Strictly Broadband Ltd has become the first video-on-demand (VOD) provider to have financial penalties imposed upon it by Ofcom for breaching statutory rules regulating VOD.

On 7 December 2012, Ofcom imposed a £60,000 fine following a determination by the Authority for Television On Demand (ATVOD), Ofcom’s designated regulatory authority for such services, that Strictly Broadband had breached the VOD content rules introduced in 2009 by Part 4A of the Communications Act 2003 (CA). However, with Strictly Broadband subsequently moving ownership and control of its VOD services to a non-UK company, Ofcom will now have to seek payment from UK liquidators.

Background

VOD content rules were introduced in 2009 by Part 4A of the CA to implement the Audiovisual Media Services Directive (2010/13/EU). The CA requires VOD providers to register with ATVOD and to comply with specific content rules, including the application of Content Access Control (CAC) systems for services containing adult content to verify that the content user is aged 18 or over (Rule 11, ATVOD Rules and Guidance).

Adjudication on breaches of the content rules is carried out by ATVOD whilst Ofcom has retained responsibility for imposing fines. The maximum financial penalty is 5 per cent of the provider’s applicable qualifying revenue or £250,000, whichever is the greater.

Facts

Strictly Broadband was notified to ATVOD as a website provider of on-demand adult programme services. In March 2012, ATVOD carried out a routine assessment of its free and pay-per-view material and found it to be in breach of Rule 11, by not having an appropriate CAC system in place. Section 368(E)(2) of the CA states that:

If an on-demand programme service contains material which might seriously impair the physical, mental or moral development of persons under the age of eighteen, the material must be made available in a manner which secures that such person will not normally see or hear it.

ATVOD requires that there should be in place an effective CAC system at the point of access which verifies the user is aged 18 or over. On 31 May 2012, ATVOD issued its preliminary view that Strictly Broadband had failed to put in place any such system. On 4 October 2012, Strictly Broadband notified ATVOD that its service had been sold to an American company on 1 August 2012 and that its UK company had been put into liquidation.

Decision

Ofcom imposed a fine of £60,000 on Strictly Broadband, stating that it considered the breaches to be “sufficiently serious, deliberate, repeated and reckless as to warrant the imposition of a statutory sanction on the Service Provider in this case.” In reaching its decision, Ofcom took full account of the need to ensure that any penalty would act as a deterrent to the video-on-demand industry from committing further breaches in the future.

Comment

Following this decision, Ofcom imposed further fines for breaches of Rule 11 totalling £100,000 on VOD providers Playboy TV and Benelux Limited. Like Strictly Broadband, both companies have sought to move to non-EU jurisdictions, which will allow them to avoid the scope of these rules, whilst making it difficult for Ofcom to enforce the penalties it has imposed.

The ability of the internet to reach across borders allows companies such as Strictly Broadband, Playboy TV and Benelux Limited to provide VOD services to consumers within the UK whilst operating outside the regulated EU jurisdiction. Such services provide a challenge to regulators such as Ofcom. It appears that fines alone will not be enough to prevent continued breaches of ATVOD Rules.