3.10

The delivery of content, mostly as video, over broadband is one of the key drivers of demand for broadband over fixed lines and by wireless. The days of FMS (fixed-mobile-substitution) are already history as content can now be delivered to multiple devices, from Internet high definition ‘connected TVs’ to handheld mobile devices of all kinds.

This is both a challenge and an opportunity for telecom companies who mostly own the networks. By caching content at vantage points within their networks they can become wholesale content distribution networks (CDNs) offering content service providers a guaranteed quality of service that may not be available over the Internet. Their billing relationship with customers and their knowledge of the local market are competitive advantages to them. They can also deliver their own content and applications, but content creation and applications innovation is not the traditional core competency of telecom companies.

Regulators on the other hand face more of a challenge than an opportunity, apart from an opportunity to get it right. It is to be expected that telecom companies baulk at the idea of content service providers, independent CDNs or Internet access providers by-passing their networks by going Over-The-Top (OTT). The only gain for the telecom company is that this drives the demand for broadband and for higher speeds, for which they can charge customers a fee. But against that they fear to lose revenues, especially from traditional voice and SMS services for which OTT provide substitutes. How should regulators react to the lobbying of telecom companies wanting to preserve their traditional core business? The net neutrality debate in part already addresses this question, with the consensus of non-carrier content providers being predictably against the right of telecom companies to block or throttle or degrade content services which are not their own. This is also likely the position favoured by most consumers.

The Challenge for Regulators

The challenge for policy makers and regulators is really twofold. How to ensure that there will be sufficient investment in networks to maintain a steady level of innovation and upgrade in broadband for society, and what laws and regulations to apply. The first challenge is best addressed through opening the market to new entrants who are willing to invest in networks. The fear that network owners will not be able to earn a sufficient rate of return on their investment is really a fear that they will not be sufficiently adept and flexible in the market to find new business models that work. Protection of incumbents is the guaranteed way to make this fear real as rent seeking replaces competition.

The second challenge is actually the greater one. Pre-dating the Internet was cable TV as an alternative to free-to-air (FTA) and Pay-TV broadcasting. The problem for regulators was that cable was a wired-based medium and not a radio-based medium like broadcasting, so it was close to being a carrier, and indeed could be adapted to carry telephony and when upgraded to digital to providing Internet access. It also became a competitor to IPTV provided by carriers. In different jurisdictions it was handled in different ways. In the US, where cable, like the Internet, really started, the Communications Act of 1934 applied to carriers and broadcasters under different parts of the law leaning heavily on the fixed line and radio distinction, so the powers of the regulator over cable became a question of legal interpretation for the courts. The courts decided that the law gave the regulator “ancillary” powers to protect broadcasting and so cable regulations were mostly derived from the impact cable would have on broadcasting, for example, threatening its advertising revenues.

In one case the court went further and upheld the FCC’s requirement that cable operators should contribute to local content production through “mandatory origination” to achieve public service goals not being adequately fulfilled by the broadcasters. A change of stance by the FCC in 1976 repealed this requirement and replaced it by a new “access” requirement whereby cable operators had to provide equal access to public, educational and government services and to lease capacity to unaffiliated third parties. After some legal wrangling, these conditions were embodied in the 1984 Cable Act.*

As in the USA, protection of FTA broadcasters was the initial reaction of the regulator in Hong Kong to as independent new entrant to broadcasting.

In 1988 a company was formed to launch Star TV, a regional satellite TV broadcasting service out of Hong Kong. Viewers could receive the signals through a C-band dish attached to a cable distribution system. Before a broadcasting licence could be issued Star TV was challenged by the Broadcasting Authority (BA) to prove that it would not compete directly with local free-to-air broadcasters ATV and TVB and would not diminish their share of the market and their advertising revenues. Star TV had to reassure the BA that its target market was regional, not Hong Kong, and it would not be broadcasting in Cantonese, the local majority Chinese language of Hong Kong. On this basis Star TV was allowed to start regional operations in 1991.

The same line of reasoning was used in Hong Kong in the early 1990s as in the US with the regulation of cable TV. Government had licensed FTA broadcasters to provide programmes 

for a mass public TV audience and regulations were designed to protect them. But technologies rapidly outdated this regulatory stance. First came a licence for Wharf Cable TV which, being a subscription service, was seen as less of a direct competitor to FTA. Then the incumbent carrier, Hong Kong Telecom (HKT) was permitted to launch a Video-on-Demand service again as a subscription service. This faltered, but was successfully resurrected in the 2000s as NOW TV, an IPTV service using DSL broadband. At the same time a new entrant Hong Kong Broadband was licensed to launch a web-based TV service. The 2000s then witnessed the rapid development of video content over broadband wireless access (BWA) using 3G and more recently 4G and WiFI to smartphones and tablets. The latest twist to the story is that with the shift to digital TV the FTA market is now being opened up, although not before an unsuccessful legal challenge by the larger of the two FTA broadcasters.

The telecom and broadcasting regulators have been merged into the Office of the Communications Authority (OFCA) and the cross-overs between OTA and over cable, over broadband, over BWA and over the Web to multiple receiving devices have transformed the market out of all recognition. In just two decades the challenge of regulating content over broadband makes the policies and regulations of the early 1990s seem like another era altogether.

As a consequence the Broadcasting Ordinance has been revised, with the distinctions between technology means of delivery fading into the background, the key distinctions now being whether the broadcast is free or subscription, and whether designed for a domestic or a non-domestic audience as these are the criteria that most closely reflect the impact of TV on Hong Kong society. Where the broadcast or the distribution originates in Hong Kong these services require a licence and the Ordinance tries to protect licensed services by outlawing a class of decoders designed to break the encryption of signals, but this is another area in which technologies make the law difficult to apply in a comprehensive manner. And with more OTT content becoming available, even decoders tend to become part of history.

Other forms of regulatory oversight include ownership restrictions on disqualified persons or parties, cross-ownership restrictions to maintain competition and diversity of programming and opinion, separations accounting between affiliated companies, and codes of practice to restrict undesirable content or content at inappropriate times of broadcast. Licencees are prohibited from broadcasting content that is likely to “(a) incite hatred against any group of persons, being a group defined by reference to colour, race, sex, religion, nationality or ethnic or national origins; (b) result in a general breakdown in law and order; or (c) gravely damage public health or morals.” The Ordinance provides for an appeals process and the courts of law rather than the regulator to be the ultimate arbiter.

BOX 3.11
Star TV in Hong Kong, SAR (China)

Broadband and the Internet now pose similar challenges to those thrown up by cable TV for the FCC. In the US the Internet had been treated by the FCC not as a carrier service but as an information service. However, in April 2010, in the case of Comcast Corp. v. FCC, the United States Court of Appeals for the District of Columbia decided that the FCC does not have ancillary jurisdiction over Comcast's Internet service under the language of the Communications Act of 1934, as amended.  (See Module 3.7.1). The FCC has also traditionally defined other substitutes for carrier services, such as VoIP, as “enhanced” services and therefore not subject to the same regulations as “basic” services. But these definitions are really driven by their implications. A decision to encourage innovation and allow a new service to flourish is served when the service is treated as unregulated or regulated very lightly. The problem with defining according to traditional “basic” and “enhanced” or “value-added” is that all telecom services are “value-added” including voice, because without the transmission mechanism there would be no communication. And if it were not adding value then no one would pay for it. The shift in regulatory perspective in recent years has been away from these technologically-differentiated definitions, which really have no objective basis to them, and towards technology-neutral and economic regulation.

As with cable TV, Internet-based services cut across the technological separations of carriers and broadcasters, including the fixed-wireless divide. But there is another separation that has become increasingly blurred, the one between apps and content. The spread of P2P communications using web-based applications, such as ‘torrents’, means for example, it is possible to download different parts of a movie or video from many different servers over a period of hours, or within minutes with fast enough broadband. Downloading a health check app similarly provides the user with health care content, or an education app allows a user to access education content and so on.

Most of these apps and the content they provide access to are provided by third parties. They can be delivered by third parties. They are part of a vibrant digital economy. But they can represent a challenge to the social norms and culture of a society and sometimes a security risk. For example, in May 2013 an Internet posting in the USA provided a video of a gun made from plastic by a 3D printer which was rendered legal under the Undetectable Firearms Act of 1988 by having a piece of steel inserted into the body of the gun to make it evident to a metal detector.* The State Department demanded temporary take-down due to a possible breach of the International Traffic in Arms Regulations, but this may not apply to the Internet if it is judged by the courts to be a “library” of information.

What Lessons?

Whatever the outcome of this particular case it is a good illustration of the many new challenges to policy and regulation that content via the Internet throws up. So what lessons can be drawn? The first is that in an interconnected world in which content can go viral within minutes, and in which proxy servers can be used to by-pass national restrictions, the law may not be a very effective means to control content. The second is that, rather like the war on drugs, the most effective interventions are likely to be at the user end. At the benign end of the scale are awareness and alertness campaigns and the use of Internet filtering apps by parents and guardians to protect children.

At the other end of the scale is the use of the law. For example, it may be impossible to prevent the uploading of child pornography somewhere in the world but cyber-detection and law enforcement can identify users and break-up the crime rings that supply them. However when the law is being used, the principle of proportionality is important and this is mostly to be judged in terms of two factors: whether the intent itself was criminal or not and the social impact of the infringements weighed against the rights of the individual of freedom of access to the Internet.

  • 3.10.1 Freedom of Opinions and Expression

    In 2012 the United Nations General Assembly accepted a report from its Human Rights Council that, among other things, 

    Affirms that the same rights that people have offline must also be protected online, in particular freedom of expression, which is applicable regardless of frontiers and through any media of one’s choice, in accordance with articles 19 of the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights;*

    The Universal Declaration of Human Rights is a statement of human design. Societies make choices, and the recognition of a ‘human right’ as a universal principle is an inherent part of a democratic tradition whatever form it takes. The idea of a ‘human right’ hinges on the fact that people will naturally demand it when they have the opportunity. While it cannot be said that everyone in the world agrees on democracy and human rights, what can be asserted with good reason is that global forces for change such as interconnected broadband and the Internet, which can do so much to alleviate poverty, illiteracy, poor health and other social ills and so much to improve the overall wellbeing of society, are not compatible with too many restrictions on the freedom of expression, and not at all with the efforts to restrict the freedom of thought.

    It is important to stress these points as a guideline, because the challenges are very real. Getting the balance right between freedom of expression and freedom to access and to use the Internet on the one hand, and protecting society from serious problems is never going to be an easy one to achieve, nor if achieved will it remain in balance forever. What the UN Declaration of Human Rights provides is a good reality check on proportionality, on what that balance should look like.

    No society can be absolutely safe, no society can be absolutely free, but every society can be resilient if the great majority of people are convinced of the goals. Different societies have different priorities, different needs, enjoy different cultural traditions, and the resilience of every society will be determined by how far they can adjust to these global changes. The role of the Internet in giving ordinary people a voice cannot be over-estimated and regulators have an important role to play one way or the other. Social media in particular represents a genuine opportunity for user-generated news and analysis and is having repercussions throughout the world.

    But there are clouds on the horizon as every action causes a reaction. At the highest levels there are serious debates about Internet governance and what should be the respective roles of governments and civil society. This has become a controversial issue among member states of the ITU for example, where some members argue a need for greater state involvement  and others see this as a dangerous way to rein-in freedoms on the Internet. There are also pressures on social media organizations to exercise some degree of editorial control over what appears on their sites. In some cases this is really about content that may be considered extreme and harmful to society, such as the spreading of race or religious hatred or homophobia or gratuitous violence. In other cases it may be about clamping down on freedoms of expression and information. For example, at times in during the Arab Spring in some countries the regulator closed down mobile networks and occasionally the Internet also became unavailable. In emergencies such extreme actions might reduce the immediate likelihood of violence, or they might be an act in a political conflict that only exacerbates tension. The cost of such actions is to reduce transparency and the free flow of information.

    Policy makers and regulators should therefore bear two things in mind. First, what are the social consequences and implications of taking or not taking action and is this better left up to the courts of law. Second, are the actions being proposed designed to strengthen and safeguard social freedoms, or simply to serve and protect vested interests.

  • 3.10.2 Regulating Specific Forms of Content

    As the case of Hong Kong illustrates, the old distinctions between content and content channels is breaking down. Under the traditional approach, regulators would rightly see FTA broadcasting as having the greatest social impact and therefore the regulation of content considered inappropriate was more strictly applied. Subscription channels reached smaller audiences of self-selected viewers, and in the early days of the Internet receiving content online was limited to highly specialised users. Those distinctions are rapidly losing their validity. People of all ages can access virtually any content over the Internet, some of it highly disturbing, using a mobile phone.

    In a sense, all channels are equal, it’s just that some are more equal than others. Most families have TVs, and most individuals have mobile devices. In some countries broadband is widely available, in others not, but it is only a question of time and the availability of high speed broadband is the driver of these content channels. The supply of content is also becoming diversified as never before, from the big movie makers and the TV in-house productions, to the professional and the amateur videos on You Tube, to local content providers trying to become a business, to content on social media networks, to downloaded P2P content. There are no all-embracing standards for rating this cornucopia of content. Some regulators, for example in Singapore, are suggesting a code of practice by which content providers such as Internet access providers like Yahoo! will not only commit to making local content but will rate it appropriately for audience guidance.

    This does inevitably raise the issue of a more libertarian approach to regulation. Exposure to family shows on TV which openly discuss issues of sexuality, mortality, and similar ‘adult’ themes has been a factor in changing social attitudes, and it may not be the attitudes of the young that are changing because their attitudes are already conditioned by the technologies and the social discourse of their peers around them. It is rather the attitudes of older generations that are being challenged to change with the times, the generations to which most policy makers and regulators themselves belong, and seeing things through futuristic  eyes is not always easy. The point here is that it may become impossible, despite regulations, to shield society from  exposure to all sorts of challenging content. Society itself has to adjust to this by becoming more resilient to these challenges, and more self-confident is meeting them. This starts with home and family and school and college environments, and regulators will perhaps need to shift their perspectives from trying to regulate what cannot be regulated to engaging more closely with all stakeholders, from providers to users, to support society in managing these challenges.

    Child Safety

    Of particular concern to all stakeholders of the Internet is the safety of children: in particular safety from inappropriate content, from child abuse and the dangers of sexual predators and from trafficking. There are two aspects that should be noted with particular care: online behaviour and dangerous websites. In 2010 the ITU also launched a Child Online Protection (COP) initiative, including the allocation of number 116111 for help lines,* and issued a Guideline for Policy Makers for Child Online Protection*

    The reality is that infants below the age of five can now readily use the Internet and laws and regulations will not prevent predators, nor prevent children being able to access unsuitable material,* which means that at a large part of the focus must be on helping parents and guardians how to educate the children in their care to conduct and protect themselves online. Regulators also need to be aware, as ICANN has pointed out, of unscrupulous ‘fast flux hosting’ whereby “operators automate domain name service updates to hide the location of web sites where illegal activities – IP Piracy (music, videos, games), hosting of child pornography, hosting of phishing systems, sales of illegal pharmaceuticals, and execution of identity theft and fraud – are performed.”*  Children can very innocently find them themselves in a completely wrong environment.

  • 3.10.3 Intellectual Property Rights

    Intellectual property (IP), copyright in particular, is always an issue for Internet companies, especially in an era of user-generated content and content going viral. For example, take-down notices are difficult to enforce. The World Intellectual Property Organization (WIPO) has put in place rules addressing interoperability, a key principle behind Internet neutrality, through the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. The guidelines are, however, only related and limited to the prohibition of the circumvention of certain technological measures to gain access to protected digital works.* Regulators and Internet companies are grappling with appropriate and effective codes of practice with regard to safe use, copyright infringements, hate content, child pornography, libel, and so on. The only effective way forward is if there is industry agreement, but often the debate becomes infused with political, social, religious and cultural deliberations which can result in unrealistic solutions.

    IP issues always put policy-makers and regulators under pressure from lobby groups, and there exists a panoply of trade agreements that commit signatory countries to protect patents, trademarks, copyright, designs and geographical indicators for country of origin, ranging from the World Trade Agreement (WTO) which administers the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) under the auspices of the World Intellectual Property Organization (WIPO) to multilateral (MTAs) and bilateral treaty agreements (BTAs) and Free Trade Agreements (FTAs).These agreements need to take into account the very different stages of economic development and administrative capacity of the countries involved. For example, the context of the 2008 Economic Partnership Agreement between the CARIFORUM Latin American states and the European Community, given in Article 131 includes the sentence:

    [The Parties] recognize that the protection and enforcement of intellectual property plays a key role in fostering creativity, innovation and competitiveness, and are determined to ensure increasing levels of protection appropriate to their levels of development.*

    The reference to “appropriate to their levels of development” is telling for a number of reasons. Take software piracy as an example. Although more and more countries are developing a capability in software development, the economies of scale that are required to make operating systems and utility programmes commercially valid act as a brake on less developed countries. Because the price of imported software can be high relative to personal incomes in these countries the incentive for many users is to use pirated copies. Although officially frowned upon it is nevertheless widely recognized that it can be a way to kick-start an ICT market in low-income country. It is interesting to note that as China has reached an advanced stage in writing software coding, Chinese developers are among the strongest advocates of IPRs within China.* The same pattern of development can be expected in other countries and in other economic sectors.

    Policy makers and regulators are undoubtedly under pressure to enter trade agreements to gain access to major markets, and as further rounds of WTO negotiations have faltered in recent years an increasing number of FTAs and BTAs have emerged, including the Trans-Pacific Partnership (TPP) initiative led by the USA.* Many contain IPR provisions which are controversial because the countries owning most IP are the wealthier nations, and economists are divided on how far IPR issues should be part of trade negotiations. These are, by definition, issues of political economy. The business of trade negotiators and policy makers is to find mutually-beneficial workable compromises, but it is important in market-oriented economies that regulators remain as far as possible neutral and honest brokers for the ICT industries under their authority.

    Regulation and IPRs

    In the ICT sector, as in other industries such as pharmaceuticals, IPRs have become a battle ground for companies in fierce competition with each other over issues such as ownership of algorithms to trade-mark designs. Whereas disputes between companies are usually civil law cases, under Article 61 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) signatory countries are required to establish criminal laws to cover cases of "willful trademark counterfeiting or copyright piracy on a commercial scale". However, often individuals can get caught up in criminal cases, and once again it is important for the sake of equity and practicality to exercise proportionality when applying the law.

    One approach to online copyright violations has been the “three strikes” approach whereby the regulator issues two warnings and then applies a penalty, such as broadband disconnection, a fine or referral to a law court. France introduced a “three strikes” law in 2010 and by September 2012 the High Authority for the Distribution of Works and Protection of Rights on the Internet (HADOPI) had issued over 1.1 million first warnings, of which 9% were followed by second warnings of which 0.3% (14 cases) were taken to court.In the first case to be heard the court imposed a fine. But critics see a danger of over-reaction to downloading when it is technologically difficult to stop, and complain that by making it a criminal rather than a civil offence public resources are used to protect private, mostly corporate, property rights. The counter-arguments include the economic impact copyright theft can have upon local content, such as a local movie industry, and theft is theft even though digital theft unlike physical theft may not deprive the owner of the original asset. As always, the arguments will be influenced by the questions of intent and proportionality and effectiveness.*

    Other innovate approaches have been tried. For example, Google decided to offer copyright holders who could prove their content had been illegally posted on You Tube one of three options: to take down, to keep up with acknowledgement, to keep up and share in advertising revenue associated with visitors viewing the content. Needless to say, this last option has proved popular and in some cases profitable. Regulators might consider encouraging other win-win approaches. 

    Regulation and Openness

    The basis of accountability is transparency. This is true of government and of the private sector. One of many initiatives to improve the level of transparency and openness is the OECD-backed Global Privacy Enforcement Network ("GPEN"), a global network of privacy enforcement authorities working together to protect the privacy rights of individuals. In May 2013, for example, GPEB organized an Internet Privacy Sweep ("the Sweep") by 19 participating authorities. The capacity of regulators to carry out industry and market research of this nature is often limited in developing countries, but to develop such capacity is a move in the right direction as it can only lead to better informed public policy.

    Another good example of openness is the decision of UNESCO to make its digital publications free for anyone to download under a worldwide open license.UNESCO was the first member of the United Nations to adopt such an Open Access policy for its publications. In 2010 The World Bank announced it will offer free access to more than 2,000 financial, business, health, economic and human development statistics that had mostly been available only to paying subscribers.* This sets an important principle that publically-funded data collection, research and publication should be made freely-available, subject only to certain confidentiality rules. In lower income countries policy-makers and regulators will certainly benefit from having this added source available to make more informed decisions, and it follows an important trend in education by some of the world’s leading universities to place their course materials online free of charge.* The World Bank is also supporting local open data Initiatives to make government data more open and online, for example the LGU Research Project in the Philippines.*

    Regulators would do well to examine their own websites and databases to judge how transparent they are to their own public. A better informed public will be able to provide regulators with better informed feedback which in turn will make regulation more responsive and more effective.