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					              Convergence, Competition and Regulation
                                            by

                    Campbell Cowie and Christopher T. Marsden


1. Introduction
The broadcasting industry, the telecommunications industry and the image processing
part of the computing industry (the Internet/World Wide Web) are rapidly converging
towards a single multi-media market in which TV operators supply voice telephony,
telecommunications companies supply video images, and where the Internet is delivering
both basic voice telephony and moving pictures on a commercial basis. Moreover, this
convergence is expected to accelerate over the coming decade. At the same time as this
process of convergence, technical and regulatory barriers to entry in both
telecommunications and broadcasting markets have been falling, and are likely to
continue to do so. Telecommunications markets around the world have been liberalised,
following the examples of the United Kingdomi and United Statesii in 1984, and basic
voice telephony in the EU was officially liberalised in January 1998. In broadcasting,
shortage of effective spectrum created perceived barriers to entry. Consequently, specific
prior structural regulation was instituted to prevent abuse of monopoly power, integrated
in Europe with positive content regulation in the public interest iii . However, the
development of multi-channel service provision and the anticipated use of digital
technology have essentially removed the spectrum barrier to entry. As the UK Green
Paper on Convergenceiv states: ”The presumption that broadcasting and communications
should be regulated should therefore in general be reversed.”v

Although each sector in isolation has become more competitive, which might suggest a
lesser need for regulatory oversight, the cross-entry of telecommunications and
broadcasting firms into each others' markets, whilst ultimately pro-competitive, raises
significant and difficult transitional regulatory issues. An example is when networks, with
their substantial fixed costs, are used to supply multiple products. Bottleneck facilities
are not new in the communications industries, but the transition to digital television and

                                            1
the impending convergence introduces the potential for a new series of bottlenecks vi .
Increased competition in the market for pay-TV services has increased concerns regarding
bottleneck facilities among competition authorities and service providers. In addition to
providing an informed examination of the concerns within the framework of convergence,
we seek to explain the often misunderstood concept of bottleneck facilities, and explore
through comparative case studies possibilities for abuse by vertically integrated actors.

The regulatory implications of convergence are both the substantive issues of access to
technical services, and the question of institutional design of the regulatory framework.
Historically, the commercial separation of telecommunications and television has been
mirrored with separate regulatory authorities, but with convergence, the commercial
distinctions are being eroded and the rationale for multiple regulation is being questioned.
In particular there is a view that the convergence of the markets ‘requires’ a merger of the
sectoral regulators, to form a single communications regulator vii .          The European
Commission issued a Green Paperviii that addressed the issue of the appropriate regulatory
structure, consulting with interested parties until 3 May 1998ix.

In this paper we examine the complex issue of regulatory structure in the broadcasting
industry as it stands today, and in the broadly defined multi-media market of the
near-future, as best as we can envisage it. After a brief survey of national communications
regulators, we focus on the questions raised in the EC Green Paper on convergence as to
the appropriate regulatory structure in the multi-media industry. We attempt to stand back
from the ‘turf wars’ between threatened regulators that has heavily influenced the debate
within the UKx, and even from the discussion of the suitability of existing regulatory
institutions for multi-media regulation.      Rather, we approach the issue from first
principles. First, we enquire as to the particular regulatory functions that need to be
undertaken in the multi-media market. Secondly, possible synergy between regulatory
functions, which might suggest that they should be jointly exercised, are analysed and,
finally, we project as to the sort of institutional arrangements which are likely to emerge.
We do not offer, however, definite views on institutions: there are we argue, some bad
ways to skin the regulatory cat, but there is more than one acceptable way.



                                              2
2. Bottlenecks
It is appropriate to begin this section with a definition of terminology. When we make
reference to a ”bottleneck” facility (or technology), we are describing some technology
without access to which it would be very difficult for a third party to provide a service to
consumers. Where this term differs from the conventional understanding of an essential
facility is by-pass of the facility must not be economically viable for the facility to be
regarded as essential.      We avoid analysis under the so-called Essential Facilities
Doctrinexi, in order that we are not required to discuss the economic viability of by-pass.

Bottleneck facilities are not new to the communication industries and are certainly not
new to the television industry. However, what is new is the requirement for regulatory
intervention on such a scale to address control of bottlenecks. The traditional approach
to regulation in the television sector has often been founded on the need to prevent abuse
of ownership of one or more of the bottleneck facilities.                 A typical vertical
decomposition of the television industry reveals the key stages in the supply chain, from
the creation of content, to the household reception equipment, and it is within this
structure that the key regulatory and competition policy issues can be identified.xii

Table 1. Vertical decomposition of the TV industry

Stage                           Key facility in analogue        Key facility in digital

Content                         Yes                             Yes (but more so than in
                                                                analogue)

Bundling    of   content   into No                              Yes
channels;

Packaging of channels into No                                   No
multi-channel offerings

Delivery                        Yes                             Yes (but less so than in
                                                                analogue)

Conditional access              Yes                             Yes (but more so than in
                                                                analogue)



                                              3
Consumer            reception No                                Yes
equipment

Subscriber management          No                               No (but customer information
                                                                is    more    valuable     in    a
                                                                competitive                digital
                                                                environment,       where        the
                                                                competitor is denied access to
                                                                the information)

At each of the key (bottleneck) stages in the supply chain there is typically only one
provider within each geographic territory, effectively placing the provider in a gatekeeper
position xiii , with third party access to the bottleneck facilities only possible through
agreement with the proprietary service provider. Gatekeepers are in a powerful position
to disrupt the competitive constraints that would otherwise be present in the market.
There are a number of generalxiv ways through which competition might be undermined:

1.) Services that are viewed as potentially competitive with the (vertically integrated)
service provider’s own offerings may be flatly denied access;

2.) Service providers may exert undue influence to ”encourage” independent third parties
to join the proprietary service package;

3.) Access to the facility may only be granted on non-discriminatory terms

4.) Where access is granted on non-discriminatory terms, all users may be charged a
monopoly access feexv;

5.) Proprietary services may only be sold when bundled with non-proprietary services,
thereby leveraging market power to related markets (foreclosure); and

6.) Access terms may contain ”unreasonable” restrictions, such as platform exclusivity
clauses, which reduce scope for competition.

In countries reliant on the radio frequency spectrum for the delivery of television signals,
the oft-cited ”justification”xvi for regulation has been the shortage of effective spectrum
capacity, while for those more dependant upon non-terrestrial means of delivery, delivery
still remains an important matter, but the bottleneck is not radio frequency spectrum, but
                                             4
either cable capacity of satellite transponder capacity.       In conventional (analogue)
television industries it the process of delivery that is perceived as the key bottleneck
facility. The typical response to the potential problem is government ownership of the
                                                 xvii
facility with access granted under licence.             Advances in digital compression
technology should make it possible for households to receive many hundreds of digital
services, using only a fraction of the valuable spectrum resources that are employed
today.xviii Will the transition to digital reduce scarcity in the supply chain and lessen the
need of regulatory interference?

The answer is a resounding ‘No’. In fact, the introduction of digital television creates
new and additional bottleneck problems, some of which we seek to address here. The key
difference between analogue and digital in this regard is the location of the bottleneck
facilities in the supply chain of production. Traditionally, the fierce competition between
the creators of content for scarce retail outlets (channels delivered to the consumer), was
the source of market power for those providing delivery services. However, as spectrum
restraints diminish, the situation is reversed, with a greater number of retail outlets
competing for relatively scarce content. This phenomenon was referred to in the EC
Green Paper on Convergence, but with no explanation of dynamics.xix While this may be
true, it does not tell the full story. Market power (in the shape of control of bottleneck
facilities) may also move down the supply chain, to the level of household reception
equipment. It is the bottleneck facilities at this stage in the supply chain which are the
focus of this paper.

Competition authorities are aware of the significance of bottleneck facilities for
competition in the digital environment and have demonstrated their desire to prevent the
abuse of position by those who control these gateways. Herbert Ungerer of the European
Commission Competition Directorate has recently stated:

       Convergence is driving infrastructure provision but it is also defining the future
       bottlenecks…whether the band-width explosion will happen, will entirely depend
       on the competitive conditions… Convergence can now not mean the creation of




                                             5
       new super-monopolies - and this danger is very real. It is the immediate question
       underlying most current competition cases in the area.xx

In attempting to demonstrate the complexity of addressing the issues of third party access
to bottleneck facilities, we adopt as case studies the regulation of key technical elements
of the supply chain, associated with consumer reception equipment. Specifically, the
necessary set-top box decoder (formally, the Integrated Receiver-Decoder or IRD) can
itself be decomposed into its technical components, Applications Programme Interface
(API) and Electronic Navigation Guide (also referred to as navigation software,
Electronic Programme Guide (EPG) or Electronic Scheduling Guide (ESG)). We
compare these software applications in the set-top box decoder with the ubiquitous
Windows operating system and Internet Explorer navigational software in Personal
Computers [PCs], with specific reference to recent case law relating to alleged abuse of
dominance in important areas of the PC sector. The case law is highly relevant to our
discussion, as the technologies subject to legal intervention perform a similar function to
the API and EPG and subject to similar competition concerns.

Similarly, the market power is greatly enhanced through the vertical control of the key
facilities. In fact, abuse only makes sense where the controller is active at both levels, as
in the absence of vertical integration there would be little commercial justification for
dissuading entry.xxi The problems of the vertical control of technical facilities is being
addressed in the Microsoft case. We are therefore exploring a case study which bears
remarkable similarities to the phenomenon of ‘Wintelism’ xxii . We are conscious that
definitional analysis of such ‘bottlenecks’ carries comparisons with the essential facilities
doctrine of United States jurisprudence, and that such comparisons, if injudiciously
applied, result in presumptuous regulation of first mover innovators in dynamic
high-technology marketsxxiii. As Overd and Bishop state: ”The overzealous application of
the essential facilities doctrine has the potential seriously to undermine the incentive for
firms to innovate.”xxiv They criticise the regulation of digital pay-TV conditional access
systems by European Union Directivexxv, as an example of essential facilities regulation in
practice, leading to a ‘chilling effect’ on innovation by first movers.



                                              6
Phillip Areedaxxvi has criticised US jurisprudence for extending the concept of competitor
access to monopoly bottlenecks in a distribution chain from ”an extreme case” until it
”ultimately becomes ridiculous”: ”judging by catchphrase”. He saw 1980s US
jurisprudence as the expansionary phase. The landmark cases of Terminal Railroad
(1912) xxvii and Associated Press (1945) xxviii provide initial guidelines for European
policy-makers. In the former case, a consortium's purchase of an existing railroad
essential facility led the Supreme Court to insist on all competitors being granted access.
In the latter, which Areeda describes as ”a more doubtful case”, Associated Press was
disbarred from applying non-competition clauses to new membership of its news agency
consortium. In the deciding judgment, Frankfurter J. stressed the importance of extending
the concept of ‘public utility’ in the interests of ”such access to the function of a free
press in our democratic society”xxix. There is thus expressly stated a presumption of access
to essential facilities in the interest of media pluralism. MCI v. AT&T (1983)xxx further
establishes that public policy of access to communications must not be flouted by a
monopolist.

One can identify increasing enthusiasm for the essential facilities doctrine in Europe in
the 1990s xxxi , culminating in the more generous interpretations put on Magill TV
Guide/ITP, BBC and RTE (1989) xxxii . The case dealt with RTE (Republic) and BBC
(Northern Ireland) public broadcasters' refusal to deal in programming information. They
refused to supply programme schedules to an innovatory Magill/ITP product, a combined
TV listings magazine for the whole of Ireland, a geographical market in which neither
broadcaster published a rival product. The Court upheld the Magill/ITP complaint against
the broadcasters. The initial Commission decision in Magill could tenuously be held to
apply a general duty to deal in intellectual property essential facilities, extending even to
major sports coverage. This stretches the credibility of the doctrinal approach. It is better
analysed as a flagrant abuse on the facts from the Court of First Instance analysis
(1995)xxxiii. In the latest assessment of judicial use of essential facilities doctrine in the
European context, Ladbroke (1997), Korah has written of her unhappiness with ”the
failure expressly to limit Magill to extreme cases.”xxxiv



                                              7
This leads to the offering of a valid comment on the application of economic principles to the
practice of competition policy. Typically, competition authorities have typically taken a rather
”textbook-ish” view on the existence of economic surplus or economic rent.xxxv Specifically, all
rent is viewed as monopoly rent and is therefore regarded as a result of anti-competitive actions
or behaviour. In passing judgement on the possible anti-competitive consequences of the control
of bottleneck facilities in high technology sectors, a greater understanding of the concept of
economic rents should be demonstrated. Rent may be divided into three categories, where only
the first, monopoly rent, may be accurately said to be the result of anti-competitive activity.xxxvi
Rents may accrue due to innovation and risk taking, without which there may be no advancement
in the market. Welfare economics suggests that innovation or Schumpetarian rents should be
actively encouraged rather than penalised and that care must be taken in the regulatory process so
as not to stifle incentives. The third form of rent is due entirely to natural events and may be
regarded as a Riccardian rent or a natural monopoly rent. Existence of Riccardian rent cannot
be the result of anti-competitive activity and so should not be penalised as though it were,
although care must be taken such that the monopolist does not abuse the position.

These problems appear novel in television because of its formerly strict vertical separation and
government ownership of bottlenecks, but needless to say the bottleneck issues have always
existedxxxvii. Extension of the essential facilities doctrine raises problems of regulating a dynamic
and structurally complex industry, where successful innovation can easily confer monopoly
status, which may trigger a competition intervention. We are, however, encouraged by the 1996
Office of Fair Trading investigation of pricing in the UK wholesale market for content xxxviii, as
the conclusion were clearly based on a need to not penalise innovation. We begin our analysis by
examining UK regulation of the API and EPG ‘bottlenecks’.


3. Technical Bottleneck Facilities
Applications Programme Interface

Where the technical bottleneck facilities have been made subject to regulatory
interference, the issue of third party access to conditional access services has been the
primary concern. However, some understanding of how digital television reaches the
consumer suggests that there are other technical bottleneck facilities that may be equally,
if not more, important.       This is especially the case for the provision of interactive


                                                 8
services. In this section, we focus on the regulatory problems that surround the set-top
reception unit (Integrated Receiver Decoder (IRD) or set-top-box).

The IRD may itself be broken down into its component parts, primarily the Applications
Programme Interface, the Verification software xxxix and the Electronic Navigation System xl .
Consider the IRD. To a rough approximation it may be regarded as a computer. In the vertical
description of the computer system architecture, the API rests between the operating system that
shields the user from the complexity of the hardware, and the applications (the individual pieces
of software that provide the user with services). The API is an operating language that controls
the functioning of the terminal. The API defines the software interface that the applications
expect to find on the IRD.

Many of the hyped digital TV applications will need to interact with the IRD’s API. It is
therefore important that service providers are able to use the API in order to deliver their full
range of services.

Example Applications

        1.) Side channels

        2.) Digital teletext

        3.) Interactive programming

        4.) Navigation software

        5.) Transactions technologies

There are several ways by which the controller of the API could obstruct market entry.xli

        1.) The procedure of getting applets checked and delivered to the IRD could be
        restrictive and a source of delay.

        2.) The API may be unable to support the desired service.

        3.) The operator may refuse to provide access to the technical specifications
        necessary to interact with the API.

        4.) Access may be provided but not on advantageous terms

In developing the API for the digital TV industry, manufacturers have typically made use
of technologies developed for the PC industry.xlii In fact, the origins of the API are found
                                               9
in the PC industry, where Windows is perhaps the best known API. The PC market
provides a useful insight into the problems surrounding the API.                Technical
specifications for the Windows API are well defined and licensed to applications
programmers. Retailers are therefore able to stock ”Windows compatible” software,
confident that it will operate on any Windows-based computer. The importance of API
compatibility is well known for the PC market. In Microsoft (1998) xliii , Williams J.
analysed the function of the API:

       the operating system provides a basic support structure for an application via
       APIs…Each operating system’s APIs are unique; hence applications tend to be
       written for particular operating systems…xliv

Similarly, if the technical specifications of the IRD API are well defined and made easily
available then programmers for applications such as interactive software can operate with
the confidence that the application will function on all compatible decoding equipment.
It should be noted that there is no requirement to define a formal API. For example,
PerfecTV (in Japan) digital services provides just an EPG, and so long as agreement can
be reached between the relevant parties on transmission specifications then the IRD from
rival manufacturers can quite easily be made to provide services in a uniform way. An
API is, however, necessary where the service provider wishes to offer either new
applications or an updated version of an installed application. This function may be
useful given that, once installed, updated versions of the software and new software
applications will be developed and introduced.

Electronic Navigation Software

Similarly, there are clear links between the navigation software to be used on the digital
IRD and that found for accessing and browsing the World-Wide-Web (WWW).
Navigation software designed for digital television enables consumers to access
information on all services that are available to them. The consumer is able to navigate
between services without reference to the multiplex that carries them, the EPG thereby
concealing the complexity from the viewer.       The EPG processes user commands and
calls the appropriate file manager to perform the requested function. Although like


                                           10
others, we commonly use EPG as synonymous with navigation software, EPG is only one
possible technology. The EPG may be best thought of as a richer system that provides
service details for many days in advance, while the term Electronic Services Guide (ESG)
describes a far simpler, text based system that provides bare minimum functionality.xlv It
is the function of the navigation software to enable the consumer to move easily between
services, to review current and near-future services without disrupting current viewing or
recording and facilitate the future scheduling of event recording.                There are two
approaches to the user interface. First, the navigation can be ”up/down”, where there are
sequentially numbered channels within a bouquet or second, a single key selection where
consumers will select services by the programming genre rather than by channel location
within the bouquet.

From a regulatory perspective control of the EPG is important as it provides a daily opportunity
to influence viewing shares. The navigation technology provides for provides for strategic
control of the digital TV industry, as they are the first service that confronts the viewer and they
inform the consumer of the services that are available. The EPG will be the de facto method by
which the consumer will control daily scheduling as well as the means by which service
providers will market their content to consumers. As the audience becomes increasingly
fragmented across multiple channels the navigation software will become the crucial tool for
influencing viewing patterns.

The potential for abuse is obvious given the purpose of the EPG. Consumer selection of
programming services may be influenced by the navigation software, and any bias in the listing
will have serious implications for content providers.

With respect to Internet navigation software, Williams J. analysed the function of browsers:

        Browsers enable the users to navigate the Web and to access information. Most
        browsers are designed according to a ”multiplatform” approach…Microsoft’s
        Windows 95 licence agreements have required [manufacturers] to accept and
        install the software package as sent to them by Microsoft, including Internet
        Explorer, and have prohibited [them] from removing any features or functionality,
        i.e. capacity to perform functions such as browsing.xlvi




                                                11
The Department of Justice had previously succeeded in obtaining a temporary stay on
such bundling of navigator with API, with the intention of forcing Microsoft to display
Netscape’s Communicator navigation programme with equal prominence. The success of
Microsoft’s appeal on 23 June raises the prospect that it wins the full hearing of the
appeal in the autumn of 1998. A very similar competition dilemma arises with the digital
pay-TV decoder’s API and navigation browser, the EPG. In the UK, the API and EPG is
designed and licensed by vertically integrated actors, who typically also control
proprietary conditional access systems, programming rights and subscriber management
systems.

Although there are undoubtedly competition concerns that arise from control of
bottleneck facilities on a stand-alone basis, control by vertically integrated xlvii service
providers of the key facilities yields extra-proportional increases in market power. xlviii
Consider the route to the consumer. Content suppliers must be able to access all the
facilities of the IRD, as a package. It is vertical integration the facilitates the potential
for abuse.


4. Regulation as Means of Control
While the issue of third party access to technical facilities was central to the 1995
Advanced Television Services Directive, control of the internal functions of the IRD were
largely ignored. There may have been many credible reasons for the exclusion and any
guesswork would be mere supposition. Under the 1995 Directive, third party access to
conditional access technologies was to be granted on ”fair, reasonable and
non-discriminatory terms”, with responsibility for ensuring this given to Member State
legislation.   Authority for ensuring that third party access to proprietary conditional
access systems within the UK has been awarded to the telecommunications regulator,
Oftel. Regulation by Oftel has been justified on the grounds that although conditional
access is a television service the technology makes use of existing telecommunications
infrastructure and should therefore be regulated as other telecommunications services.xlix

After a lengthy period of industry and public consultation Oftel published provisions that
would underline the regulation of access to conditional access services. Oftel

                                             12
demonstrates that regulatory interference should be regarded as a last resort, as
intervention will only be triggered where commercial negotiations fails to produce an
agreement that is acceptable to Oftel.

We view the approach taken by Oftel to be a sensible one and it may serve as a useful
guide to other, similarly position regulatory authorities. Rather then impose some form
of price regulation, the UK system is to rely primarily on commercial negotiation.
Regulatory intervention will only materialise where there is a failure to achieve an
acceptable agreement.

Now to the interpretation of the specific regulatory conditions. ”[F]air and reasonable”
have been construed as inferring some general equality between the total revenues and the
overall costs associated with conditional access services. However, aspects still to be
settled include the appropriate method by which any network subsidy can be recovered
from third parties.    With regards anticipated charges, Oftel has proposed that these
should be set somewhere between incremental and stand-alone costs, but some difficulty
still arises here as that leaves a broad range of choice, especially as many of the incurred
costs are common.

Perhaps even more arduous has been the interpretation of non-discrimination. While it is
true that a flat uniform charge for each broadcast service might be non-discriminatory, but
it is inefficient in that it ignores the demand conditions. The effect of uniform charging
would be that otherwise viable services would fail to survive, as they had insufficient
revenue potential.    Once again, Oftel has shown a great deal of common sense by
enabling price discrimination among three categories of services: free to air, pay TV and
interactive services. Although, we believe this to be a sensible approach, until it is
tested, we cannot say with certainty how effective the process will be.

It comes as no surprise that Oftel has taken a very broad definitional view of conditional
access services. l    Oftel has claimed the disputed right to regulate all EPGs that are
married to a conditional access system, taking the view that the EPG is an integral
element of the conditional access system. Although not specific on the details, Oftel




                                            13
will, by regulation, seek to prevent any restriction of competition between broadcasters on
the EPG.

The EPG provides an example of a regulatory issue that arguably overlaps the
responsibilities of both the ITC and Oftel, as the ITC has published a Code of Conduct for
the provision of EPG systems. While the Code is very detailed, the terms of access are
very vague, stating only that access must be provided on fair, reasonable and
non-discriminatory terms. It is pleasing to see that with regards to the regulation of the
EPG, the ITC and Oftel have initiated a joint committee to oversee the regulation,
although as the industry develops in the UK it will be of interest to see which regulator
will take precedence.

One recent example where there is clear industry confusion li as to whom is actually
responsible for imposing regulation is that of IRD interoperability, where the satellite
service provider BSkyB has complained vociferously that the ITC has no powers to
mandate minimum technical standards for the IRD.lii It is argued, by BSkyB, that those
powers lie with Oftel. This confusion arises from the failure to address all of the
technical facilities and to explicitly define responsibilities.

However, the high cost, lengthy and complex regulatory process makes the regulation of
each and every technical facility inadvisable. We are concerned with the apparent
approach proposed in the UK Green Paper liii , for ex-ante regulation of bottleneck
facilities, without any apparent consideration of the implications of such regulation. In a
dynamic industry it is also very difficult for the slow moving regulatory process to
address each new facility as it develops and to adjust the regulation as any combination of
competition, dynamics and technological development, acts to reduce the potential for
abuse at any particular stage. It is also difficult to address the potential that may exist for
technological by-pass of certain facilities and what the consequences may be for the
consumers should the degree of regulation be regarded as too stifling. For example, as
already noted it may be possible to introduce an IRD without an API. It is the consumer
who suffers, as the IRD then has a lower degree of functionality and many of the benefits
of digital television would not be realised.


                                               14
5. Self-Regulation and Industry Standard Setting
Where specific regulation may fail to provide an adequate to the problem of ensuring fair
and effective competition at the stages of technical bottlenecks it may be possible to
provide standardised technical interfaces, where the technical specifications are
effectively open, that is well defined and freely available for commercial exploitation. It
may be then that standardisation provides a route around the bottleneck.

The   primary    beneficiary    of   standardisation    is   the   network    industry   (e.g.
telecommunications and television liv ), where the consumer benefit increases with the
number of network users.       Where there is competition between rival incompatible
standards, it is often the case that where one standard is perceived to take a slight lead (in
terms of the number of users) then there is a bandwagon effect, where new consumers
move increasingly in favour of the ”ahead” standard. This is a rational approach as the
larger customer base may lead to obvious consumer benefits. For example, a subscriber
to a mobile telephone service will be able to contact a greater number of people (and a
greater number of people will be able to contact him) if he chooses the most popular
standard. This tipping effect can be decisive in the market battle between competing
standards and the user growth can become self-sustaining. During the standards battles
the end result can often depend upon very subtle differences in the technologies and in
changes in consumer perceptions of the perceived benefits. For an analysis of competition
in the convergence sector it is important to appreciate the problems of standardisation and
why the process itself may inhibit competition.

First of all, from the very brief description of the bandwagon effect and the explanation of
network economics, it becomes obvious that once a standard has become entrenched it
becomes very difficult to replace or to compete with it. This is not so much of a problem
where the standard is a good one and the technical specifications are freely available, but
when a superior technology (in whatever way that may be determined) is developed it
may be impossible for it to achieve a critical mass in the market. It may sounds perverse
but there are even problems associated with competition between rival standards. Where
there is competition, neither standard may achieve the critical mass required to ensure a
future for the technology, as consumers will often refuse to enter the market rather than

                                             15
risk purchasing the ”losing” technology and becoming obsolete. In a dynamic
environment, such as the converging industries, there is a great risk of premature
standardisation. For example, while third generation mobile communications will not be
licensed for some years, the International Telecommunications Union is already engaged
in the process of standardisation. This is despite the fact that no-one is certain what use
the consumers will seek to make of this mobile multi-media technology and the fact that
competing standards may provide an indication of the consumer wants, rather than the
wants of the technologists. Moreover, there is also a problem of market fragmentation,
where ”pockets” materialise, within which there may be a single standard, but there may
be no compatibility between the pockets. The standardisation process itself may be
corrupted by the nature of the standards bodies. Where these bodies are established for a
specific purpose (e.g. to reach an industry agreement on the width of a widget), the
extension of their ”life” may be for the purpose of protecting either the established
standard from external competition (in this case the process forms a trade barrier) from a
competing standard, or to protect the established ”owners” of the standard from new
entrants.

This perhaps portrays too negative a view on standardisation. We also recognise the
benefits. For example, in general, standardisation offers the following benefits:

       1.) the larger markets for complementary products as a result of the freely
       available interface specifications

       2.) scale economies for manufacturers, meaning that unit costs of production are
       lower

       3.) there can be increased connectivity (anyone, anywhere, anytime)

       4.) greater competition between the manufacturers of the core products

There are three traditional approaches to standardisation: market driven, government
imposed and technology industry driven. The method of standard setting and the structure
of the body responsible is highly case specific. With the rapid technological challenges of
convergence the traditional approaches to standardisation were shown to be inadequate
and it soon became the norm for the industry to drive the process, and from a commercial

                                            16
rather than technological focus. The European Digital Video Broadcasting group (DVB)
are responsible for producing an impressive list of technical specifications for all aspects
of digital television and in a very short period of time. The DVB is a consensually driven
voluntary industry group with more than 250 members world-wide. However, its reliance
on consensus has demonstrated one weakness in this process. The case of conditional
access is well known, where the DVB was unable to reach a satisfactory agreement and
produced a fudged compromise solution, that required European Commission
intervention in an attempt to salvage some credibility for the process. The basic problem
with achieving a common standard on conditional access is that there were too many
powerful vested interests, that were able to block what was not in their own interests. The
existence of strong private interests among influential members disrupts the
consensus-based system, perhaps beyond its degree of usefulness.

After an unexplained delay, that may have serious implications for competition in the
marketlv, the DVB began to develop technical specifications for the EPG and for the API,
as did national industry groupings, such as the UK Digital Television Group. While the
DVB specifications do go some way towards facilitating the production of universal
IRDs, with its specifications for service information and programme service information,
they fail in that they permit private data formats for programme information. With this
flaw, the specifications enable those who wish to exclude selected IRD customer bases.
If a common format had been mandated then this would not have been possible. The
WWW browser industry provides an excellent illustration of different browser suppliers
running on different hardware, but all addressing the same information. This
demonstrates that where there is a will, it is possible to achieve comprehensive
standardisation. However, the existence of powerful self-interest acts as a barrier to the
process of standardisation.

In the US standardisation of digital TV the conflict of self-interests has acted as a barrier
to standardisation and has slowed the development process significantly. On the video
format element of the digital TV transmission standard the conflict between the computer
industry and the TV industry threatened to destroy the whole standard (until it was
eventually and reluctantly decided to approve two video format standards). Conflict has

                                             17
again arisen between the two groups with regard the development of a standard for the
API, with the computer industry strongly favouring the mandating of the current
computer industry standard API, Win-32.

It is clear then that the desire for a common standard that would remove the potential to
abuse the monopoly position may be futile and that a standard can raise as many
difficulties as it solves. Moreover, the process itself can be used by dominant interests, to
inhibit the potential for competition.


6. Regulatory Institutional Structure
An associated problem to that of definition of the ‘bottleneck’, is the structure of the
institutional regulatory bodies, which examine and implement competition policy in the
converging communications environment. Two alternative approaches have previouslylvi
been suggested: bottleneck control through specific regulation, or through generic
competition law. These approaches are in addition to the asymmetrical regulation of
dominant market actors evident in much telecoms ‘local loop’ access and interconnection
regulation. Cave and Cowie caution that ”a policy of minimum regulation would appear
appropriate” lvii , as specific regulation may lack flexibility, and lead to technological
by-pass and regulatory obsolescence in a market as dynamic as digital pay-TV. Generic
competition law is flexible and acts as a more general deterrent to anti-competitive
conduct. However, we conclude by cautioning against the use of such an instrument to
pursue a narrower objective, where an alternative declaration of public policy is
practically feasible. Where control of a facility is held to be egregious to public policy, a
regulatory declaration to that effect may prove more transparent than continual
efficiency-diverting litigation. In converging communication industries, the historical
experiences of broadcast (specific spectrum ‘bottleneck’ regulation) and telecoms
(asymmetrical regulation), are contrasted. In conclusion, we also caution that a converged
super-regulator, though superficially attractive to European actors accustomed to
continual intra-institutional turf wars, may bring a surfeit of institutional and operational
baggage to competition cases, resulting in internal institutional confusion and investor
uncertainty.

                                             18
We examine four national institutional approaches lviii: Australia, the US, the UK, and
Germany. It is the degree of flexibility, efficiency in enforcement, and transparency,
which is examined, in view of our concern with specific and generic approaches to
‘bottleneck’ regulation. Australia exhibits generic competition regulation, Germany a
federal-regional division of responsibilities for respectively telecoms and broadcasting,
the UK a ‘coexistence’ of telecoms and television regulators supported by a newly
reformed generic competition law, the United States a unified specific regulator supported
by generic competition law. Proposals for reforming regulators are also compared.

Australia

Australia is in the forefront of de-regulatory policy in the communications sector and in
1997, replaced industry specific regulation with general competition law. The Australian
Competition and Consumer Commission now has responsibility for the application of
general competition law (under the Trade Practices Act 1974) to ensure that there is no
undue restriction of competition in the communications industries. Although it is too
early to offer a firm opinion on the success or otherwise of a system of control based
entirely upon competition law, there are a few comments that we can make. The major
difficulty in relying on competition law is the lack of industry specific expertise and while
this can certainly be acquired there is a positive significant cost to this. This can lead to
a lack of action on the part of the regulatory system, due to uncertainty of the economics
of the industry in question. The ACCC has been vociferously accused of a failure to
address     problems   in    the   telecommunications      industry    by   the    Australian
Telecommunications Users Group Limited (ATUG), who have complained that the slow
pace of intervention has lead to industry confusion and frustration.lix It may be argued,
however, that the high evidence requirement of the judicial system may slow the process.
It will really require a substantial amount of case study material to ascertain the success of
general competition law in Australia in controlling abusive behaviour in the convergence
sectors.

Germany




                                             19
Of our four case studies, Germany exhibits the greatest regulatory and institutional
complexity in its governance of communications serviceslx. Arguably, this is due to the
rigidities of its federal constitution, under which a distinction is made between the
responsibilities of states (lander) and the central government (bund). While these federal
jurisdictional issues are familiar in the United States and Australialxi, they are unusually
strongly drawn under the post-war German constitution. States regulate broadcasting
and media services – Mediendienst – while the federal government in Bonn regulates
telecommunications, communications and information services – Teledienst. Recent
policy debate in Germany has tended to concentrate on the constitutional rather than
regulatory efficiency arguments. As Koenig and Roeder statelxii:

       Neither states nor federal government dared the more holistic venture of changing
       the constitution, to create joint competence and a joint regulatory regime between
       federal and state government.lxiii

They indicate that such constitutional prevarication prevents effective reform:

       In creating a holistic "one-stop shop" for enterprises, Germany's position in the
       contest for investment in the sectors of telecommunications and media would be
       decisively improvedlxiv.

The surfeit of multi-level regulators for different sectors are in addition to the Federal
Cartel Office, and the authority of the European Commission, a further layer of regulation
which is shared with fellow European Union member states, including the UK.

United Kingdom

The UK system differs from that in Australia in that there are sector-specific regulatory
agencies that are bound by competition regulation.         Traditionally, the Independent
Television Commission (ITC) has responsibility for the regulation of commercial
             lxv
television         , while the Office of the Telecommunications Regulator (Oftel) has
responsibility for the regulation of telecommunications services. Competition policy is
addressed by the Office of Fair Trading (OFT) and the Monopolies and Mergers
Commission (MMC)lxvi.



                                             20
The transition to digital television has created a powerful argument for regulatory changes
to address the specific regulatory challenges of convergence. While in opposition, the
present government stressed the need to match the convergence of communications
technologies with the convergence of regulatory bodies, in the shape of the much-hyped
Ofcom (Office of Communications Regulation).               Ofcom would oversee all the
communications industries. While it may eventually materialise in the UK, we feel that
it is an unnecessary step at this stage in the development of the technologies. For the
UK, it is necessary to begin by asking for the tasks that would be required of the
regulatory structure. It is then possible to begin a debate over the ultimate structure of
regulation.   We are pleased that the Government now accepts the validity of this
argument and in the recent (very) Green Paperlxvii on the future of regulation in the UK
goes no further than raising for discussion a range of options for the future structure.

The present dual regulatory approach raises interesting issues. Where there is overlap of
responsibilities it has proven sensible to encourage joint committees to address specific
issues, but where matters are now explicitly identifiable with on regulator or the other,
there has been confusion and industry frustration. Unregulated competition between the
regulators raises issues of efficiency and, in particular, the questions of: which regulator
will have greater ability to enforce regulatory decisions; and to which regulator will
complainants turn for protection from abusive actions?

United States

In the US communications industry, the Federal Communications Commission (FCC) is
responsible for regulating interstate and international communications by television,
telecommunications and radio. Rather than adopt the single regulator structure of Oftel
(and the proposed Ofcom) the Senate appoints five Commissioners, each for a 5 year
term, with the President appointing one of the five as Chair. The FCC is comprised of
specialist bureau, each of which is responsible for a certain part of communications
industry policy. The FCC has wide ranging powers, but is constrained somewhat by the
rights of the US Department of Justice to become involved in competition issues and the




                                             21
litigious nature of the US regulatory system. In addition, an important role is played by
state Public Utility Commissions.

While one of the proposals for UK Ofcom is based on the FCC style regulatory
commission (see earlier), the FCC system is far from perfect. In view of the UK debate, in
which outgoing Director General of Telecommunications, Don Cruikshank, argued for
the implementation of a ‘college of commissioners’ modellxviii, in contrast with the single
regulator which was the model adopted in the privatisations of public utilities in the
period 1984-91, it is striking that Harry Shooshan has argued recentlylxix for the FCC to
be reformed, in favour of a single regulator. A reasonable inference from such opposing
views is that there is no easy answer to the personnel structure. As with any commission
structure, there are clear differences in opinions as to regulatory matters on may occasions
and it is often the case that these differences can slow down the regulatory process and
lead to indecision. Where compromise is reached, as is often the case, it is clear that the
regulatory decision is nothing more than a fudge and will be subjected to severe legal
scrutiny. Despite the benefits of overseeing the whole communications market and being
able to interpret the consequences of decisions in one sector for another and in particular
for addressing cross-sectoral matters, the commission approach is not an impressive one.
At the end of the day, regulatory structures are really a matter of regulators (i.e. the
individual regulators concerned), but a single regulator is in our view undoubtedly a
superior option to that of a commission.

Comparing Alternative Institutional Approaches

In the introduction to this paper, we briefly indicated the concerns raised by the European
Commission Green Paper on the Regulatory Implications of Convergence. Its importance
for future European regulatory structure merits re-emphasislxx. Commissioner Bangemann
has stated:

       We may need to simplify the current framework and to perhaps bring together
       legislation on the provision of infrastructure, services, content and on conditions
       for access to that content (via TV, computer, or telephone networks)...10 years
       after the 1987 Green Paper [which led to telecoms liberalisation], we intend the


                                            22
        Convergence Green Paper of 1997 to be a platform for defining the policy
        response to this evolving communications and media environment over the next 5
        years.lxxi

The implication is that a European-wide Federal Communications Commission, adapting
the US model, be adopted. Equally, there may be reasonable disagreement regarding the
‘coexistence’ or convergence of discrete telecoms and broadcast regulatorslxxii. While the
FCC is a converged regulator, it is arguable, and often argued, that transparent public
disagreement is thus replaced by opaque internal negotiation processes. In the UK, the
functional vertical distinction between carriage and content, as suggested by the European
Commission Green Paper, is in practical terms indistinct. Individual licenses to broadcast,
for instance, select from a menu of public and private obligations, rights and duties, in
such diverse subjects as minority and commissioned programming, standards of fairness
in journalism, and other policy considerations lxxiii . When combined with the wide
discretion which the legislature and judiciary afford to the television regulator lxxiv, the
regulatory landscape in the UK appears inimical to a converged regulatory arrangement
based on competition law.

Resolving such an apparently intractable regulatory inheritance by resort to generic
competition law, as suggested by Huberlxxv, may therefore appear attractive, if politically
unfeasible. The evidence from the most radical such regime, in New Zealand, is mixed,
suggesting that competition policy alone may not resolve public policy concerns in a
converging communications landscapelxxvi. It has already been seen, in our discussion of
German and European Union regulation, that institutional and even constitutional issues,
often far removed from considerations of economic efficiency, can override the issues we
have thus far considered. Some general comments, supported by striking European case
studies in political intervention in the regulatory process, may shed light on public policy
considerations in which efficiency plays little part.


7. Public Policy Constraints on Generic Competition Law
Television content regulation, though often cited as in the V-chip debate, is not the only
obstacle to rationalist economic analysis of convergence. Less predictable interventions

                                                 23
are also evidenced, principled and less principledlxxvii. The use of generic competition law
to pursue a much narrower objective, that of declaring an essential facility, is the
approach evidenced in the Microsoft litigation, as also in the European Broadcasting
Union caselxxviii. The definitional uncertainty of ‘bottlenecks’ in the vertical value chain is
perhaps a symptom of the wider complexity of response to the issues arising in this
dynamic marketlxxix.

In the European context, it is on public policy grounds, rather than generic competition
law, that any attempt to impose the essential facilities doctrine on European digital
pay-TV actors is strongest. European public service broadcasting goals of quality and
diversity are not content-neutral. European regulators, unhindered by US precedents for
the unconstitutionality of content rules, can be explicit in their embrace of such
content-biased policy. The problem met in the Court of First Instance's European
Broadcasting Union (1996) decision is that the application of generic competition law
fails to embrace these wider policy goals. The EBU, the European public broadcasters'
cartel, performs a video service somewhat similar to the print operations of the
Associated Press in the US. Excluded commercial broadcasters, which compete with the
EBU for sports rights, had complained that the widening of EBU membership to various
commercial broadcasterslxxx undermined the original public policy rationale for granting
an exemption. The Court of First Instance found that EBU was in breach of its obligations
under Article 85(3) of the Treaty of Rome, which grants prior notified exemptions for
cartels which operate to the benefit of consumers or economic welfare, express economic
parameters. DG IV had always given such an exemption under Article 90(2) in the public
interest. This wider public policy consideration was struck out by the Court. EBU is now
preparing an appeal to the European Court of Justice on narrower competition grounds.

However, there is a European precedent for a legislative approach, which brooks no
judicial argument. Following the controversy described above in the European
Broadcasting Union decision, and as a result of concern at European digital pay-TV
operators acquiring the intellectual property rights to sporting events, Protocol 32lxxxi was
in 1997 added to the Treaty of Rome, the basic legal document establishing the European
single market. This Protocol establishes a privileged position in competition law for

                                              24
public service broadcasters. Another example of specific regulation, in the case of
intellectual property rights, is the revised Article 3A of Directive 89/552/EC lxxxii . The
Article ensures that transfrontier broadcasters must respect national legislation enforcing
compulsory free-to-air carriage of specific listed eventslxxxiii.

One may therefore conclude that there are various non-competition responses to
convergence, encompassing constitutional law and often unanticipated, shifting public
policy goals. The certainty of regulatory lag, in digital pay-TV, tempts either a crude and
excessive regulatory response, or industry resistance to regulation in any form, beyond a
stage at which public policy dictates at least some regulatory intervention, if only to
outlaw the worst excesses of contentlxxxiv.


8. A Tentative Conclusion
The regulatory principles of transparency and flexibility must be adhered to. In specific
hard cases, in which fine judgements must be made on public policy grounds, such as in
the Microsoft litigation or European digital pay-TV, it may be observed that government
will intervene only when industry actors’ behaviour is perceived as inimical to the public
good (whatever the economic reality of the case). With this overriding policy assumption
in mind, it is suggested that government regulate in specific circumstances using specific
tools, where necessary. Economic theory evidently requires there to be overwhelming
evidence in favour of such intervention, though legislative practice is less rigorouslxxxv.
Generic competition law is too broad an instrument to brandish when pursuing a specific
policy. Equally, specific policy should result from specific market analysis. Policy failure
in generic competition analysis can result in a judicial decision, such as Tetrapak II, as
described by Valentine Korah, ”in a judgment that contains hardly any reasoning – mainly
just conclusions.” lxxxvi The use of courts to settle fundamental policy issues in the
European Union, is perhaps less well known than in the US. It is equally unsatisfactory. It
is as well to note that generic competition solutions, in addition to the merit of flexibility,
carry the liability of judge-made law, with often contentious political ramifications. In
conclusion, there is therefore no right way to skin the cat, but perhaps no proven need to
harm the creature in the first place.

                                               25
i
      Telecommunications Act 1984.
ii
      Modified Final Judgement, breaking ‘Ma Bell’ into the ‘Baby Bells’ and AT&T.
iii
       See for instance, Hoffman-Riem, Wolfgang (1996) Regulating Media: The Licensing
and Supervision of Broadcasting in Six Countries Guildford Press. A US perspective is
provided in Noam, Eli M. (ed.) (1985) Video media competition : regulation, economy, and
technology change Columbia University Press.
iv
       DTI/DCMS Regulating Communications: approaching convergence in the Information
Age,           Command        4022,      HMSO,           released         21    July         1998.
http://www.dti.gov.uk/converg/exec.html
v
      At para.3.26.
vi
       Cave, M. and Campbell Cowie (1996) "Regulating Conditional Access in European Pay
Broadcasting", Communications and Strategies, No.23, 3rd quarter 1996 at 119
vii
       A debate stoked at European level by KPMG (1996) Public Policy Issues Arising
From Telecommunications and Audiovisual Convergence, a report prepared for DG XIII,
London September 1996
viii
         CEC    (1997)   COM(97)623      Green       Paper    on    the   Convergence   of     the
Telecommunications, Media and Information Technology Sectors, and the Implications
for Regulation, Brussels, 3 December
ix
       The UK Green Paper is open to consultation until 30 November 1998. Supra n.4.
x
      For a ‘snapshot’ of the debate in October 1997 in the UK, see Marsden, C. (1997)
‘Convergence or Coexistence? Television and Telecommunications Policies Diverge in
the             Convergence           Debate’            in           JILT         3            at
http://elj.warwick.ac.uk/jilt/wip/97_3mars/default.htm
xi
       Temple Lang J. (1994) Defining Legitimate Competition: Companies' Duties to Supply
Competitors and Access to Essential Facilities 18 Fordham International L.J. at
           441-523; Ridyard D. (1996) Essential Facilities and the Obligation to Supply
Competitors under UK and EC Competition Law 8 European Competition Law Review at

                                                26
438-452; Furse M. (1995) The Essential Facilities Doctrine in Community Law 8
European Competition Law Review at 469
xii
       The television industry lends itself to decomposition into a series of discrete stages.
Such decomposition is entirely arbitrary, but here we view such an exercise as useful.
xiii
        The term ”gatekeeper” refers to the controller of proprietary bottleneck facilities.
Access to an installed base of reception equipment is only possible with the agreement of
such operators.
xiv
        Further, there are potential abuses that are specific to particular bottlenecks.
xv
       A non-discriminatory access charge may be fair but it is not economically efficient, as
it fails to reflect demand conditions. This is especially the case for conditional access
services.
xvi
        It is certainly the case that regulation at the level of delivery has had more to do with
political interference and public policy than economic efficiency and spectrum scarcity.
xvii
        License conditions are commonplace, governing how the facility is actually used.
xviii
         This raises issues of how to make the most efficient use of spectrum capacity, a topic
that is beyond the scope of this paper.
xix
        For a discussion of the economics of access to content, see Cowie, Campbell and
Williams, Mark, ”The Economics of Sports Rights”, Telecommunications Policy, August
1997.
xx
       Ungerer, Herbert (1998) extracts from published speech, ”Beating the band-width
bottleneck”                                      14/05/1998                                Paris
http://europa.eu.int/en/comm/dg04/speech/eight/en/sp98017.htm
xxi
        There would be no gains to any downstream subsidiary to offset the lost profits at the
upstream level.
xxii
         From ‘Windows’ and ‘Intel’ – used to describe standard setting in dynamic
high-technology markets at intermediate points in the vertical value chain. See further


                                                   27
Borrus, M. and Zysman, J. (1996) You don't have to be a giant, Working paper 96A,
Berkeley Roundtable on the International Economy (BRIE), UC Berkeley
xxiii
         See Page, A.C. (1996) Technology and the Future of Antitrust Law 47 Fed.Comm.LJ 1
at 100. Shapiro, C. (1996) Antitrust in Network Industries, San Francisco, 25 January
gopher://justice12.usdoj.gov:70/00/atr/talks/shapir.mar; Biggio, C.E. (1996) Antitrust and
Networks,                      San                 Francisco                  2                February.
gopher://justice12.usdoj.gov:70/00/atr/talks/biggiospc.txt
xxiv
         Overd, A. and Bishop, W. (1998) Editorial: Essential Facilities: The Rising Tide,
European Competition Law Review Vol.4 at 183-185.
xxv
        Commission of the European Communities (1995), (95/47/EC) EC Directive on the use of standards for
the transmission of television signals 23/11/95 EN OJ EC No.L281/51-54

xxvi
         Areeda P. (1990) Essential Facilities: An Epithet in Need of Defining Principles, 58
Antitrust L.J. at 841
xxvii
        United States v. Terminal R.R. Association (1912) 224 US 383

xxviii
          Associated Press v. United States (1945) 326 US 1
xxix
         Ibid at 29.
xxx
        MCI Communications Co. v. AT&T (1983), 708 F.2d 1081 (7th Cir.), cert. denied, 464
US 891at 1133
xxxi
         Commission decisions include: British Midland/Aer Lingus (1992) (Commission
Decision EEC 92/213, OJ 1992 L96/34); B&I/Sealink, Holyhead (1992) (22nd Report on
Competition Policy at point 219); Port of Rodby (1994) Commission Decision EC 94/119,
OJ 1994 L55/52; Port of Roscoff (1995) 4 CMLR 677; Sea Containers/Stena Sealink (1994)
Commission Decision EC/94/119, OJ 1994 L15/8; Irish Continental Group/C.C.I. Morlaix
(1995) 5 CMLR 177. Non-shipping decisions include Sabena (OJ L317/47 [1988]). Temple
Lang (1994) emphasises a 1981 case: IGR Salora. See White S. (1995) Is there an
essential facilities doctrine in Europe? IBA 6th Annual Seminar on Telecommunications
Services and Competition Law in Europe, Vienna, April 1995.



                                                      28
xxxii
         Magill TV Guide/ITP, BBC and RTE (1989) OJ 78/43 [1989], Cases C-241/9/P and
C-242/9/P.
xxxiii
          Radio Telefis Eirann and Others v. Commission (1995) C-241 &242/91P, [1995] ECR
I-743 [1995] 4 CMLR 718.
xxxiv
          Korah, Valentine (1998) The Ladbroke Saga, European Competition Law Review
Issue 3 at 176
xxxv
         Economic rent is the surplus of revenue over costs.
xxxvi
          Even here, there is some need to understand the existence of entry barriers and the
appropriate policy response to the barriers.
xxxvii
                      Temple               Lang              (1996)             at            5,
http://europa.eu.int/en/comm/dg04/speech/six/htm/sp960541.htm
xxxviii
           The Director General’s Review of BSkyB’s Position in the Wholesale Pay TV
Market, OFT, December 1996.
xxxix
          The issue of third party access to the Verification software is not dealt with in this
paper although inference can be made to the views of the authors on the appropriate
regulatory treatment.
xl
       Electronic Navigation Systems are often also referred to as Electronic Programme
Guides (EPG) or Event Scheduling Guides (ESG), depending upon their complexity and
their user interface.
xli
        These are in addition to the general bottleneck concerns highlighted earlier.
xlii
        Reference to the Microsoft system.
xliii
        United States v. Microsoft Corporation (1998) District of Columbia Circuit Court of
Appeal, Cases 97-5343 and 98-5012, decided 23 June 1998, from 94cv01564 available at
http://www.cadc.uscourts.gov/common/opinions/199806/97-5343a.txt
xliv
        At 1.
xlv
        For example, the UK Digital Television Group’s defined ESG will only allow the user
to view schedules for the next 10 days.
                                                  29
xlvi
         Supra n.43 at 3: Joint Appendix 81, 86-89, to the case.
xlvii
         For example, see Hart and Tirole, Vertical Integration and Market Foreclosure,
Brookings Papers: Microeconomics 1990; Bolton and Whinston, The Foreclosure Effects
of Vertical Merger, Journal of Institutional and Theoretical Economics, 147 1991;
Ordover, Saloner and Salop, Equilibrium Vertical Foreclosure, American Economic
Review 80 (March) 1990.
xlviii
         As noted earlier, without vertical integration, the incentive for abuse is removed.
xlix
         This could have been interpreted as the first step towards a single communications
regulator.
l
      The original discussion on allocation of regulatory responsibility took place within a
framework of fierce competition between regulators for control of digital television.
li
       There is an industry cost associated with regulatory confusion.
lii
       Financial Times, July 28, 1998, pg. 20.
liii
        Supra n.4 at para.4.6: ”It would often be uneconomic to duplicate these facilities [CAS
and EPG], but those who control them have considerable market power. These gateways
are an instance of developments which justify ex-ante regulation.”
liv
        The more subscribers there are to a television service the more money the service
provider has to invest in content, improving the value of the service to the consumer.
lv
       The longer the standard takes to develop, the longer the window of opportunity for a
proprietary standard to establish critical mass.
lvi
        Cave, Martin and Cowie, Campbell (1998) Not Only Conditional Access. Towards a
Better Regulatory Approach to Digital TV, presented to Euro CPR ’98 Conference.
lvii
        At conclusion 21-22.
lviii
         A more detailed examination of five telecoms regulatory regimes is provided in Brian
Levy and Pablo Spiller (1994) The Institutional Foundations of Regulatory Commitment:
A Comparative Analysis of Telecommunications Regulation, 10 Journal of Law,
Economics and Organisation 2, pp201-246. Their analysis of developing countries and
                                                 30
the UK is applied to the US by Barbara Cherry and Steven Wildman (1998) An
Institutional Perspective on Regulatory Regimes and Investment Decisions by
Telecommunications                                                                        Providers,
http://www.its98.org/conference/library/showpaper.asp?id=730
lix
        ATUG Report Card, January, 1998.
lx
       See generally Philipp Braun and Andreas Schaal (1998): Federalism, the Nation State
and        the   Global     Network::   The    Case    of   German        Communications     Policy
http://ksgwww.harvard.edu/iip/iicompol/Papers/Braun-Schaal.html
lxi
        The UK is unusual in this respect, as the other systems exhibit some degree of
federal-regional cooperation.
lxii
         Christian Koenig & Ernst Röder (1998) Converging Communications, Diverging
Regulators?           -   Germany's   Constitutional   Duplication       in   Internet   Governance
http://www.digital-law.net/IJCLP/final/current/ijclp_webdoc_1_1_1998.html
lxiii
         Ibid para.9.
lxiv
         Ibid para.13.
lxv
        Note that the ITC has no authority to regulate the BBC.
lxvi
         Soon to be renamed the Competition Commission, and reformed under the
Competition Act 1998. http://www.hmso.gov.uk/acts/acts1998.htm
lxvii
         Supra n.4.
lxviii
         Oftel (1998) ”BEYOND THE TELEPHONE, THE TELEVISION AND THE PC –
III”             OFTEL’s          Second         Submission          -          March         1998:
http://www.oftel.gov.uk/broadcast/dcms398.htm#Section 5 at 5.20.
lxix
         Shooshan, Harry M. (1998) A Modest Proposal for Restructuring the Federal
Communications Commission, 50 Federal Communications Law Journal 3, at 637-658.
lxx
        Marsden, C. (1997) JILT3 ”The European Digital Convergence Paradigm”

http://elj.warwick.ac.uk/jilt/commsreg/97_3mars/default.htm

                                                 31
lxxi
         Bangemann,     Martin    (1997)   Speech    in   Geneva     on     8    September
http://www.ispo.cec.be/infosoc/promo/speech/geneva.html
lxxii
         See for a broadcast regulator’s viewpoint, Redley, Michael (1995) 'The Case for
Untidiness' in Converging Media? Converging Regulation? (ed. Richard Collins), Institute
of Public Policy Research, IPPR, London at 21
lxxiii
         See briefly Marsden (1998) Looming Battles in Britain: Fairness Regulations Meet
the Marketplace, 12 Media Studies Journal 2, at 80-84 [Freedom Forum, NY, NY].
lxxiv
         See Gibbons, T. (1998) Regulating the Media (2nd ed.) Sweet & Maxwell, and for
judicial intervention specifically, Marsden (1996) Judicial Review of the Channel 5 TV
Licence Award: ITC Exercises Model Care, 5 Nottingham Law Journal 1 at 86-91.
lxxv
         Huber, Peter (1997) Law and Disorder in Cyberspace: Abolish the FCC and Let
Common Law Rule the Telecosm, Oxford University Press. For criticism, see Permut,
Philip V. (1998) Dogma in Cyberspace, 50 Fed Comm L.J.
lxxvi
         An agnostic legal viewpoint is presented by Webb, Malcolm and Taylor, Martyn
(1998) Light-handed Regulation of Telecommunications in New Zealand: Is Generic
Competition                                  Law                                 Sufficient?
http://www.its98.org/conference/library/showpaper.asp?id=674.      A      more   optimistic
assessment of the ability of generic competition law to regulate interconnection is
provided in Evans, Lewis, Quigley, Neil (1998) Common Elements in the Governance of
Deregulated Electricity Markets, Telecommunications Markets and Payments Systems, at
http://www.its98.org/conference/library/showpaper.asp?id=850
lxxvii
         As an example of a principled approach, it has recently been mooted that the
relationship between competition law and its alter ego, intellectual property law, requires
re-examination in light of the greater complexity and dynamism apparent in the
development of the Internet. Barton, John H. (1997) The Balance Between Intellectual
Property Rights and Competition: Paradigms in the Information Sector, European
Competition Law Review Issue 7 at 440-445. Rather less principled US jurisprudence
indicates that constitutional protection of free speech under the First Amendment is a

                                             32
potential source of reward for commercial litigants. See Nadel, M. S. (1992) A
Technology Transparent Theory of the First Amendment and Access to Communications
Media 43 Fed. Comm. LJ 2 at 157
lxxviii
          (1996) 5 CMLR at 386. This decision has been appealed to the ECJ.
lxxix
          For a legal viewpoint, see Goldberg, D. and Verhulst, S. (1997) Legal Responses to Regulating the
Changing Media in the United Kingdom 8 Util L.R. at 12-22

lxxx
          In the case of Canal+, a pay-TV channel.
lxxxi
          Protocol (No 32) on the system of public broadcasting in the Member States (1997)
http://ue.eu.int/Amsterdam/en/traiteco/en/conso2/conso2.htm
lxxxii
                   The           ‘Television            Without               Frontiers’        Directive
http://europa.eu.int/dg10/avpolicy/twf/160497en.html
lxxxiii
            See Oreja, Marcellino (1997), Exclusive Rights for TV Broadcasting of Major
(Sports) Events, SEC[97] 174 final. See further, the broader analysis on competition
grounds by DGIV, Commission of the European Communities (1998) Broadcasting of
Sports Events and Competition Law Competition Policy Newsletter No.2 (June) at 18-28.
lxxxiv
           Producing an equal but opposite reaction. For an examination of public policy issues
which adopts a prescriptive interventionist philosophy see Mathiason, John; Kuhlman,
Charles (1998) An International Communication Policy - The Internet, international
regulation                       &                  new                  policy                structures
http://www.its98.org/conference/library/showpaper.asp?id=589. See for a more catholic
economic viewpoint, Spacek, Tom (1998) Internet Evolution: Some Communications
Policy Implications and Guiding Principles for a New Policy Framework,
http://www.its98.org/conference/library/showpaper.asp?id=539.                        For   a      salutary
examination of interventionist privacy regulation, see Palme, Jacob (1998) Swedish
Attempts                        to                 Regulate                    the               Internet,
http://www.its98.org/conference/library/showpaper.asp?id=549
lxxxv
           Clear evidence of the information asymmetry between legislators and their telecom
constituents. See C. Goodhart (1997) Economics and the Law: Too Much One-Way

                                                       33
Traffic? 60 Modern Law Review 1.
lxxxvi
         Korah, Valentine (1997) Tetra Pak II – Lack of Reasoning in Court’s Judgment,
European Competition Law Review Issue 2 at 98.




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