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,
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 societyto 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
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
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
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
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;
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
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 nowsubject 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
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
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
C. THE STRUCTURE
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.