Select Committee on European Union Third Report

CHAPTER 2: The Scope of the Proposal

Introduction

50.  One of the main drivers for reform of the Television Without Frontiers Directive has been the rapid growth in the number and types of different platforms over which EU citizens may receive audio-visual material. Free-to-air terrestrial broadcasting now competes with satellite, cable, broadband Internet and mobile services.

51.  A second fundamental change in the market concerns the manner in which audio-visual material is supplied to citizens. The classic broadcasting paradigm was one where the broadcaster transmitted (or 'pushed') its programmes simultaneously to the general public, who simply chose whether to watch their television. In our current environment, while that paradigm continues to represent the dominant means of receiving such material, we are also witnessing the emergence of a wide range of alternatives, most specifically the provision of material in response to the demand of an individual viewer, often obtained (or 'pulled') from a selection of material made available by the broadcaster.

52.  Such fundamental changes in the provision of broadcasting services have meant that the existing regime is no longer 'fit for purpose', since it was drafted in an era when each Member State had relatively few providers generally operating in a similar manner.

53.  We too recognise the changes that have taken place, and are continuing to take place in the sector. We accept, as do all those that gave evidence, that reform of the regime is needed. Witnesses also generally supported the view that now is a good time to be reassessing the existing regulation.

54.  The central issue in the Proposal is, therefore, how far to extend its scope of application: what sort of activities should be brought within the regulatory regime?

The Electronic Commerce Directive and the Audiovisual Media Services Directive

55.  Activities left outside the regime will either be subject to the general law or other regulatory regimes, such as that governing the provision of "Information Society Services" under the Electronic Commerce Directive (00/31/EC).

56.  One concern expressed by some of the witnesses was that the proposal will add to the regulatory definitions already in existence, resulting in another layer of uncertainty about what and when such rules are applicable to an entity operating in an Internet environment. An Internet service provider, for example, will already be considered a provider of "electronic communications services", under European communications law and a provider of "information society services", under European e-commerce law.

57.  As outlined in the box below, the broad conception of "information society services" means that "on-demand services" would simply be a subset. Indeed, a proposed recital in the revised text recognises this overlap, providing that in the event of conflict, the Audiovisual Media Services Directive would prevail.

BOX 1

How will the Audiovisual Media Services Directive relate to the Electronic Commerce Directive?

The Electronic Commerce Directive (00/31/EC) provides a regulatory scheme for those that provide "information society services". It has been transposed in UK law by the Electronic Commerce (EC Directive) Regulations 2002. Such services are those delivered "at a distance", "by electronic means" and at the "individual request of the recipient".

The Directive contains the following key provisions:

• The application of the Country of Origin principle to service providers
• Transparency obligations, i.e. requirements to provide certain information to consumers
• Rules governing commercial communications, including unsolicited commercial communications
• The validity of contracts formed electronically, as well as conditions on the mechanism for entering into such agreements
• Safeguards from liability for 3^rd party content where the provider is engaged in "mere conduit", "caching" or "hosting" activities.

The draft Audiovisual Media Services Directive overlaps with the Electronic Commerce Directive in respect of the operation of the country of origin principle and the transparency obligations. The Electronic Commerce Directive expressly excludes traditional broadcasting, but this will not be possible under the Council's revised proposal (see below), particularly in respect of on-demand services.

58.  The Committee shares the concern of witnesses about the proliferation of multiple and overlapping regulatory schemes. We call upon the Commission to work to make the regulatory boundaries as clear as possible for business and to enhance legal certainty.

The 2005 Proposal

59.  The December 2005 proposal created a two-tier regime, with a set of minimum rules governing all forms of "audiovisual media service" and additional provisions imposed only on those that provide "television broadcasts" or so-called "linear services". The inclusion of "non-linear services" within the scope of the proposal was intended to reflect the new forms of service provision that have arisen with developments such as the Internet and 3G mobile services.

60.  The proposal sought to be "technology neutral", i.e. to not favour one delivery platform over another but to create a "level playing field". Simon Persoff from Orange UK expressed the concern that in the proposal "the principle of technology neutrality has been turned on its head", and "used as a justification for imposing inappropriate and administratively unworkable regulation" and effectively "turning into a regulatory-initiated barrier to market entry". (Q 66)

61.  According to the evidence we received from Phonographic Performance Limited (PPL) and Video Performance Limited (VPL) the similarities between online and offline services mean that, in principle, laws which apply offline should apply online as well. However, PPL and VPL told us that the broadcasting environment is very specific, as is the regulatory environment which has grown around it. They argued that in the offline world, spectrum (the range of frequencies available for over-the-air transmission) is a scarce commodity, whereas in the online world there is no such scarcity. Therefore, the regulatory mechanism which allows detailed scrutiny of broadcasters no longer applies.

62.  Out of physical necessity, offline broadcast services, e.g. traditional television, are broadcast from an establishment in one Member State, although those services may be broadcast into some or all other Member States. Online, however, a service can be located anywhere in the world. The PPL and VPL argued that if the supply-side conditions imposed on European-based operators become too onerous, they will simply move their operations overseas. The impact assessment carried out by RAND Europe for Ofcom took the view that the requirements in the Commission's original proposal would have precisely this effect. This assessment differs strongly from the findings of the study carried out by the same consultants for the Commission. We return to this issue in Chapter Seven.

63.  The witnesses representing consumer groups strongly supported the extension of scope. The Voice of the Listener and Viewer (VLV) welcomed the Commission's proposal to extend the scope of the TVWF Directive to all Audiovisual Media Services. VLV felt that the proposed distinction between a linear and a non-linear service makes sense from a consumer's perspective.

64.  Jim Murray from the European Consumers' Organisation (BEUC), also accepted the premise that the scope should be extended to non-linear services which compete commercially with television, arguing that "since we have always accepted … the need for regulation of commercial communication and advertising, it makes sense, although it is by no means easy, to try to follow commercial communication wherever it goes in terms of regulation." (Q 353)

65.  The Newspaper Society told us that online versions of newspapers should be excluded from the scope of the Directive. The Society argued that regional and local newspapers are firmly based in their local communities and that their print and online content is aimed at that local audience and readers. They further argued that few print newspapers are intended to circulate across national frontiers (although online services are obviously globally accessible).

66.  The Society noted that newspaper companies which have diversified into local radio, local television and new media have not encountered any of the regulatory problems by which the Commission seeks to justify its proposals. The Society concluded that the Directive would not simplify the regulation of audiovisual content but complicate it. It might well impose stricter content controls over material generated and published by regional media companies and increase newspaper companies' liability.

67.  When the Commission issued the proposal, the issue of scope was viewed as the most controversial aspect by the Government. Appearing before the Committee, the Minister described the initial scope as "too ambitious, too burdensome, too costly and too onerous". (Q 157)

68.  Ofcom shared the Government's misgivings on this issue. Alex Blowers, the Head of Policy Development, told us that they were concerned "that many internet-type services, weblogs containing video content, online gaming, for instance, would be caught by this proposal and it was almost as if nobody had thought that that might be the implication." He was clear that these services were "nothing like broadcasting" and thus it would be totally inappropriate to seek to include them in this proposal. (Q 120)

69.  We agree that the original scope of the proposal was too broad and too ill-defined to operate without risk of great harm to new media businesses. We welcome the reduction in scope in the revised proposal.

The Council of Ministers text

70.  The November Council text amends the fundamental definition of audiovisual media services in a number of ways.

71.  First, the text introduces the requirement for the service to be "under the editorial responsibility of a media service provider". (Article 1a)

72.  The revised text also narrows the scope of the Directive, limiting the extension to non-linear services to "on-demand services", and describes the characteristics of these services in Recital 13a:

BOX 2

Recital 13a of the revised draft Directive

It is characteristic of on-demand services that they are "television-like", i.e. that they compete for the same audience as television broadcasts and the nature and the means of access to the service would lead the user reasonably to expect regulatory protection within the scope of this Directive.

73.  We were concerned that, as Gregory Paulger from the Commission conceded, "TV and TV-like are words that one can understand but to define them in law is difficult." (Q 321)

74.  Despite apparent pressure from some Member States in Council, we are relieved that the latest text continues to exclude electronic versions of newspapers and magazines. It is perhaps ambiguous as regards online content which is not a direct copy of printed content, but the text states that "The definition excludes all services not intended for the distribution of audiovisual content, i.e. where any audiovisual content is merely incidental to the service and not its principal purpose." (amended Recital 13)

75.  We welcome the apparent intention to exclude entirely electronic versions of newspapers and magazines but believe that in a rapidly changing communications world, the above distinction may well prove difficult to make in practice.

76.  The implementation and enforcement of this Directive, particularly when many of the services covered are 'a moving target', may be fraught with difficulties in the absence of sufficient legal certainty over its exact scope as the range of new media services continues to develop and expand.

77.  We recognise that the evidence before us has demonstrated clearly that the distinction between television and internet and other new media services is becoming blurred. This 'blurring' takes two forms: firstly consumers are freely exercising their choice across these media; and secondly the advertising market also views these varying markets as to a degree inter-competitive or substitutable.

78.  It is an assumption of the proposal that traditional advertising revenue is migrating from television broadcasting to new media services. As the current regulation of advertising is far stricter for traditional broadcasters, there could be said to be something of an "un-level playing field."

79.  As we noted in Chapter One, there has been an undeniably rapid growth of advertising revenue on the internet. However this is not necessarily a "zero sum game" between television and the internet, and the Directive risks presenting the market in just such a manner.

80.  It could equally well be argued that, with the much greater degree of choice available to the consumer, the Commission should seek to liberalise the provisions on advertising for established broadcasters, as discussed below, than to seek to extend similar provisions to the new media services.

81.  In our view, it is neither the role of regulation nor the role of any regulator to protect those with established market positions from threats by new market entrants operating under different business models.

82.  We are concerned that the identification of some of media services as "television-like", may lead some to conclude that eventually "like-services" should be regulated in a "like-manner", i.e. a perfectly "level playing field."

83.  The Council text seeks to identify and propose the regulation of "television-like" services but proposes to regulate them differently. As we note above, if they are to be included at all we agree that they must be regulated differently, but the wording and definitions in the latest versions of the text may encourage the idea that they can and should be regulated in the same way as television. We would consider such a move now or in the future to be a grave error.

84.  There may also be a second problem with extending the draft Directive into non-television services, such as the internet and other new media services. It might be taken as an encouragement that it is desirable to extend regulation into these services more widely and eventually to go beyond "television-like" services into other parts of the internet and new media.

85.  Given the practical difficulties in defining, regulating and enforcing a Directive based on "television-like" services, we believe that any further incursion into the internet and other new media services will be fraught with even greater difficulties and, as we have indicated above, is unnecessary in order to secure a single internal market.

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