My Lords, DLA Piper has something like 80,000 clients. I am sure that some of them have interests in virtually everything that passes through this House on a daily basis. However, that does not require a partner in a law firm, like me, to make a declaration or, indeed, to state who their clients are. Otherwise, I would take up even more of the House’s time than I already am. Perhaps I could continue.
The current regulatory regime governing the relationship between PSB channels and TV platforms rests on three assumptions: that some of the analogue terrestrial value enjoyed by the PSBs should be used to encourage platform competition in the UK; that platforms effectively offer audiences to commercial PSBs to sell to advertisers; and that platforms do not inhibit the ability of commercial PSBs to exploit content, originally delivered free to air, in secondary markets.
The first assumption no longer holds—there is no analogue spectrum and there is a highly successful and well resourced pay-TV platform in the UK. Increasingly, however, the second and third assumptions are also in jeopardy, in particular as a result of the rise of subscription-based, high-capacity personal video recorders. PVRs are now in the vast majority of Sky and Virgin households and are key to both platforms’ proposition to consumers. PVRs are rented or sold by the main pay-TV platforms to their subscribers as added-value services and enable pay-TV platform customers to record and keep copies of very significant amounts of commercial PSB content. They also allow viewers to skip the advertising in such content, as they are doing in increasing volumes, particularly in genres such as drama.
For example, the Sky+HD 2TB box is now capable of recording the entire ITV peak-time schedule for 11 months of the year, and storage space is expanding exponentially. The concern is not about PVRs per se—they are a great enhancement to consumer choice—but rather the fact that the regulatory regime now allows platform operators to extract further value from PSB content, which is supplied either for free or, worse still, following payment to the platform operator in the first place. The PSBs are not able to capture any of this value by renegotiating the original terms of supply to the platform, as a result of the following components of the current regulatory regime: Section 73, which this amendment attempts to deal with; the Ofcom-regulated technical platform services regime, under which PSBs have to provide content for free and have to pay several million pounds to a platform operator for the technical platform services that enable viewers to receive the PSB channels; and thirdly, the time-shifting exception to copyright that allows customers to record and keep TV content. Around 10% of all viewing is now time-shifted, which is nearly five times greater than the highest level of time-shifting in the VCR era. PSB content is the most time-shifted—drama in particular, where levels of time-shifting and advertising-skipping are far higher.
6 pm
I want to deal with some of the arguments made in Committee. The first is that repealing Section 73 would unbalance a delicate equilibrium in the UK broadcasting market. The market is evolving very rapidly as technology changes and convergence continues. In no sense is the UK market in equilibrium, whether technologically or economically. The second argument is that Section 73 ensures that consumers who have already paid for PSB content through the licence fee or indirect taxation can access this content through a cable platform at no additional cost. This is not the case for ITV, Five and, arguably, Channel 4. These are commercial channels with no government funding. The third argument is that Section 73 continues to provide cable subscribers with access to the PSB channels without their having to pay twice. Cable subscribers would not have to pay twice for ITV and Channel 4. As I have described, they do not have to pay even once at the moment. Watching advertisements is really the way that they pay, and that is being undermined by subscription.
A further argument is that the broader channel-platform relationship should be on a level playing field —that is, zero fees either way. Rather than repealing Section 73, a clause should be drafted to ensure zero fees either way. This surely would not be the right outcome. If platforms increasingly enable consumers to skip advertisements, extracting more value from channels and reducing the size of the secondary market for programme rights via subscription PVRs, such as Virgin’s TiVo and Sky+, it will become impossible for the free-to-air channels to sustain investment in high-value content such as drama.
The penultimate argument is that repealing Section 73 would be contrary to the interests of 4 million cable customers who access PSB content, at no cost to those broadcasters, through cable platforms. There is an increasing cost to broadcasters as the TV market continues to evolve. Subscription PVRs generate content for platforms and extract increasing value from FTA content, reducing the opportunity for PSB channels in secondary content markets.
The final argument is that the Government believe that Section 73, properly interpreted, is consistent with EU law. In that case, the UK Government are substituting what they think is the proper interpretation of Section 73 for that of the UK High Court. It was the UK court’s interpretation of Section 73 that the European Commission suggested was in breach of the UK’s obligation under the 2001 copyright directive. Therefore, I am unclear what the words “proper interpretation” might mean. The fact is that the European Court of Justice did not comment on compatibility in its recent judgment because the UK court did not agree to the request by the broadcasters to refer the question to the European Court of Justice in the first place.
We discussed these arguments in Committee, and those are some of the points of rebuttal to the arguments made. I am not sure that we had a particularly enlightened debate last time. I hope very much that the Minister will be able to respond with greater particularity. In addition, I very much hope that he can give some reassurance that this issue is being seriously addressed and will be dealt with when the expected White Paper sees the light of day. I beg to move.