Examination of Witnesses (Questions 260-279)
Mr Jonathan Simon, Mr Martin Stott and Mr Magnus
Brooke
30 OCTOBER 2006
Q260Chairman: Good afternoon Mr Stott, Mr Brooke
and Mr Simon. I am not sure if you were all sitting there patiently
at the back listening to the previous witnesses but certainly
I saw a couple of you. Thank you very much indeed for coming along
this afternoon. The written evidence we received some time ago
was short and sharp and very much to the point, so thank you very
much for that. We would like to push on because we have only got
50 minutes and there may or may not be another division which
that may cut us short. If there is and if the Committee can still
be fitted in, I would like to give you at least 50 minutes. Can
we go straight into questions? Although we have got it in writing,
for the record, Mr Stott, Mr Brooke and then Mr Simon, it would
be useful to read into the record who you are and who you work
with.
Mr Stott: My name is Martin Stott. I am Deputy
Head of Corporate Affairs at Channel Five.
Mr Brooke: My name is Magnus Brooke. I am Controller
of Regulatory Affairs at ITV.
Mr Simon: My name is Jonathan Simon. I am Senior
Manager in Corporate Relations at Channel 4.
Chairman: Thank you very much. We will
go straight into scope of the proposal.
Q261 Lord Haskel: The proposal attempts
to bring the emerging media platforms, specifically the internet,
under the existing regulatory framework for broadcasting. Do you
consider this to be appropriate? What are the advantages and disadvantages
that this regulatory approach might have?
Mr Brooke: In a sense we start from a slightly
different place because we start with the adequacy of the current
regulatory framework for broadcasting and we abstract from that.
From our perspective, we see the current framework as based on
a premise of limited competition in exchange for rather detailed
regulation, both positive and negative in relation to advertising
regulation, in a world where there was limited choice for viewers
and relatively limited competition, and therefore there was a
need for quite tight regulation of television broadcasting. There
is no doubt that has delivered enormous benefits for consumers
and viewers. Between us we invest around £1.7 billion a year
in original content, that is a by-product of that system of positive
and negative regulation. What is clear is that our revenue is
under real pressure and therefore very strict regulatory framework
for broadcasting probably is not appropriate in a world of enormous
multi-channel choice where roughly 70 per cent of householders
have multi-channel television and the internet is potentially
a very powerful competitive force. I think we need to look again
at the scope of the Directive and, in particular, at some of the
detailed rules. Our starting point is therefore not necessarily
to extend the current broadcasting rules to the internet. We also
think there are practical issues of extending—as you have
just heard from some of the gentlemen from T Mobile—the
current regulatory framework to the internet, particularly the
question of exactly what you bite on in relation to internet service
providers and other providers of content who are established overseas.
However, the nub of our concern in relation to a possible extension
of scope is that services which are like scheduled TV services,
services where a provider decides on the moment of transmission
of broadcast content with the intention that that content should
be received by viewers at the same time, which is essentially
classified as a linear service under the current Commission draft
Directive, should all be regulated in the same way. I have to
say that is our priority, particularly since the Directive introduces
two tiers of rules, one for linear services and one for non-linear
services with greater obligations on linear services than non-linear
services. We face a higher tier of regulation as the providers
of linear television services, scheduled television services,
compared with new entrants providing non-linear services. Our
concern is to make sure that there is not a loophole between the
definition of linear and non-linear services such that if you
are providing, for example, live streaming of a sports event or
a pop concert, which is, in effect, live television provided via
the internet, where you decide the moment you start streaming
it to viewers and viewers watch it live over the internet then
from our point of view that is a television service and that should
be regulated as a television service and the quantitative rules
on advertising, the rules on product placement and, indeed, the
rules on listed events should apply to those broadcasts and those
should be classified as linear television services.
Q262 Lord Haskel: Thank you for that
definition of linear and non-linear, but we have heard from other
people that the whole thing is in a state the flux, it is changing
and there are new things coming on all the time. How would you
deal with all these various new television concepts coming into
the market, for instance the programmes which are prepared by
the viewers themselves and that sort of thing?
Mr Brooke: Conceptually, provided you take a
technology neutral approach, I do not inherently see that the
development of new technology should necessarily invalidate the
Directive. For example, you can take a basic approach of saying
that a linear service is a service where a service provider decides
on the moment that service is made accessible to the viewer and
the objective intention is that viewers should receive that service
at the same time, which is essentially what television providers
do, we schedule content and we make it available at a particular
point in time and those people who are interested can view it.
The reality is we can do that, and indeed to some extent are already
doing that, over a variety of different platforms, so we stream
ITV 1 over a mobile platform, for example, but essentially we
are providing by and large, the same services we are providing
to you via your television set. There is no particular reason
why if we are doing that over the internet, for example, it should
necessarily be any different, we are just providing the same service
over a new medium. We have done that for some time, from terrestrial
transmission to cable to satellite. One is talking about new means
of distribution here I think to some extent, and I do not necessarily
see why a set of definitions should not keep up with that. The
separate point you make is about user-generated content and the
question of the scope of regulation, should you be regulating
a video made by a rugby club or something somebody makes in their
bedroom? I think the answer to that is probably no, you should
be looking to regulate the mass media in some shape or form, so
people who are essentially economic actors who are putting themselves
in the market place, not people who are putting their own home
videos on the internet.
Lord Haskel: Thank you, that is very
clear.
Q263 Baroness Eccles of Moulton:
It seems that so far what you have described does throw up all
sorts of grey areas because if you said, "Right, okay, linear
can be defined as mass media professional production which is
then streamed out and available as it is being produced and against
that you put the amateur, where do you draw the line". The
distinction between amateur and professional can so often be blurred
and you might have something that is being produced on a very,
very low budget which is just for a niche market? Where would
that fall? Would that be linear or non-linear? The definitions
can become very difficult, can they not?
Mr Brooke: I think you are right to highlight
that, but I am not sure that falls into the issue of linear and
non-linear, it is a question of whether that is caught by the
Directive at all. There is a very clear category of people who
are manifestly doing this not for economic reward but I think
you are right, there is a category of people who, if at all possible,
would be doing it for economic reward but have not sold the film,
the video or whatever it is the person is putting it on the internet.
Again, I think that would fall into the category of user-generated.
Where you have got a business which is seeking to put content
on the internet specifically to make money, I think there is an
argument that that content should be regulated.
Q264 Chairman: It is important to
have clarity of definition because this is law at the end of the
day. In relation to your definition, if someone or body puts material
on the internet, for example, and they announce that certain aspects
of this will be available at certain times and anybody can look
at it because anybody who was viewing it would view it at the
same time, that would come under linear and that would come under,
in the Government's words, "TV-like services" according
to you. That is potentially a very wide definition.
Mr Brooke: To step back for a second, our interest
here is in a directive which is in formulation, and our concern
is in relation to the distinction we see in the two tiers of regulation.
We see ourselves being subject to quite stringent regulation on
advertising and on things like listed events in circumstances
where we can foresee potential competitors subject to very few
quantitative limits on advertising. In the end, our ability to
continue to invest in original production depends on us operating
on a level playing field to other people who are putting content
out essentially as a television service.
Mr Simon: From the new services you are starting
to see emerge I think the vast majority of the content which is
available is on-demand, it is not scheduled, so if it is caught
in the Directive at all it would be non-linear. I think the range
of content which we are most concerned about is the very small
subset of things which might be like live events, sports and music,
where the only way you can watch it is at the same time as everyone
else. It is that content we are arguing should be classified as
linear, but everything else, which is the vast, majority of what
you are seeing on the internet, is either non-linear or should
not be caught by the Directive at all.
Q265 Chairman: In evidence to us,
the Minister said that TV-like services would include, for example,
someone who put out a catalogue of films on the internet and you
could source them on demand and that does not seem at all like
what you are talking about.
Mr Stott: I think the use of the phrase "TV-like
services"—
Q266 Chairman: That is the Minister's
phrase.
Mr Stott:—may not be the most helpful
of phrases because there is a distinction between, on the one
hand, services that look like television, which might be a definition
of TV like services and perhaps on the other hand, the rather
narrow distinction we are trying to draw between those services
which are available to be viewed at a particular point in time.
That is the essential distinction between linear and non-linear
and that is the crucial point.
Q267 Chairman: With services on demand
where you can call a service up and not everybody would necessarily
want the same part, then your feeling towards this definition
is it would not come under the definition of TV-like services?
Mr Stott: It would come under the definition
of a non-linear service. You can either use the word TV-like services
meaning linear services, which is what we would tend to use, but
if you wanted to use TV like services to mean linear and non-linear
services then obviously you need to distinguish between linear
and non-linear within that definition.
Q268 Lord Roper: Some TV like services
are in a subset of non-linear programmes which are comparable
with what you are doing and would perhaps be subject to the same
regulation.
Mr Stott: I think the sort of regulation to
which we are subject may be quite difficult to apply. For example,
some quantitative rules on advertising could be quite difficult
to apply to a service which was available on a non-linear basis.
The draft Directive makes this distinction between the rules that
can be applied to linear and non-linear services and those that
can be applied only to linear services. I think we accept that
in principle. Part of our concern is the height of the hurdle
to which linear services have to jump because I think in a more
competitive world we would prefer the level of detail which falls
on linear services to be made lower and closer to that of non-linear
services because this is a world in which we are having to compete
as a linear television provider with non-linear services.
Q269 Lord Geddes: Is it too simple
a definition to describe linear services as scheduled services?
Mr Brooke: That is certainly an element of the
definition, but I do not think it is quite enough to capture the
whole element; the notion of the schedule is an important one.
However, a schedule should not necessarily mean lots of different
programmes, in other words you could have a single event that
was scheduled at a particular point in time.
Q270 Lord Geddes: It would still
be scheduled though?
Mr Brooke: It would still be scheduled, exactly,
but not necessarily part of "a bigger schedule". In
addition to that, you would need some sort of notion of the provider
deciding on the particular programme which is put out at that
particular point in time and there would be some notion that the
intention is that people generally should have access to that
particular content, broadly speaking, at that particular time,
with some delay for transmission and so on, but that is the objective
intention of the service provider. I think essentially those are
the elements and it should be delivered over any platform, so
a platform neutral definition
Q271 Lord Geddes: This is a rather
different question, and I am sure all three of your organisations
have done this research, what sort of overlap and confusion is
there going to be with this proposed Directive with other EU directives?
I am thinking particularly of the E-commerce Directive?
Mr Brooke: There is a possibility of some confusion
and it would mainly relate to non-linear services. My understanding
of the E-commerce Directive is that it effectively carves out
broadcasting services. Presumably that would need to be reviewed
in the light of the revision of the TV Without Frontiers Directive.
However, I think we are talking largely about non-linear services
which are not our particular area. My understanding is in general
terms where there is a sector specific directive generally specific
rules would overrule the general rules of the E-Commerce Directive.
Of course there is a degree of ambiguity about which are the specific
rules and which general rules they overrule. There are legal precedents
which will deal with that.
Q272 Baroness Eccles of Moulton:
This is a question about the level playing field and the fact
that at the moment you see it being quite unfair to have to stick
to the existing Television Without Frontier regulations if other
people in the game do not have to. This is hypothetical, but from
your position of representing independent television, if you were
able to say in the light of everything that is happening and the
inclusion of part of non-linear services in the Directive, what
now do you think would be a sensible degree of regulation to have
in any revised directive?
Mr Stott: It is not a question of what is in
our interest as much as what is in the viewer's interest. Free-to-air
television has been incredibly successful over the last 50 years
in delivering high quality programming to audiences without them
having to pay for it at the point of viewing. When the original
Directive was being drawn up 20 years ago—it is about what
the Minister was saying earlier—we lived in a world where
there were very few viewing channels, my channel had not even
been thought of and Channel 4 was only a few years old, therefore
there was limited competition and you could have a fairly restrictive
and detailed set of rules about our main concern, it would be
helpful to have that advertising directive and so forth. We now
live in a world where there are hundreds of television channels,
there are new on-demand services being made available to mobiles,
television, the internet and so forth and we are going to be facing
a world which is far more competitive which impacts on our ability
to continue to deliver high quality programming to our viewers.
We think there needs to be a levelling down of the detailed rules,
a levelling down of this level of regulation and there should
be far fewer detailed rules. There should be a form of rules of
principle within the Directive and far less micro-management telling
us how long we can take between an ad break, whether we can have
an ad break with only one advertisement in it, all these sorts
of rules are a level of micro-management. We need to remember
that this draft Directive, when it is finalised, is going to be
regulating television for the next decade or more when the trends
we have been talking about are going to be even greater, so we
need a minimal level of regulation because of the new situation
we face.
Q273 Baroness Eccles of Moulton:
We are going to come later on to the question of regulation and
then you will be able to give us a clear idea of what you mean
by broader principles rather than micro-regulations. It will be
interesting to know what you think should continue to be regulated.
Mr Brooke: One of our crucial concerns in relation
to definitions is that we should not find ourselves in unfair
competition with somebody for World Cup television rights, live
television rights, who is proposing to stream that event live
on the internet in 10 year's time if we are all watching the internet
on the television. The danger is that the person bidding is not
covered by the advertising rules and, therefore, could effectively
generate a lot more income and, therefore, bid more money but,
also, frankly, would not be subject to the listed events rules.
Potentially they could charge a subscription and really undermine
part of the purpose of the Directive, which is to ensure that
these events of high importance are available free for people
to watch.
Q274 Chairman: That appears to be
saying that your preference of approach is to let the whole question
of non-linear services look after themselves and worry about themselves.
Your overriding concern is with the linear service element and
your overriding desire in the light of a changed marketplace and
much more competition in conventional TV channels is to have a
much more liberal lighter touch approach to regulation. That is
it in a nutshell.
Mr Brooke: Yes, that is a very good synopsis.
Q275 Chairman: But with the added
little frisson at the end there that you would rather like to
see the definition of linear services extended so that competition
from new sources does not threaten advertising revenues because
advertising revenues are very important to free-to-air services.
Mr Stott: If they are linear services, if it
looks like television, feels like television and smells like television
then it ought to regulated by television; I think that is our
point.
Q276 Chairman: For the Committee's
sake I am trying to distil down to the essence of the issue. First
of all, you want a much more liberal approach, lighter touch to
regulation in a number of areas which you were telling us about
because the world has moved on. There is a lot more competition
in conventional television services and there is a lot more media
out there for advertising, so you want lighter touch regulation
for TV services or TV like services. The second thrust which you
are coy about is that the definition of what is linear and non-linear
is important because it goes to the heart of ensuring, from your
point of view, that other services which are in the same pool
as you for a certain kind of programming and content against advertising
revenues are not able to be free of certain regulation that you
are not free of, so boring though it is, a definition of linear
is important.
Mr Brooke: Exactly so.
Q277 Chairman: I say that to the
Committee because I know eyes glaze over, occasionally Members'
eyes do glaze over, it is so boring to you all, what do you mean
by it but, at the end of the day, this will be law. In terms of
business certainty out there, for a lot of people producing a
lot of material they will want to know, are they going to be caught
by these regulations or not? It is important, is it not?
Mr Brooke: Yes.
Q278 Chairman: I only want to get
us agreed on that point. We may not agree on what the definition
is but it is important to try and get the definition. Is that
right? Those are the two issues?
Mr Brooke: Yes.
Mr Stott: Yes.
Mr Simon: I want to add one thing to the very
last thing you said which is that a number of people have argued
that it is very, very difficult, almost impossible, to draw a
distinction between linear and non-linear and almost suggest it
is futile to even attempt to do so. I do not think we agree with
that. You are never going to get it 100 per cent perfect but I
think a reasonably workable definition along the lines we have
just discussed is achievable.
Mr Brooke: It is also worth saying that, of
course, there has been litigation on the current Directive and
the meaning of television broadcasting. The Media Kabel case,
which went to the European Court of Justice a year or two ago,
was a case on what the current definition of television broadcasting
is, so I do not think we can assume that definitions are ever
perfect.
Q279 Lord Haskel: In view of what
you say about the lighter touch regulation and accepting your
quite clear definition of linear broadcasting, how would this
impact on your business as public service broadcasters because
there is another aspect of your business, you have a deal that
you are going to give a certain amount of time to public service?
Would you see any change in that? Would you see it impacting on
your duties as a public service broadcaster?
Mr Stott: In so far as we are a public service
broadcaster we are obliged to perform certain public service functions
as part of our licence. Clearly, if there were more restrictive
rules on advertising and our ability to earn revenues then that
impacts on our ability to deliver public service.
Mr Simon: I agree with what Martin was saying.
To add to that, a lot of what we say may make us sound like very
traditional, old fashioned broadcasters boxed into one technology,
and one thing we all need to do is embrace all these technologies
and make sure that we deliver impact for our public service programming.
We are getting our content out across all platforms, on mobile,
video-on-demand, across the whole plethora of services which would
be available, and our business models will change accordingly.
I think what we are all keen to preserve—some of these business
models may involve different ways of adding revenues but the core
of our activities remains advertising—as Martin said before,
is the ability to provide content for free in return for advertising
which we want to be able to protect as much as we can do.
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