EU challenges EU-wide music royalty structure

The European Commission has sent a shot across the bows of the EU royalty collection agencies, saying they fear by them working closely together across the EU, but bound within their own territories, they will extended the national monopolies the societies current hold in the off-line world, to the Internet, potentially in breach of EU competition rules.

The EU executive said it sent a ‘statement of objections’ detailing its regulatory concerns to the organisations over their so-called ‘Santiago Agreement’ – a pan-EU system that allows national organisations to collect music authors’ copyright proceeds.

In 2001 the collecting societies of the UK (PRS), France (SACEM), Germany (GEMA) and the Netherlands (BUMA) notified the Commission of the ‘Santiago Agreement’. Since then, all other societies from the European Economic Area, with the exception of the Portuguese society (SPA), have signed up. They were also joing by the Swiss society (SUISA).

While strongly supporting the “one-stop shop” portion of the Agreement, and acknowledging adequate copyright protection and enforcement, the Commission “considers that such crucial developments in online-related activities must be accompanied by an increasing freedom of choice by consumers and commercial users throughout Europe as regards their service providers, such as to achieve a genuine European single market. “. The EU wants to encourage competition between the agencies, not consolidation, in their words,

“The Commission considers that the territorial exclusivity afforded by the Santiago Agreement to each of the participating societies is not justified by technical reasons and is irreconcilable with the world-wide reach of the Internet”.

Coming on the heels of the EU record fine of Microsoft Media player, we feel this shows that the EU Commission is serious about protecting the rights of the public to the fair and reasonable access to media in a digital age.

The collecting societies have two and a half months to reply to the Commission’s objections.

EU Press release – Commission opens proceedings into collective licensing of music copyrights for online use

UK’s Progress Towards Digital Switch-over “Astonishing”

The UK’s culture secretary, Tessa Jowell described the country’s progress towards digital Switch-over as “astonishing”. The statement was prompted by a new BBC report, “Towards Achieving Digital Switch-over” which confirmed that the country could switch over to digital broadcasting by 2010. The new BBC report has similar findings and recommendations to the Ofcom paper we covered last month.

There are some caveats contained in the BBC document, as there are several issues that need to be straightened out – but if the industry and the Government work together, then the 2010 date should be achievable. If left to market forces, it may take until 2013 for 95% of the country to be ready.

Issues that need to be addressed cover areas like ease of recording from digital broadcasts, telling unconverted households about digital television and simplicity of use for new services.

Tessa Jowell said in a statement responding to the report:

“This Government is absolutely committed to working with the industry to achieve digital switchover. The potential rewards, including more choice for consumers and more space for new services, are too great for us not to be.

“The fact that half of homes in the UK now have access to digital TV shows there is a considerable appetite for the product out there. This provides a solid foundation for continuing the drive towards full switchover.

“Of course there are obstacles along the way, many of which are highlighted in this report. We are working closely with stakeholders to determine the actions needed to overcome these in the journey to switchover. This report will help us focus on the challenges ahead.”

UK Government’s Digital Television site

Ofcom’s Digital Switch Over Report

“Driving Digital Switchover”, Ofcom’s report to the Secretary of State for Culture, Media and Sport, contains 30 findings and recommendations for the UK’s move to digital broadcasting, and the decommissioning of analogue signals.

  • Ofcom are recommending that the switch, due to be completed by the end of 2010, should be phased in region by region, shutting down analogue channels one at a time. They believe that a firm timetable will encourage the adoption of digital broadcasting between 2007 and 2010.
  • Additionally, they suggest that the UK Government review the BBC’s obligations to digital and add further requirements, including: obligations on rolling-out digital transmission nationwide, providing public information, continuing to provide its channels on the free-to-view satellite platform, and providing on-air marketing of digital TV on a platform-neutral basis.
  • Importantly, Ofcom believe that free-to-view digital satellite will play an important part in increasing adoption of digital viewing, particularly with those who do not wish to subscribe to services such as Sky. Ofcom is considering regulatory intervention “to secure a viable free-to-view satellite proposition.”
  • SwitchCo is the body that Ofcom are suggesting is created to be responsible for managing the switch-over by the agreed date. The suggest that the body is entirely independent and not run by the government, any broadcaster or even Ofcom.

About the Report

The Report

South African Telco Declares Voice Over IP Illegal

South African telecommunications provider Telekom has threatened to lodge a formal complain with the country’s regulator over programs such as Skype, which it claims are used as “network bypass software”.

Telkom have stated that VoiP does not have any impact on its revenues, but will file a complaint with the Independent Communications Authority of South Africa if necessary.

ITWeb on the story

UK’s Voice Over IP Sector Sets Up Trade Association

Voice over IP (VoIP) telephony is growing rapidly in the UK, but has yet to reach mass market – currently six million people worldwide make VoIP calls, mostly in the USA and Japan. In years to come this could be the number of people making VoIP calls in Britain alone. Ofcom have reports and suggestions on how the sector should be managed – including setting aside a block of non-geographic numbers for VoIP services.

To promote the sector and effectively lobby Parliament, thirteen UK companies have grouped together to form the Internet Telephony Service Providers Association (ITSPA). The thirteen founder members are Call UK, ET Phones, Gossiptel,, Idesk, Imass Telecom, Intervivo, Magrathea, Mistral Internet, Speak2World, Telappliant, Telco Global and T-Strategy. It is not yet known if BT will be permitted to join the group.

The ITSPA hopes for a self-regulating sector, known for innovation: spokesman Kim Thesiger said “Internet Telephony providers now offer a serious alternative to the existing telephone companies, and we need to look at the levels of regulation and encouragement that this industry needs. This technology will revolutionise the way in which consumers and businesses make voice calls over the next few years ushering in far cheaper prices for phone calls and offering a wealth of new products and services that were only available to the biggest corporations until now.”

E-Consultancy’s Guide to VoIP

The state of VoIP worldwide

Ofcom Chair: UK with True Broadband by 2010

Fifty days in to Ofcom’s existence, its Chair David Currie delivered a speech to the Communications Management Association conference. He recapped on what Ofcom had been doing, then outlined where he felt it was going, focusing mainly on broadband.

We feel the most exciting part of the speech was, in his words, True Broadband.

Anyone with a real understanding of why broadband is such a vital part of the future will be hugely encouraged by his words. In summary, what is currently being sold as broadband to the UK consumer and many other around the world, a 512k connection, is not broadband. It is the equivalent of a 1200/75-baud modem.

We heartily agree with Currie view that ‘DSL at 512k is a convenience product’. He argues that it is not practical or possible for the UK to lurch from a 512k connection to something much faster – the current copper-wire based system we have simply would not support it.

Instead a target of 10Mbps should be set for 2010 and that it should be provided competitively. We read this as; the long lasting monopoly that BT has, and does enjoy will be removed. His comparison with the multi-supplier mobile market bears this out. In our view BT consistently hoodwinked Oftel. At first glance it looks like they will not have the same joy with Ofcom.

This was further underlined by his praise of the Parliamentary Trade and Industry Select Committee point that

‘[we must] make certain that the regulatory framework ensures that commercial decisions by private companies are aligned with the wider economic and social needs of the country.’

He and his colleagues clearly recognise and understand what is required for a proper broadband service. With connections being symmetric rather than the slow transmit, asymmetric we have now, he identified the need for the network to enable distributed system, not just central services delivering to the ends of the network. We also find it encouraging that he reiterated the pursuit of wireless connections.

Currie states his aim is ‘Liquid bandwidth; all you can eat; always on. No contention.’

Very encouraging.

Full text
David Currie, Ofcom chairman, Communications Management Association Annual Conference, 16 February 2004

UK Reaches 3m Broadband Connections

UK regulator Ofcom announced yesterday that there are now over three million broadband connections in the UK as at Nov 2003. These are broadly split between DSL (55%) and cable (44%).

While we always support the promotion growth of broadband, knowing it is an essential ingredient of a digital lifestyles, we feel that Ofcom including connections speeds a low as 128 kbit/s, outside the excepted normal definition of broadband, leads the figures to be a little misleading.

Looked at in positive terms, the number of broadband households has more than doubled in the last year, with one in five of all UK homes with Internet access now having a broadband connection. This equates, in real terms, to around 10% of the UK population.

Take-up rates for ADSL connections continue to exceed cable modem connections by a factor of 3 to 1 which is fantastic news for BT. It is only when you dig into the detail of the figures, you start to understand the twisted nature of broadband in the UK. Excluding Kingston-Upon-Hull, while has a private telcom provider, nearly all of the DSL connection are provided, at some level, by BT, with only a pitiful 7,800 lines, less than 0.5% of DSL lines installed, having been Local Loop Unbundled (LUU), ie not provided by BT (see table below). We don’t define this as a competitive market.

Table: Broadband take-up at end November 2003

Total broadband
BT Wholesale
Cable modem
(Oftel estimate) 1,331,000
(Oftel estimate) over 400,000
Fixed wireless access
 Over 2,500
 Over 6,000

Source: Ofcom

Oftel’s Internet and Broadband Brief

Analysis: The FCC Rules to Adopt the Broadcast Flag

The US Federal Communications Commission (FCC) has elected to adopt the ATSC flag, otherwise known as the Broadcast flag – a digital code that can be embedded into a digital broadcasting stream to mark content as protected. All equipment capable of receiving a Digital TV (DTV) signal, be that TV or computer, sold after 1 July, 2005 in the US must comply with the ruling.

Content owners have been lobbying hard to try and get it brought into law, as they felt the broadcasting of their content in a digital format without the flag would lead to widespread piracy. Others, including the Electronic Frontier Foundation (EFF), raised a number of objections to the most stringent of restrictions and were particularly concerned with the protection of consumers current “fair use” rights. It appears that the FCC has listened to all sides of the debate and have accounted for their views.

The FCC announced ruling is that only equipment that is capable of receiving Digital TV (DTV) signals over the air will be affected and must “recognize and give effect to the broadcast flag”. The recording equipment and possible content protections schemes they employ will be addressed at a later date and are described below.

Alternative protection schemes had been proposed to the FCC. The considered the encryption of content at the broadcaster and the use of watermarking or fingerprinting technologies. Both of these were rejected at this stage as it was felt that the technologies were currently not mature enough and, in the case of encryption the burden on the broadcaster would be too great.

The FCC state the main aim of the ruling is to stop the wide distribution of the recorded content over the Internet. Many parties will be pleased that consumers will still be able to make personal digital copies. In the FCC words “redistribution control is a more appropriate form of content protection for digital broadcast television than copy restrictions”.

While the FCC is at pains to point out that that they feel it is important that consumers are able to move recorded content around, what they call, the Personal Digital Network Environment (PDNE), they have declined to define where the edges of this lay.

Although currently there are no detail given about the mechanism to stop personal copies be distributed wider a field, more detail on this are expected later.

One fear of consumers, who have already spent large amounts of money on DTV capable equipment, was that they would be forced to discard their current euipment and buy new, compliant equipment. They will be pleased to discover that this will not be the case; “All existing equipment in use by consumers today will remain fully functional”.

New DTV equipment, “Demodulator Products” sold after 1 July, 2005 in the US must comply with the ruling;

“If the flag is present, the content can be sent in one of several permissible ways, including (1) over an analog output, e.g. to existing analog equipment; or (2) over a digital output associated with an approved content protection or recording technology”

It is not clear if the quality that the digital broadcast brings will remain in the analogue output, or if it will be forcefully degraded to discourage the digital distribution of possible analogue recordings.

Changes to DVD
While it has been stated that current TV equipment will remain useable,  the future for current DVD players is far less secure. Hidden in footnote 47 the FCC states:

“We recognize that currently, content recorded onto a DVD with a flag-compliant device will only be able to be viewed on other flag compliant devices and not on legacy DVD players.  While we are sensitive to any potential incompatibilities between new and legacy devices, we believe that this single, narrow example presented to us is not unique to a flag system and is outweighed by the overall benefits gained in terms of consumer access to high value content.  Changes in DVD technology, such as the transition to high definition DVD devices, will present other unrelated format incompatibilities.”

The briefly translates to DVD players currently on the market will not be able to play DVDs which have been marked with a Broadcast Flag.

Given that DVD is famously the fastest ever growing consumer technology, it is not clear what the public views will be on the fact they will need to replace them.

Affect on the broadcaster
As covered above, the broadcaster will avoid the burden of having to encrypt content prior to broadcast.

The FCC has given individual broadcasters the freedom to make their own decisions as to whether they attach the Flag to their broadcast stream, but points out that they may not have content licensed to them, if they do not implement it.

Some groups urged that the broadcast of certain types of programming, such as news and current affairs, would be prohibited from use of the Flag – in effect during their transmission, they would be forced to turn the Flag off. The FCC has ruled to decline this.

Further discussion on recordings
As we have touched on, while the current ruling only covers the receiving equipment, the FCC is now seeking guidance on creating policy for recording equipment and content protection schemes.

This is the area that will prove most controversial, as it will effectively lock the content. Consumer groups fear that it will also lock the content to a particular company, leading to competing systems not allowing the playing of one companies protected content on another’s platform – the inability to exchange material between formats. This has been labelled the “interoperability” issue.

To address this whole subject, there will be an interim policy for approving digital content protection and recording technologies to enable the FCC to certify multiple compliant technologies in time for manufacturers to include flag technology in television receivers by 2005.

The policy details have been laid out and include the public publishing of proposals, followed by a twenty day period where any objection can be raised. The proposer is then given ten days to provide their response.

The FCC will take all input and make their judgement, which they hope to deliver within ninety days of filing.

The interim policy will in turn be replaced by a permanent policy and the FCC initiated a “Further Notice of Proposed Rulemaking” to examine this issue in greater detail.

FCC Order and Report (Word doc)

FCC Win Appeal for Digital TV by 2007

The US regulator, the Federal Communications Commission (FCC), whose remit covers the regulation of American TV, has ruled that by 2007 all TV sets sold in the US, bar the smallest (under 13″ screens), must be equipped to receive both digital and analogue signals.

The Consumer Electronics Association (CEA), who represents the manufacturers of US TVs, took legal action against the FCC, claiming that they had acted illegally. Yesterday, a three-judge panel at the U.S. Court of Appeals, for the DC Circuit, rejected their appeal.

President and CEO Gary Shapiro responded, “We obviously are disappointed by the DC Circuit Court of Appeals ruling, which we are still studying. We will be reviewing the full opinion and consulting with our member companies, but of course will be compliant with any final court order.” So, no clear conclusion as to whether they will appeal the decision.

The National Association of Broadcasters (NAB) supported the outcome. President and CEO, Edwards O. Fritts, said “The court’s decision today upholding the FCC’s DTV tuner requirement is a milestone towards completing the DTV transition. Consumers buying TV sets will know that the receivers they buy will continue to receive all broadcast signals, even as broadcasting changes to digital. Chairman Powell and the FCC deserve congratulations for their strong leadership in advancing the digital transition.”

The FCC had originally wanted to broadcasters to make the switch by 2006 but was extended when it became clear that this wasn’t going to be reached. Starting in 2004, larger sets must be equipped to receive digital signals.

Court ruling (PDF)

FCC response – Word | PDF

CEA response

UK Ofcom starts to take shape

This autumn (fall) Ofcom, the UK media and telecoms super-regulator, will replaces the five existing media and telecoms regulators. It recently announced that Stephen Carter will be its Chief Executive. In his previous professional life he has been the UK chief executive of ad agency J Walter Thompson, and most recently, managing director for UK cable company NTL.

His initial comments on the current state of the UK market are mostly pretty refreshing, and it will be interesting to see how they start to implement them. He argues that Ofcom must “embrace converged thinking and converged decision making”.

It’s also interesting to see that there is talk from Ofcom’s Chair about “co-regulating” TV advertising, following sustained lobbying from the industry. This will be seen as controversial by viewer groups, as they will fear that TV advertising will run amuck. The regulation of UK TV is currently handled by the Independent Television Commission, ITC.

Media Guardian supply a gallery of current Ofcom execs.