Convergence or Coexistence

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					            Journal of Information, Law and Technology


                  Convergence or Coexistence?
               Television and Telecommunications
           Policies Diverge in the Convergence Debate

                                 Chris Marsden
                                 School of Law,
                              University of Warwick
                           C.T.Marsden@warwick.ac.uk




This is a Work In Progress article published on 31 October 1997.




Citation: Marsden C, 'Convergence or Coexistence’, Work In Progress, 1997 (3) The
Journal of Information, Law and Technology JILT).
<http://elj.warwick.ac.uk/jilt/wip/97_3mars/>
Marsden C                                                                       Convergence or Coexistence




Abstract
Television, or audio-visual, and telecommunications policy in the European Union are

discrete regulatory systems. This paper illustrates some of the theoretical difficulties

of the attempt to marry the two policy fields, and the practical effect of the changes

thus far implemented. It continues by examining policy initiatives which are currently

under internal governmental scrutiny, and those already in the public sphere. It

concludes by mapping the anticipated course of the policy debate in the next six

months.




1. Introduction


‘The Impact of Convergence on Broadcasting Regulation’ is the subject of the

Working Group on Audio-visual Policy and Regulation at the European Institute for

the Media Forum on 7 November 1997. Mention is not intended as free advertising,

but to illustrate three issues.

[i] The impact of convergence is on broadcasting regulation. It is the encroachment of

telecommunications regulation, or capture of a cultural activity by an economic

analysis of the distribution of that activity, which is the real issue.

[ii] This debate is clearly European in scope, allowing for national debates within this

wider forum largely to illustrate the futility of divergent national approaches.

[iii] This futility is indicated by the asymmetrical regulation of terrestrial cultural

broadcasters in comparison with satellite economic broadcasters, as we may term

them. The former will be represented at the EIM by Werner Rumphorst of the

European Broadcasting Union; the latter by Ray Gallagher of BSkyB. The question



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Marsden C                                                                  Convergence or Coexistence




they will be asked to analyse: Will broadcasting continue as a regulated activity

dependent on state allocation of scarce spectrum, or become fragmentary lowest-

common-denominator channels amongst thousands on the Internet?



The Bangemann Report (Bangemann 1994) presented to the Council of Ministers at

the Corfu Summit in June 1994 contained an uncompromising deregulatory message.

It Europeanised the Gore/Clinton ‘Information Superhighway’ of early 1993 cliché to

the ‘Information Society’ cliché which now dominates in Brussels. Its conclusions

were that European answers to the American challenge, which since Jean Servan-

Schreiber first wrote (Servan-Schreiber 1967) has transmutated from industrial to

information, were to be found by Anglo-Saxon means.




2. From the Sublime to the Ridiculous
The Internet, for all its power to raise moral panics in pornography and privacy

amongst commentators and legislators, and its contrasting inability to approach video

transmission standard prior to the introduction of digital modems, can be seen as an

aid to the argument for continued regulation. Between approximately late 1992 and

early 1995, the assumption was that multichannel growth would be concentrated in

broadband switched systems of interactive video (Oftel 1995), rather than the

narrower-bandwidth of the Internet. Though this assumption still holds, it is clearly a

longer-term prospect than its prophets predicted at that time. The Internet is

uncontrolled and seemingly uncontrollable: in itself, a challenge to any regulator. As a

version of narrowcasting, it is not dominated by multinationals, but by amateurs. Its

exponential month-on-month growth has continued in the period since early 1995,

when it reached critical mass and changed the strategy of even Microsoft (Gates

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Marsden C                                                                      Convergence or Coexistence




1996). Consequently, the product is prone to content both illegal and incompetent,

though paradigmatically contemporary.

            The very profusion and omnipotence of Internet lends itself to an extenuated

regulatory tendency. Its distortion of the multichannel debate has enabled public

service broadcasters and their supporters in national and European legislative debate

to secure breathing space against their formerly dominant multinational opponents and

state sponsors in the convergence debate. It is far less certain in October 1997 than it

was in June 1994 whether convergence of communications will mean the

subservience of television to telecoms.

            This article argues that these policy manoeuvres may have been historically

predictable, but that the modest nature of legislative change is a result of the largely

unpredicted rise of the Internet in 1994 to date. Had the far more expensive and

complete solution of broadband cable supplemented by satellite distribution proved as

dynamic in its growth as Internet, there would have been far less regulatory lag than

has been seen. The barriers to entry and control through self-regulation ultimately

offered through cable would have proved a convergent technology far harder to

demonise. It may still prove to be the case that cable and satellite, in their domination

by the multinational and their content conformity and conservatism, will overcome the

demonisation portrayed by policy makers particularly in the Francophone community.

It is now far less certain than in 1994.




3. From Paradigm to Pragmatism
This policy change reflects a wider political reality, expressed in five factors. The

legislators in national Parliaments of the larger Member States are now dominated by

Socialists or reconstructed Socialists in France, Britain and Italy, in contrast to the

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Marsden C                                                                        Convergence or Coexistence




situation in 1993-5. The European economy is recovering from its recession of 1992-

4. The 1994 European Elections were massively distorted by the UK’s first-past-the-

post voting system, under which Labour secured a disproportionate increase in MEPs

(30 more than under proportionality). The Treaty of European Union allowed for co-

decision under Article 189b of the Treaty of Rome, giving Parliament power to play a

more active role in the legislative process. The accession of Sweden, Finland and

Austria has added to the number of member states which view broadcasting as a

national and culturally specific activity. The combination of these factors has given

cultural advocates in Brussels a more favourable set of circumstances than existed in

the recent past.




4. Horizontal From Vertical
The DG XIII Green Paper on Regulation of Communications Convergence, long-

awaited, was completed in mid-September 1997. It is circulating within the

Commission, prior to adoption and publication in November/December. While its

contents are obviously confidential, it can broadly be assumed that it will suggest

horizontal regulation, rather than vertical. There will therefore no longer be a market

for television or telecoms, but rather a market for distribution of electronic

communications in various forms. As Commissioner Bangemann stated in Geneva on

8 September 1997

            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 lead to telecoms liberalisation], we intend the Convergence




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Marsden C                                                                        Convergence or Coexistence



            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.

This removal of ‘pigeonholing’, as Richard Hooper has termed it (Hooper 1996 at

230), will allow synergistic monomedia and multimedia operators to merge with

telecoms operators. Radio and TV companies will be allowed to merge with cable

companies, subject to general competition law. British Telecom in Britain will be

allowed to enter the television market, should it wish. (As its merger with MCI was

abortive, it may find the capital to do so.) The removal of ‘Chinese walls’ between

rival distribution platforms - cable, satellite, terrestrial - will require firmer regulation

of vertical value chains, to prevent the re-emergence of oligopolies at any one stage.

Bangemann in Venice on 18 September 1997 acknowledged the need for continued

economic regulation: ‘a single European regulatory authority for communications may

one day prove necessary’. He appeared less convinced of the need for content

regulation:

            a new approach is required as content becomes network-independent and as control

            of content (and responsibility for its use) shifts from government to the individual.

Regulators will seek to avoid replacing a state-sponsored monopoly in telecoms or

television with a state-coerced monopoly in premium sports rights, for example.

            Separation of transmission from distribution, channel packaging, subscription,

conditional access, programme navigation, and decoder software, is already

recognised in pay-television competition analysis (Cowie and Williams 1997). The

‘content distribution industry’ is, however, prone to market failure, as gatekeepers

emerge in various links in the value chain: this is common to emerging high-

technology industries (Marsden 1997). The early signs are that competition regulation

has proved insufficiently co-ordinated between national agencies, as well as EU


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Marsden C                                                                  Convergence or Coexistence




institutions. The results are unfortunate: either ‘target’ companies perceive

persecution by regulators ignorant of their industry, or those same companies employ

regulatory arbitrage to secure minimal regulation in jurisdictions competing for their

expertise. Bangemann’s espousal of a telecoms competition regulator modelled on the

UK telecom regulator Oftel is therefore attractive.




5. Licensing: The Insuperable Barrier
In moving from vertical segmentation of communications to this horizontal

convergent model, states will also reform their regulatory agencies. The justification

for separate telecoms and television licensing authorities may then appear

undermined. The difficulty is in the licensing structure for terrestrial television. In

telecoms, cable and satellite television, the use of ‘class licences’ is common: similar

obligations are placed on similar sized and resourced rivals. In television, the

parcelling of various economic and cultural rights and duties is sufficiently complex

to present serious difficulty in unbundling these rights. While the separation of

distribution from programming is theoretically attractive, in practice the federal or

cross-subsidised systems which represent the government-licensed status quo in most

European countries are reliant on the existing vertical regulator. The value links may

prove indissoluble, in practical and political terms. Reconstructed social democrats

claim that the division between culture and economic goals of regulation is mythical

(Smith 1997): it may rather be that any proposed division is idealistic.




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Marsden C                                                                    Convergence or Coexistence




6. Public Service: Ghettoised?
A solution which is promulgated politically is that public service broadcasting be

‘ringfenced’ from competition concerns in deregulated markets, thus reaffirming the

pathology which currently pervades free-to-air television. This is crudely that public

service broadcasters are given the resources to finance high-quality programming, in

exchange for a stakeholding agreement of varying degrees of formality. Resources

may include viewer taxes, free or subsidised use of airwaves, limiting of competition

to produce an advertising oligopoly, or licensing of additional services. Stakeholder

obligations may include training and minority group employment, independent and

original production quotas, European programming quotas, Universal Service

Provision. The complexity of such arrangements mitigates against wholesale reform.

            In protecting these stakeholder/public service arrangements, governments

avoid a radical solution such as licensing or auctioning public service components.

This prevarication enables competitors to erode their market share, reducing resources

and legitimacy. The longer term prospect under this scenario is ‘ghettoisation’. The

Member States have agreed a Protocol to the Treaty of Amsterdam which protects

public service broadcasters from the full effect of competition laws. This may prevent

the immediate dissolution of the European Broadcasting Union but it will not secure

the long-term future of these channels.




7. Institutional Turf War - Europe
Following the Bangemann Report, Bangemann’s own think-tank and cheerleader for

the Information Society, the Information Society Project Office , was established to

co-ordinate DG III (industry) with DG XIII (telecoms and research) into a sort of

super-ministry for the Information Society.

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Marsden C                                                                       Convergence or Coexistence




            DG X (education, culture, audio-visual) initially seemed powerless in the face

of this Bangemann challenge. In early 1995, rumours were rife in Brussels (as ever)

that DG X would be dismembered and the audio-visual transferred to DG XIII. With

new Commissioner Oreja and Director-General Papas, DG X is now asserting an

independent future for public service broadcasting ringfenced from the deregulatory

environment of telecoms. This sea-change was reflected in the distinctly frosty

reception accorded to the ‘Anglo-Saxon consultancy’ report (KPMG 1996)

commissioned by DG XIII, published in September 1996. The dispersal since 1994 of

the initial euphoria surrounding the new technological paradigm is typical of the

reaction to new technology, and was repeated elsewhere in Europe, notably in the UK

government’s pragmatic Broadcasting Act 1996 following the more radical goals of

the May 1995 Green Paper (DNH 1995).

            The European Parliament’s support for cultural goals in information policy

have been vouched in terms which portray deregulation as quite literally a moral

hazard. The Protection of Minors and Human Dignity (Whitehead 1997) are the

rhetorical goals to which the liberalisers have apparently found themselves opposed.

Point 9 of the Whitehead Report is quoted in full:

            [The European Parliament] insists that any future work on both regulation and

            self-regulation of converging communications shall cover all of them, so that

            harmful content on the Internet is dealt with in the broad spectrum of point-to-

            point and multipoint electronic communication.

The Parliament, having in a bitter battle lost in its attempt to exert televisual

regulation over Internet and video-on-demand services (in the revised Article 1 of the

‘Television Without Frontiers’ directive, EP 1997 , has clearly retained its opposition

to deregulation. Whitehead recognises ‘the general instinct for deregulation’, and self-


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Marsden C                                                                     Convergence or Coexistence




regulation as a subset thereof, though acknowledging that broadcasters and telecoms

experts will lean in different directions. The Economic and Monetary Committee of

the Parliament , as will be seen in section 10 below, adopts a different perspective.

Critically, the most active members of the EMC are alternates on the Media and

Culture Committee, as co-ordinators for Christian Democrat (Hoppenstedt) and

Liberal (Larive) groups. There is therefore active involvement and indeed direction by

EMC members in Media and Culture Committee business.




8. Institutional Turf War - UK
UK communications policy was driven in 1993-6 by the economic Department of

Trade and Industry, especially in the period 1993-5 under the formidable President of

the Board of Trade Michael Heseltine. The role of the Department of National

Heritage (now renamed Culture, Media and Sport) was reduced to little more than

platitude until the Conservative defeat in May 1997.

            At the Brighton European culture ministers’ meeting on September 29, 1997,

Jack Lang characterised UK policy under Conservative ministers as ‘the victory of

ignorance over extravagance’. Though recognising the priority of cultural goals, the

present Secretary of State Chris Smith has been careful to avoid an ‘extravagant’

appearance (Smith 1997). His view is of a more or less harmonious coexistence of

culture and economics, a view apparently shared by his Italian counterpart and Deputy

Prime Minister Veltroni. Since May, Smith has repeatedly indicated that his

department is responsible for a greater share of GDP than manufacturing industry. The

result of this coexistence is that Smith and President of the Board of Trade Margaret

Beckett have co-authored a letter to the Prime Minister, indicating the pressing need

for a Communications Act in 1999-2000, replacing existing vertical regulatory

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Marsden C                                                                    Convergence or Coexistence




structures with horizontal. There will therefore be a debate in 1998 within the UK, as

in Brussels, regarding convergence.

            Labour policy radically liberalised under the stewardship of Broadcasting

Spokesman Lewis Moonie in 1995-7. Policy in this period ostensibly sought to merge

‘Ofcom’ from ITC and Oftel before the end of the century, in a model derived from

the US FCC. This found support amongst influential academic and policy analysts

(Collins and Murroni 1996). The sobriety which European Commission and UK

government policy reattained in 1995-6 as Internet grew, only reached Labour policy

in May 1997, with the appointment of Smith as Secretary of State. An independent

future for the Radio Authority, Independent Television Commission (ITC) and Oftel is

the medium term policy.




9. Regulatory Body Turf War - UK
The politicians may have become reconciled to a ‘new style of politics’ (the mantra of

the leaders of Labour and Liberal Democrat parties) within Whitehall communications

governance, but the regulators’ relationship remains strained. The abrasive and

effective regulation of Oftel under its dynamic Director, Don Cruikshank, has

succeeded in impressing the European Commission with its effectiveness, but

offending the television regulator ITC with its tactlessness, notably in Oftel advice to

ITC regarding the BDB digital multiplex licence award in June 1997. (The UK

competition office, the Office of Fair Trading, was similarly affected in the Oftel

summission to the pay-TV enquiry published in February 1996). Criukshank’s

resignation with effect from March 1998 may succeed in removing the personality

issue from the dispute.



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Marsden C                                                                     Convergence or Coexistence




10. Ofcom - The Bonfire of the Regulators?
In policy terms, detente between Oftel and ITC views of regulation has been rapid

since their initial skirmishes in 1995. The publication of Beyond the Telephone...

(Oftel 1995) was interpreted as a take-over attempt by Oftel. In 1995, momentum was

developed to transform communications regulation by merging all content regulators

into an ‘Ofcom’, a policy espoused by Labour’s superhighway policy review under

Smith’s chairmanship. Though Oftel views broadband as the digital broadcasting

future, a view shaken but firm despite the explosive growth of Internet, ITC continues

to believe in the dominance of terrestrial free-to-air TV. In the USA, the major

networks account for over 60% of all TV viewing, though in continuing decline. ITC

has expressed its belief in a prolonged period of ‘coexistence’ between on-demand

interactive services and traditional TV (ITC 1995).

            Both regulators have recently submitted evidence to their respective Commons

Select Committees. ITC saw the value in merging all content regulation within its

aegis, including the presently self-governed BBC. The National Heritage Select

Committee was ‘not persuaded that now is the time to change to a single regulator’ for

communications (National Heritage, 4th Report, 1996-7 at xviii, para 74). The Trade

and Industry Select Committee believed that ‘an earlier rather than later review would

be appropriate’ (Trade & Industry, 3rd Report, 1996-7 at xix, para 44,). The evidence

presented to both bodies was similar: their difference of view is as to the timing of

convergence rather than the necessity to amend current regulation. The crux, as earlier

discussed, will be the licensing of dominant television broadcasters.




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Marsden C                                                                    Convergence or Coexistence




11. Some Preliminary Observations
The OECD, G7, and ITU have exerted liberalising influences on the convergence

debate, as evidenced in Bangemann’s international communications Charter Initiative

in Geneva this September. The casual observer should not be misled into the

impression that convergence in favour of the telecoms model is inevitable, nor that the

policy option is unanimous even inside DG XIII, the home of the Green Paper.

Garnham’s report to the Steering Committee of Legal Advisors was couched in very

cautious terms, in keeping with his lengthy experience in communications policy

formation and analysis.

            Though functions are leaching from television to telecoms regulators, for

instance the transmission and distribution of digital pay-TV from ITC to Oftel in the

UK, consolidation of the existing content regulators provides greater scope for

legislators to simplify structures. Thus in the UK, ITC has suggested that it regulate in

place of the Broadcasting Complaints Commission and BBC self-governance. The

independent future of a Radio Authority separated from ITC in the 1990 Broadcasting

Act is vociferously argued by its Chief Executive Tony Stoller. Collins for the

Institute of Public Policy Research identified ten separate regulators, which could be

reduced to three (Radio Authority, ITC, Oftel) without perverse results for industry

structures.




12. Democracy and Convergence - The Autumn Timetable
The European Parliament and Commission are the venues for convergence debate this

winter. The European Parliament will debate the Hoppenstedt Satellite Action Plan

on 20 October, which follows his work on Trans-European Telematics Networks and

Television Without Frontiers. The Whitehead Report was adopted by the Culture

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Marsden C                                                                   Convergence or Coexistence




Committee on 2 October. In the following months Parliament will return to the issue

of convergence, especially in regard to commercial communications (note Larive’s

Report to Parliament and media pluralism (Hitchens 1994, Beltrame 1996), on which

the Internal Market Directorate, DG XV, is expected to issue proposals in the final

quarter. The Convergence Green Paper’s release to Parliament should also lead to

lively debate. It may be, however, that any new policy direction will await the

quintennial ‘Audiovisual Assizes’ in Birmingham on 6-8 April 1998, hosted by the

then-President of the Culture Council, Chris Smith. The expectations of a grand, if

pragmatic, social democratic alliance (Britain, Italy, France), to attempt reconciliation

of the vertical and horizontal regulators, will rest on the UK government’s actions

during the next six months. The political settlement of the culture/economics debate is

likely to be decided in this period. The outcome will decide the future development of

the television industry, the wider communications industry, and European consumers’

future direction into the Information Age. At a policy level, it will also reveal a great

deal of the institutional and constitutional future of the European Union in the decade

to come.


References
Bangemann, Martin, et al (1994) Europe and the Global Information Society, The

Report of the High Level Group.

Beltrame, Francesca (1996) 7 Util.LR Harmonising Media Ownership Rules: Problems

and Prospects at p172

Collins, Richard and Murroni, Christina (1996) New Media, New Policies

Department of National Heritage (1995) Media Ownership: The Government’s

Proposals

Cowie, Campbell and Williams, Mark (1997) Telecommunications Policy

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Marsden C                                                                  Convergence or Coexistence




European Parliament (1997) European Parliament and Council Directive amending

Council Directive 89/552/EEC on the co-ordination of certain provisions laid down

by law, regulation or administrative action in Member States concerning the pursuit

of television broadcasting activities

Gates, Bill (1996) The Road Ahead

Hitchens, L.P. (1994) 57 MLR 4 Media Ownership and Control: A European Approach

at pp585-601.

Hooper, Richard (1996) Chapter 16 in Media Ownership and Control in the Age of

Convergence

KPMG (1996) Public Policy Issues Arising From Telecommunications and Audio-

visual Convergence, A Report for the European Commission

ITC (1995) ITC Response to the Oftel Consultative Document at paragraph 58, p15

Marsden, Chris (1997) 8 Util.LR 4 ‘Structural and Behavioural Regulation in UK,

European and US Digital Pay-TV’ at pp114-119

Oftel (1995) Beyond the Telephone, the Television and the PC

Servan-Schreiber, Jean (1967) Le Defi American (The American Challenge)

Smith, Chris (1997) Speech to European Culture Ministers Channel 4/Arte Fringe

Meeting, Brighton Labour Party Conference, 29 September 1997

Whitehead, Phillip (1997) Draft Report on the Commission Green Paper on The

Protection of Minors and Human Dignity in Audio-visual and Information Services

(COM[96]0483 - C4-0621/96) PE 221.804 of 24 April 1997.




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