Will IPTV Kill the Television Star?

Already, YouTube has conquered your PC and mobile. However, what happens if YouTube conquers your living room, too — and in high-definition television quality? With IPTV (Internet protocol television), that is possible, and the race to see who will be best-positioned in the digital living room of the future has already started. IPTV is being called the “fourth TV broadcasting channel,” after satellite, cable and terrestrial broadcasting.

What is so interesting about this technology is that IPTV provides the potential for interactive TV not possible with traditional broadcast television, along with the true high-definition quality you do not see with typical Internet streaming. Also, network operators can offer their customers one-stop-shopping for Internet access and television as well as landline and mobile telephone services, and thereby become the customer’s sole communication link.

So far, the competition to see who gets there first mainly concerns hardware and cable providers. For example, Microsoft and Sony both provide game devices that can be used as a set-top boxes for television reception and allow video download. Also, phone companies like Verizon and AT&T have invested heavily in new broadband infrastructure in order to compete for TV customers.

Calling for Regulations

Still, this concerns the content industry just as well. IPTV will allow an immense increase in new TV programs and formats, and established TV broadcasters may fear their return on investment will decrease heavily once programs become more and more fragmented.

It is therefore no wonder that some television broadcasters are calling for regulations of IPTV. Their point: Once television provided over the Internet becomes a real substitute for traditional television, there is no argument as to why traditional broadcasters should be more regulated than IPTV providers.

Today, 68 percent of IPTV subscribers are located in Europe, 28 percent in Asia and only 8 percent in North America, Eastern Europe, the Middle East and North Africa combined. It seems logical that this is why Europe has been the first to address the issue of regulating IPTV.

The European Directive

On Nov. 29, the European Parliament formally approved the new “Audiovisual Media Services Without Frontiers Directive.” The aim of the directive is to provide a new framework for Europe’s providers of TV and TV-like services and create a level playing field for all companies that offer audiovisual services regardless of the technology used to deliver them. The European Member States were given 24 months to transpose the new provisions into national law so that the modernized legal framework for audiovisual business could come into force by the end of 2009.

What is new is that the directive explicitly covers not only near-video-on-demand (as a linear service), but also video-on-demand offerings (as a nonlinear service). To this end, the directive defines the term “audiovisual media service” in a broad sense to mean a service which is under the responsibility of a media service provider, and the principal purpose of which is the provision of programs in order to inform, entertain or educate, to the general public by electronic communication networks.

The media service provider in this context is anyone who has editorial responsibility for the choice of the audiovisual content and determines the manner in which it is organized. Concerning existing on-demand services, the provision of a catalog suffices to qualify as having editorial responsibility.

Excluded Companies

This being said, companies who merely transmit programs for which the editorial responsibility lies with third parties are excluded from this definition, as well as activities that are primarily noneconomic and which are not in competition with television broadcasting — such as private Web sites and services consisting of the provision or distribution of audiovisual content generated by private users for the purposes of sharing and exchange within communities of interest. Hence, sites such as YouTube, for example, are not subject to the directive.

In addition, the directive assumes that the service is intended for reception by — and which could have a clear impact on — a significant proportion of the general public. Therefore, smaller providers of audiovisual services are not covered.

The crucial question, of course, is what constitutes a significant proportion? In Germany, for example, the legislator is currently considering a threshold of 500 users, which is rather minimal.

Key Issues

The directive provides for a basic tier of coordinated rules that apply to both linear and nonlinear services. This concerns, in particular, rules on commercial communication, sponsoring and product placement. The directive emphasizes that this kind of advertising may in no way influence the content or the scheduling of television broadcasts.

Also, the viewer has to be informed when there is sponsorship or product placement. Advertising is not permitted for tobacco products, but may be allowed, under certain circumstances, for alcoholic beverages, medicinal products or medical treatments. Apart from these coordinated rules, there is a set of rules for on-demand services. These concern issues involving the protection of minors, as well as production and access to a certain share of European works where practical.

The majority of the regulations concern providers of so-called linear services, i.e. audiovisual services provided for simultaneous viewing of scheduled programs (including near-video-on-demand). These rules contain a more stringent set of provisions for television advertising and tele-shopping, protection of minors in television broadcasting, and also deal with the access to exclusive events as well as with the promotion and distribution of a certain proportion of European works.

A Hindrance for Some?

In general, it seems logical for the European legislation to apply rules to television-like services in so far as these services compete with traditional broadcasting. There is no argument as to why editorial content provided via a different platform should be treated differently. Also, the provisions now applicable to video-on-demand services do not really come as a surprise (putting aside the duty to provide for a share of European works “where practical,” which is a bit odd). In fact, similar rules — at least in Germany — already existed. In particular, the duty to keep editorial content separate from advertising is a long-established rule for any kind of mass media.

This being said, the new directive may be a hindrance for smaller service providers. The directive does not clearly define what is meant by a “significant proportion of the general public” and the German proposal of 500 users shows that national legislators may use this unspecified term to even regulate services, which do not really have an impact on the general public. This is cumbersome, because in Germany, this means that even small service providers have to apply for an authorization from the state authorities with all the costs involved.

This is not justified, considering that historically broadcasting licenses where only deemed to be necessary because of limited frequencies and in order to guarantee diversity of opinions. The first reason probably no longer is an argument; the second reason should not require a threshold below 10 percent market share, considering that under current law, this is the kind of market share where TV broadcasters are required to provide airtime for independent third parties.

Sibylle Gierschmann is a partner in the intellectual property practice group of Taylor Wessing in Munich, Germany.

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