DCMS consultation on the Balance of Payments between television platforms and public service broadcasters: options for deregulation

On 5 July the Department for Culture, Media and Sport (“DCMS”) published its response to the consultation on the ‘Balance of Payments between television platforms and public service broadcasters: options for deregulation’ (“BoP Consultation”).

So what?

•  TV platform providers and channel providers should consider the Government’s conclusions and how they may be affected.  
•  The status quo has largely been maintained.
• This is good news for device manufacturers and the operators of user interfaces, as there will be no extension of the EPG prominence
  rules to them.  
• The main change to come out of the BoP Consultation is a decision to repeal the legislation which provides that copyright in certain broadcasts by public service broadcasters (“PSBs“) is not infringed when re-transmitted via cable.

What is the BoP Consultation?

The BoP Consultation arose out of concern for the declining level of investment in content by the PSBs over the past 5 years. It questioned whether the complex web of regulation could be having a negative impact on the level of investment; and if so how the balance between platforms and PSBs could
be addressed.

The BoP Consultation looked at three main areas:

•  Section 73 Copyright, Designs and Patents Act 1988 (“s73”) aka the cable retransmission right – s73 provides that the copyright in certain broadcasts by PSBs is not infringed when those broadcasts are re-transmitted via cable. Where this is the case no retransmission fees are payable to the PSBs by a ‘cable’ provider. S73 has also been open to a wide interpretation, meaning that service providers have been able to rely on it to retransmit broadcasts across the open internet (and not just across cable networks) without seeking a licence from the PSBs. The consultation looked at whether s73 should be abolished.
• Must Offer / Must Carry – s272 and s273 Communications Act 2003 require that: (i) PSBs offer their core PSB channels for carriage to all major platforms; and (ii) where directed by Ofcom in the absence of a commercial agreement, television platforms meeting certain criteria must carry the core PSB channels. This regulation does not apply to the PSB VOD (video on demand) offerings or their portfolio channels, such as ITV2, ITV Be. etc in the case of ITV. The consultation looked at whether these obligations are still relevant.
• EPG prominence – the Communications Act 2003, establishing the Ofcom EPG Code of practice (“EPG Code“), requires that providers of electronic programme guides (“EPG“) give appropriate prominence to all public service channels. This obligation is confined to linear channels and the consultation looked at whether the scope of the obligations should be extended to on demand content and portals.   

This suite of regulation, which on the one hand requires PSBs to offer their core PSB channels to platforms, and on the other hand compels the
platform providers to give prominence to the core PSB channels is known as the ‘PSB compact’. It underpins the UK free-to-air broadcast landscape.

The conclusions

A number of alternatives were proposed by DCMS to wholly or partly deregulate these areas, however it appears that the Government is satisfied from the industry responses that the status quo should be maintained in all areas bar one – s73, the cable retransmission right which will be repealed.

We have set out the key conclusions by DCMS in each area below:

•  S73
  •  This is to be repealed. 
  •  S73 was originally designed to ensure the availability of core PSB channels across cable networks. DCMS considers that this objective has been met by the market and therefore s73 is no longer required.
  • DCMS considers that the repeal of s73 would not result in retransmission fees becoming payable by platform providers, because the PSBs’ ‘must-offer’ licence conditions prohibit charges being imposed for core PSB services that are attributable (directly or indirectly) to the platform receiving their service. Therefore, if a PSB attempted to charge a cable provider retransmission fees for a core PSB service, this would be considered a prohibited charge.
  • In addition to the PSB’s being prohibited from charging retransmission fees post-repeal under the terms of their licence, the DCMS considered that any further retransmission fee related to cable retransmission of core PSB services would amount to a double payment for the same broadcast (the first being revenue from advertising or the licence fee in the case of the BBC) – supporting the prohibition on retransmission charges.
  • This will close the loophole that has enabled internet-based live streaming services such as TV Catch-up to retransmit the core PSB services over the internet (the court held that ‘cable’ should be interpreted as including the internet). The TV Catch-up service has already been challenged on its interpretation and is currently awaiting judgement in the Court of Justice of the European Union which is expected towards the end of
    2016 / early 2017, however the result will be largely academic because s73 is going to be repealed.
•  Must offer / must carry
  •  DCMS decided that the overall regulatory framework is still broadly fit for purpose and the Government does not recommend wholesale deregulation of the must offer / must carry regulation.
  • Despite strong arguments from ITV in favour of a more ‘free market-like’ approach, any de-regulation of the must offer / must carry regulation would risk unbalancing the relationship between broadcasters and platforms and thus unsettling the PSB compact.
  • There was no guarantee that by deregulating, any additional revenue received by the PSBs in retransmission fees would be invested into funding more new UK original content.
  •  No new dispute resolution process is required. Ofcom’s existing powers to resolve disputes between PSBs and platforms is considered sufficient. 
  •  DCMS highlighted that Ofcom’s existing enforcement powers under the PSB licences and General Conditions of entitlement appear to be adequate on the basis that Ofcom is yet to intervene in any dispute between a PSB and a platform.
• EPG prominence
  • DCMS decided that no changes are required.
  • No future-proofing of the definition of an EPG is required to extend it to other technology. With the growth of connected platforms / devices, the user interfaces (“UI“) used to access TV content are growing and it is possible for users to switch between linear and on-demand
    content seamlessly and thus between regulated and non-regulated areas of the UI seamlessly. DCMS did not consider it proportionate to extend regulation to the UIs covering on demand content as this would extend the compliance burden to device manufacturers. DCMS will keep this area under close consideration.
  • EPG regulation will not be extended to VOD. There is no evidence of harm to PSBs that requires extending the prominence regime to the PSB on-demand players.  Furthermore the PSB on-demand players are not licensed public services and are not part of the must-offer regime; therefore it would imbalance the PSB compact to extend the prominence regime to them.
  •  Whilst no changes to the EPG regulation are required, the area will be kept under close inspection as the market develops and converges and DCMS believes that Ofcom should review its EPG Code to ensure it remains effective.
  • HD/SD switching will not be mandated by regulation, although DCMS did consider that it is in the public interest for viewers to always receive the HD variant of a channel where possible. However due to technical and cost issues cited by industry in giving effect to this, DCMS felt the best way to achieve this goal was through a voluntary process rather than through regulation.

What’s next?

• The Intellectual Property Office will undertake a consultation on the technical steps required to effectively repeal s73 and address any transitional issues. Whilst the DCMS refers to this as a ‘short consultation’ we aren’t likely to see the legislation needed to repeal s73 in the very near future. Cable providers will need to consider what arrangements or amendments to existing arrangements they will need to put in place going
  forwards.
• DCMS has indicated it will be approaching industry to find a permanent technical solution for HD channels to automatically replace SD channels where practicable.
• We may also see a consultation by Ofcom on what changes, if any, are required to the EPG Code. Given that the BoP Consultation addressed the issue of convergence and multiple UIs on platforms and smart devices, we might expect to see this reflected in the EPG Code, along with HD/SD switching. We expect both PSBs and platforms will be eager to ensure their considerations are reflected in any revised EPG Code and Ofcom will need to take care that it does not inadvertently extend the EPG regulation through any amendments to the EPG Code.