Examination of Witnesses (Questions 320-339)
Mr Gregory Paulger and Mr Jean-Eric de Cockborne
6 NOVEMBER 2006
Q320 Chairman: But surely on the
internet there is now a single market: it is global, far beyond
Europe?
Mr Paulger: Indeed, my Lord Chairman, but I
think one needs to distinguish between the internet as a platform
and the internet as a vehicle for delivering through internet
protocol TV-like services. Here you will have the internet, be
it the public internet or indeed closed-circuit services that
use IPTV, delivering linear television channels, the same ones
that are available very often on cable or on satellite or over
the airways, and you will have them delivering non-linear services,
that is, services that are on demand. These may be films that
are called up on demand or these may be catch-up programmes where
viewers have missed the previous evening's series and want to
see it and catch up with it. These services are competing with
each other. The general rule of the economic reasoning underlying
the treaty is that one tries to avoid distortions of competition.
The directive is platform neutral. One often says it is technology
neutral, but everything is digital so "platform neutral"
is perhaps a better term. Take an ordinary linear television channel.
Why should it be given different regulatory treatment, perhaps
more favourable regulatory treatment, because it is transmitted
through the internet rather than by satellite or over cable?
Q321 Chairman: That all assumes that
you can in some meaningful way identify some services that are
effectively the same as television. I think you used the phrase
"TV-like". In a sense everything on the internet in
advertising terms is as competitive for commercial revenues as
television. We were reading in a newspaper the other day that
Google or Yahoo has commercial revenues now that are equal to
those of one of the main commercial TV channels in the UK. Under
that criterion of competing for revenues, for example, Google
would be competitive. I am struggling on behalf of the Committee
to understand this idea of competitiveness. Everything that is
on the internet that earns revenue for revenue purposes is competitive.
How are you delineating what is TV-like? In the draft there is
a proposal that on-demand services are TV-like. How does one justify
that?
Mr Paulger: It is clear that the Commission
never intended to regulate everything on the internet, and indeed
companies compete in the real world and in the virtual world,
completely different companies, different kinds of companies,
different kinds of services, for commercial advertising revenues.
In the real world we would, of course, never have dreamt of subjecting
every company that competes for advertising revenues to a television
directive and in the virtual world it is the same thing, so this
is why we have produced what we consider to be a very tightly
defined definition of the scope with the six criteria, because
TV and TV-like are words that one can understand but to define
them in law is difficult. The Commission's initial proposal was
based on six criteria. They had to be services within the meaning
of the treaty, of course, in other words economic activities,
service activities, the principal purpose of which is the provision
of moving images, with or without sound, in order to inform, entertain
or educate, intended for the general public, in other words mass
media, and provided by means of electronic communications networks.
They were the six criteria in Article 1(a) and in Article 1(b)
of the Commission's proposal reference was made to the editorial
responsibility of the media service provider. We thought this
was a fairly tight definition of the overall scope. I am not at
the moment talking about the difference between linear and non-linear;
I am talking about the overall scope of the directive. Some Member
States were happy with this proposal. Others were unhappy because
they thought the criteria proposed by the Commission were not
tight enough or not clear enough, so they requested that work
start under the Austrian Presidency on examining and clarifying
the text. The European Parliament sent some similar messages.
The Rapporteur, Mrs Hieronymi, said at the outset that there was
a need for clarification and better demarcation, so the two co-legislators,
the European Parliament and the Council, have been going in the
same direction. They have added to the scope two important elements.
One is that they have moved the notion of editorial responsibility
into the main criteria in Article 1(a), so we are talking here
about editorial activities, and they have added a definition of
programmes in Article 1(aa). These are major elements of clarification
of the definition that make it clear that we are talking about
TV and TV-like. The current text as discussed in Council, because
there is no official text in Parliament yet except for the committees
consulted for opinion, quite clearly says that "programme"
means "a set of moving images with or without sound constituting
an individual item within a schedule or a catalogue established
by a media service provider and whose form and content is comparable
to the form and content of television broadcasting". Examples
of programmes include feature-length films, sports events, situation
comedy, documentaries, children's programmes and original drama,
and there is a series of recitals that clarify that. Google came
to Brussels last week to inform about its position and to seek
information. There was a discussion between Mrs Hieronymi, the
Rapporteur, and one of the chief executives of Google who came
over, and Mrs Hieronymi said, "Do you exercise any editorial
control? Are you an editor of programmes?", and the answer
was, "No, we have no editorial responsibility. Under US law
we have no editorial responsibility and therefore we would not
consider that we would come under the scope of this directive".
If they have no editorial responsibility they would not come under
the scope of this directive. There is also one thing I do not
quite understand in their position and that is that there would
be no territorial competence because, as far as we understand
it, it is not a media service provider established in Member States
of the European Union. It is a company that provides services
from outside the European Union and therefore its services are
subject to the laws of the 25 Member States and not to a European
Union directive.
Q322 Lord Haskel: I just wonder if
you have consulted your lawyers on this because it seems an absolute
minefield.
Mr Paulger: It is a minefield and we consult
our lawyers all the time. The Council Legal Service and the Commission
Legal Service are working very hard on this and are contributing
to the text that is emerging in Council and I think the Member
States on the whole are relatively happy with the text now. Article
1(a) defines the overall scope of the directive and there is no
way that it can inadvertently catch anything else. Within this
scope you have two kinds of services. The first kind is television
broadcasting, linear audiovisual media service, and that is clearly
defined as a service "provided by a media service provider
for simultaneous viewing of programmes ... on the basis of a programme
schedule", and you have an on-demand service, that is, a
non-linear audiovisual media service, which is a service "provided
by a media service provider for the viewing of programmes at the
moment chosen by the user and at his/her individual request ...
on the basis of a ... catalogue of programmes selected by the
media service provider". The demarcation line between the
two within the overall scope has also become very clear, and we
will see the result at the Council of Ministers next week, but
broadly the Member States are in two groups now. There is a group
of Member States that thinks that this is the correct text and
has struck the right balance and can support it, and that group
includes the UK, and there is a group of Member States which says,
"This is going a little bit too far down the TV-like road
because we do not want to say that on-demand services are just
television. We do not want to inadvertently not make any progress
and we do want the directive to be future-proof", so they
are starting to get worried that this is going a little too far.
Among those Member States who have made public declaration about
this are France and Germany, so you can see that the balance of
power is emerging.
Q323 Chairman: Can we deal with that
point before we move on? In 1(aa) of the revised draft as it stands
and recital 13a there is an attempt to specify "TV-like services",
non-linear services, to avoid, I assume, the danger of catching
a great deal on the internet that is not the intention.
Mr Paulger: Absolutely.
Q324 Chairman: Because almost any
major internet site effectively has a catalogue. You can choose
from different elements. If you did not you would not know how
to work your way around the site. It has a number of things. For
example, in recital 13a "they compete for the same audience
as television broadcasts and the nature and the means of access
to the service would lead the user reasonably to expect regulatory
protection...". These are, I would suggest,—and I only
ask you if you think they are—potentially contentious and
litigious. Arguing that something competes for the same audience
as television broadcasts, that the nature of it is such that a
user would reasonably expect regulatory protection and that they
have a form and content comparable with TV broadcasting—in
a sense these are very rigorous tests. Given that the Commission
has reflected upon it—it must have done by this point—can
you give us two or three non-television internet sites that would
be coming within this definition, actual practical examples? Can
you give us two or three, either today or in writing after today,
just so that we know what actually will be caught by this?
Mr Paulger: If I take an example in the UK,
you have a service called Home Choice, which is based in London
and which, thanks to an EU directive, that on local loop unbundling,
delivers down the telephone lines using the IP protocol an on-demand
service where you can use it to see an ordinary TV channel in
real time, you can use it as a catch-up service or you can use
it as a video on-demand service to see particular films. That
would be covered under the definition, as it stands, of "TV-like".
Chairman: Is it possible to give us another
one, not necessarily today but it would be useful if you could
let us have a note about it? That is a good example where it would
be difficult to deny that a service that provides the same programmes
as television but at a delay as is TV-like. It is when you move
away from that, and Home Choice which you gave me has two different
kinds of services. It is the on-demand element that slips in.
Q325 Baroness Eccles of Moulton: Which
platforms could you receive Home Choice on? Many, only one or
several?
Mr Paulger: Home Choice you can only receive
on its proprietary platform, which is a DSL, down-the-telephone
line platform using the IP protocol.
Q326 Baroness Eccles of Moulton: So
it would come on to a PC screen?
Mr Paulger: No, it comes on to a television
screen through a box.
Baroness Eccles of Moulton: So it is
getting pretty TV-like, is it not?
Q327 Chairman: I do not think the
Commission mean at all (I hope they do not) that because something
can come through what we traditionally call a television set it
gets caught because that is true of internet and now you can have
internet on television or television on internet. I do not think
for one minute it is anything to do with the screen on which you
receive it. I think I am right, am I not?
Mr Paulger: You are, yes.
Chairman: We had better push on, but
you will gather that the Committee is greatly concerned that this
is not a future-proof draft even as it stands and I rather think,
although I must not speak too strongly because we have not yet
come to a final view, that this does look like an attempt to define
something that is going to be very difficult to pursue and will
lead into great difficulties, so you will gather that we are rather
sceptical at the moment. Can we go on now to minimum content rules?
Q328 Lord Walpole: Do the proposed
rules go far enough in liberalising advertising given the current
pressures on spot advertising? Why is there a continued need for
the imposition of quantitative rules, such as what you have now
converted to a 30-minute rule on programme makers?
Mr Paulger: Do they go far enough in liberalisation
and why the 30-minute rule? The 30-minute rule is an attempt at
simplification because the current directive contains a number
of different rules: the 20-minute rule (20 minutes must elapse
between each break), special rules for films and films made for
television, 45 plus 45 plus 20. These rules may have been appropriate
for the 1980s. They are no longer appropriate today. They have
proved sometimes difficult to apply because it is difficult to
interpret them and there have been several court cases on the
application of these rules. For example, one of the things that
is not clear is whether these rules apply to—the case came
from Germany so I will use the German terms—brutto
or netto, in other words, including the time of advertising
or not. This went all the way up to the court and the court said,
"These are restrictions. Therefore they must be interpreted
narrowly. Therefore it is the most generous interpretation that
must be given and that means brutto". As I say, there
have been some difficulties, so the Commission's purpose was to
simplify as well as liberalise these rules. The Commission is
a political body. Commissioners have political debates. There
are liberals within the Commission and there are people who believe
more in protecting the consumers and the viewers so, like with
any other political body, a proposal will tend to try to strike
a balance between these views, whence came the initial proposal
for 35 minutes, so the rule would be that not the programme maker
but the broadcaster or the media service provider could interrupt
that programme by advertising for each period of 35 minutes. There
is no restriction on when this interruption should take place.
It is not after 35 minutes. It is once for each period during
the 35 minutes, so it could be 15 minutes after it had started
the programme, for example, and that is for an insertion. Then,
of course, you have the breaks between programmes which are possible.
That is a degree of liberalisation that is quite considerable
and the broadcasting industry is happy with it. There is an argument
in the Parliament and in the Council that there should no longer
be any quantitative restrictions and therefore not a 35 or 30-minute
rule, indeed not even an hourly rule of 20%, 12 minutes, the reasoning
being that free TV is having to face more and more competition
from other service providers for advertising revenues, so if we
want the free TV model to survive we have to loosen up the rules
a bit through simplification. The initial 35 minutes proposed
by the Commission has become by general consensus 30 minutes.
There are those of a mind to say that there should be no restrictions
and, apart from defending the free TV model, the reasoning is
that the advertising rules, the quantities of limits, are based
on the idea that the audiences are captive still, which they are
not. If a channel overdoes it in terms of advertising then it
is quite likely that the audience (they have a remote control)
will switch over to another channel very easily, and indeed they
do, so the market would find its right balance. Some Member States
in Council and some parliamentarians in Parliament are pleading
for the deletion of all the quantitative rules. The Commission,
and I speak for Commissioner Reding more than the Commission as
a whole, has some sympathy with that view. However, the reality
of the situation is that it might be a bit premature for most
Member States to remove all the quantitative restrictions which
they see as an important element of consumer and viewer protection.
Q329 Lord Walpole: As far as I am
concerned, I am a great fan of ITN News and I really do not mind
advertisements coming in the middle of it. In fact, it is quite
a good moment to relax. Could I ask you now about the imposition
of quotas for European works and independent productions? I do
this from living in a block of flats in Hammersmith where we have
an enormous amount of available television if you pay for it or
free television if you do not want to pay for it, but a lot of
the programmes are obviously designed for other people in the
flats, Chinese, Turkish, Arabic languages, Swahili languages and
all the rest of it. Where do you put those? As long as they are
produced in Europe is that all right? I am just a little concerned
about "European works".
Mr Paulger: First let me say that the European
works requirements in the current directive, which apply therefore
only to television broadcasting, apply where practicable. There
is a recital that says they do not apply to channels that broadcast
in non-European languages and that recital remains valid because
the Commission has chosen not to touch one hair of what represents
a historical compromise, and that is the compromise on Articles
4 and 5 of the current directive on European works and independent
works. Mrs Reding has qualified it as a religious war. It was
a long struggle between the Member States and that was the compromise
they reached and it is based on the notion of "where practicable",
which provides the necessary flexibility, and so we did not want
to upset that particular apple cart or open that particular can
of worms again. The question of non-linear services, of course,
is different. The proposal does not propose, nor do we have any
intention of proposing, quotas for on-demand services. Quotas
in the Oxford English dictionary are "quantitative restrictions".
There are no quantities and there are no restrictions in the Commission's
proposal. The Commission's proposal is that Member States should
ensure that media service providers promote, again where practicable,
European works. There are three reasons for this. First, we think
this reflects a general European consensus on the need to promote
European works and thereby cultural diversity, and indeed every
Member State has recently signed up to the UNESCO Convention on
Cultural Diversity, but nonetheless that is just another demonstration
of general consensus on the need to promote cultural diversity.
Indeed, we have the same thing in the treaty because Article 151,
paragraph 4 of the treaty says that the Community must—it
is an obligation—take account of the need to promote cultural
diversity in its other policy instruments. This is an internal
market instrument so we have the obligation to do something. Secondly,
we believe that the European production industry, because it is
the beneficiary of this kind of measure, is an important industry
in itself. It is an industry that can contribute to the Lisbon
goals. Commissioner Figel has just produced a study on the economy
of culture, on the creative industries, and one of the figures
that the authors of the study have produced is that the overall
value of the cultural industries in Europe is higher than that
of the automobile industry in Europe, so its potential is enormous
and we are transforming ourselves into a service economy. This
is par excellence a cultural industry and a service industry,
so creating an environment favourable to the development of European
works is important in itself. The third reason is that we are
here dealing with an internal market directive. An internal market
directive functions according to a particular scheme. You have
the Country of Origin Principle and Member States cannot restrict
the free flow of broadcasts or transmissions that conform to the
rules that are set out in the co-ordinated fields. In order for
this to work you have to have the right co-ordinated fields but
also enough co-ordinated fields. This is, as I said, par excellence
a cultural industry. If there were to be no co-ordinated field
measures for on-demand services there would be a gaping hole in
the internal market construction because Member States could oppose
the reception of on-demand services coming from other Member States
on the ground that there was no Community harmonisation on European
works, so it would be a very incomplete directive without such
a provision.
Lord Walpole: That was very helpful.
Chairman: There are many things we could
pursue on that but because of time we must push on, I am afraid.
Q330 Lord Fearn: Concerning illegal
or harmful content, do effective mechanisms exist to control the
types of illegal content identified in the proposal, such as race
hatred? I think that is mentioned somewhere. Is there a danger
that the proposal will substantially enhance restrictions on freedom
of expression?
Mr Paulger: The control mechanisms take place
at several levels. Your first question, my Lord, was how to apply
the rule and the second was on the substance of the rule. With
regard to how the rules apply, the European co-legislators adopt
a directive. A directive is not an instrument that is directly
applicable except in some very rare cases, so it is applicable
through the Member State's implementation into its national laws
or administrative rules and so on. It is up to the Member State
to achieve the result set by the directive and the Member State
is free to a certain extent to choose the means whereby it achieves
that result. What will a Member State do with a provision like
the one you mentioned, which says no incitement to hatred on grounds
of race, et cetera? It may do it through general law. It can be
a criminal offence to incite to hatred on grounds of race. Indeed,
in many Member States it is a criminal offence. There are very
blatant cases which would fall under criminal law. There are perhaps
less obvious cases that would need to be looked at by a regulator.
There could be cases where you would need a regulator to set some
more detailed upstream rules to avoid these cases arising.
Q331 Lord Fearn: Who would bring
the regulator in?
Mr Paulger: The national government implementing
the law would entrust the regulator with the application of that
law or it could entrust a self-regulating body with the application
of that law. We very much believe in self-regulation as a modern
technique for achieving regulatory objectives, not only with regard
to on-demand services but also broadcast services. As to the substance,
will it substantially restrict freedom of expression, the rule
exists for television already and I do not think anybody would
say that a ban on incitement to hatred on the grounds of race
would be an unjustified restriction on freedom of expression.
Q332 Chairman: Does the draft directive
not go further than the existing wording in the original? I think
it does, does it not?
Mr de Cockborne: Not in the new text from the
Council. The original text of the Commission was using the same
terminology as in the Treaty of the European Union where there
is sexual orientation, et cetera, and a number of elements have
been added in the treaty itself, so the Commission proposal took
over this same terminology and the present situation with the
Council is that it has gone back to the existing text.
Q333 Chairman: So the revised draft
goes back to the existing directive, the old directive?
Mr Paulger: Yes.
Q334 Chairman: That is helpful to
know.
Mr Paulger: The amendments in the Parliament
go in that direction too. The initial proposal was based on the
list that appears in Article 13 of the treaty, which is not about
incitement to hatred; it is about the fight against discrimination,
so that reduces the risks for freedom of expression considerably.
Also, some of the concerns about freedom of expression were based
on the concerns about scope because some people initially thought
that the directive might cover the electronic press, for example,
and so on. Now the demarcation lines are much clearer as regards
scope the risk of restrictions on freedom of expression are much
less than they would have been as the scope had been understood
to be in the beginning.
Q335 Baroness Eccles of Moulton: We
are moving now on to the Country of Origin Principle. I hope you
will not mind if I refer to it as CoOP. In light of the revised
Article 3 in the Presidency text what is your view of the current
status of the Country of Origin Principle in this directive? How
in practice will the principle now operate, because there are
some changes?
Mr Paulger: There are some changes. The Commission
is very much attached to the Country of Origin Principle and I
would venture to say that this is more important than scope: this
is the heart of the directive. That being said, a certain number
of Member States upstream of the proposal expressed concerns about
the working of the Country of Origin Principle, concerns that
took the shape of a declaration made at a meeting of the Council
in May 2004, and 13 out of 25 Member States signed up to this
declaration. That is a political reality. That means you have
a political problem; you cannot just say, "Go away".
The Commission looked at it and said, "What can we do?".
We said, "The Country of Origin Principle is the cornerstone
of the directive". This directive gives effect to two of
the fundamental freedoms of the treaty: the freedom to provide
services across frontiers and the freedom of establishment. These
freedoms are guaranteed by the treaty but they are not absolute.
There can be limitations on these freedoms, on certain very specific
grounds. They can never be economic grounds but they can be grounds
of general public interest, such as the protection of minors or
indeed the fight against incitement to hatred. We also looked
at the case law of the Court of Justice and the Court of Justice
has set some limits on the freedom to provide services when there
is deliberate circumvention, in other words, abuse of the treaty
rules, that is, when a broadcaster moves out of a Member State
in order to avoid the rules that would apply to it if it had stayed
in the Member State and continues broadcasting exclusively to
that Member State. There is quite a lot of case law on circumvention
in the services area. There is the Van Binsbergen case
law, which is the milestone case law, but there is also a sector-specific
piece of case law called the TV 10 case where a channel
broadcasting in the Netherlands to the Netherlands in Dutch, in
order to escape the rules that applied to it in Holland, moved
out of Holland to Luxembourg, broadcasting back to Holland, so
a clear case of circumvention, and the court said, "In that
case the receiving Member State is entitled to treat the broadcaster
as a domestic broadcaster". We looked at this and we said,
"This is law". The problem for the 13 Member States
who have concerns is that this law is difficult to apply because
they have to either attack another Member State, which the Member
States never do, or somehow or other get to court, but this can
take some time and in the broadcasting world four years down the
road your channel is established and it is difficult to switch
off. We therefore proposed to codify the case law in Article 2,
paragraph 7, and set in place an operational procedure whereby
the aggrieved Member State notifies the Commission and the transmitting
Member State of the measures that it intends to take to correct
what it perceives as a case of circumvention and the Commission
has to check that these measures are proportionate and in line
with Community law and so on, so we offered that in the proposal,
while not weakening the Country of Origin Principle, as a means
to take account of the concerns of the 13 Member States. In the
negotiations the Commission's proposal has not had much success,
I must say. The Member States that have expressed those concerns,
and they are very often small Member States with a big neighbour
sharing the same language so one can see where they are coming
from, were not happy with this and what we have now on the table
is something that is linked to the very nature of the directive
as a minimum harmonisation directive. The directive sets out rules
at community level but Member States can go beyond those rules
for broadcasters under their jurisdiction, in other words, they
can establish stricter rules for their own broadcasters, not other
people's broadcasters. Those Member States were saying, "The
real problem is our capacity to sustain this system of being able
to make stricter rules in areas of the general public interest,
such as the protection of minors, when broadcasters are coming
in that do not respect those rules but respect only the minimum
rules, so there is not a level playing field and there is circumvention
of our stricter rules". The whole system therefore has been
moved to Article 3, which is where the stricter rules provision
appears, out of Article 2. Part of the debate that has taken place
between the Member States, and the UK has played a leading role
in forwarding this idea, is that prevention is better than cure
so that co-operation upstream of problems happening, co-operation
between regulatory authorities, for example, or between governments,
could be a way of avoiding these conflictual situations. The Finnish
Presidency has, in the first part of this new paragraph, put in
a co-operation procedure whereby the aggrieved Member State asks
the transmitting Member State to ask the broadcaster to comply
with the stricter rules. This is not a binding procedure, it is
a co-operation procedure and reflects the results of discussions
between Member States, in particular at an informal meeting of
ministers organised by Belgium last June. If this co-operation
procedure fails then we fall back into a binding procedure whereby
the aggrieved Member State notifies its intention to take measures
against the offending broadcaster and these measures are notified
to the Commission and to the translating Member State and are
subject to the same compatibility check as we had proposed.
Q336 Baroness Eccles of Moulton: Does
that not then take you right back to square one, which was the
speed with which, under the old system, any restrictions could
take place? It seems to me that if you are going to go through
the conciliation process and then move on to the binding process
it is all going to take a very long time and surely the basic
requirements that exist are already sufficient? The third point,
I suppose, is that, okay, you give the example of Belgium and
Luxembourg, but people who were wanting to broadcast into Belgium
and who could not do it because it was against the internal rules,
as it were, could just move somewhere outside the EU and then
they would be free to transmit into Belgium and nobody could stop
them doing it. It seems as if the latest proposals are in a way
trying to satisfy only 50 per cent of the Member States who are
objecting and it is taking account of objections that are perhaps
covered by other means. I can see the advantages of the non-binding
recommendation, that there should be a process of trying to satisfy
the two parties, but to take it beyond that into law would appear
perhaps to be rather overdoing it when it is only for the sake
of 50 per cent anyway of the Member States who are objecting.
Mr Paulger: Yes, I think the Commission would
agree with that. We do not like this provision.
Q337 Baroness Eccles of Moulton: Why
not just do away with it?
Mr Paulger: We do not like this provision. By
the way, moving out of the EU is not a solution.
Q338 Baroness Eccles of Moulton: Why
is that?
Mr Paulger: Because then the national law applies
and so you just turn off the signal.
Q339 Baroness Eccles of Moulton: I
see. Then there you are.
Mr Paulger: What gives the freedom of movement
is the EU directive. If you move out of the EU then you have to
face the 25 national laws and in the case in point, the Netherlands
and Luxembourg, the Netherlands is a very heavily cabled country.
All they would have had to do was turn off the cable if the broadcaster
had been broadcasting from somewhere in eastern Europe at the
time, for example. Moving out is not a solution.
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