Speech for the European Media Forum – Consumers’ Access and Use of Digital Services

Consumers’ Access and use of Digital Services

Speech for European Media Forum

By Ed Richards

Chief Executive, Ofcom

 

23^rd June 2010

Introduction – the context

We’ve heard from Robert Madelin this morning about the Commission’s far-sighted and wide-ranging Digital Agenda and how central it is to the development of economies in the EU.

Indeed, all three EU institutions, the Commission, Council and European Parliament regard the communications sector as a motor for economic growth across the continent.

But with the reality of sluggish or even negative growth still with us, the challenge for policy-makers and legislators is turning this ambitious goal into reality.

National regulators, like Ofcom, have an important role to play in ensuring that regulation of our sector is applied in a way which helps, not hinders this objective. And with the digital vision set out by the Commission, we must also turn our attention to implementation and delivery. Our experience to date already points to three key messages. 

First, we need to get the detail right. Attention to detail matters, when we move from vision to implementation. The risk otherwise is that we end up increasing uncertainty and the burden of regulation, resulting in perverse outcomes.

Second, we should not lose sight of the fact that a vigorous digital economy will require consumers willing and able to purchase digital services and content.  So we need to keep the focus on consumer protection with rules that are justified and proportionate.

And third, we need to continually look for opportunities to de-regulate as an essential part of promoting the interests of consumers in the digital era.

But before I elaborate on these three themes, I want to recognise the important and real progress already made.

Through a revised electronic communications package, the policy framework for networks is now clear. I hope Member States will quickly and effectively implement it.

We should also be encouraged by the steps the Commission are taking to ensure progress in a few outstanding areas around broadband.

In next generation networks, the Commission is preparing to publish a Recommendation that ensures greater flexibility in the type of remedies available to regulators. It also recognises the importance of the market analysis process in determining what regulation is appropriate. This deserves widespread support.

In the area of net neutrality, NRAs are now actively considering how to discharge the new responsibilities contained in the Framework. Ofcom has launched a consultation in this area focusing on consumer transparency and discrimination in traffic management practices. The output from this process, we hope, will contribute to the Commission’s own consultation document on the subject.

And finally, the Commission is developing a broader strategy to encourage both availability of broadband, including through universal service obligations as appropriate, as well as effective access and use of digital services.  

So, with the new Framework in place and progress on NGA, net neutrality and universal broadband, we now have a robust regulatory framework for networks. The launch of BEREC should be a critical underpinning for this.

Attention should now turn to delivering consumer value in the provision of content and digital services.

Getting the detail right

As I’ve suggested already, the transition from intent to delivery depends on getting the detail right.

There is widespread agreement that key to driving take-up and use is the availability of compelling digital content.  We want to be able to encourage new content services that meet consumers’ needs, and do so in a way that promotes the emergence of new, experimental and innovative services.

But the challenges for the development of commercially attractive and accessible distribution services remain extensive.  At the heart of this is the question of how new services can be funded and monetised.

To deliver confidence that the EU is a good place to invest in new content and distribution, we need to show flexibility in the application of existing content rules. The interpretation of existing EU regulation, especially under AVMS, is vital. These rules need to be interpreted flexibly and fairly.

A very strict interpretation of broadcasting legislation, for example in the area of sponsorship, has the potential to have a serious negative impact on broadcasters’ revenue, leading to a diminution in the amount and quality of content they can provide and thereby harming viewers. 

I do not believe that is the right approach.

And outside of linear broadcasting, we need to ensure that any new approaches can operate with similar flexibility.

Clearly, part of the monetisation problem for such new services is the widespread use of illegal distribution mechanisms.  Ofcom has new duties under UK legislation to reduce and bear down on the illegal manipulation of copyright content. A priority for us over the next six months is to meet the UK Parliament’s specific requirements to draft and activate a new regime consistent with European law.

But without accessible, legal services that suit consumers’ demands for greater control and mobility, illegal alternatives will continue to thrive. The presence of an attractive and legal online content proposition is crucial to tackling online copyright infringement, as well as making the production and distribution of content much more economically attractive and sustainable.

The outstanding question is whether there are other interventions which could create a more sustainable and vigorous content economy.The Commission has announced a number of initiatives in this area, including to facilitate a reform of the copyright system to permit the cross-border distribution of legal offers, and the European Parliament is also examining the case for EU-wide co-ordinated approach in Intellectual Property Rights.

I have followed this debate with interest and believe this is an area that should be examined fully, for the potential it offers for the realisation of a genuine pan-EU content economy is significant.

But once again, we must get the detail right.

Intervention should be targeted at protecting creators’ rights and ensuring flexibility around business models. Previous attempts to simplify clearance processes have foundered on very practical issues, resulting in more rather than less burdens for distributors. We therefore need to carefully consider the potential unintended consequences of such reforms.

Keeping the focus on consumer protection

Another barrier to the development of an EU-wide content market is the need for effective consumer protection and high levels of consumer trust in online and cross-border transactions.

An important aspect here is the need to recognise emerging privacy concerns as communications services become both more complex and more pervasive, and the asymmetry in information between consumers and providers grows wider.

This is clearly an area where governments, regulators and other stakeholders must work together to find solutions which allow innovative services, whilst ensuring that the highest practicable level of privacy protection is maintained.

Looking beyond privacy concerns, we also need to acknowledge that horizontal measures such as those contained in the Consumer Rights Directive, while useful, are unlikely on their own to protect consumers in the rapidly evolving communications sectors.

So there is a clear need for sector-specific targeted protection and empowerment measures.

For example, as was shown in the work Ofcom did on broadband speeds, there is a need for authoritative and transparent information about the quality of services, especially where that is not apparent to the end users, and where it is clear that competition alone will not deliver such outcomes. Ofcom is also considering specific measures to support consumers to switch between communications services.

It is the quality as well as the comprehensiveness of information that matters here, so that we remain vigilant against the equal and opposite danger of information overload.

Keep the focus on de-regulation

These are all steps where the need for additional measures that go above and beyond horizontal protections are indicated. Taken together, it appears to spell out a range of new and enhanced regulation.

Where new regulation is genuinely necessary and has been robustly assessed, we shouldn’t shy away from it. But at the same time, as I’ve already described, the introduction of new rules has to be very carefully balanced against the significant risk to restrain the development of digital services, or to limit their benefit to consumers – the opposite of what was intended.

For instance, we now have to conduct market reviews in a list of specified markets no less frequently than every three years.  Although the list of markets itself is shorter, this constitutes a significant increase in the regulatory burden – both on Ofcom, but more importantly, on our stakeholders.

So as we move forward on the Commission’s agenda of developing EU-wide services we need to actively seek and continually probe opportunities for targeted deregulation.

Deregulation is written into Ofcom’s statutory basis, so this perhaps comes easier to us than to other regulators. But the Commission, working with key stakeholders including BEREC, could take this forward as a Europe-wide initiative.  We can do this by being clear about where existing regulation is being rendered redundant by changes in consumption, technology and distribution.

We can do so by adopting a permissive and flexible interpretation of current rules, for example on broadcast advertising.

And we can do it by continuing to look very hard and in great detail to the extent of proposed new rules, and always with a presumption in favour of introducing only the minimum needed to achieve the stated objective.

At the same time we also need to be clear that deregulation is a two-way street that requires those providers of services to act in a way that makes deregulation feasible.

The history of roaming regulation is a case in point; it is very difficult now to imagine an environment in which the regulatory burden could be substantially reduced without a very significant change among those currently regulated. So the industry has to provide a clear sense of how it will deliver its part of the bargain as well.

A failure to do so will not only slow down further deregulation, but could see the pendulum swing back in the opposite direction, resulting in a tighter, more burdensome environment.

What is needed therefore is more than just a presumption in the Commission and among NRAs towards deregulation. We need, in fact, a form of “deregulatory compact” between stakeholders, regulators and policy-makers that will enable us to introduce sensible and proportionate new measures to protect consumers while continuing to lower the overall burden of regulation as competition emerges.

In so doing, we will contribute to ensure that the Commission’s ambitious Digital Agenda becomes a reality.