Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Memorandum submitted by Telewest Communications


  1.  We recognise that the Government has three primary objectives, as follows:

    —  to make the UK the "most dynamic and competitive communications and media market in the world", to support innovation and to ensure that the UK remains attractive for inward investment;

    —  to ensure universal access to a choice of diverse, high quality services but particularly to public service content through all media; and

    —  to safeguard citizens and consumers by protecting consumer's economic interests (by making key services "affordable") and protecting citizens on the grounds of decency, privacy and freedom of speech.

  2.  We note, from the statement by the Secretary of State to the House of Commons on 12 December 2000, that Government expects to carry some key principles through into the new environment, particularly:

    —  that television channels, currently available free-to-air, should be carried on all platforms (satellite and cable) with due prominence being given to public services on all relevant electronic programme guides (EPGs);

    —  that public service broadcasting will become more important to society—to disseminate public information and to ensure that "high quality educational material is available to all at no extra charge and because it will help drive the transfer from analogue to digital";

    —  that each public service broadcaster should have a distinct remit and that there should be a strong regional dimension to public service broadcasting;

    —  that other communications services should be available at affordable prices; and

    —  that sector specific regulation (covering content as well as networks) will continue but only be targeted at players with significant market power.

  3.  As our starting point, we support the Government's overall intent but we believe that the achievement of those objectives could be hindered as much as helped by some of the proposals contained in the White Paper.

  4.  Whilst we note the Government's view that the market will not deliver some of its objectives, it is equally true that market management, through the use of regulation, will create its own problems in such a fast changing sector. We are firmly of the view that the market should be as unfettered as possible, because of the uncertainty over how the future will evolve, and that competition law principles should be predominant.


1.  The achievement of the first objective (to make the UK the most dynamic and competitive communications and media market in the world) hinges on the investment climate that exists within the UK.

  1.1  If the UK is to become the most dynamic and competitive market in the world, and have an advanced communications infrastructure that will support and deliver both anticipated and as yet unforeseen services, substantial ongoing investment will be required throughout the supply chain, from consumer equipment through distribution to content. This will require degrees of speculative investment and risk, probably more than in many other industries. Hence, the regulatory framework and other government policies must create a climate for such investment.

2.  OFCOM actions to protect consumers, particularly the promotion of open and competitive markets, may present conflicts when it considers what constitutes appropriate prices, quality and value for money.

  2.1  OFCOM's currently proposed responsibilities include a requirement to promote an "open and competitive market" as a means of protecting consumers but their judgement on what constitute appropriate prices may increasingly conflict with the industry's need to invest in more speculative (and potentially expensive) ways as technologies evolve and consumers' demands change. One option would be to give OFCOM an overall responsibility to promote investment, as well as "an open and competitive market" (although it should not be required to promote a particular competition model or technology).

  2.2  If this is not acceptable, it is essential that the actions of OFCOM, in fulfilling its central regulatory objectives, do not inhibit innovation and competition by undermining the business planning of the various players in the market. This has been a problem in the existing regulatory environment and should not be carried forward into the future. The quest for an effectively competitive market can be inhibited by regulatory provisions, which can lead to a cycle of further regulation to adjust for the effects of previous regulation, when the aim should be to withdraw.

  2.3  To guard against potentially distortionary action, the regulator should not take action without full and transparent consultation, and should have a statutory duty, similar to that of Government, to carry out impact assessments of any new regulation, which would both review the impact on the regulated entity (ie the target of the regulation) as well as assess the direct and indirect impacts on other industry players (and, hence, on the development of the industry as a whole).

3.  This first objective has to be viewed in parallel with the Government's higher bandwidth strategy. OFCOM must make its decisions in full consideration of this strategy.

  3.1  Within the White Paper, the Government has stated its desire to promote the availability of widespread access to higher bandwidth services and it is bringing together public and private stake holders to develop a practical broadband strategy. As one of the players that can deliver this broadband vision, we support the Government's objectives but we are concerned that barriers should not arise from the application of other of the Government's principles.

  3.2  Although we believe that this is a wider industrial (and economic) policy issue, with terrestrial broadcast networks, broadband cable, local loop bundling with DSL technology, broadband wireless and satellite (with an appropriate return path) all likely to play a part, new communications legislation will have to positively support the strategy.

  3.3  We should assume that consumers' bandwidth requirements will be similar, irrespective of location (ie whether they are in an urban or rural area). It is difficult to quantify individual bandwidth requirements at particular times in the future but we need to ensure that all consumers will have access to higher levels of bandwidth than they currently use.

  3.4  However, there will be differences in how that bandwidth will be provided. In practice, it is probable that consumers will have different options depending upon where they are located, but this is no different to the situation faced in the supply of a range of other services.

  3.5  Choice of access methods will be more limited in some rural areas but this should not contribute to the digital divide, provided that the higher levels of bandwidth are available from, at least, one platform. We should also recognise that technology changes will also overcome some of the concerns about the capacity restrictions on access networks that could inhibit access to content and services.

  3.6  It will be important not to try to project bandwidth requirements based on today's range of services but to aim to "get ahead of the game". This will require decisions on the provision of bandwidth for as yet undefined services. In turn, this will require a higher degree of speculation and risk by those providing access networks and developing broadband applications.

  3.7  Therefore, Government should consider financial policies that will encourage the higher degree of speculative investment required, such as tax breaks, capital allowances, regional development funding, etc.

  3.8  This adds weight to the argument that OFCOM should act primarily as a competition authority and an agency for development rather than as a sector specific regulator engaged, by default, in market management. If it deals with today's problems in today's terms, it could curtail the investment required to achieve the broadband vision.

4.  The achievement of the second objective (to ensure universal access to a choice of diverse, high quality services but particularly to public service content through all media) also hinges (i) on the investment climate referred to above and (ii) on the extent to which content and services, both public service and commercial, will be available across platforms (and the terms on which they are made available).

  4.1  We believe that the ultimate goal in the multimedia world must be to achieve the "any to any" principle that operates within the telephony world. In other words, it is in the consumers' interest that they should be able to access any content/service, over their chosen access platform(s), and that any content/service provider should be able to supply any consumer over those platforms.

  4.2  We see this objective as moving towards this goal although we recognise that a number of barriers exist today.

5.  A significant barrier may be the lack of universally available excess networks with the capacity (and capabilities) to deliver existing and new services to the great majority of consumers.

  5.1  The Government's higher bandwidth strategy aims to address this issue.

6.  Because of the variations in the availability of access networks, it will be important to ensure that consumers are not disadvantaged by the non-availability of important content and services on their chosen platform(s), both public and commercial.

  6.1  We agree that consumers should have easy access to public services, but it is equally important that consumers should have easy access to any service that they individually require. Therefore, universal access is a principle that should apply to all content and services, not just those deemed to be public services. Therefore, on the one hand, Government needs to guard against undue prominence for public services, and on the other, refusal to supply commercial services.

  6.2  In other words, the market could be distorted either by the actions of the regulator (when setting inappropriate terms for carriage of public service content) or as a result of behaviour of dominant players, both commercial and public service. The public service broadcasters have as much power, from a privileged position, to act anti-competitively in the new era as commercial broadcasters and, therefore, they should be subject to the same competition law as the rest of the industry.

7.  The objectives of plurality and diversity could be threatened in the same way as universal access

  7.1  If the primary aim is to provide consumers with universal access to a wide range of services, with choice within genres and a range of suppliers for each service, it follows that they could be disadvantaged if:

    —  commercial as well as public service content is not made available as widely as possible; ie if services are not available, for either competitive or proprietary technical reasons, across platforms. This suggests that the "must carry/must provide" principles could be extended beyond core public service, to include some commercial content and services that have a high level of demand, such as live sports. The latter could involve a "must offer" provision, on non-discriminatory terms, rather than the stronger "must provide" applicable to public service;

    —  the prominence given to PSB channels acts to the detriment of commercial services. This suggests that there should be a clear distinction between essential public services and any additional services provided by public service broadcasters so that prominence to public services broadcasters' commercially oriented services neither displaces established services that directly compete nor creates an undue entry barrier to new commercial services;

    —  the terms under which public service content has to be provided to consumers causes commercial services to be less accessible or more expensive. In this respect, the "must carry" obligation should not be on such terms that the commercial services have to unduly subsidise public service carriage. Our view is that any extension to the existing "must carry" provisions should involve some payment for carriage; and

    —  there is a lack of interoperability between platforms. We do not believe that Government can mandate standards but the regulator should ensure that interoperability and/or interconnection will allow the "any-to-any" principle to evolve.

8.  We welcome Government's intention to review the remit of Channel 4

  8.1  If Channel 4 is to retain its status as a public service broadcaster, "to complement and compete with BBC and ITV", Government should ensure that it continues to provide distinctive and innovative programming in the future. We believe that this review is important since we believe that it has recently failed to meet its remit to serve minority interests and nurture independent production in the UK. It has distorted the market through the launch of new subscription channels, which have involved significant expenditure on rights for programmes, such as Friends and ER, to launch a commercial subscription service.

9.  Given the significant changes within media markets, with the use of new technologies, trends towards globalisation and vertical integration, and the arrival of the Internet, we agree that current cross-media rules may no longer be appropriate

  9.1  Cross-media ownership must be possible, subject to the ability of the competition authority to control abuses by those having dominant positions. However, we do foresee some problems in the application of competition law in the new media, notably in the definition of relevant markets and the speed with which it could be applied to curb a major abuse.

  9.2  Therefore, it does appear necessary to set some levels of market share or "share of voice" but this area needs close attention and further detailed review.

10.  Universal dial up access to the Internet is available now—subject to consumers' personal circumstances

  10.1  The vast majority of consumers already have access to a telephone, or to a location that can offer Internet access. Increasingly, homes will not require a personal computer to achieve access as it will be provided via the television set, computer game consoles and mobile telephones. Therefore, we do not believe that any additional regulation is required in this area.

  10.2  However, we recognise the desire to reduce the cost of Internet use. We recognise also that Government has the wider objective of delivering universal broadband access and to deliver all of its own services online by 2005. We believe that the market as a whole sees great opportunity in delivering these objectives, although they may not all be achievable by 2005. The date must be a target and not a deadline. Each must be considered carefully and it shouldn't be assumed that regulatory action can deliver them any better than a market fully engaged with Government.

11.  The achievement of the third objective (to safeguard citizens and consumers by protecting consumers' economic interests and protecting citizens on the grounds of decency, privacy and freedom of speech) hinges on OFCOM's ability to recognise the needs of all consumers and citizens, in terms of generation and culture, and to fully engage the industry in developing its provisions.

  11.1  In terms of protecting consumer's economic interests, the objective of "access at affordable prices" is a sensitive issue. Clearly, Government recognises that the use of existing services and the take-up of new services (both public and commercial) will depend upon the cost of access and use. However, this is equally recognised by the commercial companies in the market, who need to price services at a level that will both drive take-up and recover costs of provision. In recent times, subsidy of new services, such as digital, has stimulated take-up but cannot continue indefinitely. Similarly, unmetered access for Internet use has also seen the introduction of various pricing packages, some of which have been "loss leaders".

  11.2  In this context, protection of consumers' economic interests should not lead to an attempt by the regulator to drive prices down prematurely through price controls, even though these may be targeted only at the dominant player.

  11.3  The market should be allowed to experiment with different pricing approaches as new billing and access and usage arrangements evolve.

12.  We agree that a set of objectives and principles should apply to all content delivered by electronic communications and that these should be based on the established "bedrock" of legal protections.

  12.1  The reason that principles of general law should be applied is that, with the advent of digital broadband technology, the idea that broadcasting is a "push" form of communications has to be adjusted. Consumers will increasingly "pull" material into their premises so there will be a need to pull back content regulation the more that viewers control the signals they access.

  12.2  Therefore, regulator tools should not be based on today's environment, but should recognise the impact of changes in the way that consumers, of different generations and multi-cultural mix, seek the services and content that suit their own needs.

  12.3  There is a strong case for the regulator to lay down guidelines and give the industry scope and time to develop a co-regulatory/self-regulatory environment as far as possible.


  1.  We support the creation of a single regulatory body, preferably with a single reporting line to Government. As indicated above, we would prefer to see OFCOM have a wider remit to ensure development of the industry in support of the Government's objective to make the UK the "most dynamic and competitive market communications and media in the world".

  2.  It should primarily act as a competition authority with a clear distinction between itself and the OFT. It should apply competition law consistently, to public service as well as to commercial companies, and the process for appeals against decisions should be clear and fair.

  3.  We believe that OFCOM should have a Chairman, Chief Executive and full-time, experienced "divisional" Directors and staff that fully understand the dynamics, economics and technological issues of the industry.

  4.  Most importantly, it should have a statutory duty to carry out impact assessments of any new regulation, not just on the regulated entity but on the industry as a whole.

February 2001

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