Examination of Witnesses (Questions 20-24)
Mr David Levy, Mr Matteo Maggiore and Mr Wes Himes
16 OCTOBER
2006
Q20 Lord Haskel: Thank you, My Lord
Chairman. Those of us who are uninformed put a lot of faith in
the impact assessment, out of necessity. Has the Commission considered
adequately the impact that this proposal is likely to have on
the sector; is it even possible to predict the likely costs and
benefits of this proposal with sufficient reliability to support
the proposed changes in the Directive? Would a precautionary approach
to regulation suggest different proposals for change, and we wonder
whether you could put us right on that?
Mr Himes: Impact assessment; yes. We have found
that the impact assessment is probably not sufficient, in terms
of justifying to us why this Directive has been promulgated and,
most importantly, extended to non-linear audiovisual online services.
As I mentioned in one of my opening comments, we have asked the
Commission this and we have yet to get what we find a satisfying
answer which justifies the extension of scope for this Directive.
We can also ask the same question under Better Regulation principles,
which I know is very dear to the heart of UK institutions and
legislators. The same sort of effort supposedly is being made
at the European Union level, but once again it does not seem to
have been applied to this particular Directive. Therefore, we
would want to have a more detailed impact assessment before an
extension is put through and we want it detailed in answering
specific questions about the impact, not generalities. We would
want to know what a European works regulation would mean for the
audiovisual online sector; we would want to know what legal liability
would be carried by audiovisual online services and what legal
uncertainty would continue to be carried by audiovisual online
services. These have not been generated statistically, have not
been generated quantifiably and, to some extent, have not even
been generated qualitatively, and therefore we would ask for a
deeper impact assessment on our industry to understand that essentially
we are not killing a nascent industry at its birth.
Mr Levy: I think, from our perspective, what
is clear is that the Commission has been engaged in consultation
on this Directive for the best part of the last five years. There
has been a whole range of studies that have been conducted. There
has been one on television advertising, there has been one on
television quotas, there has been one on co-regulation, there
has been one on advertising rules and then there has been an impact
assessment done for the European level by the RAND Corporation
and there has been another impact assessment done by RAND, which
has been done for Ofcom, looking at aspects of video-on-demand.
I do not think there is any shortage of studies or shortage of
consultation. I think what is a fair point is that during this
period the proposals have been evolving, that is the nature of
consultation and one of the good things about consultation is
that people's ideas should change in the light of that. I can
see a case for suggesting that the Commission, as the ideas firm
up and harden up, should pull together this vast amount of material
which has been generated over the last five years and actually
say what will be the impact of the specific proposals that are
on the table now. In that sense, I have some sympathy with Wes.
I think the idea that a precautionary approach would suggest no
action essentially would assume that we are in a kind of regulatory
void, that we are in an area without any regulation, and that
is just not the case, in the sense, at the moment, as I explained
at the beginning, we have the interaction of the E-Commerce Directive
and the existing Television Without Frontiers Directive. I have
some sympathy with the demand that there should be a consolidation,
if you like, of the information that is around in terms of the
impact of the proposals but I do not think a precautionary approach
would suggest no action because I do not think we are existing
in a world with no regulation. I think we have rather confused
regulation at the moment.
Q21 Lord Haskel: What the Directive
really seeks, I think, is to have more pluralism, more diversity,
more innovation, more competition, new entrants in the business,
and what the impact assessment seeks to do is to see whether regulation
will achieve this. Do you think that it does; or is it just the
incumbents who are going to be satisfied with what is going on
so that they can carry on their business, which is the attitude
of many firms which are already in existence?
Mr Himes: My Lord Chairman, all of those objectives
are admirable and they all exist, they exist on the Internet,
there is a pluralism of content, the long tail of the Internet
which allows companies to put content up at a low cost and makes
them available to the general public. You can find more content
online than you will find in the biggest off-line store out there;
so, in terms of pluralism and cultural diversity, online audiovisual
services offer it. We believe that all of those objectives are
already achieved, and therefore the question is, for this Directive,
why?
Q22 Lord Haskel: They do not need
any regulation to achieve those objectives, they are already achieved?
Mr Himes: As I mentioned earlier, we already
provide co-regulation and self-regulatory schemes. There are already
national laws, for instance the cease and desist or notice and
takedown laws for e-commerce providers for certain content. There
are already schemes to help filter out content that we would find
unacceptable to be provided. As I mentioned earlier, the e-commerce
regulation already provides a level of regulation. It is not as
though our services exist in a regulation-less world, we do have
regulation that we have to comply with, whether it is consumer
protection, whether it is access for the legal or policing authorities.
There is already a host of regulation at both European and national
level, as well as co-regulation and self-regulation, which we
feel satisfies the public interest in this market. Therefore,
we come back to the question, for this Directive, why?
Q23 Lord Haskel: What you say describes
the incumbents' behaviour very well, but what the impact assessment
tries to do is see that there are new entrants and that there
is innovation and competition, if you like, against the interests
of the incumbents?
Mr Himes: Let me use a tangible example on that,
if I may. To go back to my YouTube example, if this Directive
were in place and there was a legal liability for the founders
and creators of YouTube to have a certain amount of European works
on their site, therefore creating a compliance cost, would that
site have started, would it have gone from where it started to
where it is now? The fact of the matter is the Internet environment
has allowed three young men in California to come together and
develop a site which in 18 months' time has attracted more consumers
than many of the incumbents to which I assume you are referring.
The Internet provides this opportunity for innovation and that
is a prime example of how that occurs now, and we have to think
about how the Directive might cut across that ability.
Q24 Lord Haskel: Does the impact
assessment take care of this?
Mr Himes: I can say, just to add to what David
said, there was no doubt, and I think we both agree on this, there
was a lengthy deliberation process and a number of studies and
impact assessments done, but I do not think any of them cut to
the specific details which, for instance, I just gave in this
example. I think most of them said that there would be little
harm done in the extension, or some said that the compliance cost
would not be raised to the point of barring new entrants. The
example I give I think raises questions about that analysis and
I think we would want to see further answers before we were convinced
that this regulation would do no harm to the audiovisual online
services industry.
Mr Levy: I would just add that I think there
is a very strong case for excluding user-generated content, of
the kind of YouTube, from the scope here. Also, the Directive
does have this two-tier approach between linear and non-linear
content and the degree to which the content is accessed on the
individual demand of the user, and I would have assumed that a
service like YouTube would be excluded on both counts, user-generated
content and accessed on demand at the individual request of the
user.
Chairman: Gentlemen, you have been very patient
and very full with your answers and we are extremely grateful.
We have missed three questions, of which I think you have had
prior notice. I wonder if you could each be kind enough, very
briefly, just to give us the written reply to those three. I am
sorry we have not had time to discuss them with you face to face;
t'was always thus on these occasions, particularly when divisions
are inconveniently called. Mr Levy, Mr Maggiore and Mr Himes,
thank you all three very much indeed.
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