Examination of Witnesses (Question 80-99)
Mr Simon Persoff and Mr Paul Jevons
23 OCTOBER 2006
Q80 Lord Walpole: Can we go on to
the country-of-origin principle, which you have both mentioned
rather briefly? In your opinion, has this benefited your company,
and the UK European communications industry, and do you consider
the principle is now under threat?
Mr Persoff: Yes, we do believe that the principle
is appropriate, and we welcome its inclusion in the review, it
remaining. It has been helpful mainly in terms of people's certainty.
While Orange within the UK clearly provides products and services
only to the UK, we also—as the Internet exists you can access
content from anywhere. It is therefore an incredibly important
principle to note that where you have an approval or authorisation
within one jurisdiction, that can be applied elsewhere. It is
also important to note that this is really, from our perspective,
contained within the e-commerce Directive rather than in the Directive
currently being reviewed. One of the things we were very keen
on ensuring is that when this is looked at at the European level,
rather than looking at in the vacuum of just the current Directive,
we take a joined-up approach on it. Do we think it is a threat?
It is a difficult question to answer because the e-commerce Directive
itself is up for review quite soon, and maybe within the next
12 to 18 months the process will start. There are clearly many
aspects of the e-commerce Directive which will be reviewed. As
an industry we would lobby quite hard to see that the country-of-origin
principle in that Directive is retained. One of the problems with
the current proposal is that they could effectively lead to double
regulation. I do not see that has been properly addressed, either
in the documents currently published or in any regulatory impact
assessment which we would expect the Commission to publish. It
does remain a theoretical problem at the moment, but until we
research it in more detail as an industry in conjunction with
the Commission, it is going to be very difficult to tell precisely
how much of a problem it is.
Q81 Lord Walpole: Does it make any
difference to you, as a company, being in two different countries?
Mr Persoff: I think it does because each country
has its own specific regulatory obligations. Within the UK for
example we have various statutes relating to protection of children,
anti-terrorism, etc., which deal with the regulation of content
including content on the Internet. It is very important that we
know that we can rely on one set of laws, and that that set of
laws is what we comply with, and we only have to worry about that.
My real fear—and this is probably true throughout the entire
European Union—is that getting rid of this principle would
lead to so much legal uncertainty in terms of—have you actually
checked in an EU Member State what would be the case there? I
really do not think anyone would want to go there. This principle
has been seen elsewhere in the electronic communications framework
as well. It has not been extended throughout. There is not, for
example, a single licensing regime for telecoms services in Europe.
There is a framework, but it is up to each national regulatory
authority precisely how they manage that framework. It is for
very similar reasons. It is also important to note the principle
of subsidiarity and what is appropriate to be dealt with at the
European level and what is appropriate to be dealt with at the
Member State level. Within the UK we have that balance right.
Q82 Lord Walpole: Would you favour
greater harmonisation between Member States?
Mr Persoff: I think so, yes, but only to the
extent that there remains this certainty. It is always a difficult
balancing act, harmonisation versus certainty, especially for
a company that happens to be based in one Member State. Clearly,
there are very different rules existing throughout Europe in terms
of for example of restrictions on advertising and in terms of
quotas for a particular type of content. It would be regrettable
if harmonisation led to a dilution of rules which were either
considered important in the UK or the need to take on board some
rules that maybe some other Member States currently have in place
but which are not considered applicable or appropriate within
the UK.
Q83 Lord Walpole: In other words,
you would reach the lowest common denominator—
Mr Persoff: Unfortunately.
Lord Walpole: Which you would not want
to do—obviously not!
Q84 Lord Swinfen: How do you deal
with material that emanates from outside the European Union with
the country-of-origin principle?
Mr Persoff: From my perspective, the country-of-origin
principle relates to the content which we are providing to our
customers over which we exercise some element of control, or we
are the originator. Where we are talking about third-party content,
so content which our customers access over the Internet access
connection, but which we have nothing to do with, I am not sure
that the country-of-origin principle is the right legal tool to
look at. I would suggest that the right tool would be looking
at the e-commerce Directive: there is a defence within there called
the "mere conduit defence": an Internet provider, which
is the mere conduit through which a customer accesses content—we
are not generally speaking liable for that content. There are
some circumstances in which we, the service provider, go above
and beyond our mere legal duty to do something with that content,
for example virus protection, e-mail spam filtering and child-abuse
images are three areas where service providers do things like
log content. This is something which is quite UK-specific in some
cases, such as child-abuse images, or universally accepted, as
in the case of virus distribution, port scanning or spam. Clearly,
there are different rules throughout Europe. This industry works
together with the Government and law enforcement and international
law enforcement to ensure that where there are problems that originate
outside any particular country, whether within the European Union
or outside, we have processes in place where we can report, for
example, very bad illegal content, to that police authority; so
it can be dealt with appropriately.
Q85 Chairman: In practice, I think
I am right in saying that Member States in theory have the ability
under derogation to tailor the existing television-without-frontiers
Directive, to deal with any problems that they feel are slipping
through because of the country-of-origin principle. There is in
principle derogation. I think I am right in saying that there
has been little or no use of derogations across the European Union—is
that the case?
Mr Persoff: That is my understanding. This was
a matter recently addressed by Ofcom when they were asked the
same questions. My understanding is that that is not being used
at present.
Q86 Chairman: You yourselves sell
your services outside of the UK and outside of France. What other
countries do you operate in?
Mr Persoff: The France Telecom Group operates
in most countries in the world and specifically—
Q87 Chairman: In Europe?
Mr Persoff: Within Europe and within the world.
Within Europe we have mobile businesses in for example Spain,
Belgium, Netherlands.
Q88 Baroness Eccles of Moulton: On
advertising, do the proposed rules adequately address the emerging
business models for the content provision over the new platforms?
There are a couple of supplementaries, and I want to slip in another
one that is not there, but perhaps you would like to deal with
that specifically first.
Mr Jevons: We recognise that the existing regulations
require some revision around quantitative advertising, but the
new proposals do not in our view recognise new business models
that might be coming into different media; so there may be business
models such as advertising funded content into different media,
so there may be business models such as advertising-funded content
that exists on the Internet, and transferring some of those principles
into content that is delivered on demand on mobile. Certainly
it does not take into account the fact that there are new business
models, or changes to the existing business models by delivering
them to a different medium. Certainly bringing in advertising
regulation originally aimed around broadcast into the Internet
will, as highlighted earlier, impact existing business models.
There are existing business models out there and existing companies
whose business models may be fundamentally damaged by extending
the regulation. Also, the context within those rules would be
applied, especially when looking at perhaps more extreme cases
of consuming content around mobile, which is very much short,
snackable content, where consumers will ultimately decide themselves
whether a piece of content is still valuable if it is broken up
into blocks. We see today the strength of consumer discretion
about the longevity of services where perhaps that principle is
abused. Consumers have a high level of discretion at the moment
of simply taking those business models across. It does not take
into account new services or potential new services that frankly
we may not have thought of as a significant player, but smaller
and more innovative companies might develop and need the freedom
to develop; so it is not about advertising being an interruption
to content. Advertising may actually be the content itself or
may form a more integral part of that content. Certainly having
a framework that enables that and facilitates that and does not
put barriers in their place is one that we want, as opposed to
a framework that potentially would constrain that and put heavy
restrictions on that kind of business model and value chain innovation.
Q89 Baroness Eccles of Moulton: From
your introduction I gathered that part of what Orange does would
be concerned with constraints on programme-makers because you
are involved in straight television broadcasting.
Mr Jevons: Part of the service that we plan
to offer to consumers is effectively carrying the existing broadcast
content to—
Q90 Baroness Eccles of Moulton: Not
new content!
Mr Jevons: There would be some new content.
Q91 Baroness Eccles of Moulton: So
when it comes to the imposition of formatting rules, like the
35-minute rule and the rest of it, you would be concerned about
whether that is something that you would want to continue to support,
and also there is the view that there is a huge amount of choice
now for the consumer, and that any programme-maker or provider
who overloads their material with advertising actually potentially
will not get the same amount of audience participation, and therefore
the advertisers do not want to use them any more; so that is a
controlling factor in itself. Do you support that theory, or do
you think it is important for formatting rules to continue to
be in existence?
Mr Persoff: We agree with your general proposition
that ultimately the market will decide whether or not too much
advertising is being offered. While we talk about 5-minute snips
of programmes surrounded by 30 minutes of advertising—I
think you can be pretty sure that customers would turn off. We
agree that the impact assessment and the necessity of regulation—and
this is a key theme—where there is no need for regulation,
the burden of proof should be on the Commission or on the regulatory
authority to show that there is absolute need for regulation.
If the market can sort out the issue by themselves, then let the
market sort it out. Generally speaking, looking at this Directive
in the whole, one has to ask whether a regulatory impact assessment
has been conducted, which would include what would happen if we
did not regulate; or, if it has been conducted whether it has
been conducted looking at all possible questions. For example,
in terms of advertising clearly there are rules in the UK outside
of this Directive which apply to advertising—tobacco advertising
being one example. Even if there were no specific extension of
advertising in this Directive to non-linear services, other rules
and regulations would still apply. It is Orange's view that it
is appropriate for laws enacted within the UK relating to this
kind of content should be equally applicable. It is the specific
regulations in this Directive that concern us. Again, to highlight
the issue, there does not seem to have been any real analysis
of whether it is necessary, proportionate or appropriate.
Q92 Baroness Eccles of Moulton: At
the moment, would there be any other restrictions on marketing
and advertising which you consider necessary? From what you say,
it sounds as if we could anticipate your answer!
Mr Persoff: I must admit I am not the person
most familiar with every single aspect of advertising regulation.
I cannot think of any incremental additional regulation which
would be needed to be included in this Directive which was not
there already, and the reason for that is that Ofcom and the UK
Government are extremely acutely aware of the need to have sensible
advertising regulation, and if there was a need for something
I am pretty sure they would have done it already. Therefore, one
has to ask what additional thing could possibly be implemented
in this Directive which is not included elsewhere already.
Q93 Chairman: Can I just clarify
on the question of advertising as opposed to other matters that
we are going to discuss with you. What parts of the proposed amendment
to the draft Directive in relation to advertising, if any, apply
to non-linear services? Are there any?
Mr Persoff: I think the real problem here is
that we are not sure what is linear and what is a non-linear service.
I am sorry to dwell on this point, but
Q94 Chairman: Shall I just tell you
that your recommendation, in your note to us, was that the Directive
should only apply to services that look and feel like TV services.
Taking that as the meaning of linear and non-linear, does the
draft amended Directive, where it relates to advertising, intend
itself to apply to non-linear services or not? I think not.
Mr Persoff: The view we have taken is that implicitly
it does, but it is unclear, and we would welcome the opportunity
for the Commission to clarify that. I think there are general
concerns about volume and frequency which could—I do not
say does—be interpreted as applying to non-linear. The industry
generally has asked for clarification on this point.
Q95 Chairman: Again, your position
in Orange, is that non-linear services, which is the bulk of your
business, should not be subject to any advertising restrictions,
but linear services should be?
Mr Jevons: I think we are saying that the non-linear
services are covered by existing advertising restrictions, and
there is nothing new to be added.
Q96 Chairman: What restrictions on
advertising are there on non-linear services? Are there any at
all?
Mr Jevons: In terms of the type of advertising—
Q97 Chairman: No, the quantity, the
quantum—the timing, the quantum, the amount.
Mr Persoff: Our submission is that it is best
to let the market decide.
Q98 Chairman: My question was: what
restrictions exist at present on advertising, not content but
volume—amount, timing?
Mr Persoff: None at the moment.
Q99 Chairman: Orange's position is
that that should remain the case for non-linear services, but
you would like to see some restriction and quantity and so on
kept for non-linear services.
Mr Persoff: We definitely agree with the first
statement, that we do not think they should be extended. As to
whether they should be continued for existing ones, we do not
really offer an opinion on that.
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