1.1. The UK and the Information Society

One major characteristic of the UK is its gradualism; despite all predictions of revolution and profound change, UK media development is generally slow but continuous. A recent report published by the Department of Trade and Industry (DTI) stated that the main characteristic of the so-called ‘Information Society’ is a general uncertainty about its shape. This uncertainty is only too obvious if the track records of other technologies are considered. Implementation of ISDN, EC-promoted unified telecoms, high definition television, UK cable television, a UK fibreoptic network, etc., has dragged on for years. The former Minister for Information and Technology predicted in 1982 that “by the end of the decade multi-channel cable television will be commonplace countrywide...TV will be used for armchair shopping, banking, calling emergency services and many other services”. In reality by the end of the 1980’s, cable tv had reached 1% penetration in the UK and the vision of armchair shopping has yet to be realised.

However, although the Information Society is still an aspiration rather than a reality, according to the DTI the UK is far ahead of other countries -

• In 1995, UK cable companies alone invested more than £2bn in developing infrastructure.
• BT announced a 10-year programme of work to install fibre-optic cable to bring interactive multimedia services into homes nationwide.
• Nearly three million personal computers were sold in the UK
• More than two million people in the UK accessed the Internet in the year to August 1995.

The total market for information and communications technologies in the UK has been estimated at £48 bn per annum. A recent survey stated that “in many ways the UK is a microcosm of the battles for future media supremacy”. Indeed, looking at the three converging sectors of telecommunications, media and information technology, the UK scores very well, especially in the first two areas; thus “the UK embarks upon the route towards the Information Society with considerable advantages compared with many other European Union members”.

In telecommunications, the UK has a substantial lead over most of Europe in both technology and market structure and a DTI report concluded that “Although never the most advanced in any one area, the UK is consistently a good second and does not lag significantly in any major respect, with no one country being a consistent first.” This lead is generally considered a result of the Government’s pioneering role in liberalisation and privatisation.

Besides the comparative advantage in telecommunications, the UK media strengths are software, creativity and media packaging. The UK enjoys a significant wealth-creating asset through its talent in TV software production, music, computer games, publishing, advertising, animation and film-making. The former National Heritage Secretary stated that “It is clear that in regulatory, technological and commercial terms, Britain is the broadcasting heart of Europe...The UK is second only to the United States in the export of television programmes”. Others suggest that the UK is better placed than any other country in Europe to benefit from growth and integration of global media and communication markets; “Works in English circulate more easily than do works in other languages. And the large size and revenue base of the English language mean that there are high potential returns and, crucially, that costs of expensive and high quality works can be amortized in the English language market before being exported”.

The Advisory Committee on Film Finance aired however another view in a report concluding that the film industry was confronted with major structural, financial and communications problems which lead to competitive obstacles. Moreover, exports of TV programming indeed increased but imports rose as well from £69 million in 1983 to £228 million (real terms) in 1993. It is expected that the growth of new channels and more broadcast hours will further increase imports.

Finally, the IT industry, the third major sector involved in convergence, is less competitive on a global scale than the UK telecom and media industry. A DTI statistical and comparative study ranked the UK 14th in competitiveness relative to the other 40 major economies. The UK is well positioned when comparing absolute values for GDP and IT production and consumption, but using the per capita figures the UK’s ranking is significantly worse. IT production as a percentage of GDP is less significant since the leaders are the developing Pacific Rim countries. Moreover UK IT productivity is also significantly worse than in the other G7 countries. These results must be seen as a European malaise. The chief executive of Intel claimed recently that Europe is falling behind the US and Asia in the use of information technology; “The problem in Europe is an unenthusiastic approach to the use of IT in business”. This is putting the competiveness of European companies and the strength of its economies at risk, according to other executives of US high technology companies.

1.2. Market participants and their responses

An intense degree of strategic corporate activity in the communications-related sectors can be seen partly as a reaction to the impact and the opportunities of the convergence of technologies on markets and services; everyone acts out of a wish not ‘to miss the boat’. This leads to restructuring both within and between industries and to re-engineering to take advantage of the new technologies. Therefore, convergence is characterised in the UK as either a threat to, or an opportunity for, those in the current market. What follows gives a brief overview of the current composition of the UK media and telecoms industry, and considers the key strategic issues that most actors face as the industry develops.

Print media

The major characteristic of the UK print media is the existence of a large newspaper sector. There are approximate 1420 private owned newspapers (not all are daily), of which 21 are national (including Sunday titles). The market is mainly polarized between weekday and Sunday titles, tabloids versus broadsheets and nationals and locals. The most widely read weekday national newspapers are The Sun and Daily Mirror (tabloid) and The Daily Telegraph (broadsheet). The News of the World is the most widely read national Sunday newspaper. The national newspaper industry has experienced falling circulation; a price war between several prominent titles has failed to arrest this trend. This has had a knock-on effect on revenues and regional titles. The long-term decline in the (national) newspaper market has prompted many large media groups to pull out and concentrate their interests elsewhere. Thomson Corporation, Reed Elsevier, Emap and Pearson have all sold their regional interests and have taken a more international and cross-media approach. These moves have left room for significant expansion by medium-sized companies such as Trinity International and Johnston Press. The magazine sector is large and both the number of titles and circulation have been growing considerably the past five years, but growth has been driven by increases in cover price.

Both newspaper and magazine publishers are investigating emerging opportunities to diversify revenue sources and extend their skills, content and branding to other media, specifically online and Internet publishing, television (e.g. ITV companies and Channel 5) and, to a lesser extent, radio. This type of diversification can build on core competency while helping to protect the more mature print segment, making it ‘future-proof’. In the long run, newspapers’ expertise as content organisers will be pivotal. The former editor of The Guardian noted that “In the past newspapers were a manufacturing industry. Over the past 10 years there has been a shift to a realisation that we are news- and information-gatherers who currently happen to put out the result as newspapers. The real assets are in the newsgathering and processing, not production”.

Television is set to be by far the most dynamic sector in the UK media market and is still dominated by the BBC. There are now five free-to-air channels. The BBC supplies programming to two television channels (BBC1 and 2) and five radio networks, as well as to local radio. A new formula for increases over the next five years in the licence fee of the BBC is linked to the annual inflation rate, determined by the change in the Retail Price Index (RPI). However, this core source of revenue, is growing at a far slower rate than the revenues of its pay- and advertising-based competitors. The BBC has thus diversified its revenue base, developing complementary commercial interests, and intends to follow a similar strategy with television. However, such commercial endeavours can be controversial and provoke protests and resistance from competitors wary of misuse of licence fees and the BBC’s ability to exploit its licence fee funded brands. The corporation must also guard against the possibility that in a fragmented environment its viewing share or reach may fall below a level where it becomes difficult to justify a universal licence fee. Recent ratings show however that BBC Television is increasing its share of the total British viewing audience in spite of increased competition from cable and satellite channels. In May 1996 the BBC announced its plans for using digital technology to broaden its broadcasting activities. This includes an extended BBC1 and BBC2 in widescreen; a 24 hour television news channel; more chances to see regional programmes; education services which take full advantage of digital technology's facility to promote interactive learning; and Europe's first digital radio service. In the meantime the BBC launched “beeb”, its commercial Web entertainment and information service.

The main national private channel is Channel 3 (known as ITV), which is operated by a number of regional television companies obliged to incorporate regional programmes into their schedules, with the exception of the breakfast time franchise which broadcasts nationally. There have been some major mergers of the ITV companies the last couple of years (such as the merger between MAI and United News & Media) due to more liberal regulation and it is expected that the ITV sector will consolidate further, with perhaps three broad groupings controlling the whole network, or even only one ITV company. For the same reason, a restructuring, initiated by the three major companies Carlton, Granada and United News has been announced. The ITV Association and its central commissioning body, the Network Centre, are being scrapped to create ITV Ltd.

Channel 4 is a public service broadcaster, funded by advertising, operated by the Channel Four Television Corporation (in Wales, Channel 4 is replaced by Sianel Pedwar Cymur (S4C) which is a Welsh language channel). Finally, at the end of March 1997, Channel 5, a new national terrestrial channel was launched.

The UK launched Europe’s first satellite service in 1982 (British Satellite Broadcasting); that later merged with a second non domestic satellite service (Sky) to become British Sky Broadcasting (BSkyB, in which Rupert Murdoch’s News Corporation holds a 40 per cent stake), which currently provides multichannel services all over in Europe (such as Sky Movies, Sky News, Sky One, Sky Sports, Sky Travel etc.). More than 5.5 m homes in the UK and Ireland now subscribe and the numbers continue to rise gradually. In 1983 cable began in the UK with the awarding of eleven pilot franchises, and in the early 1990s was expanding rapidly with new franchises granted by the ITC for various parts of the country; by 1996 over 1.3 there were over 1.3 million caboe households. There are now 114 operational cable franchises, operated by mostly North American owned companies. In recent years a strong consolidation has however taken place. In 1996, for instance, Nynex, Videotron, Bell Cablemedia and Mercury Communications came together with Cable & Wireless to create the new Cable & Wireless Communications. There are now more than 20 English-speaking channels available by cable and satellite, with a growing number of cable-only channels such as Live TV (owned by The Mirror Group) and Channel One (owned by the Daily Mail & General Trust).

This will be followed by digital satellite (BSkyB) and cable services and the Independent Television Commission awarded in June 1997 licences for multiplexes (blocks of frequencies) for digital terrestrial television. A group of three licences was awarded to British Digital Broadcasting (BDB), a consortium comprised at the time of the application of Carlton Communications, the Granada Group and BSkyB. However, the BDB application raised serious competition concerns and the licence was thus made conditional on BSkyB’s withdrawal as a shareholder from the BDB consortium, though it would continue to supply programmes.The Commission also awarded the guaranteed multiplex for the existing Channels 3 and 4 to Digital 3 and 4 representing the existing broadcasters. All this will result in an increase in channels. It is expected that in the early years of channel expansion the average revenue per channel will fall and the need to differentiate channels and attract viewers will become more pressing. As a result there will be (even) more competition for rights to premium content (such as film and sport), and the cost of these particular rights will rise.

The funding model for the industry is changing, with pay-television by far the fastest-growing source of income. Specialist subscription management and billing companies may enter the market, as they have done with magazines, in order to help the industry adapt and exploit this change. This will create specific bottlenecks and potential competition abuses. The new revenue will be leveraged by the industry to help fund new channels because advertising expenditure will not grow as quickly as channel availability. The television industry too will be able exploit its subscriber databases. Other important changes in television include a blurring of the traditional distinction between the terrestrial and non-terrestrial markets, the introduction of new broadcast services, such as near-video-on-demand (NVOD), the development of interactive television, and the packaging of television with other interactive services. However those services are still in their testing phase, with technology trials taking place at East Anglia (BT, Cambridge Cable), London (Westminster Cable), Peterborough (Bell Cablemedia), etc. Those trials are characterised by a series of delays, while companies like Videotron and Two Way TV, offering elements of additional information superimposed on real-time broadcasts, are just at the beginning of a national roll-out programme. Other services such as information retrieval (eg. the Internet) are growing with 579,000 Internet (July 1996) connections in the UK in comparision with 291,000 the year before, which makes the UK the country with the second highest connections.

The UK radio sector is undeveloped compared with that of, for example, France. However, radio has been the fastest-growing medium since 1993. There are 249 separate radio services of which three are national commercial radio stations (Independent National Radio or INR) and 14 satellite radio services. Radio is also set to go digital, and the market has already supported a dramatic growth in the number of broadcasters. Digital audio broadcasting (DAB) will result in even more competitors, although the majority of radio services will remain local.

Telecommunications

The introduction of deregulation since the early 1980s, economic growth over much of that period, and the technological progress made over recent years have all contributed to a telecommunications market which is among the most advanced in the world. By 1996 more than 150 operators had received licences in addition to those held by BT and Mercury from the Department of Trade and Industry (DTI) to provide telecommunication carriage in the UK. Several such licences permit the construction of national networks, both wire-based and wireless. Cable operators are also entitled to offer telephone services and increasingly do so. In spite of the new entrants’ attractive pricing strategies and lower charges, BT is still dominant among fixed telecommunication operators and has a huge lead over its main competitor in the local loop, the cable operators. However, entry by new players, like Energis and Ionica, together with number portability, may further stimulate competition at all levels of the UK telecom market and erode BT’s dominance. Moreover BT and Mercury may still neither convey nor provide broadcast entertainment services (i.e. point to multipoint as defined in the Broadcasting Act 1990) under their main licenses. This line of business exclusion has provoked strong objections from BT, and it is expected that the Labour Government will lift the ban. In the meantime, BT is already planning on the assumption that it will be able to offer a full range of interactive services by 2000. It is currently undertaking technical interactive television market and at the same time it is running a commercial experiment of video-on-demand involving 1000 homes on a cable network in London. In March 1996 BT launched a mass-market Internet service which was followed by Mercury’s (now Cable and Wireless) announcement of low-cost Internet access for existing customers of its residential phone service. Observers note that this is just the start of BT’s Internet involvement, especially when Internet telephony will mushroom long-distance phone calls in the near future. Due to the strong national competition BT has also developed a global strategy with several plans for merger.

Consumer interactive services, which have come about through the convergence of media, telecoms and IT have been prioritised in the business development plans of many telecom, cable and media companies, which see them as an attractive, alternative source of revenues, in an area closely related to their core businesses and often requiring little additional investment. Most media companies involved in the creation of those services are now shifting the focus of their activities from CD-Rom publishing to developing new products for Internet users. The involvement of new non-media entrants, including small start-ups and major firms, such as Microsoft, will provide strong competition, and partnerships will become increasingly important. This is also the case in the emerging sector of Internet access services. Many Internet Service Providers (ISPs) are now struggling to survive against competition from the telephone companies (e.g. BT Internet) and big US providers. As a result consolidation is currently taking place in the UK with 12 major Internet providers in Britain.

Interactive media offer companies the opportunity to derive revenues from their existing content and businesses. Although these markets will grow strongly, they will do so from a small base. The vast bulk of consumer media companies’ revenues in the year 2000 will derive from existing core businesses. During this time, the new interactive media are likely to remain a supplementary activity buoyed by the traditional sectors. This explains the evolutionary aspect of these digital trends. It also explains the importance of the current regulation of the conventional media during the transition period to full interactive digital media. Most of the growth of the communications industry is likely to come through payments from consumers for cable connections and pay-television services. Pay-television will become a larger part of market value than free-to-air advertiser-funded channels.

Scale, co-operation and alliances are becoming necessary in order to spread the risk of investment in new technological developments. Vertical integration can be seen as desirable by content providers, as it offers them access to distribution, while television channels, for example, gain a ready source of guaranteed content in a future where acquisition of rights may become increasingly competitive. The core concerns of the media companies, at least in the short to medium term, centre on maintaining and improving revenues and profits in their key traditional businesses. However more geographical expansion is also expected in order to develop a portfolio of related interests in various countries. Mirroring this trend, foreign companies are targetting the UK market as part of their own expansion plans.

2.1. Structure and institutions

Policy makers

Media and communications policy making is divided mainly between two Government departments: the Department of Trade and Industry (DTI) and the Department For Culture, Media and Sport (DCMS, the former Department of National Heritage). The latter has overall responsibility for policy on broadcasting and the media. It is the “sponsor of the audiovisual industry within Government, and aims to improve the international competitiveness of this sector”. The Department is also exploring the impact of the Information Society on the cultural sector and is liaising with its sponsored bodies, other government departments, EU partners, the G7, and other bodies from both the public and private sectors.

The DTI’s overall aim is to help UK business compete successfully, also the main rationale behind its media policy. It also aims, through the Office of Science and Technology, to develop and co-ordinate Government policy on science, engineering and technology (SET), including information technology. To this end the DTI has launched ‘IT for all’ and the ‘Information Society Initiative’ (ISI) to “encourage business to take full advantage of the explosion of new ways to access, use and send information”. Moreover the ‘The Thinking Ahead: Getting Ahead’ programme envisaged by the OST aims to make more approachable and comprehensible the full implications of the ‘Technology Foresight’ programme as it relates to the engineering and IT industries. Both Departments also negotiate international agreements for communications and the media.

Broadcasting and telecommunications are regulated by several statutory and self-regulatory bodies. The Broadcasting Act 1990 established the Independent Television Commission (ITC) and the Radio Authority. The ITC is responsible for regulation and licensing of commercial television, cable and satellite services. The Radio Authority licenses and regulates independent radio. The ITC Programme Code and the Radio Authority Programme Code set out rules on quality, taste and decency, portrayal of violence, privacy, and impartiality. Allegations of unfair treatment and invasion of privacy by radio and television programmes can now be made to the Broadcasting Standards Commission (BSC), replacing the former Broadcasting Complaints Commission and Broadcasting Standards Council; it also considers issues of the portrayal of violence and sexual conduct. The BBC is outside the remit of the ITC and the Radio Authority (but not the BSC) and is regulated by its own Board of Governors who are established under Royal Charter and are for legal purposes themselves the BBC. The Board has more recently been criticised by the Select Committee of National Heritage and a review is expected.

Telecommunications is regulated by the Office of Telecommunications (Oftel) established by statue under the Telecommunications Act 1984. Its aim is to promote competition and to protect consumer interests (see below). Four self-regulatory bodies have been established by the industries. Complaints about the print media may be made to the Press Complaints Commission (PCC). The PCC replaced in 1991 the discredited Press Council, which was originally established in 1953 to remove the spectre of restrictive statutory regulation. The PCC is an independent body, funded by the print media. It has no legal powers, and thus cannot enforce judgements or ensure their publication. However, its adjudications will usually be published by the paper complained against, and often by rival papers. The Advertising Standards Authority (ASA) was set up in 1962, to make sure that non-broadcast advertisements appearing in the UK are ‘legal, honest and truthful’. The ASA protects the public by ensuring that the rules in the British Codes of Advertising and Sales Promotion are followed by everyone who prepares and publishes advertisements. The British Board of Film Classification (BBFC), though a self-regulatory body, has statutory responsibility for video classification (under the Video Recordings Act 1984) and its film classifications are becoming increasingly important in television broadcasting regulation. Finally, the Independent Committee for the Supervision of Standards of Telephone Information Services (ICSTIS) supervises and handles complaints concerning promotion material and content of premium rate telephone services.

Yet more bodies discharge other regulatory functions. The Radiocommunications Agency allocates the radio frequency spectrum to both broadcasting and telecommunications. The Monopolies and Mergers Commission (MMC) and the Media Section within the Office of Fair Trading’s (OFT) Competition Policy Division exercise jurisdiction over all the media and communications industries. Moreover the MMC has special responsibilities for newspaper mergers under the Fair Trading Act 1973.

Depending on how one counts, at least 14 statutory and self-regulatory bodies claim jurisdiction over matters of media and telecommunications in the UK. A major topic of debate, therefore, is whether there should be rationalisation whereby all those regulators (or some of them) would be merged into a single (and stronger?) regulator. Moreover with the convergence of different communication sectors, a sector specific regulator could become more or less obsolete. The Labour Party had plans to merge the powers of the ITC and Oftel into an “Ofcom” to regulate the whole communications infrastructure and ensure fair competition, with a revamped ITC to regulate content content. The Chairman of the ITC has also called for the creation of a single broadcasting regulator. And Don Cruikshank, DGT made clear that he ‘consider[s]that the industry will be best served in the next century by a commission, not an individual regulator’. However, the National Heritage Committee of the House of Commons concluded in its report that ‘while the present system of regulation cannot be carved forever in stone,..., we are not persuaded that now is the time to change to a single regulator’.

Part of the UK’s approach to formulating communications policy involved the contribution of countless interest groups and individuals. The basic structure for this was the so-called “COGs” - the Collaborative Open Groups managed under the auspices of the CCTA. Initiated in 1994 as a result of the CCTA conference on Information Superhighways, the Group’s purpose was to discuss further the issues raised at the conference. The feedback conference on Information Superhighways - "The First Mile" - reaffirmed the value of Collaborative Open groups as a mechanism for discussing issues and concerns, and for identifying opportunities and requirements for action. However with the launch of the Central IT Unit's (CITU) Green Paper - "Government Direct" the CCTA found that the original objectives of the COGs were fulfilled and proposed to close them down. This proposal led to critical on line discussion with as a result the creation of a single COG group focusing on policy matters, with further on-line debate concluding that a form of issue raising and debating facility was required. Since then other on-line fora have been created such as Cyber Rights & Cyber Liberties, the UK establishment of the Electronic Frontier Foundation, the Campaign Against Censorship of the Internet in Britain, Digital Diversity, CommUnity and others. Their main concerns and action areas are in free speech, intellectual property rights, privacy and encryption of the Internet.

More input comes from for instance the Global Highways Business Group (GHBG), the Federation of Electronics Industries (FEI) and the Computer Software and Services Association (CSSA). They form the National Information Infrastructure Task Force (NII-TF). The NII-TF was formed in November 1994 in response to a challenge by the then Minister for the Information and Communications Industries to devise initiatives to help 'UK' plc move into the digital age. Unofficial input into the formulation of policy is also likely to be affected by other interest groups and associations such as the newly created Coalition on Public Information (CoPI), The Telecommunications Managers Association (TMA), the Information Technology Professionals Association (ITPA), ISPA (Internet Service Providers Association), LINX (London Internet Exchange), and many others.

The media unions are of course also strongly interested in every aspect of media and communications policy and have all expressed their concern with an emphasis on the impact of digital technology on copyright. The major media unions are the NUJ (National Union of Journalists), BECTU (Broadcast Entertainment Cinematograph and Theatre Union), GPMU (Graphical, Paper and Media Union) and the Chartered Institute of Journalists. There are also some organisations associated to those unions, who focus on a specific area of concern such as CPBF (Campaign for Press and Broadcasting Freedom) and CCC (Creators’Copyright Coalition). More influential perhaps is the National Consumer Council which is the independent voice of consumers in the UK. The Council was set up by Government in 1975 and is largely funded by the Department of Trade and Industry. It published a report in 1996 which recommended (not surprisingly) that “the domestic consumer interest should be made a top priority by policy-makers, regulators and industry when formulating policies and developing networks and services”. Various think thanks have also published reports on the creation of the Information Society in the UK and Europe. Most of them have a specific political and ideological perspective on the topics. Examples are the Federal Trust, the Institute for Public Policy Research (IPPR), the Policy Studies Institute, the Fabian Society, the John Wheatley Centre, the European Policy Forum, Demos, the Institute of Economic Affairs (IEA), Scientists for Labour, etc.

2.2. Instruments of policy and their objectives

The Roots of the UK New Communications Policy

The roots of the present communications policy date back to the early 1980s, when the Cabinet Office published the report of the Advisory Council for Applied Research and Development (ACARD) on information technology. It recommended that a single minister and government department should be responsible for the development and promotion of IT and the regulation of communications and broadcasting, and that the Post Office should have a mandate to provide a world class UK communications network. In October 1980, Kenneth Baker MP was appointed the first Minister for Industry and Information Technology. This followed the creation of an IT Panel (ITAP) within the Department of Industry, later to become the Department of Trade and Industry and the proclamation of 1982 as ‘Information Technology Year’. However, from 1984, the integrated information technology approach was slowly abandoned and Government media policy rapidly shifted its emphasis away from those newer delivery systems to the restructuring of public service broadcasting and telecommunications. Thus it can be argued that the present media policy, which is focused on the 'information superhighway’, ‘multimedia’ and ‘convergence’, is a reflection of the old concerns and priorities of the early and mid eighties: back to the future. One feature of the current debate is the general lack of consideration of what lessons might be learned from the UK’s first (and distinctly disappointing) dry run towards the interactive wired future.

There are a number of contexts within which the UK Government’s media policy and regulation is formulated.

First, the UK is a member State of the European Union and the Council of Europe (see chapter 5 below). Given its present political stance towards the EU, the UK is likely to judge results by the extent to which existing or planned domestic regulation finds favour within the EU as the basis for the latter’s recommended way forward. The UK is also likely to take a pragmatic approach i.e. that disharmony within Europe would hinder the UK information industry as much as its competitors. Potential conflicts may however arise in relation to the development of IPR and competition law, the creation of a trans-European public administration network, UK public information access policy and the operation of the Citizen’s Charter. Finally, the commitment of the current Government to introduce legislation to incorporate the European Convention on Human Rights into United Kingdom law which led to the introduction of the Human Rights Bill into Parliament will give citizens and the media, easier access to their Convention rights of the Council of Europe.

Second, the UK is also a member of G7. At the conference on the Information Society held in Brussels on February 25th and 26th 1995, the G7 countries jointly decided to take a leading role in the setting up of a global information network. The participants agreed that their future collaboration would be based on eight basic principles, two of which aim especially at encouraging competition and private investment. Within that framework, the UK Government has developed several Information Society Pilot Projects, including the government-on-line project (cfr. infra).

Third, there was the specific political context of the Conservative government’s ideology, as advanced initially by Prime Minister Thatcher and later adopted by John Major, which dominated the political scene for almost two decades. Broadly, this was built on the themes of competitiveness; open markets; and the privatisation of public sector monopolies. This market orientation has already restructured the information industry substantially and remains the main perspective in the policy documents published so far; it remains to be seen how different the policies of the Labour Government will be.

Finally there is the political context of a constitutional framework, based on an unwritten constitution, that operates by custom and practice rather than by rights and duties. As a consequence, there is no formal protection for freedom of expression at the constitutional level and “The position in Britain is striking because of the complete absence of constitutional principles and the relative dearth of case-law.” The official position of the UK Government is that there is a “long tradition” of press freedom in the UK. The concomitant view is that self-regulation is preferable to statutory controls. This also means that the priorities and the implementations of the policies depends heavily upon the political party that governs the country.

Policy

It is important to distinguish policy making for the communications sector from regulating it and from subsidising it. Policy-making involves setting the broad framework of policy towards the sector, including for example issues of ownership (public versus private), structural policy (free versus restricted entry), socio-political objectives (the extent of universal service obligations and the role of public broadcasting) and the broad framework of (positive and negative) content regulation. Regulation involves the detailed interpretation and implementation of policy. Beside regulation, government has also developed different state financed programmes and financial advantages in order to stimulate initiatives to achieve the creation of an ‘Information Society’. As will be seen from what follows, the UK Government is involved in each of these three areas of activity, and this will be discussed in general below.

The leitmotiv of the Conservative Government’s policy was ‘to encourage enterprise and ensure that markets operate efficiently through the promotion of competition, deregulation, privatisation and the opening of markets both at home and abroad’. On the changing media and the Information Society, ‘the Government is seeking to help develop these opportunities through liberalisation of telecommunications, better management of the radio spectrum, and expanding choice in broadcasting”. This can also be considered as the summary of the aim of the policy documents issued by the Conservative Government, of which the major examples were: the DTI Command Paper ‘Creating the Superhighways of the Future: Developing Broadband Communications in the UK’, DTI’s White Paper on Spectrum Management and the proposals of the Department of National Heritage introducing new rules for media ownership and a framework for digital terrestrial broadcasting, later incorporated in the Broadcasting Act 1996. The Labour Governmnent however announced recently that ‘Good regulation can benefit us all’, at the launch of a new policy initiative 'Better Regulation, Not Deregulation'. Thus, rather than simply deregulating, ‘the Government’s new regulatory policy will concentrate on ensuring that regulations are necessary, fair to all parties, properly costed, practical to enforce and straightforward to comply with.’ How this will influence the regulation of media in particular and communications in general is not clear yet.

Of the regulators, the Office of Telecommunications (Oftel) can be considered the one which has produced the most substantial thinking about the future of the converging communications sector and how to regulate it. The Office has published several consultative documents dealing with these challenges. ‘Beyond the Telephone, the Television and the PC, published in the summer of 1995, is regarded as the major force behind the wide-ranging debate about some key issues, such as broadband switched mass-market (BSM) services; set-top devices and universal service. The key perspective of the document was to ensure the development of vibrant competition and the protection of customers’ interests; some of the proposals are reflected in recent legislation on conditional access services, as described below.

Both the House of Lords and the House of Commons have examined the Information Society and media development. The House of Lord’s Select Committee on Science and Technology published its report, ‘Information Society: Agenda for Action in the UK’, in July 1996. Recommendations include the setting up of an Information Society Task Force similar to that in the US; fundamental changes to the regulatory framework, (such as the review of the restrictions on telecommunications companies either conveying or providing broadcast entertainment services in their own right, and a code of practice for the Internet Service Providers’ Association); and the promotion of electronic publishing to facilitate widespread access to Government publications. The Committee also makes recommendations on the subjects of universal access including free use of the Internet by using terminals placed in public spaces such as libraries, post offices etc. and special provision for education and healthcare. The former Government’s response emphasised its actions and strategies within the framework of the Information Society Initiative but no real changes were proposed.

The National Heritage Committee of the House of Commons recently issued a report on the BBC and the Future of Broadcasting. One of the recommendations deals with the Board of Governors; “the BBC cannot survive if it is in the hands of a group of people nominated for various attributes not connected with broadcasting. We feel that the time has come for the BBC to be run by a single board comprising the executive chairman, nominated by the Secretary of State for National Heritage, the top management team, and a number of qualified non executive directors from different backgrounds. Overall regulation, particularly in terms of quality, taste, diversity and social responsibility, must be undertaken by an independent authority with the power of sanction, as in the case of Channel 4”. The Committee was not persuaded that now is the time to change to a single (communications) regulator integrating tasks of the ITC and Oftel, but did recommend that the Government should lift completely in 2002 the restrictions on broadcasting by national telecommunications operators. Moreover in November 1997, the Culture, Media and Sport Committee announced its intention to conduct an inquiry into the future regulation of television and radio in the light of convergence between broadcasting, telecommunications and computer technologies.

Regulatory Framework

Regulation which affects the new communications services (such as the Internet, video-on-demand and pay tv) has mainly developed around traditional and separate telecommunications and broadcasting markets. Moreover, it will become clear below that UK regulation was not drafted with convergence in mind, and as a result the way in which existing rules apply to new communication services is something of an anachronism.

As mentioned above, deregulation was one of the former Government’s priorities. The deregulation initiative “Fewer, Better, Simpler” and the creation of a Task Force were just some examples of the Government’s commitment. However, despite the fact that deregulation has taken place within several industries in the UK, such as telecommunications, this is certainly not straightforwardly so for broadcasting. Moreover broadcasting and in particular private broadcasting has been accorded a different legal regime to that governing other media; “The irony that ‘deregulation’ under the 1990 legislation means ‘more regulation’ is a tribute to the perceived power of television to influence as well as to reflect ideas and social behaviour”. It is also important in the context of new media that the UK has followed the Anglo-Saxon tradition of no special body of press law. The general law (such as defamation) applies; this is also the case for the Internet.

Finally, as a result of deregulation and privatisation of different sectors and industries, competition policy and regulation have come more and more to the forefront. This is the case for the traditional media and will certainly be the case for the newer communications services, especially in the case of potential bottlenecks. Some (in particular New Right commentators) predict that general competition policy makes the need for sector specific regulation obsolete; indeed, the blurring between sectors (and thus regulation) due to convergence requires an effective system of competition law, and this is likely to be reformed in the UK in the near future. Moreover given the highly internationalised nature of the media, transnational attempts to preserve competitive markets will become crucial.

Telecommunications

The main instrument of regulation is a Public Telecommunications Operator Licence, issued under s 7 of the Telecommunications Act 1984 (the 1984 Act). Under UK law there is no licensing requirement for the provision of telecoms services over a system; it is operating the underlying system which requires the licence. Broadly speaking, changes in policy in the sector have been achieved by granting new licences and the modification and enforcement of existing licences. The 1984 Act makes it a criminal offence to "run" a "telecommunications system" without a licence. The term "telecommunications system" is defined in s 4(1) as:

“... a system for the conveyance, through the agency of electric, magnetic, electro-magnetic, electro- chemical or electro-mechanical energy, of -

(a) speech, music and other sounds;

(b) visual images;

(c) signals serving for the importation (whether as between persons, and persons, things, and things or persons and things) of any matter otherwise than in the form of sounds or visual images; or

(d) signals serving for the actuation or control of machinery or apparatus.”

It is thus defined so broadly that all apparatus which enables any type of communication whatsoever will require a licence. In this way, a mere service provider will most likely be running some form of telecoms system even if it is as minimal as a single switch or connection or terminal equipment. A system such as the Internet, which is used for the conveyance of text, speech, music and visual images falls within subclauses (a) to (c) of this definition.

The licences contain the operators’ main social and commercial obligations (for instance the duties on BT to provide a service to all who request it, directory enquiry services, call boxes, low user schemes, etc.); the price cap formula placed on BT; and the principal instruments for promoting competition (in particular the obligations placed on all service providers to permit interconnection to other service providers without discrimination) and now a general condition relating to fair trading (see below).

Broadcasting

Broadcasting is a highly regulated industry. It is governed primarily by the Broadcasting Acts 1990 and 1996, although the legal framework of the BBC is established under its renewed Royal Charter. In contrast with telecommunications regulation, broadcasting regulation in the UK is concerned with the licensing of services and in particular the content of broadcast material. Moreover, broadcasting and in particular private broadcasting has been accorded a different legal regime to that governing other media, initially because of spectrum scarcity but more recently through the trustee concept of broadcasting. Thus ‘the trustee concept stemmed, among other things, from the effort to avoid “American conditions” in British broadcasting. The initial focus was on preventing chaos in the airwaves, which then gradually gave way to ensuring public responsibility for broadcasting’. This rationale has dominated regulation for both public and private broadcasting, although the Broadcasting Act 1990 has led to a loosening of the public service commitments of private broadcasters without, however, fully departing from the public service concept as such. The legal requirements placed on the ITV-companies have been even more detailed than those in force for the BBC, based on the assumption that a commercially financed broadcasting system would be especially tempted to side-step the traditional public service broadcasting commitments. Convergence and the creation of new communication services are questioning this rationale.

As described above, the ITC is entrusted with the licensing of television services and the Radio Authority with radio licensing. Channel 3 and 5 licenses were awarded by a process of competitive tender, after an assessment of whether the applicant was a ‘fit and proper person’ to hold a licence, and application of the ownership rules, themselves revised by the Broadcasting Act 1996. Licenses for satellite and cable programme services are awarded for any programme service which conforms to the requirement of the ITC Programme Code, and its codes for advertising and sponsorship. All licenses are awarded for a ten year period and may be revoked if there is a change of ownership of the applicant without the prior approval of the ITC. The Radio Authority’s role is to ensure a diversity of national radio services, at least one devoted predominantly to the spoken word and one broadcasting ‘music other than pop music’, together with a range and diversity of local services. Licenses are granted for eight years to ‘fit and proper’ applicants (persons convicted for radio piracy offences in the preceding five years are excluded from this category) if the statutory duties relating to programming and the ownership rules are respected.

The Broadcasting Act 1996 also provides for licensing of multiplexes for digital terrestrial broadcasting, frequency bands on which several programme services and also data services can be combined. Six such multiplexes are licensed by the Independent Television Commission, the major criterion for selecting them being the promotion of digital terrestrial broadcasting. In order to safeguard existing public service broadcasting, each existing broadcaster is offered half a multiplex for each existing channel; digital cable companies are also required to carry the public service channels. This will pave the way for an eventual switch-off of existing analogue broadcasting. Part II of the Act makes similar arrangements for digital terrestrial radio, in this case licensed by the Radio Authority.

At first glance, it might seem odd that broadcasting regulation can apply to services such as the Internet. However the 1990 Act regulates “licensable programme services” which include a service in which programmes may be received at different times in response to requests made by different users of the service. It is clear that the s. 46 licence can have a far reaching impact for Internet content providers. However, s. 46 (1) also specifies that a relevant programme must be a television programme (the latter is not defined in the Act). A clear response from the ITC on this issue has until now not been formulated.

Subsidy

In February 1996, the former Government launched its Information Society Initiative (ISI) which the Labour Government has promised to continue. The ISI covers four major strands. First, the ISI Programme for Business provides a comprehensive package of programmes and activities to help UK businesses, particularly SMEs, improve their competitiveness through use of the new technologies, based on a close partnership with industry. Second, 'IT for All' is a four year initiative designed to help people in all walks of life understand and exploit the benefits of new information and communication technologies in their everyday lives with a goal of increasing the proportion of the UK adult population confident in its use of a broad range of ICTs from the current estimate of 46% to 60% by August 2000. Thirdly, the Department for Education and Employment (DfEE) launched the Superhighways For Education initiative at the beginning of 1995. It includes 24 projects involving a variety of industry sponsors and education sectors to test out the potential of wideband and broadband technology to enrich the delivery and experience of education and to provide young people with skills needed for lifelong learning. Finally, in November 1995 a small Central Information Technology Unit (CITU) was set up by the Deputy Prime Minister. Its mission is to devise a set of strategies and policies which will enable Government to exploit the opportunities provided by information technology; it has been examining the use of IT to ‘re-engineer government’. In a broader context, the Government’s Technology Foresight Programme brings together industry, academics and government in a collaborative effort to identify opportunities in technologies and markets likely to emerge in the next 20 years. Fifteen Technology Foresight Panels have delivered reports on various sectors and the Programme offers funding for innovative industry/academic joint proposals.

2.3. Technological Regulation

Infrastructure Regulation:Wired

All countries need to make massive investments in telecommunications and cable infrastructure - the backbones of on-line and tv services - over the next few years, including the UK. The problem they face is how to get the large investments necessary from private sources whilst still operating - or moving towards operating - an open and competitive structure. Some argue that competition may well speed developments. Therefore the main objective of the former UK Government has been to provide benefits to customers from a policy of encouraging local loop infrastructure competition. In 1991, the BT - Mercury duopoly in telecoms was reviewed. The Government decided that the market should be opened for national infrastructure competition and the requirement on cable operators to provide voice telephony services only in conjunction with BT or Mercury was lifted. This allowed cable operators to “switch” their own traffic and marked the end of BT’s monopoly in the local telephone loop. In addition, operators of adjacent cable franchises were allowed to link their systems together directly and “national operators”, primarily BT, were barred from carrying entertainment services over the existing infrastructure for ten years, although there was provision for this position to be reviewed after seven years, ie from 1998. However, BT was barred from providing entertainment services nationally in its own right for at least 10 years. It has already been suggested that this ban will probably be lifted.

Another controversial issue arising from the duopoly review has been the question of interconnection of the potential new entrants to BT’s network (Condition 13 of BT’s licence), and its relation to BT’s tariff structure. BT claimed that it incurs a large loss in providing network access to consumers. The DGT however took the view that the access deficit poses no serious problems to BT’s profitability until competition becomes sufficiently strong (ie. until BT’s market share had fallen below 85 per cent). He was also influenced by the incumbent advantages that BT enjoys over entrants, notably those arising from the inability of customers to keep their phone number if they switch to a competitor, and from economies of scale.

It is interesting to note from this that the UK, by contrast to other countries, has opted for network competition with several operators building infrastructure, instead of the more traditional option of competition for services, mainly followed by the European Union, initiated in 1987 with the publication by the Commission of the Green paper on the development of the common market for telecommunications services and equipment. In such a regime innovation in services is likely to be slower but innovation and investment in networks faster and fuller. New measures to promote competition in services over telecomms networks have also been published recently. The measures include a new classification of the distinction between BT's basic network services and the enhanced services it offers, which underpins the prices BT charges itself for use of its own network.

Infrastructure Regulation: Wireless

Central to any communication policy is the question of allocation and control of two related resources: the radio frequency spectrum and the orbital positions in which communication satellites can be ‘parked’. The use of wireless telegraphy, otherwise radio communications or spectrum, is regulated mainly under the Wireless Telegraphy Act 1949, the Telecommunications Act 1984 and the Broadcasting Act 1990. It is important to stress that radio communications is an area which, if only because of the disrepect of the medium for national frontiers, calls for international cooperation, rule-making and standardisation. It is the International Telecommunication Union (ITU) and its agencies (eg. ITU-R) who co-ordinate the orbit/spectrum resource at an international level. However, as in all other countries which are members of the ITU, the UK Government undertakes the task of overall radio spectrum management, including frequency allocation through the Radiocommunications Agency (RA). The RA also represents the UK in ITU discussion of radio. Use and licensing of radio is categorised by service (eg. mobile, fixed networks, satellite services, broadcasting, etc.). The Wireless Telegraphy Act 1949 licenses and specifies the frequency assigned to the licensee, location, antenna height (if applicable) and transmission power. Allocation decisions are still predominatly made on technological grounds and by using a ‘first come, first served’ rule. However the introduction of market forces to spectrum allocation through administrative pricing and auctions is proposed in the Wireless Telegraphy Bill 1997 before the House of Commons, at the time of writing.

Standards and Interoperability

Standardisation is again an international issue and national initiatives are more or less limited to the implementation of international rules. Moreover standards are also developed in different unoffical fora, eg. the European Broadcasting Union. However looking at standardisation of communications equipment in the UK, for instance, five main Acts have been passed in the area: the Wireless Telegraphy Acts of 1949 and 1967, the Telecommunications Act 1984, the Broadcasting Act 1990 and the Marine, Etc, Broadcasting (Offences) Act 1967. A number of statutory instruments have been made under these Acts covering control of interference, control of sales of unapproved apparatus, control of the content of transmissions, setting of licence fees, and exempting certain apparatus from licensing requirements.

The Electromagnetic Compatibility (EMC) regulations, made under the European Communities Act 1972, are also important. They affect all electrical and electronic apparatus, including communications equipment, and set out the approval regime for certifying that the apparatus complies with standards of immunity to interference both to and from apparatus. Enforcement of the EMC regulations is carried out by weights and measures authorities in Great Britain and by the Department of Economic Development in Northern Ireland. These authorities have powers to purchase and test apparatus as well as to search for, seize and detain apparatus.

2.4. Economic Regulation

2.4.1. Market Structure: Competition Policy, Concentration and Ownership rules

Media

The media industry is in general subject to competition law in the same way as other industry sectors, and for example it may be subject to merger control under the Fair Trading Act 1973. Responsibility for non-newspaper mergers lies with the Director-General of Fair Trading (DGFT) in the first instance, who advises the Secretary of State for Trade and Industry about whether or not qualifying mergers should be referred to the Monopolies and Mergers Commission (MMC) for further investigation. However, in contrast to the treatment of mergers in industry at large, the Fair Trading Act 1973 contains specific provisions for cases of concentrations in the newspaper sector. However, this “will be at best a mild deterrent, to rein in further shifts in an already extremely high level of concentration. ... The overwhelming impression ... is that the MMC judgements had little impact on diversity”.

Diversity of view is also the public policy objective that is used for special regulation of media ownership in the UK. This is reinforced by the role of the media as a source of information in a democratic society. The Broadcasting Act 1996 clarifies the notion of ‘control’ of a company, leaving more discretion to the regulator in determining this. The limit of two regional Channel 3 licenses is abolished and replaced by a limit of 15% of total television audience. The restriction of newspaper holdings to 20% in television licence holders has also been abolished; newspaper groups with 20% or more of national circulation may not have more than a 20% holding in Channel 3 or 5 licensees, but other newspapers are free to own any broadcasting licenses subject to their passing a public interest test administered by the ITC and involving examination of the effects of the holding on diversity of information sources and on competition. Further provisions apply to local newspapers and radio. Enforcement is for the Radio Authority and the ITC.

Telecommunications

Oftel’s objectives include the promotion of competition (both in networks and in services) and securing fair trading in the telecommunications market. To achieve these objectives, Oftel believes that it is necessary to have a condition in licences modelled on Articles 85 and 86 of the European Community Treaty to prohibit anti-competitive behaviour, and this Fair Trading Condition was incorporated into BT’s licence on 1 October 1996, effective from 31 December 1996; it has also been incorporated into other licences. The Condition prohibits abuse of a dominant market position and anti-competitive agreements where the behaviour or agreement has an appreciable effect on competition and no countervailing benefits to the consumer and to efficiency. It applies to activities which are carried out when running a telecommunication system or providing telecommunication services and is in the form of a general prohibition of such activities where they have, or are likely to have, the object or effect of preventing, restricting or distorting competition. By the end of November 1997, the Fair Trading Condition was already included in more than 350 telecoms companies’ licences.

Independent Service Providers

Independent service providers, i.e. those who do not themselves own telecommunications networks but provide services over networks belonging to others, have complained to Oftel that BT's position as both network operator and service provider places it at a competitive advantage. Specifically they argue that BT unfairly cross-subsidises its own new services from its other activities, overcharges for access to its network, and abuses its dominant position as a network operator to obtain disproportionate benefits as a provider of services. Oftel has taken these complaints seriously and in March 1996 published a consultation paper on the competitive position of independent service providers of fixed (not mobile) telecommunications services. After a year’s consultation, measures designed to bring about more effective competition in those services over telecoms networks were published. They aim to improve competition at all levels of services, from provision of the access network through to delivery of basic and enhanced services over that network. Oftel also plans to set up an Independent Service Provider Forum, which independent service providers can use to highlight emerging issues.

Bottlenecks

The risk of anti-competitive behaviour is especially the case in the area of the so-called bottlenecks such as conditional access systems, subscription management systems and electronic programme guides. The latter have been the subject of recent Regulations developed by the DTI as implementation of the EU Advanced Television Standards Directive. The Advanced Television Standards Regulations came into force on 7 January 1997, and have three main objectives. First, to ensure that the licensing of industrial property rights for the use of conditional access technology is carried out in a way which is fair and non-discriminatory. Second, to ensure that conditional access operators offer broadcasters technical conditional access services on a fair, reasonable and non-discriminatory basis. Finally, to ensure that cable operators have the ability to use their own conditional access systems and associated services such as electronic programme guides.

The ITC has also issued a draft code of conduct on licensing (analogue and digital) electronic programme guides. The Broadcasting Act 1990 requires the ITC to discharge its functions in the manner which it considers is best calculated to ensure that a wide range of services is available throughout the UK and to ensure fair and effective competition in the provision of licensed services and services connected to them. The purpose of this Code is to implement this duty in relation to EPG services. Finally, Oftel, responsible for regulating conditional access services for digital television, also published guidelines and a consultation document concerning the pricing of conditional access services for digital television.

Pay TV: Review of BSkyB’s Position in the Wholesale Pay -TV market.

The Director General of Fair Trading published a review of BSkyB's position in the wholesale pay-TV market. Since 1990, when BSB merged with Sky, the resulting company, BSkyB, has become both the dominant supplier of direct-to-home television services to UK customers and the dominant supplier of programming to UK cable companies. BSkyB also, through its sister company, NewsDatacom, owns the UK pay-TV industry's standard encryption technology - Videocrypt - access to which is generally essential for companies wishing to transmit programming as part of a pay-TV system. Cable companies and satellite channel operators have agreed that it is very difficult for them to gain access to the UK market without entering into some form of commercial arrangement with BSkyB and have accused it of abusing its dominant position in the pay-TV market - both in the supply of programming and Videocrypt technology - to force unfair commercial terms upon them. The DGFT found that although BSkyB's market position did cause competition concerns, BSkyB was not itself acting anti-competitively. Consequently, he decided to accept new undertakings from BSkyB rather than ordering an MMC enquiry - a decision clearly influenced by the conflicting desires to reassure concerns of cable companies whilst not penalising BSkyB’s commercial success.

In the meantime, the ITC also extended its investigation into the practice of premium channel bundling in the Pay-TV market. A specific complaint had been made by the Cable Communications Association against the Disney Channel and its terms of supply will be looked at within the investigation. The focus of ITC’s inquiry will be on the effects of bundling on competition at the retail level, with particular reference to the availability of premium channels to viewers of both cable television and direct-to-home satellite services.

2.4.2. Renumeration and Finance

Intellectual Property Rights

One of the major debates surrounding the concept of the information superhighway has been the extent to which existing concepts of Intellectual Property Rights can serve a useful purpose in the common digital environment. However given its adherence to various international conventions, there is only limited scope for the UK to differ from its neighbours on the principles of the regime concerning intellectual property rights, although there may be some difference in their application. Subject to these constraints, UK communications policy is again driven by a desire to provide the infrastructure for a competitive business environment. The former UK Government made clear that “the international provision of adequate intellectual property protection is extremely important to competitiveness, but difficult to enforce ... Intellectual property issues associated with the development of the information superhighway, multimedia systems and biotechnology are a major concern. The Government will seek to ensure that EU legislation on these aspects promotes the competitiveness of UK industry”. Copyright is the first type of IPR which springs to mind as it deals with so many of the issues relating to the handling of content on the Internet, although patent law is something which cannot be ignored as trade marks and branding are a vital aspect of Internet trading.

Copyright law in the UK is currently contained in the Copyright, Designs and Patents Act 1988 (the CDPA). The Act does not deal specifically with “multimedia” or even CD-ROM publishing, online distribution or video-on-demand as separate concepts. In some ways, this can be helpful, as technology-specific legislation would be outdated before it reaches the statue books. On the other hand, this approach can create difficulties in interpreting the practical implications of the Act for new media technologies. Section 1 of the CDPA defines copyright as subsisting in:

a) original literary, dramatic, musical or artistic works,

b) sound recordings, films, broadcasts or cable programmes, and

c) the typographical arrangement of a published edition

This list of works is exclusive - there are no other categories; however, although there is no specific mention of Internet works in the Act, such works are capable of falling into several of these categories. What is less clear is the situation regarding an individual who simply places material on a Web server where it can be copied by others. Much turns upon the word “distributes”. A broad interpretatation would appear to cover virtually all situations where infringing material is placed on an open access Web server, a narrow interpretation would require that the individual placing the material on the open access Web server perform some action other than to simply provide a facility for illicit copying. It is clear that some areas of the CDPA are ambiguous and have yet to be tested in a law court. Moreover, arguments can be raised as to where the accessing act takes place and which jurisdiction applies. The Berne Convention and the Universal Copyright Convention states here that local law of the database must apply, since this is where the release of the information occurs.

The Shetland Times case could be considered as such a test case which has received widespread, and often ill-informed, comment in the press. The pursuers published, in traditional form, a local newspaper, The Shetland Times. In February 1996 they launched an Internet web site. The second defenders provide an Internet-based news and reporting service under the name The Shetland News (“the News”). In October 1996 the News reproduced, verbatim, a number of headlines that appeared in the online edition of The Shetland Times. They included hypertext links to The Shetland Times, so that, by clicking on one of the headlines in the News the user gained immediate access to the relevent text in The Shetland Times, bypassing its front page and advertisements. The pursuers argued that the headlines made available by them on their web site were cable programmes within the meaning of s7 the CDPA 1988 as they consisted of sending information over a telecommunications system, although certain interactive services are excluded from the section. They also maintained that the facility made available by the defenders on their web site was a cable programme service so that, by including copies of headlines from The Shetland Times in their service, the News infringed copyright under s. 20 of the Act. Granting an interim interdict, Lord Hamilton held that the pursuers' contention that the service provided by them involved the sending of information was prima facie well-founded and that, whilst in a sense the information sat passively awaiting access by callers, that did not preclude the notion that, on such access, the information was conveyed to and received by the caller. The case however was finally settled out of court on 11 November 1997, which means that no real precedent has been set.

Another trademark and branding issue which arises with the Internet is the issue of domain names. In a recent UK case Harrods of Knightsbridge brought an action in the High Court to force defendents to give up the "Harrods.com" domain name they had obtained from the NSI in America. Pre-1995 the NSI had operated on a 'first come, first served basis' for domain names, so that a person did not have to prove that they 'owned a name' in order to obtain a domain name registration for it. Harrods alleged registered trade mark infringement, passing off and conspiracy in the United Kingdom and was successful. However, later the Vice-Chancellor set a precedent for allowing anyone to obtain any domain name that has not already been registered by another party. Procedures for the registration of domain names have been tightened up in the UK in the last year and a domain name system (DNS) has been created. Nominet UK is responsible for the registration and maintenance of all .uk domain names on the Internet, and from 1 August 1996 operates a computerised register of the user of the registered name, and of the addressing information associated with it.

Advertising

Advertising is of central importance in this area given the reliance on advertising revenue by most audio-visual media, including the newer services. The Advertising Standards Authority (ASA) was set up in 1962, as a self-regulatory body, to make sure that non-broadcast advertisements appearing in the UK are ‘legal, honest and truthful’ through the operation of the British Codes of Advertising and Sales Promotion. The ASA has also launched its own initiative with respect to self-regulation of Internet adverts, arguing that its philosophy of self-regulation reflects the nature of the Internet itself as a network which no one body controls. The ASA has established an alliance - the European Advertising Standards Alliance - for the purposes of providing a cross-border complaints procedure. Self-regulating bodies throughout Europe intend to collaborate to ensure that complaints from one jurisdiction can be efficiently referred to and dealt with in the jurisdiction where the advert originated.

The Broadcasting Acts 1990 and 1996 also require the ITC to draw up and enforce a Code of Advertising Standards and Practice, and the ITC has a duty under the Control of Misleading Advertisments Regulations 1988 to consider complaints about television which are alleged to be misleading. Similar rules apply to radio, developed by the Radio Authority. As mentioned earlier, the 1990 Broadcasting Act includes broad definitions of what sort of electronic services should be subject to licenses from the ITC and the Radio Authority, covering programmes conveyed by means of telecommunications systems for simultaneous reception or at different times in response to requests made by different users of the service. It has been suggested that the Act covers video-on-demand and possibly also Internet services. Therefore, broadcasting regulations, including the advertising and sponsorship codes, could apply to those newer communications.

It is important to note that there are also criminal sanctions which govern false or misleading descriptions as set out in the Trade Description Act 1968, as well as civil sanctions for breach of the provisions contained in the Sales of Goods Act 1979 and the Misrepresentation Act 1967. Other relevant legislation is the Consumer Credit Act 1974, The Prices Act 1974, The Unsolicited Goods and Services Act 1971, the Consumer Protection Act 1987, The Control of Misleading Advertisements Regulations 1988 and the Trade Marks Act 1994 (particularly with respect to comparative advertising).

Electronic Commerce

Electronic commerce can in several ways be considered as a variant of distance selling, which, in the form of mail order, has been a feature of commercial life and legal consideration for generations. Much will depend on how the UK implements the Directive on Distance Selling. It will certainly apply to sales concluded over the Internet and expressly includes communication by Email. The main provisions of the Directive require the provision of information to consumers in writing, a right to withdraw and a duty to execute the contract within 30 days.

Tax

There are basically three features of the Internet, at least in its commercial application, that are of considerable importance from a tax point of view. First, its international nature: secondly, providers of services may be able to do so without any physical presence in the country where the end user is located and, thirdly, a transaction effected via the Internet is different in nature from its equivalent outside the Net. This was already illustrated when discussing electronic commerce with the difference in approach between computer software on file or electronic transfer. This difference is very often reflected in a difference in tax treatment, especially in the field of indirect tax or VAT. The introduction of changes affecting the VAT treatment of telecom services (including the provision of Internet access) has recently been announced, and European Commission proposals will be included in the chapter on European regulation below.

Pricing

In the UK, price cap regulation was first introduced in 1984, to regulate the newly privatised BT facing competition by the new entrant Mercury Communications. By means of price cap regulation, increases in the average price of telecommunications services are limited to no more than the increase in an inflation index minus a specified amount referred to as the “x” factor, the 'RPI-x' formula. The rationale behind this system of price regulation is that it provides a simple scheme which ensures that customers share in the gains from cost reduction attained by the firm. Price cap regulation has also provided the regulated firm with more price flexibility than for example cost-plus rate of return regulation. However, it has been a common practice to limit the regulated firm’s pricing flexibility through the use of separate price caps on each of several ‘sub-baskets’ of services. Regulation has sought to impose such constraints on overall pricing flexibility to reduce the ability of the regulated firm to cross-subsidise competitive services through price increases in non-competitive services.

2.5. Content Regulation

Obscenity

The UK obscenity legislation has more recently been amended by the Criminal Justice and Public Order Act 1994 (‘CJPOA 1994’). This was mainly because of the fear of child pornography and in particular to bring the UK laws up-to-date with technological changes. The Obscene Publications Act 1959 & 1964 constitute the major legislation to combat pornographic material of any kind in the UK. Much more stringent controls apply to sexual material which portrays children. Child pornography cases on the Internet have also recently led to the establishment of a self-regulation code and hotline, Internet watch. There is no ban as such on the trade in goods which portray adults and are merely ‘indecent’. However section 42 of the Customs and Consolidation Act 1876 prohibits the importation into the UK of indecent or obscene prints, paintings, photographs, books, lithographic cards or other engravings, or any other indecent or obscene articles. Moreover section 43 of the Telecommunications Act 1984 makes it an offence to send ‘by means of a public telecommunications system, a message or other matter that is grossly offensive or of an indecent, obscene or menacing character.’ In addition to dealing with indecent, obscene or offensive telephone calls, the Act also covers the transmission of obscene materials through the telephone systems by electronic means. For the purposes of the Act, a public telecommunication system is any telecommunications system designated by the Secretary of State and is not confined to that of British Telecom. However, the offence is not committed where a telecommunication system located outside the jurisdiction is used to send obscene materials into UK, and the Act itself does not penalise the act of procuring a message to be sent. The 1984 Act will also not apply to cases where the data is transmitted by using a local area network unless part of the transmission is routed through a public telecommunications system. The use of leased lines, for example by universities, would also not be caught by the Act. Therefore in some circumstances the Act may not cover obscene materials transferred by using telecommunication systems. It is also an offence to distribute indecent material through the postal system.

Child Pornography

Child pornography has been the most controversial topic arising from the use of the Internet in recent years. Its availability on the Internet has caused a ‘moral panic’ among the government, law enforcement bodies such as the police, prosecutors and judges together with the media in general. There is no settled definition of pornography in a multi-national environment such as the Internet and cultural, moral and legal variations all around the world make it difficult to define ‘pornographic content’ in a global society. The Protection of Children Act 1978 covers the use of children in pornographic photography even where no other form of abuse had occurred. Section 84 of the CJPOA 1994 extends its coverage to so-called "pseudo-photographs" of children created by computer software by using more than one picture. It is an offence for a person to have any indecent photograph or pseudo-photograph of a child in his possession, and this provision was used in the “Birmingham University Case”. The defendants faced a total of 18 charges under the Protection of Children Act 1978, Obscene Publications Act 1959, and the CJPOA 1994. During the trial they had argued that because pictures were stored on a computer hard disc they could not be regarded as photographs and could not be covered by obscene publications legislation. The judge ruled that the computerised images could be legally regarded as photographs; a pornographic computer image was, in law, the same as a photograph.

Self Regulation of Content

The Internet Service Providers Association (ISPA) was formed in 1995 and, established a Code of Practice after a meeting with Home Office in January 1996. The former Science and Technology Minister stated at this meeting that the UK Government’s ‘position is that we would want to encourage the industry to develop a system of self-regulation which might address these areas of concern, rather than considering statutory options. UK ISPs must devise a Code of Practice to control access to illegal and unsuitable material or face increasing political pressure for curbing legislation.’ Moreover on 14 August 1996, the DTI issued a press release in which it was suggested that the ISPA should ‘co-operate in developing services’ which can make use of features such as PICS (Platform for Internet Content Selection) which makes it possible to rate every web page according to its content. Subsequently, the Metropolitan Police wrote to all 140 ISPs in the UK, demanding the removal of more than one hundred newsgroups containing obscene material from the nation's Internet service provider's Usenet servers. In the letter, the police ‘threatened’ them with arrests, prosecution, equipment seizure and jail if they did not comply with the call for self-regulation.

Acceptable use policies on the part of some organisations were already in place and Demon Internet, a major UK Service Provider, had (as a reaction to a newspaper article) developed a specific self-censorship policy using the new PICS standard. Finally, following a seminar organised by the Internet Developers Association, the ‘Internet Watch Foundation’ was created. It is an independent organisation to implement the proposals jointly agreed by the government, the police and the two major UK service provider trade associations, ISPA and LINX. It aims to enhance the enormous potential of the Internet ‘to inform, educate, entertain and conduct business’ by hindering the use of the Internet to transmit illegal material, particularly child pornography, and encouraging the classification of legal material on the Net in order to enable users to customise the nature of their experience of the Net to their own requirements. In its first full month of operation 34 calls were received. Of those only half referred to material which was actually illegal; 6 of the calls, all involving child pornography, were reported to the police. None had originated in the UK. However not all of the UK ISPs are members.

Defamation

Current discussion in the UK on defamation is especially focused on the Internet. Almost all commercial bodies which operate any form of interactive service on the Internet are seeking ways in which to protect themselves from liability for defamation. At the time of writing there has been no real test case as to whether publication on the Internet would be libel or slander (a distinction only made in England), slander being defamatory material of a transitory nature and libel having an enduring quality. However in September 1997, two companies in the Norwich Union Group paid an estimated £450,000 and issued an apology to a rival company, Western Provident Association Ltd, for libellous comments sent by its staff by internal electronic mail. Members of its staff had spread rumours that Western Provident was close to insolvency. Thus, most legal opinion considers that defamation on the Internet would consist of libel rather than slander.

The Defamation Act 1996 attempts to deal with electronic media including the Internet. Section 1 seeks to offer a new defence of what is called “innocent dissemination” to service providers and operators of bulletin boards who were unaware that their services were being used to publish defamatory material. The defence is available if a person (including a compant) is able to show:

(1) that he or she was not the author, editor or publisher of the statement complained of:

(2) he or she took reasonable care in relation to its publication; and

(3) he or she did not know and had no reason to believe that what they did caused or contributed to the publication of a defamatory statement.

So far as the Internet is concerned, service providers will not be treated as an author, editor or publisher. However, to gain effective protection the other requirements must also be met, and if a service provider does nothing to monitor its services it may not have taken reasonable care in relation to its publication, particularly if the author of defamatory statement was a repeat offender and notice had been given previously.

Another aspect of defamation is how to determining which jurisdiction applies; the borderless character of the Internet could lead to “forum shopping”. Jurisdiction is normally governed by the Civil Jurisdiction and Judgments Act 1982, schedule 4, but in the case of e-mail or other Internet communication, a problem of interpretation can easily occur. Help can be found in the leading recent case of Shevill and Others v Presse Alliance SA, in which the European Court of Justice was asked by the House of Lords to make an authoritative ruling on the interpretation of the wording of article 5(3) of the Brussels Convention, on which para. 5(3) of schedule 4 of the 1982 Act is closely modelled. An issue of the newspaper France Soir had been published by a French company containing an article with defamatory comments about an individual resident in England, a company registered in Yorkshire, a company registered in France and one registered in Belgium. The ECJ made it plain that the plaintiff always has the option of bringing the entire claim, for damages arising in any country, before the courts of either the defendant’s domicile or the place where the publisher of the defamatory material is established (these would normally coincide). This would overcome the disadvantage of having different courts ruling on different parts of the dispute. It was at the discretion of the victim, then, if he or she wished, to bring an action where the defendant was established in respect of all the harm that occurred, or in each contracting state for the harm which occurred in that particular state.

Moral Rights

The Copyright, Designs and Patents Act 1988 gave certain moral rights to authors (including directors of films). These include the right to be identified as the author or director whenever their work is commercially published, publicly performed or broadcast (the “paternity” right); the right not to have a work subject to derogatory treatment (the “integrity” right); and the right not to have a work falsely attributed to them. Multimedia products often involve the work of joint authors. In these cases, each author has the right to be identified provided he/she has asserted his/her right. Moral rights can however be waived by the author in writing. The first two rights do not apply, among other things, to any copyright work produced for publication in a newspaper, magazine, yearbook or other collective reference work if it was specifically created for that purpose. Moreover, they also do not apply to a computer program or computer-generated work.

Since copyright works need adaptation to transform them into e.g. multimedia products, the integrity right is an important one. However derogatory treatment is less wide in definition than the words would at first sight suggest. Treatment is defined as ‘any addition to, deletion from or alteration to or adaptation of the work, other than (i) a translation of a literary or dramatic work, or (ii) an arrangement or transcription of a musical work involving no more than a change of key or register’. Treatment will be derogatory if ‘distortion or mutilation of the work or is otherwise prejudicial to the honour or reputation of the author or director’. Besides those three traditional moral rights, anyone who has commissioned a photograph or a film for private and domestic purposes has the right to prevent the work being issued to the public. Committing any of these acts -or authorising them- is an infringement of moral rights. Producers of multimedia or Internet works should therefore ensure that the source of any still photographs or film clips used in them has been verified.

Data Protection

Data protection in the UK is currently regulated by the Data Protection Act 1984. It was designed to allow the UK to ratify the Council of Europe ‘Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data’. The Convention has two objectives: to protect individuals in circumstances where information about them is processed automatically, and to facilitate a common international standard of protection for individuals, such that the free flow of information across international boundaries can proceed properly. The Act is therefore concerned with information about individuals which is processed by computer (personal data). It introduced significant new rights for individuals to whom that information relates and established the independent Data Protection Registrar reporting directly to Parliament. The Registrar is charged with administering the Act and supervising its operation. His decisions are subject to the supervision of the Courts and the Data Protection Tribunal, also established by the Act.

The new European data protection Directive necessitates the reform of existing UK data protection law and the Government published at the end of July 1997 its proposals for implementation. The Act will have to be amended to contain strict conditions for the processing of sensitive, eg medical, data; to require those controlling the personal data to give individuals certain information when data about them is collected; to give individuals the right to object to their information being used for direct marketing; and to bring certain manually-held data within the ambit of the Act.

Encryption

Another Government concern related to data protection is the need to define an encryption policy. This must balance the needs of national security with those of participants in the information market. A new consultation paper was issued by the DTI in March 1997, now including the use of encryption services for protecting stored data. The proposals involve licensing Trusted Third Parties who offer encryption services to the public in order to facilitate the development of electronic commerce, to protect consumers, and to preserve the ability of the intelligence and law enforcement agencies to fight serious crime and terrorism, and protect economic well being and national security, by requiring disclosure of encryption keys under safeguards similar to those which already exist for warranted interception under the Interception of Communications Act. How the current Government will implement those proposals remains to be seen.

2.6 Universal Service

At the end of 1995 Oftel published an initial consultation document on Universal Service. It stated that ‘in order to develop a more effective policy for securing universal service in the UK as we move towards the 21st century, it is necessary to define a basic minimum level of service that should be available to all customers, or to defined classes of customers everywhere, at the same price - Universal Service. It is also necessary to set out a methodology for quantifying any legitimate additional costs incurred by commercial operators in delivering universal service and establish mechanisms for sharing these costs fairly across the industry. And all this must fit into a competitive market’. It proposed (a) a levy on all telecoms operators to finance a Universal Service Fund and (b) different levels of Universal Service for different categories of customer groups (including in particular, a higher level of service for schools, public libraries and public access points). This however ran into difficulties. First, the cable companies argued that, while the idea of installing higher bandwidth connections to schools might be desirable, it could not be regarded as part of universal service. Second, the European Commission argued that such differential treatment would be in conflict with European telecommunications liberalisation provisions. As a result Oftel announced in June 1996 that it was establishing a separate “Education and Public Access Points Task Force”. In February 1997, the Task Force published its first report, stressing that affordable and predictable charges for high speed telecoms network links (ISDN or equivalent) were the key. Moreover it said that improving access for schools is vitally important and primary schools were a "top priority". In the meantime a battle broke out between the cable industry and BT over who could offer the best and most cost-effective Internet access to schools. OFTEL has approved plans by BT to provide all of Britain's 32,000 schools with high-speed digital access to the Internet by the year 2000; at present, only 6,000 schools have access to the Internet. As for the Government, it has pledged to invest 140 million Ecu in updating computers and software in UK schools as part of its plans to establish by 2002 the National Grid for Learning, a nation-wide network connecting all schools, universities and libraries, and providing teaching material and teacher aid.

Universal Service in broadcasting in the UK is provided by two public sector operators (BBC and Channel 4, cf. supra) and by positive content requirements imposed on commercial operators in exchange for spectrum. All terrestrial broadcasting services are also universally accessible and free at the point of use. However, protection is afforded for the public service broadcasters in the new digital environment by guaranteeing them multiplexes for digital terrestrial television, and a system of listed events has been retained, under which key national and sporting events cannot be shown only on subscription or pay-per-view services.

2. 7 Public Access and the Political Process

Government oversight of the development of a new communications and Internet policy for the public sector is the responsibility of the CCTA, the Central Computer and Telecommunications Agency (or the Government Centre of Information Systems). In November 1995 a small Central Information Technology Unit (CITU) was set up by the Deputy Prime Minister. Its mission is to devise a set of strategies and policies which will enable Government to exploit the opportunities provided by information technology. A green paper on the use of IT to improve the delivery of Government’s services to the public and business was published in November 1996. The purpose of this Green Paper was to explain the Government’s vision of what is possible and to start a debate. The Government claimed that its strategy would provide electronic services which are cost effective and affordable, and which conform to the principles of choice, confidence, accessibility, efficiency, rationalisation, open information and fraud prevention.

Repeated calls for freedom of information legislation were answered in part by the publication of a code of practice on access to government information in 1994. The Labour Party promised in its election manifesto to introduce such legislation, but this has been delayed until at least the next session of Parliament; meanwhile, a Freedom of Information White Paper will be published, which will ‘change the culture of government and how information is handled’.

As regards participation in the political process, UK Citizens Online Democracy (UKCOD) is Britain's first national online democracy service. The Cabinet Office supports UK Citizens Online Democracy and has confirmed that it may approach all Government departments about the use of their material and that UKCOD is ‘congruent with the Government's aims under the Citizen's Charter of facilitating the dissemination and accessibility of Government information to the public and enhancing the effectiveness of UK democracy’.

Several local authorities have also set up sites, not only to inform people of what is going on in their areas but also to stimulate political interaction. By late 1996 around 200 of the 500 local authorities were making information available electronically via the Internet. Leisure and tourism was the most prolific area, then economic development and ‘council information’.

CONCLUDING REMARKS

This chapter commenced by suggesting that the UK had a number of advantages in relation to the development of the so-called ‘information society’, especially through its liberalised infrastructure. The UK has certainly taken a lead in Europe in promoting privatization and investment in communications infrastructure but despite these advantages, the process of convergence has been a gradual one and optimistic proposals about the growth of multi-media have often not been met. The role of the ‘old’ media, and especially public service broadcasting, remains central and it is important that new regulatory developments do not act on the assumption that they are a thing of the past.

The future of the media industries is also somewhat uncertain, but there are moves towards consolidation and these make competition law important for the future. The UK has a working system of competition law, but one which has been heavily criticised; it remains to be seen how effective imminent reforms will be in responding to these criticisms. Much of the consolidation is international, making once more the point that international, especially European Community, scrutiny of competition is of the utmost importance.

The regulatory response to convergence has been nothing short of chaotic in the UK. In part this is inevitable given the historic difference in the nature of technologies; however, the plethora of different regulatory bodies cannot be justified in modern conditions and the existence of uncertainty about regulators’ powers, regulatory discretion and the lack of accountability should be tackled. Therefore proposals for regulatory consolidation need rapid implementation. Having said this, the performance of individual regulatory bodies has been impressive and OFTEL in particular has skillfully anticipated trends and has organised very sophisticated consultations on the emerging issues. However there remains a duplication of regulation. Several actors are still subject to multiple and overlapping regulation, not guided by a clear and explicit organising principle.

What is striking by its absence in the UK is a determining role for the courts. A few individual decisions have been mentioned in this report, but they have been concerned with very specific applications of traditional legal doctrines; the courts have had not general constitutional role which has set the parameters of the developing media scene as has occurred in the USA, Germany or Italy. However, the lack of activity of courts does not mean an absence of law. Apart from the detailed legal provisions discussed here, an important trend is that of ‘enforced self-reglation’, for example in relation to the Internet, by which private actors are required to set up legal regimes of their own in response to threats of more formal legal intervention. We shall return to this theme in our overall conclusion.

Finally, a lot will depend upon the media policy of the Labour Government and how it intervenes in this field. However media legislation has until now reflected a high degree of consensus between Labour and Conservatives, and therefore a major change is not expected. In the past UK media policy has been ineffective with regard to new media technology. Satellite and cable had a very slow uptake in comparison with other European countries, despite the UK Government’s obssesion with high technology at that time. It remains to be seen if this contradictory result will continue in the digital period.

Stefaan Verhulst

Prosser (T), Goldberg (D) and Verhulst (S), Oxford University Press, 1998.

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