Rethinking European Media and Communications Policy [1 ed.] 9789054876038

Citation preview

Rethinking.book Page 1 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Rethinking.book Page 2 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 3 Friday, September 25, 2009 10:01 AM

Caroline Pauwels, Harri Kalimo, Karen Donders and Ben Van Rompuy (Eds.)

Rethinking European Media and Communications Policy

Brussels University Press

Rethinking.book Page 4 Friday, September 25, 2009 10:01 AM

Institute for European Studies – publication series, nr. 14 The Institute for European Studies (IES) is a Jean Monnet Centre of Excellence. The IES operates as an autonomous department of the Vrije Universiteit Brussel (VUB). It hosts advanced Master programmes and focuses on interdisciplinary research in European Studies, in particular on the role of the EU in the international setting. Within this scope, the IES also provides academic services to scholars, policy makers and the general public. The IES book series is published under the supervision of a multidisciplinary editorial board that is chaired by the IES Academic Director. All manuscripts are reviewed by the editorial board. Institute for European Studies (IES) Vrije Universiteit Brussel Pleinlaan 2 B-1050 Brussels [email protected] http://www.ies.be Cover design: Koloriet, Leefdaal Book design: Style, Hulshout Print: Flin Graphic Group, Oostkamp © 2009 VUBPRESS Brussels University Press and the Institute for European Studies (VUB) for the edited volume © Authors for their individual contributions, respectively VUBPRESS is an imprint of ASP nv (Academic and Scientific Publishers nv) Ravensteingalerij 28 B-1000 Brussels Tel. ++ 32 2 289 26 50 Fax ++ 32 2 289 26 59 E-mail [email protected] www.vubpress.be ISBN 978 90 5487 603 8 NUR 811 / 815 Legal Deposit D/2009/11.161/063 All rights reserved. No parts of this book may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the copyright holder(s).

Rethinking.book Page 5 Friday, September 25, 2009 10:01 AM

Table of Contents Foreword

7

Introduction The Converging Media and Communications Environment Harri Kalimo and Caroline Pauwels

11

The Practical Environment Information, Telecommunication Technologies and Media Convergence Challenges Ioannis Maghiros

41

Social Computing Corina Pascu, David Osimo, Geomina Turlea, Martin Ulbrich, Yves Punie and Jean-Claude Burgelman

75

Networks and Services The New Audiovisual Media Services Directive Anna Herold

99

Rethinking European Broadcasting Regulation Peggy Valcke and Eva Lievens

127

Public Broadcasting and State Aid in the New Media Environment Ross Biggam

165

State Aid and Public Service Broadcasting Karen Donders

187

Content and Consumption State Aid for Film – A Policy Moving Too Fast? Jeanne Brunfaut and Jean-Louis Blanchart

219

Why a UNESCO Convention on Cultural Diversity of Expression? Carole Tongue

241

5

Rethinking.book Page 6 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Can Changes in Copyright Legislation Support Convergence in the Media Sector? Sakari Aalto

273

Cross-cutting Themes The Standard of Proof in EC Merger Control Ben Van Rompuy Constitutional Rights and New Technologies: A Comparative Perspective Paul de Hert, Bert-Jaap Koops and Ronald Leenes

295

319

Conclusions Policy Approaches in the Converging Media and Communications Sector Harri Kalimo and Caroline Pauwels

353

List of Contributors

367

6

Rethinking.book Page 7 Friday, September 25, 2009 10:01 AM

Foreword

Since taking office as EU’s Commissioner for Consumer Affairs in 2007, I have been implementing a consumer strategy that aims at healthy markets in which consumers can operate safely and confidently. Ensuring wellfunctioning markets is in my view best consumer policy. And reversely, advocating consumer choice and empowerment is vital so that consumers can fully play their essential role in bringing about the best in the markets. Information technology and the fast developing, converging digital environment are causing a revolution in the way people interact socially and commercially. EU policies must continue to adapt to the new challenges and help to seize the new opportunities. We need to ensure that the digital environment is one where consumers, citizens and the society at large thrive. The development is fast, so that the time to get on board is now. This book focuses on aspects that are fundamental in seizing the opportunities: the need and ways to revise European media and communications policies. In several contributions, distinguished academics and experts in the field tackle topical issues such as regulatory barriers in the media and communications sectors; the links between the internal market, pluralism and cultural diversity; privacy and other constitutional rights in the digital age; copyright as well as the protection of the minors. These issues are all crucial to the emergence of a competitive and inclusive information society in which consumer welfare flourishes. The authors in this valuable work agree that there is a pressing need to revise the European framework for media and communications policies. In the old world, media and communications policies were focused on the public authorities and on a subsidized, linear supply of content. Obviously, this approach had and continues to have its merits. Yet, in the new Europe, attention should increasingly shift to the needs and desires of consumers. Consumer generated content, social computing, video on-demand, Web 2.0, etc. put the power in the hands of consumers. The power of transparency. The power of information. The power of comparison. Hence, the ultimate power of choice. The regulatory frameworks should reflect this shift. For example, the new Audiovisual Media Services Directive seeks to strengthen the level of consumer protection. In the area of new media services, it delegates more responsibility to the industry to self-regulate and

7

Rethinking.book Page 8 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

to meet consumer demands. It should not be forgotten that it is the people that make markets work. The revision of policy in the light of individual consumer welfare and valuable public interest objectives is the major challenge ahead. Sound regulation that delivers a clear and robust framework is a sine qua non for both consumers and the business to yield the full benefits of the EU internal market. This book is a thoughtful contribution to meeting the challenges that lay before us. We must act now to ensure an environment that effectively serves consumers. We must act now to build our citizens the culturally diverse and inclusive information society that they deserve. Meglena Kuneva, EU Commissioner for Consumer Affairs Brussels, July 2009

8

Rethinking.book Page 9 Friday, September 25, 2009 10:01 AM

Introduction

Rethinking.book Page 10 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 11 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment Harri Kalimo and Caroline Pauwels

1

Framing the discussion

1.1 The challenge of convergence The media and ICT (Information and Communications Technology) sectors are at the heart of a competitive and inclusive European society. Since the late 1980s, the boundaries between these sectors have been blurring. Anno 2009, convergence is, finally, starting to take shape. First of all, the key technological drivers behind convergence, the digital format of content and universal connectivity, have become commonplace. Innovative new offerings such as mobileTV, Skype, and iTunes are used in the everyday lives of citizens, consumers and companies, as well as public authorities. From an economic perspective, convergence creates new business opportunities and redefines business models. It is therefore not just about technically migrating the offline world into a virtual one, or vice versa. It is a much bigger change, where technology is the enabler, but where the real issue is the value chain adjustments.1 The third driver of convergence, alongside the technology and the marketplace, are the socioeconomic changes. The single most important factor boosting content creation, for example, is the massive participation of end users in social computing applications such as blogs and social networks. The end-users have entered the centre stage in innovation, as they have been introduced to the culture of sharing, developing and using content in new, incremental ways, anywhere, anytime.2 By blurring the traditional boundaries between, e.g., media, broadcasting, telecommunications and information technologies, convergence challenges the traditional policy frameworks of the EU. Previously distinct policies also come together, yet the objectives of such policies may be quite diverged. Conflicts may come to the fore, as the policy makers strive to

1. 2.

Ruikka 2008. See chapter of Maghiros in this book.

11

Rethinking.book Page 12 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

harmoniously combine economic profitability, legal stability and predictability, basic human rights and socio-cultural values. The developments render the task of public authorities extremely challenging. How to keep up with the current developments – or even better, how to predict the future scenarios – of the converging information society so as to provide an optimal societal framework? How to take everyone’s interests into account, when the value chains are being completely transformed, when stakeholder groups such as consumers, content producers, network operators, right holders and public authorities interact in a constantly evolving mesh, producing and distributing content in a true hybrid ecology of the digital environment3? Much is at stake: competitiveness and jobs, social inclusion and cultural diversity, market opportunities and core values. It appears therefore necessary to fundamentally reconsider the existing legal and policy frameworks. Have they become completely outdated? If so, what are the main problems, and how should they be addressed?

1.2 The themes and topics of this book – a “layered” perspective In order to offer insights into these important and challenging questions, the VUB’s Institute for European Studies (IES) and the research center for Studies on Media, Information and Telecommunication (SMIT) organized a lecture series Rethinking European Media and Communications Policies. In the lectures, leading experts from European institutions, universities, international organizations and the private sector presented their views to a large audience of, e.g., policymakers, academics, industry representatives and post-graduate students. The focus of the analysis was on the most pertinent policy issues of the converging society. This book offers a selection of the presented views, combined with further analysis and more detailed commentary. The contributions describe the developments until the beginning of 2009. The book consists of a number of themes. First, it sets out to highlight some of the most relevant changes and challenges in today’s (and tomorrow’s) practical media and communications environment. Social computing and user created content are the key topics of the discussion. From the practical insights, the focus moves to five policy areas, where the developments are particularly relevant and topical: the audio-visual and media services directive, public service broadcasting, intellectual property 3.

Benkler 2006.

12

Rethinking.book Page 13 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

rights, state aids as well as cultural policy. Finally, two further themes of a more cross-cutting nature are also included: those on human rights and competition policy. It appears useful next to frame these themes of the book against the high level objective of bringing the European societies properly into the information age. The converging environment can be depicted as consisting of horizontal layers: networks, service provision, content and consumption. There are of course activities that take place on more than one layer, and some of the activities seem to divide single layers further. There are also terminological differences that obscure the distinctions.4 A layered approach seems, nonetheless, useful for contextualizing the themes of this book in the overall landscape of European media and communications policy. Until now, the media delivery platforms have often been separate. As Ruikka5 explained during the inaugural lecture of the series, the network layer consists of fixed telecommunications/IP networks, mobile networks, cable networks, broadcasting networks as well as satellite networks. There still is even the print media. The network technologies have been the basis of silo thinking, where each of the layers is divided into sector specific silos.6 Yet we are now entering an environment where the path through the layers is no longer restrained by such sectorial silos. Previously distinct services are delivered through a coherent, converged media infrastructure and consumed on a variety of devices.7 This means new horizontal markets. Indeed, in some EU Member States and in Japan these kinds of horizontal, layered approaches are already emerging in policy-making.8 They are hence worth a careful consideration. The contributions to this book are thus a selection of analyses on important policy issues regarding the four layers of networks, service provision, content and/or consumption. Few of the topics moreover cut across many or all of the layers. The promotion of policies on individual layers will also 4. 5. 6.

7. 8.

Cf. the division used by, e.g., Ruikka (2008), DCMS and BERR (2009), and Valcke and Lievens in their chapter. 2008. There has been sectorial content, sectorial service provision, and a sectorial delivery mechanisms. The content was consumed on a sectorially specific device, using a sectorial subscription for access. A game on a mobile phone is a good example: the content (the game), is designed for consumption on the small screen of a particular mobile phone, to be delivered as a service on a mobile phone games portal’s wap site over the mobile telecommunications network of a telecommunications operator. Ruikka 2008. For details, see the chapter of Valcke and Lievens (footnote 91, in particular).

13

Rethinking.book Page 14 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

support the overall objectives of EU media and communications policy. For example, barriers to market entry for start-ups and to the establishment of new business models can persist on any of the layers. Or cultural diversity and competitiveness; they can be promoted by measures that improve, e.g., the quality of the network, the services, or the digital content, or by facilitating the consumption process.9 Below, after a brief look at existing EU media and communications policy measures, the approach of depicting seminal topics for the layers is explained further.

1.3 EU policy measures – the current lay of the land The importance of the European Union in the media and communications sectors increases steadily. The Union’s institutions have genuine and distinctive responsibilities in the creation of an equitable information society. The EU institutions and Member States have taken strategic efforts, such as the i2010 initiative and the Lisbon Agenda, to promote the benefits and tame the challenges of digitalization. EU appears to be well positioned for the task: it could be the guardian of the dual objectives of increased efficiency and cultural diversity.10 The opening of national media sectors, for example, will give rise to new opportunities, business models, market structures and, consequently, jobs, while facilitating the distribution and enjoyment of cultural content in a socially inclusive fashion. This is—or could be—EU at its best. Indeed, Community acquis in the area of media and communications policy is already relatively substantial. Below, three particularly important EU policy initiatives have been highlighted to provide an overview of the existing policy framework. Although the Community has not (yet) fully embraced the approach of aligning its media and communications policies along the above noted four layers, many parallels with the network, services, content and consumption layers are visible.

9. See the chapter of Maghiros. 10. Commission Communication on Creative Content Online 2007, 2.

14

Rethinking.book Page 15 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

First, the EU’s communications review package11 of 2002 dealt foremost12 with many crucial issues on the network and service provision layers of electronic communications. The EU strives to assure telecoms operators and service providers the right to set up and offer their services throughout the EU internal market. This would boost the quality and reduce the prices of communications services for consumers.13 The general Framework directive14 arches over specific directives on, e.g., access and interconnection as well as unbundled access to the local loop15. Moreover, the Commission is in the process of updating the electronic communications package, with a focus on increased competition, better regulation, improved internal market as well as stronger consumer protection.16 The latter objective, consumer protection, extends the e-com package towards the consumption layer. The second foundational piece of EU media and communications policy is the Copyright directive17 and other supplementing measures on copyrights and related rights18. These enactments regulate foremost the content and consumption layers. They adapt legislation on copyrights and related rights to better reflect the digitalisation of content. Harmonization covers national provisions on various copyrights, exceptions to such rights, as well as technical protection measures.

11. Directive 2002/21/EC on Electronic Communications Networks and Services (i.e. the Framework Directive); as well as the underlying directives: Directive 2002/19/EC on Access and Interconnection; Directive 2002/20/EC on Authorisation; Directive 2002/ 22/EC on Universal Service and Users' Rights; Directive 2002/58/EC on Privacy and Electronic Communications; and Directive 2002/77/EC on Competition in Electronic Communications Services. There is also Regulation 2000/2887 on Unbundling the Local Loop. 12. The package contains also important aspects of the consumption layer (see e.g. Directive 2002/22/EC on Universal Service and Users' Rights). 13. European Commission DG Information Society 2008c. 14. Directive 2002/21/EC on Electronic Communications Networks and Services. 15. Directive 2002/19/EC on Access and Interconnection and Directive 2002/20/EC on Authorisation, respectively. 16. European Commission DG Information Society 2008a. See also European Commission DG Information Society (2008) for individual legislative proposals in this regard. 17. Directive 2001/29/EC on Copyright in the Information Society. 18. Directive 91/250/EEC on Computer Programs (“the Software Directive”); Directive 93/83/EEC on Satellite and Cable Transmissions; Directive 96/9/EC on Databases; Directive 2001/29/EC on Copyright in the Information Society; Commission Recommendation 2005/737/EC on Cross-border Licensing of Online Music 2005; Commission Green Paper on Copyright in the Knowledge Economy 2008; Commission Report on Implementing Conditional Access 2008.

15

Rethinking.book Page 16 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

The third element in EU media and communications policy to be highlighted is the Community’s Audiovisual regulation. It aims to ensure “the free provision of services and to fulfill objectives of public interest such as access to information and protection of users in areas such as commercial communication, protection of minors and human dignity”19. The focus is, in other words, on the transmission services, content and consumption layers. The Television Without Frontier’s Directive (TWFD) was the first step towards a single European television market. The Directive established minimum rules on aspects such as television advertising, production of programmes and protection of minors. Furthermore, the TWFD has just been amended by new Audiovisual Media Services Directive20. The Member States are to implement it by the end of 2009. One may also note that the Commission’s recent thinking on the content (and consumption) layer(s) has been outlined in a Communication on Creative Content Online21. The Communication considers that the policy makers need to meet three interrelated objectives in order to manage the systemic change that is taking place. One should seek to foster the dual objectives of competitiveness and cultural diversity; to remove unnecessary obstacles to online distribution of content; and to give an active role to consumers in selecting, distributing and creating content.22 The contributions to this book resonate well with the objectives in the Commission’s Communication. Finally, in addition to the above highlighted, rather focused EU policy undertakings, the Commission has launched more general reviews of for example internal market and consumer policies23, which are relevant for the media and ICT sectors. In short, the EU’s legislative agenda has been a busy one, and shows no signs of calming down.

19. 20. 21. 22. 23.

European Commission DG Information Society 2008b. Directive 2007/65/EC on Audiovisual Media Services. Commission Communication on Creative Content Online 2007. Ibid., 4. See e.g. Directive 2005/29/EC on Unfair Commercial Practices and Directive 2006/ 114/EC on Misleading Advertising. Moreover, the Commission seems to have harnessed the power that consumers possess as actors on the internal market. In other words, the Commission is expanding from the mere consumer protection logic to that of empowering the consumers. The Commission Communication on Consumer Scoreboard (2008) is a good example.

16

Rethinking.book Page 17 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

2

Networks

The first layer to be discussed is the network layer. Broadband digital communications networks are today as elementary for the European societies and their development, innovativeness and competitiveness as was electricity a century ago. It is vital to upgrade the network infrastructure layer to reap the full benefits of, for example, user created content and social networking. These phenomena are the core ethos of the Internet today, as they drive cultural creativity as well as political grassroot level participation. The networks must therefore be improved to better carry two-way services, amongst other things.24 As explained above, there are many parallel networks capable of delivering digital content: fixed/IP, mobile wireless, cable, broadcasting for TV and for radio, as well as satellite networks. These different network technologies have been the basis of the “silo thinking”: each of the layers had a specific silo for each sector. Convergence is changing this. The network structure is therefore upgraded at numerous fronts in parallel. In fixed telephone/IP networks, the market led investments may need to be backed by contingency measures. The deployment of next generation of mobile access networks, then again, brings up issues such as the specification of wireless radio spectrum25 and a better coordination of mobile network usage through sharing arrangements, in particular where these may lead to an expanded broadband universal service. In broadcasting, digitalization is taking place in both television and radio networks. It relies often on a strategic interplay between the government and a competitive market place. There are also the next generation satellite and cable networks driving an innovative services market. Indeed, the developments in networks are linked with the creation of a real marketplace for a sufficient number of competitive and innovative service providers. Together, they drive convergence. Pay TV services are today often bundled with imaginative offers on broadband and telephony, for

24. DCMS and BERR 2009, 14-17. 25. The options include, for example, industry agreed radio spectrum trades as well as imposed realignments. The progressive switch from analogue to digital broadcasting will liberate a “Digital Dividend”, for which a pan-European alignment has been planned.

17

Rethinking.book Page 18 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

example.26 Even radio may be up for a revival upon turning digital.27 Proper access to networks for market entrants is nonetheless essential for new services to emerge: the incumbents will have an interest to withhold developments, if their strong positions in the existing structures are only likely to deteriorate. Perhaps the most exiting new development in the network area relates nevertheless to mobile TV broadcasts. The first trials of mobile TV networks have already been completed, and in some countries the networks are ready for deployment. Nevertheless, a full-scale commercialization has stalled. The reasons are not related to technology, and are therefore unexpected and disappointing, considering the enormous potential that this new media could offer to all the involved stakeholders. Sakari Aalto will explore the issue in detail in his Chapter. The mobile TV sector could be one of European leadership, but the prospects of seizing the opportunity appear slim.28

3

Services

Service provision is probably the most versatile layer of the digital market. The service provision layer can extend all the way from the functioning of the core access network to the aggregation, distribution and consumption of content. Policy measures on services, in particular, reflect the EU’s and its Member States’ attempt to find a balance between economic and cultural interests. The contributions to this book focus on two aspects that have been under intensive debate lately: the new Audiovisual Media Services Directive and Member State support for public broadcasting.

3.1 Audiovisual Media Services Directive The Audiovisual Media Services Directive is a prime example of convergence. A horizontal, comprehensive regulatory framework for all audiovisual media services seeks to level the playing field between different 26. DCMS and BERR 2009, 31. 27. High quality news services and locally focused information are two examples of benefits to the public. The World DMB published the European ‘Digital Radio Receivers Profiles” to set minimum requirements for interoperability across the continent. (DCMS and BERR (2009, 33)) A single digital radio market across Europe would indeed provide leverage. 28. Ballon and Braet (2008).

18

Rethinking.book Page 19 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

kinds of broadcasters. New media players offer essentially the same or similar audiovisual media content as traditional broadcasters, but in a nonlinear (on-demand) form. This can in the converging environment create un unbalanced situation: incumbent broadcasters are, with respect to their traditional services, subjected to the stringent regulations of, e.g., the Television Without Frontiers Directive, while the new media companies only need to follow the light-handed approach of the E-Commerce Directive.29 Technology-neutrality and proportionality require future content regulation to be at the same time ‘platform-independent’ and ‘graduated’. The new Audiovisual Media Services Directive tries to achieve that. Valcke and Lievens in their contribution wonder, however, how successful and revolutionary the approach of the AVMS Directive actually is. Does it in reality extend beyond rules that already apply in much, if not all of the EU? Have the wonders of technology and the virtual world made the regulators oblivious of the plain old offline media? Another issue drawing these authors’ attention are the strains that the transformation of the societies put on the traditional media law model. The premise of broadcasting—few but “professional” senders and many receivers—is hardly tenable in the ‘digital public sphere’ of social networks. Should not the scope of the essential provisions reflect the developments? Herold complements the analysis of the AVMS Directive in her Chapter from a single market perspective. The new Directive, once implemented, will according to her enable the players in the EU market to better benefit from the internal market freedoms, the freedom of establishment and freedom to provide services.

3.2 Public broadcasting Broadcasting companies were originally mostly publicly funded incumbent enterprises. Some of the national incumbents have grown into powerful media service enterprises that provide different genres of content, including entertainment and sports. They may be active in all media markets, also those that attract private funding such as advertisements. The converging media environment is obviously a major factor contributing to the public broadcasters’ expansion. Private broadcasting has also experienced enormous success since its inception in 1980s: the audiences

29. Directive 2000/31/EC on Electronic Commerce.

19

Rethinking.book Page 20 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

have warmly welcomed the choice that the private broadcasters introduced to programs.30 Today, a wide variety of content is available on various platforms, at individually chosen times (through e.g. on-demand services) and where the consumer desires it (e.g. mobile television). All broadcasters, be they public or private, need to expand their strategies beyond the mere broadcast distribution to compete against the evolving entertainment services. A major point of disagreement, however, is how large the presence of the public sector should be. The controversy is linked to the application of EU state aid rules to public broadcasters.31 Should it therefore be for the Member States to define the “public service remit” of their broadcasters? Should there exist some type of a “public service test” for that purpose, and what should its contents be? Who should conduct it? In fact, Donders in her piece takes the debate one step further. She wonders whether ex ante evaluations might actually benefit the public broadcasters, and hence the society at large. She explores this scenario, amongst other issues, through a critical analysis of Commission state aid decisions on public broadcasters’ growth towards new markets. Biggam, then again, links broadcasting back to the layers of media policy. Should the focus of public intervention in media markets actually shift from broadcasting to the production of public service content, available for distribution on all platforms? These issues are being heatedly debated as the European Commission is currently updating its 2001 Communication on the application of state aid rules to public service broadcasters.

4

Content

4.1 Original EU content The online environment should provide excellent opportunities for creating content. New content formats, highly transparent prices, as well as supply chains with less middlemen, should lead to more efficient markets —and hence less profit margins hidden in-between the consumer and the producer of content. These key benefits, nonetheless, may turn into threats, if one takes the viewpoint of an established market player with limited ability and/or willingness to change.

30. See chapters of Biggam and Donders. 31. Ibid.

20

Rethinking.book Page 21 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

In practice, there has been an overall trend of sinking profit margins for the sales of content. At the same time, the advertising markets have been shrinking. The economic downturn curtails spending. Due to the tremendous growth in Internet advertising inventory, the markets are highly competitive, yet ineffective. Pay TVs, which have taken market share from publicly funded broadcasters and free-to-air broadcasters that rely on advertising, seem to have had a disproportionately small role in channeling money back to the creation of culture.32 In addition, Tongue claims in her contribution to this book that the several media mergers over the last two decades33 make real the dangers of an oligopolistic media market. Only few players increasingly control the market and determine what our culture looks and sounds like. These trends may have had a negative effect on the funding of traditional and new media in Europe. The scarcity has emphasized the role of public funds. Indeed, Brunfaut and Blanchart argue in their Chapter that state aid for film is crucial for the Member States’ efforts and needs to preserve a national identity and cultural values. In particular “traditional” films to preserve the European cultural identity according to in these authors important during an ‘American cultural invasion’. This approach, of course, will make tenser the already sensitive question on state aids and other public funding of films and broadcasting. An alternative view is that the challenge could be met by new business thinking: models that are flexible, reasonably priced and focused on true end user benefits. Models that reap the full benefits of the internal market. Indeed, Herold in her chapter attempts to demystify the ‘rhetoric’ of cultural diversity. She forcefully argues against a dichotomy between market and culture, the competitiveness of the industry and its cultural accomplishment. The diverse expressions of European culture must find their audience in the market in order to be successful. Cultural diversity should not be regarded as a ‘niche’ issue: support for works with no prospect for any commercial interest seems difficult to justify, be it in the EU or elsewhere. In fact, the market forces and the internal market can well play a positive role in enhancing diversity in the audiovisual market, as also Pauwels et al. have argued elsewhere.34 The new AVMS Directive is

32. DCMS and BERR 2009, 36-38. 33. For example, DreamWorks SKG acquired by Viacom Inc.'s Paramount Pictures, News International takeover of the Wall St Journal, and the merger between Google and YouTube. 34. Pauwels et al. 2007.

21

Rethinking.book Page 22 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

essential in implementing the principle of cultural diversity, which has also recently been codified in the international UNESCO Convention. According to the Convention, “States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to adopt measures and policies to protect and promote the diversity of cultural expressions within their territory.”35 The inception of the Convention is described in detail in the Chapter of Tongue. Herold’s piece seems to be in an intriguing contrast with that of Brunfaut and Blanchart, who treat the free play of market forces in the audiovisual market with a great dose of suspicion. Is deeper integration in the internal market and greater liberalisation in trade a challenge rather than an opportunity for preserving cultural identities in Europe? One can also wonder whether the Commission is in fact moving towards a more restrictive approach and too much interference in considering cultural derogations to competition rules. The Commission has requested, for example, that Member States transparently list the criteria they use in supporting films. Is this a disproportionate claim? The cultural provisions in the EC Treaty36, in any event, remain weak and require unanimity. Finding an optimal balance is a challenge for European lawmakers. As regards television programming, for example, the chapter of Herold reminds us that the earlier European regulation has been criticized for having consolidated the fragmentation of the audiovisual market rather than having opened it up. The quotas would according to these claims have been mainly fulfilled through national works. Instead of being exposed to programmes from other EU countries, European viewers would have continued to see more of the same domestic works. Cultural diversity starts with domestic content, but exchange of programming between EU countries should also certainly increase. Expanding the angle of observation to the international level, one also finds in the thinking of many authors a persistent juxtaposition between cultural diversity and free trade led globalization. Herold makes the case against such prejudices in her Chapter, and Tongue, too, despite her general antagonism towards the WTO, notes that there is a lack of positive and well-informed dialogue between the supporters of economic liberalization

35. Article 2. 36. See Article 151(3) TEC, in particular.

22

Rethinking.book Page 23 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

and those of cultural diversity.37 Indeed, part of the problem is precisely in depicting the world as consisting of two mutually exclusive camps.38

4.2 Availability of content While it is important to ensure the production of vibrant European content, it is still another thing to make the content available. It is lamentable that still today, seven years after the Internet bubble bursted— not started39—the online marketplace for content remains underdeveloped. The licensing of rights has not picked up on new platforms.40 Hence, online content services remain a nascent market. The immaturity and thinness of the marketplace hinders growth in itself: without experiences, transactions appear unpredictable and complicated. Consequently, revenue streams from existing market structures have had more appeal to many rights holders than the opportunities of venturing onto the uncharted online environment. Transforming the value chain is a much more complicated and time consuming process than the mere technological and behavioral transition to an online environment41. These appear to be the major reasons for the weak availability of content online. Maghiros depicts in his chapter to this book in more detail the unseized advantages of the new economic models. In many respects, the online environment could empower the independent creator while reducing the risks of the established publishers. The ability to easily trace and to access even the more marginal, less known content, for example, means that one may focus less on Box-office hits. Following the “long tail argument”, good quality content will eventually, over time, attract enough audience to provide a sufficient economic return. The interactive online users also provide valuable information to the stakeholders in the value chain on the characteristics of successful products and services. Word-of-mouth type viral marketing techniques can prove more effective than traditional forms of advertising.

37. Cf. for example Puppis (2008) with Messerlin et al. (2004), and van den Bossche (2008). 38. In the field of environment and trade, for example, it appears that much of the antagonism within developed internal markets such as the EU or the US can be removed precisely through positive, well-informed discourse (see e.g. Kalimo (2006)). 39. Ruikka 2008. 40. Commission Communication on Creative Content Online 2007, 4. 41. Ruikka 2008.

23

Rethinking.book Page 24 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

These types of prospects have been suppressed partly by the legal system of copyrights and related rights, through which the content is managed. During the Lecture series, Aalto and Brison42 explored many of these copyright issues, and key points are further elaborated in this book in the Chapter of Aalto. The balance is delicate. On the one hand, innovation has traditionally been promoted by securing a sufficient protection of creators’ rights. Yet, on the other hand, the consumption as well as the uptake of user created content—the fastest growing sector in content production— relies on a freedom to use content and to share it widely and quickly, anywhere and any time. Also, the price of content should match market expectations. If authorization for using the content is considered onerous, expensive and slow, either innovation is sacrificed, or then social norms in terms of what is and is not unauthorized use of third party content may start to change. This, in turn, nags on the content and communications industries’ confidence on the system. Aalto also explains in his contribution another problem in accessing content online: the licenses for online platforms may be in conflict with the licenses granted off-line.43 There are also completely new media, such as podcasts and mobile TV, where the licensing framework is only emerging. In the European Union, the licensing conundrum even has a particular twist to it. The new online platforms are often not national but European or global in nature. Yet, although discrepancies in EU copyright law have significantly reduced during a period of ten years, the rights remain to a large extent territorial.44 The complexities and costs of obtaining licenses in each Member State separately are high and futile. There is in other words no true internal market, but rather a frustratingly fragmented system of managing intellectual property in Europe. The collecting societies are often seen as the major beneficiaries of the fragmentation45, while European cultural works and other digital content, as well as the consumers, are amongst those on the losing end. Content is simply distributed in an unsatisfactory fashion.46 The Commission has launched initiatives to overcome the problem. It promotes for musical works multi-territory licenses and an expansion of collecting societies to attract right holder customers beyond their national borders.47 The overall objective of multi-territory and European licensing 42. 43. 44. 45. 46. 47.

Brison 2008. Commission Communication on Creative Content Online 2007, 4-5. Lüder 2007, 13. Ibid. Commission Communication on Creative Content Online 2007, 5. Ibid., 6.

24

Rethinking.book Page 25 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

appears highly applaudable, and it is shared by most institutions and stakeholders—the consumers in particular.48 For audio-visual works the situation is similar: a fragmented licensing market delays the uptake of services such as Europe-wide video-on-demand offerings. The uncertainties in the licensing system are therefore fundamental. A further essential issue regarding the availability of content online is piracy and the means to combat it. The ease of copying and sharing files, together with the poor availability of legal content in easily accessible and reasonably priced formats has created a widespread illegal market.49 Technical Protection Measures (TPM), Digital Rights Management (DRM) or regulation have not been particularly helpful in addressing this problem. Instead, anti-circumvention laws on both sides of the Atlantic have according to Gasser shown a tendency to promote a “digital lock-up”, inhibit fair use, limit access to public domain works and strategically prevent legitimate competition.50 Rather than an enabling technology, DRMs may have become a point of leverage and a fragmenting factor in the marketplace.51 The systems are not interoperable, standardized, nor do they usually function across platforms.52 Distributors are locked into specific channels. From the perspective of competition and innovation— and hence aggregate welfare—such limitations of interoperability seem clearly detrimental.53 They work in a direction diagonally opposite to convergence. 48. Then again, the European Parliament has issued a highly critical resolution on the Commission Recommendation on Cross-border Licensing of Music (2005). The tone is not surprising, considering that the Parliament has throughout the shift to the online environment been quite receptive to the interests of the right holders and/or collective rights managers (CRMs). The Parliament’s concern for the small right holders and for cultural diversity also comes across in a strong (albeit regrettably disorderly) fashion. (Parliament Resolution on Cross-border Licensing of Online Music 2008). 49. Council of the European Union in its conclusions of 20 November 2008 invited the European Commission to make a rigorous investigation of the scale and causes of piracy as well as its consequences for the economies of content creation and for cultural diversity. (See Council Conclusions on Creative Content Online 2008, Alinea 7 in particular). 50. Gasser 2006, 96. 51. Apple’s iTunes, the clear market leader and only clearly profitable online pay-perdownload distribution platform for digital content at the moment, deployed a proprietary protection system that supported the company’s business strategy in different ways. The creation of iTunes compatible portable players was for example hampered. Roth (2007, 524-5). 52. Commission Communication on Creative Content Online 2007, 7. 53. See further in Gasser (2006, 96, 101-103); and Roth (2007, 525). Gasser indeed claims that overly stringent anti-circumvention laws have created spillover effects and have a tendency to endanger other social values.

25

Rethinking.book Page 26 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Given the spreading of free P2P networks, the difficulties faced in creating interoperable DRM systems, and the antitrust issues raised regarding, e.g., Apple’s iTunes/iPod, new developments in the music online market are expected. The uptake of completely DRM-free sales of music could be such a trend. Another is that hardware manufacturers such as Nokia have diversified into the online music download market. These changes may imply a complete rethinking of the current licensing structures. The systems managing digital rights face challenges also from another direction. Data protection, privacy and secrecy of communications are examples of fundamental rights that are easily encountered while operating in the online environment.54 The EU data protection authorities and the United States’ Federal Trade Commission (FTC) are investigating the privacy risks on social networking sites more generally.55 Mobile services, and hence the ability to track the location of people, creates its own set of issues. These issues are further introduced in Section 6.356 hereunder, and De Hert et al. take the theme further in their chapter, as they offer a comprehensive overview of fundamental rights in the information age.

5

Consumption

In the Digital era, universal service will mean access to broadband, probably in the range of at least 2 Mb/s57. This standard can be striven for through a mixture of technologies, including fixed and mobile telecommunications networks, cable and even satellite connections. Access also needs to be provided through devices other than PCs so as to reach those parts of the population that are inclined not to possess them. TV settop boxes or mobile phones are good examples of alternatives. The hardware infrastructure needs to be combined with a comprehensive plan to ensure a full inclusion of all social groups. Affordable prices should be combined with measures to make the European population fully literate 54. This fact was also recognized in the Council Conclusions on Creative Content Online 2008. Google, for example, is currently being scrutinized by the European Commission regarding the privacy policy of the YouTube channel dedicated to the European Union activities. (EurActive 2009). 55. Gray et al. 2008. 56. Section Fundamental Rights. 57. DCMS and BERR 2009. While perhaps high at first sight, the figure should be compared with the 100-200M Mb/s range that is planned for the customers within the best-serviced networks.

26

Rethinking.book Page 27 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

in digital media. Otherwise the gaps in the society between the haves and have-nots (such as the lower income groups and the elderly) may only accentuate further. Social inclusion in the Information Society—in the EU denominated eInclusion—is a pivotal issue, and links to the fundamental rights discussion in the Chapter of de Hert. Right to health and right to selfexpression, as well as the protection of minors are examples of topics under discussion. Part of the difficulty is to find the proper societal balance between measures required to bridge the “Digital Divide” between those connected and those not, on the one hand, and the right holders’ right to exploit their works, on the other. The balancing has in some cases already involved even the judicial branch. Google for example has been a main driver behind the “Digital Libraries Initiative”58 to bring Europe’s cultural heritage (in particular so called “orphan” and “long tail“59 works) to distribution through digitalization and the Internet.60 Google was however sued by the Authors’ Guild for copyright infringements in the process.61 The parties finally ended up settling the case.62 One could argue that inclusiveness in the online environment is more important than ever before due to the phenomenon of social networking, introduced in the next section and analyzed in more detail in the chapter of Pascu et al. People are building online new social ties and networks such as communities of interest. Pascu et al. remind us that the information society is driven more by the need to communicate than by need to 58. Commission Recommendation on Online Accessibility of Cultural Material 2006. See also Council Conclusions on Online Accessibility of Cultural Material 2006. 59. Orphan work is a work where it is difficult or impossible to contact the copyright holder. Long tail works are items sold in accordance with a strategy of relatively small quantities but an extensive period of time, thereby reaching large total sales. 60. Google Book Search helps users identify books and then to purchase or borrow them from local libraries. Google was scanning, copying and/or displaying parts or all of the works in question, and then made them available in different excerpt or full text formats. On the basis of these actions, Google was sued for copyright infringement by Authors’ Guild. In particular, in the Guild’s view Google’s display of the works on the website were for commercial purposes, because Google derives its revenue mainly from advertisements displayed on such sites. Google on the other hand claimed the project was all about making available for the general public a huge amount of works, many of which were unavailable in any other way. The works did according to Google respect copyright because they were fully licensed and/or fell under the fair use exception. Moreover, copy, save and print functions had been disabled. (For a detailed description, see Constantino (2006, 235-40, 244)). 61. Complaint of the Authors Guild 2005. See The Author’s Guild (2008) for the litigation history. 62. Howe 2008.

27

Rethinking.book Page 28 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

information. Thus, there may be another kind of a “digital dividend”63 for the EU to seize: more widespread broadband access and improved ICT skills can through social networking contribute to the call against social exclusion, also in respect of groups such as the elderly and the disabled. Moreover, there may be a cultural payback in terms of user created content. By including a wider array of the social fabric online, the content to be consumed will also be more diverse and socially representative. This adds a further layer to the vision of the social benefits and collective wisdom of the networks. Ultimately, universal connectivity is also about adequate demand. The uptake of broadband services will depend on the individuals’ perception on what the services can do for him/her, not on what they are64. In particular usability, interoperability and efficient interaction are thus key determinants that drive inclusion ever further in the converging society.65

6

Cross-cutting themes

6.1 Social networks Internet is often considered the network of technical networks. It today consists, however, also of networks of another kind: social networks for interacting and for creating and distributing content. Social networks provide several benefits. They, and with them user-created content, have become the fastest growing segment in online media transactions. They promote user participation and can potentially be very effective in filtering and accrediting information. This necessitates three issues, however: motivated users, trusted and independent platforms, and tools for the successful filtering and accreditation of information. Indeed, the inner dynamics of social networks will need to be better understood and addressed to deal with the looming legal and policy challenges.66 Social networks impact all the four layers of the information society: networks, services, content and consumption.

63. The Digital dividend has been the term to describe the shift from analogue to digital transmissions: as for example digital broadcasting is roughly six times more efficient than analogue broadcasting, the shift has released large quantities of spectrum for other, new services. (Ofcom 2008). 64. DCMS and BERR 2009, 59. 65. See the chapter of Maghiros. 66. Zarsky 2008, 742-3.

28

Rethinking.book Page 29 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

First, as was explained above, social networks are an essential means of creating content (as the term “user-created content” makes obvious) and for consuming it. Consumption is taken to another level when, as Maghiros explains in his chapter, users are able to interact with the system and to personalize its substance to suit very specific purposes. In exchange, they need to supply information that reflects their opinions, personal creativity and cultural backgrounds. Consumption is also affected, for example, in terms of enhanced consumer protection, because social networks work to reduce the informational asymmetries of the market place. Social networks might in other words have a tendency to reduce the need for separate regulatory protection mechanisms.67 Second, social networks affect the supply side: the available networks, the offered services and the content being produced professionally. According to Benkler68, social networking dynamics constitute a third model of production, to complement those of the company and the marketplace. On occasion they have even greater sustainability and effectiveness. Pascu et al. explain in this book how some ‘net-native’69 companies, like Google and eBay, have become large and very profitable corporations by any means of measurement. Many social computing applications and players directly threaten the established industry leaders in distribution through peer-topeer IP networks (“wifi-piggybacking”). Freely available user-generated content (blogs, wikis and podcasts) competes for audience and advertising with content produced by established providers (broadcasters, newspapers, encyclopedias). Also, audiovisual content is being shared through peer-to-peer platforms with direct impacts on the revenues of content industries. On the other hand the communities of users are important sources of talent, information, 'viral' marketing activities and feedback for the industry. Finally, user-created content may also be commercialized.70 Social networks also challenge the role of intellectual property rights as the engine of innovation and distribution of ideas. Extremely complicated software and highly creative content can be generated through a joint effort, without regard to the ownership of the property rights. Blocking works from the networks would hamper their use and the ensuing benefits.

67. Zarsky 2008, 762. 68. Benkler 2006. 69. 'Net Native' services are built specifically for and are solely resident on the Internet. See further in the chapter of Pascu et al. 70. See the chapter of Maghiros.

29

Rethinking.book Page 30 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Thus, those in favor of social networks may be prone to support limitations to IP protection in the digital age. Lastly, social networks may be relevant for broadcasting policies. Coupled with search engines and broadband infrastructure, the social networks may offer cures to the major ills of the media market. They generate public discourse outside of the main broadcast media. Moreover, such discourse is already filtered and accredited to varying degrees. The developments therefore affect the way in which the scope of broadcasting policies should be defined.71 Indeed, the networks matter even beyond the commercial transactions. They may be a means of civil public participation, because they potentially lead to greater transparency, efficiency, user involvement and empowerment in the society.72

6.2 Competition policy In his inaugural presentation to the Lecture Series, ex-Competition Commissioner van Miert73 stressed that it is essential to maintain competition law within the policy arsenal of the converging society. The regulation of media and IT markets cannot rely on ex ante regulation, only. Ex post competition measures have a particular role in fields of quick development, where regulatory action is unlikely to always stay apace with the practice. Indeed, Alkio argued in his Lecture Series presentation that competition policy and intellectual property rights are complementary in that they both strive to promote innovation.74 Competition policy officials at the European level will need to stay alert during the creation of new digital markets. In some countries, for example, investments to new infrastructures are encouraged through “regulatory forbearance”. Operators’ investments to infrastructure are in other words rewarded by granting them monopoly access to networks.75 While high risks merit high returns, the dividing line to monopolistic inefficiencies may quickly grow thin. On the other hand, cultural diversity and support for high quality content and broadcasting may also seem poorly reconcilable with EU competition law, as this book’s critical contributions from Brunfaut and Blanchart as well as Donders reveal.

71. 72. 73. 74. 75.

See the chapter of Valcke and Lievens. See the chapter of Pascu et al. Van Miert 2008. Alkio 2008. DCMS and BERR 2009, 19.

30

Rethinking.book Page 31 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

All in all, competition law and policy functions across the network, service delivery, content and consumption layers of the information society. Indeed, it may be extremely challenging to carry the burden of proving or refuting the impacts of particular measures on competition in a mesh of countless horizontal and vertical interlinkages within and between different networks, platforms, devices, services, applications and content. The stakeholders, and in particular the competition authorities, are put under great strains. Competition policy therefore needs to be carved out with particular empirical rigor and using a proper analytical framework76. These challenges are explored in detail in the chapter of van Rompuy. Does the Commission have the necessary resources and expertise to meet the Community Courts’ standard of proof of always taking decisions that are fully reasoned and based on sound evidence – be it for or against a merger? The analysis is also shifting away from law, towards economics. Van Rompuy also explores how the shift may affect decision-making. And what about the non-economic considerations, such as cultural diversity?

6.3 Fundamental rights Finally, fundamental rights are the third important cross-cutting angle to European media and communications policy in this publication. The chapter of De Hert et al argues that constitutional values are vital in shaping the future technology-related laws and policies. The values help guide the society through a process of radical and unpredictable changes: constitutional rights are at the core of defining what a humane society is and should be. They also are general and stable, and they have a long lifespan. The stability may be contrasted with technological developments, which evolve at times in volatile and unpredictable ways. The new developments in the converging information society need to be assessed case-by-case against the rationale of constitutional protection. Blogging is a good example of how traditional concepts like ‘journalist’ may become obscure when media and the new means of expression converge. A case-by-case analysis would enable assessing, for example, a blog’s ‘importance to the public debate’ as a horizontal criterion for ‘journalism’, leaving aside the technology used. This to de Hert et al. seems preferable to an approach that focuses solely on a particular media. Other examples of blurred concepts include the potential constitutional right to anonymity and the protection of traffic data online. And how do you define “home” in an environment epitomized by mobility and virtuality? 76. Zarsky 2008, 766.

31

Rethinking.book Page 32 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Maghiros in his part links fundamental rights to social computing. He notes that privacy concerns regarding the exploitation of the users’ 'personal' data may become an impediment to the growth of social networks. Herold, then again, reminds us of the fears that a vaguely formulated EU level policy might end up being abused by national policy makers. The regulation of information exchanged online could in fact be misused to curtail freedom of speech. De Hert et al’s fundamental rights analysis provides insights into these types of situations in a number of countries. The authors also take the reverse task of assessing the impacts that new technologies may have (had) on constitutions. Has the converging media and communications environment affected the way we perceive the most fundamental values of our societies?

7

Policy approaches in the converging media and communications sectors

This book attempts to offer a selection of analyzes regarding the most pertinent policy issues in the converging European information society. The book moves from the most relevant changes and challenges of today’s (and tomorrow’s) practical media and communications environment—in particular social computing and user created content—to five topical policy areas: the audio-visual and media services directive, public broadcasting, intellectual property rights, state aids and cultural policy. The discussion is complemented by an analysis of the cross-cutting themes of fundamental rights and competition policy. All in all, the discussion on the themes takes place bearing in mind a framework “layers”: networks, service provision, content and consumption. The experts in this edited volume provide numerous useful observations and suggestions so as to create inclusive, competitive and culturally diverse media and communications policies in the converging EU. Certain more general trends also become apparent: Kalimo and Pauwels scrutinize in the concluding Chapter the important challenges that lie ahead in improving the current policy approaches, and in better acknowledging the central role of the individual.

References Alkio, Mikko. 2008. Lecture “Competition in a Converging Market Place”, IES Lecture Series, Vrije Universiteit Brussel, Brussels, 9 April 2008. 32

Rethinking.book Page 33 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

Authors Guild. Authors Guild v. Google Settlement Resources Page. http:/ /www.authorsguild.org/advocacy/articles/settlement-resources.html. (Accessed November 6, 2008) Ballon, Pieter, and Olivier Braet. 2008. The Design of Mobile Television in Europe. In Global Mobile Commerce – Strategies, Implementation, and Case Studie, edited by Wayne Huang, Yingluo Wang, and John Day, 150-73. London: Information Science Reference. Benkler, Yochai. 2006. The Wealth of Networks. How Social Production Transforms Markets and Freedom. New Haven: Yale University Press. Available at www.benkler.org/Benkler_Wealth_ofNetworks.pdf. Brison, Fabienne. 2008. Lecture “Intellectual Property Rights – Friends or Foes?” IES Lecture Series, Vrije Universiteit Brussel, Brussels, 30 April 2008. Broadcasting Act of the French Community in Belgium (2003). Communauté française de la Belgique. 2003. Décret sur la radiodiffusion D. 27-02-2003. M.B. 17.4.2003, Docu 27516, p. 1. Available at http:// www.cfwb-av.be/db/aig/gallery.asp?action=viewimage&categoryid=253& text=&imageid=835&box=&shownew= Commission Communication on Creative Content Online in the Single Market COM(2007) 836, final. Commission Communication on Monitoring Consumer Outcomes in the Single Market: The Consumer Markets Scoreboard COM(2008) 31, final. Commission Green Paper on Copyright in the Knowledge Economy COM(2008) 466, final. Commission Recommendation 2005/737/EC on Collective Cross-Border Management of Copyright and Related Rights for Legitimate Online Music Services [2005] OJ L276/54. Commission Recommendation 2006/585/EC on the Digitalisation and Online Accessibility of Cultural Material and Digital Preservation [2006] OJ L236/28. Commission Report on the Implementation of Directive 98/84/EC of the European Parliament and of the Council of 20 November 1998 on the Legal Protection of Services Based on, or Consisting of, Conditional Access COM(2008) 593, final. Complaint of the Authors Guild 2005. Complaint, The Authors Guild v. Google Inc. Southern District of New York. http://files.findlaw.com/

33

Rethinking.book Page 34 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

news.findlaw.com/hdocs/docs/google/aggoog92005cmp.pdf November 6, 2008)

(Accessed

Council Conclusions of 13 November 2006 on the Digitisation and Online Accessibility of Cultural Material, and Digital Preservation [2006] OJ C297/1. Council Conclusions of 20 November 2008 on the Development of Legal Offers of Online Cultural and Creative Content and the Prevention and Combating of Piracy in the Digital Environment [2008] OJ C319/15. DCMS and BERR (Department for Culture, Media and Sport and Department for Business, Enterprise and Regulatory Reform). 2009. Digital Britain. The Interim Report. London: DCMS & BERR. Directive 89/552/EEC of the Council of 3 October 1989 on the Coordination of Certain Provisions Laid Down by Law, Regulation or Administrative Action in Member States Concerning the Pursuit of Television Broadcasting Activities [1989] OJ L298/23. Directive 91/250/EEC of the Council of 14 May 1991 on the Legal Protection of Computer Programs [1991] OJ L122/17. Directive 93/83/EEC of the Council of 6 October 1993 on the Coordination of Certain Rules Concerning Copyright and Rights Related to Copyright Applicable to Satellite Broadcasting and Cable Retransmission [1993] OJ L248/15. Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the Legal Protection of Databases [1996] OJ L77/27. Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on Electronic Commerce [2000] OJ L178/17. Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society [2001] OJ L167/10. Directive 2002/19/EC of the European Parliament and the Council of 7 March 2005 on Access and Interconnection (Access Directive) [2002] OJ L108/7. Directive 2002/20/EC of the European Parliament and of the Council of 7 March 2002 on the Authorisation of Electronic Communications Networks and Services [2002] OJ L108/21. Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on A Common Regulatory Framework for Electronic 34

Rethinking.book Page 35 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

Communications Networks and Services (Framework Directive) OJ L108/ 33. Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on Universal Service and Users' Rights Relating to Electronic Communications Networks and Services [2002] OJ L108/51. Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 on Privacy and Electronic Communications [2002] OJ L201/ 37. Directive 2002/77/EC of the Commission of 16 September 2002 on Competition in the Markets for Electronic Communications Services [2002] OJ L249/21. Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market and Amending Council Directive 84/450/ EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (Unfair Commercial Practices Directive) [2005] OJ L149/22. Directive 2006/114/EC of the European Parliament and of the Council of of 12 December 2006 Concerning Misleading and Comparative Advertising (Misleading Advertising Directive) [2006] L376/21. Directive 2007/65/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directive 89/552/EEC on the Coordination of Certain Provisions Laid Down by Law, Regulation or Administrative Action in Member States Concerning the Pursuit of Television Broadcasting Activities OJ L332/27. EurActive. Google under Scrutiny for YouTube privacy policy. www.euractiv.com/en/infosociety/google.eu-scrutiny-youtube-privacypolicy/article-180077. (Accessed March 10, 2009) European Commission DG Information Society. Legislative Proposals. http://ec.europa.eu/information_society/policy/ecomm/library/proposals/ index_en.htm. (Accessed November 13, 2008) European Commission DG Information Society. Proposals for Reform. http://ec.europa.eu/information_society/policy/ecomm/tomorrow/reform/ index_en.htm. (Accessed November 13, 2008a)

35

Rethinking.book Page 36 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

European Commission DG Information Society. Regulation in the Information Society. http://ec.europa.eu/information_society/tl/policy/ regulate/index_en.htm. (Accessed November 16, 2008b) European Commission DG Information Society. Regulatory Framework for the Telecoms in Europe Today. http://ec.europa.eu/ information_society/policy/ecomm/current/index_en.htm. (Accessed November 13, 2008c) European Parliament Resolution of 13 March 2007 on the Commission Recommendation of 18 October 2005 on Collective Cross-Border Management of Copyright and Related Rights for Legitimate Online Music Services (2005/737/EC) [2007] OJ C301 E/64. Gasser, Urs. 2006. Legal Frameworks and Technological Protection of Digital Content: Moving Towards a Best Practice Model. Fordham Intellectual Property Media & Entertainment Law Journal 17 (1):39-113. Gray, Tracy, Thomas Zeggane, and Winston Maxwell. 2008. US and EU Authorities Review Privacy Threats on Social Networking Site. Entertainment Law Review 19 (4):69-74. Howe, Isabel. How the Settlement Will Work. http:// www.authorsguild.org/advocacy/articles/settlement-resources.attachment/ how-the-settlement-will/How%20the%20Settlement%20Will%20Work.pdf. (Accessed October 28, 2008) Kalimo, Harri (2006) E-CYCLING—Linking Trade and Environmental Law in the EC and the U.S. Ardsley, New York: Transnational Publishers. Lüder, Tilman. 2007. The Next Ten Years in E.U. Copyright: Making Markets Work. Fordham Intellectual Property Media and Entertainment Law Journal 18 (1):1-60. Messerlin, Patrick A., Siwek, Stephen E., and Cocq, Emmanuel. 2004. The Audiovisual Services Sector in the GATS Negotiations. Washington D.C.: AEI Press. Ofcom. The Ofcom Digital Dividend Review. http://www.ofcom.org.uk/ media/news/2005/11/nr_20051117. (Accessed November 13, 2008) Pauwels, Caroline, De Vinck, Sophie, and Van Rompuy. Ben. 2007. Can State Aid in the Film Sector Stand the Proof of EU and WTO Liberalisation Efforts? In Media and Cultural Policy in the European Union. European Studies, An Interdisciplinary Series in European Culture, History and Politics, edited by Katharine Sarikakis, 24-43. Amsterdam-New York: Rodopi.

36

Rethinking.book Page 37 Friday, September 25, 2009 10:01 AM

The Converging Media and Communications Environment

Puppis, Manuel. 2008. National Media Regulation in the Era of Free Trade. The Role of Global Media Governance. European Journal of Communication 23 (4):405-24. Regulation (EC) 2887/2000 of the European Parliament and of the Council of 18 December 2000 on Unbundled Access to the Local Loop [2000] OJ L336/4. Roth, Monika. 2007. Entering the DRM-Free Zone: an Intellectual Property and Antitrust Analysis of the Online Music Industry. Fordham Intellectual Property Media & Entertainment Law Journal 18 (2):515-40. Ruikka, Timo. 2008. Lecture “The Changing Media Environment?”, IES Lecture Series, Vrije Universiteit Brussel, Brussels, 27 February 2008. van den Bossche, Peter. 2007. Free Trade and Culture: A Study of Relevant WTO Rules and Constraints on National Cultural Policy Measures. Amsterdam: Boekmanstudies. Van Miert, Karel. 2008. Lecture “Competition in a Converging Market Place”, IES Lecture Series, Vrije Universiteit Brussel, Brussels, 9 April 2008. Zarsky, Tal Z. 2008. Law and Online Social Networks: Mapping the Challenges and Promises of User-generated Information Flows. Fordham Intellectual Property Media & Entertainment Law Journal 18 (3):741-83.

37

Rethinking.book Page 38 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 39 Friday, September 25, 2009 10:01 AM

The Practical Environment

Rethinking.book Page 40 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 41 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges Perspectives on the Creative Content Industries Ioannis Maghiros

Introduction1 Digitisation has enabled the development of an affordable, fast and reliable communication infrastructure: the Internet. In turn, the Internet enabled the delivery of voice and data to a multitude of devices that – benefiting from technological synergies and new content access processes – are reshaping the media sector. For instance, in the past telephone lines were used for voice transmission, and TV was broadcasted through cable or satellite networks. Today, fixed or wireless broadband Internet enables the users to access a wider range of content (fixed and mobile voice and data) and to bundled services such as 'quadruple play' (which integrates TV and Internet along with fixed and mobile telephony). Convergence blurs the boundaries between information technology, telecommunications, consumer electronics and media, for markets, individual companies, and entire industries. For example, device manufacturers provide bundled content with every new device, wired and wireless service providers sponsor concerts and music bands, new media and Internet companies provide mobile communications content services and end-users become publishers through social networking. New and traditional players alike are adopting new business models transforming the traditional value chain and benefiting from the opportunities of convergence. The convergence of Information and Telecommunication technologies in terms of sharing common resources to enable a more efficient delivery of bits and bytes, was occurring already in the 1990's.2 Convergence of 1.

2.

The article is based on the findings of the study on 'The Future of the Creative Content Industries" in the framework of the European Perspectives in the Information Society (EPIS) project available at: http://epis.jrc.ec.europa.eu/Pages/ deliverables.html. I and T industries were the first to converge once digitisation enabled conversion of text, audio and video to bits and bytes.

41

Rethinking.book Page 42 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Information and Telecommunication with the Media industries also happened during the same period (1999): video was broadcasted over the Internet to PCs using an early version of ADSL.3 But it was only after the Internet bubble burst that Internet telephony4 and mobile applications were widely taken up, signalling the much-awaited Informatics and Telecomms convergence. News websites started to compete for the attention of the public, while Internet radio stations shyly presented advertising. As the broadband developed, games consoles became Internet browsers and social networking tools. The developments continue even further, as the convergence of cellular and home networks is expected to produce yet another wave of innovation and related growth. Convergence is both simplifying the value chain, by delivering content directly to the end-user, as well as complicating the business case, since direct distribution means that many different devices and services should be able to talk to each other and thereby overcome market fragmentation. For instance, the proliferation of nomadic services requires networks, handsets, content protection and security applications that are interoperable. Beyond technological challenges, established market mechanisms are under a strain. On the one hand, dominant players may try to lock-in consumers, thus stifling innovation. On the other hand, they may contribute to the sharing of common standards and open interfaces, ultimately fostering innovation. In general, digital distribution reduces the power of large publishers and thus opens new opportunities for smaller, more agile players, which may enhance diversity. New entrants using viral (e.g. word-of-mouth) publicity as well as other Community-led strategies for promotion induce a virtuous cycle of creation, discovery and diffusion of content at the European level. However, there are still many obstacles to achieving ubiquitous content consumption and thus fully fledged convergence. Content consumption is still limited, for example, by the access devices: e.g. content produced for TV distribution can seldom be consumed on a smart phone. In this new, fascinating environment of constant evolution, 'Content (still) is King'. The Creative Content Industries (hereafter: CCI) represent some 7 % of the world GDP, with annual growth rates of 5 % to 20 % in the 3.

4.

Asymmetric Digital Subscriber Line is a data communications technology, representing 80 % of all broadband subscribers in the EU Commission Staff Working Document SEC(2008). The Skype Internet telephony application, first launched in 2003, was rapidly and widely adopted (100 million users by 2006).

42

Rethinking.book Page 43 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

OECD countries.5 Europe has almost 29 % of the world market share, with 96 out of 20 global media companies7 and a large numbers of SMEs established in Europe. New distribution channels, such as broadband Internet and wireless communications are driving much of the growth in this area; for instance through speeding-up the download of digital content on new end-user devices such as the Apple iPhone or by loading copyrighted digital content on wireless devices such as the new "Comeswith-Music" Nokia phone. Moreover, the whole of the CCI sector is instrumental in the evolution towards the digital economy. For example, according to a 2006 Screendigest study,8 the European online music market generated € 120m in 2005, and is expected to grow to € 1.1bn by 2010, while online publishing advertising revenues, which have been estimated to total € 849m in 2005, are forecasted to reach € 2bn by 2010. Whatever their contribution to growth, CCI represent an important source of next-generation jobs around the world, considering that 5.8 million people were employed in the creative industries in EU25 already in 2004,9 equivalent to 3,1 % of the active employed population. Moreover, CCI is particularly important for Europe, where cultural diversity is considered a significant asset in creating an appealing offer of 'story telling'. The CCI comprise various heterogeneous activities, such as performing arts and visual arts (like painting and sculpturing), crafts, fashion, architecture and design, as well as the more industrialised services such as book publishing, TV and radio broadcasting, music and film industries, software and mobile content industry, games, computer games, advertising and marketing.10 Even the activities that are relatively industrialised are performed at various levels of industrialisation and commoditisation, and they usually have totally unrelated value chains. This is the reason why a variety of definitions11 is used to describe the subcategories that need to be addressed. Such sub-groups may be characterised by, for example, the degree of creativity required to produce a unit (e.g. high for arts, lower for software production) or the required novelty (e.g. different for advertising or music) or the uniqueness or the accuracy and timeliness of the created unit, or the related Intellectual Property Rights. 5.

United Nations 2004. These figures include advertising and marketing, besides cultural content. 6. Vivendi Universal, Bertelsmann, BBC, ARD, MediaSet, RAI, ITV plc, TF1, France Televisions based on turnover in 2004. 7. KEA European Affairs 2006, 188. 8. Screen Digest 2006, 12. 9. KEA European Affairs 2006, 78. 10. Florida 2002, 47 11. KEA European Affairs 2006; Marcus 2005.

43

Rethinking.book Page 44 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

For the purposes of this chapter, the industrialised services part of the CCI, as well as some parts of the public cultural services such as museums and libraries, will be taken into account, while the more artistic creative side will be omitted. This chapter will try to identify the essential features of the CCI in terms of technological and socio-economic trends and drivers. It will provide evidence of the way in which digital convergence is supplementing and in some cases substituting other forms of content delivery, thereby leading to enhanced creativity and knowledge sharing for the society at large. The chapter will subsequently identify a number of issues that need to be addressed by the various stakeholders if convergence is to further develop. Finally, the text identifies challenges and presents options for public policy making.

1

Drivers and trends in convergence

1.1 Technology trends and drivers A whole range of technological advances in hardware and software12 are at the root of convergence. The most important of such advances are: a) The exponential growth in integrated circuit density and processing capacity and the associated decreasing costs of production have enabled the development of smaller and cheaper yet more powerful and faster processors; b) Advances in micro-electronics have enabled among other things the development of cheap non-volatile flash-memory that powers mobile phones and iPods, allowing their mass production and diffusion. Also, the abundance of cheap storage enables the development of very large digital repositories bringing content closer to all the users; c) Advances in networking technologies (whether fixed such as optical fibre, or wireless terrestrial such as mobile cellular, or satellite based) complemented by an abundance of affordable bandwidth, have enabled the interconnection of billions of computing devices; d) The development of a multitude of end-user devices like all kinds of desktops and portable PCs, TVs of all sizes, mobile and wireless phones, satellite receiving set-top boxes, games consoles, Personal Digital Assistants, Global Positioning Systems etc.; e) The development of cheaper, higher quality display screens even for small portable devices (e.g. the iPhone touch-screen), the development

12. Abadie et al. 2008a.

44

Rethinking.book Page 45 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

of novel input/output user interfaces (e.g. the Wii mote), and the embedding of all kinds of sensors in the environment all together enhance interactivity, thus making the content consumption experience much more pleasurable; f) Advances in software tools, major ones being the open source development, rapid prototyping and object orientation in programming, database development and maintenance tools; g) Improvements13 in power technology and more energy efficient technologies such as those benefiting from developments in power scavenging technologies and the use of ambient energy, as well as advances in "Cloud Computing" which allows locating software and storage on the network rather than the user's desktop (thus making computing a utility, like electricity, water or gas), are also promising future advances forecasted to shape convergence further. These advances have facilitated the development of a wide array of innovative tools to create, organise, store, publish and distribute digital content. They thus create a virtuous circle for further convergence. In addition to the above mentioned technological advances, the digital literacy of the younger generation, in particular, enables them to access and use all kinds of new applications. The space agnostic nature of the open communication networks facilitates the reaching of new audiences and the fostering of new niche markets. Moreover, the mostly open standards of the Internet’s communication infrastructure provide opportunity for innovation 'at the edges'. In essence, since no central authority may prohibit or charge fees that would limit which devices or systems may connect to the network, barriers to new entrants are reduced. This has in turn driven the development of a flurry of new dedicated devices which facilitate end-users access to new and old content alike (e.g. smart phones, mp3 and mp4 readers, GPS systems). More innovation is to be expected in end-user devices as a result of the foreseen evolution towards a physical world where objects are tagged with digital content, identified as the Internet of Things. Such devices will introduce new interfaces that are easier to use, like foldable multi-purpose screens and capability for 3D projections, as well as enable interactions with the intelligent sensor-filled environment, which will lead to new services still (e.g. context-aware services like "where is the next parking spot"). New market actors, such as the mobile device manufacturer Nokia or the online retailer Amazon are taking advantage of the lowering of the barriers to enter the market and introduce a new wave of innovative solutions. They 13. Abadie et al. 2008b.

45

Rethinking.book Page 46 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

allow the appropriate content to reach the end-user by implementing complex interoperability requirements and appropriate business models to safeguard both the end-user’s consumption (such as personal data protection) and the content industry’s creations (such as IPRs). Overall, this type of innovation is positive. The better availability of end-user devices implies that more content will reach the end-user, provided that interoperability issues can be solved in an affordable fashion. However, the more devices there are, the more fragmented will the market also be. This may ultimately impact negatively on user adoption and on creativity, as it may oblige creators and end-users to adopt the more difficult path, which is to translate or re-purpose available content for all existing consumption platforms. Indeed, although 'Content is King' and although the end-users do not really care about the technology they use to consume it, we are still in the process of selling hardware with a little content on top. In other words, convergence has some way to go, still. Mobile devices with Internet access capabilities are another example of convergence. Consider the recent case of Apple's iPhone 3G device which went on sale simultaneously in many European countries and managed to entice as many as one million first-time users in the first few days. The large audience that shares the 'cult' access device made it possible for Apple to negotiate bilateral contracts with mobile operators in every country for a percentage of their operating revenues over the next couple of years. At the same time, the iPhone facilitates the sales of software applications through its proprietary iTunes store, in essence bypassing most of the other stakeholders in the value chain. It is certain that the 'innovation at the edges' trend will continue, with innovative solutions enhancing end-user satisfaction by facilitating the creation of more desirable content, as well as its consumption on more flexible, powerful and easier to use access devices. Content is an information good, which means that its production structure is characterised by high fixed and low marginal costs. Traditionally, stakeholders named publishers provided the initial high investment for the production of the first 'master' copy, and then benefited from IPR regimes and proprietary distribution channels. Convergence has overturned this; it has disrupted the traditional value chain by allowing smaller firms as well as end-users to market their creations successfully without intermediaries. This has resulted in a democratisation of ‘the spotlight’. Not only can individual creators produce and market their own products over an open distribution infrastructure, such as the Internet; they can also reach a huge audience that due to the networking diffusion characteristics of the medium provide a return on investment that is significant. For instance, 46

Rethinking.book Page 47 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

the group of amateurs that produced a musical version of the short video of the Zinedine Zidane vs. Materazzi incident in the football World Cup final between France and Italy managed to attract a contract from an established music publisher as a result of the high number of downloads from their web site. However, when content proliferates, information consumption can be compared to 'trying to drink water out of a fire hose'. There is a lot of pressure on users' attention, which makes them vulnerable to the limitations that characterise the existing navigation tools and the business models that navigation tools operate upon (mainly targeted advertising). Development of content tagging (metadata), intelligent filtering (including folksonomies) and search engine tools, especially audiovisual and contextaware ones, is thus another important driver of convergence. These are the tools that allow the mixing of content from various sources and thus guarantee the diversity in supply so as to satisfy even the most demanding user needs. Related to this is the availability of storage space, which seems likely to be guaranteed in the near future. It thus enables the creation of multiple local (personal) places for data storage. This in turn may prospectively have an impact on the continuous usage of downloading services such as BitTorrent with the potential to exacerbate copyright infringement issues. In conclusion, there are technologies today – and new ones will certainly emerge in the future – that facilitate the creation, identification, downloading, sharing, complementing or modifying of digital content over a wide variety of end-user access devices and through a multitude of not necessarily interoperable distribution channels. Convergence here is exemplified by the fact that access devices operate on multiple platforms and that simultaneously, technological platforms become suited for multiple purposes. Socio-economic trends and drivers will be identified and discussed below by looking into the main value chain processes: content creation (production) and delivery (distribution).

1.2 Socio-economic trends/drivers Not only technology drives convergence; we have witnessed many examples of socio-economic changes over the last few years that also affect convergence. For instance, the publishers’ marketing strategies to promote content have been substituted by innovative viral (word-of-mouth) or community-led strategies. For example, MySpace enables musicians and bands to sell their Digital Rights Management (DRM)-free tracks directly

47

Rethinking.book Page 48 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

from the artists’ MySpace pages. This is only natural, as most customers are motivated by the utility that the technology enables rather than the technology itself. Enhancing the ease of use, the efficiency or the elegance of the interaction with a technology as well as the use of available technologies in a manner convenient to the user and the situation also affect convergence. In addition, the need, especially of the younger generation, to create and maintain social relationships in real time, and mobility requirements further drive convergence. The role of communities of users and the impact of their shared consumption experiences and trust and security (or the lack thereof) are important phenomena to analyse as to their influence on convergence. So are issues like access to both creative and ICT related skills, access to both creative and marketing talent, and access to innovative methods and tools to capture audiences and monetise their attention. They make European cultural diversity an opportunity. Content creation/production Interested audiences, from virtually everywhere on the planet, take advantage of the space-agnostic nature of the Internet and the growing availability of cheaper – in many cases freely available – tools that enable the professional and semi-professional actors to re-configure and experiment with content. In addition to satisfying their needs, the experiments also contribute to the creation of interesting niche markets. For instance, Apple's GarageBand software suite has provided a platform for music processing that even professional musicians successfully use.14 Freely downloadable computer-based recording and editing tools aid in the creation of blogging, music, video or podcasting content. In addition, more content is made available in the public domain (no royalties attached for free use) for new generations to access and reutilise (morph it into new content) with the aim to foster creative behaviour. For example, the possibility exists to access and reutilise interoperable digital data collections such as the BBC’s creative content archive.15 Sophisticated virtual reality technologies enable the creation of digital museums; thus contributing to maximising the ratio of what can be exhibited to the public to what has been collected – normally constrained by the availability of space in a physical museum.

14. Noel Gallagher lead singer of the OASIS music band explains in an interview with Music Radar the use he is making of GarageBand (Music Radar). 15. First created in 2006, the BBC creative archive pilot has released nearly 500 clips, full programmes, audio tracks and images for the public to use and enjoy under the terms of the Creative Archive Licence (BBC Creative Archives License Group).

48

Rethinking.book Page 49 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

There are also new opportunities for actors who create content specifically tailored for mobile devices and other consumption modes that may prevail, rather than translate generally created content. There is a new culture that promotes the creation of content 'snacks' as opposed to creating content to satisfy the ‘full menu’ of multi-channel distribution strategies. This new type of content emerged first on mobile platforms that have limited input/ output interfaces such as ring tones and short alert video clips on sports, news or entertainment. This kind of content is currently consumed on almost any platform, as it seems to satisfy the audiences' very short attention spans. Mobile devices have progressively been made more potent through technological developments in wireless networking technologies and storage and battery technologies. They are expected to become even more powerful with the adoption of novel interfaces, possibly even 3D. These multipurpose, seamlessly interacting end devices open up new opportunities for content creators and providers (see Figure 1: Prospective Scenarios for Mobile content creation).16 This kind of context-aware content and mobile 2.0 social networking content are forecasted to have the lion's share of the market, provided that they will be able to come up with a sustainable business model.17 Figure 1: Prospective scenarios for mobile content creation

16. Feijóo et al. forthcoming. 17. Mobile advertising is just beginning to take off, with AdMob (www.admob.com) declaring that the number of advertisements that they have delivered worldwide has tripled to 4.5 billion in the past 12 months (Economist 2008).

49

Rethinking.book Page 50 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

However, the single most important driver for content creation is the massive end-user participation in blogging and social networking sites; there the end-users are introduced to the culture of sharing content and developing in an incremental18 way new content that suits their specific purposes. The process is called extreme personalisation. So important is the foreseen role of end-users in shaping converged processes that the more active users have been named ‘pro-sumers’:19 they are a combination of producers or professionals and consumers. The fact that the content is thus created by amateurs and therefore lacks professional quality is only a marginal issue. The marketers appreciate the information content of the end-user contribution greatly, as may be witnessed by the success of YouTube and its buyout by Google.20 Users are now empowered to choose from four degrees of user involvement in what is commonly described as Web. 2.0 processes (see Figure 2: types of web 2.0 usage):21 a) The core users of web 2.0 are those generating fully-fledged content such as blogs, wikipedia articles, and videos on YouTube. An estimated 3 % is actively contributing to blogs.22 A number of established creators, such as musical bands, are utilising social networking websites such as MySpace, together with relatively unknown amateurs, to 'sell' their DRM-free tracks directly from their fan-pages. For instance the UK music group RadioHead marketed their latest album successfully through such channels.23 b) Other groups of end-users provide active feedback, comments and reviews, and rate and tag content for subsequent use. An estimated 10 % is thus engaged, according to an IPSOS-Mori estimation. Examples of this type of behaviour are the 'Blair Witch Project' fan-site or the children's favourite website the Habbo Hotel, which has 75 million avatars in 29 countries and derives most of its annual revenue from the sales of virtual goods. c) Yet another group of Internet users are those that passively contribute by frequently accessing, reading and watching content produced by 18. By chipping in small parts of content over time rather than developing a full blown product all by themselves 19. First coined by Toffler in The Third Wave, is analysed in Abadie et al. (forthcoming). 20. Google buys YouTube, see BBC News 2006. 21. Osimo 2008, estimation based on PEW EUROSTAT, IPSOS-MORI, Forrester, Deere 2006, Rainie 2007, Young 2007. 22. Pascu 2008. 23. RadioHead self-released their last creation "In Rainbows" via Radiohead.com in October 2007, before traditionally releasing it through TBD Records/ATO in January 2008.

50

Rethinking.book Page 51 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

others. This non-active group is estimated to form around 40 %.24 It is considered that this category is important, as it contributes to new forms of a widely accepted social activity. For instance, it is thought that the success of virtual network games such as SecondLife is mostly based on the wide participation of the otherwise relatively non-active participants to the chat rooms. d) Finally, almost all Internet users are unintentionally providing input and intelligence through their everyday choices and actions. The actions are monitored and processed, even though the people are not deliberately using Web 2.0 applications. Amazon buyers, and news readers are good examples of such behaviour. Figure 2: Four types of web 2.0 usage, with different degrees of user involvement

These communities of users are important sources of talent, information, 'viral' marketing activities, feedback and perhaps most importantly, content. Their activities are enabled by technologies and platforms, which challenge traditional top-down models for content publication and broadcasting. New environments such as Video on Demand (VOD) repositories, peer-to-peer (P2P) networks or virtual worlds (e.g. Second 24. Estimates by IPSOS; other estimates are 36 % by PEW, and 33 % by Forrester Research.

51

Rethinking.book Page 52 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Life) empower users to create, access, reconfigure and share content in order to devise customised aggregations more suitable to their preferences than the market offerings. However, there is also an impediment to the spectacular growth of social computing, an impediment which related mainly to privacy concerns of the users regarding the exploitation of their 'personal' data. Although it is obvious that proud parents would like to exchange their children’s photos with the greater family and friends all over the globe, they are deeply concerned by the possible abuse of such personal material.25 The market, making use of advanced eID tools,26 can effectively offer users extended privacy protection for a price; this is yet further proof that convergence will be beneficial, if appropriately framed. Communities of users and social computing applications are also expected to positively transform the public domain through new, participatory forms of governance. In a number of areas, as diverse as health, learning, government and inclusion, participatory forms of civic information exchange and related decision-making are making formal institutions reshape their policies, adapt their decision-making processes and set-up appropriate digital platforms to harvest related information exchange. For example, there is evidence that research and patent environments27 may benefit if opened for citizen review. Delivery, distribution New technologies have not only helped increase the availability of content online but also contributed to improving the efficiency and flexibility of digital distribution and helped lower infrastructural costs. Both traditional publishers and novel players tap into content created by either amateur or professional creators, so as to process it and repackage it as need be, and to finally distribute it through every possible channel. This signals effectively the strength of the bottom-up approach to distribution that was long forecasted, with creators enabled to establish direct linkages with their audience as control over the traditional top-down publishing and broadcasting channels of distribution and commercialisation becomes more difficult. Highly flexible and scalable models for distribution are now possible, and allow for a disaggregation of content, e.g. selling or broadcasting single songs instead of an album, or a single TV episode

25. Hogben 2007. 26. Punie and Broster forthcoming. 27. See the innovative Peer to Patent pilot project run on behalf of the US patent Office by NYU (Peer to Patent).

52

Rethinking.book Page 53 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

instead of a TV series. This enhances the user’s choice. The revenue streams of the innovative business models are mainly based on the following: a) Periodic transaction fees. Access to content is offered, on an ‘all-you-caneat’ basis. At times this does not include premium rated goods, and is possibly for a flat fee. The trusted relationship between the providers and the customers enables the creation of communities of customers, which enhance brand loyalty and make better use of the available interactivity. b) Targeted advertising. Internet advertising is competing with TV and radio advertising channels as a result of its targeting capability, its ability to select the customer that may most require the advertised service. In this way large audiences are broken down into segments, and more effective individualised and targeted advertising approaches may be used. Then again, while advertising may help secure revenue, it may be perceived invasive or irrelevant, which may impact negatively the user experience or the attractiveness of the distribution platform. c) Micro-currencies. In the absence of general micro-payment systems and as a result of the limitations of credit cards, some providers such as Microsoft (Xbox Live platform) or Linden Labs (Second Life) or Apple (iTunes Store) have come up with models based on over the counter purchases of digital 'vouchers' that may be used online. d) Internet Cafes. On many occasions small Internet access providers play an intermediary role between customers and content providers by offering a trusted environment where even youngsters may safely transact. e) Complementary activities. Another way to translate large audiences into revenue is by freely distributing a digital good or service to attract the audience, and then selling the related physical goods. This is, for example, the case with a band which freely distributes its songs on the Internet and then sells tickets (related material) to its live concerts. Pricing is an important factor in establishing a sustainable stream of revenues, but so are the conditions of use and modalities of payment. It is always a delicate issue to price a new service so as to achieve increased enduser adoption; while dedicated platforms (like Nintendo's Wii) with limited convergence capabilities may be taken-up more rapidly because of the lower price, convergent platforms (like the SONY PlayStation 3) may prove to become more desirable distribution platforms in the long-run. Other dedicated distribution platforms include iTunes (which serves iPods with audiovisual content), the Google Book store, YouTube (which serves video streams under a multitude of business models) and Internet Protocol

53

Rethinking.book Page 54 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

TV and Video On Demand services. Another issue related to pricing is that the multiplication of distribution channels makes it easier for bundled services to be offered at varying prices. For example, freely broadcasted TV programs are also becoming available for purchase through online intermediaries. Distribution is also influenced by the economic, legal and regulatory environment related to the protection of IPRs. The growing ease in reproducing digital content and the ample storage capacity have brought about increased piracy and, in response, many counter-measures mainly in the form of DRM Technologies. A lenient implementation by Member States of European IPR legislation could encourage file-sharing of digital content which, on the one hand, may curtail publisher revenues, but be beneficial for creators, on the other. However, excessive restrictions on the perceived fair use of legally purchased content (i.e. strict and complex DRM formats) will limit its uptake. Availability of content is essential in promoting a distribution platform. In addition to newly created content, old content appears to now have a new opportunity, thanks to a low cost reproduction, storage technologies and efficient search engines. All kinds of new, platform specific, obscurely specialised or antiquated content may be 'found' and (re-)utilised. Over time, it may attract as much audience as a 'blockbuster'. Access to 'unlimited' content, which is the response to inefficient distribution, hampered mainly by physical constraints, has opened up new opportunities and has been defined as the ‘long tail phenomenon’28 (see Figure 3).

28. Wired Magazine.

54

Rethinking.book Page 55 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

Figure 3: Long Tail Anatomy as defined by Chris Anderson in Wired Magazine (2004)

55

Rethinking.book Page 56 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

This new economic model is both empowering the independent creator and reducing the risks of the established publishers: it is no longer imperative that your new product is a Box-office hit. Good quality content will eventually, over time, accumulate enough audience to produce sufficient economic return. Not surprisingly, classical music is for example making a come back as a result of the Long Tail. A prerequisite for the Long Tail to function is the availability of efficient and powerful search engines to facilitate identifying content. The most widely used search engine is Google. Google's success is in fact based on its ability to offer a scalable algorithm based on web pages' reputation in response to specification by users. Since these specifications are simple keywords, void of semantic meaning, the Google technique based on 'page ranking' popularity returns a result which is more efficient. In addition, an analysis of the result reveals context-sensitive information, which may be used to provide targeted advertising. However, even this content may be less useful, and at times it could have been even tampered with through optimization techniques such as link farming. The still crude nature of searches and the lack of recommendation tools means that blockbusters are still the most secure way of making a profit; this in turn is further proof that the impact of convergence can and will intensify in the near future. User interaction Convergence has facilitated the creation of user communities and an extensive social interaction. As mentioned earlier, the majority of the users are not creating, but simply participating in the process. Some of them are passively accessing content through the new channels. However, even the passive users, by the way of identifying and searching for their wishes, which are then religiously recorded, provide attention and taste data that are then interpreted to define user profiles. There are other, more active levels of user interaction that are also facilitated by the converging environment (see Fig. 4: European success story: LastFm). Users have come to appreciate them and request that such features are present in all of their content consumption experiences. For example, the success of the social networking site PatientOpinion,29 which groups patient opinions on the operation of the National Health System in the UK, has motivated similar web sites to be created in other areas and countries, and the NHS itself to create a similar tool called NHS choices.30

29. Patent Opinion. 30. NHS Choices.

56

Rethinking.book Page 57 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

Users are primarily invited to interact with the system and to personalise it. In order for this to happen they need to supply a lot of information that reflects their personal creativity and cultural background. In doing so, they provide valuable information to all of the stakeholders in the value chain on what makes a product or service successful and how to improve it. Moreover, highly engaged customers may carry out word-of-mouth promotional activities, which are on occasion even more successful than traditional advertising; such activities are defined as viral marketing and are beneficial to both users and providers. However, the information on personal likes and dislikes may also be abused. Once the information is out in the system, it is very difficult to control what use is being made of it. This may lead the users to lie about their preferences, which in turn leads to erroneous profiles with a negative impact on all of the involved. Even worse, users may back-off and not use the service once they have lost their trust in the system. For instance, there was widespread anger against Sony when it was discovered that it had created a blog where two supposed fans were trying to convince users to buy the SONY PSP.31 An example of a successful innovation in the music area in Europe is the UK born radio streaming site named Last.fm (see Figure 4). It enables users to listen to radio streams tailored to their preferences, as elicited from previous listens, as well as to those of other users or communities, or those selected via music tags. User interaction is vital for the success of this site in amassing audience as well as creating revenue; its multi-lingual character is also a fundamental advantage.

31. Guardian 2006.

57

Rethinking.book Page 58 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Figure 4: A European Success Story – Last.fm Last.fm is a radio platform with social networking features that had over 20 million registered users (2006) and transmits music over the web in 13 languages (Japanese, German, Spanish, French, Italian, Japanese, Polish, Portuguese, Swedish, Russian, Turkish, Korean and Simplified Chinese). Its main characteristic is that it provides a recommendation system for music through which new music pieces are recommended to users depending on their profile. The system was highly successful not only attracting significant audience but also established players. For instance, the record publisher EMI teamed with Last.fm to produce an extensive online music mapping mechanism to make accurate music recommendations. In addition, Last.fm supports user end-tagging or labelling of artists, their albums and individual tracks to create what is defined as a folksonomy of music. All major music commercial labels have agreed to have their content on offer through Last.fm, which makes its revenues mainly via advertising and subscriptions. Last.fm gives users access to premium features and services and enables a more interactive relationship. The Music heavy-weight CBS finally bought the Last.fm business in May 2007.

1.3 Selected quantitative examples of digital content diffusion The fact that digital content can easily be reproduced, indexed and moulded into various formats leads to convergence; digital content can be distributed over many distinct platforms and satisfy many distinct purposes while a variety of business models may be used to monetise user adoption. There are of course many issues that emerge during the flow of content from creator to consumer, some of which raise tensions between the various involved stakeholders, and require some kind of public resolution. However, the converging environment in Europe has been positive, and online content creation, distribution and consumption has experienced massive growth. Some quantitative examples of online content diffusion, extracted from the PricewaterhouseCoopers Study32 on Global Entertainment and Media Outlook 2007-2011,33 have been selected and will be presented below to demonstrate alternative value chains that have been implemented and that in some cases have become more successful than the traditional ones. 32. A report containing quantitative data as a result of own research in this area, referenced in a host of other reports. 33. PricewaterhouseCoopers 2007.

58

Rethinking.book Page 59 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

Television distribution The TV distribution market relies on revenue generated by the distributors of TV programs to viewers. It includes revenues from consumers purchasing a subscription to basic/premium channels (cable or satellite) from a Telecommunication service provider or other multi-channel distributor, but it does not include mobile TV revenues. It is expected that the penetration of the subscriptions in TV households will climb to 61.3 % in 2011 from 48.6 % in 2006 and that revenue from basic premium services will grow from $20 billion in 2006 to $51.8 billion in 2011 (see figure 5). The TV distribution also includes revenues from new consumer services such as Video-on-Demand (VOD), Pay-per-view (PPV) and Internet Protocol TV (IPTV). VOD enables viewers to access any program created at any time, while PPV uses dedicated channels to show films at scheduled intervals. Fast growth is forecasted for VOD adoption; it is expected to reach $3.2 billion by 2011 (see figure 5). PPV is expected to grow further in the future as the capacity and the selection choice will increase, and because PPV can be offered over both satellite and cable. Understandably countries where satellite distribution is common tend to lead also in PPV penetration (e.g. Spain, UK, France) and it is expected that the PPV market will reach $1.9 billion in 2011 from $943 million in 2006 (see figure 5). Telephone companies have been introducing IPTV – for example through the triple play offer of TV, Internet and telephony – over ADSL or Fibre to the Home connections since 2006 in many EU27 Member States (e.g. France, Italy, Spain). Even faster growth in IPTV services offered by Telephone-companies is expected as a result of the analogue broadcast shutdown, which has been scheduled for over the next 5 years in almost all of Europe. These three new services rely on different business models to create revenue; a hybrid of the models mentioned in the previous subchapter. Mobile TV revenues are also expected to grow as the hardware improves (e.g. display, memory and power consumption), the speed and affordability of the networks increases and the appropriate business models are established. The advertiser-supported business model is expected to be used in mobile TV distribution as a result of more suitable types of advertising and exchange of services for attention.34

34. Amobee (www.amobee.com) allows customers send free text messages if targeted advertising is also inserted (Economist 2008).

59

Rethinking.book Page 60 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Figure 5: European TV Market Evolution, Source EPIS – based on PWC 2007-2011 Media Outlook TV distribution market evolution (in bil. USD) 40 30 20

2002 2006

10 0

2011 Premium

Basic

VoD

PPV

Convergence in the TV market has happened rapidly and successfully in Europe. It incorporates the latest interactive services, as the European satellite and cable providers offer IPTV and Triple play services. New players such as Virgin TV in the UK and the telecommunication channels in Spain have quickly adopted the new online paradigm and offer Internet Television along their other products. The richness of the European TV market creates important opportunities for innovative producers, who find a broad range of potential distribution channels. It is also expected that larger screens, better resolution and wifi connectivity will enable the reception of mobile TV. Music distribution Music sales via online and mobile channels have risen in 2007 to an estimated $2.9 billion, representing 15 % (est.) of industry sales. The existing business models are enabling the move from record-centric sales to many kinds of products and services, allowing consumption on many platforms and a varied user experience of music and their favourite artists. For example, users can buy a download, a CD, wallpaper for their mobile phone, a mastertone, an e-ticket, a music video, become a friend on a social network or sign up to a subscription service.35 The recorded music market is made up of revenues from the sales of music in the form of albums, single sound recordings, music videos as well as digital distribution. Digital distribution consists of music distributed to mobile phones (i.e. monophonic or polyphonic ring tones, ring backs, mastertone) through wireless carriers, and of music downloaded from the Internet through licensed services. Single track downloads, which is the most popular digital 35. IFPI 2008.

60

Rethinking.book Page 61 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

music format, can be accessed in more than 500 legitimate digital music services worldwide, offering a total of 6 million tracks – over four times the stock of a music megastore. With richer mastertone format displacing polyphonic tone distribution, artists and record labels are embracing this promising distribution platform.36 Physical channel music distribution is expected to decline, falling from $11.3 billion in 2006 to $7.7 billion in 2011, while digital distribution is expected to grow from $1.8 billion in 2006 to $6.6 billion in 2011 (Figure 6). Internet distribution is rising significantly to reach $2.7 billion by 2011while distribution to mobile phones is expected to grow even more to $3.9 billion by 2011 (see figure 6). With the growth in digital distribution making up for some of the decline in physical distribution, the overall market is expected to expand by some 3 % by 2011. However, widespread copyright theft continues and the ratio of unlicensed tracks downloaded to legal tracks sold is estimated at about 20 to 1.37 Figure 6: European Music sales, Source EPIS – based on PWC 2007-2011 Media Outlook

Because convergence has made recording, editing and distribution of music cheaper, small and more flexible record labels are advantaged against the big ones. Independent labels, mostly involved in discovering and guiding new talent are thus empowered and can afford to retain even well known artists; for instance the European label Domino promotes artists through the MySpace social networking site. However, major labels can also play this game; for instance EMI Island Records does this in 36. USA Today. 37. IFPI 2008.

61

Rethinking.book Page 62 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

relation to pop star Lily Allen. It is expected that new revenue streams based on the sales of merchandise or of live performance tickets will affect positively even non-English speaking artists over the whole of Europe. It is obvious that the new distribution paths that become successful impact negatively the retail outlets for physical goods. These will have to change their strategy and possibly start selling products that are related to the sector, but not available online, or even to create downloading spaces and embrace the new channels. The uptake of mobile music is also expected to create new revenue streams in Europe, provided that alternative distribution platforms and homogenised DRM solutions are defined.

2

Issues and challenges

From the evidence presented above it is clear that convergence of Information, Telecommunication and Media sectors has created an environment for emerging services and goods, bringing about radical technological, organisational and behavioural innovation that impacts our everyday lives. New or significantly enhanced applications and services are widely adopted and determine the competitive position of companies. They create economic growth and jobs, which benefit directly the regions and countries that host such services. However, convergence has also brought about a number of challenges: for instance matters of trust and security as well as social aspects of consumption. Some of the key challenges that have emerged are specific to the new distribution platforms, while other challenges pre-existed but their negative impacts have grown stronger, mostly due to the network nature of the systems involved. Many issues relate to the technological solutions offered. There are also business, cultural and societal challenges that need be addressed to foster the position of the European market.

2.1 Main cross-cutting issues Some of the identified issues are of a cross-cutting nature. In particular usability, interoperability and efficient interaction are key determinants for the uptake of technology and for competitiveness, driving convergence ever further.38

38. Abadie et al. 2008a.

62

Rethinking.book Page 63 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

The first key determinant has to be the usability of the technology. Mass markets do not demand complex technology for the sake of having it; technology is just the means to an end, which is to access high quality content in a convenient and easy way. The processes of selecting, accessing, configuring and paying for content are intimately linked to technological issues such as user interfaces, reproduction and delivery technologies, as well as copyright protection technologies. High usability means that the processes are available and usable in a straightforward manner, even by the inexperienced (not-frequent users) consumers, who place a high value on convenience. The second key determinant relates to the distribution of as much content to as many end-user devices through as many distribution platforms as possible; in other words the interoperability requirements that will fight market fragmentation. There are many levels of interoperability that have to be bridged such as content formats (highly dependent on the end-user device), copyright protection and payment systems (highly dependent on the business models). Enhanced interoperability will likely remove fragmentation and will likely promote innovation further for the benefit of both consumers and creators. The third key determinant is efficient interaction between creators and consumers. It is precisely the efficient end-to-end communication that allows bypassing the intermediaries and helps in identifying the talent, monitoring demand changes and promoting brand loyalty. Strong interaction between creators and users enhances the social dimension of the communication; for instance users playing games online are also enabled to maintain a message exchange interaction with the other players online, which makes the gaming experience more satisfying. Moreover, strong interaction may also have positive economic consequences. Google, for instance, has been able to translate the data that it collects from every query into information that may be used to target users with advertising that is much more focused to the real needs, thus achieving revenues from interaction. While social gratification of content consumption as a result of the enhanced communication is directly perceived as positive from the end-user, the economic benefits are best left to professionals, as one will have to balance many issues to make a profit.

2.2 Technological challenges The convergence phenomenon has a technological foundation as previously separate technologies such as telecommunications and

63

Rethinking.book Page 64 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

informatics started sharing resources as a result of digitisation. The transformation of data, voice and video into bits that were seamlessly transferred from source to destination created increased system efficiency which was further enhanced by even more technological development. However, there are still many technological challenges that need be addressed. First, further infrastructure capacity is required to ensure the diffusion and affordability of broadband penetration in all EU countries39 to overcome existing market fragmentation40 (especially in wireless networks and between fixed and wireless networks). In addition, R&D into alternative network architectures (fibre-to-the home, femtocell) is needed to address new audio-visual content increased bandwidth needs.41 Further R&D and innovation would also be welcome in scalable Next Generation Networks (NGN), digital cinema distribution networks, payment and billing systems, network technologies standards and cloud computing. Second, more development is expected and needed in display interfaces. Sophisticated display technology applications such as extra flexible and transparent displays for mobile use and as a replacement for paper, ultrathin Organic Light Emitting Diode (OLED) displays and 3-D display technologies (auto-stereoscopic) need be developed as well as easy to learn and easy to use interfaces, such as multi-modal and natural language human-computer interaction interfaces, are required for a wide consumption of digital content, Moreover, new end-user needs in relation to mobility and anywhere / anytime consumption, impose new demands on developing appropriate interfaces to deal with specific context-aware content (location-based services) and mobile social interaction (Mobile 2.0). Beyond creating the appropriate interface, the real-time adaptation of content to the characteristics of the distribution channel (multi-channel distribution), the type of device and the specific consumption environment, would enhance content availability. Thus further R&D into architectures for the creation, distribution, presentation and 'personalised' consumption of multi-purpose content (content that is specifically adapted

39. Broadband penetration in EU 27 stands at 21,7 % (July 08) with mobile broadband starting to take-off with 6.9 % penetration, according to the COCOM08-41 report. 40. Main reasons are lack of competition and regulatory weaknesses to be addressed through the reform of the EU's telecoms rules. 41. E.g. a high-definition version of YouTube could require 12 EB/year (x1018) compared to 600 PB/year (x1015) that were used for streaming video to YouTube users in 2007.

64

Rethinking.book Page 65 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

to the different distribution channels or specific access devices) would be beneficial. Finally, a number of areas can be identified where technological innovation could further enhance efficiency and thus further advance convergence processes: for instance, semantic technologies, linguistics and translation systems, as well as audiovisual search engine technologies, automatic content extraction and classification. All these areas can be related to the creation of 'intelligent content'.

2.3 Market issues Besides technological issues, market issues will also need to be addressed by the stakeholders for convergence to continue shaping the environment for the benefit of users. Public policy, at the EU, national and regional levels will need to address issues in relation to: (a) removing barriers to market entry for start-ups and helping define new business models; (b) dealing with copyright issues and ensuring the quality of digital content; (c) facilitating access to risk capital and to harmonised technological standards; and (d) helping create an innovation-friendly environment. The needs of the many dynamic start-ups in the EU, in their struggle to global dominance, are many. For example start-ups could benefit from access to affordable infrastructure and standardised equipment, possibly through guided access to pan-European repositories of open source tools (that may be developed and used in a shared manner), as well as access to financial resources (risk-capital), special tax regimes and an extended mobility of skilled workers and entrepreneurs within Europe (towards the centres of excellence overcoming the burden of the lack of a common pension and insurance schemes, for example). Equally important is the identification of appropriate business models that allow sustainable revenue streams.42 Further study of market mechanisms in open systems and deep understanding of the factors that rule the monetisation of enduser attention (e.g. selling connection time in exchange of content or selling live-concert tickets in exchange of free music distribution) is needed. Yet another issue that is at the heart of the converged market evolution is copyright. From content producers and publishers (usually incumbents) who wish to see their IPR safeguarded, to users who wish to consume content avoiding unnecessary constraints, all stakeholders demand that the 42. See discussion in sub-section 1.2 .

65

Rethinking.book Page 66 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

current situation is reviewed. Labelling of the content with the precise rights assigned to it, promoting flexible use by preventing lock-in situations, and empowering 'collecting societies' are but three ways of ensuring that copyright would foster innovation rather than hinder it. SMEs, freelancers as well as amateurs will be able to further develop innovative products and services if the right to copy and the right to re-use content would be extended. However, this may raise concerns over the quality of the services or the misuse of the collected data. Both of these issues would need to be tackled through appropriate public intervention. The enhanced quality of online content is crucial to its widespread adoption (e.g. the quality of the 'smart' phone cameras will have to match that of digital cameras if quality content is to be produced and further processed). In addition to standard market mechanisms that strive to improve quality, Europe-wide quality standards must be set and met to ensure content reliability, authenticity and sustainability so as to facilitate cross-border consumption. This would mean that a process to raise consensus on widely accepted quality standards and certification most likely benefiting from further investigation of user behaviour, use of content and new consumption patterns. Dealing with illegal behaviour with respect to the protection of IPR and child abuse is already being implemented and will have to be extended to cover the protection of private or public collections of data from likely abuse. Market mechanisms would do well to continue to support user-created content as these will mostly gain from the synergies created by the blending between amateurs and professionals. Access to capital and funding is still a major impediment to the growth of the converging Telecommunications, Information Technologies and Media sectors. Enabling access to a more risk-friendly capital market could help boost the sector. New PublicPrivate-Partnerships (PPPs) could provide solutions to the access to riskcapital problem by bringing together, for example, public content providers and private processing and distribution firms, especially aiming at helping 'local champions' become 'global heavyweights'. Moreover, public R&D funding should be better geared towards the needs of the creative stakeholders, which is not the case today. However, the use of public funds to maintain cultural diversity, which is a current policy goal, may have adverse effects on content market integration and a balance will need to be struck for example by ensuring that content thus preserved will be made multi-lingual, easy-to-find at EU-level and available free-of-IPR for further processing and re-use. In addition, there is a need for the harmonisation of standards for content creation, delivery and reproduction in Europe – and indeed their coordination worldwide. To

66

Rethinking.book Page 67 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

ensure that this process is not heavy, new institutional structures could be created – possibly linked with the repositories of shared open source metatools, which serve also as a pool of expertise and consensus-raising among stakeholders. Finally, an innovation-friendly environment could help overcome many of the EU content market inefficiencies. Although convergence has fostered innovative behaviour in all of the involved sectors, to further enhance the innovation culture, sustained efforts would be needed in areas such as: investments in infrastructure, innovation-oriented public procurement, nurturing ICT literacy, promotion of hybrid skills that include economics and creativity and social-media innovation.

2.4 Regulatory issues It is well known, and admittedly a cause for the success of convergence, that the new entrants to the market operate under a more liberal telecommunications legal framework while the traditional players are subject to broadcast directives with relevant universal service obligations as well as content and advertising restrictions. Despite this lowering of entry barriers extensively used by incumbents and new entrants, there are still legal provisions that unnecessarily hinder online content distribution. For instance, the fragmented market for broadband services, spectrum availability issues, legal issues related to the harmonisation of taxation and licensing across the EU and the availability of attractive billing systems. The existing EU-level regulatory framework in broadcasting consists mainly of the Television without frontiers Directive43 and the Audio Visual Media Services Directive44. It is obvious that some of the above challenges will need to be achieved through a combined effort using legislative, self-regulatory and mixed policy solutions (soft law), also considering whether the appropriate moment of intervention is in the development or implementation phase. The European Commission's current action plan in relation to content online involves: (a) the creation of a single European Information Space so as

43. Directive 97/36/EC amending Directive 89/552/EEC on Television Broadcasting Activities. 44. Directive 2007/65/EC amending Directive 89/552/EEC on Television Broadcasting Activities.

67

Rethinking.book Page 68 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

to facilitate access to creative content;45 (b) protection of users in Internet and mobile space and more specifically of minors;46 (c) media literacy47 and the MEDIA programme; and (d) European Film Heritage.48 Policy making in this area needs to rely on quantitative data. A monitoring and benchmarking entity, which will provide strong quantitative evidence (statistical tools and indicators), will need to be established so as to allow the exchange of information amongst all stakeholders and the reaching of consensus on the elaboration of appropriate policy initiatives. However, this task is complex as the sector evolves fast. Indeed, there is a problem with the definition of the sector, which is intensified as various disruptive phenomena create the need for new classifications, data collection and indicators.

Conclusions The discussion above has elaborated how a series of technological advances has paved the way for the convergence of Information, Telecommunication and Media sectors. Convergence is usually vertical in the sense that various steps in the value chain are bypassed or rendered obsolete. Yet, it may also be horizontal, as the substitution between fixed and mobile technologies in accessing content demonstrates. Despite the many powerful industry interests, all of the above sectors are under transformation. New innovative stakeholders unsettle the long established value chains in different sectors. For instance, changes in the music industry are clearly visible and the games industry has fully embraced the digital era, while public broadcasting in Europe has only recently started to take advantage of the advances in digital storage and distribution technologies. We are thus witnessing an evolution rather than a revolution. The traditional industry giants, many of which are European, also attempt to master convergence. There are many hurdles on the way to a stable situation, where all distribution channels are utilised to the best of their capacity and the content sectors reap the benefits offered by convergence. While the distribution of physical goods currently still is performed more efficiently than the distribution of digital goods in Europe, users have not 45. Communication of the Commission COM(2007) 836 on Creative Content Online. 46. Recommendation 2006/952/EC on the Protection of Minors and Human Dignity. 47. Communication of the Commission: COM(2007) 833 on European Approach to Media Literacy. 48. Recommendation 2005/865/EC on Film Heritage and the Competitiveness of Related Industrial Activities.

68

Rethinking.book Page 69 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

yet decided what they prefer,49 considering the price, status, branding, convenience, availability for reproduction and storage alternatives. Users are also uncertain as to their preference for convergent devices, since they may access their photos on their PCs, TV set, mp4 player or simply their smart phone. In general, mass adoption of convergent devices is dependent on price rather than the features on offer or the number of converging platforms. Moreover, users are willing to invest varying levels of effort to access their favourite content, be it centralised platforms that provide seamless user experience or decentralised platforms that require intensive configuration and searching and filtering of content. Users are also not sure whether they trust in targeted advertising: on the one hand users have confidence in the trade-off between improved search results and online advertising, while on the other hand they seem to have little confidence in viral marketing strategies, which blur the borders between personal communications and advertising. Users, then again, are certain that they enjoy socialising online, participate in communities of peers, carry-out content tagging and meta-tagging activities and express their preferences so that these may be shared by all. User-created content, although not huge in absolute numbers, has experienced massive growth all over Europe and it is certain that, once adequately supported, it will be the source of new, innovative and highly rewarding services. However, for this to happen further research is required to help unleash the full potential of the sector (re-enforce cultural diversity, foster skills, develop over-the-horizon R&D, transform education structures to teach 'how to tell a good story'). There is also the need to further encourage innovation in relation to user-generated content. Even if the influence of user-created content remains low, it may serve as the 'cherry on the cake' that will help the cake be sold to certain groups of consumers. Mobile devices and their converging future is another important issue for Europe. With device capabilities growing as a result of the technological advances in hardware, software, networks, interfaces, displays, as well as storage and battery technologies, the attractiveness of the mobile market is growing for content creators. Further developments in connectivity will likely enhance access to both re-purposed and mobile specific content. The mobile device is thus a candidate for becoming the main tool for accessing 49. It is still more economically efficient to offer a CD through a physical retailer for EUwide sale than its digital contents online although the demand for CD physical products is decreasing steadily and the demand for online music content is increasing.

69

Rethinking.book Page 70 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

converging content; especially as advertising on mobile phones seems to finally take-off. However, it is not yet clear whether the users will be willing to pay for premium content that may not be transferred to and accessed also from other 'home' devices. This is so in particular because mobile devices may still be perceived as appropriate for content 'snacks' rather than high quality content, despite the advances in these products. A possible solution to this dilemma is to have a number of portable devices tailored for content of a higher quality and more convenient consumption. This move would simultaneously open yet fragment the mobile phone market. Several hurdles will need to be overcome for the benefits of convergence to fully unfold. First, an innovation friendly environment where open standards lower entry barriers, where there exist incentives for the further development of the existing infrastructure and where new business models can be tested, is needed. Such an environment also requires a continuation and reinforcement of the current pro-competitive regulation of ecommunications markets and the appropriate consumer safeguards. Secondly, the development in network technologies needs to be enhanced further. The internet of the future will require: (a) an increased spreading of broadband connectivity all over EU; (b) sufficient bandwidth for future applications (e.g. to support mobile TV); (c) R&D support for Next Generation Networks and a new scalable communications infrastructure (one that would grow as needed); and (d) better access to spectrum on a flexible basis to allow new wireless services to emerge. Third, support measures (empower the users, industry self-regulation, improved legal framework) are needed to enhance trust in the environment and to safeguard user security and privacy, yet at the same time strive to maintain the openness and freedom the Internet has been built on. Fourth, there is a need to promote the use of hybrid sets of skills so as to advance creativity and ICT business understanding. Finally, further research needs be encouraged in relation to component technologies, human-computer interfaces, multi-lingual applications, intelligent search engines, conversion standards,50 DRM interoperability, labels for the quality of content, mobile distribution channels and interfaces, to name a few key areas. Ideally, market forces will be able to deal with the issues presented and advance convergence further. However, some of the presented issues create conflicts that require light public intervention. Since the consequences of convergence can be very disruptive, any sensible policy measure needs to 50. For storage and transfer of consumer data and content between platforms.

70

Rethinking.book Page 71 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

have gone through a solid ex-ante impact assessment to enable a better understanding of the forecasted consequences. In addition, a monitoring observatory that follows developments and measures impacts will benefit the stakeholders and public policy makers alike. Convergence is an unstoppable force of creation that invades all sectors of the society and affects the wider personal environment. It is expected that convergence will continue to have a positive influence on growth and job creation by promoting new demand. The pre-requisite seems to be the ability to take advantage of the above noted opportunities while minimising the described risks.

References Abadie, Fabienne, Ioannis Maghiros, and Corina Pascu,eds. 2008a. The Future Evolution of the Creative Content Industries – Three Discussion Papers. IPTS publications http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=1920. (Accessed December 1, 2008) Abadie, Fabienne, Ioannis Maghiros, and Corina Pascu, eds. 2008b. Annual Monitoring Synthesis Report and Emerging Trends Updates. IPTS publications. http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=1919. (Accessed December 1, 2008) Anderson, Chris. 2004. The Long Tail. Wired Magazine. http:// www.wired.com/wired/archive/12.10/tail_pr.html. (Accessed December 1, 2008) BBC Creative Archive License Group. http://creativearchive.bbc.co.uk/. (Accessed December 5, 2008) BBC News. 2006. Google buys YouTube for $1.65bn. BBC News, October 10. http://news.bbc.co.uk/2/hi/business/6034577.stm. (Accessed December 5, 2008) Commission Staff Working Document, Accompanying document to the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Preparing Europe’s digital future: i2010 MidTerm Review COM(2008) 199, final. Communication of the Commission to the European Parliament, the Council, The European Economic and Social Committee and the Committee of the Regions. A European Approach to Media Literacy in the Digital Environment COM(2007) 833, final. 71

Rethinking.book Page 72 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Communication final of the Commission to the European Parliament, the Council, The European Economic and Social Committee and the Committee of the Regions on Creative Content Online in the Single Market Single Market COM(2007) 836, final. Communications Committee COCOM08-41final Working Document: Broadband Access in the EU: Situation at 1 July 2008. European Commission. http://ec.europa.eu/information_society/policy/ecomm/doc/ implementation_enforcement/broadband_access/ Broadband_data_july_08.pdf. (Accessed December 1, 2008) Deere, G. E. 2006 The Business Impact of Blogs. Ipsos-MORI, 21 November 2006. http://www.ipsos-mori.com/polls/2006/blogging.shtml, (Accessed April 3, 2008) Deloitte Touche Tohmachu (DTT). TMT trends: Media Predictions 2007. http://www.deloitte.com/dtt/cda/doc/content/ dtt_MediaPredictions011107.pdf (Accessed April 3, 2008) Directive 97/36/EC of the European Parliament and of the Council of 30 June 1997 amending Directive 89/552/EEC of the Council of 3 October 1989 on the Coordination of Certain Provisions laid down by Law, Regulation or Administrative Action in Member States Concerning the Pursuit of Television Broadcasting Activities [1997] OJ L 202/60. Directive 2007/65/EC of the European Parliament and of the Council of 11 December 2007 amending Directive 89/552/EEC of the Council of 3 October 1989 on the Coordination of Certain Provisions laid down by Law, Regulation or Administrative Action in Member States Concerning the Pursuit of Television Broadcasting Activities [2007] OJ L 332/27. Economist. 2008. Mobile Advertisements, Madison, We have lift-off. The Economist, November 27. http://www.economist.com/business/ displaystory.cfm?story_id=12685528. (Accessed December 5, 2008) Feijóo, C, Ioannis Maghiros, Fabienne Abadie, M Bacigalupo, R Compañó, W Lusoli, and Corina Pascu. Forthcoming. Mobile Content: Evolution towards Mobile 2.0. IPTS Publications. Florida, Richard. 2002. The Rise of the Creative Class: And How It's Transforming Work, Leisure, Community and Everyday Life. New York: Basic Books. Guardian. 2006. New Sony viral marketing ploy angers consumers. The Guardian, 14 December. http://blogs.guardian.co.uk/games/archives/2006/

72

Rethinking.book Page 73 Friday, September 25, 2009 10:01 AM

Information, Telecommunication Technologies and Media Convergence Challenges

12/11/new_sony_viral_marketing_ploy_angers_consumers.html. (Accessed December 5, 2008) Hogben, Giles, ed. 2007. Security Issues and Recommendations for Online Social Networks. ENISA Position Paper 1. http://www.enisa.europa.eu/doc/ pdf/deliverables/enisa_pp_social_networks.pdf. (Accessed December 1, 2008) IFPI. 2008. Digital Music Report 2008: Revolution, Innovation, Responsibility. London: IFPI publications. http://www.ifpi.org/content/library/ DMR2008.pdf. (Accessed December 1, 2008) KEA European Affairs. 2006. The Economy of Culture in Europe. A Study for the European Commission DG Education and Culture. http:// ec.europa.eu/culture/key-documents/doc873_en.htm#bad_nodepdf_word/ economy_cult/executive_summary.pdf. (Accessed December 1, 2008) Marcus, Carmen. 2005. Future of Creative Industries: Implications for Research Policy. Foresight Working Document Series EUR 21471. Brussels: European Commission. http://www.heranet.info/Admin/Public/ DWSDownload.aspx?File=Files%2FFiler%2FRapporter+HERA%2FCreati ve_industires_report.pdf. Music Radar. Noel Gallagher Exclusive Interview. http:// www.musicradar.com/news/guitars/noel-gallagher-exclusive-interview171793?sr=hotnews. (Accessed December 5, 2008) NHS Choices. http://www.nhs.uk/Pages/homepage.aspx. December 5, 2008)

(Accessed

Osimo, David. 2008. Web 2.0 in Government: Why and How?. European Commission JRC Scientific and Technical Reports, IPTS EUR 23358 EN. Luxembourg: Office for Official Publications of the European Communities. http://ftp.jrc.es/EURdoc/JRC45269.pdf. (Accessed December 1, 2008) Pascu, Corina. 2008. An Empirical Analysis of the Creation, Use and Adoption of Social Computing Applications. European Commission JRC Scientific and Technical Reports IPTS EUR 23415 EN. Patent Opinion. http://www.patientopinion.org.uk/. (Accessed December 5, 2008) Peer to Patent. Community Patent Review. http://www.peertopatent.org/. (Accessed December 5, 2008)

73

Rethinking.book Page 74 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

PricewaterhouseCoopers. 2007. Global Entertainment and Media Outlook: 2007 – 2011. New York: PricewaterhouseCoopers LLP. http://www.pwc.com/extweb/ncpressrelease.nsf/docid/ E042C329AE028974852573010051F342. (Accessed November 26, 2007) Punie, Y, and D Broster, eds. Forthcoming. Empowerment Enabled by Social Computing: Challenges for EU Policy Making. Rainie, Lee E., and Bill Tancer. 2007. Wikipedia Users. Memo Report. Pew Internet and American Life Project. http://www.pewinternet.org/PPF/r/ 212/report_display.asp. (Accessed December 5, 2008) Recommendation 2005/865/EC of the European Parliament and of the Council of 16 November 2005 on Film Heritage and the Competitiveness of Related Industrial Activities [2005] OJ L 323/57. Recommendation 2006/952/EC of the European Parliament and of the Council of 20 December 2006 on the Protection of Minors and Human Dignity and on the Right of Reply in Relation to the Competitiveness of the European Audiovisual and On-line Information Services Industry [2006] OJ L 378/72. Screen Digest Ltd, CMS Hasche Sigle, Goldmedia GmbH, and Rightscom Ltd. 2006. Interactive Content and Convergence: Implications for the Information Society. Study for the European Commission (DG Information Society and Media). London: Screen Digest Limited. http://ec.europa.eu/information_society/eeurope/i2010/docs/studies/ interactive_content_ec2006.pdf. (Accessed 5, December 2008) Toffler, Alvin. 1980. The Third Wave. London: Collins. United Nations Conference on Trade and Development. 2004. Creative Industries and Development. Report TD(XI)/BP/13. São Paulo: United Nations Conference on Trade and Development. http://www.unctad.org/ en/docs/tdxibpd13_en.pdf. (Accessed December 5, 2008) USA Today. Music News. http://www.usatoday.com/life/music/news/200611-28-mastertones-main_x.htm. (Accessed May 3, 2008) Wired Magazine. Anatomy of the Long Tail. http://www.wired.com/wired/ images.html?issue=12.10&topic=tail&img=2. (Accessed December 1, 2008) Young, G. Oliver. 2007. Topic Overview: Web 2.0. Forrester Research. http://www.forrester.com/Research/Document/ 0,7211,42027,00.html#heading5. (Accessed December 5, 2008)

74

Rethinking.book Page 75 Friday, September 25, 2009 10:01 AM

Social Computing Implications for the EU Innovation Landscape1 Corina Pascu, David Osimo, Geomina Turlea, Martin Ulbrich, Yves Punie and Jean-Claude Burgelman

Introduction The trends and innovations under scrutiny in this paper—blogs, podcasts, wikis, social networking websites, search engines, auction websites, games, VoIP and peer-to-peer services—exploit fully the connectivity dimension of the Internet. In so doing, they support the creation of networks of people and content. The user has become an active participant: (s)he co-produces content (e.g. blog, wiki, Flickr, MySpace), shares tastes and gives relevance (e.g. Amazon, de.li.cious, Google pagerank), builds reputations and provides feedback (e.g. eBay, TripAdvisor), shares storage and server capacity (peer-to-peer), expands connectivity (e.g. wifi-sharing, mesh networks) and (s)he is a part of collective intelligence (e.g. business web2.0). Time Magazine’s selection in December 2006 of ‘You’2 as the person of the year, may be viewed as a recognition of the new digital democracy. The people behind the social computing trends go mainstream. There has been a rapid growth of social computing applications, both in terms of the number of users and subscribers, and in terms of usage patterns. This leads to the fact that social computing is also increasingly considered by policymakers both as a tool and an object of policymaking. As a tool, it is used to communicate with and connect citizens and other stakeholders (e.g. the weblogs of European Commissioners3). As an object, 1.

2. 3.

"© European Communities, 2008. The information and views set out in this article are those of the author(s) and do not necessarily reflect the official opinion of the European Communities. Neither the European Communities institutions and bodies nor any person acting on their behalf may be held responsible for the use which may be made of the information contained therein. Reproduced with kind permission of Emerald Publishing group Ltd. The paper is an updated version of the article published in Foresight: the journal of future studies, strategic thinking and policy vol. 10, issue 1 http://www.emeraldinsight.com/10.1108/14636680810856017. Grossman 2006. European commission.

75

Rethinking.book Page 76 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

social computing could play a role in information society policies, as Viviane Reding, the European Commissioner for Information Society and Media, recently noted in her speech on ‘The Disruptive Force of Web 2.0: how the new generation will define the future’.4 There are some important policy issues that are behind the development of Web 2.0, such as neutrality, governance and quality control; however the future definitely lies in a European approach towards a web-based economy.5 This chapter aims to analyze the rise of social computing applications and to discuss its implications for the EU innovation landscape. It observes an exponential growth in the rise and take-up of social computing applications and discusses the changes this implies on the role of users in the innovation process. It also provides evidence on both the social and economic relevance of social computing and discusses its implications for innovation and competitiveness. Moreover, the paper presents both challenges and opportunities for research and policy.

1.

The exponential growth of social computing applications

An extensive desk-based survey of secondary data in 2005-2007 showed very clearly that the diffusion and use of social computing applications have been growing dramatically.6 In many cases the growth is so fast that it reminds us of Metcalfe's law (square growth of network utility), or even Reed's law (exponential growth of group-forming networks).7 The service gets better as more people use it. More content leads to more traffic, which leads to more edits which generate more content. The number of blogs, for example, has doubled every 5-7 months, currently (Nov 2008) counting more than 100 million. Social networking website usage is multiplying year on year. Wikipedia has now more than 4.

5. 6. 7.

The disruptive effect of the social computing phenomenon with reference to IPTS work has been mentioned in a recent speech by Commissioner Reding. See Reding 2006. Reding 2008. Pascu et al. 2007. Robert Metcalfe originally coined Metcalfe's Law to describe the potential of network effects (the value of a communication network is proportional to the square of the number of users); David Reed then proposed that the value of networks that allow formation of groups grows proportionally with 2n ; Seely Brown proposed that total value of network is proportional to the square of the number of user communities (rather than only users); Recent work (Bob Briscoe, Andrew Odlyzko, Benjamin Tilly) proposes a logarithmic model for modelling growth (Briscoe, 2006).

76

Rethinking.book Page 77 Friday, September 25, 2009 10:01 AM

Social Computing

2.5 million articles in English and it maintains a growing base of over 1.5 million registered users; around 70,000 clips are uploaded daily in videosharing websites like YouTube; and FON, the wifi-sharing network, has become the largest wifi network in the world in just one year (see annex).8 Sometimes this explosive growth is due to the very small starting base as was the case with wifi-sharing, blogs and social networking. In some cases, like podcasts, the growth is still more a future projection than a reality. However, their growth has generally been continuous since 2005 and cannot be considered just a passing trend. Furthermore, some of these trends have already reached the mainstream of Internet usage. In terms of penetration, most Internet users rely on search engines to find information, at least a quarter of European Internet users visits social networking websites, visits blogs or plays games online and a third of them uses Wikipedia9. With regard to the intensity of usage, social networking websites are visited the most in terms of page views. The largest part of Internet traffic by far is peer-to-peer file sharing. Some commentators argue that only a minority of users appears to make active use of these applications, by writing blogs, contributing to Wikipedia, creating podcast and videos, and offering goods for sale on eBay. The majority simply ‘lurks‘ in the background.10 In Europe, roughly a quarter of Internet users make use of social computing with a third of them using social computing content, a tenth providing feedback or sharing content, and only three percent are ‘creators’.11 These figures are nevertheless only a snapshot of a highly dynamic phenomenon. Secondly, one shouldn’t underestimate the creative use that the information acquired by passive users might have inside and outside the virtual space. In fact, increasingly, the behavior of passive users is being explored via technological means. For instance, Amazon has the recommendation system of "people who bought this book also bought these other books." In other words, there is the so called ‘read wear’12 effect. Read wear means the simple activity of reading or using material while leaving traces as an anonymous way of sharing preferences and interests. It is increasingly seen as a way of exploring the community of passive users.

8. 9. 10. 11. 12.

For more updated figures, see Pascu 2008. Pascu 2008. Markham 1998. Pascu 2008. Hill et al. 1992.

77

Rethinking.book Page 78 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

2.

The changing role of users

A particularly powerful characteristic of social computing applications is that users are becoming much more deeply involved in production and service innovation.13 The distinctive roles of producers and consumers are beginning to blur and even to merge. People are increasingly both producers and consumers. This idea of the ‘prosumer’ is of course not new. It was coined by Alvin Toffler in 1980 in his book ‘The Third Wave’. What is different, however, is that now the idea is becoming a reality. First, the user is a supplier of content. Social computing services, applications and infrastructure, such as blogs, podcasts, wikipedia, YouTube and orkut enable the user to easily publish and share text, audiovisual content, and contacts in social networking websites. The impact of this phenomenon on the media industry should not be underestimated. Second, the user supports the distribution of content and services. In peerto-peer networks and wifi-sharing, the user is a provider of the transport infrastructure and services. Third, the user plays a fundamental role in finding, selecting and filtering the relevant content and services. Search engine ranking relies on other websites’ links in order to estimate the relevance of the search. Wikis rely on users to evaluate and select the quality of content. Tagging and taste-sharing by users, and finding out what other users like, is a fundamental way to share and find interesting information and content like music over social networking websites. Feedback by users is the basis of the reputation management system of eBay. In every application mentioned above, the role of the user is essential in the production, distribution, selection and retrieval of content and of services. Social computing applications seem to be turning a common dream into reality: “Every sender should become a receiver and every receiver a sender.”14

13. In 1976, Von Hippel published his seminal work on innovation. See Von Hippel (1976). 14. “Broadcast has to be changed from a system of distribution into a system of communication. Broadcast would surely be the perfect means of communication in the public sphere, […] if it were able not only to receive, but also to send – which is to make listeners not only to hear, but also to speak, and insofar not to isolate them but to put them into relations.” (Brecht 1967).

78

Rethinking.book Page 79 Friday, September 25, 2009 10:01 AM

Social Computing

In addition, users are becoming more powerful in economic terms. The ‘cluetrain manifesto’15 noted that "a powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets are getting smarter—and getting smarter faster than most companies."

These new areas of innovation lay at the crossroads of an increasingly complex process of both tacit and codified knowledge production. As such, the authors believe they contribute substantially and directly to shaping the emerging Knowledge Economy and Society. The Value Map underneath depicts this new dynamics. Figure 1 – Value network map

The reasons for which people are actively contributing go beyond the simple monetary rewards. Rather, it seems that people are taking up the possibilities of social computing applications to do things differently, to do

15. The Cluetrain Manifesto is a set of 95 theses organised and put forward as a manifesto, or call to action, for all businesses operating within what is suggested to be a newly-connected marketplace. The ideas put forward within the manifesto aim to examine the impact of the Internet on both markets (consumers) and organisations (cluetrain).

79

Rethinking.book Page 80 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

things in ways that have not been available before and that make sense. As Benkler16 also argues, "personal computers, camera phones, audio and video editing software and similar utilities are examples of tools whose value increases for users as they are enabled to explore new ways to be creative and productively engaged with others."

3.

Towards a new techno-economic paradigm

The spectacular growth of social computing and the changing role of users do seem to indicate that things are being done differently. These new dynamics are highly relevant both socially and economically. The combination of all these factors is leading to what can be described as a new techno-economic paradigm.

3.1 Social relevance Customers and users are becoming more aware and more demanding as a result of the horizontal sharing of information, mainly through blogs. Information, content and services are increasingly available for free or at a low cost, thanks to either advertising or piracy. The users are becoming more selective in what they are ready to pay for. With the help of technical solutions such as RSS (Really Simple Syndication) and news aggregators, every user is able to build his/her own personal newspaper. The idea of a ‘Daily Me’ was also put forward by MIT Media Lab founder Nicholas Negroponte in his book ‘Being Digital’.17 Bloggers are influencing the way public opinion is shaped, particularly in terms of agenda setting. They focus attention on issues that would not otherwise be considered by mainstream media. Blogs played a major role in the 2004 American elections. An Internet study explored the potential influence of blogs in the French referendum on the EU constitution: the study showed that the 'No' campaign set up 161 of the 295 sites on the constitutional debate, which helped redress a bias towards the ' Yes' campaign in the mainstream media.18 16. 2006. 17. Negroponte 1995. 18. Two-thirds of the websites and blogs devoted to France's recent referendum about the European Constitution favoured the 'No' campaign; the original dataset contained 12.000 sites, of which only 295 sites commented on the referendum. See Thornhill (2005).

80

Rethinking.book Page 81 Friday, September 25, 2009 10:01 AM

Social Computing

Moreover, as people become more networked and interconnected through the use of ICT, new forms of social organization are emerging. They are different from the ones known in traditional societies, i.e. traditional social relations based on physical proximity and close social ties, such as the extended family. These issues echo the debate that has continued since the 19th century in social sciences regarding the changes in community life due to economic and technological advances. Some feel community life has been 'lost' due to the emergence of the industrial society. Others, who look beyond locality as the defining characteristic of community, point to transformations in social life and the emergence of a 'liberated' community.19 The breakthrough of the communicative use of ICT is well illustrated by social computing applications. They are clear signs that people are indeed building new social ties and new social networks (e.g. communities of interest). This will possibly lead to greater social engagement and provides the basis for a 'glocal' civil society that is simultaneously global and local.20 The digitalized social networks allow people to construct and maintain digital identities and provide what Giddens called ‘ontological security’: a basic trust and confidence in the world you live in, through physical proximity and traditional ties in earlier times.21 It is this trust and confidence that is being developed in ICTmediated communications that has an important impact on the social fabric of society.

3.2 Economic relevance Social computing is economically relevant in numerous ways. First, some ‘net-native’22 companies, like Google and eBay, have become large and very profitable corporations. The wave of emerging Web 2.0 applications has also shaped the economic landscape by initiating various buyouts, mergers, acquisitions and partnerships. For example, Yahoo bought Flickr, Google bought YouTube,23 eBay bought Skype, and News Corp. bought MySpace. The strategy involves the building up of a large customer base and then selling. 19. 20. 21. 22.

Quan-Haase and Wellman 2004. Van Bavel et al. 2004. Giddens 1993. 'Net Native' services is a term describing services that were built specifically for and are solely resident on the Internet; the term 'net native' or 'digital native' has also been used by some authors to describe those, the first generation, born and raised completely wired. See e.g. Palfrey and Gasser (2008). 23. See for instance, a timeline of acquisitions for Yahoo and Google at shmula.com

81

Rethinking.book Page 82 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Many small websites are also generating revenues now, mainly through advertising. In this way, even a small but well written blog can become a source of revenue and a full time job for its owner. In a similar way, trading on eBay has become a full-time job for many of its users: about 1 million people rely on it as primary or secondary source of income.24 Second, many social computing applications and players represent a direct threat to established industry leaders such as telecommunications and content industries – in different ways for different products. VoIP, for instance, puts the revenue sources of telecom operators at risk with regard to voice traffic. Wifi-sharing threatens the revenue streams of Wireless Internet Service Providers for home connections and consumption fees for nomadic hotspot connections). And a combination of wifi with VoIP might well change the whole operator business for good. With regard to content industries, freely available user-produced content (blogs, wikis and podcasts) is competing for audience and advertising with content produced by established providers (broadcasters, newspapers, encyclopedias). Also, the degree to which the sharing of audiovisual content through peer-to-peer platforms threatens the revenues of content industries can currently not be underestimated.25 With regard to the software industry, the threat is perhaps less immediate and less visible. However, Google’s web-based collaborative applications (e.g. Google Apps service) could become competitors to MS Office. Third, social computing applications are already being used for professional purposes. Blogs and wikis are increasingly used in the corporate world to collaborate inside and outside the company. Peer-topeer is being used by companies, especially in the media sector, to distribute content efficiently. Most broadcasters distribute content via podcasting. Google Earth has been used in the aftermath of the Katrina hurricane to support the relief effort. And of course, as this paper shows, researchers increasingly use Wikipedia, Google Scholar etc. as a reliable source in their work. Last but not least, social computing applications change the relationship between final customers and suppliers by reducing the information asymmetries. Thanks to horizontal sharing of information between users, customers become smarter, more demanding, and more aware of the choices – in one word, empowered. ‘Blog-like’ feedback and customer 24. Yahoo Finance 2008. 25. Although it is uncertain how long this will persist in the future, bearing in mind the increasing numbers of legal complaints by the audiovisual industry.

82

Rethinking.book Page 83 Friday, September 25, 2009 10:01 AM

Social Computing

reviews are now standard in e-commerce websites. Bloggers, for example, have been instrumental in drawing attention to faulty consumer devices, forcing companies to recall them.

4.

Implications for innovation and competitiveness

Digital technologies have lowered the costs and complexities of content production and distribution to such a degree that, potentially, every individual or group could become a content producer. The technologies thus offer an important development potential for Internet-based start-ups. However, with the burst of the Internet bubble, it appeared that low entry barriers alone do not guarantee start-up survival in the longer term. They must be accompanied by viable business models that generate real revenues.26 Although this seems to be the case today, in contrast to the situation seven years ago, it remains to be seen if the business models for many applications are sustainable in the longer term. Nevertheless, the economics of social computing look much less shaky than the economics of applications during the Internet bubble. Although a second Internet bubble is possible, the authors assess it unlikely. Social computing companies tend to have a small cost base, since they rely on users for a large part of their output. The companies have viable business models, real markets, and they are ever more deeply integrated in the old economy. The income streams are consequently also more and more predictable. In addition, the basics of social computing consist of networking and communication between humans. It is quite unlikely that services that address the social needs of interacting with people will diminish or disappear. It has been proven many times in the past that the driver for information society has been the need for communication rather than information. This can be illustrated by comparing the growth in the take up of communication facilities (email, mobile) with the failure of information services such as WAP.27 Additional indirect evidence for the importance of communication is that communication services have registered the highest growth over the last few years as a category of expenditure in household consumption.28

26. Punie, Burgelman and Bogdanowicz 2002. 27. Silverstone and Sorensen 2006. 28. OECD 2007.

83

Rethinking.book Page 84 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Figure 2 – Change in household expenditure in OECD countries29

29. Adapted from: OECD 2007; SNA Database. Note: 'Communications' includes Telecommunication equipment and services and Postal services. New Zealand and Turkey are not included in the calculations.

84

Rethinking.book Page 85 Friday, September 25, 2009 10:01 AM

Social Computing

Social computing developments do not only give signs of societal reengineering such as the development of friendships, dating relationships and collective action. The emerging and dominant role of the user in the innovation process and its disruptive impact in the economic system (which has been called the ‘democratisation of innovation’)30 generates and accelerates the ‘creative institutional destruction’, where new players emerge to address the shift towards participation and new community practices, while old actors who refuse to adapt to the new environment will disappear. The emergence of social computing has significant impacts on the value chain of affected industries. In particular, the role of platform providers is fundamental. Platform providers attempt to integrate downstream and upstream in the value chain and will thereby influence the alignment of different layers of the ICT industry.31 A key issue thus seems to be to optimize the competition models for these emerging opportunities, especially taking into account the vertical chains and the emergence of new horizontal markets. The impact on the creative content industries, in particular, can be observed across the whole value chain. It affects content creation (lowering the barriers to entry, blurring the boundaries between ‘creators’ and ‘users’ and bypassing the need for intermediaries such as publishers); distribution (trend towards disaggregating in constituent parts e.g. singles, emergence of new aggregators and integrated platforms and of a whole new range of attention services); and finally user interaction (new channels for user feedback, self-publishing paradigm).32 The ‘economy of abundance’33 is challenging for businesses. The abundance of information causes scarcity of attention on the users' side, which in turn has consequences along the entire value chain. Recommendation systems like Amazon, last.fm, Pandora and others address the relevancy issue. They guide the user to relevant content by generating recommendations based on their preferences, such as the music they are listening to. Approaches fall into two categories: personalized recommendations are based on the individual's past behavior, while social recommendations are based on the past behavior of similar users. However, 30. As described in Von Hippel's seminal (1976) work on innovation. 31. See for instance Fransman (2001). 32. More on the impact on the Creative Content sector in "European Perspectives on Information Society - The impact of ICT innovation on the furute of the Creative Content sector in Europe" (EPIS study). 33. See for instance Anderson 2006b.

85

Rethinking.book Page 86 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

issues like standards and infrastructure need to be addressed to build such services. A particular issue for innovation-led growth in ICT is Intellectual Property Rights (IPR) protection. Anyone is technically capable, for example, to post a video on YouTube for everyone else to see yet without the permission of the owner. People can exchange potentially copyrighted material in MySpace. Current IPR systems need to be adapted to the special features of the social computing trends. Alternative licensing frameworks such as Creative Commons (CC) have emerged. CC enables owners of copyrightprotected material to publish and license their work online to users free of charge, but with conditions (‘Some Rights Reserved’). The BBC implemented a similar model – BBC's creative archive34 – that released online nearly 500 clips, programmes and audio tracks for the public to license and share in different ways.

5.

Conclusions

Social computing applications have displayed a viral growth over several years and the trend is unlikely to stop here. The applications are responding to the underlying societal trends and have already visible social and economic impacts. For researchers and policy makers, social computing applications present both a challenge and an opportunity. More research is needed on what areas will be most impacted, how and to what extent. The authors assess that low technological and financial entry levels, key contributions from the users and viable business models make the applications likely to stay, despite possible mini-bubbles. However, more research is needed on whether social computing applications will become mainstream. Moreover, Europe’s position in social computing applications should be analyzed. New research approaches are required to capture the new innovation dynamics and to translate them into a holistic policy-making approach in terms of R&D, deployment policies, business and education. The development of social computing applications opens a wealth of policyrelated research questions. Here, some examples: Users as creators and innovators – The role of users is a key driver and shaper of the current technological revolution. This means that policies 34. BBC Creative Archive License Group.

86

Rethinking.book Page 87 Friday, September 25, 2009 10:01 AM

Social Computing

need to be more open to user-led innovation and to provide the right context and platforms that favour user-led, bottom up innovation. In addition, there is a role for policy-makers to educate the public and to raise skills so that as many people as possible are able to play the roles of creators and innovators. Innovation and technology – Investment in R&D is ever more important, even if it needs to be adapted to new realities. Competition-friendly environment – New business practices and different business ‘mindsets‘. Businesses need to address the shift towards participation and new community practices. A key issue seems to be the optimization of the competition models on these emerging markets in the face of vertical integration and new horizontal markets. Creating IPR- and DRM " friendly" environment – The move towards stronger IPR and DRM protection needs to be balanced between the interests of producers and users. A new model of innovation is emerging, which is open, collaborative, multidisciplinary and global. New regulatory frameworks have also to ensure an adequate balance between protection and the use of content. Potential solutions could be Creative Commons, or new DRM forms such as forensic DRM35. Harmonisation of IPR rules throughout Europe is also an issue. Social Computing has important implications for health, learning, inclusion, innovation and governance, amongst other issues. Social computing enables greater transparency, efficiency, user involvement, empowerment and real-time engagement. It may thus lead to fundamental changes in the nature of (EU) policymaking as it has implications for all policy areas, as well as for business and everyday life.36

35. Forensic DRM comprises technologies, such as fingerprinting and watermarking, which help to identify actual end-users of digital content. 36. IPTS research is compiled into a JRC Reference Report that will provide input to a wide spectrum of policy makers.

87

Rethinking.book Page 88 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Annex – Growth patterns of some selected web2.0 developments Table 1 – Growth Patterns of selected web2.0 developments Blogs

Around 100,000 blogs created daily; more than 130 million Blogs (Sep 2008)

Podcast Forecasted 50 million audiences in 2010. Apple is selling 20 iTunes tracks per iPod sold and the ratio has slightly accelerated in 2007 (Forrester Research)

Wiki

Wikipedia has currently more than 2.5 million articles in English and maintains a growing base of over 1.5 million registered users.

88

Rethinking.book Page 89 Friday, September 25, 2009 10:01 AM

Social Computing

P2P

P2P is the fastest growing distribution protocol ever, >60 % of Internet traffic now (EITO 2006)

VoIP

The number of worldwide VoIP subscribers estimated to grow to approximately 250 M by the end of 2011 (IDATE 2006)

45 % of total web Social users visits these networking sites, +/- 1.8 billion web pages viewed/month in member community sites = over 57 million every day! YouTube: 100million clips daily viewed and nearly 20 million users

89

Rethinking.book Page 90 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Multiplayer online roleplaying games

Europe takes lead in Second Life users (54 % of active users in January 07 vs 34.5 % in USA Linden Lab data); 4M registered accounts in Feb 2007; Second Life statistics claim that 144,108 customers spent money in-world in December 2006182

37

References Aghion, Philippe, and Peter Howitt. 2005. Appropriate Growth Policy: A Unifying Framework. Cambridge: Harvard University Department of Economics. http://www.economics.harvard.edu/faculty/aghion/ papers.html. (Accessed December 9, 2008) Anderson, Chris. 2006a. The Long Tail: How Endless Choice Is Creating Unlimited Demand. New York: Hyperion. Anderson, Chris. 2006b. Wired. The Long Tail, Chris Anderson’s Blog. The Economics of Abundance. http://www.longtail.com/the_long_tail/2006/ 10/the_economics_o.html. (Accessed December 9, 2008) Battelle, John. 2005. The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture. London: Nicholas Brealey Publishing. BBC Creative Archive License Group. http://creativearchive.bbc.co.uk/. (Accessed December 5, 2008) Benkler, Yochai. 2006. The Wealth of the Networks. How Social Production Transforms Markets and Freedom. New Haven: Yale University Press

37. Second Life.

90

Rethinking.book Page 91 Friday, September 25, 2009 10:01 AM

Social Computing

Bertold, Brecht. 1932. Radiotheorie (Radio Theory). In Gesammelte Schriften, edited by B. Brecht, 119-134. Frankfurt am Main: Suhrkamp. Bowman, Shayne, and Chris Willis. 2003. Hypergene MediaBlog. We media: How Audiences are Shaping the Future of News and Information. http://hypergene.net/wemedia/weblog.php. (Accessed December 9, 2008) Briscoe, Bob, Andrew Odlyzko, and Benjamin Tilly. 2006. Metcalfe's Law is Wrong. IEEE Spectrum, July. http://www.spectrum.ieee.org/print/4109.. (Accesed December 9, 2008) Burgelman, J.C, and Yves Punie. 2006. Information, Society and Technology. In True visions. The Emergence of Ambient Intelligence, edited by Emilie Aarts and Jose Luis Encarnacao, 17-34. Berlin, Heidelberg, New York: Springer. Castells, Manuel. 1996. The Rise of the Network Society, The Information Age: Economy, Society and Culture, Vol. I. Cambridge, Oxford: Blackwell. Castells, Manuel. 1997. The Power of Identity, The Information Age: Economy, Society and Culture, Vol. II. Cambridge, Oxford: Blackwell. Castells, Manuel. 1998. The End of the Millennium, The Information Age: Economy, Society and Culture, Vol. III. Cambridge, Oxford: Blackwell. Cluetrain. http://cluetrain.com/. (Accessed December 9, 2008) de Certeau, Michel. 1984.The Practice of Everyday Life. Berkeley, Los Angeles, London: University of California Press. Digiworld Summit. 2006 28th IDATE International Conference, Le-Corum, Montpellier, 14-16 November. EPIS Study. EPIS: European Perspectives on Information Society. http:// epis.jrc.ec.europa.eu/pages/content.html. (Accessed 4 april, 2008) European Commission. Blogs of the European Commission. http:// blogs.ec.europa.eu. (Accessed December 9, 2008). Flichy, Patrice. 1995. Une histoire de la communication moderne - Espace public et espace privé. Paris: La découverte poche. Fransman, Martin. 2001. Evolution of the Telecommunications Industry into the Internet Age. http://www.telecomvisions.com/articles/pdf/ FransmanTelecomsHistory.pdf. (Accessed December 9, 2008) Freeman, Christopher. 1988. Japan: A New National Innovation System? In Technology and economy theory, edited by G. Dosi, C. Freeman, R. R. Nelson, G. Silverberg and L. Soete. London: Pinter. 91

Rethinking.book Page 92 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Giddens, Anthony. 1991. Modernity and Self-identity. Self and Society in the Late Modern Age. Cambridge: Polity Press. Graham, Paul. 2004. What the Bubble Got Right. www.paulgraham.com/ bubble.html. (Accessed December 9, 2008) Grossman, Lev. 2006. Time’s Person of the Year: You. Times, December 13. http://www.time.com/time/magazine/article/0,9171,1569514,00.html Hill, Will, James D. Hollan, Dave Wroblewski, and Tim McCandles 1992. Edit Wear and Read Wear. In Proceedings of CHI'92 Conference on Human Factors in Computing Systems Conference, Monterey, 3-7 June, edited by Penny Bauersfeld, John Bennett, and Gene Lynch, 3-9. ACM Press Lazonick, William. 2005. Evolution of the New Economy Business Model. Business and Economic History On-line (3). http://www.thebhc.org/publications/BEHonline/2005/lazonick.pdf. (Accessed December 9, 2008) Ledlie, Jonathan, Jeff Shneidman, Margo Seltzer and John Huth. 2003. Scooped, Again. Second International Workshop on Peer-to-Peer Systems (IPTPS). http://iptps03.cs.berkeley.edu/final-papers/scooped.pdf. (Accessed December 9, 2008) Lenhart, Amanda, and Susannah Fox. 2006. Bloggers – a Portrait of the Internet's new Storytellers. Washington: PEW/Internet & American Life Project. Markham, Anette. 1998. Life Online. Researching Real Experience in Virtual Space. London, New Delhi: AltaMira Press, Sage Publications. Moser, Petra. 2003. How Do Patent Laws Influence Innovation? Evidence From Nineteenth-Century World Fairs. NBER Working Paper 9909. Cambridge: National Bureau of Economic Research. https://www.nber.org/ papers/w9909. (Accessed December 9, 2008) Moulthrop, Stuart. 2004. From Work to Play: Molecular Culture in the Time of Deadly Games. In The New Media Reader, edited by N. WardripFruin and N. Montfort, 56-70. Cambridge: The MIT Press. Negroponte, Nicholas. 1995. Being Digital. Cambridge: MIT Press. Nielsen//Netratings. 2006. Nielsen/Netratings Announces July U.S. Search Share Rankings. Ne Yok, 21 August. http://www.nielsen-netratings.com/ pr/pr_060821.pdf. (Accessed December 9, 2008) OECD. 2005. OECD Communications Outlook. Paris: OECD

92

Rethinking.book Page 93 Friday, September 25, 2009 10:01 AM

Social Computing

OECD 2007. OECD Communications Outlook. 2007. Paris: OECD O'Reilly, Tim. 2005. O’Reilly. What Is Web 2.0: Design Patterns and Business Models for the Next Generation of Software. http:// www.oreillynet.com/pub/a/oreilly/tim/news/2005/09/30/what-is-web20.html. (Accessed September 12, 2008) Palfrey, John, and Urs Gasser. 2008. Born Digital: Understanding the First Generation of Digital Natives. New York: Basic Books. Pascu, Corina, David Osimo, G. Turlea, Martin Ulbrich, and J.C. Burgelman. 2007. The potential disruptive impact of Internet 2 based technologies. First Monday 12(3), March. http://www.firstmonday.org/ issues/issue12_3/pascu/. (Accessed December 9, 2008) Pascu, Corina. 2008. An Empirical Analysis of the Creation, Use and Adoption of Social Computing Applications. European Commission IPTS Exploratory Research on the Socio-economic Impact of Social Computing. Institute for Prospective Technological Studies IPTS, JRC, EUR 23415 EN. http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=1684. (Accessed December 9, 2008) Pérez, Carlota. 2006. Re-specialisation and the Deployment of the ICT Paradigm – An essay on the Present Challenges of Globalisation. In The future of Information Society in Europe: Contributions to the Debate, edited by R. Compano, Corina Pascu, A.F. Bianchi, J.C. Burgelman, S. Barrios, Martin Ulbrich and Ioannis Maghiros., European Commission IPTS Technical Report, JRC, EUR 22353 EN. http://www.jrc.es/home/pages/ detail.cfm?prs=1453. Punie, Yves, J.C. Burgelman, and Marc Bogdanowicz. 2002. The Future of Online Media Industries. Scenarios for 2005 and Beyond. The IPTS Report May (64): 35-42. Quan-Haase, Anabel, and Barry Wellman. 2003. How does the Internet affect social capital. In Social Capital and Information Technology, edited by Marleen Huysman & Volker Wulf, 151-76. Cambridge: MIT Press. Reding, Viviane. 2006. The Disruptive Force of Web 2.0: How the New Generation will Define the Future. Youth Forum, ITU Telecom World, Hong Kong, 3 December. Europa Press Reselases RAPID. http://europa.eu/rapid/ pressReleasesAction.do?reference=SPEECH/06/ 773&format=HTML&aged=0&language=EN&guiLanguage=en. (Accessed December 9, 2008)

93

Rethinking.book Page 94 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Reding, Viviane. 2008. Digital Europe: the Internet Mega-trends that will Shape Tomorrow's Europe. A view of the Digital World in 2025, European Internet Foundation Special Event Brussels, 13 November. Europa Press Releases RAPID. http://europa.eu/rapid/ pressReleasesAction.do?reference=SPEECH/08/ 616&format=HTML&aged=0&language=EN&guiLanguage=nl. (Accessed December 9, 2008) Saveri, A., H. Rheingold, A.S.K. Pang, and K. Vian. 2004. Toward a New Literacy of Cooperation in Business: Managing Dilemmas in the 21st Century. Institute for the Future Technology Horizons Program. http:// www.iftf.org/docs/SR851A_New_Literacy_Cooperation.pdf#search=%22'cooperation%20in%2 0business'%22. (Accessed July 4, 2008) Second Life, Economic Statistics. http://secondlife.com/whatis/ economy_stats.php. (Accessed December 9, 2008) Seely Brown, John, and Paul Duguid. 2000. The Social Life of Information. Boston: Harvard Business School Press. Seely Brown, John, and John Hagel. 2005. From Push to Pull- Emerging Models for Mobilizing Resources. Working Paper, October. Shmula.com. http://www.shmula.com/blog/timelines/google-microsoftyahoo/g-y-m.htm. (Accessed December 9, 2008) Silverstone, Roger, and Knut Sørensen. 2005. Towards the Communication Society. In Media, Technology and Everyday Life in Europe: From Information to Communication, edited by Roger Silverstone, 213-22. London: Ashgate Publishers Ltd. Thornhill, John. 2005. Internet Study Warns Politicians on Power of the Blog. Financial Times, July 13. http://www.ft.com/cms/s/86546624-f33a11d9-843f-00000e2511c8.html. (Accessed Deember 9, 2008) Tuomi Ilkka. 2002. Networks of Innovation. New York: Oxford University Press. Van Bavel, R., Yves Punie, and Ilkka Tuomi. 2004. ICT-Enabled Changes in Social Capital. The IPTS Report, Special issue: Building the Information Society in Europe: the Contribution of Socio-economic Research, June (85): 28-32. Von Hippel, Eric. 1976. The Dominant Role of Users in the Scientific Instrument Innovation Process. Research policy 5 (3): 212-39.

94

Rethinking.book Page 95 Friday, September 25, 2009 10:01 AM

Social Computing

Wikipedia. Modelling Wikipedia's growth. http://en.wikipedia.org/wiki/ Wikipedia:Modelling_Wikipedia%27s_growth. (Accessed December 9, 2008) Ya-De Wong, Tiffany. 2003. Move Over, First Mover – A Theoretical and Empirical Analysis of First-Mover Advantage in the Internet Economy. Stanford: Stanford University. http://www-econ.stanford.edu/academics/ Honors_Theses/Theses_2003/Wong.pdf. Yahoo Finance Press Release of 29 September 2008. eBay Inc. Awarded the National Medal of Technology and Innovation for Advancing Global Entrepreneurship. http://biz.yahoo.com/bw/080929/ 20080929005677.html?.v=1. (Accessed December 9, 2008) Zerdick, Axel, Arold Picot, Klaus Shrape, Roger Silverstone, Jean Claude Burgelman, Valerie Feldmann, Christian Wernick, and Carolin Wolff, eds. 2005. E-Merging Media: Communication and the Media Economy of the Future. Berlin, Heidelberg: Springer Verlag.

95

Rethinking.book Page 96 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 97 Friday, September 25, 2009 10:01 AM

Networks and Services

Rethinking.book Page 98 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 99 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive Empowering Cultural Diversity in the EU Internal Market Anna Herold1

1.

Introduction

After several years of heated debates, broad and open consultations and an animated legislative process, the Audiovisual Media Services Directive was adopted on 11 December 2007 and entered into force on 19 December 2007.2 Member States have two years to transpose the new provisions into national law, so that the modernized legal framework for audiovisual media services will be fully applicable by the end of 2009. One year earlier, on 18 December 2006, the European Community had become a Party to the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions (‘the UNESCO Convention’ or ‘the Convention’). On 18 March 2007, the Convention entered into force. The Audiovisual Media Services Directive (‘the new Directive’) amends the existing Television without Frontiers Directive (adopted first in 1989 and subsequently amended in 1997, ‘the old Directive’)3 in order to adapt it to the present technological and market developments in the distribution of audiovisual media content through broadening its scope and modernizing some of its provisions. The fifth recital of the new Directive’s preamble contains an explicit reference to the UNESCO Convention, stressing that the Directive respects the principles of the Convention and reiterating that cultural activities, goods and services have both an economic and cultural

1. 2. 3.

The views expressed herein are those of the author and do not represent any official view of the European Commission. Directive 2007/65/EC on Audiovisual Media Services. Directive 89/552/EEC on Television without Frontiers.

99

Rethinking.book Page 100 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

nature, a proposition long present in the EU audiovisual policy. As it was acknowledged by the European Commission in 2001: "Audiovisual works have unique characteristics because of their double nature: They are economic goods, offering important opportunities for the creation of wealth and employment. … They are also cultural goods, which at the same time mirror and shape our societies. This is the reason why the development of this sector has never been left solely to market forces."4

In fact, the cultural dimension of the cinema and television sector has figured prominently in the EU’s audiovisual policy from its beginnings so that the promotion of cultural diversity is nothing new to this policy or to the new Directive. Already back in 1989, the old Directive introduced, as one of the minimum harmonization measures in the internal television market, a commitment to reserve a majority proportion of television programming on EU screens to European works (Article 4)5 and to reserve at least one-tenth of EU broadcasts for works produced by independent producers (Article 5).6 These measures, which formed since then a centrepiece of European policy in that respect, were deemed to offer “new opportunities and outlets to the marketing of creative talents of employment of cultural professions and employees in the cultural field”.7 This proposition has not lost any relevance over time: in the 1999 Communication the Commission clearly acknowledged that “regulatory policy in the sector is aimed at safeguarding certain public interests, such as cultural and linguistic diversity, the protection of minors and consumer protection”, which “are not

4. 5.

6.

7.

Cinema Communication 2001. Article 4(1) (as amended by the 1997 Directive) provides that “Member States shall ensure where practicable and by appropriate means, that broadcasters reserve for European works, within the meaning of Article 6, a majority proportion of their transmission time, excluding the time appointed to news, sports events, games, advertising, teletext services and teleshopping. This proportion, having regard to the broadcaster’s informational, educational, cultural and entertainment responsibilities to its viewing public, should be achieved progressively, on the basis of suitable criteria.” Article 5 (as amended by the 1997 Directive) reads as follows: “Member States shall ensure, where practicable and by appropriate means, that broadcasters reserve at least 10 % of their transmission time, excluding the time appointed to news, sports events, games, advertising, teletext services and teleshopping, or alternately, at the discretion of the Member State, at least 10 % of their programming budget, for European works created by producers who are independent of broadcasters. This proportion, having regard to broadcasters’ informational, educational, cultural and entertainment responsibilities to its viewing public, should be achieved progressively, on the basis of suitable criteria; it must be achieved by earmarking an adequate proportion for recent works, that is to say works transmitted within five years of their production.” Recital 23 of the old Directive.

100

Rethinking.book Page 101 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

called into question by technological development.”8 The impact assessment of the new Directive clearly indicated that “the promotion of European works and works made by independent producers is held to be essential in order to contribute to cultural diversity within the EU, freedom of expression and pluralism” and went on to affirm that “introducing some kind of regulation at the EU level to ‘encourage’ EU content would be likely to have a positive impact on cultural diversity and on the development of the European audiovisual industry, a key driver of the knowledge economy.”9

The concept of cultural diversity in the audiovisual sector is usually seen, however, in contradiction with the free market and free trade logic. Indeed, the free play of market forces in the audiovisual market is treated with a great dose of suspicion. Trade liberalization and market integration are generally seen as enemies of diversity in the audiovisual sector. The old Directive, although it was also clearly aimed – through Articles 4 and 5 – at guaranteeing more cultural diversity in the internal market, had to clarify that it would leave unaffected “the independence of cultural developments in the Member States and the preservation of cultural diversity in the Community” (recital 13 of the old Directive). Still, the old Television without Frontiers Directive had been widely criticized for not being able to produce cultural diversity or even favour production and distribution of European content in the European television market. Quite early in its history, the criticism was voiced that, even if the requirements of Articles 4 and 5 (often referred to as ‘quotas’) were largely fulfilled, there has been a considerable decrease in the programming of European films10 and the presence of European films in EU cinemas remained rather modest. Even as regards television programming stricto sensu, it was argued that European regulation contributed to consolidating the fragmentation of the audiovisual market, as the quotas would be mainly fulfilled through national works11 so that European viewers continued to see more of the same domestic works, instead of being exposed to programmes from other EU countries.12 It was also contended that the provisions of Article 4 might be considered as inducing the broadcasters to transmit low-budget productions and very often productions of lower quality (like series) and even flow programming

8. 9. 10. 11. 12.

Communication on the Community's audiovisual policy in the digital age 1999. Commission Staff Working Document 2005. De Bens, Kelly Els and Bakke 1992, 91. European Broadcasting Union 2002. Katsirea 2003, 205; Drijber 1999, 108; Dehousse and Van Hecke 2006, 3.

101

Rethinking.book Page 102 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

(like reality shows) as a large room for manoeuvre is left at the discretion of broadcasters as to how to fulfil the European requirements.13 The new Directive, although it has not even yet become operational, has not escaped criticism either. “A wide gap between cultural diversity rhetoric and the real instruments put in place”, “the lack of a clear and comprehensive vision of how to approach the new dynamic multi-faceted audiovisual environment …”14 have been alleged. In particular, it was noted that the Directive's definition of European works is “neither based on originality or quality criteria nor does it require a particular expression of national and European themes.”15 Overall, the new Directive is seen as a victory for commercial interests and its contribution to the achievement of cultural goals as practically non-existent.16 Most recently, it was argued that "the purported cultural objectives of Articles 4 and 5 suffer from a number of shortcomings: they lack any qualitative criteria; they lack any stipulations about timescheduling and they lack any requirement to reinvest percentages of profits in new, independent European production."17 These voices seem to echo the old conviction that the market logic cannot have any positive impact on cultural diversity in the audiovisual sector, and that cultural diversity must be ‘steered’ and the ways to achieve it prescribed with a high level of detail. This chapter attempts to demystify the ‘rhetoric’ of cultural diversity, arguing that the dichotomy between market and culture, the competitiveness of the industry and its cultural accomplishment is fundamentally flawed. In fact, market forces and market integration can well play a positive role in enhancing diversity in the audiovisual market,18 and the new Directive – in its entirety, and not only through Articles 4 and 5 – is certainly crucial in the practical implementation of the principle of cultural diversity, anchored recently at the international level in the UNESCO Convention. To show this, the chapter first investigates the rationale for the extension of certain regulatory principles by the new Directive to an emerging category of audiovisual media: on-demand services. Then, it analyses the main provisions of the new Directive relevant for cultural diversity in a quest to assess, in conclusion, whether it is fit to enhance the cross-border delivery of diversified audiovisual media content within the EU in the years to come. 13. 14. 15. 16. 17. 18.

Hitchens 1996, 69; Mestmäcker et al. 1990, 20. Burri-Nenova 2007, 1723. Burri-Nenova 2007, 1707; see also, Graber 2003, 253. Burri-Nenova 2007, 1698. McGonagle 2008, 6. Some refer in this context to a ‘false dilemma’ between cultural exception and freedom of exchange, see Foà and Santagata 2004.

102

Rethinking.book Page 103 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

2.

From Television without Frontiers to Audiovisual Media Services Directive: the rationale for change

The production and distribution of audiovisual media content is seen in the first place as an economic activity. Yet, the provision of audiovisual media content is not like any other business. A number of objectives of general interest are at stake in the audiovisual media sector: cultural diversity and media pluralism, protection of minors and human dignity, and – last but not least – consumer protection, in particular in the area of advertising. As long as these values remain pillars of modern societies, there is a need for regulating the provision of audiovisual media content. Within the EU, the provision of audiovisual media content has been regulated by the Television without Frontiers Directive, adopted back in 1989 and revised in 1997, and soon will be governed by the 2007 Audiovisual Media Services Directive. The basic premise of this regulatory activity is to provide for a minimum harmonization of national legislations applying to television services and – with the new Directive – to all audiovisual media services across the EU, in order to facilitate the free movement of such services within the internal market.

2.1 A changing economic landscape It is a truism to say that we are confronted with a constantly changing economic landscape in the audiovisual sector across Europe. Digital services mean more choice for consumers, who have a multitude of channels at their disposal and, moreover, are offered multiple platforms for consumption of audiovisual content: terrestrial, satellite, cable, mobile, and, increasingly, Internet. On-demand services mean also more control for viewers who can decide when specific content is transmitted. The regulation in the field must respond to these changes and be flexible enough to let both the industry and consumers benefit from them. This was, in fact, already recognised by recital 4 of the 1997 revision of the old Directive. “the importance of a regulatory framework applying to the content of audiovisual services which would help to safeguard the free movement of such services in the Community and be responsive to the opportunities for growth in this sector opened up by new technologies, while at the same time taking into account the specific nature, in particular the cultural and sociological impact, of audiovisual programmes, whatever their mode of transmission.”

103

Rethinking.book Page 104 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

2.2 The internal market as a pre-condition for the take up of new services At the same time, the take up of new audiovisual media services needs a stable and predictable regulatory environment. The prerequisite for creating such an environment is the establishment of a single market for such new services through the introduction of the country of origin principle. We cannot expect the European audiovisual industry to lead the way in developing innovative services if it is confronted with 27 or more different regulatory regimes. In most Member States, on-demand services are already now subject to some media law rules, for example with regard to the protection of minors, incitement to hatred or consumer protection (advertising). If not included in the scope of the new Directive, there are concerns that differences in these regulations would create barriers to the internal market. The European regulatory frameworks must therefore improve the conditions for the establishment and the functioning of the internal market. In this way, obstacles to the exercise of the freedom to provide services, which national rules have created or could lead to, can be eliminated. This is exactly what underpins the Commission's audiovisual policy and the revision of the regulatory framework in the field. The current content regulation – the old Directive – that allows service providers to benefit from a single European market is limited to television, through the old Directive. The new Directive, once implemented, will enable all providers of audiovisual media content in the EU market to benefit from the internal market freedoms, the freedom of establishment and freedom to provide services. This is expected to provide legal certainty for the deployment of new services and for successful young pan-European businesses in the area.

3

The new Directive: the elements to enhance diversity in the audiovisual sector

3.1 Creating a common market for audiovisual media services How is a common market for audiovisual media services to be achieved within the EU? Through the application of the so-called ‘country of origin’ principle to all the providers of audiovisual media services. The country of origin principle allocates to the Member State that has jurisdiction19 over 19. For a more detailed analysis of the country of origin principle, see Katsirea 2008.

104

Rethinking.book Page 105 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

the media service provider the responsibility to exercise control over the provider’s content. The country of origin principle must also ensure that audiovisual media content that does fulfil the legal requirements of the country of origin cannot be ‘stopped’ at the borders of the Member State that imports the service.20 It is clear that the country of origin principle can only be applied if it is combined with a minimum harmonization of national media law. Therefore, the strategic choice for the EU was not between revising the Directive and no regulation at all, as is frequently implied in the debates preceding the Directive's adoption.21 The alternatives were either harmonized minimum obligations at the EU level or fragmented markets with a high level of legal uncertainty regarding trans-border transactions. It clearly appears that the second option was not desirable for anyone. In order to allow all audiovisual media services to benefit from the country of origin principle, the new Directive extends a minimum set of rules to all such services. Thus, the Directive is not creating new barriers to the activities of new audiovisual media service providers, as it was repeatedly argued in the revision process,22 but it paves the way for new business models by introducing the country of origin principle for new media services. The key innovation of the new Directive is the platform neutral approach. The scope of the old Directive has been extended to any service under the editorial responsibility of a media service provider whose principal purpose is the provision of programmes in order to inform, entertain or educate the general public through electronic communications networks.23 Such a broad definition means that a service with audiovisual media content is covered by the Directive, irrespective of the technology that is used to deliver the content. Services are no longer regulated on the basis of their mode of delivery, but according to the type of the service: linear (push) or non-linear (pull or on-demand). This means for example that IPTV services (linear services), mostly offered by telecommunications companies, will have to follow exactly the same content rules as ‘traditional’ analogue terrestrial broadcasting services, while on-demand (non-linear) services, whatever their delivery platform, be it for example

20. 21. 22. 23.

See also Herold 2008. See for example, Marsden et al. 2006. See for example, Ross 2005; Espiner 2006; Warren 2006. Article 1(a) of the New Directive.

105

Rethinking.book Page 106 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Internet or mobile phones, will be subject to a basic tier of lighter regulation.24 This platform neutrality ensures a level playing field for audiovisual media service providers, without discrimination between different platforms of delivery for similar audiovisual media content. It does, however, take into account the different nature of linear and non-linear services. The new Directive thus offers an important benefit to European audiovisual businesses: legal certainty for their operations across the EU, once the minimum rules in the providers’ countries of origin are complied with. To give an example: by including provisions on cultural diversity in the fields harmonized by the Directive, any operator established in the EU can be sure that it will not be subject to different or additional rules – like quota obligations – in another Member State. It will only have to comply with the minimum promotion obligations, established at the EU level. This means more content flowing across the borders, with clear benefits for the consumers in terms of accessible offers and for cultural diversity itself. It is also important to note that this does not preclude individual Member States from continuing to oblige providers under their jurisdiction to comply with more detailed or stricter rules imposing additional requirements on the content of European productions in terms of the original language of productions, or the portrayal of national or regional cultures, or requiring providers (also selectively) to invest in such works. The possibility to introduce or keep such further-going rules for ‘national’ broadcasters was explicitly acknowledged by the Directive for broadcasting services,25 and certainly remains an option for the Member States willing to be particularly

24. The Commission proposal is not about extending traditional broadcasting regulation to new non-linear (on-demand) services. There is a common set of principles underpinning the EU audiovisual policy approach, whether the programming is delivered by linear broadcasting or by means of a non-linear service. But how these principles are implemented can be different for different services, depending on the degree of consumer control over the service. Thus, rules imposed on broadcasting (push) services, remain tougher than those that we propose for non-linear (pull) services. The differing degrees of regulation of content 'pushed' by suppliers or 'pulled' by users reflects differences in user choice and control and in the likely impact of media services on society. In other words: as the user/consumer has a greater control and choice in the case of non-linear services – he or she can decide at which moment in time to watch a specific programme – the rules for these services are lighter. For a more detailed analysis of the difference between linear and non-linear audiovisual media services, see the contribution of Peggy Valcke and Eva Lievens in this edited collection. 25. Recitals 44 and 45 of the 1997 Directive. See also Rolfe et al. 2008, 48.

106

Rethinking.book Page 107 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

active in the field of promotion of European content in on-demand services. It should be stressed that the New Directive will be crucial in increasing the exchange of audiovisual media content in the EU market, and thus in promoting greater cultural diversity. This aspect is not yet fully recognized or may even be completely ignored.

3.2 Articles 4 and 5: no business as usual? Despite animated discussions during the revision process on how to render Articles 4 (European content) and 5 (content from independent producers) more effective, these provisions were finally left untouched. Suggestions for strengthening the current European requirements included proposals for introducing an explicit quantitative objective instead of the expression “a majority proportion of its transmission time”, in a range from 51 % (reflecting practically the status quo) to 75 %, on the one hand, and clarifying the legal character of the obligation by deleting the wording “where practicable and by appropriate means,” on the other. Similarly, in respect of independent productions, it was suggested that the current quota could be raised to 25 % and be made more legally constraining. Some of the suggested solutions went even further, introducing, for example, new sub-quotas for non-national European works,26 or cinematographic works and ‘regional’ programmes with special language inter-connections. An investment obligation for European works was also proposed, to complement the transmission time requirements. Finally, some asked for the improvement of the monitoring system used by the Commission in relation to Articles 4 and 5, re-issued guidelines on the collection and validation of data or by organising the monitoring at the EU level.27 Timescheduling prescriptions were also suggested.28 Although none of these suggestions were introduced in the text of the new Directive, one new provision inserted in a recital deserves some consideration in this context. Recital 50 provides that “when implementing the provisions of Article 4 of Directive 89/552/EEC, Member States should encourage broadcasters to include an adequate share of co-produced European works or of European works of non-domestic origin”. This echoes the voices advocating the introduction of ‘sub-quotas’ for non-national European works and may be useful to improve the situation in countries where the 26. See IMCA 2002. 27. Cinema Communication 2001. 28. McGonagle 2008, 6.

107

Rethinking.book Page 108 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

European requirement is fulfilled almost exclusively with national content (for example, in the United Kingdom). Overall, the presence of nondomestic European works on EU markets is rather modest. According to a recent study, such content made up 8.2 % of the total qualifying transmission hours on sample channels in 2007, and this result was even worse when looking at the appeal of such programming to viewers: it represented only 4.3 % of total qualifying viewer hours.29 At the same time, the broadcasters in the Member States increasingly realise themselves the need to enhance exchange of content within Europe. In the last application report on Articles 4 and 5,30 Poland reported on the efforts by TVN731 to increase the share of European works in its output by concluding new licensing agreements on German- and British-made series. Also Finland reported on a strategy of a channel under its jurisdiction (‘Subtv’) to acquire more European programmes, mainly from Britain and Sweden, but prospectively also from Southern Europe.32 The trend to enhance the exchange of European non-domestic programming will certainly continue. Especially the necessity to promote exchange of contents between the European countries has been explicitly recognised at the EU level in the Directive’s preamble and – if it is not to remain dead letter – should be monitored in some way by the European Commission. This being so, it should not be forgotten that cultural diversity starts with domestic content. Where viewers have the choice, most of them prefer domestic to imported programmes. According to the trade magazine Broadcast, foreign broadcasters are increasingly turning to “home-made product to fill their schedules... Relatively cheap home-produced programming works, in terms of ratings, and fulfils local production quotas.”33 As the recent study confirmed, national contents are usually much more successful in attracting audiences: while European works made up an average of 62.4 % of the total qualifying transmission hours on the sample channels in 2007, they made up an average of 74 % of the total viewer hours (and even 75.5 % in peak-time). This shows not only the strong appeal of European works to European audiences, but also the broadcasters’ reliance on European content to build their ratings (and thus the strategic cultural importance of European programming in terms of programming decisions).34 Thus, it becomes clear that the actual content of cultural diversity to be achieved 29. 30. 31. 32. 33. 34.

Impact Study 2005, 109. See also, Rolfe et al. (2008). Commission staff working document 2008, 133. TVN7 is a Polish commercial broadcaster. Commission staff working document 2008, 152. Keighron 2000, 7, quoted by Freedman (2003, 295). Rolfe et al. 2008.

108

Rethinking.book Page 109 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

within Europe must remain a matter for the consumers to decide. The actual balance between domestic and non-domestic European content should certainly be influenced (by fostering circulation of European works) but cannot be pre-decided or arbitrarily imposed. Similar arguments are valid to counter criticisms on the actual contribution of Articles 4 and 5 to cultural diversity. According to the critique they are flawed because of the lack of any qualitative criteria or more prescriptive stipulations in the definition of 'European works' that would guarantee the cultural content of programmes or their visibility. In particular it was considered that the Directive's definition is “neither based on originality or quality criteria nor does it require a particular expression of national and European themes.”35 Indeed, imposing detailed conditions in the Directive would certainly not be in line with the subsidiarity principle and the spirit of the European regulation. At the same time, detailed prescriptions might risk dangerously limiting the broadcasters’ editorial freedom and the freedom of expression as such: deciding for broadcasters which content would be qualitatively worth transmitting or even imposing on them to transmit certain types of programmes (feature films instead of series for example) would be very difficult to justify in the light of European law. In any event, this would be almost impossible to monitor or measure because of the subjectivity of the considerations. As it was put forward by AdvocateGeneral Kokott in her conclusions in the UTECA case in the context of the Spanish obligations imposed on broadcasters to invest in film production, it would appear "to be practically impossible to lay down objective and, in particular, fair criteria as to what is culture and, to an even lesser extent, as to what should constitute ‘cultural products’ eligible for assistance. Any attempt to do so would necessarily entail a risk of being hidebound by traditional thought patterns and especially of ignoring the dynamics of more recent cultural trends as well as the cultural activity of minorities in society."

She continued to stress that "even if one were to venture to lay down objective criteria as to whether a cinematographic feature film or film made for television could be considered a ‘cultural product’ or a ‘quality film’, the practical implementation of such criteria would involve a considerable degree of bureaucracy.” In order to ensure a minimum level of legal certainty, it might be necessary for a State-appointed panel of experts or an institution approved by the State to ultimately report on whether or not film projects should be taken into consideration with regard to pre-funding by television broadcasters. This might give the producers and artists concerned the 35. Burri-Nenova 2007, 1707 (quoting also Graber (2003, 253)).

109

Rethinking.book Page 110 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

impression that their film projects were being subjected to a State system of prior censorship.36 So, although ‘quality’ considerations are certainly feasible at the national level and may be part of, for example, the national film funding systems, the difficulty in creating such mechanisms and controversies revolving around such systems clearly show that such requirements are totally misplaced at the European level, both from a practical and – most significantly – competence point of view. It should also be borne in mind that Articles 4 and 5 do already foresee an important qualifier as regards the type of contents to be calculated under the majority proportion: mainly feature films and television fiction.37 In other words, what is considered to be particularly worth promoting is the socalled ‘stock’ programming. Such programmes, more costly to produce domestically and easily licensed for a fraction of the cost from abroad (mainly from the United States), are more likely to genuinely reflect domestic identities than ‘flow’ programmes. Flow programmes are anyway usually domestically produced, given their national or regional affinity, and as such represent a field in which Europe does not have so much to fear from Hollywood. Consequently, a focus of EU requirements is clearly on fiction and this can hardly be described as a ’lack of any qualitative criteria’. Considering that both the Directive's requirements are easily fulfilled (according to the last report on their implementation, more than 63 % of Europe's television broadcasters' programming time is devoted to European works and over 36 % to works by independent European producers),38 a positive impact of the Directive on diversity on European screens is difficult to deny.39 These positive figures are confirmed by the results of a recent impact study, which shows on the basis of a channel sample that European works represented in 2007 an average of 62.4 % of the total qualifying transmission hours (62.8 % in peak-time), while independent European works made up for 30.1 % (33.7 % in peak time) of these hours.40 While it certainly remains true that Europeans do not get to see enough European films (both in theatres and on the small screens), the 36. Opinion of AG Kokott UTECA 2008, 112-113. 37. Defined negatively: "a majority proportion of their transmission time, excluding the time appointed to news, sports events, games, advertising, teletext services and teleshopping". 38. Eighth Communication on the application of Articles 4 and 5 2008. 39. For evidence that Articles 4 and 5 have increased the proportion of European works and independent productions broadcast by channels in the EU, see David Graham and Associates 2005. 40. See Rolfe et al. 2008.

110

Rethinking.book Page 111 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

overall availability of European programming (including feature films and above all television fiction) at the disposal of European viewers is growing.

3.3 Supporting cultural diversity in on-demand services While Articles 4 and 5 remain in the new Directive applicable to linear (television) services, for non-linear (i.e. on-demand) services, a new provision was introduced in the Directive. It requires the Member States to ensure that on-demand audiovisual media services supplied by providers under their jurisdiction promote (where practicable and by appropriate means) the production of and access to European works.41 As explained in recital 48, the necessity to have such a requirement stems from the fact that “on-demand audiovisual media services have the potential to partially replace television broadcasting.” Accordingly, the production and distribution of European works should be promoted by on-demand service providers, just as it is promoted today by broadcasters under Articles 4 and 5. As a result, European cultural diversity should be promoted on all distribution platforms of audiovisual media content in Europe, be it traditional television, mobile television or video-on-demand. Examples of such promotion measures, adapted to the specificities of on-demand services (any ‘quotas’ being inapplicable to non-linear content) are provided in the operative part of the Directive. They include the financial contribution made by such services to the production and rights acquisition of European works, as well as the share and/or prominence of European works in the catalogue of programmes offered by the on-demand audiovisual media service.42 This is a non-exhaustive, illustrative list: other ways of promoting diversity in on-demand services are imaginable, like for instance creating a particular navigation system to access European works. It will of course be very important to regularly re-examine the application of the provisions relating to the promotion of European works by audiovisual media services, as the recital states. In fact, Member States will have to report to the Commission before the end of 2011 and then every four years on the implementation of the measures foreseen. On the basis of these reports and of an independent study, the Commission will then report to the European Parliament and the Council on the application of the measures, taking into account the market and technological developments and the objective of cultural diversity.43 These new reports 41. Article 3i(1). 42. Article 3i(2). 43. Article 3i(3).

111

Rethinking.book Page 112 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

will run in parallel to the current reporting practice on the application of Articles 4 and 5.44 Member States should, within the framework of the reports required, take into account not only the financial contribution by the services to the production and rights acquisition of European works and the share of European works in the catalogue of audiovisual media services, explicitly mentioned in the operative part of the new Directive. They should also consider the actual consumption of European works offered by such services. The real novelty and added value of the latter clarification is the requirement for the Member States to consider the actual consumption of European content within their reports to the Commission on the application of this provision. Together with the requirement to ensure prominence of European works, it marks an attempt to innovate in the EU approach to promoting cultural diversity. There is also a certain shift from the widely criticized45 quantitative approach towards a more qualitative one. In fact, while on-demand providers will be required by the Member States to invest in European works and/or ensure an adequate share of such works in their catalogues, ensuring prominence of such works has been introduced as a valid alternative or addition to these quantitative methods. While reporting to the Commission on the details of such measures, additional attention should be paid to another innovative measure of a more qualitative nature: how do European viewers respond to European content, what is actually watched (or consumed) by them. Of course, it remains to be seen how the new provision will be implemented by the Member States, and how much weight will be given in this process to qualitative considerations. They are more ephemeral and difficult to monitor. The discussions on this implementation are still at the early stages in the majority of the Member States. France has traditionally been the Member State with most experience and ideas for the promotion of audiovisual works. According to the general tax code, the French video-on-demand service providers contribute a 2 % tax out of the fees paid by consumers.46 The French national audiovisual regulator Conseil Supérieur de l’Audiovisuel (‘CSA’) has been empowered to issue 'catalogue quotas' for on-demand services.47 However, this option 44. The European Commission has adopted eight such reports so far, the last being published in July 2008, see Eighth Communication on the application of Articles 4 and 5. 45. Graber 2003, 253. 46. Code General des Impôts Article 302 bis KE. 47. Law no. 96-299 of 10 April 1996, Article 5.

112

Rethinking.book Page 113 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

was not followed by the regulator; instead a voluntary inter-professional agreement on cinema–on-demand (‘Protocole d’accord interprofessionnel sur le cinéma à la demande’) was concluded on 20 December 2005 between the French government, the film industry operators and Internet service providers. With this agreement, the following commitments were undertaken by the French VOD operators: 앫 the operators with a turnover of less than € 1.5 million committed to invest 3 % of revenue into European cinematographic works (of which 3.5 % was to be allocated to French films); 앫 the operators with a turnover between € 1.5 million and € 3 million committed to invest 5 % of their revenue in such works (of which 3.5 % was to be allocated to French films) 앫 for the operators with revenues of more than € 5 million, the commitments towards European and French films were to be increased incrementally to a maximum of 10 % and 7 % of their revenue respectively. This voluntary agreement expired on 20 December 2006 without being renewed.48 As the new Directive was passed in the meantime, these obligations are to be replaced by the measures implementing Article 3i. For the moment, no such measures were adopted yet, but the issue has been subject to a public consultation.49 In its response to this consultation, CSA considered two risks in implementing Article 3i.50 On the one hand, the risk of delocalisation of new on-demand providers, which is particularly pertinent for online services, was pointed out. On the other hand, the risk to stifle innovation and the distribution of new formats corresponding to tastes and expectations of the audience was mentioned. Thus, even in France – the cradle of quotas and cultural diversity – there is a realisation that any new obligations should be considered with care and introduced progressively. At the same time, qualitative factors such as visibility and prominence were considered issues of primary concern in the French implementation process. Voluntary inter-professional agreements within the industry (possibly following the 2005 model), validated by the regulator (i.e. co- and self-regulation – following the Directive's language) were considered particularly viable and practical solutions in this respect.51 The draft French law implementing the new Directive and currently under 48. Rolfe et al. 2008. 49. DDM 2008. The consultation ended in March 2008 and the results are now being considered in the debate over the shape of the future law. 50. The introduction of the provision in the Directive is deemed to be a victory for the French in the negotiation process. 51. CSA 2008a.

113

Rethinking.book Page 114 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

discussion does not contain any specific provisions in this respect. It is foreseen that such provisions will be concretised in a decree, which could fix obligations for new services. Such a decree will take into account the specificity of new services in order not to strangle their development.52 Also in the UK, the objective within the implementation process is to create a co-regulatory system for video-on-demand. The effect is to introduce a light-touch, industry-led system to give consumers of video on-demand services supplied from the UK a guarantee that these meet the EUmandated standards, including those related to the promotion of European works.53 This does not mean however that the Member States cannot take recourse to traditional regulatory approaches when implementing this part of the Directive. The current legislation of some of the Member States is actually already flexible enough to embrace the objectives of Article 3i of the Directive. Under the Polish film funding requirements, on-demand service providers would be considered to operate digital platforms (or cable TV services), and therefore be subject to the 1.5 % levy on the revenue from providing access to re-aired television programmes through the on-demand service.54 Italy adopted recently provisions obliging the electronic communications operators providing on-demand services to invest a part of their income from audiovisual content offered to the public for a charge in the funding of European works. The criteria and means of this contribution are to be defined by the national regulator, AGCOM, which has not yet taken any action in this respect (and thus the obligations are not yet operational).55 The 2003 decree of the French Community of Belgium56 was based on a principle of technological neutrality, and amended in 2007 to include a specific definition of non-linear services, in line with the definition in Article 1(g) of the new Directive. On this basis, the national regulator considered non-linear television services subject to the same obligations (including those related to reserving sufficient proportions of European and independent works) as other television broadcasting services. In 2007, the regulator took a decision in which it found that these obligations had not been fulfilled by the on-demand service ‘A la demande’, operated by Skynet iMotion Activitites (SiA), a company in the Belgacom group. In response to this decision, the provider declared that it was not in 52. 53. 54. 55.

Draft French Law 2008. DCMS 2008. Act of 30 June 2005 on Cinematography. See Article 44 of the legislative decree no. 177 of 31 July 2005, as amended by Law 244/2007, 56. Broadcasting Decree of 27 February 2003 (as amended).

114

Rethinking.book Page 115 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

possession of the information on the achievement of the required proportions but was examining the technical possibilities under which it could be able to provide it.57 It remains unclear from the decision, however, how the proportions were to be calculated. One may, however, suppose that they would need to be calculated as the proportion of the total offering to the public (catalogue) under the current requirements.58 As regards future legislation in this respect, the working group on the implementation of the new Directive suggested that a non-linear regime for European and independent productions could follow the linear regime, leaving however the choice of alternative targets for investment and prominence to the individual service providers.59 In sum, considering the positions from different Member States with diametrically different approaches and traditions in the area of audiovisual policy – the ‘liberal’ UK, on the one hand, and the ‘dirigiste’ France (or Belgium), on the other60 – it seems that lighter policy approaches options for the promotion of diversity in on-demand services will prevail, at least where and as long as such services are still a nascent market. Much will be left for the moment to voluntary initiatives by market players, under the supervision of regulators. They are not steered top-down from the traditional regulatory level. In the long run, such an approach may prove more efficient and demonstrate that cultural diversity may well develop and be fostered close to the realities of the market.

3.4 Opening new revenue and funding possibilities In the discussion over the implementation of Article 3i in France it was requested, in return for a commitment to contribute financially to the production and purchase of such works, to render more flexible the rules governing the insertion of advertising.61 Anticipating such voices, the new Directive modernizes the existing advertising rules in order to take into account new developments in broadcasting. Linear services (i.e services similar to traditional broadcasting) will continue to comply with more specific rules. This is justified by the omnipresence and unparalleled impact of television broadcasting on society and the effect it has on the way through which people form their opinions. This being so, the new 57. 58. 59. 60. 61.

See CSA 2006. See also Rolfe et al. 2008. See CSA 2008b. Collins 1994, 94. DDM 2008.

115

Rethinking.book Page 116 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Directive provides for more flexibility as regards television advertising, by doing away with the majority of the insertion rules and the daily limit of advertising, as well as being open to new forms of advertising (such as split-screen, virtual or interactive advertising).62 Relaxation of the advertising rules is expected to benefit not only advertisers, but the whole audiovisual industry in Europe, by strengthening its economic basis. The new Directive introduces also a possibility for the Member States to authorize product placement in certain types of programmes, be it broadcast or provided on-demand.63 The relaxation of the advertising rules is associated not only with the empowerment of the viewer – as a result of the higher number of services and channels, availability of personal video recorders and other control mechanisms – but also clearly with the necessity to “enhance the competitiveness of the European media industry” as reflected by recital 61 on product placement. This recital clarifies that “in order to ensure a level playing field, and thus enhance the competitiveness of the European media industry, it is necessary to adopt rules for product placement.” In fact, the new rules on product placement are expected to boost the European audiovisual industry, by providing legal certainty as to where and when this new form of commercial communication can be used to finance television and film production. In view of the absence of consistent rules across the Member States, this is of course accompanied by appropriate safeguards to ensure editorial independence and transparency for consumers. Great hopes are attached to the potential revenues flowing from product placement. In fact, the genesis of this provision is the conviction that there is no reason why Europe's audiovisual industries should not benefit from the additional revenues opened up by product placement, in order to be better able to compete with the US film and television producers. In fact, product placement is a reality on European TV screens already today, but operates essentially to the benefit of non-European content producers and without the viewers being informed. The value of advertising investments and their importance for the viability or even survival of major players in the media industry explain why the advertising rules have been made more flexible and why even the controversial provisions on product placement have been adopted at last.64

62. See the amended Chapter IV of the new Directive. 63. See Article 3g of the new Directive. 64. See Darby 2008.

116

Rethinking.book Page 117 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

It is rightly hoped that additional funding from the relaxation of the advertising rules and product placement will be invested by providers in production of domestic European content (which as we have seen before has a strong appeal for European audiences), contributing thus greatly to diversity on the EU markets. This potential contribution is often ignored and 'liberalization' of advertising rules is very often misinterpreted as representing a disadvantage for the European viewers. The fears that the relaxation of advertising rules and the possibility to authorize product placement will exacerbate the commercialisation of television and the commodification of artistic productions and reduce – rather than foster – diversity of cultural expressions65 overlook two basic issues. First, as it was mentioned in relation to product placement, this type of commercial communication is no novelty in European programming. Before the new Directive, it remained unregulated, however, and thus unidentifiable for the viewers. The new Directive aims precisely at empowering viewers by informing them when recourse to product placement was made in an audiovisual work they are watching. Secondly, these suspicions ignore the fact that additional revenues from advertising attached to lower quality works like quiz shows, games or talk shows and from product placement inserted in these works can be usefully re-invested in other higher quality original programming like films, series or children productions.66 It can indeed be hoped that the solution found in the Directive is very well balanced. It should open new funding possibilities for production of original European content, without overwhelming the viewers with too much advertising. Both the advertisers and the providers widely realise that this would indeed be counterproductive.67

3.5 Towards a dynamic concept of European works: making cultural diversity happen The UNESCO Convention foresees the possibility of developing regional co-operations in the field of audiovisual and cultural productions and stimulates in this regard exchanges with developing countries through preferential treatment granted to cultural goods and services.

65. Burri-Nenova 2008, 1713 (quoting Graber 1994, 151ff) and 1795. 66. It is worth noting that in the latter no product placement is permitted except provision of prizes or props free of charge, see Article 3g(2) of the New Directive. See Key4biz 2008. 67. See ACT Responsible.

117

Rethinking.book Page 118 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

The Television without Frontiers Directive was open to international cooperation, but only in limited cases: in co-productions with third countries with which a Member State has concluded a bilateral coproduction treaty.68 Alternatively, also works made mainly together with non-EU authors and workers residing in one or more Member States were allowed to the extent that their share corresponded with the contribution of the Community producers.69 In the new Directive, a new category of works was introduced in the definition of European works: “works co-produced in the framework of agreements related to the audiovisual sector concluded between the European Community and third countries and fulfilling the conditions defined in each of these agreements.”70 As a result, audiovisual works co-produced in the framework of Community agreements with third countries will be treated as fully ‘European’ for the purposes of the Directive's requirements regarding the promotion of audiovisual works, as regards both broadcasting (linear) and on-demand (non-linear) audiovisual media services (Articles 3i, 4 and 5). The introduction of this new category marks a switch from a ‘passive’ to a ‘dynamic’ instrument, allowing the Community to determine the partners to whom it will grant preferential treatment by including co-productions with them in the definition of European works. Inevitably, the choice of partners for audiovisual cooperation will involve an assessment of the positive effects for the European industry; it will also be restricted to countries that share the European approach concerning cultural diversity, in line with the UNESCO Convention.71 The agreements referred to in the Directive, which would grant preferential market access to co-productions treated as European works, imply preferential trade arrangements. Such arrangements are allowed under the General Agreement on Trade in Services (GATS), without being obliged to extend this treatment to all WTO Members, and without the need for specific legal exemptions that some of the European trade partners would not have, were they not included in the so called Economic Integration Agreements (‘EIA’). Thus, this new provision will be implemented through an inclusion of a specific Cultural Cooperation Protocol in future EU international 68. 69. 70. 71.

Article 6(4) of the Old Directive. Article 6(5) of the Old Directive. Article 1n (i), third indent of the new Directive. Thus countering worries of some stakeholders that no account would be taken of the specific production characteristics of the given third country, see FERA 2008.

118

Rethinking.book Page 119 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

agreements with third countries qualifying under the EIA. Furthermore, such framework allows the EU to define conditions for preferential access of co-productions to the Parties' markets in line with the Directive, and thus modulate this kind of advantage taking account of the differing situations of international partners. A model case of such a protocol was negotiated and signed recently between the EU and 15 Caribbean States (the so-called Cariforum).72 It may be incorporated in further negotiations with Euromed (partnership between the 27 EU Member States and 12 Southern Mediterranean States) countries, Korea, India, ASEAN, the Andean Community and Central America.73 This new definition can be deemed to have a twofold effect on cultural diversity. In general, it is a further incentive to cooperate with the EU in the audiovisual sector through co-productions, which will definitely benefit the export potential of such works on a global scale. More importantly, the circle of types of works potentially benefiting from the 'quotas' will be enlarged as EU co-productions with third countries will from now on also qualify as 'European works', which will definitely promote cultural diversity within the EU. Moreover, it can also be expected that development of cultural co-operation with third countries will also have a positive impact on the diversification of the origin of import of audiovisual works on European markets, so that Europeans get to see more of the Asian or Latin American cinema. It was suggested previously that the definition of ‘European works’ used in the Directive would not ensure cultural diversity and that effective implementation of the Convention on Cultural Diversity would necessitate an adjustment of this definition.74 The approach illustrated above demonstrates that such statements could not be more wrong. The opening of the definition of 'European works' in the new Directive represents without doubt a practical example of the implementation of the recently adopted UNESCO Convention (in particular in relation to its Article 16 on preferential treatment). Instead of introducing EU top-down criteria of quality,75 impinging on cultural sovereignty of the Member States, the dynamic approach to cultural diversity opens the definition of European works to co-operation with 72. Protocol III on Cultural Cooperation to EPA Agreement between the Cariforum States and the European Community and its Member States, initiated on 16 December 2007. 73. Coalition for Cultural Diversity 2008. 74. Wouters and De Meester 2008, 9. 75. See discussion on such criticisms above.

119

Rethinking.book Page 120 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

third countries sharing the same vision of cultural diversity, while keeping this diversity close to where it belongs – the market – which means nothing else than the audience.

4

Conclusion

The above considerations were aimed at providing elements proving that the cultural goals of European audiovisual policy can indeed be accommodated by – rather than being surrendered to – commercial ones within the internal market, while fulfilling commitments of the UNESCO Convention. Recital 1 of the New Directive specifies the goal as aiming “to ensure optimal conditions of competitiveness and legal certainty for Europe’s information technologies and its media industries and services, as well as respect for cultural and linguistic diversity”. Indeed, the two must go together: European diverse audiovisual expressions must find their audience in the market in order to be successful. Cultural diversity understood as ‘niche’ culture only and promotion of works with no prospect for commercial success has no future, not in Europe, nor elsewhere. What the new Directive attempts is to empower this diversity in a common European market, first and foremost through eliminating barriers to the circulation of European audiovisual works between the Member States – seen as the main obstacles to the achievement of cultural diversity. This is completed by a harmonized set of rules aimed at the promotion of European works both on EU television screens and in on-demand services, a forwardlooking approach to advertising regulation and opening the definition of what is to be promoted under the heading of European works to international cooperation. As it is put forward here, this attempt has all chances to be successful, just as European works have all chances to be successful with their audiences in the EU marketplace.

References ACT Responsible. Advertising Community Together. http://www.actresponsible.org/public/. (Accessed January 21, 2009) Burri-Nenova, Mira. 2007. The New Audiovisual Media Services Directive: Television without Frontiers, Television Without Diversity. Common Market Law Review, 44:1689 -1725.

120

Rethinking.book Page 121 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

Coalition for Cultural Diversity. 2008. EU Cites UNESCO Convention in Embedding Cultural Cooperation Protocol in Trade Pacts. http://www.cdcccd.org/main_pages_en/Publications_en/ News_UE_cooperation_April08_en.html. (Accessed January 9, 2009) Collins, Richard. 1994. Unity in Diversity? The European Single Market in Broadcasting and the Audiovisual, 1982-92. Journal of Common Market Studies 32 (1): 89. Commission Staff Working Document SEC(2005) 1625/2 Annex to the Proposal for a Directive of the European Parliament and the Council amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities Impact Assessment – Draft Audiovisual Media Services Directive [COM(2005) 646 final]. Commission Staff Working Document SEC(2008) 2310 Accompanying document to the Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions: Eighth Communication on the application of Articles 4 and 5 of Directive 89/552/EEC ‘Television without Frontiers’, as amended by Directive 97/36/EC, for the period 2005-2006 [COM(2008) 481 final]. Communication COM(99) 657 final from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions Principles and Guidelines for the Community's Audiovisual Policy in the Digital Age. Communication COM(2001) 534 final from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on Certain Legal Aspects Relating to Cinematographic and other Audiovisual Works, 26 September 2001 OJ C43/6–17. Communication COM(2008) 481 final from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions: Eighth Communication on the Application of Articles 4 and 5 of Directive 89/552/EEC ‘Television without Frontiers’, as amended by Directive 97/36/EC, for the period 20052006.

121

Rethinking.book Page 122 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Conseil supérieur de l’audiovisuel (CSA). 2006. Contrôle de la réalisation des obligations de SiA. A la demande pour l'exercice. http://www.csa.be/ documents/show/689. (Accessed January 21, 2009) Conseil supérieur de l’audiovisuel (CSA). 2008a. Contribution du à la réflexion sur la transposition de la directive SMA, 30 April. Conseil supérieur de l’audiovisuel (CSA). 2008b. Transposition de la directive « Services de médias audiovisuels » dans le décret du 27 février 2003 sur la radiodiffusion Collège d’avis, Avis n°01/2008. http://www.csa.be/ system/document/nom/826/CAV_20080617_decret_transposition_SMA.pdf. (Accessed January 21, 2009) Darby, Ian. 2008. Commissioner Viviane Reding pledges lighter ad regulation. Campaign, 15 April. David Graham and Associates. 2005. Final Report Limited for The Audiovisual, Media and Internet Unit, Directorate-General Information Society and Media, European Commission, May 24. De Bens, Mary Kelly Els, and Marit Bakke. 1992. Television Content: Dallasification of Culture. In Dynamics of Media Politics, edited by K. Siune and W.Truetzschler, 73-100. London: Sage. Dehousse, Franklin and Karel Van Hecke. 2006. Towards an Audiovisual Media Services Directive: an Analysis of the Commission's Proposal. http:// www.irri-kiib.be/papers/06/eu/060606-AudioVis.directive.doc. (Accessed January 9, 2009) Directive 89/552/EEC of the Council of 3 October 1989 on the Coordination of Certain Provisions laid down by law, Regulation or Administrative Action in Member States Concerning the Pursuit of Television Broadcasting Activities OJ L 298/23-30, as amended by Directive 97/36/EC OJ L 202/60-70. Directive 2007/65/EC Amending Council Directive 89/552/EEC on the Coordination of Certain Provisions laid down by law, Regulation or Administrative action in Member States Concerning the Pursuit of Television Broadcasting Activities, OJ L 332/27. Drijber, Berend Jan. 1999. The Revised Television Without Frontiers Directive: Is It Fit for the Next Century? Common Market Law Review 36 (1): 87-122. Espiner, Tom. 2006. TV Without Frontiers, Lawmakers in Tears. ZDNet.co.uk, July 11. http://news.zdnet.co.uk/internet/0,1000000097,39278500,00.htm. (Accessed January 9, 2009) 122

Rethinking.book Page 123 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

European Broadcasting Union (EBU). 2002. Review of the Television without Frontiers Directive. State of Internal EBU Reflection in May 2002. Geneva: EBU. http://www.ebu.ch/en/legal/other/index.php. (Accessed January 9, 2009) European Commission. 2008. Economic Partnership Agreement between the Cariforum States, of the one part, and the European Community and its Member States, of the other part, Protocol III on Cultural Cooperation [2008] OJ L 289/3–1955. Federation of European Film Directors (FERA). 2008. European Union Trade Agreement Negociations: Protocol for Cultural Cooperation, Memo February 13. Brussels: FERA. www.ferainfo.org/documents/ CulturalCooperationProtocolFTAMemo13.2.2008EN.pdf (Accessed January 9, 2009) Foà, Sergio and Walter Santagata. 2004. Eccezione culturale e diversità culturale. Il potere culturale delle organizzazioni centralizzate e decentralizzate. EBLA working paper 3/2004. Turin: Turin University. France, le Ministère de la Culture et de la Communication, la Direction du Développement des Médias (DDM). 2008. Consultation Publique sur la Transposition en Droit Français de la Directive Services de Médias Audiovisuels. Freedman, Des. 2003. Cultural Policy-making in the Free Trade Era: an Evaluation of the Impact of Current World Trade Organization Negotiations on Audio-visual Industries. International Journal of Cultural Policy 9 (3):285-298. Graber, Christoph-Beat. 1994. Zwischen Geist und Geld; Interferenzen von Kunst und Wirtschaft aus rechtlicher Sicht. Baden-Baden: Nomos. Graber, Christop-Beat. 2003. Handel und Kultur im Audiovisionsrecht der WTO. Völkerrechtliche, ökonomische und kulturpolitische Grundlagen einer globalen Medienordnung. Berne: Staempfli. Graham, David. 2005. Distribution and Production of TV Programmes Provided for Under Article 25(a) of the TV Without Frontiers Directive. Final Report Prepared by David Graham and Associates Limited for The Audiovisual, Media and Internet Unit Directorate-General Information Society and Media European Commission. http://ec.europa.eu/avpolicy/ docs/library/studies/finalised/4-5/27_03_finalrep.pdf.

123

Rethinking.book Page 124 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Herold, Anna. 2008. Country of Origin Principle in the EU Market for Audiovisual Media Services: Consumer’s Friend or Foe? Journal of Consumer Policy 31 (1): 5-24. Hitchens, Lesley. 1996. Identifying European Community audio-visual policy in the dawn of the information society. In Yearbook of Media and Entertainment Law II: 45-73. Oxford: Oxford University Press/Clarendon Press. IMCA. 2002. Identification et évaluation des flux économiques et financiers du cinéma en Europe et comparaison avec le modèle américain. A Study for the European Commission, DG EAC/34/01. Impact Study of Measures (Community and National) Concerning the Promotion of Distribution and Production of TV Programmes Provided for Under Article 25(a) of the TV Without Frontiers Directive. Katsirea, Irini. 2003. Why the European Broadcasting Quota Should be Abolished. European Law Review 28 (2):190-209. Katsirea, Irini. 2008. Public Broadcasting and European Law. A Comparative Examination of Public Service Obligations in Six Member States. The Hague: Kluwer. Keighron, P. 2000. Domestic Crisis, Broadcasting, 29 September 2000. Key4biz. 2008. ‘Il diavolo veste placement’: il PP e la Direttiva sui Media Audiovisivi. Ecco come cambia il mercato televisivo e cinematografico in Europa. 27 October. http://www.mondotv.biz/Pubblicita%27/2008/ %27Il_diavolo_veste_placement%27_il_PP_e_la_Direttiva_sui_Media_Au diovisivi._Ecco_come_cambia_il_mercato_televisivo_e_cinematografico_i n_Europa.html. (Accessed January 21, 2009) Legifrance, Le Service Public de la Diffusion du Droit. 2008. Projet de loi relative à la communication audiovisuelle et au nouveau service public audiovisual, 22 October 2008. http://www.legifrance.gouv.fr/ affichLoiPreparation.do;jsessionid=6780001004AC99B08390EA95D5B04 FEB.tpdjo10v_1?idDocument=JORFDOLE000019674918&type=general. (Accessed January 21, 2008) Marsden, Chris, Jonathan Cave, Edward Nason, Andrew Parkinson, Colin Blackman, and Jason Rutter. 2006. Assessing Indirect Impacts of the EC Proposals for Video Regulation. A report prepared by RAND Europe for the United Kingdom Office of Communications. http://www.rand.org/pubs/ technical_reports/TR414/ (Accessed January 21, 2009)

124

Rethinking.book Page 125 Friday, September 25, 2009 10:01 AM

The New Audiovisual Media Services Directive

McGonagle, Tarlach. 2008. Promotion of Cultural Diversity via New Media Technologies: An Introduction to the Challenges of Operationalisation. IRIS Plus 2008-6. Strasbourg: European Audiovisual Observatory. Mestmäcker, E.-J., C. Engel, K. Gabriel-Bräutigam, and M. Hoffmann. 1990. Der Einfluss des europäischen Gemeinschaftsrechts auf die deutsche Rundfunkordnung. Baden Baden: Nomos. Negrine, Ralph, and Stylianos Papathanassopoulos. Internationalisation of Television. London: Pinter.

1990.

The

Opinion of Advocate General Kokott. UTECA, 4 September 2008 Case C222/07. http://eur-lex.europa.eu/LexUriServ/ LexUriServ.do?uri=CELEX:62007C0222:EN:NOT. (Accessed January 8, 2009) Rolfe, David, David Graham, Farid El-Husseini, Claus Adamsen, Godfrey McFall, Therese Vimmerslev, Sean McGuire, Arnaud Dupont, and Marion Dupreyrat. 2008. Draft Final Report for the "Study on the Application of Measures Concerning the Promotion of the Distribution and Production of European Works in Audiovisual Media Services (i.e. including television programmes and non-linear services)”. Attentional, Rambøll Management, Oliver & Ohlbaum Associates and Headway International. http:// ec.europa.eu/avpolicy/docs/library/studies/art4_5/draft_final_report.pdf. (Accessed January 8, 2009) Ross, Patrick. 2005. Regulation without Frontiers: Europe Shows U.S. Policymakers How Not to Embrace Convergence. Progress Snapshot, 15 September. http://www.pff.org/issues-pubs/ps/2005/ps1.15frontiers.html. (Accessed January 21, 2009) The UK Department for Culture, Media and Sport (DCMS). 2008. Public Consultation on Implementing the Audiovisual Media Services Directive. London: DCMS. Warren, Peter. 2006. It's TV, But Not as we Know it. The Guardian, July 6. http://www.guardian.co.uk/technology/2006/jul/06/ guardianweeklytechnologysection. (Accessed January 21, 2009) Wouters, Jan and Bart De Meester. 2008. The Implementation by the European Community of the UNESCO Convention on Cultural Diversity. Policy Brief 6. http://www.ggs.kuleuven.be/publications/policybriefs/ PB%206%20-%20J%20Wouters-B%20De%20Meester.pdf. (Accessed January 21, 2009)

125

Rethinking.book Page 126 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 127 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation The Audiovisual Media Services Directive Unraveled at the Dawn of the Digital Public Sphere Peggy Valcke and Eva Lievens

Introduction1 On December 11, 2007, the European legislator adopted Directive 2007/ 65/EC which amends the Television without Frontiers Directive (‘TWF Directive’) and renames it Audiovisual Media Services Directive (‘AVMS Directive’).2 With the new directive, the European legislator aims to respond to the technological developments in the audiovisual sector and create a level-playing field in Europe for emerging audiovisual media services. Since the amendment of the TWF Directive in 1997, the media and telecommunications sectors have witnessed the emergence of digital technologies, leading to the widespread use of new communications means (such as the Internet), the convergence of networks and services, the multiplication of the number of devices with which traditional and emerging new media services can be accessed, and moreover, the unprecedented lowering of the threshold to media content production and distribution. The rocketing popularity of ‘user-generated content’ or ‘personal media’ (citizens sharing their own thoughts, photos, music or videos online) is radically changing Habermas’ concept of the public sphere, with computer–mediated communication taking the place of coffeehouse discourse.3 As networks become structurally decentralised, wider publics gain access to them, and digital communications technology may empower groups and individuals to change social structures. The ‘digital public sphere’ plays a growing role in the transformation of societies. Not surprisingly, this is putting pressure on the traditional media law model, based on the premise of few but professional senders and many receivers.

1. 2. 3.

This contribution is based on the presentation given by the first author in the IES Spring Lecture Series at VUB on 19 March 2008 and on Valcke et al. 2008. Directive 2007/65 on Audiovisual Media Services. Boeder 2005.

127

Rethinking.book Page 128 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Is the new directive really addressing these challenges? It certainly introduces some important reforms, like the extension of the scope of application to on-demand audiovisual services, a two-tier approach of regulation (or ‘graduated regulation’), a substantial relaxation of advertising rules and the possibility of product placement. Co- and selfregulation are brought forth as alternative or complementary mechanisms to achieve the policy goals pursued by the directive. A lot of these issues provoked a lively debate in the committees of the European Parliament as well as the Council of Ministers working groups, and only after intense inter-institutional negotiations, a consensus on a compromise text could be found. It is important in the light of the implementation of the Directive, which all Member States are currently going through (deadline for implementation is 19 December 2009), to remember where certain rules came from or why they were formulated in a specific way. It is the aim of this contribution to highlight the issues that sparked most controversy in the preparation of the new directive, compare the positions of the European Commission, Council and the Parliament, and scrutinise the final outcome of the discussions against the Commission’s initial proposal. The analysis forms the first part of this contribution. The second part addresses some important gaps in the AVMS Directive. It indicates issues that should be taken into account in future content regulation, but which the AVMS Directive falls short of addressing.4

1

A closer look at the discussions underlying the AVMS Directive

1.1 Background: the legislative process The AVMS Directive was adopted following the co-decision procedure, under which EU legislation is adopted jointly by the European Parliament and Council of Ministers, and which is triggered by the publication of a legislative proposal by the European Commission. On December 13, 2005,

4.

For other analyses of the directive, see Johnson 2005; van Eijk 2007; Mediaforum 2008; Ariño and Llorens 2008.

128

Rethinking.book Page 129 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

after a lengthy consultation process,5 the Commission published its longawaited proposal for the revision of the TWF Directive (‘Commission’s original proposal’).6 Basically, the Commission proposed two major reforms: on the one hand, an extension of the TWF Directive to on-demand audiovisual services, and on the other hand, a relaxation of the advertising rules. The latter is a response to the advertising and broadcasting sectors’ request for more flexibility in the light of new advertising techniques and the declining success of traditional advertising spots. The introduction of a horizontal, comprehensive regulatory framework for all audiovisual media services was considered a necessity by the Commission in order to create a level-playing field between traditional broadcasters and new media players, who offer the same or similar audiovisual media content but in a non-linear (on-demand) form. Traditional broadcasters were namely subject to the more burdensome regulation laid down in the TWF Directive, while the new media companies enjoyed the “light-touch” approach of the ECommerce Directive.7 Technology-neutrality and proportionality require future content regulation to be at the same time ‘platform-independent’ and ‘graduated’. Platform independency means that requirements on the content are imposed irrespective of the underlying platform or means of distribution. A graduated approach, then again, implies a two-tier system of rules for linear and non-linear services: there are minimum rules for all services, and a sub-set of heavier rules for linear services, only. These concepts will be explained in more detail below. After the first discussion on the Commission’s proposal in May 2006, the Council reached an agreement on the general approach of the proposed Directive on Audiovisual Media Services on November 13, 2006 (‘Council’s general approach’).8 Officially this ‘general approach’, which was based on 5.

6.

7. 8.

The modernisation of rules for audiovisual services was already launched in 2002 with the Fourth Communication from the Commission (COM(2002)778final) relating to the application of the Television without Frontiers 89/552/EEC directive for the period 2001-2002. In an annex to this communication, the Commission proposed a work programme for the modernisation of rules for audiovisual services and a timetable of future actions. For more information on the consultation process that preceded the formal co-decision procedure, see http://ec.europa.eu/avpolicy/reg/ history/consult/index_en.htm. Commission Proposal on the AVMS Directive 2005; the various text versions of the draft directive – from the Commission’s initial proposal to the text adopted by Parliament in second reading – are available at: http://ec.europa.eu/avpolicy/reg/ history/codecision/index_en.htm. Directive 2000/31 on Electronic Commerce. Council General Approach on the proposed AVMS Directive 2006; http:// register.consilium.europa.eu/pdf/en/06/st15/st15277.en06.pdf.

129

Rethinking.book Page 130 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

the Finnish Presidency’s compromise text, was stated to be broadly in line with the Commission proposal. Nonetheless, Sweden, Ireland, Latvia, Belgium, Lithuania, Luxembourg and Austria did not agree with it and Germany, Italy and Austria announced that they would add statements to the Council’s minutes. Although agreeing in principle with the compromise, almost all the other Member States also disagreed with one or more of the provisions of the Finnish proposal. On the same day, the European Parliament’s lead Committee (Culture and Education) for the AVMS Directive adopted the report of Ms. Hieronymi. The report was, overall, consistent with the Commission’s proposal and the general opinion of the Council, but it contained several important amendments relating to the scope, country of origin, the basic rules applicable to all audiovisual media services (whether linear or non-linear) and advertising and product placement. Exactly one year after the publication of the Commission’s proposal, on December 13, 2006, the European Parliament voted in the plenary session in favour of the Hieronymi Report, thereby completing the first reading of the Directive (‘EP first reading’).9 An informal Council, held on February 12, 2007 in Berlin, prepared the ground for a political agreement on a common position on May 24, 2007 (under the German Presidency). The Commission published an updated proposal – consolidating its initial proposal, the amendments adopted by the European Parliament in first reading and the amended Commission proposal – on March 29, 2007 (‘Commission’s amended proposal’). After the formal adoption of the common position by the Council in October 2007,10 the Parliament finished its second reading on November 29, 2007, approving the text without any amendments.11 Finally, the Directive was adopted on December 11, 2007.

1.2 Major discussion points 1.2.1 Extension of the scope to audiovisual media services One of the major changes in the AVMS Directive is the extension of the scope of application from traditional television to all ‘audiovisual media services’ (as is reflected in the directive’s new title). Parliamentary resolutions, public consultations and expert opinions initially pointed to an overall consensus that a modernised framework should also include 9. European Parliament 2006. 10. Council of the European Union 2007. 11. European Parliament 2007.

130

Rethinking.book Page 131 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

new and emerging audiovisual media services (such as video-on-demand, mobile TV or audiovisual services on digital TV). The Commission was, therefore, surprised by the fierce opposition it encountered at the Liverpool conference in September 200512 from the side of new media providers in the online and mobile sectors, as well as certain Member States like the UK itself. The critics claimed that an extension would entail the risk of ‘overregulation’, which would threaten the take-up of new media services and hamper EU’s competitiveness.13 After the publication of the Commission’s legislative proposal, media scholars also expressed concerns about a possible negative impact on the freedom of speech that would result from the directive’s broadened – and in their view too vague – scope of application. Their fear was that governments, particularly in some Central and Eastern European countries, might (mis)use the new directive as an excuse to impose strict regulations on any kind of information exchanged via the Internet – which in their view should remain an entirely ‘free medium’.14 Consequently, the exact scope of application of the new directive has been one of its most intensely discussed items, and both the Council and the Parliament have tried to fine-tune the key concept of ‘audiovisual media services’. Already in the Commission’s original proposal it was clear that not all audiovisual content would be the target of the new directive, but both the Council and the Parliament considered it necessary to tighten up and clarify the concept even further.

12. Liverpool Major Audiovisual Conference “Between Culture and Commerce” during the UK Presidency, where the first issues papers (working documents) of the European Commission for the revision of the TWF Directive were publicly discussed with a wide group of stakeholders, regulators, broadcasters, experts and academics, with the aim of assisting the Commission in developing its legislative proposals (which were published in December of the same year); http://ec.europa.eu/avpolicy/ reg/history/consult/liverpool_2005/index_en.htm. 13. The warnings continued also after the publication of the Commission’s legislative proposal in December, 2005; see for instance Espiner 2006; OUT-LAW 2006a; OUTLAW 2006b. 14. Cf. Budapest Declaration, 2006, http://www.edri.org/docs/BudapestDeclaration.pdf: “the extension of the scope of some rather burdensome part of the Television Directive to the Internet – as the draft new directive of the European Commission suggests in far too vague terms that would leave content providers and users uncertain about whether or not their various activities are regulated by this new directive – would be an unjustifiable restriction on freedom of speech and freedom of information.”

131

Rethinking.book Page 132 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Commission’s proposal Initially, in the Commissions original proposal, an ‘audiovisual media service’ was defined as “a service as defined by Articles 49 and 50 of the Treaty the principal purpose of which is the provision of moving images with or without sound, in order to inform, entertain or educate, to the general public by electronic communications networks within the meaning of Article 2(a) of Directive 2002/21/EC of the European Parliament and of the Council.”15

This definition contained six criteria that a service would have to fulfill in order to be qualified as an audiovisual media service: 1. an economic activity (‘service as defined by Article 49 and 50’, i.e. a service that is normally provided for remuneration) 2. the principal purpose of which is 3. the provision of moving images with or without sound 4. in order to inform, entertain or educate 5. to the general public 6. by electronic communications networks. Hence, the notion would include audiovisual services that are delivered ondemand or in a non-linear fashion, such as video-on-demand, online or mobile news services (see figure 1), but not activities like personal websites or non-commercial blogs (not an economic activity); travel agents or car manufacturers offering websites with videoclips of exotic locations or the latest car model (delivery of audiovisual content just incidental and not the principal purpose of the service); private communications, such as e-mail or chat services (no information to the general public; no mass media); and online editions of newspapers or magazines, radio services (cf. recital 13 Commission’s original proposal)

15. Article 1 (a) Commission’s original proposal.

132

Rethinking.book Page 133 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

Figure 1: European Commission, “The Commission Proposal for a Modernisation of the Television without Frontiers Directive: Frequently Asked Questions”, MEMO/05./475, 13 December 2005

With the last criterion, it was made clear that the transmission method used for the delivery of the service would not be a relevant criterion—as long as the service would be delivered via an electronic communications network in the sense of the Framework Directive.16 The same reasoning applied in fact already to the concept of broadcasting under the TWF Directive, as confirmed by the European Court of Justice (‘ECJ’) in the Mediakabel case: “A service comes within the concept of ‘television – if it consists of the initial transmission of television programmes intended for reception by the public, that is, an indeterminate number of potential television viewers, to whom the same images are transmitted simultaneously. The manner in which the images are transmitted is not a determining element in that assessment.”17

However, the explicit inclusion of the principle of technology-neutrality was considered useful to bring more clarity to stakeholders. Hence, the Commission proposed that the new directive would cover audiovisual services irrespective of the distribution means or whether the content is offered in a linear way or on-demand. This implies that new types of 16. Directive 2002/21 on Electronic Communications Networks and Services. 17. European Court of Justice, Mediakabel, Case C-89/04 par. 33 (emphasis added).

133

Rethinking.book Page 134 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

delivery modes (like Internet or mobile platforms) would be included, as well. Amendments Both the Council and Parliament were of the opinion that the Commission’s suggested definition of audiovisual media services needed further refinement, distinguishing more clearly the services that would fall within the scope of the new directive from those that would remain outside it. The European Parliament adopted several amendments through which such clarification should be achieved. First of all, they introduced the concept ‘editorial responsibility’ as a key element of the definition of audiovisual media service. The Commission’s initial proposal only related to the definition of media service providers. In the final text of the directive the notion of ‘editorial responsibility’ is further clarified as “the exercise of effective control both over the selection of the programmes and over their organisation either in a chronological schedule, in the case of television broadcasts, or in a catalogue, in the case of on-demand audiovisual media services. Editorial responsibility does not necessarily imply any legal liability under national law for the content or the services provided.”18

Moreover, the Parliament explicitly referred to ‘programmes’, as opposed to just any type of moving images, as the substance of the service offered. The concept of programmes was introduced in the definition of audiovisual media service and further clarified in a new Article 1 (kb) by the Parliament.19 The Commission redrafted the definition of ‘programme’ in its amended proposal as: “a set of moving images with or without sound constituting an individual item within a schedule or a catalogue established by a media service provider and whose form and content is comparable to the form and content of television broadcasting.”

18. Article 1 (c) AVMS Directive, inspired by amendments 25 and 79 EP first reading; accepted in the Commission’s amended proposal: Article 1 (kd) and recital 17. Please note that in the Parliament’s amendment and the Commission amended proposal a slightly different wording was used “responsibility for the composition of the schedule or the compilation of programmes intended for the general public, in a professional capacity, in order to deliver the media content within a set time frame or to allow it to be ordered from a catalogue” and “the responsibility for the selection and organisation, on a professional basis, of the content of an audiovisual offer. This may apply to an individual content or a collection of contents. Such editorial responsibility applies to the composition of the schedule, in the case of television programmes, or to the programme listing, in the case of non-linear services.” 19. Amendments 66 and 77 EP first reading.

134

Rethinking.book Page 135 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

The latter phrase stresses that the service in question should be ‘televisionlike’, i.e. it should compete for the same audience as television broadcasts, and that the nature and the means of access to the service would lead the user reasonably to expect regulatory protection.20 The final Article 1 (b) AVMS Directive lists a number of examples of ‘programmes’: “featurelength films, sports events, situation comedies, documentaries, children’s programmes and original drama”. Recital 17, however, states that the notion of ‘programme’ should be interpreted in a dynamic way taking into account developments in television broadcasting. This means that new types of programmes, like ‘mobisodes’ – which are television episodes especially made for viewing on a mobile telephone screen and usually of a short, 1-3 minute duration – are likely to fall within the notion as well. The Parliament also suggested excluding some services from the scope of the directive explicitly in the text. In the very definition of ‘audiovisual media service’, the Parliament proposed to clarify that this would not include “services where the provision of audiovisual content is merely incidental to the service and not its principal purpose, nor […] the press in printed and electronic form.”21 However, in the final text, this specification remains part of the recitals 18 and 21. Finally, there was a perceived need to provide for additional explanation and examples in the recitals. For instance: games of chance, lotteries and betting, online games and search engines are explicitly stated as being excluded,22 while on the other hand the economic element of the included services was stressed: according to the Parliament this economic aspect had to be significant to justify the application of the directive, so that only economic activities that are normally provided for remuneration, intended for a certain period and characterised by a certain continuity could be covered.23 Next to these important changes also the concepts of ‘television broadcasting’ (or linear audiovisual media service) and ‘on-demand service’ (or non-linear audiovisual media service) have been redrafted. According to the Parliament, crucial elements that had to be reflected in the definition of television broadcasting (linear services) related to the simultaneous offer of programmes to an indeterminate number of potential viewers in 20. Recital 17 AVMS Directive. 21. Amendment 66 EP first reading. 22. Amendment 213 EP first reading; accepted in the final text in recital 18 AVMS Directive. 23. Amendment 18 EP first reading, accepted in condensed and redrafted form in the Commission’s amended proposal and in the final text in recital 16 AVMS Directive.

135

Rethinking.book Page 136 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

accordance with a fixed programme schedule set by the service provider.24 The final text of Article 1 (e) AVMS Directive contains the following definition: “television broadcasting or television broadcast (i.e. a linear audiovisual media service) means an audiovisual media service provided by a media service provider for simultaneous viewing of programmes on the basis of a programme schedule.”

Recital 20 AVMS Directive specifies that television broadcasting currently includes “in particular analogue and digital television, live streaming, webcasting and near-video-on-demand.” In contrast, video-on-demand is given as an example of an on-demand, non-linear service. The recital further clarifies that “for linear audiovisual media services or television programmes which are also offered on a live or deferred basis as non-linear services by the same media service provider, the requirements of this Directive are deemed to be met by the linear transmission”.25 So, basically, linear television broadcasts are scheduled broadcasting services via traditional TV, the Internet or mobile phones, ‘pushing’ content to viewers. In the definition of on-demand (or non-linear) service the two key elements are the selection of a catalogue of programmes by the provider (with the associated editorial control), on the one hand, and the user’s choice over the content and time of viewing, on the other. Article 1 (g) AVMS Directive reads:26 “on-demand service (i.e. a non-linear audiovisual media service) means an audiovisual media service provided by a media service provider for the viewing of programmes at the moment chosen by the user and at his individual request on the basis of a catalogue of programmes selected by the media service provider.”

With this type of services, the viewer ‘pulls’ the content from a network and has full control over what he/she watches at which moment. As we will explain further below, the European legislator uses this larger control of the viewer to justify imposing a lighter tier of requirements to on-demand services. Finally, the definition of media service provider was further specified: “it does not include natural or legal persons who merely transmit content for 24. The text between brackets was included explicitly in amendment 68 EP first reading, but not copied into the Commission’s amended proposal. 25. Proposed by amendment 20 EP first reading, accepted in the Commission’s amended proposal. Recital 20 goes on to say that – to the contrary – “where different kinds of services are offered in parallel, but are clearly separate services, this Directive should apply to each of the services concerned.” 26. Accepting in principle amendment 205 EP first reading.

136

Rethinking.book Page 137 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

which the editorial responsibility lies with third parties.”27 Again, this demonstrates that YouTube-like service providers were not considered to be the target of the new directive. In the discussions on the draft AVMS Directive, the example of YouTube (or YouTube-like services,28 since YouTube itself is located in the United States) was often thought of as a type of service which ought not be included in the new directive. Because the platform provider does not actively select the content and does not control its organisation in a chronological schedule or a catalogue, he does not exercise editorial responsibility within the meaning of the directive.29 Another sign of this concern can be found in recital 16, where it is explicitly stated that services consisting of the provision or distribution of audiovisual content generated by private users for the purposes of sharing and exchange within communities of interest are not covered by the directive. This seems to place the whole world of user-generated content outside the scope of the directive30 since, firstly, the citizens themselves fall outside the scope because they are not offering an economic service; and, secondly, the service providers are not included either because they merely transmit or host content for which they are not editorially responsible. 1.2.2 Country of origin The country of origin principle – which was already at the heart of the original TWF Directive of 1989 – entails the obligation for the home country to exercise control over its broadcasters/service providers. The other side of the medal is the prohibition for receiving countries to establish secondary control over incoming content services. For the service providers themselves, this implies that they only have to comply with the rules of the Member State where they are established, even if their services are received in other Member States as well. This principle is key for the 27. Amendment 67 EP first reading, accepted in the Commission’s amended proposal, incorporated in recital 19 AVMS Directive. 28. Such as GarageTV, the video sharing portal of Telenet (the largest Flemish cable operator); http://www.garagetv.be/. 29. Even though it cannot be denied that YouTube and the like exercise (at least) some secondary control. They usually post a (minimal) code of conduct and have a policy of removing videos that have been flagged by the users of the community themselves as inappropriate (see for instance YouTube Community Guidelines at http:// www.youtube.com/t/community_guidelines). As long as the intervention is ex post, acting upon complaints from users, and not reverts into active selection ex ante, such control is not considered as editorial responsibility in the sense of the AVMS Directive. 30. For an assessment of regulatory questions surrounding user-generated content and online video portals, see for instance Ariño 2007, 115 – 35.

137

Rethinking.book Page 138 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

creation of the internal market. Without it, pan-European service providers, such as many online providers, risk being subject to twentyseven different national legal systems. This would undoubtedly amount to a serious barrier to the deployment of new audiovisual services. Therefore, the country of origin principle also remains at the heart of the new AVMS Directive and is essential in order to ensure the free flow of information and audiovisual programmes in the internal market. However, this principle has also been one of the most controversial issues in the discussions in the Council and the Parliament. Over the years, several Member States – especially the smaller ones – have complained about the problem of forum shopping: broadcasters establish themselves in the Member State with the lightest set of rules. The principle thus renders it virtually impossible for them to impose on broadcasters under their jurisdiction rules stricter than the minimum requirements prescribed by the TVW Directive.31 During the discussions in the Council’s working groups and COREPER, some Member States (the socalled ‘Group of 13’, including Ireland, Sweden, Poland, Latvia, Belgium and the Netherlands) insisted on firm measures to protect them against incoming broadcasts in case these do not respect their stricter national rules, while other Member States (e.g. Luxembourg, UK, Germany, Hungary, Denmark) considered that such measures would weaken the country of origin principle, which should remain the cornerstone of the directive. To overcome the problem of jurisdiction shopping, the European legislator basically had three options: it could allow derogations in certain circumstances, change the establishment criteria or impose regulatory cooperation.

31. Member States theoretically had (and still have under the new AVMS Directive) this possibility pursuant to Article 3 TWF Directive, but were often confronted with the problem of delocalisation when they wanted to implement stricter rules in practice (the Flemish Community of Belgium, for instance, recently abolished its prohibition on children’s advertising under the pressure of the Flemish commercial broadcasters who had already been complaining for several years about unfair competition from broadcasters in the Netherlands; in the South of Belgium, the French Community was recently confronted with the delocalisation of its most popular commercial station, RTL-TVi, to Luxembourg).

138

Rethinking.book Page 139 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

Commission’s proposal The Commission’s approach in its initial legislative proposal was to codify the case law of the ECJ with regard to the so-called ‘U-turn doctrine’.32 Moreover, the doctrine would be combined with a more efficient procedure for regulatory cooperation, yet without calling into question the proper application of the country of origin principle. Under the ECJ’s case law, a Member State retains the right to take measures against a television broadcasting organisation established in another Member State if the following conditions are fulfilled: the activity is entirely or principally directed towards the receiving country’s territory, and the establishment has been set up with a view to circumventing the rules which would be applicable to the company. In other words, the receiving Member State has to prove an abuse or fraudulent conduct on the side of the broadcaster in order to apply its own rules. These wordings were reflected in Article 2, al. 7-10 as introduced in the Commission’s initial proposal. Moreover, the Commission’s proposal required the receiving state to engage in a strict procedure of regulatory cooperation, whereby the sending Member State is asked to take measures but fails or refuses to do so. The Commission also has to assess the compatibility of the intended measures with Community law, exercising a kind of veto power. Finally, the measures need to be objectively necessary, non-discriminatory, effective and proportionate. Amendments Several Member States attempted to render the procedure stricter, in the sense that it would imply mandatory measures for the home country when contacted by a receiving Member State. Looking at the adopted text, it seems that the attempts have (only) been partially successful. The final text of the directive still requires a receiving Member State, which has adopted more detailed or stricter rules and which assesses that a broadcaster under the jurisdiction of another Member States provides a television broadcast which is wholly or mostly directed towards its territory,33 to turn to the 32. European Court of Justice, Centros, Case C-212/97; European Court of Justice, Van Binsbergen, Case C-33/74; European Court of Justice, TV 10, Case C-23/93. 33. Such assessment of whether a broadcast by a media service provider established in another Member State is wholly or mostly directed towards its territory should be done on a case-by-case basis, and may refer to indicators such as the origin of the television advertising and/or subscription revenues, the main language of the service or the existence of programmes or commercial communications targeted specifically at the public in the Member State where they are received (Directive 2007/65 on Audiovisual Media Services, Recital 33).

139

Rethinking.book Page 140 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

home country first. According to Article 3, al. 2 AVMS Directive, a Member State shall “on receipt of a substantiated request by the [receiving] Member State, […] request the broadcaster to comply with the rules of general public interest in question,” i.e. the rules of the receiving Member State which are more detailed or stricter in the fields coordinated by the directive.34 However, the home country is not required to achieve any concrete results; it should only inform the receiving Member State of the results obtained within two months of the request. The latter then can take measures unilaterally if it considers the intervention by the home country not satisfactory and if it can prove the broadcaster’s intentions to circumvent the stricter rules.35 Hence, on the one hand, the Parliament has rendered the procedure stricter, by imposing on the home country an obligation to act (but not to achieve any results). On the other hand, it has made it more difficult to apply the procedure by the receiving Member State: the rules, which are circumvented should relate to the fields coordinated by the Directive-not to just any legislation. Consequently, providers retain the right to establish themselves in Member State A for the sole purpose to enjoy the benefit of more favourable rules on issues beyond the AVMS Directive (e.g. tax legislation), even if that provider conducts activities entirely or mainly in Member State B.36 Moreover, the receiving Member State is still faced with the very high burden of proving circumvention before it can take unilateral measures. The procedure is also restricted to broadcasters because for ondemand services, a different procedure applies.37 Parliament also heavily amended the existing procedure of provisional derogation from the country of origin principle (without having to prove abuse or fraudulent intent) in cases where programmes originating from another Member State seriously infringe a requirement on the protection of minors or on incitement to hatred.38 The Parliament’s amendments 34. The full text of Article 3, al. 3 states that “in order to circumvent the stricter rules, in the fields coordinated by this Directive, which would be applicable to it if it were established within the [receiving] Member State”. It is inspired by amendment 221 EP first reading. 35. Directive 2007/65 on Audiovisual Media Services, Art. 3. Inspired by amendment 222 EP first reading. 36. Cf. Report of Member of European Parliament Hieronymi, in which it was stressed that blocking services that fully comply with the rules of the directive (i.e. with those rules harmonised to ensure the functioning of the Single Market) should only take place in exceptional cases where public order is threatened (p. 164, justification of amendment 52 proposed by the Committee on Industry, Research and Energy). 37. See infra. 38. Directive 1989/552 on Television without Frontiers, Art. 2a.

140

Rethinking.book Page 141 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

extended the possibility for a receiving Member States to block also nonlinear services if they seriously infringe the rules on protection of minors or incitement to hatred.39 Moreover, the Parliament also installed a special ‘urgency’ mechanism for such non-linear audiovisual media services: the Member States could temporarily derogate from the country of origin principle without following the established procedure. However, the derogation was connected to an obligation to notify the measures to the Commission and the home country in the shortest possible time, indicating the reasons of urgency.40 Whereas the second point on temporary derogations was accepted in the Commission’s amended proposal, the Commission preferred to stick to its initial viewpoint, which was also the opinion of the Council with regard to the first one. Hence, it restricted the possibility for provisional derogations to television broadcasts. However, in the final text of the directive a division was again made in Article 2a between television broadcasts and on-demand services. In al. 4 a procedure was foreseen to derogate from on-demand services if the measures were necessary for public policy, the protection of public health, public security or the protection of consumers. The services would also need to present a serious and grave risk of prejudice against those objectives. Finally, the measures would need to remain proportionate to their objectives. It is worth noting that the chosen wording is identical to the derogation procedure foreseen for information society services in the eCommerce Directive.41 1.2.3 Advertising (product placement) Under the TWF Directive, rules on TV advertising were quite detailed, both in quantitative and in qualitative terms. Back in 1989, these detailed rules were felt necessary, given the limited familiarity of the viewers with advertising on the emerging commercial channels. Today, viewers’ expectations are less naïve and they usually know well the difference between editorial and commercial content. Hence, simpler and more flexibile advertising rules, urged by both the advertising industry and the broadcasters in recent years, could be embraced without jeopardising the 39. Amendment 82 EP first reading. In the Commission’s original proposal, this possibility remained restricted to television broadcasts. Amendment 82 also replaced the involvement by the ‘transmitting Member State’ by an involvement by the Member State in which the media service provider concerned is established. 40. Amendment 199 EP first reading. 41. Directive 2000/31 on Electronic Commerce, Art. 3.

141

Rethinking.book Page 142 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

protection of consumers and general public policy objectives. The Commission’s interpretative communication of 200442 was considered an interim solution, the first step in the modernisation process. It provided guidelines to reconcile the existing rules in the TWF Directive with new advertising techniques, such as virtual advertising, split screen and interactive advertising. The AVMS Directive now aims at considerably simplifying the rules concerning television advertising. This will allow the media service providers to take advantage of the innovations in the advertising sector and to compensate for their dropping revenues in traditional commercials. Commission’s proposal Four main changes proposed by the Commission to Chapter IV on television advertising concerned, firstly, the introduction of flexible and simplified rules for the insertion of advertising. Instead of being compelled to allow 20 minutes time between each advertising break, as was the case under the TWF Directive, broadcasters would be allowed to choose the most appropriate moment to insert advertising during programmes. Nonetheless, interruptions of films made for television, cinematographic works, children’s programmes and news programmes would still be limited: only once per period of 35 minutes. In religious services it would still be prohibited to insert advertising or teleshopping.43 Secondly, the Commission was in favor to allow product placement, but under clear rules. For instance, no influence on editorial independence would be allowed and the information to the public on the placement of an advertiser’s products in a programme would have to be clear and precise in order to avoid qualification as surreptitious advertising.44 Thirdly, the Commission suggested abolishing the daily limit on television advertising. According to the explanatory memorandum to the Commission’s proposal,45 this limit was considered obsolete, finding no application in practice. However, the directive would not increase the hourly amount of admissible advertising, so the hourly limit of 20 % would remain in place.46 Finally, quantitative restrictions with regard to teleshopping would be removed.47

42. 43. 44. 45. 46.

Commission Interpretative Communication on Televised Advertising 2004. Article 11 Commission’s original proposal. Article 3h Commission’s initial proposal. Explanatory memorandum to the Commission’s initial proposal, p. 11. Article 18 Commission’s initial proposal – compare with old Article 18 TWF Directive. 47. Old Article 18a TWF Directive.

142

Rethinking.book Page 143 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

Amendments Product placement turned out to be a very sensitive topic during the discussions in the Council and in the Parliament. Germany, heavily opposed to product placement and thematic placement, convinced the Council to include a principal ban on all product placement in the Directive and leave it up to the Member States to derogate from this prohibition (i.e. ‘opt out’) for certain categories of programmes and subject to strict conditions to protect the viewer. The Parliament also adopted an amendment that set out a general prohibition on product placement, in particular in certain programmes, but it already provided for some exceptions in the Directive itself. According to the Parliament’s position in the first reading,48 product placement would be permitted – by way of derogation from the general prohibition – in a limited range of programmes and subject to certain conditions. The categories of programmes in which the Parliament wanted to allow product placement was limited to cinematographic works, films and series made for television and sports broadcasts. This list has been broadened in the final text of the directive to cover also films and series made for audiovisual media services, light entertainment as well as sports programmes other than mere sports broadcasts.49 The Parliament’s amendments also provided explicitly that product placement would be forbidden in news and current affairs programmes, children’s programmes, documentaries and programmes of advice. In the final text only the prohibition of product placement in children’s programmes was retained, however. The Commission did also not accept the prohibition of product integration and thematic placements, introduced by amendments 227 and 133.50 As one of the conditions for the admissibility of product placement, the European Parliament put forward the obligation to appropriately notify the viewers of the existence of product placement at the start and the end of the programme, not just at the start as suggested in the Commission’s initial proposal. The Parliament also proposed to signal the inclusion of 48. Amendments 227 and 133. 49. Also allowed is “where there is no payment but only the provision of certain goods or services free of charge, such as production props or prizes, with a view to their inclusion in a programme” (Article 3g al. 2 AVMS Directive). 50. Product integration and thematic placement were defined by the Parliament as “the intervention of any undertaking or body in the plot of a film or fictional programme seeking to promote in particular a product, service or brand” (amendment 72 EP First Reading).

143

Rethinking.book Page 144 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

product placement at least every 20 minutes during the programme in order to avoid any confusion on the part of the viewer.51 While the former obligation has been retained in the final text of the directive, the latter was replaced by the obligation to inform the viewer when a programme resumes after an advertising break.52 Both Parliament and the Council agreed with the Commission that product placement for certain products, such as tobacco products or cigarettes and specific medical products or treatments available only on prescription in the home country, should be completely banned.53 The Parliament also proposed to further clarify the definition of product placement,54 but the final text of the directive stays close to the original definition put forward in the Commission’s initial proposal: "product placement means any form of audiovisual commercial communication consisting of the inclusion of or reference to a product, a service or the trade mark thereof so that it is featured within a programme, in return for payment or for similar consideration.”55

With respect to the more general rules on advertising, the Parliament voted in favour of the proposed relaxation of the rules on insertion, including the deletion of the 20-minutes rule. It also accepted the category of programmes that could be interrupted by advertising and/or teleshopping,56 but changed the period of interruption to “each scheduled period of 30 minutes.”57 The Parliament agreed with the Commission that subliminal techniques had to be forbidden in all forms of audiovisual commercial communications.58 Finally, amendment 226, that asked the Member States and the Commission to “encourage audiovisual service providers to develop a code of conduct regarding children's programming containing or being interrupted by advertising, sponsorship or any marketing of unhealthy and inappropriate foods and drinks such as those high in fat, sugar and salt and of alcoholic beverages” was accepted in the Commission’s amended proposal

51. 52. 53. 54. 55. 56.

Amendments 227 and 133. Article 3g, al. 2 (d) AVMS Directive. Article 3g, al. 3 AVMS Directive. See amendment 75 EP First Reading, rejected by the Commission. Article 1 (m) AVMS Directive. Films made for television – so excluding series, serials and documentaries – cinematographic works, children’s programmes and news programmes. 57. Amendment 208 EP first reading, accepted in the final text in Article 11 AVMS Directive. 58. Article 3e, al. 1 (b) AVMS Directive.

144

Rethinking.book Page 145 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

and is included in the final text of the directive, although in a slightly different wording.59 1.2.4 Short news reporting While the TWF Directive contained harmonised rules ensuring the public’s access to (live or deferred) coverage of major events on free television,60 it did not address the issue of short news reporting.61 The harmonisation resulting from Directive 2001/2962 was only minimal, since the exception to copyright for news reporting in Article 5, al. 3 (c) is optional for the Member States. It was therefore considered useful by the Commission to establish in the new directive a right of transfrontier access63 to programme extracts for news purposes. The proposal provides the basic principles (such as the events covered and the beneficiaries of this right), but leaves it up to the Member States to fill in the details of the regulation, such as the applicable conditions, duration and destination of the extracts, or compensation arrangements. Hence, the idea behind the new provision is more about non-discrimination between domestic and foreign broadcasters in getting access to short extracts, rather than harmonisation of national rules on short news reporting. Commission’s proposal The Commission’s initial proposal introduced a new Article 3b on the nondiscriminatory application of the right to short news reporting for linear services. Member States would have to ensure that “for the purposes of short news reports, broadcasters established in other Member States are not deprived of access on a fair, reasonable and non-discriminatory basis to events of high interest to the public which are transmitted by a broadcaster under their jurisdiction.” Broadcasters would be entitled to freely choose these short news reports from the transmitting broadcaster’s signal, but would have to

59. In Article 3e, al. 2 AVMS Directive. 60. ‘Events list’, Article 3a TWF Directive. 61. Contrary to the European Convention on Transfrontier Television, which refers to the right of short reporting in its Article 9 (see also Recommendation No. R (91) 5 of the Committee of Ministers to Member States on the right to short reporting on major events where exclusive rights for their television broadcast have been acquired in a transfrontier context, 14 April 1991). 62. Directive 2001/29 on Copyright in the Information Society. 63. Although the idea of a “right of access” was firmly rejected by private broadcasters and rights holders, who considered this to be a matter for voluntary codes; Issues paper for the audiovisual conference in Liverpool – Right to information and right to short reporting, July 2005.

145

Rethinking.book Page 146 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

identify the source by, for instance, displaying the name or logo of the exclusive rights holder. Amendments Both the Council and the Parliament endorsed the idea of a harmonised regulation for short news reporting, limited to linear services. The Parliament, however, adopted some amendments. In particular, it sought to: 앫 make clear that the provision on short extracts would be without prejudice to existing contractual agreements between broadcasters;64 앫 establish that the broadcaster granting the access should be entitled to ‘appropriate compensation’ for the technical costs incurred;65 앫 state that the provision on access to short extracts would be without prejudice to other copyright rules including those in the Directive 2001/ 29 on Copyright in the Information Society;66 앫 ensure that the conditions of access to short extracts are defined, by the Member States, in particular on time transmission limits and identification of the host broadcaster;67 앫 introduce a second sub-right of short news reporting (besides the right to have access to short extracts), notably the right for broadcasters to gain access themselves to the event concerned.68 The press agency representatives have been lobbying for an extension in their favour of the right to short extracts of events worthy of media interest. This would be a part of the service that the press agencies render to broadcasters that do not have the technical capability or financial resources to acquire broadcasting rights. The press agencies have, however, been unsuccessful in their attempts. According to the adopted text in the AVMS Directive the right to (transfrontier) short reporting is confined to 64. Amendment 223 EP first reading, not included in the final text. 65. Ibid.; accepted in Commission’s amended proposal, but leaving out the explicit reference to ‘technical’ costs, included in the final text in Article 3k, al. 6. 66. Amendment 207 EP first reading, rejected by the Commission. 67. Amendment 97 EP first reading, accepted in principle in the Commission’s amended proposal, included in the final text in Article 3k, al. 6. 68. Amendment 98 EP first reading, accepted in principle by the Commission but using the wording of the Council’s general approach, stating that “as an alternative [to the right to freely choose short extracts] a Member State may establish an equivalent system which achieves access on a fair, reasonable and non-discriminatory basis through other means”; included in the final text in Article 3k, al. 4 AVMS Directive. This kind of a clause exists, for instance, in the Flemish Community of Belgium (Article 157 Flemish Broadcasting Decrees of 4 March 2005, Belgisch Staatsblad 8 April 2005, err. Belgisch Staatsblad, 24 November 2005 (see Valcke et al. 2008)).

146

Rethinking.book Page 147 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

broadcasters only (i.e. providers of linear audiovisual media services). Article 3k, al. 5 specifies that “short extracts […] may be used in on-demand audiovisual media services only if the same programme is offered on a deferred basis by the same media service provider”.

1.3 Summarising main reforms It follows from the preceding paragraphs, in which the positions of the Commission, the Council and the Parliament were presented and compared with the finally adopted text of the AVMS Directive that, all in all, the basic lines of the reforms initially proposed by the Commission have remained unaltered throughout the preparatory process. Although some issues were subjected to intense discussions, no fundamental changes were introduced on, e.g., the scope of the directive, the country of origin principle, or product placement. There may be some changes that appear as major, such as the introduction of a general ban on product placement, but in the end they did not alter the relevant rules fundamentally. Member States can easily derogate from the general ban on product placement, so its relevance remains limited. Most modifications concern either legal finetuning for the sake of legal clarity; this explains for instance the inclusion of the criterion of editorial responsibility in the definition of audiovisual media service as well and not only in the definition of audiovisual media service provider. Or they are the result of political compromises; think of the complicated procedures and conditions for derogation from the country of origin principle. The contribution of Anna Herold in this book describes in more detail the changes brought about by the new directive.69 The concluding paragraphs to this chapter will therefore be limited to a snapshot of the – in our view – four most important characteristics of the new directive. The first main feature of the directive is its horizontal approach. The new framework is no longer limited to the traditional broadcasting sector, but will apply both to linear and non-linear audiovisual media services. In other words, the framework’s starting point is no longer the vertical division between broadcasting and telecommunications. It deals with the

69. See also, “From TvWF to AVMSD – synopsis (unofficial consolidated working document)”, available at http://ec.europa.eu/avpolicy/docs/reg/avmsd/avmsd_comp_table_en.pdf.

147

Rethinking.book Page 148 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

so-called ‘content layer’ that comes on top of the ‘transmission layer’, which is regulated by the electronic communications directives.70 Technology-neutrality is the second major characteristic of the new directive. The means of conveying the content or the underlying technology are irrelevant to qualify a service as “an audiovisual media service.” Technological criteria hence do not affect the scope of application of the new directive. Thirdly, the directive is characterized by its so-called graduated regulation of ‘regulatable content’. The directive contains two tiers of regulation: a set of minimum requirements applicable to all audiovisual media services (both linear and non-linear)71 and a tier of additional requirements applicable only to linear audiovisual media services. The basic tier includes: 앫 The obligation to render public certain information about the provider’s identity, address, contact details.;72 앫 The prohibition to make services available in such a way that might seriously impair the physical, mental or moral development of minors;73

70. Directive 2002/21 on a common regulatory framework; Directive 2002/19 on access and interconnection; Directive 2002/20 on the authorisation of electronic communications networks and services; Directive 2002/22 on universal service and users' rights; Directive 2002/58 on privacy and electronic communications; Directive 2002/77 on competition in the markets for electronic communications services. 71. Strictly speaking, some of the requirements in the basic tier only apply to non-linear services, notably the rules on protection of minors and promotion of European works. However, these policy goals are also pursued in the context of linear services, albeit via stricter rules. Hence, we could say that for linear services, these stricter rules add up to the basic requirements in the areas of protection of minors and promotion of European works (as it was initially presented in the Commission’s proposal of December 2005). 72. Article 3a AVMS Directive. 73. Article 3h AVMS Directive (applicable to on-demand services; Article 22 AVMS Directive contains stricter rules for linear services). Note that the Parliament introduced several amendments seeking to strengthen the protection of minors both in linear and in non-linear services. They, for instance, aimed at encouraging the relevant players in the media sector to promote a Community-wide labelling, assessment and filtering system, at obliging providers to offer filtering systems for content that is damaging to the physical, mental or moral development of minors, and at requiring Member States to ensure that media service providers under their jurisdiction would not, in any circumstance, broadcast any child pornography under penalty of administrative and penal sanctions. All these amendments were rejected by the Commission.

148

Rethinking.book Page 149 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

앫 The prohibition to provide content that contains any incitement to hatred based on race, sex, religion or nationality;74 앫 The obligation to promote production of and access to European works;75 앫 Basic (qualitative) obligations for audiovisual commercial communications (such as distinguishability from editorial content, respect for human dignity and no discrimination) and sponsoring (for instance, no influence on editorial independence and clear identification);76 앫 Conditions for product placement;77 앫 Accessibility (“gradually and where feasible”) to people with a visual or hearing disability.78 The additional tier with stricter rules that apply only to linear audiovisual media services contains four further specifications: 앫 Minimum percentages for the inclusion of European works and of independent works (‘European quota’);79 앫 Qualitative and quantitative requirements for television advertising, sponsorship and teleshopping. The requirements are more detailed than the aforementioned obligations applicable to any type of commercial communications, but are considerably more relaxed than the advertising rules in the TWF Directive;80

74. Article 3b AVMS Directive – note that the list of grounds for discrimination in the Commission’s initial proposal has been shortened following the Council’s general approach, hence no longer including “ethnic origin, disability, age or sexual orientation.” 75. Articles 3i contains ‘basic’ requirements for on-demand services, while Articles 4-9 contain more detailed obligations for linear services (infra). 76. Article 3e and 3f AVMS Directive. 77. Article 3g AVMS Directive. 78. Article 3c AVMS Directive. 79. Articles 4-9 AVMS Directive. Note that a definition of ‘independent producers’ has not been included in the directive; Member States, however, when defining this term, “should take into account the ownership and proprietary right of the production firm, the number of programmes provided to the same broadcaster, and the ownership of secondary rights”, thereby providing – especially smaller and medium-sized production companies – an argument to counterbalance the broadcasters’ usual request to transfer all IP rights (recital 49; amendment 137 EP first reading suggested to include this in the text of Article 6 itself but was not accepted). 80. Articles 10-20 AVMS Directive.

149

Rethinking.book Page 150 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

앫 The prohibition to broadcast programmes which might seriously impair the development of minors;81 앫 Right of reply, although still limited to a right of correction.82 Finally, the fourth main feature of the directive lies in its attention for coand self-regulation. In line with the general European policy on better regulation,83 the new directive opens perspectives for a greater reliance on co- and self-regulatory regimes to implement its provisions and to achieve its objectives.84 The Commission initially only referred to co-regulation as a means for implementation. The final text of the directive however requires Member States not only to encourage co-regulatory regimes in the fields coordinated by the Directive, but also to encourage self-regulatory regimes. This is in line with the Council’s and Parliament’s views. The Directive does, nonetheless, point out in recital 36, following the Parliament’s amendment 36, that “while self-regulation might be a complementary method of implementing certain provisions of this Directive, it should not constitute a substitute for the obligations of the national legislator.” Hence, some government involvement is a minimum requirement for the implementation of the Directive’s obligations. Given that the same recital defines co-regulation as “[giving], in its minimal form, a legal link between self-regulation and the national legislator in accordance with the legal traditions of the Member States,” one could assume that co-regulation is preferred above self-regulation to apply the Directive.85 In our view, the AVMS Directive rightfully takes these four principles or characteristics as the starting point for the new European approach on content regulation in the media landscape of the 21st century. However, it seems doubtful whether the new directive fills in the details of these principles in a correct and appropriate way in order to provide a consistent and future-proof regulatory framework for audiovisual content services. The second part of this article will pinpoint some issues – important 81. Article 22 AVMS Directive. 82. Note that the Parliament in its first reading adopted amendments to introduce a new recital 38A and Article 3hd, extending the right of reply to non-linear services (amendments 136 and 55); these were however not endorsed by the Council and not accepted in the Commission’s amended proposal nor in the final text. 83. See for instance: Interinstitutional Agreement on Better Law-making of 2003; Communication COM(2005) 97 of the European Commission on Better Regulation for Growth and Jobs in the European Union. 84. Article 3, al. 7 AVMS Directive. 85. Of course, following this interpretation the inclusion of ‘self-regulation’ in Article 3, al. 7 AVMS Directive seems somewhat contradictory. It is also possible to argue that a correct interpretation of recital 36 depends on the exact scope of the definition of the concepts self- and co-regulation.

150

Rethinking.book Page 151 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

remaining gaps – where the directive could and should have been more forward-looking.

2

Remaining gaps in the light of future content regulation

2.1 Old wine in new barrels? In previous papers and publications86 we have raised the question whether the AVMS Directive really adds something to the existing obligations for non-linear services. The extension of the scope of application seems revolutionary at first sight. A closer look at the basic tier of requirements on the on-demand services reveals, however, lists of rules that were predominantly already applicable in most (if not all) EU countries. It is often disregarded that general civil and criminal laws already contain some ‘content’ rules—provisions that are applicable to any type of media service. Some examples are given in the following paragraphs. The requirement on service providers to render certain information public to customers is often part of general consumer protection law. Protection of minors and respect for human dignity are rules that belong to the core of public decency rules, the infringement of which is usually penalised. Hence, these rules can be found in national criminal laws. “Promoting, where practicable and by appropriate means, access to European works”87 is mainly a symbolic provision. Its practical meaning will probably diverge widely throughout the Member States, and perhaps amounts to a zeroburden in some Member States. The qualitative requirements imposed on audiovisual commercial communications are already to be found, either in other European Directives88 or in codes of conduct.

86. Valcke and Stevens 2007, 285 – 302; Valcke and Stevens 2006; Valcke 2006. 87. Article 3i AVMS Directive. 88. Like the E-Commerce Directive or Directive 2003/33 on advertising and sponsorship of tobacco products.

151

Rethinking.book Page 152 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Bluntly stated, one could say that from the start, adding something new was not the Commission’s ultimate ambition. This was justified by referring to the proportionality principle: “As the harmonisation of minimum rules for non-linear audiovisual services mostly does not introduce new obligations for operators but only harmonises them at European level to implement the country of origin principle, it therefore seems proportionate to the objective.”89

Nevertheless, there are some benefits in systematically bringing all these obligations together in a harmonised regulation for the audiovisual sector. Member States will probably implement the provisions in their broadcasting legislation, even if they already existed elsewhere. This in turn will bring them into the ambit of the media regulator’s supervision and may thereby lower the threshold for citizens to complain in cases of non-compliance and may render enforcement more efficient.

2.2 Will convergence result in ‘functional content regulation’? Although the AVMS Directive pretends to install a comprehensive framework for content regulation at the European level, taking technological neutrality as its leitmotiv, its scope remains limited to electronic audiovisual services. The question arises whether genuine technological neutrality should not lead to a completely level playing field for online and offline media, for electronic and print media. Is it still justified that a life-style television channel, offered in both linear and nonlinear (on-demand) way, will be subject to certain rules which are not applicable to its paper counterpart, even where that life-style magazine is produced by the very company responsible for the TV content? Instead of making a distinction along the lines of electronic versus print media, functional criteria or the target public could be the starting point for triggering the application of certain rules. Functional criteria refer to whether the content serves an informative, entertaining, educative or other purpose. While it seems appropriate to regulate (professional) news and information services more closely in terms of objectivity, transparency, impartial news gathering and provision, pluralism, etc., such rules could be relaxed for entertainment content (which would however still remain subject to rules on public decency and hate speech). A distinction based on the target public within entertainment could lead to imposing stricter rules for children’s media compared to adult content; after all, does not everyone 89. Explanatory memorandum to the Commission’s initial proposal, p. 9.

152

Rethinking.book Page 153 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

find it perfectly normal that baby food is subject to stricter requirements than ordinary food? Engineers are currently developing technological convergence solutions that will enable a seamless provision of content and information services, detaching these services from the underlying medium. For instance, the consumer will subscribe to a certain news service and consult that service via the network and with the device that is most suited for that time of the day or that type of an activity. She could consult the news headlines on her mobile phone when waiting for the bus, or watch the news flashes on her PDA in the train, or look at high resolution video streams on her PC at work. She could enjoy the news service in brilliant colours and the surround effect on the LCD screen in her living room in the evening. In the future, newspapers and/or magazines might predominantly be distributed via electronic networks, with consumers downloading their journal every morning and reading it on a flexible screen. New trends and technologies, such as ‘e-paper’, result in blurring boundaries between electronic and print media, undermining the justification for a different legal treatment of these media. Hence, a comprehensive legal framework that covers all types of media services seems the only logic answer to the continuing convergence of electronic and print media, at least in the long term (due to the wide divergences in the legacy frameworks for electronic and print media, the political feasibility of this option is close to zero in the short term). Such a framework should be based on a comprehensive definition of ‘media’, a definition that is not at all linked to the distribution technology. An example of a definition going in that direction (but limited to news media) was given in Recommendation Rec. (2004) 16 of the Committee of Ministers of the Council of Europe, in which ‘medium’ refers “to any means of communication for the periodic dissemination to the public of edited information, whether on-line or off-line, such as newspapers, periodicals, radio, television and web-based news services.”90

90. Cf. Gibbons 2005, 54: “In considering how far the scope of the Directive should extent, a crucial implication of digital convergence is that the mode of delivery should become irrelevant to content regulation. If content is to be regulated, it must be justified without reference to the nature of the service that delivers it. Furthermore, since digital content can be highly differentiated, the logic is that any regulation should also be justified without reference to any service in which it is packaged.”

153

Rethinking.book Page 154 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

2.3 The intermediate layer: have they forgotten the ‘content distributors’? The Council of Ministers and the European Parliament undertook quite some efforts to fine-tune the definition of ‘audiovisual media service’ in order to show beyond any doubt that YouTube-like providers remain outside the scope of the new directive. This might seem in contradiction with their rocketing popularity, turning them into the media providers of the new generation. Also in conceptual terms, there is something missing in the current European legal frameworks: on the one hand, there are the providers who bear editorial responsibility for audiovisual content (‘content editors’) and who thus are subject to the AVMS Directive. On the other hand, network operators provide technical transmission services, including conditional access services. They are regulated by the electronic communications directives of 2002. But what about the third category of actors in the communications value chain: the ‘content distributors’? The content distributors deliver to the end-users audiovisual media services, which are usually edited by third parties.91 A typical example of this category in the traditional sphere is the operator of a digital TV platform or of a PCTV platform. Besides offering technical transmission facilities (qualifying him as network operator), he also sells packages of channels and services edited by broadcasters, production houses or other media companies. But we can also think of new actors, such as YouTube, MySpace or DailyMotion. They fulfil the role of a portal by providing a forum for citizens to make personal audiovisual content publicly available. They guide people with a specific profile to content that is possibly of interest. Yet they do not qualify as network operator. Another example is Zattoo, an online distributor of both international and local linear TV channels.92 Will all these merely be ‘information society service providers’, falling under the regime of the E-Commerce Directive? This would imply that they remain subject to the wide discrepancies in the liability regimes between various 91. To illustrate the legal relevance of this third category, we can refer to the 2003 Broadcasting Act of the French Community in Belgium, where this type of actors follow a specific regime, including the obligation of a prior notification to the CSA (Conseil Supérieur de l’Audiovisuel, i.e. the media regulator of the French Community (Valcke et al. 2005, 31 – 40)). The Flemish Community will adopt a similar three-layered approach in its new Media Act, implementing the AVMS Directive. 92. Cf. in this respect the remark on the remaining uncertainties concerning internet broadcasting by Dehousse and Van Hecke 2006, 11.

154

Rethinking.book Page 155 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

Member States. The provisions sometimes impose secondary liability, sometimes provide a ‘safe haven’, comparable to the ones in the ECommerce Directive for mere conduit, caching and hosting providers. Unfortunately, the AVMS Directive does not seek to remedy this lack of harmonisation at EU level. It does not regulate the (secondary) liability for illegal or harmful content in the case of content distributors. Nor does it contain any clarification of these actors’ obligations with regard to audiovisual content that is not edited by them but to which they provide access. In our view, this can be perceived as a serious gap in the EU regulatory framework.93 Moreover, it cannot be denied that this intermediate category of distributors is crucial to manage problems that might arise from the intrinsic links between transmission and content. These links render a complete separation of transmission and content regulation infeasible and undesireable94. How will the new European framework cope with players that are ‘in between’ these frameworks? Think about search engines, EPGs, Internet portals or other navigational tools, which open the gate to content edited by others. The service they are offering is neither an electronic communications service, nor a service “the purpose of which is the delivery of moving images with or without sound to the general public by electronic communications networks.” Nevertheless, they determine to a growing extent which information will reach the end-user, which in turn explains the increasing attention of scholars on this type of services. Think, for instance, about the growing concern for the hidden manipulation exercised by certain search engines.95 If neither the electronic communications

93. At the OSCE and CEU workshop on the AVMS Directive that took place in Budapest on 1 December 2006, we suggested the idea that it might have been a wiser option for that type of provider to lobby in favour of being included in the new directive, firstly, in order to be able to benefit from the country of origin principle and secondly, to obtain some kind of liability exemption clause (a safe harbour provision similar to the ones in the E-Commerce Directive), which would clarify their responsibilities in that regard. Of course, we are also aware of the danger involved in opening such a ‘pandora’s box’, undoubtedly explaining why they choose the other option, of staying squarely and neatly outside the scope of the AVMS Directive. 94. Helberger 2005, 10-19, in the context of conditional access systems. 95. For instance: van Eijk 2006. See also, the forthcoming IRIS special reporting on the workshop organised by IViR and the European Audiovisual Observatory in Amsterdam on 12 April 2008 on “audiovisual search – regulatory challenges for audiovisual abundance.”

155

Rethinking.book Page 156 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

directives96 nor the AVMS Directive provides more clarity, the ECommerce Directive seems to be the most appropriate framework. But for the time being, the Commission seems reluctant to reform that directive. In any case, the three-layered model (content – distribution – transmission),97 which is emerging in some Member States98 and is envisaged in Japan,99 is worth a careful consideration by all policy makers and legislators in the near future.

2.4 Where does user-generated content and participatory media fit in? Member States should be aware of the rapid growth of ‘non-professional’ media. Citizens are to an increasing extent participating in the dissemination of media content towards the public at large or within virtual communities. The decentralized ‘architecture of participation’ of Web 2.0 enables people to become content creators themselves, aggregating their own music or television channels, spreading news and opinions via weblogs, video blogs, etc.100 Collaborative interactivity becomes a key feature of new and emerging audiovisual applications, ‘participatory media’, where users become active participants in two- or multi-way tele-presence sessions instead of just being passive consumers. In a genuine iDTV (interactive digital television) setting, the user is no 96. Although the Cullen study on The Regulation of Broadcasting Issues under the New Regulatory Framework of December 2006 also pointed to the legal vacuum for distribution activities in the current EU frameworks and formulated some ‘possible ways forward’ (at p. 119 – 121), these suggestions were not take over in the Commission’s proposals for amending the electronic communications regulatory framework, published in November 2007. 97. Or actually four-layered, if we consider equipment as the fourth layer to be regulated. 98. Ibid., footnote 348. See also the French Communications Act (Loi n°86-1067 du 30 septembre 1986 relative à la liberté de communication, ‘Loi Léotard’) that uses the concept of ‘distributor’ (especially in the context of digital terrestrial broadcasting). 99. Japan currently intends to integrate its existing regulatory frameworks for (tele)communications and broadcasting into a single comprehensive ‘information and communications law’, structured along the lines of ‘content’, ‘platforms’ (as intermediate layer) and ‘transmission infrastructure’; Ministry of Internal Affairs and Communications 2008 (http://www.soumu.go.jp/joho_tsusin/eng/Releases/ NewsLetter/Vol18/Vol18_21/Vol18_21.html). 100. The legal implications of these and other forms of collaborative interactivity and the phenomenon of ‘prosumers’ (consumers evolving into content producers) are currently being studied by ICRI in the context of the IBBT-project “Virtual Individual Networks” (2005-2008) and the IWT-project “FLEET” (FLEmish E-publishing Trends; 2006-2009); http://www.icri.be.

156

Rethinking.book Page 157 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

longer a mere ‘receiver’ of audiovisual contents, but also a ‘sender’ – think of the MyTV and MythTV products that by now have passed their status of myth. The user/consumer uploads pictures, images, sounds, and text messages in order to share this content with people belonging to the same online community. The community can be as narrow as his/her own family, but also as broad as all the people from all over the world that have expressed their interest in the same type of music or books, the same hobby, the same tourist place, the same environmental organisation, etc. Or, he creates his own virtual community (in Second Life, for instance). In short, people become the creators of their own content on social networks or in virtual worlds, aggregating their own music or television channels whether or not with the fruits of their own creativity and either for free or to make a living. As the EU’s internal market based powers are confined to regulating economic activities, it is up to the Member States to grab the occasion to implement the new directive and to reflect on the legal implications of citizen journalism and other forms of collaborative interactivity. The States will – sooner or later – be confronted with questions such as whether limiting content rules to professional media is sustainable in the long term, or how to cope with political parties that launch their own TV channel, etc. Careful and profound analysis is needed, though, as any regulatory intervention should always be tested against the principle of freedom of expression, which underlies all forms of content regulation. This principle dictates the golden rule that freedom should prevail if possible, and restrictions only imposed where necessary.101

3

Conclusion

This contribution presented a critical analysis of the major changes brought about by the new AVMS Directive. The analysis is based on a comparison of the various positions in the inter-institutional discussions that prepared the new directive. The AVMS Directive is undoubtedly an important step forward in the European Union’s media policy.102 It acknowledges the growing importance of online and on-demand media and seeks to achieve a minimum harmonisation for all audiovisual media services, irrespective of the underlying technology or the means used to 101. This issue is addressed in more detail in Ariño 2007, 115 – 135. 102. Even though some academics have formulated harsh critics on the directive; cf. van Eijk 2007.

157

Rethinking.book Page 158 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

convey these services. Such harmonisation contributes both to the objective of the internal market and to a series of cultural policy objectives, such as the protection of minors and of human dignity, the right to information and the promotion of European culture. As such, the directive still aspires to strike the right balance ‘between culture and commerce’.103 Depending on which side one is on, it may be argued that the directive either tilts too much to the side of commerce or that it imposes cultural obligations which may give the wrong incentives to industry. In our view, the directive came up with a realistic and workable solution. However, it misses a really forward-looking approach, which is probably due to political reasons. The Directive does not address some of the challenges posed by new or emerging technologies in the digital media landscape. In its second part, the present contribution has pointed to the growing role of intermediaries (distributors), the convergence of print and audiovisual media and the changing role of the user. It is the aim of this contribution to stimulate debate on these issues while the Member States are to implement the directive by December 19, 2009 at the latest.

References Ariño, Monica, and Carles Llorens. 2008. Back to the Future: New Media, Same Principles? Convergence Regulation Re-visited. In The European Union and the Culture Industries: Regulation and the Public Interest, edited by David Ward. Hampshire/Burlington: Ashgate. Ariño, Monica. 2007. Content Regulation and New Media: A Case Study of Online Video Portals. Communications and Strategies (66):115 – 135. Boeder, Pieter. 2005. Habermas’ Heritage: the Future of the Public Sphere in the Network Society. First Monday 10 (9); http://firstmonday.org/ htbin/cgiwrap/bin/ojs/index.php/fm/article/view/1280/1200. (Accessed December 11, 2008) Budapest Declaration for Freedom of the Internet. 2006. http://www.edri.org/ docs/BudapestDeclaration.pdf. (Accessed December 11, 2008) Chavannes, Remy et al. 2008. Themanummer Richtlijn Audiovisuele Mediadiensten. Mediaforum 20(2). http://www.mediaforum.nl/ index.php?pid=2&year=2008&number=2&jurisprudentie=. (Accessed December 11, 2008) 103. Cf. the title of the aforementioned UK Presidency Major Audiovisual Conference in Liverpool in September 2005; Ibid., footnote 269.

158

Rethinking.book Page 159 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

Commission Interpretative Communication on certain aspects of the provisions on televised advertising in the ‘Television without frontiers’ Directive [2004] OJ C102/2. Communication COM(2005) 97 of the European Commission to the Council and the European Parliament on Better Regulation for Growth and Jobs in the European Union SEC(2005) 175. Council of the European Union. 2006. General Approach on the Proposal for a Directive of the European Parliament and of the Council amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative Action in Member States concerning the pursuit of television broadcasting activities (Television without frontiers), 15 November (COM(2005)0646 – 15277/06 – 2005/ 0260(COD) Council of the European Union. 2007. Common Position (EC) No 18/2007 of 15 October adopted by the Council, acting in accordance with the procedure referred to in Article 251 of the Treaty establishing the European Community, with a view to the adoption of a Directive of the European Parliament and of the Council amending Council Directive 89/ 552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities [2007] OJ C307E/1. Cullen International. 2006. Study for the European Commission on the Regulation of Broadcasting Issues under the New Regulatory Framework. Prepared for the European Commission Information Society and Media Directorate General. Namur: Cullen Intrenational SA. http://ec.europa.eu/ information_society/policy/ecomm/doc/library/ext_studies/ reg_bc_issues_under_nrf/broadcasting_study_report.pdf Dehousse, Franklin, and Karel Van Hecke. 2006. Towards an Audiovisual Media Services Directive: An Analysis of the Commission’s Proposal. Egmont Paper Series. Brussels: Royal Institute for International Relations. http://www.irri-kiib.be/papers/06/eu/060606-AudioVis.directive.doc. Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on Certain Legal Aspects of Information Society Services, in Particular Electronic Commerce, in the Internal Market (Directive on electronic commerce) [2000] OJ L178/1. Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society [2001] OJ L167/10.

159

Rethinking.book Page 160 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002 on Access to, and Interconnection of, Electronic Communications Networks and Associated Facilities (Access Directive) [2002] OJ L108/7. Directive 2002/20/EC of the European Parliament and of the Council of 7 March 2002 on the Authorisation of Electronic Communications Networks and Services (Authorisation Directive) [2002] OJ L108/21. Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a Common Regulatory Framework for Electronic Communications Networks and Services (Framework Directive) [2002] OJ L108/33. Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on Universal Service and Users' Rights Relating to Electronic Communications Networks and Services (Universal Service Directive) [2002] OJ L108/51. Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the Processing of Personal Data and the Protection of Privacy in the Electronic Communications Sector (Directive on privacy and electronic communications) [2002] OJ L201/37. Directive 2002/77/EC of the Commission of 16 September 2002 on Competition in the Markets for Electronic Communications Networks and Services [2002] OJ L249/21. Directive 2003/33/EC of the European Parliament and of the Council of 26 May 2003 on the Approximation of the Laws, Regulations and Administrative Provisions of the Member States Relating to the Advertising and Sponsorship of Tobacco Products [2003] OJ L152/16. Directive 2007/65/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directive 89/552/EEC on the Coordination of Certain Provisions Laid Down by Law, Regulation or Administrative Action in Member States Concerning the Pursuit of Television Broadcasting Activities [2007] OJ L332/27. Espiner, Tom. 2006. Government Attacks EC’s ‘Dangerous’ Online Media Plans. ZDNet UK, June, 29. http://news.zdnet.co.uk/business/ 0,39020645,39277928,00.htm. (Accessed December 11, 2008) European Commission. Audiovisual and Media Policies. History: AVMSD Consultation process. http://ec.europa.eu/avpolicy/reg/history/consult/ index_en.htm. (Accessed December 16, 2008)

160

Rethinking.book Page 161 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

European Commission. Audiovisual and Media Policies. History: AVMSD Co-Decision process. http://ec.europa.eu/avpolicy/reg/history/codecision/ index_en.htm. (Accessed December 16, 2008) European Commission. Audiovisual and Media Policies. Major Audiovisual Conference: "Between Culture and Commerce", Liverpool, 22 September 2005. http://ec.europa.eu/avpolicy/reg/history/consult/ liverpool_2005/index_en.htm. (Accessed December 26, 2008) European Commission. Audiovisual and Media Policies. From the Television without frontiers Directive to the Audiovisual Media Services Directive. Synopsis (unofficial consolidated working document). http:// ec.europa.eu/avpolicy/docs/reg/avmsd/avmsd_comp_table_en.pdf. European Commission. 2005a. Proposal for a Directive of the European Parliament and of the Council amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, 13 December COM(2005) 646 final. European Commission. 2005b. Commission Staff Working Document – Annex to the Proposal for a Directive of the European Parliament and of the Council amending council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities: Impact Assessment – Draft Audiovisual Media Services Directive {COM(2005) 646 final}, SEC(2005) 1625/2. European Commission. 2005c. Commission Staff Working Document – Annex to the Proposal for a Directive of the European Parliament and of the Council amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities: Impact Assessment – Draft Audiovisual Media Services Directive – Statistical Annex {COM(2005) 646 final}, SEC(2005) 1626/2. European Commission. 2007. Amended proposal for a Directive of the European Parliament and of the Council amending Council Directive 89/ 552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities ("Audiovisual media services without frontiers"), 29 March COM(2007) 170 final. European Court of Justice, Van Binsbergen v Bestuur van de Bedrijfsvereniging, Case C-33/74 [1974] ECR I-1299.

161

Rethinking.book Page 162 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

European Court of Justice, TV 10 SA v. Commissariaat voor de Media, Case C-23/93 [1994] ECR I-4795. European Court of Justice, Centros v. Erhvervs-og Selskabsstyrelsen, Case C212/97 [1999] ECR I-1459. European Court of Justice, Mediakabel v Commissariaat voor de Media, Case C-89/04 [2005] ECR I-4891. European Parliament. 2006. Legislative Resolution on the proposal for a Directive of the European Parliament and of the Council amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, 13 December (COM(2005)0646 – C6-0443/2005 – 2005/0260(COD)). European Parliament. 2007. Legislative Resolution of 29 November 2007 on the Council common position for adopting a directive of the European Parliament and of the Council amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities (10076/6/2007 – C6-0352/2007 – 2005/0260(COD) Garage TV. http://www.garagetv.be/. (Accessed December 16, 2008) Gibbons, Thomas. 2005. Jurisdiction over (Television) Broadcasters – Criteria for Defining ‘Broadcaster’ and ‘Content Service Provider’. In Die Zukunft der Fernsehrichtlinie – The Future of the ‘Television without Frontiers’ Directive, Schriftenreihe des Instituts für Europäisches Medienrecht (EMR) Band 29, 53 – 60. Baden-Baden: Nomos. Good, Natasha, and Stuart Goldberg. 2006. European Reaction to the Proposed new Audiovisual Services Directive. Communications Law 11 (6):183 – 186. Harcourt, Alison, and Weatherill, Stephen. 2007. The Consumer, the European Union and Media Law (Special Issue). Journal of Consumer Policy (31) 1:1-4. Helberger, Natali. 2005. Controlling Access to Content – Regulation Condititonal Access in Digital Broadcasting. London/The Hague/Boston: Kluwer Law International. Helberger, Natali. 2008. From Eyeball to Creator – Toying with Audience Empowerment in the Audiovisual Media Service Directive. Entertainment Law Review (6):128 – 137.

162

Rethinking.book Page 163 Friday, September 25, 2009 10:01 AM

Rethinking European Broadcasting Regulation

Interinstitutional Agreement of the European Parliament, the Council of the European union and the Commission of the European Communities on Better Law-making [2003] OJ C321/1. Johnson, Howard. 2005. Television Without Frontiers: Timely Change or Premature Extension. Communications Law 10 (6):197 – 204. Katholieke Universiteit Leuven. The Interdisciplinary Centre for Law and Information & Communication Technology (ICRI). http://www.icri.be. (Accessed December 16, 2008) Lievens, Eva, Evi Werkers, and Peggy Valcke. 2007. Exploring the Legal Boundaries of Online Journalism. In Communication Crossroads: Limits and Transgressions – Proceedings of the IV International Conference on Communication and Reality, edited by Pere Masip and Josep Rom, Volume I, 457 – 469. Barcelona: Facultat de Comunicació Blanquerna Universitat Ramon Llull. Ministry of Interenational Affairs and Communications Telecommunications Bureau Japan. 2008. Final Report from the Study Group on a Comprehensive Legal System for Communications and Broadcasting. Communications News 18(21). http://www.soumu.go.jp/ joho_tsusin/eng/Releases/NewsLetter/Vol18/Vol18_21/Vol18_21.html. (Accessed December 16, 2008) OUT-LAW. 2006a. EU Warned that Internet will Suffer if Regulated like TV. OUT-LAW News, June, 1. h http://www.out-law.com/default.aspx?page=6968. (Accessed December 11, 2008) OUT-LAW. 2006b. Television Without Frontiers Directive must Protect new Media, says Ofcom. OUT-LAW News, September 21. http://www.outlaw.com/page-7319. (Accessed December 11, 2008) Prosser, Tony. 2006. Regulating the New Media Landscape: A Directive for Audiovisual Media Services Without Frontiers. ERA Forum (2):273 – 276. Sugaya, Minoru. 2008. From Vertical to Horizontal. Presentation at the 17th Biennial Conference of the International Telecommunications Society, Montréal 24-27 June. http://www.canavents.com/its2008/plenary3/13.pdf. (Accessed December 11, 2008) Valcke, Peggy, Dieter Gillis, and Sven Van Damme. 2008. TV Rights for Sports Events in Belgium, In TV Rights in Europe, edited by Robert Siekmann & Ian Blackshaw (forthcoming). Valcke, Peggy, and David Stevens. 2007. Graduated Regulation of ‘Regulatable’ Content and the European Audiovisual Media Services 163

Rethinking.book Page 164 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Directive: One Small Step for the Industry and one Giant Leap for the Legislator? Telematics & Informatics 24 (4):285 – 302. Valcke, Peggy, and David Stevens. 2006. Re-regulation of the InfoCommunications Market – Delivering Content Services under the new European Framework for Audiovisual Media: Fair Play or Unfair Competition? Paper presented at the 45th FITCE Congress on Telecom Wars: The Return of the Profit, Athens, 30 August – 2 September. http:// www.fitce2006.gr/. (Accessed December 11, 2008) Valcke, Peggy. 2006. Convergent Content Regulation – Towards a Horizontal and Graduated Legal Framework for ‘Regulatable’ Content. Paper presented at the 16th Biennial Conference of the International Telecommunications Society (ITS2006) on Information Communication Technology (ICT): Opportunities and Challenges for Telecommunications, Beijng, June. http://www.its2006bupt.org/. (site now discontinued) Valcke, Peggy, David Stevens, and Eva Lievens. 2005. The Future of Must Carry – From Must-Carry to a Concept of Universal Service in the InfoCommunications Sector. Iris Special: To Have or Not to Have – Must Carry Rules. Strasbourg: European Audiovisual Observatory. van Eijk, Nico. 2007. The Modernisation of the European Television Without Frontiers Directive: Unnecessary Regulation and the Introduction of Internet Governance. Paper presented at the 19th European Regional Conference of the International Telecommunications Society, Istanbul, 25 September. http://www.ivir.nl/publications/vaneijk/ Paper_twf_avms_its_2007.pdf. (Acessed December 11, 2008) van Eijk, Nico. 2006. Search Engines: Seek and ye shall find? The Position of Search Engines in Law. IRIS plus 2. Strasbourg: European Audiovisual Observatory; http://www.obs.coe.int/oea_publ/iris/iris_plus/iplus2_2006.pdf. (Accessed December 11, 2008) Werkers, Evi, Eva Lievens, and Peggy Valcke. 2006. Bronnengeheim voor bloggers. Nieuw Juridisch Weekblad 5 (147):630 – 636. YouTube. YouTube Community Guidelines. http://www.youtube.com/t/ community_guidelines. (Accessed December 16, 2008)

164

Rethinking.book Page 165 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment Is There a Need to Update the European Commission Broadcasting Communication1, and Do ‘Public Value Tests’ Resolve Long-running Competition Issues? Ross Biggam

Introduction Even in today’s global economy, European media markets are characterized by a relatively high degree of heterogeneity. Successful broadcasting groups recognize the diversity of the viewers whom they are targeting and adapt their schedules accordingly. We take a local approach, with each business at arm’s length from the others. Very often we work with local partners. In Germany, we are German, in France we are French, and in the UK we are British.”2

But one key fact which is common to all European media markets is the broad, three-stage pattern of historical evolution. In phase one, and in contrast to other parts of the world, broadcasting began in Europe as a public monopoly. Although limited private competition was introduced in the 1950s in the UK, Finland and Luxembourg, the public monopoly remained in place until well into the 1980s in all other Western European markets and until the early 1990s – in the more malign guise of State or party broadcasting – in Central & Eastern Europe. Following the successful entry of private players into European broadcasting markets, in the second phase it was by the mid-1990s commonplace for EU policymakers to refer to broadcasting as a ‘dual system’,3 a model which, it was felt, successfully avoided the perceived excesses of an unrestrained free market approach. However, while nobody has yet coined a neat slogan to

1.

2. 3.

The revision process of the 2001 Broadcast Communicatino started in January 2008 and resulted in a new Broadcasting Communication, published on 2 July 2009. This contribution was submitted in July 2008 and revised in December 2008. Zeiler 2004 (Gerhard Zeiler is CEO of the RTL Group). High Level Group on Audiovisual Policy 1998.

165

Rethinking.book Page 166 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

replace the ‘dual system’, it is clear that European media markets are now developing in such a way that referring to a dual public-private system is no longer adequate. In this third phase of European market development, broadcasters – whether private or public – are increasingly competing not merely with one another, but also against a range of screen-based entertainment services, including on-demand content delivery, DVD viewing, 3G mobile phone usage, Internet surfing and social networking. The same content is now available on a number of platforms, including those which allow the consumer to choose when to view the content (e.g. catch-up television) or where to view it (e.g. mobile television). The impact of these new means of consuming audiovisual content on broadcasting business models is accentuated by the fact that they are disproportionately popular with younger media consumers. Precisely because young consumers are harder to reach than older viewers, they are the most sought-after target group for advertisers. At the same time they are also a key demographic for broadcasters funded by universal taxation or licence fee – who are as a result, implicitly or explicitly, obliged to offer programming of interest to all societal groups. So, today’s European broadcasting markets are a result of a process of – relatively recent and still ongoing – evolution rather than a ‘big bang’ privatisation. It is perhaps therefore unsurprising that one can still observe in European media policy certain characteristics of the monopoly era. It, after all, only came to an end around 25 years ago, within the working life of many of today’s broadcasting executives and EU politicians. Examples of these ‘legacy’ characteristics in European broadcasting are extremely broad public service remits, a preference for supervision of the public broadcaster by boards of governors rather than by professional media regulators, and – doubtless as a function of the first two characteristics – a generous level of financing. The German and UK markets are good illustrations of both points. Neither the German Rundfunkräte (Broadcasting Councils) nor the BBC Trust are fulltime, independent regulators. Yet public financing in Germany is estimated to total € 7.2bn, in the UK it is € 4.2bn –between them, these countries account for around half of the public support to broadcasting in Europe. As far as the level of financing is concerned, the European Commission should update their data on the amount of State aid in the broadcasting and media sectors, in the context of the revision of the 2001 Broadcasting Communication. When compiling data for a White Paper on the

166

Rethinking.book Page 167 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment

Financing and Regulation of Publicly-Funded Broadcasters,4 the best available estimate was that State aid exceeded 15 billion Euro in 2001 for the EU-15. Clearly the figure today, in a Union of 27 Member States and with publicly-funded broadcasters such as RTE, ORF or the BBC having benefited from above-inflation increases in State aid in recent years, will be significantly higher. The ACT’s unofficial estimate is that this sum may now total 22 billion Euro – a figure which appears to be very close to the best estimate made by the European Audiovisual Observatory.5 However, these are only estimates. After Altmark,6 DG Competition decided to remove aid granted to ‘services of general economic interest’ from the State Aid Scoreboard. The Scoreboard is the Commission’s benchmarking instrument for State aid, measuring progress towards the goals of the Lisbon agenda of March 2000 which called on the Commission, the Council and Member States to "further their efforts to … reduce the general level of State aid, shifting the emphasis from supporting individual companies or sectors towards tackling horizontal objectives of Community interest, such as employment, regional development, environment and training or research." The Scoreboard – which is updated twice a year – was launched by the Commission in July 2001 to provide a transparent and publicly accessible source of information on the overall State aid situation in each of the EU Member States and on the Commission's current State aid control activities. The absence of broadcasting aid from the Scoreboard means that there is no transparent, independently verifiable data about the amount of State aid granted to publicly funded broadcasters. Nor is such information readily available elsewhere. The lack of such fundamental information often frustrates any rational discussion about the role of public broadcasting in Europe. Yet, the question of the public service remit is central to any debate about public broadcasting – the issue of what programmes are being made in exchange for public financing – so this is perhaps the most relevant structural issue to explore in depth. 4.

5. 6.

This White Paper was published by the Association of Commercial Television in Europe (ACT), L’Association Européenne des Radios (AER) and the European Publishers Council (EPC) in 2004. The term ‘publicly-funded broadcasters’ is deliberately used, rather than the more usual ‘public service broadcasters’ to clarify that the issue between the private and public sectors is about financing, not remit – indeed, many private sector broadcasters are classified as ‘public service’ broadcasters (in the UK, France, Scandinavia and Spain). Lange 2008. European Court of Justice, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, Case C-280/00.

167

Rethinking.book Page 168 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Hence, the aim of this contribution is to give a – private sector’s – insight into Member States’ and, indirectly through State aid control, European Commission’s re-examination of the public service remit. While the Commission is formally excluded from virtually all consideration of questions of remit, it is impossible to consider some factors which are properly the competence of the Commission, e.g. alleged overcompensation, without indirectly coming up against questions of, or linked to, the public service remit. The UK’s public value test is used as a case study for this purpose. The argument of the contribution is that broadcasting, including public broadcasting, is in transition and that, accordingly, it is necessary for the historically purist interpretation of the ‘public service remit’ to evolve. The introduction of a public value test could provide a helpful contribution in this respect and might resolve some long-running issues of competition in the media sector – provided it is a well-designed test, carried out by an independent body.

1.

The public service remit yesterday, today and tomorrow

1.1 Finding a middle ground between a ghetto public broadcaster and a circular remit A broad public service remit was of course perfectly understandable when that remit was assigned to the ‘national broadcaster’ – a time when public broadcasters were the only possible outlet for entertainment and sports programming. However, this is not the case anymore. Now public broadcasters share the market with private competitors. There are valid reasons to debate about the need for a ‘Grundversorgung’ or ‘Kulturversorgung’ model for public broadcasting. These two ‘types of remit’ came to the forefront in the intense discussions in Germany about the future remit for public broadcasting. The first is a broad, general provision – ‘something for everyone’ – allowing public broadcasters considerable latitude in their scheduling, including much material which can also be found on commercial channels. The ‘Kulturversorgung’ model, by contrast, requires a much clearer cultural emphasis in the public broadcaster’s scheduling. This discussion has been settled: Member States may, should they so wish, opt for a broad ‘Grundversorgung’ remit. However, the problem remains

168

Rethinking.book Page 169 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment

that a broad remit – encompassing all or most programme genres, including sports and entertainment – cannot be allowed to shade into a meaningless remit, one which is devoid of any real public service obligation. This is a real risk. At its most extreme interpretation, a broad remit could lead to the conclusion that “public service broadcasting is what a public service broadcaster does”7 – a purely circular piece of reasoning would of course render impossible any meaningful scrutiny by regulators or competition authorities. But many European public broadcasters are still governed by the general, abstract notions of the monopoly era often summed up in the BBC mantra “inform, educate and entertain”. Such remits appear barely compatible with the Broadcasting Communication (2001),8 paragraph 37 which states that “the definition of the public service mandate should be as precise as possible” – although, in fairness, paragraph 33 of the Communication confuses the matter by allowing a ‘wide’ definition of the remit. The definition of the remit is under the Amsterdam Protocol (1997), quite logically, assigned to Member States rather than to the European Commission. But given that the public service remit – the description of those programmes, which justify public money – is the foundation of all public intervention in media markets, it is impossible to avoid this issue when considering the strengths and weaknesses of the current Broadcasting Communication, and its prospects for revision. However, any attempt to raise the remit issue on the part of the private sector often provokes a particularly hostile reaction from the public broadcasters, who immediately raise the spectre of being confined to a ghetto of market failure programming.9 But there are more thoughtful analyses available. An interesting example comes from one of the first national considerations – not surprisingly in the United Kingdom – of the appropriate role of public broadcasting in the new media, i.e. the Davies Report of 1999.10 As the Chairman of that committee11 went on shortly afterwards to chair the BBC, its conclusions may have particular weight. On remit, Davies states that: 7.

Scharf 1999 (Albert Scharf was President of the European Broadcasting Union from 1983 to 2000). 8. Commission Communication 2001/C on the Application of the State Aid Rules to Public Service Broadcasting. 9. de Carolis 2008 (Patrick de Carolis is CEO of France Télévisions). 10. Department of Culture, Media & Sport 1999. 11. This Committee was charged by the UK government to investigate ways to finance the BBC’s digital plans. Its core recommendation, for a £24 p.a. supplement on the licence fee for digital households, was widely criticized and never implemented. But the report itself was probably the first independent analysis of the challenges faced by public broadcasters in expanding into new media.

169

Rethinking.book Page 170 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

“some form of market failure must lie at the heart of any definition of public service broadcasting.” It is interesting to note that the Davies committee is not calling for a ‘pure market failure’ model of public television. But by placing ‘some form of market failure’ at the heart of the definition of public service, Davies is implicitly pointing out that there must be significant middle ground between the ghetto model at one extreme and the circular remit at the other. Also, Davies sets the bar relatively high as the UK market, against which the BBC’s definition would have to be assessed, is characterised by a proliferation of public service content offered by non-public operators: “There is currently an abundant supply of content that exhibits public service purposes and characteristics (…) there are more providers and hours of this type of content available to consumers than ever before”.12

Certainly, there are no genres that can be considered exclusively the domain of the public sector in a UK market, which delivers fourteen news channels, over fifty foreign-language and ethnic minority channels and specialised providers in documentary, history and culture. This abundant provision of the market has probably ruled out any prospect of a ‘pure market failure’ model in the UK – as the market has left few niche tastes uncatered for. The challenges for public broadcasters therefore are not necessarily to abandon certain genres but rather, firstly, to react to this increased provision of public service content from the marketplace by continually improving their own offering so as to ensure that a margin of distinctiveness is preserved; secondly, to recognise that there may be no justification for spending public money on some content; but, thirdly, to exploit the fact that markets are dynamic, which means that new failures will arise just as old ones are rectified. There is for example an increasing consensus in the UK that the economics of original production in children’s television, or in regional news, are such that these genres will shortly become unsustainable for commercial operators, even those with historic strengths in these genres.13 Given the undeniable importance of such content for society, this could well mean the public broadcaster actually spending more in these areas than at present.

12. House of Commons Select Committee on Culture Media and Sport 2007/2008, 15-16 13. For more information about the problems associated with children’s programming, see for example Ofcom (b).

170

Rethinking.book Page 171 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment

1.2 Attracting audiences: inspiration for or imitation of commercial players Unfortunately, the wide remit, generous financing and/or lack of independent regulation too often means that public broadcasters have the opportunity to respond to the understandable temptation to instead choose a more populist course. While it is accepted by competitors and DG Competition (by means of paragraph 33 of the Broadcasting Communication) that a public broadcaster needs to get an audience for its programming, it is important to remember that there are different ways of attracting an audience, and indeed different ways of measuring that audience. This is what, to outsiders, may appear a rather esoteric discussion among broadcasting professionals about audience reach – the proportion of the total population who watch a given programme – and audience share – the proportion of people watching television at a certain time who choose that programme. Competition among broadcasters is usually expressed in terms of share – whether channel A ‘beats’ channel B on a given night or in a certain timeslot. The arrival of pay-TV services in the early 1990s somewhat complicated this equation, given the different business model that underpins subscription television, but share remains the key currency even today in the terrestrial/free to air market – the markets where public broadcasters have historically operated. Share is also the metric on which newspapers, including specialised publications, focus when reporting on the success and failure of programmes. As such, audience is certainly a relevant criterion for public broadcasters, but it cannot be the sole criterion used in public broadcasting. The concern is, rather, how that share is delivered. It is a simple fact of broadcast economics that the easiest way to boost (or protect) audience share is not to try to persuade new viewers to watch one’s channel, but rather to persuade existing viewers to watch more television. Scheduling an additional weekly episode of a popular soap opera will guarantee that the vast majority of the existing audience will also watch that episode – a much lower-risk (and cheaper) operation than commissioning a new drama. So an excessive focus on the part of public broadcasters on audience share will inevitably produce at least a strong temptation to focus on populist programming – soaps, entertainment, football – rather than more innovative content. Certainly, if we are to adopt the Davies’ ‘some form of market failure’ approach, more innovative content should underpin the privileges (e.g. guaranteed public financing) of public operators. In the absence of a meaningful public service remit and of an independent 171

Rethinking.book Page 172 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

regulator to enforce that remit, this is a temptation to which public broadcasters are increasingly succumbing. Cultural, distinctive programming is now regularly moved to the margins of the schedule or to a secondary channel.14 As an example of the linkage between the various structural issues identified above, it is arguable that such temptations are likely to be increased when public broadcasters are financed partially by advertising revenues as is the case in many European countries. Advertisers’ demands for a mass audience will be an additional strong factor in encouraging public broadcasters to produce schedules which seek to imitate, rather than to inspire, the commercial marketplace. Quantitative evidence to demonstrate this thesis is notoriously thin on the ground – there are no agreed European criteria for classifications of programme genres, and many European public broadcasters are not subject to the sort of detailed quantitative regulation familiar in the commercial sector. But there are some interesting examples. The European Commission’s most recent report15 on the application of the quota obligations in the Television Without Frontiers directive shows two striking cases. In both Ireland and Austria, one of the main national public broadcasting networks failed to meet the minimum requirement under Article 4 of the Television Without Frontiers directive of ensuring that a majority proportion of their schedules are of EU origin. While it is true that the broadcasting industry in general takes a rather sceptical view of the utility of this quota obligation, it appears extraordinary that broadcasters in receipt of public money and with strong market positions were unable by some distance (Austria’s ORF: 33 % content of EU origin, Ireland’s RTE: 43 %) to meet this basic obligation. The rest of the schedule is made up by foreign (i.e. non-EU) acquired content (news and sports do not count towards the EU quota) – which in practice usually means US material. Even if one accepts that some Hollywood content can have a place in public broadcasters’ schedules, it is hard to reconcile the often high-flown rhetoric of public broadcasters with any system that allows for such a preponderance of US material. The debate on market failure, audience share, distinctive programming and remits was summed up by the Chief Executive of the Independent

14. Clément 2003. 15. Commission Communication on the application of Articles 4 and 5 of Directive 89/ 552/EEC ‘Television without Frontiers’.

172

Rethinking.book Page 173 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment

Television Commission, formerly responsible for regulating and licensing commercial television in the UK: “the BBC should accept the challenge to make the market: that is, to make it different from what it would be if the BBC didn’t exist. Beating ITV with Blue Planet is a triumph. Beating ITV with Celebrity Sleepover is a tragedy.”16

The report from the Copé Commission17 in France also contains some interesting pointers as to how a public broadcaster could, in the words of Copé, treat audience share as “an ambition, not an obsession.”18 Copé suggests four qualitative indicators, the third of which is audience reach: 1. Measurement of the programmes’ impact (What do we remember? What is the influence of the programme?); 2. Measurement of the programme’s audience and of its derivatives on all platforms/networks and on a long-time period; 3. Measurement of the usage rate of public service (percentage of persons having used at least once a service offered by France Televisions on a given period); 4. Measurement of the programmes’ cost/efficiency ratio by taking account of the specificity of each genre.19 The success or failure of this suggestion will ultimately depend on how these criteria are translated into quantifiable obligations, whether they are enforced by an independent regulator, and – crucially – whether they are applied per channel or across the whole of the broadcasters’ output. But Copé has at least identified a problem and proposed a solution.

1.3 Beyond broadcasting: public intervention in the new media In the multi-platform environment described in the introduction to this chapter, the issues raised by public broadcaster activity may differ slightly from those in the conventional broadcasting market. The emergence in the 16. Blue Planet was a documentary co-production on marine life between the BBC and Discovery Channel, Celebrity Sleepover was a BBC reality programme featuring various celebrities. 17. Copé 2008. The Copé Commission was set up in early 2008 by the French government to examine how to introduce ‘une nouvelle télévision publique’. This followed the declaration by President Sarkozy that advertising on public television would be phased out. The mandate of Copé was wide-ranging, covering financing, regulation and remit questions. 18. Copé 2008, 15. 19. Translated from French.

173

Rethinking.book Page 174 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

past three years of what appear to be sustainable new business models for distribution of media content has provoked a rash of sweeping predictions about the ‘death of linear television’ – though these are counterbalanced by a more sceptical view.20 Regardless of the position one takes on the impact of the changes underway in the media sector, it is clear that all broadcasters, public or private, need to devise strategies which go beyond broadcast distribution. Contrary to what is sometimes asserted, there is no serious desire on the part of the commercial sector to restrict public operators to an analogue ghetto. If Member States wish so, it is perfectly legitimate for public intervention in broadcasting markets to continue beyond analogue switch-off and for public broadcasters to have an online presence. The issues are rather how large that presence should be, which services it should encompass, and how to ensure that emerging markets are not foreclosed. As the first two issues are largely matters for Member States in the first instance, debates on the new Broadcasting Communication should properly focus on the third. There are two reasons why the changes in the media sector since 2001 form perhaps the strongest evidence, even more so than the significant changes in case law and in State aid policy21 since that date, as to why the European Commission is correct in revising the Broadcasting Communication now. First, while the 2001 Communication makes some reference to nonbroadcast activities (e.g., at paragraph. 34) and while there was some theoretical discussion about new media ventures, it is clear that broadcasters’ new media strategies have evolved significantly since 2001. For example, broadband-based catch-up services – currently proving of great interest to both private and public operators22 – were not much discussed in 2001. Secondly, the expansion of public broadcasters into new areas means that their activities now bring them potentially into competition with non-broadcast stakeholders. The print media are an obvious example. It is striking how far the present debate in Germany is being driven by issues of how to reconcile public broadcasters’ expansion online with print media interests.23 Similarly, among the most vociferous opponents to the BBC’s plans for digital expansion have been local 20. Fenton 2008. 21. For a better understanding of State aid policy and case law relating to the funding of public broadcasting, the author refers to Karen Donders’ contribution in this collection. 22. Catch-up services allow viewers to watch programming, via a broadband connection, for a period of around seven days after the broadcast. Examples of such services are iWatch in Flanders, M6 Replay in France, or the BBC’s i-Player. 23. Stöckter 2008.

174

Rethinking.book Page 175 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment

newspaper groups.24 The arrival of new issues and new stakeholders may not in itself require a revision of the Communication. It may be inappropriate to apply rules drawn up for the broadcasting sector, where there is a certain acceptance of market distortion by public intervention and of statutory regulation and licensing, to neighbouring markets without such traditions. Additionally, there is a concern that new media markets may, because they are start-up markets, be more susceptible to foreclosure by unrestrained public intervention.

2.

The role of the European Commission’s Broadcasting Communication

In line with the Amsterdam Protocol, decisions on which online services public operators should offer are in the first instance a matter for Member States. Nevertheless, the European Commission is (building on precedents in the Dutch25 and German26 decisions) considering the introduction of some form of EU level obligation for ex ante evaluation in a new Broadcasting Communication. This implies that Member States would be obliged to develop an ex ante test for public broadcasters’ new media services. Commercial operators have been explicit in calling for certain minimum requirements for such an evaluation. Some may go beyond the recent Commission precedents in the German and Dutch decisions. It is uncontroversial – assuming the ‘circular remit’ is rejected – that public broadcaster activity in new media services must be subject to an analysis of what is already available on the market. Online activities potentially offered by a public broadcaster (e.g. chat rooms, online games, calculators, links to third parties offers/services) do not automatically constitute services of general economic interest and may lack specific features as compared to other similar or identical services on the market. In its consultation paper of 10 January 200827 on the review of the Broadcasting Communication, the European Commission asked three specific questions on ex ante regulation: first, should a revised Broadcasting Communication further clarify the scope of an ex ante 24. See Newspaper Society response to the PVT on the BBC’s local video proposal at www.newspapersoc.org.uk. 25. Decision C2/2004 on The ad-hoc Financing of Dutch Public Service Broadcasters. 26. Decision E3/2005 on Financing of Public Service Broadcasters in Germany. 27. Questionnaire on the Review of the Communication from the Commission on the Application of State aid Rules to Public Service Broadcasting, 2008.

175

Rethinking.book Page 176 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

evaluation of the public service remit by Member States? Second, which services or categories of services should in your view be subject to an ex ante evaluation? And third, should a revised Broadcasting Communication contain the basic principles as regards the procedural and substantive aspects of such an evaluation (such as the involvement of third parties or the possible evaluation criteria, including for instance the contribution to clearly identified objectives, citizen needs, available offers on the market, additional costs, impact on competition)?

2.1 Ex-ante scrutiny: the view of the commercial sector These three questions are, of course, interlinked. European commercial operators replied by drawing specific attention to the experiences so far with the BBC’s Public Value Test (‘PVT’). This test consists of two parts: a Public Value Assessment (‘PVA’) and a Market Impact Assessment (‘MIA’). The BBC Trust28 is responsible for the PVA, OFCOM for the MIA. The PVT was singled out by Commissioner for Competition Neelie Kroes in her speech to the French Presidency Conference on ‘public service media in a digital age’ in Strasbourg on 17 July 2008.29 For European commercial operators, the focus on the PVT was mainly the result of it being the only ex-ante system in place in the EU, which had delivered meaningful precedents at the time of the Commission consultation. The commercial operators’ early experiences on the PVT30 were that the test was a demonstrable improvement on the previous system. Nonetheless, its early operation did reveal some significant shortcomings, which should be rectified. The revised Broadcasting Communication should indeed clarify Member States’ obligations to carry out ex ante evaluation of proposed expansions by public broadcasters into new areas of business. If the revised Communication also includes meaningful rules on the procedural,

28. The BBC Trust is the sovereign body of the BBC. It replaced the BBC Board of Governors in January 2007 under a new BBC Charter. The purpose of the BBC Trust is ‘to work on behalf of licence fee payers, ensuring the BBC provides high quality output and good value for all UK citizens, and it protects the independence of the BBC’. While it has greater operational independence from the BBC management than the Governors’ structure, there are criticisms from the commercial sector that the Trust falls short of genuinely independent regulation of the BBC - for example, the Chairman of the Trust has a dual role as Chairman of the BBC. 29. Kroes 2008. 30. This contribution was finalized shortly before the BBC Trust, in its highest-profile PVT to date, rejected BBC plans to expand into local video content.

176

Rethinking.book Page 177 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment

institutional and substantive aspects, then this would be a significant step forward in introducing an element of transparency into the system. Key issues identified by commercial operators in this respect are: what analysis should be carried out?, against which criteria?, by whom should it be carried out; on which services?; and the extent of third party involvement. The overall conclusion of the private sector is that, while the PVT provides greater scrutiny of new BBC services and material changes to existing services, there are a number of problems which undermine the PVT as a means of a meaningful, ex ante review: the Trust is not independent of the BBC, the Trust has a has a number of conflicting roles in relation to the PVT, which are not resolved by OFCOM involvement, the structure of the PVT obliges the Trust to make a subjective assessment rendering the ‘test’ meaningless, and OFCOM’s role in conducting the MIA is not that of an independent regulator, but rather that of a paid expert witness. In the absence of satisfactory guidelines in the Broadcasting Communication, there is a risk that ex ante scrutiny becomes legitimisation, rather than regulation, of all public broadcasters’ activities, despite of their eventually commercial nature. The analysis to be carried out under an ex ante evaluation needs to be rigorous, objective and – above all – devoid of subjective and abstract concepts such as ‘quality’ which have underpinned so many distortions of competition in the broadcasting market. 2.1.1 Who should carry out the analysis? Moreover, it is essential that the ex ante scrutiny is carried out by an independent authority. It is probably outwit the competence of the European Commission to express a preference as to whether this would be the broadcasting regulator (NRA), the competition regulator (NCA), or a stand-alone body. Rather, this would be up to the Member States to decide… so long as it was a body wholly independent of the public broadcaster. Any other scrutiny will be neither meaningful nor objective. This insistence on independent regulation follows the logic of recital 46c of the new Audiovisual Media Services Directive, and should ensure that scrutiny is carried out by regulators who are genuinely independent of political and industry interests. The UK PVT is carried out in two stages: first, a PVA, carried out by the BBC Trust against the BBC’s own remit (a remit which, like those of other publicly-financed operators in Europe, is very general). OFCOM, the independent regulator for the entire communications industry (apart from some activities of the BBC, which is otherwise self-regulated via the Trust) 177

Rethinking.book Page 178 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

then carries out a MIA. These two assessments are undertaken simultaneously through public consultation and information gathering leading to separate reports being provided to the BBC Trust in order that it may conduct the PVT by weighing one assessment against the other to decide whether the BBC executive should be permitted to implement its proposal. However, the ultimate decision falls to the BBC Trust, rather than to OFCOM. So unless the BBC Trust decides that a negative market impact assessment outweighs the positive contributions of a new service it has identified in its own public value analysis (based on non-economic criteria), the proposed new service will pass the PVT. OFCOM’s terms of reference when conducting a MIA, including the markets that it is to consider, are dictated by a Joint Steering Group made up of OFCOM and BBC Trust members. The overall relationship between the BBC Trust and OFCOM in relation to MIAs is set out in a ‘Memorandum of Understanding’ that was not subject to public consultation. OFCOM has also published a BBC agreed methodology for conducting MIAs,31 according to which it will assess the market impact of BBC proposed new services, including ‘positive market creation’ effects, notwithstanding the difficulties of conducting such assessments on new and emerging markets. Accordingly, the ‘test’ carried out by the Trust is a subjective assessment of whether the BBC’s proposals are contrary to its public purposes, against OFCOM’s assessment of the overall impact of the service on consumers, suppliers and competitors (including benefits to consumers which would more appropriately be considered under the PVA). 2.1.2 On which services should an analysis be conducted? The practical operation of the PVT also gives rise to some concerns, both about the results of the PVTs carried out as well as the absence of a PVT for some other services. We will discuss some examples below. There is above all a need for clarity as to which services, or changes to services, would require ex ante scrutiny. Again the early operation of the UK system has shown some interesting lacunae. For example, the BBC was able to gain approval for launching a satellite platform without a PVT on the grounds that this platform was, under the BBC rules, classified as a ‘non-service’. Thereby it did not require a PVT (even though it was referred to as a ‘service’ in the BBC Trust statement approving the launch). While the notion of a ‘non-service’ may or may not make sense to those steeped 31. See OFCOM (a).

178

Rethinking.book Page 179 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment

in the logic of the internal workings of the BBC, it is hardly a sensible precedent for the rest of the European Union. A clear definition of the concept ‘non-service’ is for the moment still lacking. Equally, under the BBC’s system, the recent launch of the BBC iPlayer, the heavily promoted seven-day online catch-up service, did not require a PVT test. The Broadcasting Communication should specify that ex ante scrutiny is needed for any significant expansion of publicly-financed operators into new business areas. It is assumed in making this statement that publiclyfinanced operators are extending into areas compatible with their (‘sufficiently clear and precise’) remit. Finally, a revised Communication should make clear that third parties have the right to be consulted at all relevant stages of the process. Even for public service broadcasting advocates, the results of a PVT can be somewhat unexpected. To date the Trust has conducted three full PVTs: into BBC on-demand services, BBC High Definition services, and the BBC Gaelic digital service. Only the last of these was turned down on the first application, and was then subsequently approved following cost saving changes to the proposals. Yet the provision in Scotland of audiovisual media content in the Gaelic language would appear to be a clear ‘public service’ task. There is certainly, under the ‘Davies’ definition (supra), a clear market failure if there is no prospect of the private sector undertaking such a service. Unlike the other main Celtic languages in the UK and Ireland, Gaelic has never benefited from a dedicated television channel or from a place on the national school curriculum and plays a much more marginal role in public life in Scotland than do Irish or Welsh in their respective countries. Yet it was precisely this service – undeniably fulfilling a clear public service role – which had problems passing the PVT, whereas other potentially more controversial developments such as the BBC using an interactive channel to launch a de facto sports channel was able to pass without a separate PVT. This was possible as all BBC’s interactive services have one service licence (for BBC Interactive, or BBCi) and therefore one PVT was sufficient for a number of services covered by that licence. Hence, the call from the private broadcasting sector that the Communication should specify that effective and independent ex ante scrutiny is needed for any significant expansion of publicly-financed operators into new business areas.

179

Rethinking.book Page 180 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

2.1.3 What with third party rights of comment? In terms of third party access, the BBC PVT system, while imperfect, is certainly to be preferred to the system outlined in par. 331 of the DG Competition’s decision on the licence fee funding of German public broadcasters ARD and ZDF.32 The German system appears to give third parties the right to make submissions on market impact – but only to the public broadcasters’ own so-called internal control bodies. Given that confidential commercial data may well be at the core of any assessment of market impact, the German system is profoundly flawed. It will never gain the confidence of competitors and other stakeholders. Experience with other broadcasting issues – notably the self-regulation of advertising or of programme content – shows that self-regulation can only be truly effective if it engages with and enjoys the confidence of other stakeholders. Independent control is a necessary condition for any objective evaluation of the extent of the remit and/or justification of any new services.

2.2 Next steps: what can we expect from the Commission’s consultation on a revised Broadcasting Communication? The period since the adoption of the 2001 Broadcasting Communication has been characterised by a relatively low-key discussion of issues of State aid and public broadcasting in European media policy. This contrasts with a flurry of activity from the mid 1990s onwards as European institutions, including those with no formal locus on State aid issues, rushed to take positions on this issue. The process began with almost simultaneous initiatives from the Council of Europe and the European Parliament.33 Perhaps surprisingly, this process accelerated even after the adoption of a specific Treaty Protocol on State aid and public broadcasting in 1997. Notably, there were highly politicised discussions around the leaked draft Guidelines from DG Competition in 1998, the Court of First Instance rulings in the Telecinco case and the adoption of a Council resolution under the Austrian Presidency in 1999.34 If the State Aid Communication has achieved nothing else, it has at least created a more rational framework for discussing the issue of direct public intervention on broadcasting 32. Decision E3/2005 on Financing of Public Service Broadcasters in Germany , par. 331. 33. Council of Europe Recommendation on the Guarantee of the Independence of Public Service Broadcasting 1996; Tongue 1996, respectively. 34. Court of First Instance, Telecinco SA v Commission of the European Communities, Case T-95/96, Council Resolution on Public Service Broadcasting, 1, respectively.

180

Rethinking.book Page 181 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment

markets, essential to bring about a degree of stability in the ‘dual system’ model of European public and private broadcasting. The recent consultation of DG Competition on a possible revision of the Broadcasting Communication has produced a consensus that the 2001 text has been a useful instrument in allowing the Commission services from late 2003 onwards to begin clearing the backlog of cases which had built up since the early 1990s. According to the Commission, twenty decisions have been taken since the adoption of the Communication. This contrasts with the period from 1992 to 2003, when the Commission felt unable to take substantive decisions on many of the cases brought by private operators. The possible revision of the Communication makes it inevitable that EU policymakers will need to revisit the complex balance between Member States’ liberty to organise their broadcasting markets on the one hand and the need to respect competition rules on the other. This duality is already implicitly recognised in the Amsterdam Protocol (1997) which balances its much-quoted first sentence about remits and financing being a national prerogative with an important second sentence recalling that State aid “may not affect trading conditions and competition in the Community to an extent which would be contrary to the common interest”. It is very much the wish at least of the private sector media companies that the review process will be a technical revision of the Communication, rather than a reopening of some questions which should by now be definitively settled. At the time of writing,35 there are some grounds for optimism as to the tone and nature of the debate ahead. There is, nevertheless, also a concern that a failure to agree among stakeholders as to the appropriate content of this consultation may lead policymakers into some blind alleys. To start with the grounds for optimism point, the political and market context of 2008 is radically different from the early 1990s, when the first competition cases were filed by private broadcasters. At that time, privately-owned television was in its infancy – the Telecinco case of 1992 was filed two years after Spain had opened the market to private broadcasting. And the phenomenal success of private broadcasting (which proved very attractive to viewers who had until then been denied any meaningful choice in their viewing) was such that marginalisation of public television may have appeared a realistic prospect. Additionally, it is arguable that the institutional self-confidence of the European 35. This contribution is based on a lecture given at the VUB in April 2008 and has been updated for this book in October 2008. At that stage, both the grounds for optimism and the concern about potential blind alleys remained in place.

181

Rethinking.book Page 182 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Commission was at that time at a historical high point, with the completion of the 1992 single market programme and ambitious plans for the introduction of competition in markets previously reserved to national public sector operators – of which the telecommunications market is an obvious example. Against that backdrop, both the hopes of the private sector and the fears of the public sector could easily become inflated. Might the privatisation of public broadcasters follow on from that of the telecommunications operators (and of course from the successful precedent of the privatisation of TF1 in France in 1986)? Could European broadcasting markets end up resembling the US model, with public intervention limited to an under-funded niche player, whose sole purpose is to rectify the failures of a vibrant market in commercial television? Today, while privatisation of public broadcaster remains a policy option in some parts of Europe – notably as an (admittedly controversial) option for the future of Channel 4 in the UK, and, according to recent press reports, for ORF 1 in Austria, this is certainly not a debate which is in any way being driven by the EU, nor is it one of wider application beyond the sui generis cases of Channel 4 and ORF 1. Nor is the prospect of a European public broadcaster like the BBC or ARD playing a marginal role in their national life and inhabiting a ‘ghetto’ of market failure programming a realistic scenario. This means that there is at least a chance for a more rational and objective debate than in the 1990s. But for this to happen there needs to be a better understanding as to what is at stake – i.e., agreement that a revision of the Broadcasting Communication will not confine public broadcasters to an analogue ghetto – as well as a certain scepticism about some of the claims made in defence of the status quo. Many strong arguments are in fact as much about defending current institutional arrangements (public sector broadcasters) as they are about the delivery of quality content (public service broadcasting).

3

Conclusion

If stakeholders in these debates agree on nothing else, there is at least a consensus that the new media environment fundamentally changes the rules of the game, whether for public or private operators (or, indeed, for regulators). The European Commission is to be congratulated for picking up on a recent innovation in one Member State – the introduction of a Public Value Test – to see whether it could usefully be extended to the rest of the EU. Such a test – if based on objective criteria and carried out by an 182

Rethinking.book Page 183 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment

independent regulator – should help minimise the number of complaints to the European Commission from the private sector. Although it is too early to make a definitive judgment on the introduction of such a test in the UK, the first European market to have this form of scrutiny, the early evidence is that this does at least provide a forum for third parties to bring economic arguments to the attention of regulators in a way that would be impossible under many old-style regulatory structures. Further improvements will be needed to the UK PVT, and to the many national variants which it is hoped will be introduced at the behest of the European Commission – but it is clearly a step in the right direction. To finish on an optimistic note, the debate in many Member States has moved beyond the rather sterile and abstract argument about whose programming delivers more ‘quality’. In these Member States, there are some interesting discussions underway about the future of public support for broadcasting. Commissioner Kroes’ comments in Strasbourg that “the assessment of public value and market impact should essentially be carried out at national level”36 were particularly apposite. While not all of these debates are directly relevant to the revision of the State aid Communication, they will of course provide the backdrop to the consultation. Interesting examples of debates about the future of public broadcasting are in this regard: 1. Should public intervention in media markets move away from supporting broadcasting and rather focus on production of public service content for distribution across all platforms? This has been floated in the UK, notably by the NRA, OFCOM, though it is intended to supplement, rather than substitute, a robust public service broadcasting structure and the original idea for a ‘Public Service Publisher’ no longer appears to be on the immediate policy agenda and encountered significant opposition not just from public broadcasters but also from some commercial operators. 2. A variation of (1) above – should public financing be ’top-sliced’, i.e., a proportion of public money should be contestable for producers and rival broadcasters? Smaller European markets which have relatively underdeveloped commercial sectors such as Switzerland, Austria and Ireland are the most advanced in their consideration of this model, though it has also been ‘floated’ in larger markets; 36. Kroes 2008.

183

Rethinking.book Page 184 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

3. How to finance an ambitious public broadcaster without recourse to advertising? The French debates on this issue have attracted a lot of attention, following President Sarkozy’s announcement in January 2008 he would phase out dual financing (State aid plus advertising) on public television. France is not the only country to follow this path – the Czech Republic will end advertising on public television at the same time as it switches off analogue terrestrial television. The specificity of the French scheme is that, according to the information presently available (and the draft law is yet to be debated in the French parliament) one option is that the shortfall in funding for public television as a result of them no longer screening advertising will be made good not by an increase in public funding but rather by a tax on the revenues of private broadcasters, telephone companies and internet service providers. While it is too early to comment on the details of such an (unpublished) scheme, it seems likely that the State aid issues potentially raised here will eventually require the scrutiny of the European Commission. Overall, these factors may give some grounds for believing that the forthcoming debates around the review of the Broadcasting Communication will be more objective and enlightening than has too often been the case in the past. But the prospects for a harmonious co-existence between private and public operators should not be exaggerated – the simple structural fact that one competitor has the security of guaranteed public income on a multi-annual horizon while the other is subject to the vagaries of advertising and subscription markets will always make for uneasy relationships between the two sides of the old dual system. And relationships will only become more strained as public operators expand beyond broadcasting and come into conflict with new competitors. Nor should we overstate what the Communication can achieve. Public broadcasting remains an extremely politicised, and politically influential, sector. It is perhaps not surprising – although profoundly frustrating to the private media sector – if DG Competition chooses to prioritise and deploy its human resources and political capital in other battles with Member States. But a sensible updating of the Communication remains essential – above all, a willingness on the part of the Member States to make meaningful and lasting reforms including tackling the remaining legacy structures of the monopoly era. The alternative – a system in which every new initiative from a public broadcaster is subject to a State aid complaint at EU level – is not in anyone’s interest.

184

Rethinking.book Page 185 Friday, September 25, 2009 10:01 AM

Public Broadcasting and State Aid in the New Media Environment

References ACT, EPC and AER. 2004. Safeguarding the Future of the European Audiovisual Market: a White Paper on the Financing and Regulation of Publicly Funded Broadcasters. Brussels: ACT, EPC and AER. Clément, Cathérine. 2003. Rapport sur la culture à la télévision. Paris: La documentation française. Commission for new-style public television (chaired by Copé, JeanFrancois). 2008. Method report, submitted to the President of the French Republic. Paris, April 16. Communication 2001/C 320/04 of the European Commission on the Application of the State Aid Rules to Public Service Broadcasting [2001] OJ C320/5. Communication COM(2008)/0481 final from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Eighth Communication on the Application of Articles 4 and 5 of Directive 89/552/EEC ‘Television without Frontiers’, as amended by Directive 97/36/EC, for the period 2005 2006 [SEC(2008) 2310]. Council of Europe Recommendation on the Guarantee of the Independence of Public Service Broadcasting No.R (96)10. Council Resolution of 25 January 1999 Concerning Public Service Broadcasting [2001] OJ C30/01. De Carolis, Patrick. 2008. Speech delivered at the French Presidency’s Conference on ‘Public Service Media in the Digital Age’, Strassbourg, July 17-18. Decision C 2/2004 of the Commission of 22 June 2006 on the Ad-hoc Financing of Dutch Public Service Broadcasters. Decision E 3/2005 of the Commission of 24 April 2007 Relating to Financing of Public Service Broadcasters in Germany. Department of Culture, Media and Sports. 1999. The Future Funding of the BBC (‘Davies Report’). London: DCMS. European Commission. Review of the Communication from the Commission on the Application of State Aid Rules to Public Service Broadcasting. http://ec.europa.eu/comm/competition/state_aid/reform/ broadcasting_comm_questionnaire_en.pdf. (Accessed November 20, 2008) 185

Rethinking.book Page 186 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

European Court of First Instance, Telecinco v Commission, Case T-95/96 [1998] ECR II-3407. European Court of Justice, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, Case C-280/00 [2003] ECR I-7747. Fenton, Ben. 2008. Web no threat to TV, says expert. The Financial Times, July 19. High Level Group on Audiovisual Policy (chaired by Marcelino Oreja). 1998. The Digital Age: European audiovisual policy. Brussels: the European Commission. House of Commons, Select Committee on Culture Media and Sport. 2007. First report. London: House of Commons. Kroes, Neelie. 2008. The Way Ahead for the Broadcasting Communication. Speech delivered at the French Presidency’s Conference on ‘Public Service Media in the Digital Age’, Strassbourg, July 17-18. Lange, André. 2008. Comparative Analysis of the Financing of the Public Audiovisual Sector in the European Union. Speech delivered at the French Presidency’s Conference on ‘Public Service Media in the Digital Age’, Strassbourg, July 17-18. Newspaper Society. BBC Trust Responds Local Media Concerns and Rejects Local Video Plans. http://www.newspapersoc.org.uk./ Default.aspx?page=3855. (Accessed November 21, 2008). OFCOMa. Methodology for Market Impact Assessments of BBC Services. http://www.ofcom.org.uk/research/tv/bbcmias/statement/. (Accessed November 20, 2008) OFCOMb. Project Overview. http://www.ofcom.org.uk/tv/psb_review/ childprog/tor/. (Accessed October 20, 2008) Scharf, Albert. 1999. Public Service Broadcasting in the Digital Age: EBU Yearbook. Geneva: EBU. Stöcket, Christian. 2008. Verleger fordern Zäune für ARD und ZDF. Spiegel online, July 17. Tongue, Carole. 1996. The Future of Public Service Broadcasting in the Digital Age. Brussels: (adopted by) the European Parliament. Zeihler, Gerhard. 2004. Public Service Broadcasting: Obligation or Luxury? Speech delivered at the British Screen Advisory Council, London, January 29. 186

Rethinking.book Page 187 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting How Future-proof is the Remit of Public Broadcasting Organisations? Karen Donders

Introduction Over the years, it has become clear that the European Communities’ State aid rules1 apply to the funding of public broadcasting organisations by the Member States. While the first complaints of Spanish, Italian, Portuguese and French private broadcasters against the dual funding of RTVE, RAI, RTP and France Télévisions respectively were stalled in the beginning of the 1990s,2 the European Commission (‘Commission’) has become more active in its application of the State aid rules to the funding of public broadcasting organisations since 2001. The Commission’s interference with Member States’ public broadcasters is not undisputed, however. While private companies complain that the application of the State aid rules to the funding of public broadcasting is not going far enough, public broadcasters and Member States’ media ministries fear that the Commission is limiting the public service remit when applying the EC Treaty rules to broadcasting. They are worried the Commission imposes an increasingly strict market logic on public broadcasters. State aid procedures involving support schemes for public broadcasters are thus characterised by two conflicting perspectives on public service broadcasting. Following one perspective, public broadcasters have a competitive advantage over other market players. They are too generously financed and their activities lack sufficient transparency and control. Proponents of this perspective are in favour of a ‘small’ public broadcaster that is constrained in the expansion of its services to the Internet, digital

1. 2.

Following the State aid rules, the European Commission is competent to assess the legality of Member States’ State aid schemes (for example, subsidy mechanisms). Gorini 2003; Michalis 2007.

187

Rethinking.book Page 188 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

television and mobile devices.3 Representatives of the second perspective strongly defend the idea of a ‘big’ public broadcaster that provides different genres of content (so, also entertainment and sports) and is active in all media markets and, as such, evolves into a public service media enterprise. These broader institutions of course need regulation but the regulatory framework must be flexible in order to guarantee the independence and innovative potential of public broadcasters.4 Due to these diverging opinions about public broadcasters, the application of the European Community’s State aid rules to their funding is becoming increasingly important. The number of complaints and decisions is on the rise.5 Given the significance of State aid rules for public broadcasting organisations and their disputed nature, the aim of this chapter is to provide an insight into the actual meaning of State aid policy for the remit of public broadcasting in a digital age. Hence, the question underlying this contribution is whether or not the Commission is, indeed, as is feared by public broadcasters and Member States, limiting the remit of public broadcasting organisations. The assumption that public broadcasters should be active in different markets on different platforms with a diversity of genres and content is the starting point of this analysis. The chapter consists of three parts. In the first part, the author gives an overview of the EU regulatory framework on State aid and on the funding of public broadcasting organisations. There is a discussion on Art. 87(1) EC, which contains a general ban on the use of State aid. After that, the exceptions allowing for State support for public broadcasting are discussed. In the second part, the application of these rules in particular State aid cases is addressed. Here, the focus lies on recent Commission decisions like the decisions on the licence fee funding of ARD and ZDF and the support for Flemish public broadcaster VRT. Other decisions like the BBC Digital Curriculum are included where relevant to support the analysis. Finally, some conclusions are made.

3. 4. 5.

See for instance, Armstrong and Weeds 2007. See for instance, Jakubowicz 2007. For a complete overview of all State aid decisions concerning public broadcasting, see Donders and Pauwels 2008.

188

Rethinking.book Page 189 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

1.

The State aid rules: legal constraints and margins

There are two essential questions in every State aid procedure. First, is the funding scheme in place State aid? Second, if so, can the measure be exempted from the general ban on State aid on the basis of one of the exceptions provided for by the EC Treaty?

1.1 Art. 87(1) EC: Is support for public broadcasting organisations State aid? Measures that are State aid are incompatible with the aims of the internal market and are therefore prohibited. Art. 87(1) EC determines which support measures are State aid within the meaning of the EC Treaty. “Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the common market”.6

The article identifies three criteria with which measures have to comply in order to be regarded as State aid: there has to be a transfer of State resources, the measure must confer a selective advantage upon certain undertakings or sectors, and the support can potentially harm trade between and competition in Member States. The funding of public broadcasting organisations normally meets these three criteria.7 First, the public subsidies granted to public broadcasters like Flemish VRT or Dutch NOS can be regarded as a transfer of State resources. Second, governments support public and not private broadcasters. Consequently, the funding of public broadcasters is selective in nature. Third, since most public broadcasters are active in advertisement markets and in the acquisition of transnational media rights, the funding of public broadcasters can bring about a distortion of competition and trade. The three criteria are not undisputed, however. Public broadcasters and some Member States for example argue that the licence fee funding of public broadcasters (e.g. ARD and BBC) is not a transfer of State resources.8 The licence fee, so they argue, is a direct transfer of citizens’ contributions and is, hence, not imputable to any State authority. Nevertheless, since 6. 7. 8.

Emphasis added. Some authors make a distinction between four or five criteria (state resources, selectivity, advantage, effect on trade, effect on competition). Katsirea 2008.

189

Rethinking.book Page 190 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

government authorities enforce the collection of the licence fee, the Commission has classified the licence fee as a transfer of State resources.9 Another problem with regard to Art. 87(1) EC is the selective advantage criterion. In general a measure constitutes an advantage when a company or sector acquires certain benefits they would not have acquired in a normally functioning market. If governments’ funding of public broadcasters can be motivated on the basis of sound private sector motives (e.g. the perspective on profits) there is no selective advantage. It is up to the Commission to determine whether or not governments behave like normal private undertakings. This assessment is based on the ‘Market Economy Investor test’. This test has been criticised heavily,10 and not only because of the assumptions (perfect competition, perfect information, perfect markets, etc.) that underlie it. Government support for public broadcasting organisations is motivated by some shortcomings of the market and aims to support services that contribute to social, cultural and democratic goals.11 Consequently, the comparison with private undertakings’ behaviour seems superfluous and biased. “When public authorities intervene on the market on the same terms as private investors, there is no granting of State aid. This case, however, is quite rare, since public authorities generally take action precisely because the market fails to deliver the desired supply.”12

Notwithstanding this criticism on the Art. 87(1) EC criteria, the funding of public broadcasters in general meets the constitutional conditions set in Art. 87(1) EC. As a consequence, the funding of public broadcasting organisations qualifies in principle as State aid. However, if public broadcasting services are considered to be services of general economic interest (infra),13 the application of Art. 87(1) EC is somewhat more complicated. The question indeed has arisen whether measures that purely offset the cost of a public service obligation (e.g. the public service remit of broadcasting) can be considered to be State aid within the meaning of Art. 87(1) EC.14 Two approaches can be observed: the first one is dubbed the ‘aid’ approach, the second the ‘compensatory’ approach.15 9. 10. 11. 12. 13. 14. 15.

See for instance, Decision E3/2005 on Financing of Public Service Broadcasters in Germany, par. 143ff. Hakenberg and Erlbacher 2003, 434. Plender 2003. Hencsey et al. 2005, 10. Whether ‘public service media’ would be considered as services of general economic interest remains to be seen. Antoniadis 2006, 597. Rizza 2003, 69.

190

Rethinking.book Page 191 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

“… deux approches se sont opposées: l’approche ‘compensatoire’, qui voit dans ce financement non pas une aide mais une rénumération appropriée pour les services fournis ou une compensation pour les coûts de fourniture de ces services et l’approche ‘aide d’état’, pour qui ce financement constitue une aide d’état, susceptible le cas échéant d’être justifiée au titre de l’article 86, par 2, CE si les conditions sont loin d’être anodines, dans la mesure où les aides d’état sont soumises à une procédure de contrôle par la Commission.”16

The ‘aid’ approach stands for a more critical approach that considers the funding of services of general economic interest to be State aid within the meaning of 87(1) EC. Not the goal of the measure, but rather the potentially harmful effects on competition qualify support schemes as State aid.17 The ‘compensatory’ approach fiercely contradicts this stance and puts forward that State aid in favour of services of general economic interest is not intended to favour one undertaking over another, but to favour the end-user. It is for this reason that governments offset the costs of delivery of services of general economic interest. In addition, if governments merely compensate for the cost of public service obligations there is no advantage and consequently, bearing in mind the phrasing of Art. 87(1) EC, no State aid.18 It is the latter view that is dominant with proponents of a ‘broad’ public broadcaster. They feel that market distortions, although not negligible, are subordinate to the public interest (and hence the citizen) that is served.19 It seems that at present also the European Court of Justice (‘ECJ’) favours to some extent the compensatory approach. This became clear in the Altmark case. In this case the Court dealt with German compensations for universal service obligations in the transport sector. The Court ruled that measures do not constitute State aid following Art. 87(1) EC if they comply with four criteria: entrustment with a clearly defined public service mission, objective parameters for control, proportionality of government support, and selection on the basis of a public tender or evidence of efficiency.20 However, until now no support scheme for public broadcasting has met the criteria the Court set.21 Therefore, all support schemes for public broadcasting organisations have 16. 17. 18. 19.

Dony 2005, 110. See for instance, Nicolaides 2003, 561. Dony 2005, 133. See for instance, Barbara Thomass’ assessment of the German three-step test that has the purpose to evaluate ex ante the delivery of new services by ARD and ZDF (Thomass 2008). 20. European Court of Justice, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, Case C-280/00, par. 87-88. 21. For more information about Altmark and its inherent difficulties for public broadcasting, see for instance, Mortensen 2008; Antoniadis 2006.

191

Rethinking.book Page 192 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

to be – for the moment – considered to be State aid within the meaning of the EC Treaty. As a result, the Commission usually continues its investigation of State aid to public broadcasting by assessing its compatibility with exceptions in the Treaty.

1.2 Art. 86(2) EC and the Broadcasting Communication: Can support for public broadcasting organisations be compatible with the EC Treaty? As stipulated by Article 86(2) EC: “undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.”

This Article is quite ambiguous, since it acknowledges the importance of public services on the one hand, and the weight of Community rules, on the other. It is often criticized by lawyers on the ground of its superfluous nature22 and it has indeed given rise to heated debates about the ‘balancing act’ between the public interest as defined by Member States and the common interest as pursued by the Commission. “Article 86(2) EC, as with any exception, should be interpreted strictly. This is not always easy since its objective is to strike a balance between the Community objectives of market integration and national public service objectives. This provision is thus the main point of contact between two ‘tectonic plates’ moving in opposite directions. Regular ‘seismic movement’ is for this reason to be expected around Article 86(2) EC and its interpretation.”23

It is up to the Commission to shape the balancing act: Art. 86(3) EC explicitly recognises the authority of the Commission to decide how to implement Art. 86(2) EC in this regard. This does not take away the ambiguity of Art. 86(2) EC, however. There is a latent contradiction between national State aid objectives and the overall goals of the Community. Article 86(2) EC recognizes this field of tension and the controversy attached to the interpretation of Community law with regard to services of general economic interest, but it does not solve it, which is a fundamental difference. This subsequently implies that every public 22. Nitsche 2001, 137. 23. Buendia Sierra 2006, 543.

192

Rethinking.book Page 193 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

broadcasting case will be assessed on a case by case approach, which on the negative side is, and probably will remain, problematic in “such a fundamental area of traditional State activity.”24 On the positive side, a caseby-case approach is to be applauded, because it allows the Commission and the Courts to take into account sector-specific sensitivities.25 Given that public broadcasters are now also active in new markets, such a case-by-case approach is even more important. As different public broadcasters are engaging in the changing media environment at different speeds, diverging complaints and broadcasting markets require a context-specific assessment of support schemes. The flexible rules in the Broadcasting Communication (2001)26, that makes explicit the criteria under which a State aid measure can qualify as compatible under Art. 86(2) EC, and the Amsterdam Protocol (1997) illustrate that a sector-specific approach is considered necessary by most stakeholders. The Broadcasting Communication,27 of which the first proposals were submitted by the Commission in 1995 and 1998,28 has a dual nature. On the one hand its goal is to stress that public broadcasting serves some very important public interest objectives. On the other hand, it articulates that the funding of public broadcasters is subject to EC competition rules, despite its acknowledged social, cultural and democratic importance. The latter is justified because broadcasting no longer operates in a monopolistic, but in a ‘mixed media’ environment in which “growing concerns for a level-playing field”29 are being raised by private undertakings and the Commission. As such, the applicability of the State aid rules to public service broadcasting is in essence an intrinsic consequence of the – from a diversity and pluralism perspective vital – liberalisation of the broadcasting market at the end of the 1980s. On the basis of three criteria, it is up to the Commission to decide whether or not State aid to public broadcasters is indeed compatible with the EC Treaty. These criteria are: (i) definition and entrustment, (ii) control and monitoring, and (iii) proportionality. A discussion of all three criteria is 24. Szysczcak 2004, 190. 25. Moreover, one can claim that – notwithstanding there are some guiding precedents – a case-by-case approach is followed throughout the entire field of competition policy. 26. The revision process of the 2001 Broadcasting Communication started in January 2008 and resulted in a new Broadcasting Communication, published on 2 July 2009. This contribution was submitted in July 2008 and revised in December 2008. 27. Commission Broadcasting Communication 2001. 28. See Commission Proposal on State aid and public broadcasting 1998. 29. Commission Broadcasting Communication 2001 par. 3.

193

Rethinking.book Page 194 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

relevant in light of this contribution’s focus on the remit of public broadcasting in a digital era. The first criterion demands that the remit and mandate of public broadcasting is clearly defined and that its fulfilment is legally entrusted to the public broadcaster receiving State resources. This norm has been quite flexible since the Commission can only pursue a ‘manifest error’ approach vis-à-vis the remit of public broadcasters. The manifest error concept implies that the Commission can merely challenge the remit when Member States are without doubt funding commercial and not public services. So far, the Commission has sometimes doubted Member States’ definitions of public broadcasting,30 but never formally contested them in a final State aid decision. It is not unthinkable that the Commission would do so in the near future, however. Now that public broadcasters engage in digital services themselves, it is clear to the Commission that this activity should also be clearly defined and entrusted. The definition of manifest error becomes increasingly crucial as digital services are often assumed to be more of a commercial than public nature. The Commission moreover forcing the Member States to define the public service remit in the digital sphere runs the risk of limiting the definitional freedom of Member States. The two other criteria concerning the monitoring and control of public service delivery and the proportionality of public funds are closely linked to the remit of public broadcasting. The monitoring and control principle means that Member States should check whether public broadcasters are living up to set public objectives and stay within the legal framework underlying their operation. Also this criterion could be more scrupulously assessed in a new media market. Proponents of a ‘smaller’ public broadcaster (see introduction of the chapter, supra) indeed argue that the new media activities of public broadcasters necessitate more government control. The third proportionality criterion, has also been very contentious. Here, the Commission determines whether there is any overcompensation of the public service task, which in turn assumes a high degree of transparency in public broadcasters’ financial records. In addition, the criterion implies that the Commission analyses to what extent public support of public broadcasting is more or less than the actual cost of providing the required public services. The proportionality calculation is, however, not undisputed. It is not a simple and straightforward mathematical exercise. The separation of commercial and public revenues and costs of public 30. See for instance, Decision 3E/2005 on Financing of Public Service Broadcasters in Germany.

194

Rethinking.book Page 195 Friday, September 25, 2009 10:01 AM .

State Aid and Public Service Broadcasting

broadcasters is a prerequisite to assess whether or not the funding is proportional. Such a separation of course interferes with the difference between public services and commercial services. Now that also public broadcasters are experimenting with new sorts of business models, new questions emerge with regard to the proportionality criterion. In particular the debate on pay services is very vivid: can they fit the remit of public broadcasting given their lack of universality?31 Taking into account the ambitious – primarily market-oriented – policy goals the Commission has set itself with regard to the development of an integrated European market32 and a European competitive knowledge economy33 – and the level-playing field approach34 underlying it – the digital expansion of the remit of public broadcasting might challenge the flexibility of the Broadcasting Communication. In a digital media environment, the economic potential of developing new media services is indeed booming and more emphasis has been placed on the achievement of a ‘fair’ balance between private and public undertakings to exploit the potential benefits of digitalisation. For some this search for a ‘fair’ balance is in practice a threat for public broadcasters,35 for others it is a necessity to ensure a level-playing field in the broadcasting market.36

1.3 The Amsterdam Protocol: muddling through In addition to the above discussion of Art. 87(1) EC, Art. 86(2) EC and the Broadcasting Communication, it is important to include the Amsterdam Protocol in the analysis. Although the Amsterdam Protocol has been agreed upon in 1997, the Protocol remains relevant and is revitalised in light of the current expansion of public broadcasters to new media markets. “The provisions of the Treaty establishing the European Community shall be without prejudice to the competence of the Member States to provide for the funding of public service broadcasting in so far as such funding is granted by broadcasting organisations for the fulfilment of the public service remit as conferred, defined and 31. See for example, the diverging views on this issue in a position paper of the Association of Commercial Television (ACT) and the European Broadcasting Union (EBU) (ACT 2008; EBU 2008). 32. Goodwin and Spittle 2002; Dinan 1999. 33. Pauwels and Burgelman 2003. 34. Harcourt 2004, 10. 35. See for instance, Coppieters 2003. 36. See for instance, Hobbelen et al. 2007; Antoniadis 2006; Depypere and Tigchelaar 2004.

195

Rethinking.book Page 196 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

organised by each Member State, and in so far as such funding does not affect trading conditions and competition in the Community to an extent which would be contrary to the Common interest, while the realisation of that public service shall be taken into account.”37

The Amsterdam Protocol reflects the growing concerns of Member States about the direction in which media policy was heading under pressure of European State aid policy. In 1997, Belgian Prime Minister Dehaene and German Chancellor Helmut Kohl lobbied, herein supported by various lobbying groups (most importantly the European Broadcasting Union), for the implementation of the Amsterdam Protocol in the Amsterdam Treaty.38 The Protocol can be seen as a political commitment to a ‘European-style’ concept of public broadcasting.39 It recognises the importance of public broadcasting for European democracy and emphasizes Member States’ autonomy to organize their own system of public service broadcasting. At the same time the Protocol ensures the application of European competition policy to this particular field of media policy. Opinions on the importance of the Protocol differ. Some find it a major political achievement.40 Others find this appraisal of the Protocol too optimistic. Nihoul,41 for example, says that the ‘bilan’ of the Protocol is rather disappointing, and that it merely contains “quelques indications politiques et l’annonce d’un statu quo juridique”. The Protocol indeed has not led to a complete exception of public broadcasting from the EC Treaty. Member States are not completely free in determining their policies with regard to public service broadcasting. From a legal point of view this might be a muddled solution.42 One should, however, not overlook the importance of political signals, nor the legal obligation of the Commission and the Courts to take the Protocol, that is part of Community law after all, into account. In the light of the current discussions about the role of public broadcasters on new media platforms, the Amsterdam Protocol is back in the centre of attention. It is argued that the Protocol contains a specific position for public ‘broadcasting’ only, and not necessarily for public service ‘media’. Member States and public broadcasters, however, argue that the Protocol is not linked to any specific medium, but to a political intention. The fact that this intention is extended beyond the broadcasting medium to, for 37. Amsterdam Protocol 1997. 38. For information on the Amsterdam Treaty, see for instance, Héritier 2001; Duff 1997. 39. Humphreys 2003, 2. 40. See for instance, Raboy 2003, 46. 41. Nihoul 1998, 346. 42. Nitsche 2001, 152.

196

Rethinking.book Page 197 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

example, the Internet and mobile devices does not change the validity of the Protocol. The Commission, although supporting the notion of technology-neutrality, has not yet intervened in this debate on the width of the Amsterdam Protocol.43 The discussion of the State aid legal framework44 already indicates that the assessment of support schemes for public broadcasting will not be straightforward. The rules themselves are inspired by sometimes opposing political objectives and contain concepts that are more often than not difficult to define (see for example, the discussion of the ‘aid’ and ‘compensatory’ perspectives on the presence of a ‘selective advantage’ when assessing the support for services of general economic interest, supra).

2.

The application of the State aid rules: still ‘to inform, to educate and to entertain’?

The aim of this chapter is to analyse whether or not the Commission’s application of the legal framework has a negative impact on the remit of public broadcasting organizations and should as a consequence rightly be perceived as a threat for public service broadcasting. Here, the focus lies on the expansion of the remit to new media markets. In order to answer this question a selection of rather recent Commission decisions has been made, in particular the decisions concerning the funding of the German public broadcasters ARD and ZDF (14 April 2007) and Flemish public broadcaster VRT (27 February 2008). These decisions are relevant since they represent the most up to date interpretation of Community law by the Commission. For the sake of argumentation other decisions that concern the funding of public broadcasters in the Netherlands, the United Kingdom, Denmark, etc. are introduced in the analysis.45 The findings are based on the analysis of Commission decisions and on interviews conducted with experts in the field of media policy and EU officials. The case analysis is divided into three parts. It addresses the issues of definition 43. For more information about these different standpoints, see for instance, AER 2008; Biggam 2008; EBU 2008, 10; Plasterk 2008; Vlaamse Regering 2008. 44. In our discussion of the legal framework we have not discussed Art. 87(3)d EC, the so-called 'cultural derogation' in the Treaty. The relevance of this Article is for the moment rather limited in the application of the State aid rules to public service broadcasting and will, therefore, not be discussed in this chapter. For more information about Art. 87(3)d EC see for instance, Psychiogopoulou 2006. 45. For a complete overview of Commission decisions on State aid and public service broadcasting, see Donders and Pauwels 2008.

197

Rethinking.book Page 198 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

and entrustment, monitoring and control, and proportionality, i.e. the three criteria of the Broadcasting Communication. As already indicated in the discussion of the Broadcasting Communication, all three criteria pose particular questions with regard to the expansion of the remit to new media platforms.

2.1 Definition: how precise can/should the remit be? The Broadcasting Communication is rather ambiguous with regard to the required specificity of the definition of the remit.46 In par. 33 of the Communication one can read that “a wide definition may be considered legitimate”, whereas par. 37 states that “the definition should be as precise as possible”. Recently, with the expansion of public broadcasters’ activities to new media markets, this haziness has given rise to substantial problems of interpretation.47 The Commission fears indeed that Member States might abuse the flexible Treaty provisions and the Amsterdam Protocol in order to fund public broadcasting services that go beyond the remit of public broadcasting organisations (so-called ‘mission creep’). As a consequence the Commission, notwithstanding its hesitance to go against the Member States’ autonomy to define the remit of public broadcasters, has become more active in questioning the definition of the remit. This, of course, provokes quite some criticism.48 Until now, the Commission has put forward three differing approaches49 towards this issue of definition. Closely associated The first approach starts from the concept ‘closely associated’. In the BBC Digital Curriculum case, in which the Commission assessed the funding of online educational services of the BBC, it was maintained that the remit concerned only those services that were closely associated with, and therefore limited to, radio and television services. The inclusion of “non television and radio services as ancillary services of the BBC is a matter of UK legislation. The provision of educational material over the 46. As is also suggested by Ross Biggam in another contribution to this edited collection. 47. It seems to make more sense that a wide remit, that is precisely defined, is considered legitimate. A wide definition, that is at the same time precise, seems to be illogical. 48. See for instance, Holtz-Bacha 2005; Wiedemann 2004; Meijnen 2007. 49. We discuss these approaches in chronological order.

198

Rethinking.book Page 199 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

internet may be considered to be within the ‘existing aid’ nature of the scheme to the extent that it remains closely associated with the BBC’s television and radio services.50 If, however, the proposed ‘ancillary service’ sheds this ‘close association’ it can no longer be considered as one offering continuity within the existing scheme. The use of public funding to enter markets that are already developed and where the commercial players have had little or no exposure to the BBC as a competitor cannot be considered as maintaining the status quo regarding the nature of the scheme.” Two remarks can be made with regard to this approach. Firstly, the above statement infringes Member States’ competence to define what are services of general economic interest. It implies that services that are not closely associated with radio and television services cannot be part of the remit and can subsequently not be regarded as a public broadcasting service (which is a service of general economic interest). Secondly, it is not clear whether this approach is technology neutral. This tendency could run against the overall philosophy of the Commission’s Information Society policy. In this policy field the Commission indeed stresses that regulation should become technology neutral: given fast developments in the media sector, regulation should not depend on specific platforms or technologies.51 The concept ‘closely associated’ implies a difference on the basis of technology however. Radio and television services are at the core of the remit, whereas other services are situated within or even outside the margin of the remit, depending on how ‘closely associated’ they are with the core. The ‘closely associated’ approach is, hence, problematic in two respects: firstly, with regard to the reference made to specific types of services, and secondly, concerning the different platforms on which these services can be offered. Added public value The imperfections of the BBC Digital Curriculum decision were not neglected by the Commission. It puts forward a slightly different approach in its decision on German licence fee funding of ARD and ZDF. In this decision the Commission makes three clearly discernible remarks with regard to the definition of the remit in a new media landscape. Firstly, the Commission says that there is no clear dividing line between commercial and public services in the German public broadcasting 50. Decision N37/2003 on BBC Digital Curriculum, par. 36. 51. See for instance, Reding 2006, 4.

199

Rethinking.book Page 200 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

system.52 The lack of clarity in the definition of the remit could give ARD and ZDF the possibility to exploit commercial services on the basis of public funding, which would constitute a manifest error and lead to the incompatibility of the State aid with the Treaty. Hence, it is not the platform or the technology underlying the platform that can give rise to a manifest error, but the business model that supports the service and determines its nature (commercial or public). This statement is more in line with the issue of technology neutrality and also with the Commission’s task to find a manifest error. However, it is potentially problematic since the Commission could imply – with this statement – that e.g. pay-per-view services (a specific business model underlying some on-demand services) cannot be considered as public services.53 So, if public broadcasters exploit their archives54 and charge the consumer a reasonable market price for this content, this would imply that these services would be commercial and not public broadcasting services. This logic is not conclusive as it denies Member States’ right to decide upon the funding mechanisms that benefit public broadcasting organisations. The nature of revenue streams, be it a licence fee, advertising revenue or pay-per-view income, is to be determined by Member States and does not affect the public character of a service.55 Moreover, even if the Commission has no formal position on payservices yet,56 the classification of pay-services as commercial services could potentially harm innovation in service delivery with public broadcasters.

52. Decision E3/2005 on Financing of Public Service Broadcasters in Germany, par.238239. 53. Ibid., par.239-240. 54. The exploitation of archives is often mentioned in the debate about pay-services. Although the author is not necessarily against the offering of pay-services as public services, she thinks that it is advisably to study and communicate what exactly the costs of the digitization and exploitation of archives are. Quite some public broadcasters get additional funds to stimulate digitization of content. The cost of the exploitation of archives should, therefore, be linked to copyrights, operational and/or technical costs. It is not clear to what extent these costs (for example, some public broadcasters hold most copyrights of programmes themselves) justify remuneration by citizens who have already paid for the content offered. 55. TV2/Danmark and others v Commission, Cases T-309/04, T-317/04, T-329/04 and T336/04. 56. The issue is under debate in the current update process of the Broadcasting Communication. In January 2008 the Commission launched a consultation on a possible review of the 2001 Broadcasting Communication. One of the issues being discussed is the public or commercial nature of pay-services (see Commission Questionnaire on the Application of State Aid Rules to Public Service Broadcasting, 2008 par.2.4.2.

200

Rethinking.book Page 201 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

Secondly, the definition of the remit – so it can be read in the decision – is too vague, in particular with regard to new media services. The delivery of these services cannot be justified on the basis of imprecise cultural, educational and democratic objectives. There is a need for a ‘clearer circumscription’. The Commission insists that “it remains unclear what is the public service value of these channels in addition to the already existing channels.”57 It is disputable whether this demand for an ‘added public value’ for new media services is technology neutral and can, in addition, be seen as legitimately falling within the scope of Art. 86(2) EC and the Broadcasting Communication. Yet, the fact that the Commission insists on a more clear definition of the remit in a more complicated digital era is given its task to check for any manifest error, justified. The underlying idea of this more active approach toward the issue of definition is that not everything can be swept away under the carpet of democracy, social cohesion, universal service delivery, cultural diversity, etc. Moreover, a more precise definition of the remit might perhaps be perceived by public broadcasters as burdensome and uncomfortable – and indeed one should be careful when intervening with the independence of public broadcasting organisations – yet it is necessary to legitimate better the need for public broadcasting in a fast developing and far more complex media landscape. Thirdly, the Commission asserts that “the public service remit might include certain services that are not ‘programmes’ in the traditional sense, such as online information services.”58 This remark illustrates very well that there remains a conceptual problem in the ‘added value’ approach. This problem goes beyond the mere quest for technology neutrality and illustrates how difficult it is to leave behind the old mindsets in media policy. The Commission mentions ‘programmes’ in the traditional sense and compares them with non traditional services like online services, because nobody really knows how to phrase it otherwise. Taking into account the legal importance and possible impacts of using certain concepts, a thorough rethinking of concepts is not just necessary. It is urgent. No hands-off approach59 In the decision on Flemish public broadcaster VRT the Commission clarifies its approach further. Emphasis is put on the competences of 57. Decision E3/2005 on Financing of Public Service Broadcasters in Germany, par.227. 58. Ibid., par.222. 59. The Commission prevents Member States from upholding a 'hands-off' approach with regard to their public broadcasters. In particular, it is required that Member States control their public broadcasters' expansion to new media markets.

201

Rethinking.book Page 202 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Member States with regard to definition and the acceptability of a wide definition.60 Nonetheless, the Flemish authorities should ensure that the remit is not determined by the VRT but by the government itself. In the current situation, so the Commission maintains, this is not the case and as a consequence, it is difficult to judge which new services are part of the remit as defined by the Flemish government and which are not. As a result, the Commission observes a lack of transparency about what the VRT is doing and a high degree of uncertainty for other players in the market.61 The latter argument is reasonable and is explicated further by the Commission. “The Commission does not contest the participation of public broadcasters in new technological developments, nor does it argue against their distribution of television and radio content over different platforms. Yet, the Commission upholds that the possibility to use new platforms does not automatically mean that all services offered by public broadcasters over new platforms are necessarily public broadcasting services. New platforms offer quite some opportunities to distribute services that differ considerably from the traditional remit of public broadcasters and traditional television programmes offered by them. The relevance of these services for the democratic, social and cultural needs of society is not always clear.”62

Hence, in the VRT case, the evaluation of the definition criterion, as identified in the Broadcasting Communication, is captured in one single question: is there a mechanism, imposed by Member States, that prevents public broadcasters from freewheeling in new media markets? In other words: do governments ensure that public broadcasting organisations are active in merely these markets where they are required to be, or do they uphold a hands-off approach vis-à-vis public broadcasting organisations (and as such allow (again) everything to be swept under the carpet of democracy, social cohesion, universal service delivery, cultural diversity, etc.)? Even if this approach is still not completely technology neutral, it is – in comparison with the ‘closely associated’ and ‘added value’ approaches discused above, more in line with the State aid rules. These try to guarantee that the funding behaviour of EU Member States does not harm competition and trade to an unacceptable extent. At the same time, they for services of general economic interest also give Member States the nearly autonomous right to define the remit of these services. In this approach, 60. Decision E8/2006 on the Public Financing of Public Service Broadcaster VRT, par.170-174. 61. Ibid., par.178-180. 62. Ibid., par.181 (Quote translated from Dutch).

202

Rethinking.book Page 203 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

the Commission indeed limits itself to checking governments’ definition of the remit and tries to make sure a certain level of predictability for other players in the market. In other words, the Commission asks Member States to take responsibility and ensure a clear definition of a possibly wide remit. In doing so, the Commission seems to find a balance between the necessity for public broadcasters to evolve in rapidly developing media markets and the concerns of commercial undertakings that there would be no clear limits to this evolution.63 In short, the Commission’s approach towards the definition of the public service remit has evolved over different cases. Initial approaches were fine tuned and have been brought in line with the State aid rules. The line between the Commission’s and Member States’ competences with regard to the definition of the remit remains a thin one however. Overall, it is clear (as has been put forward already several times, supra) that the Commission fears a stretching or abuse of Member States’ competences to define the remit and wants to prevent an outsized expansion of the remit on the basis of vague and not necessarily justified (or explicitated) democratic, social and cultural policy objectives.

2.2 Monitoring and control: imposing a/the public value test? The impact of Commission policy on the remit of public broadcasting organisations is substantial, but for now there remains a lot of room for manoeuvre for Member States to determine what their public broadcasters have to do. With regard to the second assessment criterion in State aid cases, i.e. monitoring and control, matters have very recently become more complicated and contentious. Notably in the decision on the German licence fee funding of ARD and ZDF, the decision on the Irish funding for RTE and the decision on the financing of Flemish public broadcaster VRT, the Commission has demarcated its approach toward monitoring and control. Two elements come to the front: demands for, (i) external control of public broadcasters’ performance and, (ii) ex ante evaluation of new media services. Firstly, the Commission asks Member States to set up external monitoring bodies checking whether or not public broadcasters fulfil their public service objectives. The Irish and Flemish governments, as a consequence of Commission intervention, created such a regulator. In Ireland this is the Broadcasting Authority Ireland and in Flanders the Flemish Regulator for 63. See for instance, ACT 2008.

203

Rethinking.book Page 204 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

the Media. In Germany, the Länder did not go along with this Commission demand and stayed loyal to the Broadcasting Councils.64 Secondly, and the focus of the contribution lies on this element, the Commission has devoted significant attention to the entrustment of new media services to public broadcasters. In the above mentioned decisions, the Commission argues that a general entrustment of the remit does not suffice when new media services are concerned. There is a need for a separate entrustment of new or additional services. This separate entrustment should be preceded by an ex ante evaluation of the new media service in question. Such an ex ante evaluation, shaped after the BBC’s public value test,65 should check whether or not a particular service fits the remit of public broadcasters and has a proportionate effect on the market. The Commission explicitated this approach for the first time in the preliminary investigation on the funding of Dutch public broadcaster NOS. In the Dutch case, the Commission observed that ‘side activities’ (including for example some new media activities) of the different broadcasting organisations that participate in the overall Dutch public broadcasting system were not formally entrusted to the public broadcasters involved. Moreover, the Commission found the definition of new media activities vague and ambiguous, which might lead to uncertainty about the activities of NOS on commercial markets and eventually to the entrustment of services that do not fall within the remit.66 The Commission elaborated on

64. In Germany all public broadcasters are controlled by the so-called Broadcasting Councils. These Councils are not external to the public broadcasting organizations. Their members represent different groups in society and often have an expertise in the field of media policy. The Councils have been created in order to ensure public values like pluralism, quality, independence, etc. 65. The Public Value Test (PVT) is one of the key components of the British public service broadcasting regime since January 1, 2007. It is a tool to evaluate every substantial change to the BBC's activities. The public value test consists of two parts: a Public Value Assessment (PVA, done by the BBC Trust) and a Market Impact Assessment (MIA, responsible for this is OFCOM). A new service that is considered to be a substantial change to the BBC's 'normal' activities is subject to the test. The test takes six months. After the Trust's evaluation (although OFCOM is responsible for the Market Impact Assessment, the BBC Trust takes the lead) the service is approved upon or not (the Trust can also ask for modifications to, for example, limit possible market distortive effects). Fore more information about the Public Value Test see for instance, BBC Trust 2007. 66. Commission Preliminary Investigation 2004/C on ad-hoc measures to Dutch Public Broadcasters and NOB, par. 91-92.

204

Rethinking.book Page 205 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

the above ideas in its decision on the German licence fee funding of ARD and ZDF: “in line with Commission practice, a mere authorisation granted to a public service broadcaster to perform activities which are described in a very broad way cannot be regarded as sufficient for the act of entrustment. This general possibility would need to be further substantiated and the public service broadcaster be specifically entrusted with the provision of the thus specified services.”67

It is not clear what ‘Commission practice’ is, however. This is one of the first decisions in which the Commission actually pays attention to the entrustment criterion. The preliminary investigation on the Dutch funding of NOS cannot as such be regarded as ‘Commission practice’. Therefore, it is not entirely clear to what ‘practice’ the Commission is reffering. Moreover, it is noted that the Commission requires an additional entrustment for new media services. The entrustment of a general remit is thus no longer adequate for these less traditional activities. It may be added that this approach might not be technology neutral. In spite of these more critical remarks, it might become rather difficult for the Commission to control State aid to public broadcasters without a more specific entrustment. In many EU Member States, public broadcasters have – given the fast developments in the media market – justifiably expanded their activities, and governments have not always supervised this expansion. As a result the legal framework that should support the current activities of public broadcasters is sometimes somewhat outdated. It is no longer fully in line with what public broadcasters are actually doing, which presents the Commission with some evaluation and assessment problems. Hence, it comes as no surprise that the Commission repeats its request for a more specific and detailed entrustment in its decision on the funding of Flemish public broadcaster VRT.68 Similar demands for a clear and separate entrustment can be expected in future cases. In addition to its demand for a more clear entrustment act, the Commission urges Member States to implement an ex ante control of new media activities (before entrusting these services to public broadcasters). After negotiations between the Commission, on the one hand, and the German Länder on the other, an agreement was made to develop a public value test to assess ARD’s and ZDF’s new media services. Also the Flemish government agreed to implement an ex ante control or evaluation of new media services. In the Commission decision on the Flemish public broadcaster VRT, it was stated that “without any prior evaluation and explicit 67. Decision 3E/2005 on Financing of Public Service Broadcasters in Germany, par.245. 68. Decision E8/2006 on the Public Financing of Public Service Broadcaster VRT, par.63.

205

Rethinking.book Page 206 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

entrustment of the Flemish government, the VRT is not allowed to deliver services or perform activities that are not covered by the Beheersovereenkomst.”69 The demand for ex ante control can be problematic for several reasons. First, while the Commission indeed has the intention to foster transparency, it might stretch its competence with regard to State aid and public broadcasting, since the Broadcasting Communication does not mention an ex ante controle of new media services. Second, the idea of ex ante control is inspired by the public value tests that have been introduced in the UK already more than a year ago. However, it is not clear whether the UK system can be exported succesfully to for example smaller Member States that do not have the same resources to apply an ex ante test. Third, the Commission justifies its demand for an ex ante control by pointing at the rising number of complaints by private actors. It is upheld that the implementation of an ex ante evaluation will curb the number of complaints significantly. Yet, the increasingly fierce competition in media and communications markets will probably yield more complaints. It is most unlikely that an ex ante control, in which the private sector might awkwardly co-determine the remit of public broadcasters, will change this trend. Fourth, and perhaps most crucial, ex ante evaluations concern individual services, whereas public broadcasters represent a more holistic project. A judgement of singular services can far too easily introduce a market failure logic into the public broadcasting project and eventually lead to the marginalization of public broadcasting organizations. By consequence, Member States’ caution with regard to ex ante control is certainly understandable and – to some extent – justified. This does not mean, however, that an ex ante test, cannot – if adapted to local circumstances – be a useful exercise to strengthen public broadcasters’ position in a new media environment. Public broadcasters’ role is, in light of technological and economic evolutions, under fire.70 As public broadcasters are expanding activities to new markets, it is vital to illustrate the importance of their presence there. Steemers71 puts her finger on the spot when saying that “failing to demonstrate both uniqueness and appeal across a broad range of output, the consensus surrounding public funding could conceivably dissolve.” In this regard, Suter stresses that it is vital to treat the test as something more than a necessary evil. Because “PSBs face 69. Ibid., par.239. 70. See for example, Armstrong and Weeds 2007. 71. Steemers 2003, 133.

206

Rethinking.book Page 207 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

unprecedented pressure to make, and justify, investment in new means of productions and distribution,”72 they have to illustrate how new services deliver public value to – ad ultimo – citizens. An ex ante test cannot only strengthen public broadcasters’ legitimate presence in new media markets, but has the potential to improve the internal organizational structure of public broadcasters. Following this point of view, the idea of a public value test or ex ante evaluation should be grasped as an opportunity to proactively tackle questions about the position of public broadcasters (especially) in new media environments: should public broadcasters offer on-demand sports content? are pay-services public services? are their limits to public broadcasters’ presence online? is their a justification for an ‘internet licence fee’; etc. Such questions will certainly arise and might lead to a decline in public, and also political, support for public broadcasting. However, imposing an ex ante evaluation on Member States will not encourage them, nor their public broadcasters, to genuinely and honestly complete an evaluation of new services. The current development of the German three-step-test shows that Member States will try to adopt a test that is as loosely defined as the European Commission will accept. In the German three-step-test the importance of the market impact assessment is reduced and, in addition, it remains highly unclear which services will be subject to the test. The current tensions between the European Commission, on the one hand, and the German Länder, on the other – also triggered by private companies that are dissatisfied with the actual implementation of Commission demands in relation to the funding of ARD and ZDF – illustrate how much the public value test debate focuses on (the lack of) competences. The legal basis of the public value test in European State aid law is indeed – to say the least – disputed. This does not mean the public value test cannot have an inherent value for, not against (!), public broadcasters. In short, the discussion about an ex ante evaluation for the moment largely misses the point. Arino convincingly argues that “the distribution of competences in the media arena should not be a power struggle between member states to avoid interference by the Community.”73 Even if the Amsterdam Protocol gives Member States discretion over the organization of their public broadcasters, the question should be whether an ex ante evaluation, despite the problems possibly attached to it, can contribute to a stronger public broadcaster. This is a scenario worth exploring.

72. Suter 2008, 5. 73. Arino 2004, 125.

207

Rethinking.book Page 208 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

2.3 Proportionality: transparency of accounts The Broadcasting Communication devotes significant attention to the proportionality of funding and to the transparency of accounts. It is the application of this criterion that has had a big, concrete impact on the financial and organisational structure of public broadcasters. Before focussing on Commission decisions, two remarks should be made with regard to the proportionality criterion. Firstly, the fact that public compensations should not exceed the net costs of public service delivery, and that commercial and public revenues and costs should be separated in public broadcasters’ accounts, does not imply that public broadcasters can only receive public revenues. In principle, the nature of the funding system, be it dual or single, is determined by Member States.74 However, it has already been indicated that the discussion on pay-services challenges this to some extent. Secondly, proportionality is an important criterion since it stresses the need for transparency in public broadcasters’ accounts and structures. Without such transparency and clarity the Commission cannot check the compatibility of the public funding with State aid rules. Yet, the relevance of transparency and its practical application (e.g. separation of accounts) lies not so much in its value for the Commission’s assessments of State aid, but rather in its positive effect on public broadcasters. For long, public broadcasters have been known for their inefficient management, complex accounting systems, troubled financial relationships with subsidiaries, political intervention, etc. The Commission’s demands for more clarity have created a momentum for reform of public broadcasters and in many countries the financial and organisational structures of public broadcasters have been changed significantly, and to the better, over the last decade. Despite its intrinsic positive merit for public broadcasting, proportionality and transparency have been controversial in the framework of State aid control. Several75 State aid cases illustrate the somewhat problematic nature of the proportionality assessments in some instances.

74. Antoniadis 2006, 596. 75. For example, in a Commission decision on the funding of TV2/Danmark the proportionality was highly disputed and has - in the meanwhile - been rejected by the Court of First Instance. The latter claiming that the Commission's investigation and analysis was based on inadequate reasoning (Decision C2/2003 on Measures Implemented by Denmark for TV2/Danmark, 2004; Court of First Instance, TV2/ Danmark v Commission, SBS TV and SBS Danish Television v Commission, Viasat Broadcasting UK Ltd v Commission, Case T-309/04, T-317/04 and T-336/04).

208

Rethinking.book Page 209 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

The Commission’s analysis of overcompensation, on the basis of which two negative decisions have been taken so far (concerning the ad hoc funds for Dutch NOS and the funding of TV2/Danmark) is often said to be empirically flawed. In the Dutch case, for example, the mathematical exercise, that underlied the observation of a € 76.8 million excess aid, did not only include a cost/revenue assessment of the scrutinized ad hoc funds (e.g., matching funds to anticipate rising prices of program rights), but it also took into account the entire annual funding of NOS.76 Leaving aside the impossibility of doing it otherwise, the assessment of the proportionality of the ad hoc funds (that added the ad hoc funds and the annual public revenues) could not determine to what extent the ad hoc funds exceeded the net cost of the public service delivery for which they were intended. Therefore, the Dutch authorities argued that the Commission was empirically wrong to declare the State aid measures incompatible with the EC Treaty. They moreover pointed at the Amsterdam Protocol that explicitly states that funding of public service broadcasting is acceptable “insofar such funding does not affect trading conditions and competition in the Community to an extent which would be contrary to the common interest.” Since the Commission could not verify that there was indeed a negative impact of the behavior of the Dutch public broadcaster on overall competition in the media market, it should – following the Dutch complaint brought against the Commission before the Court of First Instance – not have reached its negative conclusion of overcompensation.77 This argument should, however, not be taken too far since the lack of facts and figures about public broadcasters’ accounts is partly caused by the empirical flaws in the Commission’s analysis. Certainly the incapability (or unwillingness) of Member States to provide for all necessary figures, makes it extremely difficult, if not virtually impossible, for the Commission to conclusively assess the compatibility of State aid. Moreover, the blurry nature of most public broadcasters’ accounts, which of course gives the impression that funding is not proportionate vis-à-vis the public service tasks they need to fulfil, inhibits not only a solid proportionality assessment, but also efficient service delivery. Certainly with regard to public broadcasters’ entrance in new media markets, public broadcasters and Member States alike would benefit from more transparency of accounts and should moreover try to adapt the organisation of their financial accounts to the complexity that goes along 76. Commission Preliminary Investigation 2004/C on Ad-hoc Measures to Dutch Public Broadcasters and NOB. 77. Action T237/06 Nederlandse Omroep Stichting v Commission of the European Communities, 49.

209

Rethinking.book Page 210 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

with the expansion of the remit to digital activities. This will, however, not prevent the balancing act between the ‘socio-cultural’ remit and ‘economic’ market distortion from remaining fundamentally difficult.

Conclusion78 The discussion of the State aid rules underlying the assessment of support schemes for public broadcasting and the analysis of recent State aid decisions illustrates the impact of the Commission’s policy on the remit of public broadcasting. In these recent decisions, there is a focus on the expansion of the public broadcasting remit to new media markets. Observing an impact does not equal a conclusive finding of a limited remit, however. Some conclusions can be drawn from the analysis. Firstly, the analysis illustrates that the Commission’s approach towards the definition of the remit has sometimes been flawed. However, the Commission has gradually adapted its approach. The formulation of a ‘closely associated’ principle has not occurred any longer, and more recent decisions reflect a more prudent policy line with regard to the definition of the remit. In addition, the analysis suggests that State aid control of the funding of public broadcasting, is not pushing public broadcasting in the margin, but is, on the contrary, making public broadcasters more responsive as regards their core competences (see the discussion on ex ante evaluation). This is to be applauded and leads us to the conclusion that the Commission’s State aid policy, perhaps indirectly, has benefited democracy. By forcing governments to make their public broadcasters more transparent and increasingly responsive, the Commission has served the citizen and/or tax payer. Secondly, Member States retain the competence to regulate their public broadcasters. The Amsterdam Protocol is largely respected – obviously also because Member States continuously (and rightly) stress the subsidiarity principle in this regard. The concrete implementation of the public value test in Germany (‘three-step-test’), for example, illustrates that the

78. The conclusions of this contribution are based on an assessment of a rather limited number of Commission decisions. For the purpose of this contribution, which mainly focuses on public service remit-related aspects of the application of State aid law to the funding of public service broadcasting, only a small amount of cases have been introduced in the analysis. Similar conclusions, based on a more comprehensive case analysis, have been made in another publication of the author (for this, see Donders and Pauwels 2008).

210

Rethinking.book Page 211 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

commitments that Member States make in the course of a State aid procedure, can be (and are) flexibly translated in national measures and rules, hereby taking into account the specific historical development of public broadcasters. Thirdly, it is unclear whether and to what extent the Commission would indeed stimulate a level-playing-field in the broadcasting sector. Whereas citizens, Member States’ governments and public broadcasters have benefited from State aid control policy, it is unclear to what extent market distortions are effectively remedied by DG Competition’s assessments of public broadcasters’ funding. This observation does not necessarily mean that public broadcasters are distorting the market as much as the private sector claims. This statement cannot be made as neither the public nor the private sector are sufficiently transparent with regard to their activities. This makes it difficult for academics, but undoubtedly and regrettably also for the Commission, to examine complaints of the private sector and public broadcasters’ defense against these attacks. Finally, it must be emphasized that the objective of State aid policy cannot and should not be the limitation of the public service remit of public broadcasters. Pushing public broadcasters in the margin of the market is unacceptable and does not correspond with a holistic and integrating (i.e. reaching a majority of the population with a variety of content) perspective on public broadcasting. The past and current decision practice of DG Competition does not prove that such a squeezing of public broadcasting is happening. Even if the conditions for granting exceptions to State aid have become more strictly defined (here, reference can be made to the demand for an ex ante control of new media services), and even if an increased vigilancy of the Commission can be observed, the findings tend to invalidate the idea that the Commission is limiting the remit of public broadcasting organizations. In the course of the years, all parties have tried to be more explicit on the framework in which public broadcasters are expected to evolve and be controlled. Member States have thought about entrustment and control, while public broadcasting organizations have been pushed towards greater transparency. This can be considered as the positive outcome of Commission activities, and has benefited the democratic objectives that public broadcasting stands for, in particular with regard to the end-users of public broadcasting services.

211

Rethinking.book Page 212 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

References ACT. 2008. Response to the Commission Questionnaire. http:// ec.europa.eu/comm/competition/state_aid/reform/ comments_broadcasting/index.html. (Accessed September 25, 2008) AER. 2008. Response to the Commission Questionnaire. http:// ec.europa.eu/comm/competition/state_aid/reform/ comments_broadcasting/index.html. (Accessed September 25, 2008) Antoniadis, Alexandra. 2006. The Financing of Public Service Broadcasting. In The EC State Aid Regime: Distortive Effects of State Aid on Competition and Trade, edited by Michael Sanchez Rydelski, 591-630. London: Cameron May. Arino, Monica. 2004. Competition Law and Pluralism in European Digital Broadcasting: Addressing the Gaps. Communications and Strategies (54): 97-126. Armstrong, Marc, and Helen Weeds. 2007. Public Service Broadcasting in the Digital World. In The Economic Regulation of Broadcasting Markets: Evolving Technology and Challenges for Policy, edited by Paul Seabright, and Jürgen von Hagen, 81-149. Cambridge: Cambridge University Press. BBC Trust. 2007. Public Value Test (PVT): Guidance on the Conduct of a PVT. London: BBC Trust. Biggam, Ross. 2008. Public Broadcasting and State Aid in the New Media Environment. Speech delivered at the Institute for European Studies’ Spring Lecture Series, Brussels, April 16. Buendia Sierra, José Luis. 2006. An analysis of Article 86(2) EC. In The EC State Aid Regime: Distortive Effects of State Aid on Competition and Trade, edited by Michael Sanchez Rydelski, 541-574. London: Cameron May. Communication 2001/C 320/04 of the European Commission on the Application of the State Aid Rules to Public Service Broadcasting [2001] OJ C320/5. Coppieters, Sandra. 2003. The Financing of Public Service Broadcasting. In The Law of State Aid in the European Union, edited by Andrea Biondi, Piet Eeckhout, and James Flynn, 265-279. Oxford: Oxford University Press. Court of First Instance, TV2/Danmark and others v Commission, Cases T309/04, T-317/04, T-329/04 and T-336/04 [2008] not yet reported.

212

Rethinking.book Page 213 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

Decision E 3/2005 of the Commission of 24 April 2007 Relating to Financing of Public Service Broadcasters in Germany. Decision E 8/2006 of the Commission of 22 February 2008 Relating to Public Financing of Public Service Broadcaster VRT. Decision N 37/2003 of the Commission of 1 October 2003 Relating to BBC Digital Curriculum. Decision NN22/2002 of the Commission of 19 May 2004 Relating to Measures Implemented by Denmark for TV2/Danmark. Depypere, Stefaan, and Nynke Tigchelaar. 2004. The Commission’s State Aid Policy on Activities in Neighbouring Markets. Competition Policy Newsletter (2): 19-22. Dinan, Desmond. 1999. Ever Closer Union: an Introduction to European Integration. London: Macmillan. Donders, Karen & Caroline Pauwels. 2008. Does EU Policy Challenge the Digital Future of Public Service Broadcasting? Convergence: the International Journal of Research into New Media Technologies 14(3): 295311. Dony, Marianne. 2005. Les compensations d’obligations de service public. In Aides d’état, edited by Marianne Dony, and Catherine Smits, 109-152. Brussels: Institut d’études Européennes. Draft Proposal of the European Commission on the Application of the State Aid Rules to Public Service Broadcasting [1998] unpublished. Duff, Andrew. 1997. The Treaty of Amsterdam. London: the Federal Trust. EBU. 2008. Response to the Commission Questionnaire. http:// ec.europa.eu/comm/competition/state_aid/reform/ comments_broadcasting/index.html. (Accessed September 25, 2008) European Commission. 2008. Review of the Communication from the Commission on the Application of State Aid Rules to Public Service Broadcasting. http://ec.europa.eu/comm/competition/state_aid/reform/ broadcasting_comm_questionnaire_en.pdf. (Accessed November 20, 2008) European Commision. 2004. Preliminary Investigation 2004/C 61/05 of 3 February 2004 Relating to Ad-hoc measures to Dutch public broadcasters and NOB

213

Rethinking.book Page 214 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

European Court of Justice, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, Case C-280/00 [2003] ECR I-7747. Goodwin, Ian, and Steve Spittle 2002. The European Union and the Information Society: Discourse, Power and Policy. New Media and Society 4(2): 225-250. Gorini, Sabrina. 2003. European Commission: Decisions on State Financing of Public Service Broadcasters. IRIS Legal Observations. http:// merlin.obs.coe.int/iris/2003/10/article4.en.html. (Accessed November 27, 2008) Harcourt, Alison. 2004. Institution-driven Competition: the Regulation of Cross-border Broadcasting in the EU. EUI RSCAS Working Paper 2004/44. Florence: European University Institute, Robert Schuman Center for Advanced Studies. Hencsey, Monika, Olivia Reymond, Alexander Riedl, Sandro Santamato, and Jan-Gerrit Westerhof. 2005. State Aid Rules and Public Funding of Broadband. Competition Policy Newsletter (1): 8-15. Heritier, Adrienne. 2001. Market Integration and Social Cohesion: the Politics of Public Services in European regulation. Journal of European Public Policy 8(5): 825-852. Hobbelen, Hein, Victoria Harris, and Ignacio Dominguez. 2007. The Increasing Importance of EC State Aid Rules in the Communications and Media Sectors. European Competition Law Review (2): 101-115. Holtz-Bacha, Christina. 2005. The EU, the Member States and the Future of Public Broadcasting. Doxa (3): 231-237. Humphreys, Peter. 2003. EU Policy on State Aid to Public Service Broadcasting. Paper presented at the SMIT-CEAS-TELENOR Conference, Brussels, April 7-8. Jakubowicz, Karol. 2007. Public Service Broadcasting: a New Beginning or the Beginning of the End. http://www.knowledgepolitics.org.uk. (Accessed February 23, 2008). Katsirea, Irini. 2008. Public Broadcasting and European Law: a Comparative Examination of Public Service Obligations in six Member States. New York: Wolters Kluwer International. Letter MLB/M/2008/44.445 of Ronald H.A. Plasterk of 13 August 2008 on Broadcasting Communication/State Aid for Public Service Broadcasting.

214

Rethinking.book Page 215 Friday, September 25, 2009 10:01 AM

State Aid and Public Service Broadcasting

Meijnen, Joop. 2007. Hof EU trekt grens voor staatssteun omroepen. NRC Handelsblad, November 9:2. Michalis, Maria. 2007. Governing European Communications: from Unification to Coordination. Lamham: Lexington Books. Mortensen, Frands. 2008. Altmark, Article 86(2) and Public Service Broadcasting. European State aid Law Quarterly (2): 239-249. Nicolaides, Phaedon. 2003. Compensation for Public Service Obligations: the Floodgates of State Aid? European Competition Law Review (11): 561573. Nihoul, Paul. 1998. Les services d’intérêt général dans le Traité d’Amsterdam. In Le Traité d’Amsterdam: espoirs et déceptions, edited by Yves Lejeune, 341-355. Brussels: Bruylant. Nitsche, Ingrid. 2001. Broadcasting in the European Union: the Role of the Public Interest in Competition Analysis. The Hague: TMC Asser Press. Pauwels, Caroline, and Jean-Claude Burgelman. 2003. Policy Challenges Resulting from the Creation of a European Information Society: a Critical Analysis. In The European Information Society: a Reality Check, edited by Jan Servaes, 59-86. Bristol: Intellect. Plender, Richard. 2003. Definition of Aid. In The Law of State Aid in the European Union, edited by Andria Biondi, Piet Eeckhout, and James Flynn, 3-39. Oxford: Oxford University Press. Psychogiopoulou, Evangelia. 2006. EC State Aid Control and Cultural Justifications. Legal Issues of Economic Integration 33(1): 3-28. Raboy, Marc. 2003. Rethinking Public Broadcasting Policy in the Global Media Environment. In Broadcasting and Convergence: New Articulations of the Public Service Remit, edited by Gregory Ferrell Lowe, and Taisto Hujanen, 41-56. Göteborg: Nordicom. Reding, Viviane. 2006. Foreword. In Communications, the Next Decade: a Collection of Essays Prepared for the UK Office of Communication, edited by Ed Richards, Robin Foster, and Tom Kiedrowski. London: OFCOM. Rizza, Cesare. 2003. The Financial Assistance Granted by Member States to Undertakings Entrusted with the Operation of a Service of General Economic Interest. In The Law of State Aid in the European Union, edited by Andrea Biondi, Piet Eeckhout, and James Flynn, 76-84. Oxford: Oxford University Press.

215

Rethinking.book Page 216 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Szyszczak, Erika. 2004. Public Services in the New Economy. In Competition, Regulation and the New Economy, edited by Cosmo Graham, and Fiona Smith, 185-206. Portland: Hart Publishing. Thomass, Barbara. 2008. The Debate About ARD Mediathek and ZDF Mediathek and the Public Value Test. Paper presented at the IAMCR Conference, Stockholm, July 20-25. Vlaamse Regering. 2008. Response to the Commission Questionnaire. http://ec.europa.eu/comm/competition/state_aid/reform/ comments_broadcasting/index.html. (Accessed September 25, 2008) Wiedemann, Verena. 2004. Public Service Broadcasting, State Aid and the Internet: Emerging EU Law. http://www.ebu.ch/en/union/diffusion_on_line/ pub_broadcasting. (Accessed August, 17 2007)

216

Rethinking.book Page 217 Friday, September 25, 2009 10:01 AM

Content and Consumption

Rethinking.book Page 218 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 219 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?1 Jeanne Brunfaut and Jean-Louis Blanchart

Introduction The 2001 ‘Communication on Certain Legal Aspects Relating to Cinematographic and Other Audiovisual Works’ (‘Cinema Communication’)2 forms the cornerstone of the current policy of the European Commission related to the financial support of cinematographic and audiovisual works in the EU. Despite the fact that this Communication will remain unchanged until the end of 2009, it seems that, since the end of 2006, the Commission's position has been moving towards a narrower interpretation of the EC Treaty's cultural derogation (Article 87(3)(d) EC), which legitimates the various national films support schemes. This chapter aims at singling out the main elements which underpin that observation. In this respect, the title of this chapter is an ironic reference to the title of an article written in 2007 by Directorate-General Competition members, namely ‘State aid for films – a policy in motion?’.3 The first section of this chapter will be devoted to general considerations about the cultural and economic rationales behind the legitimization of State aid for film, and the tensions between these rationales and Community law. In the second section, we will return to the pre-2001 period to show that State aid for film has always been a matter of concern for the Commission. The third section will be devoted to the current legal framework, with a presentation and first analysis of the 2001 Cinema Communication. The fourth section will look into territorialisation requirements, and the attempt of the Commission to review them. The fifth section will be devoted to an analysis of the current implementation of the 2001 Cinema Communication by the Commission and to its move towards a more restrictive approach. The sixth section will analyse the Commission’s idea of a block exemption regulation for cinema. 1. 2. 3.

This article has been written under the sole responsibility of the authors. Therefore, it couldn’t engage the public authorities of the French Community of Belgium. Communication COM(2001)/534 final on certain legal aspects relating to cinematographic and other audiovisual works.. Broche et al. 2007.

219

Rethinking.book Page 220 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

In conclusion, the authors will suggest some thoughts on how to bring back greater legal certainty.

1.

State aid for film: different perspectives

State aid for film is directly linked with the Member States’ needs to preserve their national identity and their cultural values. This has always been the basis of the Member States’ request to be allowed to support their national and local film industry, in particular traditional films to preserve the European cultural identity in the face of what could be seen as the ‘American cultural invasion’. This argument has been used even more frequently since the UNESCO Convention on the protection and promotion of the diversity of cultural expressions (UNESCO Convention) (2005), which enables the States to develop their own cultural policy, was approved. State aid also enables countries that lack the necessary private assets to develop their film industry and promote their national culture. Furthermore, apart from the cultural reasons invoked in order to legitimise State aid for film, economic reasons may be pointed out. The economic importance of the film sector, not only in terms of direct revenues but also in terms of the number of jobs provided, and the structural links to tourism and other services, make it very attractive for national governments. Therefore, in addition to cultural reasons, economic considerations also prompt Member States to develop support schemes for film. At the EU level, the move towards a deeper integration of the internal market and of a greater liberalisation in trade has been a real challenge. It has become very difficult for European institutions to ensure the coexistence of the ultimate goals of the internal market with the constraints that stem from the wish of the Member States to preserve their cultural identity. Furthermore, the above-mentioned economic argument can also cut the other way: the Commission may use it as a proof that State aid to film industry may lead to market distortions, and therefore be incompatible with the EC law. In this respect, we have to remind ourselves that the founding texts of the European Community were essentially centered on economic integration. It is only in the beginning of the 1990s that culture became an important issue at the European level. One can see in the Maastricht Treaty, which entered into force in 1993, the founding cultural act in the EU. The Treaty introduced Article 151 EC about the role of the Community in promoting 220

Rethinking.book Page 221 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?

culture in Europe, and of Article 87(3)(d) EC as a cultural derogation to the general prohibition of State aid. Nevertheless, one cannot ignore the tension between the cultural and economic provisions of the EC Treaty and their interpretation by the European Court of Justice (ECJ). On the one hand, the principles of the internal market and free competition are the cornerstones of the EC Treaty. In particular, it will be demonstrated below that, according to ECJ jurisprudence, the cultural derogation set out in Article 87(3)(d) EC must be of a strict interpretation. Yet, the ECJ considers national cultural policy measures as overriding reasons of general interest, which may justify a restriction to the principles of the internal market. This is, in a certain way, a ‘negative’ approach, which considers cultural measures as exceptions to the principles of the internal market.4 On the other hand, Article 151 EC states that “the Community shall contribute to the flowering of the cultures of the Member States, while respecting their national and regional diversity and at the same time bringing the common cultural heritage to the fore”, and that “the Community shall take cultural aspects into account in its action under other provisions of this Treaty, in particular in order to respect and to promote the diversity of its cultures.”

This ‘positive’ approach is nevertheless constrained by the fact that the European Council’s scope of action is limited under article 151(5) TEC to incentive measures and recommendations. Furthermore, these provisions have to be adopted under unanimity rule. Moreover, on 18 December 2006, the European Community became a party to the UNESCO Convention, which might have changed the legal context. In this respect, some authors have recently argued that: “the hierarchical position of the Convention in the legal order of the EC is below the provision of the Treaty establishing the European Community (primary EC law) (thus below Articles 43 and 49 TEC on freedom of establishment and freedom to provide services) but above secondary EC law (Regulations, Directives, Decisions, Recommendations or Opinions).”5

The rationale behind this assertion seems to ensue from Article 300(7) EC which states that an agreement such as the UNESCO Convention shall be binding on the institutions of the Community and on the Member States. This issue, as well as its consequences, are quite unclear. To be more precise, and if this assertion is correct, it will highlight the tension between the EC Treaty and the UNESCO Convention. Indeed, some contradictions 4. 5.

Burri Nenova 2007, 26. Wouters and De Meester 2008, 2.

221

Rethinking.book Page 222 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

may appear regarding the interpretation of the two treaties as any act that is at, or below the level of secondary law (such as the Cinema Communication – cf. infra) must be simultaneously consistent with the EC Treaty and the UNESCO Convention.

2.

The EU and State aid for film: let’s do some European palaeontology

Even though Decision N 3/98 of the Commission, founding the current European policy on State aid to film, dates back to 1998, the Commission had already earlier examined support schemes in the field of cinema and television for their compatibility with the EC Treaty.6 The provisions contained in the EC Treaty, and in particular the rules on competition and the free movement of goods, persons, services and capital, have always applied to all activities provided for remuneration, whether of an economic, cultural, social or other nature. According to the Commission, “film production as a gainful activity satisfies the conditions for the application of the EEC Treaty. Furthermore, in accordance with the General Programmes of 18 December 1961, the Council adopted during the transitional period Directives 63/607/EEC, 65/264/EEC, 68/639/EEC and 70/451/EEC in the field of film production. In particular, Article 3(2)(b) of the last-mentioned Directive provides for the abolition of the requirement that a person wishing to receive financial aid towards productions should be of a given nationality.”7

Nevertheless, it appears that from the beginning, the Commission has been favourable to State aid in the film production sector. Before the introduction of the cultural derogation in Article 87(3)(d) of the EC Treaty, the Commission already approved several national aid schemes for film production, for example in France, Italy, Denmark, Spain, UK and Germany,8 as long as the treaty requirements were respected.

6. 7. 8.

Decision N3/98 on Soutien à la production cinématographique. Decision 89/441 on Aid Granted by the Greek Government to the Film Industry. Dony 1996; Pons 1996.

222

Rethinking.book Page 223 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?

To quote the Commission, “[The Commission] has always considered that aid to the film industry should, in view of its combined economic and cultural function, qualify for exemption under Article 92(3)(c) of the EEC Treaty provided, however, that is satisfies all the requirements of the Treaty, notably those concerning the free movement of persons and freedom to provide services.”9

In this respect, the Commission noticed that several national legislations contained numerous limitations on grounds of nationality, therefore incompatible with the treaty requirements. The most striking example was the Greek scheme, based on the law of 12 May 1986. The Commission considered it incompatible with the common market. The Commission pointed out that: “not only should such discrimination on grounds of nationality not be incorporated more or less explicitly in legislative instruments and implementing arrangements, they should not constitute a criterion applied in practice to the award of aid.”10 In other cases, in particular in France, Italy, Denmark and Germany, public authorities had agreed to modify their schemes before a negative decision from the Commission, in order to remove restrictions based on grounds of nationality. In this pre-1998 period, one can thus note that the main concern of the Commission was to ensure the respect of the EC Treaty provisions on non-discrimination, freedom of establishment and freedom to provide services in every sector of the society. In 1998, however, a complaint was addressed to the Commission regarding the French support system for film. The system was considered to create exclusionary effects. France agreed to review parts of its scheme and the French case led the Commission to adopt a general policy towards State aid to film instead of a case-by-case approach. On the basis of its decision on France, the Commission then adopted in 2001 the Cinema Communication. As expected, this Communication requires the 'general legality principle' to be respected: the schemes must not contain clauses that are contrary to any EC Treaty provisions, not just those on State aid provisions. The Communication also lists four specific compatibility criteria. They will be examined in the next section.

9. Decision 89/441 on Aid Granted by the Greek Government to the Film Industry. 10. Ibid.

223

Rethinking.book Page 224 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

3.

The current legal framework: Article 87 EC and the Cinema Communication

Public film support schemes in the EU are assessed on the basis of Article 87 EC. As far as film production is concerned, the assessment of the compatibility of the public funding with EU rule on state aids is made on the basis of the cultural derogation laid down in Article 87(3)(d) EC. This derogation reads as follows: “The following may be considered to be compatible with the common market: (...) (d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Community to an extent that is contrary to the common interest.”

The 2001 Cinema Communication sets out the more specific conditions for the application of this cultural derogation to the production of 'cinematographic and audiovisual works'.

3.1 Does the Cinema Communication apply to all sectors? It should be noted that the Communication only refers to the production of films. The Commission considers that “[A]id should be towards the overall budget of a specific film-making project (...). Aid schemes shaped on this basis are deemed to support the creation of an audiovisual product and not to assist the development of an industrial activity. Consequently, this aid is to be assessed under the culture derogation of Article 87(3)(d) EC rather than the industrial derogation of Article 87(3)(c). Undertakings in the film and TV programme production sector may also benefit from other aid types granted under national horizontal aid schemes authorised by the Commission under the Article 87(3)(a) & (c) EC exemptions (e.g. regional aid, aid for SMEs, R&D aid, training aid, employment aid).”11

This differentiated approach can be criticized because it could lead to an inconsistency in the Communication itself: “on the one hand, the Commission acknowledges the double nature of the audiovisual sector and underlines that the rationale behind support measures for this sector is based on both cultural and industrial considerations; but on the other hand, it at-

11. Communication COM(2001)/534 on certain cinematographic and other audiovisual works, 8.

224

legal

aspects

relating

to

Rethinking.book Page 225 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?

tempts to strictly distinguish between aid to the creation of a cultural product (film) and aid to the film industry.”12

Nevertheless, the Commission has applied the Communication by analogy to activities closely linked to the production of films, such as distribution or theatrical release. It has also progressively developed a more graduated approach. The second decision on the French scheme, which occurred in 2006, can be seen as establishing the framework of analysis.13 Four types of measures are distinguished: 앫 Measures that take place during stages upstream from production (for example aid to script writing or development). The communication is applied to these measures by analogy. 앫 Measures that take place downstream from production, measures related to the distribution and promotion of film, as well as the publishing on video of audiovisual works. In this case, the Commission applies the Communication as a pertinent reference, and also examines the proportionality of the measures 앫 Measures that take place downstream from production, measures related to the exhibition of films (namely support to exhibition in cinemas): these measures are examined directly on the basis of Article 87(3)(d) EC 앫 Measures not strictly aimed at promoting culture are examined on the basis of Article 87(3)(c) EC instead of Article 87(3)(d)

3.2 When does a measure constitute “State aid”? While examining a national support system (being either in the framework of a prior notification or based on a complaint), the first thing that the Commission assesses is whether the concerned measures really are State aid in the meaning of Article 87(1) EC. This is not merely a rhetorical question, since the Commission has to ensure that, according to this Article, four criteria are fulfilled: (a) the involvement of State resources, (b) the existence of an economic advantage, (c) the possibility of a distortion of competition and (d) and effect on intra-community trade. The three last criteria are generally fulfilled because the Commission applies a very low threshold for finding effects on trade and distortion of competition.

12. Pauwels, De Vinck and Van Rompuy 2007, 29. 13. Commission Decision NN84/04 on régimes d’aide au cinema et à l’audiovisuel.

225

Rethinking.book Page 226 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

As far as the first criterion is concerned, it is clear that direct grants involve State resources. The same reasoning applies also to fiscal schemes – e.g. tax reliefs, tax credits and accelerated depreciation – since the public authorities are in charge of the fiscal revenues. The Cinema Communication raised also the question whether legal obligations imposed by Member States upon TV broadcasters to invest in audiovisual production should be considered State aid. According to the Commission, “the extent to which these legal obligations may be considered State aid as such has to be considered in view of the development of the EC Court of Justice jurisprudence after its judgement of 13.3.2001 in Case C-379/98 (Preussen Elektra).”14

In 2006, the Commission examined a complaint from the French broadcaster TF1, which was targeted at the French scheme of investment obligations. The Commission found in its above-noted Decision that obligations imposed upon TV broadcasters to invest in audiovisual production could be assimilated to purchasing obligations between private undertakings, comparable to the purchasing obligations examined in the Preussen Elektra judgement. Consequently, the Commission considered that investment obligations imposed upon TV broadcasters, whether private or public, do not involve State resources, and can therefore not constitute State aid (NN 84/04).

3.3 The criteria set out in the Cinema Communication In order to be compatible with the regulations regarding State aid, the Cinema Communication requires the fulfilment of the ‘general legality principle’ and four specific compatibility criteria. The general legality criterion The Commission oversees that the eligibility conditions of the State aid schemes do not contain clauses contrary to the EC Treaty provisions in areas other than State aid. It must ensure, inter alia, that the EC Treaty 14. Communication COM(2001)/534 final on certain legal aspects relating to cinematographic and other audiovisual works, 8. The main finding of the Preussen Elektra judgement is the following one: “in this case, the obligation imposed on private electricity supply undertakings to purchase electricity produced from renewable energy sources at fixed minimum prices does not involve any direct or indirect transfer of State resources to undertakings which produce that type of electricity” (European Court of Justice, Preussen Elecktra, Case C-379/98, par. 59).

226

Rethinking.book Page 227 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?

principles prohibiting discrimination on the grounds of nationality as well as on freedom of establishment, free movement of goods and freedom to provide services have been respected.15 The specific compatibility criteria The specific criteria on the basis of which the Commission currently assesses State aid to cinema and TV programme production under the cultural derogation of Article 87(3)(d) EC were established in the Commission’s 1998 Decision on the French scheme (1998) and summarised in the Cinema Communication. These specific criteria are as follows: 1. Aid must benefit a cultural product Each Member State has to ensure that the supported content is cultural according to verifiable national criteria, respecting the state’s discretion in accordance with the subsidiarity principle. The application of this criterion resembles closely the concept of manifest error, used by the Commission in the field of services of general economic interest. To quote DG competition case-handlers: “the Commission does not assess what is culture and what is not. The Commission only verifies that the national authorities have drawn up a verifiable selection system which ensures that only cultural products, as defined by the national authorities, will benefit from the aid. It is only where the Commission considers that there is a manifest error in the definition of the cultural products concerned that the Commission might question the substance of the cultural definition.”16

However, one can wonder what a manifest error is, where to draw the boundaries of the concept. It is important to remember here that Article 87(3) (d) EC constitutes an exception to the general prohibition of State aid, and must, according to general rules of legal interpretation and the ECJ jurisprudence, be construed strictly. To quote the Commission: “the notion of "culture" within the meaning of Article 87(3)(d) must be interpreted restrictively”.17 Moreover, the difference in the wordings of the cultural derogation and the economic derogation set out in Article 87(3)(c) EC has lead some members of the Commission to “suggest that the threshold for aid to culture, should it be declared compatible, is higher than for other types of aid. It could be speculated on whether such a higher 15. Articles 12, 28, 30, 39, 43, 48 and 49 EC. 16. Broche et al. 2007, 45. 17. Communication COM(2001)/534 on certain cinematographic and other audiovisual works, 26.

legal

aspects

relating

227

to

Rethinking.book Page 228 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

threshold seeks to compensate the somewhat vague nature of the notion of culture”.18 Perhaps the confusion and vagueness of these different elements has led the Commission to consider narrowly its interpretation of the first specific criterion, as will be examined below. 2. Territorialisation The producer must be free to spend at least 20 % of the film budget in other EU Member States without suffering any reduction in the aid granted in the scheme. Therefore, a restriction to the exercise of internal market freedoms can be considered acceptable, as long as it remains limited to what is necessary in order to ensure the continued presence of national audiovisual talent and expertise required to produce/make the films. The question of territorialisation has also been very much discussed recently. The Commission has expressed the fear that the actual level of territorialisation imposed under several schemes was creating a fragmentation of the internal market. The issue will be discussed further in the next section. 3. Aid intensity Aid intensity must be limited to 50 % of the production budget. The limitation is intended to encourage regular commercial initiatives inherent to a market economy, and to avoid films financed entirely with public money. Derogations, however, may be considered for difficult and low budget films. According to the subsidiarity principle, it is up to the Member States to define what a difficult or a low budget film is. It is important to stress that the aid intensity must be calculated while taking into account all public funds, and not scheme by scheme. However, funds provided directly from EC programmes like MEDIA are not State resources. Therefore, they do not have to be taken into account in calculating the 50 % aid ceiling. 4. Aid supplements The last criterion states that the aid supplements for specific film making activities, such as post-production, are not allowed. This criterion ensures that the aid granted has a neutral incentive effect and is not intended to attract specific activities to the territory of the Member State granting the support.

18. Scharf and Orssich 2006, 517.

228

Rethinking.book Page 229 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?

4.

Will the 2001 Cinema Communication be reviewed? Some considerations about territorialisation

The validity of the 2001 Cinema Communication (until June 2004) was first extended until 30 June 200719 and subsequently until 31 December 2009.20 The Commission has announced its will to review the Cinema Communication with regard to the reality of national and regional support schemes to film. The Commission has started to question the permitted level of 80 % territorialisation as it suspects that territorialisation clauses “would fragment the internal market and hinder its development.”21 They may actually aim at protecting the national industry and therefore constitute an obstacle to the free circulation of persons, goods and services within the EU. In the field of research and development, the ECJ found in 2006 that Article 49 EC precludes legislation of a Member State which restricts the benefits of a tax credit for research only to research carried out in that Member State.22 It led some members of the Commission to consider that, 19. Communication COM(2004)/171 on the Follow-up to the Commission Cinema Communication. 20. Communication on the Prolongation of the Application of the Communication on the Follow-up to the Cinema Communication 2007. 21. Communication COM(2004)/171 on the Follow-up to the Commission Cinema Communication. 22. European Court of Justice, Laboratoire Fournier S.A., Case C-39/04. In this case, the French Code général des impôts provides that industrial and commercial or agricultural undertakings may receive a tax credit for expenditure relating to scientific and technical research activities. However, as the benefit of this tax credit was restricted to research carried out in France, the ECJ ruled this to be contrary to the freedom to provide services (Article 49 EC). The Court also found that the difference in treatment between research carried out in France and in other Member States cannot be justified on grounds of the promotion of research and development. However, one can ask to what extent this judgement has an impact on territorialisation requirements in the audiovisual sector. Arguably, there are differences between EC research policy and EC audiovisual policy. Article 163 (2) EC states that the Community shall support efforts made by undertakings active in the field of research and technological development to cooperate with one another, aiming, notably, at enabling them to exploit the internal market potential to the full. There’s no equivalent provision to Article 163 EC for culture, and Article 151 EC might be seen as enshrining the subsidiarity principle. However, par. 14 of the Laboratoire Fournier judgement states that “although direct taxation falls within the competence of the Member States, the latter must none the less exercise that competence consistently with Community law”.

229

Rethinking.book Page 230 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

in the field of cinema, “the compatibility of the territorialisation requirement with Community law, especially after the Fournier judgement, is not altogether clear-cut.”23 Having said this, the ECJ recognizes nevertheless that a restriction on freedom to provide services can be justified on grounds of an imperative requirement in the general interest. The following conditions need to be fulfilled: the measure (a) must be applied in a non-discriminatory manner, (b) must be suitable for securing the attainment of the objective being pursued and (c) must not go beyond what is necessary in order to attain this objective.24 The ECJ therefore paves the way for a legal justification of territorialisation clauses on grounds of cultural requirements. Indeed, in its 2004 Communication, the Commission seems to implicitly refer to this jurisprudence. First, it recalls the principle of general legality: territorialisation requirements must be applied in a non-discriminatory manner.25 Secondly, the Commission seems to balance the territorialisation intensity with the aid intensity,26 questioning therefore the proportionality of the measure in relation to the pursued objective. Furthermore, the Commission requested a study on the “the economic and cultural impact of the territorialisation requirements imposed by Member States, in particular taking into account their impact on co-productions.”27 The Commission has, in other words, been collecting input to analyse the appropriateness and the proportionality of the territorialisation criteria. The draft of this study28 was discussed in July 2006 with the representatives of the Member States, along with representatives of the civil society. Together, they wanted to discuss the reasons why such a high level of territorialisation was a crucial part of any national audiovisual policy.

23. Scharf and Orssich 2006, 524. 24. European Court of Justice, Gebhard, Case C-55/94, par. 37. 25. Territorialisation clauses concentrate usually on the place where the service is provided, without imposing nationality conditions on services providers and recipients. One can therefore consider that, if they are tailored in this way, they apply in a non-discriminatory manner. 26. In the 2004 Communication, the Commission is “willing to consider (…) higher aid amounts being made available provided (…) that barriers to the free circulation of workers, goods and services across the EC in this sector are reduced.” (Commission Cinema Communication 2004, par. 7). A discussion document issued in December 2003 was more explicit in this regard. 27. Communication COM(2004)/171 final on the Follow-up to the Commission Cinema Communication, par. 8. 28. Cambridge et al. 2007.

230

Rethinking.book Page 231 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?

During public debate, Member States and representatives from the industry, insisted on the fact that territorialisation does not constitute a barrier to free circulation. It not only makes possible a sustainable film sector, it also assures the maintenance and development of a film culture in Europe. Besides, territorialisation requirements are indispensable to the development of a strong creative fabric, without which the film sector cannot grow and cannot guarantee innovation and creativity. European Commissioners Viviane Reding and Neelie Kroes have recently announced the publication of the final report of the European Commission on the economic and cultural impacts of territorial conditions in film support schemes. According to the Commission, “the final report of the study does not seem to be conclusive (…) one way or the other. However, the results underline the need for further reflection before proposing a modification of the existing territorialisation criterion in the Cinema Communication.”29 Therefore, in October 2008, the Commission has announced a three-year extension to the validity of the Cinema Communication.

5.

Implementation of the Cinema Communication by the European Commission: a move toward a more restrictive approach?

Notwithstanding the successive postponements of the Cinema Communication’s review, it appears very clearly that in the last years, the Commission’s interpretation of the four criteria set out in the Cinema Communication has deeply changed. It therefore remains an active issue. Indeed, without clearly stating it, the Commission seems to be narrowing its interpretation of the first criterion regarding the cultural nature of film. In the beginning, the Commission had to ensure that the Member States had not committed a manifest error in defining the cultural purpose of the scheme. Earlier, almost any film was considered to be a cultural product, likely to be eligible for State aid. According to the current interpretation and since the assessment of the UK Film tax incentive, the Commission has been asking the Member States to clearly list the criteria used to assess the cultural nature of the supported films and to have its say on their definition.30

29. Commission press release 2008. 30. Commission Decision N461/05 on UK film tax incentive.

231

Rethinking.book Page 232 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

This more restrictive interpretation of the first criterion of the Cinema Communication definitely comes from the tendency among some Member States to offer incentives, especially fiscal incentives, that are aimed at attracting foreign productions on their territory rather than at developing national cultural products. As stated before, the economic weight of the audiovisual industry may explain this new tendency among some Member States. Certain of them have indeed developed tax systems aimed at attracting foreign productions. Nevertheless, we have to bear in mind that the production of any film, whether foreign or not, will benefit the local talents and industry. In this regard, it might contribute to the strengthening of national cultural identities. The Commission has therefore started to tell Member States in the notification procedures, that it wants to have its say on the 'verifiable cultural criteria'. The criteria are aimed at ensuring that the national schemes only support cultural products. The first case cleared by the Commission under this doctrine was the UK Film tax incentive: the approval was based on a revised cultural test submitted by the UK authorities in November 2006, rather than on the original test that they had notified to the Commission.31 Shortly afterwards, the Commission approved the new German Federal Film Fund.32 The Commission examined in detail the different criteria proposed by the German authorities, the structure of the tests as well as the individual points attributed in the tests to the different aspects of film-making. This new approach has led to opposition from many European Film agencies. They consider that the cultural criteria are to be decided unilaterally by them, without any intervention from the European level. These agencies also think that it is obvious, given the specific position of European films on the international market in comparison with the American film, that every European film is a cultural product, in contrast to the more commercial products coming from the US. It needs to be underlined that if the Commission’s request is an attempt to stop foreign (i.e. American) production from benefiting from European public funding, it may also have negative effects on co-productions with parties from third countries other than the US. Cultural tests that impose criteria based specifically on European nationality will make it more difficult to work with non-European countries, especially outside of co31. Ibid., Broche, et al. 2007, 46-47. 32. Commission Decision N659/06 on German Film Fund

232

Rethinking.book Page 233 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?

production agreements. The tests may also hinder circulation of European films in a wider market. Such negative effects on co-production seem odd, when the EU is at the same time trying to encourage audiovisual cooperation and cinematographic co-productions with third countries through Cultural protocols added to the economic partnership and free trade agreements,33 and through the ‘Media Mundus’ programme that aims at increasing audiovisual cooperation with third countries. Tests on the cultural nature of the supported products is not the only matter in relation to which the European Commission seems to be developing a more interventionist approach. The 2001 Cinema Communication specifies that the notion of a 'difficult or low budget film' is to be defined by Member States, in accordance with the subsidiarity principle. Yet, it seems that the Commission has also decided to have its say on this definition. An interesting parallel can be drawn with the position of the Commission in the field of the public financing of public service broadcasting. In this sector, the Amsterdam Protocol (1997) reinforces the subsidiarity principle. The Broadcasting Communication (2001) states that the definition of the public service mandate falls within the competence of Member States, as long as they define the remit clearly, leaving no doubt as to whether or not a certain activity is part of the remit.34 However, recent developments seem to show that the Commission is trying to narrow down the application of the subsidiarity principle. To quote the Commission, “the Broadcasting Communication recognises that activities other than TV programmes in the traditional sense can be included in the public service remit, to the extent that while taking into account the development and diversification of activities in the digital age, they are addressing the same democratic, social and cultural needs of the society in question. However, the Broadcasting Communication does not specify how to assess this and how the Commission can exercise its task to check for manifest errors in the definition.”35

The Commission services think that an ex ante evaluation (a kind of 'public service test' somewhat similar to the 'cultural test') would help to determine the public service character of new offers and avoid disproportionate effects on competition. Therefore, one may ask whether 33. The first and only protocol in force is the protocol on cultural cooperation annexed to the CARIFORUM agreement (CARIFORUM agreement). Another draft protocol is currently discussed in the framework of negotiations with South Korea. 34. Communication COM(2001)/534 final on certain legal aspects relating to cinematographic and other audiovisual works. 35. Commission Explanatory Memorandum 2008, 3.

233

Rethinking.book Page 234 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

there is a general tendency for the Commission to adopt a more restrictive approach in the interpretation of derogations to competition rules. Reverting to cinema, the involvement of the Commission in the definition of 'verifiable cultural criteria' as well as in the definitions of 'difficult and low budget films' may be considered by the Member States as an inconsistent intervention in two respects. On the one hand, they may be seen as contrary to the subsidiarity principle. On the other hand, they contravene in a way with the UNESCO Convention on the protection and the promotion of cultural diversity. The Convention clearly reaffirms “the sovereign right (of Parties to the Convention) to formulate and implement their cultural policies and to adopt measures to protect and promote the diversity of cultural expressions (…)”. However, it has been discussed above that the issue of the articulation between UNESCO convention and EC law is not yet clearly resolved. In the framework of the European Film Agencies’ Directors (EFADs), European film agencies have been insisting for quite some time on the necessity of prolonging and confirming the dispositions included in the Cinema Communication. But the agencies have also underlined the necessity for the Commission to adopt an interpretation of this Communication that is clear and transparent. The Communication then should leave to public authorities the right to make unilateral decisions that are directly linked to their knowledge of the specific context in which they are working. The difficulty that the Commission has in combining cultural diversity with the achievement of the internal market and liberalisation of trade renders its position on State aid to film very ambiguous and unclear. This could well endanger the existing and future support schemes. For example, the ambiguity in the Commission’s current position makes it difficult for the public authorities to assess their chances of having their support scheme approved. The Commission has adopted a case-by-case approach with countries willing to notify; this approach has appeared to be positively flexible but has also led to a legal uncertainty that is harmful to the strengthening of actual national support schemes in Europe. Indeed, the problem is not the case-by-case approach itself, but rather the uncertainty about the specific policy that the Commission follows/conducts. One can wonder if criteria and definitions agreed for one Member State can actually be applied to all the Member States. At this stage, the frequent changes in the options favoured by the Commission when assessing a cultural test in the framework of a notification and with regards to the review of the

234

Rethinking.book Page 235 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?

Cinema Communication definitely do not calm the fears of the Member States that their support schemes be declared incompatible with EC law.

6.

A block exemption regulation for film: a false good idea?

For the sake of completeness, it should be mentioned that the Commission launched in 2005 also the idea of a block exemption regulation for cinema. The State Aid Action Plan for the Period 2005-2009, reads: “in addition, and on the basis of its experience in this field, the Commission could ask the Council to extend the scope of the Enabling Regulation, so that cinema can also benefit from a block exemption.”36 But what is a block exemption? First of all, one must remember that, according to Article 88 EC, every State aid scheme must be notified to the Commission before its implementation. In other words, Member States cannot grant any State aid unless it has been notified and authorised by the Commission. In the 1990s, the Commission started a process of modernisation and simplification of State aid procedures. To this end, the Council adopted regulation N° 994/98 of 7 May 1998, which enables the Commission to adopt so-called block exemption regulations for State aid. With these regulations, the Commission can declare specific categories of State aid compatible with the EC Treaty, assuming they fulfil certain conditions. State aids falling under the regulation are exempted from the requirement of prior notification and Commission approval. As a result, Member States are able to grant aid that meets the conditions laid down in these regulations without the formal notification procedure. They only have to submit information sheets on the implemented aid.37 At first sight, this proposition could be considered a good idea. It could simplify the work of Member States as much as that of the Commission, which could in turn provide enhanced legal certainty in the implementation of support schemes.

36. Commission State Aid Action Plan 2005, par. 62. 37. Commission Vademecum 2007, 7-8.

235

Rethinking.book Page 236 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

But the devil lies in the details. In the same State Aid Action Plan, the Commission also declared that it would: “evaluate the need to enlarge the scope of Council Regulation (EC) No 994/98 enabling the Commission to block exempt additional types of measures, e.g. aid for culture and heritage conservation. In that context, the Commission intends to clarify the roles and uses of block exemptions and guidelines, and will consider the possibility of giving the block exemptions not only a positive effect like the one they already have, but also in certain cases a negative effect. This would mean that some criteria for exemption of notification would also be criteria for compatibility of aid, which would enable the national jurisdictions to apply block exemptions directly not only by declaring the compatibility but also the incompatibility of certain aid.”38

This could constitute a real danger for some support schemes. In certain cases (which are not still known), there would no longer be any “grey area” that permitted a dialogue with the Commission when more qualitative issues were at stake. With this perspective in mind, it is important to wonder what will be the future of the Cinema Communication. If a block exemption regulation becomes a compatibility regulation, then the Cinema Communication should be incorporated into the regulation. But this issue is highly problematic. Indeed, the rationale behind all existing block exemption regulations is that the conditions laid down in these regulations must be as ‘quantitative’ and ‘objective’ as possible, since the Member State which applies a regulation must have the largest legal certainty. In this way, a block exemption regulation for the cinema would give to the Commission the opportunity to lay down its own ‘verifiable cultural’ and ‘difficult and low budget film’ criteria (they could become criteria for compatibility of aid, as explained above). Moreover, as a block exemption regulation for the cinema would apply to all Members States, this would mean that the same ‘cultural’ criteria would apply in the same way to all Member States. This could be considered a significant challenge to the concepts of subsidiarity and cultural diversity. On the other hand, if a block exemption regulation did not become a compatibility regulation, and if the Cinema Communication continued to exist, one could wonder what would be the content of the regulation, and even question the added value of this regulation. Having said this, the results of the consultation were in this respect quite unclear. Many of the comments received by the Commission underlined the importance of making sure that the block exemption for cinema would not involve the application of a more restrictive approach than the existing 38. Commission State Aid Action Plan 2005, par. 59, (emphasis added).

236

Rethinking.book Page 237 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?

guidelines. So far, the Commission has not announced any progress on this issue, and it seems that it might abandon the idea.

7.

Conclusions

In conclusion, the top priority for national film agencies at the moment is to restore and improve legal certainty among national support schemes. This can be achieved by working on several levels: 앫 by increasing the transparency of the assessment procedure used by the European Commission in the framework of notification so that policy makers know exactly what is requested and favoured by the Commission and what is not. 앫 by launching the debate on “is there a better way” to support European films. Some Member States seem to have focussed recently mainly on strengthening their national film industry 앫 by improving the coherence of the European Commission’s position towards State aid to film with objectives such as the ones set out in the UNESCO Convention. 앫 by ensuring a coherent interpretation of the 2001 Cinema Communication or by adopting a new Cinema Communication. The criteria should not be more restrictive in granting latitude to Member States to adopt the system to their specific situation, while also respecting European law as well as common European objectives. Only once such legal certainty is in place, will the national public authorities be able to set up new, coherent support schemes and to strengthen the existing ones. This, in turn, will create a European cinema that respects cultural diversity as well as national and local cultural values. But as we all know, developing a European approach to cultural policies while respecting the diversity of national support schemes and contexts is definitely not an easy task to fulfil. The three-year extension of the validity of the Cinema Communication that was announced in October 2008 will be the occasion for European institutions and Member States to work at this challenge together in the years to come.

References Broche Jérôme, Obhi Chatterjee, Irina Orssich, and Nóra Tosics. 2007. State Aids for Films – a Policy in Motion? EC Competition Policy Newsletter (1): 44-48 237

Rethinking.book Page 238 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Burri Nenova, Mira. 2007. The Reform of the EC Audiovisual Media Regulation: Television Without Cultural Diversity. NCCR Trade Working Paper 2007/06. www.nccr-trade.org/images/stories/publications/ twf_workingpaper.pdf. (Accessed December 1, 2008) Cambridge et al. 2007. Study on the Economic and Cultural Impact, Notably on Co-productions, of Territorialisation Clauses of State Aid Schemes for Films and Audio-visual Productions. Draft study. Cambridge: Cambridge Econometrics, David Graham and Associates, Ramboll Management, and Germann Avocats. www.ec.europa.eu/avpolicy/docs/library/studies/territ/ final_rep.pdf. (Accessed December 1, 2008) CARIFORUM Agreement. 2008. Economic Partnership Agreement between the CARIFORUM States, on the one part, and the EC and its Member States, on the other part [2008] OJ L289/I/3. http://ec.europa.eu/ trade/issues/bilateral/regions/acp/pr220208_en.htm. (Accessed December 1, 2008) Commission Decision of 24 June 1998 on State Aid N3/98 (France), Soutien à la production cinématographique [1998] OJ C279/4. Commission Decision of 22 March 2006 on State Aid NN84/04 (France), Régimes d’aide au cinema et à l’audiovisuel [2005] OJ C159/24. Commission Decision of 22 November 2006 on State Aid N461/05 (United Kingdom), UK Film tax Incentive [2007] OJ C9/1. Commission Decision of 20 December 2006 on State Aid N695/06 (Germany), German Film Fund [2007] OJ C14/1. Communication COM(2001)/534 final from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on Certain Legal Aspects Relating to Cinematographic and Other Audiovisual Works OJ [2002] C043/6. Communication from the Commission on the Application of State Aid Rules to Public Service Broadcasting [2001] OJ C320/05. Communication COM(2004)/171 final from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions on the Follow-up to the Commission Communication on Certain Legal Aspects Relating to Cinematographic and Other Audiovisual Works [2004] OJ C123/01. Commission Communication Concerning the Prolongation of the Application of the Communication on the Follow-up to the Commission

238

Rethinking.book Page 239 Friday, September 25, 2009 10:01 AM

State Aid for Film – A Policy Moving Too Fast?

Communication on Certain Legal Aspects Relating to Cinematographic and Other Audiovisual Works of 26 September 2001 [2007] OJ C134/5 Decision 89/441/EC of the Commission of 21 December 1988 on Aid Granted by the Greek Government to the Film Industry for the Production of Greek Films [1989] OJ L208/38. Dony, Marianne. 1996. Les aides à l’audiovisuel à la lumière du traité de Maastricht. In L’actualité du droit de l’audiovisuel européen, under the direction of Carine Doutrelepont, edited by Bruylant, 111-24. Brussels : ULB-Collection. European Commission Explanatory Memorandum of 10 January 2008 Regarding the Questionnaire Related to the Revision of the Communication from the Commission on the Application of State Aid Rules to Public Service Broadcasting. http://ec.europa.eu/comm/ competition/state_aid/reform/broadcasting_comm_memorandum.pdf European Commission Press release MEMO/08/329 of 22 May 2008. State Aid: Future Regime for Cinema Support. European Commission Public Consultation Media Mundus. http:// ec.europa.eu/information_society/media/mundus/index_en.htm. (Accessed December 1, 2008) European Commission Results of the consultation on the State aid action plan. Detailed Summary February 9 2006. European Commission State Aid Action Plan: Less and Better Targeted State Aid: a Roadmap for State Aid Reform 2005-2009. Consultation document presented by the Commission June 7 COM(2005)/107 final. European Commission Vademecum. 2007. Vademecum Community Rules on State Aid. http://ec.europa.eu/comm/competition/state_aid/studies_reports/ vademecum_on_rules_2007_en.pdf. (Accessed December 1, 2008) European Court of Justice. Reinhard Gebhard v Consiglio dell'Ordine degli Avvocati e Procuratori di Milano. Case C-55/94 [1995] ECR I-04165. European Court of Justice, Preussen Elektra AG v Schhleswag AG, Case C379/98 [2001] ECR I-02099. European Court of Justice. Laboratoire Fournier S.A. V Direction des vérifications nationales et internationales Case C-39/04 [2005] ECR I02057. Pauwels, Caroline, Sophie De Vinck, and Ben Van Rompuy. 2007. Can State Aid in the Film Sector Stand the Proof of EU and WTO Liberalisation 239

Rethinking.book Page 240 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Efforts? In Media and Cultural Policy in the European Union. European Studies – An Interdisciplinary Series in European Culture, History and Politics (vol. 24), edited by Katharine Sarikakis, 23-43. Amsterdam-New York: Rodopi. Pons, JF. 1996. La politique de concurrence européenne dans le domaine de l’audiovisuel, EC Competition Policy Newsletter, 2 (3): 6-9. Scharf, Tibor, and Orssich Slavetich. 2006. The Application of State Aid Rules to Culture and Sports. In The EC State Aid Regime: Distortive Effects of State Aid on Competition Trade, edited by Michael Sanchez Rydelski 51139, London: Cameron May. Treaty of Amsterdam of 10 November 1997 Amending the Treaty on European Union, the Treaties Establishing the European Communities and Certain Related Acts – Protocol Annexed to the Treaty of the European Community – Protocol on the System of public broadcasting in the Member States [2003] OJ C340/109 UNESCO. 2005. Convention on the Protection and Promotion of the Diversity of Cultural Expressions. www.unesco.org/culture/en/diversity/ convention. (Accessed December 1, 2008) Wouters, Jan, and Bart De Meester. 2008. The Implementation by European Community of the UNESCO Convention on Cultural Diversity. Paper presented at the public hearing organised by the European Parliament, February 27.

240

Rethinking.book Page 241 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression? A Bold, Imaginative and Practical Response to Cultural Globalisation Carole Tongue

Introduction Can film and television, the most powerful cultural media, just be treated as commodities? This question has always exercised governments and has led to intervention – particularly in the regulation of television – to protect and stimulate production and broadcast of home grown programming. Some countries, notably France, Canada and South Korea have deployed a significant and complex range of special measures to support and sustain the production and exhibition of their national films, drama and documentary. In order to preserve cultural diversity, these support measures, so Pauwels et al.1 argue, should protect and stimulate domestic production on the one hand and foster the subsequent circulation and exchange of these local productions on the other hand. This is out of concern that the medium of the screen plays a significant part in a nation’s culture, the formation of its values and in the common conversation necessary to underpin and develop democracy and cultural identity. “For as distinct from the priorities of trans-national entertainment and profitdriven television, the ‘broadness’ of broadcasting suggests a potential for dialogue across otherwise embattled cultural, experiential and faith boundaries.”2

For France, film is the seventh ‘art’ and viewed as central to the nation’s culture. It would be unthinkable for the French if a majority of films on television and cinema came from outside France. Thus, France has developed a cultural policy ‘toolkit’ to support and protect the production, distribution and exhibition of its own and European films, television programmes and other services. 1. 2.

Pauwels et al. 2007, 24-43. Harvey 2006, 48.

241

Rethinking.book Page 242 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

In the 1990’s ministers, parliamentarians and creators (particularly from Canada and across Europe) in favour of defending and promoting cultural diversity, began to express disquiet about the application of world trade rules to the audiovisual sector for example, for fear that they could be used to undermine the cultural sovereignty of nations to adopt specific measures to support their audiovisual industry and other cultural forms of expression. If the World Trade Organisation (‘WTO’) rules about trade liberalization, such as national treatment, applied to cultural industries, they argued, this could outlaw the wide variety of cultural policies used by countries around the world to support local expression in film, television and music. This is to be contrasted with the American view as expounded by United States trade representative Robert Zoellick that trade liberalization and open markets, including for all audiovisual goods and services, is “a vision of a world in which free trade opens minds as it opens markets, encouraging democracy and greater tolerance.”3 In addition, at a discussion in Washington (on April 2008) on the export of US film to “billions of people around the globe who both welcome and resent them”4 Dan Glickman, the Chairman and CEO of the powerful Motion Picture Association of America (MPAA) dismissed the idea that movies have anything to do with culture insisting that they are mere commodities. These are arguments that have been constantly deployed by the US in world trade talks and elsewhere, where US representatives never mention the cultural role of audiovisual works outside of a US economic imperative, seeking through world trade negotiations to make all audiovisual works and services subject to free trade rules. Hollywood and Washington cooperate closely to defend the export of film, “creating a balance of trade more favourable than that of any other industry save aerospace.”5 The US trade surplus in audiovisual goods and services now stands at over $8 billion. MPAA’s Glickmann, at his recent speech to the National Press Club6, made it clear how high the economic stakes are for the US: “Of course, I also recognize that it’s easy for the chairman of the MPAA to be protrade when approximately 60 % of our box office and home video receipts come from outside the U.S. American movies run a trade surplus with virtually every country in the world that we do business. Fifty years ago, the global box office was largely an afterthought. Today, the U.S. is one important market among many for our movies.”

3. 4. 5. 6.

Zoellick (2004) in Freedman (2008, 199). Bayles 2008. Ibid. Glickmann 2008.

242

Rethinking.book Page 243 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

It must also be remembered that world trade talks are conducted largely by unelected civil servants from ministries of trade and industry, for whom cultural diversity is not their central brief. Until this year there has been little or no room for “reflecting upon the importance of film and television as distinct means of human expression and communication, reflecting the values and beliefs of their culture of origin.”7

1.

Challenges

Culture is now transmitted at the speed of light across frontiers in our global economy. Alongside concerns about the drive to include audiovisual goods and services in world trade talks, there has been an increase in the myriad of satellite and cable channels facilitated by this digitalisation. Unhindered trans-border broadcasting has been perceived as a threat by some countries. They fear a negative impact on their own television regulation and support for their own culture. In 1989, the European Union television legislation, known as the Television Without Frontiers directive, contained provisions for cultural and linguistic diversity and the broadcast of a majority of national/EU audiovisual works ‘wherever practicable’. This phrasing represents a major loophole, however, allowing many licensed channels to argue that it is not practicable for them to broadcast a majority of national/EU works. This would continue to allow a significant dominance of US film on all screens and enable many channels to sidestep the broadcast quota, which require that 51 % of screen time for fiction is to be devoted to national and European drama, fiction and documentary. In addition, several mergers in the last two decades (such as: DreamWorks SKG acquired by Viacom Inc.'s Paramount Pictures, News International takeover of the Wall St Journal, and the Google and YouTube merger), have merely confirmed the constant danger of an oligopoly of media owners. The latter will increasingly decide the vast majority of our culture. In the 1990s, cultural producers and a range of politicians underlined the extent of the trade deficit between the US and the EU in audiovisual programmes and films. The specific economic characteristics of the sector, denied by neo-liberal economic adherents, have led to a deficit now standing at over $8 billion. This imbalance in the trade in film and television increasingly has been seen as a risk to the diversity of other national cultures, in which film and television, and the screen in general,

7.

Harvey and Tongue 2006, 222.

243

Rethinking.book Page 244 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

are the dominant form of cultural expressions, central to the democracy, values and cultural identity of different societies. Furthermore, cultural production and exchange between nations are limited, particularly North-South. Many developing countries have no indigenous film or television production industry to speak of. People in these countries are thus denied access to their own stories and voices on the screen, with all the attendant implications for national culture, identity and democracy. Such a finding can and should be coupled with the decline in coverage of the wider world in certain countries like Britain.8 This concerns many who believe that out of cultural exchange can grow mutual understanding and long lasting peace, much needed where cultural misunderstanding continues to fuel conflict unnecessarily. This chapter will look at some of the background to how these competing visions and challenges and desired responses to them have played out from the end of the 1990s until the present day resulting in the adoption of a UNESCO ‘Convention for the Protection and Promotion of the Diversity of Cultural Expressions’ (‘Convention on Cultural Diversity’ or ‘the Convention’) in November 2005. The Convention seeks to strengthen the creation, production, distribution, access to and enjoyment of cultural expressions, as conveyed by cultural activities, goods and services. In particular, the Convention aims to reaffirm the sovereign right of States to draw up cultural policies. It also recognizes the specific nature of cultural goods and services as vehicles of identity, values and meaning, and strengthens international cooperation and solidarity in cultural expressions.9

2.

Who’s afraid of the WTO?

2.1 Principles of the WTO trading system A number of simple, fundamental principles run throughout all WTO agreements. The one deemed by, inter alia, the European Union and Canada10 to be the most threatening to national and European audiovisual support measures is the principle of non-discrimination: the application of national treatment and most favoured nation status rules.11 National 8. 9. 10. 11.

Scott 2008. UNESCO 2005. Harcourt 2008. WTO. Principles of the Trading System.

244

Rethinking.book Page 245 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

Treatment (‘NT’) means exactly what it says: that Member States agree to apply the same rules to companies of any WTO member as it does to its own nationals. The implications of the application of the NT status to the audiovisual sector is that, for example, a nation’s film fund could be accessed by any WTO member without discrimination. Special support for public service broadcasting (e.g. the BBC), as well as special rules on broadcasting requiring certain broadcast and investment obligations could be open to challenge.12 Application of the Most Favoured Nation (‘MFN’) status reinforces this position by obliging a Member State to apply the same special provisions it might have regarding certain countries to all WTO Member States.

2.2 GATS in relation to audiovisual and cultural services The General Agreement on Trade in Services (‘GATS’) was concluded during the Uruguay Round (1984-1994), which also established the WTO13. However, in the 1990s it became increasingly clear that there was an inherent tension between the basic premise of the GATS – progressive liberalization of trade in services – and policy objectives not driven by purely economic factors, such as the promotion of environmentalism or cultural diversity. This is resolved in some cases by the list of general exceptions in Article XIV, which serves to exempt certain objectives (e.g. those related to the environment and health) from the GATS disciplines. The French campaign for a ‘cultural exception’ in the Uruguay Round, whereby audiovisual services would also have been included as a general exception, was an attempt to address cultural objectives in the same way under the GATS. However, no such exception was negotiated. Instead, GATS was made applicable only to those service sectors for which countries made commitments, and most countries did not make such commitments in regard to audiovisual or broadcasting services in 199514 to avoid being subject to rules that could undermine national cultural policies that protect and support these services, be it through public service broadcasting or film subsidies. The next section explains this further. It should be noted that the MFN clause, which requires that preferential treatment granted to certain nations be applied to all members of the WTO, 12. Wiedemann 2004. 13. The 1947 General Agreement on Tariffs and Trade (‘GATT’) was only an international agreement and was not incorporated in any international organization. 14. Pauwels et al. 2006.

245

Rethinking.book Page 246 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

applies to all sectors. Nevertheless, it is possible to make certain reservations with regard to this clause by submitting a list of exemptions to cover specific agreements (for example, agreements governing cinematographic co-production). Nevertheless, such flexibility, which appears to grant the states a certain degree of freedom, serves in fact to permit certain steps towards liberalization. Even if some States did not initially make any undertaking to introduce liberalization in the course of the Uruguay Round, (for example, in the audiovisual sector, including the 15 EU Member States), the undertaking to introduce progressive liberalization as contained in Article XIX of the GATS puts pressure on them to go even further in their undertakings for liberalization during each round of negotiations. In this way they would abandon their MFN exemptions in the long run. The disciplines of the GATS bring into question all regulations governing these audiovisual sectors. Actually, all regulations that endeavour to counteract the radical effects of the free reign of market forces are considered to be an obstacle to trade, which must be abolished. Media ownership regulations requiring, for example, a certain percentage of national ownership for specific media, are considered to restrict market access by foreign operators. The British government responded to this provision in its 2003 Communications Act by a provision to allow nonnational ownership of terrestrial commercial channels for the first time. Moreover, national audiovisual rules guaranteeing specific financial resources or specific facilities to national operators are considered to be contrary to national treatment. This represents a potential significant threat to public service broadcasting. Furthermore, quotas (quantitative restrictions, present in many national and European audiovisual laws) would be forbidden if they had to comply with international trading regulations. This could threaten the Television Without Frontiers Directive, (now Audiovisual Media Services Directive), which provides that 51 % of screen time in the European Union should be indigenous drama, film and/or documentary.

2.3 Government positions at the GATS In 2000 and 2001, a range of governments submitted papers for discussion on the issue of audiovisual services and their treatment in GATS. The issue of a nation’s cultural sovereignty was put firmly on the table by the Canadian government.

246

Rethinking.book Page 247 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

Against a Convention on Cultural Diversity Four Members of the WTO took an initial position against the Convention on Cultural Diversity: the United States, Switzerland, Brazil and Japan. In 2000, the United States put forward a paper15 pointing to the impact of new technologies on the audiovisual sector, providing opportunities for lower-cost distribution. It argued against an ‘all or nothing’ approach and asked nations to agree to “negotiated commitments for the audiovisual sector that establish clear, dependable, and predictable trade rules with due account taken of the sector’s specific sensitivities.” The last three words are interesting. At no time would any US government representative use the word ‘culture’ in connection with audiovisual works and services. The US government had already mandated their spokespeople way back, even during the negotiations on the EU Television Without Frontiers Directive from 1994-1996, never to use the word ‘culture’ in connection with film and television services. The US clearly wanted all audiovisual products and services included in GATS negotiations and subject to free world trade rules, which would further benefit their most successful audiovisual industry. Acknowledging this was about culture would sabotage these efforts. Also the Swiss argued for progress inside the WTO. They said that the ‘digital revolution’ has led to ‘important structural changes’ in the audiovisual sector with new technologies bringing about lower-cost forms of digital production and distribution, and convergence blurring the boundaries with telecommunications services. In line with the US submission, it also argued that the ‘all-or-nothing’ debate needed to be overcome in order to address the treatment of audiovisual services under the GATS, calling for “a balanced solution that satisfies both [cultural and commercial] sensibilities”.16 Brazil took a position between Europe and the United States arguing against both extremes saying that neither side of the debate recognised that audiovisual products have both cultural and economic importance. The Brazilian government wanted progressive liberalization while ensuring governments’ autonomy to preserve and promote cultural identity, cultural diversity and an increasing participation of developing countries in trade in services, in particular by creating opportunities for effective market access for their exports. One driving force for the Brazilians was the desire to export freely their own brand of particularly successful soap operas to the rest of the world. The Brazilians proposed that Members “make specific commitments in audiovisual services taking into account the objectives of Article IV of the GATS” (Increasing 15. United States 2000. 16. Switzerland 2001.

247

Rethinking.book Page 248 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Participation of Developing Countries). In that regard, special attention should be given to audiovisual services in which developing countries have greater potential such as (but not exclusively) television services.17 Finally, Japan (a long time supporter of the United States) made a communication on the negotiations on trade in services proposing that “all registered MFN exemptions should be eliminated by the end of 2004”. Regarding audiovisual services, their paper argued that liberalization “is important for respecting the right of the citizens of each Member to free access to a variety of cultures and information. Audio-visual services have become remarkably important with the recent progress of information technology.”18 For a Convention on Cultural Diversity Unlike the US and Japan in particular, the Canadian and French governments argued in favour of a framework that could be counter-posed to the regulatory principles of GATS. This was despite an earlier two-fold concern by the French government that a new framework outside the WTO might, firstly, not be an effective counterbalance to WTO rules and secondly, might be used as an alibi for new demands inside the WTO for further audiovisual liberalization. In particular Canada has supported the idea of a UNESCO Convention on Cultural Diversity. In February 1999, a blue ribbon19 trade advisory panel in Canada published a report recommending that instead of a ‘cultural exception’ in world trade talks, a legally binding international Convention on Cultural Diversity should be adopted that would protect the ability of countries to maintain cultural policies without fear of trade retaliation. In October 1999, the Canadian government adopted this recommendation. The Canadian government communication of 200120 put forward to GATS in ‘Initial Canadian Negotiating Proposals’, makes two references to the audiovisual sector. Firstly, it notes (in paragraph 3) that the GATS respects national policy objectives and emphasises the right of Members to regulate the supply of services within their territories in order to meet such 17. Brazil 2001. 18. British Screen Advisory Council 2001. 19. The term "blue ribbon" generally means high level, prestigious or highly placed. Here it refers to the members of the SAGIT (Sectoral Advisory Group on International Trade) on Cultural Industries, all of whom were senior executives in the cultural sector appointed by the Canadian Minister of International Trade to advise him. SAGIT’s 1999 report would be available directly from the Canadian government. It is no longer on the relevant website. The report by the SAGIT was published in February 1999 and was available on the government website for a number of years. 20. Communication Canada, quoted in Maule 2002: 4.

248

Rethinking.book Page 249 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

objectives. It states that these are important GATS principles “as they ensure that each Member’s ability to implement social and cultural policies is maintained.” The communication went on to say: “Canada will also not make any commitment that restricts [its] ability to achieve [its] cultural policy objectives until a new international instrument, designed specifically to safeguard the right of countries to promote and preserve their cultural diversity, can be established.” Canada was thus giving support to the proposal to establish a legal cultural instrument on the promotion and preservation of cultural diversity.

3.

Growing support for a Convention on Cultural Diversity

From the above, it becomes apparent that a considerable support for some sort of instrument on cultural diversity, as counterweight to the WTO agreement on trade in services, grew. The following section discusses how this support has increased both inside the European Union and various civil society groups. From a mere pragmatic point of view, the Council of Europe, although not part of the European Union, will be discussed in the EU section as well.

3.1 The European Union: unity in diversity The EU Commission, through its Trade Commissioner, is delegated by the EU Treaties to negotiate in world trade talks on behalf of all EU Member States. The Trade Commissioner does so (as is required by Article 133 EC) in consultation with a special committee consisting of members from the 27 Member States, ‘the Article 133 Committee’. The Committee consists entirely of civil servants that are appointed by the Council of Ministers, leaving out, in effect, only parliaments and the civil society. Since the establishment of the Committee, it has been heavily criticized as the Committee’s work is undertaken largely in secrecy and without any reports on which other interests are presented and balanced alongside commercial ones in determining the external common commercial policy. The role to be played by this Committee is that of coordinating trade policies and ensuring consistency in Community policies. As all Community actions taken under the Treaty, the Committee is however under the obligation of taking into consideration cultural aspects as required by Article 151(4) EC. This obligation must undoubtedly be interpreted as a response to the negative effects of market liberalization and as an attempt to afford greater weight to cultural issues in the balancing of commercial and cultural 249

Rethinking.book Page 250 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

interests. Nevertheless Article 151(4) EC has so far remained a political statement rather than a legal obligation due to its vague wording requiring cultural aspects only to be taken into consideration. What this duty implied beyond respecting and promoting the cultural diversity of the Member States, as listed in the provision, was unclear until the ratification of the UNESCO Convention on Cultural Diversity. With this, however, the Community has added significant substance to this political statement by recognizing the rights and obligations listed in the Convention on Cultural Diversity. That has not prevented the individual institutions, governments and particularly the Council of Cultural Ministers from influencing those negotiations. In Article 151 of the Nice Treaty, the EU is committed to linguistic and cultural diversity and to contributing to the flowering of the cultures of Member States. However, action under this Article is subject to unanimous voting in the Council of Ministers and is considered a weak legal base for action. The European Parliament21 Throughout the 1994-1999 session of the EP there was a strong majority of Members of Parliament (‘MEPs’) on the Committee for Culture, Media, Sport and Education in favour of an EU set of audiovisual rules and measures to guarantee cultural diversity through the Television without Frontiers directive, the MEDIA programme and support for public service broadcasting. Committee and plenary MEPs, led by Committee Chair Luciana Castellina, backed the creation of a European Investment Fund for cinema, that failed however to win backing from EU ministers. The EP as a whole did, however, support the continuation of the EU Media programme to support the production, distribution and exhibition of European films across frontiers. In 1996, the EP voted overwhelmingly for the ‘Tongue report’22 on the future of public service broadcasting in the digital age, which was seen by virtually all MEPs as a prime guarantor of cultural diversity. This report led on to the insertion of a protocol in the Amsterdam Treaty of 1997 underlining the essential place of public service broadcasting in a democratic society (the so-called ‘Amsterdam Protocol on Public Service Broadcasting’). Simultaneously, after 1994, many MEPs (informed constantly by many cultural producer organisations) grew more and more concerned about the potential effects of, for example, the GATS and WTO regime on national media policies. As a MEP spokesperson on media and culture, the author 21. ‘EP’. 22. Tongue 1996.

250

Rethinking.book Page 251 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

of this contribution took the opportunity to speak directly with Labour, Trade and Culture ministers during the UK Presidency as to why no commitments on audiovisual policy should be made within the WTO. In 1999, a cross section of MEPs from different political groups lobbied EU Culture Ministers and the European Commission not to make commitments in the audiovisual field in any trade negotiations. Both the Council of Culture Ministers and the EU Commission responded favourably (as detailed in the section below). EU Commission Pressure from the European Parliament, certain Member States and cultural producer organisations came to bear on EU Culture Ministers in 1999, to lobby EU Trade Commissioner Pascal Lamy who was negotiating for all EU Member States in the WTO. It worked. He received a mandate from the 15 EU Culture Ministers not to make any undertaking on audiovisual goods and services in the GATS. In autumn 1999, these Ministers issued a statement underlining the right of every Member State to cultural sovereignty and support measures which might flow from that right. This statement has never been overturned. Interestingly, this did not stop the British government expressing a desire to discuss media ownership within the WTO. This illustrates the divide between the vision and values of culture and industry ministers, even within the same country and coming from the same government. Council of Europe Upholding, promoting and sustaining cultural diversity and cooperation has always been central to the work of the Council of Europe. In December 2000, the Committee of Ministers of the Council of Europe adopted a ‘Declaration on Cultural Diversity’. This Declaration importantly declares: “Convinced that all Member States and other States party to the European Cultural Convention23 must confront this challenge from a culturally distinct perspective, but that the shared global context for development requires the elaboration of a set of principles which will provide a coherent framework for sustaining and enabling cultural diversity at all levels”24

This Declaration was an invaluable contribution and used by the growing lobby for an international Convention on Cultural Diversity. Interestingly audiovisual policies, and public service broadcasting in particular, are 23. Council of Europe 1954. 24. Council of Europe 2000.

251

Rethinking.book Page 252 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

singled out in this Declaration, as important tools for safeguarding cultural diversity and as a necessary adjunct to trade policies.

3.2 Civil society: affirming the legitimacy of cultural policies at the international level – pressures mount towards an instrument for cultural diversity Cultural producers mobilise Many actors from both the political and creative spheres would raise their voices to assert the special nature of film and television programmes. At international festivals from the late 1990s onwards, such as the influential Cinematographic ‘Rencontres’ in Beaune (France) organised by the French Association of Directors and Producers (‘ARP’), voices from across Europe, North Africa and beyond articulated concerns about the dangers of world trade rules compromising both national and EU cultural diversity policies in the audiovisual sector in particular. In 2002, ARP supported Prime Minister Lionel Jospin in affirming a cultural exception in world trade agreements within the WTO.25 ARP called for the EU to maintain the unanimous voting provision for cultural diversity matters in any future EU Treaty change and importantly said that “The introduction of the notion of cultural diversity in the provisions relating to a common commercial policy would represent a major advance.” In 2004,26 at a further ARP meeting in Beaune, the EU Commission Director of Audiovisual Policy Gregory Paulger reiterated as regards any Treaty changes that “in the domain of international trade, the text stipulates that the Council of Ministers must be unanimous in any negotiation and conclusion of any agreement in audiovisual an cultural services.”.27 The European Film Directors Federation (FERA) and the French Authors’ Rights Society (SADC) In the late 1990s and early 2000, support grew, particularly from French and Italian audiovisual industry representatives, for an international declaration to be developed under the auspices of the UNESCO, building on the ‘Charter of Cultural Identities and Rights to Cultural Diversity’ that

25. L’ARP 2002. 26. L’ARP 2004. 27. Ibid.

252

Rethinking.book Page 253 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

was prepared by FERA. This charter was proclaimed at the Versailles Assembly and recognized by UNESCO on 17 June 2000.28 In addition to FERA, a number of bodies like SACD, and their Vigilance Committee continued to pursue three objectives in 2002 in relation to issues of cultural diversity. The first goal was to sensitize and bring together all cultural professionals in France, in Europe and throughout the world regarding the need to preserve the ability of states to maintain and develop cultural policies. As a second objective the organizations wanted to convince their governments and the European Union not to ask the other states to liberalize cultural and audiovisual sectors in June 2002 and not to undertake any commitment for liberalization in these very same sectors in March 2003. Thirdly, and most importantly they spelt out the need for an international instrument on cultural diversity. “To create a consensus with professionals and in governments for development outside the context of the WTO of an international instrument on cultural diversity, which would act as a counterweight to the WTO and would include cultural commodities and services in both their cultural and commercial aspects and their own specific features.”29

FERA pointed out, however, that despite the mandate for negotiation, which the Member States of the European Union granted the Commission in October 1999,30 the United Kingdom, with the support of Germany and the Netherlands, asked the European Commission that music should be liberalized. Even in Europe, which nevertheless fought so consistently during the Uruguay Round to preserve its policies, the barriers are weak and may give way at any time, if governments do not sense pressure from professionals. FERA went on to argue consistently from this point on for a new international instrument for cultural diversity saying: “Today more than ever before, it is essential to act as a counterbalance to the WTO. As states express their demands for liberalization, we are aware that the United States are preparing their own demands to open up all audiovisual sectors in all countries that they consider to be protectionist. These demands will be expressed around the negotiation table and we will then have to refuse to give into them. There is nothing to force a country to undertake a commitment for liberalization in the cultural and audiovisual sector. However, to do so, it will be necessary to resist pressure. To resist pressure, an international instrument upholding the right of 28. ‘SADC’ 29. Despringere 2002. 30. In the course of the next WTO negotiations, the European Union will make sure to guarantee, as in the Uruguay Round, the possibility for the Community and its Member States to preserve and develop their cultural and audiovisual policies in order to preserve their cultural diversity.

253

Rethinking.book Page 254 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

States to enhance cultural diversity would legitimise cultural policies supporting creativity within a country and would guarantee opening up to all other culture. This would help to demonstrate that the WTO is not an appropriate stage on which to discuss these problems. Such an international convention would also help create another environment, for questions of cultural policy which is more appropriate because it is a specialised and global matter.”31

In 2000, in a conference on globalisation and cultural diversity, the European Commission, UNESCO film makers and parliamentarians gathered from every continent. In the absence of eminent UK screenwriter and producer John McGrath, the author of this contribution gave his speech which contained the memorable words: “If we imported 90 % of our rice from one culture we would not be overly concerned, but to import that level of our audiovisual culture would be of the gravest concern.”32 John McGrath was a rare UK audiovisual player who believed in the need for strong autonomous local, regional and national audiovisual strategies and would speak out in their defence. He always urged those with shared concerns on these issues to make their voices heard inside our government and alongside other creators, viewers and listeners in the world. Representatives from the MPAA held separate talks with other Anglophone representatives to reiterate the US government against a separate international instrument guaranteeing cultural diversity and national sovereignty in cultural policy. Nevertheless, a number of people ensured that the participants remained united in their calls for a UNESCO International Convention on Cultural Diversity. An invaluable role was played by Peter Grant,33 a Canadian communications lawyer who had been a key member of the Canadian government’s advisory panel that had previously advocated an international instrument. He acted as ‘rapporteur’ for the Valencia conference and made everyone aware of this initiative. The Valencia meeting concluded with a declaration calling for a UNESCO Convention on Cultural Diversity to counterbalance WTO rules stating that: “Governments should be invited to consider policies necessary to support the diversity of cultural expression. At the international level, there is an urgent need for the negotiation of a new international instrument on cultural diversity to address issues related to cultural products in all their aspects.”34 31. Despringre 2002. 32. Tongue 2000, quoted in Chapman (2005, 260). 33. Peter Grant has always argued for an instrument on cultural diversity even if the United States would ultimately refuse to endorse such an initiative. He always also favoured rapprochement with the forces of trade liberalization, not resistance against them by stating that ‘the perfect ought not to become the enemy of the good’. 34. Fundacion Valencia Tercer Milenio and ADC Nouveau Millenaire 2000.

254

Rethinking.book Page 255 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

Support for a Convention on Cultural Diversity continued. In 2001, the British Screen Advisory Council (‘BSAC’) formed the “European GATS Group”, co-hosted with Eurocinema (an organisation representing French audiovisual producers)35. A priority of this group was to develop a negotiating position on the GATS on behalf of the European Communities’ national film industries. This group looked into this issue focussing in particular on the impact of new technologies on the audiovisual sector, the recognition of cultural diversity in the GATS, and a WTO agreement on competition law. The first step towards a common European position was taken at the first meeting of the European GATS Group in Cannes in May 2000. A Statement of Principles36 was endorsed by the participants at that meeting (who came from nine EU Member States), and submitted to the European Commission. That document comprised a series of general statements, primarily asserting the need for the European Union to maintain its ability to promote cultural diversity. BSAC maintained in its document on GATS principles in 2001 that “The negotiating stance of the EU should be based on the measures necessary for the achievement of the cultural and economic objectives of European audiovisual policies. The EU should, during the GATS negotiations, maintain the freedom for the Community and its Member States to retain and develop these measures.”37 Other organisations added their voice. In 2002 at the International Forum of Directors’ Organisations (‘IFDO’) in Montreal numerous actors reaffirmed the fundamental principles of a cultural ecology based on the need for diversity and asserted the right of all individuals and all peoples to choose their own modes of expression. Also public broadcasters supported these initiatives. ARD, the German public service broadcaster with a regional and a national mission, was particularly active in calling for an instrument to protect and promote cultural diversity which would highlight public service broadcasting as central to that aim. A report on cultural diversity was submitted to the European Parliament by interest groups and public service broadcasters in 2002. This was strongly supported by the German public service broadcaster ARD.

35. The organisation is represented by Director Yvon Thiec – its long time active Director. 36. British Screen Advisory Council 2000. 37. Ibid.

255

Rethinking.book Page 256 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

4.

Making a Convention on Cultural Diversity

4.1 Politicians past and present join the fray On January 19, 1995, Francois Mitterrand gave his last speech to the European Parliament before he died. The French President devoted most of his speech to insisting on greater investment in our cultural diversity, particularly in film. Listening on that day were MEPs – the author amongst them – who had supported strong EU policies for cultural diversity in film and television. The President’s words were most welcome. Some colleagues even suggested we had written half his speech. At the 5th meeting of the International Network on Cultural Policy (October 15, 2002, Cape Town), Minister of Canadian Heritage Sheila Copps said: "As ministers of culture, we have launched a serious discussion of the best means to ensure that we can preserve and promote cultural diversity around the globe. We have also helped promote understanding and respect for cultures. And Canada, together with all the participating countries, worked hard to prepare a draft international instrument with the main objective of protecting cultural diversity, just as the Rio Convention protects global biodiversity. I am confident that the Working Group on Cultural Diversity and Globalization, which is chaired by Canada and whose mandate ends next year, will successfully complete its work of considering the nature and scope of such an instrument, now in the draft stage."

At a 2002 meeting to discuss European cultural policy in Paris the then French Europe Minister Pierre Moscovici declared the following: “we are all aware that monopoly kills diversity. In spite of the arguments and assurances put forward by certain champions of globalization, I must say I would feel uncomfortable in a world where the printed Bible were merely the spin-off of an animation film. To reduce creative works to the status of a mere ‘product’ is clearly unacceptable and runs counter to what should be one of our guiding principles: cultural assets are not just commodities like any other commodity.”

He also said that “globalization also represents a formidable boost. European culture is a synonym of openness to the world because it always had a universal outlook. We discovered the world and travelled to its remotest regions. Aware of our heritage, steeled by our unique cultural tradition, we should not reject or fear trade and the laws of the market, but we should not submit to them blindly and naïvely either.”38

38. Moscovici 2002.

256

Rethinking.book Page 257 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

At the same meeting, EU Trade Commissioner Pascal Lamy hinted at progress towards a UNESCO Convention on Cultural Diversity when he assured participants that the international debate on cultural diversity and cultural policies – quite apart from the WTO negotiations – was being followed by the Commission “with a great deal of goodwill”. In conclusion he said that there was a need to reconcile the different instruments to regulate the audiovisual sector (e.g. specific subsidies) with the promotion of exchange of European audiovisual goods and services. This search for a better balance also applied to developing countries, in Lamy’s opinion. The Commissioner of Trade argued that large countries like India should play a leading role in that regard. Luciana Castellina, former MEP and chair of the European Parliament’s Culture Committee from 1994 to 1996 and a staunch campaigner for audiovisual cultural diversity, sounded a note of caution: “The problem is not how to protect the rights of each culture as a self-contained world with its own parochial products and creators. This is why I have some reservations about the UNESCO Alliance for Cultural Diversity, for I believe the essence of cultural development is exchange, the specific contribution of different cultures to a common collective imagination – openness to the universal. I am not interested in protecting my own culture if this culture does not contribute to defining a universal ethos. The danger lies in allowing European cultures to become fossilised: if they are not ready for exchange they will perish.”39

Her ideas were to find expression in the final UNESCO Convention on Cultural Diversity, which was to focus heavily on the promotion of diversity and exchange between cultures. The author of this contribution has also continued to campaign for a UNESCO Convention: “We need to develop an instrument for securing cultural diversity in world trade. A first step could be the adoption of a UNESCO Code of Conduct on cultural diversity. Another idea is to go for a flexible instrument binding on all parties but justifiable per se, similar to OECD codes. This would be more acceptable at the political level while awaiting a future embodiment of the principles, terms and conditions in a WTO instrument (akin to the WTO Agreement on Agriculture). The instrument should recognize the two-fold nature of cultural products, being both trade commodities and means of social communication and transmitters of values.”40

Speaker after speaker at conferences on strengthening cultural diversity policies worldwide would refer to a ‘Proposal for an International Instrument on Culture Diversity’, written by Professor Bernier41. The latter 39. Castellina 2002. 40. Tongue 2000. 41. Associate Professor at the Faculty of Law of Laval University (Quebec).

257

Rethinking.book Page 258 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

is one of the great driving forces behind the Convention on Cultural Diversity and its effective implementation. Commenting on a possible Convention on Cultural Diversity in 2002, Bernier and Ruiz said: “A comparison of cultural and commercial approaches suggests in fact that their preferences are often reversed. The preference of the commercial approach is for complete liberalization (although progressive and ordered) of exchanges as well as the elimination of obstacles to the investment, and cultural concerns would not be able to withstand this liberalization. A true cultural exchange assumes the existence of distinct cultures by definition. The same difference of perspective is central in the ongoing debate on culture and trade. It explains the growing concerns which express themselves about the treatment of property and cultural services in trade agreements and the feeling of indisputable insecurity provoked last year by the liberalization of exchanges and investment and, in a more general way, by globalization. There is good reason to think that the mediation of inherent tensions between trade and culture could effectively be made by means of the development of an international instrument on cultural diversity.”42

Speaking in 2003 to students in London, the author of this contribution continued to campaign, saying: “When the WTO adjudicates on the rules of free trade it is culturally blind. It assumes that cultural products are like any other and therefore one nation’s culture is substitutable for another. It can override the cultural policies of nations. Developing and sustaining regional and national audiovisual cultures are essential to developing our creative talent so our creators come from every part of our society with all the rich diversity than can bring. Ensuring every region and nation has its own unique audiovisual culture is about democracy and the right to participate culturally and creatively in one’s own society in arguably the most influential cultural medium. We must have an international convention to uphold nation’s sovereignty to develop cultural policies for cultural diversity.”43

4.2 The International Movement of Coalitions for Cultural Diversity Given this background, it is no wonder that concerns about cultural diversity led to demands from grassroots organisations around the world for an international instrument to protect and enhance cultural diversity of expression and exchange. These grassroots organisations developed in the new millennium into national coalitions for cultural diversity under the umbrella of the International Federation of Coalitions for Cultural Diversity. They represent civil society, which in one definition, is 42. Bernier and Ruiz 2002. 43. Tongue 2003.

258

Rethinking.book Page 259 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

independent NGOs with a mandate to organize and represent a constituency from the wider community. In this case the coalitions, although different in each country, bring together cultural institutions and cultural producer organisations. Those supporting a new international instrument for cultural diversity (‘NIICD’), argued long and hard asserting the importance of balance between economic and technological developments and the preservation of cultural identities, the lifeblood of diversity and difference that so enriches the human condition. In 1998, Minister of Canadian Heritage Sheila Copps hosted a meeting of 16 Culture Ministers sympathetic to an international instrument for cultural diversity. Out of this was born the International Coalition for Cultural Diversity (‘INCP’). In addition, grassroots coalitions for cultural diversity bringing together cultural producers and other cultural organisations started to form in 1999 with the Canadian Coalition for Cultural Diversity (‘CCD’) leading the way. The Canadian CCD brought together the country’s 34 leading cultural organisations from the sectors of books, films, television, music, performing and visual arts and new media. Its mission is to uphold the right of countries to apply cultural policies in support of their domestic cultural sectors. The Canadian CCD together with the INCD have played a leading role in mobilizing civil society in advocating a NIICD. Their organization of international conferences to discuss this have been invaluable in moving from ideas to political reality. They have also been tireless in their work around the world helping other countries develop their own coalitions for cultural diversity. Their articles, talks, and speeches which have reached out across the world to opinion formers, decision makers and cultural practitioners have played a significant role in stimulating the drafting, adoption and ratification of an NICCD which became the UNESCO ‘Convention on the Protection and Promotion of the Diversity of Cultural Expressions’ in October 2005. Today the INCP is genuinely international in nature, bringing together coalitions on cultural diversity in 45 countries representing more than 600 cultural organisations, all dedicated to upholding the right of countries to apply cultural policies. Last year, at a founding Congress held in Seville (Spain), the coalitions unanimously agreed to create the International Federation of Coalitions for Cultural Diversity (‘IFCCD’), with its headquarters in Montreal. The coalitions derive much of their power from speaking with one unified voice. Outreach work continues to mobilize civil society in Asia, the Arab world, the Caribbean and the African Commonwealth. Also an important role for the new Federation will be to ensure that cultural professional organizations have a strong voice in the 259

Rethinking.book Page 260 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

process for implementing the UNESCO Convention on Cultural Diversity. These grassroots coalitions – working in solidarity with each other – were one of the principal driving forces behind the Convention on Cultural Diversity and continue to drive its further ratification and implementation.

4.3 The role of UNESCO Remarkably within 6 years of the initiation of the idea, the UNESCO Convention on Cultural Diversity was adopted in October 2005. Despite the US rejoining UNESCO in 2003 and campaigning against such a Convention, it was passed with only the US and Israel voting against and 148 countries voting in favour. At present, over 80 countries have ratified the Convention (including the UK, and the European Union as a regional entity). The result is that a fourth pillar, in addition to social, environmental and development ones, has been added to what the exponents of unfettered free trade within the WTO have to take on board. The UNESCO Convention on Cultural Diversity is of great political significance. It is a binding international legal instrument with the goal to protect and promote the diversity of cultural expressions, particularly as embodied and conveyed in cultural activities, goods and services which are the vehicles of contemporary culture. It is a public statement of respect and recognition for the culture of others. It represents a major shift in thinking that recognizes that human rights are mediated by culture. We can infer from this that the promotion of cultural diversity (along with economic development and the search for non-violent solutions) can become one of the basic grounds for peaceful co-existence both locally and globally. Importantly the UNESCO Convention on Cultural Diversity recognizes that cultural works are not just commodities, but transmitters of values, meaning and identity. It recognizes the cultural sovereignty of nations to develop their own cultural policies. And it recognizes the economic specificity of cultural goods and services that do not conform to traditional free market principles. This is especially applicable to the economics of audiovisual works where the notion of free and fair competition between companies, products, services and countries does not prevail. Beyond this, the Convention on Cultural Diversity gives preferential treatment for developing countries to develop their various means of cultural expression and UNESCO will house an International Fund for Cultural Diversity (‘IFCD’) of which they should be the main beneficiaries.

260

Rethinking.book Page 261 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

“The Convention can be seen as “cultural peace treaty” which enables the growth of dignity and self-confidence for individuals and communities amidst genuine cooperation between states,” said Kevin Brennan, Permanent Delegation of South Africa to UNESCO at a recent meeting in London.”44

It is too early to say what real teeth the Convention on Cultural Diversity will have, but certain political developments show a promising shift in the re-balancing of free trade and cultural policy priorities, particularly at the EU level. The Convention on Cultural Diversity is not legally subordinate to any other international agreement but political will is crucial if real measures are to be undertaken to make a reality of the Convention.

5.

A forward looking perspective: what to do with the Convention on Cultural Diversity

As Holly Aylett, Director of the UK Coalition for Cultural Diversity45 has said, the Convention on Cultural Diversity “was a huge act of political will, advanced between governments and between civil society and governments in a complimentary approach which has come to inform one of the distinctive features of the Convention – the active role which is ascribed to civil society in achieving its goals.”46 Discussions are underway both within governments, civil society and UNESCO itself as to the implementation of the Convention on Cultural Diversity. At a recent Commonwealth Foundation seminar in London the meeting recommended that parties to the Convention “should develop institutionalised and formal mechanisms for the involvement of civil society in the implementation of the Convention.”47 44. Commonwealth Foundation 2008. 45. The UK Coalition for Cultural Diversity was established in November 2006 to facilitate co-operation and the development of joint positions and actions among cultural organisations from the sectors of books, film and television, music, live performance and the visual arts. The Coalition includes organizations representing actors, authors, composers, directors, musicians, technicians and visual artists as well as independent producers of film, television and music, publishers, broadcasters and distributors. The objectives of the UK Coalition for Cultural Diversity are to support the ratification and implementation of UNESCO’s ‘Convention on the Protection and the Promotion of the Diversity of Cultural Expressions’, which recognizes the distinctive nature of cultural goods and services and affirms in international law the sovereign right of states and governments to freely determine their own cultural policies; while opposing liberalization commitments relating to cultural goods and services in the context of bilateral, regional or international trade negotiations. 46. UNESCO 2005; Aylett 2008. 47. Commonwealth Foundation 2008.

261

Rethinking.book Page 262 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

The civil society coalitions for cultural diversity will continue to press for more countries to ratify, for proper involvement of civil society in the implementation of the Convention on Cultural Diversity and for greater contributions to the IFCD. As Jim McKee, Secretary General of the IFCCD has said: “Civil society must take centre stage in Convention processes if the Convention’s aspirations are to be come meaningfully realised. Civil society may be in a unique position not only to ensure that countries affirm the right to cultural diversity, but to carry through the realisation of these rights within national policy frameworks.”48

5.1 The role of the European Union President Barroso is to be congratulated for leading the EU ratification of the 2005 UNESCO Convention on Cultural Diversity. Coupled with this, the newly revised EU Lisbon Treaty also spells out constitutionally the responsibility of the EU to safeguard and promote cultural and linguistic diversity. Importantly, the Lisbon Treaty commits the EU to ‘promote’ cultural and linguistic diversity, an emphasis and basis for action that could be lost if the Treaty is not ratified by all EU countries. With this dual underpinning of the principle of cultural diversity (both in the UNESCO Convention and the EU Treaties), EU’s role will be crucial as a regional integrated body with real political clout. Given its power of supranational policy making in the relevant sectors, its joint negotiating position within the WTO and its relationships with neighbouring and developing countries, the EU could be one of the key global players in making a reality of the aims and objectives of the Convention on Cultural Diversity. The EU Commission, with pressure from the European Parliament and agreement from national ministers, must pursue a multi-track approach: internally mainstream cultural diversity across all policies, rebalance trade and cultural policies, encourage more joint working across departments to ensure a more balanced policy approach, defend the cultural sovereignty of itself and the EU Member States to define and implement their own cultural policies, particularly in the audiovisual field and encourage culture and trade ministers to discuss policy together. The Convention on Cultural Diversity should help achieve a different balance of interests when EU policies are being developed inside the EU Commission. In that respect it is crucial that civil society is meaningfully 48. Ibid.

262

Rethinking.book Page 263 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

involved at every turn. Civil society consulters must also be non-profit making organisations, not just commercial enterprises which in some cases are classed by the EU Commission as civil society consulters.49 It is, therefore, welcome that DG Education and Culture is in the process of setting up groups with Member States and representatives of civil society to exchange views on the mainstreaming of the Convention on Cultural Diversity across all EU policies. Furthermore it will be particularly important that the Article 133 Committee50 in its role of coordinating EU trade policy, also broadens its membership and mandate to take on board the need to mainstream cultural diversity in trade policy. This has already become apparent in a proposed trade agreement between the EU and Ukraine in July 2008 where the Art. 133 Committee has sought to include audiovisual services contrary to the Commission’s mandate within the WTO not to include such services. The European Coalitions for Cultural Diversity have objected strongly to the inclusion of audiovisual services in this trade agreement to EU Trade Commissioner Mandelson. The Commission’s response is awaited and will indicate how seriously Article 151 of the EU Treaties and the EU’s ratification of the UNESCO Convention on Cultural Diversity balances free trade with cultural diversity requirements. Nevertheless, one begins to detect a new sense of purpose in the EU Commission to use all possible channels to implement the Convention on Cultural Diversity. When the Commission’s DG for Competition policy is studying cases on the compatibility of public service broadcasting with EU State aid policy, for example, the views of DG Education and Culture, which is responsible inside the Commission for applying the Convention on Cultural Diversity, are being taken into account. It is an optimistic sign 49. Harcourt 2008, 17-20. 50. The legal basis for the EU's trade policy is Article 133 of the EC Treaty. On this basis, the Commission negotiates on behalf of the Member States, in consultation with a special committee, "the Article 133 Committee". The 133 Committee is composed of representatives from the 27 Member States and the European Commission. Its main function is to coordinate EU trade policy. The Committee meets on a weekly basis, usually on a Friday in Brussels at the headquarters of the Council of Ministers. It discusses the full range of trade policy issues affecting the Community, from the strategic issues surrounding the launch of rounds of trade negotiations at the WTO to specific difficulties with the export of individual products, and considers the trade aspects of wider Community policies in order to ensure consistency of policy. In this Committee, the Commission presents and secures endorsement of the Member States on all trade policy issues. The major formal decisions (for example agreement to launch or conclude negotiations) are then confirmed by the Council of Ministers (European Commission).

263

Rethinking.book Page 264 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

that there is already pressure for more cultural analysis to be carried out, especially where competition policy is concerned. Relevant amendments to the 2007 Audiovisual Media Services directive to allow for co-production agreements with developing countries, are being considered as the EU begins to apply the Convention on Cultural Diversity to its external development policy, particularly with the African, Caribbean and Pacific nations. In this sense, we must welcome the EU’s signing of the first cultural protocol accompanying a trade agreement with the 15 Cariforum nations in October 2007. This is a new formula for cultural capacity building in trade agreements and the audiovisual dimension is included. The protocol provides new means to encourage cultural developments and exchange between the EU and the ACP countries. Further cultural protocols with other trading partners are planned. Each will be negotiated on a case-bycase basis. This is a very promising development. Further discussion with all relevant players will be needed to flesh out what these protocols mean and how they might be implemented. Key will be whether the EU can put extra resources behind their implementation within existing or new budgets. Optimistically, a new EU-ACP mechanism with 30 million Euro earmarked for the distribution of cultural goods from ACP countries to the EU should emerge soon. Cultural protocols with India and Korea will come into force as well. These cultural protocols should be an inspiration for all developing countries. Beyond cultural protocols, the second part of EU policy to cooperate and support third party countries was explored at a French Centre for National Cinema (CNC) seminar on the 7th – 8th of July 2008. The debate took place within the context of the implementation of the UNESCO Convention on Cultural Diversity. It aimed at defining how the EU could develop a cooperation policy in cinema that would complement existing national actions undertaken by Member States and meet the expectations of third countries. The event started an important process of developing actions and partnerships between the EU and third countries. This second strand of EU policy will include the preparatory action Media International, which should clear the way for the MEDIA Mundus program beginning in 2011. Also the EU Commission has formed a working group bringing together seven Directorate Generals that now meet to discuss the possible conflicts between, inter alia, trade, internal market and cultural diversity policies. This could be read as a welcome sign of the Commission’s recognition of its multiple obligations under international trade regimes, its own Treaties

264

Rethinking.book Page 265 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

and the UNESCO Convention on Cultural Diversity. Christine Merkel, Head of Culture and Communication at German UNESCO, argues that beyond this, the EU Commission should create an automatic early information system to all relevant players, including civil society to guarantee early discussions on any proposed EU policies that could have implications for cultural and linguistic diversity. Even with such a mechanism, the Convention on Cultural Diversity alone cannot resolve the tensions between EU commercial and cultural initiatives and the dominance of free trade and neo-liberal economics within the Commission. It will depend on leadership and whether the Commission President makes it clear that there should be a rebalancing of policy more in favour of cultural diversity policy than in the past. Also important, as in the pressure for a Convention on Cultural Diversity, will be grassroots civil society pressure for change in this direction.

5.2 The role of the Commonwealth and the International Organization of the Francophonie Much on the future of the Convention on Cultural Diversity will depend on the political will of other regional bodies like the Commonwealth and the International Organization of the Francophonie. They are committed to encouraging far wider ratification, the development of a significant International Fund for Cultural Diversity and developing mechanisms whereby cultural organisations and creators are able to use the spaces opened up by the Convention on Cultural Diversity’s provisions. They will need to work with a wide range of governments to also convince their membership, largely developing countries, to put cultural policy frameworks in place that open up avenues for greater cultural production and exchange. There are many strategies for development cooperation envisaged in the Convention on Cultural Diversity, including facilitating wider access to the global market and international distribution networks for their cultural activities, goods and services. For African, Caribbean and Pacific (ACP) countries there is a myriad of possibilities under the Convention on Cultural Diversity. Through greater global awareness, Member countries will now possibly be emboldened to negotiate differently both with the EU, individual nation states and within the WTO. Once again, civil society, through the international coalition movement will play an important role. Members from various CCDs joined with more than 1500 delegates from 600 organisations in 59 countries at the 265

Rethinking.book Page 266 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Commonwealth People’s Forum in Kampala in November 2007 to bring pressure on Commonwealth leaders meeting there. Their statement called upon all Commonwealth countries to ratify the Convention on Cultural Diversity, involve civil society seriously in its implementation and that Commonwealth governments should engage in discussions with civil society on cultural policy issues. This in turn led to the Commonwealth Foundation to host a London seminar in March 2008 in London to study the Convention on Cultural Diversity and propose ways forward for greater cultural autonomy, cooperation and exchange. The Francophone nations were represented and described the many mutually beneficial cultural activities within their organisation. Again, such exchange of information can hopefully lend inspiration to other countries to develop cultural policies where virtually none exist at present. Beyond this, Andrew Firmin noted importantly that new innovative steps have to be taken: “The Commonwealth has well established mechanisms for bringing civil society and government ministers together, but they have not yet been deployed with respect to Culture Ministers… there would be clear benefits in bringing Commonwealth Culture and Trade Ministers to the same table, with civil society participation.”51

The output of such meetings could lead to different stances within regional and global trade negotiations. More Commonwealth countries may be supportive of the EU position regarding audiovisual services in the WTO.

Conclusion A most optimistic sign of a new inclusiveness was the first meeting of the UNESCO States Parties and civil society in Paris on 23 June 2008 prior to the UNESCO Intergovernmental Committee the following day. Over 100 NGO delegates, (representing many thousands of artists, authors, cultural industry professionals, cultural and media institutions, development organisations and academics), met with States representatives for a four hour exchange session. Such a meeting had never taken place before within UNESCO. NGOs made a number of recommendations to ensure their full and ongoing participation in the implementation of the Convention on Cultural Diversity.52 It remains to be seen whether UNESCO structures can accommodate these new demands. Certain is that pressure from civil society will be relentless to achieve that and there will now be formalized 51. Commonwealth Foundation 2008. 52. States Parties and Civil Society Partnerships 2008.

266

Rethinking.book Page 267 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

ongoing dialogue between institutional and NGO players within the UNESCO organisation itself. Within the EU and bodies like the Commonwealth, whilst there is some discussion between economic, political and cultural actors, there is still too little positive dialogue between the supporters of globalisation and economic liberalization and those committed to the enhancement of cultural diversity. If free international trade and relations between countries is to be more balanced, reflecting the cultural diversity of humankind, then talks to relieve the tensions between purely free market and public interest concerns must advance apace. Once again, civil society must be part of this dialogue. The UNESCO Convention on Cultural Diversity should help underpin this dialogue, inspiring trade negotiations that are more balanced between free market and cultural diversity concerns. It should also empower and embolden countries to defend and develop domestic policies in favour of strong public service broadcasting or support for their indigenous film and music industries. Furthermore, the richer countries of the world, particularly the EU, must also make a significant contribution to the International Fund for Cultural Diversity provided for in the Convention on Cultural Diversity as well as creating or amending new EU budget lines with additional funding to support cultural capacity building in developing countries. Funds must be available for greater exchange and co-production, particularly in film, between the EU and the ACP for example. In this respect, the adoption of a second EU support programme for ACP films is most welcome.53 In addition, civil society must be eligible for funds to carry out projects if the provisions in the Convention on Cultural Diversity are to be translated into reality, particularly in the developing world. There must be this kind of solidarity across frontiers, to enable countries to exploit positively all the possibilities of cultural protection and expression in the Convention on Cultural Diversity. Additional meetings at all levels are required, where parliamentarians, ministers and civil servants meet across frontiers and disciplines thus providing opportunities to build solidarity and understanding. These meetings must include all relevant civil society organisations, especially the European and International Federations of Coalitions for Cultural Diversity. Only then will grassroots views from 53. ACPFILMS is the second support programme for ACP cinema and audiovisual sectors,in the framework of ACP-EU cooperation. It is open to the 79 member states of the African, Caribbean and Pacific Group of States, and to the 15 European Union member states having contributed to the 9th European Development Fund (EDF) in the framework of the Cotonou Agreement.

267

Rethinking.book Page 268 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

creators and cultural practitioners across the world inform and guarantee a bold, imaginative and practical implementation of the Convention on Cultural Diversity to: “encourage dialogue among cultures with a view to ensuring wider and balanced cultural exchanges in the world in favour of intercultural respect and a culture of peace.”54 This is imperative if our world is to survive in peace and harmony in all its great diversity.

References Aylett, Holly. 2008. A Magna Carta for International Cultural Policy: The Scope of UNESCO’s Convention for the Protection and Promotion of the Diversity of Cultural Expression 2005. London: Global Policy Institute. Bayles, Martha. 2008. Risky business for Hollywood. Herald Tribune, May 8. Bernier, Yvan, and Helene Ruiz. 2002. Speech presented at the What Future for European Cultural Policy seminar,organised by Friends of Europe and Eurocinema, Paris, 12 February. Brazil. 2001. Communication S/CSS/W/99 of 9 July on Audiovisual Services. World Trade Organization, Council for Trade in Services. British Screen Advisory Council. 2000. Statement of Principles on GATS 2000 Following European Meeting in Cannes. European GATS Steering Group. London: British Screen Advisory Council. British Screen Advisory Council. 2001. Essential Background to Understanding the Current GATS Negotiations. A Briefing Paper prepared by the British Screen Advisory Council on behalf of the European GATS Steering Group, London; British Screen Advisory Council. http://www.bsac.uk.com/reports.html. (Accessed December 5, 2008) Castellina, Luciana. 2002. Speech presented at the What future for European Cultural Policy seminar, organised by Friends of Europe and Eurocinema, Paris, 12 February. Chapman, Jane. 2005. Comparative Media History: an Introduction, 1789 to the Present. Cambridge: Polity Press. Commonwealth Foundation. 2008. Seminar Final Report. Report from the seminar Sharing Strengths: Commonwealth and Francophone Engagement 54. UNESCO 2005.

268

Rethinking.book Page 269 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

with the UNESCO 2005 Convention, London, 11 March. Available from Commonwealth Foundation London. Additional information at: http:// www.commonwealthfoundation.com/news/news/detail.cfm?id=468 Council of Europe. 1954. European Cultural Convention, 19.XII.1954, Paris. http://conventions.coe.int/Treaty/EN/Treaties/Html/018.htm. (Accessed December 8, 2008) Council of Europe. 2000. Declaration of the Committee of Ministers on Cultural Diversity, Adopted by the Committee of Ministers on 7 December 2000 at the 733rd meeting of the Ministers' Deputies, CDMM (2000) 44. Despringre, Cecile. 2002. Statement of FERA (European Federation of Film Directors). A French and European view of Cultural Diversity, Seoul, Korea, 13-15 May. Available from Cecile Despringre, Director, FERA, Paris, France. www.ferainfo.org or www.sacd.fr European Commission. EU and the World. External Trade. The EU and the WTO. http://ec.europa.eu/trade/issues/newround/index_en.htm. (Accessed December 8, 2008) FERA. 2000. Charter of Cultural Identities and Rights to Cultural Diversity. Paris: Versailles Assembly, June 17. Freedman, Des. 2008. The Politics of Media. Cambridge: Polity. Fundacion Valencia Tercer Milenio and ADC Nouveau Millenaire. 2000. Final Communique. The Challenge to the Audiovisual Industry. Forum on Globalisation and Cultural Diversity, the Challenge to the Audiovisual Industry, organised by Fundacion Valencia Tercer Milenio and ADC Nouveau Millenaire, under the patronage of UNESCO and the support of EU Commission and Valencia City Council, Valencia, 22-24 May. Glickman, Dan. 2008. Speech presented at the National Press Club, Washington, 28 April. http://mpaa.org/press_releases/ press%20club%20fin.pdf Grant, Peter S, and Chris Wood. 2004. Blockbusters and Trade Wars: Popular Culture in a Globalized World. Vancouver: Douglas & McIntyre. Harcourt, Alison. 2008. Case study findings from the international level. Paper presented at the ESRC Workshop on Regulatory Competition in audiovisual markets University of Exeter 20 June. http://www.ex.ac.uk/ research/networks/information/documents/harcourtgovernance2008.pdf. (Accessed December 5, 2008)

269

Rethinking.book Page 270 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Harvey, Sylvia. 2006. Indigenous Culture and the Politics of Place: Regulation for Regionalism in British Broadcasting. In Trading Culture, Global Traffic and Local Cultures in Film and Television, edited by Sylvia Harvey Eastleigh: John Libbey Publishing. Harvey, Sylvia, and Carole Tongue. 2006. Trading Cultural Commodities or Promoting Cultural Diversity? UNESCO’s new Convention. In Trading Culture, Global Traffic and Local Cultures in Film and Television, edited by Sylvia Harvey Eastleigh: John Libbey Publishing. L’ARP Press Release of 16 January 2002. Association Realisateurs Producteurs. Available on request from l’ARP. Paris. http://www.larp.fr/ article.php3?id_article=11 L’ARP. 2004. Cultural diversity in Europe and the World (La diversite culturelle en europe et dans le monde ). Minutes of discussions of the 14th Rencontres Cinématographiques de Beaune, 14 October. Available on request from l’ARP, Paris. Maule, Christopher. 2002. Rhetoric and Reality – the Debate over Trade and Culture. http://www.carleton.ca/economics/cep/cep02-02.pdf. (Accessed December 8, 2008) Moscovici, Pierre. 2002. Speech presented at the What future for Eurpean Cultural Policy seminar, organised by Friends of Europe and Eurocinema, Paris, 12 February. Pauwels, Caroline, Sophie De Vinck, and Ben Van Rompuy. 2007. Can State Aid in the Film Sector Stand the Proof of EU and WTO Liberalisation Efforts? In Media and Cultural Policy in the European Union. European Studies, An Interdisciplinary Series in European Culture, History and Politics (vol. 24), edited by Katharine Sarikakis, 24-43. Amsterdam-New York: Rodopi. Pauwels, Caroline, Karen Donders, and Jan Loisen. 2006. Culture Inc. or Trade revisited? In UNESCO’s Convention on the protection and promotion of the diversity of cultural expressions. Making it work, edited by Nina Obuljen and Joost Smiers, 127-156. Zagreb: CultureLink. Scott, Martin. 2008. Screening the World, How UK Broadcasters Portrayed the Wider World in 2007-8. London: International Broadcasting Trust. http://www.ibt.org.uk/all_documents/research_reports/ screening_the_%20world_June2008.pdf?PHPSESSID=b1b08f69c5cd8fdee c2f365375bd1212#page=1. (Accessed December 5, 2008)

270

Rethinking.book Page 271 Friday, September 25, 2009 10:01 AM

Why a UNESCO Convention on Cultural Diversity of Expression?

States Parties and Civil Society Partnerships. 2008. NGO recommendations to the Intergovernmental Committee for the Protection and Promotion of the Diversity of Cultural Expressions, 1st Extraordinary Session, Paris, 2427 June. Switzerland. 2001. Communication S/CSS/W/74 of 4 May on GATS 2000: Audio-visual Services. World Trade Organization, Council for Trade in Services. Tongue, Carole. 1996. Report A4-0243/96 on the role of public service television in a multi-media society. Brussels: European Parliament, July 11. Tongue Carole. 2000. Speech at Ottawa Conference on new developments in Communications Law and Policy. Ottawa, April 2000. Tongue Carole. 2003. Speech to BA and MA journalism students at the London College of Communication (University of the Arts, London), January 30. Available from author: [email protected] UNESCO. 2005. Convention on the Protection and Promotion of the Diversity of Cultural Expressions. October 20. Paris. www.unesco.org. What future for European cultural policy? Summary of Debates. 2002. A seminar organised by Friends of Europe and Eurocinema with the support of the French Ministry of European Affairs and the Culture 2000 Programme of the European Union in co-operation with Vivendi Universal Paris, Centre des Conférences Internationales Klébe, 12 February. Available from Eurocinema, Brussels. [email protected] United States. 2000. Communication S/CSS/W/21 of 18 December from the United States on Audiovisual and Related Services. World Trade Organization, Council for Trade in Services. Wiedemann, Verena. 2004. Cultural Diversity: the Central Mission of Public Service Broadcasting at the Crossroads of WTO and UNESCO. Köln. http://www.ioer.org/09dokumente/wiedem.pdf. (Accessed Decemnber 8, 2008) WTO. Principles of the Trading System. http://www.wto.org/english/ thewto_e/whatis_e/tif_e/fact2_e.htm. (Accessed December 5, 2008)

271

Rethinking.book Page 272 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 273 Friday, September 25, 2009 10:01 AM

Can Changes in Copyright Legislation Support Convergence in the Media Sector? Sakari Aalto

1.

Introduction

The poorly functioning licensing regimes have become the major stumbling block in capturing the emerging, vast opportunities of new services in the media sector. On the face of it, achieving viable licensing should not be overly difficult: convergence should be beneficial to all the involved stakeholders. Consumers should have more content available more conveniently and, consequently, they should consume more both in terms of volume and diversity. As a result, they will also pay more. The increased business opportunity should thus benefit also the right holders and the users: distributors (such as broadcasters, online music shops) and other service providers. Unfortunately, recent history suggests that despite the seemingly mutual benefits, the different right holders and user groups have extreme difficulties in agreeing on a functioning licensing regime. The market does not materialize. The European Commission has addressed copyright and convergence related issues in a number of studies and publications from different points of view. The study on “Interactive Content and Convergence”1 touches one of the roots of the difficulty in agreeing on a functioning licensing regime: convergence provides for different things for different stakeholders. Consumers can access existing and new forms of content through new platforms and devices at a time and place they choose. Content providers, then again, may benefit from expanded content markets and demand under new business models. The new means of consumption have for long been considered more as a threat than an opportunity by the major content providers, which has inhibited the adoption of new business models.

1.

Commission Study on Interactive Content and Convergence 2006.

273

Rethinking.book Page 274 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

1.1 Need for regulatory intervention in the light of recent market failures This article first discusses few recent examples of parties failing to reach a suitable licensing regime in time to capture an opportunity. Music has been at the forefront of discussions concerning the effects of technological developments on copyright2 protection and, as a result, the examples here concern music rights in particular.3 Broader convergence in the media sector calls for multi-territorial solutions for all types of content. In providing examples of success and failure, this article does not endeavor to be exhaustive. The aim is, rather, to select examples that demonstrate the difficulties of agreeing on copyright law in cases of evolving technology or business models. The chosen examples illustrate how the adoption of new technologies in the media sector is delayed because the parties cannot agree on appropriate license regimes. Through the examples, this article also tries to assess the potential reasons for a failure to agree. This should provide the basis for considering the benefits and difficulties of regulatory intervention.

1.2 Options for regulatory intervention Indeed, after the introduction of the practical examples, this article will look at the legislative options available, taking into account the rationale behind copyright protection. The national copyright regimes vary significantly from one another and, as this analysis has not been conducted with any particular national law in focus, the list of options is at a general level. Finally, this article will assess the effectiveness of the alternative legislative measures in promoting convergence. The purpose is to answer the following question: should legislators intervene to support the licensing negotiations and, if so, how? The answer is not a simple one-size-fits-all solution. Certainly, legislators should carefully look at and consider using all the measures to ensure that the parties will not fail to find an appropriate risk and reward balance. Technical development should not be stifled, nor the society as a whole prevented from achieving the available benefits. 2. 3.

For the purpose of this article the term ”copyright” refers both to the protection of artistic and literary work and to the neighboring rights. Commission Study on Interactive Content and Convergence 2006.

274

Rethinking.book Page 275 Friday, September 25, 2009 10:01 AM

Can Changes in Copyright Legislation Support Convergence in the Media Sector?

2.

From illegal to legal online distribution of music

Today, 15 % of all music purchased globally is downloaded.4 This number, though impressive, could be significantly higher. The technical solutions for online distribution of music files existed already in the mid 1990s, but music was not legally available in any significant extent until well in to the 21st century. The failure to make music available through legal distribution methods contributed significantly to the spreading of unauthorized distribution of music files. Unauthorized distribution exploded with the launch of Napster in 1999. Faced with lawsuits, Napster was forced to shut down its network in July 2001. Having settled the matter in September 2001, Napster now operates as a legal service with much reduced volumes. However, the damage had already been done and systems similar to or developed from Napster were spreading fast. They have thus far proven burdensome to fight through recourse to law. Since the Napster case, the US Supreme Court has ruled on copyright infringements in, inter alia, the Grokster5 Case in 2005. The Supreme Court found contributory infringement on the basis of a test called the inducement rule.6 The ruling introduced a new form of liability in the context of copyright,7 and was considered a landmark victory for the entertainment companies in their battle against P2P networks.8 These cases have provided lawyers with interesting work, but it seems very likely that if music had been available legally, the illegal distribution would not have spread as fast and as wide, and some of this litigation could have been avoided. Along the same lines, a study for the EC Commission found that the music industry has historically been slow to embrace new opportunities.9 According to this study, the business showed “lack of insight in the face of rapidly developing Internet technology and the changing behavioral patterns of its consumer base”.10 In relation to downloadable music, the failure to find suitable licensing models resulted in more than five years’ delay in the legal dissemination of any significant repertoire of music files online. As a 4. 5. 6. 7. 8. 9. 10.

IFPI Digital Music Report 2008, 5-6. U.S. Supreme Court, Metro-Goldwyn-Mayer Studios v. Grokster, 545 U.S. 913. Mamudi 2005, 1. Lim 2008, 11. Mamudi 2005, 1. Commission Study on Interactive Content and Convergence 2006. Ibid., 46.

275

Rethinking.book Page 276 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

consequence, none of the stakeholders that could have benefitted from legal dissemination did so. Legal dissemination on the Internet was left to play catch up with the illegal forms of distributing content. Below, this chapter will briefly touch upon the most crucial reasons for the failure to reach solutions for the legal distribution of downloadable music.

2.1 The inherent inefficiencies of complex licensing structures In principle, the distribution of a downloadable music file requires in most, if not all, jurisdictions a license from the authors of the song (composer(s), songwriter(s) and arranger(s)), from the producer(s) of the recording and from the performing artist(s). By law, these rights are typically vested in the persons that created the protected subject matter. The person can assign his/her rights before or after the creation of the subject matter, to a degree that depends on the law applicable to the transfer agreement. Prominent authors of music have typically assigned their rights to the work to a publisher. At the same time the rights to manage the collection and the rights with respect to most uses of the music are typically assigned to an authors’ collecting society or societies. The publisher often assigns the rights it has received further to other publishers for different geographic locations, and possibly also with respect to specific uses. These publishers are typically members of the authors’ collecting societies, as well. Further, the authors’ collecting societies have cross licenses with each other for the purposes of managing the rights they have obtained in each other’s territories. The producers and performing artists most commonly have an agreement with a record label, which contains a transfer of their rights to the recording to the label in question. The record labels manage some of the assigned rights directly and assign the management and enforcement of other rights either to other record labels or to collecting societies for performing artists and producers. The exact terms of these assignments vary significantly. The above described assignment and agreement structure is complex and, due to its complexity, inherently slow to change. The online distribution of downloadable music shook—and is still shaking—the system. It was not clear which rights the online distribution of music required. Parties held different rights, potentially relevant for the dissemination, and had therefore varying views as to the significance of each individual right for the dissemination of the works. These differences of opinion were exacerbated by the fact that within the web of contractual assignments, construed under 276

Rethinking.book Page 277 Friday, September 25, 2009 10:01 AM

Can Changes in Copyright Legislation Support Convergence in the Media Sector?

different laws, it was not very clear who held which rights, either. Particularly unclear was the status of the “new” rights that had materialized as a consequence of or in response to online distribution, such as the making available right or the wide communication to the public right. The result of the structural uncertainties was that for a user wishing to engage in the legal distribution of downloadable files, it was practically impossible to achieve certainty on whom to talk to. Further, the licensors who were generally available to discuss were somewhat uncertain of their position and, as a result, very cautious in making any concession that could later be challenged. The complex structure also means that there is no-one in the chain with a concrete overall responsibility for making the best out of the future for any author, producer or artist. Each independent or semi-independent actor in the web of contracts optimizes his/her own position and, consequently, will also work against solutions that would be beneficial for the whole system, if they do not benefit him/her. This structure, combined with the inability to think out-of-the-box in the rapidly evolving business environment, still seriously hampers the harnessing of the full potential of online music distribution. Only few players have managed to establish systems that provide for legal distribution of downloadable files.

2.2 Unrealistic expectations on Digital Rights Management (DRM) Digital Right Management refers to the managing and controlling of rights to digital intellectual property.11 The term DRM is often used interchangeably with the term Technical Protection Measures-TPM. However, the difference between TPM and DRM is that whereas TPMs are designed to impede access or copying, DRMs create an environment in which any kind of content usage is possible only in compliance with the terms set by the right holders and/or if it allows the collection of information on the use of protected work.12 DRM technology came about with the commercial rise of the Internet; with the development of digital content of which flawless copies could be made.13 A three-year period, from 1994 to 1996, has been identified as the phase when the basis for the current DRM took place.14 Two important 11. 12. 13. 14.

Rosenblatt 2002, viii. Hugenholz 2003, 3. Rosenblatt 2002, x. Ibid., xi.

277

Rethinking.book Page 278 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

DRM systems were developed at the time, IBM’s infoMarket and its competitor, a DRM system by the company Electronic Publishing Resources (“EPR”).15 A third development that has been regarded as preparing the ground for DRM development was the publication of Dr. Mark Stefik, a researcher at the Xerox PARC research labs, called “Letting Loose the Light: Igniting Commerce in the Electronic Publication”.16 The development of effective content protection systems has proven to be cumbersome.17 The problems still today concern interoperability and the circumvention of the DRM systems.18 Not surprisingly, many of the original players have disappeared from the business since 1996.19 Despite the obvious functional inadequacies of the DRM systems, major players continued to insist on the implementation of a robust DRM system as a condition for providing downloadable music. As a consequence, the disparities between the actual offering and the market expectations, on the one hand, and the differences in the ease of use in legal and illegal systems, on the other, grew to a breaking point and lead to a fast adoption of illegal distribution systems. Right holders and legal distributors of music would have been significantly better off, had the market accepted significantly simpler forms of DRM systems, and had they seriously launched services making music available for online downloads, instead of waiting for the perfect DRM system. A great majority of consumers prefer to obtain their music legally, and are willing to accept DRM systems without ever trying to break or violate them. Further, legal music services could have spent more money and effort on building user friendly platforms for distributing music, putting them at a competitive advantage vis-à-vis their illegal counterparts. Naturally, some level of illegal activity would have remained, but it seems that the significance of such activity would have been marginalized.

2.3 The issue of price in the early development of online music Price was arguably one of the major issues in the early dissemination of music in the online environment. Described as the first online music store, Sony’s “The Store” was an “ill fated attempt” not only regarding its DRM 15. 16. 17. 18. 19.

Ibid., xi. Ibid., xii. Ibid., viii. Still 2007, 97. Rosenblatt 2002, xiii.

278

Rethinking.book Page 279 Friday, September 25, 2009 10:01 AM

Can Changes in Copyright Legislation Support Convergence in the Media Sector?

system, but in particular with respect to the prices.20 The tracks were expensive, $3.50 a piece, and the DRM system made them expire after a while.21 Price has also been regarded as a key element in providing an attractive alternative to unauthorized music distribution.22 As has been proven by the massive success of iTunes, consumers seem willing to pay for legitimate content, as long as the prices are reasonable. Both the right holders and the businesses involved in the online dissemination of music need to respect the consumers in their pricing decisions. The prices of downloadable music in the early services were clearly superior to what the consumers were willing to pay. There were several reasons contributing to the situation, such as the high royalty demands for online distribution that resulted from the fragmented structure of rights management. Each of the right holders priced their bit of the whole so high that combining the different demands resulted in costs that consumers were not willing to pay.

2.4 iTunes, the success of legal distribution of music The success of Apple’s iTunes online service together with the portable music player iPod has proven that legal distribution of music can be successful. Today, Apple reports that iTunes has 50 million paying customers who have bought over 4 billion tunes from the service.23 It has even been suggested that the portable music devices have revolutionized the way consumers listen to music.24 However, iTunes and iPods were not an immediate success. Initially, there were, e.g., compatibility issues with respect to PCs. With the launch of the third generation iPod in 2003,25 however, the real revolution that has brought Apple its 50 million clients began. The success of the iTunes online distribution of downloadable music files has led to music being provided with much less stringent DRM systems, or even entirely without DRM, and at much lower prices than the prices ten years ago. The right holders and the parties seem to rely on the logic that the increased volumes will offset the losses caused by potentially increased illegal dissemination and by lower unit prices. If these conclusions could 20. 21. 22. 23. 24. 25.

Schollin 2008, 148. Ibid. Perlmutter 2001, 26. Tietoviikko. IFPI Digital Music Report 2008, 12. O’Barrett 2007, 3.

279

Rethinking.book Page 280 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

have been reached ten years earlier, the music industry and those legally disseminating the works would be in a much better standing at this moment, and could offer better services to consumers.

3.

A slow start for Mobile TV in Finland

Mobile TV is a fascinating opportunity to increase the availability of content to consumers. If consumers are able to view TV broadcasts anywhere and anytime through their mobile devices, presumably they will consume more content and due to the higher availability will be willing to pay more for the offering. While mobile TV is, at its best, currently only a nascent market everywhere in the world,26 there have already been attempts in Finland, for example, to create a new service for consumers. A network for mobile TV was built out in Finland as early as 2005. The same year, a project piloting mobile TV was carried out. However, despite the encouraging results from the mobile TV trial – 41 % of the pilot participants were willing to purchase mobile TV services27 – the network in Finland is currently not in use or, to be more precise, has much less than a thousand users. Due to an ambiguous copyright situation and lack of agreement, consumers are, thus, deprived of an interesting product, a product which 58 % of the consumers in the mobile TV trial estimated to be popular in the future.28 Great cultural and financial potential remains unrealized, both for right holders and other market participants. Ironically, Finland has been regarded as being at the forefront of mobile TV development for some time.29 Following the mobile TV trial, the Ministry of Education in Finland set up a workgroup at the end of 2006 to evaluate the need for legislative changes with respect to the emerging mobile TV market. The workgroup concluded that, despite the differences in opinion concerning prices and the nature of agreements, there was no need for changes in copyright law. As the market had not moved forward by early 2008, the Ministry of Education set up another working group in February 2008. This working group could not agree on a conclusion. It issued a report where the users and user groups called for changes in the copyright law, changes that would provide for implied licenses for forms of dissemination that are relevant for the mobile 26. 27. 28. 29.

Rapo 2008, 10. Finnish Mobile TV. Kaasinen, Kivinen, Kronlund, Kulju, Lindroos, Oksman and Uronen 2008, 15. Ibid., 14.

280

Rethinking.book Page 281 Friday, September 25, 2009 10:01 AM

Can Changes in Copyright Legislation Support Convergence in the Media Sector?

TV. The right holders opposed any legislative changes to this effect. The Finnish Government is currently considering legislative options to enhance the development of multichannel distribution.

4.

Supporting convergence through legislation

This article focuses on options to modify copyright law so as to support convergence. Although changes in copyright law are naturally not the only means available, the examples above powerfully demonstrate that copyright law is one of the major building blocks of the converging media sector. Without a functional copyright framework, the resources spent on other important policy instruments, including direct and indirect financial support, may fail to have a lasting effect.

4.1 The basis for copyright protection Copyright can be described both as the right to make copies and as the right for the copyright holder to control the use of a protected work. Copyrights are exclusive rights to authorize or prevent certain acts, listed in the relevant statutes. Right to exclusive control and compensation enables the right holder to build and control successful business models around the use of copyright protected works. Society grants right holders protection in return for incentives to develop and create. Indeed, the goals to promote, reward and support active innovation and creativity, which benefit the whole society, legitimate copyright protection. Olsson lists the legal policy explanations to copyright protection as follows: (i) Copyright protection stimulates creativity and innovation; (ii) it supports the often considerable investments required in the cultural, media and information sectors and finally (iii) it has an ideological purpose in the protection of the author’s rights especially.30 However, to guard the public interests, such as access to information, and to avoid problems with overreaching protection, copyrights are not absolute, but subject to limitations such as exceptions, statutory licensing mechanisms and presumptions. Therefore, copyright legislation, including any changes to it, can be characterized as a balancing act between the right to protection and the limitations and exemptions to this protection.

30. Olsson 2006, 38-9.

281

Rethinking.book Page 282 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Copyright law is, therefore, said to mediate between the broader public interest and copyright owners’ particular interests.31 In the Internet environment, copyright provides for the backbone of legal protection for many of the services and products provided to the users. As such, the content of copyright legislation is essential for many of the actors involved in the distribution of services and products in the Internet.32 Put in a wider social perspective, claims have been made that few other bodies of law have “a greater effect on the development of culture, the availability of education and the terms of political discourse” than copyright law.33 Copyright is granted by the society to provide the creator of the work with control over the results of his/her creative efforts, and to promote creativity through establishing a system that enables the creator to reap the economic benefits of his/her work. For the purposes of assessing the regulatory options to promote convergence and new services, the emphasis is on the last justification for this protection. Looking at the discussion and problems around convergence in the mobile sector, there seems to be only few issues where one would need to control the use of works to protect the personal rights of the author. The discussion and problems thus far have centered on the control for economic benefit. The central questions have thus been to determine how much the right holder should be paid, by whom and under which structure. The discussion on the regulatory options, as it relates to convergence in the media sector, should therefore concentrate on the economic side of the rights.

4.2 Difficulties in promoting agreements between right holders and users through legislation Copyright provides its holder an exclusive right to permit or prohibit many forms of exploitation of the work. As discussed above, even though the right is formulated in essence as a negative right, i.e. a right to prohibit others from exploiting the work, the desired goal from the society’s perspective is not that the work is not used. The negative right provides for the foundations of positive control. In a well functioning copyright market, the users of the protected subject matter are able to find and obtain rights to the works they want to use and pay for. The right holder can permit the uses it desires, and prevent the others. 31. Vinje 1999, 193. 32. Aalto and Paemen 2001, 631. 33. Vinje 1999, 192.

282

Rethinking.book Page 283 Friday, September 25, 2009 10:01 AM

Can Changes in Copyright Legislation Support Convergence in the Media Sector?

The examples above on music online and mobile TV illustrate how the key issue has been that the parties cannot agree on the licensing of rights necessary for new types of services. It also seems clear that there is nothing in the legislation that would prevent the parties from agreeing on the necessary use of rights. What is also clear is that the content of the copyright law significantly impacts the relevant negotiation positions of the parties. For example, the right to communicate the work to the public and the expanded right to make the work available, introduced by the WIPO copyright treaties, certainly strengthened the position of the right holder in the negotiations on the rights to use material. One of the key arguments in introducing these rights was that the right holders would be more willing to license the exploitation of their rights provided that they could be more certain on the scope of such rights. Unfortunately, it seems that this effect has not been achieved. The willingness to license evaporated after the WIPO copyright treaties were implemented. Nonetheless, the question remains how to make sure that legislative measures do not prevent the parties from agreeing, and beyond that, how the measures actively contribute to reaching an agreement between the parties. Below, alternative measures to promote agreements between the parties on the use of copyrights in relation to converged services are presented.

4.3 Revisiting the definitions in the copyright laws Copyright laws are generally built on market structures that existed a long time ago. The definitions do not directly relate to modern forms of use, including the uses related to music in the converged services. The relationship between the often old fashioned wording of law and the modern forms of use has been established in case law, often through patchy attempts to bend the old wording of law for the purposes of a particular new issue. The relationship remains, however, unclear and subject to further interpretations. One option to support the parties in reaching an agreement could be to modernize the wording of copyright laws so as to include definitions that relate more directly to the use of copyright protected works in converged media services. Arguably, linking the content of the rights more directly to the modern forms of use would make it easier for the parties to agree on the terms of use. Revising the wording of copyright laws, especially the definitions, may also have a retarding effect. A more direct relationship between the wording and modern forms of use could stifle the introduction of new structures.

283

Rethinking.book Page 284 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

The parties could be fixed to the structures behind the codified law and could therefore be more reluctant to introduce new structures. This approach also has the major difficulty that it is very challenging to implement. As demonstrated by the recent changes to copyright law in Europe and the US, such changes are extremely difficult to successfully introduce. Any change typically takes years to be accepted. Wordings are subject to several compromises in the legislative process, which often results in ambiguous provisions that would not be any improvement to the current situation.

4.4 Presumptions on the content of transfer of copyright rights Copyright laws could include presumptions on the content of transferring copyrights in certain situations. Presumptions are already today used to substantiate incomplete or general agreements between the parties in limited circumstances set forth in law, such as the provisions concerning the content of publishing agreements in Finnish copyright law. Currently, right holders and users have to re-interpret and re-negotiate the existing licenses in order to encompass new technologies.34 The parties may have difficulties in agreeing even on the basic structures of the transfer of rights model. The difficulties are bound to slow down development and innovation. Arguably, presumptions in copyright laws regarding the transfer of rights could promote agreement while maintaining the freedom of contract if the parties wished to deviate from the presumptions. Presumptions could provide the parties a point of departure for the negotiations on the content of the transfer of rights. Further, presumptions could remove uncertainties related to transfers that have not been defined exhaustively. An obvious downside to presuming the content of a rights transfer is that the parties may view it as the only solution, which would result in decreased flexibility in contract practices. It would seem that the risks related to this downside are nevertheless manageable; the presumptions should be explored as a possibility for enhancing agreements on new technologies. Naturally, the fact that the transferee may not end up with more rights than what the transferor is entitled to grant, has to be taken into account in formulating the presumption.

34. Commission Study on Interactive Content and Convergence 2006, 280.

284

Rethinking.book Page 285 Friday, September 25, 2009 10:01 AM

Can Changes in Copyright Legislation Support Convergence in the Media Sector?

4.5 Mandatory content for rights transfers One step further from introducing presumptions into the regulations would be to provide mandatory provisions on the content of certain transfers of rights. Such regulation could provide that a publishing agreement containing the right for the publisher to make the work available without limitations as to the territory or number of copies in physical form would automatically also include the right to communicate the work to the public online, for example. Similarly, referring to the above example on mobile TV, the copyright law could define that the right to broadcast a work or other subject matter over traditional broadcast networks includes the right to broadcast the work using other technologies as well. The challenge is that mandatory provisions on the content of the transfers of rights are difficult to establish, as the appropriate content of a transfer is often closely tied to the business model chosen by the parties. In addition, drafting such provisions could be difficult while remaining compliant with the obligations of the international copyright treaties, which set forth exclusive rights for the right holder. Mandatory provisions on the content of the transfers could be viewed as limitations of the exclusive rights. At worst, the mandatory structures could hamper transfers, as they would mean transferring rights to broader uses than what the right holder is willing to accept. Thus, the right holder could choose not to license at all. Further, generally the parties should be in the best position to define the correct content for the transfer of rights. However, at least in cases of significant market failures mandatory provisions could and probably should be considered.

4.6 Price regulation Price has been one of the major sources of disagreement in new media services. It would seem that if the parties could agree on the price, many of the new converged media services could be launched significantly faster. This would seem to support price regulation as a means of speeding up the agreement procedures. Price regulation has been used with apparent success in the copyright context on reproduction fees for music in the U.S.35 As most of the copyright relevant content for the converged media

35. Section 115 of the United States Copyright Act 1976.

285

Rethinking.book Page 286 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

services can be identified and categorized, price regulation might be effective in facilitating agreement between the parties. Then again, extensive regulation of prices may not be the optimal solution since literary, artistic and innovative works tend to be individual in nature. It would also be challenging in practice to set up a price regulation system. In a free market economy, price regulation probably is the least desirable solution to spur negotiations between the right holder and users. This also appears to be the conclusion at the European level.36 Price regulation stiffens the market structures and a lack of price elasticity would lead to a situation where technical developments may be prevented.

4.7 Mandatory licensing or license structures The current situation, where users need to acquire licenses on a countryby-country basis for each content type separately seems unsatisfactory in an online environment. The situation and problems resemble to some extent the difficulties faced in the field of technological development and standardizing. Numerous right holders have the ability to block a new technology or service, or to make unreasonable royalty demands independently of each other. The result is often an overwhelming complexity in acquiring the necessary licenses, and a royalty accumulation that renders the cost of new services commercially unviable. Over the last ten years there have been a number of private initiatives by businesses and collecting societies on providing simpler international structures, at least for certain types of rights. Especially at the European level, there has been a demand for a single European license to facilitate the developments in the music sector.37 An attempt to create a one-stop-shop for online and mobile uses of music is on its way, namely CELAS.38 In January 2008, CELAS signed the first EU-wide licensing arrangement, i.e. with the mobile operator Omnifone.39 There is practically no movement on providing a more holistic system where the licensing of different types of rights would facilitate the creation of new services. Regulatory interventions in the international licensing structures or an allocation of royalty fees between different right holder types are structurally difficult to establish. Some of these goals could be reached 36. 37. 38. 39.

Commission Study on Interactive Content and Convergence 2006, 55. Commission Study on Interactive Content and Convergence 2006, 56. Celas. Commission Summary on Monitoring Music Online Recommendation 2008, 7.

286

Rethinking.book Page 287 Friday, September 25, 2009 10:01 AM

Can Changes in Copyright Legislation Support Convergence in the Media Sector?

through a mandatory licensing of rights in certain situations. However, such solutions would primarily be national and, thus, would not solve the problems of international use. Further, mandatory licensing is not necessarily the appropriate vehicle to determine the overall level of royalties applicable to a particular type of use, or the allocation of royalties between different right holders. The value of different rights will, after all, depend heavily on each use situation. One solution to simplify the licensing structures significantly is to clarify the provisions on applicable law. This should be done in line with the country of origin principle of the Satellite Directive40. The applicable law provisions in copyright laws are national and unclear; consequently, in many forms of converged uses it is not obvious which national law or laws apply. Setting international standards on applicable law in different cases of use would therefore probably simplify licensing as well as contribute to reaching an agreement.

4.8 Independent and accelerated dispute resolution In the EC Commission’s Recommendation on collective cross-border management of copyright and related rights for legitimate online music services (2005/737 EC), it is stated that Member States are invited to provide for effective dispute resolution mechanisms. In monitoring the implementation of the recommendation, the Commission found that only the users demand strengthened rules on dispute resolution, while the collecting societies reportedly regarded transparency and governance of copyrights unproblematic and in no need to be strengthened.41 Dispute resolution as a supporting means could have an important function in making it easier for the parties to reach an agreement on the new forms of use. However, dispute resolution has its limitations. The national laws would first have to set forth the basic structures that could then be interpreted in dispute resolution. Currently, even the basic structures of national laws in the EU are often too unclear to provide for a meaningful resolution in a dispute resolution procedure.

40. Directive 1998/13 relating to Telecommunications Terminal Equipment and Satellite Earth Station Equipment. 41. Commission Summary on Monitoring Music Online Recommendation 2008, 8.

287

Rethinking.book Page 288 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Solution

Possible Advantages

Possible Shortcomings

Revisiting the Definitions

– Common language makes negotiations easier. – Easier to implement than other forms of intervention.

– Does not solve disagreements in substance. – Stifle effect on development when the definitions become outdated.

Presumptions Provided by Law

– Tested and widely used solutions in other fields of law (such as consumer law). – Reduced time required for negotiations.

– Misplaced presumptions are counterproductive. – May impair new licensing models.

Mandatory Content for Rights Transfers

– Tested and widely used solutions in other fields of law (such as consumer law). – Reduced time required for negotiations. – Less time spent on agreeing the content of the transfer.

– Misplaced presumptions are counterproductive. – May impair new licensing models. – Licensing for limited uses could become overly costly.

Price Regulation

– Objective price setting beneficial to capture new opportunities.

– The legislators’ and/ or authorities’ expertise in price setting for the varying types of content and uses requiring complex pricing systems may be inadequate. – Misplaced prices could prevent introduction of new services. – Price flexibility is difficult to achieve in a state driven price setting.

288

Rethinking.book Page 289 Friday, September 25, 2009 10:01 AM

Can Changes in Copyright Legislation Support Convergence in the Media Sector?

Solution

Possible Advantages

Mandatory Licensing or License Structures

– Forced structures – Reduced number of would limit the parties’ parties to agree leads to autonomy and right to more focused decide upon their negotiations. rights. It would thus be – Forced licensing alien to the principles structures would underlying copyright provide clarity as to law. who is authorized to – Forced structures are grant rights to the inflexible and difficult relevant uses. to modify in a changing environment.

Independent and Accelerated Dispute Resolution

– Effective dispute resolution could be a powerful tool to support the primary solution adopted to promote convergence.

5.

Possible Shortcomings

– Dispute resolution mechanisms do not have a value without a underlying mandate to decide either on the content of the licenses or on pricing.

Conclusions

As demonstrated by the examples above, failure to agree on the terms of use for the necessary rights can seriously hamper the introduction of new services. It could be claimed that both the online music industry and the mobile TV industry could have developed earlier and differently, had there been legislative means to support convergence in the emerging markets. Negotiation processes and copyright clearance in the online environment could have been improved by a legislative solution. Imagine, for example, the number of downloaded tracks of music today, if the online dissemination of music had picked up in the mid 1990s. New legitimate media services would be beneficial to the right holders, to the providers of such services, to consumers—and indeed to the society at large. Despite being beneficial to all the parties, they have not emerged because the parties have varying views on the terms of use. Under the current structures, none of the parties is generally under an obligation to provide or use the rights or services. The right holders can decide to wait for a better offer. Similarly, the service providers do not have an obligation to pro-

289

Rethinking.book Page 290 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

vide services, or services with protected content, if they do not believe the terms of use support their business case. The cautious approach in the licensing of rights is in contrast with the rapid development of technology in the media sector. Especially the convergence of media services would seem to call for more rapid and aggressive solutions in agreeing on the use of rights with respect to such services. Already in 2001, new market models emerged. They assisted in enhancing the potential of technology, and empowered users to enjoy the benefits of the latest technological developments. Such models are the ones that will survive in the developing technological environment.42 As the parties with the rights and those using them seem to have extreme difficulties in coming to an agreement, the legislator should consider whether regulatory intervention is available to promote the introduction of new services. As discussed, the parties involved in the business of managing the rights and the use thereof are generally best equipped to determine the appropriate terms of use. Without a doubt, the most appropriate long-term solutions are reached if the right holders and users do agree on the terms of use. All regulatory options are prone to obvious difficulties in capturing the needs of the right holders and users. The difficulties and possible drawbacks of regulatory interventions on the terms of use should not, however, stop the regulators from considering whether such intervention would be beneficial in promoting culture and creativity. Legacy structures and lack of foresight should not stand in the way of offering content creators and consumers the enhanced possibilities of new technologies. In assessing the costs and benefits of a regulatory intervention, the legislator should maintain as wide a freedom of operation as possible for the parties and focus on measures that most directly promote culture and creativity. Also, the regulator should consider whether temporary measures could be considered in bridging the parties’ interests so as to agree on more long-term solutions. Unfortunately, the history of legislative attempts both nationally and internationally would imply that the chances in achieving temporary solutions are slim. All legislative measures seem to take years to establish and, consequently, temporary solutions are easily outdated before they are passed into law. This article has demonstrated that there have been—and still are— significant market failures in agreeing on rights relevant for the converging media services. Further, such failures are likely to have a considerable 42. Perlmutter 2001, 26.

290

Rethinking.book Page 291 Friday, September 25, 2009 10:01 AM

Can Changes in Copyright Legislation Support Convergence in the Media Sector?

negative impact on the development of new services. There would be an opportunity for the legislator to move, although this needs to be done at the same time swiftly and with utmost caution. With all too many years of wasted opportunities behind us, however, standing back and doing nothing while the deadlocks between the parties discourage the promotion of culture and content creation must be a worse option than proactively seizing the opportunity.

References Aalto, Sakari and Dieter Paemen. 2001. Copyright Licensing of Music on the Internet in the EU. Defensor Legis 4/2001. Barnett, Thomas. 2007. Interoperability Between Antitrust and Intellectual Property. George Mason Law Review 14 (4):859-70. CELAS. http://www.celas.eu. (Accessed November 18, 2008) Commission. 2008. Summary of results of monitoring Commission Recommendation 2005/737/EC of 18 October 2005 on collective crossborder management of copyright and related rights for legitimate online music services. Published 7 February 2008. (Available at: http:// ec.europa.eu/internal_market/copyright/management/ management_en.htm) (Accessed September 21, 2008) Hugenholtz, P. Bernt, Lucie Guibault, and Sjoerd van Geffen. 2003. The Future of Levies in a Digital Environment. Amsterdam: Institute for information and Law. IFPI. 2008. Digital Music Report 2008, Revolution Innovation Responsibility. London: IFPI. Kaasinen, Eija, Tuomo Kivinen, Jonas Kronlund, Minna Kulju, Liisa Lindroos, Virpi Oksman, and Mia Uronen. 2008. FinPilot 2 Final Report, User Acceptance of Mobile TV services. http://www.finnishmobiletv.com/ press/FinPilot2_Final_Report_20080529.pdf (Accessed November 16, 2008) Lim, Daryl. 2008. Beyond Microsoft: Intellectual Property, Peer Production and the Law's Concern with Market Dominance. Fordham Intellectual Property, Media and Entertainment Law Journal 18 (Winter): 292-331. Mamudi, Sam. 2005. 2005 Supreme Court Provides IP Guidance. Managing Intellectual Property Americas Enforcement Focus 1 (Oct):6-9.

291

Rethinking.book Page 292 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Olsson, Henry. 2006. Copyright, Svensk och Internationell Upphovsrätt. Stockholm: Nordstedts Juridik. Perlmutter, Shira. 2001. Convergence and the Future of Copyright. Nordiskt Immaterial Rättsskydd 1/2001. Screen Digest Ltd, CMS Hasche Sigle, Goldmedia Gmbh, Rightscom Ltd Interactive Content and Convergence. 2006. Implications for the information Society. A Study for the European Commission. (Available at http://www.anacom.pt/render.jsp?contentId=456314) (Accessed September 18, 2008) Schollin, Kristoffer. 2008. Digital Right Management, The new Copyright. Stockholm: Jure Förlag AB. Still, Viveca. 2007. DRM och Upphovsrättens Obalans. Helsinki: Helsinki University. (Available at: https://oa.doria.fi/handle/10024/5482) Vinje, Thomas. 1999. Copyright Imperiled. European Intellectual Property Review 21 (4): 192-207. U.S. Supreme Court, Metro-Goldwyn-Mayer Studios, Inc. v Grokster, Ltd., 545 U.S. 913 (2005).

292

Rethinking.book Page 293 Friday, September 25, 2009 10:01 AM

Cross-cutting Themes

Rethinking.book Page 294 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 295 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control Conclusions from the Sony BMG Saga Ben Van Rompuy

1

Introduction

One of the most important developments in EC competition policy during 2006 was the Court of First Instance’s (‘CFI’) annulment of the European Commission’s (‘Commission’) Decision authorizing the creation of Sony BMG, a joint venture incorporating the worldwide1 recorded music businesses of Sony and Bertelsmann. In 2004, the Commission had concluded that the merger would not create or strengthen a collective dominance position on the part of the majors (i.e. Universal, Sony BMG, Warner, and EMI).2 In Impala v. Commission (‘Impala I’), however, the CFI harshly criticized the Commission’s Decision because it found that the evidence relied on by the Commission was not capable of substantiating that conclusion.3 In doing so, the CFI raised fundamental questions about the standard of proof incumbent on the Commission in its merger review procedures. Two years later – after the Commission’s reexamination of the concentration and even after the European Court of Justice’s (‘ECJ’) judgment overturning Impala I – some of these questions linger on. The fact that the joint venture has now been brought to an end by Sony’s acquisition of the 50 % share of Bertelsmann4 does not change this. As this chapter will demonstrate, the implications of the Sony BMG saga indeed go far beyond the facts of this particular case. The Commission’s 2004 Sony BMG Decision should be seen in light of the CFI’s consecutive annulment of three merger prohibition decisions in 2002: Airtours v Commission (‘Airtours’),5 Schneider Electric v Commission6 1. 2. 3. 4. 5. 6.

Except for Japan. Commission Decision COMP/M.3333 on Sony/BMG 2004. Court of First Instance, Independent Music Publishers and Labels Association v. Commission, Case T-464/04 (Impala I). Commission Press Release, 2008. Court of First Instance, Airtours v Commission, Case T-342/99. Court of First Instance, Schneider Electric v Commission, Case T-310/01.

295

Rethinking.book Page 296 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

and Tetra Laval v Commission (‘Tetra Laval I’).7 The resoluteness by which the CFI criticized the Commission for its analysis of the evidence and questioned the rigor of its decisions in these judgments was unprecedented. The three CFI judgments, which were delivered over a five-month period, gave rise to a flood of criticism of the Commission’s merger analysis and opened a debate about the economic soundness of its decisions.8 Moreover, the judgments acted as a catalyst for a far-reaching reform of EC merger control, as the Commissioner for Competition (Mario Monti at that time) acknowledged that the judgments exposed significant errors: “I believe that, in a certain time, with more hindsight, we will say that these judgments, no matter how painful, came at the right time. Indeed, there are no doubt lessons to be drawn from the judgments: in particular, it is clear that the CFI is now holding us to a very high standard of proof, and this has clear implications for the way in which we conduct our investigations and draft our decisions.”9

The detailed economic analysis that was undertaken by the Commission in the Sony BMG investigation should have been characteristic of the more central role given to economics as a consequence of the merger control reform.10 The increased emphasis on economic analysis in merger investigations has been a steady process that is continuing today. It was emphasized, for instance, by the appointment in 2003 of a Chief Competition Economist and an accompanying team of 10 specialized economists. The Sony BMG case was in fact the first case in which the economic guidance and the methodological assistance of the Chief Competition Economist were sought – in light of this the harsh criticisms of the CFI were particularly painful. The 2004 Sony BMG Decision should furthermore be seen as an attempt to comply with the strong felt standard of proof now imposed on the Commission by the Community Courts. Indeed, while the Commission expressed concerns about the high degree of concentration in the music industry, it concluded that the evidence available was not sufficiently strong to prove collective dominance and it thus approved the merger. The fact that the Decision was annulled for not meeting the requisite legal standard for authorizing a merger, is therefore both ironic and challenging because it put the Commission on a knifeedge.

7. 8. 9. 10.

Court of First Instance, Tetra Laval v Commission, Case T-5/02 (Tetra Laval I). Diaz 2004, 177-199. Monti 2002. Aigner, Budzinski and Christiansen 2006, 2; Baxter and Dethmers 2006, 151-152; Levy 2005, 123-125.

296

Rethinking.book Page 297 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

Following an in-depth reassessment of the Sony BMG joint venture, the Commission again concluded in October 2007 that the transaction would not create or strengthen a dominant or collectively dominant position in the music markets in the European Economic Area (‘EEA’).11 It struck back with what Competition Commissioner Neelie Kroes called “one of the most thorough analyses of complex information ever undertaken by the Commission in a merger procedure”.12 In parallel to this reinvestigation Sony and Bertelsmann had brought an appeal against Impala I to the ECJ. On July 10, 2008, the ECJ gave its judgment in Bertelsmann and Sony Corp of America v. Impala (‘Impala II’). It overturned Impala I because of a number of identified errors of law and referred the case back to the CFI. In the meantime, Impala – an international trade association of independent music companies – also appealed the Commission’s second clearance Decision.13 The Sony BMG saga thus continues. While the ECJ did not give final judgment in the matter, it did address several matters of evidence and proof. These clarifications have to be welcomed, as they provide much-needed guidance on some of the issues that were raised by Impala I. However, they certainly do not resolve the fundamental question underlying the judicial review of the Sony BMG Decisions, namely whether the Commission actually has the necessary resources and expertise to meet the Community Courts’ standards. Particularly in the communications sector this is a pertinent issue as the Commission is faced here with peculiar difficulties. Firstly, there is an accelerating change of markets due to the technological and market-led convergence. This is also true for the music industry where strategic alliances have been sought to benefit from the opportunities of a converging market (e.g. the delivery of digital music services via internet and mobile networks). Secondly, market investigations are complicated by the fact that communications have an essential role in our informationdriven society both in terms of economic development of the sector and in its broader public interest.14 Concentration tendencies in the music industry thus inherently also raise concerns about cultural diversity – something that is not easily translated in econometric analysis. The aim of this chapter is to address these broader issues by analyzing and evaluating the wider implications of both Impala I and Impala II for the Commission’s future handling of complex merger investigations. 11. Commission Decision COMP/M.3333 on Sony/BMG 2007. 12. Commission Press 2007a. 13. European Court of Justice, Bertelsmann and Sony Corp of America v Impala, Case C413/06 P (Impala II). 14. Bavasso 2003, 10-11.

297

Rethinking.book Page 298 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

First, a brief overview will be given of the previous case law on the standard of proof incumbent on the Commission in EC merger proceedings. Second, the CFI’s criticisms on the 2004 clearance Decision will be discussed. Third, the Commission’s reinvestigation of the Sony BMG concentration will be analyzed in light of these criticisms. Fourth, the ECJ’s teachings on these matters in Impala II and the wider implications of the Sony BMG legal saga for the Commission’s evidentiary burden in the context of EC merger control will be identified and commented upon.

2

The standard of proof in EC merger control: the case law before Impala I

Neither the old Merger Regulation 4064/89 nor the new EC Merger Regulation (‘ECMR’) make any reference to the standard of proof incumbent on the Commission in its merger decisions, so it is necessary to look at the case law of the Community Courts for guidance. At the outset, it must be noted that a definite and precise standard of proof has yet to be articulated. Indeed, the Courts usually refer to the ‘requisite legal standard’ without explaining what that standard actually is.15 Furthermore, it has been argued that, even though the use of the term ‘requisite legal standard’ has remained consistent over the years, the application of this standard seems to tell a different story.16 In Commission v Tetra Laval (‘Tetra Laval II’) (2005), the ECJ clarified that the evidence relied on needs to be “factually accurate, reliable and consistent”, should contain “all the information which must be taken into account in order to assess a complex situation” and must be “capable of substantiating the conclusions drawn from it”.17 As the CFI phrased it recently, it is not enough for the Commission to put forward a series of logical but hypothetical developments (which it fears would have harmful effects for competition):

15. According to Sir Christopher Bellamy, a former president of the CFI, the reason for this must be sought in the different legal traditions of the EC judges. See Bellamy 1997, 105. 16. Bailey 2003, 845-888. 17. European Court of Justice, Commission v. Tetra Laval, Case C-12/03 P (Tetra Laval II), par. 39.

298

Rethinking.book Page 299 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

“Rather, the onus is on it to carry out a specific analysis of the likely evolution of each market on which it seeks to show that a dominant position would be created or strengthened as a result of the merger and to produce convincing evidence to bear out that conclusion”.18

In its appeal against Tetra Laval I (2002) the Commission had claimed that the CFI, by requiring it to constitute “convincing evidence”19 that a proposed merger “in all likelihood”20 will give rise to significant anticompetitive effects, imposed a disproportionate standard of proof for merger prohibition decisions that is impossible to meet in practice.21 It took the view that this test differed substantially, both in degree and in nature, from the requirement to produce “cogent and consistent” evidence the ECJ established in Kali & Salz (1998).22 The ECJ nonetheless discarded the Commission’s arguments in Tetra Laval II (2005) by stating that the CFI, in its call for a precise examination supported by convincing evidence “by no means added a condition relating to the requisite standard of proof but merely drew attention to the essential function of evidence, which is to establish convincingly the merits of a decision on a merger”.23 Both Tetra Laval judgments thus essentially recapitulate the principle that, where the Commission finds that a concentration would lead to a situation in which effective competition in the common market is significantly impeded, it must provide cogent and consistent evidence to support its decision. This is the very standard that was set out by the ECJ in Kali & Salz — a standard that, although considered to be high, was instantly recognized by the Commission in Price Waterhouse/Coopers & Lybrand.24 With regards to the prospective analysis, the ECJ acknowledged that merger control requires a difficult assessment of the way in which a proposed concentration might alter the factors determining the level of competition on a given market. Since this entails a prediction of events, and not an examination of current or past events (as is the case for antitrust investigations), this analysis needs “to be carried out with great care”.25

18. 19. 20. 21. 22. 23. 24.

Court of First Instance, General Electric v. Commission, Case T-210/01, par. 429. See e.g., Tetra Laval I, supra note 7, par. 155, 162, 223, 256 and 281. Ibid., par. 153. Commission Press Release 2002. European Court of Justice, France and others v. Commission, Case 30/95, par. 228. European Court of Justice, Tetra Laval II, supra note 17, par. 41. Commission Decision IV/M.1016 on Price Waterhouse/Coopers & Lybrand 1999, par. 27. 25. European Court of Justice, Tetra Laval II, supra note 17, par. 43.

299

Rethinking.book Page 300 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Furthermore, it is necessary “to envisage various chains of cause and effect with a view to ascertaining which of them are the most likely”.26 This supports the general observation that the Community Courts have a ‘balance of probabilities’ standard rather than a ‘beyond reasonable doubt’ standard in mind in the field of merger control. Given the flexibility inherent a ‘balance of probabilities’ standard, this still raises the question as to what the actual degree of likelihood is that the Commission’s fact-finding and analysis in merger cases must meet. The remaining part of this chapter will discuss what lessons can be learned from the Sony BMG merger case in this regard.

3

The 2004 Sony BMG clearance decision and the CFI’s Impala I ruling

In January 2004, Sony and Bertelsmann notified to the Commission their plans to merge their recorded music business. The proposed concentration was still assessed under the old Merger Regulation 4064/89. Because the Commission found that the transaction raised serious collective dominance concerns, it decided to initiate an in-depth investigation.27 This hardly came as a surprise: the Commission had already entertained similar concerns on the 1998 merger between Seagram and Polygram, which reduced the number of majors from six to five, and on the withdrawn EMI/ Time Warner merger.28 Yet, in light of the parties’ response to the Statement of Objections (cfr. infra), the Commission remarkably changed its position and eventually cleared the merger on July 19, 2004.29 After the approval of the merger by competition authorities around the world (e.g., the United States, Australia, Canada, Switzerland, Poland, and South Africa),30 the Commission thus too gave green light for the creation of Sony BMG, a fully functional (50-50) joint venture incorporating the parties’ activities in the discovery and development of artists31 and in the marketing and sale of sound recordings. 26. Ibid., par. 43. Emphasis added. 27. Commission Press Release 2004. 28. Commission Decision IV/M.1219 on Seagram/Polygram 1998, par. 26 and 29. The fact that EMI and Time Warner gave up the merger was not only due to the Commission’s alarming preliminary conclusions, but should also be seen as a concession to enable Time Warner and AOL to merge (Ranaivoson 2006, 8). 29. Commission Decision COMP/M.3333 on Sony/BMG 2004. 30. Not to mention, the Czech Republic, Hungary, Romania, and Mexico. See Court of First Instance, Impala I, supra note 3, par. 229. 31. These are the so-called Artist & Repertoire (“A&R”) activities, in essence the music industry’s research and development.

300

Rethinking.book Page 301 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

The Commission’s findings on market transparency and the use of retaliation formed the essential grounds of the first clearance Decision. These two elements constitute the most prominent elements of the substantive test that was put forward by the CFI in its judgment in Airtours.32 The CFI clarified that, for a finding of collective dominance, it must be established that: 1. there is sufficient market transparency so to allow spotting deviations from the common policy; 2. there are adequate deterrents to ensure that there is an incentive not to depart from the common policy; and 3. the benefits of coordination are not jeopardized by the action of current and future competitors or consumers. To assess the degree of market transparency in the market for recorded music, the Commission examined whether it could identify coordinated price policy. For this purpose, price developments over the previous three to four years were considered (with a particular focus on the United Kingdom, France, Germany, Italy, and Spain). The Commission further examined the development of the average wholesale net prices for the top 100 albums of each year, whether any parallelism could have been reached on the basis of published prices to dealers (PPDs), and whether the different majors’ discounts were aligned and sufficiently transparent. On the basis of the average net prices, the Commission found some parallelism and a relatively similar price development for the albums of the majors. It also found that PPDs are transparent enough to enable monitoring of other major’s list pricing. Nevertheless, the Commission concluded that these observations could not constitute sufficient evidence of coordinated pricing behavior in the past. Moreover, it reasoned that certain deficits in the transparency of campaign discounts render the market opaque so that price coordination by the majors would require further monitoring at the level of individual albums. In the Commission’s view, it could not be established that the publication of hit charts nor Sony and BMG’s weekly sale reports ensured the necessary degree of transparency of competitor’s campaign discounts. No real evidence was found that the reduction of major recording companies from five to four would significantly facilitate transparency; the Commission accordingly concluded that the concentration was also not likely to create a collective dominant position. In Impala I, the CFI pointed out that the Commission principally mentioned factors that “far from demonstrating the opacity of the market, 32. Court of First Instance, Airtours v Commission, Case T-342/99, par. 62.

301

Rethinking.book Page 302 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

show, on the contrary, that the market was transparent”.33 It particularly emphasized that the observed sources of price transparency (e.g., the public nature of PPDs and the limited number of reference prices) are capable of giving rise to a high level of transparency. The Court furthermore dismissed the finding that list prices of albums are rather aligned as a “prudent conclusion to say the least” since “the alignment was in fact very marked”.34 Subsequently, the CFI heavily criticized the Commission for countering the claim of transparency with the “rather limited and unsubstantiated” assertion that campaign discounts could reduce transparency and make tacit collusion more difficult.35 It furthermore reproached the Commission for basing its findings solely on data relating to – and prepared by – the notifying parties. While the CFI acknowledged that the Commission could not ascertain in the slightest detail the reliability of all the information submitted to it, it nevertheless stated that the Commission “cannot go so far as to delegate, without supervision, responsibility for conducting certain parts of the investigation to the parties to the concentration”.36 After a thorough review of the findings relating to market transparency, the CFI briefly examined the Commission’s assessment concerning retaliation. The Commission identified two measures that could represent possibilities for retaliation against any ‘cheating’ major,37 but found no evidence that such means have been used or threatened in the past. The CFI observed, however, that the Commission had not substantiated this assertion. Furthermore, the CFI disagreed with the Commission’s view that it would be necessary to establish an absence of retaliatory action. On the contrary, it held that the mere existence of punishment mechanisms is in principle sufficient to establish collusion. Hence, the CFI concluded that the analysis 33. Ibid., par. 290. 34. Ibid., par. 299. 35. Ibid., par. 294. The Court invalidated the Commission’s reasoning in a forceful manner: “Clearly, such vague assertions, which fail to provide the slightest detail of, in particular, the nature of campaign discounts, the circumstances in which such discounts might be applied, their degree of opacity, their size or their impact on price transparency, cannot support to the requisite legal standard the finding that the market is not sufficiently transparent to allow a collective dominant position” (Ibid., par. 289). 36. Ibid., par. 415. The CFI found this to be particularly problematical in light of the observations that the alleged opacity constituted the crucial element on which the Decision is based. 37. These include (1) a return to competitive behavior or (2) the exclusion of the deviator from compilation joint ventures (e.g., the refusal to license tracks for the deviator’s compilation albums).

302

Rethinking.book Page 303 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

in the Decision relating to retaliation is, like the assessment of market transparency, vitiated by an error of law and a manifest error of assessment.

4

The reexamination of the Sony BMG merger: a second attempt to jump the fence

The annulment of the 2004 Sony BMG Decision gave the Commission a second chance to prove that it has the necessary resources and expertise to meet the Community Courts’ standards. After the case was re-notified to the Commission in January 2007, the Commission started its new assessment of the Sony BMG joint venture. Even though the new investigation was still carried out under the previous Merger Regulation – under which the Commission had to assess whether the merger would strengthen or create a collective dominant position in the EEA as it stood before May 1, 2004 – the Commission decided to reexamine the transaction under current market conditions.38 Consequently, the Commission was able not only to assess the actual impact of the merger but also to take into account the development of the digital music market since 2004. In 2004, this market was still in a state of infancy. This situation has changed considerably as the majors have since then adopted their strategy on digital sales. The new market investigation confirmed that, from both the demand side and supply sides, this market could be distinguished from the physical market. The situations in both markets were therefore analyzed separately.

4.1 The market for recorded music in digital formats On the basis of market shares, the Commission at the outset concluded that the merger has not led to a position of single dominance in the national markets for digital distribution of music or to market foreclosure. Given the absence of non-coordinated effects, the Commission assessed whether the concentration has led to a creation or strengthening of a collective dominant position on the wholesale market for the licensing of music to digital music providers. For this purpose, it conducted an in-depth investigation of both the contracts between the majors and the most important digital music service providers and of price developments in all the affected markets (for the period between 2004 and 2007). The pricing data showed that the majors apply different prices and price structures and 38. Commission Press Release 2007b.

303

Rethinking.book Page 304 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

use different business models: rather than coordinating their activities, record companies thus appear to individually maximize their returns on recorded music in digital form. As regards market transparency, the Commission observed that digital retail market pricing is more standardized than in the physical market due to the importance of iTunes as a price setter. iTunes is the leading music provider worldwide with a market share in Europe of at least 50 percent and it applies uniform prices. The competing digital music providers tend to follow Apple’s “one-size-fits-all” pricing model. The market investigation moreover indicated that a number of elements considerably limit the ability of the majors to reconstruct wholesale prices or to identify any deviation regarding wholesale pricing on the basis of retail prices. The Commission particularly pointed to the increasing diversity and complexity of wholesale pricing structures and agreements. As there are no PPDs in the digital market that could function as a focal point for coordination, the Commission concluded that there is not sufficient transparency to monitor whether the coordinated terms are adhered to. No indications were found that the merger would increase market transparency. As regards retaliation, the Commission found no credible deterrent mechanisms for the majors to reinstate adherence to any agreed collusive scheme. It emphasized that the wholesale prices of the majors vary considerably in different directions without any observable reaction of the majors. As regards the ability of competitors or consumers to engage in countervailing measures, the market investigation showed that independents exert only limited competitive pressure on the majors. Customers on the other hand could jeopardize to a certain extent the benefits of any coordination. iTunes in particular was found to have a strong impact on the recording companies’ pricing decisions. According to the Commission, the creation of Sony BMG did not affect the balance of power that currently exists between the majors on the one hand and iTunes (and increasingly a number of other strong players, e.g., telecom operators) on the other.

4.2 The market for recorded music in physical formats In analyzing the market for recorded music, the Commission significantly widened its new market investigation in response to the CFI’s criticisms in Impala I (cfr. supra). The Commission extended its original analysis of the 304

Rethinking.book Page 305 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

top 100 sales by collecting data on net prices, discounts and wholesale prices for all CD chart albums sold by all majors in all the 15 affected markets for the period between 2002 and 2006 – equivalent to millions of data points. In addition to these quantitative aspects, it investigated the nature of discounts and the circumstances in which record companies use discounts to diminish their PPDS and the merger’s impact on consumer choice in terms of cultural diversity. As regards market transparency, the Commission scrutinized five theories of harm that had been suggested during the market investigation.39 It assessed the criteria of transparency against each theory of price-related coordination, because each theory requires a specific level of transparency. The Commission considered that a coordination of the prices of the merging parties’ new (chart) album releases is the most likely theory as the bulk of sales of major recording companies are realized in the first weeks following the release. The investigation indicated, however, that the level of transparency (that characterizes PPDs, discounts, and markups applied to retail prices) was not particularly high. The study of the discount stability confirmed that, even in the hypothetical case of full transparency of PPDs, a significant number of sales transactions would not follow a simple and stable pattern that could be inferred on the basis of public information. As regards retaliation, two potential mechanisms were evaluated: (1) the exclusion of the deviating company from compilation joint ventures or joint activities, and (2) the termination of the tacitly coordinated behavior with respect to prices and releases of albums. The Commission reasoned that the absence of an observable alignment confirmed that these mechanisms are no credible means of retaliation. As regards countervailing abilities, the Commission again concluded that the independents are not likely to jeopardize the expected outcome from any coordinated behavior. Similar to the findings concerning the digital music market, it found that at least a sizeable proportion of customers (e.g., supermarkets) were on the contrary capable of destabilizing coordination by majors by reducing purchases and advertising on their products.

39. These include (i) coordination at the level of budgets; (ii) coordination at the level of each title pricing; (iii) coordination at the level of pricing policy (stabilization of current business model); (iv) coordination on prices at and shortly after the release date; and (v) coordination at the level of non-price terms (Commission Decision COMP/M.3333 on Sony/BMG 2007, par. 530-634).

305

Rethinking.book Page 306 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

On the basis of the above considerations, the Commission again concluded that there was no factual evidence to demonstrate that the notified operation would lead to a strengthening or creation of a collective dominant position on the online and offline markets for recorded music.

4.3 The evidence in the Commission’s 2007 Sony BMG Decision The evidence put forward in the 2007 Sony BMG Decision demonstrates that the Commission made substantial attempts to address the CFI’s criticisms voiced in Impala I. First, the new market investigation can rightfully be called one of the largest and most complex econometric analyses conducted thus far in the context of EC merger control.40 In addition to the extensive widening of the investigated dataset on the market for recorded music, the Commission also analysed the market for the licensing of recorded music in digital format in the light of its development since 2004. Second, the Commission fully embraced the points that were raised by the CFI on the legal criteria for a finding of a collective dominant position (cfr. supra). Third, the Commission clearly took the CFI’s criticism that it had solely relied on data relating to and prepared by the notifying parties, to heart. Third-party submissions were taken into account in all instances (i.e. information from other market players – both majors and independents, independent market observers, professionals, and so forth). For example, the Commission received information from Impala that the merger of Sony BMG has had a negative impact on cultural diversity, i.e. by furthering the strategy of the majors to reduce their catalogues and local language repertoire. This issue was not (explicitly) addressed in the 2004 Sony BMG Decision, even though the Commission is legally obliged to consider such cultural aspects by Article 151(4) EC. In response to Impala’s observation, the Commission did examine the impact of the merger of Sony BMG on customer choice in its re-investigation of the transaction. It found that there is, also in view of the customers, still fierce competition among the majors and independents for the discovery and signing of artists. The Commission’s analysis showed that between 2002 and 2006 the share of local repertoire (as opposed to international repertoire) has in fact increased in almost every Member State. Moreover, it considered that the Internet proposed considerable prospects for artists to record and present their music to a wider audience themselves. Consequently, the Commission concluded that the Sony BMG merger did not negatively affect cultural diversity.41 40. Commission Press Release 2007a. 41. Commission Decision COMP/M.3333 on Sony/BMG 2007, par. 415-428; Kroes 2007.

306

Rethinking.book Page 307 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

These observations about the evidence in the 2007 Sony BMG Decision thus seem to indicate that the CFI’s Impala I judgment has changed the Commission’s performance for the better.42 In what follows, the Commission’s second investigation of the Sony BMG merger will be reassessed in light of Impala II in order to identify and evaluate the wider implications of the Sony BMG legal saga for EC merger control.

5

Implications of the Impala rulings for the standard of proof in EC merger control

The publication of the 2007 Sony BMG Decision interestingly coincided with the ECJ’s judgment in Impala II, which was delivered by a Grand Chamber of 13 judges in July 2007. The ECJ did not give a final judgment on the appeal against Impala I, but it did address several important questions of evidence and proof that are of wider relevance for EC merger control. The ECJ’s guidance on the following procedural and substantial issues are of particular importance: (1) the symmetrical standard of proof for clearance and prohibition decisions, (2) the applicable legal test for a finding of collective dominance, (3) the role and purpose of the Statement of Objections and (4) the standard of reasoning in merger decisions.

5.1 Symmetrical standard of proof Most significantly, the judgment of the ECJ brings an end to the discussion about whether there exists a bias against or in favor of the compatibility of mergers with the common market. It expressly held that there is nothing in the old Merger Regulation (nor the new ECMR) that indicates that there would be a different standard of proof in relation to decisions approving a concentration on the one hand and decisions prohibiting a concentration on the other.43 The ECJ essentially referred to the symmetrical requirements laid down by Articles 2(2) and 2(3) of the Regulation: “2. A concentration which does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared compatible with the common market.

42. For a more detailed analysis of the Commission’s 2007 Sony BMG Decision, see Van Rompuy and Pauwels 2008. 43. European Court of Justice, Impala II, supra note 12, par. 46.

307

Rethinking.book Page 308 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

3. A concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared incompatible with the common market”44

In his opinion in Tetra Laval II, ECJ Advocate General Tizzano had argued on the contrary that there should be a presumption of the mergers’ compatibility with the common market especially when it is difficult to foresee the effects of the notified transaction (so-called ‘grey-area’ cases). In his view, Article 10(6) of the Merger Regulation undermines the symmetry of the conditions provided in Articles 2(2) and 2(3). The article stipulates that where the Commission has not taken a decision within the time limits set, the notified merger shall be deemed to have been declared compatible with the common market. According to Tizzano, this clearly demonstrates that, in the case of uncertainty, the Community legislature preferred to run the risk of authorizing a transaction that is incompatible with the common market.45 The ECJ firmly rejected this reasoning and stressed the provision in question is nothing but an expression of the need for speed in merger review procedures.46 It is true that a symmetrical standard of proof may pose problems for the Commission when it is confronted with ambiguous evidence. However, as Advocate General Kokott indicated in her opinion on the appeal against Impala, there can only be a few small and infrequent ‘grey-area’, borderline cases in which, even after extensive market investigations, it is not clear on which side of the line the case falls.47 Arguably in these cases the concentration may be presumed to be compatible with the common market. It would be wrong though if the Commission would opt by default for a clearance decision in any case of doubt. In the communication sectors, this would particularly imply that commercial interests would unreservedly override other interests, such as concerns about media pluralism. With regard to the Sony BMG concentration, for example, Impala persistently stressed that the transaction was not only problematical in terms of market access but that 44. With the adoption of the revised EC Merger Regulation (ECMR) in 2004, the substantive test for the compatibility assessment of a concentration changed. From May 1, 2004 on the test has been whether or not a notified concentration would “significantly impede effective competition in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position”. The symmetrical nature of Article 2(2) and (3), however, remains the same. 45. Opinion of Advocate General Tizzano, European Court of Justice, Tetra Laval II, supra note 17, par. 78-81. 46. European Court of Justice, Impala II, supra note 12, par. 47. 47. Opinion of Advocate General Kokott, European Court of Justice, Impala II, supra note 12, par. 139.

308

Rethinking.book Page 309 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

it would also further marginalize the position of the independents to the detriment of cultural diversity (cfr. supra 3.3).48 But even when one only considers competition issues, an unequal standard of proof in favor of clearance may in practice lead to the undue authorization of anticompetitive mergers. This was precisely the fear that was raised in the aftermath of the three judicial defeats in 2002. If anything, the 2004 Sony BMG Decision demonstrates the drawbacks of an asymmetrical standard of proof. Far from arguing why the merger would not lead to the creation or strengthening of a collective dominant position, the Commission mainly indicated why the evidence was ‘not sufficient’ to underpin a prohibition decision. The ECJ therefore rightfully confirms that the Commission cannot opt for a clearance decision to be on the safe side but rather must always take a fully reasoned decision based on sound evidence. Hopefully, this will also reestablish the legal certainty that a clearance decision will be permanent, as the notifying parties have little control over ensuring that the Commission’s analysis can withstand judicial scrutiny.

5.2 Different standards for existing and potential collective dominant positions? In Impala I, the CFI observed that the existing case law on collective dominance had been developed in the specific context of the assessment of the possible creation of a collective dominant position. The appraisal of an existing collective dominant position is different, the Court argued, because here the Commission has the clear advantage that it can base its findings on a series of elements of established facts (past or present).49 The CFI therefore suggested that the Airtours conditions for a finding of coordinated effects (cfr. infra) could be more easily satisfied in the investigation of a preexisting collective dominant position. Most remarkably, the Court indicated that: “(A)lthough the three conditions (…) are indeed also necessary, they may, however, in the appropriate circumstances, be established indirectly on the basis of what may be a very mixed series of indicia and items of evidence relating to the signs, manifestations and phenomena inherent in the presence of a collective dominant position.

48. Impala. 49. Court of First Instance, Impala I, supra note 3, par. 250.

309

Rethinking.book Page 310 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Thus, in particular, close alignment of prices over a long period, especially if they are above a competitive level, together with other factors typical of collective dominant position, might, in the absence of an alternative reasonable explanation, suffice to demonstrate the existence of a collective dominant position, even where there is no firm direct evidence of strong market transparency, as such transparency may be presumed in such cases.”50

Quite in contrast to the often-heard claim that Impala imposed a too demanding standard of proof on the Commission, the CFI thus in fact lowered the evidentiary threshold for establishing an existing collective dominant position.51 Sony and Bertelsmann had submitted that this ‘watered-down’ test constituted a misapplication of the Airtours conditions. The ECJ acknowledged that that the inherent complexity of a theory of competitive harm cannot, of itself, have an impact on the standard of proof that is required.52 However, it interestingly did not object to the CFI’s obiter dictum. On the contrary, the ECJ highlighted that“(i)t is necessary to avoid a mechanical approach involving the separate verification of each of those criteria in isolation, while taking no account of the overall economic mechanism of a hypothetical tacit coordination”.53 This can be seen as an explicit recognition of the difficulties the Commission may encounter when examining collective dominance cases. At the same time, it illustrates that the application of the legal Airtours conditions is not clear-cut yet. Unfortunately, the same can be said about the CFI’s teachings in Impala on the indirect establishment of the market transparency criterion (e.g. the undefined “indicia and items of evidence” or the vague formulation of “appropriate circumstances”). While the Commission did explore this approach in its 2007 Sony BMG Decision, it is thus unlikely that it will ever go as far as to substantiate a finding of a pre-existing collective dominance position solely on the basis of indirect signs.

5.3 The role and purpose of the Statement of Objections A further important aspect of the judgment is that the ECJ expressly confirmed the provisional nature of the Statement of Objections (SO) in merger review procedures. The SO is a normal procedural act in a second phase merger investigation that enables the parties to exercise their rights of defense. It sets forth the Commission’s preliminary findings both on the facts and on their legal and economic significance. This is of great 50. 51. 52. 53.

Ibid., par. 251-252. Emphasis added. See e.g. Aigner, Budzinski and Christiansen 2006; Simpson and Tatcher 2007. European Court of Justice, Impala II, supra note 12, par. 51. Ibid., par. 125.

310

Rethinking.book Page 311 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

importance, as the Commission can only base its decision on objections on which the parties have been able to submit their observations.54 Contrary to its final decision, the Commission had argued in its SO that the notified Sony BMG merger was incompatible with the common market. As explained above, it provisionally concluded that the merger would strengthen an existing collective dominance position and that the market for recorded music was transparent and particularly conducive to coordination. The CFI not only found this “fundamental U-turn in the Commission’s position” surprising, but also harshly criticized the Commission for not being capable of demonstrating how the previous findings were incorrect: “unless the entire investigative administrative procedure is to be deprived from the slightest value, the Commission must be able to explain, not in the decision, admittedly, but at least in the context of the proceedings before the Court, its reasons for considering its provisional findings were incorrect”.55

In overruling the CFI, the ECJ rightfully observed that these remarks on the relationship between the contested Decision and the SO could not be minimalized as “unfortunate choices of expression”, as Advocat General Kokott put forward in her opinion. It found on the contrary that the CFI erroneously treated what it termed ‘findings of fact made previously’ in the SO “as being more reliable and more conclusive than the findings set out in the contested decision itself”.56 The ECJ deemed this to be an error of law and stressed that “it should not be assumed that the assessments made in a SO cannot be modified in the light of the replies to such a statement”.57 The fact that the Commission is, by contrast to the position under Articles 81 EC and 82 EC, subject to strict time limits thus has no effects on the preparatory nature of the SO. This clarification certainly has to be welcomed. The extent to which the CFI used the SO as a benchmark for its review was unseen and already had adverse consequences beyond the fact of the case. Since the CFI’s Impala judgment in 2006, the Commission simply avoided the issuance of a SO in about one-third of the merger case it has cleared following a second phase investigation.58 The obvious drawback of this approach is that it seriously impedes the parties’ rights to properly defend themselves, on the basis of all the necessary information, before the Commission adopts a formal 54. 55. 56. 57. 58.

Art. 18(3) ECMR. Court of First Instance, Impala I, supra note 3, par. 335. European Court of Justice, Impala II, supra note 12, par. 71. Ibid., par. 75. Brandenburger, Janssens and Aitken 2008, 9.

311

Rethinking.book Page 312 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

decision. Another strategy was followed in e.g. Ineos/BP Dormagen.59 After examining the parties’ response to the SO, the Commission made use of its investigative powers under Article 11 ECMR to request information from competitors in order to assess the validity of the evidence that was submitted.60 This approach also has tough limitations. Because of the mandatory time restrictions governing the adoption of decisions, there is very little room for conducting fresh investigations. Interestingly, the ECJ acknowledged this by holding that the Commission “cannot, in principle, be required, in every individual case, to send, following communication of the objections and after hearing the undertakings concerned, requests for extensive information”.61 Not in the least because it also held that the same standard of proof should apply to arguments of the notifying parties submitted in reply to the SO than to those submitted at an earlier stage.

5.4 Adequate statement of reasons The ECJ furthermore clarified the standard of reasoning the Commission is required to satisfy in its decisions. It reiterated that the essential purpose of the statement of reasons is to enable the Community Courts to exercise their judicial review. In that regard, the ECJ stressed that a distinction should be made between the procedural requirement to state adequate reasons and the question whether this reasoning is well founded. In other words, the statement of reasons can be adequate even when it sets out reasons that are incorrect. The ECJ observed that the CFI was clearly aware of the reasons for which the Commission decided to approve the concentration. It subsequently concluded that the reasoning in the contested Decision was adequate for a third party complainant – in this case Impala – to challenge its validity.62

59. Commission Decision COMP/M.4094 on Ineos/BP Dormagen 2007. The Decision was taken in August 2006, only a few weeks after the Impala judgment. In this case, Ineos (a U.K.-based company active in the production, distribution sales, and marketing of chemicals) sought to acquire BP Dormagen Business (a Germany-based company active in the production of ethylene oxide and ethylene glycols). 60. Ibid., par. 4. 61. European Court of Justice, Impala II, supra note 12, par. 91. 62. Ibid., par. 181.

312

Rethinking.book Page 313 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

By reversing the CFI’s finding that the reasoning of the 2004 Sony BMG Decision was inadequate, the ECJ did not follow the criticisms voiced by A.G. Kokott. In her opinion, she stated that: “Simply put, in a merger control decision which to a large extent reads as if it were a prohibition decision, it is essential that a sufficiently precise explanation is given of the considerations on the basis of which the matter ultimately turns, even for informed readers who are familiar with the market”.63

The ECJ did not object to the fact that the Decision made numerous comments adverse to the merger and set out only briefly the reasons for clearance. The Court admitted that there was “a certain imbalance in the contested decision” in the presentation of the reasons. But it stressed that the degree of precision of the statement of the reasons for a decision must be weighed against “practical realities and the time and technical facilities available for making the decision”.64 The Court moreover found that it was unreasonable of the CFI to require a detailed description of each of the factors underpinning the Commission’s decision as “it is not necessary for the reasoning to go into all the relevant facts and points of law”.65 The ECJ’s sympathy for the particular context in which the 2004 Sony BMG Decision was adopted and the margin this provides for the Commission in stating the reasons for a decision, is remarkable.66 It even appears to be inconsistent with the Court’s call to establish convincingly the merits of a decision on a merger. While it is certainly true that the importance the CFI attributed to the SO in Impala I (cfr. supra) had swung the pendulum too far, the Commission should be capable of explaining the reasons for a fundamental change in its position. Not in the least when it completely reverses this initial position – based on an investigation lasting five months – only at the very end of the formal merger proceeding, as was the case in the first investigation of the Sony BMG merger.

6

Conclusions

The tsunami of judicial defeats in 2002 prompted the Commission to fundamentally reform its merger control review process. The Commission needed to improve the quality of its decisions, by e.g. advancing the use of economic analysis. The annulment of the 2004 Sony BMG Decision, which 63. Opinion of Advocate General Kokott, European Court of Justice, Impala II, supra note 12, par. 124. 64. European Court of Justice, Impala II, supra note 12, par. 167. 65. Ibid., par. 166. 66. Brandenburg, Janssens and Aitken 2008, 15.

313

Rethinking.book Page 314 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

was supposed to be representative of an economically sophisticated merger control and of a more cautious approach towards prohibition, was therefore generally perceived as a crushing defeat for the Commission. A careful analysis of the judgment has shown that the implications of Impala I are indeed not without problems. The extent to which the CFI used the SO as a benchmark for its review of the 2004 Sony BMG Decision was particularly troublesome. The fact that the ECJ heavily criticized the CFI for treating conclusions set out in the SO as established is therefore welcomed. A further problematic aspect of Impala I is the CFI’s insistence on obtaining data from third parties. The Commission’s increasingly lengthy and demanding information requests in the aftermath of the judgment already illustrate the additional burden on the Commission and the (third) parties. The analysis did not confirm, however, that Impala I would have significantly raised the standard of proof in EC merger proceedings. The CFI in fact lowered the evidentiary threshold for establishing an existing collective dominant position (even though its statements on the Airtours test are not unambiguous). This might be a recognition of the fact that the conditions for the finding of collective dominance might be too difficult to establish in practice, especially in complicated “grey area” cases. The fear that this in turn would lead to the undue clearance of anti-competitive mergers, is precisely the reason why the Impala judgments have to be welcomed for clarifying that the standard of proof is equal for clearance and prohibition decisions. The ECJ rightfully confirmed that the Commission cannot opt for a clearance decision to be on the safe side but rather must always take a fully reasoned decision based on sound evidence. When asked in a 2002 interview whether the Commission has the necessary resources to meet the Community Court’s standards, the president of the CFI responded that it did not, but that this could not refrain the Court from striking down flawed decisions.67 In the last five years, the Commission has made various attempts to enhance the combination of legal and economic expertise in its analysis of merger cases. However, the reliance on economic analysis and its empirical support does not in itself guarantee better decision-making. Given the annulment of the first clearance Decision, the reassessment of the Sony BMG joint venture is therefore of great strategic importance for the credibility of EC merger control. It has given the Commission a second chance to prove that its ‘more economic approach’ is more than just a bumper sticker. The analysis of the 2007 Sony BMG Decision indicated that this attempt has been 67. Burnside 2002; Quatremer 2002.

314

Rethinking.book Page 315 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

successful. In addition to the quantitative data, the Commission also gathered information on qualitative aspects of the concerned markets. It is particularly notable that the Commission, in response to observations of Impala, investigated the consequences of the merger on cultural diversity. The Commission’s hesitance to invoke or even refer to Article 151(4) EC – which requires the Commission to take cultural aspects into account in all of its actions – illustrates the continuing lack of political courage to give weight to cultural diversity considerations in its merger decisions. Nonetheless, it is an important step forward in comparison to the 2004 Decision. To a certain extent it also suggests that the push for more economic analysis is not necessarily detrimental to the consideration of non-economic objectives. Particularly for the communications sector, where the application of the competition rules may give rise to a diversity of non-economic concerns, this is a reassuring observation. Unfortunately it is doubtful that the Commission will be able to conduct an equally thorough investigation in a normal, very time-constrained merger review procedure. It must be remembered that the reinvestigation of the Sony BMG merger is atypical in at least two ways. For one thing, the Commission was in a unique position to investigate the actual impact of the merger since it was already implemented for one to three years, depending on the territory. The need for a prospective analysis to evaluate the likelihood of the creation of a (collective) dominant position was therefore limited. What is more, the normal time pressure to adopt a decision was far less present. The 2007 Sony BMG Decision was adopted 15 months after the annulment of the first Decision, whereas a normal procedure has a tight schedule of 20 or 115 (in the case of a Phase II proceeding) working days. Consequently, the Commission may have set itself an impossible precedent with the 2007 Sony BMG Decision. The observation that the Commission has avoided the formal SO stage in several recent merger proceedings – arguably out of fear of judicial review – already seems to imply that the Commission is not entirely confident it can jump the fence again in a similar fashion. The ECJ’s emphasis on the provisional and preparatory nature of the SO will hopefully now reverse this trend.

315

Rethinking.book Page 316 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

References Aigner, Gisela, Oliver Budzinski, and, Arndt Christiansen. 2006. The Analysis of Coordinated Effects in EU Merger Control: Where Do We Stand after Sony/BMG and Impala? Marburg Working Papers on Economics 200614. Marburg: University of Marburg. Bailey, David. 2003. Standard of Proof in EC Merger Proceedings: A Common Law Perspective. Common Market Law Review 40 (4):845-888. Bavasso, Antonio. 2003. Communications in EU Antitrust Law: Market Power and Public Interest. The Hague: Kluwer Law International. Baxter, Simon, and Frances Dethmers. 2006. Collective Dominance Under EC Merger Control—After Airtours and the Introduction of Unilateral Effects is There Still a Future for Collective Dominance? European Competition Law Review 27 (3): 148-160. Bellamy, Christopher. 1997. Standards of Proof in Competition Cases. In Judicial Enforcement of Competition Law, proceedings OECD Seminar of 27 November 1997, 105-106. Brandenburger, Rachel, Thomas Janssens, and James Aitken. 2008. Bertelsmann and Sony Judgment: Welcome Clarity for EC Merger Review from the EU’s Highest Court. GCP Online Magazine for Global Competition Policy, July 2008 (2). Burnside, Alec. 2002. Preuve Solide: the CFI Raises the Bar, Competition, December. http://www.linklaters.com/in_competition/200212.htm (Accessed November 22, 2008). Commission Press Release IP/08/1322 of 15 September 2008. Mergers: Commission Approves Proposed Acquisition of Bertelsmann's 50 % share in Sony BMG by Sony. Commission Press release IP/07/1437 of 3 October 2007a. Mergers: Commission Confirms Approval of Recorded Music Joint Venture Between Sony and Bertelsmann after Reassessment Subsequent to Court Decision. Commission Press release IP/07/272 of 1 March 2007b. Mergers: Commission Opens In-Depth Investigation Into Sony/BMG Recorded Music Joint Venture. Commission Press release IP/04/200 of 12 December 2004. Commission Opens In-Depth Investigation Into Sony/Bertelsmann Recorded Music Venture.

316

Rethinking.book Page 317 Friday, September 25, 2009 10:01 AM

The Standard of Proof in EC Merger Control

Commission Press release IP/02/1952 of 20 December 2002. Commission Appeals CFI Ruling on Tetra Laval/Sidel to the European Court of Justice. Court of First Instance, Independent Music Publishers and Labels Association (Impala) v Commission, Case T-464/04 [2006] ECR II-2289. Court of First Instance, General Electric v. Commission, Case T-210/01 [2005] ECR II-5575. Court of First Instance, Airtours v Commission, Case T-342/99 [2002] ECR II-2585. Court of First Instance, Schneider Electric v Commission, Case T-310/01 [2002] ECR II-4071. Court of First Instance, Tetra Laval v Commission, Case T-5/02 [2002] ECR II-4381. Decision COMP/M.3333 of the Commission of 3 October 2007 on Sony/ BMG, [2007] OJ C94/19. Decision COMP/M.4094 of the Commission of 10 August 2006 on Ineos/ BP Dormagen, [2007] OJ L69/40. Decision COMP/M.3333 of the Commission of 19 July 2004 on Sony/BMG [2005] OJ L62/30. Decision IV/M.1016 of the Commission of 20 May 1998 on Price Waterhouse/Coopers & Lybrand [1999] OJ L50/27. Decision IV/M.1219 of the Commission of 21 September 1998 on Seagram/ Polygram [1998] OJ C309/8. Diaz, F.E.G. 2004. The Reform of European Merger Control: Quid Novi Sub Sole? World Competition 27: 177-199. European Court of Justice, Bertelsmann and Sony Corp of America v Impala, Case C-413/06 P, not yet reported. European Court of Justice, Commission v. Tetra Laval, Case C-12/03 P [2005] ECR I-978. European Court of Justice, France and others v. Commission, Case 30/95 [1998] ECR I-1375. Impala. Press releases. http://www.impalasite.org (Accessed November 21, 2008).

317

Rethinking.book Page 318 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Kroes, Neelie. 2007. Answer of Commissioner Neelie Kroes given on behalf of the European Commission to Parliamentary question nr. P-5280/2007, December 7. Levy, Nicholas. 2005. Mario Monti’s Legacy in EC Merger Control. Competition Policy International 1 (1): 99-132. Monti, Mario. 2002. Merger Control in the European Union: A radical reform. Speech given at the European Commission/IBA Conference on EU Merger Control, Brussels, November 7. Opinion of Advocate General Kokott, European Court of Justice, Bertelsmann and Sony Corp of America v Impala, Case C-413/06 P, not yet reported. Opinion of Advocate General Tizzano, European Court of Justice, Commission v. Tetra Laval, Case C-12/03 P [2005] ECR I-978. Ranaivoson, Heritiana. 2006. Cultural Diversity and Competition Policy in the Recording Industry. Paper presented at Fourth International Conference on Cultural Policy Research, Vienna, July 12-16 2006. Simpson and Thacher. 2007. The European Court of First Instance Annuls the European Commission’s Decision Approving the SonyBMG Joint Venture. http://www.simpsonthacher.com/content/publications/pub558.pdf (Accessed November 22, 2008). Van Rompuy, Ben, and Caroline Pauwels. 2008. The European Commission’s Re-examination of the Sony BMG Merger: a Precedentsetting Attempt to Jump the Fence. GCP Online Magazine for Global Competition Policy, July 2008 (2). Quatremer, Jean. 2002. Un contrôle des fusions plus intense. Libération, November 7.

318

Rethinking.book Page 319 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective Paul de Hert, Bert-Jaap Koops and Ronald Leenes

Introduction This contribution is based on a book with seven country reports, covering Belgium, Canada, France, Germany, the Netherlands, Sweden, and the US. These reports study the changes in constitutional rights and human-rights policy related to developments in respect of Information and Communication Technologies (ICT) and other new technologies. The main focus is on the constitutional rights to privacy and data protection, inviolability of the home, secrecy of communication, and freedom of expression.1 The central aim of this chapter is to identify which developments have taken place in the countries at issue with respect to constitutional rights and new technologies, in particular since 2000. Knowledge of these developments may help countries in adapting or updating their Constitution, as it provides inspiration for diverging strategies to achieve functionally equivalent results, i.e. the continued protection of the widely shared constitutional values of privacy and freedom of expression. Constitutional rights provide the citizens with a basic level of protection: they establish the core rights the citizens need to survive and to develop themselves in society. Constitutional rights tend by their nature to be general and stable, and they have a long life-span. In contrast, technologies tend by their nature to be rather volatile and in constant development. The enormous – both positive and negative – impact of technologies, not least of ICT, has significant implications on society for the constitutional protection of citizens. An obvious tension thus exists between long-standing constitutional rights and new and constantly developing technologies. Countries somehow have to deal with this tension, although depending on their constitutional system and legal tradition, they may do this in various ways. Most legal systems have in

1.

The book was a sequel to an earlier study carried out in 1999-2000 under supervision of Alis Koekkoek of Tilburg University. Koekkoek, et al. 2000.

319

Rethinking.book Page 320 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

one way or another, through legislation or case-law, addressed the advent of large-scale computing and data processing in the 1980s and of the Internet in the 1990s. But legal solutions found in the 1980s and 1990s are no longer sufficient, as technologies continue to develop. This chapter starts with a brief survey of recent developments in technology that may offer novel challenges to citizens’ constitutional protection. This survey is followed by a section on Western constitutionalism that discusses the nature and main characteristics of Western constitutional systems and the changes therein, in particular since 2000, for instance with respect to constitutional review, horizontal effect, and the influence of international law. The third section discusses privacy issues and privacy related issues (data protection, protection of the home). The fourth section deals with communication-related rights such as the right to secrecy of communications and the freedom of expression. A short and final section on ‘other constitutional rights affected by technology’ is followed by conclusions.

1.

Background: developments in technology

Mobile phones became common in the 1990s, and are currently replacing traditional fixed telephones as the principal means of telephony. Mobile communication differs from traditional telephony in a number of ways. Mobile phones are, for instance, carried along instead of bound to a location: they are thus less likely to be shared by multiple individuals, like in a family. This implies that conversations involving a mobile phone are likely conducted by the owner of the device. Furthermore, the precise location of the device is known to the communication service provider, which means that also the current location of the device's owner is known. And finally, mobile phones contribute to potential for constant availability of those users that have their phones on. Telephony is also moving to the Internet, with Voice over IP (VoIP). Whereas traditional telephony, including GSM, can easily be wiretapped, this is not the case with most VoIP systems, such as Skype. VoIP therefore differs from other forms of telecommunication with respect to the confidentiality of the communication. These types of developments lead to a first series of problems as they affect the discussions with respect to a potential constitutional right to anonymity and the protection of so-called traffic data – two issues debated in the 1990s, for example, in the Netherlands. These issues have received new input. New arguments in favor of a right to anonymity have been put 320

Rethinking.book Page 321 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

forward,2 and also arguments that favor the equal treatment (i.e. equal protection) of traffic data and content have been issued.3 As a result of technological developments, possibilities for monitoring telecommunications increase. This calls for a reflection on the fundamental rights to confidential communication and protection of privacy. Also with respect to other Internet applications, significant changes that may affect constitutional rights have been witnessed since the end of the 1990s. Peer-to-peer (p2p) networks facilitate information exchanges in ways that do not easily reveal the sender(s) and recipient(s). Google has become synonymous with searching the Internet. The flipside is that Google retains an enormous amount of information about what is on the Internet, as well as on the information needs of its users. Both Google's search capabilities and the possibilities to use its logfiles to study information needs – and thereby the preferences – of its users, raise serious questions with respect to privacy of Google users. The US government, for instance, in early 2006, requested search engine providers, including Google, Yahoo, and AOL, to provide large amounts of search queries to establish how easy it is for users of search engines to locate online pornographic material.4 Google and other search engines also play a role in the debates on other constitutional rights. They filter information at the request of the Chinese government that aims to ban politically sensitive material and porn. This means in practice that Google operates as a censor.5 The considerable effects of search engines, such as Google, on society call for critical reflection.6 A second series of problems regards the respect for the constitutional right to the inviolability of the home.7 Many constitutional provisions, for instance Articles 11 of the Dutch Constitution, protect the home. Since these provisions are formulated in a rather general way, they have not been given attention to in literature. This neglect is deplorable, since new and relatively unknown technologies threaten the sanctity of the home in unprecedented ways. More and more technology is built-in in the house and it is increasingly possible to obtain information covertly, through surveillance, at a distance. The means to enter the individual's private sphere also evolve in the physical world. Communication by individuals is 2. 3. 4. 5. 6. 7.

Ekker 2006. Smits 2006. Hafner and Richtel 2006. BBC News 2006. See Van Eijk 2005. Koops, Van Schooten and Prinsen 2004.

321

Rethinking.book Page 322 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

increasingly carried out by means of electronic devices, such as computers, (mobile) phones, and PDAs. These devices communicate by means of cables, but also over wireless networks. Both can be monitored remotely. This means that private communication in the home can be monitored from the outside without the subjects being aware of this. This kind of unobtrusive eavesdropping is possibly not covered by the constitutional right to inviolability of the home.8 Advanced equipment, such as millimeter scanners, can see through clothing to reveal weapons carried on the body of the subject.9 These devices are currently being tested in airports. TNO – a Dutch governmental research institute – is developing terrahertz scanners that can see right through walls. This allows the detection of people in a room. As a result, houses and bodies become more transparent: clothes and walls no longer veil hidden secrets. In the longer term, a reflection on the interpretation of the concept of ‘home’ is required. The function of the house will slowly change, incorporating more and more activities that used to be done outside, such as working and socialising. At the same time, the feeling of ‘being home’ will sometimes extend to the outside world. Ambient intelligence enables a cab or a hotel lobby to anticipate your personal preferences, playing your favourite music and adjusting light and colours just like you have them at home. Such developments suggest that in the longer term, courts cannot simply look at ‘home’ as the place where a bed is located, but they must look at the function of a place in the context of the private life of the individual citizen. In other words, perhaps courts will have to look more where people feel at home than where people sleep. A third series of problems regard the respect to the constitutional right to inviolability of the body. Although the issue of the inviolability of the body will not be considered in this chapter, it is worthwhile to briefly highlight these problems.10 The inviolability of the body is enshrined in many Western constitutions as a right to defend oneself against violations of the integrity and sanctity of the body, including the mind. The right seems to be restricted to activities that influence the body from the outside: merely taking stock of a body (for instance by filming it is not a violation, as long as the body is in no way affected. The right is at stake in various criminal investigation procedures, such as searching clothes, external and intimate body searches, identification measures like shaving 8. Ibid. 9. Simonite 2006. 10. See more in detail, Koops, Van Schooten and Prinsen 2004.

322

Rethinking.book Page 323 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

a beard or making people stand in a line for witness confrontation (lineups), and DNA investigation. Technology will change the functioning of the body in numerous ways, for instance, with smart clothes, chip implants, brain-machine interfaces, and cancer-fighting nanoparticles travelling the arteries. Increasingly, body and technology will integrate. At the same time, opportunities to invade or to scan the body from the outside will expand, from cameras that photograph the naked body underneath clothing to, perhaps, brain lie detectors and electronic ‘mind readers’. DNA investigation will necessitate various choices in the near future. While current forensic DNA law is almost solely targeted at profiling, attention should be given to the increasing possibilities of deriving genetic information from DNA. This requires reflection on the scale of retention of DNA samples and particularly on the conditions under which DNA material may be analysed for genetic information. The same holds for intercepting brain signals. It is to be expected that brain implants or chips connected to the nervous system will increasingly be used to perform certain external body functions, such as moving an artificial leg or moving a cursor on a computer screen by someone who is completely paralysed. Such applications will largely be medical in nature and uninteresting to law enforcement. Nonetheless, it is a relevant theoretical question to what extent the police should be allowed to intercept brain signals, for instance those that a paralysed person communicates to another person through a brain implant. This kind of interception will not only infringe the secrecy of communications, but also, quite penetratingly, bodily integrity and the inviolability of the mind. And, while one thinks of such futuristic scenarios, how should a network search deal with body or brain chip implants that are connected to computer networks? After this overview of technological developments, let us now turn to Western constitutionalism and identify its general features.

2.

Brief discussion of Western constitutional systems

2.1. Little constitutional dynamics as a general trend Constitutions ground systems of law. Ordinary laws are voted and organise society within a constitutional framework. This function explains why

323

Rethinking.book Page 324 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

constitutional systems hardly show any change.11 The US is an example of a very stable system. Their ‘rigid’ constitution is steadfast: significant amendments have been added, but not a single line has so far been altered or omitted. One could even question the necessity of such amendments from a technological viewpoint. As will be discussed below, most constitutional rights are phrased in terms that are technology neutral. Hence, the right to free speech in the First Amendment to the US Constitution can be exercised regardless of the technology that is used to express oneself. Moreover, there is the Supreme Court. This constitutional court has produced several relevant judgments that keep the interpretation of the Constitution up-to-date in light of technological and other developments. Belgium, then again, is an example of a country that has been very static from a constitutional point of view, but that lately has started to incorporate many changes. The original 1831 Constitution has received several important revisions between 1970-1993 in order to transform the Unitarian centralised state into a federal state, with a plurality of legislative bodies with distinct competences, and governments. In addition, the Constitution was supplemented with certain fundamental rights relevant to this study in 1993-1994 and in 2000. Moreover, the Court of Arbitration, operational since 1984 as an arbiter between the different legislative bodies, became a full Constitutional Court in 2004. The Netherlands, with provisions in its Constitution that are not technology neutral (the exercise of certain rights depends on the technology that is used), is an example of a country where considerable debate has taken place on amending the Constitution in light of the ‘digital age’, but even there, despite several Bills having been drafted, the Constitution is still to be amended. In general, most legal systems only reluctantly alter their constitutions. If they do, it is rarely with technological developments in their minds. Even in Belgium, technological developments have not been a primary trigger for constitutional amendments. The fact that this country has been the most dynamic among the countries surveyed in this book in constitutional change since 2000, indicates that new technologies have overall had little impact on constitutional changes over the past years. The lack of profound constitutional changes in the countries surveyed has without a doubt an institutional logic. Constitutions generally have a ‘rigid’ 11. A similar conclusion was drawn by Franken and Koekkoek 2006 on the basis of a survey of Canada, Denmark, Japan, and the Netherlands.

324

Rethinking.book Page 325 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

status and are not meant to be amended or altered swiftly. This seems to be even more the case in federal systems with a delicate balance of power between different governments. The US, where the 1789 Constitution is still in function more or less in its original form, is a case in point. The Canadian fundamental rights, as formulated in the Canadian Charter of Rights and Freedoms (Part I of the Constitution Act, 1982), are also extremely difficult to amend. The consent of the Parliament is needed together with the agreement of seven out of ten provincial legislative assemblies, representing more than 50 percent of the population.12 Another reason that none of the countries have undergone profound constitutional changes due to the emergence of new technologies, is that most constitutional rights, unlike Articles 7 and 13 of the Dutch Constitution,13 are drafted in general terms broad enough to encompass new technologies. Freedom of expression and the right to secrecy of communications, for example, are usually worded in a technology-neutral way or, as for instance in Sweden, with open ended text like ‘and other technical recordings’ and ‘or other confidential communications’. Most legal scholars stress the importance of technology neutrality in constitutional protection, given the usually complex process of amending the Constitution. However, one author warns that technology neutrality poses the risk of constitutional rights becoming very vague, thereby diluting constitutional protection. In that respect, open-ended formulations are to be preferred over general, abstract formulations.14

12. See also Franken and Koekkoek 2006, 1162. 13. Article 7 of the Dutch Constitution on freedom of expression states that “(1) No one shall require prior permission to publish thoughts or opinions through the press, without prejudice to the responsibility of every person under the law. (2) Rules concerning radio and television shall be laid down by Act of Parliament. There shall be no prior supervision of the content of a radio or television broadcast. (3) No one shall be required to submit thoughts or opinions for prior approval in order to disseminate them by means other than those mentioned in the preceding paragraphs, without prejudice to the responsibility of every person under the law. The holding of performances open to persons younger than sixteen years of age may be regulated by Act of Parliament in order to protect good morals. (4) The preceding paragraphs do not apply to commercial advertising”. Article 13 on the secrecy of Communication states that “(1) The privacy of correspondence shall not be violated except, in the cases laid down by Act of Parliament, by order of the courts. (2) The privacy of the telephone and telegraph shall not be violated except, in the cases laid down by Act of Parliament, by or with the authorization of those designated for the purpose by Act of Parliament”. 14. Sjöberg 2008. On the pros and cons of technology neutrality and strategies to deal with the trade-off between sustainability of law and legal certainty, see Koops 2006.

325

Rethinking.book Page 326 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Still, the technology neutrality of most constitutional rights does not account wholly for the lack of dynamics. Developments in ICT and new technologies are simply seldom looked at from a constitutional or humanrights perspective, perhaps with the exception of some privacy issues. This seems to be especially the case for countries with older constitutions (Sweden, the US, Belgium, and the Netherlands). These texts often tend to be more concise and less value-driven. The more pragmatic approach of Belgium contrasts heavily with the more principled approach of Germany and France, for instance in the area of biomedical technologies. It is not possible at this stage to assess these differences. One could also hold that the seemingly pragmatic approach in Belgium is inspired by the liberal value of freedom (e.g. to sell one’s organs or to alter one’s body) that dominated most nineteenth-century Constitutions. The impression, nevertheless, remains: technology seemingly produces little constitutional dynamics. This is not to say that constitutions are entirely dormant. In France and Germany, for example, constitutional rights play a fairly active role in debates about technological developments. In Germany, this is due to the presence of many value-driven constitutional rights (post-Wold War II). There is so much ethics in this anti-Holocaust document that the slightest ethical implication of a new technology will directly reverberate in the Constitution. In France, technological developments often trigger constitutional debated due to procedural reasons. For example, there is a rule in the French Constitution entrusting the legislator with the task to define the guarantees to the exercise of fundamental rights and liberties. Hesitations by the legislator to fulfil this role account for most of the constitutional case-law produced by the French Constitutional Council in the area of new technologies.15

2.2. The impact of international legal instruments International human-rights treaties such as the European Convention of Human Rights and Fundamental Freedoms (ECHR) (1950) and the UN International Covenant on Civil and Political Rights (1966) play an important role in the constitutional tradition of most European countries. In Belgium, France, Germany, and the Netherlands, directly binding rights from international treaties, which are sometimes absent in the national constitutions, play a major role. The ECHR is more specific with regard to the possibilities for limitation, whereas the national constitutions tend to

15. Coudert, Debet & De Hert 2008.

326

Rethinking.book Page 327 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

emphasise the existence of rights as such and usually do not go beyond the requirement that limitations have to have a legal basis. Although not all of these European countries belong to the monist tradition (like France, Belgium and the Netherlands), they are all eager to have cases decided in accordance with the case-law of the European Court of Human Rights. This situation stands in a striking contrast with the ethics of the US Supreme Court which, as a rule, does not refer to international treaties or case-law of foreign or international courts. Limitations to US constitutional rights do not resemble the European approach. The First Amendment concerning freedom of expression omits every mention of the possibility to restrict this right, and the Fourth Amendment has its own particular requirements regarding limitations. The open attitude in the European countries also concerns acts and initiatives generated not by the Council of Europe, but by the European Union. Very often, ordinary legislation with regard to technological developments in the Member States of the European Union is enacted as a result of obligations created at the EU level by directives or by (framework) decisions. The position of the French Constitutional Council not to supervise national laws that implement European initiatives might be problematic from a constitutional point of view with regard to third-pillar ‘laws’ enacted without co-decision power of the European Parliament and without effective judicial control by the European Court of Justice.16 However that may be, the omnipresence of the European law-maker in areas affected by technological change likely also contributes to the lack of national constitutional activity discussed above.

2.3. Constitutional review Above it was observed that most Western countries have constitutional rights with an open texture that apply in one way or another to the use of new technologies. In addition, most of these countries have a system of constitutional review, ranging from unlimited variants, such as the US (all courts without limitation in time), to more limited variants, such as France (only the Constitutional Council before or six months after the adoption of the text of the law). From a theoretical perspective, one could argue that the continuous development of technology does not allow a court to decide on the constitutional nature of a given law in too short a period of time, but this argument is not supported by the French constitutional practice. 16. See on this, De Hert 2004.

327

Rethinking.book Page 328 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Although there is a time limit to review, the active French constitutional court is seemingly unhampered by the requirement to demand constitutional review within six months of enactment of a law.17 It is therefore difficult to conclude on the eligibility of a particular form of constitutional review. There is however no question about the importance of having at least one form of constitutional review to begin with, and this is a major point of attention for the Netherlands. Particularly now that Belgium has recently opted for a fairly broad form of constitutional review, the Netherlands have become rather isolated in the Western constitutional scene by their prohibition of constitutional reviews (Art. 120 Gw). Despite recommendations by the Koekkoek report, the Commission on Fundamental Rights in the Digital Age (CFRDA), and the ‘National Convention’, constitutional review is still not possible in the Netherlands. As constitutions are amended to update the constitutional rights in the light of new technologies – particularly if they are made considerably technology-neutral, like intended in the Dutch proposals, constitutional review is an important safeguard for effectuating constitutional protection in actual practice. Having said this, it should be noted that constitutional review does not solve all problems. It allows the courts to keep the Constitution alive and to keep a check on the legislative activities of the legislature. But it can also function as a restraint on constitutional vitality. American constitutionalism clearly spells out a backward evolution with regard to judicial activism: most of the expanding interpretations of existing rights are set back by the present Court with its more conservative composition.18 Effective human-rights protection therefore cannot rely solely on the eagerness of judges to apply constitutional principles to the society of today. Judges also need to work on the basis of constitutional texts and principles that guide them through their work, and hence, constitutions should have truly guiding principles and should not become too abstract or too general.

2.4. Horizontal effect Technology is not an instrument specifically for governments; citizens depend on the use of technology at least as much. Most constitutions, 17. Coudert, Debet & De Hert 2008. 18. Brenner 2008.

328

Rethinking.book Page 329 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

however, do not contain any clause relating to the horizontal effect of fundamental rights.19 Constitutional law seems to be devised as an instrument to regulate vertical relations and to protect the citizens against governmental power abuses. It is clear that similar power abuses can occur by private actors, including businesses, but this has not had a clear effect on constitutional protection at large. The observation is striking. Constitutions do not seem to protect against fellow citizen or against firms infringing on rights. Most constitutional systems address the issue of horizontal effect by assuming in one way or another that it is up to the legislator to convert fundamental-rights protection into specific legal norms that apply between citizens, for example in data-protection acts. Some constitutional courts have gone one step further and recognize a direct effect of constitutional rights on relationships between citizens.

3.

Privacy

When discussing infringements of technology (or the use of technology) on human rights, privacy is often the first right to be mentioned. It is an important right in many technological debates, but its constitutional status is not always very solid (see below). In Europe this problem is solved by the existence of Article 8 paragraph 1 ECHR. The recognition of a privacy right on the European level compensates for national systems that do not recognize this right. Article 8 paragraph 2 ECHR allows for certain limitations to the privacy right granted that there is a legal basis, a legitimate purpose and a proven necessity for the limitation.

3.1. General overview of the constitutional systems The right to privacy is not explicitly mentioned in the Canadian, US, French, German, and Swedish constitutions, but it is recognised as being a part of the constitutional heritage in all the reporting countries. Belgium has, like the Netherlands, a general privacy right, albeit of a more recent date. The 1994 insertion of this right in Article 22 of the Belgian Constitution is remarkable: it copies the general wordings of the right as formulated in Article 8 paragraph 1 ECHR, but omits the limitation grounds of paragraph 2 of this article. Seemingly Belgian constitutional law is far more flexible for state authorities to limit privacy: only a legal basis is required, whereas Article 8 paragraph 2 ECHR requires, on top of legal basis 19. See also Franken and Koekkoek 2006, 1155.

329

Rethinking.book Page 330 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

for privacy limitations, a legitimate purpose and a proportionality check. When Belgium adopted the amendment, it was asserted that the right and its limits should be understood along the lines of the ECHR and its case-law. It is unclear whether such a use of supranational constitutional law at the expense of national constitutional law is ultimately beneficial to privacy protection. Given the fact that proportionality is at the heart of many constitution-related privacy debates, it can be recommended to codify at least this criterion, if not the other elements of Article 8 ECHR, in the national constitutions’ unequivocal order to the legislator to explain the proportionality of proposed privacy-infringing laws. Privacy in general may be expressed in different terms and may also be constructed differently. In Germany, where neither privacy nor data protection20 are mentioned in the Constitution, the sources are Article 2 paragraph 1 (liberty) and Article 1 (human dignity). In France, the source of privacy is not human dignity, but liberty. Besides an implicit recognition by the French Constitutional Council in 1997, privacy was more explicitly recognised in French constitutional law in 1995-1999 as a part of the more generic right to individual liberty (Art. 66 Constitution) and rooted in Article 2 of the 1789 Declaration of Man and the Citizen: the right to liberty as an unalienable human right. It is hard to assess the implications of these different expressions of the right to privacy. Is there a need for a recognition of privacy as an autonomous self-standing right as is the case in the ECHR and in the Dutch and Belgian constitutions? It is clear that the choice of Article 1 of the German Constitution as the source for the right to privacy is important for its strong position in German constitutional law. The experience of US constitutionalism and its sad story of privacy protection clearly demonstrate the weakness of privacy when it is not provided for explicitly in the constitution: privacy protection can be built up or broken down by judges, and can therefore fluctuate significantly in time. It has been observed above that the right to privacy is not explicitly mentioned in the Canadian and US constitutional order. It is read into other rights. The main constitutional provision in both Canada and the US, into which privacy is read, is the provision protecting against unreasonable searches and seizures. Analysis suggests that this right is formulated in terms that are perhaps too physical, but that the wordings are (still?) open enough for the courts to apply them in a rapidly changing world.21 A 20. On data protection, see below 21. Brenner 2008; Young 2008.

330

Rethinking.book Page 331 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

crucial element in both rights is that they protect people, not places. This approach has significant advantages in a technology-driven world where traditional notions of place become blurred. In a world of Ambient Intelligence, ‘place’ becomes something that centres around people rather than physical objects or geographical locations, since the surroundings change along with the people acting in them.22 Courts in Canada and the US also use the criterion of ‘reasonable expectations of privacy’ to determine whether certain measures are acceptable. The application of the criterion, especially in the US, seems rather tricky for privacy protection in a rapidly changing world, where technology permeates everyday life. As technology develops, the ‘reasonable expectation of privacy’ develops along with it, generally to the detriment of privacy, as technology tends to decrease privacy expectations.23 An example is the Kyllo case in the US, where the Supreme Court used the criterion of a device being ‘in general use’ to determine whether or not it infringed privacy.24 As most technology applications tend to develop from limited, sectoral use to general, public use, the related privacy expectations at some point in time will become unreasonable. Due to this kind of reasoning that is counter intuitive one has to conclude that within the US constitutional system one cannot expect privacy to be respected after a privacy eroding device is put on the market and becomes in general use. Hence, using ‘reasonable expectations of privacy’ to face developments in technology poses the risk of a slow but certain erosion of privacy. Although the criterion is not wholly absent in the case-law of the European Court of Human Rights,25 courts and legislatures should be cautious in applying it in the field of technology law.

3.2. Data protection Recently, the role of data protection has received constitutional recognition in the Charter of fundamental rights of the European Union.26 In the Charter, right to data protection has been recognised, quite separately from a right to a private life for the individual. The right to have 22. 23. 24. 25.

See also infra 3.3. See Koops and Leenes 2005. U.S. Supreme Court, Kyllo v. United States, 533 U.S. 27 (2001), ECtHR, Halford v. United Kingdom, [1997] ECHR 32, par. 42. See also, generally, Nouwt, et al. 2005. 26. See European Commission. Justice and Home Affairs.

331

Rethinking.book Page 332 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

personal data protected is, however, not explicitly mentioned in the majority of the Western constitutions, with the exception of countries such as Sweden (Ch. 2, Art. 3, para. 2 Instrument of Government) and the Netherlands (Art. 10 paras. 2-3 Gw). Nevertheless, it is recognised as part of the constitutional heritage in most countries. Its incorporation in the EU Charter may be a sign of growing recognition for data protection as a constitutional right. Whether data protection will further develop as an autonomous right, independent from privacy,27 remains to be seen: in most countries, data protection is (still) largely discussed in the context of privacy. In Germany, the right to informational self-determination is a stand-alone right next to privacy. In France and Canada, the data-protection laws have to a large extent a quasi-constitutional status. The French Data Protection Act is of a general nature. In Canada, the 1983 Privacy Act was designed to protect personal data in the federal public sector, whereas the 2000 Personal Information Protection and Electronic Documents Act was enacted to protect personal information in the private sector. Only the former has quasi-constitutional value: it will trump other laws unless the other act addresses the privacy issues. The latter has the status of ordinary legislation. The 1995 EC Data Protection Directive primarily provides data protection in the European reporting countries.28 Whereas Canada has responded to this initiative by enacting similar legislation, the US has refrained from adopting general data-protection legislation. In US law some basic principles of data protection familiar to the Canadian and European regulations are absent. As soon as one gives data away or shares them, legal protection stops. The purpose-limitation principle, i.e. the principle that data should be collected and processed according to a predefined goal or purpose, has not found firm ground in the US tradition, although the added value of the principle to the rights protection of the citizen is clear-cut. Data-protection principles are important yardsticks to measure new developments in the respective constitutional regimes. Constitutionalisation of these principles in national law, in line with the EU Charter, is therefore to be recommended. In that respect, it is worth mentioning that the protection personal data in the EU Charter is very firm and more inclusive than the protection of personal data in the Dutch Constitution (Art. 10 para. 3 Gw). The Dutch Constitution does not, for instance, mention the role of the Data Protection Authority. Generally, one senses reluctance on 27. As recommended by some scholars, e.g., Blok 2002. 28. See also Franken and Koekkoek, 1160.

332

Rethinking.book Page 333 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

the side of the courts in many countries to apply data-protection principles to their fullest extent. This is partly compensated for by the activities of the national Data Protection Authorities.29 The recognition of their role in the EU Charter seems therefore to be the right option and it can be recommended that these institutes be given constitutional recognition in national constitutions. Also, the pivotal role of the purpose-limitation principle in many privacy debates, such as the debate about privacy versus security, also suggests that this principle should be part of the constitutional codification of data protection. Culture seems to be a factor of importance with regard to data protection. Sweden was the first state (after the German Land of Hessen) to enact a national data-protection act (1973) and Chapter 2, Article 3 of the Instrument of Government recognises that ‘every citizen shall be protected against any violation of integrity by automatic processing’. Yet, at the same time, Swedish constitutionalism is dominated by the notion of transparency and access to government information. Sweden therefore struggles with the implementation of the main principles of the European Data Protection Directive. It in fact is now proposing a more US-like dataprotection regulation that does not focus on prevention, but on data abuse.30 The Swedish development warrants closer scrutiny: it can be questioned whether the European data-protection system, with its focus on a priori regulation of data collection and processing, can be upheld much longer in today’s world, where data processing occurs in so many ways, to such an extent, and for so many purposes. Shifting the focus of legal protection to a posteriori regulation of data abuse might turn out to be a better strategy to protect individuals in the long run. In most Western states, specific issues have determined the focus of the constitutional privacy and data-protection agenda. These agendas overlap only partially, except with regard to the issue of balancing privacy and security: this issue has triggered significant debates and legislative activity in all countries. As a consequence of the September 11 attacks, many countries have adopted anti-terrorist laws with new police powers – often but not always technology-related – that infringe privacy or dataprotection principles. Some constitutional courts resist against intrusive government powers. For instance in Germany, a Court has tied video 29. In France, for example, the Data Protection Act is acknowledged as law which guarantees a constitutional right, but the control of it by the Constitutional Council is weak. The Council only formally controls whether other laws respect the dataprotection guarantees and principles established by the Data protection Act. In reality, control is therefore realised by the CNIL. 30. Sjöberg 2008.

333

Rethinking.book Page 334 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

surveillance in public places to the requirement that the location has objective indications of dangerousness.31 In general, however, constitutional rights have not functioned to substantially limit or block legislative proposals to extend government powers to enhance security. At the same time, it should be noted that in several countries, the move towards more security measures to the detriment of privacy started already before 9/11, even if the terrorist attacks seem to have speeded up certain measures.

3.3. Inviolability of the home The inviolability of the home is covered explicitly in most European constitutions, except the French, and via the protection against unreasonable searches in the Canadian and US systems. Although these provisions have not triggered much debate in the reporting countries with regard to technological developments, two observations can be made. The first observation regards the source of these provisions. Whereas French constitutional law considers the right to have the home protected a component of individual liberty (Art. 66), most other systems identify privacy as a basic value underlying the protection of the home. This view certainly corroborates the observation that if there is an inner and outer sphere of privacy, then the home belongs to the most inner sphere (in the German term: Kernbereich) of privacy. This is not unproblematic, however. Indeed, the right to have the home protected is much older in legal history than the right to privacy, which was only recognised as such in twentiethcentury constitutions. In the nineteenth century, it was therefore held that the right to property was at the core of the values underlying the protection of the house. It is unclear from a digital-rights perspective whether the right to inviolability of the home should be conceived as an independent right based on a plurality of values (liberty, property, privacy, etc.) or as a privacy-specific right protecting not bricks but people. This issue certainly merits further debate. Second, linked to the foregoing, it appears that the current conception and wordings of the right to inviolability of the home is not technology-proof. The right seems too poorly formulated to tackle appropriately certain problems with regular video surveillance in public places (the issue of homes is often addressed in this context), with satellite video surveillance, with RFID, with data relating to living conditions in houses (such as water 31. VGH Mannheim 2004, 498.

334

Rethinking.book Page 335 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

and electricity bills), and with heat surveillance and other forms of scanning the home from the outside. Related to the latter, Article 13, paragraph 1 of the German Constitution – ‘The home is inviolable’ – has been complemented with a paragraph to allow the use of wiretaps, bugs, and similar equipment in homes for fighting organised crime, ‘provided that alternative methods of investigating the matter would be disproportionately difficult or unproductive’. Similar issues in other countries have given rise to case law. The Belgian Constitutional Court made it clear in 2004 that police competence to use bugs in houses needed to fulfil all the requirements of regular physical searches. An issue not yet addressed in case law is to what extent the inviolability of the home protects against hacking into or searching, by means of a network connection, personal computers located in the home. Both observations give rise to two questions that should be answered by constitutional legislators. First, are the spatial dimensions of terms such as ‘home’, ‘search’, and ‘illegal trespassing’ technology-proof, given the new means of monitoring the home from the outside in increasingly intrusive ways?32 Second, what exactly is being protected by the inviolability of the home: the place or the people? Property, liberty, or privacy – or a combination of all these? It is important to take a stance on this, with a view to longer-term developments. For example, there are domotics, which make homes ‘intelligent’ and therefore more revealing of intimate life to outside snoopers, and Ambient Intelligence, where a personalised environment follows individuals as they move around, rather than that individuals have a fixed geographical basis for a private sphere in the form of their physical home. In the long run, the very notion of ‘home’ may need to be adapted itself to denote the personalised sphere around an individual rather than a fixed, brick-and-mortar place.

4.

Communication-related rights

Next to privacy and data protection, technological developments might raise questions about other rights such as the right to secrecy of communications and the liberty to express oneself.

32. Cf., Koops, et al. 2004.

335

Rethinking.book Page 336 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

4.1. Secrecy of communications The right to secrecy of communications is explicitly recognised at the constitutional level in Germany, Sweden, and the Netherlands. Whereas the Netherlands only protects letters, the telephone, and the telegraph (Art. 13 Gw), the former countries use a sufficiently technology-neutral formulation: “the privacy of correspondence, posts, and telecommunications” (Germany) and “mail or other confidential correspondence, (…) telephone conversations or other confidential communications” (Sweden) (emphasis added). In Belgium and France, the secrecy of communications is not regulated at the constitutional level, but by lower legislation; Belgium only provides a constitutional protection of mail (letters). In Canada and the US, the secrecy of communications has been read into the constitutional protection against unreasonable search and seizure. In Canada, e-mail falls within the scope of this protection, albeit to a lower degree than letters. In the US, the constitutional protection of e-mail is still undecided. This is similar to France, where the protection of e-mail by ordinary legislation, as interpreted by the Constitutional Council, depends on the circumstances. In these countries, encryption of e-mail is likely a sufficient condition to invoke legal protection, but it is not a necessary condition: depending on other circumstances, unencrypted email can also be considered secret.33 As with the inviolability of the home, it is relevant to consider the exact nature of what is being protected: the communication itself, the place where the communication takes place, or the medium over which the communication is transported? The importance of this issue is borne out by the Dutch discussions, where different interpretations of the nature of the protection lead to differing proposals for reformulating the constitutional provision34 The US approach, similar to the Canadian approach, that the Fourth Amendment protects ‘people, not places’, was established in the Katz decision on wiretapping. This remark referred, however, primarily to the place where the interception occurred: a public phone booth. The argument was that people can have a reasonable expectation of privacy even in a public space. This gives little guidance as to the core of protection, but it is presumably more closely related to protecting the sender or recipient of a communication and the

33. Cf. with the Weir case in Canada. The Court in R. v. Weir drew an analogy between emails and first class letters to illustrate which aspects of an e-mail carry a reduced expectation of privacy (ABQB, R. v. Weir 1998 A.J. No. 155). 34. See Koops and Groothuis 2008.

336

Rethinking.book Page 337 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

communication itself, than to protecting the medium transporting the message. The German approach differs in this respect. The German Constitution protects the confidentiality of individual communications that depend on a third party for transmission; it principally covers all forms of mediated communication for the period of the transport. It is, hence, the channel that is protected rather than the communication as such. The French protection in ordinary legislation seems to be based on the same approach of protection while in transit. This ‘channel’ approach has advantages in that it provides more legal certainty in terms of what kind of communications are protected, namely that all communications transported across a media like the telephone are protected as such. In the ‘communication’ approach, the medium is neither a sufficient nor a necessary condition: protection has to be determined on a case-by-case basis, by looking at all relevant aspects of the communication itself. A channel approach is, however, more difficult to maintain as media converge. This is visible in Germany, where only individual communications are protected, not mass communications such as broadcasts. This distinction is blurred now that communications infrastructures converge: e.g. there is narrowcasting on TV infrastructures, broadcasting on the Internet, and there are types of communication on the Internet, such as blogging or communicating in large-scale but ‘closed’ communities like Hyves, that are not easy to call either individual or mass communications. It is difficult to conclude on the eligibility of either a ‘communication’ approach or a ‘channel’ approach. It is nonetheless advisable that constitutional legislators at least make an explicit and argued choice in this matter, to provide as much legal certainty as possible in this complex area.

4.2. Traffic data and data retention A relevant issue is to what extent the constitutional protection of secrecy of communications covers traffic data (such as the number, time, and – with mobile communications – location of a call). Generally, the reporting countries make a distinction between the content of communication and traffic data. There seems to be a traditional tendency in most countries to consider the latter less privacy-sensitive than the former, although the literature in some countries increasingly argues that traffic data should be

337

Rethinking.book Page 338 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

considered equally privacy-sensitive.35 In Germany and Belgium, traffic data fall within the scope of secrecy of communications (Art. 10 GG, Art. 122 et seq. Belgian Electronic Communications Act of 2005).36 In the Netherlands, however, traffic data are seen as part of privacy and data protection instead (Art. 10 Gw). In Canada and the US, traffic data are treated – like the content of communications – in the context of unreasonable search and seizure, but with different outcomes: whereas the US denies constitutional, Fourth Amendment, protection to traffic data outright, Canada assigns some constitutional, Section 8, protection to traffic data, albeit to a lower extent than communication content. Given these varying constitutional approaches, it is hard to recommend how exactly traffic data should be protected at the constitutional level; perhaps it is ultimately a matter of choice to be made in light of the national interpretation of rights to secrecy of communications, privacy, data protection, and protection from unreasonable search and seizure. It should also be noted that, however varying the constitutional approaches may be, the material protection for traffic data does not necessarily differ that much in practice, since it is usually provided by ordinary legislation. The US ECPA, for example, offers more protection than the Fourth Amendment Katz standard. Another topical issue is data retention: the requirement for telecommunications providers to store traffic data for a certain period, as a measure to combat serious crime and terrorism. Significantly enough, this measure is only taken in Europe, with the 2006 Data Retention Directive.37 It does not feature in the US anti-terrorism PATRIOT Act, nor are there proposals considering data retention in the US or in Canada. In Europe, France and Belgium had enacted data-retention legislation before the EC Directive. In France, the application Decree bringing into force the so called Daily Safety Act was published in 2006, and ultimately approved by the CNIL as being constitutionally acceptable, given law’s limitations on purpose-specification and duration. In Belgium, the implementing decree for Article 126 Electronic Communication Act is still in preparation. 35. In the context of the Lawful Access Initiative in Canada, scholars argue that traffic data can be just as privacy-sensitive as the content of communications. See Young 2008. In the Dutch context, see the annotation by Dommering P.G. & J.H. v. United Kingdom 2001. 36. Cf., the European Court of Human Rights, which treats traffic data as part of the right to respect for privacy and ‘correspondence’ in Art. 8 ECHR. See e.g., ECtHR, Malone v. United Kingdom [1984] ECHR 67; and ECtHR, P.G. & J.H. v. United Kingdom [2001] ECHR IX. 37. Directive 2006/24/EC on Data Retention.

338

Rethinking.book Page 339 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

Germany, the Netherlands, and Sweden still have to draft bills to implement the Data Retention Directive. From a constitutional perspective, it is relevant to note that a motion was rejected by the German Parliament to request the government to challenge the Data Retention Directive at the European Court of Justice.38 However, several groups and individuals have announced to challenge the future German transposition law before the Constitutional Court.39

4.3. Freedom of expression Freedom of expression is an important constitutional right in all Western systems. The scope of the right differs, however. In France, the Netherlands, Sweden, and the US, the right focuses on the expression or communication of thoughts and opinions. Canada has a more encompassing right, covering also the freedom to hold thoughts and beliefs. Belgium is similar in that it creates the freedom of expression along with the freedom of worship (Art. 19 Belgian Constitution). Germany also stipulates a constitutional right to gather information, to stimulate the forming of thoughts and opinions. Despite the overall importance of the freedom of expression and the largely similar culture in the reporting countries to favor openness and public debate over censorship, each country distinguishes certain types of speech that are excluded from protection. Several of these are shared by most countries, such as – in the US terminology – ‘true threats’, defamation, and child pornography (in all reporting countries), and hate speech (in all except the US). Other categories are more specific for certain countries, such as political speech (banned in Canada in the 20-hour period preceding the closing of polls, given the vastness and time zones of the country), court proceedings (which in certain cases cannot be published in Canada), and commercial speech (which has a lower standard of protection in the US and is completely excluded in the Netherlands). For virtual child pornography, it is noteworthy that a US law banning this was struck down as unconstitutional. The constitutionality of a subsequent, more strictly formulated but functionally equivalent, criminalisation has so far not been decided in court. In the other reporting countries, several of 38. See Deutscher Bundestag 2006. 39. See European Digital Rights 2006. Outside the scope of this survey, but relevant to note in this respect, is the case brought before the Irish High Court against the Irish government by Digital Rights Ireland, challenging the Irish data-retention law and the EC Directive as unconstitutional (Digital Rights Ireland).

339

Rethinking.book Page 340 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

which have also criminalised virtual child pornography in the wake of the Council of Europe’s Convention on Cyber crime, the constitutionality of these prohibitions does not seem to be an issue. Particularly relevant in the context of this report is the freedom of media that express or transmit opinions. Article 7 paragraph 1 of the Dutch Constitution specifically addresses freedom of the press, whereas paragraph 2 deals with broadcasting through radio and television, and paragraph 3 protects other means of expression. It is unclear if, and if so under which provision, the expression of ideas and opinions by means of digital media such as the Internet, is protected. In case law, the courts include both Article 7 Gw and Article 10 EHCR into their consideration without specifying which part of Article 7 applies. Article 25 of the Belgian Constitution is restricted to freedom of the press, which tends to be associated with the printing press, and courts are reluctant to interpret this to cover new media. The US First Amendment also only mentions freedom of the press, but this is interpreted much more broadly than in Belgium, and there is no debate that the right is formulated in a too technologyspecific way. The German Constitution, in Article 5, mentions the freedom of the press and the freedom of reporting by means of broadcasts and films, thus distinguishing the press from audiovisual media. Given a similar distinction in French ordinary legislation, the Internet has triggered a restructuring of French media law, which now has a general category of ‘electronic public communications’, which is divided in two subcategories: ‘audiovisual communications’ (subject to the Freedom of Communications Act) and ‘on-line public communications’ (subject to the Trust in the Digital Economy Act). Canada and Sweden have no problems with new technologies, since they use open-ended formulations: “and other forms of communication” (Canada), “and certain like transmissions, (…) and other technical recordings” (Sweden). Nevertheless, given the fact that Swedish constitutional protection of freedom of speech is spread across two constitutional laws, the Freedom of the Press Act and the Fundamental Law on Freedom of Expression, an inquiry is on-going to merge these laws. The Internet raises several questions with respect to the freedom of expression. A primary topic is the categorisation of bloggers. On the one hand, they serve a purpose very similar to journalists in the printed press, by fostering the collection and spreading of information, ideas, and opinions. Therefore, they may well, in the longer term, turn out to be equally valuable for the public debate as traditional media. On the other hand, on the Internet, everyone can start a blog and call herself a journalist. Most Western countries are tentatively coming to terms with defining 340

Rethinking.book Page 341 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

bloggers. In Belgium, the broad criterion of “everyone who directly contributes (…) information aimed at the public via a medium” in the Act of April 7, 2005 on the protection of journalistic sources, covers bloggers as well. In Canada, courts tend to apply a broad definition of journalism as well in relation to new media.40 In Sweden, a more material criterion is used, namely that information be “of importance to the public debate” in order to be protected by the freedom of expression.41 This allows courts to assess bloggers – and others who express opinions on new media – on a case-by-base basis in light of the rationale of the constitutional protection. With converging media, this seems a more sustainable approach than a media-centered type of protection. Other interesting Internet-related issues with respect to the freedom of expression are the distinction between static and interactive websites (in Sweden, only static websites fall within the scope of the Fundamental Law on Freedom of Expression), the liability for hyperlinks that link to prohibited speech (Germany: no liability because the hyperlinker aimed at facilitating people to form an opinion; France: liability because the hyperlinker had explicit knowledge of or advertised the linked content), the liability of ISPs (in France, the Netherlands, and Canada), the impact of search engines (the Netherlands), and filtering systems (Canada). Also noteworthy are the activities in France and Belgium for the protection of minors on the Internet. It can be recommended that the freedom of expression – possibly strengthened by the freedom to gather information and to hold beliefs and opinions – is formulated in a sufficiently media-neutral way. An enumeration of media with an open-ended formulation – like the Canadian “and other forms of communication” – seems particularly apt to strike a balance between legal certainty (for media that should be protected in any case) and technology neutrality (for media that may also need to be protected, perhaps through future technological developments). The increasing convergence of media and the rise of new ways of expression, such as blogging, blur traditional concepts like ‘journalist’. It is therefore useful to also consider including, besides or instead of mentioning the media, a criterion, such as ‘of importance to the public debate’. The judges can then decide whether in a concrete case a communication serves the values underlying the freedom of expression.

40. Jason Young, communication at the 1 December 2006 workshop. 41. Cecilia Magnusson Sjöberg, communication at the 1 December 2006 workshop.

341

Rethinking.book Page 342 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

5.

Other and new constitutional rights

Other constitutional rights are also affected by new technologies. Apart from the right to anonymity, no general conclusions on these rights can be drawn, due to the scarcity of sources.

5.1. Right to anonymity Although anonymity is a topic of debate in most countries, none of them acknowledge a general right, constitutional or otherwise, to anonymity. It is, however, often a subsidiary or a derivative of other constitutional rights. There exists, to some extent, a constitution-related right to anonymity in the context of privacy (in France), data protection (in the form of the right to informational self-determination, in Germany), the secrecy of communications (in Germany), free speech (in the Netherlands, Canada, and the US) and the right to individual liberty (which, in France, includes the freedom to come and go anonymously). This right is far from absolute: numerous exceptions are made, such as a legal obligation for bloggers to inform the hosting provider of their identity (France), a ban on equipment that obstructs caller-identification in telecommunications (Belgium), and a prohibition of anonymous political advertising (Canada). Also, discussions about revealing the identity of unknown or pseudonymous Internet users allegedly infringing copyright or committing a content-related crime online, can be witnessed in all countries. Often the rules allow lifting the anonymity of the purported offender. A tentative conclusion that can be drawn from this overview is that anonymity tends to be protected in most countries as an important value, also at the constitutional level. However, infringements of anonymity are generally easily accepted. It is therefore not possible to conclude that a ‘right’ to anonymity exists; rather, anonymity is a value servicing several other constitutional rights.

5.2. Various Various other constitutional rights and issues are affected by new technologies. The freedom of assembly is possibly relevant for on-line demonstrations or virtual sit-ins, however, a lower court in Germany declined applicability.42 The freedom of association can apply to new media, although banning associations from a virtual game by game 42. See Hoeren & Rodenhausen, 2008

342

Rethinking.book Page 343 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

providers might be quite lawful. The right to petition ‘in writing’ was interpreted in the Netherlands as also covering petitions by electronic means.43 Equal treatment (Art. 10-11 Belgian Constitution) was an issue in Belgium when the Official Journal (Belgisch Staatsblad) was transformed into an on-line publication, impacting the accessibility of the journal in an unconstitutional way.44 Computer games raise questions about the applicability of personality rights, such as portrait rights, and the freedom of art. A German lower court held that a computer game could claim the constitutional right to freedom of art, but the appeal court found that even so, a celebrity’s consent was needed to use his name in the game. In France, the so-called right to be forgotten is mentioned for underage offenders.45 In the criminal-law context, the criminal legality principle (no crime without prior law, Art. 12 Belgian Constitution) is relevant in that it requires precise law-making. Citizens must be able to foresee what is punishable and how they can be investigated. In the Belgian Computer Crime Act, the use of the terms ‘any other technological means’, next to the term computer was used in an attempt to make the description technologyneutral. This seemingly meets the legality principle on the face of it, since all ‘technical’ crimes are covered, but at the same time, foreseeability is not guaranteed with such open ending terms.46 Also in the criminal context, the American privilege against self-incrimination (Fifth Amendment) is relevant in relation to technology, for instance in the context of the power to compel citizens to hand over encryption keys. Brenner argues that such a power would violate the Fifth Amendment, unless the key (or password) was reduced to tangible, recorded form.47 Saliently enough, although such a power has not been enacted in the US, it does exist in France and Belgium. In these countries, however, the power to force suspects to decrypt their own communication has so far not been challenged as infringing the privilege against self-incrimination.48 In the context of electronic government, various issues spring to attention. Notable, first of all, is the right to access public information, which is a constitutional right in both Belgium and Sweden. In the Netherlands, a Bill 43. 44. 45. 46. 47. 48.

See Koops & Groothuis 2008. See Kindt et al. 2008 Coudert et al. 2008. See Kindt et al. 2008 Brenner 2008 The privilege against self-incrimination is not always recognised at the constitutional level in European countries, but it is at the core of the constitutional right to a fair trial as interpreted by the European Court of Human Rights, since its first acknowledgement in ECtHR 25 February 1993 (Funke v. France).

343

Rethinking.book Page 344 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

to introduce this right in the Constitution is expected.49 Whereas the Dutch proposals speak of ‘public information’, the other countries use the term ‘document’. In Belgium, this has been interpreted broadly to cover all kinds of documents regardless of the storage medium, whereas in Sweden, the term ‘recording’, used alongside ‘written or pictorial matter’ in the definition of ‘document’, refers to electronic documents. ‘Recordings’ in Sweden can be ready-made (such as e-mail messages) or compilations (like merged data bases). Compilations only fall within the scope of the right to access public information if the government can make them accessible ‘using routine means’. Another relevant right in the context of e-government is the right to vote. In Belgium, the law to allow voting machines was adapted in 1998, without debate.50 In the US, a few civil-law suits arguing that flawed voting machines violated their right to vote were denied. E-voting has been discussed and briefly experimented with in France as an alternative to distance-voting. In the Netherlands, which has a long history of using voting machines, serious debates about the secrecy of the ballot have only started in 2006 as a result of studies regarding the security measures of these voting machines and the possibilities of secretly eavesdropping on the votes cast.51 Finally, a fundamental issue outside the field of human rights has been raised in Sweden. The power to enact laws is constitutionally attributed to the legislator (the Parliament, and sometimes the Government or by delegation another public authority). The increasing use of computerassisted and computer-executed legal decisions, notably in the field of administrative law, raises the question whether and to what extent the programs used for these decisions should be seen as enacted laws. After all, the legal rules of law proper are not trivially translatable into technical, computer-logical rules. Hence, the programming constitutes a degree of autonomous rule-making. This requires a check on the conformity between legal rules and the resulting program rules, as well as the constitutional authority underlying the technical rule-making process. Related to this issue in Sweden is the distribution of competence between local and central authorities: if administrative decisions are largely the result of centralised information systems, the constitutional task of local governments to take individual administrative decisions is at risk.

49. See Koops & Groothuis 2008. 50. See Kindt et al. 2008 51. See Koops & Groothuis 2008.

344

Rethinking.book Page 345 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

Conclusion New technologies challenge constitutional rights. This is particularly visible in the Dutch context, where the technology-specific formulation of several constitutional rights necessitates an adaptation of the Constitution. In the other countries covered in this paper, however, the text of the Constitution itself is hardly at issue. In some countries, a few adaptations have been made to bring the formulation up-to-date in the light of new technologies. No such adaptation has occurred since 2000, however, and no need is currently felt in any of the countries to adapt the Constitution – with the possible exception of the Belgian freedom of the ‘press’. Generally, constitutional rights are sufficiently technology-neutral, because they are abstractly worded or use open endings (notably in Sweden), use guiding principles like a general right to personality (Germany), or are kept up-todate by constitutional or other courts that can interpret the rights by deviating from a literal reading (US, Canada). Judicial review of legislation on basis of the constitution (constitutional review) is in varying forms a primary feature of all constitutional systems covered in this report, except the Dutch, that explains the lack of need to modify the constitution itself. Some countries, notably Belgium, have seen a relatively vibrant constitutional activity in the past few years, with a full-blown Constitutional Court as a result. In all countries, however, including Belgium, constitutional rights do not seem to play a key role in the debates over new technologies – at least not at the face of it.52 A second look at many of the issues covered in this chapter shows that constitutional values related to privacy and freedom of communication do guide technologyrelated policymaking, legislation, and case law, but often without reference to specific constitutional rights. In other words, constitutional values are important for technology policy and law, but in an indirect way: they often play an implicit role, working through non-constitutional legislation that embeds and implements constitutional rights. This is encouraging, because new technologies pose challenges, if not so much to Constitutions as such, to all areas of the law. Constitutional values 52. About the differences in style and rhetoric between American and European constitutional courts: Lasser 2004; Rosenfeld 2006. Both authors show that compared to the American Court, European courts within the French tradition tend to speak in one, abstract voice. The U.S. Supreme Court is more prone to focusing on a multitude of ‘factors’ and ‘considerations’ when tackling constitutional issues. Due to these differences of style, it is therefore more difficult to learn about the actual difficulties presented by constitutional issues at stake when reading European constitutional judgments.

345

Rethinking.book Page 346 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

are urgently needed for shaping the law and legal policy for the future technology-related developments. The values help guide the society through a process that will certainly invoke radical and unpredictable changes. Constitutional rights are core values that define what the human beings and society are and should be. Therefore, the legislatures and policy-makers would do well to more explicitly refer to constitutional rights in their activities, and to create an environment in which constitutional rights can flourish and guide the society along.

References ABQB (Court of Queen’s Bench of Alberta), R. v. Weir [1998] A.J. No. 155, 1998 ABQB 56, aff’d [2001] A.J. No. 869, 2001 ABCA 181. Asscher, L. 2002. Communicatiegrondrechten. Een onderzoek naar de constitutionele bescherming van het recht op vrijheid van meningsuiting en het communicatiegeheim in de informatiesamenleving [Communications-Related Constitutional Rights]. Amsterdam: Otto Cramwinckel 2002. BBC News. 2006. Google censors itself for China, BBC News, January 25. http://news.bbc.co.uk/2/hi/technology/4645596.stm. (Accessed December 22, 2008) Blok, P. 2002. Het recht op privacy [The Right to Privacy]. Den Haag: Boom Juridische uitgevers. Brenner, Susan W. 2008. Constitutional Rights and New Technologies in the United States, In Constitutional Rights and New Technologies. A Comparative Study, edited by Ronald Leenes, Bert-Jaap Koops and Paul De Hert. Information Technology and Law Series 15: 225-264 Commissie Grondrechten in het digitale tijdperk. 2000. Rapport. Den Haag: Commissie Grondrechten in het digitale tijdperk. http:// www.ejure.nl/exturls/dossier_id=269/id=813/show.html. (Accessed December 22, 2008) Coudert, Fanny, Anne Debet and Paul De Hert, 2008. Constitutional Rights and New Technologies in France. In Constitutional Rights and New Technologies. A Comparative Study, edited by Ronald Leenes, Bert-Jaan Koops and Paul De Hert. Information Technology & Law Series 15: 95-136. Council of Europe and the Committee of Ministers. 2003 Declaration on Freedom of Communication on the Internet. Adopted by the Committee of

346

Rethinking.book Page 347 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

Ministers on 28 May. http://www.unesco.nl/images/freedcomminternet.pdf. (Accessed December 22, 2008) De Hert, Paul. 2004. Division of Competencies Between National and European Levels with Regard to Justice & Home Affairs. In Justice and Home Affairs in the EU. Liberty and Security Issues after Enlargement, edited by J. Apap, 55-102. Cheltenham: Edward Elgar Publishing. Deutscher Bundestag. 2006. 16. Wahlperiode (German Parliament rejection of the Resolution "Reviewing the Directive on Data Retention by the European Court of Justice). Drucksache 16/1622. http:// dip.bundestag.de/btd/16/016/1601622.pdf. (Accessed January 4, 2009) Digital Rights Ireland. Posts filed under 'Data Retention'. http:// www.digitalrights.ie/category/data-retention/. (Accessed January 8, 2009) Directive 2006/24/EC of the European Parliament and of the Council of 15 March 2006 on the Retention of Data Generated or Processed in Connection with the Provision of Publicly Available Electronic Communications Services or of Public Communications Networks and Amending Directive 2002/58/EC [2006] OJ L 105/54-63. Dommering, Egbert. 2001. Annotation under ECtHR, P.G. & J.H. v. United Kingdom, 25 September 2001. Nederlandse Jurisprudentie 2003, No. 670. http://www.ivir.nl/publicaties/dommering/ehrm25sep2001.html. (Accessed January 4, 2009) European Court of Human Rights, Funke v. France, 10828/84 [1993] 16 E.H.R.R. 297 (25 February 1993). European Court of Human Rights, Halford v. United Kingdom, 20605/92 [1997] ECHR 32 (25 June 1997). European Court of Human Rights, Malone v. United Kingdom, 8691/79 [1984] ECHR 67 (2 August 1984) European Court of Human Rights, P.G. & J.H. v. United Kingdom, 44787/ 98 [2001] ECHR IX (25 September 2001) Ekker, Antonie Hendrik. 2006 Anoniem communiceren: van drukpers tot weblog [Communicating Anonymously: From Printing Press to Weblog]. Den Haag: Sdu Uitgevers. http://dare.uva.nl/document/19656. (Accessed December 22, 2008) European Commission. Justice and home Affairs. The Charter of Fundamental Rights. How the Charter was drawn up -The sources of

347

Rethinking.book Page 348 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

rights. http://ec.europa.eu/justice_home/unit/charte/en/charter02.html. (Accessed December 22, 2008) European Digital Rights. 2006. EDRI-gram 4.10, 24 May. Data Retention faces growing opposition in Germany. http://www.edri.org/edrigram/ number4.10/dataretentionde. (Accessed January 8, 2009) Franken, H., and Alis K. Koekkoek, 2006. The Protection of Fundamental Rights in a Digital Age. In International Academy of Comparative Law, 11471164. Brussels: Bruylant 2006. Hafner, Kate, and Matt Richtel. 2006. Google Resists U.S. Subpoena Of Search Data, The New York Times, January 20: 1, section A. http:// select.nytimes.com/gst/ abstract.html?res=F70F12FA395B0C738EDDA80894DE404482. (Accessed December 22, 2008) Hoeren, Thomas, and Anselm Rodenhausen. 2008. Constitutional Rights and New Technologies in Germany. In Constitutional Rights and New Technologies. A Comparative Study, edited by Ronald Leenes, Bert-Jaan Koops and Paul De Hert. Information Technology & Law Series 15:136-158. Hofman, Johannes Andries. 1995. Vertrouwelijke communicatie: een rechtsvergelijkende studie over de geheimhouding van communicatie in grondrechtelijk perspectief naar internationaal, Nederlands en Duits recht [Confidential Communications: a Comparative Legal Study]. Amsterdam/ Zwolle: Vrije Universiteit Amsterdam/W.E.J. Tjeenk Willink. Kindt, Els, Eva Lievens, Elenis Kosta, Thomas Leys, and Paul De Hert. 2008. Constitutional Rights and New Technologies in Belgium. In Constitutional Rights and New Technologies. A Comparative Study, edited by Ronald Leenes, Bert-Jaan Koops and Paul De Hert. Information Technology & Law Series 15:11-56. Koekkoek, Alis, Paul Zoontjens, Frank Vlemminx, Gert-Jan Leenknegt, Sjaak Nouwt, Bert-Jaap Koops, Hanneke van Schooten-van der Meer, and Raymond Bos. 2000. Bescherming van grondrechten in het digitale tijdperk. Een rechtsvergelijkend onderzoek naar informatie- en communicatievrijheid en privacy in Zweden, Duitsland, Frankrijk, België, de Verenigde Staten en Canada. Eindrapport [Protection of fundamental rights in the digital age. A comparative study of the freedom of information and of communication and privacy in Sweden, Germany, France, Belgium, The United States of America and Canada]. Tilburg: Katholieke Universiteit Brabant.

348

Rethinking.book Page 349 Friday, September 25, 2009 10:01 AM

Constitutional Rights and New Technologies: A Comparative Perspective

Koops, Bert-Jaap. 2002. Strafvorderlijk onderzoek van (tele)communicatie 1838-2002. Het grensvlak tussen opsporing en privacy [Criminal Investigation of (Tele)communications 1838-2002]. Deventer: Kluwer. Koops, Bert-Jaap, H Hanneke van Schooten-van der Meer, and M. Prinsen. 2004. Recht naar binnen kijken. Een toekomstverkenning van huisrecht, lichamelijke integriteit en nieuwe opsporingstechnieken [Seeing Right Through. Exploring the Future of Inviolability of the Home and the Body and New Investigation Techniques]. Den Haag: Sdu Uitgevers. Koops, Bert-Jaap, and Ronald Leenes. 2005. “Code” and the Slow Erosion of Privacy. Michigan Telecommunications & Technology Law Review 12:115-188, http://www.mttlr.org/voltwelve/koops&leenes.pdf. (Accessed December 22, 2008) Koops, Bert-Jaap. 2006. Should ICT Regulation Be Technology-Neutral?. In Starting Points for ICT Regulation. Deconstructing Prevalent Policy OneLiners, edited by Bert-Jaap Koops et al., 77-108. The Hague: T.M.C. Asser Press. http://papers.ssrn.com/abstract=918746. (Accessed December 22, 2008) Koops, Bert-Jaap, and M. Groothuis. 2008. Constitutional Rights and New Technologies in the Netherlands. In Constitutional Rights and New Technologies. A Comparative Study, edited by Ronald Leenes, Bert-Jaan Koops and Paul De Hert. Information Technology & Law Series 15:159-198 U.S. Supreme Court, Kyllo v. United States, 533 U.S. 27 (2001). Lasser, Mitchel de S.-O.L’E. 2004. Judicial Deliberations, A Comparative Analysis of Judicial Transparancy and Legitimacy. Oxford: Oxford University Press. Nouwt, Sjaak, Berend R. De Vries and Corien Prins eds. 2005. Reasonable Expectations of Privacy? Eleven Country Reports on Camera Surveillance and Workplace Privacy. The Hague: T.M.C. Asser Press. Rosenfeld, Michel. 2006. Comparing constitutional review by the European Court of Justice and the U.S. Supreme Court. International Journal of Constitutional Law 4 (4):618–651. Simonite, Tom. 2006. Scanner Recognises Hidden Knives and Guns. New Scientist. September 26. http://www.newscientist.com/article/dn10160scanner-recognises-hidden-knives-and-guns.html. (Accessed December 22, 2008) Sjöberg, Cecilia Magnusson. 2008. Constitutional Rights and New Technologies in Sweden. In Constitutional Rights and New Technologies. 349

Rethinking.book Page 350 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

A Comparative Study, edited by Ronald Leenes, Bert-Jaan Koops and Paul De Hert. Information Technology & Law Series 15:199-224. Smits, A. H. 2006. Strafvorderlijk onderzoek van telecommunicatie [Criminal Investigation of Telecommunications]. Tilburg/Nijmegen: Wolf Legal Publishers. Somsen, Han. 2006. Regulering van humane genetica in het neo-eugenetische tijdperk [Regulating Human Genetics in the Neo-Eugenic Era]. Inaugural lecture Tilburg. Nijmegen: Wolf Legal Publishers. Van Eijk, N.A.N.M. 2005. Zoekmachines: zoekt en gij zult vinden? Over de plaats van zoekmachines in het recht [Seek and Ye Shall Find. About the Place of Search Engines in Law]. Inaugural lecture. Amsterdam (UvA). Amsterdam: Otto Cramwinckel Uitgever. Verwaltungsgerichthof (VGH) Mannheim, 21 July 2003. 2004. Videoüberwachtung öffentlicher Räume. Neue Zeitschrift für Verwaltungsrecht 23 (4):498-506. Young, Jason. 2008. Constitutional Rights and New Technologies in Canada. In Constitutional Rights and New Technologies. A Comparative Study, edited by Ronald Leenes, Bert-Jaan Koops and Paul De Hert. Information Technology & Law Series 15:57-94 Zweigert, K., and H. Kötz. 1998. An Introduction to Comparative Law, 3rd edn. Oxford: Oxford University Press.

350

Rethinking.book Page 351 Friday, September 25, 2009 10:01 AM

Conclusions

Rethinking.book Page 352 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 353 Friday, September 25, 2009 10:01 AM

Policy Approaches in the Converging Media and Communications Sector Harri Kalimo and Caroline Pauwels

This book set out to offer a selection of topical expert insights on media and communications policies in the EU. Attentive to a framework of layers— networks, services, content and consumption—the analysis touched upon a number of important, interlinked policy issues: fundamental rights in the converging information society, cultural diversity and services in the internal market, the phenomenon of social networking, as well as legal bottlenecks to the availability of content, to name just a few. The authors provided numerous useful criticisms and suggestions regarding media and communications policy in the EU. As the final stage of analysis, this chapter outlines the more general trends that seem to emerge from the specific deliberations. How should the public authorities approach the challenging task of crafting inclusive, competitive and culturally diverse media and communications policy for the converging Europe?

1

Top down, bottom up – or merry-go-around?

Convergence, as change in general, is not an exclusively positive phenomenon. Convergence does not offer a cornucopia of unseized opportunities for all, but may rather present itself sometimes as a massive challenge on existing value chains and values. If the caused changes are fundamental, so are also the differences of opinion. Which explains why some of the issues have taken, or will continue to take, a long time to be ironed out. The leap into the converged, user-driven online society has therefore lasted in some respects considerably longer than originally predicted. From the perspective of media and communications policy, the question arises whether rule making exacerbates or alleviates the problems. There are bodies of law, such as state aid rules and trade law, which a part of the stakeholders perceive as hampering the promotion of culture. On the other hand, public policy has been a solution in further developing the converging society in, for example, protecting minors from harmful Internet content. Simplifying and unifying the complicated and fragmented 353

Rethinking.book Page 354 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

copyright related licensing regimes in different EU Member States could be another positive contribution. Obviously, the distinction between beneficial and obstructing regulation often is in the eye of the beholder. What for one party creates an opportunity, is likely to raise a barrier to someone else. Moreover, the distinctions are far from clear-cut. Facially minute differences in the provisions may mean considerable changes in practice: adding in the definition of a fundamental right just the words “or by other means” may have an enormous impact. It may guarantee a technologically neutral, horizontal applicability of a core societal principle. Yet at other times the reverse will happen: large overhauls of rules and regulations may lead to only superficial changes in practice, or even negative consequences. The harmonizing effects of EU’s copyright regime on cross-border licensing, for instance, have in practice been modest at most. The EU’s model of multi-level governance creates further complications. The EU’s legitimacy lies in a code of conduct that is conditioned by universal human rights and is operationalised through statues. It is above all a continuous process of engagement, discourse, and negotiation with multiple players operating at the local, regional, national, transnational and global levels.”1 The problems may sometimes reveal themselves only at the stage of implementation or interpretation in the Member States. This is not necessarily because the provisions are particularly strict, but because they are too vague. Or because they are simply not addressed properly, in purpose or not. Some of the Member States, for example, read the EU’s Audio-Visual Media Service Directive as imperilling cultural values while promoting the internal market. Others see a threat to fundamental rights. The perceptions will impact the way in which the provisions are transposed into national law. After some years of media and communications laws in operation, litigation regarding such rules is also starting to accumulate. Interpretations by the European Court of Justice (ECJ) may, if successful, clarify the situation. Then again, experiences in competition law show how an overly stringent judiciary may also risk stifling the developments.2 Often, the main challenge of convergence is perceived to be that it combines the lightly regulated field of IT with the heavily regulated and mutually incompatible fields of, e.g., telecommunications and public broadcasting. This division reflects the general distinction in policy 1. 2.

Rifkin 2004, 29. See the Chapter of van Rompuy.

354

Rethinking.book Page 355 Friday, September 25, 2009 10:01 AM

Policy Approaches in the Converging Media and Communications Sector

making between a proactive (interventionist) approach and a libertarian, non-interventionist model3. As has been noted, this dichotomy did nonetheless not surface in a noteworthy manner in the articles of this book. Rather, the main tension seemed to be that between vested interests—of the incumbents, usually—and the opportunities of new entrants. Social computing applications surely are expected to transform the public domain through new, participatory forms of governance. As Pascu et al. explained in their chapter, in areas ranging from health to learning, participatory forms of civic information exchange and related decisionmaking are making formal institutions reshape their policies. In media and communications, which are at the heart of social networking, adaptations to the decision-making processes should therefore be expected in particular. The role of the private sector is likely to be emphasized horizontally, beyond any potential demarcation between IT and communication sectors. This observation is linked to the general trend in the EU to prioritize selfregulatory measures, also where regulation previously has been predominant. Policy-making happens “in the shadow of the hierarchy”4: the private sector is given precedence in establishing rules, but while the authorities stay on the background, they have learned to closely scrutinize that the societal objectives are actually achieved. Should voluntary instruments prove inadequate or inefficient, the authorities are ready to engage in classic regulatory actions to the extent necessary. This approach is emphasized in the converging online environment, where markets are still nascent. The majority of stakeholders have called on the European Commission and other authorities to resist the temptation to prematurely intervene on the marketplace. And if they do, it is easy to agree with Maghiros5: since the consequences of convergence may be very disruptive, any policy measure should be preceded by a solid ex-ante impact assessment.

3.

4. 5.

For example, some authors take the libertarian view that at least in the US context, the socially optimal solution for the converging society is best reached when the current legal regime is combined with a good dose of free market forces and civil disobedience. Further legislation and aggressive litigation by the music industry will not be able to hold up with the developments of the market and new technologies. (Perritt 2007, 257,262-3 (quoting in part Professor Lunney)). For observations on this type of policy making in the field of environmental policy, see e.g. Rubik et al. (2009). See the Chapter of Maghiros in this book.

355

Rethinking.book Page 356 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

According to the chapter of Herold, the European Commission has indeed chosen this approach. Much in the audio-visual and media services sector will be left, for the moment, to the voluntary initiatives of the market players. The operators act under the supervision of regulators, but they are not steered top-down from the traditional regulatory level. A self-regulatory approach is hoped to prove more efficient in the longer term, also as far as cultural diversity is concerned. It will better reflect the realities of the market. Then again, in e.g. the UK, the government has been forced to intervene on certain issues such as on online piracy. The discussions between the largest Internet Service Providers (ISPs) and various right holder groups dragged on too slowly.6 The UK government thus started specifying its plans to set up a Digital Rights Agency, and to combat P2P file sharing by requiring ISPs to notify an alleged infringer that his/her conduct is unlawful.7 In the contribution of Valcke and Lievens it was nonetheless observed that the AVMS Directive does contain important carve-outs. Recital 36 states that “while self-regulation might be a complementary method of implementing certain provisions of this Directive, it should not constitute a substitute for the obligations of the national legislator.” Some government involvement is in their view a minimum requirement for the implementation of the Directive’s obligations. Biggam8, too, pointed out that experience from self-regulation of advertising or of programme content in certain broadcasting markets shows that self-regulation can only be truly effective under certain preconditions. It needs to involve the main stakeholders and enjoy their confidence. There should also be an independent control mechanism. De Hert et al. reminded us in this context of the unwarranted consequences of a self-regulatory model, where the policy-making clout resides in a private body. It seems namely clear that just as the public authorities may engage in abuses of power, similar misuse can occur by private actors, including businesses. However, the shift from publicly lead policy-making towards private sector initiatives has not been reflected in the constitutional protection mechanisms. The individuals may therefore end up in a weaker position under the self-regulatory model of governance. They may not be able to claim protection in a formally horizontal dispute between two private parties. De Hert et al. find the observation striking. Most constitutional systems still leave the protection up to the legislator, who 6. 7. 8.

O’Shea 2008. Subject to reasonable levels of proof from rights-holders. DCMS and BERR 2009, 44. See Chapter Biggam.

356

Rethinking.book Page 357 Friday, September 25, 2009 10:01 AM

Policy Approaches in the Converging Media and Communications Sector

should convert the constitutional protection of fundamental rights into specific, hierarchically lower legal norms that apply to the relationships between the citizens. Data-protection acts are a good example.9 The role of the public authorities can perhaps therefore be seen as “granulated” or “circular”, as “going around in circles”: at specific times and for certain issues, the authorities should proactively intervene, while at other times regulatory abstinence is called for.10 The optimal approach varies dynamically throughout the policy cycle. For example, the state may need to maintain a central and continuous role to weed out any attempts to manipulate the social networks for commercial purposes. A much looser approach could be warranted to promote the availability of critical content online. The European Commission’s “Code of Conduct” and Content Online Platform depict the Commission working on the background, inciting cooperation between the relevant stakeholders so as to facilitate the creation of an online market. Shaw describes11 the Commission’s cooperative procedures in the Code of Conduct as balancing between the interests. They are less hands-off than the communications industry would want, but more hands-off than the right holders’ preferred approach. Moreover, it seems that the role of regulation in the converging information society may rather quickly vary from one extreme to another. In some instances, laws and policies strive to promote interaction, information flows and content online. Once the system functions, the provisions may become redundant, only to be again re-established to clamp an overabundance of solicitation and other undesired side-effects. It becomes thus essential for the authorities to determine whether a restrictive or supportive policy approach, or no measures at all, would be best suited to each situation. Do the existing regulatory systems create barriers that need to be abolished, or do they rather offer much needed guidance from the public sector? A turbulent and unknown environment should be accompanied with flexible policy instruments. Flexibility does not mean that the societal core objectives, rights and values should constantly vary, however. On the contrary, there should be flexibility in the policy framework for the very purpose of ensuring the inviolability of the fundamental rights and values at stake. To state this differently, flexibility must be balanced with legal certainty. Indeed, 9.

See the chapter of De Hert et al. These authors add, however, that some constitutional courts have in fact recognized the direct effect of constitutional rights on relationships between citizens. 10. Zarsky 2008, 770; Rubik et al. 2009. 11. O’Shea 2008.

357

Rethinking.book Page 358 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

flexibility is an advantage usually offered by self-regulatory approaches. Self-regulation is usually lighter, and easier and quicker to alter than command-and-control type regulation. Flexibility may also mean neutrality. Technological neutrality should be combined with neutrality in choosing between the different policy instruments (e.g., economic, informational and liability based instruments), and ability (indeed, agility) to swiftly move from one tailor-made set of policy measures to another, as the evolution of the situation may require. One should thus look for opportunities to flexibly shift between mandatory and voluntary instruments, for possibilities to find a middle way between self-regulation and stringent legal requirements. This constitutes a part of rethinking the media and communications policies. Co-regulation is described in the AVMS Directive12 as “[offering], in its minimal form, a legal link between self-regulation and the national legislator in accordance with the legal traditions of the Member States.” Indeed, Valcke and Lievens conclude in their Chapter that although self-regulation and co-regulation are both promoted in applying the directive, the latter is in fact preferred over the former. One may also wonder how the judiciary, a different institution, would be equipped to deal with the technological and market developments. The rules of the judicial procedure offer their horizontal, principle-based balancing logic, which is often not tied to specific circumstances or technologies. For example, those claiming that their commercial interests have been harmed in the new realities of the marketplace bear the burden of proving their case. Without solid evidence, the courts refrain from interfering13, or at least should do so. For example, the proponents of more protective anti-circumvention measures should bear the burden of proving the necessity and effectiveness of their systems.14 In case the burden is not met, the measures should not be entitled to protection. There hence is inertia in the judicial system that works for the benefit of technological progress. In the EU, the ECJ and the Court of First Instance (CFI) have a particular role in combining the common and civil law traditions. It may also be noted that the ECJ has been criticized for legal activism. It has been considered biased in often taking a pro-integrationist position in deciding legal disputes. If this were the case, those defending a wide national 12. Directive 2007/65/EC on Audiovisual Media Services, Recital 36. See the Chapter of Valcke and Lievens. 13. See e.g. the concurring opinion of Justice Breyer in U.S. Supreme Court, Grokster III, 545 U.S. at 949. 14. This principle can be found in the recommendation of, e.g., Gasser (2006, 105).

358

Rethinking.book Page 359 Friday, September 25, 2009 10:01 AM

Policy Approaches in the Converging Media and Communications Sector

discretion to, for exemple, cultural state aid or powerful national copyright management systems would not consider the ECJ’s involvement favourably. In fact, as far as copyrights are concerned, national courts in the member states have recently taken decisions, which do seem sympathetic to right holders’ concerns.15 The Turku Appellate Court decision on BitTorrent16, and the Stockholm District Court decision on Pirate Bay17, for example, have framed the Nordic countries as amongst the first in Europe where the administrators of a file sharing service in a peer-to-peer Internet piracy case have been found guilty of the charges (pending appeal). In the Brussels Sabam decision18, the Brussels Tribunal of First Instance ordered SA Scarlet (formerly Tiscali) to install filtering software to exclude infringing peer-topeer files from being distributed.19 If national cases start to proliferate, the Commission may be faced with an increasingly fragmented internal market, and the ensuing pressure to enact further prescriptive, harmonizing legislation. The involvement of the national judiciaries would hence push the developments towards EU level legislation. Legislative efforts in the EU should then be directed against the key barriers to a balanced development of an inclusive and culturally diverse European internal market. The chapters in this book aspire to offer the Commission—and all other stakeholders involved in the process—insights to guide their efforts.

2

Focus on the Individual

It was described above how social computing is a part of the explanation on why self-regulation as a mode of governance continues to increase in importance. The civil society, you and me, are ever better equipped to obtain information on socially relevant issues, and to participate in their governance. As Pascu et al. showed, social computing enables each individual to take a more proactive role. And the individuals have responded to the call. Time Magazine chose “you” as the person of the year in 2006.20 “The many” have started to wrestle with “the few” for power, helping one another for free. They have changed the world, but even more 15. 16. 17. 18. 19. 20.

DCMS and BERR 2009, 11. See Manner (2009); and Turku Court of Appeals, Case S 1409. Stockholm District Court, Case B 13301-06. Brussels Court of First Instance, N° 04/8975/A. Commission Staff Working Document on Copyright 2007. Time.

359

Rethinking.book Page 360 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

fundamentally, they have also changed the way the world changes.21 The incessant creation of Facebook pages, podcasts and Amazon book reviews; all these ways in which individual users play a part in creating the content have formed the digital democracy. The individuals, together, have changed the way the world functions. The focus on the individuals that form the social networks is therefore very much a part of rethinking media and communications policy. Some authors22 go so far as to claim that the proliferation of social networks renders some of the current laws and policies entirely redundant. Be that as it may, the way in which users take part in social networks needs to be taken into account in the democratic process.23 The developments will possibly lead to greater social engagement in more general terms. This provides the basis for a 'glocal' civil society that is simultaneously global and local.24 The change may in fact reach all the way into the fundamental rights and values of the society. Any policy measures should be based on the societal bedrock of fundamental rights and freedoms. These rights are, indeed, for the most part individual rights. Privacy, for instance, is defined by its individualistic character: it is the ability of an individual to choose to what degree (s)he, or information about him/her, is accessible to others. Openminded challenges to current policy perceptions are called for to explore the optimal means and directions of media and communications policy. All in all, a fundamental rights approach to media and communications policy therefore has the tendency to focus the attention on the individual. Attention on the individual links convergence closely to consumer policy. In the new digital environment the way in which people interact commercially is changing. EU consumer policy strives25 to make sure that consumers are properly informed and protected so as to bring about the best in the markets. Artificial geographic barriers, non-transparent and fragmented price elements (such as copyright levies) and poorly enforced protection measures are examples of an inadequately functioning European electronic marketplace for consumers. As a consequence, only some 5 percent, i.e. 30 million Europeans shop online across borders in Europe. Consumer empowerment therefore provides a useful angle of observation on the converging media and communications environment. 21. 22. 23. 24. 25.

Ibid. See e.g. Zarsky (2008, 741). Ibid., 756. Van Bavel et al. 2004. Commission Communication on Consumer Scoreboard 2008; Kuneva 2008.

360

Rethinking.book Page 361 Friday, September 25, 2009 10:01 AM

Policy Approaches in the Converging Media and Communications Sector

The central role of the individual surfaces as a theme also in specific areas of media and communications policy. In the broadcasting sector, it relates to one of the most heatedly debated issues: the service remit of public broadcasters26. The private sector has been vigorously advocating a “Public Value Test (PVT)” as a means to define and assess such a remit. Davies has claimed that “some form of market failure must lie at the heart of any definition of public service broadcasting.”27 Services of little or no interest to the individual consumers should from this perspective be considered to fall outside the remit. They should then also be excluded from public funding. If a service, on the other hand, were already offered to the full satisfaction of the consumers by the private sector, public sector involvement would also seem futile. The downside in this type of ”audience share” thinking is, of course, that it may dwarf into a populist focus at the expense of high quality content. The balance is not easy to establish, and the proponents of powerful national public broadcasters will oppose the public value tests. What seems clear, in any event, is that as the demands of individual users move through convergence from traditional broadcasting towards the interactive internet, so too must the broadcasting services—both public and private. The focus on the individual is also discernible in EU competition law and policy, which cuts across the media and communications sectors. Impacts to consumer welfare have been raised to a central tenet of testing the acceptability of potentially competition restricting measures or conduct. In simplified terms this means that if the consumer will ultimately benefit from, for example, an agreement between companies, the competition restricting aspects of the measure may be considered negligible.28 Or, the other way around, any agreement that decreases consumer welfare is susceptible to being prohibited. An important aspect of the Court of First Instance’s Microsoft judgment, for example, was the finding that Microsoft’s refusal to supply its competitors with interoperability information lead to a negative effect on consumer welfare.29 Article 82(b) TEC clearly states that abusive practices which consist of limiting production, markets or technical developments to the … prejudice of consumers, are prohibited. As in broadcasting, there is 26. See the Chapters of, for example, Biggam, Donders, Herold, as well as Valcke and Lievens. 27. Davies 1999, 10. 28. See Article 81(3) TEC. 29. See for example, ECJ, IMS Health, Case C-418/01 par 48; ECJ, Magill, Joined Cases C241/91 and C-242/91 par 54; and CFI, Microsoft v Commission, Case T-201/04 pars. 643-7, 664, 693 – 708.

361

Rethinking.book Page 362 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

a balancing exercise that needs to be carried out with care. There needs to be a balance between the longer term end user benefits (companies’ incentives to innovate) and the more immediate effects on him/her. Finding such a balance is demanding. The Courts must make sense of the complicated market structures, and follow all the procedural legal requirements of burden of proof, right of appeal, etc., while staying in time for the judicial decision still to be relevant. Take the Microsoft browser case30, for example: during the legal proceedings, Netscape browser lost virtually all its 90 % market share to Microsoft’s Explorer. Did competition law rescue the individual consumer? The benefits of end users may also be relevant when cultural issues meet trade law. The World Trade Organization (WTO) is still often made the scapegoat for ailing cultural policies. However, the WTO has to a great extent recognized the shortcomings of a purely economic model, and is not in a fundamental conflict with active cultural policy. The GATS Agreement obligations are not of general application to all sectors, such as audiovisual services. Indeed, the EU has made no commitments in the audiovisual sector, and only limited commitments in entertainment. However, one could speculate with the impacts of applying trade law principles—more specifically the non-discrimination rules, which require national treatment and most-favoured nation treatment—to media and communications policies. If the national cultural policy measures were indeed determined to contradict these principles, and hence considered prohibited, the analysis would shift to the country’s justifications for such measures. Are the chosen measures necessary; are they the least restrictive alternatives (LRA) to trade of the different available options of reaching the set policy targets? These focal questions would seem to introduce the aspect of user benefits into the debate. The LRA test namely ensures a chosen level of (e.g.) cultural measures, while maximizing the trade opportunities. When properly applied, trade law can help in optimizing a wide cultural supply. It ensures that the national (discriminatory) measures actually benefit the consumer of cultural products, the individual end user, not a particular local industry. In this vein, Emmanuel Cocq31 elaborately criticized in his speech in the Lecture Series the “automatic support” granted by the French government in the 1980s and 1990s to only few well-established parts of the French film industry and their large-scale productions. The support effectively deprived the culturally diverse French small-scale productions of their means of survival. The consumer had been denied a range of niche cultural 30. U.S. D.C.Cir., United States v. Microsoft (2006). 31. Cocq 2008. See also Cocq and Messerlin (2003); Messerlin et al. (2004).

362

Rethinking.book Page 363 Friday, September 25, 2009 10:01 AM

Policy Approaches in the Converging Media and Communications Sector

products at the expense of few large-scale productions. Thus, cultural policy had in fact turned into a camouflage for industrial protectionism. This, the WTO rules could challenge. The WTO trade law’s justification test could focus the discussion on the true objectives and effects of the measures. By rooting out economic protectionism, the WTO can hence actually play an important role in protecting cultural diversity. This seems vital in the era of global convergence, where the “nationality” of films is often neither clear nor relevant. What matters is cultural diversity, assessed as benefits to the individual end users.

References Brussels Court of First Instance (TGI), SABAM v S.A. Scarlet (previously Tiscali), N° 04/8975/A, 29 June 2007. Cocq, Emmanuel, and Patrick Messerlin. 2003. The French Audiovisual Policy: Impact and Compatibility with Trade Negotiations. HWWA-Report Series, Report no.: 233. Hamburg: Hamburg Institute of International Economics. Cocq, Emmanuel. 2008. Lecture “Who’s afraid of the WTO? Trade Policy meets Cultural Diversity”, the IES Lecture Series, Vrije Universiteit Brussel, Brussels, 7 May 2008. Commission Communication on Monitoring Consumer Outcomes in the Single Market: The Consumer Markets Scoreboard COM(2008) 31, final. Commission Staff Working Document on the Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society SEC(2007) 1556. Court of First Instance, Microsoft Corp. v Commission, Case T-201/04 [2007] ECR II-3601. Davies, Gavyn. 1999. The Future Funding of the BBC. Report of the Independent Review Panel to Department of Culture, Media and Sport. London: DCMS. DCMS and BERR (Department for Culture, Media and Sport and Department for Business, Enterprise and Regulatory Reform). 2009. Digital Britain. The Interim Report. London: DCMS & BERR. Directive 2007/65/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directive 89/552/EEC on the Coordination of Certain Provisions Laid Down by Law, Regulation or 363

Rethinking.book Page 364 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

Administrative Action in Member States Concerning the Pursuit of Television Broadcasting Activities (“Audiovisual Media Services (AVMS) Directive”) [2007] OJ L332/27. European Court of Justice, IMS Health GmbH & Co. OHG v NDC Health GmbH & Co. KG., Case C-418/01 [2004] ECR I-5039 (“IMS Health”). European Court of Justice, Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission, Joined Cases C-241/91 and C-242/91 [1995] ECR I-74 (“Magill”). Gasser, Urs. 2006. Legal Frameworks and Technological Protection of Digital Content: Moving Towards a Best Practice Model. Fordham Intellectual Property Media & Entertainment Law Journal 17 (1):39-113. Kuneva, Meglena. 2008. Speech of European Consumer Commissioner “Key Challenges for Consumer Policy in the Digital Age” at the Roundtable on Digital Issues, London, 20 June 2008. Available at: http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/08/ 347&format=HTML&aged=0&language=EN. (Accessed 7 October, 2008) Manner, Mikko. 2009. A BitTorrent P2P Network Shut Down and its Operation Deemed Illegal in Finland. Entertainment Law Review 19 (1):21-23. Messerlin, Patrick A., Siwek, Stephen E., and Cocq, Emmanuel. 2004. The Audiovisual Services Sector in the GATS Negotiations. Washington D.C.: AEI Press. O’Shea,Tim. 2008. Commission Communication on Creative Content Online in the Single Market—Music to the Ears of the Industry? Entertainment Law Review 19 (4):83-86. Perritt, Henry H. 2007. New Architectures for Music: Law Should Get Out of the Way. Hastings Communications and Entertainment Law Journal 29 (Spring):257—358. Rifkin, Jeremy. 2004. The European Dream. How Europe’s Vision of the Future is Quietly Eclipsing the American Dream. New York: Jeremy P. Tarcher/Penguin. Rubik, Frieder, Gerd Scholl, Katja Biedenkopf, Harri Kalimo, Franziska Mohaupt, Ólöf Söebech, Eivind Stø, Pål Strandbakken, and Bruno Turnheim. 2009. Innovative Approaches in European Sustainable Consumption Policies. Berlin/Heidelberg: IÖW. Stockholm District Court, Case B 13301-06 of 17.4.2009.

364

Rethinking.book Page 365 Friday, September 25, 2009 10:01 AM

Policy Approaches in the Converging Media and Communications Sector

Time. Time’s Person of the Year: You. http://www.time.com/time/ magazine/article/0,9171,1569514,00.html. (Accessed October 11 2008). Turku Court of Appeals, Case S 1409 of 19.6.2008. U.S. Court of Appeals (D.C. Cir.), United States v. Microsoft Corp., 2006 WL 2882808. U.S. Supreme Court, Metro-Goldwyn-Mayer Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) (Grokster III). Van Bavel, R., Yves Punie, and Ilkka Tuomi. 2004. ICT-Enabled Changes in Social Capital. The IPTS Report, Special issue: Building the Information Society in Europe: the Contribution of Socio-economic Research June (85):2832. Zarsky, Tal Z. 2008. Law and Online Social Networks: Mapping the Challenges and Promises of User-generated Information Flows. Fordham Intellectual Property Media & Entertainment Law Journal 18 (3):741-83.

365

Rethinking.book Page 366 Friday, September 25, 2009 10:01 AM

Rethinking.book Page 367 Friday, September 25, 2009 10:01 AM

List of Contributors The editor-contributors Prof. Dr. Caroline Pauwels is director of the Center for Studies on Media, Information and Telecommunications (SMIT), a research partner in IBBT. She lectures national and European communications policy and media economy in the department of communications sciences at the Free University of Brussels (VUB), Belgium. She is member of the Board of the Institute for European Studies (IES). She is also a member of the board of the Flemish public service broadcaster VRT. [email protected] Prof. Dr. Harri Kalimo is a senior research fellow at the Institute for European Studies (IES). He is a professor at the law and political sciences faculties at the Free University of Brussels (VUB), Belgium. In addition, he is a visiting fellow at Yale University and an Associate Professor at the Turku School of Economics. Before these academic posts, he held various private sector managerial positions in the ICT field. [email protected] Karen Donders is a researcher at the Institute for European Studies (IES) and affiliated to the Center for Studies on Media, Information and Telecommunications (SMIT), Free University of Brussels (VUB), Belgium. She prepares a PhD concerning EU State aid policy and its impact on the organization, financing and definition of the remit of public service broadcasters in various EU Member States (including Belgium, the Netherlands, Germany, Ireland and the United Kingdom). [email protected] Ben Van Rompuy is a researcher at the Institute for European Studies (IES) and affiliated to the Center for Studies on Media, Information and Telecommunications (SMIT), Free University of Brussels (VUB), Belgium. He prepares a PhD on EC antitrust law and its capability of taking into account non-competition considerations. More specifically, he is looking at the place of such considerations (e.g. cultural diversity or the specificity of sport) in the interpretation and application of Article 81 EC in the telecommunications and audiovisual sectors. [email protected]

367

Rethinking.book Page 368 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

The contributors Sakari Aalto is a Partner at Roschier, Attorneys Ltd. He heads the firm's Information and Communications Technology practice and maintains a specialization in matters relating to IPR licensing, IT, and telecommunications. He is the author of a number of expert articles concerning ICT and IP transactions. [email protected] Ross Biggam is Director General of the Association of Commercial Television in Europe (ACT). ACT is a trade association representing the interests of the commercial broadcasting sector in Europe and represents commercial television companies in over 34 European countries. [email protected] Jean-Louis Blanchart works at the French speaking Community’s (Belgium) Centre du Cinéma et de l’audiovisuel. He deals with issues concerning the audiovisual sector and is in particular responsible for multimedia topics. [email protected] Jeanne Brunfaut works at the French speaking Community’s (Belgium) Centre du Cinéma et de l’audiovisuel. [email protected] Prof. Dr. Jean-Claude Burgelman is Societal Advisor at the European Commission Bureau for European Policy Advisors (BEPA), Brussels, Belgium. Previously, he was the head of the Information and Communication Technologies (ICT) Unit at the European Commission’s DG Joint Research Centre (JRC), Institute for Prospective Technological Studies (IPTS) in Sevilla, Spain. He was full Professor of Communications Technology Policy at the Free University of Brussels (VUB) and has been director of the Center for Studies on Media, Information and Telecommunication (SMIT). [email protected] Prof. Dr. Paul de Hert is associate professor in Law & Technology at the Tilburg Institute for Law, Technology and Society (TILT) of Tilburg University, the Netherlands, and professor at Law, Science, Technology & Society (LSTS) of the Free University of Brussels, Belgium. [email protected] Dr. Anna Herold is a policy and legal advisor with the European Commission’s Directorat General Information Society and Media. She works on issues relating to the Audiovisual Media Services Directive (in 368

Rethinking.book Page 369 Friday, September 25, 2009 10:01 AM

List of Contributors

particular the promotion of European and independent works) and follows State aid cases related to the audiovisual sector. [email protected] Prof. Dr. Bert-Jaap Koops is professor in Regulation & Technology at the Tilburg Institute for Law, Technology and Society (TILT) of Tilburg University, the Netherlands. [email protected] Dr. Ronald Leenes is associate professor in Law & Technology at the Tilburg Institute for Law, Technology and Society (TILT) of Tilburg University, the Netherlands. [email protected] Eva Lievens is a researcher at ICRI (Interdisciplinary Center for Law and ICT). She prepares a PhD concerning the legal aspects of converging media and alternative regulatory instruments. [email protected] Ioannis Maghiros is a Principal Scientific Officer at the European Commission’s DG Joint Research Centre (JRC), Institute for Prospective Technological Studies (IPTS) in Sevilla, Spain. He is currently leading the team responsible for the implementation of Techno-economic Foresight in the Information Society (TEFIS) work plan. Prior to joining the European Commission he had been working for IBM in Greece. [email protected] David Osimo works as a researcher at the European Commission’s DG Joint Research Centre (JRC), Institute for Prospective Technological Studies (IPTS) in Sevilla, Spain. His specific fields of competence are egovernment, ICT indicators, ICT policy, spatial impact and ICT impact. [email protected] Corina Pascu is Scientific IST Officer at the European Commission’s DG Joint Research Centre (JRC), Institute for Prospective Technological Studies (IPTS) in Sevilla, Spain. Her main research interests and activities concern the social and economic impacts of information society technologies by using prospective methodologies (foresight) and integrating them to develop policy support at European level. [email protected] Dr. Yves Punie works as a researcher at the European Commission’s DG Joint Research Centre (JRC), Institute for Prospective Technological Studies (IPTS) in Sevilla, Spain. In general, his projects deal with the socio-

369

Rethinking.book Page 370 Friday, September 25, 2009 10:01 AM

Rethinking European Media and Communications Policy

economic and technological monitoring and analysis of the future of domestic new media technologies such as Ambient Intelligence. [email protected] Dr. (honoris causa) Carole Tongue has been a Member of European Parliament (for the UK’s Labour Party) for over 15 years. She has strongly advocated for the so-called Amsterdam Protocol (1997) for public service broadcasting (annexed to the Treaty of the European Communities) and, more recently, for the UNESCO Convention on Cultural Diversity (2005). She heads the UK Coalition for Cultural Diversity, is the Associate Director of Sovereign Strategy and guest Professor with multiple universities in the UK. [email protected] Dr. Geomina Turlea works as a researcher at the European Commission’s DG Joint Research Centre (JRC), Institute for Prospective Technological Studies (IPTS) in Sevilla, Spain. Her main interests are in macromodelling and applied econometrics, particularly as regards the knowledge economy and endogenous growth. [email protected] Martin Ulbrich works as a researcher at the European Commission’s DG Joint Research Centre (JRC), Institute for Prospective Technological Studies (IPTS) in Sevilla, Spain. His current main topics are biometric identification system, ICT and productivity, and the impact of ICT on social and economic structures. [email protected] Prof. Dr. Peggy Valcke is a Professor in media and communications law at the Catholic University of Brussels and the Catholic University of Leuven. She is senior research fellow with ICRI (Interdisciplinary Center for Law and ICT) and has conducted several research projects in the area of media, telecommunications and competition law. [email protected]

370