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26|01|05

ISPA Parliamentary Advisory Forum

26 January 2005

Updated 28/01/05 due to transcription error

It is a pleasure to be asked to speak at the ISPA Parliamentary Advisory Forum. The theme of this evening's Forum is how to regulate Internet content. This is an important debate and one which will be with us for some time to come. I would therefore like to use this evening's Forum as an opportunity to offer some context to the debate to come and to reflect on some of the key challenges for the future.

I want to begin by looking at the radical and rapid transformation being experienced by both UK society and the communications industry today.

Broadband is now used in 5m UK homes and growing by 60,000 connections per week. Nearly 80% of British adults own a mobile phone. In 2003, for the first time, we spent more on mobile than fixed telephony. We are seeing, for the first time, traditional media services such as TV and radio broadcasting being delivered over internet-based network infrastructure.

I think we can all agree that the direction of travel is very clear. Consumers are demanding access to any service, any time and anywhere. The availability of ever-higher bandwidths on all platforms is allowing service providers to innovate and develop services to meet this demand. Convergence - that once holy grail that we knew was out there but apparently unattainable - is finally a reality. And the speed of this transformation is accelerating. This collision of worlds until now separate - those of broadcasting and the Internet - poses many challenges for the future.

So, what does this mean for the communications sector and the different media which it comprises?

First, it is clear that we find ourselves in an exciting but somewhat unstable environment. While the direction of travel, as I have said, may be clear, the pace and nature of change also creates uncertainties.

We can observe the boundaries between the different media starting to blur. Consumers can now choose how to receive their TV services. There are multiple channels to market. TV is no longer only terrestrial - we have seen it evolve from cable to satellite and now to fixed and wireless broadband. Consumers can also choose how to view these services; for example on a traditional television set or on a computer monitor with an in-built TV receiver. Soon we will be able to watch TV on the move on mobile devises.

Second, the digital era is shifting the balance of control towards consumers. No longer are customers satisfied with traditional one-to-many services. They want services on demand. They want to design their own packages of services and consume them at a time of their choosing. Many consumers want a one-stop-shop for these services; the market has responded to this demand and a wide variety of bundled and packaged services are now available to the end user. Others like to shop around and buy services from a range of different suppliers; they can do this too. In short, we are seeing the impact of growing consumer power in the range and choice of products and services in the today's market.

Third, the value chain is also evolving. The chain is getting longer and the relationships more complex as more and more players are involved in delivering a service to the end-user. In the past, it was relatively straightforward; a broadcaster produced and edited content and pushed it to the viewer. An ISP provided simple access to the world wide web. In today's world, the value chain includes content creators, content aggregators, providers of search engines, rights management bodies, operators of payment platforms, network operators ensuring quality of service and, finally, service and access providers providing the consumer's gateway to this exciting world of choice. This is list is by no means exhaustive - and it is still growing as entrepreneurs spot new opportunities in this exciting and expanding market.

Many ISPA members in this room will have first-hand experience of this shifting landscape and the many and varied challenges it presents. It is changing the way we do businesses and our relationships with the people we do business with. It is also changing how service providers interact with their customers; manage their expectations, inform them about the choices they are making and protect them from any risk.

In the online world, service providers are facing many challenges. How do we best protect children from harmful or offensive content? How can we effectively ensure that copyright is respected? These are just some of the questions that the internet industry has had to face in recent years.

And what do these challenges mean for the regulatory framework? What is the most appropriate public policy response to these challenges? On this point, the debate has yet to begin. Parliament has decided in the Communications Act that Ofcom should have no remit over internet content. That was, I believe, the right outcome.

We must not forget either that today's internet is not entirely unregulated. It's not the Wild West as many observers still portray it. Indeed, much of the existing legal framework which applies in the off-line world also applies online. National rules on consumer protection, criminal content and distance selling as well as sector-specific rules in areas like banking, insurance and air travel apply to online operators in the same way as they do to their bricks and mortar counterparts.

In areas where the Government has decided to forebear from formal regulation and in others where the online environment tests the limits of existing frameworks, the internet industry has responded. The sector has led the way in tackling the challenges of the online environment, finding new and creative solutions. The UK internet industry, for example, responded to the exploitation of the internet by criminals to distribute child pornography and created the Internet Watch Foundation, making it a model for similar initiatives around the world and a focus for international cooperation to combat this global problem. ISPA itself promoted a self-regulatory code of practice among its members which has now evolved in to the CISAS scheme; a respected consumer-focused dispute resolution mechanism. These are just a few examples of industry leading the way in this brave new world.

Nonetheless, a challenge for policy-makers will arise at the point where the boundaries between traditional media and internet-based content truly blur. And we are closer to this point now. I have already mentioned that consumers can view television broadcasting on their PCs over an IP-based broadband connection. The future will hold many more, new possibilities which will further blur the expectations consumers have become accustomed to. There will be a balance to strike between protecting consumers from the additional risks of the online world and not under-estimating their ability to understand and assess these risks for themselves. Some consumers will be less vulnerable than others.

Let me be clear. We at Ofcom are not asking for an extension to our rule book. It is a plea for honesty in the debate which must follow - in society, in industry and in Parliament - about what is appropriate and necessary in the future. It would clearly not be desirable to assume that this debate should focus on how we remodel television regulation and adapt it to the world of content delivered by IP. It may not be feasible or even desirable. Equally, self-regulation may not always be the answer.

Ofcom will shortly complete its strategic reviews of telecommunications and public service broadcasting. Our reviews of radio and spectrum are on-going. These reviews are lengthy exercises involving extensive consumer research and input from a wide range of stakeholders. The evidence base we have gathered gives us a valuable insight in to how consumers are responding to new technologies and what they want and expect.

While we find ourselves in a transitional phase, we have a window of opportunity to engage in a constructive discussion based on a common understanding of consumers' needs and expectations. And we see many challenges ahead. For Ofcom, these challenges are reflected in the programme of work we are proposing in our annual plan for 2005/2006 which we published last week.

The draft plan sets out a three-year strategic approach to in some key areas to:

• Implement the strategic reviews carried out in our first year of operation
• Actively search for new ways to reduce regulation over time, and
• Understand future developments by conducting further analysis of evolving markets

I would like to take a few moments before I close to explain our thinking on this last point.

We want to look to the future so that we can anticipate and respond to the changing market. This programme of work will cover three areas:

1. digital multi-media platforms
2. second generation broadband
3. broadcast content production

Each review will be thorough and result in published research and proposals for consultation. Together, they will address the regulatory issues associated with content becoming available via a range of different platforms and the interchangeable use of technology by consumers.

We will examine technology trends, digital rights, perceptions of citizens and consumers and look at approaches taken elsewhere in Europe and internationally. In doing so, we hope to facilitate a wide-ranging debate about whether content, including internet content, could or should be regulated in a more converged world, and if so, how.

We will be considering important questions such as:

• Whether the current model of regulating broadcast content is sustainable
• Whether a consistent or platform-neutral approach to content regulation - looking beyond traditional broadcasting - is desirable or, indeed, practicable
• How consumer protection can be balanced against the rights of others
• The extent to which citizens and consumers will be able to control access to content themselves using tools such as parental controls
• Content drivers for the take-up of second generation services such as video-on-demand and online gaming
• The impact of digital platforms in terms of changing methods of distribution of content, new business models for paying for content and the implications this may have for regulation in the future

Let's be clear. Our objective is to create an environment which will help markets to grow; not to stifle innovation.

ISPs have adapted well to the technological changes I have described and will clearly play an important and full role in this debate, sharing their experience with, and learning from, other stakeholders. Ofcom welcomes the industry's continued commitment to self-regulation and looks forward to working together during the coming year.

Thank you.

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