Select Committee on Culture, Media and Sport Minutes of Evidence

Memorandum submitted by AOL UK

  AOL UK is delighted to comment and give evidence on the White Paper "A New Future for Communications" to the Culture, Media and Sport Select Committee.

  AOL UK is the UK's leading subscription-based interactive services provider and a division of AOL Europe. AOL Europe provides the AOL, CompuServe and Netscape Online services, AOL Instant Messenger, AOL and CompuServe portals in 10 countries and five languages across Europe.

  AOL is the service for the whole family, providing members with interactive education, entertainment, financial and information content, and access to the whole Internet. From the first service launch in 1995, AOL UK's multiple brands now reach more than 5.4 million households in Europe including more than 3.9 million households served by the company's AOL and CompuServe subscription services.

  This paper provides a summary of AOL UK's position and identifies our key areas of interest. A more detailed response on all the issues raised by the White Paper is to be submitted to the Department for Culture, Media and Sport and Department of Trade and Industry and we would welcome a discussion of all aspects of the paper during our hearing before the Select Committee next week.


  In summary we welcome the White Paper and the vision it addresses of the future convergence of the communications industry. This is a vision we share and have adopted as a key driver of our "AOL Anywhere" business strategy by which we aim to make our interactive services and content available to consumers wherever they are over whatever platform they choose.

1.  The Internet is a consumer revolution merging the broadcasting and Internet industry across all communications platforms.

  At its heart convergence revolutionises the role of consumers in the communications industry. Consumers now have the potential to enjoy:

    —  Multiple ways of accessing content, so that—for example—news can be read in a newspaper, received by e-mail, downloaded on to a Palm pilot;

    —  New forms of content, such as increasingly sophisticated and interactive video games;

    —  New ways of controlling content through interactivity, such as choosing or changing the ending to a film or book; and

    —  An unfettered ability to create content and make it accessible to others.

  In the last year, this consumer revolution has begun to extend beyond its heartland of the PC and narrowband analogue modem. Mobile telephones, personal digital assistants and the TV are beginning to add interactive functionality. However for most consumers, those platforms are isolated from each other with separate phone numbers, separate e-mail addresses and separate customer relationships. We are connecting these dots. For example, the AOL Anywhere Strategy means that an AOL Member's e-mail address is the same irrespective of which device is used (PC, Palm, Mobile etc), providing seamless interaction between various communications platforms.

  As a result of these changes old regulatory approaches must be reassessed and challenged. We are concerned that the White Paper stops short of addressing the full impact of these changes. For example, AOL suggests that at least in part the traditional motivation for regulation has been scarcity of distribution channels (such as through a limited number of television channels, itself linked to spectrum scarcity) and the resulting limited accessibility for consumers of the content and services carried over those channels. New technologies and platforms mean that this scarcity has been rebalanced. Therefore, we would suggest, the need for, and type of, regulation should be reassessed.

  AOL would endorse the White Paper's consumer-centric approach to policy and regulation. In our view that approach should lead Government to seek regulation only where it is needed to ensure that consumers have access to services and content of their choosing.

  Content issues are discussed later, but this goal requires an appropriate regulatory framework for infrastructure which should be driven by market need. This means acting promptly to ensure competition in the monopolistic or oligopolistic markets which look set to prevail in the provision of access to communications networks (be it narrowband, fixed broadband, 3G mobile etc), and preventing any anti-competitive leveraging from these markets into downstream markets where a much greater degree of competition is and can be expected to exist. It is also important that the complex problems and issues relating to access to infrastructure and leveraging are not diluted or underestimated in the broader pursuits of the new OFCOM.

  Regulation of media ownership will also need review. The broadening in the choice of distribution channels available to consumers, coupled with the shift towards demand driven access to information and content, means that a more refined view needs to be taken of whether disproportionate media control is being achieved. Moreover, it is likely that a competition law based analysis could be just as capable of identifying problematic situations as today's market share assessments.


  AOL UK welcomes the unified regulator OFCOM, as we believe that a combined regulator will provide an essential overview and understanding of the converged industry as it develops. However, in AOL UK's view it is crucial to ensure key requirements are met in order for OFCOM to succeed in its role:

    1.  The Regulator must be independent of Government and must be staffed by highly skilled and experienced personnel able to tackle the complex and often cutting edge issues associated with this industry. Proper incentives must be put in place to ensure retention of key personnel.

    2.  The Regulator must be able to act in Internet time. In this fast moving industry timing is critical—a complaints resolution process is unsatisfactory when it requires (even when expedited) many months to achieve resolution. The regulatory processes put in place must enable the Regulator to act in a sufficiently timely manner.

    3.  The Regulator should contain staff sufficiently skilled to deal with the particular issues raised by the various bottlenecks and impediments to competition and in particular access to telecoms infrastructure—such as the continued dominance of British Telecommunications Plc in the local loop.

3.  What is the role of public service broadcasting in the unknown converged communications market of the future?

  The changes we have outlined above also mean that preconceptions concerning the future of public service broadcasting need to be challenged. As convergence empowers people to pursue their own individual and community interests, be they local, national or global, AOL UK believes that the role of public service broadcasting in the unknown communications future should be re-analysed and that flexibility will need to be included in any legislation. In particular:

    —  As convergence and interactivity multiply the ways in which people can connect with each other and access information and entertainment, and therefore maximise consumer sovereignty AOL questions whether public service broadcasting will still be central or important to consumers' lives in five or 10 years time and whether the choice of content and services and of platforms over which these can be accessed will be so diverse as to end the need to safeguard public service broadcasting.

    —  AOL UK also questions whether the BBC—increasingly operating in a competitive market and now considering advertising over some of its properties—should in the view of its commercial strategies continue to be offered protections such as guaranteed prominence on competitors' EPGs, in particular in a world where set-top boxes can support a variety of competing EPGs.

  In any event the role of the BBC and public broadcasting in the new converged industry will require a delicate balance of regulation and liberalisation. AOL UK would recommend that no decisions should be pre-empted through hasty legislation to protect the BBC without full consideration by OFCOM of the position of the BBC and its commercial strategies in the converged communications industry.

4.  The foundations of Internet regulation are potentially being radically revised with the move from economic regulation by Oftel to economic and content regulation by OFCOM.

  The White Paper puts forward a list of principles and objectives for the regulation of content across all electronic communications. The White Paper does recognise the different needs for content regulation over various channels, so that the Internet (where content is not "pushed out" to consumers) suits a lighter touch for regulation. We also welcome the results of the ITC research which demonstrated clear consumer endorsement of this approach. However, we are concerned that the proposed remit of OFCOM and its powers to make decisions on the acceptability of content are not consistent with this approach.

  In tackling the issue of content on the Internet, AOL UK welcomes the Government's recognition that partnership provides the best approach for Internet services and their intention to support self/co-regulatory schemes.

  AOL has a policy of worldwide zero tolerance of child pornography and is a member of the Internet Watch Foundation (IWF). The basic objectives of the IWF are to remove criminal content, in particular child pornography and illegal racial hate speech hosted by ISPs in the United Kingdom. The IWF operates a hotline enabling users to report illegal content. AOL is also a leading member of the Internet Crime Forum, a group composed of ISPs, law enforcement and data protection officers.

  In terms of labelling and filtering of legal material, AOL is a founding member of the Internet Content Rating Association (ICRA), which is developing a voluntary international self-rating and filtering system. AOL UK also offer to its members, free of charge, its own "Parental Controls" with four category levels that can also be tailored individually (kids only, teens, young adults and general access). Parents can determine the level of access to AOL and Internet areas based on the maturity of each individual child. AOL is supporting the search for effective solutions to such issues. As well as contributing to the funding of the IWF and ICRA, AOL has its own dedicated team helping members experiencing difficulties online.

  AOL is a member of the Internet Services Providers Association (ISPA), which since its inception has argued for self-regulation to allow this technologically fast moving industry to progress and expand without the hindrance of unnecessary legislation. ISPA has developed a Code of Practice for ISPs, which addresses service quality and the issue of illegal material on the Internet. The UK Government and European Commission have previously publicly commended ISPA's efforts in this area.

  However, AOL UK is concerned that the White Paper acknowledges research that suggests that consumers prefer self-regulation and user empowerment to make choices about access to Internet content, whilst also stating that OFCOM "will consider and adjudicate on complaints on content; if unresolved by the service provider in a timely manner". The White Paper also suggests that representative bodies will be put in place to represent "public interest" in the content of communications. AOL UK believes in the power of the judiciary and Courts to state whether content is illegal. Criminal behaviour in the online world is no different to the offline world. If the real issue is the speed of decision-making, then the judiciary should find a solution. The introduction of mechanisms such as online magistrates could be considered. On the question of content which is legal but may be unsuitable for minors or offensive to certain groups then filtering products enable consumers to make their own choices as to whether they or their children access this content.

  Finally, AOL UK is committed to working with industry to devise codes of conduct for notice and takedown for illegal content as part of the implementation process of the E-Commerce Directive to be managed by the DTI. AOL UK would caution Government against taking action or vesting powers in OFCOM which would be inconsistent with the regime anticipated by the E-Commerce Directive.


  In summary, AOL welcomes the White Paper as a good starting point for addressing the many challenges posed in effectively achieving the right level of regulation in the communications sector. It also provides a good basis for the Government's own approach to bringing Government services online. However, there are questions and issues which need more deeper consideration and we look forward to exploring these in depth with the DCMS and DTI over the coming months.

February 2001

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Prepared 26 February 2001