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Viviane Reding
Member of the European Commission responsible for Information Society and Media
New EU Rules for a Convergent
Multi-Media World : the need for a "Light Touch"
IIC and Chatham House 36th annual conference
London, 10 October 2005

European Commission - SPEECH/05/590   10/10/2005

Other available languages: none

SPEECH/05/590












Viviane Reding

Member of the European Commission responsible for Information Society and Media




New EU Rules for a Convergent
Multi-Media World : the need for a "Light Touch"




















IIC and Chatham House 36th annual conference
London, 10 October 2005

Introduction

Ladies and Gentlemen,

It is a pleasure to be here today with you to speak about the policy and regulatory challenges raised by convergence in the electronic communications and audio visual sectors.

As the first European Commissioner to be responsible for both the Information Society and  Media Policies - that is for infrastructure and content - I face the challenge but also have the unique opportunity to help to unleash all the economic potential of  sectors which have become increasingly interdependent and have the capability to enrich each another.

1. Convergence: What I see happening as regards technological and market developments

The ICT and media sectors are (I believe) on the verge of a new phase of growth based on the convergence of high speed broadband networks, audio visual media and electronic devices.

We have been talking about convergence in the sector for more than a decade now. Convergence is not a revolution, it is an evolutionary path. It is bringing to the mass-market technological revolutions which took place during the 90’s, and which are based on scientific findings and techniques developed during the 70’s and 80’s.

So what is new? What sort of policy response do we require?

What is new is that convergence has started to deliver. We are already seeing fixed and mobile networks being deployed, with new electronic devices and content processing technologies opening the way to brand new applications. Above all, the Internet is acting as a catalyst in areas which have been operated separately since their inception. It has the capacity to change the economics of the whole communications and media sectors. Telecommunications providers are already starting to offer broadcast services (IP TV) alongside traditional voice services. At the same time, content providers are offering communications services (voice over IP). An increasing proportion of consumers is able to watch or listen to audiovisual content anytime, anywhere, and on a variety of technical platforms (TV set, computer, mobile phone, personal digital assistant, etc.).

It has therefore become critical to seize the opportunities offered by convergence in a competitive and global environment for the benefit of all citizens and of the EU economy as a whole. This is first of all a task for the industry. For policy, the challenge is to ensure that a modern, flexible and open regulatory environment is in place that does not stifle, but instead encourages innovation, investment and competition. This is what the European Commission’s initiative “i2010” aims to do.

i2010, adopted by the Commission in June of this year, was the first concrete initiative taken under the renewed Lisbon Agenda. It provides the framework to address the main challenges and developments in the ICT and Media sectors in the next five years and in particular to ensure an open and competitive single market for information society and media services.

ICT is crucial to the EU economy. The latest EU25 data show that the ICT sector represents just over 5% of EU GDP. But this 5% drives 25% of overall growth and about 40% of our increases in productivity – the fundamental source of new wealth in the economy.

This sounds good, but we could do better. Most economists now agree that weaker and later investment in ICT by the European economy has widened the productivity gap with the US. The much larger ICT sector in the US delivers benefits to the economy, yielding as much as 60% of their productivity growth. I have said it before and I will say it again: this gap between the US and Europe is not a failure. It is an “opportunity gap” which we should try to bridge.

A wider and more efficient use of ICT throughout the economy will help the EU to preserve its global competitive position and to maintain existing jobs and create new ones.

The media sector is also critical in the convergence process. Building upon the richness and diversity of the cultural inheritance of Europe, it is the “life blood” of the information society. In the end, the consumer is not buying electronic infrastructures but premium content tailored to his needs, combined with communication services.

Convergence is closely coupled with cultural, economic and network issues which form an integral part of the Information Society:

  • From a cultural perspective, it challenges the traditional relationship between content creation, the media and the consumer.
  • From an economic perspective, we are confronted by a high pace of development of new actors in the value chain, the “creative destruction” of established positions and changing consumption modes.
  • From a networking perspective, the emergence of the Internet as one of the major vehicles of converged services has the capacity to challenge the sustainability of traditional business models in the sector.

It is the Commission’s task to ensure that the right framework for the digital convergence and for investment in ICT is in place. This is Europe’s best bet for delivering sustained growth and skilled jobs.

In addition – please allow this comment from a former journalist – we must make sure that media services are regulated to the least possible extent, and that self-regulation – provided it works in fact and is the result of a broad consent – is given preference over regulatory intervention. Politicians must not try to rule on the quality of media content, or restrict access to information! Freedom of the media and freedom of expression are rightly amongst the highest European values – and this applies in particular to the decentralised global network of ideas, thoughts and knowledge that is offered by the Internet.

2. Convergence inside policy and regulatory authorities

My first policy priority is to use all the means and instruments at my disposal to ensure a modern, market-oriented regulatory framework for the converging digital economy and to stimulate the availability of online content. This implies two major tasks for the next 18 months: firstly the modernisation of the EU rules on audio visual content, and secondly the review of the regulatory framework for electronic communications. In both cases, the issues raised by convergence will have to be tackled.

In that context, the European Commission’s responsibilities in the field of Information Society and Media have been brought together in one and the same Directorate General which is under my responsibility. This makes DG Information Society and Media a real driver for EU convergence policies, responsible for sector specific regulation in the field of electronic communications on the one hand, and audiovisual policy on the other hand, in addition to research and development programmes in the field of information society technologies (IST).

However, having a single head for driving policies in the information society and media sector does not mean that the two related frameworks of regulation will be combined into one. On the contrary, it has been very important to define a clear border between electronic communications services – (this means: the infrastructure of the information society) – and content for regulatory purposes in order to secure investment in the sector. This means that the content features of a given transmission service are not subject to electronic communications regulation and vice-versa, even though the economic interactions between both sides of the story are of growing importance.

Of course, as new markets and services emerge, this regulatory border may be challenged. But I see content regulation and infrastructure regulation responding to different needs. My approach, as you know, is a “light touch” to nascent services, giving them the maximum freedom to develop. That is why, for example, I have encouraged the national telecom regulators in the EU to follow such an approach on Voice over IP. This “light touch” should also be the rule for new audiovisual content services. And it works: you only have to look at how these issues are being dealt with here in the United Kingdom, with the Association on Television on-demand (ATVOD) entrusted with the duty to self-regulate video-on demand-services.

The 2003 UK Communications Act has drawn the consequences of convergence in establishing a simpler regulatory framework for convergent communications industries, and in replacing a number of regulatory authorities (ITC, Radio Authority, Broadcasting Standards Commission, Radiocommunications Agency, as well as Oftel) by a unique regulator, i.e. OFCOM. This new structure allows the British government to make a choice, according to circumstances, between regulation by OFCOM and co-regulation by delegation to entities such as ATVOD that I mentioned before.

The only other examples we have in Europe of “convergent” regulators covering both content and transmission are Italy with AGCOM and Finland with FICORA. Given the current state of development of converging markets, it is too early to express any opinion about the efficiency of sector specific authorities. Formally, such arrangements are part of the institutional autonomy of Member States, and are not covered by Community policy.

But my personal feeling is that, in the face of the current market developments, these changes seem to go in the right direction. And I am determined to strongly draw on the experiences of these national “convergent regulators” for my future work on convergence at the EU level.

3. Convergence: Implications for content regulation

The first main regulatory task that I mentioned is the modernisation of the EU rules on audio visual content.

Only three weeks ago, the Commission organised along with the UK presidency a conference on the review of the Television without Frontiers Directive. This conference was the last step in the very extensive consultation process which will lead to the adoption of a legislative proposal for a new framework for audiovisual content services at the end of the year.

In fact what we are working on is the regulatory response to the convergence of technology. We want to provide a light, but efficient legal framework for the cross-border provision of audiovisual content services. With convergence, accessing TV programs and audiovisual content in general can be done in a number of ways: by traditional broadcast, by ADSL-TV, by downloading online, by ad-hoc network or by mobile TV over 3G.

Today, these audiovisual services receive very different regulatory treatment based solely on their delivery mode. This creates an uneven playing field that is holding the audiovisual industry back from contributing to the Lisbon goals.

Convergence calls for a new level playing field between the different audiovisual content service providers. A modern framework at Community level should be based on delivery platform neutrality. This would enable content service providers to compete on an equal footing, ensure regulatory consistency and strengthen legal security.

The legal framework that we are preparing will include minimal harmonization linked to national rules in order to ensure the effective application of the country of origin principle. This principle for me is and must remain the cornerstone of the internal market. It is essential for the future of the distribution of audiovisual content in Europe. It must remain the principle for any rules in this field in order to put in place a legal framework which will favour the development of these services. And let me be very clear about this: those who call into question this principle in the audiovisual field, in reality ask for stopping the cross-border circulation of ideas, information and entertainment services. This is unacceptable for me. I do no want to establish new “Chinese walls” in Europe (in particular not on the Internet), but I want to promote Audiovisual Content Without Borders for Europe’s citizens and consumers. This can only be achieved on the basis of a strong country-of-origin principle.

Let me be also clear on a second issue that has already caused some controversy: For me, it is clear that one cannot and must not extend traditional broadcasting regulation to new audiovisual on-demand services. With regard to new services, where there exists a strong user control, only certain minimum principles such as the protection of minors or the fight against incitement to racial hatred could make sense also. This would plug a regulatory gap, establish the country of origin principle for new services and provide legal security to operators. Of course, here effective and broadly accepted self-regulation regimes will be of utmost importance.

As regards cultural diversity, a broad consensus has emerged that the rules in place for traditional television represent a workable compromise that allows the promotion of European and independent audiovisual productions in line with national traditions, allowing some countries to work under binding quotas, others under recommendations only. While we can, I believe, all agree on the objective of a vibrant European audiovisual production sector reflecting the diversity of our cultures, it is also clear that extending the provisions of the Articles 4 and 5 of the TVWF Directive is certainly not an option for a non-linear environment.

It is first and foremost in the interest of our industry and services to have a clear set of light, but Europe-wide rules. The alternative is a patchwork of national rules and case law, some very restrictive and many of them contradicting each other and thus making cross border business increasingly difficult for both providers and users. The new Audiovisual Content Without Borders Directive therefore must offer one single, basic framework instead of 25 different legal regimes.

4. Convergence: implications for infrastructure regulation

Reviewing the EU regulatory framework for electronic communications will be another of my main tasks over the next 18 months.

I intend to ensure that we have a modern, market-oriented regulatory framework for e-Communications, able to deliver substantial consumer benefits. In particular, I want to promote the development of high-speed communication networks that will allow consumers to have speedy access to rich contents on multiple platforms. The current regulatory framework has now been in place for over two years. The Commission will be reviewing it next year, in line with its duty to report to the European Parliament and the Council by July 2006.

The aim of the review will be to see what has worked well with the current framework and what needs to be changed in order to take into account evolutions of technological and of economic nature on the electronic communications market. This includes of course developments which are driven by convergence. Be sure that I will have a fully open mind on the principles and the architecture of the future framework, and that I do not exclude at this stage any policy option. My objective is that we further strengthen the competitiveness of Europe’s electronic communications sector and that EU citizens and businesses benefit from an advanced, innovative, efficient and cost effective communications sector.

The current framework is anchored to the fact that competition is the best way to guarantee choice, new innovative services and value-for-money for consumers. With the exception of certain horizontal consumer protection measures, operators should only expect to be regulated in areas where they are dominant so that consumers fail to reap the benefits of effective competition, or where new entrants face obstacles to offer their services.

The goal is to have sustained effective competition without on-going regulatory intervention; for example, to have competing companies delivering services over their own infrastructures, and not being dependent on access being provided by a stronger competitor. DSL technology was already almost a decade old when the EU local loop Regulation was put in place. Although such technologies were available there was little or no effort to deliver new services to consumers under the previous monopoly regime. It is thanks to the competition made possible by local loop unbundling, and to competition with independent cable networks that had already started to invest, that broadband has taken off so well.

The current regulatory framework has been designed from its inception to deal with convergence. I mean by that the ability of any infrastructure to deliver any service, content or communications. This is because it is based on markets, and not on networks or technologies, further to the principle of technological neutrality. A critical step in the EU framework for electronic communications is market definition. This can be a complex exercise in the face of some of the new convergent services. However we use methodologies developed under EU competition rules of which the Commission has long experience and which are sufficiently flexible to accommodate technological changes.

Furthermore, the framework only regulates certain specified markets, not all eCommunications markets. Generally speaking, it is crucial to make sure that emerging markets are not subject to inappropriate regulation, in order to encourage innovation. This will be the case for products and services markets representing a real innovation for customers.

A pioneer in convergence regulation, OFCOM here in the UK has put forward a new approach to address those structural aspects of the UK’s electronic communication markets that may give rise to long term restrictions or distortion of competition. It will be interesting to see whether OFCOM’s proposed approach will result in a more effective application of the obligations that may be imposed under the EU regulatory framework.

5. Convergence: implications for the EU Commission’s approach to public broadcasting

Ladies and Gentlemen, there is one last point I would like to touch upon. It is the implication of convergence for the Commission’s approach to public broadcasting.

Convergence brings about new issues for public service broadcasting such as the extent to which the public service remit may include services other than traditional broadcasting services.

On the one hand, the 2001 Communication on state aid to public service broadcasting (which is the result of a fruitful cooperation between former Competition Commissioner Monti and myself) has already recognised that public service broadcasting may offer services other than traditional ones, such as online information services, if this is clearly spelt out in the public service remit that needs to be defined by legislation at national level. This 2001 Communication has already served as a basis for solving competition cases involving thematic channels and online programmes.

Concerning thematic channels, the Commission has recognised that they may form part of the public service remit to the extent that they pursue the same democratic, social and cultural objectives. I would like to remind you of the Commission’s decision Kinderkanal for children’s programmes and the BBC 24 hours for news programmes.

Concerning online programmes, the Commission approved UK funding for BBC provision of online educational services. Apart from this particular case, online services such as video streaming, information related to the public service broadcasters’ programmes also seem to fall in the public service remit if they are a mere continuation in the digital and online environment of the services traditionally offered by public service broadcasters. As a matter of fact such services address the “same democratic, social and cultural needs of the society”, which is the relevant criterion. In contrast, the 2001 Communication does not allow for the same interpretation in favour of electronic commerce.

On the other hand, the extension of public service broadcasting to online services has some economic and competitive implications. While in the traditional broadcasting environment, public service broadcasters compete with commercial broadcasters, public broadcasters active in the online environment may be involved in situations of competition with other commercial operators such as the written press or other companies that offer services.

Therefore, there must be some guarantees for the stakeholders confronted with this competition from public service broadcasters. Let me mention two of them:

  • Transparency: as stated in the 2001 Communication, public service activities must be clearly identified for the sake of commercial operators: a « clear identification of the activities covered by the public service remit is [...]important for non-public service operators, so that they can plan their activities ». This transparency requirement, means that the remit of the public service broadcasters should be clear, transparent and as precise as possible and that the financing of the commercial activities should be separated from the public service broadcasting activities;
  • Supervision by an independent authority : the 2001 Communication requires that public authorities should be given the task to guarantee that the public service mission has effectively been performed. While Member States enjoy a margin of discretion to choose the mechanism that is adapted to ensure effective supervision of the fulfilment of the public service obligations, the Communication indicates that the public authority should preferably be “independent from the entrusted undertaking”.

Conclusion

Ladies and gentlemen,

The two major tasks I just have described are my immediate responsibilities for moving forward the convergence agenda: establishing appropriate frameworks for the development of markets for advanced network services and rich audiovisual content. This is my side of the bargain.

I am looking also to the Member States, to Industry and to other stakeholders to share these responsibilities with the Commission, through active engagement in the development of a European information space, support in streamlining regulatory barriers, through investing in new opportunities and open competition between services.

There are a lot of opportunities for growth and many new European jobs could be created in these high potential sectors if we work on a common convergence agenda.

Thank you very much for your attention.


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