My Lords, I am afraid I have three amendments in a row. I do not know whether it will be “three strikes and you’re out”, but Amendment 30 is the second. I will first explain that Section 73 of the Copyright, Designs and Patents Act is a provision in UK copyright law that permits the immediate retransmission of the main PSB free-to-air services by “cable” in the area where the original PSB channel was broadcast. Crucially, Section 73 provides that the copyright in the broadcast, and in any work included in the broadcast, is not infringed by such retransmission. The effect of the section is to permit “cable” operators to retransmit PSB services without agreement or consent.
What was the original purpose of the provision? The policy justification for Section 73 in its current form was to encourage cable rollout in the 1980s and 1990s as a competing platform to terrestrial television. How have the courts interpreted the provision today? In the recent TVCatchup litigation in the UK and CJEU, TVCatchup, an online TV service provider, argued that its retransmission and commercial exploitation of the PSB services via the internet was lawful under Section 73 on the basis that “cable” ought to be given its natural meaning. The judge in the High Court litigation agreed, and stated:
“I see no reason why the cabling system inherent in the internet should not be regarded as ‘cable’ for the purposes of the Section 73 defence”.
This is not an interpretation that can ever have been intended by Parliament—and nor, based on correspondence with the IPO, is it one that the Government believe is correct. In that correspondence in 2008-09 the IPO stated that,
“‘cable’ in section 73 as amended must mean the same thing as ‘cable’ in the Information Society Directive, the relevant requirements of which were implemented by the section 73 amendments in question. In the Information Society Directive ‘cable’ is not synonymous with ‘wire’ and is confined (as therefore, is section 73 CDPA) to the retransmission of broadcasts by conventional cable programme providers. The foregoing supports this Office’s view that the activities of IPTV providers such as ‘Zattoo’ who purport to rely on section 73, are in fact wholly outside the scope of that provision and that there are grounds for challenging them on that basis”.
The IPO also stated in the correspondence that the interpretation of Section 73 by the IPTV providers, and confirmed by the UK courts in the TVCatchup case,
“cannot have been Parliament’s intention”.
What are the problems with Section 73 now, in the light of that case? First, economic loss for PSBs and the UK creative economy. Section 73 is now being relied on by a series of service providers, most notably TVCatchup and FilmOn, to make money from PSB channels by retransmitting them via their own online services and placing advertising in and around the channels, which include BBC channels. Not only are the PSB services being exploited without agreement or payment to anyone, including contributors, but, perversely, Section 73 effectively permits these illegitimate online services to stream a small amount of content on the PSB channels, such as a number of old series for which online rights were not obtained and some sports coverage, that the PSB services themselves cannot stream online for rights reasons. This perverse consequence of Section 73 has attracted significant attention from underlying rights holders, including UK producers and foreign providers such as US studios, as well as from other industry bodies.
Services such as TVCatchup undermine the legitimate online streaming services and on-demand catch-up services provided by PSBs which, in the case of commercial PSBs, are a core part of ongoing efforts to make a financial return on the PSB investment in original UK content.
It is increasingly clear that TVCatchup in particular is operating at scale in the UK and has many millions of users. Indeed, it claims that it has close to 12 million registered users on its site. The key losses from this exploitation for the PSBs are loss of audience from legitimate PSB online streaming services, linear broadcast viewing and on-demand services, and, for the commercial PSBs, loss of advertising and sponsorship revenue from their own channels. By contrast with PSB exploitation of channels and content online, none of the TVCatchup revenue flows back into original UK content production or to underlying talent and rights holders. The scale and problem of this free riding is likely to increase substantially over the coming years as more and more households adopt connected TV—that is, IPTV.
Secondly, the original policy rationale for Section 73 has gone. Significant cable roll-out is now a thing of the past and the TV distribution market is now highly competitive. Cable is a highly effective and well resourced competitor to Sky and freeview/digital terrestrial television. There is no reason to continue to grant a primary legislative advantage from the 1980s to one particular platform operator in the current competitive market. Moreover, the Communications Act 2003 introduced a “must offer” obligation on the PSBs under Section 272, requiring broadcasters to offer the main PSB services for carriage on the cable, as well as satellite, platform. In addition, Virgin Media contracts with the PSBs for the supply of all the other channels offered by the PSBs that are not covered by Section 73.
Thirdly, the provision is almost certainly in breach of European law and exposes the UK Government to damages actions. In its submissions to the CJEU on the TVCatchup case, the European Commission made clear that it had grave doubts about the compatibility of Section 73 with the 2001 copyright directive. I will not go into the detail of that. The Commission went on to observe that it was “very doubtful” that the UK court’s ruling that TVCatchup could make use of Section 73 for that part of its service transmitted over the internet “could stand”. Notwithstanding the Commission’s clear position, however, the CJEU could not deal with the compatibility of Section73 in its judgment in the TVCatchup case because the UK court had declined the request of the broadcasters to refer the question of the compatibility of Section 73 to the CJEU in the first place. What should the Government do in the face of this?
In broadcasters’ meetings with the Government to date it has been very hard to understand the remaining policy rationale for Section 73, particularly given the “must offer” obligation that applies to the PSB channels. Broadcasters believe that repeal of Section 73 would be a sensible deregulatory measure that would end the unjustifiable damage which is being suffered by the PSBs, and would ensure that the UK continues to meet its Community law obligations. They believe that the forthcoming legislative programme, including this Bill, provides the Government with an opportunity urgently to consider repealing Section 73, assuming this cannot be achieved by secondary legislation following the passage of the Enterprise and Regulatory Reform Act. Repeal of Section 73 would not only assist broadcasters in their fight against parasitic websites—we have used that term earlier today—but would also ensure that UK legislation complies with the EU acquis and therefore reduces the risk of any potential infringement proceedings against the UK.
The negative commercial impact of retaining Section 73 is significant for UK public service broadcasters, and ultimately, as a result, the producers of the audio-visual content they broadcast. This impact will continue to increase if no action is taken by the Government to repeal these provisions. I beg to move.