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
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
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
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 significantunder
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
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.
There are similar concerns in terms of the remit
of the proposed Content Boardit 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.
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.
OFCOMTransparency 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