EUROPEAN BROADCASTING UNION

UNION EUROPEENNE DE RADIO-TELEVISION

Legal Department

Dpartement juridique

30.4.1998 DAJ

EBU REPLY TO THE CONVERGENCE GREEN PAPER

APRIL 1998

Executive summary
THE INFORMATION SOCIETY: FROM SCARCITY OF FREQUENCIES TO SCARCITY OF CONTENT AND SCARCITY OF ACCESS TO THE AUDIENCE? Convergence does not affect the basic distinction between the provision of content and technical transmission, or, in other words, between issues of content and distribution infrastructure. The two aspects need to be examined separately and require different regulatory approaches. 1. Content

Content is the key element in a convergent environment, in both economic and societal terms. An information society without socially relevant content would not be worthy of the name. Users, as consumers and citizens, will embrace new services and new technical devices (e.g. set-top boxes) only if these allow them access to interesting content. = Content must be diverse, responding to mass appeal as well as to various minority-type interests. As far as possible, it should be of (high) quality. Such content constitutes a merit good which - at least in a free-to-air environment - the market itself cannot deliver. Theoretically, the merit good constraint could, to a certain extent at least, be overcome in a pay-environment. However, this raises the still more fundamental problem of information society haves and have-nots. = The remit of public service broadcasting covers exactly this type of programming, and the public funding of public service broadcasting continues to be the best means of ensuring that it will actually be produced and will be available to every member of the information society. The more audiences become fragmented, the more the public funding of public service broadcasting will be necessary to ensure production of such content. = The role which public service broadcasting is called upon to play in this field is bound to become still more important, given that the possibilities for regulators to enforce "positive" content regulations vis--vis commercial operators will be increasingly limited in a global competitive environment. This applies to traditional broadcasting and, even more so, to new on-line services, where the enforcement of "negative" content regulations is already becoming difficult. = Content which is of interest, relevance and importance to society as a whole ("major events") must continue to be available to the entire population, via free-toair broadcasting which reaches the highest possible proportion of the population.

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= Content needs to respect human dignity and other basic rights and social values. To ensure that unsuitable material, including pornography and matter inciting racial hatred, is not communicated to the public, so-called "negative" content regulations will remain necessary. In applying such regulations to a whole new range of on-line multimedia services, the characteristics of those services need to be respected. This will imply a graduated approach which takes into account factors such as the "publicness" (public accessibility) of services, the relevance of the content (in cultural, political and social terms) and the amount of effective consumer control (through filtering systems). = Diverse content, a result of true pluralism of opinion, will not be available where diverse programme sources do not exist in the first place, or where access to programme material is unduly restricted. Horizontal concentration, including cross-media concentration (television/radio/publishing), constitutes a serious threat in this regard. No less serious is the threat from vertical integration on the programme supply side, where a broadcaster or other programme service provider simultaneously owns or controls a sports rights agency, an advertising agency, a film rights agency, a major television or film production company, a major phonogram production company, a football or other sports club or, indeed, a combination and a multitude thereof. "Globalization" cannot serve as a valid excuse, and competition law cannot provide an appropriate (media-specific) remedy here. = Huge amounts of invaluable radio and television output, reflecting Europe's unique audiovisual heritage, are held in public broadcasters' archives. Subject to legislative assistance with copyright clearance, public broadcasters could make this material available to the information society thanks to the new communication channels and methods opened up by convergence. Otherwise, ... = Finally, content provision must not be unduly hampered, or even made impossible, by measures proposed to be taken (such as the extension of the reproduction right) or not envisaged (such as the introduction of an incidental reproduction exemption or the limitation of phonogram producers' on-demand delivery right in connection with radio and TV productions) in the field of copyright legislation. 2. Access to the audience

Access to the audience is the indispensable concomitant to content. Even the best content is useless if content providers are denied access to the audience or if the audience (or at least a substantial part thereof) is incapable of finding content that is available.

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= The interoperability of technical systems is of key importance in all areas of technological convergence. Interoperability should allow viewers access to all broadcasting services via a single set-top box. And it should allow them, if they wish, to have access to the broadest possible range of interactive multimedia services through the same home terminal. = Digital gateways (conditional access systems, EPGs, APIs, etc.) open, or block, a broadcaster's door to the audience. In the absence of open systems and effective regulation ensuring non-discrimination, gate-keepers are in a de facto position to cause a serious threat to media pluralism as well as to competition. This is one of the most important regulatory challenges at the crossroads of telecommunications, broadcasting and information technology. = Vertical concentration on the programme delivery side, where a broadcaster or other programme service provider owns or controls satellite transponders, terrestrial transmission networks, cable distribution systems, multiplex services or digital gateway providers, may result in serious constraints and competition disadvantages for other programme providers wishing to reach their intended audience. = Broadcasters can play a major role in preparing the general public for the information society and enabling it to use new information and communication tools. Education (especially for the "older" section of the population) is an indispensable prerequisite for everyone to be able to find his way through the technical maze and to the programming of his choice. As long as that result is not ensured, the public is entitled to be given automatic first access (or, at least, easy and straightforward access) to those programmes which, through the scope and quality of their content, serve as a reference point for the entire population. For EBU members, convergence and, in particular, the information society which is expected to result from convergence, constitute a challenge and offer positive opportunities. However, the avoidance of foreseeable, undesired consequences as well as the furtherance and promotion of desired results will need regulation which addresses the specific issues of content provision as well as, separately, technical infrastructure and competition, and which is placed at the appropriate geographical level. The EBU's members are determined to play an active role in, and for, the information society, by providing socially relevant content and making it available to the audience via the most appropriate channels and means which exist at any given time in an increasingly converging environment. ____________

Table of contents
Executive summary.........................................................................................I Table of contents ............................................................................................i Questions in the Green Paper and Answers................................................1
Question 1 ................................................................................................................................................1 Convergence at the technological level................................................................................................1 Starting-point: the scope of the convergence phenomenon ............................................................1 Numerous competing delivery mechanisms... and several factors for success................................1 There is no certain universal recipe for success in new multimedia delivery systems ....................2 The convergence of terminal equipment .........................................................................................3 Is the convergence phenomenon happening at the industry, service and market levels? .....................4 The industry level: vertical integration and alliances rather than convergence ...............................4 Content and the markets: diversification and complementarity rather than convergence ...............4 Are effects felt in business and by consumers?....................................................................................5 Question 2 ................................................................................................................................................6 Some basics on the economics underlying broadcasting......................................................................7 Potential effects of convergence and globalization on underlying economics .....................................8 Effects of market forces on the markets ..........................................................................................8 Public service broadcasting and a strong policy for European production will have to be strengthened in a converging environment......................................................................................9 The potential impact on jobs, education, training, way of working ...................................................10 The 5th framework programme..........................................................................................................11 Question 3 ..............................................................................................................................................11 Preliminary remarks ...........................................................................................................................11 The limited scope of the regulatory analysis of the Green Paper .......................................................12 A. Important factors with respect to content ......................................................................................13 Availability of diverse content is the real challenge......................................................................13 Cultural diversity and market forces an uneasy relationship ......................................................13 Regionalization and globalization a new balance needed ..........................................................14 Digitization and media concentration............................................................................................15 B. Important factors with respect to infrastructure and access...........................................................15 Interoperability is the key to convergence.....................................................................................15 Bottlenecks: from frequency scarcity to digital gateways .............................................................15 Question 4 ..............................................................................................................................................16 Different legal frameworks for different objectives ...........................................................................16 A three-layer approach: media, telecommunications and competition law........................................16 The rationale of media and broadcasting law ................................................................................17 The rationale of telecommunications law......................................................................................19 The rationale of competition law...................................................................................................19 Question 5 ..............................................................................................................................................21 About definitions................................................................................................................................21 The basic distinction between content and carriage remains valid................................................21 A greater need for differentiation ..................................................................................................22 Will the convergence phenomenon require adaptation of existing approaches or the adoption of new approaches to be applied to specific issues? ......................................................................................23

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Market entry/Licensing .................................................................................................................23 Access to network, conditional access systems and other bottlenecks ..........................................24 Access to content...........................................................................................................................27 Pricing ...........................................................................................................................................27 What should be the objectives of standardization? ............................................................................27 Will convergence require changes in management of frequencies, in particular with respect to "analogue switch-off"?.......................................................................................................................28 Radio Spectrum Issues ..................................................................................................................28 Switching off analogue TV/radio services ...................................................................................28 What about consumer protection?......................................................................................................29 Consumer protection is a major concern alongside the protection of individuals and of the public interest ...........................................................................................................................................29 Question 6 ..............................................................................................................................................30 Is the way public interest objectives are achieved challenged by convergence?................................30 Would a more universal service-approach be appropriate to achieve this?........................................31 The case for public funding................................................................................................................32 Funding new services offered by public service broadcasters ...........................................................32 Question 7 ..............................................................................................................................................33 Deregulation and competition case law: the solution? .......................................................................34 A new communications law: another miracle? ..................................................................................35 Adaptation of existing regulatory frameworks and better coordination .............................................35 Question 8 ..............................................................................................................................................36 Globalization and European values....................................................................................................36 Global standards.................................................................................................................................37 Central and Eastern European countries ............................................................................................37 Question 9 ..............................................................................................................................................38 Proposed principles ............................................................................................................................38 Adapting regulations at the three layers to cover new services and markets in an adequate way ......39

Questions in the Green Paper and Answers

Question 1 Question 1: The nature and impact of convergence today Chapter I highlights the nature of the convergence phenomenon, the technological and market developments and the underlying political stakes for Europe. (A) Whilst convergence is occurring at the technology level, to what extent and at what speed is this happening at the industry, service and market levels? (B) Are the effects of convergence already being felt in the business world and in our everyday lives, and if so, in what way?

Convergence at the technological level Starting-point: the scope of the convergence phenomenon Convergence essentially refers to a series of technical developments related to the production and distribution of data on networks, i.e. digitization and compression. Briefly put, in a converging environment various networks and platforms can be used to convey content of various kinds, independently of each other. Digital broadcasting and the Internet now appear to be the current "pillars" of the information society. Over the coming years, they may be combined in terms of distribution (broadcasting services delivered via the Internet, Internet services via broadcast delivery) and in terms of terminal equipment (radio/TV on the multimedia PC, Internet on the TV set). Combinations are also possible at the service level; for example, broadcasters can offer links between television programmes and the Internet, including their own websites. Numerous competing delivery mechanisms... and several factors for success Convergence will bring with it numerous delivery mechanisms competing for the public's attention: = Over-the-air broadcast to TV sets = Internet services to PCs

= Over-the-air broadcast to PCs: PC cards for reception of TV (already on the market) also permitting new forms of broadcast multimedia services = TV access to the Internet: Special set-top box to access the Web on a standard TV set (e.g. WebTV) = Broadcast delivery of the Internet: Internet compatible services on spare capacity of the broadcast channel; these could improve with digital TV or DAB or dedicated DVB channels. = Broadcasting via the Internet: Many broadcasters and others already use the Web to offer limited audio and video services Success on the consumer market will, inter alia, depend on: = the content (quantity and quality)1 = the range of features = the ease of use = the cost of equipment = the cost of use. There is no certain universal recipe for success in new multimedia delivery systems The successful introduction of new technology relies on the combined strength of the technology, infrastructure and content. The strength of content is particularly important and must be measured in terms of the difference between the new service and what is available already. It is content and low cost infrastructure that have made the Web successful. There may well be different formulae needed for success in different geographical areas, even across Europe, because already available local content, and locally available infrastructure, will be different. For example, it may be said in broad terms that in Northern Europe there is a greater tradition of using the written word for leisure than in Southern Europe. There is also a considerable disparity in available delivery infrastructures for interactive systems, differences in telephone rates, etc. There may well be different formulae needed for success within a given national or local environment, since distinct patterns of behaviour are emerging for media systems within a given society. For example, one recent classification separates the user audience into four groups exhibiting different media behaviour: knowledge workers, time-constrained individuals, leisure-seekers and PC enthusiasts. Each of these may be attracted to a greater or lesser extent to interactive services.

1 See also the 1996 London School of Economics study on convergence, which includes the following as factors of success : consumer demand, cost, good supplier reputation, ability to integrate technology, realization of economies of scope, standards that facilitate the development of compatible products (and that will, in turn, promote competition, leading to success).

A range of technology is possible for introducing "interactive television" in its widest sense. There are no ways of predicting with certainty which will be successful and which will not be. The best that can be done at this time or probably at any other, in a climate of rapid technological evolution - is to identify which seem to offer the greatest prospects of success. To be successful, an interactive system will need a sensibly-sized mass audience it must be of value to at least one, and preferably more than one, of the user groups mentioned above. We can note the growing popularity of websites that offer "branded" content (TV channels, radio channels, print media outlets, etc.), as well as the growing popularity of "push technology", which is the pre-selection of Web material to be supplied automatically to the user. This brings the Web closer to a broadcasting model, customized to the individual. The companies which probably have the greatest chances of success may be those which attract and exploit the content and on-line distribution capacity of broadcasting and the Internet. We can envisage a future world where the Web is used for video-on-demand. But today's telephone connections are sufficient only for short, barely watchable video clips. It will be some years before even VHS quality television is available from the Web. The data rate needed for even VHS quality video is around 1 Megabit/s; this is about thirty times the rate available with most Web connections to the home. There is no certain universal recipe for success in new multimedia delivery systems. The same technology, DVB-S, introduced in Germany, France, and Italy, has, to date, enjoyed dramatically different degrees of success. While the technology was the same, the infrastructure used and the content (relative to already available content) were different. Furthermore, there may be real differences in public preferences in different parts of Europe. The introduction of new technology must be looked at from the content, technological, and infrastructure viewpoints, and not simply in terms of technology itself. The convergence of terminal equipment The convergence of terminal equipment - between TV set, PC and telephone - is less certain to happen; "couch viewing" and "desk viewing" may remain distinct forms of communications behaviour. PCs are used in "lean-forward" mode, whereas TV sets are used in "lean-back" mode.

PC viewing distance social aspect nature -viewing distance = about 1.5 x picture height -solitary activity -interactive

TV -viewing distance = between about 6 and 10 x picture height -often shared with other people -passive

Is the convergence phenomenon happening at the industry, service and market levels? The industry level: vertical integration and alliances rather than convergence Technological convergence does not imply that the industry itself will converge. Companies may wish to form alliances2 with other players; the latter may operate either on the same level (e.g. network operators trying to achieve economies of scale) or on other levels (vertical alliances between, for example, rights owners and/or producers and/or distributors). However, globalization, rather than convergence, may have an impact on the number of independent players. In particular, vertical integration may appear to be attractive, for several reasons. Most traditionally, "manufacturers and retailers" try to guarantee the alignment between the development and the promotion of a set of products or services. Another reason appears to be that companies wish to spread their risks in a highly dynamic environment. To that extent, it might even be said that diversity, rather that convergence, has impact on undertakings. However, vertical alliances might also be intended to exert power or close the market and are then undesirable in a market economy3. This is particularly the case where control is extended to digital gateways and other bottlenecks (see below). Vertical integration represents a challenge for competition authorities. Content and the markets: diversification and complementarity rather than convergence Technological evolution does not imply, as such, that content services will converge. From a purely economic point of view, it might, on the contrary, be said that providers of services will diversify the products/services.

2 3

In the broadest sense of the term. See the previously mentioned LSE study on convergence for DG IV, 1996.

Many broadcasting markets will remain fragmented geographically according to national or regional preferences and languages, or even become fragmented owing to the mass market development of pay-services. Diversification Television channels will no longer be "stand-alone" services. They will become part of an overall offer of audiovisual services to the public ("bouquets"): traditional and interactive services; generalist, thematic or on-line services (including an Electronic Programme Guide); services including images, sound and data ("multimedia"). The websites of the BBC, ZDF and ORF are among those which receive the most visits in their respective countries or, in the case of the BBC, the most visits throughout the whole of Europe. Complementarity rather than convergence of services New interactive services will, to a large extent, be complementary to traditional broadcasting services. Broadcasting services are probably the most important platform for the launch of new information society services. In many programmes, such as sports events, documentaries, current affairs, advertising, etc., complementary information services will be provided as well as real interactivity. For instance, several projects in the field of educational programming already include the Internet as an integral part of the service, i.e. such features as websites or e-mail are used from the first creative stages onwards. The EBU's so-called "Economics" coproduction project4 is an example. Interactivity also makes it possible for third parties to intervene in the communication process, instances being evaluators in audiovisual training programmes. Are effects felt in business and by consumers? Seen as a series of technical developments, convergence has so far had a limited effect on the so-called emerging markets. Digital television output itself is not a reality in all European countries, and Internet penetration is still limited, even if its growth is impressive. The consumer is beginning to feel the effects of the technological developments, providing that he at least has access to a wider range of media and multimedia distribution sources, thanks to the output of digital bouquets and access to the Internet, and to the extent that leisure time is available. Consequently, and under the same conditions, the quantitative output of available services is also increasing.

"Economics" is a series of documentaries on economic issues, which is expected to be available next year.

Moreover, the amount of money which the consumer has invested in such services has increased overall, given that, in a number of cases, access to these new services has to be paid for (connection to the Internet, pay-TV, etc.). From the point of view of companies, few truly "pre-convergent" mass products are actually available: interactive advertising (on the French digital bouquet TPS), the loading of software on the digital Canal Satellite bouquet (C Service), etc. Services such as video-on-demand are still at the experimental stage. As regards the effects of the technological developments on the companies themselves, it can be noted that the networks and multimedia are becoming, for some people, tools for electronic commerce, whereas many people see them as a tool for communication both within and outside companies (video-conferencing, etc.), which may have a profound effect on methods of working and of organization. Question 2 Question 2: The socio-economic, business and consumer impact of convergence Chapter II highlights the potential for convergence to have a significant impact on society, on employment, growth and competitiveness of businesses in Europe, and on the way we access a range of services, information, entertainment and culture. (A) Will convergence have a significant impact on job creation, as well as on education and training in the European Union? How is convergence likely to impact the way in which we work? Will its effects be spread evenly throughout the European Community? (B) What effect are current developments likely to have on telecommunications, media and IT sectors, in terms of the underlying economics of those sectors, the services offered and the likely service providers? (C) What evidence is there of changes in Europe in the way services, information, entertainment and culture is being accessed in the home and in the office? What are the implications of current levels of PC penetration, Internet use and TV penetration for the take up of new services? What action (if any) is needed to overcome low levels of multimedia computer penetration and Internet use? (D) In the light of the positions put forward in the Commission Working Paper on the Fifth Framework Programme, what kinds of Community RTD projects should be launched in the context of convergence?

Some basics on the economics underlying broadcasting Since economic reflections (growth expectations, development of new markets, competition, etc.) appear to lie at the basis of the present Green Paper, it is useful to take a look at the basics of the broadcasting sector before analyzing the potential effects of the "convergence" process, not to mention potential regulatory implications. The broadcasting sector is worth about 58 billion ECU, i.e. about 0.8% of the EU GDP (cf. 2.7% for the telecommunications sector). It is growing at a rate of more than 9% a year5. Other features are: = Ownership is becoming concentrated, whereas the audience is fragmenting. On the one hand, since high quality content is expensive to produce (but relatively cheap to edit and very cheap to reproduce), one can say that it has high fixed costs and low marginal costs, i.e. factors favouring concentration6. On the other hand, the audience is fragmented, since the increased number of channels has not really meant more time being spent on more watching/listening7. = The European broadcasting sector has many different cultures and languages. This does not constitute a barrier which could be lifted; rather, it distinguishes Europe from, for instance, the United States. It implies that media markets, including broadcasting, are mainly national (or regional or local in certain cases), i.e. geographically fragmented markets, except for a few niche markets following a pan-European strategy (such as international business news). = The broadcasting sector is also characterized by the fact that it does not produce and distribute content-neutral services. It directly shapes people's cultural identity (Europe-wide, nationally, regionally or locally), and it influences citizenship and social cohesion, which are non-financial but fundamental values. Unlike telecommunications or IT, an increase in demand (potentially induced by convergence or globalization) might lead to more services, but will not per se match European quality requirements. If only for these reasons, unlike telecommunications services or information technology (both of which, however, are regulated), the broadcasting market, which also represents one of the main sources of creative content for the foreseeable future, cannot simply be market- or technology-driven.

5 6

Source: IDATE. Graham, Davies, Broadcasting, Society and Policy in the Multimedia Age, John Libbey, Media, 1997, p.16. 7 Graham, Davies, p. 17.

An illustration of this is the effect of liberalization on the broadcasting sector which in most countries occurred in the 1980s. It did not produce the full benefits expected: = If growth did indeed characterize the liberalized sector, ownership was highly concentrated and production rose relatively little. (Public service broadcasters generally remained the main producers.) = Acquired programmes, and especially programmes imported from the United States (almost twice as many US imports between 1990 and 1995), reached high levels. = In parallel, the price for premium content rose, because of its scarcity. It appears that content is generally decreasing in terms of creative quality (see EBU and UK studies on children's programming8), whereas the total offer of programming is rising and the cost for the consumer is steadily increasing too (owing to pay-TV in particular). Thus the main effects on the markets appear to be: more programmes but more imported content (less European or national), less quality yet higher costs for the citizen/consumer. Potential effects of convergence and globalization on underlying economics Effects of market forces on the markets If content provision were to be deregulated, however, the following trends would most probably be emphasized, whatever the globalization/convergence at the level of networks services might be: = More fragmentation of audiences, since more services will be available to the audience, which cannot readily grow in the meantime9 and more concentration of players, in order to spread the risks underlying highly dynamic markets10 = The shift towards more costs for the end-consumer (pay-TV, conditional access systems, etc.)

8 The recent UK study on the new children's channels in pay-television suggests that the new channels increase the choice for children in quantitative terms but do not increase the variety and quality of such programming. The new channels are filled mostly with cartoons from US archives. 9 See also Norcontel et al, Economic implications of New Communication Technologies on the Audiovisual Markets, final report to European Commission DG X, March 1997, p. 9. 10 See also the LSE Study on convergence for DG IV: London School of Economics, Convergence within the media industry, and between media, information technology and/or communications, prospective for competition and competition policy, final report to European Commission DG IV, December 1996, p. IX.

= Fewer creative and diverse European productions, on account of their cost, and, therefore, higher level of imports. The retail price of many already amortized nonEuropean productions in Europe is low. The Internet constitutes an example of the potential trend. The global increase in "communication capacity" has resulted in a situation where 94 of the 100 most frequently visited WWW sites (even when adult sites and Internet access providers are excluded) are located in the United States11. As regards pay-TV, many thematic channels broadcast existing material. Premium film channels contain an overwhelming number of Hollywood productions. Generally speaking, the percentage of American programming appears to be very high across the board, e.g. throughout film channels, drama and sitcom channels, Western and action channels and, even, children's channels. Public service broadcasting and a strong policy for European production will have to be strengthened in a converging environment Given the underlying economics, the future presence of public service broadcasting within the broadcasting systems in the Member States is as necessary as it ever was, since public service can both resist competition pressures on quality through public funding and constitute the best structural guarantee for achieving the public service mission. Public service broadcasting makes it possible to ensure that a strong audiovisual production base of high quality content with a specific national and regional focus catering for all citizens alike will continue to exist. Over 90% of programmes shown on German public television, for example, are of European (mostly national) origin. The raison d'tre for public service broadcasters is embedded in the diversity, creativity and quality of their in-house or commissioned productions. These programmes are expected to reflect the interests, experiences, concerns and informational, educational and entertainment needs of everyone falling within the scope of the publicly conferred remit. These programmes are not produced with the sole aim of making a profit, but are made in the general interest. They are thus able to resist the pressures on quality and diversity of content resulting from market fragmentation. Research shows that viewers have a strong preference for national content, though the smaller European markets in particular have extremely limited capacity for funding such productions. For public service broadcasters to act as a counterbalance to the strong economic pull towards increasingly homogenized audiovisual content, they need to have a sound and viable financial basis and to participate fully in digital television of the future and its specific forms of presentation.

11

Internet hosts with English as the primary language have a "market" share of over 75% (1997 figures in: OECD, Webcasting and convergence: policy implications, OECD/GD(97)221, 1997).

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The potential impact on jobs, education, training, way of working In a general way, the content industry, and particularly the audiovisual sector, creates jobs. There is no way of knowing with any degree of certainty the implications which technological developments will have on the total number and character of jobs. To date, for example, there has been redistribution of jobs rather than an increase in their number. On the other hand, what is already known is that in the information society, where content will be a key resource, the content industry will be of increasing importance and will require higher levels of qualified staff. It is necessary to innovate, create and update a larger quantity of "content"; public service broadcasting organizations, which represent a considerable force in Europe in terms of employment, have the necessary human expertise and audiovisual equipment to deal with these tasks. Using the technological resources of multimedia services, the content industry (and public service broadcasters in particular) will bring into being totally new services, thereby creating the indispensable benefits which will convince citizens and consumers to move on to the information society. If Europe selects the appropriate regulatory framework, i.e. either a framework which supports domestic production (national, regional, European, etc.), which is healthy (and competitive), its content industry and, in particular, the public service broadcasters will generate new, highly qualified jobs. In parallel to this, the increasing use of information technology at the work place and elsewhere (multimedia productions, distance working, teleshopping for products and services, etc.) will naturally have an effect on working methods. As regards education and training, the need (which is recognized by all) has never been so urgent. Broadcasters - and particularly public service broadcasters - who have an explicit education mission in their respective countries play an important role in this regard. Their participation in educational projects of the European Commission for the development of multimedia content, as well as the guarantee of quality through their current educational audiovisual productions, show their wish to take up this major challenge. Finally, and more generally, the important role played by public service broadcasting in strengthening social cohesion in Europe eventually leads to a climate favourable to investment and job creation.

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The 5th framework programme The 5th framework programme must focus on the central pillars of convergence, which are digital broadcasting and the Internet. In particular, it should encourage the development of systems which exploit the potential synergy between the systems. Question 3 Question 3: Barriers to convergence Chapter III highlights both actual and potential barriers to convergence. What is the likely impact of the barriers identified and are there other barriers or factors which may have a significant impact on the convergence process in Europe?

Preliminary remarks The various elements listed in the Green Paper cannot be reduced to "barriers"; some constitute real safeguards in the sectors concerned, whereas other refer simply to economic factors. The following safeguards are mentioned: general interest objectives, protection of consumers, protection of privacy, universal service, public service, licensing regimes, frequency management, exclusive intellectual property rights on creative works, regulatory bodies. The particular issue of public service broadcasting will be dealt with under question 6, but it can already be mentioned that if regulations prevented broadcasters (in particular, public service broadcasters) from offering new/interactive services, i.e. services outside their traditional field of activity, that would seriously restrict the variety of content on offer. Some elements of the regulatory frameworks concerned might have to be adapted according to the technological evolution, i.e. certain definitions or certain restrictions on the use of infrastructure. Nevertheless, these safeguards have very little to do with convergence as such; still less do they represent barriers to convergence.

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Other elements are merely factors linked to the current underlying economics of the sector, or at least to the behaviour of parties involved on the markets: limited access to users, lack of confidence of users, lack of standardization, interconnection prices, high cost of telecommunications services, lack of availability of quality content, fragmentation of the media markets. With respect to these economic factors, European authorities should ascertain whether and how they can and should intervene: preventing abuse of a dominant position (e.g. on the local loop and other essential facilities, or on secondary markets), reducing excessive telecommunications costs (although the new liberalized environment in telecommunications should help this), maintaining/promoting European content diversity, promoting quality production, etc. The limited scope of the regulatory analysis of the Green Paper Finally, it should be mentioned that the scope of the regulatory analysis of the Green Paper is limited. A significant example is intellectual property rights (IPR). Whereas the issue of IPRs is obviously crucial for the proper functioning of many "information society" services, it is not addressed, but is merely "identified", in the Green Paper. Indeed, although the Commission's document has not really addressed the issue of intellectual property rights, before converged services can take off some crucial issues must be resolved. Thus, as it stands now, the Commission's draft Directive fails to build up a consistent regime for a basic category of content, i.e. archives. If the current proposal were to be adopted as it stands now, only a tiny proportion of the estimated 10 million radio productions and 2 million TV productions of public service broadcasters - that is to say the core of the national and European audiovisual cultural heritage - now stored in their archives could be offered on the hundreds of new European programme channels. The proposed extension of the reproduction right, the failure to provide for an incidental reproduction exemption, the failure to limit phonogram producers' exclusive right of on-demand delivery in cases where phonograms are included in radio or TV productions, and the absence of an express recognition that Member States have the right to provide for mandatory collective agreements between producers and programme contributors are further issues which, while seeming highly technical and abstract, could have serious practical implications for the development of the information society. Urgent action is needed here. Another example is the important issue of pluralism and its relationship with ownership and competition law. Although mergers and acquisitions and alliances of all kinds might be regarded as some of the most perceptible consequences of the growing uncertainty around convergence and globalization (see below), no in-depth analysis is made of the effect of such a trend on pluralism.

13

A. Important factors with respect to content Availability of diverse content is the real challenge A broad range of quality information for citizens should be at the centre of the information society. However, the fact that video/audio/text/data may be transmitted across the world by wireless means or by wire, or by a combination thereof, and may be received by a single device combining what are still separate pieces of equipment today (TV set, radio, PC, telephone) does not of itself result in informed citizens. Nor does the expansion of transmission capacity, together with the multiplication of distribution outlets, automatically lead to greater diversity of content. As the overall number of programmes broadcast increases, genuine choice does not grow commensurately. In addition, some forms of content may increasingly be offered only against specific payment (pay-TV, pay-per-view), and may no longer be available to the entire public. The chances of equality of access will diminish. Scarcity of so-called premium content, alongside escalating prices for popular sports events and films, does not necessarily mean that more investment will be made in the European audiovisual industry, or that investment will be made in a broader range of programmes. Soaring prices for premium content, together with increasing economic pressure, may also mean that less money will be available for less popular (e.g. minority) programmes and programmes which are relatively expensive to produce (e.g. domestic films, certain news programmes, documentaries, etc.). If this is the case, genuine choice for viewers could even become narrower in the new environment, at least in certain fields, if there are not regulatory or other safeguards, and, in particular, a viable public broadcasting system, based on public funding. Cultural diversity and market forces an uneasy relationship The new environment will not automatically promote cultural diversity in Europe. It is often said that Europe's cultural and linguistic diversity is a strength for the development of the information society and that, in turn, new information society services will contribute to that diversity. Unfortunately, this seems to be based on hope rather than concrete market research. Indeed, the opposite view is also plausible: that Europe's cultural and linguistic diversity may act as an obstacle for European communications services, that Europe will therefore be at a competitive disadvantage compared to the United States, and that a new "world Internet culture" will develop without regard to national and regional characteristics.

14

Europe's cultural and linguistic diversity not only needs to be accepted as a matter of fact but also merits wholehearted support, on account of the creativity it promotes. Such diversity is an objective jointly proclaimed by the European Union and its Member States (see Article 128 of the EC Treaty, as amended by the Amsterdam Treaty). Thus a political choice has been made, which means that cultural and linguistic diversity must also prevail in Europe's information society. Regionalization and globalization a new balance needed Despite the globalization of networks and services, the communication needs of society are still to a large extent national, regional and local. Public communication at these levels is essential for the functioning of public institutions as well as for the civil society. They are no less important for economic and social cohesion. Care has to be taken to ensure that the benefits of the information society also materialize at these levels. For all of them, content should be produced, and made available, which is directly related to the local, regional, national and European context. If developments were merely to be left to the market, there would be a great risk that communication in less-favoured regions, and at the regional and local level in general, would be left behind. Here again, public service broadcasting can provide an institutional guarantee. It is firmly rooted in national and regional society and is normally characterized by a balanced regional structure (with regional studios, correspondents, programme windows, etc.). It may also be a means of strengthening regional identity and integration. At the same time, public service broadcasters offer a means of opening up towards European and world communications. For example12, within the Eurovision and Euroradio systems, the EBU's terrestrial and satellite network permits the exchange of over 22,000 news items and 1,800 classical music concerts with digital sound quality; in 1997, about 6,500 hours of sport and cultural programming were relayed. Nevertheless, it is no contradiction to find national/regional/local broadcasting services being distributed more broadly at a European level, without changing the fundamental character of their programming. It is the programme content, and not the distribution area, which gives the regional dimension. Indeed, a more widespread distribution of local/regional/national/European content should be welcomed. This contributes to mutual understanding across Europe and beyond, and meets new communication needs arising from people's increased mobility. However, a favourable framework is needed for such distribution beyond the primary target audience.

12

Source: EBU, 1997.

15

Digitization and media concentration The setting-up of digital platforms for broadcasting in many European countries goes hand-in-hand with an unprecedented level of media concentration. Even the most powerful media and telecommunications groups are entering into alliances. One may argue that this is a necessity for the development of new digital and interactive services, at least over a transitional period. However, without effective safeguards, pluralism in the media will never be able to recover fully from such a concentration. Internal pluralistic safeguards could be of some help, but while such safeguards work well in general with public broadcasters, it is doubtful whether they can be effective with regard to private commercial broadcasters, since internal pluralistic structures and their impact on programming (if any) could seriously affect the profitability of the enterprise. Therefore, as a counterweight to the concentration in the commercial sector, a strong and innovative public service broadcasting system will be needed more than ever. B. Important factors with respect to infrastructure and access Interoperability is the key to convergence Apart from the excessive European telecommunications tariffs, the lack of legal safeguards for the interoperability of systems is probably the main barrier to convergence. Interoperability must first of all be ensured for digital broadcasting (between different digital TV platforms at the national and the European level) but it should also be achieved as far as possible across different sectors, and particularly between broadcasting in the traditional sense, the Internet and new interactive audiovisual and communications services. Bottlenecks: from frequency scarcity to digital gateways It is true that frequency scarcity can be partly overcome by digital compression techniques. However, in view of extended programme offers, frequency scarcity will still be an issue, particularly for terrestrial transmission. The beneficial effect of alleviating frequency scarcity is counteracted by another aspect of digital technology: the development of "digital gateways". Whoever is in control of key elements of digital technology or of the digital distribution infrastructure is in a position to extend this power to the provision of content. This is a threat to media pluralism and competition.

16

Digital gateways result from proprietary digital technology (both hardware and software) embedded in, or linked to, digital decoders/set-top boxes. Among these are conditional access systems, navigation systems/electronic programme guides (EPGs) and application programming interfaces (APIs). In the absence of open systems and effective regulation ensuring non-discrimination, gatekeepers are in a position to block or limit viewers' access to certain programme services via their set-top boxes. This is one of the most important regulatory challenges at the crossroads of telecommunications, broadcasting and information technology, and it is a challenge to which the European authorities must response. Question 4 Question 4: The impact of convergence on current regulation Chapter IV.1 examines the challenges which current developments pose to the balance between regulation, competition rules and reliance on market forces. It also considers how the convergence process may impact on the principles underpinning current regulation in the telecommunications, media and IT sectors. (A) Do current developments require more or less regulation in the sectors affected by convergence, more or less reliance on competition rules, and more or less reliance on market forces to achieve the objectives identified in earlier Chapters? (B) Whether and if so, to what extent convergence challenges the principles underpinning existing regulatory approaches in the telecommunications, media and IT sectors? Different legal frameworks for different objectives The most relevant regulatory frameworks in the field of convergence are broadcasting law (or more generally media law), telecommunications law and competition law. These three sets of rules can be regarded as three separate layers of regulation for content, convergence and the market, as the diagram below shows. All too often their special character and inter-relationship are misunderstood. A three-layer approach: media, telecommunications and competition law Media law deals with the provision of content services to the public. If there is no relevant content or if there is no communication to the public, or at least to individual members of the public, then broadcasting or media law does not apply. This is the reason why broadcasting law does not apply to voice telephony.

17

Telecommunications law deals with the carriage, in other words the transmission of signals. It covers the provision of network and transmission services. This distinction between the transport of electromagnetic signals transmission and the provision of content which is conveyed over these networks, has also been retained in the agreement on basic telecommunications, reached in the framework of the World Trade Organization in 1997. It has thus achieved global recognition. Competition law, the third layer of regulation, deals with the functioning of markets, and the behaviour of undertakings on these markets. Closely linked to these different objects of regulation are different public policy objectives or rationales.

Regulatory frameworks
1. Broadcasting/Media Law

Policy objectives
Media independence, pluralism, information, culture, education, protection of minors, etc., public service broadcasting Availability of communication infrastructures, spectrum administration, universal service

Content
2. Telecommunications Law

Carriage

3. Competition Law

Market

Fair competition, economic efficiency

The rationale of media and broadcasting law Media law deals with the provision of content to the public. It is usually regarded as necessary in order to achieve pluralism of opinions, sound (diversified) information and education, cultural objectives, etc. In fact, it lies at the very basis of a democratic

18

society. These objectives should not lose their force owing to technological changes in the distribution of existing services. The central role of the electronic media with regard to democracy and culture is unlikely to change. As regards broadcasting law itself (as part of the general media law), consideration should be given to the specific character of the media: its impact on people and social cohesion, the social importance of information/education, its universal accessibility, etc. One of the features of traditional broadcasting, the scarcity of frequencies available, will lose much significance through the combined effect of digitization and compression, though having a profusion of channels is not of itself the objective. The rationale is rather that a certain type of content should be available to the public. Impartial information, dissemination of culture and languages, education and pluralism are at the heart of public service broadcasting. The necessity to protect those public interest objectives will be all the more pressing in a converging environment. There follow some examples of areas which are still of legitimate concern: Information: open and balanced information and editorial treatment are needed more than ever in view of the overflow of information; Dissemination of cultures and languages: national public service broadcasters pay much attention to the promotion of language and culture, whether national or regional (production, etc.). Such action will be all the more necessary in the global environment of Information and Communications Technologies (ICT), in order to promote, or even maintain, cultural diversity; Education: more than ever there needs to be global education, even if only with regard to ICT. The need for training and awareness recognized by everyone has never been so urgent. Public service has an important role to play at that level; Pluralism: competition seems to lead to mergers and other alliances of "content providers", rather than to diversity of opinions. In addition, private providers are essentially looking for an audience. As a consequence, programmes may become very similar, and not pluralistic. Preserving pluralism means that it is still necessary to have appropriate guarantees. With a view to attaining the public interest objectives listed above, ICT should be used whenever necessary. Public service broadcasters are already offering will continue to offer, for instance, children's channels with interactive educational programmes, multimedia history or science channels (e.g. benefiting from the rich store of own archives), etc., according to the particular needs of the public.

19

The fact that the need to safeguard these public interest objectives will remain does not mean that there should be no evolution in broadcasting regulations in line with technological development. (This will be explained later on.) The rationale of telecommunications law In contrast to broadcasting law, telecommunications law is concerned with the conveyance of signals. It does not deal with content, as telecommunications services are content-neutral, but rather covers such issues as universal accessibility to networks and basic services, interconnection or the administration of the frequency spectrum. In addition, since few major players are in place to provide infrastructures, complementary rules aim to ensure fair competitive behaviour (the so-called ONP open network provision - rules). The content service, through the technical evolution, can increasingly be seen as independent from the underlying infrastructure and platforms, i.e. the distribution. Alternative infrastructures (including cable television networks) are increasingly used to convey telecommunications services, upgraded telecommunications networks are able to transmit audio and video items, etc. There are, however, important links between both, the most important possibly deriving from the following principle: there is no content if one cannot gain access to it. Ensuring open access to technical gateways (such as conditional access systems and APIs) is crucial not only for interoperability but for the whole media system and for competition too. Therefore, it is not exclusively a matter for telecommunications law. The rationale of competition law Competition law aims to ensure fair competition and contributes to economic efficiency. Certain arguments in favour of a predominant role for competition law result from the assumption that the potential application of several regimes would increase legal uncertainty about the regime applicable to a particular service or activity: "Which law broadcasting, telecommunications, etc. applies, if any?". On the one hand, such uncertainty would not cover the whole range of broadcasting services, telecommunications services and other on-line services, but only part of the grey area on the borders of the respective categories. On the other hand, the potential overlap should not automatically be dealt with by giving priority to light-handed competition law over other types of regulation.

20

Firstly, competition law pursues specific economic objectives that are not similar to other regulations: fair and competitive behaviour, etc. In other words, competition law has no vocation to replace other regulations. It may even turn a blind eye to the public policy objectives of both media and telecommunications law. It is an additional set of rules with specific objectives. Leaving other concerns aside is not a sound approach. In that context, competition authorities will have to pay particular attention to vertical integration of operators, which can easily be used to exert undue dominance over the markets involved. Secondly, competition law does not imply legal certainty in itself. It is based to a large extent on case law, and leaves competition authorities a considerable margin for discretion and assessment. For instance, assessing likely future developments of products or service markets under the Merger Regulation is very difficult when this evolution is linked to technology which is evolving every day. More generally, a posteriori intervention by competition authorities may not ensure immediate, fair competition, whereas, for instance, an advance of six months is very often crucial to the success of technology-related businesses. Nor should it be forgotten that competition law will also have to adapt to technological evolution13. Competition law (in particular Article 85(3) of the EC Treaty and the Merger Regulation) has to take dynamic efficiency issues (versus static competition) into greater account (innovation markets perspective). It should make maximum use of the essential facilities doctrine (Article 86) and will also need to regulate specifically certain bottleneck and standards issues. Therefore, if competition law requires ex-ante regulation in certain areas, for instance regarding standards or access issues, it is difficult, a contrario, to believe that case-by-case application of competition law, not to mention the market alone, could achieve objectives which are not primarily economic. Thirdly, legal certainty would logically lie within an evolutionary application of an existing set of rules rather than within a regime, still to be created, based on the caseby-case application of competition law. The equation "competition law = legal certainty = development of markets" is simply wrong. To summarize, it can be said that specific regulations covering communications activities should be adapted to the extent necessary, rather than be replaced by general competition principles with other aims. Competition law, on the other hand, should adhere to its primary objective: ensuring fair and competitive behaviour as smoothly as possible (e.g. opening up any bottlenecks), preventing abuse of a dominant position and avoiding the replacement of public monopolies by private ones. In so doing, particular attention must be paid to vertical integration.

13 See also: London School of Economics, Convergence within the media industry, and between media, information technology and/or telecommunications - Prospective for competition and competition policy, Final report to the DG IV of the European Commission, December 1996.

21

Question 5 Question 5: Overcoming the barriers - Getting the right regulatory framework for business and for consumers Chapter IV.3 examines in a number of key areas where regulatory solutions may be needed to overcome barriers and to safeguard competition. (A) Are the definitions in the telecommunications, media and IT sectors in national and/or Community legislation adapted to the convergence process? (B) Will the convergence phenomenon require adaptation of existing approaches or the adoption of new approaches to be applied to issues of market entry and licensing; access to networks, customers (including conditional access systems), content; and pricing? (C) Will convergence require changes in the approaches to the award and pricing of frequency spectrum, and in particular what approach should be taken, in the light of convergence, to the issue of completing the transition from analogue to digital services, including the need for a timetable for analogue switch-off? (D) What should be the objectives of standardisation in the light of convergence and what should be the relationship between regional and international standardisation? (E) What additional action (if any) is required to ensure that the interests of consumers and of users with disabilities are respected in the light of convergence? About definitions The basic distinction between content and carriage remains valid Regulations for distribution infrastructures and programme services need to remain distinct. One of the common traits of new regulatory approaches is the distinction made between "carriage" (distribution infrastructure, transmission) and "content" (audiovisual programmes, electronic publishing, information society services, etc.). This approach was also adopted in the GATS agreement on basic telecommunications of February 1997: telecommunications concerns the transport of electromagnetic signals sound, data, image and any combinations thereof but not the activity consisting of content provision which requires telecommunications services to transport it.

22

This legal distinction has proved useful and corresponds to the "value chain" of audiovisual services and is also adequate for new "converged" services. It is independent of the fact that integrated operators may provide both transmission and content services14. A greater need for differentiation Broadcasting law today already differentiates between, at least, radio, television and, increasingly also, teletext. In the future, more distinctions will need to be made in media law to deal with on-line services in all their different forms (electronic press, audio on demand, video on demand, teleshopping, games, etc.). Telecommunications law varies according to the different networks, such as public telephone networks and cable television networks (as well as broadcasting networks). It also normally distinguishes between wired networks and wireless (mobile) networks. (Regarding networks, however, we probably shall not have the same diversification as for content services; accordingly, the need for differentiation may not increase in telecommunications law as it will in media law.) Competition law makes distinctions in identifying the so-called "relevant markets". This has to be done in accordance with established principles of competition law, and the result will be a large variety of markets for different goods and services. Convergence actually increases the need for differentiation, as there is more interplay between different kinds of services and between digital television and the Internet. The categories of services, networks and relevant markets will certainly need to be amended. But it is extremely important to note that convergence does not, as such, challenge the distinction between the three horizontal layers. The challenge of convergence is to make the distinctions right within media law, within telecommunications law and within competition law. In other words, the questions arise (horizontally) on each of these layers. We need to extend/adapt regulations at each level (where appropriate) to cover new services and markets in an adequate way. This process is already under way in some countries. This might lead to the creation of a separate category for certain new services if the underlying principle requires it, although it would not be an option as such. Only a pragmatic approach of this kind will ensure both the necessary legal certainty for investment and the further adaptability to a highly dynamic technology environment.

14 For more details, see the Comments on the KPMG Study "Public Policy Issues Arising from Telecommunications and Audiovisual Convergence" forwarded to DG XIII of EC (EBU, February 1997).

23

Regulatory frameworks

Different services/networks/markets
Radio TV
On-line Interactive Multimedia

Telephone

Broadcasting/Media Law

( )

n/a

Content
Telecommunications Law

( )

Carriage
Competition Law

( )

Market

Will the convergence phenomenon require adaptation of existing approaches or the adoption of new approaches to be applied to specific issues? Under this item, only brief comments are given hereafter, since these issues have been addressed above. It should be stated, however, from a general point of view, that the fact that in a multichannel/multiservice world broadcasting regulation can no longer simply focus on individual channels but must deal with multiplexes, bouquets and a broadcaster's entire programme offer, relates to one of the necessary adaptations of broadcasting law. Such an adaptation will deeply affect such areas as licensing/registration, as well as must-carry rules or the assessment of pluralism. Market entry/Licensing In line with the above-mentioned observations under questions 3 and 4, and apart form pure competition aspects, there have always been justifications for regulatory constraints on the provision of infrastructures on the one hand and content services on the other.

24

As far as infrastructures are concerned, the distinctions between telecommunications and cable television networks (CATV) or other alternative networks, for instance, will become blurred. To that extent, there may no longer be any reason why a provider would be prevented from using its infrastructure in order to convey any kind of services, on condition that "essential requirements" and other matters of public interest are respected. Finally, licensing procedures are likely to remain an important tool for achieving public policy objectives at the national level. However, growing European and global competition among media (and other) companies, strong competition among national and regional regulators to attract investors, and the threats of relocation are already pushing national regulators towards partial deregulation. For example, the possibility stated in Article 3(1) of the "Television without Frontiers" Directive (i.e. the freedom of Member States to require television broadcasters under their jurisdiction to comply with more detailed or stricter rules) is an option which will become less and less feasible in practice, since it would put a Member State's own media industry at a competitive disadvantage. This is particularly true with regard to the Directives limits on television advertising, sponsorship and teleshopping. Outside the areas coordinated by the Directive, it is particularly felt regarding requirements for media pluralism. The only notable exception where the fulfilment of stricter requirements can still realistically be expected is public service broadcasting, which is not exposed to market pressures to the same extent. Thus public service broadcasting may well be, in the long term, the only effective instrument that remains for achieving national and regional media policy objectives in the new environment. Access to network, conditional access systems and other bottlenecks Some parts of the media production and delivery chain risk becoming potential gateways. As far as access is concerned, it is important to prevent any unfair attempt to favour specific players or to give an undue advantage to the party controlling the gate. The following potential gateways can be identified: access to the network, conditional access systems (CAS), electronic programme guides (EPGs), application programming interfaces (APIs).

25

Access to the network Ex-ante sector-specific rules ensuring fair competition have been implemented regarding the interconnection of telecommunications infrastructures for the provision of telecommunications services (ONP rules). It remains to be seen whether these should not be extended/adapted to the use of networks for other types of services. Conditional access systems (CAS) A first kind of gateway is created by proprietary conditional access systems. Although sector-specific legislation does indeed exist with respect to these systems, it is recognized that this does not achieve the objective of an open market in receivers. The Green Paper can, however, be read as implying that the measures provided in the current Television Standards Directive to ensure the public interest are successful. This is not the case. As an example, in the country that is most advanced in digital television broadcasting today, France, there are two incompatible digital satellite systems. The route to television sets stacked high with different set-top units has begun. The Directive's plan of using Simulcrypt to protect the public interest and ensure the need for only one set-top box has not worked. Many EBU Members would say this was inevitable. If the Directive had made the Multicrypt interface mandatory, the chances of an open market for receivers would have been greater. Navigation systems, electronic programme guides (EPGs) As far as the basic navigator or electronic programme guide is concerned, there need to be legal safeguards. The "basic navigator" is currently understood as the system which gives viewers access to all programmes and services available through set-top boxes/integrated digital receivers. Navigation systems should make it easier for viewers to find the programmes of their choice, and not more difficult. Free-to-air services should not be hidden away among a plethora of pay-TV offers. This applies particularly to access to public service programmes funded by viewers and listeners. Legal safeguards are required to ensure that navigation systems are unbiased and offer viewers a full choice. Navigation systems should at least include a full and non-discriminatory "channel listing" based on Service Information (SI) data provided by individual broadcasters. They should give due prominence to public service offerings and allow rapid, simple access to them (ideally, automatic first access). Viewers should have the possibility to override the default settings and rearrange the order of channels.

26

Application programming interface (API) In the future, set-top boxes/integrated digital receivers should have a common application programming interface15 and sufficient processing capacity and memory to allow multiple EPG applications. This means that individual broadcasters, or groups of broadcasters, should be in a position to offer viewers their own EPG applications, with additional programme information and interactive functions. If set-top boxes do not work with an open API, companies controlling the software of set-top boxes should be required to provide competitors, on non-discriminatory terms, with all the information (particularly regarding the API) which the latter need to develop EPG applications16. This, however, is much less satisfactory than the common use of a unique API, which must be capable of evolution. Reaching interoperability There would be clear advantages if the APIs for the different digital delivery systems were interoperable to the maximum extent. Since each of the systems has a different capacity, not all of the features can be included on all of the delivery systems. Nevertheless, there is a case for considering the API situation globally, to harmonize the systems and to use the same one wherever possible. This will not happen without intervention. Different individuals in different standards bodies are developing the systems. This is bound to result in diversity. Regulators can play a useful role in helping to introduce interoperable software interfaces for the different multimedia delivery systems.

15

Digital broadcasting offers the possibility of broadcasting "applications". These are packages of computer software, which "run" or "execute" once in the viewers receiver. These applications can range from simple multimedia packages (electronic magazines) to games, calculators, and other interactive experiences. In the years ahead, broadcasting "applications" may be just as normal as broadcasting films or sports events. In order to broadcast applications, the broadcaster must know what language (in computer terms) the viewers receiver is able to accept. This is called the application programming interface. It is just as necessary to have a known API as it is to have a known standard for the picture and sound. The world already has standards for pictures and sound (MPEG, etc.), but it has no standard for an API. Broadcasters have known the advantages of having a common open API for Europe for about 18 months. The EBU wrote to DG XIII in early 1997 hoping for action to encourage convergence on a common system. It is reassuring to find that the Commission is finally acknowledging the value of a common API, although not according it as much priority as the EBU would like. The digital television receiver is not the only digital delivery system that will need an API. Probably all digital delivery systems will need one. This includes the GSM telephone and its higher bit rate successor, the UMTS system, DAB, and the DVB delivery systems, whether satellite, terrestrial or cable.

16

For more details, see "Difficult to be easy the electronic programme guide" (EBU, January 1998).

27

The issues relating to both EPGs and APIs, however, are currently left unregulated in most Member States. If the market proves unable to respond adequately to these issues, regulations will have to be adopted quickly. The question will remain that of determining who will regulate (competition or sector-specific regulators). It is nevertheless important to note that the need for regulation, at least during a transitional period, is very strongly felt already. (See also the objectives of standardization, below.)17 To prevent excessive regulation, the most urgent step is obviously to favour the voluntary adoption of open standards, with a commitment to legislation if this is not effective. Access to content Access to content cannot be compared to access to infrastructures: unlike telecommunications services, for instance, quality and desirable content cannot merely be the subject of a binding regulation. Moreover, exclusivity is a fundamental feature of intellectual property rights. On the other hand, quality is not produced by the market itself, as audiovisual liberalization has confirmed. All that can be done, therefore, is to favour the production of quality content in Europe, through an appropriate policy. Even so, talent will remain a scarce resource. Any such policy should take account of the fact that broadcasters are currently the main investment engines of creative content production in Europe. Pricing The issue of the public service broadcasters' licence fee is dealt with under question 6. What should be the objectives of standardization? In line with what has been said above with respect to digital gateways, the role of official and de facto standards is crucial in an area where telecommunications, broadcasting and information technology meet. Without such standards, interconnectivity and interoperability will not be achieved, and convergence will be considerably delayed. Open standards can also help to prevent dominant positions and thus allay competition concerns the opposite of a situation where the most powerful players, alone or together, impose their proprietary systems18.

See also the LSE study for DG IV. The fragmentation of the digital broadcasting market in Europe, resulting from the introduction of set-top boxes with different proprietary technology, is a first example of a missed opportunity, and in the absence of common standards the same is likely to happen with regard to interactive services.
18

17

28

Industry-led attempts at standardization should be encouraged. This is particularly true in relation to the recent initiative of the DVB Steering Board to work towards an open standard for digital multimedia broadcasting, which should include a common API as the main element. However, where an industry consensus cannot be achieved (as happened with regard to the common interface for conditional access), there is a case for urgent regulatory action. Whether or not industry can agree on its own to use a common system should be known by summer 1998. Open standards are always preferred to proprietary systems, since they contribute to open up the markets for new entrants and prevent potential abuses of a dominant position. Will convergence require changes in management of frequencies, in particular with respect to "analogue switch-off"? Radio Spectrum Issues There are certainly anomalies in the current arrangements for spectrum management. The use of fixed satellite service bands, ostensibly for point-to-point services, but actually used for broadcasting, is one example. The lack of spectrum to develop terrestrial DAB services is another. Frequencies currently used for analogue broadcasting which may be liberated in the future should continue to be available, to the extent necessary, for - digital broadcasting. Switching off analogue TV/radio services From a public service point of view, universal accessibility (to the extent practical) and affordability of services form the basic requirement of any public policy in the broadcasting sector. Any potential decision on a switch-off of analogue services must keep these criteria in mind. On the basis of penetration levels for both satellite television in Europe and technological innovations, it is unlikely that half of the European households will receive digital television within eight to ten years. It would therefore be premature to set a date for such a transition in Europe. (The year 2006, which has apparently been retained in the United States for the transfer from analogue to digital, would be unrealistic for Europe.) European States face different stages of digital development, so that it may not be efficient to decide on this

29

issue at the European level. That should not, however, prevent the European Union from supporting the take-off of digital broadcasting by more appropriate means. What about consumer protection? Consumer protection is a major concern alongside the protection of individuals and of the public interest The expansion of audiovisual services provided against payment and the development of electronic commerce (e.g. teleshopping) raises new issues of consumer protection which did not exist with respect to traditional broadcasting. The distinction between advertising and teleshopping may be becoming blurred, in view of the greater interactivity, which helps ensure a fast and seamless switch from one to the other, thereby increasing the need for consumer protection. (Questions that arise include whether there was real consent and whether the conditions were effectively agreed upon.) Harmonization of sector-specific rules with common regimes should be considered because, as a consequence of convergence, different regimes may apply to similar services (cf. a commercial teleshopping service on television and a multimedia/video teleshopping service on the public switched telephone network). On the other hand, the protection of individuals in their role as consumers must not be mixed up (as seems to be done by the Green Paper) with the protection of individuals as such. For example, the protection of privacy vis--vis the media is a concern which should be independent of whether or not the individual whose private life has been violated is a consumer of the media outlet in which the publication took place. The same is true with regard to the right of reply, which serves all individuals and, at the same time, the public interest, since freedom of expression is a precondition for democratic opinion-forming. Accordingly, such safeguards need to be applied to all media, whether or not the services are transactional or interactive. Therefore, any attempts to reinterpret existing safeguards for the protection of individuals or of the public interest and to reduce them to mere safeguards for consumers would be a retrograde step incompatible with the democratic principles underlying the Rome Treaty.

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Question 6 Question 6: Securing public interest objectives in the light of convergence Legislation at Community level meets a range of public interest objectives. This was also examined in Chapter IV.3. Current developments may well result in new ways of achieving such objectives. Where such objectives are achieved today by placing obligations on one or more market actors, (such as universal service obligations in telecommunications or a public service mission vested in certain broadcasters) new technologies and services may enrich the services being offered. (A) Does the convergence phenomenon support or challenge the way in which public interest objectives are achieved in the telecommunications, media and IT sectors? (B) Should such objectives be more clearly identified and. where they translate into particular obligations, should a wider group of actors be able to take on such obligations? Is the way public convergence? interest objectives are achieved challenged by

Many of the so-called "barriers" mentioned in the Green Paper actually refer to the means used to safeguard public interest objectives. Such safeguards are present in the three specific layers of regulations mentioned, i.e. broadcasting law (as part of media law), telecommunications law and competition law. In brief, convergence implies, on the one hand, that services that were traditionally conveyed through (a) specific delivery mechanism(s) will eventually be distributed over any network. So the real question is whether there are specific problems preventing the proper realization of public interest objectives (pluralism, must-carry, accessibility and affordability, etc.) on these other delivery mechanisms. On the other hand, convergence will facilitate the production and the distribution of new content services, whose nature is not always, and will not always be, easy to define. In that case, the proper realization of public interest objectives might usefully be sought through the functional or technology-neutral adaptation of existing rules. For instance, the degree of interactivity, i.e. the effective choice made by the consumer and its impact on the content, might justify different regimes. Convergence and globalization are separate issues from a regulatory point of view. Globalization, rather than convergence, seems to question the effectiveness of any rule (including self-regulatory ones). Satellite broadcasting and the Internet, for

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instance, already reveal the difficulty of enforcing rules at a national or European level. Some agreement may be reached at world-wide level on technical standards for the Internet, but content rules are of a different nature, as mentioned earlier. Most of them belong to European, national or local cultures and ethics. States will therefore be faced with the increasing difficulty of imposing national rules on commercial content providers (commercial pressure, globalization, regulatory dumping), and, therefore, they will have to promote their culture and ethics in positive terms. If the latter choice were to be made, public service broadcasting, less exposed to competition, would be very well placed to ensure content of quality. Generally speaking, deficiencies in the market cannot be rectified by "negative rules"19 only, i.e. rules prohibiting certain types of content, imposing time scheduling, etc.20 The reasons for this are: = Such content rules are not fully appropriate to attain quality, which cannot easily be measured21. Positive rules, often organizational/procedural, i.e. rules that ensure the best structural conditions necessary to create quality content (independence of media, internal pluralism, public funding, etc.), appear to ensure effectively a certain level of quality content; = Satellites and the Internet make negative regulations less effective. Would a more universal service-approach be appropriate to achieve this? Establishing parallels between telecommunications and media regulations are not something that could be justified by convergence. Since telecommunications law deals with carriage, and broadcasting law with content, it is not possible to transpose legal solutions from one sector to the other. An example is universal service in telecommunications vis--vis public service in broadcasting. The only "universal service" aspect of the public service remit in broadcasting is the obligation to cover the entire (national, regional) population, to the extent that this is practical. This is a technical obligation which is quantifiable and can be required of a given provider of (terrestrial) transmission services. However, the main elements of the public service remit (the democratic, social and cultural

The distinction between negative and positive rules regarding content provision is becoming commonplace, although the two notions may not always be clear. It may be said that whereas negative rules repress certain (illegal and undesirable) content, positive rules promote other content which meets (cultural, democratic, social, etc.) objectives. Negative rules restrict freedom of expression and information by limiting the dissemination of certain content (such as pornography or material inciting racial hatred). Positive rules tend to enlarge the scope for freedom of expression and information by helping to make desirable content available and by contributing to media pluralism. 20 See also Graham, Davies, p. 3. 21 Graham and Davies even state: "Rules can only stop the undesirable, they cannot promote the desirable" (p. 3).

19

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functions, quality and diversity, internal pluralism, transparency, etc.) are not clearly definable and quantifiable. There are many creative ways of achieving the given objectives in the overall programme offer, and the results are not objectively measurable. Therefore it is mainly the organizational and funding structure of a public service broadcaster (separation from the State and to some extent from market forces) which makes it possible to translate the public service remit into concrete programming, and to ensure that all the means available are used in the public interest, to fulfil this remit. The particular structures of public service broadcasters (internal pluralistic safeguards, transparency, public accountability, public funding, non-profit-making purpose, etc.) allow the fulfilment of given content-related objectives to be reconciled with editorial independence. This means that for these content- and organization-related aspects of the public service broadcasting remit, the solutions retained for universal service obligations in telecommunications cannot work. These aspects of the public service remit can be achieved only by setting up a specific not-for-profit organization.. They cannot be split up into a number of quantified obligations and be made the subject of tenders. The case for public funding Embracing new technology and new services for the fulfilment of the public service remit does not automatically mean that more public funding, or more resources of other kinds, need to be provided. Digital technology allows for substantial savings in production and distribution. There may also still be scope for economies to be achieved through rationalization, synergies and the switching of priorities. In addition, possibilities for new forms of funding and for cooperation with third parties need to be explored further. On the other hand, undermining the financial basis (public and mixed funding) of public service broadcasters at this decisive stage would prevent them from taking advantage of the opportunities arising from digital technology and technological convergence, leading to their marginalization and the disappearance of their contribution to society. The end of public funding would also be the end of the dual broadcasting systems, which reflect and promote Europe's cultural and democratic values. The EBU therefore greatly welcomes the new Protocol on public service broadcasting, which, as part of the Amsterdam Treaty, gives unequivocal support to dual broadcasting systems and guarantees the Member States all necessary means to develop these systems further. Funding new services offered by public service broadcasters To enable public service broadcasters to offer new services, and thus to make their contribution to convergence, there needs to be a clear and reliable funding framework for new services.

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The normal case is that public service broadcasters offer new services within their public service remit. The public service mission - as conferred, defined and organized by each Member State - will often include the provision of new services. Sometimes the decision is taken by independent supervisory bodies. The mandate to offer new services may be given explicitly or implicitly. An example of the latter would arise when new services (such as electronic programme guides) are ancillary to existing ones or simply embrace new (digital) technology. Insofar as new services are covered by the public service mission, there is, in principle, the same scope for (public or mixed) funding as for traditional services. In reality, however, Member States (and, according to the national regulatory framework, broadcasters themselves) may sometimes choose to fund certain new activities in a different manner, e.g. advertising revenue, pay services, etc. In such cases, Member States may require some kind of financial transparency, but it has to be kept in mind that "commercial" funding does not in itself imply that certain activities fall outside the public service remit. If public service broadcasters were to provide new services outside their public service mission, as conferred, defined and organized by each Member State, the normal funding arrangements for public service broadcasting could not be applied. Instead, such services would have to be provided under market conditions and would have to be funded as a commercial activity. Public service and commercial activities would, of course, need to be clearly separated (through accounting or structural separation). It will be for each Member State to choose the funding system which best suits the legal traditions and market developments, in conformity with Community Law as clarified by the Amsterdam Protocol on public service broadcasting. Question 7 Question 7: The future shape of regulation Chapter IV.1 raised the challenge of the convergence process to the principles underpinning current regulation, whilst Chapters IV.2 and IV.3 considered a range of substantive regulatory issues. Chapter IV.4 discusses how those principles may be applied in future, separately to each sector, or "horizontally" across different market sectors. It also raises related issues about the number of regulatory bodies and the balance between Community and national level action. (A) Do current developments require a reassessment of the way in which rules are applied to the telecommunications, broadcasting and IT sectors?

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(B) Does the existence of different regulatory authorities or ministries responsible for different aspects of telecommunications, media and IT activities offer a workable structure for regulatory supervision in the light of convergence? (C) Will convergence require a reassessment of regulatory responsibilities at a national, Community or international level, and, if so which areas? Deregulation and competition case law: the solution? A solution has been proposed which deserves study: deregulation. Deregulation is often understood as meaning that the first two layers, media and telecommunications law, should be reduced to a minimum or even abolished, and that, in the future, competition law should play the only, or at least a predominant, role, when the market itself fails to reach a certain objective (see the three-layer approach discussed under Question 4 above). But it is obvious that scrapping the first two layers of regulation would sacrifice important public policy objectives. These objectives are becoming even more important, and not less so, in the information society. Competition law is (increasingly) important, but it has its own limited objectives and cannot take over functions from the other two regulatory layers. Nor can general competition rules offer the same legal security for the media systems, given that they are mostly applied ex post and on a case-by-case basis. Legislators should not escape responsibility for shaping the information society by taking refuge in sweeping deregulation. In the current state of development of the information society, which is characterized by uncertainty, deregulation may be nothing more than a blank cheque for the major players. More often than not, deregulation would put individuals' freedoms at risk rather than enhancing them. Liberalization often leads to reregulation rather than deregulation. If we neglect the content aspect and concentrate only on building up distribution networks and creating a deregulated global market, that will not boost content production in Europe but will merely increase the importation of audiovisual products. This has already happened in the past with the multiplication of our satellite and cable television channels (see economic reflections under Question 2 above). Therefore, in the content area, deregulation cannot mean growth, and, even less so, the creation of jobs. On the contrary, employment could become precarious even in sectors which are thriving now. The point is that deregulation has little to do with convergence. So if scrapping the first two layers is no contribution to convergence, is there another miracle solution?

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A new communications law: another miracle? Some people advocate a merger of the first two layers, the creation of a joint communication law. But, here again, we must recognize that the policy objectives of the two layers are very different, as are the instruments which are used to achieve them. For example, we have public service broadcasting regarding content, and we have universal service regarding carriage. Drawing analogies between these two layers is not always helpful. The Green Paper sometimes seems to toy with this idea, but it can easily lead to confusion, precisely regarding public service and universal service. Bringing broadcasting and telecommunications law closer together could be a very difficult exercise (if not an impossible one) and would not actually contribute to convergence. Adaptation of existing regulatory frameworks and better coordination The only realistic, pragmatic approach, therefore, is to build on the existing regulatory frameworks of media (broadcasting), telecommunications and competition law. If these frameworks are understood as three different regulatory layers, which cover content provision, infrastructure and market aspects, and pursue different public policy objectives, they form a valid basis for regulation in the information society too. All three frameworks can then be adapted without fundamental problems to cope with technological change and convergence. Convergence does not challenge the distinction between the three layers. However, it will be necessary to make appropriate distinctions, at each of these layers, between different services, networks and markets. One example is the regulation of on-line services. Many of these services involve the communication of audiovisual content to the public (or, more precisely, to individual members of the public). They are thus much closer to traditional broadcasting than to traditional telecommunications services. However, this does not mean that the rules traditionally applied to broadcasting should be applied to these on-line services. The application of media law principles to new services needs to be carried out in a graduated way. There may be different degrees of regulation depending on public accessibility, the relevance of the content aspects of a particular service, and the amount of consumer control (through effective filtering devices - the mere fact that the consumer has to pay for a service does not put him in control of the content). Convergence makes it necessary to coordinate and adapt existing regulatory frameworks in a better way, and particularly the frameworks for broadcasting, the press, and telecommunications, including competition aspects. This is a challenge for

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both national and European legislators, but it is a manageable one, and does not carry with it the need for any revolutionary changes. The different regulatory frameworks need to be developed further in a proactive and flexible way, in accordance with clear principles, anticipating new developments as far as possible and leaving the remainder to independent regulatory authorities, which must be given full competence. The reorganization of regulatory authorities is another issue to be considered. Should one or more regulator be in charge of the whole "communications" sector, including telecommunications and broadcasting? Legal traditions vary in Europe, notably according to the federal or central organization of the Member States. In the long term, rationalization of the systems could prove more transparent, time-saving and cost-effective. However, it should be remembered that, whatever the choice may be, important differences exist between the regulation of content and of its distribution, so that the creation of a single regulator may create more problems than it solves. In any case, a single regulator would need to pay attention to the characteristics of both content and distribution. (Specific expertise is required in each of these areas.) Question 8 Question 8: The international aspects of convergence Chapter IV.5 examines a range of international activities underway which are linked to convergence, as well as to specific aspects impacting on it, such as the Internet, Intellectual Property Rights, and Electronic Commerce. It also highlights the opportunities which convergence offers to our partners in Central and Eastern Europe, and more widely to the world's developing economies. (A) Is further action required at an international level in light of convergence? (B) What additional steps (if any) are required to encourage other countries, particularly, in Central and Eastern Europe, to create conditions within which current developments can be exploited?

Globalization and European values The underlying economics of the broadcasting sector are mainly national, regional or even local. In any case, values protected by European rules such as data protection, universal and public service, etc. are not necessarily fully shared by Europe's main partners in international discussions. These must be put forward by European authorities in international fora. The elaboration of international harmonization instruments must be sought whenever possible, e.g. in the case of the protection of personal data or consumer protection.

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Where rules relate to one country's specific culture or ethics, cooperation, rather than harmonization, will then form the basis for international treaties. Regulatory dumping, i.e. the tendency for States to lower national legal requirements to attract investment, will remain a risk, owing to relatively cheap international satellite and Internet communications. It will reinforce the necessity for an independent player, such as the public service broadcaster, which is capable of resisting, to a certain extent, the undesirable effects of globalization and competition. Global standards The Green Paper discusses technical standardization and touches on the difficult question of how to arrange simultaneous regional and world standardization. There are bodies for world standards such as the IEC, ISO, ITU and DAVIC, and there are regional standards bodies such as ETSI and CENELEC. ETSI has done important work in arranging European standards. In practice, it is very difficult today to come before a standards body with a system already agreed upon at a regional level and expect the rest of the world to accept it. World standards have to be put together in the world standards body itself, through multilateral discussions. A conscious choice has to be made between aiming for a world standard and a regional standard.

Central and Eastern European countries With particular respect to Central and Eastern European countries (CEECs), it should be recalled that many of them will benefit from positive effects of convergence only if their networks are sufficiently upgraded. Moreover, in some CEECs, public service broadcasters are the main broadcasters of European content. A viable content production base must be preserved and further developed. Nor should it be forgotten that in some countries public service broadcasters, which are the main producers of original and national content, are economically weak and in a difficult transitional phase.

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Question 9 Question 9: Principles and possible approaches in the light of convergence Chapter V identifies a number of important policy principles which could underpin future regulatory approaches in the light of convergence. It also proposes three possible ways in which current regulatory approaches in the different sectors might be adapted in order to embrace on-going developments. (A) What effect will convergence have on the principles for future regulation applied in the telecommunications, media and IT sectors, and should those principles be adapted in the light of convergence? (B) If convergence requires adaptation of existing regulatory approaches, should that adaptation: (i) seek to build on, and if appropriate, extend existing frameworks, rather than create new ones; (ii)create a new framework for many on-line and interactive services, to co-exist with the those currently applied to traditional telecommunications and broadcasting activities, or (iii)seek to create a comprehensive framework applying similar regulatory approaches to all three sectors.

Proposed principles Who would not be in favour of a legal framework following the principle of proportionality (principle 1), respecting users' needs and the public interest (principle 2), providing legal security for investors (principle 3), guaranteeing accessibility/ affordability to anyone on the basis of, inter alia, public service broadcasting (principle 4), and, finally, being adopted by independent and efficient regulators? It must be hoped that these principles of sound regulation will not be challenged on the pretext of convergence. However, the implications implicitly drawn by the authors of the Green Paper are sometimes questionable. The following basic principles can be added: = The different sets of rules media, telecommunications and competition law should be closely coordinated.

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= Regulation should be consistent. This means that similar services (for example, analogue and digital television) should be regulated in a similar way whatever the delivery mechanism, in order to prevent an anti-competitive situation for specific operators. = Continuity in legal change should be favoured, making it possible for investors to know what the rules are and in which direction they are evolving. After all, legal security is one of the most important pre-conditions for investment. From a "methodological" viewpoint, it implies that a step-by-step, evolutionary approach should be chosen. Incremental change, seeking pragmatic solutions in new situations, is the most appropriate means of coping with highly complex issues and unpredictable developments. In contrast, the idea of creating a completely new regulatory framework from scratch does not seem very rational. Adapting regulations at the three layers to cover new services and markets in an adequate way In the light of the above-mentioned points, the regulatory options proposed under 9(B) may seem rather theoretical. Media law, telecommunications law, and competition law have specific and different objectives, which undoubtedly remain valid. Creating a comprehensive new framework replacing the existing ones (option 3) is obviously neither suitable nor desirable. The challenge of convergence is rather to adapt regulations at each layer (media, telecommunications, competition) to cover new services, networks and markets in an adequate way. In other words, the appropriate approach would then be closer to option 1: building on the existing frameworks, drawn up on the basis of experience and which have proven generally positive, whilst adapting rules to the characteristics of certain new services. To a certain extent, this approach does not exclude the possibility of a progression towards new rules (see option 2) whenever this corresponds to the very nature of the services concerned. However, in so doing, the general interest rather than convergence in itself will remain the main public policy concern.