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EU not neutral about the net - March 3, 2008

While the FCC prepares to take up the issue of Net neutrality in earnest, having collected over 26,000 public comments on the so-called Comcast petitions, Europe is racing ahead with its own plan to regulate the operation of networks and the distribution of movies, music, games and other content online. And there's nothing neutral in its approach.

Last week, at the same time the FCC was closing the comment period on Net neutrality, the European Commission closed the comment period on its Consultation on Creative Content Online in the Single Market. In a communique on the consultation adopted March 1, the Commission--the quasi-executive arm of the European Union--urges formal EU action to establish Europe-wide standards in four main areas:

• Availability of creative content online: "Lack of availability of creative content for online distribution and lack of active licensing of rights on new platforms remain major obstacles for the development of online content."
• Multi-territory licensing for creative content: "While it is first for right holders to appreciate the potential benefits of multi-territory licensing, there is a need to improve the existing licensing mechanisms to allow for the development of multi-territory licensing mechanisms, for instance, by promoting fair competition on the market for rights management."
• Interoperability and transparency of DRM systems: "As lengthy discussions among stakeholders did not yet lead to the deployment of interoperable DRM solutions, there is in any case a need to set a framework for transparency of DRMs regarding interoperability."
• Legal offers and piracy: "It would indeed seem appropriate to instigate co-operation procedures ('code of conduct') between access/service providers and right holders and consumers in order to ensure a wide online offer of attractive content, consumer-friendly online services, adequate protection of copyrighted works, awareness raising/education on the importance of copyright for the availability of content and close cooperation to fight piracy/unauthorized file-sharing."

The communique goes on to urge two concrete steps:

• The creation of a Content Online Platform to facilitate cross-industry negotiations toward resolving the challenges in each of the four areas; and
• Developing a Recommendation of [the European] Parliament by mid-2008 regarding EU-wide standards for availability, interoperability, multi-territory licensing and piracy.

While U.S. content owners will certainly welcome a "code of conduct" for ISPs in dealing with unauthorized file-sharing, some of the other provisions in the recommendation could prove problematic if the EU ultimately were to take action (unclear at this point).

Should the EU end up mandating interoperability among DRM systems, content owners could lose the ability to chose for themselves which DRM to use, and therefore which business models to support, in their biggest market outside the U.S.

More critically, a requirement of multi-territory licensing could undermine U.S. media companies' long-standing model of financing production through territory-by-territory licensing in Europe.

In any case, while content owners battle here to keep regulators from doing anything that would interefere with their plans for filtering the Net, in Europe they're likely to find a highly regulated business for the online distribution of content.

The initial batch of comments from European stakeholders has been posted here.
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