ATVOD

26 Sep 2006

ATVOD response to DCMS consultation on proposed revision of TVWF Directive

The Association for Television On-Demand (ATVOD) response to the DCMS consultation on the Proposal by the European Commission for the revision of the TVWF Directive

A. Introduction
ATVOD welcomes the opportunity to participate in the DCMS consultation (the "Consultation") on the Proposal by the European Commission for the revision of the TVWF (the "Directive").

ATVOD is the self-regulatory body for audio-visual content-on-demand services in the UK and the Board currently comprises representatives from 6 communication companies (Video Networks (now part of Tiscali UK), On Demand, ntl:Telewest, Channel 4, Blockbuster On Demand and BT) and two non-executive directors. ATVOD's members in the UK provide and enable, through a variety of media and technologies, a number of different content-on-demand services such as aggregation, storage and delivery of audiovisual content. Together, these companies make up the largest, and most diversely competitive, content-on-demand community outside the United States.

ATVOD's members have signed up to the ATVOD Code of Practice. The Code is based on two core principles: first, that members must assist consumers and the general public with their efforts to protect children and young people from unsuitable content; secondly, that members must provide adequate information and guidance to consumers to enable informed selections of content and commercial services. ATVOD's core principles are reflected by its members' implementation (in launched services) of a range of access control mechanisms which enable consumers to prevent minors accessing potentially unsuitable content. These mechanisms work through a variety of methods, including personal identification number (PIN code) protection and, where appropriate, content watershed rules and other point-of-sale limitations. ATVOD's members also provide advice and guidance to their consumers on steps that can be taken to manage any content that may cause harm and offence. Companies joining ATVOD do so voluntarily and are admitted as members by decision of the ATVOD Board. As members, they gain the right to use the ATVOD 'trustmark' in order to inspire and ensure public confidence in the establishment of their new on-demand services. Further, they have the opportunity to help ensure that the rules applicable to their nascent industry are current, proportionate and relevant. ATVOD's members are also acutely aware of section 361(7) of the Communications Act 2003, in which the Secretary of State was granted the power to modify the legislation (and implicitly require content-on-demand services to submit to centralised regulation) in circumstances which can best be described as arising from any failure of self-regulation. The Government has made clear that it would seek to invoke these powers if necessary but would prefer not to, and is therefore keen for ATVOD to establish itself as an effective and successful self-regulatory body.

B. General Comments
ATVOD has not identified a need for additional audio-visual regulation at this time - particularly in relation to the content-on-demand industry - and remains unconvinced that the scope of the Directive should be expanded to non-linear services. ATVOD believes that emerging self-regulatory models are providing structure and regulation in proportion and application commensurate to the needs and circumstances of the new electronic content services and their consumers.

ATVOD suggests there is no need to impose additional audio-visual regulation on new electronic content services, such as content-on-demand. Whilst some services which are of concern to the Commission may currently operate within a regulatory vacuum, they do not operate within a legal void. Member State legislation, in combination with existing directives such as the E Commerce directive, already provide a fabric of legal certainty for such services. Self-regulatory organisations such as ATVOD are emerging to fill the regulatory gap and provide additional structure and certainty for evolving audiovisual services. The development of such organisations renders unnecessary the burden to taxpayers of centralised or statesponsored regulation for content-on-demand services.

The regulatory burden imposed on the ATVOD membership by its Code of Practice is bespoke to the needs of the UK's content-on-demand industry and the cultural needs of its consumers. It is financed entirely by its member companies. At its inception, ATVOD's members took the UK's broadcasting codes as their guide, acknowledging that certain of the content-on-demand services provided by ATVOD's members have superficial similarities with linear television services. Critically, however, where ATVOD and its members identify points of difference between content-on-demand services and linear services, ATVOD can alter its code by way of practice statements. It is producing (and, where necessary, revising) such practice statements with increasing frequency as the differences between linear and content-on-demand services become clearer.

ATVOD's self-regulatory codification is proportionate, flexible and capable of rapid adjustment. It is therefore able to keep pace with the changing technological landscape - a highly likely event in such a new, dynamic and technology-dependent industry - and the maturing needs and experiences of the consumers. The flexibility delivered by self-regulatory organisations is far greater than could be achieved bystatutory regulatory frameworks faced with the need to apply regulatory requirements with equal relevance and efficacy to a broad range of old and emerging media throughout the European Union, where different models are developing at different speeds, in such a way that it is not clear whether a single model for nonlinear services will ever emerge across the EU.

Furthermore, self-regulation is capable of producing economic conditions conducive to business growth. ATVOD has itself helped to deliver legal and economic certainty to the UK's content-on-demand industry. Since ATVOD's inception, content-ondemand services have taken root in the UK and are beginning to flourish. Two operators now provide commercial on-demand services to the British public, supported by others within the value-chain. Subscriber numbers have risen from around 15,000 in 2003 to a figure in excess of 2 million today and are expected to continue their recent sharp rise as further operators enter the market and existing providers expand their networks and extend their deployment. Over 40 million items of content have been selected by consumers from services offered by ATVOD's members since 2003, without attracting any complaints which have required adjudication by ATVOD. Complaints which have arisen have been settled by the members themselves, without ATVOD's intervention. However, the establishment and operation of content-on-demand services remains challenging. Within the UK, the content-on-demand service operated by Kingston Communications has been discontinued. Other operators will emerge and some will fail. An increase in the regulatory burden - the necessary result of certain of the options under consideration by the Commission - will only raise the barriers to business success in this developing area. Similar side effects will result from an increase in the regulatory uncertainty that will be caused by artificially distinguishing between competing ondemand services by way of imperfect legislative definitions.

C. Extending the Directive to "mass-media video-on-demand services"
The DCMS (in its question 7) raises the prospect of extending the Directive to what it calls "mass-media video-on-demand services of the kind currently available". That suggestion is not supported by ATVOD. It is not clear to ATVOD how such a massmedia service would be defined. However, it is possible to anticipate that such a proposition would rely on an artificial and unsustainable distinction between ostensibly similar and competing content-on-demand services.

Further, the intellectual basis for such an approach to the Directive's future appears flawed. It ignores the fact that no case has been made for additional statutory intervention in the regulation of content-on-demand services. Those services are necessarily different from linear services; they rely upon the informed selection by the viewer of content at a time of their choosing.

Content-on-demand services compete across the media spectrum for share of market. The personal video recorder (the "PVR") is as much a competitive threat as the broadcast, linear television channel. The emergence of YouTube, MySpace and other sites hosting niche on demand content also compete with the newly established "mass-media video-on-demand services" which can exploit the technological opportunites of their systems architecture to make available niche material. But would the PVR or the online community sites find themselves subject to the regulatory burden proposed by this asymmetrical extension of the Directive. An extension of the Directive's ambit in this manner will impose on the content-ondemand community a greater cost of regulatory compliance than is currently faced and adds considerable cost to the taxpayer. Of greater significance, it will stifle future investment in the services they operate and may similarly suppress inward investment into the operators of content-on-demand services. Rather, capital will be targeted at (and more economically available to) those services which share many clear similarities with those loosely termed "mass-media video-on-demand services" but find themselves outside the expanded regulatory ambit.

D. Summary
ATVOD believes that the imposition of any additional statutory regulatory burden on content-on-demand services may have a chilling effect on investment in the providers of those new services and their deployment across Member States. If that was the case, service evolution would slow and both investors and consumers would lose out. ATVOD believes that, should the Directive's ambit be extended to content-ondemand services, there is a real risk that investment will be displaced and directed to new services establishing and operating beyond Europe's regulatory controls. This would be to the Community's detriment..

ATVOD's achievements to date support the argument that additional statutory regulation is unnecessary. Such regulation is not needed to stimulate service growth. Neither is it needed to enshrine regulatory principles. Those objectives are best met by self-regulatory mechanisms.

ATVOD is concerned that the imposition of additional costly regulation onto contenton- demand service providers - as proposed by Option 4 - will create a cumbersome and disproportionate regulatory burden that will slow service evolution, subject the content-on-demand industry in particular to an extended period of regulatory uncertainty and restriction and may quickly become overtaken by the pace of technological change and convergence.

ATVOD believes that effective self-regulatory organisations are well-placed to tackle the concerns articulated by the Commission in a proportionate and flexible manner. ATVOD therefore continues to believe that the Directive should not be extended (as proposed or at all) to 'non-linear' services and therefore supports Options 2 and 3.

The Association for Television On-Demand
14 September 2006