Author's name: Christian Kaschuba

Institutional affiliation: University of Washington, School of Communications

Postal Address: Box 353740, Seattle, WA 98195-3740, USA

Phone: (206) 543 - 2660

E-mail: kaschuba@u.washington.edu

Title of paper:

The Digital Challenge to the Public Interest: The Regulation of Virtual Advertising in the European Union

Abstract text:

The clear separation between advertising and editorial programming is a fundamental principle in European broadcast regulation (Television Without Frontiers Directive, EEC/89/552). The purpose of the separation principle is to keep journalism free of commercial influences and to inform the viewer of the commercial purpose of certain program segments (transparency). However, the increasingly competitive broadcast environment (more channels; higher production/rights costs; evasive, “zapping” audiences) forces broadcasters, event organizers and right holders to re-evaluate the traditional model based on program breaks for spot advertising.

The latest buzz in the television industry is a new technology called Virtual Advertising (VA). VA - defined as the “live or post-production insertion of computer-generated electronic advertising images into television broadcasts or video streams” - raises many complex, yet intriguing, questions. Is the current regulation of broadcast advertising overly restrictive? Is VA television advertising or is it a form of event sponsoring? Is the insertion of VA compatible with the separation principle? And, more generally, in the age of digital media convergence, what is the "public's interest" and how can regulation be justified?

Understandably, the VA industry lobbies for self-regulation and an “open environment” for this new advertising technique. The national regulatory authorities and the European Commission, on the other hand, will have to decide how to balance legitimate public interest principles with the overall objective of deregulating European broadcasting in order to allow broadcasters to maximize their economic potential and be competitive in global markets.

This study, then, analyzes the current regulation of VA in the four largest European media markets (Britain, France, Germany, and Italy) in order to discuss possible scenarios for the anticipated revision of the TVWF in 2003. Further, the results are compared and contrasted with the broadcast advertising regulation in the United States, the No. 1 exporter of television programs in the world. As programs are either transmitted live across national borders or bought and sold for re-broadcast in another country, consistency in the regulation of VA is essential to provide legal certainty for all parties involved. Finally, interactive, "point-and-click" VA icons promise enhanced revenue streams in the digital broadcasting environment, where computer networks and TV broadcasting converge into integrated electronic content service providers. Hence, the European “E-Commerce Directive” (2000/31/EC) - which governs point-to-point services such as video-on-demand or commercial communications - becomes an increasingly important piece to the puzzle of European broadcast regulation.

Title: 3-G Wireless Auctions: A Barrier to New Services for Local Communication

Fax: (716) 645-2141

gozanich@acsu.buffalo.edu

New Services for Local Communication

Wireless telecommunications services are an essential means of local communication. Existing wireless telephony and messaging applications have the potential of being enhanced by broadband applications supported through “Third Generation” wireless services. Across the globe, governments have been allocating electro-magnetic spectrum for these 3-G services.

Increasingly, governments and regulatory agencies have been relying upon auctions to allocate this spectrum. The concept of auctions as a means of allocating this scarce resource was first articulated by Coase (1959). The rationale being that the entity that pays the most for a resource will create the greatest value from it. More recently, Hazlett (1998) argued that the establishment of property rights in spectrum ownership results in profit maximization leading to a better means to increase wireless traffic.

The use of auctions has removed the concept of public ownership of the electro-magnetic spectrum and radically redefined performance for this local communications technology. Issues of universal service, equality, and general definitions of performance and service characteristics are no longer directly addressed, but rather, service and performance are decisions made at the corporate level. This precludes most community-based services such as the novel applications associated with a “wireless commons” (Lessig, 2001).

A different theoretical perspective may be applied to auctions. That is, the purchasing of spectrum to create a barrier to new competition (Porter, 1980). Industrial organization theory recognizes the role of the firm to respond to potential competition through a variety of means, including acquisition or influencing regulatory decisions (Scherer, 1990).

This paper hypothesizes that national and transnational wireless carriers acted to create barriers to new competition through the 3-G auctions by implementing a “win at any cost” strategy then retarding the roll-out of services and subsequently negotiating down the costs of the auction. In testing this hypothesis, analyses of the auction prices for 3-G licenses are compared to the intrinsic value of these licenses based upon a discounted cash flow model. These analyses demonstrate that prices paid for spectrum were uneconomic decisions. That is, economically speaking, these carriers overpaid for the spectrum. Further the actions by these carriers subsequent to the auctions are analyzed to show that by retarding the introduction of 3-G services they continue to maximize revenues from existing wireless systems while they attempt to renegotiate auction terms and seek other types of regulatory relief.

Dima Dabbous

Ending The War? Broadcasting Legislation in Lebanon

 

Soon after the end of the civil war, Lebanon witnessed the birth of its first audio-visual law: the Broadcasting Act of 1994. This Act was, according to the Document of National Reconciliation that ushered the end of the civil war, considered to be crucial in ending civil strife in Lebanon. The 1994 Act was also the first legislation for private broadcasting to be passed in the Arab world.

The introduction of the Act created great political upheaval. The present paper documents the controversy created by the Act and seeks to understand the extent to which vehement criticisms of the Act and of the government behind it were justified. It will seek to do so by examining the various phases of the Act: its inception as a draft, its final wording and the economic and political forces that shaped it, and finally its implementation mainly through the creation of a new regulatory body, the National Audio-visual Council (or NAC), responsible for studying license applications. The present study is based almost exclusively on primary sources: archival material most of which is inaccessible to the general public (e.g. application files), and personal interviews with high ranking government officials and media representatives.