Joint Committee on the Draft Communications Bill Minutes of Evidence

Memorandum submitted by Microsoft Ltd


  Microsoft Ltd is the UK subsidiary company of Microsoft Corporation and currently employs 1000 people in four locations in Britain. Our main functions are service, support, and sales and marketing for our customers and partners across the UK.


  Microsoft, as well as making the comments below, supports the submission of INTELLECT, the new organisation comprised of the former Computer Software and Services Alliance and the Federation of the Electronics Industry, which ably sets out the industry-wide view on the draft Bill.

Internet and Regulation

  Microsoft supports the Government's stated intention, continued from the earlier Communications White Paper, to continue with the current policy on voluntary Internet regulation.

  It is not in anyone's interests to apply border-specific regulation to Internet content. Since Internet content is global, over-zealous regulation could simply lead to the development of more off-shore Internet services, as has happened for example with gambling sites, which would damage the government's objective of "making the UK home to the most dynamic and competitive communications and media market in the world". We of course recognise that industry needs to get more closely involved on Internet content issues, for example illegal content and the protection of minors, and work as much possible with the IWF and the Government to assist with measures to prevent such abuses of the Web. Microsoft has taken many steps in this area, and our work to protect children on the Internet is detailed as an addendum to this paper.

  But although the Government have stated their intention to leave Internet content out of regulation, concern remains that proposed policy in other parts of the Bill could potentially leave the door open for future attempts to regulate the Internet. The definition of "television licensable content services", which will be regulated by OFCOM, is laid out in Clauses 154 and 155, but can be altered by the Secretary of State.

  To achieve the Government's stated policy of avoiding such regulation, the draft Bill attempts to differentiate in Clause 238 between the way the public would access content from regulated broadcast services or from the Internet, but it is arguable as to whether it succeeds in doing so.

  This makes the question of what OFCOM can regulate heavily dependent on the kind of choices a person makes when accessing content, and would therefore appear to risk falling foul of the increasing technical convergence of Internet-based services with those offered via (particularly digital) television. In a general sense, it is perhaps erroneous to attempt to rule out Internet regulation by designing what appear to be technology-specific clauses, when the general aim of the Bill is to prevent enacting technology-specific legislation that would be fast overtaken by events.

  Even leaving aside the question of whether the clauses work, the way is left open in the Bill for future OFCOM activity in this area, particularly relating to video-on-demand, and also more generally.

  Finally, the definition of "electronic communications service" raises the question of whether information society services will be captured in the concept. The definition in the Framework Directive that is being implemented by the Bill contains a specific exemption for information society services as defined in Directive 98/34/EC, which helps to clarify that e-commerce services generally will not be considered to be electronic communications services. It may be a reasonable to read the definition of "content service" to encompass e-commerce services, but including the exemption from the Framework Directive could help to clarify that both content and e-commerce activities should not subject Internet providers to regulation.


  The issue of access to electronic communications networks is an important component of the Bill. Competitors must have the access required by the directives to foster the goals of the Bill. Yet, access must be defined carefully so that the range of activities that the principle covers is not unjustifiably broad. We are concerned that two definitions in the Bill extend beyond the terms of the directives in a manner that could extend regulation to the Internet as the Bill clearly does not intend.

  Firstly, the Bill defines an "electronic communications network" to include "software and stored data" that are used "for the conveyance of signals". This is a category of network information that is not included in the Framework Directive's definitions, and the use of such a broad concept could extend access regulation far beyond its intended scope. It also is unclear how an obligation to provide access to 'stored data', without limitations, could be squared with data protection obligations.

  Secondly, the definition of "associated facility" may be unduly broad. Again, this is important because an overly broad determination of what will constitute an "associated facility" could extend telecommunications regulation to areas that were not intended by the Bill or the directives it implements.

The breadth of the Bill's definition of "associated facilities" arises because its phrasing encompasses any service that is "available for use" with a communications network, whether or not it is actually used for that network. In contrast to this approach, the Framework Directive limits "associated facilities" to only facilities that are actually "associated with" a network and actually 'enable and/or support the provision of services' on that network. The difference is significant—under the Bill's language, a competitor could gain access to a facility that is not actually used in connection with a communications network, whilst under the Framework Directive access would be limited to facilities that are actually used in connection with a network. It also is worthy of note that the Bill expands "associated facilities" beyond facilities that are used for a particular network or service to facilities "making possible the provision of other services" in addition (emphasis supplied). Again, this is an expansion over the Framework Directive's definition and may have unintended and untoward effects. We would suggest that the concepts in the Bill be more closely aligned with the concepts in the directives the Bill seeks to implement.

Secretary of State powers

  In terms of any changes being proposed to OFCOM's remit, we would push for inclusion of a statutory duty for the Secretary of State to consult with OFCOM, and for OFCOM to duly consult with the industry, on any proposed changes to its content regulation remit.

  We would also hope that Ministers would, in the House of Commons, during the final Bill's progress, confirm their intention to limit OFCOM's role in regulation of the Internet to ensuring the working of mechanisms such as those operating under the Internet Watch Foundation.

Content Board

  There are similar concerns in terms of the remit of the proposed Content Board—it appears as though the scope of its remit could include matters relating to the Internet.

  The draft Bill states that OFCOM must allow the Content Board to have "at least a significant influence on decisions" (CL18, 3(A)), on matters including that which is "published by means of being distributed by means of any electronic communications network to members of the general public or of any section of the general public" (CL18, 7(b)).

  It is less than completely clear whether this would include considering and recommending action on areas including Internet content, a situation potentially at odds with the Government's stated intentions on the matter.

Consumer Panel

  In addition, we would argue that for the Consumer Panel to also have scope to look at questions of content, something for which its potential members are already arguing, would merely constitute a further muddying of the waters.

Promoting Media Literacy

  OFCOM's role is also to include ensuring that industry-based mechanisms exist to offer necessary protection on the Internet, such as filtering systems. There is arguably need for clarification in terms of whether OFCOM can order industry to develop these systems regardless of cost, or whether OFCOM would make funding available.

OFCOM—Transparency and Accountability

  We would like to draw out this issue as one of particular concern, and strongly subscribe to INTELLECT's view that the creation of OFCOM heralds not only a newly-converged regulatory framework, but also should mark the beginning of greater transparency and accountability as core aspects of that framework.

  With such a flexible Bill, much of the policy detail will be shaped by those at the helm of OFCOM. It is therefore extremely important that the reasoning behind decisions made is not only made widely known, but that this is done so with significant detail as to give a clear guide to the thinking behind them. This is essential if the industry is to be able to plan ahead in the knowledge that it will not fall foul of future regulatory decisions. Leading up to those decisions, it must be required that OFCOM give appropriate opportunities for industry to give its views on issues on which OFCOM is seeking to act.

  And as much of OFCOM's activity as possible should be carried out in the public eye. Except in cases of commercial confidentiality, proceedings of any inquiries or hearings should be formal and made in public, vis a vis the procedure of the FCC in the United States.

  This transparency should extent into the relationship between OFCOM and its planned sponsoring departments, and it this point we would also reiterate our concern regarding the manner in which OFCOM will be required to report back to two different Government departments. Although in theory the division between DTI and DCMS issues is clear, there will inevitably be times when both departments will have a 'say' in a policy area.



  As detailed in our White Paper submission, Microsoft fully supports the Government's commitment to universal Internet access by 2005, but is concerned, as is indeed the Government itself, that so far not enough progress has been made. Although there has been some progress since the White Paper's publication, high-speed access continues to be hampered by the slower than expected rollout of broadband. Arguably OFTEL has not done enough to facilitate investment and the creation of a market that can use the diverse technology available to ensure that businesses or domestic users in remote locations are able to obtain broadband. This must change with OFCOM, and there are implications here in terms of the extent to which the Government itself is prepared to act regarding investment.

  Microsoft works with small business both in terms of its customer base and in terms of developing software and services. We are working to provide joined-up solutions to those companies and individuals working across locations, and we are keen to see the capability to do so given the wings to spread through the wider availability of broadband.

  OFCOM must take a proactive role in ensuring that the right circumstances are delivered for greater investment in broadband services and systems, if the Government's aims for the UK are to be realised.


  On access to the Internet generally, it is still the case that some fifty per cent of homes, the majority of which are also in deprived areas, do not have any kind of Internet access, neither do they possess the economic means to make this possible. Microsoft, for our part, is a willing and able partner in any strategy that is adopted to reach the 2005 target. The Government needs to be prepared to meet the challenge head on if it is to reach its target. Specifically, if extra funding is required to provide a basic device at home to allow normal-speed Internet access, then the Government needs to consider making such a commitment.

  For example set-top boxes remain a strong model for low-cost, late adopter Internet access and are a valid alternative to more expensive and sophisticated connecting devices. The Government should consider needs-based subsidisation of interactive service devices in areas of high deprivation, and with the collapse of one of the digital TV platforms, and thus one method of gaining 'net access, the Government needs more than ever to focus on this strategy.

June 2002

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