This is Damian Tambini’s submission to the Communications Review. It is his view, not that of the LSE media policy project, and submitted in a personal capacity.

Damian writes:

The government has quite tightly defined the scope of the review around the issue of growth, so it is difficult to answer the questions and at the same time raise all the issues that need to be addressed during this policy cycle. The result is somewhat superficial. But we all know this is the start of a long process..

Question 1.

What could a healthier communications market look like? How can the right balance be achieved between investment, competition and services in a changing technological environment?

The government is absolutely right to focus the debate on investment and growth in communications and media sectors. Government has a crucial role to play in creating the context in which networks and services can thrive, because there is a complex interdependency between networks and services. Long term investment in new services is often a bet on network capacity, and investment in networks will depend on content and services driving consumer demand. Government can provide a spur and some certainty to those considering investing in this market.

Networks.

In order to support long-term development in innovative new content, applications and services, including the games sector where the UK is a global leader, Government should make long-term commitments to support network rollout. In addition to the (welcome) commitments to fund broadband and next generation access, specific and measurable targets should be announced, which should be publicly funded in the event that rollout targets are not met. The current target to have the ‘best broadband network’ offers no clarity.

Services (and applications).

Services content and applications will drive network take-up. The UK public service broadcasting system has for a long time supported domestic production through quotas and various forms of subsidy including through spectrum. The government should investigate market failures also in the area of applications and services, particularly those based on the broader social value/ public value that these services (such as those which support UK democracy or access to public services) with a view to supporting public interest services and applications subject to market failure. As the public service and quotas system did for UK content industries, this intervention will support investment in content, applications and services that may otherwise not be made.

Competition has driven investment but this can only be sustainable in an environment in which there is long-term certainty. Government should set out a long term (not merely a medium term) set of policy objectives which will give investors certainty. Legislation will need to revise current regulatory framework not simply by ‘removing unnecessary regulation’ but by reforming and clarifying necessary regulation that creates uncertainty for future investors. For example, it is clear that the merger regime public interest test, whilst essential within the current framework has held back investment. If it was replaced with a more robust and consistent framework for constant monitoring of media pluralism through annual market reviews, this would clarify to those considering investment that they would not be the victims of uncertainty. The same holds for other areas such as content regulation, public service obligations and net neutrality where the government needs to set out a clear policy framework to reduce uncertainty.

Question 2

What action can be taken to facilitate greater innovation and growth across the wider competition regime, and how can deregulation help achieve this?

It is important to monitor the level of openness of networks. Innovation depends on a neutral network, so attention should be focused on the impact of traffic management techniques on new entrants to markets in content, services and applications. The FCC, the Netherlands and other countries have adopted principles that defend the principle of network neutrality. Under the Communications Act 2003 as amended by the Digital Economy Act 2010, (Sections 134 and 134b) Ofcom has a duty to monitor and report on the development of networks in the UK. Ofcom should be asked to report specifically on the development and deployment of traffic management techniques and their implications for competition. Consumer transparency measures are important but they may not be enough.

The special public interest merger regime that applies in the case of media mergers should be reviewed. It creates uncertainty, deals badly with endogenous growth and is thus insufficient to protect the important objective of media plurality. A more robust system of market reviews needs to be in place with frequent reports on levels of media plurality according to an agreed methodology based on the recent Ofcom Public Interest Test on the News International/ BSkyB merger.

Consumer representation in the communications sector should be reformed and maintained because dynamic markets depend on prevention of what the OFT has called the ‘fourth market failure’ i.e. behavioural biases and irrationalities among consumers. Dynamic competition depends on informed, active consumers, and there is a continuing need for an independent but internal consumer body on the model of the Communications Consumer Panel.

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Question 3

Is regulatory convergence across different platforms desirable and, if so, what are the potential issues to implementation?

There are strong pressures for convergence of content regulation. In the long term content regulation should be based on consumer expectation and market share, and be platform neutral, as was proposed by the Communications White Paper of 2000. This would require a much more radical shift than was delivered by the 2003 Act however. Convergence should not be pre-empted by regulatory reform, but it is crucial that tools are in place (both positive and negative content regulation) to protect the public interest as the transition to a more on-demand world continues. It is also crucial that the UK preserves plurality in the public service system, and a plurality of models of media organisation, incorporating more purely commercial providers alongside those with regulatory obligations and various forms of self-regulation. The public is best served by a genuine mixed economy of communications providers with varying levels of accountability to the state, the public and the market.

Question 4

What barriers can be removed to facilitate greater exports and inward investment and make the UK more globally competitive in digital communications?

Exports are important, but television and film, and increasingly games are an important part of the cultural and democratic life of the UK and its constituent nations and regions. So when ‘barriers’ are identified – such as, for example public service obligations which may encourage production of programming that does not sell well globally – it is also necessary to weigh the importance of this apparent barrier to the public, and whether it remains necessary.

The current framework for intellectual property protection can act both as a barrier and a facilitator for digital communications industries. The 2011 Hargreaves recommendations for Intellectual Property reform should be implemented.

Certain aspects of digital communications services are subject to the trade liberalisation MFN/ Market Access provisions of the GATT/ GATS agreements. Where barriers to market access to key export markets are identified, these should be assessed in the round, with a view to regulatory barriers (such as quotas and public service/ content regulation) that could constitute barriers to our trading partners.

Question 5

What further market and regulatory developments would lead to widespread take-up of superfast broadband? What regulatory action would government need to take to make superfast broadband more readily available in a) urban areas; and, b) rural areas?

Spurring competition through access remedies such as Duct Access and other infrastructure obligations may spur investment but there is no reason to expect that the effect of such interventions will have a similar degree of impact to that of local loop unbundling for broadband. The scale of investment necessary for superfast broadband is much higher as a succession of government and stakeholder reports has found in the last 6 years. However most of these reports were made on pre – 2008 assumptions and there is therefore considerable uncertainty (likely over-estimates) about the potential speed of rollout as investments and consumer demand has been suppressed by the financial crisis.

Consumer demand for superfast broadband will depend on the launch of new and attractive services and applications which require much improved speed and reliability. Public service subsidies and obligations should be extended in a way that provides a competitively allocated fund not only for content, but for applications and services accessible by broadband. (See q1).The government should commit to clear measureable targets for superfast broadband, and make clear that public funding will be made available to support rollout should these targets not be achieved. This will have the effect of bringing forward the launch of key services and applications that will in turn stimulate consumer demand.

It is important that spectrum is made available for the services that genuinely need it.

It is crucial however to take account of the abundant evidence from recent surveys (available on request) that show that the main barriers to access and takeup of broadband in general and superfast broadband in particular, are a lack of literacy and skills, and knowledge of the utility of using such services. (See in particular the Communications Consumer Panel’s Digital Participation Framework). So there is a role for government in promoting literacy and skills. The current provisions for Ofcom to promote media literacy should be retained and updated to include ‘digital literacies’.

Question 6

What are the competing demands for spectrum, how is the market changing and how can a regulatory framework best accommodate any rapidly changing demands on spectrum and market development?

In its proposals for local television, Government has sent a strong signal that it sees spectrum policy and in particular the DTTV platform as a strong potential lever for public service oriented intervention. Because of the enduring power of the DTTV platform and the continuing dominance of linear TV for news consumption, the government views it as attractive to launch local DTTV services even whilst acknowledging that in the longer term they are likely to be delivered over broadband.

Question 7

How should spectrum be managed to deliver our growth objectives whilst also meeting our policy objectives of furthering the interests of citizens and consumers in relation to communications matters?

Ofcom and government should continue to use the full range of spectrum allocation mechanisms, including auctions, administered incentive pricing, command and control licensing and open unlicensed models. It is likely in the long term that market based mechanisms will become the dominant mechanism, but for some services such as DTTV and mobile there remain strong justifications for public intervention through licensing and service requirements, for example for supporting local television.

Ofcom’s work in developing secondary markets for spectrum and encouraging divestment by public sector holders of spectrum should be supported.

Question 8

How should the UK engage on an EU/International level in relation to spectrum?

The UK should continue to support the ITU/RRC process. The need for a European spectrum authority remains to be proven.

Question 9

Is the current mix of regulation, competition and Government intervention right to stimulate investment in communications networks?

See answer to Q1. The key challenge is to take a more long-term view of the key challenges of communications policy. The current situation of uncertainty is a significant chill on investment. The 2009 Digital Britain report attempted to strike a new deal, and the current government needs to do something on that scale.

Question 10

Are there disproportionate regulatory barriers to investment in content? If so, what are they and how can increased investment in UK content production be encouraged?

Are there disproportionate regulatory barriers to investment in content? If so, what are they and how can increased investment in UK content production be encouraged?

Broadcasting channels hold too much power in the commissioning process and they should have a clearer code of conduct to ensure that there is much more openness in the relationships between commissioners and the independent production sector.

Question 11

Should the core focus of public service broadcasting be on original UK content?

Yes, but the rationale for PSB is not reducible to UK production. It remains the objectives set out in the 2003 Act and the 2006 BBC charter and the 2011 Public Service Content Bill.

News production in the UK faces a funding crisis, and there is a strong argument to make production of news at national regional and local level more central to the PSB remit. The Open Society Foundation report: Mapping Digital Media: United Kingdom outlines the scope of the crisis and recommends that the government should set up a Media Commission to review the problem. This recommendation should be implemented.

Question 12

What barriers are there to innovation in new digital media sectors, including video games, telemedicine, local television and education?

A key barrier to investment is uncertainty about access to broadband, mobile broadband and superfast broadband. Another key barrier is uncertainty about the price of distribution for providers of such services. Government can create certainty by creating clear targets for network rollout (and making clear that failure to reach targets will trigger public investment) and setting out principles that will protect network neutrality in the long term. Without guarantees of network rollout and guarantees that networks will be open to new service providers, investors simply do not have the certainty necessary to develop these services.

In telemedicine and games in particular (and also in education services involving video) the value of fibre based NGA networks is extremely important not only because of speed but because they offer much improved reliability over DSL services. Utility of telemedicine services and applications, and also of games and video declines sharply if a certain quality of service cannot be guaranteed. (See the Broadband Stakeholder Group/ Ofcom Consumer Panel report from 2009).

The value of universality (of access, coverage and use) is often neglected. Where telemedicine (and other services) should be available free at the point of use and universally, patchy coverage of access to broadband and mobile services will act as a strong brake on service development as it will be politically unsustainable.

The UK, with a universal free healthcare system has a unique opportunity to develop a progressive and innovative approach to telemedicine services. There are also dangers of NHS commissioning of telemedicine services, and government should conduct a policy review to develop a strategic approach to telemedicine and the NHS involving key network providers and Ofcom. The review should cover key cross cutting issues impacting telemedicine such as:

-Open Data

-Copyright and fair dealing (support for Hargreaves recommendations)

-Privacy of personal data

-Network access, reliability and neutrality.

-The economic benefits of telemedicine (electronic delivery of NHS services).

Question 13

Where has self- and co-regulation worked successfully and what can be learnt from specific approaches? Where specific approaches haven’t worked, how can the framework of content regulation be made sufficiently coherent and not create barriers to growth, but at the same time protect citizens and enable consumer confidence?

Where has self- and co-regulation worked successfully and what can be learnt from specific approaches? Where specific approaches haven’t worked, how can the framework of content regulation be made sufficiently coherent and not create barriers to growth, but at the same time protect citizens and enable consumer confidence?

Self and co-regulation work only when the incentives to protect the public interest align with those of service providers. In some cases, for example advertising self regulation there is a clear interest in making regulation work (misleading advertising devalues all advertising); in some other cases, for example online gambling there is less interest in the sector regulating itself for public interest objectives. (There may be less of an incentive for gambling sites to genuinely reduce gambling addiction and social problems which arguably support their business). Where self regulation does not work it is often necessary to enforce self regulation and audit it in some form of co-regulatory structure. This can work because it involves industry buy in and expertise but can be complex and conflictual. Self regulation should therefore be part of the overall mix in the UK communications ecology but we should not expect too much of it. There are problems of legitimacy, capture, and also cost as it can be more expensive for the sector to maintain a self regulatory body. See Ofcom’s report ‘Identifying appropriate regulatory solutions: principles for analysing self- and co-regulation’ (2008) and Damian Tambini (et al.) Codifying Cyberspace (2008).

From the point of view of media independence and free speech self regulation can on the surface be attractive alternative to state regulation. However, where self regulatory bodies operate censorship or quasi censorship functions (notice and takedown for instance) and where self regulation operates across whole markets – or players with significant market power they are restricting speech rights and must be subject to scrutiny, transparency, due process and rights of appeal, because their actions impact on the fundamental right to freedom of expression of users. This can make self regulation more resource intensive.

Problems of cost and of fundamental rights could be addressed in part by providing a pan-media ‘final court of appeal’ for a range of industry-operated self regulatory initiatives in the content area. This body which may or may not have a relationship with Ofcom, could audit codes and procedures of self regulatory bodies (but not all their decisions) and provide a publicly funded final appeal mechanism, perhaps involving a judge or an ombudsman.