Archive for the ‘P2P’ Category

DEFAMATION HAS CHANGED - How does this affect your business?

The new Defamation Act 2013, passed into law on the auspicious date of 25th April 2013, has come into force on 1st January 2014.

It brings in a whole new look to defamation, enacting a series of new measures, including:

  • a “New serious harm threshold”, which is aimed at helping people to understand that a certain level of damage has to be done to someone’s reputation before a claim will be successful, and which discourages wasting the Court’s time;
  • enabling protection for scientists and academics who publish “peer-reviewed” material in scientific and academic journals;
  • enabling protection for those publishing material on a matter of public interest (where they reasonably believe that it is in the public interest);
  • reducing libel tourism by tightening the test for claims involving those with little connection to England and Wales;
  • introducing a new process aimed at helping potential victims of defamation online, by resolving the dispute directly with the person who has posted the statement;
  • bring in a single-publication rule to prevent repeated claims against a publisher in respect of the same material.
  • Please contact Roger Field or Ian Penman

    (roger.field@newmedialaw.biz or ian.penman@newmedialaw.biz)

    if you would like to know more about the new defamation law, and how this will affect your business, please get in touch.

    Tel: +44 20 7291 1670

    Ian Penman

    Partner, New Media Law LLP

    +44 20 7291 1670

    OSCAR NOMINATIONS!

    “Philomena” has been nominated for FOUR Oscars!!  

    For best picture, best actress, best adapted screenplay & best original score.  

    “Philomena” starring Judi Dench & Steve Coogan is produced by New Media Law’s client Gabrielle Tana whose producer credits include “The Duchess”, “Coriolanus” and the soon to be released “The Invisible Woman”. “Philomena” is also nominated for 4 BAFTA’s; 3 Golden Globe Awards; 5 London Critics Circle Awards; and 1 Screen Actors Guild Award.  The film won several awards at the 2013 Venice Film Festival including Best Screenplay.   

    Released in the UK on 1 November 2013, “Philomena” and has grossed over £10.5 million at the UK and Ireland Box Office, making it the highest grossing independent British film of 2013.  The film has only just started its international roll out but has already achieved a global haul of US$45m with particularly strong results in the US, Australia and Italy.     

    Exciting news for all those involved in this brilliant film including our very own Peter Dally!  

    EUROPEAN COMMISSION LAUNCHES COMPETITION INQUIRY INTO PAY-TV

     On 13 January 2014 the European Commission (Commission) launched a formal competition law investigation into pay-TV licensing arrangements (see press release at: http://europa.eu/rapid/press-release_IP-14-15_en.htm?locale=en).  The investigation focuses on the licensing provisions in agreements between major US film studios (Twentieth Century Fox, Warner Bros., Sony Pictures, NBC Universal and Paramount Pictures) and Europe’s pay-TV broadcasters including BSkyB, Canal+, Sky Italia, Sky Deutschland and DTS.  The Commission will investigate whether the arrangements prevent cross-border provision of pay-TV services.   

    The investigation could have wide reaching effect on the business models of content owners who license their rights on the basis of exclusive territories. This development was foreshadowed in an earlier post on this blog written in collaboration with Suzanne Rab, independent competition law barrister and Alison Sprague, economist [see here for New Media Law News » Blog Archive » DO EXCLUSIVE LICENCES FOR MEDIA RIGHTS BREACH EUROPEAN LAW?].

    EU INVITES COMMENT ON COPYRIGHT REVIEW

    The European Commission has started a consultation on its continued efforts to review and modernise EU copyright rules. 

    The consultation “document” is focused on ensuring that the EU framework for copyright remains fit for the challenges of the digital world, exploits full potential for the single EU market, and stimulates growth and investment, while fostering cultural diversity.  It’s an ambitious aim and one which has been on the EU regulatory agenda for some time.

    The consultation comes in the wake of the Commission’s Content in the Digital Single Market communication of 2012 [http://ec.europa.eu/internal_market/copyright/licensing-europe/index_en.htm]. There it asserted its efforts to update the EU copyright rules through an industry-led initiative.  That process has led to recommendations for multi-territory licences for the use of music online on a small scale.  The Commission is expected to decide later in the year whether it wants to back this up with legislation.

    The consultation invites views on a wide range of topics including whether there are limitations in the current regime due to a patchwork quilt of rules and fragmented protection.

    The consultation spans some 80 questions over 8 sections.  It is a portmanteau ‘catch all’ document reflective of the multiple interests at stake.  It covers such issues as: 

    • Have you faced problems when trying to access online services in an EU Member State other than the one in which you live?
    • Have you faced problems when seeking to provide online services across borders in the EU?
    • How often are you asked to grant multi-territorial licences?
    • Do you think that further measures (legislative or non-legislative, including market-led solutions) are needed at EU level to increase the cross-border availability of content services in the Single Market?
    • Does the territoriality of limitations and exceptions, in your experience, constitute a problem?
    • Should digital copies made by end users for private purposes in the context of a service that has been licensed by rightholders, and where the harm to the rightholder is minimal, be subject to private copying levies?
    • Should the EU pursue the establishment of a single EU Copyright Title?

    These issues are among the most perplexing issues facing rights owners, collecting societies and distribution platforms in a digital age.  The territorial aspects of licensing are particularly controversial.  Rightowners have traditionally licensed different EU countries individually taking account of the specificities of each territory.  Yet this model is coming under increasing pressure in the face of goals for a truly borderless EU and demands for a more flexible pan-European solution.

    On a different but parallel track, the Commission has also indicated that it will launch an inquiry in 2014 into exclusive licensing of ‘premium’ rights.  That inquiry has arisen in a sports rights context following FAPL’s legal challenge through the UK and EU Courts.  Its interface with the current copyright consultation cannot be ignored.  See, further,  New Media Law News » Blog Archive » Do exclusive licences for media rights breach European law?  

    The crux of the matter is that this has been a long standing debate and where copyright, competition law, free movement of goods and the raft of EU legislation interact.  There have been noble efforts at “solutions” including a move for an EU copyright but so far none of these have received widespread support.  The consultation is laudable for its aims.  Yet as any avid watcher of this area will know, it can take time for consultations to work their way through and for solutions to be implemented and effective.  So, is the EU licensing framework fundamentally broken or is it a case of tweaking around the edges?   

    Answers on a post-(Christmas) card to Brussels. The 5 December consultation document invites comments by 5 February, 2014.

    For details of the Commission’s consultation see: http://europa.eu/rapid/press-release_IP-13-1213_en.htm?locale=en

    This briefing has been prepared with Suzanne Rab, a barrister specialising in EU competition and regulatory law at a leading chambers in Lincoln’s Inn and whom New Media Law instructs for competition law matters.

    Please contact Ian Penman or your usual NML advisor for further information on how we may assist you in responding to the consultation.

    .

    DO EXCLUSIVE LICENCES FOR MEDIA RIGHTS BREACH EUROPEAN LAW?

    The Red White and Blue:

    Mrs Murphy revisited

    The possible EU sector inquiry into premium rights

    Context

    At almost £300 million per season, in November 2013, BT paid more than double the current UK deals for the exclusive right to screen live Champions League matches from 2015.  Both of the current rights owners, Sky and ITV, were reported as saying that they were unwilling to pay over the odds based on their business models.  The BT Champions League deal follows a massive increase (71%) in the amount paid for the UK Premier League live broadcasting rights back in June 2013, in which BT played a part.  But a recent communication regarding the EU’s competition directorate may call into question the EU law treatment of territorial premium content rights. 

    Licensing

    The licensing of audiovisual content rights is typically conducted on a national basis to the extent that there is only a limited demand from bidders for global or pan-European rights; broadcasters usually operate on a territorial basis and serve the domestic market either in their own country or in a small cluster of neighbouring countries with a common language.[1]  

    Moreover, content licensing has traditionally been contracted on a territorially exclusive basis; licensees are granted absolute territorial protection regarding the licensed rights.  As one commentator points out, territorial exclusivity has been broadly accepted in individual Member States:

    In principle, under EU competition law, territorial restrictions fragmenting the EU internal market, such as absolute territorial protection, restrict competition by their very object (without the need to prove their effects). However, the jurisprudence and decisional practice concerning territorial exclusivity in the agreements between right holders (owners of premium content rights) and broadcasters has so far been limited and interpreted as allowing such absolute territorial protection.[2]

    This stance was endorsed at the EU level by the landmark Coditel II case.[3]

    Under well-established EU case law restrictions on the freedom to provide services can be justified if they pursue a legitimate objective, are justified by overriding reasons of public interest and are suitable for securing the attainment of that objective without going beyond what is necessary.

    Territorial exclusivity: Mrs Murphy and the Red White and Blue

    Then there was a challenge to the accepted thinking on exclusive territorial licensing in cases concerning pubs that bought foreign satellite decoders for screening live football matches.  The Premier League sought to prevent the avoidance of the exclusive territorial licensing and brought actions against the Greek suppliers and their licensees. 

    A parallel case arose from an appeal against a criminal conviction in proceedings against Mrs. Murphy, the now infamous publican who showed Premier League matches in her pub using a Greek decoder card.  What at first blush may have appeared to be a relatively straightforward case was ultimately a multi-layered complex legal scenario with a number of potentially wide-ranging outcomes.  The issues raised straddle free movement of goods, competition law and copyright infringement as well as the criminal law. 

    The UK High Court referred various questions to the Court of Justice of the EU (‘CJEU’) relating to the compatibility of The Premier League’s licensing arrangements with EU law.  These included questions relating to application of EU free movement rules and competition law.  In October 2011, the CJEU provided a landmark ruling, stating, amongst others:

     The Court of Justice holds that national legislation which prohibits the import, sale or use of foreign decoder cards is contrary to the freedom to provide services and cannot be justified either in light of the objective of protecting intellectual property rights or by the objective of encouraging the public to attend football stadiums.[4]Ultimately Mrs. Murphy’s prosecution was quashed by the High Court in London.  It was not a criminal offence to subscribe to a foreign decoder and to receive broadcasts from outside the UK using that decoder and the restrictions on the use of such decoders were unlawful under EU free movement principles.  She was therefore free to continue subscribing to Greek pay TV retailer Nova TV for broadcast Premier League matches via its decoder.  But she was not permitted to show the broadcasts in her pub as they would have breached the limited copyright the Premier League has, namely any opening video sequence, the Premier League anthem, pre-recorded films showing highlights of recent Premier League matches and various graphics.  The CJEU considered that the EU rules on free movement (specifically Article 56 TFEU) precluded national legislation that made it unlawful to import and sell foreign decoding devices.[5]  This restriction could not be justified by the objective of protecting IP rights.  It further ruled that the grant of exclusive satellite broadcasting licences for the territory of a Member State or states and which required the licensee not to supply decoding cards to enable viewing outside the territory restricted competition within Article 101(1) TFEU.On 22 November 2013, the Financial Times reported that the European Commission is set to launch a formal investigation into sales of pay-TV rights, quoting a short paragraph from a Commission communication published in May 2013:whether licensing agreements for premium pay-TV content contain absolute territorial protection clauses which may restrict competition, hinder the completion of the single market and prevent consumers from cross-border access to premium sports and film content…”[6]The context or impetus for the Commission comment in the document is that following the Murphy decision, it had conducted a preliminary fact-finding investigation to examine licensing agreements.  We observe that DG Competition categorises “sport rights, music, popular films, etc.” as premium content.   The comment by the judge in Murphy that there were wider legal issues to explore (and not least the delicate relationship with copyright) is expected to lead to a wider inquiry at EU level.  Such an inquiry may presumably take the form of an EU sector inquiry or similar which permits the Commission to undertake an inquiry into a sector even where it does not suspect wrongdoing by individual companies.  As stated in Article 17 of Regulation 1/2003 such inquiries are within the Commission’s remit.  In particular: 

    Where the trend of trade between Member States, the rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the common market, the Commission may conduct its inquiry into a particular sector of the economy or into a particular type of agreements across various sectors.”[7]

    A principal question to ask is, why now?  While there are no further comments from the Commission available in the public domain (save the one referenced at footnote 6), it is assumed that the judgment in the Murphy case was a catalyst.  And some preliminary fact-finding will have been necessary to justify opening the case.  Moreover, it is worth noting that it is over four years since the Commission concluded its pharmaceutical sector inquiry in July 2009 after a probe of some 18 months.  It is understandable that it may want to avoid too precipitous a probe to fend off the criticism in the pharmaceutical sector inquiry that a disproportionate amount of time was spent in basic fact-gathering. 

    As stated above, the Murphy case entailed a complex array of legal issues but it signals what appears to be a move away from the comfort of the previous case law enshrined in Coditel and a reassertion of a clear focus on the free movement of goods and services.

    Moreover, further complexities may arise owing to individual Member State investigations and competition cases (such as Ofcom’s pay TV investigation and the Competition Commission’s movies on pay TV investigation).  It cannot go unnoticed that in the UK’s probe into premium movies, the Competition Commission concluded that Sky did not enjoy such an advantage over its rivals as to adversely affect competition in the pay TV retail market.[8]

    What does a Commission sector inquiry entail?

    EU sector inquiries typically begin with an announcement (although in the pharmaceutical sector inquiry the Commission launched its inquiry with dawn raids) and the following process is invoked:

          Information requests sent to interested parties, suppliers, customers and the Member States.

          Preliminary findings issued followed by a consultation on the findings and proposed action (if any).

          Assessment of further information and a final report is issued.

          Standalone competition law investigations may be opened if the Commission believes that there has been an infringement of competition law; it may recommend other parties (e.g. Member States) to take action.

    A brief overview of previous Commission sector inquiries is provided in Figure 1. 

    Figure 1: overview of Commission sector inquiries

    Sector Dates Outcome
    Pharma Jan 08 to Jul 09 1.58 years Monitoring continues.Enforcement actions.  New legislation for Member States re: introduction of generic drugs
    Retail banking Jun 05 to Jan 07 1.67 years Enforcement actions.Range of measures to strengthen competition in retail banking, including in the market for payment cards.
    Energy Jun 05 toJan 07 1.67 years Standalone competition lawInfringement cases; Third Energy Package.
    Local loop Jul 00 toJan 02 1.75 years Follow on actions – Infringement actions and monitoring.
    Leased lines Jul 99 to Dec 02 3.50 years Commission closed the inquiry owing to the ‘strong drop in prices since the inquiry’s launch’.

    While at a high level (each inquiry was both detailed and nuanced), key takeaways are:

          A sector inquiry requires disclosure of vast amounts of information by affected companies, even if they are not the main focus of inquiry.

          Since an inquiry may last well over a year, this inevitably presents challenges for ‘business as usual’ during the period of regulatory uncertainty and a consequent burden on management time.  The Commission aims to resolve such inquiries in 18 months but previous inquiries have lasted at least that time or longer. 

          On the other hand, a sector inquiry may allow for the industry case to be more effectively presented and heard if the process is properly managed.

    As such, even though a sector inquiry is different from a competition investigation into a possible infringement of competition law it should be treated with no less seriousness.

    In Figure 2 we provide a summary of potential (generic) outcomes of an EU sector inquiry. Figure 2: potential outcomes of an EU sector inquiry

    Sector Dates Outcome
    Pharma Jan 08 to Jul 09 1.58 years Monitoring continues.Enforcement actions.  New legislation for Member States re: introduction of generic drugs
    Retail banking Jun 05 to Jan 07 1.67 years Enforcement actions.Range of measures to strengthen competition in retail banking, including in the market for payment cards.
    Energy Jun 05 toJan 07 1.67 years Standalone competition lawInfringement cases; Third Energy Package.
    Local loop Jul 00 toJan 02 1.75 years Follow on actions – Infringement actions and monitoring.
    Leased lines Jul 99 to Dec 02 3.50 years Commission closed the inquiry owing to the ‘strong drop in prices since the inquiry’s launch’.

    This demonstrates that:

          The outcomes of sector inquiries are potentially wide ranging from a clean bill of health to a follow on investigation under competition law. Indeed many of the abuse of dominance investigations in the energy sector were sparked by or coincided with the energy sector inquiry (2005-2007).

          However, the Commission has no power to apply intrusive remedies such as mandated divestments unless an infringement of competition law is found (unlike the Competition Commission or its successor the Competition and Markets Authority (“CMA”) in the UK.[9]  Nevertheless, the Commission may make recommendations to other bodies or even national authorities to take effective action where they are better placed to deal.  For example, in the pharma inquiry the Commission urged wider reforms in relation to an EU Patent, a reform thought by many to be overdue.

    What are the implications for this inquiry?

    The recent Premier League and Champions League live broadcast rights auctions have led to the signing of numerous new contracts.  We do not have access to their detail and thus cannot form a view as to whether amendments were made following the Murphy judgment. 

    Rights to certain live football matches tend to be high value in monetary terms and for the viewers, a matter of life and death for many (recalling the famous Bill Shankly quote).  However, they are but one sub-genre within the broader sports genre.  There’s the other sports, and further genres beside – ‘music, popular movies etc.’ – to quote the Commission.  Multiply the number of rights holders by genre and licensees within Member States and it is clear that any industry inquiry (if all-embracing) is potentially enormous in scale and scope. 

    Moreover, each genre/sub-genre has its own specific economics and characteristics.  The economics of Hollywood movies and their temporal multi-format release channels – or windows – contrasts significantly to many other forms of content.  The packaging of content is also important – content has to be made specific to suit each particular territory.  In addition to marketing and promotion, there is possible adaptation to each relevant population on the basis of cultural and linguistic specifics.  Such costs are not negligible. 

    And don’t forget about online – it is conceivable that geo-blocking will be an issue of focus, particularly following the Commission’s ‘Licences for Europe’ stakeholder dialogue.  This resulted in, amongst others a pledge for the further development of cross-border portability of subscription services.  And we must not dismiss the CJEU’s focus on the importance of the free movement of goods and services in the internal market. 

    While the actual scope and focus of the inquiry remains to be seen, a number of issues have been flagged by the Commission in its comments so far.  It has earmarked that the following issues are likely to be examined, namely, whether the relevant licensing agreements contain clauses which may:

          restrict competition between Member States;

          hinder the effective operation of the single market; and

          unduly prevent EU consumers from accessing premium sports and film content across EU borders.

    We consider each in turn.

    Restriction of competition

    An agreement falls within the prohibition laid down in Article 101(1) TFEU when it has as its object or effect the prevention, restriction or distortion of competition. 

    In the Murphy case, the CJEU stated:

    it is apparent from the Court’s case-law that the mere fact that the right holder has granted to a sole licensee the exclusive right to broadcast protected subject-matter from a Member State, and consequently to prohibit its transmission by others, during a specified period is not sufficient to justify the finding that such an agreement has an anti-competitive object (see, to this effect, Case 262/81 Coditel and Others (‘Coditel II’) [1982] ECR 3381, paragraph 15).[10]

    However, any comfort given to rights holders and broadcasters that the principles enunciated in Coditel remained unaffected was short-lived. Several paragraphs later the CJEU stated that:

    “…a premium is paid to the right holders concerned in order to guarantee absolute territorial exclusivity which is such as to result in artificial price differences between the partitioned national markets. Such partitioning and such an artificial price difference to which it gives rise are irreconcilable with the fundamental aim of the Treaty, which is completion of the internal market. In those circumstances, that premium cannot be regarded as forming part of the appropriate remuneration which the right holders concerned must be ensured.”

    Consequently, the payment of such a premium goes beyond what is necessary to ensure appropriate remuneration for those right holders.”[11]

    And in conclusion:

    Accordingly, given that those clauses of exclusive licence agreements have an anticompetitive object, it is to be concluded that they constitute a prohibited restriction on competition for the purposes of Article 101(1) TFEU.[12]

    The CJEU considered that agreements that aimed to partition markets according to national borders or made cross-border supply more difficult must be regarded as agreements whose object is to restrict competition.

    It appears from the judgment that it is not the exclusive licences themselves that are being challenged as restrictive by object but the requirements on broadcasters not to supply devices that would enable supply outside the territory. This latter requirement is the basis of absolute territorial exclusivity which is the apparent nub of the CJEU’s concern.  The CJEU considered that such clauses would not meet the conditions of individual exemption under Article 101(3) TFEU since they would go beyond what was necessary to protect the underlying IP rights.

    However, Article 101(3) was not raised before the national court. In the authors’ view, the issue of compatibility with Article 101(3) will inevitably be testing ground for further inquiries which by their nature will be fact-based.  One thing is sure, however, is that the CJEU’s pronouncements as to such clauses being restrictive by object raises the burden on rights holders to justify their arrangements under Article 101(3).

    Hindering the completion of the single market

    There is some overlap between the CJEU’s reasoning in relation to free movement and competition issues.  The crux of the matter from the perspective of free movement is whether the restriction on free movement so identified is objectively justified.  In the pub cases the CJEU rejected the objective of the protection of IPR and the objective of encouraging the public to attend football stadiums as adequate justification.  In so doing it has forced the question as to whether the hitherto accepted economic justifications for the current premium rights licensing models still hold.  In short, it has forced a rethink into the underlying economics of the industry.

    Prevention of consumers from cross-border access to premium sports and film content

    The CJEU cast doubt about the legality under competition law and free movement law of restrictions in exclusive licensing that provide absolute territorial protection for broadcasters by preventing consumers in one Member State from acquiring devices to allow them to view broadcasts from another Member State.  As such, it may be considered a partial victory for consumers who buy such equipment across borders.  A prime example is expats who like to view their favourite domestic TV shows once abroad. 

    And this is of course where online enters the fray.  Consider all the frustrated Brits on holiday abroad during the summer of 2012, unable to watch the Olympics on the BBC iPlayer. The Licences for Europe stakeholder dialogue resulted in a pledge by the audiovisual industry to increase gradually the cross-border portability of subscription-based audiovisual services.  The status of this initiative at the time of the inquiry, will play a key part in the extent to which the Commission delves deeper into online cross-border issues. 

    It is unclear as to whether music will fall under the scope of the inquiry.  A question arises as to the extent to which such content could be considered ‘premium’ – if indeed any EU inquiry is limited to such.  Whatever the scope of inquiry, it is likely that any examination of the EU rules on exclusive licensing on a territorial basis will not go unnoticed by players in other or related sectors where such practices are common.  In a different context the European Commission’s inquiry into the licensing practices of collective societies in the CISAC case has emphasised that the delicate balance between competition, copyright and fee movement remains an ongoing policy priority.

    On 12 April 2013, the General Court gave judgment in appeals brought by CISAC and its collecting society members against the Commission’s decision in 2008 finding that the societies had infringed Article 101(1) TFEU through their reciprocal representation agreements.[13]  Although the General Court ruled that the Commission had not established evidence of a concerted practice between the societies as to the terms of their agreements it dismissed appeals against the Commission decision finding that the individual provisions in the agreements were in fact contrary to Article 101(1) TFEU.[14]

    What next?

    What are the likely implications of the sector inquiry for stakeholders?  Some serious issues are sure to be raised.  For example, may there be a wholesale change to future content licensing deals?  May the economics of the various content genres be significantly undermined?  To what extent will DG Competition take into consideration possibly nuanced audiovisual-specific (and policy) factors?

    Rights holders, broadcasters and licensees all have a stake in the inquiry and will need to assess where their interests lie.  Those facing complaints or investigations domestically will also need to ensure consistency of messaging. The key drivers of the inquiry will likely be the strength of complaints, the coherence of arguments and the evidence presented.  While an ostrich-like strategy may be warranted for a peripheral player, such players may want to consider whether there are opportunities from more active participation.

    Among the issues to consider are:

          Development of the business’ regulatory strategy and how this impacts on commercial decision-making (licence fees, renewals etc.).

          Case-making and submission to the Commission and other bodies.

          Evidence assembly in relation to the above.

    Whatever the focus of the inquiry, interesting questions arise as to its relevance to licensing of audiovisual rights more generally.  At this stage it may be premature to predict the way in which the inquiry might unfold.  Important issues for determination will include:

          Whether and to what extent music is covered.

          The relationship between online access and cross-border access.  The commitments made in the recent Licences for Europe initiative may provide a sufficient level of comfort in some areas (e.g. cross-border access to online live streaming of live and catch-up domestic broadcasts for consumers when they go overseas).

          The extent to which the economics of different sectors dictate a different treatment.  In the Murphy case, the CJEU expressed concerns about partitioning national markets, “such as to result in artificial price differences between the partitioned national markets. Such partitioning and such an artificial price difference to which it gives rise are irreconcilable with the fundamental aim of the Treaty … that premium cannot be regarded as forming part of the appropriate remuneration which the right holders concerned must be ensured”.  An important first step will be to demonstrate the economics of the movie value chain and the nature of licensing policies vis-à-vis individual territories.  

          The Premier League cases concerned premium sporting rights.  The traditional rationale for territorial licensing is based on the different risks inherent in penetrating different territories.  The CJEU accepted that the objective of protecting intellectual property rights could be a relevant justification for restrictions on free movement but only appropriate remuneration is accepted.  The CJEU considered that the restrictions in issue went beyond what was necessary. 

    Interesting issues arise as to whether a particular pricing model is justified by reference to the economic value of the services provided. In the case of broadcasting this may be measured in terms of the size of the audience.   Where high returns are not guaranteed, rights holders and licensees (including putative licensees) will want to argue their case as to why a particular business model is or is not justified.

    How may we assist

    We are able to assist you in preparing your response to the forthcoming inquiry as follows: 

          Helping you to develop the strategic response to the inquiry, including advice on the appropriate ‘lines to take’ with the Commission.

          Collating evidence in support of specific licence pricing policies.

          Developing the appropriate counterfactual and approach to benefits/efficiency/economic arguments.

    Please get in touch if you would like to discuss the issues raised in this paper. 

    Any opinions expressed in this communication are personal and are not attributable to Competition Economists Group LLP

    Contact details 

     
    Dr. Alison Sprague Partner, CEG EuropeOne Fetter Lane, London, EC4A 1BR, United Kingdom   T  / +44 (0)20 3440 5526M / +44 (0)75 0784 0740 E / asprague@ceg-europe.comwww.ceg-europe.com Suzanne Rab Barrister, Serle Court6 New Square, Lincoln’s Inn, London, WC2A 3QS, United Kingdom T /  +44 (0)20 7242 6105D /  +44 (0)20 7400 7117M / +44 (0)75 5704 6522E /  srab@serlecourt.co.ukwww.serlecourt.co.uk

    Alison Sprague

    Dr. Alison Sprague is a partner in CEG’s London office.  She has more than 15 years’ economics consulting experience and specialises in the media, entertainment and telecoms sectors, advising private and public sector clients. Her sector experience includes television, radio, film, internet, music, sport, gambling, music, publishing and fixed/mobile telecoms.  She has led numerous strategy and economics projects, providing commercial, competition, policy and regulatory advice.  She has additionally conducted research into brands and advertising effectiveness and led a number of expert witness reports. Several projects have employed econometric techniques.  Clients comprise leading broadcasters; pay TV retailers, and telcos; trade associations; regulators, government departments, and their legal advisers, in the UK and overseas (including the EU, Eastern Europe, South Africa, Russia, India, Hong Kong). Alison has written numerous thought leadership papers - on media plurality (in the UK and Australia), local newspapers, government media policy, copyright, gambling, future business models for fixed and mobile internet, mobile markets in the EU, consumer policy and the competition regime in the UK.   Alison has expertise in advertising revenue forecasting gained in numerous successful franchise applications and renewals and cases covering competition, deregulation, litigations, due diligence, and privatisation. She has also examined funding models, public value and economic impact in relation to public service broadcasters, assessed possible uses, values and bidders for the UK’s ‘digital dividend’ (UHF) spectrum, and examined the likely impact of changing the amount of permitted advertising minutage on TV.   She conducted two major studies of pay TV markets in the EU as input to a client’s submission to Ofcom’s pay TV investigation. Other competition experience includes a merger in the Netherlands TV market, EU roaming charges, UK transport pricing, the collective selling of UK sports rights, UK newspaper and magazine distribution, EU and UK fixed-to-mobile termination rates, the UK outdoor advertising sector, EU local loop and leased lines, and GSM spectrum in the Netherlands. She recently appraised international media plurality and competition regimes as input to a regulatory response on behalf of a major satellite industry association.  She has additionally examined sports rights including an estimation of the implicit value of the rights to the Champions League in terms of advertising and sponsorship revenue, an analysis of the Premier League’s revenue distribution model, an assessment of the regulatory and competition issues in respect of the Premier League’s next sale of its broadcast rights, and reviewed an expert report regarding the collective selling of football rights following an investigation by the OFT.   Many of the studies she has led have been published, including: the BBC’s educational activities for the BBC Trust; the European pay TV sector in support of client submissions to Ofcom’s pay TV investigation; advertising effectiveness; the economic impact of the BBC, how Ofcom takes into account the consumer interest in its regulatory processes; the assumptions underpinning the reach projections for the BBC iPlayer; measuring media plurality on behalf of News Corporation, and a report for Ofcom on the commercial viability of local TV.   Alison has three degrees in economics. She was Research Assistant to Professor Patrick Minford and her M.Phil and D.Phil theses supervisor was Professor Stephen Nickell.  She was also a college lecturer at Oxford University.  Prior to joining CEG, she held positions at FTI, PwC, KPMG and NERA.  She is a member of the IAB’s Future Trends Working Group and is co-author with Suzanne Rab of “Media Ownership and Control: Law, Economics and Policy in an Indian and International Context” (forthcoming in Hart Studies in Competition Law in 2014). 

    Suzanne Rab 

    Suzanne is a barrister specialising in competition law at Serle Court, a leading chambers based in Lincoln’s Inn.  Suzanne has wide experience of EU law and competition law matters combining cartel regulation, commercial practices, IP exploitation, merger control, public procurement and State aid.  Suzanne advises in relation to a wide range of industry sectors, with a focus on industries that are subject to sector-specific regulation.  Suzanne has advised on a considerable range of competition law and regulatory issues in the converging communications and media sector including in matters relating to telecoms, online distribution, pay TV, newspapers, sports rights and licensing of copyright. In the telecoms sector, she has advised a UK mobile operator on the licensing, competition and regulatory aspects of the UK Competition Commission’s investigation into termination charges.  At EU level, she has advised on the European Commission’s competition investigation into differential pricing of iTunes in the EU Member States.  She has also been engaged to advise on the EU and UK competition law, regulatory and merger control issues relating to Video-on-Demand.  In the print media, Suzanne’s representative engagements include advising a UK investor on the competition law and public interest aspects of its proposed investment in a major UK newspaper quality title and a regional newspaper on the competition law implications of its distribution arrangements.  Suzanne has advised at the cutting edge of media plurality issues including advising News Corporation on the UK and EU competition law and public interest aspects of its proposed acquisition of the shares in British Sky Broadcasting Group that it does not already own.  In the audio-visual sector, she has advised a range of players from start-ups to major content owners and broadcasters.  Suzanne has advised extensively on the intersection between intellectual property and competition law in communications, and media and technology cases.  Suzanne has wide experience of advising business, governments, regulators and governments on the design and implementation of new laws and regulatory regimes in line with international best practices, including in telecoms and network industries.   

     

     In private practice as a solicitor for 15 years prior to joining the bar, she has held positions at magic circle and leading international antitrust practices.  Most recently she was an antitrust partner with a leading international practice.  She has also held the role of director at PricewaterhouseCoopers working within its strategy, economics and forensics teams. 

    Suzanne is also co-author with Alison Sprague of “Media Ownership and Control: Law, Economics and Policy in an Indian and International Context” (forthcoming in Hart Studies in Competition Law in 2014).



    [1] In contrast, demand for music licensing is often much wider than national e.g. from iTunes.

    [2] OECD Roundtable on Competition Issues in Television and Broadcasting, contribution submitted by the services of the European Commission, Directorate-General for Competition; p 92. See:  http://www.oecd.org/daf/competition/TV-and-broadcasting2013.pdf

    [3] Case 262/81 Coditel SA and others v Ciné-Vog Films SA and others [1982] ECR 3381.  Available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ .do?uri=CELEX:61979CJ0062:EN:PDF 

    [4] Judgment of the Court, Joined Cases C‑403/08 and C‑429/08.  Available at: http://curia.europa.eu/juris/document/document.jsf?text=&docid=110361&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=20618

    [5] TFEU refers to the Treaty of the Functioning of the European Union.

    [6] See:Commission Staff Working Document accompanying the report from the commission on Competition Policy 2012 at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri= SWD:2013: 0159:FIN:EN:HTML

    [7] DG Competition web page outlining the media sector.  Available at: http://ec.europa.eu/competition/sectors/media/overview_en.html

    [8] Although we note that this inquiry was not focused on absolute territorial protection, not least given its domestic remit. 

    [9] The CMA replaces the UK’s first stage and second stage competition authorities with effect from 1 April 2014.

    [10] See: Para 137, Judgment of the Court, Joined Cases C‑403/08 and C‑429/08.  Available at: http://curia.europa.eu/juris/document/document.jsf?text=&docid=110361&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=20618

    [11] Ibid.

    [12] Ibid.

    [13] CEG advised one of the parties in the CISAC case.

    [14] Case T-392/08 - AEPI v Commission, Case T-398/08 - Stowarzyszenie Autorów “ZAiKS” v Commission, Case T-401/08 - Säveltäjäin Tekijänoikeustoimisto Teosto v Commission, Case T-410/08 - GEMA v Commission, Case T-411/08 - Artisjus Magyar Szerzõi Jogvédõ Iroda Egyesület v Commission, Case T-413/08 - SOZA v Commission, Case T-414/08 - AKKA/LAA v Commission, Case T-415/08 - IMRO v Commission, Case T-416/08 - EAU v Commission, Case T-417/08 - SPA v Commission, Case T-418/08 - OSA v Commission, Case T-419/08 - LATGA-A v Commission, Case T-420/08 - SAZAS v Commission, Case T-421/08 - Performing Right Society v Commission, Case T-422/08 - Sacem v Commission, Case T-425/08 - KODA v Commission, Case T-428/08 - STEF v Commission, Case T-432 - AKM v Commission, Case T-433/08 SIAE v Commission, Case T-434/08 - TONO v Commission, Case T-442/08 - CISAC v Commission and Case T-451/08 - Stim v Commission

    COMPETITION LAW ADVICE FROM NEW MEDIA LAW

    December 4

    We are delighted to announce that Suzanne Rab is now working with New Media Law, and is available to advise clients on Competition Law issues via our office.

    Suzanne is an independent barrister specialising in competition law at a leading chambers based in Lincoln’s Inn. Suzanne has wide experience of EU law and competition law matters combining cartel regulation, commercial practices, IP exploitation, merger control, public procurement and State aid.

    Suzanne advises in relation to a wide range of industry sectors, with a focus on industries that are subject to sector-specific regulation. Suzanne has advised on a considerable range of competition law and regulatory issues in the converging communications and media sector including in matters relating to telecoms, online distribution, pay TV, newspapers, sports rights and licensing of copyright.

    In the telecoms sector, she has advised a UK mobile operator on the licensing, competition and regulatory aspects of the UK Competition Commission’s investigation into termination charges. At EU level, she has advised on the European Commission’s competition investigation into differential pricing of iTunes in the EU Member States. She has also been engaged to advise on the EU and UK competition law, regulatory and merger control issues relating to Video-on-Demand.

    In the print media, Suzanne’s representative engagements include advising a UK investor on the competition law and public interest aspects of its proposed investment in a major UK newspaper quality title and a regional newspaper on the competition law implications of its distribution arrangements. She has also conducted legal and economic analysis of competition and consolidation in the UK regional newspaper sector with PwC Economics.

    Suzanne has advised at the cutting edge of media plurality issues including advising News Corporation on the UK and EU competition law and public interest aspects of its proposed acquisition of the shares in British Sky Broadcasting Group that it does not already own.

    The law is a challenging platform from where we can genuinely help others + enjoy learning continous lessons. Objectivity, personability + excellent organisational skills are key. The size + nature of a niche media practice like ours allows me a good amount of flexibility with which I can also enjoy motherhood as well as a career in the law.

    To see Suzanne’s full CV (in pdf format) use the link below.

    http://www.newmedialaw.biz/pages/suzanne-rab.php

    IS THERE ENOUGH COMPETITION IN BROADCASTING?

    The ex ante competition regime for broadcasting                                           The forthcoming DCMS consultation 

    Connectivity, content and consumers  

    Despite Jeremy Hunt’s promises of radical reform and deregulation reform and deregulation akin to ‘Big Bang’ in the City, in Summer 2013, DCMS instead published ‘Connectivity, content and consumers: Britain’s digital platform for growth’ (the ‘3Cs’ report). This followed a series of stakeholder seminars and clear feedback to government that radical change was not necessary. No Green Paper emerged and the 3Cs report hit the holiday season at the end of July. All the tricky business of cleaning up the internet has been handed back to the service providers, the massive public investment programme into next generation broadband was paraded, and another spectrum strategy was announced.  

    One had to scour the report to identify any areas for concern. But they are there; two of them. First, media plurality (déjà vu), which DCMS recently consulted on. Second, the ex ante competition regime for broadcasting where DCMS appears to have been influenced by the argument (made in representations to the House of Lords inquiry into convergence) that convergence implies that broadcasting and telecoms may need to be subject to the same regulatory regime. Ahead of the forthcoming DCMS consultation on the issues, this paper highlights some of the important areas that are likely to give rise to vigorous debate.  Convergence’ has become a familiar term to describe the technological and market changes that have taken place in media and telecommunications markets.                     The development of the internet protocol allows for digitisation of services and enables different services such as data, video or voice to be delivered over any network.  In today’s dynamic market, the traditional lines between formerly discrete sectors of media or communications markets have become blurred; they can no longer be maintained as rigid demarcations. The implications of convergence are many and varied and include: (a) a transition from historic scarcity in distribution to relative abundance;[1] (b) increased use of distribution networks; and (c) the emergence of new and potentially complex industry structures.  Against this background, DCMS has entered the fray with a proposed consultation that may lead to a radical overhaul of the regulatory landscape.  

    Ex ante vs. ex post intervention   Convergence and innovation may raise issues for competition and market structures, and how markets are defined and assessed in competition law and regulation.   

    This in turn raises the perennial question of whether regulation should be ‘ex ante’ (i.e. intervention before there is observable harm on the basis that the market may not deliver efficient outcomes if left to itself) or ‘ex- post’ (i.e. on the basis of evidence of actual or likely harm or violations of relevant laws, including competition law).  Mario Monti makes the case for the continuation of ex ante regulation in a speech on telecoms markets: 

    “We have by now firmly moved to an approach which envisages that regulation is essentially economic regulation… based on the perspective that intervention on the market is necessary and beneficial only when it offers the solution to certain sorts of market power, and in particular to market failures which derive from formerly monopolistic market structures… As long as problems such as unjustified impeded access to basic networks exist, ex ante regulation remains necessary.”[2]  

    Ex ante regulation is thus used when there is a lack of effective competition owing to structural problems that make development of normal market dynamics impossible: 

    ·         High or insurmountable barriers to entry·         Asymmetric cost structures·         Control over bottleneck facilities 

    These features may give rise to: 

    ·         Exclusionary abuses (price squeeze, discrimination, raising rivals’ costs, refusal to interconnect, predatory pricing, etc.)·         Exploitative abuses (excessive pricing, application of unfair trade conditions, etc.) 

    A key distinguishing feature of sectors in which ex ante regulation is appropriate is that they involve non-contestable ownership of largely non-replicable infrastructure assets.  Thus ex ante regulation tends to be applied in network industries such as telecoms, rail, gas, electricity, and water.  Indeed, Joaquin Alumnia cites the telecoms sector as a good example of ex ante regulation and competition working hand in hand: 

    “It is typically the sort of industry where ex ante regulation has been a necessary complement to competition enforcement, because there are enduring economic bottlenecks, namely non-replicable legacy facilities.  So regulation of access to networks has been necessary to allow market entry.[3]   

    The line between sector regulation and competition law tends to correspond, broadly, to the ‘ex ante’ and ‘ex post’ labels: 

    ·         Sector regulation is generally ‘ex ante’ enabling ‘regulators’ to control the activities of natural or unnatural monopolies.  Once markets have been opened up to competition, market forces come into play.  It is maintained that competition law can then be applied to intervene if – and only if – there have been observable restrictions on competition or evidence of likely violations of law (‘ex post’).  ·         Sector regulators tend to have an on-going relationship with regulated companies and benefit from detailed sector information derived from carrying out their continued supervisory functions.  Competition authorities rely generally on complaints and obtain information in the context of specific enforcement actions.·         Sector regulators impose and monitor detailed behavioural remedies.  Competition authorities, if the distinction is maintained, typically elect for structural-based remedies addressing specific activities.·         Sector regulators tend to have regulatory duties to fulfil a broad range of policy objectives.  These may include industrial policy objectives as well as consumer welfare objectives.  Competition authorities have a narrower remit, typically to promote consumer welfare or total welfare. 

    Sector regulation and competition can combine to achieve the optimum balance between preventing the creation or entrenchment of market power and not undermining companies’ incentives to invest and innovate.   

    First, some sort of temporary market power may be needed to achieve efficiencies connected with investment and innovation.  Second, it is apparent that markets may not always be left to their own to address the challenges presented by technological development if consumers find it costly to switch to new products and services.   

    This situation may give rise to complex balancing that does not always have a clear-cut policy solution.   The implication is that it is vital that regulators limit themselves to intervention ‘ex ante’ only where this is demonstrated to be necessary to prevent the foreclosure of entry, competition and innovation.    

    The current ex ante broadcasting competition rules have their origin in the 1990 Broadcasting Act   At that time there was a limited number of TV channels broadcasting in the UK, including four terrestrial channels (Channel 5 did not launch until 1997). Sky launched in February 1989 with 3 channels and BSB launched in April 1990 with five channels. BSkyB was formed in November 1990 (the merger of BSB and Sky).  In 1990, ITV had a viewing share of 44%.    

    Moreover, at the time the broadcasting framework was established, competition law in the UK bore little resemblance to what it is today.  Today there has been a shift from a form-based approach to one that is more underpinned by economic principles.  Viewed in this historical context, it is perhaps understandable that the framework was predicated on a more form-based approach that is characteristic of ex ante regimes.  

    The ex ante conditions were subsequently specified in Section 316 of the Communications Act 2003 and allow Ofcom to impose on broadcast licence holders conditions that Ofcom considers appropriate for securing: 

    “fair and effective competition in the provision of licensed services or of connected services.[4]  

    In contrast the ex ante telecoms regime is governed by the EU regulatory framework    The framework covers fixed and wireless telecoms, internet, broadcasting and transmission services and identifies specific markets to which ex ante regulation is to be applied.  

    The regime is characterised by strict rules such as designation of relevant markets, the conducting of regular market reviews, and granting the power to impose remedies on players with significant market power (‘SMP’) in order to promote competition. The regime was designed to address the specific characteristics of legacy telecoms networks owned and run by incumbents, typically former state monopolies.   

    We observe that the list of relevant markets subject to ex ante regulation is not fixed.  For example, during 2003-2007 the number of markets on the EC list (i.e. likely to require ex-ante regulation) fell from 18 to 7.     

    Recent expert advice published by the Commission in September 2013 recommended that fewer markets should be included on the Commission’s list than under current EU rules, and that no new markets should be added.[5]   

    Against this background, the UK debate on the proper scope for ex ante regulation is rather timely.   

    Convergence is at the core of the EU telecoms regulatory framework [6]                                                   “The convergence of the telecommunications, media and information technology sectors means all transmission networks and services should be covered by a single regulatory framework.” 

    But the EC acknowledges the need to distinguish transmission and ‘media content’; media content is outside the telecoms regulatory framework                          Media content is instead regulated by audiovisual media services rules.   

    “It is necessary to separate the regulation of transmission from the regulation of content. This framework does not therefore cover the content of services delivered over electronic communications networks using electronic communications services, such as broadcasting content, financial services and certain information society services.” 

    In respect of relevant content regulation, the Commission states: 

    “Audiovisual policy and content regulation are undertaken in pursuit of general interest objectives, such as freedom of expression, media pluralism, impartiality, cultural and linguistic diversity, social inclusion, consumer protection and the protection of minors.” 

    This context is important.  It serves as a reminder of the main basis for the different regulatory treatment for electronic communications networks and services under the EU Framework which has stopped short of regulating content.   

    The House of Lords’ (‘HoL’) convergence inquiry appears to have paved the way for DCMS’s focus on the effectiveness of Ofcom’s current broadcast-specific competition powers                                                      “During this inquiry, we heard calls for more effective “ex ante” (literally—before the event) broadcast-specific competition powers to be given to Ofcom. In essence, Ofcom’s existing media competition powers, it was argued, should be strengthened to match its powers in telecoms markets.” 

    In concluding the inquiry, the HoL recommended further consideration of: 

    ·         the scope of Ofcom’s media-specific competition powers - should they apply only to broadcast licensees, or more widely (as Ofcom suggested)?·         the nature of those powers - the extent to which they should be extended to the promotion of competition; ·         when those powers can be used - in particular, can greater certainty be given to the sector by making it clearer when Ofcom can (and cannot) use ex ante powers of this nature? 

    The HoL did express, however, that use of the powers would be subject to a high hurdle and that the use of ex ante powers would be justified only in markets:  

    ·         characterised by high and non-transitory barriers to entry;·         where market structure does not tend over time towards effective competition;·         where competition law by itself is not sufficient to deal with market failures identified.   

    The convergence inquiry heard polar views on the ex ante competition rules for media content [7]                                                     Ofcom and others argued that the ability to intervene in media content markets is severely limited.  Indeed, Ofcom posited that the legislation in its current form lacks clarity.   

    Amongst others, Ofcom stated that 

    “It is important that the competition regime should be capable of keeping pace with the changing competitive landscape. Without clarity on the application of Ofcom’s ex ante competition powers, there is a strong risk that in future we will be unable to take effective action in cases where we anticipate that changes in the market could hamper competition.”[8] 

    BT argued: 

    “To align this [telecoms] regime to the media sectors would simply involve copying the powers that Ofcom has for telecommunications and applying them to media: the powers to define markets, identify market failures (including, but not limited to, market power), and the design of remedies to promote effective competition and provide a consistent level of protection for consumers.” 

    In sharp contrast, two economics professors took a different position.  Professor Valletti argued that: 

    “As an economist, I would say that content to me seems to have less of the nature of a persistent bottleneck like some infrastructure. In that sense, just from the economics alone, I would say, therefore, it would be better to subject it ex post to competition policy instead of having a regulator and doing things before they happen.” 

    Professor Cave stated: 

    “Well, I know it is very dangerous to say that you would eat your hat if anything happens, but I would be inclined to make that claim that I would eat my hat if the European Commission decided to include the content markets as susceptible to ex ante regulation to a greater degree than it is now. … content issues can be sorted out by competition policy.” 

    Other stakeholders also disagreed with the notion of strengthening ex ante powers.  For example Sky argued: 

    “Providing Ofcom with the additional powers that it seeks to intervene in the sector is unnecessary and risks having a significant negative impact at a time when UK media companies face substantial threats from global competitors.” 

    We anticipate that similar arguments will re-emerge in responses to the forthcoming DCMS consultation                                                               In its ‘3Cs’ paper, DCMS raises a preliminary list of issues for consideration and poses the following key question:  

    “is there a risk of unfairness or market distortion if firms are more – or less – regulated because they are subject to one form of regulation rather than another?” 

    The issues that DCMS wishes to explore in the consultation comprise: 

    Objective of the regime: convergence may suggest that there is benefit in greater alignment of the duty to “ensure fair and effective competition” with Ofcom’s principal duty to further the interests of consumers, “where appropriate by promoting competition”, as is explicitly the case for the ex-ante telecoms regime.   

    Types of services which the regime applies to: currently powers apply only to licensed services and perhaps clarification of the definition of ‘connected’ services in the existing provisions is required.   

    Features which the regime should consider: DCMS posits that greater certainty may be provided by identifying the types of features which require attention.  Examples suggested by DCMS include: high concentration levels and SMP (e.g. in access to premium content); market failure (e.g. a lack of interoperability and issues in co-ordinating technological standards); and whether aspects of policy/regulation may create barriers to entry or have other unintended consequences. 

    Available remedies under the regime:  greater certainty may be provided by setting out a specified list of remedies available under the regime.   

    Time limits for action under the regime: greater effectiveness and more timely intervention may be facilitated by introducing time limits into the regime.  

    The above shopping list suggests that DCMS has given serious consideration to a possible new, detailed and prescriptive ex ante regime for broadcasting.  What may be of further concern are some of DCMS’s references to the sector displaying features of concentration: 

    “for example: the vast majority of homes primarily watch TV over the three main platforms (Freeview, Sky and Virgin Media).” 

    We ask, how many competing and sustainable platforms does DCMS consider there could be? Moreover there’s no mention of other competitors such as Freesat or IPTV or more recent entrants providing OTT services.   

    DCMS also states, bizarrely, that: 

    “…many of the key features of the broadcasting sector which led to the introduction of an ex-ante competition regime endure. For example despite the growth in video on-demand and new devices, viewing of traditional TV remains stable, with the average adult watching over four hours of TV a day. In addition, almost 75% of that viewing continues to be attributable to Public Service Broadcasters (the BBC, ITV, Channel 4 and Channel 5).” 

    We do not see how such consumer outcomes give cause for concern given the plethora of choice available. 

    How important is convergence?    Convergence blurs the lines between historically distinct networks, services and devices and a reasonable question to ask is, what are the implications of convergence for ex ante competition rules for broadcasting? Convergence per se does not imply that broadcasting and telecoms should be subject to the same ex ante regulatory regime.     

    The rationale underpinning the telecoms regulatory regime is one of injecting competition, rebalancing prices, reducing costs and setting cost orientated prices so as to transform old state monopolies into vibrant, competitive and innovative markets.   

    Moreover, there is a distinction between the content and the pipes.  The former cannot be divorced from public interest issues which include, amongst others, culture and media plurality.[9] 

    Some will argue that there should be no policy interventions in media content – akin to the publishing world – as the market will deliver what the consumer wants.  In such a world there is no rationale for ex ante competition powers.   

    Even if one accepts that public policy requires local (European) content to be produced and available on-screen, by a combination of commercial and public institutions, this does not automatically dovetail to a regime of increased ex ante competition powers in ‘broadcasting’.   

    DCMS refers to the importance of the broadcasting regulatory regime being as effective as the telecoms regime, stating that: 

    “This is especially important in converging markets – if firms regulated under the telecommunication regime are more or less effectively regulated than those under the broadcasting regime, then the converged market may be distorted.”   

    We ask, how may the converged market be distorted?  A closer inspection of this argument reveals its complexities.  The comparator between negotiated prices and regulated prices may be too simplistic in circumstances where there is a sound reason to believe that the regulated operator may increase prices above competitive levels in the absence of regulation.  

    For example, in a bundled offering, it may be open to the supplier to match a competitor’s retail prices across the bundle even if its wholesale input costs differ.  It does not necessarily follow that there is competitive distortion if one supplier’s input prices are regulated and the other’s are not. Asymmetric regulation across telecoms and broadcasting per se does not imply possible market distortions.   

    In our view convergence enables policy makers to stand back and re-appraise the rationale for existing regulation/whether new regulation may be required. As per the quotation from Allan Fels (footnote 7), convergence, if anything, implies that regulators should be cautious when intervening in markets.   

    Presumably DCMS will explore several options for future regulation                                                        DCMS will have to decide whether the current policy with regard to regulation of converging media and telecoms markets needs to change.   

    The HoL discussions relayed above give a flavour of the likely issues to be raised by the consultation paper.  The key issue appears to be whether broadcasting should be regulated like telecoms.   

    To propose a significant departure from the current regulatory regime should of course be underpinned by robust evidence of market distortions/failures rather than assertion.   

    At a high level, the main categories of possible policy responses appear to be: (1) do nothing; (2) extend ex ante regulation to broadcasting as per the current telecoms regime; and (3) relax telecoms regulation.   

    Ultimately DCMS will need to compile a regulatory impact assessment that compares the policy options against the base case in terms of costs and benefits.  The results of this exercise should be the cornerstone of any new policy proposals.   

    At this stage it is too early to second-guess the detailed content of the DCMS consultation paper and the policy options that will be tabled.  We thus provide a brief discussion of some of the issues under each of the options we considered.  Option 1:  Status quo                                          If there is no change to current regulation of broadcasting or telecoms this prompts a comparison between the effect of this on competition, investment and innovation between converging networks and services.   

    In this situation, a provider of electronic communications networks or services that is subject to SMP conditions has to continue to meet any ex ante conditions including g any access obligations to which it is subject.  Now, let us suppose that operator is considering upgrading its facilities.  It may factor into the business decision the need to remain competitive with other services and, also, the reality that it may need to grant access as a corollary of the SMP conditions.   

    An operator that is not subject to such ex ante conditions would not have to factor in the same regulatory obligation.  So, the issue in this scenario is whether the preservation of the status quo somehow distorts competition between converging or competing broadcasting or telecoms providers where the boundaries between their activities are not as distinct as they once might have been?  Interestingly, DCMS concedes that: 

    “we do not consider that full alignment between the telecoms and the broadcasting regimes would be appropriate”. 

    DCMS then goes on to postulate that: 

    “we should ensure that any broadcasting regime is as effective as the telecoms regime.” 

    The forthcoming consultation may articulate reasons to believe the current broadcasting regulatory regime may not be as effective as the telecoms regime.  Yet, in the absence of any evidence or arguments on the inefficacy of the current regime, continuation of the prevailing regime has to be the starting point. 

    Option 2:  Extend regulation                                                  This option would be to broaden the current telecoms approach to all elements of broadcast value chain (we note that transmission is already covered as per the EU Framework).  This approach would raise tensions with or run counter to the EU Framework which does not bite on media content.  We do not discuss the economic and legal intricacies of this option: we merely state it is an extreme option which is at least hinted at in DCMS’ consultation. 

    Option 3:  Relax or overhaul regulation          The opposite end of the regulatory spectrum to Option 2 is to relax regulation by jettisoning the current ex ante approaches in telecoms (specifically electronic communications networks and services). This would have as its aim the creation of a regulatory level playing field between converging services.  Again, this raises questions of compliance with EU law where operators are subject to SMP conditions. 

    But let’s assume that some loosening of regulation is possible this would create a symmetrical regulatory regime from the point of principle.  However, whether this is genuinely symmetrical regulation in terms of treating ‘like as like’ depends on a much more detailed inquiry on whether the services are genuinely comparable.   

    CONCLUSION                                                    

    The DCMS consultation is likely to raise some important questions and the policy options are potentially radical.  If there is to be a transition from ex post to ex ante interventions – or vice versa – all segments of the industry will want to contribute to the policy debate.   

    We do not believe that convergence per se provides a rationale for broadcasting and telecoms to be subject to symmetric regulation.   

    Ex ante and ex post regulation are complementary tools in the telecoms sector, and over time, the number of ‘markets’ subject to ex ante intervention has fallen.  DCMS is now considering the possible option of increasing ex ante regulation in broadcasting.  Discussions held thus far on these issues have been vigorous and no consensus has been reached.   

    DCMS may be wise to re-visit the Competition Commission’s (‘CC’) investigation into movies on pay TV.  During a period of 10 months, the CC reversed its preliminary decision that BSkyB was having an adverse effect on competition to the conclusion that BSkyB did not have such an advantage over its rivals when competing for pay-TV subscribers as to harm competition.  The CC noted the increasing trend of audiovisual content being delivered over the internet, and that it had increased competition and consumer choice.   

    The ultimate conclusion reached by the CC demonstrates the reluctance of a regulatory authority to impose remedies in a rapidly changing and uncertain market place.   

    It is imperative that DCMS adopts a ‘first principles’ approach.  It needs to identify clearly any problems (with appropriate robust supporting evidence) in the relevant markets, asking some basic questions – ‘what’ should now be regulated and why?  Is it the case that absent effective ex ante regulation, broadcasting does not exhibit/will not develop effective and sustainable competition?  What are the costs and benefits of such intervention compared to the status quo?  What are the risks to innovation and investment?   

    We end this paper with food for thought, a comment made by Ed Richards in a speech to the UCL Jevons Institute for Competition Law and Economics: 

    “…a national regulator needs to use a balance of powers to address complex competition problems, and should not overstate or seek to hold ideologically pure technical positions above the interests of competition and consumers, which is what ultimately matters.”  (See: http://media.ofcom.org.uk/2010/07/13/competition-law-and-the-communications-sector/) 

    This briefing has been prepared by Dr. Alison Sprague of CEG and competition lawyer Suzanne Rab.

    Contact details 

     
    Dr. Alison Sprague Partner, CEG Europe One Fetter Lane, London, EC4A 1BR, United Kingdom   T  / +44 (0)20 3440 5526 M / +44 (0)75 0784 0740 E / asprague@ceg-europe.com www.ceg-europe.com Suzanne Rab Barrister, Serle Court 6 New Square, Lincoln’s Inn, London, WC2A 3QS, United Kingdom  T /  +44 (0)20 7242 6105 D /  +44 (0)20 7400 7117 M / +44 (0)75 5704 6522 E /  srab@serlecourt.co.uk www.serlecourt.co.uk

    Alison Sprague  Dr. Alison Sprague is a partner in CEG’s London office.  She has more than 15 years’ economics consulting experience and specialises in the media, entertainment and telecoms sectors, advising private and public sector clients. Her sector experience includes television, radio, film, internet, music, sport, gambling, music, publishing and fixed/mobile telecoms.   She has led numerous strategy and economics projects, providing commercial, competition, policy and regulatory advice.  She has additionally conducted research into brands and advertising effectiveness and led a number of expert witness reports. Several projects have employed econometric techniques.  Clients comprise leading broadcasters; pay TV retailers, and telcos; trade associations; regulators, government departments, and their legal advisers, in the UK and overseas (including the EU, Eastern Europe, South Africa, Russia, India, Hong Kong).  Alison has written numerous thought leadership papers - on media plurality (in the UK and Australia), local newspapers, government media policy, copyright, gambling, future business models for fixed and mobile internet, mobile markets in the EU, consumer policy and the competition regime in the UK.   Suzanne Rab  Suzanne is a barrister specialising in competition law at Serle Court, a leading chambers based in Lincoln’s Inn.  Suzanne has wide experience of EU law and competition law matters combining cartel regulation, commercial practices, IP exploitation, merger control, public procurement and State aid.  Suzanne advises in relation to a wide range of industry sectors, with a focus on industries that are subject to sector-specific regulation.  Suzanne has advised on a considerable range of competition law and regulatory issues in the converging communications and media sector including in matters relating to telecoms, online distribution, pay TV, newspapers, sports rights and licensing of copyright.  Suzanne is also co-author with Alison Sprague of “Media Ownership and Control: Law, Economics and Policy in an Indian and International Context” (forthcoming in Hart Studies in Competition Law in 2014). 

     



    [1] We acknowledge that capacity issues remain in some distribution networks.  [2]http://ec.europa.eu/competition/speeches/text/sp2003_015_en.pdf[3] See: http://europa.eu/rapid/press-release_SPEECH-10-121_en.htm[4] We observe that licensed broadcasters are additionally subject to other forms of regulation (e.g. broadcast codes on taste and decency, impartiality, and restrictions on permitted advertising minutage).  Public service broadcasters are subject to additional restrictions including hours broadcast of specific genres, independent production quotas and specification of the location of production.  [5] See: https://ec.europa.eu/digital-agenda/en/news/future-electronic-communications-markets-subject-ex-ante-regulation[6] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do? uri=OJ:L:2002:108:0033:0050:EN:PDF[7] Extensive detailed oral and written submissions were provided by several stakeholders.  Here we provide some brief overviews.[8] This approach contrasts with views expressed in “Competition issues in television and broadcasting”, Contribution from Mr Allan Fels (DAF/COMP/GF (2013)6): “the speed and unpredictability of technological change makes it vital competition authorities recognise the risks of ‘getting it wrong’: in the sense of mistaking transient commercial success for market power; or, conversely, in over-estimating the corrective efficacy of entry and of new competition.  Striking the balance between these errors will undoubtedly be challenging for competition regulators, and at times frustrating for market participants, in developed and developing countries alike.”  [9] The ‘pipes’ of course may raise public interest issues such as affordability and access.  

    CHINA TIGER REVIVAL - Inaugural dinner

      CHINA TIGER REVIVAL

    Breaking news: 2 October 2013

    CHINA TIGER REVIVAL

    New Media Law would like to thank Sir David Tang and Stephen Fry for their most excellent hospitality at China Tang in the Dorchester Hotel last night (1st October 2013) for the inaugural dinner for China Tiger Revival.

    China Tiger Revival is a new charity set up by conservationist Li Quan, together with New Media Law partner Ian Penman (who is Chairman and founding director of the charity), with patrons Lord Clement-Jones, Lang Lang, Nick Rhodes and Jackie Chan.

    Its primary focus is working with the Chinese government to provide a protected habitat in China for the South China Tiger.  The South China Tiger is an endangered species, but thanks to the efforts of Li Quan, the Tiger is now slowly but surely increasing in numbers.  Li’s groundbreaking work in the re-wilding of the South China Tiger has shown that there is still a glimmer of hope for the survival of the species.

    New Media Law is proud to be associated with Li’s work, and with the support of patrons such as Sir David Tang and Stephen Fry, Li will be able to continue her vital work in ensuring that the words of William Blake continue to refer to an existing species that can still be seen by our children in the future.

    Tiger! Tiger! burning bright
    In the forests of the night,
    What immortal hand or eye
    Could frame thy fearful symmetry?

    In what distant deeps or skies
    Burnt the fire of thine eyes?
    On what wings dare he aspire?
    What the hand dare sieze the fire?

    And what shoulder; what art.
    Could twist the sinews of thy heart?
    And when thy heart began to beat,
    What dread hand? what dread feet?

    What the hammer? what the chain?
    In what furnace was thy brain?
    What the anvil? what dread grasp
    Dare its deadly terrors clasp?

    When the stars threw down their spears,
    And watered heaven with their tears,
    Did he smile his work to see?
    Did he who made the Lamb make thee?

    Tiger! Tiger! burning bright
    In the forests of the night,
    What immortal hand or eye
    Dare frame thy fearful symmetry?

    New Media Law - at www.rAsia.com

    Ian Penman and Rick Riccobono attended and spoke at www.rAsia.com in Moscow on 24 and 25 June 2013.

    The conference was in Moscow, and focussed on global licensing, the future of copyright and mobile.

    On Monday 24, Rick and Ian gave a presentation about the copyright licensing process for new models in the music industry, which led to an analysis of the future of copyright licensing.  The panel discussion that followed was moderated by Ralph Simon.

    The slides and transcription of the presentation can be found here:

    http://rasia.com/2013/forum/en/video-24

    But beware, the transcription is in Russian!

    On Tuesday 25, Ian participated in a panel discussion about content and mobile.

    More detail can be found at www.rasia.com:

     

    About the Forum

    On June 24-25 the international innovation Forum rASia.COM will be held at the Digital October centre in Moscow.

    It is a unique annual event encouraging  the exchange of latest technologies  and experiences between entrepreneurs from all over the world.

    The main goal of the Forum is to answer the most pressing question: ‘What will tomorrow bring?’ It will give us a new perspective and thus allow us to observe trends of the world economic system and help to evaluate the efficiency of our own business strategies in a new way, and get new ideas and inspiration.

    Traditionally, the Forum programme consists of 4 subjects:

    • wireless mobile technology and the Internet;
    • new media, up-to-date advertising technologies and marketing solutions;
    • venture capital funding, finance and investments, payment systems, innovative bank technologies;
    • content and entertainment business.

    The most current issues will also be covered:

    • innovations in luxury and premium markets;
    • amazing innovations (robots, 3D printing, augmented reality, immortality);
    • women and innovations, the female point of view on the situation;
    • Brands & Co-branding;
    • Made in Moscow.

    This year the Forum is focused on Indian business perspectives—”Doing business with India”.

    An exclusive video TELL (Techology, Edutainment, Life and Lifestyle) will be shot within the Forum with the participation of companies’ top managers: shareholders and and executives.

    The Forum will combine the reports by leaders from all over the world and they will share their success stories with the audience.

    Also, various training conferences, workshops and round table discussions will be held at Digital October.

    The Forum is an excellent opportunity to present your ideas and business models, finding new contacts and offering your services.

    Contacts: conference@rasia.com.

    Russian Piracy Bill now active

    Moscow, Monday 24 June

    The State Duma in Russia passed a bill last Friday which combats copyright infringement on the Internet.

    The law allows Russian authorities to block websites which infringe audio-visual copyright content at the request of copyright holders.

    Google in Russia has spoken out against the bill, saying that it will allow whole websites to be blocked indefinitely.

    The bill is designed to combat damage from internet piracy in Russia, which is estimated at 60 billion rubles per year ($1.8 billion).

    The bill allows authorities to take unspecified “provisional measures” against infringers using internet “resources”.

    The copyright holder can apply to the Federal Mass Media Inspection Service, who will then notify the hosting provider about the copyright infringement.  The hosting provider then has 1 day to demand that the website owner removes the infringing content. The owner has 1 day to remove it.  If the provider fails to take action, the FMMIS can demand that telcos block access to the content.

    The copyright holder must file a civil lawsuit at the same court within 15 days after the provisional measures are approved by the court.

    If the civil court rules that the content does not infringe, then the website can be switched back on and unblocked and the owner of the non-infringing content can sue for damages and costs.

     

    Ian Penman

    rAsia conference

    Moscow, 24 June

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