Memorandum submitted by Video Networks
Video Networks is grateful for the opportunity
to comment on the content of the Government's Communications White
Paper in relation to this Committee inquiry.
Video Networks is the leading UK service provider
for broadband interactive TV services including video-on-demand
(VOD), and recognised as a world leader in this field. Our interactive
services, branded HomeChoice, empower our customers to fully control
their own viewing experienceto see whatever they want when
they want. This move to 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.
Video Networks welcomes the publication of this
Communications White Paper, which sets as its main objective the
fostering of 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
the new interactive television companies and to sustain their
potential developments. New opportunities are opening up to use
broadcasting and related interactivity media, for example in delivering
education in flexible ways to institutions and to independent
Ultimately, the Government seems to acknowledge
that there clearly exists a role for innovative interactive media
companies like Video Networks in contributing to a more democratic
media environment in which viewers have full control of what/when/and
where to watch.
The upgrade and unbundling of the local loop
are key factors for us. Central to the implementation of our strategy
is that BT allows alternative network operators to access and
upgrade the lines. This will result in greater competition and
lower tariffs for consumers. To the best of our knowledge we make
more use of ADSL technology than any other company in the UK,
and have been using ADSL technology longer than anyone else in
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. First, we explain
Video Networks and its HomeChoice service; then we address the
role of OFCOM, the importance of local loop unbundling, and the
right level of regulation in the area of new media; we will then
turn to the importance of new media in the evolution of traditional
television and the necessity to re-discuss and re-invent traditional
concepts like public service broadcasting (PSB), including regional
and educational programming; we will then conclude with a brief
summary of Video Network's commitments.
1. ABOUT VIDEO
1.1 How we started and where we are now
We have been delivering VOD and interactive
television services continuously since 1996 (first pilot in Hull
from December 1996 to July 1999).
In September 2000, we launched our commercial
interactive broadband service HomeChoice in London, at prices
competitive with other pay television offerings on cable and satellite.
HomeChoice is delivered over BT's local telephone
lines once they have been upgraded to a broadband delivery channel
using ADSL technology. In the future, we may also seek to utilise
other broadband delivery channels such as cable or fixed wireless
We currently have approximately 10,000 customers,
with HomeChoice available to approximately two million households
in the Greater London Area. Take-up is constrained by the availability
of lines from BT. Our own estimates of current take-up, were we
not subject to such constraints, would be that it would be nearer
40-50,000. Our pilot in North London achieved take-up of 3 per
cent in four months without the benefit of any television advertising
to promote it. This would be the equivalent of 750,000 homes nationally.
Our own research shows that:
our services are popular amongst
all sections of the population; and
65 per cent of our customers have
never bought any form of pay-TV before: Video Networks is therefore
reaching a new section of the population and enhancing the opportunities
for digital roll-out and take-up.
1.2 What services do we provide?
Our HomeChoice service is a real video-on-demand
(VOD) service, offering an intelligent home system whose key factors
are interactivity and personalisation and the widest range of
video-on-demand content services:
Unparalleled range of programme content,
including FilmChoice, the largest VOD library of films in the
UK, which offers more than 1,000 movies on a pay-per-view basis.
We have a wide range of agreements in place with key rights-owners
including film studios such as Warner Bros, Buena Vista International
(including Disney pictures) and Sony Columbia Tristar, broadcasters
such as the BBC and Channel Four, and independent TV producers,
and independent distributors such as Kenwray, Carlton International
and specialised "Bollywood" distributors and music producers
like Video Performance Ltd and BMG. We also have rights to a number
of films from the pre-1956 RKO library.
Television programmes and music videos
are available to subscribers in packages. We currently offer:
NewsChoice offers daily news
on a time shift basis from the BBC, ITN, ABC, CNBC and Bloomberg.
HighStreetChoice is a new home
shopping service featuring SHOP! the popular TV shopping channel.
It will allow customers to order products and services from featured
events past and present a wide range of sporting events, including
Wimbledon; we offered coverage on a time-shift basis of every
soccer match in the recent Euro 2000 tournament.
travel, home and garden and performing arts.
and classic comedy.
and wildlife programmes.
and period drama.
club covering aerobics, relaxation, healthy eating.
Other key features of the service include:
time shift functionality: we provide
broadcast content with time shift functionality allowing customers
to view a programme only minutes after its live broadcast has
ended, with the ability to fast-forward, skip to any point and
pause during the programme;
full control of viewing experience:
customers' choice is genuinely expanded; customers can, for instance,
watch News at 10 not just at 10 pm but at 11, 12 or whenever they
family friendly viewing: each member
of the family has different access codes and therefore children
are protected from adult viewing at any time; and
tailored content: each viewer can
create his/her own portfolio according to personal requirements
At present, cable operators in the UK offer
their customers "near" VOD which, unlike our "real"
VOD, allows customers access to a very narrow range of films and
other content only at scheduled times and without the full VCR
functionality we provide. Other digital PAY-TV operators (both
terrestrial and satellite) offer interactive services that lag
behind our level interactive functionality. However, we expect
competition in the market for VOD to intensify and increase in
the near future.
HomeChoice also offers a fast "always-on"
Internet access. E-mail to television services are also planned.
2. OFCOM: A REGULATORY
We embrace the Government's proposal for the
creation of a single regulatory body, which will cover both telecommunications
and media. We compete directly with Internet-based services and
we believe that the basis of regulation should be the light-touch
afforded to the Internet.
We particularly welcome this proposal because,
being ourselves a company that provides neither a traditional
broadcast service nor a classic telephony service, we in fact
operate on the border of telecommunications and broadcasting.
Companies like us are presently facing high administrative costs
in complying with a complicated and disproportionate regulatory
regime. As set out in the White Paper the current system carries
a double jeopardy problem and the same issue could be examined
in parallel by different regulators (paragraph 8.3 of the White
At present, we hold the following licences:
A Telecommunications Service Licence,
a class licence under the Telecommunications Act 1984, for Video
Networks Ltd. Should we wish to effect widespread deployment of
telecommunications network infrastructure, we would need a fixed
public telecommunications operator licence under the Act.
A Local Delivery Licence from the
ITC, to provide broadcast television services, which might require
us to carry (under the "must carry" rules) digital versions
of BBC 1 and 2 and Channels 3, 4 and 5 and certain teletext services.
Oftel has also granted us "Schedule 2 Operator
Status" which allows us to interconnect with BT's network
at BT's cost based rates and to take advantage of BT's unbundling
obligations by obtaining services from BT once available.
Consequently, we strongly feel the need for
a simplification of the regulatory environment in which we operate
and, in particular, we call for a review of the current licensing
regime to take into account new services such as our own. We believe
in a system of general authorisation rather than a system based
on individual licences.
2.1 Unbundling: a number one priority
Video Networks is concerned for the future of
unbundling. In recent months, local loop unbundling has, at last,
taken off. What we fear is that the impetus that the process of
unbundling has gained recently will slow down as a consequence
of the time necessary to establish OFCOM. We do understand that
there has to be a transition period but we would like to ensure
this would not have a negative effect on the future of the process.
To the best of our knowledge, we make more use
of ADSL technology than any other company in the UK, and have
been using ADSL technology longer than anyone else in the UK.
Vigorous action to complete the unbundling of BT's local loop
is still needed and we want the Government to fully commit itself
to thoroughly carry out such process. Supervision will be needed,
for example, in sorting out the logistics of co-location sites
and their related problems. Many of these issues have been well-publicised.
We believe however, that there are basic flaws in the method of
unbundling which need to be addressed.
If the Government really wants to avoid the
creation of "communication ghettos" it has to grant
to new entrants like Video Networks national coverage as soon
as possible and make the completion of unbundling its number one
2.2 Regulation at the minimum necessary level
We also fully share the view expressed by the
Government in the White Paper (see paragraph 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
these services must parallel that of the liberal environment of
the Internet rather than the more restrictive regime traditionally
applied to television advertising, since ultimately in the future
all services are likely to be received by broadband Internet.
We support the Government's stance of identifying
diversity and plurality as pivotal priorities in an era in which
the boundaries of communications industries are blurring.
As we have pointed out to the DTI and DCMS,
Video Networks is ready to take on a facilitating role in the
delivery of PSB in order to meet regional, local and cultural
interests. In particular, Video Networks is committed to explore
all the potentials of VOD, and to elaborate on an offer which
goes beyond entertainment, to promote interactive educational
content and local culture.
3.1 PBS is the era of new media and the importance
of a non-discriminatory access to archives by new media companies
We welcome the view taken by the Government
which sees a key role for PBS in the digital future and "potentially
an even more important role than it has now" (paragraph 5.3
of the White Paper). This is exactly the view that we have taken
in representations to the DTI and DCMS. Interactive television
opens new opportunities to deliver the public service remit tailored
to different audiences and it can thus play a greater 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 VOD suppliers make for these
programmes are seen to be fair and reasonable given the level
of public subsidy the programmes already receive.
In order to fulfil their role, companies like
Video Networks need to be granted access to archives and content
providers at a price that is non-discriminatory. At present, we
are working closely with broadcasters like the BBC and Channel
In conclusion, we believe it is essential that
the public service obligations that certain channels enjoy mean
that they continue to make their archives available to new service
providers who wish to develop new products and services on a commercial
basis. For example, the ITV Network Centre currently operates
a five-year network holdback on the licensing of programmes to
other suppliers: in effect warehousing content which consumers
would like to see.
3.2 Regional Programming and new media
Real local television has never existed in the
UK, since regional television services have been determined by
the structure of transmission systems rather than the geographies
of local communities. Local television has been inhibited by issues
of spectrum scarcity which no longer apply. It is of the utmost
importance that broadcasting meets the needs of different communities
and cultural interests (see paragraph 3.3 of the White Paper).
Niche and local services can be supplied at low cost over broadband
services using technology such as our own. Television needs to
appeal to a wide range of tastes and interests, as well as to
people of different ages and backgrounds. The regional dimension
of programming is a fundamental contributor to diversity.
The Government specifically commits to ensure
that the value of regional television is properly taken into account
in planning the digital future. In this respect, we welcome the
opportunity of participating in an open debate among broadcasters,
independent production companies and citizen groups at local and
regional level about how regional programming could be further
developed. We would like the Government to go a step further and
present media companies with supporting initiatives that will
speed up the delivery of new programmes in this important area
HomeChoice offers a highly personal stream into
the home, which enables truly local programming to be delivered.
In our pilot in Hull, in an experiment with the Hull Daily
Mail, we equipped journalists with video cameras to enable
a truly local TV news service to be developed. We believe that
such a service can be developed, funded potentially by local advertising.
3.3 Educational Programming
As we have already pointed out to DTI and DCMS,
VOD has the unique attraction of enabling viewers to customise
their learning experience, so adults can "attend" vocational
courses at their convenience and children can work at their own
pace. We intend to link up schools as soon as we can expand our
coverage. There is no reason why online learning initiatives like
Learndirect and others could not take advantage of our service.
We will keep you informed of our progress in
this area and in particular of our progress in commissioning educational
programming from established production companies. To date, we
have reached agreements with both BBC Worldwide and Pearson Television.
We have also had initial discussion with the DfEE to explore the
educational potential of VOD.
4. THE CREATION
The Government acknowledges that with convergence,
many communications companies have begun to invest in new and
original content production for the first time. Thus, diversity
needs now to be measured not only between genres but also within
genres. It is beyond question that consumers will benefit from
a diversity and plurality of communications services.
Compilations of material can easily be assembled
on VOD, for example. Content would be packaged according to customers'
5. VIDEO NETWORKS
In conclusion, Video Networks is ready to commit
to safeguard diversity and promote services that would meet different
geographical, cultural and linguistic needs and interests.
In order to take on such a role there are reforms,
which are needed to enable a more optimum regulatory regime for
VOD. Interactive television is something entirely new, and requires
reform that opens up access to archives, lighter-touch regulation
of advertising and sponsorship, and possibly a new service licensing