Support for the creative economy

Written evidence submitted by BT [SCE 074]

Introduction

BT is pleased to respond to this inquiry. Our comments relate to issues primarily from the perspective of a provider of communications services whose activities impact the UK’s digital, including the ‘creative’, economy in a number of ways. Given BT’s ongoing development of broadband services and increasing their availability in the UK, its role in the Olympics and Paralympics, its role in developing skills to equip young people to take a full part in the digital economy and support for innovation, we hope the Committee will find our observations useful.

Widespread availability of broadband continues to be one of the key drivers of growth, not only for established media and creative industries but also for newcomers: new entrants going into business for the first time and players from other industry sectors pursuing business opportunities created by ongoing changes in product/technology integration and consumer behaviour. Greater bandwidth provides them all with opportunities to develop new and exciting products and services, and allows them to distribute these quickly and to the widest possible audience.

The creation of a fully-digital Britain in which every citizen has the opportunity and ability to enjoy the benefits of being online is one which sits at the heart of our business. Such an environment will support a vibrant UK economy, underpinning growth and employment while providing enhanced social benefits, as well as broader and more cost-effective access to services. Realising these benefits will require innovation and investment across the global communications and content industries.

Specific questions in the call for evidence

How best to develop the legacy from the Olympics and Paralympics of the display of UK talent in the creative industries in both Opening and Closing ceremonies and more generally in the design of the Games?

1. The legacy of UK talent from London 2012 can be developed using assets developed in and around venues, which would not have materialised were it not for the Games. BT’s communications network, which links venues and areas around them, is a great example of this; it can be a fundamental contributor to the UK’s creative talent to demonstrate its skills.

2. A significant BT network developed around London 2012 venues; BT will leave the thousands of kilometres of cable that we put in the ground for the Games, providing a communications legacy for Stratford and other Games sites such as the sailing venue in Weymouth. The next-generation fibre network will be left in place at the Olympic Village for the benefit of local communities and businesses; just under 3000 apartments in the Village will have broadband speeds of up to 300Mbps.

3. In terms of network actually within the venues, we have been approached by a number of them to consider donating equipment as a further legacy contribution. We are considering these on a case-by-case basis.

4. We are also working with the London Legacy Development Corporation, negotiating legacy use of our mobile and WiFi networks both at the Olympic Park and at other venues.

The impact on the creative industries of the independent Hargreaves Review of Intellectual Property and Growth, and the Government’s Response to it. The impact of the failure, as yet, to implement the Digital Economy Act, which was intended to strengthen copyright enforcement. The impact of proposals to change copyright law without recourse to primary legislation (under the Enterprise and Regulatory Reform Bill currently before Parliament)?

5. Copyright has a fundamental role in providing incentives for the creation of valuable works. The Hargreaves Review and the Government’s acceptance and pursuit of its recommendations relating to making the UK’s copyright system more fit-for-purpose for the digital age should facilitate innovation and growth in the creative economy.

6. With regard to the objectives of the Digital Copyright Exchange concept, eg:

· to improve understanding of when rights are in issue and licences to them required

· to improve identification of potential licensors and their repertoire to potential licensees

· to reduce the current cost and complexity of the processes of engagement in licensing (both the initial engagement phase and subsequent in-life management of granted licences).

If these can be achieved, then we anticipate that the potential benefits derived from such improvements could spread through the ecosystem of copyright licensing. Easing the pathway to engage in licensing for those who are inexperienced in copyright licensing, should stimulate and encourage more licensing activity overall.

7. We also hope that changes being implemented through the Enterprise and Regulatory Reform Bill and proposed changes on copyright exceptions can bring far greater understanding and clarity than there is today for consumers and others. Improvements such as reducing confusion and ignorance on what is and is not infringing activity, could cultivate greater respect for and compliance with copyright law. This too would have a positive impact on the creative economy.

8. Reaching a situation where copyright holders, potential licensees and end-users are better equipped to innovate and utilise copyright works within the bounds of copyright law, updated to reflect the needs of a digital age, should complete a virtuous circle of productivity and fairness.

9. In relation to the Digital Economy Act (DEA), whilst some will feel frustration about the time taken to implement, it should be recognised there is an inevitability of delay when introducing controversial laws; France, Spain and New Zealand have all experienced this with similar legislation. However, developments from and alongside the Judicial Review have helped to clarify a number of the issues that troubled a number of stakeholders during the passage of the legislation. These issues were not satisfactorily addressed at the time because of the lack of pre-legislative scrutiny by Parliament and the Bill being rushed through under the pre-election ‘wash-up’ process.

10. The increased certainty and clarity provided by these developments should be helpful in generating greater acceptance and respect for this law. It should contribute to the law being understood and applied fairly, and perceived to be so. This will also be aided by increasing growth and uptake of legitimate digital services in sectors such as films, music and publishing.

11. BT’s view, therefore, is that there has been no material adverse impact from the current failure to implement the Digital Economy Act in line with the timetable envisaged at the time the DEA was passed.

12. Indeed, in the intervening period, developments in EU and UK case law have clarified that in terms of enforcement, copyright owners are able to obtain injunctions against internet intermediaries such as internet access providers to restrict access to copyright infringing web-sites under existing law. Therefore it can be argued that the extremely controversial provisions in sections 17 and 18 the DEA were not needed. Section 97A of the Copyright Designs and Patent Act 1998 provides the necessary remedy in appropriate cases. The Government had already instigated a review of the feasibility of the web-blocking provisions of the DEA [1] and in June this year announced that it would repeal those provisions [2] . Copyright owners have already obtained injunctions against two sites through this route, more are expected. The process is becoming streamlined with the experience gained by all sides on the applications which have been made.

13. It has also been clarified by case law that the test of whether technical measures such as filtering and blocking are an appropriate remedy is fact-specific and requires balancing of the rights of all stakeholders who would be affected – copyright owners, "infringing" content providers and users and the impact on ISPs putting measures in place. It has been emphasised that remedies cannot be pursued on the basis that copyright owner’s rights in any way "trump" the rights of others, all need to be weighed to reach a fair and proportionate result [3] .

14. Clarification has also been provided on the allegations that can be properly made against people whose internet access services appear to have been involved in copyright infringing activities. This included the evidential proof limitations of IP address information obtained by copyright owners in the course of detection of P2P file-sharing activities which forms the basis of copyright infringement allegations against ISPs’ customers.

15. These issues and the Government’s statements during the Judicial Review have helped to clarify that the role of notifications sent under the Initial Obligation Code of the Digital Economy Act are to educate ISPs’ customers about copyright infringement potentially occurring on their internet access lines. Judgments in the Media C.A.T. cases [4] and Goldeneye [5] are providing guidance on the need for care in any notices sent to customers, e.g. on tone, accuracy of allegations made and the inferences that can be drawn from IP address data being matched to a customer’s internet account. They have also led to Ofcom’s original proposals in the draft Initial Obligations Code on accuracy and reliability of copyright owners’ evidence to ISPs being revised in ways which will increase the robustness of, and confidence in, the fairness of the DEA regime overall.

16. The Judicial Review challenge has been a source of delay to the original timetable but it was not possible to gain the clarity and certainty that BT considered it prudent to have until after the Act was passed. It would not have been to anyone’s benefit to rush into implementation only to find that fundamental elements of the legislation were unenforceable and, or unable to be progressed, for example:

· because of a failure to notify the DEA to the EU for review under the Technical Standards Directive before it was adopted

· that it required general monitoring by ISPs within the meaning of the E-Commerce Directive which was prohibited

· to meet challenges under data protection law about the processing of IP address information by copyright owners and ISPs

· what, if any costs of the system could lawfully be placed on ISPs.

17. The Judicial Review has provided some answers, enough for the Government to restart the clock on DEA implementation, but a great deal of uncertainty and inbuilt delay remains. The Initial Obligations Code has not been settled yet and will have to go through an EU review process before it can be adopted. Difficult issues about sending notices to customers such as libraries, universities and businesses which are both ‘subscribers’ as well as ‘internet access providers’ within the meaning of the Act remain to be resolved.

18. ISPs cannot begin technical implementation because they do not have basic information on the level of infringements, a pre-requisite for system design and build. This normal starting point has been turned on its head by the way DEA is to be implemented. A prolonged period is involved during which ISPs have to estimate costs against different potential volumes, Ofcom has to review and agree the cost model, potential tariffs agreed between Ofcom and copyright owners, an iterative tariff agreement/bargaining period between Ofcom and copyright owners on what volumes at what costs they are prepared to agree, and so on until an agreed volume/cost tariff can be reached.

19. Meanwhile, the rules within the Government’s Cost Order Statutory instrument, currently before Parliament, are still the subject of concerned comment by consumer, citizen and taxpayer groups for seeking to introduce a £20 "appeal" fee, justified on the basis that this is the level of fee designed to deter too many appeals and so make the system "attractive" to copyright owners to use (as long as the ISPs’ costs are low enough too).

20. In terms of Ofcom’s activities, Ofcom cannot begin putting the Appeals Body envisaged by the DEA into place until further down the current process, and uncertainty remains for all stakeholders on the precise remit and procedures for appeals. Ofcom can do little to assist without encroaching on matters the Appeal Body itself will have to determine. Ofcom will also have to develop and specify what it wishes to put in place to establish an objective and reliable measure of the amount of P2P infringement occurring. This will enable it to assess what impact Initial Obligations Code measures have and help determine which ISPs should be subject to DEA obligations. In addition, in its draft Code consultation, Ofcom indicated some reviews it intends to consult on after six months, eg, running of the Code and any material changes, as well as factoring in the three to four month EU review process and any necessary legislative changes that follow.

21. Copyright rules and the consequences of infringement need to be explained in ways digital consumers can understand. Breach of copyright is entirely wrong but action against those who access or share music, movies and other material unlawfully needs to follow due process and be proportionate. The objectives of the DEA’s Initial Obligations Code are right in aiming to address assisting copyright owners providing cost recovery for the actions of ISPs, as well as fairness to customers. At this point it appears to be unlikely that the right balance can be achieved except through the DEA route with the checks and balances built in through regulation and oversight by Ofcom and an independent Appeals Body.

Ways to establish a strong skills base to support the creative economy, including the role of further and higher education in this?

22. BT is key to the creative industries and digital economy, which increasingly depend on the communications infrastructure that we continue to develop to match the needs of users.

23. A strong skills base is needed for the growth and development of the UK’s creative industries and digital economy as a whole. This is not confined to the creative economy in isolation. Although the Committee has indicated in its call for evidence that it wishes to focus on sectors such as film, music, television, design and games; the artistic, production and technical skills that these industries need to remain world-class will be developed in a much broader arena.

24. Our principal concern with regard to education is about ensuring that people have ‘all-round’ skills, not just those required for specific jobs. We believe that the role further and higher education has in supporting the creative economy is to ensure that individuals who want to pursue careers in the creative industries are able to do so without losing perspective on how their industry fits into the wider world; as well as studying creative subjects, individuals must still be able to understand and articulate the impact of what they do or want to do means in business and society terms.

25. Crucially, individuals must retain a firm grip of maths and English, as well as ICT. This was also a recommendation of the recent Wolfe report. It shouldn’t be assumed that these should be ignored if individuals are good in creative areas. Instead, educational establishments should ensure that individuals understand how these relate to the work that they do. For example, there is little point in designing creative media if this can’t be adequately described and presented in a sales pitch. It’s no good wanting to run an exhibition if you can’t balance the books in terms of costs and income and in an ever increasingly online world, you need ICT skills to communicate your message effectively.

BT’s contribution

26. All kinds of activities that develop coding and software programming skills are available for the creative industries to draw on for their workforce. BT’s plays a significant part in this, with initiatives that also enhance the foundation skills of literacy and numeracy in school leavers and providing support and investments in apprenticeships and further and higher education.

27. BT recruits around 500 young people every year onto our apprenticeship programme. These young people undertake a range of roles including engineering, IT and customer service. Much of this training involves coding and software programming. Apprentices rotate their places of work, gaining experience in, for example, our TV activities. We also make a significant contribution to many skills projects, sponsor three academies and a university technical college and 1000 BT people act as school governors.

28. BT is working with e-skills UK and the National IT Partnership (NITP) to develop and launch a ‘gold standard’ IT apprenticeship for new recruits into SMEs. BT will provide the quality assurance and also significant other value-add activities such as employment/business skills, mentoring support, access to eLearning and membership to our apprenticeship network.

29. BT sponsored a Department for Business, Innovation and Skills report into simplification in the skills system in 2011. Work in 2012 includes a project with e-skills UK and the National Apprenticeship Service to support small companies in taking on and developing apprentices and working with the UK Commission for Employment and Skills on its ‘Employer Investment in Skills Project’.

30. With regard to literacy and numeracy, BT is running projects with schools including the ‘Communication Triathlon’, which helps children express themselves through improved speaking and listening skills; All Talk, a range of materials that support English GCSE and A-level English language; and we have sponsored STEM Challenges, a series of competitions designed to encourage young people aged 11-14 to use science, technology, engineering and maths (STEM) skills.

The importance of "clusters" and "hubs" in facilitating innovation and growth in the creative sector. Whether there is too much focus on hubs at the expense of encouraging a greater geographical spread of companies through effective universal communication?

31. BT believes that clusters and hubs create the environment necessary for innovation to flourish. The mixing and circulation of people and ideas provided by geographical proximity is essential for a vibrant and sustainable innovation environment.

32. BT also supports the general principle of making the most of existing centres as the vehicles most likely to create world-beating innovation. Creating the critical mass necessary for a world-class centre takes time and investment that cannot necessarily be afforded by the fast moving industries such as those in the creative sector.

33. In addition, advances in communications technology have significantly improved remote interaction and collaboration which provides the potential for 'distributed clusters' as a way to further leverage established centres.

34. As an example from industry, BT’s global engineering HQ at Adastral Park in Suffolk, BT Labs@Adastral Park, is evidence of a world leading IT and telecommunications cluster. 45 technology companies, including global IT & telecoms businesses such as Alcatel-Lucent, Cisco Systems, Fujitsu, Nokia Siemens Networks and Huawei Technologies, have elected to cluster around the labs.

November 2012


[1] Ofcom report on SS 17, 18, DEA http://stakeholders.ofcom.org.uk/binaries/internet/site-blocking.pdf

[2] DCMS announcement June 2012 www.culture.gov.uk/news/media_releases/9160.aspx

[3] Court of Justice of the EU decisions: 24 November 2011 in Scarlet Extended v Sabam Case C-70/10 http://curia.europa.eu/juris/celex.jsf?celex=62010CJ0070&lang1=en&type=NOT&ancre=

[3] on the limits of obligations that can be placed on an internet access provider ( “mere conduit” providers) to prevent the unlawful use of protected works; 16 February 2012 Sabam v Netlog Case 360/10 http://curia.europa.eu/juris/document/document.jsf?text=&docid=119512&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=157703 http://curia.europa.eu/juris/celex.jsf?celex=62010CJ0360&lang1=en&type=NOT&ancre=

[3] on the limits of obligations that can be place on the owner of an online social network (“hosting” providers) to prevent the unlawful use of copyright protected works

[4] Patent Country Court judgment of Birss J on 1 December 2010 www.bailii.org/ew/cases/EWPCC/2010/17.html

[5] High Court Judgment of Arnold J on 26 March 2012: www.bailii.org/ew/cases/EWHC/Ch/2012/723.html

[5]

Prepared 21st November 2012