“Mobile groups threatened with bandwidth auction,” O’Doherty, H., www.FT.com, 13 February 2009.
 “Ofcom ultimatum over broadband access on mobile phones,” Mostrous, A., www.timesonline.co.uk, 14 February 2009.
 “Questions over UK mobile broadband plans,” Wood, N., www.totaltele.com, 30 January 2009.
Digital broadcasting networks: Television and radio
The digital television switchover programme is underway and due to be completed in 2012. Instead of looking at any new developments, the Report primarily highlights what it sees as “transferable lessons” from this sector. It cites the importance of strategic direction from the Government and regulator combined with the role of the market in providing innovation and new services. The Report’s glowing review of this area is clear that this is a model that it would like to see followed through the development of broadband at the very least, if not the development of the digital economy as a whole. Indeed the rhetoric of the balance between the operation of the market and regulatory controls, content driven take-up, and the near-universal availability of choice and diversity has clearly been transferred into the mass-penetration broadband debate. The transfer of the same level of success may well prove harder to come by.
The Report takes a different approach with regard to radio as it is at a much earlier stage of working towards digital switchover. While it does describe the UK as a world leader in development and take-up of digital radio it suggests that a slower transition is necessary. The coexistence of analogue and digital transmissions is anticipated for some time to come. First, because there is no interference between the two, which would limit roll-out and secondly, because of its intrinsic relationship with the motor industry. As most cars have radios, the replacement cycle of those cars and/or the costs of re-fitting them with updated DAB radios would have to be taken into account in any switchover plans.
The Report does nevertheless view DAB as being the medium of consumer choice and suggests that the Government issues a clear policy commitment to enable DAB to be the primary distribution network for radio. However, it notes that while the Government and Ofcom have a key role to play, so too do the radio industry and manufacturers. There is a clear need to increase appeal to consumers through innovation in services while manufacturers should be encouraged to integrate DAB into new devices. Indeed, the Report goes so far as to suggest that a number of Government initiatives for driving the migration to digital will in fact be “in exchange for a clear plan from industry.” The proposed creation of a Digital Radio Delivery Group will bring together representatives of many of the interested stakeholders in a role to increase the attractiveness, availability and affordability of DAB. Given that this is a Report that seems heavy with proposals for forming new groups and initiating further reviews this has perhaps not surprisingly been met with scepticism in some quarters. That may be justifiable in some respects, but similar bodies undoubtedly played a key role in the drive towards digital television migration and Digital UK continues to be an organisation that is integral to this today.
As part of the planning for the digital future, the Report also rejects proposals for further extension of analogue and multiplex licenses, unless forming part of a compelling digital plan. The Report goes on to set out the criteria for when the Government should countenance digital radio switchover. It believes that this should only occur once 50% of radio listening is digital, national DAB coverage is similar to FM coverage and local DAB reaches 90% of the population and all major roads. The Report itself indicates that subject to major industry initiatives the necessary coverage is unlikely to be achieved before 2015. To put this further into perspective, reportedly digital radio currently only accounts for 18.3% of all radio listening. However, it is of interest that the Report places so much emphasis on DAB radio. Internet based radio listening has received little attention in the Report despite itself being on the increase. While this may still account for a small proportion, DAB is also not that widespread, and an approach to digital switchover that more clearly addressed both platforms may have been both more realistic and more helpful in driving the migration forwards. As it stands at the moment, what is clear is that there is still some way to go in working towards a viable date for the switchover of digital radio.
 Supra n1, pg 33
 “Digital Britain: Government to make DAB ‘primary network’ for radio,” Plunkett, J., www.guardian.co.uk, 29 January 2009.
Economics of digital content
The Report highlights four commercial challenges that must be dealt with in order to maintain an appropriate content market in the digital future:
- If digital distribution and copying costs are lower, so too are the revenues and new business models may be required to take account of this. The role of regulation is not to preserve old and unsustainable business models.
- The rapid growth of digital outlets where content is perceived to be free (funded by advertising rather than paid for by the consumer) has led to an increase in the volume of advertising and conversely a reduction in price.
- Convergence has allowed bundles packages of content and services. However this depends on wholesale access to important content to increase the range of bundles tailored to consumer preferences.
- The ease of copying and distribution has also dramatically increased the scope for unlicensed and illegal copying. Counter-piracy measures and rights management are important but new methods of legitimate access are crucial to reduce this.
The Report is particularly concerned with identifying suitable models or mechanisms for funding quality digital content. The creation of new content has historically been driven by advertising revenues and as this starts to ebb away there is a need to search for alternatives. This is not simply down to the current economic climate, but rather due to the fact that as there are so many more avenues available for advertising the revenue per any single avenue has fallen. Where that avenue has traditionally been funded through that revenue it is now tending to see a shortfall as the total revenue becomes even more fragmented across the whole market over time.
The Report has been commended for its focus here as, despite the significant contribution of the creative industries to the British economy, this debate has otherwise tended to be overshadowed by areas of more obvious and immediate interest to consumers. The Report does note that it is not for the Government to develop new business models, but it can of course provide incentives to help create an attractive environment for those looking to try out new ideas and search for new ways to create value from their digital content.
 “Digital Britain needs pipes and the poet’s licence,” Hughes, J., www.FT.com, 4 February 2009.
Investment in content: Rights and distribution
Illegal filesharing is recognised by the Report as having reached widespread social acceptability, particularly amongst the young. To change this, it is considered that the rules themselves may also need to change. Copying content is not new, but analogue copying was always accompanied by a detectable loss in quality, which was arguably a deterrent. However, digital copies can often be near-perfect and certainly of sufficient quality for repeated use. Abuse of legitimate filesharing technologies can also allow millions to access the material. This has created a resistance to paying for content, and many no longer accept that an inability to access content is an inevitable and justifiable consequence of an inability to pay.
The Report suggests tackling the problem with a combination of approaches; consumers need to be educated in the need for respecting copyright to ensure the ongoing availability of high quality content; there needs to be a significantly higher chance of repeat offenders being caught; and most crucial is the availability of legal content in the forms that consumers want. Indeed the Report does seem very keen to facilitate an industry response to the challenges. By the time if the final Report it is aiming to have considered the potential for a Rights Agency to develop incentives for the legal use of copyright material and to facilitate technical solutions that work for both consumers and content creators.
The possible technical solutions mentioned include Automated Content Access Protocol and Digital Rights Management (DRM). DRM particularly seems to be reported on quite favourably as having a role to play insofar as it allows consumers to access content on any device they own. The Report does note that this will require cooperation between the rights owners, distributors and device manufacturers. Nevertheless it fails to acknowledge that in some areas at least there is already a definite move away from DRM use. In this regard the Report has been on the receiving end of some particularly stinging criticism.
The Report again risks the ire of those in favour of net neutrality by further suggesting that ISPs should consider using traffic management technologies (such as deep packet inspection) to try and combat illegal file-sharing. Following a consultation on peer-to-peer file sharing the Report states an intention to legislate, requiring ISPs to notify alleged infringers that their conduct is unlawful, and to collect anonymised information on serious repeat infringers, to be made available to rights holders along with person details on receipt of a court order. This will make it easier for rights holders to take targeted action against the most serious infringers. However, this not only places an onerous burden on ISPs, but will often also put them in the position of having to take action against their users on the basis of an as yet unsubstantiated infringement. Legislation may still be some way off in this regard as even the Report’s preferred method of co-regulation failed to attract widespread support due to a lack of certainty over the nature of the obligations on ISPs. Not surprisingly the Report found that there are greatly polarised views between rights holders, consumers and ISPs in relation to what should be done about illegal file-sharing and so this debate will likely continue notwithstanding the Report’s proposals.
 “Rights management in the digital world”, Craig, C. and Graham, R., Computer Law & Security Report, Volume 19, Issue 5, 356--362, September 2003
 Supra n 8.
Investment in content: Original UK content
The Report is clear in its desire to maintain a high level of British content, especially impartial British news. With a reduction in the profits that fund British content, the BBC, as the only publicly secured provider, may no longer be sufficient. For cultural and social reasons the Report believes that there should be at least one other provider of scale to provide impartial news at local, regional and national levels, large scale original content, a wide range of voices from across the UK, and original children’s production. It also indicates that plural public service provision is its preference for ensuring investment in large scale original British content.
The Report remains keen to maintain local content despite being aware that some are starting to question its longevity, a particular issue in commercial radio and the newspaper industry. UK-wide and international news is considered by the Report to be well covered from a variety of sources, but news for the devolved nations and regions is less well catered for, with ITV and other Channel 3 licensees being the chief provider other than the BBC. Ofcom’s recent analysis has highlighted the economic pressures on the continued delivery of public service obligations. The BBC has already proposed news gathering and production partnerships with the ITV companies which could improve efficiencies. Another option considered by the Report is to open up regional news slots to third parties such as news providers in related media who could offset their costs against a range of outlets.
Similarly, the Report has found that advertiser-funded free-to-air broadcasters contribute almost as much investment in original UK content as the BBC, using about 60% of advertising and publicly funded income. By contrast pay TV accounts for 26% of television related income but only 5% of spend on new television programming. As this article mentioned earlier, there has been a significant drop in advertising revenue and advertiser funded broadcasters have been adversely affected just as other media has and this will cause problems for the continued generation of original content.
The Report highlighted that Channel 4 remains a strong brand but has stated it will face increasing difficulties in balancing its public purposes and its commercial future. Both the Report and subsequent commentary has considered the possibility of tie ups with BBC Worldwide or Five and as yet the preference seems unclear. The final Report will establish whether a long term, sustainable second public service organisation can be created to provide competition for quality to the BBC. At least until then Channel 4 has an uncertain future and the Report has again received criticism for delaying its response to this issue.
 Ofcom’s Second Public Service Broadcasting Review: Putting Viewers First, Ofcom, 21 January 2009.
 See, for example, “Digital Britain report espouses broadband for all but unclear on status of Channel 4,” Andrews, A. and Mason, R., www.telegraph.co.uk, 30 January 2009.
It is this part of the Report that has been the focus of much commentary since its publication. In perhaps the firmest stance that it takes throughout, the Report is clear in its belief that practical universality will be required if Britain really is to be able to take full advantage of a digital economy. Connectivity is considered to be a boundary point for social exclusion as only the broadband-enabled population have the easy access to information, education, e-commerce, BBC license fee funded services and other public services that it offers.
The Report notes that practical universality will require two things: availability of network and consumer take-up. While broadband rollout in the UK has been good (90% of households can receive it), take-up has only been 60%. This is understood to be well above average, but there is obviously some way to go to actually achieve universality.
The Report proposes a universal service commitment in broadband by 2012. On the face of it this seems a dynamic and ambitious commitment. This is particularly the case since the European Commission has recently indicated that it would only look to update its guidance on state aid rules to broadband projects and only two years after the European Commission indicated that it believed that broadband universality should generally be left to the market (the exception being in cases of geographic remoteness),  However, if universality is achieved, but at such a low level of quality and speed that it does not actually enable anyone to participate in the digital economy or in any way overcome social exclusion then it is not much of an achievement at all. To really be dynamic and ambitious the plan for a Universal Service Commitment in broadband by 2012 must find a way to also supply sufficient quality and speed within a fragmented market and myriad investment challenges.
The Report has considered these quality of service issues and the factors which it believes need to be considered in setting a minimum level of service are:
- Broadband speeds most commonly subscribed to by the population as a whole;
- The sorts of online services that consumers want and expect;
- Public services like education or remote health, for which delivery depends on a certain speed; and
- The point at which a level of service can be delivered ubiquitously at proportionate and reasonable cost.
The Report considers the benefits of three different speeds. 512kb/s would offer limited benefits to a small number, and the market is likely to provide this almost universally by 2012 in any event. It is a basic level of broadband and would become increasingly out of step with what the bulk of customers chose to receive. 1Mb/s would incur greater costs and in the short term would meet many consumers’ expectations. However it would not support long-form video content. 2Mb/s would require even greater initial expenditure but would be in step with standard broadband usage in 2012. Given that the Report has earlier identified that one of the reasons that NGA is required is down to the increasing demand for high-speed connections, then the estimate that only 2Mbps will be the norm in 2012 is perhaps conservative.
Traditionally universality has been achieved by the imposition of a statutory universal service obligation (USO) such as that imposed on BT at the point of privatisation. At that time fixed line was the norm for communication and BT held a pre-eminent position in the market. The landscape has obviously changed considerably in this time and plans for universality need to take full account of this. Indeed, any review of this area must have to take account of the whole communications market, including fixed and mobile, and wired and wireless connectivity.
The Report states that today only 60% of households are customers of BT Retail and just 25% for broadband. Indeed, for broadband, 65% of the retail market is now actually served by Virgin Media, Carphone Warehouse, Sky, Tiscali and Orange. In such an environment it would be very difficult to argue that the significant extra costs involved should fall on BT alone, and this is acknowledged by the Report. It believes that contributions to universality should come more widely from a range of communications providers, either financially or in kind (such as mobile operators widening their networks near-universally). It is perhaps in this context that the plan is truly ambitious as it will be no mean feat to identify how best to deal with the complexities of this sort of shared obligation.
There are also plans to seek commitments from the Government and public service broadcasters to continue to drive demand through the provision of high quality content and the development of platforms with open standards available to all content providers and device manufacturers. The Report states that in the UK 17 million people over 15 are not using computers and the internet. Unless awareness of the benefits is built, the Report suggests this inequality may accelerate social divides and create new ones. A Digital Inclusion team has been established to create a cross-Government, cross-sector action plan to support those not currently benefitting. The public service broadcasters are again seen as having a key role to play aiding access issues through the provision of training and education.
Despite this there still remains doubt in some quarters that such universal service is really needed for broadband. It is acknowledged by the Report that there will continue to be some people that will opt-out. However, as digital literacy continues to improve over time and it is broadly accepted by the population that broadband is an ideal delivery medium for high quality content (even if they do not fully appreciate its potential for use for more technologically advanced features) then demand is likely to be high. While the market may well ensure supply in many areas this will clearly not be the case wherever the remoteness of the location means it is not economically viable. In which case, this could lead us to support the European Commission’s view from two years ago and as mentioned above. The Report’s insistence on universal service may therefore be as much to do with the perceived efficiencies that the Government can obtain through the online delivery of public services whilst sharing the costs of that delivery across the market as whole as it is to do with any other facets of the digital economy or social exclusion.
 Communication on future networks and the internet, Commission of the European Communities, COM(2008) 594 Final, Brussels, 29 September 2008.
Report regarding the outcome of the Review of the Scope of Universal Service in accordance with Article 15(2) of Directive 2002/22/EC, Commission of the European Communities, COM(2006) 163 Final, Brussels, 7 April 2006.
 “Citizens as digital denizens – the digerati’s answer to the economy,” Toole, D., www.FT.com, 4 February 2009.
 “Interim Digital Britain report: Broadband for all by 2012,” Trenholm, R., www.crave.cnet.co.uk, 29 January 2009.
Equipping everyone to benefit from Digital Britain
The Report classifies 3 categories of skills which it is seeking to develop:
- Digital Life Skills – needed by all;
- Digital Work Skills – needed by most;
- Digital Economy Skills – needed by some.
As the Communications Act already contains certain obligations with regard to media literacy, the Report is seeking to use this as a platform for broadening the population’s digital skills base. As a starting point, the Report requests that Ofcom assesses these existing obligations and responsibilities in light of the significant market changes that have occurred since they were put in place. Once more the BBC is also being asked to step up to the plate and to work with Ofcom in relation to recommending a new ‘National Media Literacy Plan’.
It is worth noting that this part of the Report is also closely linked with the earlier section which discusses the importance of encouraging take-up as part of ensuring the universality of broadband. There would seem to be little point in having universal service of the very people being served were then unable to fully engage with what was being offered. It does therefore make sense that some emphasis being given to this area. However, the Report considers its importance far more broadly. It stresses that training in digital technologies must not be considered just another subject area, but rather that it must be pervasive as it will underpin everything we do throughout the 21st century. It believes that this principle has been embraced by successful emerging economies and so Britain must do likewise if it is to in any way be a leader in a global digital economy.
The idea was to create an action plan that would secure the Britain’s place at the forefront of the new media age. However, the interim version whilst wide-ranging report and tackling everything from broadband speeds to internet regulation and public service broadcasting is light on real detail and concrete proposals. It is a taster to get the thoughts flowing before what we hope will be a more substantial main course, which is expected to be published in June. To get those thoughts flowing is certainly a step forward, but until we start seeing the conclusions of those thoughts we won’t really know if we’re heading in the right direction.
Britain’s digital economy is increasingly important economically both in its own right and as part of the future of our manufacturing and service industries. This is doubly so in the challenging circumstances we currently find ourselves in. If networks are not upgraded it will become increasingly difficult for them to meet the needs of our ever more knowledge-based economy. This also needs to be achieved fairly without leaving parts of society digitally disenfranchised.
We await the final Report.
Carolyn Burbridge (Carolyn.Burbridge@twobirds.com) and Graeme Maguire (Graeme Maguire@twobirds.com) Bird & Bird LLP, London, UK
 Supra n1, pg 63.
 Communications Act 2003, s.11.