Documents considered by the Committee on 25 April 2017 Contents

10Digital Single Market: Audiovisual Media Services Directive

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; scrutiny waiver granted; further information requested

Document details

Proposal for a Directive amending Directive 2010/13/EU concerning the provision of audiovisual media services in view of changing market realities

Legal base

Articles 53(1) and 62 TFEU; QMV; Ordinary Legislative Procedure

Department

Culture, Media and Sport

Document Number

(37812), 9479/16 + ADDs 1–4, COM(16) 287

Summary and Committee’s conclusions

10.1As part of its Digital Single Market Strategy, the European Commission proposes to revise the regulatory framework which governs the operation of the Single Market for broadcasting to ensure that it reflects recent technological developments, such as the growth of on-demand services such as Netflix and video-sharing platforms such as YouTube. In its Explanatory Memorandum of 13 June 2016 the Government indicated that it was broadly supportive of the proposal, but would oppose some elements of it.

10.2The UK’s imminent exit from the EU raises significant challenges for the broadcasting sector. The EU has succeeded in creating a highly integrated Single Market in broadcasting: the Audiovisual Media Services Directive (AVMSD) ensures that any broadcaster that is established in an EU Member State and conforms to the rules of that state’s national regulator can freely broadcast content to the other 27 Member States.

10.3This framework, combined with the UK’s strengths in the creative sector and its attractive business ecosystem, has led to the UK becoming the destination of choice for international broadcasters seeking to access the EU market: the Creative Industries Federation reports that “of all 2,200 of the broadcasting licences granted to channels across the European Union, more than half (1,100) are granted by Ofcom in the UK, and half of these (650) are for ‘nondomestic channels’ that are broadcast from the UK to other countries”.14

10.4In contrast to the level of integration within the EU broadcasting market, broadcasting is one of the least liberalised sectors in global trade, in terms of both World Trade Organisation (WTO) commitments and Free Trade Agreements (FTAs). This is because most countries insist that the particular nature and importance of culture means that it should not be treated like other commodities (“l’exception culturelle”).15

10.5If current broadcasting arrangements are not covered in a UK-EU Free Trade Agreement, the Council of Europe Convention on Transfrontier Television (CTT), which predates the AVMSD, is likely to be the alternative route to market for UK-based broadcasters, but suffers from significant limitations: online services are not covered by the CTT, several EU Member States (Denmark, Greece, Ireland, Luxembourg, the Netherlands and Sweden) have not signed it, and it does not contain an effective enforcement mechanism.

10.6The Minister of State for Digital and Culture (Matthew Hancock) now writes to the Committee in advance of a forthcoming meeting of the Council of Ministers on 22 May, at which it is anticipated that a General Approach will be reached. Overall, the Minister is content with the direction of travel. However, there are a number of areas in which the Council appears to be split, and it is difficult to see at this stage how this will resolve or in which direction. He responds to some of the Committee’s previous questions about the implications of Brexit for the sector.

10.7We thank the Minister for his letter, in advance of a meeting of the Council of Ministers on 22 May at which it is anticipated that the Maltese Presidency will seek agreement on a General Approach.

10.8We note the Minister’s summary of the state of play in relation to the proposed Directive. The Government’s overall position remains unchanged—it is supportive of the proposed Directive, but objects to some aspects and is neutral on others.16 The Minister observes that “there are several issues where the council appears to be split”, and states that the parallel process of exiting the European Union means that the Government’s negotiating position “will remain flexible”.

10.9Few of the points of contention appear to present major concerns for the Government: support for watering down the Country of Origin principle, which underpins the operation of the Single Market in broadcasting, is limited; the proposed derogations from the principle “could only be used in the most severe cases”; most UK providers will not have difficulty meeting the European Works quotas for video-on-demand platforms; and accessibility requirements will be contained in the AVMSD, rather than the European Accessibility Act.

10.10The Minister says that in working groups the Government has been opposing proposals to extend the scope of the AVMSD to video-sharing platforms, to include child protection measures such as parental controls, as well as proposals to extend the definition of video-sharing platforms to include social media platforms, but adds that the Government is “being pragmatic and assessing if the proposals would cause excessive burdens, as many of the requirements are already captured in the terms and conditions of existing social media platforms.”

10.11The Minister responds to some of the Committee’s Brexit questions. He states that:

10.12The Minister does not answer a number of the Committee’s Brexit-related questions, including: how significant a failure to secure continued access to the EU market would be for UK-based international broadcasters; what proportion of UK-based international broadcasters would have to relocate part or all of their operations to the EU if this eventuality came to pass; and how many jobs depend on securing continued access to the EU market.

10.13We request an update from the meeting of the council of Ministers on 22 May, as well as an update in progress in the European Parliament and (in due course) trilogue negotiations. We specifically request information about any developments which could potentially impact the terms on which third country broadcasters (which UK broadcasters will become, post-exit) can access the Single Market for broadcasting.

10.14In the meantime, we retain the proposal under scrutiny but grant a scrutiny waiver for the meeting of the Council of Ministers at which agreement on a General Approach will be sought.

Full details of the documents

Proposal for a Directive amending Directive 2010/13/EU concerning the provision of audiovisual media services in view of changing market realities: (37812), 9479/16 + ADDs 1–4, COM(16) 287.

Background

The Audiovisual Media Services Directive

10.15The Audiovisual Media Services Directive (2010/13/EU) (AVMSD) governs EU-wide coordination of national legislation on all audiovisual media, including both traditional (referred to as ‘linear’) broadcasts and on-demand (‘non-linear’) services. The Directive establishes minimum regulatory standards that Member States and national regulators must implement, which aim to preserve cultural diversity, protect children and consumers, safeguard media pluralism, combat racial and religious hatred, and guarantee the independence of national regulators.

10.16The Directive has created a very deep Single Market in broadcasting. This is because it applies a ‘Country of Origin’ approach to broadcasting, meaning that a broadcaster only has to obtain a licence and observe regulatory standards in any one Member State in order to be able to offer its services in the others without being subject to additional requirements. This removes the obligation for broadcasters to meet multiple regulatory regimes when trading across borders.

10.17The Directive requires broadcasters to promote the production of, and access to, ‘European works’, both for linear and on-demand services. For linear (television) services, the Directive requires Member States to ensure that broadcasters, “where practicable”, reserve a majority proportion of their transmission time for European works, excluding the time allotted to content such as news, sports events and advertising. Broadcasters should reserve at least 10% of their transmission time, or alternately allocate at least 10% of their programming budget, for European works created by independent producers. Member States are given flexibility as to how they choose to promote European works, and there is wide variation.

Proposed reforms

10.18As part of the EU’s Digital Single Market Strategy, the European Commission committed to modernise the AVMSD in order to reflect changes in the broadcasting landscape, such as the increasing volume of content that is viewed online.

10.19In its draft Directive,17 the Commission proposes to:

10.20It is also proposed to extend the scope of the Directive to include video-sharing platforms, such as YouTube. Specific requirements are proposed for such platforms concerning protection of minors from harmful content and the protection of all citizens from incitement to hatred. Measures to implement these requirements could include:

10.21Video-sharing platforms will also be encouraged to develop national codes of conduct.

Brexit implications

10.22UK-based international broadcasters have made it clear that access to the EU market is the bedrock of their UK operations and that securing continued access to this market is the priority.

10.23There are a number of different ways in which they can retain access to the EU market, which are discussed below.

The Council of Europe Convention on Transfrontier Television (CTT)

10.24As a member of the Council of Europe the UK is a signatory of its Convention on Transfrontier Television (CTT), the predecessor of the EU regime. Although dated, the CTT remains in force, and provides an automatic fallback in the event of an exit without alternative arrangements. It operates according to the same basic principles as the AVMSD, but has three defects: online services, which are of growing importance, are excluded; six Member States are not signatories; and it lacks an effective enforcement mechanism. For broadcasters, the CTT is therefore an imperfect substitute for membership of the Single Market.

10.25Broadcasters are accordingly concerned by the prospect of an exit in which the UK falls back on the Council of Europe’s Convention on Transfrontier Television. Adam Minns, the Executive Director of the Commercial Broadcasters Association (COBA), told the Financial Times that “The UK’s status as Europe’s leading international broadcast centre is at risk. … It’s black and white. Either those licences are valid or they aren’t”.18

Moving part of the workforce to the EU

10.26The EU framework (the AVMSD) allows broadcasters with their head office in third countries—such as the UK, post-exit—to apply for a licence in an EU Member State. However, to be eligible for this licence broadcasters would have to make editorial decisions in the EU and have a “significant part” of their workforce in the EU (compared to the UK). This would entail the relocation of a proportion of broadcasters’ staff—particularly editorial staff—from the UK to the EU. Having one’s editorial staff in one country and one’s production operation in another is obviously not ideal for any business, so there are concerns that some broadcasters might migrate their production operations as well.

A Free Trade Agreement

10.27The UK could seek to include provisions on broadcasting in a UK-EU FTA. However, the EU has always excluded broadcasting from its negotiating mandates for FTAs, including the recent EU-Canada FTA (CETA) and the WTO’s Trade in Services Agreement (TiSA). The only exception is the EU-Korea FTA which granted some access for animé. There is no precedent for a third country securing Single Market-equivalent access for broadcasters.

10.28The reason for the reluctance to include broadcasting in trade agreements is known as the “cultural exception”, which refers to the view that cultural services are too important to be treated as other commodities in trade. This is the reason why audio visual is one of the less liberalised sectors in global trade.

The White Paper

10.29The Government’s White Paper, The United Kingdom’s exit from and new partnership with the European Union, states the following in relation to the broadcasting sector:

“Content that is carried over electronic communication networks is regulated in the EU by the Audiovisual Media Services Directive. This underpins the operation of the internal market for broadcasting by ensuring the freedom to provide broadcasting services throughout the EU. The UK is currently the EU’s biggest broadcasting hub, hosting a large number of international broadcasting companies. In the course of the negotiations, we will focus on ensuring the ability to trade as freely as possible with the EU and supporting the continued growth of the UK’s broadcasting sector.”19

Questions for the Minister

10.30In its most recent report on the proposed Directive,20 the Committee requested further clarification on number of points, based on the Government’s consultation with sectoral stakeholders:

10.31The Committee also asked:

10.32The Committee also requested further updates on progress in negotiations and the Government’s position on all major aspects of the proposal, including any contentious developments in negotiations.

Letter from the Minister (11 April 2017)

10.33The Minister of State for Digital and Culture (Matt Hancock) writes in response to the Committee’s request for further information.

10.34In response to the Committee’s request for an update on progress in negotiations, the Minister states that “Given the process that the UK is preparing to undertake to leave the European Union, our negotiating position on this Directive will remain flexible”. He then summarises the state of negotiations as follows:

“The negotiations are currently ongoing, we are due to be sent a revised compromise text from the Maltese presidency before the end of March, which will be followed by four further working groups. The Maltese presidency is aiming to achieve a general approach by the Education, Youth, Culture and Sport council meeting on 22 May, and it is unclear at this stage if this will actually be achieved. There are several issues where the council appears to be split in two or three ways, and it is difficult to see at this stage how this will resolve or in which direction. Given the confidentiality of internal working group discussions, we cannot disclose country positions (which of course could change in the process of negotiations).”

An update to the negotiations so far;

1. Country of Origin. We have continued to resist any suggest that the country of origin principle is resisted. There is a minority group who would prefer country of destination regulation.

2. Derogations. The proposal to extend the derogations, which currently exist for video on demand to linear, where there is a severe risk to national security. We think that the proposals as drafted could only be used in the most severe cases. As proposed, there is a requirement for there to be two contraventions of the national rules, before a Member States could take action. It is worth noting that Lithuania suspended the Russian language service RTR Planeta for such contraventions on hate speech for a period of three months, which the Commission concluded was compatible with EU law.

3. Quotas. We have opposed the quotas for European Works on video-on-demand platforms but accept that the majority of countries do support quotas. Our assessment is that for UK providers, the 20% quota will be achievable, and so limits the market impact.

4. Exclusions. There has been considerable work to clarify wording for which services would be excluded to the video-on-demand levy in order to ensure regulatory certainty.

5. Advertising. The UK has taken a neutral view on the advertising proposals. This is an area where the working group is split into three; those who are in favour of the Commission’s proposal, those who prefer the status quo, and those who prefer a compromise proposal (which is to restrict advertising minutes during peak-time to 12 minutes per clock hour, and have them more flexible as an average of 20% at other times).

6. Independence of national regulatory authorities, is something that the majority of countries support in principle, and work in the working groups has surrounded the detail of the wording, which has not yet concluded.

7. Role of European Regulators Group. This has split the working group, between those who do not believe that this group should have a formal role, and those who consider that the European Regulators Group currently works well and want to ensure it continues to do so.

8. Inclusion of Accessibility requirements. The Commission had proposed to remove the requirements for accessibility in the audiovisual media service directive, proposing that these should be captured by the European Accessibility Act. Member States were unanimous in wanting sector specific wording, and the working group is now working on wording which could be considered acceptable to all.

9. Extension of scope. The proposal for AVMSD proposed extended the scope to video-sharing platforms, to include child protection measures such as parental controls, and the ability to rate uploaded content. There has been some proposals to extend the definition of video-sharing platforms to include social media platforms. The cleared negotiating position for the UK requires that we avoid excessive burdens on video-sharing platforms, and therefore we have been opposing this in working groups. We are also being pragmatic and assessing if the proposals would cause excessive burdens, as many of the requirements are already captured in the terms and conditions of existing social media platforms. If necessary we will write-round again on this issue.

10.35The Minister responds to some of the Committee’s specific questions in relation to Brexit but ignores others. In response to questions about the impact on the sector of failure to secure access to the Single Market through a Free Trade Agreement, and the extent to which broadcasters the Government has consulted with would, in this scenario, have to relocate staff, the Minister states that:

“You have asked in the absence of an agreement, would the broadcasters have to relocate some or all of their operations to the EU. As noted above, we will seek the best possible outcome for the sector to ensure their continued ability to trade with the EU. We continue to engage with the sector, and have regular meetings with their industry representatives to ensure that we are aware of their concerns.”

10.36The Minister does not answer the Committee’s questions about what proportion of the broadcasters the Government has consulted with indicated that they would countenance relocating part of their operations abroad in the absence of an FTA, and how many jobs depend on the ability of UK-based international broadcasters to retain current levels of market access.

10.37Asked whether retaining EU rules in domestic law through the Great Repeal Bill would secure continued market access, given the reciprocal nature of the EU regime, the Minister states that: “That is a matter for the negotiation. The Great Repeal Bill will convert current EU law into domestic law, while allowing for amendments to take account of the future negotiated UK-EU relationship”.

10.38The Minister states that the Council of Europe Convention on Transfrontier Television (CTT) means that all works created in the UK, whether linear or non-linear, will continue to qualify as European Works, explaining that: “The definition of an European Work as set out in the Audiovisual Media services directive, is a work produced in an EU Member State or a country that is a signatory of the CTT”.

10.39The Minister states that the EU could not itself disapply the Council of Europe’s CTT as it is not a signatory to it, but that individual Member States could:

“The EU itself is not a party to the CTT, rather a number of individual Member States are. While the EU has asserted that it has exclusive competence in this area, meaning Member States are unable to negotiate in their own capacity in relation to the CTT, it seems to us that it would be for individual Member States to withdraw from the CTT rather than the EU to disapply it.”

10.40He also acknowledges that there is no precedent for the EU offering market access to broadcasters based in third countries: “Broadcasting has previously been excluded from international trade deals due to cultural sensitivities in EU trade agreements”.

10.41He emphasises the UK’s success in the sector and the Government’s desire to ensure in the negotiations that the sector can continue to grow:

“As noted in the Government’s White Paper on “The United Kingdom’s exit from and new partnership with the European Union”, the UK is currently the EU’s biggest broadcasting hub, hosting a large number of international broadcasting companies. In the course of negotiations, we will focus on ensuring the ability to trade as freely as possible with the EU and supporting the continued growth of the UK’s broadcasting sector.”

10.42The Minister states that he hopes that his letter “helps to provide some clarity on the current positions within AVMSD” and adds that “I remain at your disposal for any further clarifications”. He says that he will “seek to provide an update at the end of April regarding the progress towards a general approach in the Council working groups”.

Letter from the Minister (16 February 2017)

10.43In response to the Committee’s report on 23 November 2016, which raised a number of Brexit-related questions, the Minister referred to paragraph 8.35 of the Government’s recent White Paper on the United Kingdom’s exit from and new partnership with the European Union:

“Content that is carried over electronic communication networks is regulated in the EU by the Audiovisual Media Services Directive. This underpins the operation of the internal market for broadcasting by ensuring the freedom to provide broadcasting services throughout the EU. The UK is currently the EU’s biggest broadcasting hub, hosting a large number of international broadcasting companies. In the course of the negotiations, we will focus on ensuring the ability to trade as freely as possible with the EU and supporting the continued growth of the UK’s broadcasting sector.”

10.44The Minister then answered the Committee’s question regarding the extent to which the Council of Europe Convention on Transfrontier Television (CTT) would act as an effective substitute for market access, in the absence of one being included in a bilateral trade agreement:

“The Council of Europe Convention on Transfrontier Television (CTT) was first established in 1993 to allow for free transmission across borders within the Council of Europe and in that respect is intended to cover the audiovisual sector. There are, however, a number of limitations in relying on the CTT: the CTT is dated, having been agreed for the market as was in 1993, so services that are distributed in ways other than satellite, such as online, are not within its scope; a number of countries have not signed the Convention so its application does not extend to all Member States; and it does not contain any specific enforcement mechanisms to ensure its effective operation.

“While updating the CTT to align it with AVMSD might address some of these limitations, this may prove problematic in a practical sense. The EU Commission has asserted that it has exclusive competence in relation to the CTT and therefore any update would need to be agreed with the Commission rather than the individual Member States. The Commission has stated that it does intend to become a party to the Convention in future. As a result, Council of Europe level work on transfrontier television has been discontinued and there is no longer a CTT Standing Committee in place. Having said that, we will continue to consider whether and how the CTT might fit with the future audiovisual landscape as part of the Brexit negotiations and more generally.”

10.45In response to the Committee’s questions about the extent to which audiovisual was typically included in EU FTAs, the Minister wrote that:

“It is correct that audio visual media services are generally excluded from EU free-trade agreements. However, while we will examine precedents from other agreements, we will not seek to replicate an existing model and will pursue the right deal for the UK.”

10.46In answer to the Committee’s question about the extent to which divergence between UK and EU law on the provision of audiovisual services could operate as a barrier to trade, the Minister stated that:

“The Great Repeal Bill will end the authority of EU law and allow us to take back control of our own laws. The same rules and laws will apply on the day after Brexit as they did before. It will be for Parliament to decide what laws to keep, amend or repeal. Any decision to diverge will be taken after that point and an assessment of the likely impacts will be made at that time.”

10.47The Minister also provided an update on the consultation the Government undertook “regarding how best to accommodate the audio-visual sector outside of the EU:

“Since the referendum result the Secretary of State held roundtables with both Broadcasters and Creative Industries and further roundtables are planned. Meetings with individual companies that might be affected have been held with ministers, special advisors and policy officials and the department is in continued dialogue with the broadcasting and creative industries to ensure that their interests are captured and taken into consideration in formulating our post-Brexit policy.”

Previous Committee Reports

Thirty Third Report 71-xxxi (2016–17), chapter 5 (1 March 2017), Nineteenth Report 71-v (2016–17), chapter 4 (23 November 2016); Seventh Report 71-v (2016–17), chapter 7 (6 July 2016).


15 The Cultural Exception, or “exception culturelle”, is a political concept introduced by France in General Agreement on Tariffs and Trade (GATT) negotiations in 1993 to treat culture differently from other commercial products. It is often cited as the providing the rationale for excluding cultural services from FTAs.

16 More detail is provided in the summary of the Minister’s letter later in this note.




27 April 2017