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| Oftel response to the European Commission on the Green paper on the convergence of the telecommunications, media and information technology sectors, and the implications for regulation (COM(97)623) | |
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March 1998 Contents
This paper contains Oftel’s comments in response to the European Commission Green Paper on convergence. It builds on submissions Oftel has made recently to the House of Commons Select Committee on Culture, Media and Sport in relation to its inquiry into audio-visual communications and the regulation of broadcasting. Oftel believes that a coherent regulatory regime needs to be put in place for the electronic communications sector, comprising telecommunications, broadcasting and networking aspects of information technology. The submissions to the Select Committee set out a regulatory model which Oftel believes to be suitable for appropriate and effective regulation of that sector within the UK in the interests of the consumer. This paper explains Oftel’s view that the model will also be suitable for regulation throughout the EU. Sections 2-4 describe the model and explain why it is important to proceed urgently towards implementation. Sections 5-9 describe the principles and types of rule which Oftel believes to be necessary once the “Open State” is established – a time where capacity is not scarce and where direct commercial relationships between suppliers and customers for services supplied over electronic communication networks are straightforward. Oftel believes that there should be much greater reliance than at present on general competition, consumer protection and criminal law. However, sector-specific rules and regulatory mechanisms, over and above the general law will continue to be needed to prevent restrictions or distortions of competition, to deliver certain social and consumer policy goals and to provide effective regulation of content. Adoption of the model would amount to a substantial degree of deregulation overall. Oftel believes that the concept of public service broadcasting needs to be retained to ensure delivery of sufficient content of types which a normal market would be unlikely to deliver. However, the present system of content control used for television needs fundamental change. Oftel proposes a system which puts the individual consumer in charge of deciding what types of content are accessible in their home and which will work for all delivery media. Sections 10 and 11 set out Oftel’s views on regulation during the transitional period before the Open State is reached and summarise the types of change from existing regulatory approaches which will be needed. Oftel believes (Section 12) that the bulk of regulation is best carried out by National Regulatory Authorities who are attuned to local market conditions and cultural sensitivities. Existing arrangements for co-operation amongst such authorities and between authorities and the Commission need to be built upon. Oftel hopes that the Commission will proceed speedily in following-up this Green Paper and that the planned 1999 review of European Telecommunications legislation will be carried out in that context. A number of immediate priorities are described in Section 13. 1.1 Oftel welcomes the opportunity to respond to the European Commission’s important Green Paper on convergence. The Commission’s review of this area is very timely. The electronic communications market is changing rapidly. Regulatory approaches which have worked in the past will become increasingly irrelevant as the market develops. A considered programme of regulatory change is necessary and the Commission’s Green Paper gets the debate off to an excellent start. 1.2 Oftel has also been preparing evidence on the issues for the UK House of Commons Culture, Media and Sport Select Committee. Oftel’s “January CMS Submission” and “March CMS Submission” to the Committee are relevant background to this paper. Although structured differently from the Commission Green Paper, Oftel’s CMS Submissions address a number of the Commission’s questions. (Oftel’s first submission to the Culture Media and Sport Select Committee Inquiry into audio-visual communications and the regulation of broadcasting – January 1998 and Culture, Media and Sport Select Committee Inquiry into audio-visual communications and the regulation of broadcasting: Oftel’s second submission – March 1998) 1.3 The underlying issues have both an international and a national dimension. Both the Commission and national authorities have a part to play in promoting and contributing to worldwide discussion of the issues. And while the framework for regulation within EU Member States needs to be defined at a European level, Oftel considers that the regulation itself should continue to be nationally-based, with very few exceptions. Because of the inter-relationship between national and international dimensions, this paper covers both. 1.4 Neither this paper nor Oftel’s CMS Submissions give detailed consideration to a number of important matters, in particular intellectual property matters, data protection, privacy and electronic commerce. All are important and need to be addressed both in EU and worldwide fora. 2.1 The January CMS Submission covers the development of markets and technology while the March CMS Submission includes an outline of a model regime for the regulation of electronic communications. This paper concentrates on the latter. Although the language of the CMS Submissions are UK-focussed, Oftel believes that the model regime is applicable in the medium term to the electronic communications markets of Europe without further addition (except in respect of the excluded areas mentioned in the previous paragraph). Obviously however, it is merely an outline; more detail remains to be defined. 2.2 Although market conditions are not yet right for the model regime to be applied, it is necessary to anticipate developments and ensure that markets develop on desired lines. This paper:
3.1 Increasingly, it is impractical to attempt to regulate broadcasting separately from telecommunications. Not only are the markets linked economically, in that competition problems in one can spill over into another. The markets increasingly overlap (in that the distinction is meaningless for certain retail services), both with each other and with the information technology market. A regulatory regime needs to be coherent and internally consistent. After careful consideration, Oftel believes that the scope which best fits these requirements is the entire field of electronic communications: by which it means all communications which use electronic transmission networks, including access to services provided over those networks. The term thus includes traditional broadcasting and telephony and, critically, the control functions of IT devices (both software and hardware) attached to electronic communications networks. 3.2 Although this latter activity represents an expansion of regulation from what is now considered to be “unregulated”, the characteristics of this activity suggest that it has the same “problems” as more traditional networked services. Moreover, Oftel’s proposed regime would be far simpler than the present regimes for telecommunications and broadcasting; there would be far fewer detailed rules and a requirement to obtain a licence in advance of commencing service only in very limited circumstances. The overall effect of Oftel’s proposals would therefore be a substantial measure of deregulation. 3.3 The issues are considered in more detail in Sections 2 and 3 of the March CMS Submission. 4.1 Some argue that convergence is of limited relevance to the present and that there is no pressing need to meddle with existing regulatory rules and systems. Given the pace of change, not so much of technology but of the nature and scope of services which new technology makes possible, Oftel believes that such a view is very short-sighted. Consumers deserve a regulatory system which encourages competition to flourish and innovative services to be developed, while ensuring universal access to the necessary components of the Information Society and providing effective consumer protection and deterrence to anti-competitive practices. 4.2 The present regulatory regimes in Europe were not developed with market convergence in mind. Some cracks are already evident. Competition problems in the broadcasting sphere can overspill into telecommunications; and vice versa. And the current method of controlling content will become increasingly problematical. These cracks are likely to grow quickly. Further detail is at Section 3.4–3.10 in the March Submission. 4.3 Setting the regulatory agenda for the future will enable the EU and Member States to shape future outcomes rather than try to respond too late to undesirable market situations brought about by dominant firms. 5.1 Oftel believes that regulation of electronic communications in Europe should be founded on the following principles:
6.1 Oftel believes that the key task of regulators is to define a set of rules for the “Open State”, an era when the following two conditions are met:
6.2 Oftel believes that in open, competitive, developed economies the Open State will be reached in about 5–10 years time unless there is an artificial restriction on the availability of capacity or the application of policy designed to deny consumers the means to enter into direct commercial relationships with content providers. Neither of these policies is likely to be in the interests of consumers. 6.3 Once the Open State has been reached, Oftel believes that a much more limited set of rules than currently applied to this sector will be appropriate for effective regulation. The sector will be much more like other parts of the economy, and many of its potential problems can be, and should be, dealt with by general competition law, consumer protection law and the criminal law. However, there will still be a need for a relatively limited set of “special” rules to reflect the particular economic, social and cultural characteristics of electronic communication. The creation of the right framework for these special rules, in advance of the realisation of the Open State, is vital if private investors are to fund the (large) investments needed. Given the gestation period necessary to bring EU legislation into effect, it is important to start planning now. 6.4 Oftel believes that the regulatory framework should fulfil the following objectives:
6.5 Sections 4.1–4.20 of the March CMS Submission cover these issues in more detail. 6.6 Notwithstanding the presumption in favour of rules which apply generally throughout the economy, Oftel believes that three types of special rule (but only these three types) will continue to be appropriate to the Open State:
6.7 Further detail is at paragraphs 4.21–4.32 of the March CMS Submission and at sections 7 to 9 below. 7. Restrictions or distortions of competition 7.1 Most restrictions or distortions of competition should be capable of being dealt with satisfactorily under general European or national competition law. However, in the Electronic Communications Sector, there can be barriers to effective competition which do not necessarily derive from abusive behaviour, nor from dominance. Such circumstances are usually characterised by bottlenecks, either of a physical nature (most consumers will choose to have only one fixed telephony connection to their homes), by virtue of control over some product or service which is key to providing a retail communications service to end-users or by virtue of control over interfaces. Even where dominance could be established (and hence problems could be addressed under competition law), specific prescriptive rules are often a more effective means of dealing with competition problems arising from bottlenecks. In the absence of such rules, by the time that abuse of dominance has been established, it may be impracticable to restore competition in the relevant downstream market. 7.2 Oftel believes that specific prescriptive rules will be appropriate to deal with restrictions or distortions of competition where:
7.3 While existing Telecommunications Directives already contain specific prescriptive rules of this kind, in particular to deal with problems of interconnection and network externalities, Oftel believes that these rules will need to be revisited to ensure that they continue to apply to the right set of operators and that they remain effective while avoiding being too interventionist. However, the Directives do not deal generically with problems arising from control over key enabling products or services or over interfaces such as:
7.4 Oftel therefore believes it imperative to put in place rules for regulating bottlenecks, either to prevent exploitative pricing or to prevent restriction or distortion of competition downstream of the bottleneck. It has introduced rules of this type within the UK under its “Access Control” regulatory regime and believes that they are suitable for incorporation into the European regulatory framework. A summary is at Annex A.
8. Rules to ensure delivery of social and consumer policy goals 8.1 Social and consumer policy objectives will not all necessarily be achieved through the operation of well-functioning competitive markets. It is crucial therefore that a regulator has sufficient powers to ensure that such Government-defined objectives are met. One of the most significant of these objectives is universal service. Universal service is a dynamic and evolving concept – currently access to voice telephony and public service broadcasting at affordable prices is defined as the key constituent of the universal service “basket” because it is necessary for full participation in society. But in the foreseeable future, access to a digital and/or high capacity line might be defined as part of the universal service obligation. Consequently, rules and regulatory powers must be sufficiently flexible to respond to changes in the market and the needs of the consumer, particularly the least advantaged members of society. 8.2 Achievement of particular universal service goals or targets will be much easier to achieve in some Member States than others – both because of the relative state of network development and for various cultural reasons. Member States therefore need considerable freedom to define the concept of universal service, in accordance with the principle of subsidiarity. However, it is equally important that rules for achievement of universal service are enforced in an efficient, competitively neutral and cost effective way. In particular, no firm should secure competitive advantage by being charged with delivery of all or part of the universal service obligation. 8.3 Further detail can be found in Section 6 of the March CMS Submission.
“Public service” content 9.1 Oftel believes there will remain for the foreseeable future a need for “public service” content – to ensure availability of desirable content which would not necessarily be delivered by an unconstrained market. A flourishing competitive market will deliver two of the traditional aims of a democratic society – plurality and diversity – to some extent. But Oftel believes that society will want more in this area than an unconstrained competitive market may deliver. Accordingly, an additional mechanism will be needed in the Open State although it is right that it should be reviewed periodically to ensure that it remains appropriate. 9.2 Oftel proposes that the mechanism should take the form of a contract between governments and certain content providers. Such contracts could be with existing public service broadcasters. Alternatively, they could relate to a general subsidy fund for which anyone can apply and from which contracts are awarded on a non-discriminatory basis. 9.3 It is not necessary to specify at European level how national public service content should be delivered; nor how bodies delivering such content should be funded. Oftel believes that the process of defining the mechanism and awarding and monitoring contracts should be more transparent and publicly accountable than is common at present. Moreover, the requirement for efficient, cost-effective and competitively neutral delivery applies just as much here as for the achievement of universal service. Finally, there should be a common understanding of the interaction between Member States rights’ under the Public Service Broadcasting protocol to the Treaty of Rome agreed at the Amsterdam Summit and the European competition rules. This is best achieved by the issue of guidance by DGIV, in consultation with DGX. 9.4 Further details are set out in paragraphs 6.29 to 6.40 and Annex A of the March CMS Submission. “Negative” content rules 9.5 There is a balance to be struck between freedom of expression and protection of society, especially the most vulnerable, from illegal or undesirable content. This protection is equally necessary whether the dissemination of content is achieved via electronic networks or other means. 9.6 Rules to restrict circulation of illegal material should therefore apply to all content providers and are best enshrined in the general law. To the extent that such European harmonisation of such law is necessary or desirable, it should apply to any method of circulation, electronic or otherwise. It may also be appropriate to apply similar general laws to the consumption of such material. 9.7 However, there is an important class of material that is not illegal, but which society as a whole, or individuals in responsible positions, may wish to be restricted and made unavailable to classes of customers – most notably children. The current way this is achieved in the broadcasting sphere is by using control over the means of distribution – which is the scarce commodity – as a proxy for control over content providers. In an Open State, distribution will no longer be scarce, many content creators will not be bound to any distribution method, and the operators of the distribution network will not in general know what is being distributed. (The Internet is a current example of this split between content and distribution.) Thus, the current rules will increasingly fail to maintain a realistic barrier to access by the class of customer needing protection. 9.8 This combination of market changes facilitated by technological advance leads Oftel to the firm conclusion that content regulation must change if it is to remain relevant to society’s needs. To do otherwise would be to rely on the hope that the traditionalists are correct; the issue is too important for that. 9.9 Moreover, new technologies provide important opportunities to enhance consumers’ and citizens’ sovereignty in respect of information and communication at the same time as technological change has weakened Governments’ ability to exercise control. Oftel’s proposals for “negative content” regulation are therefore designed to identify the law as the locus of control over illegal material and to promote the ability of consumers to exercise informed choice over the legal content they wish to consume. 9.10 Oftel believes that alternative control systems should be judged against whether, in practice:
9.11 Perfection cannot be achieved in this area. There will be too much content, too readily accessible for perfect control to be achievable. But Oftel believes that its proposed system, described in Annex B, scores well against the above criteria.
10. Additional rules during the transition to the Open State 10.1 The transition from the present to the Open State presents additional problems that need to be overcome if the Open State is to be realised as quickly as possible. Failure to address this transition runs the risk of reducing EU competitiveness in this sector as other countries move more quickly towards the Open State, and to the maximisation of competitive markets that this state implies. As the technical and economic changes that allow for this transition are already with us there is even less time to get the Community framework right. 10.2 In the transition period, the following will be required in addition to the rules appropriate to the Open State:
10.3 Discussion of these issues is at paragraphs 4.34–4.41 of the CMS Submission
11.1 The above analysis suggests the need both for some additions to and a number of deletions from the existing rule-set in the short-to-medium term. In particular, rules should in future be based on general authorisation to enter markets. The old practice of restricting market entry via the granting of individual licences should disappear completely except for the purpose of optimising use of scarce resources, such as spectrum – and even in that case conditions attached to the use of those scarce resources should be the minimum possible. 11.2 This fits well with the philosophy underpinning recent European Telecommunications Directives. It has not so far been pursued much in the broadcasting sphere. Oftel believes that the philosophy needs to be applied generally across the whole electronic communications sector and, to some extent, taken even further than it has gone already in existing telecommunications legislation. 11.3 In reviewing the current set of rules, particular attention needs to be given to rules which apply to all market players, even those which are not in a position to distort or restrict competition in a particular service. In the Open State, there should be no such rules, unless they are necessary for the delivery of explicit social and consumer policy goals or for the control of content. 11.4 An explicit assessment needs to be made of the relative weights of the benefits to be achieved by specific rules against the costs to the economy of imposition. Such an assessment should pay particular attention to the impact on players without a degree of power in the relevant market
12.1 Some suggest that the movement towards convergence and the development of a European single market are in step, thereby indicating that not only should regulators converge within member states, but across them. This is a neat solution, but a misconceived one. It is clear that there needs to be a consistent framework of rules at Community level. And some rules, for example, competition law insofar as it applies to trade between Member States, need to be applied at Community level. 12.2 However, National Regulatory Authorities (NRAs) know the local market conditions, cultural conditions and sensitivities and important actors best, and can best target regulation to greatest effect. Placing responsibility on the NRA ensures that the policy mix chosen reflects the different circumstances which exist in each Member State. Without the involvement of the NRA, there is a risk of developing all-encompassing detailed policy prescriptions. This would give rise to anti-competitive increases in the regulatory burden while simultaneously failing to meet the varying national needs. The current system of NRAs for telecommunications regulation is only recently established. It is a sound concept and there is no reason to believe that it will not work. 12.3 The role of Commission is as guardian of the Treaties and it has the task of oversight over NRAs. The regular Implementation Reports from the joint DGIV/DGXIII task force, especially as they evolve beyond the listing of transposition measures into a more analytical look at how Member State policies are affecting the development of competition in each market, are a potentially very useful tool in carrying out this task. And the infraction proceedings launched by the Commission against those Member States which fail to bring the Community framework into national law are also key. However, the Commission could not hope efficiently to police the detailed enforcement measures in all Member States and it would be swamped by detail if it were to try to get too involved. 12.4 There will also need to be increasing co-operation amongst NRAs, so as to promote best practice and common approaches. Both formal and informal arrangements to facilitate this are in place. Additional arrangements to promote co-operation between NRAs and DGIV on the application of Community competition law are desirable. 12.5 For the most part, it is for Member States to choose the form and method of application of the principles established within the agreed framework. (Oftel has proposed a particular regulatory structure which it believes will be suitable for the UK; but in other Member States, there may be national considerations which suggest a different structure.) However, Oftel believes strongly that the NRA charged with economic regulation of the electronic communications sector must also have the competence to apply national competition law within that sector. This allows the most effective instrument to be used in every case and minimises the risk of double jeopardy.
13.1 The most immediate priority for the Commission is to achieve consensus on the regulatory model for the Open State. That in itself will take some months to achieve. In the meantime, however there are a number of important actions which can be tackled. A. Globalisation 13.2 The communications market is increasingly a worldwide one. More and more, there will be a need to co-ordinate and harmonise policies not simply within Europe but across the globe. The European Commission and national governments have already taken this point, as exemplified by initiatives in the fields of patents, electronic commerce and pornographic material on the internet, to name a few. There are two further areas mentioned in this submission where an international consensus would be helpful, if not essential. It would be useful for the Commission (and indeed Governments) to raise these issues in appropriate international fora as soon as practicable. Access control and interoperability Filtering of content B. State of competition within the EU 13.3 The Commission should set in hand as soon as possible a survey of the probable state of competition across the Member States in the early years of the next Millennium. The aim should not be to consider whether a particular regulatory technique will be useful; rather it should have the intention of identifying where there will be vigorous competition and where the development of sustainable competition appears unlikely in the absence of further regulatory initiatives. In the latter case, the costs and benefits of the full range of options (including doing nothing) should be assessed; the necessity of deploying such initiatives throughout the EU, as opposed to within some Member States only, should also be considered. 13.4 Such an assessment could of course only be indicative of action to be taken. It is nevertheless such a vital component of the decision-making process that no additional legislation should be contemplated without it. C. Feasibility study of transition to an Open State regulatory regime 13.5 Economic regulation of telecommunications is harmonised across the EU. And although Oftel believes that a number of changes are needed for the Open State, this will not require a fundamental change to the framework of laws (although, as noted above, Oftel believes that there will need to be a thorough review of the detail). More change is needed in the broadcasting sector, especially in relation to the approach to licensing and in the application of appropriate Open State rules to information technology. The Commission should conduct an early feasibility study into the nature of the changes that would be required. D. Variation in market conditions across the EU 13.6 Development of competition is at different stages across the EU; and at different stages amongst different communications markets within any one member state. Moreover, as transition towards the Open state proceeds, competition will develop at different rates. The Commission needs to develop a plan for dealing with this, allowing economic regulation to be fine-tuned according to the development of competition. A European regulatory regime which insists on a unified approach, irrespective of the development of competition in particular markets will stultify innovation and impose unnecessary burdens on service providers in markets where competition is best developed. This runs counter to the interests of consumers. 13.7 One possible approach to this conundrum is as follows:
13.8 It should be a high priority for the Commission to refine this model or, alternatively, propose a better one. 13.9 The above model will lead to gradual progression towards the Open State regime, with the pace of progress being determined by the state of competition in particular markets. It builds on the local expertise of the NRA while giving the Commission an appropriate role in monitoring how the Member State fulfils the responsibility placed upon it.
14. Telecommunications Review of 1999 14.1 The Commission has a remit to review, during 1999, the body of EU Telecommuni-cations legislation and to consider what changes are necessary and appropriate. Oftel presumes that this will be done within the context of following up the Convergence Green Paper. Any other approach would make little sense. The studies mentioned above are essential pre-requisites.
15.1 While the arguments above and in the CMS Submission address a number of the questions and issues raised by the Commission Green Paper, there are a some issues of significance which have not been addressed by Oftel so far. Attached at Annexes C and D respectively are some comments on standardisation and spectrum issues.
Outline of an Access Control Regime A1 The rules for an access control regime will need to be generic in nature because it will be very difficult to predict where the next bottleneck will form. For example, 3 years ago, it would not have been generally appreciated that there was a possibility of dominating the market for supply of interactive services to consumers by way of controlling the conditional access system in digital television receivers. In line with the philosophy that detailed rules should not be imposed until they are necessary, it might be thought that the best approach would be to create a special set of rules to deal with each bottleneck as it arises. A2 This would be impractical – in that it will be possible to create new bottlenecks very quickly as technology advances. It would also be inefficient use of legislative time – because a generic solution can be formulated. A generic solution also makes for a clearer regulatory regime than a cluster of specific solutions. A3 However, especially because of the wide scope of the problem, there will need to be a very carefully defined trigger test, so as to ensure that only those actually controlling a bottleneck are brought within the scope of the rules. Oftel’s regime is based on the principles below. The trigger A4 The regime applies in the following circumstances Scenario 1
Example: pay television providers who wish to market services to consumers with receivers controlled by a particular proprietary conditional access system Scenario 2
Example: owners of a set-top box designed to deliver web pages to the TV, where the administrator of the box operates an internet “walled garden” and controls the gateway to the wider internet Scenario 3 Supplier A wishes to supply a “downstream” service which needs to interface with the “upstream” service or product of Supplier B. If B has disclosed more details of the interface to another party than it has to A, B will be at a disadvantage in designing its service to compete with that of that other party Example: Internet browser software, where a supplier of operating system software has not published full details of external interfaces but has made them available either to its own in-house browser supply business or to selected external suppliers The regulatory regime, when the trigger test is satisfied A5 In all the above scenarios, supplier B must, if it has been nominated (by the appropriate regulator as a “regulated supplier”):
A6 There would of course be an appropriate mechanism for making representations and appealing against a “regulated supplier” nomination. Narrowness of scope A7 The above regime is considerably narrower in scope than it might appear at first sight. An interesting comparison is with the conditional access regulatory regime applied in accordance with the Advanced Television Standards Directive. The latter is imposed, in effect, on all suppliers of conditional access services. In contrast, the regime proposed above applies only to those who have a degree of market power sufficient to allow them to control significant “gateways” or “bottlenecks” and which have been so nominated by the appropriate regulator. A8 The regime therefore combines the virtues of flexibility, certainty of application and minimisation of scope. Interpretation A9 The operation of the regime relies on interpretation of such terms such as “economical” or “fair and reasonable”. Oftel believes that problems of interpretation can be overcome substantially by guidance which takes due account of EU jurisprudence.
Content control B1 Oftel considers that, in future, “negative” content regulation should be based on the following principles:
B2 What Oftel proposes is a system of classification, not a system of censorship and suppression of content. Suppression of content is a matter for the law. Classification will ensure that consumers will be able to programme their domestic equipment, or use a filtering service, to ensure they do not inadvertently access material they may find offensive and that they are able to bar children, and other vulnerable people, from accessing material deemed unsuitable for them. B3 Oftel recognises that values differ between Member States as well as between different citizens within individual Member States. What in one Member State may be unexceptionable in another may be generally offensive. Accordingly, the standards applied to negative content regulation are likely to continue to differ from Member State to Member State. B4 However, both the imperatives of the Single Market and the shift from national wireless broadcast delivery of audio-visual services towards wired distribution over global “any to any” wired networks mitigates against comprehensive and mandatory application of national standards. Accordingly, EU citizens will increasingly access audio-visual services emanating from outside the state in which the services are received. Indeed, their ability to do so, eg by receiving national or local radio and television services over the Internet, is likely to promote mobility of labour within the European Union. In consequence, services which conform to agreed European standards, such as those in the European Convention on Human Rights, and are lawful within the EU state of origin should be freely receivable within other EU member States. But, as observed above, standards vary between Member States as well as within them. Some EU citizens will wish to be protected from inadvertent exposure to material which they may find offensive. This can be achieved if the content classification systems used by Member States are interoperable. B5 For such a scheme to be effective there are a number of conditions that need to be met. In particular the means to filter material must be universally available to customers. This does not presently exist on traditional “broadcasting” networks supplying traditional broadcasts. However, it does exist on these networks where there are access control systems, which are needed for both subscription TV and pay per view. On traditional telecommunications networks rather primitive systems do exists to filter some material – in particular “opt-in” control can be (and in the UK is) applied to particular types of premium rate services (audiotex). Material on the Internet is supplied through customer premises equipment (ie a PC or similar) that is sophisticated enough to support such a filtering system, if the other conditions are met. In addition, most domestic access to the Internet is mediated by access service providers who, again, have IT equipment connected to the network which has enough intelligence to carry out this task if the other conditions are met. (Indeed, many service providers are already providing simple filtering mechanisms for their customers.) On balance, it can be expected that the majority of households will have access to effective means of filtering within the timescale envisaged for the Open State. To the extent that this is not so, the matter could be addressed as a “universal service” issue. B6 Another requirement is that sufficient commercial material is classified to enable “non-classified” (or, indeed, declassified) material to be put into the restricted access category without severely degrading the services provided to end users. If too much legitimate commercial material ends up by default in the restricted access category, consumers will not use filtering services. If consumers do not use filters, there is little incentive on content providers to classify their material. However, there is likely to be a significant demand for filtering services, especially from educational and similar establishments, and from parents wishing to control access by their children. This demand for filtering services should go a considerable way to ensuring that the critical mass of both end users and content creators is created for the system to be self sustaining. In addition, most content providers will have little, if any, difficulty in self classifying their material. B7 However, it must be recognised that the issue of classification is international in character: on converged networks content will be available from around the globe and, if filtering is to work effectively, all material should be capable of being classified according to a consistent set of definitions. Thus, there is a role for the regulatory authorities to encourage both classification within their own territories and to ensure interoperability of classification schemes between different countries. The emphasis should, however, be on interoperability, rather than uniformity, of different national classification schemes. The filtering services that can be delivered on digital networks are very flexible, if the control of such services is located with the customer, rather than being centrally imposed. Decentralised control will allow the filtering to respond to different classification definitions in different countries to be interpreted in a way that meets the individual customer’s requirements – as opposed to disputes between nation states if a uniform classification is needed throughout the world (or, indeed, if one country tries to impose its classification scheme on everyone else). B8 Further detail can be found in paragraphs 6.47 to 6.56 of the CMS Submission.
Spectrum issues C1 Traditionally, spectrum has been strictly demarcated internationally between fixed, mobile and broadcasting uses, providing limited flexibility to address changing patterns of market demand. In each service category, the limited availability of spectrum was (and still is) used to justify a limitation on the number of competing operators, particularly in the mobile and broadcasting areas. C2 Evolution in technology and in the nature of the services being provided will lead to greater spectrum availability and a blurring of the traditional demarcations. The key technology driver is digitalisation, which has already brought benefits to the telecommunications sector (it is unlikely that either mass market mobile telephony or radio fixed access could have got off the ground without digital technology). The benefits are likely to be substantially greater in the broadcasting sector, not least because the gulf between the current analogue technology and the proposed digital technology is so much greater than it was for telecommunications. C3 Advances in technology are also enabling frequencies much higher in the radio spectrum to be used economically. This means that substantial tranches of spectrum could soon become available for the development of broadband wireless services to homes and businesses. In Europe, up to 4 GHz is likely to be available for such services in the 28 and 42 GHz bands. C4 As noted above, convergence is progressively blurring the distinction between the traditional fixed, mobile and broadcasting sectors. Given this, does it make sense to have such rigid demarcation between the services? C5 There are of course technological considerations - to a large extent the current international demarcation between services reflects the requirement to ensure they co-exist without interference. However this could be dealt with at the standards level by ensuring compatible technologies are deployed, rather than by dictating what services can or can not be delivered. C6 Clearly convergence requires changes to the award and pricing of radio spectrum, to take more account of the economic potential of an increasingly valuable resource. The imminent introduction of spectrum auctions in the UK is a firm step in this direction and needs to be complemented in the future by further access creating measures such as the creation of a secondary market. The migration to digital is key to increasing the supply of radio spectrum in line with escalating demand, and the Commission should take steps to ensure a timely switch off of analogue throughout the EU. Such a unified approach will be essential to gain the full benefit - the incompatibility of analogue and digital services could severely hinder any one Member State’s ability to migrate spectrum in the presence of continuing analogue services elsewhere in Europe.
Standards issues D1 Standardisation plays two important roles in the communications industry. Firstly it facilitates interoperability between customers and service providers across a multiplicity of networks and terminal equipment. Secondly, it can lead to the minimisation of technological variants, thus creating economies of scale which in turn benefits both producers and consumers. However, standardisation also has drawbacks. In both cases, by closing off technological variation, it can limit the potential for competitive differentiation of services. Also, standardisation can be a lengthy process and can slow down the initial pace of innovation. D2 For these reasons, it is necessary to strike the appropriate balance between encouraging, or even mandating, standards, on the one hand and promoting competition and innovation on the other. D3 Interconnection and interoperability have traditionally been ‘horizontal’ issues for public networks providing basic voice and data services. Such standards allow customers to communicate using basic transport services across interconnected ‘peer’ networks. Standards in this area are adequately addressed by ETSI. The underlying broadband transport networks of the future will still need such standards. In the emerging convergent information and entertainment services industry, interworking issues mainly arise from the need for compatibility between players in the ‘vertical’ value chain. Traditionally service providers have solved this problem by providing the means for customers’ equipment to be compatible with their own services in situations where the intervening networks have provided transparency, for example by providing appropriate access software. In the future, steps might need to be taken to ensure interoperability when the value chain includes multiple players, some exercising ‘bottleneck’ gateway control over the delivery of services. D4 However, with the increasing globalisation of services and the drive for standards which are timely and focussed on market needs, it is less likely that the necessary standards will come from traditional regional or international standards bodies. Such bodies developed to meet the needs for national telephone networks to interwork on a worldwide basis. In the emerging convergent information and entertainment services industries, standards, and the important pre-standardisation activities, are more likely to emerge from voluntary industry consensus groups such as DVB, DAVIC, the ATM Forum and the IETF. The objectives of traditional standards bodies, such as ETSI and the ITU, should be to collaborate with such consensus groups to exploit their complementary strengths. One such strength is the continuity and wider recognition that flows from formal standards, coupled with the speed and market focus that comes from consensus bodies. D5 In the past, EU Directives have assumed that the important feature of network standards was that interfaces should be published to ensure an open, common market. In the future, additionally, care needs to be taken by regulatory authorities that those with market power do not impose their own proprietary standards on the wider industry where this raises others’ costs, prevents or impedes market entry or otherwise distorts fair competition. Particular attention needs to be taken in cases where a dominant player, by deploying a proprietary standard, undermines any formal or consensus standards which the rest of the market wishes to use. However, there will be little or no role for the imposition of mandatory standards. Market power will need to be moderated by the application of competition rules to the creation and deployment of standards. D6 The other benefit of standards is the creation of a harmonized market for equipment, leading to economies of scale. It should not be assumed that the great successes of the past, eg GSM, will be repeated in markets with high levels of enhanced or value-added features, as over-standardisation in such services can limit innovation. D7 One possible path which can strike an appropriate compromise between the opposing benefits and disbenefits, is the creation of so-called ‘meta-standards’. These allow a rich vocabulary of message sets across networks, without defining in detail their precise meaning. The strength of the Internet arises from such a concept: anything which can be carried over the IP Protocol can be delivered over the internet, as the network takes little account of anything above the IP layer. D8 There is, however, a second and important trend flowing in another direction. In the debate about convergent technologies and services, it is often said that digital networks are blind to the distinction between voice and data – it is only necessary for networks to be transparent. This however leads to problems, especially when faced with the asymmetric and radio-based delivery mechanisms which are now being deployed to deliver convergent services. It is precisely because of the knowledge of the application, say Video on Demand, that an asymmetric network can be used. Similarly, if the known purpose of a call is the carriage of high speed data, connections which optimise the use of radio spectrum can be arranged. In the past, the uniform 64kbit/s paths of narrow-band ISDN have led to complications when interworking with mobile networks for which ‘real-time’ 64kbit/s is not an optimum speed or method of delivery. Hence, future standardisation may need to place greater emphasis on the creation of ‘purpose-based’ standards, where the transport protocols taken account of the desired end-user application. Voice compression systems are an example of standards specifically optimised to the end use. It may not be easy to strike the balance between an approach based on ‘meta-standards’ and one based on ‘purpose’.
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