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


Memorandum submitted by Video Networks Limited


  Video Networks Limited welcomes the opportunity to submit evidence to the Select Committee's Inquiry into the prospects for a new Communications Bill. The issues we wish to raise are relevant to a number of themes set out by the Committee in relation to this Inquiry:

    —  the Government's overall objectives on: the UK communications & media market; access to high quality diverse services; and the safeguarding of citizens and consumers;

    —  defining and providing public service broadcasting;

    —  the development and promotion of digital broadcasting, including local/community services and radio;

    —  progress towards analogue TV switch-off;

    —  progress towards universal Internet access in the UK;

    —  progress towards effective broadband, and higher bandwidth, networks;

and on the balance to be struck between the protection of intellectual property rights and individual fair use of broadcast, or Internet, material.

  Video Networks has previously given evidence to the Select Committee on the Communications industry. We were pleased that in its previous report, the Committee noted: if 60 per cent of current customers for higher bandwidth services provided through the local loop are customers in the home "this is almost wholly due to the ground-breaking use of local telephone lines for delivering video-on-demand and interactive television services by Video Networks Limited, which has launched a service under the brand name `Home Choice'".

Video Networks Limited

  Video Networks Limited is an infrastructure-based provider of interactive broadcast entertainment and content to all market sectors, but principally residential customers. It is investing in high-speed transmission with full geographic reach. Video Networks' business is based on convergence between telecommunications and broadcasting. It is the type of business which will benefit most from the Government's proposals in the Communications White Paper and is strongly supportive of the Government's initiative in preparing and bringing into force the Communications Act. To the best of our knowledge, we make more use of DSL technology than any other company in the UK, and have been using DSL technology longer than anyone else in the UK.

  Our HomeChoice service offers consumers both high speed Internet access and high-quality, diverse Video-on-Demand services, based on a wide range of quality content. Video-on-demand gives consumers complete control over their viewing, allowing them to watch what they want, when they want. Programmes can be accessed using a remote control device in conjunction with an onscreen menu and viewers are able to start, stop, pause, rewind and fast-forward each programme, in the same way that they would if they were watching a video or DVD.

  HomeChoice provides customers with access to over 1,000 pay-per-view film titles, 1,000 music videos and 2,000 TV programmes including drama, comedy, soaps, children's, news, sports and music programmes via individual subscription services which can be purchased separately or as a complete package. 150 hours of new content is added every month. In autumn 2001 for example, we signed an exclusive Video-on-Demand deal with the FA Premier League giving us access to the 106 games that will be televised live in each of the seasons 2001-02, 2002-03 and 2003-04, as well as exclusive Video-on-Demand access to the Premier League archive for the previous nine years.

  HomeChoice also offers a Fast Internet service to PC and Mac users for a fixed monthly subscription fee and no additional call charges.


  Video Networks welcomed the Government's White Paper, particularly its main objective of fostering a dynamic and competitive communications and media market. Video Networks also fully shares the Government's priorities of extending choice, enriching entertainment and enabling learning matched by a strong and firm commitment to secure the highest quality content and value for consumers.

  Video Networks is also pleased to see that the Government is prepared to embrace the changes brought about by new interactive television companies and to sustain their potential developments. New opportunities are opening up to use broadcasting and related interactive media, for example in delivering education in flexible ways to institutions and to independent learners alike.

  The Government clearly recognises the important role which innovative interactive media companies like Video Networks can play in establishing a sophisticated, diverse, pluralistic, multimedia environment in which viewers have full control of what, when and where to watch. VOD is a worldwide development and Britain is at its head because of its leadership in the development of digital television. The regulatory environment needs to reflect that worldwide leadership position. The nature of regulation can influence Britain's lead in either a positive or negative direction.

  Our submission will touch upon the key issues identified by the Committee and that we believe are central to the future development of the media industry. Broadly speaking, our interests fall into the areas of network infrastructure on the one hand, and content issues on the other.


  Under the theme of network issues we group questions such as the promotion of digital, analogue switch-off, universal internet access, and effective broadband/higher bandwidth.

  Investment in high speed networks is following the same cycle as competition and investment in other forms of electronic communications services. The first beneficiaries are the most profitable business users, followed by the SME market, the biggest by volume. The residential market is the third wave, involving the greatest numbers of citizens but it is historically the most difficult to break into because of the need for scale to make roll-out economic. In the White Paper, the Government discussed ways to bring high bandwidth to this mass market, through public subsidy. It expressly acknowledged that high bandwidth should be available to all but took the view that this is unlikely to happen within a reasonable timescale through competition alone.

  The Government should ensure that regulation for exploitation of BT's local loop infrastructure encourages development of innovative services for the benefit of UK consumers. BT itself has little or no commercial incentive to develop the required infrastructure in a timely and economically-effective manner because development of digital services could increase competitive pressure on its retail business.

  The regulations put in place so far to unbundle BT's local loop have not yet had the desired effect. This is partly because the process of putting the regulations into practical use has made slow progress, and partly because there are barriers to entry for infrastructure suppliers competing with BT which go beyond the local loop itself. To achieve its goal, the Government should ensure that telecommunications regulation does not limit itself to policing abuse of dominance, but should systematically and vigorously break down the barriers to effective competition at all points of the national network.

  We have a concern that Government thinking on broadband is proceeding separately from the development of specific actions to promote digital television and hasten analogue switch-off. In our response to the Government's Digital Action Plan in November 2001, we pointed out that "other than in the case of one oblique reference, the existence, reach and benefits of DSL to Britain's digital future have been ignored by the Action Plan. As a result, the Action Plan fails to suggest steps to capitalise on the assistance the DSL platform can deliver to Digital switch-over and secure the digital future."

  Video Networks believes that DSL can supply the "fourth platform" for digital delivery. Unlike the other platforms, DTT, DSat or digital cable, DSL has the capability to reach 90 per cent of homes and possibly 100 per cent in due course. A nationwide broadband platform incorporating DSL could be built at a cost of hundreds of millions rather than billions of pounds, offering attractive returns on their investment. DSL offers greater flexibility and functionality and—as Video Networks will demonstrate when it adds broadcast television to its HomeChoice service in mid-2002—can provide the full range of free-to-air and Pay TV services currently available on competing platforms, as well as a more diverse range of services and functionalities capable of driving consumer demand, including on-demand services, seamless interactivity, on-line multi-user applications such as games and personal video recording capability. DSL does not require new cable to be laid, and new services could be supplied via a simple plug-and-play box. DSL can provide new kinds of government information services such as those we have piloted in conjunction with the London Borough of Newham.

  In short, we are concerned that the Government's Digital Action Plan was product-led (ie biased to DTT) rather than demand-led. As a result, the plan gives insufficient consideration to meeting the real interests of consumers that DSL can deliver.


  Content issues are central to stimulating consumer demand for new services. In this submission, we wish to address intellectual property—based issues, commercial content regulation and also negative content issues.

  In terms of intellectual property issues, we are particularly concerned about the warehousing of programmes by broadcasters who have public service broadcasting obligations. We welcome the view taken by the Government which sees a key role for PSB in the digital future and "potentially an even more important role than it has now" (para 5.3. of the White Paper). Interactive television opens new opportunities to deliver the public service remit tailored to different audiences and it can thus play a great role in increasing the reach of public service programming.

  VOD has the potential to increase the value of every publicly funded programme made for television by making it available whenever a viewer wishes to see it. It is important that the licensing arrangements which content suppliers make for these programmes are fair and reasonable given the level of public subsidy the programmes already receive.

  Furthermore, to fulfil their role, companies like Video Networks need to be granted access to archives and content at a price that is non-discriminatory.

  Other channels also have public service broadcasting privileges and obligations. We believe it is essential that the public service privileges and obligations that certain channels enjoy mean that they should continue to make their archives available on a fair, reasonable and non-discriminatory basis to new service providers who wish to develop new products and services on a commercial basis.

  It is not only public service broadcasters who may operate practices which restrict the development of new services. We are concerned by the acquisition of Video on Demand rights by operators who have no intention of offering VOD services, simply to keep operators like ourselves from acquiring the rights. We are also concerned about the restrictive ways in which certain channels are made available to competing suppliers, and welcome the OFT's recent findings in respect of BSkyB.

  In terms of commercial content, we fully share the view expressed by the Government in the White Paper (see para 1.3.9.) of keeping regulation at the minimum necessary level in order to ensure that the interests of citizens and consumers are fully safeguarded. It is in this respect that we believe that the regulatory regimes to be applied to advertising and sponsorship in new interactive services should be limited to the minimum. Advertising and sponsorship provide significant revenue opportunities for VOD and interactive services as well as programme-makers. It will be very important to ensure that these revenue sources are not choked off by heavy-handed regulation that was more relevant to the age of spectrum scarcity.

  The regulatory regime that needs to apply to interactive services such as HomeChoice must parallel that of the liberal environment of the Internet rather than the more restrictive regime traditionally applied to television advertising. In particular, we are concerned that regulations such as the ITC's two-click rules are in danger of inhibiting commercial developments, and consequently our ability to invest further in our services and our commitments to public service broadcasting. Simplification of the regulatory environment in which we operate would allow us to concentrate on customer service and constant improvement of our offerings.

  As far as consumer protection or negative content issues are concerned, Video Networks recognises the place for continuing controls on taste and decency. However, Video Networks believes that its PIN system of content control satisfies the concerns of those who are worried about the dangers of unrestricted access to certain content and services. All our users benefit from our PIN system and are able to determine at the point of taking our service whether to have one PIN-code for the entire family or separate codes for different members of the family which allow different levels of access as determined by the householder. The HomeChoice service can be configured by the householder to require confirmation of PIN at the point of entry to the service or, in the alternative, prior to our delivery of any classified content or service thereafter. Video Networks' PIN system therefore empowers the householder to the maximum extent possible and creates an environment and user expectations quite unlike any other service. Video Networks' relationship with its users should be reflected by its regulatory regime.


  Video Networks Limited believes that the Government's focus needs to shift more actively to the stimulation of demand for broadband services, and encourage the active development of DSL as a fourth platform. Policies should be focused on encouraging the utilisation of DSL as a means of achieving the government's goals for the roll-out of digital and analogue switch-off, preventing anti-competitive behaviour by network-owners and content-owners and ensuring that the regulatory regime for innovative interactive services such as Video Network's HomeChoice is consistent with and reflective of the evolving relationship between those services and their users.

11 January 2002

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