Understanding the consequences of Europe’s ‘Digital Single Market’

The European Commission today unveiled plans for a single market fit for the digital age. Here, Raymond Snoddy assesses the impact of removing regulatory walls – and moving from 28 markets to just one.

It may be difficult to avert your gaze from domestic events to concentrate for a moment on developments in far off Brussels, but the effort should be made.

You don’t have to be a closet UKIP supporter to fear that almost by accident the European Commission may be about to try to overturn the economics of the entire audio-visual sector not just in the UK but across the European Union.

The threat is called the Digital Single Market (DSM) and from the point-of-view of Brussels the formal proposals, which have just been unveiled, are manifestly sensible.

The aim is to extend the concept of the single market into the online world and Commission projections suggest that removing the barriers to creating a DSM could lead to an additional £250 billion worth of economic growth in Europe.

The DSM could mean the abolition of unpopular data roaming charges across the EU and making it easier for small companies to do business abroad.

The Brussels proposals would also improve cyber security, tackle the administrative costs of different VAT rates and make parcel deliveries cheaper and easier across Europe to boost sales from overseas websites.

Then the DSM would end “unjustified geo-blocking” of content. This would mean that if a film or television programme, including live sport, was available online in any one EU country, it might have to be available in all the rest.

There has been movement in the Commission thinking. The word “unjustified” did not appear in a late draft of the proposals but is will be interesting to see how this will now be defined.

There has also been an extensive debate on “portability”. When you go on holiday anywhere in the EU you could, say, take your Sky subscription with you. At the moment this is geo-blocked outside the UK.

President-elect Jean-Claude Juncker announces the The Digital Single Market

Andrus Ansip, a European vice-present who is in charge of implementing the DSM, is particularly keen on portability.

The Estonian who has to spend around six months of each year in Brussels is beyond frustration that he cannot see the Estonian football that he has already paid for in his home country.

Some suggest that Ansip has simply failed to locate the right cable TV package in Brussels but out of such small misunderstandings do serious policy grow.

Draft proposals called for “full portability of legally acquired content”.

The final proposals talk of a review of the Satellite and Cable Directive to access if its scope needs to be enlarged to broadcasters’ online transmissions and to explore how to boost cross-border access to broadcasters’ services in Europe. Again it appears to represent a watering down of original plans.

The campaign against geo-blocking has weight behind it not least because Ansip the Estonian is not alone – he is one of thousands and thousands of politicians and Eurocrats doomed to spend their evenings in Brussels without the programmes of their choice.

What a liberation the end of geo-blocking and the arrival of portability would be. Who could possibly stand up to protect such an out-dated concept based on the old-fashioned, clumsy territory by territory selling of online rights, which by their nature should logically be as universal as possible.

So why on earth should virtually all the film and TV rights owners in Europe, including the US studio majors, be implacably opposed to such an apparently liberal and forward-looking plan?

At a fundamental business level it could amount to a breach of the ability of rights owner to negotiate freely with customers on how those rights should be deployed.

Mostly though we are into the realm of unintended consequences, including the creation of the exact opposite of the effect being sought.

Apart from helping consumers, the aim in the Brussels mind is to encourage the growth of the European audio-visual industries, and just a little disingenuously it says it wants to end geo-blocking “while safeguarding the value of rights in the audio-visual sector.”

The reality is that the end of unjustified geo-blocking could still mean the auctioning of trans-European rights, effectively pricing national European media groups out of the game.

It would be a huge boost for the likes of Netflix or even international cable and telecom companies.

Another possible consequence could mean that less rather than more content could be available to cross frontiers.

Rather than submit to an uncertain international auction, rights owners might just sit on their online rights until the lucrative traditional broadcast rights – sold in the traditional country-by-country way – have been exhausted before going to online.

Life would be also be made very difficult for the Premier League which earns a disproportionate sum from the rights sold in the UK to Sky and BT. If it had to sell a single European package of rights would there be a levelling down of overall value?

For Ansip the Estonian the ironic consequences of his efforts could easily be the marginalisation of minority cultures and minority languages.

Some in the Commission have been heard to say they want access to the BBC iPlayer even though they are not UK licence fee payers.

Overall there is a fear that such a system could produce lower levels of funding for the high quality programmes that the Commission believes it is seeking to encourage.

The good news is there is a long way to go and a lot of lobbying to be done before geo-blocking becomes law.

The lobbying already appears to have had an impact with the insertion of wriggle room though the arrival of the word “unjustifiable”.

Although the plan is to produce formal legislative proposals by the autumn the legislation then has to go to the European Parliament for ratification before going on to the member states.

The Commission may yet be persuaded to modify its geo-blocking proposals further to avoid delaying the other important proposals in the DSM package.

There again the single market concept lies deep in the DNA of the European Union and they may be reluctant to let the bone go. The Cameron led coalition didn’t exactly help the UK film and television industries by being conspicuously supportive of the overall digital single market proposals, presumably to win brownie points in advance of any treaty re-negotiation.

The one to watch is portability, which could be implemented without overturning the traditional freedom of negotiating rights territory by territory.

The technology surely exists, or could soon exist, to enable those travelling abroad on holiday or on business to have access to programmes they have already paid for, over short periods.

The stumbling block is ensuring there is no leakage across territorial boundaries – the very thing that the Commission is trying to ensure as an act of policy.

Long after the next UK general election in the autumn, media folk could still be grappling with the move against geo-blocking and wondering whether it was time to join UKIP.