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25|07|07

Keynote speech at Westminster Media Forum Event: The Audiovisual Media Services Directive

This whole morning is intended to be about implementation of the Directive, and Ofcom certainly anticipates playing a significant role alongside DCMS in the implementation process over the next couple of years.

However, Jon Zeff has already covered most of the challenges and issues which we will need to tackle in the implementation process, and I don’t want to go over the same ground. Instead, I’m going to talk about the world might be like under AVMS, thinking about the new areas of content regulation: video on-demand services, and in particular internet-based services.

Over the next couple of years, we will be creating a new regulatory environment (by we, I mean the DCMS/BERR/Ofcom team who will be handling the implementation process, and, as importantly, the industry and consumer stakeholders who will be our partners in that process). What might that world look like? And what challenges will it present for Ofcom and for our regulatory partners?

But before that I would like to make a few comments about the relaxation in the Directive of some of the rules which apply to advertising on broadcast TV channels, and how Ofcom proposes to respond to that deregulatory opportunity. Advertising is the one aspect of AVMS implementation which is entirely within Ofcom’s hands.

As most of you will know, the Directive will remove entirely, or reduce the extent of a number of rules about the amount and placement of advertising. Changes in the advertising rules were, in fact, one of the major objectives of the revision process. Notably, the AVMS will:

• Eliminate the rule which requires 20 minutes between centre breaks
• Increase the number of breaks in films to one per 30 minutes from one per 45
• Eliminate the maximum daily average of 9 minutes spot advertising per hour, leaving only the hourly maximum of 12 minutes

It also it introduces a new rule which requires a children’s programme to have a scheduled duration greater than 30 minutes if it is to have a centre break.

Although the removal of restrictions on advertising should generally be positive for the advertising-funded broadcasters and for advertisers, in practice the position is much more balanced.

At present, the public service broadcasters are subject to much tighter rules than are cable/satellite channels; adoption of the AVMS rules for all broadcasters would probably mean a significant shift of income from the cab/sats to PSBs.

Some cab/sat channels are unable to sell the volume of airtime available to them under current rules. Even within the cab/sat sector deregulation could equally result in a reallocation of revenue away from marginal channels towards the larger ones.

The UK advertising market is already in a complex regulatory position: with continued debate over a review of the Contract Rights Renewal arrangement, the Sky/ITV inquiry including an examination of advertising markets, and of course with Ofcom’s PSB review now getting under way. The potential for a significant uplift in commercial airtime available to ITV would have a significant impact on the workings of the CRR remedy.

And of course, there are viewers: we can’t assume that they will welcome either more advertising or more frequent breaks. On the other hand, viewers are increasingly able to avoid advertising which they find intrusive: the opportunity to change channels is more powerful when every home has 30 or 40, as they will after switchover, and when half or more are likely to have over 200. PVRs, already in more than 3½ million homes, and on-demand content, available in millions more, also offer audiences greater control.

None of this is to say that we are not committed to an examination of the appropriate extent and the timetable for the introduction of new rules on the amount and distribution of advertising. However, it is to say that there are many and widely different stakeholder concerns which a review of the rules must take into consideration. Ofcom has created a project to address these issues, whose first task will be to establish what the broad approach should be a review of the current rules, given the diversity of stakeholder interests and the involved regulatory position.

We will be having some preliminary discussions with stakeholders over the course of the summer. We don’t anticipate that there will be quick and easy answers on this complex issue, but we will have a picture of the overall timetable later this year.

I will now return to the main theme I identified earlier: what we might want the regulatory environment to look like post-implementation, and what challenges it will present.

First of all, the internet: as you all probably know, the Directive makes explicit the need to regulate on-demand services offered on the internet - despite the much asserted adage that the internet cannot be regulated.

In fact, the Directive does not suggest that the internet should be regulated - only that certain types of service should be. Regulated services should be like television (and there are a range of criteria which help determine this), and as importantly, they should be European. For Ofcom and its co-regulators, that means UK video-on-demand services - it does not mean trying to control all of the audiovisual content on the internet. That would be a ridiculous task.

This is critical: although the implementation of the Directive will help create a very specific category of UK and European services which are regulated, and comply with some basic standards, it will not make internet video safe. For audiences, AVMS is only part of the picture.

The internet content market is and will remain a global one, with no central control of the services offered and no single point for consumer protection enforcement.

However, it isn’t the wild west: there is a broad range of individual or collective industry initiatives which work together to support consumer protection all along the value chain. Producers can label their content through the Platform for Internet Content Selection (PICS) and other labelling initiatives. At the content aggregation level, some players (such as AOL) offer their subscribers a filtered proposition and also label content. Web hosts and ISPs work with the IWF to take down illegal content, and block illegal URLs. Many ISPs support their subscribers by offering them filtering software to run on their home PCs. Search engines and navigation tools can provide tools to protect internet audiences such as Google safe search. The software companies who make web browsers like Firefox or Internet Explorer may also offer filtering tools embedded in their programmes.

Alongside these, consumers must play a critical role in protecting minors and in ensuring that their own individual standards for content are met in their own homes, by using the services and the tools provided by industry, and by monitoring and managing the behaviour of those in their care.

This is nothing new. We rely today on audiences’ media literacy - their awareness of the watershed, and their ability to respond to on-air warnings, programme titles, and to the context provided by channel brands - to know they should expect something different from a programme called “DanceX” on BBC One and one called DanceX on, say The Adult Channel or Playboy TV. However, the internet clearly creates an expanded need for media literacy skills - and Ofcom is committed to promoting and supporting their development.

As we introduce a new regulatory framework for on-demand services, we will also need a way of ensuring that audiences can benefit from this regulation: to benefit, audiences will need to know where they can expect regulatory protection, and where they cannot.

This means that alongside the creation of new institutional arrangements, we will have a new media literacy task, which is to ensure that audiences are aware of, and can identify and choose regulated services if they want to do so.

This is not to suggest there could or should be a regulated internet; rather, it is to say that there could be an internet where there are some video services which can be approached with the same confidence as audiences currently bring to broadcast TV. One of the key tasks for industry, Ofcom and co-regulators to tackle as the new system gets under way, will be communicating with audiences about the scope and characteristics of this regulated environment.

The second point I wanted to make is about the new regulatory structure which the Directive requires us to put in place, specifically in relation to on-demand services. As Jon has emphasised, the Directive specifically encourages the use of co-regulatory arrangements, and through the EU negotiation UK has repeatedly emphasised its desire to adopt a co-regulatory model for the oversight of video-on-demand services. “Co-regulation” means different things to different people; but in the case of the Directive it means that, one way or another, the state must be able to step in enforce the relevant standards for on-demand services, if the co-regulator is not doing so effectively.

We already have in the UK a couple of self-regulatory institutions which set standards for on-demand video services, in the Association for TV on Demand (ATVoD) and the Independent Mobile Classification Body. This should give us a head-start in the development of a new framework; and we have an established success story in media, in the form of the ASA, for the process which takes an existing self-regulatory body, and develops it into a co-regulator with a new relationship or link to the state or the statutory regulator.

However, the ASA had been operating as a self-regulatory institution for decades before Ofcom devolved its statutory duty in relation to broadcast TV advertising standards to the institution in 2004. The ASA had established strong relationships of trust with the industry it regulates, with consumers (and consumer groups) and with Ofcom or its antecedent regulators. However good their performance may have been to date, the IMCB and ATVOD are much younger institutions, which have not had the chance to develop such strong relationships with their stakeholders.

That brings me to my point about Ofcom: we want to be in a relationship of trust with our co-regulators - that they will ensure that service providers deliver to the basic standards set out in the Directive, for protection of minors etc. We want the backstop powers which will remain with the state or with Ofcom to remain that - a backstop, upon which it shouldn’t be necessary to call.

Equally, industry will want to trust that their commitment of effort and resources to co-regulation will be worthwhile, both in creating an on-demand services market which consumers trust, and in retaining the degree of industry control and the flexibility which co-regulation promises.

Finally, consumers (and the UK Government and the European Commission) will want to trust that the system will deliver the basic protections promised in the Directive and in the duties assigned to the co-regulator.

It should be clear that designing and introducing a regulatory system which meets these challenges over the next two years is not a trivial task, even aside from the complex process of determining exactly how duties, powers and responsibilities will be assigned across the different players - and of course creating and passing the relevant legislation. That task falls mainly to DCMS BERR and Ofcom, but it is essential that we can also rely on a real commitment of effort and thought from the industry and other stakeholders to build a lasting and effective co-regulatory system.

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