Examination of Witnesses (Questions 160-179)
Mr Shaun Woodward, MP, Mr Chris Bone and Mr Christopher
Dawes, OBE
25 OCTOBER 2006
Q160 Lord Roper: Minister, I am not
quite sure how far the amendments which the UK have proposed are
in the public domain and I can refer to them, but in the third
subsection of subsection (e) of Article 1 which you have put forward,
which does try and define what an on-demand service is, the first
two definitions are perfectly clear but the third you provide
is: "The nature and means of access to the service would
lead the user reasonably to expect regulatory protection within
the Scope of this Directive". I have to say I find that a
little difficult to understand or to know how it would operate
in practice.
Mr Woodward: I wish it were unique amongst EU
regulations that you only find that one difficult to understand.
Q161 Lord Roper: This is your amendment.
Mr Woodward: Absolutely. I have to say to you
that it is couched in language that, do not forget, has to be
translated in terms that work for the Commission. I think as most
of us around the table would acknowledge if EU regulation was
in plain English we would be in a much easier place. My colleague,
Chris Bone, has been dealing with the details of this because,
as you know, it has not yet come finally to the Council of Ministers.
This is in negotiation at the moment.
Q162 Chairman: Before you come in,
could I pose another question in relation to the same amendment
so you can deal with them at the same time. It concerns this attempt
to define "non-linear". Minister, based upon your own
deep experience of these matters, you said if it walks like a
duck, quacks like a duck, it is a duck. The problem is it is not
really entirely clear in this rapidly changing world quite what
is real television or television-like programmes and so on, which
is precisely one of the problems. I have two questions. There
is an attempt to define "non-linear" by meaning effectively
television-like programmes, which were the words Ofcom used to
us, and you do not define this, it seems that it has got certain
characteristics, and then it says "for example". It
does not try to define it, it simply says what you mean by "non-linear"
is on-demand services, and I assume it is any on-line demand services,
but some on-line demand services have certain characteristics
and it says, "for example, feature length films". That
is saying that a feature length film bought on-line is the same
as television. That is the implication of this. This is not robust
at all, it is very fudgy. The issue with that is the industry.
People in the non-conventional television business have got to
decide whether what they are doing does or does not fall into
non-linear services that for the purpose of this Directive would
come under the Directive, because clearly there are other non-linear
services that do not fall within this attempt to confine them
that do not fall under the Directive. Effectively we are trying
to distinguish between television, on-line television-like services,
they come under the Directive, under the amendment, and other
on-line services which are very much more substantial in volume
that would not come under the Directive at all. The question to
back up Lord Roper's is in this ever rapidly changing technological
world where the distinction between television and internet is
increasingly blurred, can that be a very helpful and meaningful
basis for the industry to know where it comes within the regulation?
Is this something that is going to be robust and stand the test
of time? It will not be implemented for three or four years, I
assume, and in 10 years' time it will probably have changed completely.
That is not meant to be casting doubt on the attempt to do what
you are trying to do but trying to look at whether it offers certainty,
which is what you said industry would really like. If they feel
that they might get caught they will go offshore.
Mr Dawes: In the Communications Act 2003 we
grappled with the same problems, as Parliament did at that time,
and produced a definition which distinguished between television
with a number of characteristics of simultaneity, availability
and means of transmission, and what was not a television programme.
At that time we took out the TV-like video on-demand services
from regulation. That was difficult to conclude but we achieved
it then. What we have looked at here in trying to narrow the Commission's
definition is rather than taking a very broad set of criteria
which, as the Minister indicated, embrace a huge range of these
sorts of services, is try to distinguish the crucial criteria
which might justify some form of regulation which are those characteristics
of services like video on-demand services which share a number
of the characteristics of broadcasting in that they are mass media,
they expect to have a large audience, the crucial distinction
is they are available on-demand and the principal purpose of the
service is the provision of programmes, television-like programmes.
That has to be the principal purpose of the service, it is not
just a general service where someone happens to have uploaded
a television programme. Also, there is the important question
of editorial responsibility. There has to be someone who takes
control of determining the catalogue which lists all of these
programmes. Those are the kinds of services that are currently
available: Homechoice and there are proposals by BT and other
companies to promote similar services. We thought if you added
all those characteristics together you ended up with something
that did provide a reasonable amount of certainty now, so this
is a pragmatic approach, if you like: what are the sorts of things
that we think are in the on-demand space and which are effectively
competing with television, what are their characteristics, let
us include those in the definition. One of the ones which we added
was user expectations which you have questioned. This is an element
which has been described as particularly Anglo-Saxon but it is
one that is already in the Communications Act and we had a provision
in that Act whereby what could be licensable as television might
be altered by secondary legislation subject to meeting various
tests, one of which was user expectations. I realise that is slightly
uncertain and changes over time and can only be determined with
research, but it is something that is crucial to the job we are
trying to do because you only want to regulate where people are
expecting regulation and where that regulation is necessary; if
people do not expect it or need it then you should not need to
regulate it. Overall, you have to look at these various factors,
including that last aspect. Certainly in discussions with industry
and the broadband stakeholders' group they are fairly confident
certainly as to how we would apply it and they are fairly confident
that it does produce a rational result now. Of course, it is not
entirely future-proof but we have also proposed that there should
be quite stringent review clauses in the Directive should it be
necessary to change. It does already have a bit of flexibility
in it because as TV changes so "TV-like" might change,
but all of these characteristics will apply.
Q163 Chairman: If it manages to restrict
the scope of the Directive then obviously we wish you well.
Mr Woodward: It may be helpful just to say to
the Committee that notwithstanding the difficulty of getting the
definition right and notwithstanding the points that Lord Roper
drew our attention to in his question, at the moment despite the
extraordinary speed with which convergence is taking place and
new platforms are appearing, most people know the difference between
a television programme and not a television programme. If the
Committee has had the opportunity, as I have because I have got
younger children, of seeing things like MySpace and YouTube, they
are not television programmes. Our point about a feature film
in relation to your question, my Lord Chairman, is if it is transmitted
at eight o'clock on BBC tonight or you decide to watch it as an
on-demand service, it remains a feature film. The BBC is not going
to transmit MySpace or YouTube tonight. On the other hand, on
the internet you may be able to call up MySpace and you may even
generate your own content and put it on to YouTube or MySpace.
On the bulk of these content issues I think the consumer can make
up their mind as to whether it is a television-like programme
or it is not. There will be a grey area, there often is, and there
is a grey area here. For example, what happens, as I know has
happened in America, when a major television studio sees a fantastic
marketing opportunity by making a soap effectively for YouTube
without the consumer on-demand realising they are actually watching
something made by Fox Television? I am not suggesting for one
moment that issue is not there but I do believe by and large it
is at the margins and the difficulties that are posed in the clarification
of a non television-like service poses us a problem in a relatively
small area. Yes, we have got to focus on that and, yes, we have
got to get it right and, yes, we have to work with our colleagues
in the European Union to get it right, but for the vast majority
of the services on-demand it is perfectly clear—Newsnight
watched on demand is a television programme whether it is seen
at 10.30 at night or you call it up on your Apple Mac this evening.
Q164 Lord Swinfen: Minister, do the
proposed rules on advertising adequately address the emerging
business models for content provision over the new platforms?
Mr Woodward: I think the first thing I want
to say is that we actually have some pretty good advertising rules
already. My problem with the proposals by the Commission is in
a sense they are trying to play the role of futurologists and
look into the future. This is a world which is changing so fast
and they are trying to pin it down and hold it where it is. Even
if they have got it right now, and I am actually going to suggest
to the Committee that they have not, I think what they are trying
to regulate will already have changed in one or two years' time
anyway and they are going to need to revisit this. I think we
have to be careful, even if we have got it right now, in saying
to ourselves this is perfect in terms of where we are trying to
go with this because this is such a fast changing world, new platforms
emerging, that I believe it is too early to try and regulate in
the way that they are doing. Then you come down to asking is it
better to proceed with general advertising controls or sector
specific controls. Again, my view in relation to this is we have
got some effective rules at the moment but this has been a conversation
we have had inside the Department and it may be helpful again
in terms of the detail of this if—I am very fortunate they
are both called Chris and I am not sure which one is going to
deal with it—Chris would like to explain where we are going.
Mr Dawes: On television there is some liberalisation,
notably the relaxation of the 20 minute rule, but still the liberalisation
is not very great. There is also a curious new proposal in the
Commission's original draft to introduce a 35 minute rule requiring
35 minutes to elapse between advertising breaks in children's
programmes and news, which is a new constraint that does not exist
in the current Television Directive. That seems to be going in
the opposite direction from liberalisation. In broadcasting terms,
the slight liberalisation overall that is in the Commission's
proposal is welcome but they could have gone further, for example
they are still proposing isolated spot adverting should be very
exceptional and that is something that broadcasters have said,
with personal video recorders, et cetera, they should be able
to do and that we should allow advertising more to find its own
level, as with radio, rather than have very strict regulation.
That is where we are on television. On on-demand services, the
Directive only has provisions in Article 3G relating to what should
not be advertised and there we find it very curious that one needs
to have these provisions which are being applied specifically
to certain on-demand services rather than to all advertising.
Why not just use a horizontal directive, like the Unfair Commercial
Practices Directive, what is so special about on-demand services
that they need special rules? There we think it is an unnecessary
intervention and is likely to mean that in the UK where the Advertising
Standards Authority currently exercises regulation of on-demand
advertising on a self-regulatory basis that we would need to impose
some kind of co-regulatory structure at the very least.
Mr Woodward: This brings me back to my concern
about whether or not, despite arguably if you share the intentions,
this manages to achieve those intentions. I think what Chris has
just demonstrated is that at best it is likely to be inefficient
and ineffective. What worries me is the speed of the technology
because to some extent the arguments about programme duration
in relation to adverts, and there is a divided view on this, can
be rendered completely irrelevant because of personal video recorders.
It does not really matter whether the programme is of any duration,
we are going to have a generation of personal video recorders
that will simply edit out the adverts. There is also a very lively
debate to be had about product placement. We have a considered
view in the UK, and Ofcom have just produced a report, there is
a diversity of views within Europe and it is a very important
and intelligent and healthy debate to be having. It has to be
said that in a very different television market, but nonetheless
one that sells a great deal of programmes to the United Kingdom,
the USA, in the face of declining advertising revenue because
of falling audience shares, commercial television stations there
are developing product placement and indirect product placement.
It may well be the case that we do not want to have that here
but, on the other hand, it is an interesting question to consider
that if, for example, the group of people (who are now somewhat
middle-aged) of Friends decided to make the eleventh series
and bring it back and instead of Central Perk it became Starbucks,
that would not half put us all in a bit of a dilemma as to what
we would do because arguably that would be product placement of
an extraordinary kind. Would we be saying to the commercial stations
here "you cannot buy it"? Would we be trying to digitally
paint it out? I put that on the table because this is such a fast
changing world that even if we got it right today we would probably
have to revisit it in two years' time. The danger is that we are
probably not even going to get it right and then we end up with
the absurdity of trying to create special rules for special sectors
along the way that Chris has just outlined, in which on-demand
services would be saying, "Why are you picking on us?"
The Commission set out with an intention, they saw they could
not quite get it right, they are now adapting it and twisting
it to see if it is possible to squeeze it in in some way and the
result of this is a mess. We have made some progress on this but
the debate is wide open on the advertising area and product placement.
We welcome liberalisation in relation to advertising but it has
to be said that is not a view which is entirely shared by some
of our fellow EU Member States.
Q165 Lord Swinfen: Thank you. Are
there any other restrictions on advertising that you would like
to see brought in or, indeed, on the marketing side of it?
Mr Woodward: If we are entirely frank, we are
not looking to bring in more EU regulation. What we would be up
for undoubtedly is if, for example, Ofcom came in and they said
it was necessary to look at this area of advertising in the UK,
we would want to do so. I think a very good example of this is
in relation to children and obesity. I think it is incredibly
important in the UK, which arguably has a bigger problem with
obesity in children than any other EU State at the moment, that
we have the flexibility to be able to respond to that. As you
know, the debate out there ranges from those who want to put a
ban on all products marketed at children which contain certain
high levels of fat or salt, and there is a discussion about a
watershed time and so on. I think it is extremely important that
there is a debate that happens. I think it is incredibly important
that we have a regulatory body like Ofcom which can remind us
of the need for things to be proportionate. It is incredibly important
that this can be judged in relation to British culture. It is
a very worrying dimension when we start to see this responsibility
to a bureaucracy which is far removed from the area of the problem.
In relation to advertising and television advertising, the issues
of product placement, nothing perhaps so importantly illustrates
the importance of flexibility and proportionality than the advertising
of children's food and the need to keep this local unless there
is a very strong argument for moving it from local to EU state
level.
Q166 Chairman: What is the burden
of the amendments you are seeking to achieve in this regard? Is
it essentially to leave it to the marketplace, in other words
a very liberal approach to advertising, or is it seeking to get
rid of the 35 minute rule? I am trying to understand your broad
stated approach.
Mr Woodward: For example, on this—
Q167 Chairman: What do you want to
see at the end of the day?
Mr Woodward: There were rules in relation to
adverts only being able to happen every 20 minutes and those are
being swept away in this Directive and I think that is a very
good example of the Directive dealing with the world as it is
rather than the world as it was. It is interesting to note when
we were preparing for the Committee yesterday we were trying to
think of examples of whether or not that is always consistent,
and I was suddenly thinking about those times when I watch Sky
News and I just seem to be only watching adverts, and my colleagues
pointed out to me that is because the programme has finished and
the next one has not begun and it is in-between the weather or
something. There are interesting ways already in which people
find a way around it and, therefore, liberalisation is not just
about saying "Let us leave it to the market", it is
about getting ourselves up to speed with where we are. As a general
approach our view is not to simply say, "The market will
sort it out", we do not believe that. What we do believe
is that self-regulation is what by and large best sorts it out.
We have authorities in this country in relation to advertising
which work extremely effectively. We have bodies like Ofcom which
develop very strong views and also, with huge respect, my Lord
Chairman, the speed is very important. Ofcom can move very, very
quickly on an issue if we need them to. The flexibility to respond
very quickly can sometimes be extremely important. When you have
to countenance the views of 25 Member States it takes a very long
time and you become an inflexible, slow moving body. If we look
at some of the things in advertising, who knows what product we
could find being advertised in the next few months on television.
It is incredibly important to have a body that can respond to
that very quickly. We do not want a body that responds to it in
two years' time. Unless my colleagues have something to add, I
think our response would be to say that it is an informed but
not an unfettered market but it is, on the other hand, respecting
the fact that self-regulation works better than state regulation
and it is better done at Member State level than at European Union
level.
Mr Dawes: Could I just add a point of detail
on the 35 minute rule. Our amendment is specifically to get rid
of that, but in relation to the other advertising rules unfortunately
there has been inadequate discussion in Council. This is something
that is very unsatisfactory and, as the Minister indicated, our
instinct is more liberalisation but, frankly, as he also indicated,
a number of other Member States and some of the Parliament actually
are going in the other direction and realistically where we currently
are it would be difficult to get more liberalisation than a reduction
from the 35 minute rule to a 30 minute rule, which the Commission
appear willing to concede.
Mr Woodward: I think something that may be important
for the Committee to note which it may not be aware of is that
we have also introduced an amendment on media literacy because
we believe that the most powerful tool in all of this is the consumer
and ultimately the consumer should decide, and will decide, and
the consumer should only be protected from themselves if they
really do need to be protected from themselves. This summer we
introduced a media literacy amendment which will promote media
literacy in Member States and put a requirement on Member States
to promote that. I think that has to be seen as part of the debate,
whether it is about advertising or, indeed, programme content.
Q168 Lord Roper: On media literacy
we put the same question to Ofcom and they are going to let us
know what their plans are in developing work on media literacy.
I would be very interested to know what sort of response you have
had on the issue of media literacy both from the committees of
the Parliament and from other Member States.
Mr Woodward: I can comment on some of the governments
that I have visited in the last month, which is to say that it
has been universally welcomed. In fact, I cannot think of a single
country which has not welcomed it, and welcomed it extremely enthusiastically.
My colleague, Chris, has done the detailed work on this.
Mr Bone: I think it is fair to say as well that
within the Parliament and among Member States on the Council it
is also playing very well. It is not an issue that anybody actually
opposes, it has got a generally pretty warm welcome all round.
There have been amendments introduced by MEPs on their own initiative
which will also promote media literacy through the Directive.
Q169 Chairman: Could we turn briefly,
very briefly, to the question of programming quotas, proportions
of European content and so on. Can you just remind the Committee
what the current position is and how the Directive as currently
drafted changes that, if at all, and what the view of the Government
is on this?
Mr Bone: The Directive which currently applies
to television only contains Articles 4 and 5, provisions which
require Member States to ensure that broadcasters under their
jurisdiction reserve 50 per cent of programming time for works
of European origin and 10 per cent of programming time at least
for works which have been produced by producers who are independent
of broadcasters. There are some exceptions in the case of news
broadcasts, sports broadcasts and so on, but that is the overall
position. The proposal which the Commission made in December would
retain that for what the Commission now calls linear services
rather than TV broadcasting, but basically the same animal. It
will also have introduced I think what was originally Article
3G, in fact, originally Article 3F, a proposal that both for the
linear and non-linear services, but more importantly for the non-linear
services, there is a requirement for Member States to ensure that
providers of non-linear services promote where practicable and
by appropriate means production of and access to European works.
This is a kind of European quota by the back door except there
is no percentage mentioned and Member States are simply required
to ensure that people promote these things, which you might take
as being a fairly meaningless requirement. Indeed, the view which
we have taken throughout this discussion is we do not think that
setting quotas in the way that is currently done in Articles 4
and 5 is a particularly helpful thing for European legislation
to do. For example, we do have lots of independently produced
programming and home produced, ie European programming, on British
television at the moment which is all nailed into place by agreements
with the major public service broadcasters. The European Directive
does not really add anything to that. Similarly, as far as non-linear
services are concerned we believe that the notion that you can
set quotas of any sort for any type of programming on services
which by definition have a very large back catalogue potentially,
an enormous long tail of programming which people can get access
to, is not going to achieve anything and is perhaps not even worth
the paper it is written on, but that might be an extreme view.
Mr Woodward: It is also worth pointing out to
the Committee again that it seems to me this is a view about a
world of television that has long since gone. The whole nature
of on-demand services is that it is up to you to decide what you
want to watch, what you want to call up. We cannot make people
choose from a catalogue, the catalogue they have got is global.
The idea that in some way if we could only persuade enough people
to make European content that will fulfil the quotas is patently
absurd and it immediately poses the question how are you going
to regulate it anyway. You are not going to. It also poses the
question that since much of the content that will be on non-linear
services, on-demand services, is going to be user generated, and
some of it will be both, and some of it will be user generated
in more than one part of the world, part of it might be European,
part of it might be American, how do you define MySpace? I find
myself again saying that what the Commission is trying to do here
is vastly over-reach itself even if it is quite well-intentioned
and certainly the outcome of this would only be ineffective because
it cannot be done. It will impose a bureaucracy on governments,
it will impose a bureaucracy on the larger companies and it will
involve costs and all of those costs, all of those bureaucracies,
we are being told, will not only damage the larger companies like
MySpace, Yahoo! and so on, but will also drive out the start-ups
of small and medium-sized enterprises from Europe in the first
place because, of course, outside of Europe none of these quotas
or regulations will apply.
Q170 Chairman: If your proposed changes
to the extent of non-linear services are included in the Directive,
we are talking about—I simplify it—television-like
offerings, not programmes. Is the objective of the Government's
thinking in the discussions to seek for non-linear services as
narrowly defined for the purpose of going forward with the Directive?
Mr Woodward: Yes.
Q171 Chairman: But they would not
be included, there would not be requirements in relation to quotas
or reference to it.
Mr Woodward: We would like the references to
quotas removed altogether but we are pragmatic about this because,
if we are entirely frank, what the Commission is proposing is,
first of all, not mandatory, it requires governments to write
to people to see if they can do them a favour and meet the quotas.
It is not suggesting that there will be an imposition of penalties.
Of course, it does create a bureaucracy and, as I say, we would
like to see it not there at all but so long as this is effectively
voluntary if the Commission feels a compelling need and Mrs Reding
can sleep better at night by having this in the Directive we can
live with it.
Chairman: Can we return to the question
of self-regulation.
Q172 Baroness Eccles of Moulton: Minister,
this is a theme that has run through the whole discussion but
if we could just focus on it quite hard for the moment. It seems
that the Directive has presented a threat to the way in which
we self-regulate, co-regulate, through Ofcom, through the industry,
and it has appeared to us both from the point of view of the regulator
and from the point of view of the industry that the players are
quite happy that this is a good way to proceed. It has also become
apparent that we started off as being quite a lone voice in wanting
to defend, as it were, the status quo so far as the UK is concerned
and most of the other Member States seem to have been quite supportive
of the extension of controls over the non-linear services. I suppose
really there are two questions that I would be interested to ask.
One is whether we are going to end up in a position where we will
have a Directive which means that we can continue to co-regulate
and self-regulate as we have done up until now. The second question
is why it is that the arguments that have been so strongly put
today and by other witnesses have not found favour with enough
of the rest of the Member States for it now to become almost a
non-issue?
Mr Woodward: They are very good questions. If
I may take the second question first. The UK's initial position,
and our position has changed, against any change was one that
allowed us to put the argument on the table in a very, very forceful
way. It was the case that most people did not entirely agree with
us, of course that was the case. It is perhaps a little disingenuous
if we think the difference between the support of the government
in Bratislava was then people were entirely against us. What was
indicated to us in the course of that first five or six months
was that other countries were coming to be persuaded of the argument
but were not persuaded that there should be no change and, therefore,
the position that we worked out through May, June and July, when
I came into this office and worked with my colleagues through
the summer, was one in which we believed we could have a principled
argument which was if we already regulated television services
we should not worry about how they are transmitted but beyond
television-like services we should not regulate. What was extraordinary
was the speed with which once we put that amendment down we found
enormous support. I believe that in relation to advertising it
is important to update and liberalise the current Directive, so
I think there is a need for a Directive, and that being one case
in point, I am not remotely suggesting we do not need one at all
but we did not need the Directive that was originally on the table
last December. There has been considerable change, there will
be a Council of Ministers, as you know, in the middle of November
when I think the Finnish Presidency will try, although we will
know more from Coreper at the end of this week as to whether or
not they indeed will go for trying to bring this to fruition.
There is the 10-14 December meeting of the Parliament for first
reading which will look at the amendments that have come through
the committees. I think this is a very timely moment for us to
have reached this stage of debate. The arguments that we are strongly
putting today are no more or less strongly put than they would
have been a year ago, the difference is that since the summer
we have actually won a great deal of support from other member
countries with our proposals. The adding in of media literacy
I cannot over-emphasise enough, I think that is a huge step forward.
In relation to where we end up with self-regulation I think if
the amendment that the UK is putting forward, with the support
of Spain and other countries, in terms of scope as it now is if
we only regulate television-like services that will leave self-regulation
the role of dealing with those areas that do not fall into that
domain. I think it is probably worth pointing out to the Committee
that this is not because the Government believes there should
be no regulation of those services that are not television-like,
that is absolutely not the case. The Government does believe that
there should be regulation of those services, it is just that
we believe they should be self-regulated. It is only if self-regulation
fails that Member States should step in and if Member States fail
then the EU may well have a role. We believe it does not start
from the other end of the telescope. I see an enhanced role for
self-regulation as a result of this Directive, not a lesser role.
I see regulation as continuing to serve the public, continuing
to protect minors, continuing to prevent incitement to hatred,
but I do not believe it follows that an inflexible European Union
bureaucracy is the best instrument to do it. I hope that we have
managed to persuade enough of our European colleagues to come
with us on this journey now to recognise that state regulation
is not the only way of dealing with on-demand services and that
self-regulation is likely to be more effective, more responsive,
more flexible, not least because this is such a fast changing
marketplace that we need a very flexible method of self-regulation
otherwise it will fail the very people it is setting out to protect.
Q173 Baroness Eccles of Moulton: Do
our fellow Member States have the confidence in their own internal
systems to be able to self-regulate effectively or do they really
rather hope that perhaps the EU will do it for them?
Mr Woodward: I think one of the hallmarks of
the debate that I have found interesting in the last five or six
months, and of course the Government from time to time is accused
of not being as close to the ground with its ear to the ground
as it might be, is that industry has been quite good at connecting
with the Government and government departments and sharing its
concerns, and I think the UK Government has by and large pretty
faithfully reflected the balance of the needs of the industry
and the consumer in framing our response.
Q174 Baroness Eccles of Moulton: Across
Europe?
Mr Woodward: Across Europe. I think what has
been interesting as we have toured around Europe has been seeing
how that same connection and closeness does not exist in many
other Member States. It has been very interesting to see how a
number of other Member States' industries—the equivalent
of Orange, for example—would have gone straight to Brussels
with their concerns and, therefore, I have to say it is all the
more alarming that those concerns have not been reflected in the
Impact Assessment of the European Commission.
Q175 Chairman: We have heard so much
criticism of the Commission's Impact Assessment and there being
clearly significant shifts in attitudes amongst other Member States
about some substantial matters within the draft Directive as it
was, how could the Commission have gone forward with a proposal
in such a rapidly changing area of one of the forefront industries
of the modern era and got it so wrong?
Mr Woodward: That was my very first question
when I came into the job and I am afraid that after five months
I am still unable to assist you with that enquiry.
Q176 Chairman: When we meet the Commission
it is not in any way the purpose of this House or yourself to
be antagonistic but simply to draw the lessons. It was only a
year or two ago the Commission were talking about better regulation,
better Impact Assessments, more consultation, more careful thought,
and then this happens. It really is disappointing.
Mr Woodward: Perhaps it might be of assistance
if Chris answers, who has had the pleasure of dealing with the
detail of this with the Commission. One of the very first people
I saw when I came into this post as Minister for Creative Industries
was Viviane Reding because I do regard this as one of the four
or five most important priorities in my job in terms of dealing
with them. We had a very good discussion. As I say, I do believe
that Mrs Reding is extremely well-intentioned, I do not believe
for one second we are looking at somebody who is poorly or ill-intentioned,
but she also believes that this is a comprehensive Impact Assessment.
It is not just the bureaucracy that believes that, this is the
Commissioner who believes that this is a thorough analysis of
the impact of this regulation on industry. As you say, it is quite
extraordinary that anybody could convince themselves that—when
dealing with regulation which could affect something in the order
of seven to 8 per cent of the European Union's economy—they
could possibly settle on such an inadequate report. Chris had
the pleasure of dealing with the Commission on a daily basis.
Mr Bone: Just a couple of comments. The first
is that the Commission do still regard this as being a thorough
and detailed Impact Assessment. I think what they mean by that
is that they have covered all the angles, all the objections,
all the types of industry that might be affected, they are all
mentioned in there somewhere and they all get a plus or a minus
on the Commission's balance sheet. The difficulty, of course,
from our point of view and from the point of view of industry
and other Member States perhaps is that there are no actual hard
figures attached to any of this stuff so you cannot take an overall
view as to what is the best thing to do. That is one observation.
The second is, and it is not my role any more than yours is, my
Lord Chairman, to be critical of the Commission or anybody else,
one particular thing that struck us was in the Commission's work
leading up to the production of this Impact Assessment of December
last year which involved assembling various focus groups and stakeholders
to discuss all the issues which would eventually be put into the
Directive what we noticed about that very strongly, and noticed
it in the run-up to our own Broadcasting Conference which we ran
in Liverpool last year where the main parts of the forthcoming
Directive were discussed, was the bias towards bringing existing
broadcasting interests into these discussions but not including
enough of the telecoms industry, the software providers, the software
houses, the games developers and all the other people who potentially
could be affected by this. If you look at the list of official
consultees in the Commission's focus groups, they are almost all
broadcasters. I think that had the effect of casting the Commission's
proposals back to an almost bygone age of five or 10 years ago
when it was the big dinosaur broadcasters who stalked the landscape
and there was no-one else in this field. What it points to is
the importance of not just consulting with stakeholders but also
identifying them.
Mr Woodward: As always, Chris is very good at
drawing our attention in the Department to critical issues and
one of the issues that has concerned me in the Department has
been the video games industry. I do not know if the Committee
has had a chance to look—I only recently did—at the
report which was made for Ofcom, the RAND Report, and in the introductory
section on page 14 they talk about the impact of this on online
games. That is just one illustration. They say: "Whilst large
publishers could mitigate costs by integrating administration
with existing quality management, developing and hobbyist SME
developers would face disproportionately high impacts. However,
precisely these small players constitute Europe's comparative
advantage in the global market." I think the fact is that
the games industry has a specific problem and yet that problem
is completely put to one side in the course of the Impact Assessment
and it would be of great assistance if your Committee, my Lord
Chairman, feels that the Impact Assessment is inadequate if that
could become something of an even broader discussion about the
nature of Impact Assessments because it really is a very serious
worry that such significant legislation as this Directive, which
I believe is potentially as sclerotic as the Common Agricultural
Policy and it has taken us 50 years to try and get rid of that
and we are still trying to do it, has the possibility of impacting
on these newly emerging industries which are a huge source of
wealth and jobs in the European Union and yet no account whatsoever
has been take of these.
Chairman: I think we may have shot Lord
Roper's fox!
Q177 Lord Roper: Not totally. The
point you make does suggest that in the process of consultation
the Commission tends to look backward or to look at the existing
rather than to look forward and in an area like this that is clearly
a mistake. I have a slightly wider question. It has been very
interesting, Minister, to hear you talk about the way you have
dealt with this in the last few months, and it is not just dealt
with by officials in a Council working party but you have said
that you have spent a certain amount of time going round Europe
seeing your colleagues in other comparable departments. I wonder
if you could just say a little more about that and what proportion
of your time it may have taken up over the last four or five months.
Mr Woodward: I think you had better ask my children,
they were looking for a slightly different September from the
one they enjoyed. Part of the programme of work that I saw before
in May was undoubtedly, as I said, to make four or five priorities
in the Department and I see this as absolutely one of those. Because
of the demands of the parliamentary timetable it was difficult
to find parliamentary time in June and July to travel but obviously
the recess presented an easier opportunity. Having a chance to
talk with colleagues face-to-face makes a huge difference and
whether it is about this regulation or any regulation if you have
the chance to meet people and talk to people you are more likely
to find common ground. I cannot thank my officials too highly
for the preparatory work that they did. If they had not done this
work we would not have made the progress that we were able to
make. As a consequence of the work of my officials it was possible
for us to go, find common ground and find, I hope, what will emerge
as a way forward. Very clearly the big decision for the Finnish
Presidency is whether they bring this to a head. It has to be
said that since the Parliament will have their first reading on
10-14 December matters will come to a head to some extent within
the Finnish Presidency before the Germans take it up. I have no
doubt that in the event that we do not have a successful Council
of Ministers in November it will be the wish of the German Presidency
in May to bring it to a head, and that probably feels like a more
realistic timescale. There is a very important caveat here. Although
it was not in the original proposal but has come in since the
original proposal, so long as the changes we have seen to Country
of Origin are not implemented I believe it will be possible for
us to find common ground in November. In the event that those
proposals on Country of Origin were to look as if they were something
the Finnish Presidency wanted to go with then the UK would do
everything in its power to resist that.
Q178 Chairman: That was going to
be my last question, Minister. Could you update us on what is
going on? What is it that is emerging in relation to the Country
of Origin principle?
Mr Woodward: Unfortunately, I think it is an
example of people having a rather overzealous view about the capacity
of the European Union because the argument has shifted away from
the original Country of Origin principle to those who think Country
of Destination would be a better way of looking at it. Again,
it comes back to the test of will it be effective and will it
be efficient? Of course, it is impossible for a programme maker
now anyway to imagine where a programme might be destined for
in 20 years' time and who might be watching it. This is an area
we need to look at. Chris has had the responsibility recently
of following this up. It is a very fluid situation. We see from
day-to-day almost the numbers rise up and down in relation to
this. You might be able to give us the current position, Chris.
Mr Dawes: Yes, Minister. The Swedish proposition
in relation to Country of Origin has been the one that has gained
most favour. That initially would effectively have meant that
if one Member State disliked the service from another Member State
which was targeted on them they could require the Member State
where the broadcaster was to take action on public policy grounds
against them. To take a Swedish example, if there was advertising
to children from a UK-based channel targeted at Sweden then the
Swedish Government would be able to make a case to the UK to change
that broadcaster's behaviour. In our view that clearly went against
the Country of Origin principle in practice even though it paid
lip service to it in drafting terms. That has not been adopted
but some of the concepts of it have been included in the Finnish
text in relation to requests coming—at the moment requests
rather than requirements but who knows whether that will remain—so
we have to consider whether the real risk to the current text
from the Swedish intentions will be fulfilled in the Directive.
There are other elements of the text which are less bad which
include ECJ case law which is somewhat more helpful, the TV-10
case in relation to circumvention. It is not 100 per cent clear
yet whether it is a real destruction of Country of Origin or whether
it is more like what my colleague described in relation to the
on-demand quota provisions as a process which is tiresome but
would not necessarily produce a bad result. Clearly we prefer
no such text because it does introduce uncertainty to industry,
but it is not yet clear that it is absolutely fatal to the Country
of Origin principle which is so fundamental to this Directive.
Chairman: It would be extremely helpful,
Minister, if we could have a brief note on the arguments being
put forward. We came across this, you will not be surprised, in
the Services Directive where this blew up into a big issue. There
is a mood around the Union of moving away from Country of Origin,
not just in this area, and it would be helpful to have a note.
I said mine was the last question but Baroness Eccles is quite
reasonably using a Baroness' prerogative to ask one more.
Baroness Eccles of Moulton: It is a rather
cheeky question and you might rule it out of order.
Chairman: You had better tell me what
you are going to ask then.
Baroness Eccles of Moulton: As we are
going to Brussels in 10 days' time I just wondered whether the
Minister would have any idea about the most telling question we
could ask.
Q179 Chairman: That is something
best discussed outside this room. Minister, you have been extraordinarily
generous with your time, informative and very impressive in your
evidence today, we are very grateful to you. We did not exactly
follow the team sheet, so if there are one or two questions where
we feel on reflection you have probably prepared something on
the background that we could have a note on may we do that, but
we will not do it unless it is helpful to us.
Mr Woodward: First of all, can I thank the Committee
for your time. Certainly we would be happy to answer not only
any questions you had on your sheet that there was not time to
ask but any supplementaries that emerge in your deliberations
as you prepare your report. Very often it is the case that it
is only when you sit down and you see the first draft of a report
that you realise you would have liked to have asked me another
question. Our only interest is in getting this right for the UK.
If there are any questions that arise out of your deliberations
or questions that arise from evidence you take from other stakeholders
on which we can assist, my officials would be more than happy
to help the Committee in answering any questions whether from
today or otherwise. Thank you very much indeed.
Chairman: Thank you, and, of course,
thank you to your two officials. Thank you very much.
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