By Patrick Ross
November 16, 2005

Regulators across the pond are drafting rules that would extend regulations for European broadcasters and satellite operators to new media outlets, primarily the Internet. The European Commission seems not to recognize the inherent impossibility of applying rules as disparate as local content quotas and limits on advertising times to a network transmitted by broadband across the global Internet. The process at hand, however, brings to the fore a critical question - to what extent are regulations on traditional (or as Europeans say, "linear") services still relevant when consumers are enjoying equivalent entertainment right through their Internet connections? It's conceivable this process, taken to its natural conclusion, could lead to less burdensome rules on European video satellite providers, and more competition for the European video consumer.

European Union Information Society and Media Commissioner Viviane Reding has taken it upon herself to update the 1980's-vintage Television Without Frontiers directive to reflect the digital era. "Our current and future action in the audio-visual area is strongly influenced by convergence at the level of networks, services and devices, made possible by digital technology," she explains. When the BBC is experimenting with a broadband-only channel, there is obvious logic in revisiting rules from an earlier era. Reding also strikes the right tone. "From an economic perspective, we are confronted by a high pace of development of new actors in the value chain, the creative destruction of established positions and changing consumption modes."

It's welcome to see a public official mention creative destruction, and cite the Patron Saint of digital convergence, the late Austrian economist Joseph Schumpeter. Schumpeter taught us that entrepreneurial innovation disrupts the economic flow and forces changes in the way business is done. In turn, this leads to outdated regulatory models. This would seem, in the context of Television Without Frontiers, to invite a scaling back of existing regulations, in recognition of new competitors.

However, draft language of the new directive actually extends many existing regulations for "linear" services to "non-linear" services such as webcasting. The draft aims to achieve regulatory parity by regulating up, not deregulating down. Nearly 200 European companies and trade groups filed comments objecting to at least some of the proposed new rules. The European ISP Association was representative of those comments. It found "the absence of any real justification for the extension of scope of a revised TVWF Directive ... disconcerting," and said "there is widespread unrest about a possible extension of the scope of broadcasting regulation to audiovisual content delivered via the Internet ... EuroISPA fully supports the promotion of competition in the online sector, but believes that the approach reflected in the Issue Papers will impose barriers to market entry and innovation."

The European Commission has been told loudly and clearly that extending linear service rules to non-linear services will stifle innovation, harm consumers and be all but impossible to implement. Given Reding's pro-market language, one hopes that by the end of the year, when she sends a draft directive to the European Parliament, this misguided regulatory creep will have been replaced by a free-market model.

Reding is correct when she says the digital era's creative destruction calls for a new regulatory model. The question will be, does the European Commission take the next logical step and allow satellite and terrestrial broadcasters to compete with new media unencumbered by restrictive regulations? BSkyB CEO James Murdoch certainly hopes so. "A lessening of TV content regulation seems inevitable," he wrote in a Financial Times op-ed in September. Dismissing the extension of regulations to new media as "for the birds," he called for deregulation: "A totally new approach that recognizes the on-demand world is needed." If Murdoch's dream is realized, then the European Commission will be unleashing a new wave of competition in the European media market, benefiting video providers, content producers, investors, and most importantly, consumers.

The European Commission would also be creating a model for its peers across the pond on Capitol Hill and at the Federal Communications Commission. We've seen recently that both bodies have shown an inclination to regulate up, not down, at least when social policy is at stake. Before the House and Senate could clear legislation mandating emergency alert service for digital radio and DBS, the FCC issued the mandate without formal congressional authorization. It's hard to argue against emergency alert services, but the unilateral FCC action that disregards the possibility of a self-regulatory model suggests an inclination to extend regulations of one industry onto another. This sort of approach should on any continent be "for the birds," and not "birds" as in satellites.

Patrick Ross is vice president for communications and external affairs with The Progress & Freedom Foundation. He spent several years as an investigative reporter after working as a legislative aide in the U.S. Senate.

Reprinted with Permission.