The Future of Content Regulation in a Converged Market

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Guest lecture given in the Semester A core module on "Science, Technology and Innovation" at the University of East London

Date: 22/10/2008
Venue: University of East London, London, UK

1. Introduction

Nobody living at this time can safely claim that the collective decisions we take are based on a set of immutable laws; there may be a kind of natural law theory about our moral responses [i] but this does not extend to our collective methodology for making things work in a complex society. In the field of economics, for example, Bentham's utilitarianism [ii] gave way to Bernstein's [iii] democratic socialism which was in turn succeeded by Keynesianism [iv]. In each case the economic theory was a response to a new set of circumstances, respectively mercantilism, industrialism and state corporatism. You will notice that I did not complete the narrative with Milton Friedman [v] and that is because I wanted to make two points: first, the economic theory of the free market was a rational response to the perception that the central government control that had been necessary between 1914 and 1950 was a negative force in economic growth by 1970; but, secondly, the theory uniquely transformed greed from one of the seven deadly sins [vi] into a public virtue. This is important because, as Andrew Dilnott noted presciently in 2006:

"Economics is a powerful discipline, replete with insight into how our world works, beautiful to study, and in no sense inconsistent with the great truths of the Christian faith. And yet our society is in real danger of being in thrall to a bastardized version of economics that either condones or encourages the belief that financial self interest should be our over-riding goal, and that this is both inevitable and good for the economy." [vii]

We must therefore be careful to separate our collective social obligation from our self delusion that what we want is what best serves that obligation; we should, in other words, recall John Rawls [viii] "Veil of Ignorance" which says that society should make rules for itself in a situation where each individual proposes a rule he would formulate not knowing his individual circumstances or prospects; in simple terms, without such a constraint, the strong and the clever will make - and have made - rules favouring the strong and the clever.

The first conclusion which I want to draw in this presentation is, therefore, that

Proposition 1: Regulation must further a public collective goal which is explicitly stated and not an unexplained private, individual or monopoly goal.

Always remembering that goals - or what many people call rights - are not absolute and indivisible but are in conflict, a subject to which I will return; but for now I can easily make the point by saying that in countries where there is no regulation of firework factories there are more accidents than in countries where there are; in other words there is a straight trade-off between safety and profit.

The relevant point for us is that the economic theory of de-regulation has 'read across' into the area of content regulation. Ofcom was, according to Government Ministers established as a "light touch" regulator [ix] with the remit to become progressively lighter; but we need to be careful not to think that there was a complete de-regulatory surge across society. The reason for the Ofcom decision was that broadcasting and telecommunications were regarded as economic activities rather than the means of social cohesion which might require regulation; if there was to be a conflict between profit and pornography, then the latter would steadily gain ground, as it has; as, indeed, it always has under the auspices of supposedly morally conservative regimes: every time Republicans in the United States or Conservatives in the United kingdom are faced with a choice between profit and moral stricture, they choose profit. Yet, at the same time, the economic liberalism of Friedman

bred a culture of mistrust - if I'm a bastard he must be one too! - which generated the health and safety culture, the audit culture, the obsession with governance and conflicts of interest and codes of practice and a general defensiveness in public space which Onora O'Neil [x] so graphically described and which has now reached its apotheosis in the collapse of credit (personally I would not want to join an organisation that thought I needed a code of ethics!).

Which leads, seamlessly I hope, to my second proposition:

Proposition 2: That content regulation has both an economic and a social dimension which represent different citizen rights

It may be rather 'grey' to say this but in most cases sound social arrangements depend on striking balances. In the economics field there will almost certainly be an over-reaction to de-regulation but I want to show in this presentation that the evolution of digital information technologies means that this will not be possible in the area of content regulation; whether you like that or not.

2. The Purpose of Regulation

In the way that I define it, regulation has three fundamental purposes which distinguish it from the arbitrary use of power to abridge the rights of a weaker party by a stronger party, from the use of the criminal justice system to enforce a public purpose and from the imposition by the public sector of an obligation arising out of a crisis. Any such regulation must therefore result from a democratic mandate and consultations with the affected parties whose activities (some would say rights) are being in some way abridged. In this respect, my definition can apply to some forms of public sector regulation (although consultation is frequently somewhat token).

The three major purposes of regulation are; to:

Modify the behaviour of a free agent through statute, regulation or contract to achieve a disclosed, public benefit;
Create a tier of jurisdiction 'below' the civil and criminal courts;
Facilitate a constructive dialogue between regulators and regulated not possible in an adversarial judicial system.

3. The History of Content Regulation

It is at this point that we should introduce the technological factor. Content regulation in the United Kingdom has been primarily technology rather than morally based since its inception:

Printing was regulated simply because it could be and because it was seen as a threat to stable government; the moral content of censorship was highly consensual;
Analogue radio and television were regulated for similarly 'defensive' reasons to print but there was the added leverage of the scarcity of spectrum and the growing perception of the power of television to enrich or corrupt;
Telecommunications regulation was based on the state monopoly of the industry;
Internet regulation has been, outside nation state criminal law and some notable exercise of political and religious pressure, self regulation, operated in the context of near monopoly power at various points in the supply chain; for example, the regulation of accessibility was the result of a confrontation between Microsoft and the rest.

It can be seen from this brief summary that the regulation of content was not derived from an ethical or moral abstract theory; it was strictly based upon the technological possibilities.

Now that digital convergence is becoming a reality we need to consider whether, if we want regulation at all, we want it to be a curate's egg of historical provision or whether we want a more elegant solution.

The answer to my implied question is that we will want content regulation and I will return to this issue later;

4. Convergence

But for now I want to review the most important technological factors in the short term which will partly determine the scope of regulation:

Platform convergence.

Put simply, Platform Convergence means that the publisher does not need to apply radically different production methods to deliver content to consumers; 50 years ago, delivering text through printing, images through celluloid or engraving, sound through audio tape and interactivity through telephony were all radically different operations but we are now familiar with such concepts as: television on telephones; telephony on computers; interactivity on computers and televisions; and even solid object printing (Stereoscopic Lithographic Apparatus: fast prototyping technology) [xi]

Content convergence

The corollary of platform convergence is a matching convergence in the way that material is produced. This is an area long forecast but sluggish in implementation; it involves the same content being automatically customised to fit different user interfaces; for example, if you design a web page for a standard PC screen it is possible to write macros so that the same material can be down loaded onto a mobile telephone with a small screen. this convergence of content creation should lead to three simple production rules; material should be:

Platform and user interface neutral;
Customisable;
Multimodal.

If you want to know what multimodal means, think of television; what it means is that:

A concept or object that is simultaneously represented in audio, graphics and symbolic language such that the three media are discretely coherent but mutually reinforcing.

This concept is going to feature as one of my core requirements for regulation later on so it is worth thinking about it in some detail here.

This form of content creation is not cheap but there are mitigating factors:

The life of content in the digital environment is theoretically unlimited, producing a 'long tail' of consumption;
Quality and topicality only require migration and modification (e.g. from WordStar to Word or Digital to HD television);
The requirement relates to public purpose.

From client side to server side

There has been a huge delay in realising the potential of digital technology because of the near monopoly of Microsoft with its client side model and the reluctance of major corporates and governments to write rational procurement policies to overcome its deficiencies. Imagine, in spite of near universal broadband in the UK, every time you want a PC upgrade (or don't want it but are forced to have it), somebody has to install it on each computer often by inserting a CD which has been purchased from a remote supplier. There are some available upgrade downloads but this still leaves the software and its bugs in a client machine. It would be much cheaper and more rational to supply all such services from a server where one adjustment could upgrade the facilities available to all clients; you can see how that might have regulatory implications. This concept is particularly important for people layering assistive technologies on top of generic technologies. [xii]

Modular user interfaces

At the same time, we are becoming more accustomed to our technologies becoming modular; in other words, our control devices, processors and output devices are not locked up in one box. We are familiar with the remote controller for the television and now the screen is separating from the processor; we are familiar with the ear phones and processor for a mobile phone but there, too, there will soon be a separate screen. What this means is that the re-processing of data need not even be device specific; your favourite television programme might be sent through the telephone but you can still watch it on the large screen you carry both for your lap top and phone access.

Spectrum Auctioning

It therefore follows that a large number of different publishers will want to use spectrum for different purposes whereas our history identifies spectrum according to user interfaces; there used to be radio and television spectrum but in our new world there will simply be spectrum; for example, last year the French chose T-DMB as their digital radio standard because it is really a multi media standard whereas the UK has chosen DAB because of its audio quality.

Ecological pressure

Finally on technology, this convergence of content production and modularity of user interfaces will make it possible for us to cut down on the number of user interfaces we need to access content; we will, in essence have three processors: one in our car, one in our hand and one in our home; and we will be able to choose our favourite hardware to access all three. [xiii]

It can readily be seen from this lightning summary that regulating on the basis of the way the material is carried and received is not a long term option; if there are strict conditions on the users of traditional broadcasting spectrum they will switch to the internet. It is also true, and I will come back to this later, that the internet technologies mean that regulating on the basis of the territory from which the content is transmitted is not a good long term option as it will induce regulatory flight from the more strict to the less strict.

Now let us remind ourselves that regulation is a balance between economics and social considerations; and so, having briefly considered the technology, let us look at the citizen.

5. Citizen Requirements

Before I plunge into the issue of citizen requirements I need to clear up a point that has had to be cleared up millions of times since it was misbegotten during the passage of the 2003 Communications Act; when politicians (and later on Stephen Carter, the CEO of Ofcom) said that regulation needed to consider the Citizen/Consumer they rightly had in mind the trade off between content regulation and profit; but, to state this position classically you would have to think of the citizen/producer. True, the sometimes benefits of production costs fall but it does not follow and this was a piece of Orwellian subterfuge.

The citizen may well have a requirement for certain kinds of content and she may only want to pay a certain price for it but for most of the time the two concepts are in conflict. Most publishers follow the 'hotel effect' of crowding in the middle of the market, whether you are thinking about the commercial imitations of BBC Radio 2, reality television formats, the singles chart, best seller fiction or the ITV flight from public service broadcasting.

I want to propose five principles for content regulation in the digital age:

Proportionate to purpose

The most important regulatory principle is that regulation should relate to the purpose of the entity being regulated. For example, as the Government is paid for by all of us it should be subject to a high degree of regulation of its content, as should the BBC which is funded by a flat tax. Any organisation which claims to serve "all citizens" should, likewise, be subjected to strict content regulation. This, of course, will take different forms:

The BBC's accessibility provision should be strictly regulated but its actual content should be sensitively regulated to reflect its remit as a content provider
Government content should only be subject to strict accessibility requirements and the criminal and civil law.

At the other extreme, there is not much point in regulating a web site where new paintings are uploaded so that it is accessible for blind people, both because the cost of describing the pictures will be greater than uploading them and also because there are not likely to be any buyers. Of course, you may argue that there may be one or two blind people in the world who want to buy the latest art but their supposed right to have it described is disproportionate to the right of the gallery owners to make a profit. We are back to our second proposition. In other words, the citizen requirement has to be balanced against the producer freedom of action. We cannot simply abridge the legal obligation of a company to maximise shareholder value just because we fancy a bit more international news on television or because we're not altogether fond of seeing Jordan's bottom. It is also important here to note that there are limits to what is collective: we should not insist on a huge cross subsidy from the poor to the rich in the context of the BBC because the elite fancy more opera and less soap opera. We then have to consider whether we want regulation because we think it does people good or simply to ensure that people get what they want.

This brings us to the heart of the matter, and to proposition 3:

Proposition 3: The market cannot satisfy the information requirements of a complex, multi cultural, richly diverse democratic state.

This is, actually, a no brainer but we need to think of it in a wider context than television and instead think about platform and user interface neutrality. There will always be a need for something like the Licence fee and, indeed, something like the BBC. There have been complaints from commercial companies that the BBC has exploited its dominant position by subsidising new media services; but the idea that the BBC's remit should be user interface specific is surely out-dated. If I have one complaint it is that the BBC, stacked as it is with Guardian readers, has made its new media PC/Apple specific and has more or less ignored the mobile phone which is the preferred means of communication of the 'bottom' 1/3 of the population which does not have domestic PC access.

Conversely, there is a fourth proposition:

Proposition 4: Regulation should not be invoked where the market works

On the basis of this principle, The BBC should not be using a flat tax to subsidise football or soap opera which the market can handle. As media become more platform neutral and global, the areas which the market cannot handle will decline in spite of the 'hotel effect' because there will always be a vibrant social entrepreneur sector; even in the UK there is a voluntary organisation for everything! The one area where I believe content regulation will survive is in impartial news, current affairs and documentaries which are a basic requirement for a functioning democracy. There is a subsidiary area for consideration which is whether regulation should be used to spark innovation in technology and content; I doubt it.

In summary of this point, then, we need to think less about a blanket 'rights' or regulatory stance and more about the purpose of the producer and the needs of the citizen.

Underpin Collective Values

Regulation should not be based on a whim or a minority preference, no matter how admirable. All regulation which abridges a legal right or obligation should be publicly discussed and the outcome transparently determined in line with publicly declared objects. The two classic cases are the analogue broadcasting watershed and the content diversity remit of public broadcasters. In the first case, the citizen requirement for the protection of children has to be balanced against the citizen requirement for adult content. The central question is whether regulators should intervene when citizens refuse to do so. It has been technologically possible since the mid 1970s to apply PIN technology to television access but the segments of society which are most thought to require protection are those which exercise least parental intervention; the middle class which calls for protection is precisely the population segment which does not need it. In the context of convergence, it is still possible to exercise the kind of content regulation exemplified by the watershed but this would be extremely complex and expensive and it would almost certainly mean putting current post 9pm television in the same category as pornography. Again, PIN technology utilised for accessing R18 material could be used for a wider variety of content, but is this inconvenience justified. There are no easy answers but the questions raise central issues for regulators.

At the heart of any discussion of what constitutes a reasonable citizen requirement we need to take on board the concept of peer group normativity. We all operate in a huge variety of peer groups, so, looked at from the regulatory point of view, we might be any or all of the following with our own peer group specification:

Citizens requiring objective information;
Children requiring educational material and safety;
Poor people on benefits;
Community leaders acting as intermediaries;
Genealogy hobbyists.

Here we are at the interface of what is required by the citizen and how to address the different purposes of information providers. The great virtue of peer normativity is that it can be quantified in terms of a threshold that makes certain provisions a regulatory requirement: as all citizens can vote, it is peer normative for all citizens to be able to receive impartial news and current affairs; if mobile phone market penetration reaches, for example, 60%, it is peer normative to be able to receive certain information via the mobile phone. At a much more microcosmic level, there are certain kinds of information which are peer normative for employee groups.

Optimise diversity

At first glance, collective public purpose and optimising diversity appear to be at odds but they are not. The use of a public purposes test is to establish the case for doing something whereas optimising diversity is an instance of implementing a collective public purpose, that of recognising equal citizenship regardless, say, of first language, religion, special interests or needs. There is a particular role for convergent multimedia to play here because providing for diversity is much easier and cheaper in the digital environment than in the analogue in such specific areas as:

Audio description;
Sub titling and signing;
Grammatical and lexicographic options;
Language choice.

This set of requirements leads to a fifth Proposition:

Proposition 5: That regulation should cover how as well as what content is delivered.

We are familiar in WAI [xiv] and the regulation of broadcasting special services that accessibility has become a regulatory issue but we need to add to this, the provision of simplified language and a multiplicity of language.

Note, however, the use of the word "optimise"; this means that:

Definition of Optimisation

The requirement to provide a service has to be balanced against its

Cost;

The capacity of the organisation; and

The likely uptake by consumers.

Require platform neutrality

We have already discussed platform neutrality as an emerging idea; and it needs to be part of our regulatory perspective. As I have noted, it is not enough for a universally funded BBC to provide its iPlayer service to people who have domestic PCs or Apples. A regulator might be justified, for example, in forcing the Government to communicate with its poorest citizens by mobile phone as well as PC.

Operate end-to-end

One of the more disastrous pieces of EU legislation with respect to the way citizens receive information was the 1999 RTTE Directive [xv] which de-regulated the design of hardware except in respect of health and safety requirements. What this means in practice is that the Communications Act 2003 can require broadcasters to make their programmes accessible but there is no regulatory mechanism to insist that user interfaces can decode the special services. We are now faced, for example, with compulsory digital switch over but no guarantee that blind and visually impaired people will be able to use the new electronic programme guides or access audio description.

As the distinction between hardware and software decreases - many operations which began as hardware are now run by software - regulators ought to become aware of the need for their operations to provide an end-to-end solution for citizens; this may require different intensities of regulation in the supply chain, for example broadcasters may need to supply a certain level of service whereas not all manufacturers need necessarily provide hardware to identically high specifications.

6. Regulatory Mechanisms

I now come to a discussion of a variety of regulatory mechanisms which are, in the nature of things, not as tidy as the principles which might govern their use.

I will deal in more or less detail with the following Regulatory Mechanisms:

Publisher, aggregator or distributor controls

The Largest single change in the regulatory mechanism in the next few years will be a switch from the concentration on the publisher or broadcaster to the aggregator or the ISP. It was grossly anachronistic of the recent Audiovisual Media Services Directive [xvi] to stick with the principle that regulatory requirements should be imposed on the originator of material because this will simply induce regulatory flight from medium to medium and even country to country. It will always be possible to exercise regulatory power if there is a substantial financial or legal lever and that is our clue because the place of the lever is where the supplier or carrier collects from the consumer. It is possible that a system could be established for us to settle our credit card bills in a rogue state but in the near future it will be possible for a degree of regulation to be exercised over distribution and payments systems in most countries.

There are two components to this proposal:

First, it is clear that ISPs will soon be the focal point for enforcing content regulation in respect of national security, criminal activity and child protection; and it is not much of an imposition to add accessibility and citizen requirements as long as the economic model is worked out (ISPs have already made a deal with music distributors).

Secondly, the major problem with regulating pornography is the payments system; if people are not paid they will not produce; so the clue here is to locate payments systems at a point in the supply chain that can be controlled. There will always be ways round this - like using gold bullion shipments - but governments have, latterly, been over acquiescent in the face of credit and charge card company complaints about over-regulation; as the regulatory regimes tighten, this is the time to focus on payments as well as content; but one key regulatory precondition is the establishment of robust, simple and traceable micropayments systems.

As they slipped past, let me list the areas where I think there will remain some form of content regulation by 2015:

National security;
Criminal offences;
Child protection;
Accessibility;
Citizen Requirements.

Must Carry requirements

The likeliest mechanism for preserving the impartial information system which oils our democratic wheels is some form of 'must carry' on the part of major information aggregators which, in turn, will generate a market for information producers. The problem here is not that information will not be available but that it will, invariably, be in the wrong places; there will be plenty of reliable news in niche channels but, without some form of regulation, none at all on the most popular channels. There is an argument that there should be no controls, that we do not need to insist that popular channels carry news; but I would argue that this can only hold good if, as a symmetrical measure, we make voting compulsory. If our news is in ghettos and a large part of our citizenship is ignorant of the country they live in we will not only lose social cohesion, governments will lose legitimacy in a global environment where much of their authority is already leaking away. "Must Carry" might be regulated according to aggregator turnover and might even be made more sophisticated to take account of demographics.

Universal Service

We are familiar with the use of universal service as a means of imposing obligations on an industrial sector so as to try to maintain a level playing field. This might be usefully linked with making certain provisions part of the conditions of licence. Almost everything of importance that we do is licensed, including: banking and financial services, telecommunications, broadcasting and the retailing of alcohol; the only large missing piece is the failure of Government to regulate or licence itself.

Determining ends and funding means;
Now here we reach the core principle of regulation in proposition 6:

Proposition 6: That the party that imposes the end must finance the means.

This looks like a simple principle but it has enormous regulatory implications because the tension in regulation is always based on the homely thought that there is nothing easier than spending somebody else's money! The chief culprit, of course, is Government that frequently abridges the legal requirement of companies to maximise shareholder value by imposing restrictions. We have already discussed the ways in which such restrictions might be justified. I have also just referred to the idea of making certain requirements conditions of granting a licence. this looks quite reasonable on the surface but we need to ask whether it is because, after all, we think that alleviating poverty is desirable but we do not solve this problem by forcing a price regime on grocers, even when the market is not working efficiently. The existence of a uniform requirement on all suppliers of a certain sort and size to create a level playing field makes the imposition less draconian; but we need to ask ourselves whether there should be such an imposition.

I should note in passing that the UK Governments imposition of digital television or, rather, its use of state power to switch off analogue television is a gross abuse of power whatever the economic arguments in its favour; but such a use of force to over ride the market will not be possible more than once in each generation.

7. Two Strategies

Finally, I want to outline two basic regulatory strategies for our consideration:

Corporate purpose.

I have already spent some time on the idea that regulation should depend on corporate purpose and this idea could be applied in national and multi national regulatory frameworks; we might, for instance, draw up a Regulatory Flow Chart:

In descending order of implementation

Governments;
Agencies funded by government;
Agencies operating on behalf of government;
Agencies operating under Government licences;
Agencies with universal remits.

The great virtue of this approach is that it would secure compliance for most of the larger information providers of interest to the majority of citizens and it would exempt the digital publishing of individuals and small groups that amount to digital private clubs.

Showing Exception

The alternative approach is to formulate general regulations from which organisations can claim a reasonable exception. This is nearer to the contemporary 'rights' approach but its major problem would be that the main infractors would almost certainly be Government which would break general rules without showing cause. Nonetheless, it makes regulatory sense to police exceptions rather than being expected to monitor compliance.

8. Conclusion

I realise that I have covered a very large area but if you were only to take one idea away it would be this:

Conclusion Proposition 7: That the future of digital content regulation in a converged environment depends critically on a grounded concept of legitimacy

Of course there will be regulation by dictators, elitists, do-gooders, fixers, busybodies and idealists of all kinds but, in the end, in a global converged market regulation will only be sustainable if people want it badly enough for good enough reasons. I suspect, if we consider this carefully, we will conclude that they don't want it all that badly and their reasons for wanting it are not all that good.

[i] Dawkins, Richard: The God Delusion: Bantam 2006, p223 ISBN-10: 0593055489, ISBN-13: 978-0593055489

[ii] Bentham, Jeremy (1748-1832): The Theory of Legislation (1802)

[iii] Bernstein, Eduard: Die Voraussetzungen des Sozialismus und die Aufgaben der Sozialdemokratie, Stuttgart 1899. First published in English under the title Evolutionary Socialism in 1907 by the Independent Labour Party.

[iv] Keynes, John Maynard: (1936) The General Theory of Employment, Interest and Money, London: Macmillan (reprinted 2007)

[v] Friedman, Milton: (2002-11-15). Capitalism and Freedom. University of Chicago Press. ISBN 0226264211.

[vi] CATECHISM OF THE CATHOLIC CHURCH - Latin text copyright (c) Libreria Editrice Vaticana, Citta del Vaticano 1993, part 3, section 1, chapter 1, Article 8, Sin. http://www.vatican.va/archive/ENG0015/_INDEX.HTM

[vii] Dilnott, Andrew: christianity and economics: Borderlands Issue 5, Summer 2006

[viii] ‘Veil of Ignorance' Rawls, John: 1999, A Theory of Justice, Harvard University Press 2005 [original published 1971] ISBN 0674017722, 9780674017726

[ix] This is a classic case of a Government glossing a piece of legislation. There is no reference in the Communications Act 2003 to ‘light touch' regulation.

[x] O'Neil, Onora: A Question of Trust (the 2002 Reith Lectures) Cambridge University press (ISBN-13: 9780521529969 | ISBN-10: 0521529964)

[xi] http://www.stereolithography.com/

[xii] Broadband & Disability; humanITy Paper Sponsored by BT in association with Ability Magazine and e-Access Bulletin; September 2006

[xiii] The Case for Server Side Digital Information Applications with particular reference to ‘Voice Out'; humanITy Report for ReadSpeaker UK Ltd; May 2007; http://www.readspeaker.com

[xiv] Web Accessibility Initiative (WAI) http://www.w3.org/WAI/

[xv] Radio and Telecommunications Terminal Equipment (R&TTE) http://ec.europa.eu/enterprise/rtte/dir99-5.htm

[xvi] (AVMSD) Audiovisual Media Services Directive http://ec.europa.eu/avpolicy/reg/avms/index_en.htm

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