum that has been relinquished by operators to conform to the spectrum caps referred to below and spectrum authorised for use by 3G licences extended from a fixed term to an indefinite term.

174.     Under the proposals put forward by the Independent Spectrum Broker, a set of temporary spectrum caps will be put in place during the auction and for a limited period after to prevent any one person holding more than a specified amount of spectrum. Operators may therefore be in a position of having to relinquish spectrum in order to comply with these caps and the relinquished spectrum will be auctioned.

175.     Where operators are required to relinquish spectrum in order to comply with temporary spectrum caps, time limits will be set for that release of spectrum within the wireless telegraphy licence conditions. It is important that this release happens in the timeframe set out to ensure effective competition is maintained. Licensees will also be subject to certain retail service and wholesale access obligations, in order to widen access to the spectrum. OFCOM’s existing powers to revoke or prosecute for breach of a wireless telegraphy licence condition may be disproportionate or insufficiently flexible to enforce the conditions which are proposed pursuant to a direction under section 5 of the 2006 Act to allow the timely reform of the spectrum.

Clause 39: Payment for licences

176.     Subsections (1) to (3) of this clause allow OFCOM to make regulations under section 12(1)(b) of the 2006 Act which apply charges payable during the term of the licence to specified cases of wireless telegraphy licences allocated by auction. Section 12(5) of the 2006 Act, which includes power to impose charges payable during the term of the licence, does not apply to a licence that has been allocated through auction.

177.     Subsections (4) to (7) of this clause allow OFCOM, with the consent of the Secretary of State, to make regulations under section 14(1) of the 2006 Act which will permit or require licences to which the regulations apply to provide for payments between operators in relation to licences auctioned under section 14 of the 2006 Act.

178.     Under existing legislation, payments for spectrum at auction are made to OFCOM who must pay them into the Consolidated Fund. Under the Independent Spectrum Broker’s proposals, the proceeds from any 2.1GHz relinquished spectrum should go back to the operator who relinquished it, on the basis that they bought this at auction in 2000. There will also be additional payments between operators arising from the auction of other relinquished spectrum.

Clause 40: Enforcement of licence terms etc

179.     This clause inserts a new section 43A into the 2006 Act giving OFCOM power to impose financial penalties for contravention of certain licence provisions, terms or limitations to which section 43A applies by virtue of a licence provision. A provision applying section 43A can only be included in a licence if it appears to OFCOM that a direction of the Secretary of State made under section 5 of the 2006 Act requires OFCOM to include a particular provision, term or limitation in the licence.

180.      Under the current legislation, OFCOM’s powers in respect of breaches of wireless telegraphy licences are limited to prosecution where such breach amounts to an offence under Chapter 1 of Part 2 of the 2006 Act or to revocation of the licence.

181.     OFCOM has power under sections 42 to 44 of the 2006 Act to impose financial penalties for contraventions of the terms, provisions or limitations of a general multiplex licence.

182.     This clause also amends section 400 of the Communications Act 2003, to ensure that financial penalties imposed by OFCOM under new section 43A are dealt with in a consistent manner to other similar penalties paid to OFCOM. Section 400 of the Communications Act 2003 requires the money received from certain penalties and charges imposed by OFCOM to be paid into the Consolidated Fund.

Topic 9: Video Recordings


183.      The Video Recordings Act 1984 (“the 1984 Act”) makes it an offence to supply a video recording, such as a DVD, containing a video work, such as a film or video game, unless the video work has been submitted to an authority designated by the Secretary of State for classification as to its suitability to be viewed by persons of particular ages and the DVD is supplied in accordance with the classification certificate. The Secretary of State has designated principal office holders in the British Board of Film Classification (BBFC) for this purpose.

184.     Certain types of video works are exempted (see section 2 of the 1984 Act). They include video works that, taken as a whole, are designed to inform, educate or instruct, or that are concerned with sport, religion or music, provided that they do not contain the particularly objectionable content described in section 2(2) and (3), which includes sexual activity and gross violence. For example, a music video is not exempted from the classification requirement if it contains depictions of gross violence, human sexual activity or if it is likely, to any significant extent, to stimulate or encourage human sexual activity. .

185.      Most video games are currently exempted from the 1984 Act, unless they contain content such as sexual activity, gross violence or other matters of concern listed in section 2(2) and (3) of the Act. The BBFC classify video games which contain any film material, because the film material is not usually exempt from the requirements of the 1984 Act, even when it is contained in an exempt game. Additionally, on a voluntary basis, the video games industry submits to the BBFC games which they believe are likely to be classified as 18+.

186.      Video games which are currently exempted under the 1984 Act are usually classified on a voluntary basis by the Pan-European Games Information (PEGI) system. PEGI classifications of 12 and over are administered throughout Europe by a UK body, the Video Standards Council (VSC).

Clause 41: Classification of video games, etc

187.     The Bill will extend the statutory classification requirement to video games that are only suitable for viewing by persons aged 12 years and above (see new subsection (1A) of section 2 of the 1984 Act). This extension of the classification requirement to a wider age bracket for video games will implement Professor Tanya Byron’s recommendation set out in her independent review entitled Safer Children in a Digital World 9and it follows in the wake of a UK-wide public consultation on the future structure of the video game classification system.

188.     Clause 41 sets out the conditions that must be satisfied for the game to be an exempted work under the 1984 Act. The existing statutory exemptions for video games will continue to apply. So those games that, taken as a whole, are designed to inform, educate or instruct, and those concerned with sport, religion or music, will not be required to be classified, provided that they do not depict human sexual activity, gross violence or any of the other matters set out in section 2(2) and (3) of the 1984 Act.

189.     A video game will also be exempted if it satisfies one or more the conditions set out in new section 2A. The first condition is that the game does not contain anything listed in section 2A(2)(a) to (h). The second condition is that the designated authority (or a person nominated by it) has confirmed in writing that the game is suitable for viewing by persons under the age of 12. The criteria listed in section 2A(2)(a) to (h) are based on the criteria used by the PEGI 10 system to determine whether a video game is only suitable for those aged 12 years and above. They include depictions of violence against human or animal characters, depictions of activity involving illegal drugs, swearing and offensive language. Depictions of violence against human or animal characters would not meet the criteria if the character was of a rudimentary form, such as a simple stick character.

190.     The Secretary of State would have power to amend the criteria set out in section 2A(2)(a) to (h) by regulations, subject to the affirmative resolution procedure. This would enable the criteria to be updated, if necessary, in the future, subject to Parliamentary scrutiny. The Secretary of State would also have power, by regulations subject to the affirmative resolution procedure, to add or remove further criteria for exempted video games.

191.     Clause 41 confers a new power on the Secretary of State to amend section 2 of the 1984 Act by adding, amending or removing cases in which video works are not exempted works for the purposes of the Act (see new subsection (4) of section 2 of the 1984 Act). The power is exercisable by regulations subject to the affirmative procedure.

192.     Section 3 of the 1984 Act sets out the circumstances in which a supply of a video recording is an exempted supply, even if the film or game contained in the video recording is not exempted. The Bill amends that section to secure that the supply of video games by means of amusement arcade machines is exempted (see new subsections (8A) and (8B)), unless the game includes any of the matters mentioned in section 2(2) and (3) of the 1984 Act. It also confers on the Secretary of State a new power to amend section 3 of the 1984 Act, by regulations subject to the affirmative procedure, by adding, varying or removing exempted supplies under the Act.

Clause 42: Designated authority for video games

193.     This clause inserts a new section 4ZA into the 1984 Act and allows the Secretary of State to designate two different authorities under section 4 of the Act. So, a person (or persons) may be designated to make arrangements with respect to video games (“the video games authority”) and a different person or persons may be designated for making arrangements in respect of other video works (“the video works authority).

194.     Some mechanism is thought to be necessary to enable the designated authorities, where appropriate, to transfer work between them. New section 4ZB provides that where two authorities are designated under section 4, responsibility for classifying a class of video games may be allocated by the video games authority to the video works authority. This would allow the video games authority to allocate to the other authority responsibility for video games that are considered to be suitable only for supply in licensed sex shops. It also provides that the video games authority may allocate responsibility in relation to video games when they are supplied in a particular type of video recording - for example, responsibility might be transferred for video games that are supplied on the same disc as a film or within the same boxed set as a film. An example would be the basic games found on Blu-Ray discs. Once an allocation is made, the video works authority has responsibility for making arrangements in respect to the allocated works.

195.     An allocation must be made by notice and may only be made with the consent of the video works authority. It may only be withdrawn by notice and with consent. When making or withdrawing an allocation, the video games authority must have regard to any guidance issued by the Secretary of State.

196.     Any question as to which authority is responsible for making arrangements with respect to a class of video games may be determined conclusively by the video games authority. New section 4ZA(2) provides that references in the 1984 Act to the designated authority in relation to a particular video work will be to the authority designated to be responsible for making arrangements in relation to the video work, taking account of any allocation made by the video works authority under new section 4ZB.

197.     New section 4ZC relates to video works that are found within video games, for example, a film which can be viewed as part of the process of playing a game. Where the video work already has a classification certificate issued by the video works authority, it enables the video games authority to take account of that certificate. For video works that have not already received a classification certificate, it enables the video games authority to make arrangements to obtain and have regard to any subsequent determination made by the video works authority as to the suitability of all or part of the video work included in a video game. The video games authority must consult the video works authority with respect to the appropriateness of the arrangements that it makes for taking account of such matters. It must also have regard to any guidance issued by the Secretary of State.

Schedule 1: Classification of video games etc - supplementary provision

198.     Schedule 1 makes further amendments of the 1984 Act.

199.     Section 4 of the 1984 Act makes provision about the arrangements to be made by the designated authority. Sections 4(1)(b)(i) and (ii) and 7 are to be amended to clarify that the arrangements may include provision for the revocation of classification certificates.

200.     A new subsection (1C) is to be inserted into section 4 so that arrangements made under this section may require a person seeking a classification certificate for a video work to agree to comply with a code of practice, such as the PEGI 11 code of practice. That code includes provision relating to the labelling of video recordings.

201.     A new subsection (3A) is to be inserted into section 4 to ensure that, prior to making any designation under section 4, the Secretary of State must satisfy himself that adequate arrangements will be made for taking account of public opinion in the United Kingdom. This means that the designated authority must have an effective system to gauge public opinion and take account of it.

202.     Section 4(5) currently requires the Secretary of State to approve tariffs for fees to be charged by the designated authority in connection with the classification of video works. The Bill would amend this so that the designated authority simply has to consult the Secretary of State about the fees that it proposes to charge.

203.     A new subsection (6A) is to be inserted into section 4 to ensure that the designated authority complies with any guidance issued by the Secretary of State relating to arrangements made under that section. For example, the Secretary of State may provide guidance on administrative matters such as how records of classification certificates are to be kept and how appeal arrangements may be set up. New subsection (6B) makes it clear that the Secretary of State’s guidance is not to extend to the criteria to be taken into account in making individual classification decisions. Section 4A of the 1984 Act sets out the criteria to which special regard is to be given by the designated authority when making such decisions.

204.     New section 7A of the 1984 Act provides that classification certificates may be issued so as to have effect only for the purposes of a particular video recording. This enables video works to be classified by reference to the recording in which they are to be published. For example, a video game may be classified for the purposes only of its supply for use on a particular platform, such as Nintendo or Xbox. Section 7A(2) provides that, in such a case, the classification certificate can only be relied on for the supply of the video work for use on that platform and not for its supply more generally.

205.     The offences set out in the 1984 Act at sections 11 (supplying a video recording of classified work in breach of classification), 13 (supplying a video recording not complying with requirements as to labels, etc) and 14 (supplying a video recording containing false information as to classification) are amended to provide that an offence is not committed where the video work concerned is an exempted work or the defendant believed on reasonable grounds that the video work was an exempted work. For example, the defendant might believe, on reasonable grounds, that a video game has not been classified because it is suitable for viewing by persons aged under 12, having regard to the criteria set out in new section 2A(2)(a) to (h).

206.     The offences under the 1984 Act relate to the supply, or possession for the purpose of supply, of a video recording that contains a video work. Section 22(2) of the 1984 Act provides that a video recording contains a video work if it contains information by means of which all or part of the video work can be produced. There is an exception to this: if a video work contains an extract of another video work (for example, a film that includes an extract from another film), the extract is not part of the work of which it is an extract but a part of the video work which contains the extract; and hence the video recording contains that video work including the extract. An increasing variety of video recordings are available, some of which contain a mixture of films and video games. New subsection (2A) of section 22 would provide a power for the Secretary of State to make provision about the circumstances in which a video recording does or does not contain a video work for the purposes of the 1984 Act. This would allow provision to be made to take account of new formats, such as where a video game contains a whole film within it or a film contains a game within it.

Topic 10: Copyright and performers’ property rights: licensing and penalties

Clause 43: Extension and regulation of licensing of copyright and performers’ rights

207.     This clause introduces powers for the Secretary of State to make regulations for authorising the use of orphan works and orphan performers’ rights, and for authorising licensing bodies to extend their licensing activities to cover works and rights in relation to which they do not act for the owner. It also makes provision for the regulation of licensing bodies. Currently, some uses of a work or right without the consent of the copyright or rights owner are an infringement of copyright even where that owner cannot be identified or traced. There are civil penalties for infringement, and infringement can be a criminal offence if it takes place on a commercial basis. As a result, many orphan works, some of significant cultural value, are not used.

208.     The advent of digital media has increased the volume and speed at which material protected by copyright or performers’ rights is created and disseminated in the United Kingdom. Extended licensing would allow a licensing body to act on behalf of those remaining copyright owners and performers’ rights owners who were not members of, and so are not represented by, the body once that body had been authorised to do so by the Secretary of State. This is intended to make the system of rights clearance simpler for those seeking to use works. It would also help licensing bodies to ensure they have the appropriate permissions to offer broad licences without themselves violating copyright. Factors that would have to be taken into account in deciding whether to authorise a particular licensing body to carry out extended licensing include the likely effect on authors, copyright owners, licensees and potential licensees of the works concerned, the likely effect on the licensing body’s members, and the extent to which the body already represents copyright owners of similar works.

209.     Any licensing body authorised to operate extended licensing or that is failing to self-regulate and any licensing body or other person that is authorised to use or license orphan works could be subject to regulation, including by being required to a code of practice.

210.     The clause introduces the following new sections into the Copyright, Designs and Patent Act 1988 (“the 1988 Act”):

  • Section 116A enables the Secretary of State to make regulations providing for the authorisation of a licensing body or other person to use or to license the use of orphan works on a non-exclusive basis. Subsection (4) of the section requires any such regulations to provide for the treatment of royalties or other sums paid in respect of the use of the orphan works concerned. Subsections (5) and (6) of the section enable the Secretary of State in the regulations to determine whether a licensing body or other person meets the requirements for authorisation, and for the rights and obligations of any person if an interest in an orphan work ceases to be registered as such.

  • Section 116B enables the Secretary of State to make regulations to authorise a licensing body to operate extended licensing of published works, broadcasts and works included in a broadcast, except where the copyright owner has opted out. Subsections (3) to (6) of section 116A apply also to regulations about extended licensing, with some exceptions where the works concerned are not orphan works.

  • Section 116C defines an orphan work; this definition may be amended by regulations.

  • Section 116D contains registration requirements for orphan works and provides for the consequences of failure to comply with these requirements.

  • Section 116E introduces Schedule A1 to the 1988 Act (inserted by this section and Part 1 of Schedule 2 to the Bill) which confers powers on the Secretary of State to provide for the regulation of licensing bodies and persons other than licensing bodies authorised under sections 116A. Schedule A1 also deals with enforcement for the purposes of sections 116A to 116D.

  • Section 116F provides that section 116B and Schedule A1 do not apply in relation to Crown copyright or Parliamentary copyright. It also makes general provision about regulations under the provisions inserted by the clause, including provision about consultation prior to making regulations and parliamentary procedure for making regulations.

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Prepared: 17 March 2010