The Digital Britain report (the "Report") sets out the Government's action plan to secure the UK's place at the forefront of innovation, investment and quality in the digital and communications industries. The Report was prepared in consultation with stakeholders and a steering board comprised of industry leaders led by Lord Carter, and follows the Interim Report which was published on 29 January 2009. The Report was published on 16 June 2009 and covers issues such as broadband access, digital radio, copyright in creative industries, public service broadcasting and digital security.

Set out below are what we believe to be the critical points arising out of the Report.

  • Broadband For All
  • Protection and Security of Personal Data
  • Classification of Video Games
  • Copyright Infringement
  • Orphan Works
  • Public Service Broadcasting
  • Radio: Going Digital
  • Wireless Spectrum Modernisation

Broadband For All

The Government confirms its policy of promoting the availability of broadband to all through delivery of the 'Universal Service Commitment' comprising a mix of professionally assisted consumer home solutions (including satellite) with the aim of ensuring that a broadband network is available to everyone at 2Mbps by 2012. This will be funded through a combination of the Digital Switchover Help Scheme underspend, a contribution from the Strategic Investment Fund administered by the Department of Business, Innovation and Skills and contributions from private partners and other public sector organisations. Of course, any Government funding proposals will have to comply with EC State Aid rules.

In tandem, the Government plans to implement staggered delivery of next generation broadband, concentrating on two thirds of the population over the first ten years followed by the 'Final Third Project' aiming to deliver at least 90% coverage by 2017.

The delivery of next generation broadband will be funded using a form of targeted subsidy – a general supplement on all fixed telephone lines – rather than by offering tax incentives. An open tender would be held to determine the appropriate operator.  

Bob Stankey (Partner, Reed Smith) notes that: "The creation of a fund for next generation broadband is a logical step, although it is unfortunate that it is going to be funded by additional taxes passed on to consumers rather than from general tax revenues. What will be critical to the fund's success or failure are the details of how companies can apply for the money and what conditions the Government will impose on successful applicants. For example, will there be open access requirements? Will there be requirements to build in interception capabilities? Will private investors want to partner with operators in the scheme?"

Protection and Security of Personal Data

The Report addresses consumer confidence in the security of personal data in the face of high-profile data privacy breaches, fraud and the exploitation of personal information by third parties for commercial purposes.

Confidence in data privacy is acknowledged as being critical. The Report reinforces Governmental support for the work of the Information Commissioner's Office (ICO), including the forthcoming "Personal Information Online" consultation. This will aim to provide comprehensive guidance on operating privacy-friendly websites, the rights and protections of individuals, privacy choices and default settings and cyberspace and territoriality, resulting in a published Code of Practice.

The Report welcomes the increasing involvement of the Office of Fair Trading (OFT) in data security issues, championing a pivotal role for the OFT in online consumer protection. This role will be outlined in a Consumer White Paper, to be published later this Summer. The Government's GetSafeOnline initiative will link to the "one-stop-shop" for online child safety proposed by the Byron report.  

Cynthia O'Donoghue (Partner, Reed Smith) highlights that: "The principle of transparency continues to play an important role as part of data protection compliance. The Government and the ICO clearly look favourably upon those businesses that provide unambiguous information concerning what personal data is being collected, how it is used and what can be done to redress any issues of concern."

The Report further supports the Internet Advertising Bureau's (IAB) launch of an information portal about behavioural advertising. The portal will cover user education, notice and choice. Support of the IAB's portal will be welcome news to those industries involved in behavioural advertising, given that the IAB's principles broadly allow behavioural advertising on the basis of consumer opt-outs.  

Gregor Pryor (Partner, Reed Smith) notes: "Increasing oversight by trade associations, together with the European Commission's recent action against the UK in relation to complaints by UK Internet users about Phorm, an ISP-based behavioural targeting company, makes behavioural targeting a complex legal issue for companies in the digital advertising market. Although welcome, the Government's support of the IAB's portal may be ultimately undone by the findings of the Commission."

Classification of Video Games

The Report announces that the Government is to adopt a classification system for boxed video games which incorporates the newly enhanced Pan-European Game Information System (PEGI). PEGI advocates a Europe-wide self-regulatory approach, which will be overseen in the UK by the Video Standards Council. The system will provide a clear set of logos (which are already used in most European countries) to age-rate video games. It will replace the current hybrid system of two separate sets of symbols, either of which can appear on video games, and is sufficiently flexible for the rapidly expanding online games market. It will become illegal to sell video games suitable for 12 year olds and older to underage children.  

Sachin Premnath (Associate, Reed Smith) comments that: "The move to PEGI will be welcomed by the video gaming industry and consumers alike. The PEGI system fulfills the criteria set out in the Byron report, and the industry has long advocated the benefits of a single system of game classification specifically for interactive entertainment, as opposed to the alternative BBFC classification regime. Developers, publishers and retailers should now avoid unnecessary costs associated with ensuring compliance across multiple territories with differing classification regimes. Consumers will benefit from the transparency of a single, clear standard."

Copyright Infringement

Ofcom will be placed under a duty to take steps to reduce online copyright infringement. This will include ensuring that Ofcom places obligations on ISPs, underpinned by a Code of Practice, requiring them to:

  • notify account holders when their account is being used to infringe copyright; and
  • collect, maintain and make available to rightsholders (on receipt of a court order) information to enable repeat infringers to be identified.

While the Government hopes that a newly formed 'rights agency' will oversee the Code, Ofcom is also to be given backstop powers to place additional conditions on ISPs, such as:

  • Blocking (site, IP address, URL)
  • Protocol blocking
  • Port blocking
  • Bandwidth capping
  • Bandwidth shaping
  • Content identification and filtering

These powers would be triggered if the notification process has failed to reduce infringement by those notified by 70% within 12 months of the Code of Practice becoming effective.

The Department for Business, Innovation and Skills launched a consultation on 16 June 2009 on the legislation to address illegal P2P file sharing. The closing date for submissions is 15 September 2009.  

Gregor Pryor notes that: "This is the Government's clearest indication yet that it will consider forcing ISPs to take action against serial infringers and, perhaps, operators of sites offering infringing content, though it is heavily tempered by the fact that any concrete action is some time away. A further lengthy consultation process, coupled with sanctions to be imposed by Ofcom which are as yet uncertain, is likely to frustrate creative industries who already feel that the Government has not acted strongly enough. While the report welcomes the development and growth of innovative legal services, those same services are struggling to survive in the face of rampant piracy."

Orphan Works

The Government proposes introducing legislation to enable commercial schemes for dealing with 'orphan works' (copyright works whose authors cannot be identified despite all reasonable efforts being made to do so) to be set up on a regulated basis.

Operators of such schemes would be permitted to grant rights to use orphan works subject to certain safeguards, such as a requirement for appropriate searches to be made and for reimbursement of rightsowners who are subsequently found.

The Government will also explore the extent to which extended collective licensing arrangements, such as those operating in the Nordic countries, should be introduced. These schemes allow collecting societies to grant licences for the use of the works of not only their members but also of non-members who own works of the same type, in circumstances where it would be impracticable to expect users to clear rights with individual rights-owners. Such a regime has applied for many years to cable re-transmissions of foreign broadcasts.  

Stephen Edwards (Partner, Reed Smith) comments that: "The digital age demands that this successful model be available wherever the need for it can be shown to exist. For such schemes to command support, the Government rightly recognises that the collecting societies who will participate in it must be subject to a higher degree of regulation than presently exists. It is envisaged that there will be provisions for adherence to agreed codes of practice, greater transparency, and improved complaints handling procedures for rights-owners and users.

These proposals create a win-win-win outcome for rights-owners, rights users and the general public. While respecting copyright owners' rights, they facilitate access to the works they control. It's not often that radical proposals come at no-one's expense or detriment."

Public Service Broadcasting

The Report recognises the importance of a strong and independent BBC, describing it as a 'gold standard' for British media. The Report welcomes the partnership proposals being developed by the BBC and their review by the BBC Trust in terms of their potential impact on competition.

The Government acknowledges that Ministers have called for "greater clarity and transparency in the relationship between the BBC and BBC Worldwide." The Report acknowledges BBC Worldwide's commercial success, and its role as a key player in the exploitation of rights. To limit its role, states the Report, would be a missed opportunity. However, the aim of financial and functional separation between the two organisations must be achieved, and to that end, the Government encourages the BBC Trust to consider proposals for this, including a sale of a part of BBC Worldwide. Notwithstanding this, the importance of retaining BBC Worldwide's 'first look' arrangement and protecting the BBC's brand name is acknowledged.

The Report recognises the key role that Channel 4 has to play in providing a balancing mix of public service content alongside the BBC. There will be an updated statutory remit for Channel 4. The Government considers Channel 4's current remit to be "too television-centric" and says that it should be expanded to include investing in a wide range of original, innovative, high quality audio-visual content for online and multi-media public service content. It also supports Channel 4's role in the funding and creation of films, and proposes a key role in programming appealing to older children and younger audiences.

Regarding the possibility of a merger between Channel 4 and BBC Worldwide, the Report confirms that the Government is willing to facilitate joint ventures or partnerships on areas such as digital channels, advertising and DVD sales, subject to commercial terms being agreed and regulatory clearance being obtained. The Report appears to rule out a full-blown merger between the two organisations on the basis of competition and structural issues. The Report rules out direct public funding for Channel 4 or any privatisation of the whole or part of Channel 4.  

Katherine Holmes (Partner, Reed Smith) notes: "The Report's proposals concerning the BBC, BBC Worldwide and Channel 4 build on the work being undertaken by Ofcom in relation to the review of public sector broadcasting and the significant consumer demand for a strong Channel 4 as the main public service broadcasting competitor for the BBC. Channel 4's funding will continue to be an issue and these proposals contribute to the debate."

The Report also allows for liberalisation of the Channel 3 and Channel 5 licences, adjusting the public service obligations and replacing Channel 3's regional news obligations from 2012 through the funding of independently financed news consortia.

The Government will consult on the idea of a contestable element of the Licence Fee being channelled to organisations other than the BBC, primarily for the provision of news services. The Report states: "from 2013, when the Digital Switchover is complete, the Universal Service Commitment has been met, and DAB roll-out funding has been agreed, an element broadly equivalent to 3.5% [of the Licence Fee]...could be maintained as a Contained Contestable Element." This share would be directed at commercial broadcasters to fund public service programmes.

Radio: Going Digital

Digital is confirmed as the future of radio and the Report identifies a target date of 2015 to upgrade. The plan for implementation stresses the importance of meeting key criteria to trigger switchover and the need for intervention to drive the behaviour of manufacturers, the motor industry and other stakeholders.

The programme will see the upgrade of FM services to DAB and MW services to FM, with vacated FM spectrum being filled by a new tier of ultra-local radio consisting of small local commercial and community stations. These will be funded by contributions from commercial operators and the Digital Switchover Help Scheme underspend. The timeline for upgrade is dependent on two criteria being met: (i) digital accounting for at least 50% of radio listening; and (ii) DAB being comparable to current FM coverage and reaching at least 90% of the population. The current system of local commercial radio regulation will be scaled back. Commercial stations will be able to reduce the number of locally produced hours they broadcast, stations will be given greater flexibility to co-locate and analogue services will be able to merge to form new DAB operations.  

Stephen Edwards notes that: "From a legal perspective, the critical change being proposed is the devising of a new regulatory regime which will secure the provision of local content. The Report recognises the difficulty of doing this in a way that reflects the economic realities of local media markets and so the sensible proposal to work with Ofcom to agree a two-year pilot of a new regulatory regime is to be welcomed. Radio broadcasters will also welcome the proposal that those stations not participating in the pilot should have a reduction in the number of locally-produced hours they are required to broadcast, in exchange for an enhanced commitment to regular and updated news."

Wireless Spectrum Modernisation

The Report gives support to a number of measures to better use the UK's spectrum resources, with a particular focus on vital spectrum below 1GHz and its use for mobile broadband and other innovative services. Work will continue on liberalising the 2G spectrum in the hands of the existing users to ensure that these spectrum bands do not become fragmented.

Significantly, the Government wants to free up the so-called "wireless white spaces" (the unused frequencies between television channels) to provide an opportunity for exciting new wireless services such as enhanced wi-fi. The US has already approved the use of white spaces, and Ofcom is developing plans for putting this into operation in the UK.

Bob Stankey comments that: "The Report's support for white spaces is a significant step – allowing use of these frequencies on a licence-exempt basis and taking full advantage of recent advances in cognitive radio technology and spectrum-sensing devices will position the UK as a leader in innovative mobile services and devices."

Other Issues

The Report proposes a consultation on the disparity between the penalties Ofcom can impose under the Communications Act 2003 for consumer harm compared to action taken for breaches of the Broadcast Code (for example, in relation to phone-in scandals). The Government intends to rectify the discrepancy between the levels of penalty Ofcom can impose.

The Report, while praising ICANN for its work in policing the security of the domain name system, also highlights the possibility of Ofcom regulating the UK domain name industry in future.