Examination of Witnesses (Question 60-79)
Mr Simon Persoff and Mr Paul Jevons
23 OCTOBER 2006
Q60 Chairman: If it does not take
more than two minutes, yes! This is not an opportunity, helpful
though it is, to advertise your products, but to enable us to
understand this. That is a very serious point. We have read your
evidence and it is helpful. We have met other witnesses and we
will meet others. If you feel it is going to help the inquiry,
do, but I will cut you off pretty sharply if, in my judgment,
it does not.
Mr Jevons: I will try very briefly—and
aim for the two minutes—just to help set a context for our
evidence. On the mobile side we have a combination of video clips
that you can download to mobile phone and television and television-type
content that is streamed and pulled by the consumer and viewed
on their mobile phone. On the Internet side, IPTV, we are planning
to launch services. Those services effectively are a combination
of traditional broadcast; they are video-on-demand services and
interactive services that could comprise content traditionally
seen on the Internet, and new content that will be delivered to
a television set, as well as the same content being available
to consumers on a PC as traditional Internet consumption. Just
to set that context, it is both viewed on the TV, viewed on the
PC, and it is a mixture of content and content types from traditional
broadcast and on-demand content.
Chairman: You met both criteria splendidly
under two minutes, and very helpful to the inquiry. Thank you.
Q61 Lord Haskel: That leads very
nicely into the very first question, which deals with the scope
of the proposal which the European Commission is trying to bring
to the emerging media platforms, specifically the Internet. Under
the existing regulatory framework for broadcasting what they have
is a set of rules. Do you consider that this attempt is appropriate,
bearing in mind all the various services that you have just told
us; and what advantages and disadvantages might this regulatory
approach have?
Mr Jevons: No, we do not think it is appropriate,
and there are a number of reasons for that. The existing regulatory
framework obviously deals with traditional broadcast, and as I
explained in my introduction, going forward the services that
would come under the scope of this Directive are not services
that are going to effectively replace the traditional broadcast;
they are services that would exist alongside. They are services
that, in the IPTV case, will address a significantly smaller part
of the market, and we do not anticipate there to be in any way
a displacement of traditional broadcasting.
Q62 Lord Haskel: Which part of the
market is that?
Mr Jevons: The market that currently receives
broadcast content. We also do not think that when you have services
that are made up of such a combination of different types of content
delivered through different means, whether it be on demand or
streamed, that the legacy or traditional broadcast regulation
can be applied to that in an effective way because you are talking
about significant blurring across technology boundaries and the
ability to define what would and would not fall into particular
categories. It also would cause a significant overhead in trying
to understand how to enforce and regulate that market because
you are looking at a significantly higher number of content providers,
whether that be individual users with small players in the market,
and adding or extending the existing regulatory framework that
existed for broadcasters would in effect play into the hands of
the existing broadcast industry and against the people who are
effectively making investment in the market, or even the very
small players that are trying to enter and create new services
and offer new services to the consumer. It would effectively put
a significant barrier to entry. It would also play against UK
organisations and EU organisations because in the Internet space
that content or competing services would be available from people
overseas and it would inhibit our ability to compete in that space.
Q63 Lord Haskel: So as far as regulation
is concerned do you see that there are two types of broadcasting:
broadcasting and then the streaming—or would you just leave
regulation out of the picture altogether?
Mr Jevons: There is existing broadcast content,
and where we are taking, for example, a service as we envisage
it where you take content that has been broadcast over one medium
and you are carrying that same content, that would, in our view,
be covered by the existing regulations. New content or new services,
from a regulatory perspective, are covered by things that are
already in place, that are either there to protect the rights-holder
or to protect the consumer. The proposals would not add anything
to that.
Q64 Lord Haskel: You do not think
there is anything additional needed—just leave it as it
is.
Mr Jevons: I agree.
Mr Persoff: To concentrate on one point of this,
I think it is important to look at the context of what is happening
in the market. We are clearly on the verge of a massive technological
change in the way in which content is both accessed and consumed
by customers, and this change will undoubtedly benefit consumers.
As with the electronic communications sector, the telecoms framework,
a review of the AVMS Directive was therefore widely considered
both appropriate and timely, in order to make sure that the legislation
was fit for purpose in dealing with these new technologies and
market uses. Similarly, as with the electronic communications
sector, it was widely anticipated that a key element of the review
would be a full assessment of the competition policy implications
of the Directive, by which I mean assessing whether regulation
supported or promoted market entry, which, as I said, is from
our perspective, ultimately for the benefit of consumers. While,
clearly, there has been some analysis in the review of competition
policy implications, for example lighter touch controls of TV
advertising and the retention of the "country of origin"
principle, we believe it has not been the case for every aspect
of the review. Specifically, a lot of emphasis has been placed
both in this sector and in other sectors on the principal of technology
neutrality. This principle was developed as a way of ensuring
that outmoded technology-specific regulation adapts to new technologies.
It is very important to ensure that it does not act as a barrier
against market entry, but rather facilitates what I would describe
as healthy competition. The remedy to a lack of technology neutrality
has historically always been to adapt the old regulation so that
it allows for a level playing-field between the different types
of technology. Sometimes this means removing elements of technology-specific
regulations—
Q65 Chairman: That is extremely helpful
to us. You look as if you are reading. How long are you going
to read on for?
Mr Persoff: About another thirty seconds.
Q66 Chairman: Fine.
Mr Persoff: Some elements of the industry, including
Orange, are very concerned that the principle of technology neutrality
has been turned on its head, and is currently being used as a
justification for imposing inappropriate and administratively
unworkable regulation designed for those legacy technologies on
new market entrants without any genuine regulatory impact assessment
on whether it is appropriate, or what the impact on competition
might be. For lack of a better phrase, this is turning into a
regulatory-initiated barrier to market entry, and this is something
that concerns us considerably. Given the fact that non-linear
content is not limited by availability of spectrum or how near
you are to a broadcast signal, we do not think it is appropriate
to introduce these regulatory rules on this particular new part
of technology, because, simply put, all it will do is lead broadcasters
or concept-providers outside of the EU where they will be free
from all types of regulation. That does not mean that we do not
think that the regulation is important; but either it is covered
by the existing regulation or else the ability to circumvent it
is so great, there is simply no benefit from extending the regulation.
Q67 Lord Haskel: That applies to
the content as well as to the technology platforms, does it not?
Mr Persoff: Yes, it does. My colleague, Mr Jevons,
stated that where we are taking existing broadcast feed from another
supplier, let us say for example BBC, we would be, by virtue of
them being covered for the content, also covered. For example,
it would be up to the BBC to make sure that the content was suitable
for the audience, and all the rules applicable there. We would
just carry the content and we do not believe therefore that for
traditional broadcast content that we would have any additional
obligations to the ones already met.
Q68 Lord Haskel: You would be originating
your own content.
Mr Persoff: Correct. Where we are originating
our own content, it will be a very different type of content to
that being provided by our traditional broadcasters; it will be
user-generated content, and we could be talking anything from
thousands if not millions of different users generating their
own content. We do not think that under those circumstances it
is appropriate to extend regulation, when it was designed not
for this new technology but rather for a very simple linear—one
broadcaster sends the content to everyone. It is very easy to
control that kind of broadcasting. It is incredibly administratively
unworkable to extend regulation in the situation where you have
thousands if not millions of originators of this content.
Q69 Lord Geddes: I have a very simple
question of clarification. You used earlier, Mr Persoff, the two
words that seem to me to be the same, but you were differentiating.
I know nobody used the word "viewer" but you then said
"accessed and consumed". What is the difference between
a viewer accessing and consuming?
Mr Persoff: The answer there is that under the
new technologies it is quite possible for the end-user, the customer,
to interact with the content. It is not merely a matter of viewing
the content; it is a matter of doing something with that content
once they have accessed it.
Q70 Lord Geddes: That is when that
customer is consuming it, is it? I see.
Mr Persoff: It goes to the heart of the issue
here because we envisage under this new technology our customers
not only viewing content from others, but adding comments to it,
sharing their views with others and voting on that content, because
on websites generally speaking the popularity of the content is
judged by how many people would view it and what they thought
of it. This is very important when you look, for example, at specific
obligations for the right to reply. One has to ask what problem
specifically the right of reply is looking to address. We would
argue that when it comes to this new kind of user-generated concept
there is already a de facto right of reply in a much more
interactive way than would exist under current broadcasting.
Q71 Baroness Eccles of Moulton: Mr
Persoff has been referring to new technologies, but this thing
about how many hits a particular advertisement or item on the
Internet has is not new; that is going on already; so what is
the difference between what happens now? You can play chess or
bridge or anything on the Internet. What is this new technology
that is different to what is happening already?
Mr Persoff: It is new in terms of the Directive
did not take it into account when it was drafted or last amended.
It is new in that it is only now we are talking about extending
regulation to it. You are absolutely right, however; the technology
is not new; it is just that for the first time we are having a
discussion about extending regulation to it.
Q72 Baroness Eccles of Moulton: In
your introduction you said there are these new technologies coming
on stream which would be of great benefit to the consumer—but
what are they? Are they technologies as we have been discussing?
Mr Persoff: Yes, they are.
Q73 Baroness Eccles of Moulton: They
are—so they are not new! They are only new in the Directive;
they are not new to the consumer.
Mr Persoff: In terms of the availability of
those, it is only in the last few years that use of user-generated
content has really come to its—specifically if you look
at YouTube or Myspace, it is only within the last two to three
years where you have seen them take off. You are right that they
are existing, but it is only now that we are looking at extending
regulation too.
Q74 Baroness Eccles of Moulton: So
the consumer is already benefiting from these technologies; there
is not some great new dawn about to burst on us; it is just that
they are now coming under the scrutiny of the Directive.
Mr Persoff: Yes.
Q75 Chairman: I have been listening
to both of your replies to the questions. The, for want of a better
word, traditional television medium has now further developed
by accessing on the Internet. Are you suggesting that there should
not be a level playing-field in any way? In other words, you appear
to be arguing: "It is okay to keep on regulating the old
television, updated for the Internet; but new services are different
to that; they should not be regulated." That seems a pretty
un-level playing field. You said that it is not competitive, these
services; but you are; you are competing for advertising revenue;
you are competing commercially. You do not want your technology
and your services to be regulated other than existing e-commerce
and others, but you are very happy to see the existing people
regulated. It seems a pretty useful thing to argue, but they have
got all the costs of regulation and you have not had any. That
is a pretty un-level playing field. Would you go further then
and say there should not be any regulation of any audiovisual
service other than basic self-regulation and so on? What are you
arguing?
Mr Persoff: I do not think we are going that
far. Where we provide directly comparable broadcasting to our
customers, as do the existing broadcasters, we submit that it
is appropriate for regulation to apply. We are talking about a
completely new type of—
Q76 Chairman: I am asking why should
existing broadcasting be regulated and you not.
Mr Jevons: We are saying that there is regulation
for the new services. What we are saying here is that extending
the broadcast regulations into the Internet or IPTV or mobile
TV or video downloads is not the appropriate way to regulate those
services. An example might be for mobile video downloads, where
the consumer is generally snacking for a couple of minutes at
a time, it does not seem appropriate to have the same regulation
where in a broadcast, one to many, open access—so no need
for—very low levels of consumer control to what they are
viewing in the traditional medium where if they switch on a television
set they are being broadcast to in the truest sense of the word—whereas
these services are services that are consumed in a very different
way, in a very different context. They also have built into them
a much higher level of user control, user discretion, in terms
of customers are actively saying, "I want to view that individual
bit of content" and there is a level of control that the
nature of delivery gives them. So we are not saying that no regulation
applies; we are saying that it is not appropriate to take that
regulation and apply it through these new media because it is
impossible to distinguish between certain elements of the new
media.
Q77 Chairman: For the moment you
are clearly happy with an un-level playing field in a sense, and
I can well understand that you are. Do you accept the distinction
between linear and non-linear services as a basis for distinction?
If you do, can you explain to us your own definition of linear
and non-linear services?
Mr Jevons: Again, simply linear and non-linear
is in itself very difficult to define, and that is one of the
reasons why taking the existing regulation and bringing it in
with that kind of very black and white distinction is not appropriate.
An example might be that as a mechanism we can take, as an output
from any website or effectively a PC and deliver that to the television
as a play-out, through to someone's TV so it looks and feels as
a linear service—but they have asked to view it. So you
have that area of distinction, which is quite difficult. You then
have the viewing of linear services where you effectively time-shifted
the content. There is technology in the market now that allows
you to pause live TV or catch up TV services; so it was linear
two minutes ago, but is it linear now?
Q78 Chairman: You tell us!
Mr Jevons: Which is why certainly as we view
it you have the true linear, or the TV broadcast but anything
else you do around that, you need to rely on the appropriate content
protection and consumer protection rather than trying to extend
the broadcast regulation into a world where linear and non-linear
and stream and download or broadcast—it is very difficult
to make that distinction not only from a regulatory framework
but in the consumer's mind and understanding when you deliver
a service—all these different types of content and content-delivery
mechanisms are available to the consumer to decide.
Q79 Chairman: But that distinction,
which you say is actually very difficult to make, in practice,
lies at the heart of the draft Directive amendment. You are saying
right at the heart of the amendment to the Directive is a fundamental
flaw.
Mr Jevons: It is a very grey area. It would
be very, very difficult to enforce or distinguish. The fact is
that every piece of content and every single new service from
every single content service provider would need to go through
the regulator for assessment. That overhead in itself would be
quite significant, and therefore it is flawed to say that we can
simply take that proposal and try and try and apply it even with
that.
Chairman: We will have plenty of chance
to revisit this throughout the next forty minutes.
| 
